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AGP City Gas Private Limited, Represented by Its Authorised Officer, Chennai v/s M/s. Lynx Properties & Developers, Represented by Its Partner, Laji Joseph, Ernakulam & Others

    OP (DRT). No. 261 of 2021
    Decided On, 18 May 2022
    At, High Court of Kerala
    By, THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS
    For the Petitioner: Joseph Kodianthara, Sr. Advocate, Sradhaxna Mudrika, Mathew A. Kuzhalanadan, Kuriakose Varghese, V. Shyamohan, Sudeep Aravind Panicker, Advocates. For the Respondents: K.K. Chandran Pillai, Sr. Advocate, V.K. Peermohamed Khan, George Thomas Mevada, K.M. Aneesh, Saijo Hassan, Biju Varghese Abraham, Dileep Chandran, Shashank Devan, Adarsh Kumar, Advocates.


Judgment Text
1. In the course of proceedings for enforcement of security interest created by the borrower, the secured creditor sold the secured asset under a private treaty. After confirmation of the sale and consequent registration of the document of title, the borrower approached the Debts Recovery Tribunal (for short, 'the Tribunal), challenging the sale including the steps initiated for enforcement of the security interest. By order dated 27.08.2021, the Tribunal directed maintenance of status quo over the property in question. The attempt of the auction purchaser to vacate the interim order before the Tribunal itself did not fructify due to the absence of Presiding Officers in the Tribunal. Hence the jurisdiction of this Court under Article 227 of the Constitution of India was invoked challenging the ad interim ex-parte order dated 27.08.2021 issued by the Tribunal. A relief to declare the securitisation application pending before the Tribunal as one without jurisdiction is also sought for.

2. When the original petition came up for admission, after hearing the petitioner as well as the secured creditor, this Court stayed the operation of the ad interim order issued by the Tribunal. Since both sides insisted on the original petition itself being disposed of, the matter was heard at length.

3. Petitioner claimed to be a bonafide purchaser of 64 cents of land comprising in Survey Nos. 228/07-1 & 228/07 of Vayalar East Village, Uzhuva Muri, Cherthala Taluk, Alappuzha District having purchased it under a private treaty from respondents 3 and 4 on 28-02-2020, as per the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, ‘the Act'). Petitioner asserted that it is a global company engaged in liquified natural gas and gas logistics, distribution and infrastructure solutions. It has been given the contract work to lay, build and operate the City Gas Distribution Network in three districts of Kerala including Alappuzha where the disputed property is situated. According to the petitioner, it purchased the property for Rs.3,15,00,000/- pursuant to the private treaty mentioned above.

4. After the property was purchased, the third respondent approached this Court through W.P.(C) No.16997 of 2020. By judgment dated 24.09.2020, this Court directed the Sub Registrar, Cherthala to register the sale certificate in accordance with law. Pursuant to the said judgment, the sale deed was registered on 11-12-2020 and according to the petitioner, it commenced construction of the time sensitive project. Petitioner claimed that the parent company of the petitioner is one of the world's fastest growing providers of Liquified Natural Gas and is committed to provide clear, secure and affordable natural gas to downstream customers in new markets around the world and further that, petitioner is an entity authorised by the Petroleum & Natural Gas Regulatory Board to market the natural gas to domestic, industrial and commercial customers. Petitioner further averred that, the property in dispute was acquired by the petitioner in furtherance of their objective to carry out obligations under the Petroleum and Natural Gas Regulatory Board Act, 2006 and that since the activity done by the petitioner in the property in dispute is governed by the provisions of the above mentioned Act, no interference is called for as provided under section 56 of the aforesaid Act.

5. According to the petitioner, the property involved in the dispute was identified and purchased by them to pursue their obligations bestowed upon it and the project is of utmost public importance. However, after commencement of their activities in setting up the plant, petitioner had to stare at an order of status quo issued by the Tribunal. Though petitioner attempted to vacate the interim order of status quo by filing a counter affidavit, from 23.09.2021 onwards, the Presiding Officers of the Tribunal either resigned or retired and thereafter no Presiding Officers were appointed, causing great prejudice to the petitioner. Faced with such a predicament, this original petition was filed.

6. Petitioner contended that the first respondent, which is a partnership firm, had borrowed amounts from the respondent bank. When default persisted, the respondent bank filed O.A. No.430 of 2014 before the Debts Recovery Tribunal-II, Ernakulam. On the strength of a final order of the Tribunal dated 04.07.2016, a recovery certificate was issued in favour of the respondent bank permitting it to recover an amount of Rs.3,84,95,964.92 within 15 days from the publication of the said notice. After complying with various procedures, the property is alleged to have been put up for auction repeatedly but without success. The bank failed to obtain bidders even after reducing the reserve price to Rs.2,25,00,000/-. It was at this juncture that petitioner came forward and purchased the property offering a premium price of Rs.3,15,00,000/-. The sale price offered by the petitioner being far above the reserve price, respondent bank agreed to sell the property and after intimation to the borrower, a private treaty was entered into. In the meantime, since there were other attachments by civil courts pending on the property, respondent bank approached this Court in W.P.(C) No.16997 of 2020 and by judgment dated 24.09.2020, this Court directed the attachments to be effaced and also directed registration of the sale certificate.

7. As mentioned earlier, it was thereafter that, while the petitioner commenced construction of the liquified compressed natural gas station after obtaining all the permits required under law, S.A. No.177 of 2021 was filed by the first respondent challenging recovery proceedings, including the taking of possession of the property. Petitioner pleaded that as a bonafide purchaser, the Tribunal ought to have issued notice to petitioner, however, even without notice, the impugned Ext.P12 order dated 27.08.2021 was issued. Petitioner alleges that it has been dragged into the dispute between the respondents and that since the sale stands completed and confirmed in its name, it cannot be interfered with. It was further averred that the borrower is estopped from challenging the proceedings because respondents 1 and 2 had never responded despite repeated notices having been issued prior to the auction sale and that it was always approaching the issue with a closed eye, rendering their challenge against the securitisation proceedings as foreclosed. Despite the above, the Tribunal issued the impugned order for the mere asking, that too, on the date of admission, without even issuing notice to the petitioner.

8. A counter affidavit has been filed by respondents 1 and 2 stating that the petition is not maintainable when a statutory remedy is available and further that, S.A. No.177 of 2021 was filed in exercise of the respondents' right to approach the statutory Tribunal to impugn the steps taken for enforcement of the security interest. It was pleaded that the third respondent bank had initiated proceedings under the Act for enforcement of security interest after wrongfully classifying the first respondent's account as NPA and issued a demand notice for Rs.2,10,37,529.50 on 12.08.2013. When the bank claimed that they took possession of the property on 01.11.2013, S.A. No. 770 of 2013 was instituted by the second respondent, challenging the measures initiated. Subsequently, the demand notice of 2013 was withdrawn and a fresh demand notice dated 16.04.2014 was issued. Against the said measures, the first respondent approached the Tribunal in S.A. No.408 of 2014, which was later renumbered as T.S.A. No.719 of 2016. Thereafter, the Tribunal heard the case on 21.11.2018 and reserved it for Final Order. In the meantime, the first respondent was called upon by the bank to pay an amount of Rs.4,10,07,413.14 within 60 days of the notice. While so, O.A. No.430 of 2014 filed by the respondent bank before the Tribunal was allowed and a final order was passed on 04.07.2016 allowing the secured creditor to recover amounts from the borrower and the guarantor. Thereafter the Authorised Officer issued a demand notice on 19.07.2018 demanding respondents 1 and 2 to pay an amount of Rs.3,84,95,964.92. It was further averred that the first respondent moved the Tribunal for getting information about the sale conducted and that the securitisation application was preferred after serving copy to the respondent bank and further that the impugned order was issued by the Tribunal after hearing the counsel for the respondent bank as well as the petitioner. According to respondents 1 and 2, the notices issued by the bank contained several incorrect statements and on the other hand, the right of respondents 1 and 2 to institute a litigation questioning the steps initiated, culminating in the sale of the property of the secured asset cannot be questioned by a purchaser, that too, one who stepped in on the basis of a private treaty entered into without following the provisions of the Act and its Rules. It was averred that the sale alleged to have been entered into was fraudulent and the result of a collusion. According to respondents 1 and 2, the consideration for the sale of 64 cents of land, that too, lying on the side of a National Highway, was too meagre and there is no public interest involved except the private interest of the petitioner. It was also pleaded that the actual possession was never taken from respondents 1 and 2 and that they continued to be in possession of the mortgaged property and further that the authorised officer has to explain how he was able to sell the secured asset to the petitioner without even taking possession of the asset legally. On the above basis, respondents 1 and 2 sought for dismissal of the original petition. It was also contended that there was no proper service of notice of demand on the borrower as well as the guarantor.

9. A counter affidavit was filed by respondents 3 and 4 contending that the security interest was enforced after there was default in repayment. It was pleaded that the demand notice was duly served on the borrower as well as the guarantor and that though some of the notices were returned “unclaimed”, there was proper personal service as well as publication carried out in the Indian Express newspaper as well as Kerala Kaumudy dailies and further that even before the private treaty was entered into, communication was issued to the borrower on 24.12.2019 stating that the property will be sold under the private treaty for Rs. 3,15,00,000/-, in case the borrower failed to pay the outstanding dues. According to respondents 3 and 4, there was absolutely no response in spite of repeated notices and that it was in such circumstances the property was sold to the petitioner under a private treaty.

10. Exhaustive arguments were addressed by Sri.Joseph Kodianthara, learned Senior Counsel assisted by Adv.Sradhaxna Mudrika on behalf of the petitioner, Sri.K.K.Chandran Pillai, learned Senior Counsel assisted by Adv.Peer Muhammed Khan on behalf of respondents 1 and 2 and Sri.George Thomas Mevada, learned Senior Counsel instructed by Adv.K.M.Aneesh on behalf of respondents 3 and 4.

11. Sri.Joseph Kodianthara, the learned Senior Counsel for the petitioner, while reiterating the contentions raised in the petition, submitted that the petitioner is a bonafide purchaser having paid Rs.3,15,00,000/- for a property which could not fetch buyers even after reducing the reserve price to Rs.2,25,00,000/-. He further pointed out that, unless the sanctity of the sale is secured, petitioner would be put to irreparable prejudice and that a court of law ought not to lean in favour of a person who had never responded or objected to any of the notices that were issued in compliance of the statutory provisions. The learned Senior Counsel relied upon the decisions in Sadashiv Prasad Singh v. Harendar Singh and Others [(2015) 5 SCC 574], Janatha Textiles and Others v. Tax Recovery Officer and Another [(2008) 12 SCC 582], Central Bank of India v. C.L.Vimla and Others [(2015) 7 SCC 337], Arce Polymers Private Limited v. Alphine Pharmaceuticals Private Limited and Others [(2022) 2 SCC 221] and canvassed for the proposition that the borrower is not entitled to any relief, especially one in the nature of interfering with the sale conducted in the enforcement of the security interest.

12. Sri.George Thomas Mevada, learned Senior Counsel instructed on behalf of respondents 3 and 4 (the Bank) submitted that all formalities contemplated under law were carried out by the bank and in spite of repeated notices, no response of any nature had been put forth by the borrower, even for the demand notice dated 21.11.2018. The borrower had not raised any objection and further, if at all the borrower or the guarantor had any objection regarding quantum or in respect of any of the demand notice, it was incumbent upon them to object to the same, to enable the secured creditor to consider the objection. In the absence of such an objection, the borrower cannot turn around and object to each and every aspect mentioned in the demand notice as they are estopped from objecting, that too, after the sale. He further argued that several attempts were made to sell the scheduled property and that even after reducing the reserve price, a sale could not be effected. It was thereafter that the petitioner came forward to purchase the property for their business purposes at a price which was almost a crore more than the reserve price fixed. He further submitted that time and again the Supreme Court has warned against interference in concluded sales, that too, as interim measures and further that the present dispute was not raised before 45 days of the sale, thereby the entire challenge itself became barred by limitation.

13. Sri. K.K.Chandran Pillai, learned Senior Counsel appearing for respondents 1 and 2 on the other hand, in his exhaustive arguments, pointed out that the very basis of the securitisation proceedings is illegal and hence the subsequent sale built upon such an illegal platform cannot survive. He argued that the statute is framed in such a manner that any violation of the procedure contemplated under the Act must invalidate the proceedings and that the draconian legislation was upheld by the Supreme Court in Mardia Chemicals Ltd. and Others v. Union of India and Others [(2004) 4 SCC 311] only due to the safeguards inbuilt into the procedure in the statute. It was further submitted that the proceedings in enforcement of the security interest were completely fraudulent, warranting interference by the court of law. He pointed out that, if the bank invited an adjudication on the quantum of debt by approaching the Tribunal in O.A. No.430 of 2014, they could not have demanded anything more than what was ordered by the Tribunal and hence the demand notice dated 21.11.2018 was illegal. It was also argued that possession of the property was not taken over prior to the date of sale and that a Division Bench of the Madras High Court in V.Sridhar v. Authorised Officer Indian Bank, Guindy Branch, Chennai (AIR 2018 Madras 87) had concluded that sale without taking possession is illegal. Relying upon the principle that when a statute provides a manner in which a thing has to be done, it can be done only in that manner. It was argued that the sale certificate issued was not what was registered and the same violates the statutory provisions.

14. Countering the contentions raised by the petitioner as well as the respondent bank, learned Senior Counsel for respondents 1 and 2 submitted that the decisions relied upon by the petitioner were factually inapplicable, especially the decision in ITC Limited v. Blue Coast Hotels Ltd. and Others (AIR 2018 SC 3063) and further that the burden was upon the secured creditor to prove that the procedure contemplated under the Rules were strictly followed. It was also contended that there was a clear violation of Rule 8(1) of the Security Interest (Enforcement) Rules, 2002, especially in the matter of service of notice. Appendix V to the Rules providing for the form of sale certificate has also not been satisfied thereby rendering the entire proceedings totally illegal warranting an interference. Learned Senior Counsel finally contended that the proceedings before the Tribunal had only commenced and that respondents 1 and 2 have an effective opportunity of agitating the issue before the Tribunal.

15. I have considered the rival contentions.

16. A few significant factors are required to be borne in mind while appreciating the exhaustive arguments raised by all the learned Senior Counsel. The debt due from the first respondent is practically admitted. As per the final order dated 04.07.2016 in O.A. No.430 of 2014, the bank was permitted to recover an amount of Rs.2,45,62,682/- with interest at 13.5% per annum from 02.09.2014 till realisation. A further amount of Rs.2,86,158/- along with interest at 11% per annum from 02.09.2014 till realisation was also allowed to be recovered. In Annam Steels (P) Ltd. (M/s.) and Others v. M/s. Canara Bank Ltd. and Another (2022 (1) KHC 536), this Court had held that the bank cannot recover anything more than what has been ordered by the Debts Recovery Tribunal in an adjudication initiated by the secured creditor to quantify the debt under the Recovery of Debts due to Banks and Bankruptcy Act, 1993. Once a debt is quantified, only the said amount can be recovered.

17. The notice under section 13(2), which is made the basis for the sale held on 28.02.2020, was dated 21.11.2018 wherein an amount of Rs.4,10,07,413.14 was demanded by the third respondent bank from the petitioner. It is evident that the quantum demanded in the notice under section 13(2) dated 21.11.2018 is higher than the quantum adjudicated by the Tribunal in O.A. No.430 of 2014. The recovery certificate issued by the recovery officer in O.A. No.430 of 2014 shows an amount of Rs.3,84,95,964.92 as on 19.07.2018. No doubt in view of the decision in Annam Steel's case (supra) the secured creditor cannot proceed to recover, even in exercise of the powers under the Securitisation Act, anything more than the debt quantified by the Tribunal.

18. In the instant case, the notices under section 13(2) of the Act was issued to the borrower, its partners and the guarantor. The notices were served on the Managing Partner and partner of the borrower on 30-11-2018, as evident from Ext.R3(c) and Ext.R3(d). The notices issued to the guarantors were returned unclaimed, as is seen from the endorsement on R3(e) series of postal covers. The demand notices were published in the newspapers also, as is seen from Ext. R3(f) and Ext. R3(g).

19. A reference to section 24 of the Indian Partnership Act in this context is apposite. S.24 deals with the effect of notice to a partner. The said section stipulates that service of notice to a partner operates as notice to the firm, except in the case of fraud on the firm. S.24 is based on the principle that a partner stands as an agent in relation to the firm and a notice to the agent tantamounts to notice to the principal and vice versa. As a general rule, notice to a principal is notice to all his agents; and notice to an agent in respect of matters connected with his agency is notice to his principal. Such a notice is binding, if the following conditions are satisfied: (a) the notice must be given to a partner; (b) the notice must be a notice of any matter relating to the affairs of the firm, and (c) fraud should not have been committed with the consent of such partner on the firm. [See Ashutosh v. State of Rajasthan and Others [(2005) 7 SCC 308].

20. On an appreciation of the aforestated legal and factual circumstances, it has to be concluded that the notice of demand dated 21.11.2018 was served on the borrower, their partners as well as the guarantors.

21. Once the notice of demand is served, the mandate of the Act, as evident from section 13(3)-A, is the availability of an opportunity to the borrower to raise any objection against the notice issued. This statutory notice enables the borrower to raise an objection on any of the grounds available to him, including the objection regarding the quantum specified in the demand notice.

22. In the instant case, admittedly no objection was raised by the borrower or guarantor on the quantum specified in the demand notice issued under section 13(2) of the Act. Therefore, the opportunity available to the borrower as well as the guarantor, to object to the quantum mentioned in the demand notice was not availed by them. Hence, they cannot thereafter, turn around and question the quantum mentioned in the demand notice to contend that the notice is bad in law. The demand of a higher quantum through the demand notice cannot by itself invalidate the notice in the circumstances of this case since the mistake in the quantum was not brought to the notice of the secured creditor. Even if a higher amount was demanded in the notice under section 13(2) of the Act, that by itself will not erode the sanctity of the notice, unless the secured creditor refused to correct the mistake, even after bringing it to the notice of the secured creditor. Had the borrower or the guarantor objected to the demand notice, necessarily the bank would have got an opportunity to correct the quantum in the reply to their objections. Having failed to even object to the notice under section 13(2), respondents 1 and 2 cannot now turn around and question the validity of the notice issued under section 13(2) of the Act, merely on the ground that a higher quantum is demanded. Therefore, I am of the view that the demand notice dated 21-11-2018 issued under section 13(2) of the Act was valid in the circumstances of this case, subject to the rider that the amount that can be recovered shall only be the amount determined by the Tribunal in O.A. No.430 of 2014.

23. The next contention of the learned Senior Counsel for the borrower that possession of the property was not taken over before the conduct of sale, relying upon the decision in V.Sridhar v. Authorized Officer Indian Bank, Guindy Branch, Chennai, (AIR 2018 Madras 87), was controverted by the learned Senior Counsel for the secured creditor as well as the auction purchaser and submitted that actual physical possession had, in fact, been taken over, prior to the sale and even handed over to the auction purchaser.

24. To appreciate the aforesaid contention, it is necessary to peruse some of the documents produced as exhibits. Ext.R3(h) is the possession notice dated 06-09-2019 issued by the secured creditor and Ext.R3(i) is the copy of postal receipts. Ext.R3(k) is a communication issued by the Senior Post Master, Ernakulam Head Post Office, specifying that the registered letters were delivered on 14-09-2019. Ext.R3(h) mentioned that possession of the property was taken over on 06-09-2019. Ext.R3(m) and Ext.R3(n) are the paper publications specifying that possession of the property was taken over on 06-09-2019. Of course, in all these notices, reference is to the demand notice of 2014, which was actually withdrawn. Though the reference to the demand notice of 2014 is obviously a mistake, the fact remains that the notices as well as the paper publications specified that possession of the property was taken over on 06-09-2019. No objection of any nature was raised by the borrowers or the guarantors regarding the statement in the notices that possession was taken over on a particular date. Apart from the above, it is further noticed that Ext.R3(o) is the communication dated 24-12-2019 issued by the bank to the Borrower as well as the guarantor and their partners, specifying that the bank is proposing to sell the property under a private treaty and that if the borrower or the guarantors have any other interested buyer ready to pay more than Rs.315 lakhs, they are requested to bring such a buyer within 30 days. In the said notice it was also specifically mentioned that the Authorized Officer had taken possession of the property on 06-09-2019. The said notices were served on the borrower, as is evident from Ext.R3(p), Ext.R3(q) and Ext.R3(r). The schedule of the property was also attached along with the notices. Even for the said notices, neither the borrower nor the guarantors raised any objection.

25. Reference to the panchnama and inventory will not advance the case of the first respondent, since, those documents relate only to movable properties and not to the immovable properties. Thus, the contention that actual physical possession of the property was not taken over on 06-09-2019 is not available in law and on facts, to the first respondent. They are estopped from contending that actual physical possession of the property was not taken over prior to the sale of the property.

26. In Sridhar’s case (supra) the Madras High Court, was considering the circumstances that were totally different. In Sridhar’s case, the Court was considering the claim of an auction purchaser to set aside the sale, since the sale was conducted while various persons were occupying the property and who could not be evicted by the secured creditor even after the auction. In the said case, admittedly, possession was not taken over by the Bank and the auction purchaser was disputing the validity of the sale stating that possession of the property could not be given to the said purchaser, apart from encumbrances remaining on the property having not been brought to the notice of the bidders. A reading of the aforecited decision reveals various distinguishing features from the present case.

27. In view of the above, this Court is not persuaded to follow the dictum laid down in Sridhar’s case (supra), since the circumstances in the instant case are different.

28. The decision of this Court in Kottakkal Co-operative Urban Bank v. T. Balakrishnan and Another [(2008) 2 KLJ 83], in fact stipulated that only de jure possession was required to be taken for effecting a sale under the Act, in contradistinction to de facto possession. However, since I have already found that de facto possession of the property was itself taken over by the secured creditor on 06-09-2020, reference to and discussion on the decision of the Madras High Court in Sridhar’s case becomes academic in nature.

29. Though several decisions were cited by counsel on either side, reference to some of those decisions alone will suffice. In Arce Polymers Private Limited v. Alphine Pharmaceuticals Private Limited and Others [(2022) 2 SCC 221], the High Court set aside a sale conducted by the bank for violation of section 13(3-A) of the Act. However the Supreme Court in the aforesaid decision, relying upon the dictum in ITC Limited v. Blue Coast Hotels Limited and Others [(2018) 15 SCC 99], held that “Waiver is an intentional relinquishment of a known right. Waiver applies when a party knows the material facts and is cognizant of the legal rights in that matter, and yet for some consideration consciously abandons the existing legal right, advantage, benefit, claim or privilege…… However, a statutory right may also be waived by implied conduct, like, by wanting to take a chance of a favourable decision….... The borrower challenged the auctions taken by the bank after the subject property had changed hands and third-party interests had been created. Taking into consideration the entire facts of the case, which perspicuously reflect disingenuous conduct on the part of the borrower to gain indulgence, unfulfilled assurances and promises, their unwillingness to pay, and in light of the law laid down by this Court, we are of the view that the borrower has waived and is estopped from challenging violation of section 13(3-A) of the SARFAESI Act…......”

30. Similarly in the decision in L&T Housing Finance Limited v. Trishul Developers and Another [(2020) 10 SCC 659], it was observed that when action has been taken as per the procedure prescribed by law and the person affected has the knowledge, leaving no ambiguity or confusion in shedding proceedings by the secured creditor, such actions cannot be held to be bad in law merely on raising trivial objections unless the person is able to show substantial prejudice being caused on account of the procedural lapse. It was also observed that the nature of the procedural lapse and the resultant prejudice caused cannot be put into a straitjacket formula to be uniformly followed in all transactions and the same depends upon the facts of each case.

31. In the decision in Sambhaji and Others v. Gangabai and Others [(2008) 17 SCC 117], it was held that the procedural law is not to be a tyrant, but a servant, not an obstruction but an aid to justice. A procedural prescription is the handmaid and not the mistress, a lubricant, not a resistant in the administration of justice. It was also observed that a procedural law should not ordinarily be construed as mandatory and is always subservient to and is an aid to justice.

32. It is also fruitful to refer to the decision in Janatha Textiles and Others v. Tax Recovery Officer and Another [(2008) 12 SCC 582], where the Supreme Court reiterated that a third-party auction purchaser’s interest in the auction property will continue to be protected, notwithstanding that the underlying decree was subsequently set aside. A distinction was brought in, in the case of bonafide third party purchasers in court auctions and decree holders purchasing the property. It was

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stated that, unless such protection is afforded to strangers to the decree, court auctions would not fetch a good price and that would be detrimental to the decree-holder. The following observation has some relevance to the instant case: “Law makes a clear distinction between a stranger who is a bona fide purchaser of the property at an auction-sale and a decree-holder purchaser at a court auction. The strangers to the decree are afforded protection by the court because they are not connected with the decree. Unless the protection is extended to them court sales would not fetch market value or fair price of the property.” 33. The circumstances arising in the instant case reveal that though notice under section 13(2) of the Act was served on the borrower as well as the guarantor, no objection was raised by any person. The property was brought for sale several times, however no bidders turned up, even after reducing the reserve price to Rs.2.25 crores. In fact, as noticed earlier in this judgment, prior to the sale in favour of the petitioner, an opportunity was granted to the borrower as well as the guarantor to bring forth any buyer who can provide a consideration higher than that offered by the petitioner. Those notices were also not responded to by the guarantor or the borrower. They have thus waived their right to object and on the other hand, acquiesced into the proceedings, without raising a finger. There is nothing on record to even whisper that petitioner was not a bonafide purchaser. In such circumstances, issuing an interim order of status quo causes great prejudice and injury to the auction purchaser. Protection is to be granted to the auction purchaser as otherwise, the credibility of such sales will be affected and willing purchasers may not come forward, thereby causing prejudice to not only the secured creditor but even to the borrower and the guarantor. 34. The contentions regarding non-compliance of the form of sale certificate is not sufficient enough to cancel a sale held under the Act. The form provided in the Rules cannot control the substantive provisions under the Act or the sale held as per the provisions of the Act. In this context, reference to the decision in Krishnan v. State of Kerala (2021 (6) KLT 377) that registration of the sale certificate itself is only optional, assumes significance. Thus the said contention raised by the borrower is not substantial, warranting an interference on the sale conducted. 35. In view of the above deliberations, this Court is of the view that the ad interim ex parte order dated 27-08-2021 in S.A. No.177 of 2021 on the files of the Debt Recovery Tribunal-II, Ernakulam is liable to be set aside and it is so ordered. As regards the relief of declaration is concerned, no specific legal contention was advanced to justify such a relief and hence the same is declined. 36. Since the proceedings in S.A. No. 177 of 2021 is pending consideration before the Tribunal, the factual observations in this Judgment are made purely for the purpose of considering the challenge against the order of status quo. The Tribunal shall decide the case untrammelled by any of the observations on facts made in this judgment. The original petition is allowed in part as above.
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