Case Note & Summary
The writ petition under Article 226 of the Constitution of India was filed by Canara Bank, a body corporate constituted under the Banking Companies (Acquisitions and Transfer of Undertakings) Act, 1970, represented by its authorised officer, against respondents, a proprietorship firm and a guarantor. The dispute arose from proceedings under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI). The borrower had availed a loan from the bank and committed default; the bank initiated SARFAESI measures, took possession of the secured asset, and conducted a public auction on 21.11.2015. The auction purchaser deposited 25% of the sale consideration on the date of auction but failed to pay the balance within fifteen days. The bank extended the time for balance payment with the consent of the auction purchaser, and a sale certificate was issued. The borrower and guarantor challenged the auction before the Debt Recovery Tribunal-2, Hyderabad, in S.A. No.126 of 2017, arguing that Rule 9(4) of the Security Interest (Enforcement) Rules, 2002 requires consent of all parties, including the principal borrower, for extension of time. The Tribunal accepted this contention and set aside the auction by order dated 29.01.2019. The bank appealed to the Debt Recovery Appellate Tribunal, Kolkata, in Appeal No.15 of 2019, but the Appellate Tribunal dismissed the appeal on 18.07.2023. The bank then filed the present writ petition seeking a writ of certiorari to quash the DRAT judgment and the DRT order, and also sought interim suspension. The central legal issues were the interpretation of Rule 9(4) of the Security Interest (Enforcement) Rules, 2002 and whether the 2016 amendment to that rule is retrospective. The petitioner argued that the rule, as amended with effect from 04.11.2016, clarifies that extension of time may be agreed between the purchaser and the secured creditor only, and that borrower consent is not required. The petitioner also argued that the amendment is clarificatory and retrospective, applying to the present case even though the auction occurred before the amendment. The respondents, before the tribunals, had argued that the term 'parties' includes the principal borrower, and that the extension without borrower consent was invalid. The High Court heard the arguments of learned counsel for the petitioner; no appearance was entered for the respondents. The provided text ends before the court's final decision, so the final holding and operative directions are not included in the excerpt.
Headnote
A) Securitization and Asset Reconstruction - Auction Sale and Balance Consideration - Rule 9(4) Security Interest (Enforcement) Rules, 2002 - Consent for Extension of Time - The core issue was whether the principal borrower's consent is required for extension of time to deposit balance sale consideration beyond fifteen days when auction purchaser defaults. The petitioner contended that Rule 9(4) as amended with effect from 04.11.2016 makes clear that extension may be agreed between purchaser and secured creditor only, and the amendment is clarificatory and retrospective. The tribunal had held that the term 'parties' includes the principal borrower, rendering the sale invalid without borrower consent. The High Court examined whether the amendment applies to pre-amendment auctions and whether the sale is valid. (Paras 3-7) B) Interpretation of Statutes - Retrospective Effect of Clarificatory Amendment - Rule 9(4) Security Interest (Enforcement) Rules, 2002 - Amendment of 2016 - Whether the substitution of 'between the purchaser and the secured creditor' for 'between the parties' operates retrospectively to validate prior extensions of time. Petitioner argued that the amendment is clarificatory and applies to the present case even though auction occurred before 04.11.2016; respondents contended no consent of borrower was taken. The court considered the statutory scheme and cases referred, though the final conclusion is not included in the extracted text. (Paras 5-7)
Issue of Consideration
Whether consent of principal borrower is required under Rule 9(4) of Security Interest (Enforcement) Rules, 2002 for extension of time to pay balance sale consideration, and whether the 2016 amendment to Rule 9(4) is clarificatory and retrospective
Final Decision
Not mentioned in the provided excerpt; the High Court heard the arguments but the final operative order is not included.
Law Points
- Rule 9(4) of Security Interest (Enforcement) Rules
- 2002 requires balance sale consideration to be paid within fifteen days
- extendable as agreed in writing between parties
- 2016 amendment clarifies extension may be agreed between purchaser and secured creditor
- borrower consent not required under amended rule
- clarificatory amendment operates retrospectively
