C.A. No.4679/ 2014 @ SLP(C)No.

35168 of 2011

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]

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)

JUDGMENT

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

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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.

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

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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.

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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

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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

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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

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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:

“Rule 8 Sale of immovable secured assets:

(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):

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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.

9.Time of same, issues of sale certificate and delivery of

possession, etc.-

(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

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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

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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.

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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

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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.”

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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/-

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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
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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

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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
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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

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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

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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

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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

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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

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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
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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

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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

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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
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the purchaser has, in the meantime, utilized the property in question.

28.Subject to the above, the appeals are dismissed.

…………………………J.
(Surinder Singh Nijjar)

………….……………..J.
(A.K.Sikri)
New Delhi,
April 22, 2014

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