Mandatory provisions of Security Interest (Enforcement) Rules 2002 can be dispensed in certain conditons

Mandatory Provisions of Rule 9 of Security Interest (Enforcement)  Rules 2002 can be dispensed with when secured creditor, borrower and auction purchaser by a written agreement so agree

In a matter revolving around the compliance of mandatory provisions of Rule 9 of the Security Interest (Enforcement) Rules, 2002 (2002 Rules), two aspects emerged before the Court for determination, one, whether parties can mutually decide to waive of such provisions or rights which are mandatory otherwise and, second, when there is a specific provision laid down under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 SARFAESI Act) affording borrower an opportunity to appeal against notice received under section 13 of the SARFAESI Act, Courts can interfere in exercise of writ jurisdiction.

Rule 9 of the 2002 Rules provides timeline to be followed in regard to sale of immovable property including issuance of sale certificate and delivery of possession. Rule 9(4) provides for extension of timeline to be followed otherwise. It connotes following:

•    An auction purchaser (successful bidder) must pay on or before the fifteenth day of confirmation of sale of immovable property OR such extended period as may be agreed upon in writing between the parties.
•    The stress is on the need of a written agreement.
•    The written agreement means recording of mutually agreed assent in writing.
•    The parties here means the secured creditor, borrower and auction purchaser.

Due to any reason if auction purchase is unable to meet the statutory timeline to performance, if the parties (as stated above) can in mutual consensus extend the time limit affording him an opportunity to fulfill the terms of auction purchase in compliance of Rule 9.

The borrower if has any grievance against the Bank issuing notice under Section 13(4) of the SARFAESI Act, he has a remedy by way of appeal before the Debts Recovery Tribunal (DRT) under Section 17, which is an efficacious remedy. SARFAESI Act being a special enactment contains a detailed mechanism for redressal of grievance. Alternative remedy is not an absolute bar to the exercise of writ jurisdiction but where a statute provides efficacious and adequate remedy; the High Court should avoid entertaining a petition under Article 226.

In the instant matter the auction purchaser failed to make balance payment within stipulated number of days of the confirmation of sale and instead made the balance payment in installments. Upon the payment of last installment sale certificate was issued by bank in his favour. However, since proceeds from the sale of property fell short of the total outstanding amount against the borrower, bank after securing award to recover the outstanding amount from the borrower initiated execution thereof. At this stage borrower challenged the sale certificate by way of writ petitions and that too after four years of it being issued. Vide impugned findings sale certificate was quashed on the premise that procedure as prescribed under Rule 9 was not properly followed and though alternate remedy was available under Section 17 of SARFAESI Act, interference in exercise of writ jurisdiction had become necessary. The Apex Court in view of the above position set aside the impugned finding.

GM, Sri Siddeshwara Co-operative Bank Ltd. & Anr. vs. Sri Ikbal & Ors
[22.08.2013, SC]