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Sale must be as per SARFAESI rules - SC

The Supreme Court last week set aside the sale of a property under the Securitisation (SARFAESI) Act as it was done according to a private treaty between the creditor and the buyer without any agreement in writing and violating the rules of public auction. The judgment in the case, J Rajiv vs M/s Pandiyas, stated that "there were no terms settled in writing between the parties that the sale can be affected by private treaty." Moreover, the borrowers who could not repay the loans were not called at the meeting between the creditor bank and its agent for conducting the sale. Though the property was bought in 2006, the court directed that it shall be returned to the borrowers on certain conditions to protect all parties.

Referring to an earlier judgment the court stated ".....Rule 8, which relates to Sale of immovable secured assets and Rule 9 which relates to time of sale, issue of sale certificate and delivery of possession etc. With regard to Section 13(1), this Court observed that Section 13(1) of SARFAESI Act, 2002 gives a free hand to the secured creditor, for the purpose of enforcing the secured interest without the intervention of Court or Tribunal. But such enforcement should be strictly in conformity with the provisions of the SARFAESI Act, 2002.....

 This Court further observed that the provision contained in Section 13(8) of the SARFAESI Act, 2002 is specifically for the protection of the borrowers in as much as, ownership of the secured assets is a constitutional right vested in the borrowers and 
protected under Article 300A of the Constitution of India. Therefore, the secured creditor as a trustee of the secured asset can not deal with the same in any manner it likes and such an asset can be disposed of only in the manner prescribed in the SARFAESI Act, 2002. Therefore, the creditor should ensure that the borrower was clearly put on notice of the date and time by which either the sale or transfer will be effected in order to provide the required opportunity to the borrower to take all possible steps for retrieving his property. Such a notice is also necessary to ensure 
that the process of sale will ensure that the secured assets will be sold to provide maximum benefit to the 
borrowers. The notice is also necessary to ensure that the secured creditor or any one on its behalf is not allowed to exploit the situation by virtue of proceedings initiated under the SARFAESI Act, 2002......"

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