Allowed

Ikf Technologies Ltd. and Ors. v. Uco Bank

DRAT20 Jan 2023MISC APPEAL/301/2022

Case brief

AI extract

What is this about?

The Appellate Tribunal quashed an auction scheduled for 20.01.2023 for non-compliance with a previous order requiring a stay contingent on appeal pendency and for violating the mandatory fifteen-day notice period under Rule 9(1) of the Security Interest Enforcement Rules, 2002.

What did the court decide?

Directed the respondent bank not to conduct the auction slated for 20.01.2023 at 2:00 p.m.

Ikf Technologies Ltd. and Ors. versus Uco Bank — Execution and Attachment | DRAT (2023)

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DEBTS RECOVERY APPELLATE TRIBUNAL, DELHI

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Misc. Appeal No.301/2022

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Arising out of TSA No.337/2022 (DRT-II, Delhi)

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IKF Technologies Ltd. &Ors. Vs.

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UCO Bank

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20.01.2023 Hon’ble Mr. Justice Brijesh Sethi

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Present: Ms. Seema Gupta, Ld. Counsel for appellants.

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Mr. Brijesh Kumar Tamber, Ld. Counsel for respondent bank.

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Order (Oral)

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I.A. No. 39/2023

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This is an application under Section 17(7) of the SARAFAESI Act read with Section 19(17), 19(25) & Section 22 of RDB Act for seeking quashing/cancellation of the auction dated 23.12.2022 and auction dated 20.01.2023 thereby initiating appropriate contempt proceedings against the authorized officer of the respondent bank due to noncompliance/ willful disobedience of the order dated 21.12.2022 of this Tribunal as well as non-compliance of the provisions of SARFAESI Act and the rules framed thereunder.

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It is submitted that the appellant had filed the aforesaid appeal against the impugned order dated 05.11.2022 of the Ld. DRT-II, Delhi passed in TSA No. 337/2022 which was heard finally on 21.12.2022 by the Tribunal and judgement was reserved. However, while reserving the judgement this Tribunal had clarified that confirmation of the auction proceedings to be held on 23.12.2022 would be subject to outcome of the decision

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Misc. Appeal No. 301/2022 – IKF Technologies Ltd. Vs. UCO Bank

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Page-1

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of the Tribunal in the appeal and the respondent bank was directed to bring to the knowledge of the proposed bidders that confirmation of auction will be subject to outcome of the decision in the appeal.

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It is submitted that the appellants had neither received any sale notice under Rule 8(6) of Security Interest Enforcement Rules 2002 from the Respondent bank for the date of auction dated 23.12.2022 nor was having any notice regarding giving information to the prospective bidders about the auction to be held on 23.12.2022. However, it was transpired that auction held on 23.12.2022 had failed regarding two mortgaged properties situated at Jaipur, Rajasthan and PachimVihar, Delhi. As such, through the email dated 28.12.2022 of the respondent bank, the appellants no.1, 5 & 7 had received information regarding fresh auction of the mortgaged properties on 20.01.2023.

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It is submitted that appellant No.1 vide its letter dated 13.01.2023 sent a request through email to the Chief Manager of respondent bank at its Salt Lake Branch, Kolkata for making available the details of the auction such as the bids received for the Udaipur property as well as details of the auction along with copies of the advertisement in the newspaper besides requesting for appointment to settle the account but no response was received from the respondent bank. However, through affixation of the sale notice on one of the property at A-3/3A, Green Apartments, Paschim Vihar, New Delhi-110063, it came to the knowledge of the appellants that respondent bank had issued e- auction sale notice for the date of auction i.e. 20.01.2023. But the respondent bank had neither complied with the provisions of SARFAESI Act and the rules framed there-under nor followed the direction

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Misc. Appeal 301/2022 – IKF Technologies Ltd vs. UCO bank Page2

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contained in the order dated 21.12.2022 of this Tribunal which had directed the respondent bank to bring to the knowledge of the proposed bidders that confirmation of sale will be subject to the outcome of the decision in the appeal. As such, the authorized officer of the respondent bank as well as the respondent bank had blatantly flouted the order dated 21.12.2022 of this Tribunal.

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It is submitted that the respondent bank is required to serve the notice as per Rule 8(6) of Security Interest Enforcement Rules 2002 while putting the mortgaged property to sale/auction. However, no notice under Rule 8(6) of Security Interest Enforcement Rules 2002 was received by the appellants including appellants no.1, 5 and 7 who are the owners of the properties being put to illegal sale/auction by the respondent bank.

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It is submitted that the respondent bank is further required to publish the sale notice in English and Hindi Newspapers having wide circulation in the locality. It is not known as to when and how the respondent bank had taken out the public notice of auction as per the mandatory direction of this Tribunal vide order dated 21.12.2022.

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Ld. Counsel for appellants further submits that as per directions given by this Tribunal vide order dated 21.12.2022 the respondent bank has to inform through sale notice to public at large that auction will be outcome of the appeal but the respondent has violated and shown willful disobedience of the order dated 21.12.2022. The respondent bank had not informed the intending bidders about the pending appeal before this Tribunal while putting the property to auction on

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23.12.2022 and therefore the alleged auction if any conducted on 23.12.2022 regarding Udaipur property is in teeth of order dated 21.12.2022 of this Tribunal and therefore liable to be set-aside/canceled by this Tribunal.

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Ld. Counsel for appellant further stated that no sale notice as per Rule 8(6) and Rule 9(1) of the SARFAESI Act was served upon the appellants in compliance of the mandatory provision of the SARFEASI Act and rules framed thereunder and therefore the sale/auction fixed on 20.01.2023 is liable to be set aside/canceled/quashed by this Tribunal and the authorized officer of the respondent bank is liable to be prosecuted or to be held in contempt by this Tribunal.

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On the other hand, the Ld. Counsel for respondent bank stated that appellants had given advance notice before putting the properties on auction however, it is admitted facts that corrigendum has been issued on 10.01.2023 by the respondent bank to inform public at large about the pendency of the appeal before this Tribunal and sale/auction will be subject to the decision on the appeal.

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Heard. Reply of the I.A. has not been filed by the respondent bank. The auction is slated at 2:00 p.m. today itself. It is 1:00 p.m. now. This court has to pronounce the order.

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The present appeal has been filed by the appellants to challenge the impugned Interim Order dated 15.11.2022 passed by Ld. PO, Debt Recovery Tribunal-III, Delhi holding additional charge of DRT-II, Delhi, in the Securitization Application bearing TSA

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No.337/2022 filed by the appellants to challenge the securitization action of the Respondent bank against the auction which was scheduled for 23.12.2022. This Tribunal vide order dated 21.12.2022 directed the respondent bank to proceed for the auction but confirmation of auction will be subject to the outcome of the decision in the appeal and with the above direction the appeal was reserved for order. The operative portion of the order dated 21.12.2022 runs as follows:

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“………The arguments on the appeal have been heard in details for more than two hours. Judgment is reserved. It is, however, hereby clarified that confirmation of the auction proceedings to be held on 23.12.2022 will be subject to the outcome of the decision of this Tribunal in the appeal. The respondent bank is also directed to bring it to the knowledge of proposed bidders that confirmation of auction will be subject to outcome of the decision in the appeal.”

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Now, the appellants have filed the present I.A. No. 39/2023 against the sale/auction which is scheduled to be held on 20.01.2023 raising the objections that the authorized officer of the respondent bank has committed disobedience and non-compliance of the order dated 21.12.2022 passed by this Tribunal and put the properties on auction without following the mandatory procedures as laid down Rules 8(6), 8(7) and 9(1) of the Security Interest (Enforcement) Rules, 2002 wherein clear 15 days’ notice has to be served to the borrower. The Rules 8(6), 8(7) and 9(1) of the Security Interest (Enforcement) Rules, 2002 runs as under:-

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“8. Sale of immovable secured assets. (6) The authorized officer shall serve to the borrower a notice

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of thirty days for sale of the immovable secured assets, under sub-rule (5);

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3[Provided that if the sale of such secured asset is being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice in the Form given in Appendix IV-A to be published in two leading newspapers including one in vernacular language having wide circulation in the locality.]

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[(7) Every notice of sale shall be affixed on the conspicuous part of the immovable property and the authorised officer shall upload the detailed terms and conditions of the sale, on the web-site of the secured creditor, which shall include;

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(a) the description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor;

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(b) the secured debt for recovery of which the property is to be sold;

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(c) reserve price of the immovable secured assets below which the property may not be sold;

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(d) time and place of public auction or the time after which sale by any other mode shall be completed;

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(e) deposit of earnest money as may be stipulated by the secured creditor;

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(f) any other terms and conditions, which the authorized officer considers it necessary for a purchaser to know the nature and value of the property.]

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9. Time of sale, issue of sale certificate and delivery of possession, etc.- [(1) No sale of immovable property under these rules, in first instance shall take place before the expiry of thirty days from the date on which the public notice of sale is published in newspaper as referred to in the proviso to sub-rule (6) of rule 8 or notice of sale has been served to the borrower:

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Provided further that if sale of immovable property by any one of the methods specified by sub-rule (5) of rule 8 fails and sale is required to be conducted again, the authorized officer shall serve, affix and publish notice of sale of not less than fifteen days to the borrower, for any subsequent sale.]”

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In the present case the respondent bank has issued a corrigendum on 10.01.2023 that the confirmation of the sale/auction to be held on 20.01.2023 will be subject to the outcome of this appeal which is obviously short of 15 days as mandated in the aforesaid rules. Therefore, the auction to be held on 20.01.2023 is liable to be set aside on this sole ground alone. Accordingly, the respondent bank is directed not to conduct the auction slated on 20.01.2023 at 2:00 p.m.

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With the above direction the I.A. No. 39.2023 stands disposed of.

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The order in main appeal stands reserved. However, nothing expressed herein shall tantamount to expression of the opinion on the merits of the main appeal.

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(Justice Brijesh Sethi) CHAIRPERSON.

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Misc. Appeal 301/2022 – IKF Technologies Ltd vs. UCO bank Page7

Ikf Technologies Ltd. and Ors. v. Uco Bank

Case brief

What is this about?

What did the court decide?

Ikf Technologies Ltd. and Ors. v. Uco Bank

Case brief

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What did the court decide?

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