CANARA BANK v. M/s Kiranmayee And Anr

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2. Feeling aggrieved, the Bank preferred this Appeal.

3. As per the pleadings Respondent No. 1 availed an overdraft facility from the Appellant Bank in 2007. Respondent No. 2 was the guarantor. Loan account became irregular and was classified as NPA on 30.09.2011. Respondent No. 1 (SARFAESI Applicant) came to know about the auction proceedings through paper publication. He has filed the SARFAESI Application under Section 17 of the SARFAESI Act stating that the mandatory provisions of the Act and Rules have not been complied with by the Bank. There is violation of Rule 9(3) 9(4) of the Security Interest (Enforcement) Rules 2002 (hereinafter referred to as the Rules). Auction conducted on 21.11.2015 is not a legal auction and the same be set aside.

4. Appellant Bank submitted that the loan was rightly classified as NPA. Notices under Section 13(2), 13(4) of the SARFAESI Act were issued in accordance with law. Property was put to auction on 21.11.2015 in favour of the second Respondent who deposited the 10% of the bid amount before participation in auction and 15% on the date of auction. Remaining 75% of the bid amount was deposited on 23.12.2015 and property was delivered to him. After issuance of sale certificate on 25.02.2016, Respondent No. 2 did not appear before the Ld. DRT.

5. After hearing the Learned Counsel for the parties and perused the record, Ld. DRT recorded a finding that there is a violation of Rule 9(4) of the Security Interest (Enforcement) Rules. Accordingly, auction sale held on 21.11.2015 was set aside. SARFAESI Application was dismissed in respect of possession notice dated 09.03.2012. Bank was given liberty to proceed afresh in accordance with law for auction of the property.

6. Feeling aggrieved Appellant Bank preferred the Appeal.

7. I have heard the Learned Counsel for the Appellant. Despite notice Respondent did not appear. I have also perused the record.

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8. Learned Counsel for the Appellant mainly pressed the Appeal on the point that there was no violation of Rule 9(4) of the Security Interest (Enforcement) Rules. Time was extended by the secured creditor. There was no necessity to take consent of the borrower for extending the time. It is further submitted that all the other findings are in favour of the Bank. Hence, the Ld. DRT has wrongly recorded a finding of violation of Rule 9(4) of the Security Interest (Enforcement) Rules.

9. Ld. DRT had framed the following two issues for adjudication.

(i) Whether the Appellant made out any valid ground for quashing the possession notice dated 09.03.2012, notice prior to sale deed dated 15.10.2015 and the auction held on 21.11.2015.

(ii) To what relief. Ld. DRT recorded a finding that the notice under Section 13(2) and 13(4) were issued in accordance with law. As far as violation of Rule 9(4) is concerned, it was held that the time was extended without the knowledge and consent of the SARFAESI Applicants. Therefore, there was a violation of Rule 9(4) of the Rules.

10. It may be brought on record that no appeal against the findings recorded by the Ld. DRT is filed by the borrower. Hence, so far as the findings regarding dismissal of SARFAESI Application for violation of mandatory Rules is concerned, they attained finality.

11. Only challenge is made by the Appellant Bank for violation of pre amended Rules. It would be appropriate that pre amended Rule 9(4) of the Security Interest (Enforcement) Rules 2002 is applicable in this case as the auction was held on 21.11.2015, pre amended Rule 9(4) of the Security Interest (Enforcement) Rules reads as under:

"(4) The balance amount of purchase price payable shall be paid by the purchaser to the authorized officer 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."

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12. As far as facts are concerned, 75% of the purchased price was not deposited by the auction purchaser within 15 days upon confirmation of sale. On the request of the auction purchaser, 15 days time was extended by the Bank for deposit of 75 % of the auction price. It is an admitted fact that consent of the borrower was not obtained at the time of extension of the time.

13. It was held by the Hon'ble Apex Court in the Case of Varimadugu OBI Reddy Versus B. Sreenivasulu & ors (2023) 2 SCC 168 wherein reliance was placed on General Manager, Sri Siddeshwara Cooperative Bank Limited Vs. Ikbal and others (2013) 10 SCC 83 and it was held that -

"The period which is referred to in Rule 9(4) is not that sacrosanct and may be extended if there is a written agreement between the parties and since parties to the written agreement is not defined in Rule 9(4), this Court was of the view that it covers in its fold the secured creditor, the auction purchaser and the borrower, but later the legislature taking into consideration the judgment of this Court made its intention clear by making an appropriate amendment in Rule 9(4) of the Rules, 2002 which came into effect by a notification dated 3^rd November, 2016 effective from 4^th November, 2016."(emphasis supplied)

14. Admittedly the consent of the borrower was not sought at the time of extending the time which was mandatory. Accordingly, I am of the view that the Ld. DRT has arrived at a right conclusion that there was a violation of Rule 9(4) of the un amended Rule of the Security Interest (Enforcement) Rules, 2002. Accordingly, Appeal lacks merit and is liable to be dismissed.

ORDER

Appeal is dismissed. Judgment of Ld. DRT dated 29^thJanuary, 2019 is confirmed.

No Order as to costs.

File be consigned to Record Room.

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Copy of the order be supplied to Appellant and the Respondents and a copy be also forwarded to the concerned DRT.

Copy of the Judgment/ Final Order be uploaded in the Tribunal's Website.

Order signed and pronounced by me in the open Court on this the 18^thday of July, 2023.

(Anil Kumar Srivastava,J)

Chairperson

Dated: 18^thJuly, 2023

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