TaxTMI 
TaxTMI 
2026 (9) TMI 1834
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....titions, is whether any infraction of mandate contemplated under Rule 9 of The Security Interest (Enforcement) Rules, 2002 ('Rules, 2002', for short), vitiates the sale of immovable property secured by the Bank. The Law on this point is no more res-integra in view of latest decision by the Supreme Court in M.R.VASUMATHI VS. AUTHORIZED OFFICER AND OTHERS (2026 SCC ONLINE SC 1103) 2. The Supreme Court under sub-heading (II) Consequence of non-compliance, which reads from paragraph Nos.35 to 41, held that any infraction or non-compliance of mandate contained under Rule supra is fatal to the auction sale and accordingly, set-aside the auction sale conducted in respect of secured asset. 3. The sub-heading II. CONSEQUENCE OF NON-COMPLIANCE, from paragraph Nos.35 to 41 reads as under: "II. CONSEQUENCE OF NON-COMPLIANCE 35. The DRT, the DRAT and the High Court appear to have proceeded on a broader premise of consideration of delay, conduct of the borrower, and the perceived equities in favour of the auction purchaser. Equally, it is true that the record bears out that no concrete steps were ultimately taken by the appellant, who is the daughter of the deceased guara....
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....d by statutory non-compliance cannot otherwise be sanctified on such considerations. 39. The property in question belonged to G. Ramanujam, the deceased guarantor, and upon his demise, vested in his legal heirs. Such heirs cannot be divested of their lawful interest except in accordance with a procedure that is fair, just and in strict conformity with the governing statute, i.e., the SARFAESI Act and the SARFAESI Rules. CONCLUSION 40. In view of the foregoing discussion, the appeal deserves to be allowed in part and is, accordingly, allowed to the extent mentioned hereafter. The impugned judgment and order passed by the High Court is set aside, as are the orders passed by the DRAT and the DRT. 41. Consequently, the auction sale conducted in respect of the secured asset stands quashed and set aside." 4. The present Writ Petitions are filed seeking following reliefs: W.P.No.36694/2017: a. to quash the order dated 27/7/2017 in IA No.204/2015 in AIR (SA) 81/2015 passed by the Hon'ble DRAT Chennai vide ANNEXURE-H. b. to direct the DRAT, Chennai to entertain the appeal AIR (SA) 81 of 2015 filed by the petitioners and pass or....
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....ted 24.8.2017 in IA No.1339/2017 and 27.7.2017 in AIR (SA) 441/2014 passed by the DRAT Chennai vide ANNEXURE-G and F. b. to direct the 1st Respondent SARFAESI proceedings initiated between 14.5.2010 to 07.01.2013, for the account declared as NPA on 30.9.1999 is bad in law, vide Annexure-C and L. c. to direct the office of Sub-Registrar, Basavanagudi (Chamarajapet) Bangalore, to cancel the sale certificate issued by the 1st Respondent vide Annexue-C registered Document No. CMP-1-06460-2012-13 stored in CD No.CMPD 73. d. to pass such order or other orders that this Hon'ble Court deems fit and proper in the circumstances of the case in the interest of justice and equity. 5. Facts in brief are as under: AS PER PETITIONERS: 5.1 The second petitioner is a Women Entrepreneur, dealing in the printing and publishing business in the name and style of M/s. DELTA PRINTING HOUSE. Petitioner Nos.1 & 3 and 4 are the legal heirs of A.P. Mahesh (demised on 06.04.2022) who was the Guarantor to the loan availed from Andhra Bank, Hyderabad. In order to expand her business, petitioner No.2 availed loan credit facilities i.e., (i) Term Loan-I Rs. 3,38 Lak....
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....0,000/- and Distress Value of Rs. 1,51,00,000/- in respect of 6,200 Sq.ft instead of 8,200 Sq.ft, without the valuer visiting the property. 5.9 On 25.06.2011, the respondent Bank again obtained the valuation of Market Value and fixed at Rs. 1,89,20,000/- and Distress Value abruptly reduced to Rs. 1,41,00,000/- in respect of the very same measurement of the property stated supra. 5.10 The petitioners further claim that on 01.07.2011, the Bank issued the Sale Notice to sell the mortgaged property under the SARFAESI Act. An appeal came to be filed in Appeal SA No.359/2011, calling in question the Sale Notice before the DRT, Bengaluru. The petitioners also filed an application in No. IR 1758/2011 seeking stay of the public auction to be conducted in respect of the mortgaged property. 5.11 On 28.07.2011, the DRT, Bengaluru while disposing of the application No. IR 1758/2011 for stay, permitted to conduct the sale and also directed the respondent Bank not to confirm the sale till the disposal of SA No.359/2011, which was the subject matter in W.P.No.29172-73/2011. This Court on 02.08.2011, disposed of the Writ Petition with a direction that the Bank shall not open the Bids recei....
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....articipated i.e., respondent No.3 Dr. Vani and her husband. As per the petitioners, the husband of respondent No.3 who was another bidder showed no interest in participation. The bid was opened, wherein respondent No.3 was the only bidder available, the property was sold in favour of the bidder by the authorized officer by confirming the Sale. However, the interim order granted earlier in W.P.No.37925-26/2011 continued thereafter also, which we have already extracted above. 5.15 In a strange move, on 05.01.2013, demand drafts were purchased by respondents 3 and 4 even before sale confirmation from Hyderabad and on 07.01.2013, in the teeth of interim order supra, violating the same, the sale was confirmed and Sale Certificate was issued on 08.01.2013 after a lapse of 448 days. 5.16 On 11.01.2013, this Court in W.P.No.37925-26/2011 issued an additional Interim order not to take coercive action, however the Bank never disclosed regarding issuance of Sale Certificate on 08.01.2013. Thereafter, on 16.07.2014, the Writ Petitoin supra came to be disposed of directing the petitioners to approach the Banking Ombudsman. The Banking Ombudsman upon approaching, declined to entertain the ....
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....25-26/2011 that, the bids shall not be opened by the respondent Bank till the next date of hearing. Though the order has been communicated to the Bank, in blatant violation of the order, the Bank opened the bid and after a lapse of 448 days, issued Sale Certificate accepting the amount. The proceedings culminated in the teeth of interim order in blatant violation are all void and non-est in the eye of law. Secondly, if the bid is opened according to the Bank, only for argument sake but without admitting that, earlier to intimation of interim order, there is a blatant infraction with the mandate contained under Rule 9 of Rules, 2002. In that view of the matter, on both the counts the entire auction sale transaction in favour of respondent No.3 gets vitiated and requires to be set-aside and rests his case. AS PER RESPONDENTS: 8. Sri. T. P. Muthanna, learned counsel appearing for the Bank with all vehemence submits that the Bank opened the Sealed bids on 14.10.2011 at 11:00 am, whereas the interim order was communicated late in the evening of the said day. As such, the further action was not contemplated. Thereafter, on 07.01.2013, the Sale Certificate was issued confirming the ....
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....e highest bidder, declared as successful bidder and the secured property mortgaged, was sold in her favour. The interim order thereafter was communicated late in the evening, this was the reason for the Bank to communicate as well as the auction purchaser not to deposit the amount till 07.01.2013. In that view of the matter, the delay caused is due to the interim order and not otherwise. 12. We have perused the interim order and extracted the same afore. The interim order states that the bid shall not be opened. Even the case of the Bank that, the bids have been opened much earlier to granting of interim order i.e., at 11:00 am, as it is as there is no further order not to proceed with the sale transaction, the auction purchaser and the Bank ought to have adhered to the mandate contemplated under Rule 9 of Rules, 2002. The Bank as well as the auction purchaser cannot blow both hot and cold. At one breathe, they say that they have opened the bid and at another, they contend that the delay is caused due to the interim order. This double contradicting statement cannot be countenanced. 13. On a query as to, whether either the Bank or the auction purchaser, who appeared before the....
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....thwith be resold. Further, the balance of purchase price is required to be paid within the fifteenth day of confirmation of sale or within such written agreed extended time, failing which the deposit shall stand forfeited. Also, in such a case, the purchaser would forfeit all his claims either to the property or to any part of the sum for which such property may subsequently be sold. 27. The aforesaid legal position finds lucid expression in Sri Siddeshwara Cooperative Bank Ltd. v. Ikbal, as follows: *** 13.3. Sub-rule (3) lays down that on every sale of immovable property, the purchaser shall immediately make the deposit of 25% of the amount of the sale price. In default of such deposit, the property shall forthwith be sold again. 13.4. Sub-rule (4) provides that the balance amount of purchase price payable shall be paid by the purchaser on or before the fifteenth day of confirmation of sale of the immovable property or such extended period as may be agreed upon in writing between the parties. 13.5. Sub-rule (5) makes a provision that if the balance amount of purchase price is not paid as required under sub-rule (4), then the deposit sh....
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....visions contained in Rule 9(3) and Rule 9(4) being for the benefit of the secured creditor (or for that matter for the benefit of the borrower), the secured creditor and the borrower can lawfully waive their right. These provisions neither expressly nor contextually indicate otherwise. 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. (emphasis ours) 28. Even upon a cursory perusal of Rule 9 of the SARFAESI Rules that existed at the time of the impugned sale, it is clear that these provisions are neither ornamental nor directory; they are couched in mandatory terms and go to the root of the validity of the sale. A conjoint reading of the relevant sub-rules of Rule 9 underscore the mandatory character of these provisions, particularly accentuating the requirement of balance deposit under sub-rule (4), which is integral to the sanctity and credibility of the auction mechanism. Any deviation therefrom, absent legally sustainable justification, would render the process vitiated. 29. The factual position, as is borne out from the extant record, is not in serious dispute....
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....re was any prayer for extension of time made by the auction purchaser at any time prior 2024 SCC OnLine SC 2878 to 31.03.2010 or that any written agreement extending the time was entered into by and between the secured creditor and the auction purchaser. 34. The aforesaid legal position leads us to the examination of the consequence of non-compliance with the statutorily ordained timeline, in the absence of any record of written agreement between the secured creditor and the auction purchaser in the present factual matrix." 16. In view of the afore, applying the same to the case on hand, the bid was opened on 14.10.2011 declaring respondent No.3, the only bidder as her husband opted out, as successful bidder. The purchaser ought to have deposited the entire amount in terms of Rules which were existing as on the date i.e., prior to 2016 amendment, 25% within 24 hours and 75% within 15 days from the date of Sale confirmation. There is nothing on record to show that any attempt was made by the auction purchaser to make the payment without prejudice to the right, even if it is taken as it is that there is an interim order operating. 17. It is very germane to point out he....