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I. Case Reference

Case Citation : (2022) ibclaw.in 41 DRAT

Case Name : Union Bank of India Vs. Benoy A.S.
RA (SA) 186/2018 [TSA No. 589/2016 ( SA No. 805/2013) on the
file of DRT II, Ernakulam) and MA (SA) 94/2018 [IA 832/2018 in
Appeal No. :
TSA No. 589/2016 (SA No. 805/2013) on the file of DRT II,
Ernakulam)
Judgment Date : 22-Aug-22
Court/Bench : DRAT Chennai Bench
Present for Appellant(s) : Mr. Surya Teja Nall for Mr. Srinath Sridevan
Present for Respondent(s) : Mr. C. Suraj
Chairperson : Mr. Justice S. Ravi Kumar

II. Brief about the decision

In the decision relied on by Appellant Bank, Hon’ble Supreme Court clearly held that sale of secured
asset in public auction as per Section 13(4) of SARFAESI Act which ended in issuance of a Sale
Certificate as per Rule 9 (7) of the Rules, is a complete and absolute sale for the purpose of
SARFAESI Act, and same need not be registered under the provisions of the Registration Act. So, in
view of above decision of Hon’ble Supreme Court, Full Bench decision of Hon’ble High Court, which
took a contrary view, cannot be applied. However, the issue on hand is not as to requirement of
registration for Sale Certificate, but it is on the point of limitation.

According to 1st Respondent, as pleaded in Securitisation Application, limitation commences from

the date of registration of Sale Certificate. Now the core point that has to be seen is whether
issuance of Sale Certificate is a measure under Section 13 (4) of SARFAESI Act, 2002. In the
pleadings of Securitisation Application, one of the allegations is that Bank, without resorting to
Section 13(4), approached CJM under Section 14 of the Act, and the same is not in accordance with
law, but this contention cannot be accepted, in view of decision of Hon’ble Supreme Court in
Standard Chartered Bank Vs. V. Noble Kumar & Ors. (2017) ibclaw.in 40 SC, wherein Hon’ble
Supreme Court clarified that there are three methods for the secured creditor to take possession of
the secured assets:

i) The first method would be where the secured creditor gives the requisite notice under Rule
8(1) and where he does not meet with any resistance. In that case, the authorized officer will
proceed to take steps as stipulated under Rule 8(2) onwards to take possession and thereafter
for sale of the secured assets to realize the amounts that are claimed by the secured creditor.

ii) The second situation will arise where the secured creditor meets with resistance from the
borrower after the notice under Rule 8(1) is given. In that case he will take recourse to the
mechanism provided u/s 14 of the Act viz. making application to the Magistrate. The
Magistrate will scrutinize the application as provided in Section 14, and then if satisfied,
appoint an officer subordinate to him as provided u/s 14 (1) (A) to take possession of the assets
and documents. For that purpose the Magistrate may authorize the officer concerned to use
such force as may be necessary. After the possession is taken the assets and documents will be
forwarded to the secured creditor

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iii) The third situation will be one where the secured creditor approaches the Magistrate
concerned directly u/s 14 of the Act. The Magistrate will thereafter scrutinize the application
as provided in Section 14, and then if satisfied, authorse a subordinate officer to take
possession of the assets and documents and forwards them to the secured creditor as under
Clause (ii) above.

In view of above decision, there is no need for Secured Creditor to approach under Section 13(4) of
the Act, before availing remedy under Section 14 of the Act. It is also clarified in this decision that in
any of the three situations, after the possession is handed over to Secured Creditor, the subsequent
specified provisions of Rule 8 concerning the preservation, valuation and sale of the secured assets,
and other subsequent rules from the Security Interest (Enforcement) Rules, 2002, shall apply.

Hon’ble Supreme Court in Mardia Chemicals Ltd. Vs. U.O.I. & Ors. [2017] ibclaw.in 16 SC, clearly
held that on measures having been taken under Sub-section (4) of Section 13 and before the date of
sale/auction of the property it would be open for the borrower to file an Appeal (Petition) under
Section 17 of the Act before Debt Recovery Tribunal. So, the point that has to be seen is whether
issuance of Sale Certificate can be termed as measures under Section 13(4) of the Act.

So, measures indicated above are to take possession for the purpose of sale to realize debt. Taking
possession is an independent step and conducting sale is also an independent step. If these
two steps are challenged and Tribunal ultimately set aside that action, Bank has to take fresh steps.
After conducting sale, issuance of Sale Certificate or its registrations are only consequential steps,
and they are not independent in nature. Only if the sale is concluded and confirmed, then, question
of issuance of Sale Certificate would arise. Then, on what ground a Sale Certificate can be
challenged is a million-dollar question. As seen from pleadings of Securitisation Application, entire
challenge is as to the manner in which sale is conducted. If pleadings are taken into consideration,
the grievance of 1st Respondent is for not following the procedure of fixing valuation and not giving
proclamation of sale by marking correct boundaries, etc., these grounds are available to challenge
the sale which is held on 15.06.2013. If sale has to be challenged, 1st Respondent has to file
Securitisation Application within 45 days from the date of sale. Admittedly, no such step is taken.
But, in the prayer, 1st Respondent also prayed for setting aside the sale dated 15.06.2013, which is a
time barred relief. As already referred to above, issuance of Sale Certificate and its Registration is
only a follow up action of sale conducted, which is a primary action. Whether 1st Respondent can be
allowed to challenge the consequential action, without challenging primary action, the answer would
be in negative.

In other words, this consequential action has no independent status, therefore, it cannot be
challenged without challenging the primary action namely taking of possession which was on
11.12.2012 or sale of property which was on 15.06.2013, for both these reliefs, the prescribed time
expired as on the date of filing of SA. As already referred to above, the grounds urged in
Securitisation Application are grounds challenging the sale, but not Sale Certificate, which is a
consequential action. As seen from the impugned Order, Learned Presiding Officer completely
carried away with the conduct of Bank, which has not filed its Written Statement and not paid costs
imposed by Tribunal, which prompted Tribunal below to allow Securitisation Application. In fact,
even if the matter is decided on ex parte basis, Tribunal cannot accept the claim of Petitioner simply
because opposite party has not filed Counter or Written Statement or remained ex parte. It has to
satisfy as to the claim made in Petition and also the same is made within the stipulated time. But,

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unfortunately, Tribunal below lost sight of these aspects, and allowed Application for failure of
Appellant Bank.

On a scrutiny of the material, I am of the considered view that issuance of Sale Certificate cannot
be taken as a measure for challenging action of Bank for calculating period of limitation as
indicated in Section 17 of the Act.

For the reasons stated above, I am of the considered view that Tribunal below erred in allowing SA
and said Order is liable to be set aside. Therefore, RA (SA) 186/2018 is allowed and impugned Order
dated 14.05.2018 is set aside. Consequently TSA No. 589/2016 (SA No. 805/2013) is dismissed as it
is filed beyond the period of limitation.

The other Appeal MA (SA) 94/2018 is against Order dated 26.04.2018 in IA 832/2018 in TSA No.
589/2016 (SA No. 805/2013). Appellant Bank herein filed IA 832/2018 to decide maintainability of
TSA No. 589/2016 (SA No. 805/2013) on the ground of limitation. Learned Presiding Officer while
dismissing IA, held that SA is filed within time as it is filed within 45 days of registration of Sale
Certificate. In my view, such a finding is not correct. As already held above, issuance of Sale
Certificate or registration of Sale Certificate, are not measures, they are only consequential steps
after sale. Only sale is a measure for realization of debt, issue of Sale Certificate and its registration,
are only consequential to sale, and without questioning sale, these two steps cannot be questioned
independently. Further, issuance of Sale Certificate and its registration are ministerial acts and they
are not judicial function.

In view of orders in RA (SA) 186/2018, nothing survives in Appeal MA (SA) 94/2018, and the relief
claimed in this Appeal has become infructuous, and that too, Interim Order, which is challenged in
this Appeal, is already merged into original order. For these reasons, Appeal MA (SA) 94/2018 is
liable to be dismissed, subject to above referred observations. In the result: Appeal RA (SA)
186/2018 is allowed and Appeal MA (SA) 94/2018 is dismissed with no order as to costs. All pending
IAs, if any, stand closed. (p8-15)

III. Full text of the judgment

Click here for Judgment

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