Page 38 - BANKING FINANCE OCTOBER 2021

ARTICLE

Government intended to allow secured creditors to issue of sale and the date of sale. The Court further held that the
simultaneous notice. But, the Rule 9(1) had also been contrary view taken in Sri Sai Annadatha Polymers, (cited supra),
amended providing for issuing of 30 days notice of sale to did not represent the correct legal position.
the borrower at the first instance of sale and in case of
failure thereof, 15 days for any subsequent sale, which is Therefore, these rules are contradictory to each other and
again contradictory and ambiguous. ambiguous and there is a case for further amending Section
13(8) and the rules 8(6), 9(1) and 9(2) to provide for issuing
of simultaneous notice to the borrower of the sale of the
After amendment of Section 13(8) of the Act, in the case of
property and publication of sale notice for general public.
Sri Sai Annadhatha Polymers Vs. Canara Bank
[2018(5)ALT207], the High Court for the State of Telangana Time taken for enforcement of securities:
and Andhra Pradesh had held that the borrower should be
issued clear 30 days notice separately before publishing the As stated above, the Secured Creditor Bank should wait for
sale notice under Rule 9(1) and held as under: 90 days before issuing notice under Section 13(2). When
notice is issued, Bank has to allow 60 days time to see if the
borrower makes payment or not. Where a borrower, after
"13. Therefore, even after the amendment of Section 13(8)
completion of 60 days, neither makes payment of the money
of the SARFAESI Act, a secured creditor is bound to afford
nor hands over physical possession of the property, a Bank
to the borrower a clear thirty day notice period under Rule
8(6) to enable him to exercise his right of redemption. In has to apply to the District Magistrate/CMM for assistance
consequence, a notice under Rule 9(1) of the Rules of 2002 who has to pass order for assistance to take possession
cannot be published prior to expiry of this thirty day period within 60 days of filing of such application.
in the new scenario, post-amendment of Section 13(8) of The borrower has to be informed about the sale by issuing
the SARFAESI Act, as such right of redemption would stand 30 days notice. The sale has to be conducted 30 days after
terminated immediately upon publication of the sale notice publishing sale notice in two leading newspapers. The
under Rule 9(1) of the Rules of 2002. The judgment of the auction purchaser can deposit the sale consideration within
Supreme Court in CANARA BANK v. M.AMARENDER REDDY 90 days. Therefore, it takes a minimum of 360 days for
MANU/SC/0271/2017 : (2017) 4 SCC 735, which was rendered enforcement of security which is 30 days more than the time
in the context of the unamended provisions, would therefore taken under Insolvency and Bankruptcy Code, 2016 for
have no application to the post-amendment scenario in the resolution of the insolvency of the Corporates. This is
light of the change brought about in Section 13(8). assuming that the District Magistrate/Chief Metropolitan

Magistrates issues orders within the mandated 60 days
To sum up, the post-amendment scenario inevitably requires whereas in actual practice it takes more time.
a clear thirty day notice period being maintained between
issuance of the sale notice under Rule 8(6) of the Rules of Conclusion:
2002 and the publication of the sale notice under Rule 9(1) The SARFAESI Act is a very effective tool in the hands of Banks
thereof, as the right of redemption available to the borrower
to recover the dues of the Banks speedily. However, in view
in terms of Rule 8(6) of the Rules of 2002, as pointed out in
of ambiguity in various provisions of the Act as discussed
MATHEW VARGHESE MANU/SC/0114/2014 : (2014) 5 SCC above, the efficaciousness of the Act is being affected.
610, stands extinguished upon publication of the sale notice Therefore, there is a need for removing the bottlenecks
under Rule 9(1)."
without curtailing the rights of the borrowers by overhauling
the Act and removing the ambiguity. The notice under Section
However, in the case of Adhya Industries Vs. Vijaya Bank 13(2) should be allowed to be issued immediately on default
[2020(2)ALD298], High Court for the State of Telangana held and enforcement action could follow only if the account
that the statute nowhere required that there should be a 30 turned NPA which could cut down two months time. The
days gap between service of notice on the borrower and the borrower should be allowed to file application before the DRT
date fixed for sale of the immovable secured assets and that only on limited grounds to make it more effective for speeding
there need not be a clear 30 days notice period between up of recoveries of the Banks and to ensure that the purpose
issuance of notice under Rule 8(6) and issuance of notice under of enactment of SARFAESIA is not defeated.
Rule 9(1) of the Rules and it would suffice if there is 30 days
gap from the date of publication of public notice in newspapers The views expressed in this article are personal. T

38 | 2021 | OCTOBER | BANKING FINANCE