Cited :
1) Mathew Varghese v. M. Amritha Kumarr & Ors.; 2014 (2) SCALE 331
2) C.A. No. 3865 of 2014 titled as J. Rajiv Subramaniyan & Anr. v. M/s Pandiyas & Ors., Supreme Court
3) General Manager. Sri Siddeshwara Cooperative bank Limited and Anr v. Ikbal & Ors.; (2013) 10 SCC 83
7) P. John Chandy & Co. (P) Ltd. v. John P. Thomas
Definition:
REPORTABLE
1) Mathew Varghese v. M. Amritha Kumarr & Ors.; 2014 (2) SCALE 331
2) C.A. No. 3865 of 2014 titled as J. Rajiv Subramaniyan & Anr. v. M/s Pandiyas & Ors., Supreme Court
3) General Manager. Sri Siddeshwara Cooperative bank Limited and Anr v. Ikbal & Ors.; (2013) 10 SCC 83
4) State of Punjab v. Davinder Pal Singh Bhullar & Ors.; 2011 (14) SCC 770
5) Pannalal Binjraj v. Union of India and P.D. Dinakaran (1) v. Judges Enquiry Committee
6) Power Control Appliances v. Sumeet Machines (P) Ltd., Supreme Court7) P. John Chandy & Co. (P) Ltd. v. John P. Thomas
8) Dawsons Bank Ltd. v. Nippon Menkwa Kabushiki Kaisha
9) Basheshar Nath v. CIT, Mademsetty Satyanarayana v. G. Yelloji Rao
10) Associated Hotels of India Ltd. v. S.B. Sardar Ranjit Singh
11) Jaswantsingh Mathurasingh v. Ahmedabad Municipal Corpn.
12) Sikkim Subba Associates v. State of Sikkim and Krishna Bahadur v. Purna Theatre.
13) Municipal Corpn. of Greater Bombay v. Dr Hakimwadi Tenants ’ Assn.
Waiver is an intentional relinquishment of a right. It involves conscious abandonment of an existing legal right, advantage, benefit, claim or privilege, which except for such a waiver, a party could have enjoyed. In fact, it is an agreement not to assert a right. There can be no waiver unless the person who is said to have waived, is fully informed as to his rights and with full knowledge about the same, he intentionally abandons them.....The essence of a waiver is an estoppel and where there is no estoppel, there is no waiver. Estoppel and waiver are questions of conduct and must necessarily be determined on the facts of each case.
REPORTABLE
IN THE SUPREME COURT OF
INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 4679 OF 2014
[Arising out of Special Leave Petition (CIVIL) No. 35168 OF 2011]
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 4679 OF 2014
[Arising out of Special Leave Petition (CIVIL) No. 35168 OF 2011]
Vasu P.
Shetty .... Appellant (s)
Versus
M/s Hotel Vandana Palace &
Ors. .... Respondent (s)
With
C.A.No.4680/2014
(@ SLP(C) No. 6226 of 2012)
J U D G M E N T
A.K. SIKRI, J.
1. Leave granted.
2. Respondent No. 1 herein had taken loan from
Syndicate Bank (hereinafter to be referred as the 'Bank'). Because of its
default in repaying the said loan, the bank took action under the provisions of
the Securitization and Re-construction of Financial Asset and Enforcement of
Security Interest Act, 2002 (SARFAESI Act). After taking formal possession of
the mortgaged property which was given as a
surety for due discharge of the loan, the said property was put to sale.
The appellant herein was the highest bidder whose bid was accepted resulting
into issuance of the sale certificate. Respondent No. 1 (hereinafter referred
to as the 'borrower') challenged the said sale by filing application before the
Debt Recovery Tribunal (DRT). This application was dismissed. The borrower
filed Writ Petition before the High Court of Karnataka against the order of
DRT. The learned Single Judge dismissed the Writ Petition as well. Undeterred,
the borrower appealed against the order of the learned Single Judge. This time
it triumphed, as the Division Bench has set aside the sale of the property in
favour of the appellant. The reason given is that the public notice issued for
the said sale was defective as 30 days time which is mandatorily required under
Rules 8 and 9 of SARFAESI Act was not given. Concededly the public notice was
published in the newspaper on 28.4.2006, fixing the date for sale as 8.5.2006,
inviting tenders from prospective buyers at 2.00 p.m. on
6.5.2006.
JUDGEMENT
JUDGEMENT
3. This fact that insufficient notice was given, is,
therefore, not in dispute. Legal position about the mandatory nature of Rule 8
& 9 is also not agitated. Notwithstanding this legal possession, the
appellants viz auction purchaser as well as the Bank maintain that the sale was
valid because of the reason that delay was entirely attributable to the
borrower who by its conduct waived the said mandatory requirement of the Rules.
In this backdrop, the question that arises for consideration is as to whether
there could be a waiver of the aforesaid mandatory condition? If so, whether
this waiver can be discerned in the present case? Before we answer these
questions it would be apposite to have a thorough glimpse of the facts on
record.
4. The borrower had availed a loan of Rs.
1,84,70,000/-. This loan was obtained from the bank to construct a hotel in a
prominent place in Belgaum. The borrower has constructed the hotel at the said
place for a land measuring 1825.25 sq. mtrs. with a built up area of 4749.64
sq. mtrs. At the time of sanction of the loan, the premises were valued at Rs.
3.16 crores. As mentioned above, the borrower committed default in the
repayment of these financial facilities granted to it. Notice under Section
13(2) of the SARFAESI Act to take formal possession of the property was issued.
Thereafter, the Authorised Officer of the Bank (Respondent No. 2)under SARFAESI
Act proceeded to sell this property. Property could not be sold in the first
attempt and the efforts were fructified only when it was put to auction third
time. Since the earlier endeavour made by the Authorised Officer are used as
shield against the borrower's attack on sale in question, it becomes necessary
to take a note of these attempts as well.
5. First notice for auction was published on 11.9.2004
fixing the auction date as
15.10.2004. Reserve Price was fixed at Rs. 3.50 crores. This
notice, admittedly, was for more than 30 days. At that stage, the borrower
filed the Writ Petition in the High Court challenging the said notice 3 days
before the proposed sale i.e. on
12.10.2004. Though the High Court did not grant stay against
the scheduled auction, it granted stay against confirmation of sale. As per the
appellant, in view of the said partial stay order, nobody came forward to
participate in the auction and the exercise went into futility.
6. The Writ Petition filed by the borrower was
dismissed by the High Court on 28.2.2005 upholding notice dated 27.7.2004
issued under Section 13(4) of the SARFAESI Act. In the meantime, it came to the
notice of the Authorised Officer of the bank that there were encumbrances in
the form of statutory liabilities to the tune of Rs. 43,01,100/- payable by the
borrower and, therefore, the Reserve Price fixed at Rs. 3.50 crores had to be
reduced. The borrower was informed about it. The Bank issued fresh notice on
9.3.2005 for auction of the property fixing date of auction as 21.3.2005 with
reduced Reserve Price at Rs. 2.39 crores.
7.In the
auction held on 21.3.2005 the highest offer which was received was in the sum
of Rs. 2.25 crores which was less than even the reduced reserve price. It can
well be discussed that this sale notice was for a period of less than 30 days.
Be as it may, the bank wrote letter dated 28.6.2005 to the borrower asking it
to convey its consent for the sale of property for a sum of Rs. 2.25 crores
which was the highest bid. However, the borrower did not respond to this
letter. Thereafter, another letter dated 16.8.2005 written by the bank stating
the reasons as to why it was constrained to reduce the Reserve Price.
8.The borrower
did not accede to the request of the Bank. Instead, on 15.11.2005, the borrower
expressed its intention to settle the matter by making the proposal under One
Time Settlement (OTS) scheme of the RBI. It was followed by letter dated
8.1.2006 by the borrower to the Bank requesting for OTS at Rs. 2,13,93,320/-.
This proposal of the borrower was sanctioned by the Bank on 8.2.2006 with further
stipulation that the amount would be paid on or before 31.3.2006. Cheque of Rs.
20 lakhs which was given by the borrower along with its OTS proposal was
encashed by the Bank and was credited to the 'No Lien Account'. However, on
31.3.2006, instead of paying the amount as per the agreed OTS, the borrower
requested for extension of time giving its own reasons. Time was extended upto
15.4.2006 for payment as a last chance. However, on 14.4.2006 another request
for extension of time by two months was made which was followed by letter dated
22.4.2006 to the same effect. This time the Bank rejected the request of the
borrower vide letter dated 25.4.2006. As a consequence, the OTS did not
fructify.
9.On failure of
OTS due to the fault of the borrower, the Authorised Officer of the Bank sprung
into action and took steps for the sale of the property, in question. Notice
dated 27.4.2006 was published in Indian Express (English) and in Tarun Bharat
(Marathi) on 7.5.2006 for the acution of the property. The Auction date was
published as 8.5.2006. Auction was held on 8.5.2006 wherein the bid of the
appellant in the sum of Rs. 2.16 crores being the highest, was accepted. The
appellant paid 25 percent of the bid amount and the balance amount was paid on
24.5.2006. The appellant also made payment for the encumbrances to the
concerned statutory authorities which was in the sum of Rs. 49.91 lakhs. In
this way the appellant made total payment of Rs. 283,39,735/-. On receiving the
full consideration as per the auction, sale deed conveying the property was
executed in favour of the appellant on 26.5.2006 followed by issue of the sale
certificate.
10.It would be
relevant to mention here that the borrower had filed the Writ Petition
6471/2006 challenging the auction notice. However, it withdrew this Writ
Petition on 1.6.2006 with liberty to avail alternate remedy to challenge the
auction that is provided under SARFAESI Act. Thereafter, it filed the appeal
under Section 18 of the SARFAESI Act before the DRT. This appeal was dismissed by
the DRT on 5.7.2007 with the observations that the borrower was only adopting
dilatory tactics. This order was challenged by the borrower in the form of writ
petition filed before the High Court of Karnataka, Circuit Bench, Dharwad. The
learned Single Judge echoed the reasoning given by the DRT and dismissed the
Writ Petition vide orders dated 19.9.2011. Against this order, the borrower
approached the Division Bench by filing intra court appeal which has been
allowed by the High Court. The sale in question is set aside.
11. The High Court took into consideration provisions
of the sub-Rule (5) and (6) of Rule 8 as well as Rule 9 of these Rules which
are as under:
(5) Before effecting sale of the immovable property
referred to in sub-rule (1) of rule 9 the Authorised Officer shall obtain
valuation of the property from an approved valuer and in consultation with the
secured creditor, fix the reserve price of the property and may sell the whole
or any part of such immovable secured asset by any of the following methods:-
(a) By obtaining quotations from the persons dealing
with similar secured assets or otherwise interested in buying the such assets;
(b) By inviting tenders from the public.
(c) By holding public auction; or
(d) By private treaty.
(6) The authorised officer shall serve to the borrower
a notice of 30 days for sale of the immovable secured assets, under sub-rule
(5):
Provide that if
the sale of the such secured asset is being effected either inviting tenders
from the public or by holding public auction, the secured creditor shall cause
a public notice in two leading newspapers one in vernacular language having
sufficient circulation in the locality by setting out the terms of sale, which
shall include:
(a) The decription of the immovable property to be
sold, including the details of the encumbrances known to the secured creditor;
(b) The secured debt for recovery of which the property
is to be sold.
(c) Reserve price, below which the property may not be
sold.
(d) Time and place of public auction or the time after
which sale by any other mode shall be completed.
(e) Depositing earnest money as may be stipulated by
the secured creditor.
(f) Any other thing which the authorised officer
considers it material for a purchaser to know in order to judge the nature and
value of the property.
(1) No sale of immovable property under these rules
shall take place before the expiry of 30 days from the date on which the public
notice of sale is published in newspapers as referred to in the proviso to
sub-rule (6) or notice of sale has been served to the borrower.
(2) The sale shall be confirmed in favour of the
purchaser who has offered the highest sale price in his bid or tender or
quotation or offer to the Authorised Officer and shall be subject to
confirmation by the secured creditor.
Provided that no sale under this rule shall be
confirmed, if the amount offered by sale price is less than the reserve price,
specified under sub-rule
(5) of Rule 9.
Provided
further that if the authorised officer fails to obtain a price higher than the
reserve price, he may, with the consent of the borrower and the secured
creditor effect the sale at such price.
(3) On every sale of immovable property, the purchaser
shall immediately pay a deposit of 25 percent of the amount of the sale price,
to the property shall forthwith be sold again.
(4) The balance amount of purchase price payable shall
paid by the purchaser to the Authorised Officer on or before the fifteenth day
of confirmation of sale of the immovable property or such extended period as
may be agree upon in writing between the parties.
(5) In default of payment within the period mentioned
in sub-rule (4), the deposit shall be forfeited and the property shall be
resold and the defaulting purchaser shall forfeit all claim to the property or
to any part of the sum for which it may be subsequently sold.
(6) On confirmation of sale by the secured creditor and
if the terms of payment have been complied with, the Authorised Officer
exercising the power of sale shall issue a certificate of sale of the immovable
property in favour of the purchaser in the form given in Appendix V to these
rules.
(7) Where the immovable property sold is subject to any
encumbrances, the authorised officer may, if the thinks fit, allow the
purchaser to deposit with him the encumbrances and any interest due thereon
together with such additional amount that may be sufficient to meet the
contingencies or further cost, expenses and interest as may be determined by
him. [Provided that if after meeting the cost of removing encumbrances and
contingencies there is any surplus available out of the money deposited by the
purchaser such surplus shall be paid to the purchase within fifteen days from
the date of finalisation of the sale.
(8) On such deposit of money for discharge of the
encumbrances the Authorised Officer shall issue or cause the purchaser to issue
notices to the persons interested in or entitled to the money deposited with
him and take steps to make the payment accordingly.
(9) The authorised officer shall deliver the property
to the
purchaser free
from encumbrances known to the secured creditor on deposit of money as
specified in sub-rule (7) above.
(10) The certificate of sale issued under sub-rule (6)
shall specifically mention that whether the purchaser has purchased the
immovable secured asset free from any encumbrances known to the secured
creditor or not.”
12. The High Court has found the following informaties
in the conduct of the impugned sale:-
(i) Before bringing the property for sale vide notice
dated 28.4.2006 and 5.5.2006 fresh valuation of the property from the accrued
valuer was not obtained by the Bank when the property worth crores had to be
sold. There was infraction of sub-rule (5) of Rule 8 which is mandatory.
(ii) 30 days notice as required under sub-rule 6 of Rule
8 was not given thereby committing breach of this mandatory provision as well.
(iii) According to the High Court publication in Tarun
Bharat Marathi language was effected just one day prior from receiving from the
prospective buyers. However, publication in Marathi language cannot be
considered as vernacular language as the Belgaum is in Karnataka where the
vernacular language is Kannada and not Marathi.
(iv) As per the sale notice, the appellant was required
to deposit entire sale consideration within 15 days from the date of
confirmation of the sale. In the counter, the Bank has stated that the
appellant has made the payment within the time allowed by the Authorised
Officer. When the sale consideration is Rs. 2.16 crores, the bank was required
to give details of the payment made by the appellant in order to hold whether
the payment was made within the time stipulated in the sale and whether the
time was extended by the Officer by accepting the reasonable cause shown by the
purchaser and whether the purchaser is bonafide purchaser or not.
Unfortunately, the bank has failed to produce these documents.
13. We may point out, at the outset, that the opinion
of the High Court on the interpretation of sub-Rules (5)and (6)of Rule 8 of the
Rules is flawless. In this behalf it would be pertinent to mention that there
is an imprimatur of this court as identical meaning is assigned to these
provisions. In the case of Mathew Varghese v. M. Amritha Kumarr & Ors.; 2014 (2) SCALE 331. The aforesaid judgment has been followed by this
very Bench of the Court in C.A. No. 3865 of 2014 titled as J. Rajiv
Subramaniyan & Anr. v. M/s Pandiyas & Ors. decided on March 14, 2014, wherein the earlier
referred case has been discussed in the following manner:-
“12. This Court in the case of Mathew Varghese Vs.
M.Amritha Kumar & Ors. examined the procedure required to be followed by
the banks or other financial institutions when the secured assets of the
borrowers are sought to be sold for settlement of the dues of the
banks/financial institutions. The Court examined in detail the provisions of
the SARFAESI Act, 2002. The Court also examined the detailed procedure to be
followed by the bank/financial institutions under the Rules, 2002. This Court
took notice of 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.
Thereafter, it is observed as follows:-
“A reading of Section13(1), therefore, is clear to
the effect that while on the one hand any SECURED
CREDITOR may be entitled to enforce the SECURED ASSET created in its
favour on its own without resorting to any court proceedings or approaching the
Tribunal, such enforcement should be in conformity with the other provisions of
the SARFAESI Act.”
13. 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.
Thereafter, in Paragraph 27, this Court observed as follows:-
“27. Therefore, by virtue of the stipulations
contained under the provisions of the SARFAESI Act, in particular, Section
13(8), any sale or transfer of a SECURED ASSET, cannot take place without duly
informing the borrower of the time and date of such sale or transfer in order
to enable the borrower to tender the dues of the SECURED CREDITOR with all
costs, charges and expenses and any such sale or transfer effected without
complying with the said statutory requirement would be a constitutional
violation and nullify the ultimate sale.”
14. As noticed above, this Court also examined Rules 8
and 9 of the Rules, 2002. On a detailed analysis of Rules 8 and 9(1), it has
been held that any sale effected without complying with the same would be
unconstitutional and, therefore, null and void.
15.In the
present case, there is an additional reason for declaring that sale in favour
of the appellant was a nullity. Rule 8(8) of the aforesaid Rules is as under:-
“Sale by any method other than public auction or public tender, shall be
on such terms as may be settled between the parties in writing.”
16.It is not
disputed before us that there were no terms settled in writing between the
parties that the sale can be affected by Private Treaty. In fact, the borrowers
- respondent Nos. 1 and 2 were not even called to the joint meeting between the
Bank - Respondent No.3 and Ge-Winn held on 8th December, 2006. Therefore, there
was a clear violation of the aforesaid Rules rendering the sale illegal.
17. It must be emphasized that generally
proceedings under the SARFAESI Act, 2002 against the borrowers are initiated
only when the borrower is in dire-straits. The provisions of the SARFAESI Act,
2002 and the Rules, 2002 have been enacted to ensure that the secured asset is
not sold for a song. It is expected that all the banks and financial
institutions which resort to the extreme measures under the SARFAESI Act, 2002
for sale of the secured assets to ensure, that such sale of the asset provides
maximum benefit to the borrower by the sale of such asset. Therefore, the
secured creditors are expected to take bonafide measures to ensure that there
is maximum yield from such secured assets for the borrowers. In the present
case, Mr. Dhruv Mehta has pointed out that sale consideration is only Rs.10,000/- over the reserve price whereas the property was worth much more.
It is not necessary for us to go into this question as, in our opinion,
the sale is null and void being in violation of the provision of Section 13 of the
SARFAESI Act, 2002 and Rules 8 and 9 of the Rules, 2002.”
14. Thus, when the matter is to be examined from this
angle it cannot be said that the view of the High Court is perfunctory or flawed.
Procedure contained in the aforesaid Rules was admittedly not followed.
Notwithstanding this position, Mr. Ranjit Kumar, learned Senior Counsel
appearing for the appellant submitted that a contrary view is taken by this
Court in General Manager. Sri Siddeshwara Cooperative bank Limited and Anr v. Ikbal & Ors.; (2013) 10 SCC 83 wherein it is held that the mandatory provision of
30 days notice can be waived by the borrower and in such an eventuality, the
sale cannot be voided.
15. After recapitulating the facts which have already
been narrated above, his submission in this behalf was that the borrower had,
in the present case, delayed the sale of the property and he was not entitled
to take advantage of its own wrong. He dilated this submission by pointing out
that first notice for auction which was published on 11.9.2004, clear 30 days
notice was provided therein as the date of auction was fixed as 15.10.2004.
However, conduct of the borrower in filing frivolous Writ Petition and
obtaining interim order therein, desisted any intending purchaser from coming
forward and participating in the auction. Further, even
when second
notice for auction sale was published on 28.2.2005 and notice of less than 30
days was given therein fixing the date of auction as 23.1.2005, the borrower
never challenged the validity of this notice. Instead, at that stage the
borrower expressed its intention to settle the matter by offering OTS proposal.
The bank succumbed to this request of the borrower treating the same to be a
bonafide offer and even accepted the OTS proposal of the borrower. Here again
the borrower committed default and never remitted the money as per OTS
arrangement agreed to between the parties. In this way, highlighting the
aforesaid blameworthy conduct of the borrower, Mr. Ranjit Kumar submitted that
it is estopped from challenging the validity of the notice for auction. It was
also pointed out that not only entire amount is paid by the appellant towards
the sale consideration, the appellant has discharged statutory liabilities/
encumbrances as well; sale deed registered in its favour way back on 26.5.2006;
sale certificate issued; and the appellant is in possession of this property
ever since. Therefore, the sale should not have been invalidated. Mr. A.B.
Dial, learned Senior Counsel for the appellant Bank in other appeal also argued
on the same lines.
16. Let us examine the aforesaid submission of the
appellant in the light of the judgment in the case of Ikbal on which strong
reliance is placed by the learned Senior Counsel. That was a case where R-1
(the borrower) took a housing loan from the
appellant Bank by mortgaging certain immovable property. As R-1 committed
default in repayment of the said housing loan, the Bank issued a notice to him on
30.6.2005 under Section 13(2) of the Securatisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002 (the SARFAESI Act) informing
him that if he failed to discharge the outstanding dues within 60 days, the Bank
may take action under Section 13(4) and the mortgaged property shall be sold.
On 18.12.2005 the Bank published the auction notice in the local newspapers and
the public auction was conducted on 11.1.2006. The bid of the auction-purchaser
for Rs. 8,50,000 was accepted being the highest bid. The auction-purchaser
paid 25% of the sale consideration immediately but he did not make the
payment of remaining 75% within 15 days of the confirmation of sale. He made the final
payment on 13.11.2006 and the Bank issued the sale certificate in his favour. As
the proceeds from the sale of the mortgaged property fell short of the total outstanding
amount against the borrower, the Bank moved the Joint Registrar of Cooperative
Societies for recovery of the outstanding amount. In those proceedings, an
ex parte award for the outstanding amount was passed against the borrower R-1.
It was then that R-1 challenged the sale certificate issued in favour of the auction
purchaser in two writ petitions before the High Court. The Single Judge of the
High Court quashed the sale certificate issued in favour of the auction-purchaser on
the ground that the mandatory requirements of Rule 9 of the 2002 Rules were not
followed and, therefore, despite the remedy of appeal to the borrower provided
under Section 17 of the SARFAESI Act, a case was made out for interference
under Article 226 of the Constitution, which was affirmed by the Division Bench
of the High Court. The Bank and the auction-purchaser had filed the appeals
challenging the judgments of the High Court.
17. This Court, after interpreting the provisions of
Rule 9, returned a categorical opinion that the said provision is mandatory in
nature. It was further held that even though this Rule is mandatory, that
provision is for the benefit of the borrower. The Court held that it is a
settled position in law that even if a provision is mandatory, it can always be
waived by a party (or parties) for whose benefit such provision has been made.
The provision in Rule 9(1) being for the benefit of the borrower and the
provisions contained in Rule 9(3) and Rule 9(4) being for the benefit of the
secured creditor (or for the benefit of the borrower), the secured creditor and
the borrower can lawfully waive their rights. These provisions neither
expressly nor contextually indicate other wise. Obviously, the question whether
there is waiver or not depends on the facts of each case and no hard and fast
rule can be laid down in this regard.
18. In the facts of that case it was found that the
letter dated 13.11.2006 sent by the borrower to the Bank clearly depicted that
the borrower had waived his right under Rule 9 (1) and the provisions contained
in Rule 9(3) and Rule 9(4) as well. It was also found that at the time of
auction sale on 11.1.2006, the borrower was present but did not object to the
auction being held before expiry of 30 days from the date of which public
notice of sale was published. Not only this, he agreed that the bid given by
the auction purchaser, which was the highest bid, be accepted as the auction
purchaser happened to be his known person. Another important feature which was
noted was that the borrower expressly gave consent in writing that the balance
sale price may be accepted from the auction purchaser even when tendered after
some delay and the sale certificate be issued to him. There was a written
agreement between the borrower and the Bank for extension of time upto
15.4..2006 within which the auction purchaser had made the payment. On these
facts, the court came to the conclusion that condition in Rule 9(4) viz. “such
extended period as may be agreed upon in writing between the parties” would be
treated as substantially satisfied. Again, pertinently, the Writ Petition was
filed by the borrower more than 4 years after the issuance of the sale
certificate. On these facts the court concluded that there was a waiver of the
aforesaid mandatory provisions by the borrower.
19. It can, thus, be seen that there is no conflict
between the two sets of judgments namely Mathew Varghese case followed in J.
Rajiv Subramaniyan case on the one hand and Ikbal's case on the other hand. In
the first set of cases the interpretation given to Rule 8 and 9 of the Rules
hold that these Rules are mandatory. It is so held even in Ikbal's case.
However, Ikbal's case proceeds further to lay down the principle that since
these provisions are for the benefit of the borrower, borrower can always waive
those procedural requirements. This latter aspect never fell for consideration
in the earlier two judgments. Therefore, we see no force in the contention of
the learned Senior Counsel of the appellant that judgment in Mathew Varghese
(supra) goes contrary to the law laid down in Ikbal's case.
20. The only question, therefore, is as to whether it
can be held that the borrower in the present case had also waived the mandatory
provisions of Rules 8 and 9 of the Rules. We may remark that it is expressly
clarified in Ikbal's case itself that the question whether there is a waiver or
not depends on the facts of the each case and no hard and fast rule can be laid
down in this regard.
21. We would like to point out at the outset that the
argument of waiver was not raised by the appellant in the High Court. In fact,
this ground is not even raised in the Special Leave Petition. The appellant's
case rested with hammering the blameworthy conduct of the borrower by relying
upon the observations of the DRT to the effect that the borrower had been
adopting dilatory tactics and delaying the recovery of amounts due to the bank
somehow or the other. It was also argued that the appellant is a bonafide
purchaser and equities are in favour of the appellants which should be balanced
and the borrower is not entitled to any relief because of his intemperate
conduct.
22. Be as it may. Since the arguments is predicated on
the admitted facts appearing on record, we proceed to examine the same on
merits. Our examination reveals that no case of waiver is made out.
23. In State of Punjab v. Davinder Pal Singh Bhullar & Ors.; 2011
(14) SCC 770; the Court
explained the doctrine of waiver on the basis of earlier pronouncements which
are taken note of discussed in the following manner:
“37. In Manak Lal this Court held that alleged bias of a
Judge/official/Tribunal does not render the proceedings invalid if it is shown
that the objection in that regard and particularly against the presence of the
said official in question, had not been taken by the party even though the
party knew about the circumstances giving rise to the allegations about the
alleged bias and was aware of its right to challenge the presence of such
official. The Court further observed that: (SCC p. 431, para 8)
“8. ... waiver cannot always and in every case be inferred merely from the
failure of the party to take the objection. Waiver can be inferred only if and
after it is shown that the party knew about the relevant facts and was aware of
his right to take the objection in question.”
38. Thus, in a given case if a party knows the material
facts and is
conscious of
his legal rights in that matter, but fails to take the plea of bias at the
earlier stage of the proceedings, it creates an effective bar of waiver against
him. In such facts and circumstances, it would be clear that the party wanted
to take a chance to secure a favourable order from the official/court and when
he found that he was confronted with an unfavourable order, he adopted the
device of raising the issue of bias. The issue of bias must be raised by the
party at the earliest. (See Pannalal Binjraj v. Union of India and P.D. Dinakaran (1) v. Judges Enquiry Committee.)
39. In Power Control Appliances v. Sumeet Machines (P) Ltd. this Court held as under: (SCC p. 457, para 26)
“26. Acquiescence is sitting by, when another is invading the rights.... It
is a course of conduct inconsistent with the claim.... It implies positive
acts; not merely silence or inaction such as involved in laches. . The acquiescence
must be such as to lead to the inference of a licence sufficient to create a
new right in the defendant..”
40. Inaction in every case does not lead to an
inference of implied consent or acquiescence as has been held by this Court in P. John Chandy
& Co. (P) Ltd. v. John P. Thomas. Thus, the Court has to examine the facts and circumstances in an
individual case.
41. Waiver is an intentional relinquishment of a right.
It involves conscious abandonment of an existing legal right, advantage,
benefit, claim or privilege, which except for such a waiver, a
party could have enjoyed. In fact, it is an agreement not to assert a right.
There can be no waiver unless the person who is said to have waived, is fully
informed as to his rights and with full knowledge about the same, he
intentionally abandons them. (Vide Dawsons Bank Ltd. v. Nippon Menkwa Kabushiki Kaisha, Basheshar
Nath v. CIT,
Mademsetty Satyanarayana v. G. Yelloji Rao, Associated Hotels of India Ltd. v. S.B. Sardar Ranjit Singh, Jaswantsingh
Mathurasingh v. Ahmedabad
Municipal Corpn., Sikkim Subba Associates v. State of Sikkim and Krishna Bahadur v. Purna Theatre.)
42. This Court in Municipal
Corpn. of Greater Bombay v. Dr Hakimwadi Tenants ’ Assn. considered the issue of waiver/acquiescence by the
non-parties to the proceedings and held: (SCC p. 65, paras 14-15)
“14. In order to
constitute waiver, there must be voluntary and intentional relinquishment of a
right. The essence of a waiver is an estoppel and where there is no estoppel,
there is no waiver. Estoppel and waiver are questions of conduct and must
necessarily be determined on the facts of each case. ...
15. There is no question of estoppel, waiver or abandonment. There is no
specific plea of waiver, acquiescence or estoppel, much less a plea of
abandonment of right. That apart, the question of waiver really does not arise
in the case. Admittedly, the tenants were not parties to the earlier
proceedings. There is, therefore, no question of waiver of rights by
Respondents 4-7 nor would this disentitle the tenants from maintaining the writ
petition.”
24. From what is argued by the appellants, at best it
can be inferred that the borrower tried to thwart the earlier attempts of the Bank in selling the
property.
When the first notice was issued, the borrower filed the writ petition.
However, it is
to be borne in mind that in the said Writ Petition no interim order was
passed staking the auction on the stipulated date. The only stay granted was
against confirmation of sale. That did not preclude anybody from participating
in the auction. We are mindful of the ground realities that many times pendency
of such a Writ Petition
challenging the auction notice and the kind of stay granted, even partial in
nature, deter the intending buyers to come forward and participate in the
auction. Be as it may, we find out that even in the second attempt when the
reserve price was reduced to Rs. 2.39 crores, the highest bid received was in
the sum of Rs. 2.25 crores. Further, even the bid of the appellant which was
accepted was in the sum of Rs.2.16 crores. Likewise, after the second auction
when the Bank requested the borrower to accept the bid of Rs.2.25 crores giving
its reasons and the borrower instead of doing so took initiative resulting in
OTS but defaulted therein, it would merely indicate that the borrower was at
fault in not adhering to the OTS. By no logic it can be deduced therefrom that
the Bank was relieved from its obligation not to follow the mandatory procedure
contained in the Rules, while taking fresh steps for the disposal of the
property.
25. The moot question is, even if there were delaying
tactics adopted by the borrower in respect of first two auctions, whether that
conduct of the borrower would amount to waiving the mandatory requirement of
publishing subsequent notice dated 27.4.2006 fixing the date of auction as
8.5.2006? Our answer has to be in the negative. The aforesaid conduct cannot be
taken as waiver to the mandatory condition of 30 days notice for auction as
well as other requirements. For examining the plea of waiver, we will have to
see as to whether by implied or express actions, the borrower has waived the
aforesaid mandatory requirement when the property was put to sale. We do not
find, nor it is suggested, even the slightest move on the part of the borrower
in this regard which may amount to waiver either express or implied. On the
contrary, when notice dated 27.4.2006 was published, the borrower immediately
filed the Writ Petition 6471 of 2006 challenging the auction notice. Thus, its
conduct, far from waiving the aforesaid requirement, was to confront the bank
by questioning its validity. It is a different matter that it had to withdraw
the said writ petition in view of availability of alternate remedy.
Immediately, it filed application under Section 18 of the SARFAESI Act. There
is, thus, not even an iota of material suggesting any waiver on the part of the
borrower.
26. The moment we find that the mandatory requirement
of the Rules had not been waived by the borrower, consequences in law have to
follow. As held in Mathew Varghese’s case, when there is a breach of the said
mandatory requirement the sale is to be treated as null and void. Moreover, the
appellant have no answer to many other infirmities pointed out by the High
Court. We, therefore, are of the opinion that present appeals lack merit.
27. Before we part with, it is imperative to mention
that the purchaser has paid a sum of Rs.1.86 crores towards purchase of
property and Rs.30 lakh towards moveable items to the Bank. He has also spent
Rs.1,86,335/- towards registration fee and Rs.15,62,400/- towards stamp duty.
In addition, dues towards municipal tax, Sales Tax liability, dues of Employees
State Insurance Corporation, Employees Provident Fund and Belgaum Industrial
Cooperative Bank have also been paid. A total whereof comes to Rs. 49,91,000/-.
These were the liabilities of the borrower. In this way, total amount of Rs.
2,83,39,735/- is paid by the purchaser. He has also discharged municipal tax
liability in the sum of Rs.2,86,078/- for the period 1.4.2007 to 31.3.2009. As
we have affirmed the order of the High Court setting aside the sale, we grant
two months time to the borrower to discharge the entire liability of the Bank.
The borrower shall also reimburse the amount of registration fee and stamp duty
to the purchaser. The direction to pay this amount is given having regard to
the conduct of the borrower on earlier occasions. If the borrower pays the
amount due to the Bank, registration charges, stamp duty as well as amount of
encumbrances paid by the purchaser, which was the liability of the borrower
i.e. a sum of Rs.49,91,000/- + 2,86,078/-, the property shall revert back to
the borrower. If the aforesaid amounts are not paid within the aforesaid two
months, the Bank shall be at liberty to proceed with the sale of the property
following due procedure under the law. In so far as the purchaser is concerned,
he shall be refunded entire amount spent by the purchaser, as mentioned above.
We have consciously not granted interest to the purchaser on the aforesaid
amount, as the purchaser has, in the meantime, utilized the property in question.
28.Subject to the above, the appeals are dismissed.
(Surinder Singh Nijjar)
(A.K.Sikri)
New Delhi,
April 22, 2014
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