Allowed

N R Imayavaramban v. State Bank of India

DRAT12 Jun 2025REGULAR APPEAL/34/2022

Case brief

AI extract

What is this about?

The Tribunal set aside a sale of mortgaged property conducted by the Bank under the SARFAESI Act. The sale was invalid due to the non-service of mandatory 30 days notice to the borrower, absence of a valuation report, and excessive execution where the entire property was sold instead of a part sufficient to recover the dues.

What did the court decide?

Sale notice and sale set aside; sale certificate cancelled; possession restored to Appellant; refund of sale consideration ordered.

N R Imayavaramban versus State Bank of India — Banking and Recovery | DRAT (2025)

¶1

IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT CHENNAI

¶2

Dated the 12^th of June, 2025

¶3

PRESENT: Hon’ble Mr. Justice G. Chandrasekharan CHAIRPERSON

¶4

RA (SA) 34/2022

¶5

(OA (S) No. 107/2006 On the file of DRT, Coimbatore)

¶6

Between

¶7

N.R.Imayavaramban (68) Proprietor, M/s. Sri Imayam Towers, 576-A to J, D.B.Road, R.S.Puram, Coimbatore – 641 002.

¶8

… Appellant

¶9

And

¶10

The Branch Manager, State Bank of India, Branch Code No. 03061, 541 D.B.Road, R.S.Puram, Coimbatore – 641 002.

¶11

A. Ameen Basha, S/o. Abdul Hakeem, 78, V.C.V. Layout, R.S.Puram, Coimbatore – 641 002.

¶12

…Respondents

¶13

Counsel for Appellant : Mr. I. M. Siddartha Ramarajan Counsel for Respondent Bank : Mr. M.L. Ganesh Respondent No. 2 : Mr. E.K. Kumaresan

¶14

¶15

ORDER

¶16

This Appeal is filed against the order dated 13.10.2021 passed in OA(S) 107/2006 by Learned Presiding Officer, DRT, Coimbatore.

¶17

The Appellant availed a Medium Term Loan of Rs. 7.50 Lakhs, on 03.05.1996 and Cash Credit Loan of Rs.1.50 Lakh, on 10.11.1997 from the 1st Respondent Bank by mortgaging his property. It is his case that he repaid a sum of Rs.6.79 Lakhs toward the loan amount. Due to criminal

¶18

trespass, his property had to be kept under lock from 2000. He filed CC 371/2000 before Judicial Magistrate, Coimbatore, against the trespassers. There were various civil and criminal proceedings initiated against him by adversaries. The first Respondent Bank filed TA No.392/2002 for recovery of Rs.10,80,628.58p with future

¶19

interest at 15.30% per annum, with quarterly rests.

¶20

Pending this proceeding, 1^st Respondent Bank took symbolic

¶21

¶22

possession of his property. Appellant filed I.A. No. 690/2006 under Section 17 of the SARFAESI Act, 2002, and this Application was posted to 04.12.2006. Meanwhile, the Bank issued the Sale Notice dated 05.10.2006. In the said circumstances, he filed OA (S) 107/2006 challenging the notice issued under Section 13(2) of the SARFAESI Act as defective, Possession Notice and Tender cum Auction Sale Notice dated 05.10.2006, as null and void . He also prayed that the Bank should be restrained from proceeding further. First Respondent Bank entered appearance and filed its Written Statement. Meanwhile, the property had been sold and the Auction Purchaser, Mr. A. Ameen Basha was impleaded as Respondent No. 2 in OA(S) 107/2006. Ultimately, the OA(S) 107/2006 was dismissed. In the said circumstances, this Appeal is filed.

¶23

2.1 Learned Counsel for Appellant submitted that there is no mention about the date, time and place of sale in the Sale Notice dated 05.10.2006. Thirty days clear notice was not served on the Appellant. Therefore, the Sale Notice and sale

¶24

¶25

is hit by the judgment of the Hon‟ble Supreme Court in the

¶26

case of Mathew Varghese Vs. M. Amritha Kumar & Ors .

¶27

2.2 In paper publication of Tender cum Public Auction dated 15.11.2006, Authorised Officer, fixed the date 02.12.2006 as the last date for receipt of sealed tenders, and

¶28

04.12.2006 was fixed as date for opening the sealed tenders. No thirty clear days' notice was given to the Appellant.

¶29

2.3 Appellant was arrested in a Cheque dishonour case on 01.12.2006, and he was put behind the bars for 83 days.

¶30

Appellant's wife filed OA (S) No. 114/2006 on behalf of his son challenging the sale. An interim stay order was passed in the said OA (S), on 28.11.2006 on condition of deposit of Rs.3 Lakhs, on or before 02.12.2006. Accordingly, a sum of Rs.3 Lakhs was deposited on 02.12.2006. The tender opening fixed on 04.12.2006 was postponed to 04.01.2007. The second conditional order was passed on 02.01.2007 for depositing a sum of Rs.2 Lakhs on or before 01.02.2007.

¶31

¶32

Since that could not be complied with the stay order was

¶33

vacated.

¶34

2.4 It is seen from the record of sale proceedings that the

¶35

property was sold in tender cum private auction on 10.02.2007. Notice for this sale was said to have been given on 05.02.2007. The Bank has not produced any documents to show that Sale Notice was given on 05.02.2007 fixing the sale on 10.02.2007, despite giving sufficient opportunities by Tribunal. No notice of this sale was given to the Appellant. The record shows that the word “ Public ” Auction was stuck and replaced with “Tender cum Private” Auction. It is nothing but a fraud to sell the property to a third-party in connivance and collusion with the Bank Official. First Respondent Bank had taken a contrary position with regard to the sale held on 10.02.2007. That is, it is claimed that the sale was a public sale and in the same breath, it is also claimed that the sale was private auction sale.

¶36

¶37

2.5 In either case, no notice was given to the borrower.

¶38

The bidders in the sale are known to each other, especially,

¶39

to the Auction Purchaser. One Mr. C. M. Arumugam was

¶40

also one of the bidders. He is the witness to the settlement deed executed by Auction Purchaser in favour of his son. He also represented the Auction Purchaser before the Tribunal for the hearing on 20.07.2012 claiming that he was a representative of the Auction Purchaser. It clearly establishes that the bidders have acted in concert with the Bank officials to knock the property for a low price.

¶41

2.6 The property was valued more than Rs.1.40 Crores at the time of sale, but, it was sold only for Rs.1.16 Crores. The loan due was only around Rs.24 Lakhs. To recover this

¶42

amount, it is enough to sell one part of the property and it was not necessary to sell the entire property.

¶43

2.7 There was no step taken by Bank under Section 14 of the SARFAESI Act to take possession of the property. But it

¶44

is claimed that possession had been taken place on the

¶45

¶46

same date of sale on 10.02.2007. In a letter dated 22.02.2007, sent by the Bank to the borrower nothing is

¶47

stated about taking possession of the property.

¶48

2.8 Learned Counsel for Appellant further submitted that the Appellant and his tenants were in occupation of some portions of the property and some portions were kept vacant and some portions are illegal occupation of trespassers. Because of non service of Sale Notice dated 05.02.2007, the Appellant missed the opportunity of redeeming the property. Thus, he submitted that the sale was held without giving notice to the Appellant. There was excessive execution. In the said circumstances, Learned Counsel for Appellant prayed for setting aside the sale and restore the physical possession to the Appellant.

¶49

Learned Counsel for 1^st Respondent Bank submitted

¶50

that despite giving several opportunities by the Bank and the DRT for redeeming the property, Appellant has not

¶51

¶52

chosen to pay the debt due to the Bank and redeem the property. Even after the sale of the property, an opportunity was given to the Appellant for redeeming the property by paying the sale consideration, and that opportunity was not utilized by the Appellant. The right to redeem the property is available only till the publication of the Sale Notice and not after that. On the date of Sale Notice, the Appellant was not arrested. He filed OA (S) 107/2006 only on 01.11.2006. Appellant‟s son filed Writ Petition No.7307/2007 challenging the Sale Notice dated 15.11.2006.

¶53

was dismissed for default on 3.1 OA(S)107/2006 05.01.2007. On an Application filed, it was restored. Conditional order passed by the Tribunal was not complied with, therefore, the property was sold. Appellant‟s son was a minor then, now he became major and conducting this Appeal as an Advocate forgetting the fact that he challenged the sale measures by filing Writ Petition. There is no challenge to the sale and Sale Certificate issued. The excess

¶54

¶55

sale amount was deposited in the Fixed Deposit (FD) account and that was not immediately received by the Appellant. Now, the Appellant has received the excess sale amount, and in the said circumstances, he cannot challenge the sale. The Auction Purchaser entered into an agreement with tenant and vacated them. The property was sold “as is where is” basis. There is no proper pleadings in the OA (S) about the challenge to the Demand Notice, Sale Notice, Sale, etc. Despite having knowledge about sale, sale has not been challenged. After failing to utilize all the opportunities, to redeem the property, Appellant cannot now challenge the sale. When sale is not challenged, borrower cannot take a hyper-technical ground in the matter of taking possession. The tenders were not opened on 04.12.2006 because of stay granted in OA (S) 114/2006 and then the property was sold. Mathew Varghees case cannot be applied retrospectively. On realizing the sale amount, TA 392/2002 filed by the Bank was withdrawn and that was not challenged by the Appellant. In the said circumstances, if any adverse order is

¶56

passed, then the Bank would be seriously prejudiced.

¶57

¶58

Learned Counsel for Auction Purchaser adopted the argument of the Learned Counsel for Bank and submitted that some of the tenants had handed over the possession to Auction Purchaser. RCOP is pending against one of the tenants. It is also submitted that the Bank handed over the possession to the Auction Purchaser. There is nothing illegal for Auction Purchaser‟s clerk to participate in the auction. It is also not illegal in representing the Auction Purchaser in Tribunal‟s proceedings. Thus, he prayed for dismissal of this Appeal.

¶59

Considered the rival submissions and perused the records.

¶60

From the narration of the facts, it is seen that, the Appellant availed two loan facilities from the 1^st Respondent Bank. On failure to repay the amount, the 1^st Respondent Bank filed TA for recovery of the amount under RDB Act, 1993. Simultaneously, the Bank had also initiated the measures under SARFAESI Act, 2002, for taking symbolic

¶61

¶62

possession of the property and sale of the property. The Notice dated 02.12.2003 for taking symbolic possession is produced for the perusal. The Appellant produced Sale Notice dated 05.10.2006. It is seen from the Sale Notice dated 05.10.2006 that the 1^st Respondent Bank issued this Sale Notice informing the Appellant that Appellant‟s liability stood at Rs.11,72,936.44p as on 31.01.2002. Appellant was directed to discharge this liability within 30 days from the date of Notice, failing which, he was informed that, the Bank shall proceed under SARFAESI Act, 2002, for sale of the secured properties to realize the amount with interest and costs. Admittedly, the Sale Notice did not specify the mode of sale, date, time and place of sale.

¶63

Appellant produced a paper publication in English and Tamil dated 15.11.2006 to show the tender sale notice issued by 1^st Respondent Bank inviting the sealed tender from the public for sale of property mortgaged by Appellant for realizing Rs.11,72,936.44p with interest. It shows that sealed tender have to be submitted before 2.00 p.m. on

¶64

¶65

02.12.2006 and tenders would be opened at 10.30 a.m. on 04.12.2006. This tender notice was issued to public at large in newspaper. Whether the 1^st Respondent Bank informed the Appellant about this tender notice through personal notice is a question that looms large. No evidence in proof of issuance of notice to the Appellant informing about this tender notice was produced before the Tribunal.

¶66

It is pertinent to refer to the proceedings of the Learned Presiding Officer dated 30.09.2011, wherein it was mentioned that “ ….. one last opportunity is granted to the Respondent Bank to lay its hand upon material evidence which is required to show that the Respondent Bank acted in terms of the procedure laid down by the SARFAESI Act and Rules made there under and has not committed any illegality or irregularity in conducting the sale of the property of the Petitioner. ” Subsequently, the same Learned Presiding Officer recorded on 19.01.2012 proceedings that, “the Bank has filed certain additional documents along with a Memo

¶67

which ultimately established that the proceedings taken by

¶68

¶69

the Bank right from the date of Demand Notice upto the date of sale were perfectly legal and there is no illegality and infirmity in the said proceedings. ” However, what are the documents that were produced by the Bank to reach this finding is not spelt out. These documents are not produced before Appellate Tribunal.

¶70

The bone of contention is with regard to the sale of property to the Respondent No.2, on 10.02.2007. Appellant produced the typed set containing the recording of the proceedings of sale. It shows that the property was sold on 10.02.2007 on the basis of notice dated 05.02.2007. For better understanding, the relevant portion is extracted hereunder:

¶71

Tender Cum Private

¶72

“The Public were given publicity on 05.02.07 that the Public Auction will take place at 6:30 PM on 10.02.07. The following sealed tenders have been received.

¶73

		Bid Amount	EMD
1.	P. Selvam, 22/1,	Rs. 97,000/-	Rs. 9,70,000/-
	Vankatachalam		(SBI R.S.Puram	ChN:202504
	Road, R.S.Puram		Dt.10.02.07 A/c 300978	15611)

¶74

¶75

2.	A. Ameen Basha S/o. Abdul Hakeem	Rs. 1,16,00,000/-	Rs. 12,00,000/- HIGHEST BIDDING (ICICI Bank Ltd, Ram Nagar Br. banker
	78, V.C.V. Layout, R.S. Puram	Rs.1,16,000	cheque No. 114746 dt. 8/2/07)
3.	C C.M. Arumugam	Rs.	Rs. 11,00,000/-
	S/o. Munusamy,	1,01,00,000/-	(UTI Bank Ltd., AVINASHI ROAD,
	331, Muthusamy		PAPANAICKEN PALAYAM pay ORDER
	Senvai St Kuniamuthur, Coimbatore”		No. 030893 dt. 08.02.07)

¶76

This entry shows that public were given publicity on 05.02.2007 that the Public Auction will take place at 6.30 p.m. on 10.02.2007. The word “Public” was struck and the words “Tender cum Private” were written. This interpolation raised serious doubt in the mind of the Appellant to say that the records had been manipulated to conclude the sale in favour of Respondent No.2 surreptitiously.

¶77

It is to be seen that whether the sale dated 10.02.2007

¶78

was the outcome of the publicity given to the public on 05.02.2007 or through the Tender cum Private auction. This aspect will be considered in detail later. Prior to that, certain other aspects have to be considered.

¶79

¶80

The Appellant has produced the documents to show that he was in judicial custody from 01.12.2006 to 21.02.2007 (83 days), when the property was sold. The OA (S) 114/2006 was filed by minor Sidhartha Ramrajan represented by his mother Smt. Maheswari, wife of the Appellant. Learned Presiding Officer, passed an order on 28.11.2006 that the sale posted on 04.12.2006 was adjourned to 04.01.2007 on condition that Applicant would pay Rs.3 Lakhs on or before 02.12.2006 with Respondent Bank. This conditional order was complied with. On 02.01.2007, the Learned Presiding Officer imposed further condition to pay a sum of Rs.2 Lakhs on or before 01.02.2007 and adjourned the sale to 05.02.2007. This condition was not complied with on 02.02.2007. It was informed that the condition to deposit Rs.2 Lakhs was not complied with and due the Advocate‟s boycott, the case was adjourned to 05.02.2007. From 05.02.2007, the case was adjourned to 12.02.2007. Meanwhile, the sale had taken place on 10.02.2007. Appellant‟s son Sidhartha Ramrajan

¶81

through his mother filed Writ Petition in WP No. 7307/2007

¶82

¶83

challenging the Sale Notice dated 15.11.2006. This Writ Petition was dismissed giving a direction to DRT, Coimbatore, to dispose of the OA(S) No. 114/2006, on merits and in accordance with law.

¶84

The sale in this case had taken placed on 10.02.2007. It is pertinent to refer to the Rules 8 (5) to 8 (8) and Rule 9(1) of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as Enforcement Rules, 2002) for better understanding as to how the sale of secured asset should be held.

¶85

“8. Sale of immovable secured assets. (As it stood in 2010)- (1) ……..

(2) ……..

[(2A) ……..

(3) …..

(5) Before effecting sale of the immovable property referred to in sub-rule (1) of rule 9, the authorised officer shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor, fix the reserve price of the property and may sell the whole or any part of such immovable secured asset by any of the following methods:-

¶90

¶91

(a) by obtaining quotations from the persons dealing with similar secured assets or otherwise interested in buying the such assets; or

¶92

(b) by inviting tenders from the public;

¶93

(c) by holding public auction; or

¶94

(d) by private treaty.

¶95

6) The authorised officer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets, under subrule (5):

¶96

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 two leading newspapers one in vernacular language having sufficient circulation in the locality by setting out the terms of sale, which shall include,-

¶97

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

¶98

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

¶99

(c) reserve price, below which the property may not be sold;

¶100

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

¶101

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

¶102

(f) any other thing which the authorized officer considers it material for a purchaser to know in order to judge the nature and value of the property.

¶103

(7) every notice of sale shall be affixed on a conspicuous part of the immovable property and may, if the authorised officer deems it fit, put on the website of the secured creditor on the Internet;

¶104

¶105

(8) Sale by any methods other than public auction or public tender, shall be on such terms as may be settled between the parties in writing].

¶106

9. Time of sale, issue of sale certificate and delivery of possession, etc.

¶107

(1) No sale of immovable property under these rules 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) or notice of sale has been served to the borrower:

¶108

(2) …….”

¶109

Under Rule 8(5) of the Security Interest (Enforcement) Rules, 2002, the Authorised Officer shall have to obtain the valuation of the property from an approved valuer in consultation with secured creditor for fixing the reserve price. He may sell the whole or any part of such property by obtaining quotations from the persons dealing with similar secured assets or otherwise interested in buying the such assets; by inviting tenders from the public; or by holding public auction or by private treaty.

¶110

Rule 8 (6) of the Security Interest (Enforcement) Rules,

¶111

2002, mandates the authorised officer shall serve to the

¶112

¶113

borrower a notice of 30 days for sale of the immovable secured assets, under sub-rule (5). It means that before the sale of the property under any of the mode specified under Rule 8(5), the Authorised Officer should give 30 days of notice to the borrower. In case, the sale being effected by inviting tenders from the public or by holding public auction, a public notice should be caused in two leading newspapers including one in vernacular language.

¶114

As per Rule 8(7) of the Security Interest (Enforcement) Rules, 2002, notice should be affixed on the conspicuous part of the immovable property and put on the website of the secured creditor. Rule 8(8) of the Security Interest (Enforcement) Rules, 2002, requires that sale by any other mode other than public auction or public tender, shall be on such terms as may be settled between the parties in writing. The parties include the secured creditor, borrower and intended purchaser.

¶115

¶116

Rule 9(1) of the Security Interest (Enforcement) Rules, 2002, requires that sale should not take place before expiry of 30 days from the date of public notice of sale is published in newspapers or notice of sale has been served to the borrower.

¶117

In the case before hand, there is confusion as to whether the property was sold in terms of wide publicity given to the public through public auction or tender cum private auction. In either case, 30 days‟ notice should be given prior to the date of sale to the borrower as required under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002. The Bank has not produced any document to show the service of 30 days notice of Tender Notice dated 15.11.2006 fixing the date on 04.12.2006 for opening the tender or the Sale Notice dated 05.02.2007 fixing the sale on 10.02.2007, to the borrower. There is no valuation report filed to show that the property was valued prior to sale for fixing the reserve price.

¶118

¶119

The proceedings of Learned Presiding Officer dated 13.07.2011 reads that the Respondent Bank was directed to produce the entire SARFAESI proceedings right from the issuance of Demand Notice, service thereof, Possession Notice, Sale Notice, Minutes of the sale proceedings, copies of tenders received, sale confirmation etc., and Appellant was also directed to deposit Rs.24,40,911/- with interest at 18% p.a. Learned Presiding Officer also recorded on 30.09.2011 proceedings that the Bank has not produced the records and one last opportunity was given to Bank for producing the records. Appellant sought time to make payment in instalmnets. In the proceedings dated 01.12.2011, it was recorded that neither the Appellant was able to arrange for the money nor Respondent Bank was forthcoming with evidence required to be filed by it.

¶120

From the minutes of the sale proceedings, it is seen that one Sh. C. M. Arumugam S/o Munuswamy, one of the bidders, bid the property for Rs.1.01 Crores. Proceedings dated 24.01.2013 shows that the said C.M. Arumugam

¶121

¶122

represented the Auction Purchaser, however without any authority, in the proceedings before the Tribunal. He is a witness to the settlement deed executed by the Auction Purchaser in favour of his son, on 18.03.2011. Thus, it is evident that Mr. C. M. Arumugam is a close associate of Respondent No.2, the Auction Purchaser, and he is not an independent Auction Purchaser, who was willing to buy the property at a competitive price. Only to show a mock competition in bidding, he was roped in as one of the bidders.

¶123

Though amendment was not introduced in the Securitisation Application challenging the sale etc., it is seen from the various Applications filed by the Appellant that he has been repeatedly challenging the sale on the ground that the property was sold for low price, without following the procedures under the SARFAESI Act, 2002. In fact, the Appellant filed an Application under Section 19(25) of RDB Act, 1993, challenging the sale and that Application was numbered as IA No. 620/2007. No order was passed in this

¶124

¶125

Application. In the Counter filed in this IA, the Respondent Bank stated that, the Respondent Bank gave due notice and the property was sold in public auction. Meaning thereby, the property was sold in a public auction, for Rs.1.16 Crores. In the Counter filed in IA 651/2008, the Bank reiterated that the property was sought to be sold in public auction.

¶126

In the Written Arguments filed in IA 636/2014 and IA 620/2007, the first Respondent stated that when the conditional order was not complied with by the Petitioner and when there was no order of stay or any direction with regard to sale of the immovable secured asset, the Respondent fixed the date for the next auction sale as 10.02.2007. Postponement of the Auction Sale was known to the Petitioner, therefore, 30 days clear notice was not warranted in this case. It is further contended that on the date of auction, by tender cum private auction, the Respondent Bank received three sealed tenders from i) Mr. P. Selvam, ii) Mr. A.

¶127

Ameen Basha and iii) Mr. C. M. Arumugam. The highest

¶128

¶129

bidder Mr. A. Ameen Basha was the successful bidder and

¶130

sale was concluded in his favour for Rs.1.16 Crores .

¶131

Thus, from the aforesaid statements, it is evident that the Respondent has taken contrary position with regard to sale of the property by saying the property was sold in public auction and then retracting it by saying that the property was sold in tender cum private auction. As already stated, there is no evidence produced before this Tribunal to show that there was service of 30 days clear notice prior to sale either by public auction or by tender cum private auction.

¶132

Learned Counsel for Appellant relied on the judement of Hon‟ble Supreme Court in the case of Mathew Varghese Vs. M. Amritha Kumar & Ors. , reported in (2014) 5 SCC 610, for the proposition that 30 days notice is necessary for valid sale. He also relied on the judgement in Vasu P.

¶133

Shetty Vs. M/s. Hotel Vandana Palace & Ors ., reported in AIR 2014 SC 1947 , for the proposition that when debtor is

¶134

¶135

ready to repay the loan amount, he has the right of redemption.

¶136

Learned Counsel for Respondent Bank relied on the judgement of Hon‟ble High Court of Madras in W.A. 1771, 2042 & 2413/2021 and CMP Nos.15434, 11048 & 13016/2021, in the case of State Bank of India Vs. Shankar Varadhrajan and Anr ., for the proposition that a judgement operates only prospectively and no retrospective effect can be given to the judgement, and thus, the judgement of Mathew Varghese case, cannot be applied to the facts of this case.

¶137

In reply to this judgement, Learned Counsel for Appellant relied on the judgement of Hon‟ble Supreme Court in the case of P.V.George & Ors. Vs. State of Kerala & Ors. , in Appeal (civil) 322/2007, for the proposition that, the law declared by a court will have a retrospective effect if not otherwise stated to be so specifically.

¶138

¶139

In Mathew Varghese Vs. M. Amritha Kumar & Ors. , reported in (2014) 5 SCC 610, the interesting but very serious question that arose for consideration was with regard to interpretation of Section 13 (8) of SARFAESI Act, 2002, read with Rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002. The first and second Respondents therein stood as guarantors in respect of a credit facility of Rs.30 Lakhs granted by the 4^th Respondent in favour of a company called „Jerry Merry Exports Private Limited. As guarantors, first and second Respondents created an equitable mortgage in favour of 4^th Respondent, by depositing the title deeds of their property. When the transaction became a Non-Performing Asset, Respondent No.4 Bank filed OA 31/2002 for recovery of Rs.33,77,053/along with interest. The Bank also issued notice under Section 13(2) of SARFAESI Act, 2002, on 11.08.2006 for a sum of Rs.70,77,590/-. On 20.02.2007, Respondent No.4 had taken possession of the mortgaged property by invoking Section 13(4) of the SARFAESI Act, 2002. Respondents 1 and 2 filed SA 20/2007 before DRT, Ernakulam, challenging

¶140

¶141

the Possession Notice and seeking protection from eviction.

¶142

On 14.08.2007, Respondent No.4 issued a notice to Respondents 1 and 2 and others of its intention to sell the property under Rule 8(6) of Rules, 2002, by fixing reserve price at Rs.1.25 Crores. On 23.08.2007, Respondent No.4 Bank published its notice of sale of property in „Indian Express‟ and „Mathrubhoomi ‟, inviting tender cum auction from public. First and second Respondents were informed by Respondent No.4 by its Notice dated 30.08.2007 about the publication made on 23.08.2007 and also enclosed a tender form along with the terms and conditions for participation with tender (in the case before hand, the Respondent Bank has not produced any evidence to show that it informed the Appellant about the publication of tender notice in the newspaper) . On 20.09.2007, Respondents 1 and 2 filed Writ Petition in WP No. 27182/2007 challenging the proceedings initiated under SARFAESI Act and that was disposed of by Learned Single Judge of Hon‟ble High Court of Kerala with a direction to

¶143

DRT to hear the parties and dispose of the SA filed by

¶144

¶145

Respondents 1 and 2 and OA filed by Respondent No.4. Liberty was also given to the parties to settle the liability with a direction to Respondent No.4 to defer the sale and posted on 25.09.2007 by 6 week, on Respondents depositing Rs.10 Lakhs before 25.09.2007. Direction was given to the Bank to waive the interest if the Respondents 1 and 2 offer to settle within a reasonable time. Pursuant to the said order, sale was postponed. Respondents 1 and 2 deposited Rs.10 Lakhs. On 27.12.2007, DRT dismissed the SA 20/2007 and on the next date, i.e. 28.12.2007, Respondent No.4 accepted the tender of the Appellant who offered a sum of Rs.1,27,00,101/- and asked the Appellant to deposit 25% of the amount i.e. Rs.31,75,025/- on that date itself and pay the balance amount within 15 days. The Appellant deposited the balance amount and Respondent No.4 confirmed the sale in favour of Appellant. Thereafter, the Respondent No.4 Bank informed Respondents 1 and 2 on 02.02.2008 about the confirmation of sale in favour of Appellant. Respondents 1 and 2 were given a direction to collect the balance sale amount available with Respondent

¶146

¶147

No.4. Respondents 1 and 2 filed a Review Petition No. 157/2008 in WP No. 2782/2007 and that was dismissed. Respondents 1 and 2 filed Writ Petition No.5876/2008 on 18.02.2008 challenging the vires of the Rule, 2002. The Writ Petition was dismissed on 12.06.2009. Against that order, Respondents 1 and 2 filed Writ Appeal in WA No. 1555/2009. The Division Bench took the view that the sale was not conducted in a fair and proper manner and held that when the sale was postponed by 6 weeks from 25.09.2007, the Bank ought to have re-notified the sale or at least extended the time for receiving further tenders, particularly, when only one tender was received on last date notified for sale. It was further held that the sale was not even informed to Respondents 1 and 2 and they were informed only after the sale was confirmed. Thus, sale was set aside by imposing a condition that Respondents 1 and 2 furnish Demand Draft for Rs.2 Crores in favour of Appellant within the period of two months from the date of order. If payment is not made, the sale in favour of the Appellant would stand confirmed. There was also a direction to

¶148

¶149

restore the property in the name of Respondents 1 and 2. Respondents 1 and 2 did not make the payment, instead, filed IA 437/2010 in WA No. 1555/2009 seeking further 6 weeks time to make payment. Time was extended till 20.06.2010. Respondent No.8 was directed to deposit Rs.2.03 Crores before Respondent No.4. Respondent No.8 deposited the entire amount. The Bank was directed to execute the sale deed in favour of Respondent No.8 for sale consideration of Rs.2.03 Crores. Against the WA No. 1555/2009 and IA 437/2010 and IA 507/2010, Appeals have been filed before Hon‟ble Supreme Court. Hon‟ble Supreme Court elaborately discussed the various issues, especially, on Section 13(8) and Rules 8 and 9 of Security Interest (Enforcement) Rules, 2002, and held that:

¶150

27.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

¶151

¶152

any such sale or transfer effected without complying with the said statutory requirement would be a constitutional violation and nullify the ultimate sale.

¶153

28. Once the said legal position is ascertained, the statutory prescription contained in Rules 8 and 9 have also got to be examined as the said rules prescribe as to the procedure to be followed by a SECURED CREDITOR while resorting to a sale after the issuance of the proceedings under Section 13(1) to (4) of the SARFAESI Act. Under Rule 9(1), it is prescribed that no sale of an immovable property under the rules should take place before the expiry of 30 days from the date on which the public notice of sale is published in the newspapers as referred to in the proviso to sub-rule (6) of Rule 8 or notice of sale has been served to the borrower. Sub-rule (6) of Rule 8 again states that the authorized officer should serve to the borrower a notice of 30 days for the sale of the immovable SECURED ASSETS. Reading sub-rule (6) of Rule 8 and sub-rule (1) of Rule 9 together, the service of individual notice to the borrower, specifying clear 30 days time gap for effecting any sale of immovable SECURED ASSET is a statutory mandate. It is also stipulated that no sale should be affected before the expiry of 30 days from the date on which the public notice of sale is published in the newspapers. Therefore, the

¶154

¶155

requirement under Rule 8(6) and Rule 9(1) contemplates a clear 30 days individual notice to the borrower and also a public notice by way of publication in the newspapers. In other words, while the publication in newspaper should provide for 30 days clear notice, since Rule 9(1) also states that such notice of sale is to be in accordance with proviso to sub-rule (6) of Rule 8, 30 days clear notice to the borrower should also be ensured as stipulated under Rule 8(6) as well. Therefore, the use of the expression „or‟ in Rule 9(1) should be read as „and‟ as that alone would be in consonance with Section 13(8) of the SARFAESI Act.

¶156

29. The other prescriptions contained in the proviso to sub-rule (6) of Rule 8 relates to the details to be set out in the newspaper publication, one of which should be in „vernacular language‟ with sufficient circulation in the locality by setting out the terms of the sale. While setting out the terms of the sale, it should contain the description of the immovable property to be sold, the known encumbrances of the SECURED CREDITOR, the secured debt for which the property is to be sold, the reserve price below which the sale cannot be effected, the time and place of public auction or the time after which sale by any other mode would be completed, the deposit of earnest money to be made and any other details which

¶157

¶158

the authorized officer considers material for a purchaser to know in order to judge the nature and value of the property.

¶159

30. Such a detailed procedure while resorting to a sale of an immovable SECURED ASSET is prescribed under Rules 8 and 9(1). In our considered opinion, it has got a twin objective to be achieved. In the first place, as already stated by us, by virtue of the stipulation contained in Section 13(8) read along with Rules 8(6) and 9(1), the owner/borrower should have clear notice of 30 days before the date and time when the sale or transfer of the SECURED ASSET would be made, as that alone would enable the owner/borrower to take all efforts to retain his or her ownership by tendering the dues of the SECURED CREDITOR before that date and time. Secondly, when such a SECURED ASSET of an immovable property is brought for sale, the intending purchasers should know the nature of the property, the extent of liability pertaining to the said property, any other encumbrances pertaining to the said property, the minimum price below which one cannot make a bid and the total liability of the borrower to the SECURED CREDITOR. Since, the proviso to sub-rule (6) also mentions that any other material aspect should also be made known when effecting the publication, it would only mean that the intending purchaser should have entire details about the property

¶160

¶161

brought for sale in order to rule out any possibility of the bidders later on to express ignorance about the factors connected with the asset in question. Be that as it may, the paramount objective is to provide sufficient time and opportunity to the borrower to take all efforts to safeguard his right of ownership either by tendering the dues to the creditor before the date and time of the sale or transfer, or ensure that the SECURED ASSET derives the maximum price and no one is allowed to exploit the vulnerable situation in which the borrower is placed.

¶162

31…….”

¶163

From this judgement, it is very clear that as per Subrule (6) of Rule (8) and Sub-rule, (1) of Rule 9 of Security Interest (Enforcement) Rules, 2002, service of notice to the borrower, specifying clear 30 days notice of sale is statutory mandate. Finally, it was held in paras 50 and 51 as follows:-

¶164

50.Having pronounced the legal position as above, when we refer to the facts of the present case, the initial sale was notified to take place on 25.09.2007. The paper publication was made on 23.08.2007. Therefore, applying Rule 9(1) read along with the

¶165

¶166

proviso to sub-rule (6) of Rule 8, there can be no quarrel as to the procedure followed in effecting the publication for resorting to sale on 25.09.2007. When it comes to the question of the intimation to the borrower as required under sub-rule (6) of Rule 8, we find that admittedly Respondents 1 and 2 were informed by the 4th Respondent-Bank only on 30.08.2007. Therefore, as the sale date was 25.09.2007 it did not fulfill the mandatory requirement of 30 clear days notice to the borrower as stipulated under sub-rule (6) of Rule 8. In fact, on this score itself it can be held that if the sale had been effected on 25.09.2007, it would not have been in accordance with Section 13(8) of the SARFAESI Act, read along with Rules 8 and 9(1). But at the intervention of the Court, namely, the orders passed in Writ Petition 27182 of 2007 dated 20.09.2007, the sale date fixed on 25.09.2007 was adjourned by six weeks. In any case, the sale was not effected even after the six weeks period expired as directed in the said Order dated 20.09.2007. The Securitisation Application No.20 of 2007, came to be disposed of by the DRT only on 27.12.2007.

¶167

51. Therefore, once the Securitisation Application of the borrowers, namely, Respondents 1 and 2 was dismissed on 27.12.2007, even assuming that there was no impediment for the SECURED CREDITOR, namely, the 4th Respondent-Bank to resort

¶168

¶169

to sale under the provisions of the SARFAESI Act, as held by us in the earlier paragraphs, there should have been a fresh notice issued in accordance with Rules 8(6) and 9(1) of the Rules, 2002. Unfortunately, the 4th Respondent-Bank stated to have effected the sale on 28.12.2007 by accepting the tender of the Appellant and by way of further process, directed the Appellant to deposit the 25% of the amount on that very day and also directed to deposit the balance amount within 15 days, which was deposited by the Appellant on 11.01.2008. In fact, after the deposit of the 25% of the amount on 28.12.2007, the 4th Respondent-Bank stated to have confirmed the sale in favour of the Appellant on 31.12.2007. After the deposit of the balance amount on 11.01.2008 by communication dated 02.02.2008, the 4th Respondent-Bank informed the 1st and 2nd Respondents about the confirmation of sale and thereby, provided no scope for Respondents 1 and 2 to tender the dues of the SECURED CREDITOR, namely, the 4th Respondent-Bank with all charges, expenses etc., as has been provided under Section 13(8) of the SARFAESI Act. Therefore, the whole procedure followed by the 4th Respondent-Bank in effecting the sale on 28.12.2007 and the ultimate confirmation of the sale on 11.01.2008, stood vitiated as the same was not in conformity with the provisions of the SARFAESI Act and the Rules framed thereunder. Though, such a

¶170

¶171

detailed consideration of the legal issues was not made by the Division Bench while setting aside the sale effected in favour of the Appellant, having regard to the construction of the provisions of the SARFAESI Act, the RDDB Act and the relevant Rules, we are convinced that the Judgment of the Division Bench dated 08.03.2010, passed in Writ Appeal 1555 of 2009, was perfectly justified and we do not find any infirmity with the same.

¶172

52…………….”

¶173

It is seen from the findings recorded above, after adjournment of sale fixed on 25.09.2007 by 6 weeks and dismissal of SA on 27.12.2007, the Bank should have issued

¶174

a fresh notice in accordance with Rules 8(6) and 9(1) of the Security Interest (Enforcement) Rules, 2002. Without doing that, acceptance of tenders already received and confirming the sale was found illegal.

¶175

In the case before hand, as already stated, there is absolutely no evidence to show that the notice was served on the Appellant with regard to the public tenders called for in

¶176

¶177

publication dated 15.11.2006 and for the sale of the property either by public auction sale or private auction sale

¶178

dated 05.02.2007 fixing the sale on

¶179

10.02.2007.

¶180

From the facts extracted, it is seen that the loan transaction and proceedings initiated under SARFAESI Act, 2002, had commenced from 2002. The property was sold on 10.02.2007. Therefore, it cannot be said that Mathew Varghese case can be applied only prospectively and not retrospectively for the transaction that had taken place in 2007. The settled proposition of law is that the law declared by the Court will have retrospective effect, if not otherwise stated to be so specifically. In Mathew Varghese case, there is no specific direction given that this judgement is effective prospectively and not retrospectively. Therefore, the submission that the ratio of Mathew Varghese case

¶181

cannot be applied in this case, cannot be accepted.

¶182

¶183

In view of the grave omissions like non service of 30 days clear notice prior to sale to the borrower as required under Rule 8(6) and 9(1) of the Security Interest (Enforcement) Rules, 2002, non production of valuation report as required under Rule 8(5) of the Security Interest (Enforcement) Rules, 2002, and non-settling of terms in writing between the parties as required under Rule 8(8) of the Security Interest (Enforcement) Rules, 2002, and for the blatant violation of these mandatory provisions, this Tribunal finds that the sale has to be necessarily set aside. In the absence of valuation report, it is not possible to find out as to whether the property was valued properly, whether reserve price was fixed appropriately and whether property was sold for a fair price. This Tribunal also finds that for the recovery of loan of Rs.24 Lakhs and odd, the property was sold for Rs.1.16 Crores. It is totally unwarranted. The sale of one or two shops would have fetched the loan amount due to the Bank. Rule 8(5) requires the sale of whole or any part of the property. It has been time and again reiterated by Hon‟ble Supreme Court that the excessive execution has to

¶184

¶185

be necessarily deprecated. Merely because there was no express challenge to the sale in the prayer and the Appellant has failed to redeem the property despite the opportunities given, the sale held without following the procedures, cannot be permitted to stand. As stated earlier, Appellant had challenged the sale highlighting the procedural irregularities in IA No.620/2007. It appears that no order was passed in this Application.

¶186

In fine,

¶187

(a) This Tribunal sets aside the impugned Sale Notice dated 05.10.2006, Tender Notice published on 15.11.2006 and the sale held on 10.02.2007 in pursuance of impugned Sale Notice followed by the alleged publicity dated 05.02.2007 for public auction/tender cum private auction.

¶188

(b) First Respondent Bank is directed to take steps for cancellation of Sale Certificate and its

¶189

registration.

¶190

¶191

(c) First Respondent Bank is directed to refund the sale consideration to the Auction Purchaser with interest at 8% p.a. along with stamp duty and registration charges with interest at 8% p.a. If Appellant received the balance sale consideration, Appellant has to return the balance sale consideration with interest at 8% p.a. to the 1^st Respondent Bank.

¶192

(d) Admittedly, the 1^st Respondent Bank had not taken steps to take possession of the property by initiating proceedings under Section 14 of the SARFAESI Act, 2002. Possession, if any, taken from the Appellant by the Auction Purchaser, is only by the unauthorised means. Therefore, the Auction Purchaser is directed to restore the possession of the property to the Appellant.

¶193

(e) First Respondent Bank is at liberty to proceed

¶194

with fresh auction sale, in accordance with law.

¶195

¶196

(f) The Appeal in RA (SA) 34/2022 is allowed with

¶197

costs of the Appellant recoverable from the 1^st Respondent Bank by setting aside the order passed by Learned Presiding Officer, DRT, Coimbatore, in OA(S) No.107/2006 and OA(S) No.107/2006 is allowed. All pending IAs, if any, stand closed.

¶198

[Dictated to Athistamani, PS, transcribed by her, corrected and signed by me this 12^th of June, 2025]

¶199

[ Justice G. Chandrasekharan] CHAIRPERSON

¶200

N R Imayavaramban v. State Bank of India

Case brief

What is this about?

What did the court decide?

N R Imayavaramban v. State Bank of India

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

All orders in this case

Similar cases

Har Hotel Private limited versus Icici Bank Limited

Ms Hotel Radha Prasad versus City Union Bank Limited

Mrs Kalpana versus Dbs Bank Limited

State Bank of India versus Shri Narayana Traders

Mrs Kanimoli versus Karnataka Bank Limited

Tk Ragavendhra versus Corporation Bank