The Tax Publishers 2018 TaxPub(CL) 0870 (Telanga-AP-HC)

 

Venshiv Pharma Chem (P.) Ltd. v. State Bank of India

 

SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002,

--Enforcement of security interest--Auction sale of assets of companyNon-compliance of rules 8(6) and 8(9)--No effective statutory alternative remedy available--Where the requisite gap was not maintained between the date of receipt of the rule 8(6) notice and the publication of the rule 9(1) sale notice, and the bank granted extension of time to the auction purchaser for payment of sale consideration without obtaining written consent of company and also that no effective statutory alternative remedy was available to the company, then, writ petition assailing the auction sale of properties was to be allowed. --SBI gave loan facility to borrower-company but the company failed to clear its loan amount. Therefore, SBI issued statutory notice under section 13(2) and auctioned assets of the company under section 13(4). However, company filed securitization application under section 17(1) before Debts Recovery Tribunal (DRT) against the auction sale but the same was pending. Therefore, company filed writ petition assailing the auction sale of its properties by SBI on the ground that the requisite gap of 30 days was not maintained between the date of receipt of the rule 8(6) notice and the publication of the rule 9(1) sale notice, so as to enable it to exercise its right of redemption under section 13(8). Further, SBI granted the extended time period to the auction purchaser for deposit of balance sale consideration without obtaining the written consent of company. SBI contended that the writ petition was not maintainable on account of pendency of same issue before the DRT. Held: The sale held by the bank on 30-11-2016 pursuant to the notice dated 23-9-2016 under rule 8(6) followed by the sale notice dated 21-10-2016, published in newspapers on 23-10-2016 under rule 9(1), fell foul of the statutory mandate at its very inception, as the company was not afforded the required 30 days clear notice to exercise its right of redemption, as the requisite gap was not maintained between the date of receipt of the rule 8(6) notice on 1-10-2016 and the publication of the rule 9(1) sale notice on 23-10-2016, whereupon its right of redemption under the amended section 13(8) of the Act stood prematurely extinguished. Further, SBI committed the error of permitting extension of time to the auction purchaser, to pay the balance sale consideration without taking the company into confidence and without obtaining its written consent. Further that, the statutory alternative remedy proved to be ineffective and that pendency of the same would not bar the company from invoking the extraordinary jurisdiction under article 226. Hence, the writ petition was allowed.

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