The appellate tribunal set aside the e-auction sale notice for violating Rule 9(1) of the Security Interest (Enforcement) Rules, 2002. However, it quashed the lower court's direction to restore possession because the challenge to it was time-barred under Section 17 of the SARFAESI Act.
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Appeal No.102 of 2024 -DRAT-Kolkata
IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT
KOLKATA
HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA CHAIRPERSON
Appeal No. 102 of 2024
(Arising out of S.A. No. 17 of 2024 in DRT, Guwahati)
.…Appellants
-Versus-
Counsel for Appellants
Mr. Dipanjan Dutta, Mr. Subhajit Chowdhury, Learned Counsel
Counsel for Respondents Mr. Ashok Kumar Singh, Mr. Pritam Das, Mr. Madhusudan Sarder, Learned Counsel
JUDGMENT : 9th July, 2025
THE APPELLATE TRIBUNAL :
Heard the Learned Counsel for the parties and perused the records.
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Appeal No. 102 of 2024-DRAT-Kolkata 2. Instant Appeal has arisen against a judgment and order dated 21st June, 2024 passed by Learned DRT Guwahati in S.A. No. 17 of 2024 along with I.A. No. 61 of 2024 (Nirupama Devi versus Bank of Baroda) whereby Learned DRT allowed the Securitisation Application and further directed the Bank not to proceed for sale on the basis of auction sale Notice dated 05.01.2024 with a further direction to restore the possession of the secured assets to the Securitisation Applicants.
3. Feeling aggrieved by the impugned order, Appellant preferred the Appeal.
4. As far as facts are concerned, the Respondents herein namely Nirupama Devi was a guarantor. The credit facility was availed by Smt. Bagmita Sarma from the Appellant Bank. Loan account became irregular and was classified as NPA. Notice under Section 13(2) of the SARFAESI Act, 2002 (hereinafter referred to as the Act) dated 02.09.2019 was issued. Thereafter, possession notice dated 08.11.2019 was issued under Section 13(4) of the SARFAESI Act, 2002. Both the notices were challenged in the Securitisation Application.
5. It appears that S.A. No. 127 of 2019 was filed by Smt. Bagmita Sarma, borrower challenging the notice under Section 13(2) of the Act dated 02.09.2019 and Possession Notice dated 08.11.2019 which ultimately was dismissed in default on 19.10.2023. Thereafter, the Respondent herein preferred the present S.A. No. 17 of 2024 challenging the fresh auction sale notice dated 05.01.2024 published on
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Appeal No. 102 of 2024-DRAT-Kolkata 06.01.2024 on the ground of violation of mandatory provisions of Rule 8(6) and 9(1) of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as the Rules). A challenge to the valuation assessed by the Authorised Officer was also made.
6. Appellant Bank filed the written objection stating that the Securitisation Application is not maintainable in view of the fact that earlier S.A. No. 127 of 2019 was dismissed. Another S.A. No. 05 of 2021 was filed by the son of the Respondent herein which too was dismissed. Boundaries of the secured assets were admitted in the earlier Securitisation Application. Principles of Estoppel and waiver will be applicable. Notices under Section 13(2) and 13(4) of the SARFAESI Act, 2002 were duly issued and served and published in accordance with law. Physical possession of the secured assets was taken on 05.02.2021 which was also permitted in S.A. No. 05 of 2021. Possession was taken under Section 14 of the Act and O.A. No. 193 of 2020 also decided in favour of the Bank on 07.08.2023. Auction sale notice was duly issued and published and served in accordance with law. Learned DRT after hearing the Learned Counsel for the parties recorded a finding that service of notice under Section 13(4) of the Act. could not be established by the Bank. Accordingly, quashed the notice under Section 13(4) of the Act. Further, Learned DRT arrived at a finding that the auction sale notice dated 05.01.2024 is not in accordance with law and there is violation of Rule 8(6) and 9(1) of the Security Interest
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Appeal No. 102 of 2024-DRAT-Kolkata (Enforcement) Rules, 2002. Accordingly, Securitisation Application was allowed. Auction sale notice dated 05.01.2024 was quashed with a further direction to Appellant Bank to restore the possession of the secured assets to the Applicants.
7. Feeling aggrieved by the impugned judgment, Appellant Bank preferred the Appeal. 8. Learned Counsel for the Appellant would submit that the Learned DRT has erred in quashing the Notice under Section 13(4) of the Act issued by the Bank. The challenge to the same was expressly barred by Limitation. The same was well within the knowledge of the Appellants which was also challenged in the earlier S.A. No. 127 of 2019. Accordingly, challenge made in this Securitisation Application to the Notice under Section 13(4) of the Act and the findings thereon are against law. 9. It is further submitted that auction sale notice was issued and published and served in accordance with law. It is further submitted that the Learned DRT erred in issuing a direction for restoration of the possession as the notice under Section 13(2) and 13(4) of the Act were duly issued, published and served. There is no dispute on the issue that the Application is covered under the definition of borrower. It is further submitted that the present Securitisation Application is barred by the principles of res judicata as earlier S.A. No. 127 of 2019 was dismissed on 19.10.2023. 10. Per contra, Learned Counsel for the Respondent would submit that the Learned DRT had rightly arrived at a
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Appeal No. 102 of 2024-DRAT-Kolkata conclusion that the notice under Section 13(4) of the Act. was not duly served upon the Respondents. It is further submitted that there is violation of Rule 8(6) and 9(1) of the Security Interest (Enforcement) Rules, 2002. Accordingly, Learned DRT has rightly set aside the auction sale notice and directed the Bank to restore the possession of the secured assets.
11. Learned DRT allowed the Securitisation Application mainly on two counts. Learned DRT arrived at a conclusion that the notice under Section 13(4) of the Act was not duly served.
12. As far as other findings are concerned, I am constrained to observe that these findings are patently against the law. Admittedly, the Respondents were well within their knowledge of the possession notice dated 08.11.2019 which was challenged in S.A. No. 127 of 2019 by Ms. Bagmita Sarma who was the principal borrower. Respondent herein is the guarantor and mortgagor of the same. Hence, covered under the definition of borrower. When the possession notice was within the knowledge of the Respondents herein in the year November, 2019, then they could have challenged the same within 45 days as required under Section 17 of the Act. But the challenge was made in S.A. No. 127 of 2019 which was subsequently dismissed in default. Now the challenge to the possession notice dated 08.11.2019 in the present Securitisation Application squarely barred by the principles of law of Limitation. Further, as far as question of res judicata is concerned, it would not be
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Appeal No. 102 of 2024-DRAT-Kolkata applicable in the present case as S.A. No. 127 of 2019 was dismissed in default and not dismissed on merits. Accordingly, principles of res judicata will not be applicable in this case. So, the findings of the Learned DRT regarding quashing of Notice under Section 13(4) of the Act is liable to be set aside.
13. As far as question of e auction Sale Notice dated 05.01.2024 published on 06.01.2024 is concerned, e-auction sale was fixed for 06.02.2024. Only joint notice under Rule 8(6) and 9(1) of the Security Interest (Enforcement) Rules, 2002 was issued.
14. We have to look into the issue regarding validity of the notice issued under Rule 8(6) and 9(1) of the Rules. For the sake of appropriate adjudication of the issue provisions of Rule 8(6) and 9(1) of the Rules are reproduced below :
Rule 8(6) - the authorized officer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets, under sub-rule (5):
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. [Substituted by Notification No. G.S.R. 1040(E), dated 17.10.2018 (w.e.f. 20.9.2002).]
Rule 9(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 newspapers as referred to in the proviso to sub-rule (6) of rule 8 or notice of sale has been served to the borrower:
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
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Appeal No. 102 of 2024-DRAT-Kolkata less than fifteen days to the borrower, for any subsequent sale. [Substituted by Notification No. G.S.R. 1046 (E), dated 3.11.2016 (w.e.f. 20.9.2002).] [emphasis supplied]
15. A bare reading of the sub-rules would reveal that there is disjunction between - (i) a public notice of sale is published in the newspapers as referred to in the proviso to sub-rule (6) of Rule 8 and (ii) a notice of sale served to the borrower, maintained in Rule 9(1) by the use of the word “or”. As explained in Mathew Varghese Vs. M. Amritha Kumar [(2014) 5 SCC 610] Hon’ble Apex Court in paragraph-31 of the judgement has held that this disjunction should be read as a conjunction. The Court said that the word “or” should be read as “and”. The moment the word “or” appearing in Rule 9(1) is read as “and”, there is no scope for concluding that Rule 9(1) requires one more notice to be served to the borrower, in addition to the notice served to the borrower under Rule 8(6).
16. We are also conscious of the fact that in a recent judgment of Hon’ble Apex Court in CELIR LLP -vs- Bafna Motors (Mumbai) Private Limited & Others [(2024) 2 SCC 1] wherein ratio of the judgement passed by the Hon’ble High Court of Telangana at Hyderabad in Sri. Sai Annadhatha Polymers & Anr. Vs. Canara Bank rep. by its Branch Manager, Mandanapalle [2018 SCC OnLine Hyd 178] was said to be the good law and has upheld the ratio of the judgement at Para 51 as under :
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Appeal No. 102 of 2024-DRAT-Kolkata
Pradesh High Court in Sri. Sai Annadhatha Polymers & Anr. v. Canara Bank rep. by its Branch Manager, Mandanapalle reported in 2018 SCC OnLine Hyd 178. The court took the view that in accordance with the unamended Section 13(8) of the SARFAESI Act, the right of the borrower to redeem the secured asset was available till the sale or transfer of such secured asset. To sum up, the post-amendment scenario inevitably requires a clear thirty day notice period being maintained between issuance of the sale notice under Rule 8(6) of the Rules of 2002 and the publication of the sale notice under Rule 9(1) thereof, as the right of redemption available to the borrower in terms of Rule 8(6) of the Rules of 2002, as pointed out in MATHEW VARGHESE, stands extinguished upon publication of the sale notice under Rule 9(1).” [emphasis supplied]
17. Hon’ble Apex Court has further held at Para 37 as under:
18. In view of the law laid down by the Hon’ble Apex Court, now we have to scrutinize whether the procedure prescribed in Rules 8(6) and 9(1) of the Rules is followed by the secured creditor or not?
19. Admittedly auction sale notice was issued on 05.01.2024 and Rule 9(1) notice was published on
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Appeal No. 102 of 2024-DRAT-Kolkata
06.01.2024, whereas e-auction sale was conducted on 06.02.2024.
20. Accordingly, the e-auction Sale Notice dated 05.01.2024 published on 06.01.2024 fixing the e-auction sale on 06.02.2024 was in violation of Rule 8(6) and 9(1) of the Security Interest (Enforcement) Rules, 2002. Accordingly, findings recorded by the Learned DRT on this count is confirmed. Further, as far as finding for restoration of possession is concerned, since the challenge to possession notice is time barred in the Securitisation Application and there is no challenge to the action taken in compliance of the orders under Section 14 of the SARFAESI Act, 2002, directions issued by the Learned DRT suffers from material illegality and is liable to be set aside and is accordingly, set aside. Accordingly, Appeal is liable to be partly allowed.
ORDER
Appeal is partly allowed. E-auction sale notice dated 05.01.2024 is set aside. Further, direction issued by the DRT for restoration of possession to the Respondents is quashed. The secured creditor Bank would be at liberty to initiate measures afresh for recovery of its dues in accordance with procedure established by law.
No Order as to costs.
File be consigned to Record Room.
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Appeal No. 102 of 2024-DRAT-Kolkata 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 9th day of July, 2025.
(Anil Kumar Srivastava,J) Chairperson
Dated 9th July, 2025 14 /tp
3 issues framed by the court
Whether the notices under Rule 8(6) and 9(1) of the Security Interest (Enforcement) Rules, 2002 were properly issued to the borrower.
Whether the direction for restoration of possession to the Respondent was legally sustainable when the challenge to the possession notice was time-barred.
Whether the principles of limitation and res judicata barred the challenge to the possession notice in the present Securitisation Application.
Colour shows how this judgement treated each authority
Mathew Varghese Vs. M. Amritha KumarApplied¶15
Mathew Varghese Vs. M. Amritha Kumar [(2014) 5 SCC 610] · Who else cites this
CELIR LLP -vs- Bafna Motors (Mumbai) Private Limited & OthersFollowed¶16
CELIR LLP -vs- Bafna Motors (Mumbai) Private Limited & Others [(2024) 2 SCC 1] · Who else cites this
Sri. Sai Annadhatha Polymers & Anr. Vs. Canara BankReferred¶16
Sri. Sai Annadhatha Polymers & Anr. Vs. Canara Bank rep. by its Branch Manager, Mandanapalle [2018 SCC OnLine Hyd 178] · Who else cites this
3 provisions across 2 enactments
Bank of Baroda, Beltola Branch
Nirupama Devi
Anil Kumar Srivastava
As recorded by the court registry
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