J. RAJIV SUBRAMANIYAN & ANR. versus M/S. PANDIYAS & ORS.

Citation: [2014] 3 S.C.R. 1140 · Decided: 14-03-2014 · Supreme Court of India · Bench: S.S. NIJJAR · Disposal: Disposed off

Cited by 4 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

[2014] 3 S.C.R. 1140 
A 
J. RAJIV SUBRAMANIYAN & ANR. 
B 
v. 
M/S. PANDIYAS & ORS 
(Civil Appeal No. 3865 of 2014) 
MARCH 14, 2014 
[SURINDER SINGH NIJJAR AND A.K. SIKRI, JJ.] 
SECURITISATION AND RECONSTRUCT/ON OF 
FINANCIAL 
ASSETS 
AND 
ENFORCEMENT 
OF 
C SECURITY INTEREST ACT, 2002: 
s. 13(8) - Right of borrower - Held: The provision 
contained in s. 13(8) is specifically for the protection of the 
borrowers in as much as, ownership of the secured assets is 
0 a constitutional right vested in the borrowers and protected ul 
Article 300A of the Constitution - Therefore, the secured 
creditor as a trustee of the secured asset cannot 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 - Therefore, the creditor should ensure that the borrower 
E 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 a/so necessary 
to ensure that the process of sale will ensure that the secured 
F assets will be sold to provide maximum benefit to the 
borrowers - The notice is a/so necessary to provide the 
required opportunity to the borrower to take all possible steps 
for retrieving his property or at least ensure that in the process 
of sale the secured asset derives the maximum benefit and 
G the secured creditor or anyone on its behalf is not allowed to 
exploit the situation of the borrower by virtue of the 
proceedings initiated under the SARFAESI Act - Constitution 
of India, 1950 - Article 300A. 
H 
1140 
J. RAJIV SUBRAMANIYAN & ANR. v. PANDIYAS & 1141 
ORS. 
s. 13 - Sale of Non performing asset - Sale consideration 
A 
only Rs. 10, 000 above the reserve price whereas property 
worth much more - Held: The secured creditors are expected 
to take bonafide measures to ensure that there is maximum 
yield from such secured assets for the borrowers - Sale nil/I 
and void being in violation of provisions of s. 13 and rr. 8 and 
B 
9 and liable to be set aside - Security Interest (Enforcement) 
Rules, 2002 - rr.8 and 9. 
s. 13 - Sale of Non performing asset - Single judge of the 
High Court after holding that the sale was invalid as there was 
violation of rules, directed making of payments by borrowers C 
to the Bank with clear direction that on such payment, insofar 
as the bank is concerned its dues would be settled - Not only 
borrowers made the payment as directed which was accepted 
by bank, the Bank even accepted the said judgment and did 
not file any appeal thereagainst - Only the buyer filed the 
D 
appeal - In the facts of the case, once the payment is made 
to the buyer by borrowers the possession of the property shall 
be delivered to the borrowers with no further liability towards 
the bank. 
SECURITY .INTEREST (ENFORCEMENT) RULES, 
2002: 
rr.8 and 9 - Held: Any sale effected without complying with 
the rules would be unconstitutional and null and void. 
r. 8(8) - 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 - In the instant case, no terms 
were settled between the parties that the sale can be effected 
E 
F 
by Private Treaty - The Borrowers were not even called to the 
G 
joint meeting between the Bank and the Sale Agent - There 
was violation of rules rendering the sale void. 
Respondent no.1 and 2 had taken various loans from 
respondent no.3-Bank. Upon failure of respondent no.1 
H 
1142 
SUPREME COURT REPORTS 
[2014] 3 S.C.R. 
A and 2 to repay the loan, their assets mortgaged with 
respondent no.3-Bank were classified as Non-Performing 
Assets. Respondent no.3-Bank issued a demand notice 
and then a possession notice under the SARFAESI Act. 
Respondent no.1 and 2 challenged the two notices 
B before the High Court. Meanwhile, auction sale was fixed 
but no sale took place as there were no bidders. 
Respondent no.1 and 2 sought cancellation of auction 
notice and sought permission of respondent no3-Bank 
to sell the secured assets by private treaty. The 
c outstanding balance to the bank was Rs.1.57 crores. 
Respondent Nos.1 and 2 made a payment of Rs.42 
lacs to respondent no.3-Bank, by selling machinery with 
the permission of respondent no.3-Bank. A request was 
also made for an extension of two months for paying the 
D remaining amount after selling the secure

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