DRAT sets aside Sale not held under Provisions of SARFAESI Act, Directs LIC Housing Finance to Refund Sale Consideration [Read Order]
The DRAT observed that the sale had not taken place as required under the SARFAESI Act, sale has to be necessarily set aside, as decided by the Tribunal below.
LIC - finance - Taxscan
LIC - finance - Taxscan
In a recent case, the Debt Recovery Appellate Tribunal (DRAT) Chennai sets aside the sale which was failed to held in the manner required under the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and directed the LIC Housing Finance to refund the sale consideration.
Justice G. Chandrasekharan , Chairperson viewed “There is gross violation in receiving the balance sale consideration from the other bidder. The valuation of the undivided share of the land is not considered while valuing the secured asset and fixing the upset price. All these violations are gross violations, which cut at the root of the conduct of the sale. Therefore, this Tribunal is of the view that the sale was not held in the manner required under the provisions of the SARFAESI Act. “
The Authorised Officer, LIC Housing Finance Ltd. filed appeal under Section 18 of the SARFAESI Act, challenging the order passed by DRT – 1, Chennai. The first respondent before the DRT, filed this appeal, he as an applicant challenged the sale held on 23.12.2013, pursuant to the Sale Notice dated 18.11.2013. The Presiding officer allowed the application.
Want a deeper insight into the Income Tax Bill, 2025? Click here
Counsel for the appellant submitted that appellant filed IA 630/2018 to receive the additional documents which had been omitted to be produced before the DRT. This application was allowed on 14.12.2018. While disposing the tribunal found that additional documents cannot be received in appeal unless valid reasons are given. So stating, the petition to receive additional documents in IA 630/2018, which was already allowed, was dismissed and the appeal was also dismissed.
It was submitted that the sale notice dated 18.11.2013 fixing the sale on 23.12.2013 at 10.00 AM was sent along with the letter dated 14.11.2013. This was returned by the borrower as “unclaimed”. The copy of the Sale Notice dated 18.11.2013, the supporting letter dated 14.11.2013, copies of returned covers as “unclaimed” are produced in the additional type set of papers for the perusal of this Tribunal.
Counsel for the appellant also produced copies of affixture of sale notice in the property in dispute and copies of paper publication of sale notice made in English Daily Trinity Mirror and Tamil Daily Makkal Kural, for the perusal of this Tribunal.
The Valuation Report dated 11.11.2013 produced now shows that the fair Market Value of the property was fixed at Rs.69.45 Lakhs and its distress Value was fixed at Rs.41.67 Lakhs. The secured creditor has given consent for fixing the Reserve Price at Rs. 42.00 Lakhs and the letter dated 14.11.2013 in this regard is also produced.
How to Audit Public Charitable Trusts under the Income Tax Act Click Here
The copy of the proceedings of the Authorised Officer, fixing the Reserve Price at Rs.42.00 Lakhs on 14.11.2013 is also produced. Thus counsel for the appellant submitted that the documents now produced clearly establishes that proper measures had been taken in the matter of service of sale notice, fixing the Reserve Price and in the conduct of the sale. The property was sold for a sum of Rs.42.25 Lakhs and copy of the Sale Certificate is also now produced.
The property was leased to one tenant, who has purchased the property and became the successful bidder in the auction. The second respondent is residing in the property mortgaged. The second respondent submitted he was previously a tenant in the subject property and has become the successful bidder. He has spent a sum of Rs.42,25,000/- for purchasing this property apart from Rs.2,80,544/- towards stamp duty and Rs.11,666/- towards registration charges.
Despite paying the aforesaid amounts, sale certificate was cancelled. Now, the auction purchaser viz. the second respondent has no more interest in getting this property. She wants her money back for the reason that she has been facing the litigation since 2018.
It was submitted that after previous six sale attempts, this sale ended in success. First respondent had the knowledge that the property was brought for sale not on one occasion but on multiple occasions. Therefore, first respondent cannot take a hyper-technical ground that no notice was served to Madurai address.
These additional documents are strongly opposed by the first respondent on the ground that though these documents were available with the appellant at the time of proceedings pending before the DRT, they had not produced these documents. It is just stated in the affidavit that the appellant inadvertently failed to produce the relevant documents before DRT to substantiate the measures taken.
Know Practical Aspects of Tax Planning, Click Here
From the additional documents produced, it is seen that copies of valuation report, letters sent by the secured creditors to borrower, minutes of the sale proceedings, copy of the sale notice with returned cover, proof of affixture of sale notice, paper publication and letter of sale confirmation are produced.
The Valuation report dated 11/11/2013 shows that the value of flat No.304, the secured asset, was assessed at Rs.69.45 lakhs as fair market value of the property and Rs.41.67 lakhs was fixed as Distress Value of the property. The challenge to this valuation report is that this valuation report had not considered the right of the first respondent in respect of undivided share in the land. Admittedly, the valuation report does not indicate the value of the undivided share of the land associated with this flat.
The Tribunal found that the appellant failed to take the sale notice to the first respondent to his Madurai Address where he was residing at the time of the sale. When previous notices had been taken to that address, sending the impugned sale notice to the Chennai address, where only the tenant resides, shows that there is no proper service or non service of sale notice as required under Rule 8(6) and 9(1) of the Security Interest (Enforcement) Rules, 2002. As already decided, with regard to affixture of notice, there is no proof even in the appellate forum.
The DRAT observed that the sale had not taken place as required under the SARFAESI Act, sale has to be necessarily set aside, as decided by the Tribunal below. Consequently, the sale price, registration charges, stamp duty have to be refunded to the second respondent/auction purchaser.
The sale held in favour of the second respondent dated 23/12/2013 is set aside. The appellant is directed to refund the sale consideration with 6% interest per annum (simple) to the second respondent/auction purchaser from the date of deposit made by her and also the stamp duty and the registration charges incurred by the second respondent with interest at 6% (simple) from the date of payment made her, till the date of payment.
Support our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates
