Quashed

Mr. C. Ramalinga v. the Authorized Officer/General Manager

Karnataka HC12 Dec 2024WP/3620/2024

Case brief

AI extract

What is this about?

The High Court quashed a sale notice and confirmed sale under the SARFAESI Act because the mandatory 30-day notice under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002 was not served on the borrower. The petitioners were permitted to redeem the property by depositing the outstanding amount and interest within four weeks.

What did the court decide?

Impugned sale notice and confirmation of sale quashed; petitioners allowed to deposit outstanding amount and interest to redeem property.

Mr. C. Ramalinga Vs the Authorized Officer/General… — Banking and Recovery | Karnataka HC (2024)

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1 - NC: 2024:KHC:51369 WP No. 3620 of 2024 C/W WP No. 16119 of 2023

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 12^TH DAY OF DECEMBER, 2024

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BEFORE

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THE HON'BLE MR JUSTICE HEMANT CHANDANGOUDAR

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WRIT PETITION NO. 3620 OF 2024 (GM-RES) C/W

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WRIT PETITION NO. 16119 OF 2023 (GM-RES)

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IN WP No. 3620/2024

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BETWEEN:

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MR. C. RAMALINGA, S/O MR. CHANNAPPA, AGED ABOUT 65 YEARS , CHANNAKESHWA NILAYA, SHANTAMMA LAYOUT, SIDDESHWARA NAGAR, CHIKKAL - 577 203, SHIVAMOGGA TALUK.

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Digitally signed by R HEMALATHA Location: HIGH COURT OF KARNATAKA

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MR. R. ROHIT, S/O MR. C. RAMALINGA, AGED ABOUT 45 YEARS, CHANNAKESHWA NILAYA, SHANTAMMA LAYOUT, SIDDESHWARA NAGAR, CHIKKAL - 577 203, SHIVAMOGGA TALUK.

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…PETITIONERS

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(BY SRI. K. SHASHIKANTH PRASAD, ADVOCATE)

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AND:

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THE AUTHORIZED OFFICER / GENERAL MANAGER, UNION BANK OF INDIA, B.H. ROAD, BRANCH, B.H. ROAD, SHIVAMOGGA - 577 201.

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MR. SUDEEP KUMAR B, S/O MR. BASAVARAJ B,

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NC: 2024:KHC:51369 WP No. 3620 of 2024 C/W WP No. 16119 of 2023

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AGED ABOUT 30 YEARS, ASHIRWADA NILAYA, FIRST CROSS, SINIMA ROAD, KUMBAR GUNDI, SHIMOGA - 577 201.

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…RESPONDENTS (BY SMT. NATASHA N. MURTHY, ADVOCATE FOR SRI. VIGNESH SHETTY, ADVOCATE FOR R1; SRI. PALLAVA R, ADVOCATE FOR R2)

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THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO SET - ASIDE THE ORDER DATED 11.9.2023 IN CRL MISC.NO.89/2023 PASSED BY THE COURT OF THE PRINCIPLE SENIOR CIVIL JUDGE AND CHIEF JUDICIAL MAGISTRATE, SHIVAMOGGA. (ANNEXURE -B) AND ETC.,

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IN WP NO. 16119/2023

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BETWEEN:

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MR. C. RAMALINGA, S/O MR. CHANNAPPA, AGED ABOUT 64 YEARS, CHANNAKESHWA NILAYA, SHANTAMMA LAYOUT, SIDDESHWARA NAGAR, CHIKKAL - 577 203, SHIVAMOGGA TALUK.

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MRS. N. RATHANAMMA, W/O MR. C. RAMALINGA, AGED ABOUT 55 YEARS, CHANNAKESHWA NILAYA, SHANTAMMA LAYOUT, SIDDESHWARA NAGAR, CHIKKAL - 577 203, SHIVAMOGGA TALUK.

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MR. R. ROHIT, S/O MR. C. RAMALINGA, AGED ABOUT 43 YEARS, CHANNAKESHWA NILAYA,

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NC: 2024:KHC:51369 WP No. 3620 of 2024 C/W WP No. 16119 of 2023

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SHANTAMMA LAYOUT, SIDDESHWARA NAGAR, CHIKKAL - 577 203, SHIVAMOGGA TALUK.

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...PETITIONERS

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(BY SRI. K. SHASHIKANTH PRASAD, ADVOCATE)

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AND:

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THE AUTHORIZED OFFICER / GENERAL MANAGER, UNION BANK OF INDIA, B.H. ROAD BRANCH, B.H. ROAD, SHIVAMOGGA - 577 201.

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...RESPONDENT

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(BY SMT. NATASHA N. MURTHY, ADVOCATE FOR SRI. VIGNESH SHETTY, ADVOCATE FOR R1; SRI. H.R. SHOWRI, ADVOCATE FOR IMPLEADING APPLICANTS)

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THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO SET ASIDE THE SALE NOTICE PUBLISHED IN KANNADA PRABHA DAILY NEWS PAPER ON 06/07/2023 FOR AUCTION SALE OF SCHEDULE PROPERTY ON 27/07/2023 AT 12-00 AM TO 5-00 PM (ANNEXURE-A) ISSUED BY THE RESPONDENT AND ETC.,

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THESE PETITIONS, COMING ON FOR ORDERS, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE HEMANT CHANDANGOUDAR

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ORAL ORDER

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The petitioners have filed the present writ petitions challenging the sale notice dated 06.07.2023 issued by the respondent-Bank under Rule 8(6) read with Rule 9 of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as “the Rules, 2002”). The petitioners are borrowers who had availed a loan from the respondent-Bank.

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4 - NC: 2024:KHC:51369 WP No. 3620 of 2024 C/W WP No. 16119 of 2023

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However, upon defaulting in repayment of the said loan, the respondent-Bank initiated proceedings under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as “the SARFAESI Act”), which culminated in the issuance of the impugned sale notice.

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Following the issuance of the impugned sale notice, respondent No.2 in W.P.No.3620/2024 was declared as the successful bidder. Subsequently, upon deposit of 25% of the sale consideration, the sale was confirmed in his favour. In light of the interim order passed by this Court, the petitioner has now deposited the entire outstanding amount due as of today, excluding expenses incurred in relation to the loan account with the respondent-Bank.

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Learned counsel for respondent No.2, the Auction Purchaser, contended that once the sale notice has been published, the petitioner loses the right to redeem the mortgaged property, as held by the Hon’ble Supreme Court in THR Invent Educational Society v. UCO Bank and Others . It was submitted that the petitioner’s attempt to redeem the property at this stage is contrary to the principles laid down by the Hon’ble Apex Court.

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On the other hand, learned counsel for the respondent-Bank argued that the sale notice and the

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5 - NC: 2024:KHC:51369 WP No. 3620 of 2024 C/W WP No. 16119 of 2023

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subsequent confirmation of sale in favour of the Auction Purchaser were strictly in compliance with the provisions of the SARFAESI Act and the Rules, 2002. It was further submitted that no procedural irregularity has been committed, and therefore, the sale notice and the sale confirmation do not warrant interference by this Court.

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However, upon perusal of the records and considering the submissions made, it is apparent that the mandatory notice, as stipulated under Sub-Rule (6) of Rule 8 of the Rules, 2002, was not served on the petitioner prior to the publication of the impugned sale notice. Sub-Rule (6) of Rule 8 of the Rules, 2002 mandates that the secured creditor shall serve a notice of 30 days to the borrower before the sale or transfer of the secured assets. The failure to comply with this mandatory requirement renders the issuance of the sale notice and the subsequent confirmation of sale vitiated in law.

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The reliance placed by learned counsel for respondent No.2, the Auction Purchaser, on the decision of the Hon’ble Supreme Court in THR Invent Educational Society v. UCO Bank and Others is misplaced and inapplicable to the facts of the present case. In the said decision, the Hon’ble Supreme Court dealt with circumstances where the mandatory procedural requirements were duly complied with. However, in the present case, the non-service

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6 - NC: 2024:KHC:51369 WP No. 3620 of 2024 C/W WP No. 16119 of 2023

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of notice under Sub-Rule (6) of Rule 8 constitutes a violation of the mandatory statutory provisions, thereby rendering the entire sale process unsustainable in law.

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In view of the foregoing analysis, the impugned sale notice dated 06.07.2023 and the confirmation of sale in favour of respondent No.2-Auction Purchaser are vitiated due to non-compliance with the mandatory requirement under Sub-Rule (6) of Rule 8 of the Rules, 2002. Accordingly, I pass the following:

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ORDER

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i. The impugned sale notice dated 06.07.2023 issued by respondent No.1-Bank published in Kannada Prabha, Daily Newspaper at Annexure-A is hereby quashed. Consequently, the confirmation of the sale in favour of respondent No.2 is declared as null and void.

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ii. The petitioner to deposit the expenses if any, in relation to the loan account with the respondentBank within four weeks from today.

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iii. The petitioner to pay interest at 10% per annum on the amount of Rs.20,00,000/- deposited by respondent No.2-Auction Purchaser within four weeks from today.

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7 - NC: 2024:KHC:51369 WP No. 3620 of 2024 C/W WP No. 16119 of 2023

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iv. Upon deposit of the said amount towards interest, the respondent-Bank shall discharge the loan and release all the originals of title deeds in relation to the subject property.

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v. The respondent-Bank is under obligation to release the amount of Rs.20,00,000/- along with interest at 10% to be deposited by the petitioner within two weeks from the date of deposit of the said amount by the petitioner.

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Sd/(HEMANT CHANDANGOUDAR) JUDGE

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RKA List No.: 1 Sl No.: 54 CT: BHK

Mr. C. Ramalinga v. the Authorized Officer/General Manager

Case brief

What is this about?

What did the court decide?

Mr. C. Ramalinga v. the Authorized Officer/General Manager

Case brief

What is this about?

What did the court decide?

What the court decided

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