VARIMADUGU OBI REDDY versus B. SREENIVASULU & ORS.

[2022] 16 S.C.R. 1108

[2022] 16 S.C.R.

VARIMADUGU OBI REDDY

B. SREENIVASULU & ORS.

(Civil Appeal No(s). 8470 of 2022)

BNOVEMBER 16, 2022

[AJAY RASTOGI AND C.T. RAVIKUMAR, JJ.]

Securitisation and Reconstruction of Financial Assetsand Enforcement of Security Interest Act, 2002: ss. 13(2), 13(4),14, 17(1), 18 – e-auction sale - Respondent availed three loanCfacilities after executing necessary security documents - AnotherRespondent stood as guarantor and created an equitable mortgageover her immovable property as security for due repayment of thesaid loan amount - Respondent borrowers committed default inrepaying the outstanding loan amount as also the interest - LoanDaccounts classified as non-performing assets-NPA – Initiation ofrecovery proceedings by the respondent Bank-secured creditor underthe provisions of the SARFAESI Act – Issuance of demand noticecalling upon the respondent borrowers/guarantor to repay anddischarge the outstanding loan amount – Bank then took physicalpossession of the property from the borrowers - PossessionEchallenged by the respondent borrowers by filing SecuritizationApplication before the Debts Recovery Tribunal – Same wasdismissed and the order attained finality - Bank issued notice priorto e-auction to the respondent borrowers calling upon the borrowers/guarantor to repay the outstanding loan amount as demanded –FThereafter, issuance of e-notice by the Bank – Challenged by therespondents - By interim order Tribunal directed the respondentBank to proceed with the auction sale of the secured asset scheduledwith further direction not to issue the sale certificate provided therespondent deposits certain amount within 15 days, however, therespondent failed to deposit the same – Bank then proceeded withGthe auction sale - Appellant declared the highest bidder, and salecertificate was issued in his favour - Before tribunal, respondentborrowers raised two primary objections that there was an error inthe description of mortgaged property indicated in the e-auction

sale notice resulting in low value in auction; and that the auctionpurchaser did not deposit the auction price within the specifiedtime, as such breach of r. 9(4) of the Rules 2002 - Tribunal dismissedthe applications filed by the respondents - Respondent borrowersthen filed writ petition before the High Court u/Art. 226 - DivisionBench of the High Court set aside the order passed by the tribunalholding that error in the description of the scheduled property in e-auction sale notice was serious infirmity in the process and cannotbe sanctified; and that the auction purchaser failed to depositbalance bid amount within the stipulated time - Proceedings initiatedfrom the stage of s. 13(2) of the SARFAESI Act, 2002 till the deliveryof physical possession of the scheduled property set aside – Onappeal, held: No documentary evidence placed on record tosubstantiate the kind of prejudice in value of property - Meretypographical error due to inadvertence which has not caused anyprejudice to the borrowers, could not be considered to be the groundto annul the process held by the secured creditor - Four days’ delaywhich was caused in terms of the original auction notice, in nomanner, would frustrate or annul the auction proceedings – Findingreturned by the tribunal was well reasoned and duly supported withthe material on record - Interference made by the High Court underthe judgment while recording finding that it was in breach of Rule9(4) of the Rules, 2002 is not legally sustainable in law and is setaside – Practice of entertaining the writ application by the HighCourt in exercise of jurisdiction u/Art 226 without exhausting thealternative statutory remedy available under the law is deprecated– Respondent borrowers initially approached the Debts RecoveryTribunal by filing an application u/s. 17, but the order of the tribunalindeed was appealable u/s. 18 subject to the compliance of conditionof pre - deposit and without exhausting the statutory remedy ofappeal, the respondent borrowers approached the High Court byfiling the writ application u/Art. 226 of the Constitution - This wasto avoid the condition of pre-deposit - Security Interest(Enforcement) Rules 2002 – rr. 8(5), 8(6) & 9(4) – Judicialdeprecation.

Allowing the appeal, the Court

HELD :1.1 The practice of entertaining the writ applicationby the High Court in exercise of jurisdiction under Article 226of the Constitution without exhausting the alternative statutory

DEFG

Aremedy available under the law is deprecated. This circuitousroute appears to have been adopted to avoid the condition ofpre-deposit contemplated under 2nd proviso to Section 18 of theAct 2002. [Para 34][1124-G-H]

1.2 The borrower failed to demonstrate that because of aBtypographical inadvertent error in door number, as indicatedabove, the property could not have fetched the value as it oughtto have fetched and that apart, there was no documentaryevidence placed on record to substantiate the kind of prejudice,if any, being caused. [Para 36][1125-E-F]

C1.3 Secured creditor is under an obligation to undertakethe exercise and cross-check the description of the mortgagedproperty at the stage when the initial proceedings under Section13(2) are initiated or in the later consequential proceedings, butat the same time, mere typographical error due to inadvertencewhich has not caused any prejudice to the borrowers, that in itselfDcould not be considered to be the ground to annul the processheld by the secured creditor which, in our view, is in duecompliance with the requirement as contemplated under theprovisions of Rules, 2002. Mere mentioning of the door number“12-3-393” instead of “12-3-39” is inconsequential and does notEvitiate the auction proceedings. [Para 37][1125-F-H; 1126-B]1.4 It is relevant to note that amendment was made in Rule9(4) and Rule 9(5) of the Rules, 2002 of which reference hasbeen made by GSR No.1046(E) dated 3rd November, 2016effective from 4th November, 2016. Pre- amended Rule 9(4)Frefers to the period of 15 days for confirmation of sale or suchextended period, but the outer limit has not been defined andthat appears to be not as sacrosanct and the period can beextended, as agreed upon in writing between the parties. If thetime stands extended, the auction purchaser would not beconsidered to be defaulter as referred to under Rule 9(5) of theGRules. As the auction in the instant case was held in March 2015,fact remains that by an amendment, the legislature with itsconsciousness has clarified that the agreement has to be between

the purchaser and the secured creditor exceeding 15 days, butin any case may not exceed three months although who are theparties to the agreement are not clear in the pre-amended Rule9(4) of the Rules. [Paras 38, 39 & 40][1126-F; 1127-C-E]

2.1 The four days’ delay which was caused in terms of theoriginal auction notice, in no manner, would frustrate or annulthe auction proceedings. Debts Recovery Tribunal has rightlyheld that because in such state of flux, particularly when the bank/secured creditor requested the auction purchaser to wait for sometime because the borrowers are negotiating with the bank in thelight of interim order dated 26th March, 2015 of the Tribunal,delay in depositing 75% of the bid amount by four days in nomanner would frustrate the rights of the parties inter se, moreso, when the conduct of the borrowers in getting extension orderson two different occasions and still not depositing Rs.6 lakhs interms of the order of the Tribunal would clearly reflect that theintention of the borrowers was only to frustrate the auction saleby one reason or the other ,which they could not succeed. [Para44][1128-F-H; 1129-A]

2.2 The finding returned by the Tribunal was well reasonedand duly supported with the material on record and theinterference made by the High Court under the impugnedjudgment while recording finding that it was in breach of Rule9(4) of the Rules, 2002 is not legally sustainable in law anddeserves to be set aside. The appeal deserves to succeed and isaccordingly allowed. The judgment impugned of the High Courtis hereby quashed and set aside. [Paras 45 & 47][1129-B, E-F]

General Manager, Sri Siddeshwara Cooperative BankLimited and Another vs. Ikbal and Others (2013) 10SCC 83: 2013 (8) SCR , United Bank of India vs.Satyawati Tondon & Others (2010) 8 SCC 110: 2010(9) SCR 1 – referred to.

Case Law Reference

ACIVIL APPELLATE JURISDICTION : Civil Appeal No. 8470of 2022.

From the Judgment and Order dated 20.11.2019 of the High Courtof Telangana at Hyderabad in Writ Petition No.17702 of 2019.

Byrapaneni Suyodhan, Kumar Shashank, Ms. Tatini Basu, Advs.Bfor the Appellant.

Krishna Dev Jagarlamudi, Inderdeep Kaur Raina, N. Sai Kaushal,Sanjay Kapur, Ms. Megha Karnwal, Arjun Bhatia, Ms. Akshata Joshi,Ms. Shubhra Kapur, Lalit Rajput, Advs. for the Respondents.

CThe Judgment of the Court was delivered byRASTOGI, J.

1. Leave granted.

2. The instant appeal has been preferred at the instance of theauction purchaser (appellant herein) assailing the impugned judgmentDand order dated 20[th] November, 2019 passed by the High Court for theState of Telangana at Hyderabad setting aside the e-auction sale held bythe respondent Bank (secured creditor) under the provisions of theSecuritisation and Reconstruction of Financial Assets and Enforcementof Security Interest Act, 2002 (hereinafter being referred to as theE“SARFAESI Act, 2002”).

3. The relevant facts in brief to appreciate the controversy arethat respondent nos.1-3 have availed three loan facilities vide MortgageLoan of Rs.10 lakhs, Cash Credit Loan of Rs.8 lakhs and Car Loan ofRs.8 lakhs from the respondent Bank (secured creditor) after executingFnecessary security documents. Respondent No.4 herein stood asguarantor and created equitable mortgage over her immovable propertyas security for due repayment of the said loan amount.

4. After availing the above loan facilities, the respondent borrowershave committed default in repaying the outstanding loan amount andGhave also failed to pay the interest accrued to the loan accounts fromtime to time. Finally, the loan accounts have been classified as Non-Performing Assets (NPAs) on 30[th] September, 2012 and in furtherance,the respondent Bank initiated recovery proceedings under the provisionsof the SARFAESI Act, 2002 and issued demand notice dated 15[th]

November, 2012 calling upon the respondent borrowers/guarantor torepay and discharge the outstanding loan amount with interest and costswithin 60 days. After following the procedure as contemplated underthe provisions of the SARFAESI Act, 2002 and Rules made thereunder,on 14[th] February, 2013, the respondent Bank published possession noticein the daily newspapers under Section 13(4) of the SARFAESI Act,2002 and obtained the order from the District Collector on 23[rd] June,2013 to take physical possession of the scheduled property from therespondent borrowers/ guarantor and hand over to the respondent Bank(secured creditor).

5. These proceedings came to be challenged by the respondentborrowers by filing Securitization Application (SA) before the DebtsRecovery Tribunal which finally came to be dismissed by the Tribunalby order dated 12[th] December, 2014 and it is on record that no appealwas preferred against the order dated 12[th] December, 2014 passed bythe Debts Recovery Tribunal and that became final.

6. After taking possession of the mortgaged property, on 29[th]November, 2014, the respondent Bank (secured creditor) issued noticeprior to e-auction to the respondent borrowers after obtaining valuationof the subject property from an approved valuer in terms of Rules 8(5)and 8(6) of the Security Interest (Enforcement) Rules, 2002 (hereinafterbeing referred to as the “Rules, 2002”) calling upon the borrowers/guarantor to repay the outstanding loan amount as demanded. When therespondent borrowers/guarantor failed to respond, the respondent bankproceeded further and issued e-auction sale notice dated 25[th] February,2015 fixing the date of auction of the schedule property on 28[th] March,2015 and the said notice was widely published in Indian Express (English)and Eenadu (Telugu) daily newspapers dated 26[th] February, 2015.

7. That the aforesaid e-auction sale notice came to be challengedby the respondent borrowers before the Debts Recovery Tribunal andby an interim order dated 26[th] March, 2015, the Tribunal directed therespondent Bank (secured creditor) to proceed with the auction sale ofthe secured asset scheduled on 28[th] March, 2015 with further directionnot to issue the sale certificate provided the respondent borrowersdeposits Rs.6 lakhs within 15 days from the date of the said order. Itwas made clear that in the event of respondent borrowers fail to deposit

Athe said amount, the respondent Bank will be at liberty to issue the salecertificate in favour of the highest bidder. It is not disputed that in termsof the interim order passed by the Tribunal, the respondent borrowershad to deposit Rs.6 lakhs by 9[th] April, 2015 but failed to deposit the saidamount and at this stage, the respondent borrowers filed an applicationon 9[th] April, 2015 seeking extension of further 15 days’ time from 10[th]BApril, 2015 to deposit the amount of Rs.6 lakhs and the Tribunal by anorder dated 17[th] April, 2015 granted extension of 15 days’ time to depositthe sum of Rs.6 lakhs with direction to the respondent Bank (securedcreditor) and the respondent borrowers to maintain status-quo.

8. The fact to be noticed at this stage is that since the dispute wasCon-going before the Tribunal and the respondent borrowers have failedto comply with the interim order of the Tribunal dated 26[th] March, 2015to deposit Rs.6 lakhs within 15 days from the date of passing of theorder by 10[th] April, 2015, the respondent Bank (secured creditor)proceeded with the auction sale pursuant to the e-auction sale noticeDdated 25[th] February, 2015 in terms of liberty granted by the Tribunal.

9. The present appellant had initially deposited the earnest moneyof Rs.5,54,000/- on 26[th] March, 2015 and after being declared the highestbidder with an offer of Rs.64,23,000/, further deposited sum ofRs.10,51,750/- which comes to Rs.16,05,750/ i.e. 25% of the total auctionEprice and the balance 75% of the bid amount i.e. Rs.48,17,250/- wasdeposited by the appellant on 15[th] April, 2015 and sale certificate wasissued in favour of the appellant (auction purchaser). It is to be noticedthat the day when the order came to be passed by the Tribunal on 17[th]April, 2015 granting further extension of 15 days’ time to the respondentborrowers to deposit sum of Rs.6 lakhs, auction sale was finalised andFsale certificate dated 15[th] April, 2015 was issued in favour of the appellant(auction purchaser).

10. Respondent borrowers raised two primary objections beforethe Tribunal that there was an error in the description of mortgagedproperty indicated in the e-auction sale notice dated 25[th] February, 2015Gand to be more specific, the scheduled property bearing Door No.12-3-39, 3[rd ]Cross, Sai Nagar, Ananthapuramu was mortgaged as securityfor the aforesaid loan while in the e-auction sale notice, the propertywas described as Door No.”12-3-393" instead of “12-3-39” and this,

according to the respondent borrowers was the manifest error committedby the respondent Bank and because of the wrong description of theproperty put to auction, that property could not have fetched the valuewhich it ought to have fetched in the course of business.

11. In addition, further objection raised by the respondent borrowerswas that in terms of Rule 9(4) of the Rules, 2002, the auction price wasto be deposited by the auction purchaser within 15 days which expiredon 10[th ]April, 2015 but it was admittedly deposited by the auction purchaser(appellant) on 15[th] April, 2015 which is in clear breach of Rule 9(4) ofthe Rules 2002, in consequence thereof, the e-auction sale notice and allfurther proceedings initiated pursuant thereto deserve to be declarednull and void.12. The contentions were repelled by the Tribunal and the Tribunaldismissed the applications filed by the respondent borrowers. Althoughit was an appealable order before the Debts Recovery Appellate Tribunal,still the respondent borrowers approached the High Court under Article226 of the Constitution and the Division Bench of the High Court reversedthe findings returned by the Tribunal on the premise that there was anerror in the description of the scheduled property in e-auction sale noticedated 25[th] February, 2015 and that was considered to be serious infirmityin the process and cannot be sanctified and further held that since theappellant (auction purchaser) failed to deposit balance 75% of the bidamount within the stipulated time of 15 days which ought to have beendeposited by him on or before 10[th ]April, 2015, that admittedly depositedby him on 15[th] April, 2015, is in clear breach of Rule 9(4) of the Rules,2002 and accordingly, set aside all the proceedings initiated from thestage of Section 13(2) of the SARFAESI Act, 2002 till the delivery ofphysical possession of the scheduled property to the auction purchaser(appellant) by the respondent Bank by an order dated 23[rd] November,2018, which is the subject matter of challenge before us.

13. Learned counsel for the appellant submits that so far as thedescription of the scheduled property put to auction is concerned, fromthe stage when the initial notice was issued by the respondent Bank(secured creditor) under Section 13(2) of the SARFAESI Act, 2002, themortgaged property was described as “Door No.12-3-393” instead of“Door No.12-3-39”, but it was never the case of the respondent

Aborrowers either before the Tribunal or before the High Court that thedescription in the e-auction sale notice indicating the boundaries,measurement, ward number, block number, TS number and extent ofland, etc. left any ambiguity or confusion in the minds of the participantsin the e-auction bid and it was also not the case of the respondentborrowers that there is some other property in the locality/vicinity withBthe number as indicated in the e-auction sale notice i.e. “12-3-393”.Thus, in the given facts and circumstances, merely because there appearsto be typographical inadvertent human error in reference to door numberof the subject property may not leave ambiguity with regard to mortgagedproperty put to auction and this typographical error is inconsequentialCand does not vitiate the e-auction sale proceedings held on 28[th] March,2015.

14. So far as the non-compliance of Rule 9(4) of the Rules, 2002is concerned, learned counsel for the appellant submits that duringpendency of e-auction proceedings initiated pursuant to e-auction saleDnotice dated 25[th] February, 2015, the sale of the scheduled property wasto be held on 28[th ]March, 2015 and the said notice was published inIndian Express (English) and Eenadu (Telugu) daily newspapers dated26[th] February, 2015 and this process was initiated after giving fullopportunity and notice to the respondent borrowers in compliance ofRule 8(6) of Rules, 2002 and the appellant was held to be the highestEbidder and auction bid was much higher than the reserve price indicatedin the e-auction sale notice which was Rs.64,23,000/- and he has compliedwith all the conditions of e-auction sale notice.

15. Learned counsel submits that the appellant was ready andwilling to deposit the balance of 75% of auction bid before 11[th] April,F2015 but because of the intervention made by the Tribunal that createdconfusion in the mind of the appellant and for the aforesaid reason, delayof four days was caused in depositing the balance 75% of the bid amountwhich was deposited on 15[th] April, 2015 and the time under Rule 9(4) ofRules, 2002 is not that sacrosanct. This fact has not been noticed by theGHigh Court and in the given circumstances, the finding recorded by theHigh Court in the impugned judgment, is not sustainable in law anddeserves to be set aside.16. Learned counsel further submits that the conduct of therespondent borrowers is equally to be looked into for the reason that

when the e-auction sale notice came to be published by the respondentBank, simultaneously, application was filed by the respondent borrowersbefore the Tribunal on 23[rd] March, 2015 and interim order was passedby the Tribunal on 26[th ]March, 2015 to see the bonafides of the respondentborrowers, they were directed to deposit Rs.6 lakhs within 15 days fromthe date of order but admittedly, the respondent borrowers have failed todeposit with the respondent Bank and sought further time to deposit, onwhich order came to be passed on 17[th] April, 2015 and they are onlyinterested to nullify the e-auction proceedings initiated by the respondentBank either by taking legal recourse or by any other mechanism, whichis possible under the law and after failed to deposit the amount as directedby the Tribunal at least, they are not entitled to seek any indulgence fromthe High Court in the writ jurisdiction filed at their instance under Article226 of the Constitution.

17. Per contra, learned counsel for the respondents, whilesupporting the finding returned by the High Court submits that once theappellant has failed to deposit the balance 75% of the bid amount by 11[th]April, 2015, which was the deadline in terms of e-auction sale noticepublished by the respondent Bank and admittedly 75% of the bid amountwas deposited by the appellant on 15[th] April, 2015 which is in violation ofRule 9(4) of Rules, 2002 and that itself is sufficient to nullify the e-auction sale initiated by the respondent Bank and in support of hissubmission, placed reliance on the judgement of this Court in GeneralManager, Sri Siddeshwara Cooperative Bank Limited and Anothervs. Ikbal and Others[1]. Para 14 of the judgment is relevant for thepurpose and is extracted below:-

“14. reading of sub-rule (1) of Rule 9 makes it manifest thatthe provision is mandatory. The plain language of Rule 9(1)suggests this. Similarly, Rule 9(3) which provides that thepurchaser shall pay deposit of 25% of the amount of the saleprice on the sale of immovable property also indicates that thesaid provision is mandatory in nature. As regards balance amountof purchase price, sub-rule (4) provides that the said amountshall be paid by the purchaser on or before the fifteenth day ofconfirmation of sale of immovable property or such extendedperiod as may be agreed upon in writing between the parties.The period of fifteen days in Rule 9(4) is not that sacrosanct

Aand it is extendable if there is written agreement between theparties for such extension. What is the meaning of the expression“written agreement between the parties” in Rule 9(4)? The 2002Rules do not prescribe any particular form for such agreementexcept that it must be in writing. The use of the term “writtenagreement” means mutual understanding or an arrangementBabout relative rights and duties by the parties. For the purposesof Rule 9(4), the expression “written agreement” means nothingmore than manifestation of mutual assent in writing. The word“parties” for the purposes of Rule 9(4) we think must mean thesecured creditor, borrower and auction-purchaser.”

18. Learned counsel for the respondent borrowers further submitsthat description of the scheduled property has also created confusionin the minds of the participants in the e-auction sale notice and in supportthereof, submits that when the property was mortgaged and securityinterest was created, the value of the property assessed was much higherDin value than what being indicated as the reserve price by the respondentbank in the e-auction sale notice pursuant to which the auction proceedingswere initiated and because of the wrong description of the property putto auction, certainly inference can be drawn that property could nothave fetched the value it ought to have fetched and that is the reason theHigh Court has interfered with and set aside the notice under SectionE13(2) of the SARFAESI Act, 2002 and all other consequential proceedingsinitiated by the respondent Bank, and therefore, needs no furtherinterference of this Court.

19. Learned counsel for the respondent Bank (secured creditor)has raised an objection that order of the Tribunal was appealable orderFbefore the Debts Recovery Appellate Tribunal under Section 18 of theSARFAESI Act, 2002 and the petition filed by the respondent borrowersdirectly before the High Court against the order of the Tribunal was notmaintainable and for the delay in depositing the balance 75% of the bidamount, respondent Bank has tendered reasonable justification andGalso filed counter affidavit before this Court wherein, it has specificallystated that though the auction purchaser was ready to pay the balanceof 75% of the bid amount on time, it is the respondent Bank who requestedthe auction purchaser to wait for some time because the respondentborrowers were negotiating with the Bank at that point of time in light of

the interim order dated 26[th] March, 2015 passed by the Tribunal and thatwas the reason for which the delay of four days was caused in depositingthe balance 75% of the bid amount, which ought to have been paid by11[th] April, 2015 but actually deposited by 15[th] April, 2015.

20. Learned counsel for the respondent Bank further submits thatthe auction proceedings were initiated under Section 13(2) of theSARFAESI Act, 2002 in reference to the scheduled property and althoughthere was factual inadvertent error indicated in the door number in thenotice issued under Sections 13(2) and 13(4) of the SARFAESI Act,2002 mentioned as “Plot No.65” with the schedule of property withboundaries, ward number, block number, T.S. number, etc., there is nodoor number existing in the locality/vicinity as “Door No.12-3-393”, butno prejudice has been caused to the respondent borrowers that vitiatethe auction proceedings and further submits that after depositing 75% ofauction bid amount on 15[th] April, 2015, sale certificate was issued andpossession was later transferred to the auction purchaser (appellantherein). In the given facts and circumstances, interference made by theHigh court was not valid and deserves to be interfered by this Court.

21. To complete the facts, learned counsel for the respondentBank further submits that on 15[th] April, 2015 after receiving the completebid amount of Rs.64,23,000/- the value of property under e-auction andafter adjustments of the outstanding loan accounts and other ancillarycharges, the surplus amount remain payable to the borrowers ofRs.16,30,000/- which was offered to the respondent borrowers and sincethey failed to accept the balance amount, it was accordingly kept inFDR and at present, the aforesaid amount is lying in FDR and withaccumulation of interest, the said amount has come to approximatelyRs.18.80 lakhs, which is due and payable to the respondent borrowersand it can be transferred to the borrowers/guarantor in compliance ofthe order of this Court.

22. We have heard the learned counsel for the parties and withtheir assistance perused the material available on record.

23. The indisputed facts which manifest from the record are thatthe respondent borrowers availed three loan facilities from the respondentBank (secured creditor) to the tune of Rs.26 lakhs after executingnecessary security documents. Respondent no.4 stood as guarantor andcreated equitable mortgage over her immovable property as security for

Adue payment of the said loan amounts. The property is residentialbuilding of 266 sq. yards of land. The description of the property mortgagedcan be identified from the notice issued in the first instance under Section13(2) of the Act as follows:-

24. On account of default, the loan amounts of the respondentborrowers were classified as Non-Performing Assets (NPAs) and thebank issued demand notice dated 15[th] November, 2012 under Section13(2) of the Act which later came to be published in Hindu (English) andEenadu (Telugu) daily newspapers on 5[th] December, 2012 and laterFpossession notice dated 14[th] February, 2013 came to be published inHindu (English) and Eenadu (Telugu) daily newspapers on 20[th] February,2013 and after initiating proceedings under Section 14 of the Act, therespondent Bank took possession of the scheduled property under theorders of the District Collector from the respondent borrowers on 23[rd]GJune, 2013.

25. At this stage, the proceedings initiated by the respondent bankcame to be assailed by the respondent borrowers before the DebtsRecovery Tribunal of Andhra Pradesh at Hyderabad under Section 17(1)of the Act. It may be relevant to note that in the description of theHproperty under Sections 13(2) and 13(4) of the Act, door number indicated

was “12-3-393” in place of “12-3-39” and this question about the allegederror in the door number of the mortgaged property was available to theborrowers in the first round of litigation before the Tribunal, if at all, ithas any material bearing in reference to the proceedings initiated by therespondent Bank (secured creditor), but the proceedings initiated at theinstance of the respondent borrowers before the Tribunal came to bedismissed by judgment dated 12[th] December, 2014 and no further appealwas preferred and accordingly it has attained finality.

26. The e-auction notice came to be published by the respondentBank on 25[th] February, 2015 fixing the date of auction as 28[th] March,2015 with reserve price of Rs.55,33,000/- and e-auction notice waswidely published in Indian Express (English) and Eenadu (Telugu) dailynewspapers dated 26[th] February, 2015.

27. That e-auction notice came to the challenged by the respondentborrowers in the fresh proceedings instituted before the Tribunal on 23[rd]March, 2015. Pursuant thereto, interim order came to be passed by theTribunal on 26[th] March, 2015 with direction that the sale certificateshall not be issued in favour of the highest bidder provided the borrowerdeposit sum of Rs.6 lakhs. Relevant extract of the order of the Tribunalis quoted below:-

“The Respondent Bank is hereby permitted to proceed with theauction sale of the schedule property on 28.03.2015 in pursuanceof the Auction Notice dt. 25.02.2015 and however the RespondentBank is hereby directed not to issue the sale certificate in favourof the highest bidder in the auction subject to the condition that theApplicant shall deposit sum of Rs.6.00 lakhs directly with theRespondent Bank within 15 days from today. It is made clear thatin the event the Applicant fails to deposit the amount, as statedsupra, the Respondent Bank shall be at liberty to issue the salecertificate in favour of the highest bidder in the auction and suchsale shall be subject to the result of the above SA.”28. In terms of the aforesaid order, respondent borrowers wereto deposit the sum of Rs.6 lakhs on or before 9[th] April, 2015, but admittedly,the borrowers failed to deposit the aforesaid amount and on the saiddate i.e. 9[th] April, 2015 I.A. No.1687 of 2015 came to filed before theTribunal seeking extension of time period by another 15 days to depositthe sum of Rs.6 lakhs and extension of 15 days’ time was granted by the

ATribunal to deposit the sum of Rs.6 lakhs to the borrowers by an orderdated 17[th] April, 2015. The extract of the order dated 17[th] April, 2015 isreproduced hereinbelow:

“The Applicant is hereby directed to deposit the said sum ofRs.6.00 lakhs into the ‘interest bearing no-lien account’ with theBRespondent Bank within 15 days from 10.04.2015, as sought bythe Applicant, and accordingly, the Respondent Bank and theAuction Purchaser are hereby directed to maintain status-quo.Accordingly, the present IA is disposed of.”

29. It may be relevant to note that in the interregnum period, sinceCthe respondent Bank (secured creditor) was permitted to proceed withthe auction proceedings, appellant deposited initially the earnest moneyof Rs.5,54,000/- for participating in the proposed e-auction sale on 26[th]March, 2015 and after the auction purchaser was declared as the highestbidder with the offer of Rs.64,23,000/-, further sum of Rs.10,51,750/-totalling Rs.16,05,750/- was deposited (25% of Rs.64,23,000/-) on 28[th]DMarch, 2015.

30. In terms of Rule 9(4) of the Rules, 2002, the balance 75% ofthe bid amount being Rs.48,17,250/- was to be deposited by the appellantauction purchaser on or before 11[th] April, 2015, but prior thereto, anapplication was filed by the respondent borrowers on 9[th] April, 2015Eseeking extension of time and as the matter was sub-judice before theTribunal, the balance 75% of the bid amount could not have been depositedon 11[th] April, 2015, but it was deposited by the appellant on 15[th] April,2015 and the sale certificate was issued in favour of auction purchasersand as there was factual error in the door number of the subject property,Fwhich was indicated as “12-3-393” instead of “12-3-39”, rectificationdeed dated 21[st] April, 2015 was executed with the correct description ofthe scheduled property.

31. That since the respondent borrowers failed to deposit sumof Rs.6 lakhs in the extended period granted by an order dated 17[th]GApril, 2015, the Tribunal by its order dated 1[st] May, 2015 granted furthertime to the respondent borrowers till 10[th] May, 2015 to deposit the amountof Rs.6 lakhs, but by that time the auction proceedings were finalisedand the sale certificate dated 15[th] April, 2015 was duly registered andthe physical possession of scheduled property was handed over to theappellant on 23[rd] November, 2018. The Tribunal, after taking intoH

consideration the so-called alleged description of mortgaged property inreference to which there was great emphasis that Door No.”12-3-393"was mentioned instead of “12-3-39” and so also the breach of Rule 9(4)of the Rules, 2002, the Debts Recovery Tribunal dismissed the applicationby an order dated 1[st] August, 2019.

32. The order of the Tribunal dated 1[st] August, 2019 was anappealable order under Section 18 of the SARFAESI Act, 2002 and inthe ordinary course of business, the borrowers/person aggrieved wassupposed to avail the statutory remedy of appeal which the law providesunder Section 18 of the SARFAESI Act, 2002 in the absence ofefficacious alternative remedy being availed, there was no reasonablejustification tendered by the respondent borrowers in approaching theHigh Court and filing writ application assailing order of the Tribunal dated1[st] August, 2019 under its jurisdiction under Article 226 of the Constitutionwithout exhausting the statutory right of appeal available at its command.33. This Court in the judgment in United Bank of India vs.Satyawati Tondon & Others[2], was concerned with the argument ofalternative remedy provided under the SARFAESI Act, 2002 and dealingwith the argument of alternative remedy, this Court had observed thatwhere an effective remedy is available to an aggrieved person, the HighCourt ordinarily must insist that before availing the remedy under Article226 of the Constitution, the alternative remedy available under the relevantstatute must be exhausted. Paras 43, 44 and 45 of the said judgment arerelevant for the purpose and are extracted below:

“43. Unfortunately, the High Court overlooked the settled lawthat the High Court will ordinarily not entertain petition underArticle 226 of the Constitution if an effective remedy is availableto the aggrieved person and that this rule applies with greaterrigour in matters involving recovery of taxes, cess, fees, othertypes of public money and the dues of banks and other financialinstitutions. In our view, while dealing with the petitions involvingchallenge to the action taken for recovery of the public dues,etc. the High Court must keep in mind that the legislationsenacted by Parliament and State Legislatures for recovery ofsuch dues are code unto themselves inasmuch as they notonly contain comprehensive procedure for recovery of the dues

but also envisage constitution of quasi-judicial bodies for redressalof the grievance of any aggrieved person. Therefore, in all suchcases, the High Court must insist that before availing remedyunder Article 226 of the Constitution, person must exhaust theremedies available under the relevant statute.

44. While expressing the aforesaid view, we are conscious thatthe powers conferred upon the High Court under Article 226 ofthe Constitution to issue to any person or authority, including inappropriate cases, any Government, directions, orders or writsincluding the five prerogative writs for the enforcement of anyof the rights conferred by Part III or for any other purpose arevery wide and there is no express limitation on exercise of thatpower but, at the same time, we cannot be oblivious of the rulesof self-imposed restraint evolved by this Court, which everyHigh Court is bound to keep in view while exercising powerunder Article 226 of the Constitution.

45. It is true that the rule of exhaustion of alternative remedy isa rule of discretion and not one of compulsion, but it is difficultto fathom any reason why the High Court should entertain apetition filed under Article 226 of the Constitution and pass interimorder ignoring the fact that the petitioner can avail effectiveEalternative remedy by filing application, appeal, revision, etc.and the particular legislation contains detailed mechanism forredressal of his grievance.”

34. In the instant case, although the respondent borrowers initiallyapproached the Debts Recovery Tribunal by filing an application underFSection 17 of the SARFAESI Act, 2002, but the order of the Tribunalindeed was appealable under Section 18 of the Act subject to thecompliance of condition of pre-deposit and without exhausting the statutoryremedy of appeal, the respondent borrowers approached the High Courtby filing the writ application under Article 226 of the Constitution. Wedeprecate such practice of entertaining the writ application by the HighGCourt in exercise of jurisdiction under Article 226 of the Constitutionwithout exhausting the alternative statutory remedy available under thelaw. This circuitous route appears to have been adopted to avoid thecondition of pre-deposit contemplated under 2[nd] proviso to Section 18 ofthe Act 2002.

35. The High Court under the impugned judgment has non-suitedthe present appellant (auction purchaser) on the premise that there is anerror in the description of the door number of the property and instead of“12-3-39”, it was indicated as “12-3-393”, although there was no errorin the description of the property rather the dimensions with measurementand boundaries were properly indicated of the mortgaged property andon the premise that Rule 9(4) of the Rules has not been followed by theappellants by depositing 75% of the bid amount which ought to havebeen deposited by 11[th] April, 2015, instead it was deposited on 15[th] April,2015.

36. We find substance in the submissions made by the learnedcounsel for the appellant for the reason that so far as the error in thedescription of door number of the property is concerned, which admittedlyindicated throughout as “12-3-393” instead of “12-3-39”, but the fact isthat the description of the mortgaged property from the commencementof the proceedings under Section 13(2) of the SARFAESI Act, 2002,due to human error instead of “12-3-39”, door number was indicated as“12-3-393”, but admittedly the fact is that there is no such propertyavailable in the locality/vicinity with Door no.”12-3-393" and as fulldescription of the mortgaged property was mentioned/indicated, althoughthere was typographical error, but the respondent borrowers failed todemonstrate any prejudice being caused on account of the inadvertenterror being caused in description of the mortgaged property. At the sametime, the borrower failed to demonstrate that because of typographicalinadvertent error in door number, as indicated above, the property couldnot have fetched the value as it ought to have fetched and that apart,there was no documentary evidence placed on record to substantiatethe kind of prejudice, if any, being caused.

37. It is true that the secured creditor is under an obligation toundertake the exercise and cross-check the description of the mortgagedproperty at the stage when the initial proceedings under Section 13(2)are initiated or in the later consequential proceedings, but at the sametime, mere typographical error due to inadvertence which has not causedany prejudice to the borrowers, that in itself could not be considered tobe the ground to annul the process held by the secured creditor which, inour view, is in due compliance with the requirement as contemplatedunder the provisions of Rules, 2002 and this was extensively consideredby the Tribunal and that apart, it is not the case of the respondents that

Aparticipants in e-auction sale are misguided because of the error indescription of the property put to auction and when there is no ambiguitywith regard to the detailed description of the mortgaged property put toauction, mere mentioning of the door number “12-3-393” instead of “12-3-39” is inconsequential and does not vitiate the auction proceedingsheld on 28[th] March, 2015.B

38. So far as the second objection raised by the respondent, whichprevailed upon before the High Court regarding the breach of Rule 9(4)of Rules, 2002 is concerned, it will be apposite to note Rules 9(4) and9(5) of the Rules 2002 (pre-amended) which reads as under:

C“9. Time of sale, issues of sale certificate and delivery ofpossession, etc.-

(4) The balance amount of purchase price payable shall be paidby the purchaser to the authorised officer on or before theDfifteenth day of confirmation of sale of the immovable propertyor such extended period as may be agreed upon in writingbetween the parties.

(5) In default of payment within the period mentioned in sub-rule (4), the deposit shall be forfeited and the property shall beEresold and the defaulting purchaser shall forfeit all claim to theproperty or to any part of the sum for which it may besubsequently sold.

39. It will be relevant to note that amendment was made in RuleF9(4) and Rule 9(5) of the Rules, 2002 of which reference has beenmade by GSR No.1046(E) dated 3[rd] November, 2016 effective from 4[th]November, 2016 and it reads as under:

“9. Time of sale, issue of sale certificate and delivery ofpossession, etc.-

(4) The balance amount of purchase price payable shall be paidby the purchaser to the authorised officer on or before thefifteenth day of confirmation of sale of the immovable propertyor such extended period [as may be agreed upon in writing

between the purchaser and the secured creditor, in any case notexceeding three months].

(5) In default of payment within the period mentioned in sub-rule (4), the deposit shall be forfeited [to the secured creditor]and the property shall be resold and the defaulting purchasershall forfeit all claim to the property or to any part of the sum forwhich it may be subsequently sold.

40. It clearly manifests that the pre-amended Rule 9(4) refers tothe period of 15 days for confirmation of sale or such extended period,but the outer limit has not been defined and that appears to be not assacrosanct and the period can be extended, as agreed upon in writingbetween the parties. In sequel thereto, if the time stands extended, theauction purchaser would not be considered to be defaulter as referredto under Rule 9(5) of the Rules and if the amended provisions are beingtaken note of, of which reference has been made, effective from 4[th]November, 2016, however, may not be relevant as the auction in theinstant case was held in March 2015, but the fact remains that by anamendment, the legislature with its consciousness has clarified that theagreement has to be between the purchaser and the secured creditorexceeding 15 days but in any case may not exceed three months althoughwho are the parties to the agreement are not clear in the pre-amendedRule 9(4) of the Rules.

41. This Court, while examining the pre-amended Scheme of Rule9(4) in judgment in General Manager, Sri Siddeshwara CooperativeBank Limited (supra) was of the view that the period which is referredto in Rule 9(4) is not that sacrosanct and may be extended if there is awritten agreement between the parties and since parties to the writtenagreement is not defined in Rule 9(4), this Court was of the view that itcovers into its fold the secured creditor, the auction purchaser and theborrower, but later the legislature taking into consideration the judgmentof this Court made its intention clear by making an appropriate amendmentin Rule 9(4) of the Rules, 2002 which came into effect by notificationdated 3[rd] November, 2016 effective from 4[th] November, 2016.

42. In the instant case, although there was no written consent byall the three partners, namely, secured creditors, borrowers and auctionpurchaser, as being referred to by this Court in General Manager, Sri

ASiddeshwara Cooperative Bank Limited (supra), but this fact cannotbe ruled out that in the instant case, the peculiar situation has comeforward when the respondent borrowers in the first instance approachedthe Tribunal assailing the e-auction notice issued by the respondent Bank(secured creditor) and were able to secure an interim order from theTribunal dated 26[th] March, 2015 permitting the auction proceedings toBcontinue, subject to the condition that the borrower shall deposit Rs.6lakhs directly with the respondent Bank within 15 days from the date oforder, which admittedly expired on 9[th] April, 2015 and the respondentborrowers failed to deposit the aforesaid amount.43. On the last date when the period was to expire on 9[th] April,C2015, I.A. No.1687 of 2015 was filed seeking extension of time periodby 15 days for depositing the sum of Rs.6 lakhs and as there was no stayin withholding the e-auction proceedings, the appellant deposited not onlythe earnest money but 25% of the bid amount in the first instance on 28[th]March, 2015, the balance 75% of the bid amount was deposited on 15[th]DApril, 2015 and the interregnum period was in incomplete phase of fluxas to what will be the fate of the auction purchaser pending proceedingsbefore the Tribunal, more so when the application was filed by therespondent borrowers on 9[th] April, 2015 seeking extension of time andthat being the situation, 75% of the bid amount was deposited on 15[th]April, 2015 and sale certificate was issued and still thereafter when theETribunal granted extension of 15 days’ of time to the respondent borrowersby an order dated 17[th] April, 2015 to deposit the sum of Rs.6 lakhs, therespondent borrowers failed to deposit the aforesaid amount and as itreveals from the record, further time was granted to the respondentborrowers to deposit sum of Rs.6 lakhs by an order dated 1[st] May,F2015 and much before that, the auction proceedings were finalised andeven the rectification deed came to be executed on 21[st] April, 2015.

44. In the given facts and circumstances, the four days’ delaywhich was caused in terms of the original auction notice, in no manner,would frustrate or annul the auction proceedings and the Debts RecoveryGTribunal has rightly held that because in such state of flux, particularlywhen the bank/secured creditor requested the auction purchaser to waitfor some time because the borrowers are negotiating with the bank inthe light of interim order dated 26[th] March, 2015 of the Tribunal, delay indepositing 75% of the bid amount by four days in no manner wouldfrustrate the rights of the parties inter se, more so, when the conduct ofH

the borrowers in getting extension orders on two different occasionsand still not depositing Rs.6 lakhs in terms of the order of the Tribunalwould clearly reflect that the intention of the borrowers was only tofrustrate the auction sale by one reason or the other, which they couldnot succeed.

45. In our considered view, the finding returned by the Tribunalwas well reasoned and duly supported with the material on record andthe interference made by the High Court under the impugned judgmentwhile recording finding that it was in breach of Rule 9(4) of the Rules,2002 is not legally sustainable in law and deserves to be set aside.

46. Before we finally conclude, it is brought to our notice thatafter sale of property under e-auction, the respondent Bank received atotal sum of Rs.64,23,000/- and after due adjustment of the three NPAaccounts of the respondent borrowers with other ancillary charges, abalance sum of Rs.16,30,000/- is lying with the respondent bank and thesaid amount has been deposited by the bank in FDRs and withaccumulation of interest, the said amount has come to approx.Rs.18,80,000/-. We make it clear that the original sum of Rs.16,30,000/- with interest yielded over the said amount upto date shall be transferredto the account of the borrower/guarantors, as the case may be, withtheir written consent as to in whose account the money is to betransferred. The bank shall transfer the money in the account of borrower/guarantor within eight weeks.

47. Consequently, the appeal deserves to succeed and isaccordingly allowed. The judgment impugned of the High Court dated20[th] November, 2019 is hereby quashed and set aside with the aforesaidobservations.

48. There shall be no order as to costs.

49. Pending application(s), if any, shall stand disposed of.

Nidhi Jain

Appeal allowed.

(Assisted by : Rahul Kumar, LCRA)