TaxTMI 
TaxTMI 
2014 (4) TMI 943
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....er') challenged the said sale by filing application before the Debt Recovery Tribunal (DRT). This application was dismissed. The borrower filed Writ Petition before the High Court of Karnataka against the order of DRT. The learned Single Judge dismissed the Writ Petition as well. Undeterred, the borrower appealed against the order of the learned Single Judge. This time it triumphed, as the Division Bench has set aside the sale of the property in favour of the appellant. The reason given is that the public notice issued for the said sale was defective as 30 days time which is mandatorily required under Rules 8 and 9 of SARFAESI Act was not given. Concededly the public notice was published in the newspaper on 28.4.2006, fixing the date for sale as 8.5.2006, inviting tenders from prospective buyers at 2.00 p.m. on 6.5.2006. 3.This fact that insufficient notice was given, is, therefore, not in dispute. Legal position about the mandatory nature of Rule 8 & 9 is also not agitated. Notwithstanding this legal possession, the appellants viz auction purchaser as well as the Bank maintain that the sale was valid because of the reason that delay was entirely attributable to the borrower....
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.... Reserve Price fixed at Rs. 3.50 crores had to be reduced. The borrower was informed about it. The Bank issued fresh notice on 9.3.2005 for auction of the property fixing date of auction as 21.3.2005 with reduced Reserve Price at Rs. 2.39 crores. 7.In the auction held on 21.3.2005 the highest offer which was received was in the sum of Rs. 2.25 crores which was less than even the reduced reserve price. It can well be discussed that this sale notice was for a period of less than 30 days. Be as it may, the bank wrote letter dated 28.6.2005 to the borrower asking it to convey its consent for the sale of property for a sum of Rs. 2.25 crores which was the highest bid. However, the borrower did not respond to this letter. Thereafter, another letter dated 16.8.2005 written by the bank stating the reasons as to why it was constrained to reduce the Reserve Price. 8.The borrower did not accede to the request of the Bank. Instead, on 15.11.2005, the borrower expressed its intention to settle the matter by making the proposal under One Time Settlement (OTS) scheme of the RBI. It was followed by letter dated 8.1.2006 by the borrower to the Bank requesting for OTS at Rs. 2,13,93,320/-. Thi....
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....oed the reasoning given by the DRT and dismissed the Writ Petition vide orders dated 19.9.2011. Against this order, the borrower approached the Division Bench by filing intra court appeal which has been allowed by the High Court. The sale in question is set aside. 11.The High Court took into consideration provisions of the sub-Rule (5) and (6) of Rule 8 as well as Rule 9 of these Rules which are as under: "Rule 8 Sale of immovable secured assets: (5) Before effecting sale of the immovable property referred to in sub-rule (1) of rule 9 the Authorised Officer shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor, fix the reserve price of the property and may sell the whole or any part of such immovable secured asset by any of the following methods:- (a) By obtaining quotations from the persons dealing with similar secured assets or otherwise interested in buying the such assets; (b) By inviting tenders from the public. (c) By holding public auction; or (d) By private treaty. (6)The authorised officer shall serve to the borrower a notice of 30 days for sale of the immovable secured assets, under sub-rule (5....
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....period mentioned in sub-rule (4), the deposit shall be forfeited and the property shall be resold and the defaulting purchaser shall forfeit all claim to the property or to any part of the sum for which it may be subsequently sold. (6) On confirmation of sale by the secured creditor and if the terms of payment have been complied with, the Authorised Officer exercising the power of sale shall issue a certificate of sale of the immovable property in favour of the purchaser in the form given in Appendix V to these rules. (7) Where the immovable property sold is subject to any encumbrances, the authorised officer may, if the thinks fit, allow the purchaser to deposit with him the encumbrances and any interest due thereon together with such additional amount that may be sufficient to meet the contingencies or further cost, expenses and interest as may be determined by him. [Provided that if after meeting the cost of removing encumbrances and contingencies there is any surplus available out of the money deposited by the purchaser such surplus shall be paid to the purchase within fifteen days from the date of finalisation of the sale. (8) On such deposit of money for discharge....
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....s an imprimatur of this court as identical meaning is assigned to these provisions. In the case of Mathew Varghese v. M. Amritha Kumarr & Ors.; 2014 (2) SCALE 331. The aforesaid judgment has been followed by this very Bench of the Court in C.A. No. 3865 of 2014 titled as J. Rajiv Subramaniyan & Anr. v. M/s Pandiyas & Ors. decided on March 14, 2014, wherein the earlier referred case has been discussed in the following manner:- "12. This Court in the case of Mathew Varghese Vs. M.Amritha Kumar & Ors. examined the procedure required to be followed by the banks or other financial institutions when the secured assets of the borrowers are sought to be sold for settlement of the dues of the banks/financial institutions. The Court examined in detail the provisions of the SARFAESI Act, 2002. The Court also examined the detailed procedure to be followed by the bank/financial institutions under the Rules, 2002. This Court took notice of Rule 8, which relates to Sale of immovable secured assets and Rule 9 which relates to time of sale, issue of sale certificate and delivery of possession etc. With regard to Section 13(1), this Court observed that Section 13(1) of SARFAESI Act, 2002 gives a ....
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....As noticed above, this Court also examined Rules 8 and 9 of the Rules, 2002. On a detailed analysis of Rules 8 and 9(1), it has been held that any sale effected without complying with the same would be unconstitutional and, therefore, null and void. 15.In the present case, there is an additional reason for declaring that sale in favour of the appellant was a nullity. Rule 8(8) of the aforesaid Rules is as under:- "Sale by any method other than public auction or public tender, shall be on such terms as may be settled between the parties in writing." 16.It is not disputed before us that there were no terms settled in writing between the parties that the sale can be affected by Private Treaty. In fact, the borrowers - respondent Nos. 1 and 2 were not even called to the joint meeting between the Bank - Respondent No.3 and Ge-Winn held on 8th December, 2006. Therefore, there was a clear violation of the aforesaid Rules rendering the sale illegal. 17. It must be emphasized that generally proceedings under the SARFAESI Act, 2002 against the borrowers are initiated only when the borrower is in dire-straits. The provisions of the SARFAESI Act, 2002 and the Rules, 2002 have been ....
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....on to settle the matter by offering OTS proposal. The bank succumbed to this request of the borrower treating the same to be a bonafide offer and even accepted the OTS proposal of the borrower. Here again the borrower committed default and never remitted the money as per OTS arrangement agreed to between the parties. In this way, highlighting the aforesaid blameworthy conduct of the borrower, Mr. Ranjit Kumar submitted that it is estopped from challenging the validity of the notice for auction. It was also pointed out that not only entire amount is paid by the appellant towards the sale consideration, the appellant has discharged statutory liabilities/ encumbrances as well; sale deed registered in its favour way back on 26.5.2006; sale certificate issued; and the appellant is in possession of this property ever since. Therefore, the sale should not have been invalidated. Mr. A.B. Dial, learned Senior Counsel for the appellant Bank in other appeal also argued on the same lines. 16. Let us examine the aforesaid submission of the appellant in the light of the judgment in the case of Ikbal on which strong reliance is placed by the learned Senior Counsel. That was a case where R-1 (t....
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....whose benefit such provision has been made. The provision in Rule 9(1) being for the benefit of the borrower and the provisions contained in Rule 9(3) and Rule 9(4) being for the benefit of the secured creditor (or for the benefit of the borrower), the secured creditor and the borrower can lawfully waive their rights. These provisions neither expressly nor contextually indicate other wise. Obviously, the question whether there is waiver or not depends on the facts of each case and no hard and fast rule can be laid down in this regard. 18. In the facts of that case it was found that the letter dated 13.11.2006 sent by the borrower to the Bank clearly depicted that the borrower had waived his right under Rule 9 (1) and the provisions contained in Rule 9(3) and Rule 9(4) as well. It was also found that at the time of auction sale on 11.1.2006, the borrower was present but did not object to the auction being held before expiry of 30 days from the date of which public notice of sale was published. Not only this, he agreed that the bid given by the auction purchaser, which was the highest bid, be accepted as the auction purchaser happened to be his known person. Another important feat....
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....t the borrower had been adopting dilatory tactics and delaying the recovery of amounts due to the bank somehow or the other. It was also argued that the appellant is a bonafide purchaser and equities are in favour of the appellants which should be balanced and the borrower is not entitled to any relief because of his intemperate conduct. 22. Be as it may. Since the arguments is predicated on the admitted facts appearing on record, we proceed to examine the same on merits. Our examination reveals that no case of waiver is made out. 23. In State of Punjab v. Davinder Pal Singh Bhullar & Ors.; 2011 (14) SCC 770; the Court explained the doctrine of waiver on the basis of earlier pronouncements which are taken note of discussed in the following manner: "37. In Manak Lal this Court held that alleged bias of a Judge/official/Tribunal does not render the proceedings invalid if it is shown that the objection in that regard and particularly against the presence of the said official in question, had not been taken by the party even though the party knew about the circumstances giving rise to the allegations about the alleged bias and was aware of its right to challenge the presence o....
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....v. Ahmedabad Municipal Corpn., Sikkim Subba Associates v. State of Sikkim and Krishna Bahadur v. Purna Theatre.) 42. This Court in Municipal Corpn. of Greater Bombay v. Dr Hakimwadi Tenants' Assn. considered the issue of waiver/acquiescence by the non-parties to the proceedings and held: (SCC p. 65, paras 14-15) "14. In order to constitute waiver, there must be voluntary and intentional relinquishment of a right. The essence of a waiver is an estoppel and where there is no estoppel, there is no waiver. Estoppel and waiver are questions of conduct and must necessarily be determined on the facts of each case. ... 15. There is no question of estoppel, waiver or abandonment. There is no specific plea of waiver, acquiescence or estoppel, much less a plea of abandonment of right. That apart, the question of waiver really does not arise in the case. Admittedly, the tenants were not parties to the earlier proceedings. There is, therefore, no question of waiver of rights by Respondents 4-7 nor would this disentitle the tenants from maintaining the writ petition." 24. From what is argued by the appellants, at best it can be inferred that the borrower tried to thwart the earlier a....
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....r from waiving the aforesaid requirement, was to confront the bank by questioning its validity. It is a different matter that it had to withdraw the said writ petition in view of availability of alternate remedy. Immediately, it filed application under Section 18 of the SARFAESI Act. There is, thus, not even an iota of material suggesting any waiver on the part of the borrower. 26. The moment we find that the mandatory requirement of the Rules had not been waived by the borrower, consequences in law have to follow. As held in Mathew Varghese's case, when there is a breach of the said mandatory requirement the sale is to be treated as null and void. Moreover, the appellant have no answer to many other infirmities pointed out by the High Court. We, therefore, are of the opinion that present appeals lack merit. 27. Before we part with, it is imperative to mention that the purchaser has paid a sum of Rs.1.86 crores towards purchase of property and Rs.30 lakh towards moveable items to the Bank. He has also spent Rs.1,86,335/- towards registration fee and Rs.15,62,400/- towards stamp duty. In addition, dues towards municipal tax, Sales Tax liability, dues of Employees State Insuran....