T. V. Babu v. Calicut Co-operative Urban Bank & Ors

**“C.R.”** IN THE HIGH COURT OF KERALA AT ERNAKULAM ## PRESENT THE HONOURABLE THE CHIEF JUSTICE MR.HRISHIKESH ROY & THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR MONDAY, THE 5TH DAY OF NOVEMBER, 2018/14TH KARTHIKA, 1940 ## **W.A. No.1948 of 2017** AGAINST THE JUDGMENT IN WPC 11715/2007 DATED 27-05-2016 ## APPELLANT/PETITIONER: T.V.BABU, PARAYADATH HOUSE, EDAKKAD POST, KOZHIKODE - 673 005. BY ADV. SRI. P.B. KRISHNAN, ADV. SRI. P.M. NEELAKANDAN & ADV. SRI. P.B. SUBRAMANYAN. ## RESPONDENTS/RESPONDENTS: - 1 THE CALICUT CO-OPERATIVE URBAN BANK, KALLAI ROAD, 673 005 REPRESENTED BY ITS GENERAL MANAGER. - 2 THAYYIL REMA CHANDRASEKHARAN, W/O. CHANDRASEKHARAN, SMRITHI, 1/3050, P.O. WEST HILL, CALICUT-673005 - 3 BEENA PREMNATH, 1/3050, SRUTHI, KURUMBRAKKATTUSSERY DESOM, KACHERI AMSOM, KOZHIKODE TALUK, P.O. WEST HILL, CALICUT-673 005. - **R1** BY ADV. SRI. DEVAPRASANTH. J. ## **R2 & R3** BY ADV. SRI.A. RANJITH NARAYANAN THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 25.10.2018, THE COURT ON 05.11.2018 DELIVERED THE FOLLOWING: WA No.1948/2017 - 2 - ## **JUDGMENT** HRISHIKESH ROY, C.J. Heard Sri.P.B.Krishnan the learned counsel appearing for the appellant/writ petitioner. Also heard Sri.Devaprasanth, the learned counsel appearing for the Calicut Co-operative Bank (Respondent No.1). Sri.Ranjith Narayanan appears for Thayyil Rema Chandrasekhan and Beena Premnath (Respondent Nos.2 and 3), who are the auction purchasers, of the secured asset. 2. The Writ Petitioner, (hereinafter referred to as “borrower”), applied for a housing loan and the loan of Rs.1,50,000/- (Rupees One Lakh and Fifty Thousand) was granted to him by the respondent Bank. The borrower defaulted in repayment of the loan and consequently the Bank initiated the proceedings under the Kerala Co-operative Societies Act, 1969 and obtained an ex-parte award [Ext.R1(a)] from the Arbitrator. Thereafter the respondent Bank initiated proceedings under Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, (hereinafter referred to as “SARFAESI Act”), issued notice dated 8.1.2005 [Ext.R1(b)] followed by the possession notice in respect of the secured asset. Then the Authorised Officer of the Bank issued the sale notice on 11.6.2005 [Ext.R1(h)] under Section 13 of the SARFAESI Act read with Rule 8 of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as “the 2002 Rules”) fixing the reserve price for the secured asset at Rs.7,50,000/- (Rupees Seven Lakhs and Fifty Thousand) and WA No.1948/2017 - 3 - notifying that the said property will be sold on any date after expiry of 30 days' of the notice. 3. The case papers indicates that the secured asset was put up for sale on 28.9.2006 and invitation was published on 14.9.2006 in the Mathrubhumi News Daily [Ext.R1(r)] and in the Deshabhimani News Daily [Ext.R1(s)] respectively. 4. A single quotation for Rs.7,50,100/- (Rupees Seven Lakh Fifty Thousand and One Hundred) was offered by the Thayyil Rema Chandrasekharan (respondent No.2) and accepting the same the sale was confirmed in his favour by issuing the sale certificate, as per the procedure under the SARFAESI Act. 5. Aggrieved by the sale of the secured asset, the borrower filed the W.P.(C) No.11715 of 2007 challenging the proceedings initiated by the Bank under the SARFAESI Act. The Writ Petition which remained pending for nearly 9 years, was taken up for hearing in May 2016 but the learned Single Judge without going into the merits of the contentions, dismissed the matter on 27.5.2016 by declaring that the case stands answered against the Writ Petitioner, through the judgment dated 9.12.2015 in W.A.No.2607 of 2015 (M/s.Sundaram BNP Paribas Home Finance Ltd. v. Nisha). The learned Single Judge opined that exercise of jurisdiction under Article 226 would not be justified, to interfere with the proceedings under the SARFAESI Act. 6. The borrower then filed W.A.No.1948 of 2017 to challenge the dismissal of the Writ Petition but under the judgment dated 21.12.2017 the Writ Appeal was dismissed. The borrower then filed SLP No.6053 of 2018 to challenge WA No.1948/2017 - 4 - the High Court's judgment which was disposed of by the Supreme Court on 16.3.2018 granting liberty to the borrower to move the High Court, to consider the Writ Appeal on merit. Accordingly, the matter is placed before us. 7. The learned counsel Sri.P.B.Krishnan for the Appellant contends that the Bank did not issue any notice to the borrower as is mandated by Rule 8(6) of the 2002 Rules. While there is a statutory compulsion on the Authorised Officer of the Bank to issue to the borrower a notice of 30 days', for the sale of secured asset, in the instant case, no such notice under sub-rule (6) of Rule 8 was served on the borrower before the sale was effected. The counsel for the borrower additionally argues that the sale notice (6.9.2006) advertised in the newspaper on 14.9.2006 [Exts.R1(r) and R1(s)] would not legitimize the auction sale inasmuch as the notice under Rule 8(6) to the borrower is a mandatory requirement without which, the sale itself would be a nullity. 8. On the other hand, Sri.Devaprasanth, the learned counsel appearing for the Bank, would argue that the borrower had an alternate remedy under Section 17 of the SARFEASI Act, and therefore, the Writ Petition filed by the borrower against the proceedings under the SARFAESI Act and the sale effected under the 2002 Rules cannot be the subject matter of interference, by the writ court. 9. Representing the respondents 2 and 3, the learned counsel Sri.Ranjith Narayanan in his turn submits that they purchased the secured asset by making the offer (Rs.7,50,100/-) above the reserve price and since the sale has since been WA No.1948/2017 - 5 - confirmed and the certificate is issued to the buyer, there can be no justification to interfere with the sale at this stage. 10. Bearing in mind the above contention of the parties, it would now be appropriate to refer to the judgments cited before the court. The Supreme Court in Mathew Varghese v. Amritha Kumari, reported in (2014) 5 SCC 610, while considering the implication of the notice to the borrower under Rule 8(6) of the 2002 Rules declared that, until clear 30 days' notice is given to the borrower, no sale or transfer can be resorted to by the secured creditor. The Court also held that if a secured creditor cannot effect the sale in pursuant to a notice under Rule 8 of the 2002 Rules, for effecting a subsequent sale, the procedure of notice will have to be followed afresh since the notice issued earlier to the borrower would lapse. The relevant portion of the judgment in Mathew Varghese (supra) is extracted below: “...... ….. ….. ….. ….. ….. ….. ….. ….. …... ….. ….. …... ….. …....... 30. Therefore, by virtue of the stipulations contained under the provisions of the SARFAESI Act, in particular, Section 13(8), any sale or transfer of a secured asset, cannot take place without duly informing the borrower of the time and date of such sale or transfer in order to enable the borrower to tender the dues of the secured creditor with all costs, charges and expenses and any such sale or transfer effected without complying with the said statutory requirement would be a constitutional violation and nullify the ultimate sale. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. WA No.1948/2017 - 6 - 53. We, therefore, hold that unless and until a clear 30 days' notice is given to the borrower, no sale or transfer can be resorted to by a secured creditor. In the event of any such sale properly notified after giving 30 days' clear notice to the borrower did not take place as scheduled for reasons which cannot be solely attributable to the borrower, the secured creditor cannot effect the sale or transfer of the secured asset on any subsequent date by relying upon the notification issued earlier. In other words, once the sale does not take place pursuant to a notice issued under Rules 8 and 9, read along with Section 13(8) for which the entire blame cannot be thrown on the borrower, it is imperative that for effecting the sale, the procedure prescribed above will have to be followed afresh, as the notice issued earlier would lapse. In that respect, the only other provision to be noted is sub-rule (8) of Rule 8 as per which sale by any method other than public auction or public tender can be on such terms as may be settled between the parties in writing. As far as sub-rule (8) is concerned, the parties referred to can only relate to the secured creditor and the borrower. It is, therefore, imperative that for the sale to be effected under Section 13(8), the procedure prescribed under Rule 8 read along with Rule 9(1) has to be necessarily followed, inasmuch as that is the prescription of the law for effecting the sale as has been explained in detail by us in the earlier paragraphs by referring to Sections 13(1), 13(8) and 37, read along with Section 29 and Rule 15. In our considered view any other construction will be doing violence to the provisions of the SARFAESI Act, in particular Section 13(1) and (8) of the said Act. ...... ….. ….. ….. ….. ….. ….. ….. ….. …... ….. ….. …... ….. ….......” 11. In the subsequent decision in J. Rajiv Subramaniyan v. Pandiyas reported in (2014) 5 SCC 651, the Supreme Court while approving the ratio in Mathew Varghese (supra) had categorically declared that sale effected without WA No.1948/2017 - 7 - complying with the requirements of Rules 8 and 9(1) of the 2002 Rules would be unconstitutional and therefore, null and void. 12. In the more recent decision in Canara Bank v. Amarender Reddy, 2017 (2) KLT SN 18 (Case No.26) SC, the Supreme Court again had occasion to examine the procedure for sale of the secured asset, prescribed under Rules 8(6) and 9 of the 2002 Rules. It was then observed that, it is permissible to simultaneously issue notice to the borrower about the intention to sell the secured assets and also to issue a public notice for sale of such secured asset, but this is made subject to the restriction of providing 30 days' time gap between the sale notice and date of sale. 13. In the present case, there is no dispute on the fact that sale of the secured asset was conducted, without the mandatory 30 days' notice to the borrower. It therefore follows from the above cited decisions of the Supreme Court that such sale without informing the time and date of the sale to the borrower, would be unconstitutional and hence, null and void. In the same context, it has to be specifically said that the sale notice(s) advertised in the newspaper does not satisfy the requirement of the Rule 8(6) notice to the borrower. The question then to be considered next is whether the Bank's plea for alternate remedy can be a reason for dismissal of the borrower's writ petition. 14. This Writ Petition was filed to challenge the process of sale of the secured asset leading upto the Ext.P3 order (30.1.2007) and the subsequent proceedings under Section 14 of the SARFAESI Act, by the Chief Judicial Magistrate Court, Kozhikode in the CMP No.4191 of 2006 whereby, the borrower WA No.1948/2017 - 8 - was directed to handover vacant possession of the secured asset to the Bank. The challenge was made as early as in April 2007 but the case remained pending in the Court until it came to be dismissed abruptly on 27.5.2016. As can be seen, the Writ Petition was admitted notwithstanding the statutory remedy, provided by the SARFAESI Act and the 2002 Rules, and the case was pending for about nine years in the High Court. In such circumstances, it would be highly inequitable according to us, to dismiss a long pending case on the plea of alternate remedy being available. That apart the dismissal of the case was on account of the non-desirability of entertaining a matter where there is a factual dispute. But, in the case in hand, it is not the case of secured creditor that due notice was served on the borrower, as is mandated by Rule 8(6) of the 2002 Rules leading to the sale effected on 28.9.2006. As was noted earlier, the law enunciated by Supreme Court make it amply clear that sale without complying the requirement of 30 days' notice to the borrower is, null and void. If the sale itself is a nullity, neither the purchaser nor the secured creditor can legitimately contend that sale should be left undisturbed by the Court. If a notice would have been issued to the borrower he could have liquidated his dues to the Bank but such an option was not made available before the sale was effected. Moreover, the consideration (Rs.7,50,000/-) offered by the purchaser was just Rs.100/- above the reserve price whereas the secured land with the house, would certainly be worth much more. These aspects cannot be brushed aside lightly. 15. In the above backdrop, since the borrower was not given the required notice, interference with the legally invalid sale is found to be justified and accordingly the Writ Appeal has to be allowed by setting aside the sale with consequential relief to the appellant. In view of such conclusion, another WA No.1948/2017 - 9 - opportunity would become available to the borrower, to redeem the mortgage and accordingly, he may avail the same within a reasonable time, say 8 weeks from today. But, if they do not discharge their loan obligation in the next 8 weeks, the Bank is at liberty to sell the secured assets, through due process. It is ordered accordingly. 16. With the above order, the impugned judgment dated 27.5.2016 being unsustainable, is quashed. The W.P.(C) No.11715 of 2007 stands allowed. The Writ Appeal is disposed of accordingly. Sd/- **HRISHIKESH ROY, CHIEF JUSTICE.** Sd/- **A.K.JAYASANKARAN NAMBIAR, JUDGE.** (True copy) DK