Can entire SARFAESI proceedings be quashed for mis-description of property in Show cause Notice issued by the Bank?

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Shubham Budhiraja[1]

 

Mr. A took a loan of 8 Lakhs from Bank B. Mr. C stood as guarantor in the transaction. Mr. A made default and Bank-B after declaring  Mr. A to be NPA, proceeded under SARFAESI by issuing section 13 Notice After taking physical possession, Bank- B took steps for auction sale.  Mr. A filed an application before DRT but the same got dismissed. No appeal filed before DRAT but Writ filed before High Court challenging the e-action notice for being vague for misdescription of property and for failure of auction purchaser to deposit 75% within 15 days. Hon’ble High Court allowed the Writ and set aside the SARFAESI proceedings. Hon’ble Supreme court held that auction notice cannot be set aside for mere typo errors.[2]

 

(i)                    It is true that the secured creditor is under an obligation to undertake the exercise and crosscheck the description of the mortgaged property at the stage when the initial proceedings under Section 13(2) are initiated or in the later consequential proceedings.

 

(ii)                   But at the same time, mere typographical error due to inadvertence which has not caused any prejudice to the borrowers, that in itself could not be considered to be the ground to annul the process held by the secured creditor which is in due compliance with the requirement as contemplated under the provisions of Rules, 2002.

 

(iii)                 The pre-amended Rule 9(4) refers to the 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 as sacrosanct and the period can be extended, as agreed upon in writing between the parties. In sequel thereto, if the time stands extended, the auction purchaser would not be considered to be a defaulter as referred to under Rule 9(5) of the Rules and if the amended provisions are being taken note of, of which reference has been made, effective from 4th November, 2016, however, may not be relevant as the auction in the instant case was held in March 2015, but the fact remains that by an amendment, the legislature with its consciousness has clarified that the agreement has to be between the purchaser and the secured creditor exceeding 15 days but in any case may not exceed three months although who are the parties to the agreement are not clear in the pre-amended Rule 9(4) of the Rules.


[1] Advocate, Delhi High Court [LLB, ACS, BCOM(H)], Budhirajalawchambers@gmail.com , +91-9654055315

[2] CIVIL APPEAL NO(s). 8470 OF 2022, Supreme Court of India, Judgment dated 16/11/2022

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