Telangana High Court
Mr. Gopu Bala Reddy vs The Brg Energy Limited In Liquidation, on 28 March, 2025
Author: T.Vinod Kumar
Bench: T.Vinod Kumar
THE HON'BLE SRI JUSTICE T.VINOD KUMAR
COMPANY APPLICATION No.70 of 2025
In
COMPANY PETITION No.170 of 2012 & Batch
O R D E R:
This Company Application is filed to declare the action of
2nd respondent in proceeding against the assets of the Company-in-
Liquidation i.e. land and buildings situated at plot No.40,
admeasuring 20,675 sq. meters in Sy.Nos.315, 317, 318, 319 and
336, Phase-I, Industrial Park, Pashamylaram village, Patancheru
Mandal, Sangareddy District by initiating sale of the same without
obtaining leave of the Hon’ble High Court as arbitrary, illegal,
void, ab initio and contrary to the provisions of the Companies
Act, 1956 ( for short ‘the Act’) and consequently direct the
2nd respondent-Bank to obtain necessary leave of the Hon’ble High
Court to stay outside the winding up proceeding with the sale of
the asset of the Company-in-Liquidation or reaching an OTS with
the 3rd respondent Company.
2. Heard Sri L.Venkateshwar Rao, learned counsel for the
applicant, Sri J.Sreenadh Reddy, learned counsel for the Official
2
Liquidator and Sri B.S.Prasad, learned Senior Counsel appearing
on behalf of 2nd respondent, and perused the record.
3. The applicant herein claiming himself to be a former Director
of the 1st respondent Company-in-Liquidation, filed the present
application. By the present application, the applicant claims that
the 2nd respondent is proceeding with the sale of the immovable
assets of the Company-in-Liquidation without obtaining leave of
the Court under Section 446(1) r/w Section 537(1) of the Act,
which action of the 2nd respondent, it is contended would make the
action of e.aucion as null and void.
4. The applicant contends that the petition for winding up of the
1st respondent Company was filed in the year 2012 and was
ordered by this Court on 21-08-2018 and that the 2nd respondent,
who is a secured creditor, has chosen to remain outside the
liquidation process.
5. Applicant further contends that the 2nd respondent having
chose to remain outside the liquidation process, had addressed a
letter dated 27-12-2024 to the Official Liquidator representing the
1st respondent Company-in-Liquidation seeking for issuance of No
3
Objection Certificate in favour of the 2nd respondent for recovery
of dues through SARFAESI/OTS/DRT.
6. It is also contended on behalf of the applicant that, by the
aforesaid letter addressed by the 2nd respondent to the Official
Liquidator, it has been stated that the 2nd respondent has issued
e.auction notice on 09-12-2024 showcasing the 1st respondent
factory at Pashamylaram for e.auction scheduled on 10-01-2025,
and in the meantime, the borrower had approached the
2nd respondent with proposal for One Time Settlement (OTS); and
that the matter is simultaneously pursued through DRT also.
7. On behalf of the applicant, it is further contended that the
applicant herein had made an offer of Rs.30.00 crores under OTS
and the 2nd respondent, without considering the aforesaid offer is
seeking to proceed with the e.auction.
8. On behalf of the applicant, it is also contended that the
Official Liquidator representing the Company-in-Liquidation on
receiving the letter dated 27-12-2024, vide reply dated
07-01-2025 by drawing attention of the 2nd respondent to the
provisions of Section 446(1) and 537(1) of the Act has stated that
4
in the event the 2nd respondent wants to proceed against the assets
of the 1st respondent Company-in-Liquidation, it is necessary to
obtain leave of the Hon’ble High Court and that the 2nd respondent
had published sale notice inviting bids from the prospective
purchasers fixing the date of e.auction as 10-01-2025, without
leave of the Hon’ble High Court, and thus, the proposed sale of
assets to be conducted on 10-01-2025 is highly objectionable.
9. On behalf of the applicant, it is further contended that
notwithstanding the aforesaid categorical reply given by the
Official Liquidator, the 2nd respondent is proceeding with the sale
of the assets of the 1st respondent-Company-in-Liquidation, affairs
of which are under the control of the Official Liquidator working
under the supervision of this Court, and as such, the 2nd respondent
cannot proceed with the auction sale.
10. Learned counsel appearing on behalf of Official Liquidator,
by drawing the attention of this Court to the report dated
28-02-2025 and the order dated 01-08-2019 of a Coordinate Bench
of this Court in C.A. No. 624 of 2018 in Company Petition Nos.39
of 2016 and 60 of 2013 would contend that, this Court in the
5
aforesaid Company Application, having regard to the decision of
the Apex Court in Pegasus Assets Reconstruction (P) Ltd. Vs.
Haryana Concast Ltd 1, has held that though, a secured creditor is
entitled to remain outside the winding up proceedings and can
exercise the rights conferred in them as a secured creditor and sell
the properties, however is required to associate with the Official
Liquidator in the process of liquidating the securities.
11. Learned counsel for the Official Liquidator would further
submit that, this Court in the abovementioned Company
Application had also held that the secured creditor i.e. Bank shall
not deal with any of the assets either movable or immovable
properties of the Company-in-Liquidation without involving the
Official Liquidator in all respects particularly with respect to the
valuation and putting the same to auction.
12. Learned counsel for the Official Liquidator would further
contend that, as the 2nd respondent did not involve the Official
Liquidator in the process of valuation of assets, the Official
1 (2016) 4 SCC 47
6
Liquidator representing the 1st respondent Company-in-Liquidation
is unable to give any comments with regard to valuation of assets.
13. Further, it is also contended that as per the provisions of
Section 529, 529A and 530 of the Act, in order to ascertain the
dues of the creditors including workmen, the Official Liquidator
has to invite the claims from the creditors of the Company-in-
Liquidation by causing publication of notice in newspaper; that the
sale of assets as being undertaken by the 2nd respondent is void and
sought for a direction to the 2nd respondent to conduct fresh sale by
involving the Official Liquidator at every stage right from the
valuation of assets till sale of the assets.
14. Learned counsel for the Official Liquidator would also submit
that in order to ascertain the dues of the creditors including the
workmen, the Official Liquidator is required to invite claims from
the creditors by causing publication, for which, he had sought for a
direction to the 2nd respondent to deposit a sum of Rs.2.00 lakhs
with the Official Liquidator towards advertisement charges for
publishing notice inviting claims.
7
15. Leaned counsel for the Official Liquidator further submit that
if only the 2nd respondent had indicated as to its intention to
proceed with e.auction sale by involving the Official Liquidator at
all stages, the Official Liquidator could have obtained necessary
permission from this Court and involved himself in the process of
valuation and apportionment of sale proceeds etc, and since the
2nd respondent did not involve the Official Liquidator in the above
process, the Official Liquidator had informed the same in response
to the letter dated 27-12-2024 received from the 2nd respondent
with reference to the relevant provisions of the Act.
16. Learned counsel for the Official Liquidator would further
submit that the Hon’ble Apex Court in Pegasus Assets
Reconstruction Private Limited (supra while holding that a
secured creditor has the right to enforce any security interest in its
favour without the intervention of a Court or Tribunal, had noted
that Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (for short ‘SARFAESI
Act“) takes care of grievance of the borrower, which in case of a
Company-in-Liquidation would mean the Official Liquidator,
8
would have right of seeking redressal of his grievance under
Section 17 and 18 of the SARFAESI Act.
17. Learned counsel for the Official Liquidator would submit that
since the 2nd respondent did not issue any notice in terms of Section
13 of the SARFAESI Act r/w Rule 8 of the Security Interest
(Enforcement) Rules, 2002 (fort short ‘the Rules’) to the Official
Liquidator, the auction initiated by the 2nd respondent to sell the
immovable assets of the Company-in-Liquidation cannot be held to
be valid.
18. Opposing the aforesaid contentions made by the learned
counsel for the applicant and Official Liquidator, learned Senior
Counsel appearing on behalf of the 2nd respondent would submit
that though notice under Section 13(2) or Section 13(4) of the
SARFAESI Act is not given to the Official Liquidator, however, a
notice of sale has been given.
19. On behalf of the 2nd respondent, it is contended that the object
and purpose of issuing notice to Official Liquidator is only for the
purpose of prioritization of dues and also details of dues of the
workmen.
9
20. On behalf of the 2nd respondent, it is further contended that
non-issuance of notice under Section 13(2) and 13(4) of the
SARFAESI Act to the Official Liquidator is not fatal inasmuch as
the 2nd respondent has put the Official Liquidator on notice of the
sale of assets of the Company-in-Liquidation through public
auction under letter dated 27-12-2024.
21. Insofar as the present application filed by the applicant is
concerned, it is contended that the applicant has no locus standi to
maintain the present application to declare the proposed sale
through public auction as void and even the Official Liquidator
cannot file any application of the present nature opposing the sale.
22. On behalf of the 2nd respondent, it is further contended that the
Official Liquidator representing the Company-in-Liquidation did
not raise any objection to the notice issued by the 2nd respondent
informing of the sale, which the 2nd respondent intends to
undertake through e.auction.
23. On behalf of the 2nd respondent, it is further contended that the
2nd respondent in the meeting of creditors held on 07-01-2019
having expressed its desire to remain outside the liquidation
10
process, has initiated action to liquidate the assets of the
1st respondent Company-in-Liquidation, in order to recover its
secured debt and as such, the objection of the Official Liquidator to
the proposed sale notice lacks bona fides.
24. On behalf of the 2nd respondent, it is further contended that the
object behind the involvement of Official Liquidator in the process
is only to ensure that the workmen dues (which take precedence
over all other dues), are protected and not to raise any objection
relating to the liquidation of assets by the secured creditor, who
remained outside the liquidation process.
25. On behalf of the 2nd respondent, it is also contended that the
Apex Court in the decision rendered in Pegasus Assets
Reconstruction Private Limited (supra) had deliberated upon the
object of the scheme of the Act and having categorically held that
the SARFAESI Act being a subsequent enactment, will take
precedence over the Act and as such, the Official Liquidator
cannot claim that the 2nd respondent is required to obtain No
Objection Certificate from this Court before proceeding to effect
sale of the secured assets.
11
26. On behalf of the 2nd respondent, it is further submitted that the
2nd respondent is ready to discharge the obligation towards
workmen dues out of the sale proceeds realized and for the said
reason, the process of sale of the secured asset by the
2nd respondent cannot be scuttled in the given circumstances.
27. By contending as above, the 2nd respondent seeks for dismissal
of the application.
28. I have taken note of respective contentions urged.
29. Based on the submissions made by the learned counsel
appearing on behalf of the parties, the following points arise for
consideration:
(i) Whether the applicant has locus standi to maintain the
present Application?
(ii) Whether the 2nd respondent secured creditor is
required to obtain leave of the High Court for
proceeding with the sale of immovable assets of the
Company-in-Liquidation?
(iii) Whether the action of the 2nd respondent in proceeding
to sell the immoveable assets of the 1st respondent
Company-in-Liquidation through e.auction without
12involving the Official Liquidator can be said to be in
accordance with law / provisions of the Act?
(iv) Whether non-issuance of notice under Section 13(2)
and 13(4) of the SARFAESI Act would vitiate the
action of 2nd respondent?
Point (i) :
30. It is to be noted that once, this Court had admitted the winding
up petition, the Board of Directors of the Company gets superseded
and all the affairs of the Company are taken over by the Official
Liquidator attached to this Court and as such, the applicant
claiming himself to be ex-Director of the Company-in-Liquidation
cannot maintain the present Application. However, while the
powers of Directors are suspended during the liquidation, the
ex-Director can still maintain the present Application against the
actions of secured creditor, if they negatively impact the
liquidation process or interest of the other creditors.
31. The only limitation for an ex-Director to maintain challenge to
the action of secured creditor is by demonstrating that he has a
legitimate interest in challenging the actions, and that the challenge
is based on a valid legal ground.
13
32. The Madras High Court in the case of Jayanthi Ramachandra
Ex-Chairman of VTX Industries Ltd v. Official Liquidator 2 has
held that:
“15. In this view of the matter, on the peculiar facts and
circumstances of this case, the applicant can be treated as an
informant (more so in the light of prayers, which are not applicant
centric) as it is the stated position of the applicant that OL has not
brought to the notice of this Court about ARC not complying with
the conditions subject to which possession was handed over. This
puts an end to the locus argument.”
33. A similar view was taken by the Delhi High Court in the case
of Vivek Kumar v. Pearl Cycle Industries Ltd 3and held that:
“19. It must, however, be pointed out that while none of the
applicants has the locus standi to challenge the decrees or their
executability and their Applications are not maintainable u/s 446 of
the Act or under any other provision of the Companies Act, Surender
Kumar is certainly interested in the proceedings for the realisation
of the amount by the Bank by the disposal of the assets of the
Company because on the amount realised would depend the
quantum of the shortfall which he would be bound to make good by
virtue of the personal decree passed against him as a guarantor. He
is, therefore, certainly interested in the securities sought to be
proceeded against in execution getting the best possible price and if
there is anything in the manner in which execution proceedings are
carried out which may affect the quantum of realisation, he would2 2020 SCC OnLine Mad 21330
3 1981 SCC OnLine Del 53
14certainly have the locus standi to approach the Court either u/s
446(2)(d), or the execution Court, seized of the execution
proceedings, for appropriate directions with a view to ensure that
the securities are not only fully protected under disposal but also
that they fetch the maximum possible price.”
34. In the facts of the present case, the applicant claiming himself
as ex-Director of the 1st respondent Company-in-Liquidation,
claims to have approached the 2nd respondent and made an offer to
pay Rs.30.00 crores under OTS Scheme in respect of the amounts
due from the Company-in-Liquidation; that the 2nd respondent
without considering the aforesaid offer made by the applicant, is
seeking to sell the immovable assets of the 1st respondent
Company-in-Liquidation through e.auction at a price lower than
the offer made by the applicant; that the action of the
2nd respondent secured creditor in selling the secured asset at a
price lower than the offer made by the applicant would affect the
interest not only of the applicant as an Ex-Director of the
Company-in-Liquidation but also the other creditors; that the
action of the 2nd respondent in not involving the Official
Liquidator in the valuation process of the assets and also the
obligations under law viz., non-issuance of notices under Section
15
13(2) and 13(4) of the SARFAESI Act r/w Rule 8 of the Rules.
Since, the 2nd respondent claiming itself as remaining outside the
liquidation process, while proceeding with the intending auction
did not take into consideration the offer made by the applicant and
also did not issue notice as contemplated under Section 13(2) and
13(4) of the SARFAESI Act. Thus, this Court is of the view that
the actions of 2nd respondent as secured creditor are detrimental to
the interest of the 1st respondent Company-in-Liquidation, and
thus, the applicant being an ex-Director of the Company can
maintain the present Application. Accordingly, challenge to the
present application by the 2nd respondent on the aforesaid ground
has to fail.
Point (ii):
35. Now, turning to other issue as to whether the 2nd respondent
can proceed with e.auction of the immovable assets, learned
counsels appearing on behalf of the respective parties, have placed
reliance on the decision of the Apex Court in Pegasus Assets
Reconstruction Private Limited (supra). It is necessary to refer to
relevant portions of the said decision as extracted hereunder:
16
“23. A reading of Sections 9 and 13 of the SARFAESI Act leaves no
manner of doubt that for enforcement of its security interest, a
secured creditor has been not only vested with powers to do so
without the intervention of the court or tribunal but detailed
procedure has also been prescribed to take care of various
eventualities such as when the borrower company is under
liquidation for which proviso to sub-section (9) of Section 13
contains clear mandate keeping in view the provisions of Sections
529 and 529-A of the Companies Act, 1956. Since significant
amendments were introduced in Section 529 while inserting Section
529-A through Amendment Act 35 of 1985, effective from 24-5-
1985 and with the aid of a non obstante clause in sub-section (1) of
Section 529-A workmen’s dues were given preference over other
dues and made to stand pari passu with dues of the secured
creditors, in case of apparent conflict, this Court through various
judgments has upheld the proceedings under the RDB Act as it
happens to be a later Act with overriding effect over other laws.
The interest of the workmen in respect of dues payable to them as
per Sections 529 and 529-A of the Companies Act has been
protected by permitting, wherever necessary, association of the
Official Liquidator with the proceedings before the Debts Recovery
Tribunal under the RDB Act. In our considered judgment, the same
view is required to be taken in context of the SARFAESI Act also, for
the additional reason that Section 13 requires notice to the
borrower at various stages which in the case of a company under
winding up being a borrower would mean requirement of notice to
the Official Liquidator. The Security Interest (Enforcement) Rules,
2002 (for brevity “the Rules”) framed under the provisions of
the SARFAESI Act also require notice upon the borrower or his
agent at different stages. For sale of immovable secured assets, as
per Rule 8, the authorised officer can take possession by delivering
17a possession notice to the borrower and by affixing possession
notice on the outer door or at some conspicuous place of the
property. Before the sale also, the authorised officer is required to
serve to the borrower a notice of 30 days. Thus, the Rules also
ensure that the Official Liquidator is in knowledge of the
proceedings under the SARFAESI Act in case the borrower happens
to be a company under winding up. As a borrower, the Official
Liquidator has ample opportunity to get the details of the workers’
dues as ascertained under the Companies Act, placed before the
authorised officer and seek proper distribution of the amount
realised from the sale of secured assets in accordance with various
provisos under sub-section (9) of Section 13 of the SARFAESI Act.
25. In the event, in the capacity of a borrower the Official
Liquidator is not satisfied with the decisions or steps taken by the
secured creditor or the authorised officer, at appropriate stage it
has sufficient opportunity to avail the right of appeal under Section
17 of the Sarfaesi Act before the Debts Recovery Tribunal. There is
a right of further appeal under Section 18 before the Appellate
Tribunal. On the other hand, if the view taken by the Punjab and
Haryana High Court in Pegasus [Pegasus Asset Reconstruction (P)
Ltd. v. Haryana Concast Ltd., Company Appeal No. 28 of 2009 sub
nom Haryana State Industrial and Infrastructure Development
Corpn. v. Haryana Concast Ltd., 2009 SCC OnLine P&H 11177] is
accepted, there shall be a conflict of rights and interest of the
secured creditor who have the right and liberty to realise their
secured interest in accordance with the provisions of
the SARFAESI Act on one hand, and the statutory rights and
liability of the Official Liquidator acting under the orders of the
Company Judge as per provisions of the Companies Act, on the
other. The appellate fora shall also differ, leading to a situation of
18uncertainty and conflict between the two Acts. In such a scenario,
we respectfully agree with the Delhi view and disapprove that of
the Punjab and Haryana High Court.”
36. From a reading of the decision of the Apex Court, it would
be clear that a secured creditor, who remains outside the liquidation
process, can seek for enforcement of its security interest under the
SARFAESI Act without obtaining any leave from the Court. Thus,
this question is answered in favour of respondent No.2.
Point (iii) & (iv):
37. A reading of the judgment of Supreme Court in Pegasus
Assets Reconstruction Private Limited (supra) would indicate that
on the Company Court admitting Company Petition, the affairs of
the Company-in-liquidation are placed in the hands of the Official
Liquidator, as thus, the Official Liquidator would take the position
of a borrower. Once, the Official Liquidator is considered as
borrower, he would be entitled to be issued with a notice by the
secured creditor in terms of the provisions of the SARFAESI Act
19
r/w the Rule 8 of the Rules. (See: Chandra Proteco Limited v.
L&T Finance Ltd & Allahabad Bank 4)
38. Since, in respect of 1st respondent as the Official Liquidator is
considered as borrower, the secured creditor is required to follow
the procedure prescribed under the SARFAESI Act and its rules by
issuing notice to the borrower, as being the normal procedure to be
followed in case of enforcement of security interest. If only notice
as contemplated under the SARFAESI At is issued, the Official
Liquidator would have the opportunity to avail the right of appeal
under Section 17 of the SARFAESI Act before the Tribunal or
under Section 18 of the said Act before the Appellate Tribunal, if
he is not satisfied with the decision or steps taken by secured
creditor or authorized officer with regard to valuation of the
secured asset or manner of disposal or apportionment/distribution
of the amount realized from the sale of secured asset in accordance
with various provisions under subsection (9) of Section 13 of the
4 2018 SCC OnLine Cal 11717
20
SARFAESI Act.(See: Mathew Varghese v. M Amritha Kumar5, J
Rajiv Subramaniyan v, Pandiyas 6)
39. Though, on behalf of the 2nd respondent it is contended that
the proposed auction sale is in the knowledge of the Official
Liquidator and he having not raised any objection and being put on
notice of sale, would be sufficient as the Official Liquidator’s
interest is limited to protect the workmen’s dues, it is to be noted
that though workmen dues takes precedence over all other dues
including that of the secured creditor as held by the Apex Court in
a recent judgment in the case of Industrial Development Bank of
India Vs. Superintendent of Central Exercise and Customs and
others7, wherein the Hon’ble Supreme Court had considered the
statutory preferences in terms of Section 529-A of the Act over
other dues and payments to be made in terms of Section 529 and
530 of the Act, the payments due, be in respect of workmen dues
or the other creditors, can only be ascertained only if the Official
Liquidator has been involved in the process of valuation of the
5 (2014) 5 SCC 610
6 (2014) 5 SCC 651
7 2023 INSC 746
21
asset, which the 2nd respondent intends to liquidate in order to
recover its security interest.
40. Though, the Apex Court had held that secured creditor has
every right to proceed against secured assets in order to recover its
security interest, the same cannot be undertaken in a manner so as
to defeat the claims of other creditors if the secured asset has a
potential to fetch more value.
41. In the facts of the case, as the applicant himself claims to have
offered Rs.30.00 crores under OTS Scheme in order not to put the
aforesaid secured asset to auction sale, the e.auction held by the
2nd respondent on the other hand, it is stated to have fetched only
Rs.25.00 crores, would itself goes to show that the lesser price
secured in the e.auction held by the 2nd respondent would have an
impact on the other creditors, as if in the auction any excess
amount is realized, the same can be apportioned among other
creditors as per the order of preference prescribed under the Act
including statutory dues payable as per Section 529 of the Act.
42. Though, on behalf of 2nd respondent it is contended of the
Official Liquidator being put on notice of auction sale and not
22
having raised any objection, it is to be noted that by letter dated
27-12-2024, the 2nd respondent informed the Official Liquidator of
its decision to proceed with e.auction of the secured asset and
sought for his No Objection for the aforesaid course of action
being adopted by it, without furnishing the details of the valuation
of immovable asset intended to be liquidated by it and also without
asking any details of the workmen dues, which are to be discharged
firstly, before the sale proceeds can be adjusted towards security
interest, the submission made on behalf of the 2nd respondent that
from and out of the sale proceeds, it is ready to discharge the
workmen dues, does not appeal this Court for being accepted either
as valid submission having support of law. It is to be noted that at
no point of time till the present Application is filed before this
Court, the 2nd respondent had sought for information as to the
workmen dues to be discharged in terms of Section 529-A of the
Act for the Official Liquidator to cause publication inviting claims.
43. Further, the communication dated 27-12-2024 addressed by
the 2nd respondent to the Official Liquidator is in the nature of
seeking No Objection for the 2nd respondent to proceed with the
23
proposed action of e.auction scheduled on 10-01-2025 and the
Official Liquidator representing the 1st respondent Company-in-
Liquidation by his letter dated 07-01-2025 having objected to the
aforesaid auction though is not strictly in accordance with the law
laid down by the Apex Court, the letter dated 27-12-2024 as issued
to the Official Liquidator also cannot be treated as notice as
mandated under Section 13(2) and 13(4) of the SARFAESI Act to
receive the stamp of approval from this Court (See : J.Rajiv
Subramaniyan Vs. Pandiyas 8).
44. Though, on behalf of the 2nd respondent is contended that non-
issuance of notice under Section 13(2) and 13(4) of the SARFAESI
Act would not be fatal, it is well settled by catena of decisions of
the Apex Court that non-issuance of such a notice to a borrower,
which in the facts of the present case would be the Official
Liquidator as held by various judicial precedents cited above,
would vitiate the entire process/auction of secured creditor
(See: Mathew Varghese(Supra), Vasu P. Shetty v. Hotel Vandana
Palace9 and Celir LLP v. Sumati Prasad Bafna & others 10)
8 (2014) 5 SCC 651
9 (2014) 5 SCC 660
24
45. Further, if only the 2nd respondent had followed the mandate
of Section 13(2) and 13(4) of the SARFAESI Act r/w Rule 8 of the
Rules, 2002 by issuing notice to the Official Liquidator by
furnishing report obtained for proceeding with e.auction of the
secured immovable asset, the Official Liquidator could have
submitted objections or availed the remedy provided in terms of
Section 17 and 18 of the SARFAESI Act. Without issuing such a
notice, the 2nd respondent has taken away right of the Official
Liquidator to avail the remedies provided under the SARFAESI
Act, if he is not satisfied with the decision or steps taken by the
secured creditor. It is also for the said reason the contention
advanced on behalf of the 2nd respondent that non-issuance of
notice would not be fatal, is liable to be rejected.
46. The issue with regard to the statutory mandate of issuance of
notice under Section 13(2) and 13(4) of the SARFAESI Act r/w
Rule 8 of the Rules, 2002, has been explained by Hon’ble Supreme
Court in the case of Mathew Varghese(Supra), wherein it was held
as under:
10 MANU/SC/1343/2024
25
28. Once the said legal position is ascertained, the statutory
prescription contained in Rules 8 and 9 have also got to be examined as
the said rules prescribe as to the procedure to be followed by a
SECURED CREDITOR while resorting to a sale after the issuance of
the proceedings under Section 13(1) to (4) of the SARFAESI Act. Under
Rule 9(1), it is prescribed that no sale of an immovable property under
the rules should take place before the expiry of 30 days from the date
on which the public notice of sale is published in the newspapers as
referred to in the proviso to Sub-rule (6) of Rule 8 or notice of sale
has been served to the borrower. Sub-rule (6) of Rule 8 again states
that the authorized officer should serve to the borrower a notice of 30
days for the sale of the immovable SECURED ASSETS. Reading
Sub-rule (6) of Rule 8 and Sub-rule (1) of Rule 9 together, the service
of individual notice to the borrower, specifying clear 30 days time gap
for effecting any sale of immovable SECURED ASSET is a statutory
mandate. It is also stipulated that no sale should be affected before the
expiry of 30 days from the date on which the public notice of sale is
published in the newspapers. Therefore, the requirement under Rule
8(6) and Rule 9(1) contemplates a clear 30 days individual notice to the
borrower and also a public notice by way of publication in the
newspapers. In other words, while the publication in newspaper should
provide for 30 days clear notice, since Rule 9(1) also states that such
notice of sale is to be in accordance with proviso to Sub-rule (6) of Rule
8, 30 days clear notice to the borrower should also be ensured as
stipulated under Rule 8(6) as well. Therefore, the use of the expression
‘or’ in Rule 9(1) should be read as ‘and’ as that alone would be in
consonance with Section 13(8) of the SARFAESI Act.
47. Further, a Coordinate Bench of this Court while dealing with
similar facts in COMPA Nos.624 of 2018 in Company Petition
26
Nos.39 of 2016 and 60 of 2013 referring to the decision of the
Apex Court in Pegasus Assets Reconstruction (P) Ltd. Vs.
Haryana Concast Ltd (supra) held that the applicant Bank shall
not deal with any assets either movable or immovable of the
Company-in-liquidation without involving the Official Liquidator
in all respects, particularly with respect to valuation and putting the
same to e.auction etc. Since, the Coordinate Bench of this Court
having taken the aforesaid view with regard to involvement of the
Official Liquidator in valuation and sale of assets and finality, by
considering the decision of the Apex Court in Pegasus Assets
Reconstruction (P) Ltd. Vs. Haryana Concast Ltd (supra) and as
it is not shown to this Court of the said order having disturbed in
appeal, this Court is of the view that the action of the
2nd respondent in proceeding to put the immovable asset to
e.auction without involving the Official Liquidator in the process
of valuation or the sale through e.auction on 10-01-2025 or any
other subsequent date cannot be said to be in accordance law laid
down/declared by the Apex Court.
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48. Further, if only the 2nd respondent had involved the Official
Liquidator in the valuation, it would have been possible for the
Official Liquidator to seek leave of the Court to take part in the
aforesaid process of valuation and sale by the 2nd respondent either
calling for claims from various secured creditors rather than only
the 2nd respondent seeking to settle its secured interest.
49. In view of the above, this Court is of the considered view that
the action of the 2nd respondent in proceeding with e.auction cannot
be held to be either in accordance with provisions of the Act or the
provisions of the SARFAESI Act and Rules framed thereunder or
not being detrimental to the interest of other creditors for it to be
approved. Question Nos.(iii) and (iv) are accordingly answered
against the 2nd respondent.
50. Accordingly, this Company Application is allowed. No costs.
51. However, it is made clear that in the event the 2nd respondent
intends to proceed with the liquidation process, it is at liberty to do
so by involving the Official Liquidator in valuation and sale as
observed by a Coordinate Bench of this Court in its order dated
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01-08-2019 passed in Company Application No.624 of 2018 in
Company Petition Nos.39 of 2016 and 60 of 2013.
52. Consequently, miscellaneous petitions pending, if any, shall
stand closed.
__________________________
JUSTICE T.VINOD KUMAR
Date: 28.03.2025
Vsv