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Judgment
JUSTICE R. D. KHARE, CHAIRPERSON
The present appeal has been filed under section 18 of the Securitization and Reconstruction of Financial Asset and Enforcement of Security Interest Act, 2002 (hereinafter referred to as "the SARFAESI Act") against the order dated 15.07.2024, whereby the Securitization Application No. 220/2023 filed by the respondents no. 1 & 2-borrowers has been allowed.
The factual matrix of the case is that the respondents no. 1 & 2 were initially granted a credit facility by the L&T Housing Finance Ltd., which was subsequently taken over by the appellant-FI and also granted a overdraft facility vide sanction letter dated 24.07.2019, to which Neha Johri and Rajrani Johri stood as personal guarantors. In addition to it, a Dropline Overdraft facility agreement was executed between the parties on 30.07.2019 and the respondent no. 2 as well as one Rahul Johri created an equitable mortgage over the property in question by depositing the original title deed with the FI. Since the borrowers did not maintain the financial discipline, therefore, accounts were classified as NPA on 20.09.2022 and a demand notice dated 22.09.2022 u/s 13(2) of the SARFAESI Act was issued for a sum of Rs.5,30,58,292.73 in respect of both the loan accounts. Since the borrowers did not pay any heed to the said demand, therefore, the possession notice dated 30.11.2022 was issued u/s 13(4) of the said Act and the said notice was also published in newspapers on 04.12.2022.
It appears that prior to the sale of the property in question, the appellant-FI had got the property valued from its approved valuer and thereafter, issued sale notice on 12.12.2022, which was published in the newspapers on 17.12.2022 scheduling the auction of the property in question on 24.01.2023, in which the first floor of the property in question was sold to M/s Tathastu Export Audit for a sum of Rs.1.40 crore, which was confirmed on 25.01.2023 and sale certificate was issued on 06.02.2023 in favour of the auction purchaser.
It transpires that for the remaining mortgaged properties, the auction sale notice was issued on 22.02.2023, but the same could not materialize for want of bidder, therefore, the appellant obtained fresh valuation report on 07.04.2023 for the said properties and issued another fresh sale notice on 07.06.2023, which was published in the newspapers on 13.06.2023 scheduling the auction of the property in question on 04.07.2023. The property, which is situated at basement, was sold for a sum of Rs.81.00 lacs and the ground floor of the property in question was sold for a sum of Rs. 3.70 crores and the same was confirmed on 05.07.2023.
It is averred that in the meantime, the respondents no. 1 & 2-borrowers challenged the demand notice, possession notice, sale certificated dated 06.02.2023 and also the second sale notice dated 22.02.2023 by filing the S.A. No. 220/2023 before the Tribunal below. In the meantime, the appellant obtained an order dated 04.05.2023 from the District Magistrate, Bhopal u/s 14 of the SARFAESI Act. The respondents-borrowers challenged the order of the District Magistrate dated 04.05.2023 as well as the sale notice dated 07.06.2023 by filing the amendment applications in the pending S.A., which was allowed and the S.A. was amended accordingly.
The Tribunal below vide order impugned has allowed the S.A. of the respondents-borrowers by quashing the entire proceedings of the appellant-F.I. Being aggrieved by the said order, the present appeal has been filed by the appellant-FI.
Learned counsel for the appellants submitted that the outstanding interest due to be paid as on 20.09.2022 by the borrowers was greater than the amount deposited by them in the last 90 days period between 23.06.2022 to 20.09.2022 and as such the loan accounts were declared as NPA on 20.09.2022 as per the guidelines issued by the Reserve Bank of India.
It was further contended that the demand notice dated 22.09.2022 u/s 13(2) of the SARFAESI Act, 2002 was issued by the authorized officer Mr. Dhirendra Sonkar and the same was sent to the borrowers/guarantors by post on 22.09.2022, which was delivered on 26.09.2022, as the copies of postal receipts dated 22.09.2022 along with the tracking reports are placed at page no. 4 to 18 of the Documents/Evidence filed by the appellant on 12.03.2024. It was also contended that the said demand notice was also published in the daily newspapers on 24.09.2022 in the locality, where the mortgaged properties are situated and the borrowers and guarantors reside, as the proof of publication of the same are already on record at page no. 19 & 20 of the Documents/Evidence filed by the Appellant on 12.03.2024. It was further contended that the said demand notice dated 22.09.2022 was also affixed at the conspicuous place of the property in question and proof thereof is already on record at page no. 21 & 22 of the Documents/Evidence filed by the Appellant on 12.03.2024.
Learned counsel further submitted that the appellant issued a possession notice u/s 13(4) of the SARFAESI Act on 30.11.2022 and the same was affixed at the conspicuous place of the property in question on 30.11.2022 and was sent to the borrowers by means of post dated 03.12.2022, which was delivered on 09.12.2022, as it is evident from the postal receipts and tracking reports placed at page no. 23 to 35 of the Documents/Evidence filed by the appellant on 12.03.2024. It was also contended that the possession notice was also published in the daily newspapers on 04.12.2022, copy of which is placed at page no. 36 to 41 of the Documents/Evidence filed by the appellant on 12.03.2024.
Learned counsel also submitted that the Borrowers did not take any measure to repay the demanded amount within the time as prescribed under the SARFAESI Act, 2002, therefore, they could not avail the right of redemption as provided u/s 13(8) of the said Act.
It was further contended that the appellant-FI got the the mortgaged properties valued by the registered valuer and the valuation report dated 01.12.2022 is placed as Annexure No. R-1 to the Rejoinder Affidavit filed by the appellant and thereafter, the appellant issued a sale notice on 12.12.2022 giving 30 days' time for sale of the mortgaged property scheduling the auction of the property in question on 24.01.2023, mentioning therein that all the three properties will be sold separately. It was further contended that the said notice was sent by post dated 13.12.2022, which was duly served to all the borrowers and guarantors including Respondents No. 1 & 2, copies of the postal receipts and tracking reports are placed at page no. 42 to 68 of the Documents/Evident filed by the Appellant on 12.03.2024. It was also contended that the said sale notice was also published in the daily newspapers on 17.12.2022 and the same was pasted at the conspicuous place of the property in question, proof of which along with proof of pasting are placed at page no. 69 to 81 of the Documents/Evidence filed by the Appellant on 12.03.2024 before the Tribunal below.
Learned counsel further submitted that the auction was duly conducted on 24.01.2023 and the property situated at part and parcel of commercial property measuring 12'6"X100' at First Floor of the building known as Vishnu Villas constructed over plot no. 130, situated at Malviya Nagar, Tehsil Huzur, Distt. Bhopal, M.P." was sold in favour of M/s Tathastu Export for a sum of Rs.1.40 crore and as such the said property was sold in accordance with law at their fair value and after deposition of entire sale consideration up to 06.02.2023, sale certificate was issued in favour of auction purchaser-M/s Tathastu Export on 06.02.2023.
Learned counsel further submitted that in respect to the remaining mortgaged properties, the Appellant issued second sale notice under Rule 9(2) on 22.02.2023, but the same could not materialize for want of bids, therefore, it got a fresh valuation conducted for the remaining properties at the basement and ground floor on 07.04.2023, copy of the said valuation report is at internal page no. 141 of the Documents/Evidence filed by the Appellant on 12.03.2024.
It was further contended that the appellant issued fresh sale notice on 07.06.2023 under Rule 9 of the Rules, 2002 scheduling the auction of the property in question on 04.07.2023, which was sent by post to the borrowers and guarantors and the same was served on all of them as per the tracking/delivery report of the Indian post. It was further contended that the said sale notice was also published in the newspapers namely Free Press Journal in English language and Navduniya in Hindi language on 13.06.2023 and the same was also pasted on the conspicuous place of the property in question on 19.06.2023, as the postal receipts, delivery reports and newspaper publications as well as proof of pasting are placed at page no. 82 to 98 of the Documents/Evidence filed by the Appellant on 12.03.2024. It was further contended that pursuant to the said sale notice, the basement and the ground floor of the property in question was sold for Rs.81.00 lacs and Rs.3.70 crores respectively in favour of Mr. Mahesh Kumar Keswani, Santosh Keswani, Hemant Janyani and Vinay Kumar Mohnani.
It was canvassed on behalf of the appellant that the Tribunal below without considering the facts as narrated above has condoned the delay occurred in filing the S.A. filed by the respondents no. 1 & 2 vide order impugned, which cannot be done because if any petition is filed beyond the period of limitation, the same has to be decided prior to entering into the merits of the case, but in the present case, the Tribunal below has firstly considered the merits of the case and on the basis of the same the delay has been condoned and there was nothing on record, which could show any sufficient or cogent reasons for condoning the delay in filing the S.A. It was lastly contended that on this ground alone, the order impugned is liable to be set aside, hence the same may be set aside and the appeal filed by the appellant may be allowed.
Learned counsel for the respondents-borrowers submitted that the answering respondent has taken specific plea that as per section 2(zf) of the SARFAESI Act, the Security Interest means that right title or interest of any kind other than those specified in Section 31 of 2002 Act, upon property created in favour of any secured creditor and includes any mortgage, charge, hypothecation, assignment or any right, title or interest. It was further contended that in the present case, the respondent-bank has not mortgaged the title deeds, as in fact they have mortgaged the area of the building, which is mentioned as 16ftX85ft at basement and similar area at ground and second floor. It was further contended that there was three floors excluding basement, which include 210 sq.ft. from the sale deed dated 17.04.2002 and the total area on which the building is constructed including surrounding area was 1785 sq.ft.
Learned counsel further submitted that the Bank cannot initiate any securitization action against the applicant, because as per Section 2(zf), there is no security interest created in favour of the Bank in respect to the alleged property, which is put for auction and against which the securitization action is initiated because there is no valid mortgage created in favour of the Bank. It was thus contended that the auction notice dated 07.06.2023 is liable to be quashed.
Learned counsel further submitted that the account was not NPA, as the Bank has deliberately declared the account as NPA by charging higher rate of interest of more than (14%). It was further contended that the respondents-borrowers were regularly depositing the amount, as the amount deposited in the last 90 days was more than the amount as required in the account, which has not been controverted by the appellant either before the Tribunal below or before this Tribunal. It was further contended that the demand notice has not been issued by a competent person of the Bank, as the appellant is not a Nationalized Bank, as it is covered under the Financial Institution.
Learned counsel further submitted that the resolution passed by the board of directors, which is at page no. 147 of the memo of appeal has been filed for the first time before this Tribunal, as the authorized officer may not be below the rank of Chief Manager. It was further contended that the Board of Directors has not executed any power of attorney in favour of Dheerendra Sonker, who has executed the present proceedings under the SARFAESI Act, therefore, the authorization by way of resolution is not sustainable in the eye of law and consequently, the demand notice issued by the said person is also not sustainable and has rightly been quashed by the Tribunal below by passing the order impugned.
It was further contended that the auction notice dated 07.06.2023, by which a property, which is alleged to be mortgaged by the respondent-Bank, was sold, but no memorandum for deposit of title deed/documents was prepared, therefore, there is no valid mortgage created by the borrowers as per Section 58(F) of the Transfer of Property Act. Hence, it was contended that there is no legal enforceable mortgage/document, which may disclose any recital of creating the mortgage over the property of the borrowers. It was thus contended that the appellant cannot be treated as a secured creditor, hence the auction notice dated 07.06.2023 is liable to be set aside.
It was also contended that the Bank has not obtained a valid valuation report from an approved valuer before fixing the value of the property in question. It was further contended that the value of the property is around Rs.2.50 crores to Rs.4.00 crores, because it is situated in the commercial area of Bhopal and the Bank has put it for auction at a throwaway price, therefore, the reserve price fixed by the Bank is already illegal, hence the auction notice deserved to be quashed.
Learned counsel further submitted that as per Rule 8(6) of the Rules, 2002, the Bank was under obligation to publish the auction notice in two leading newspapers, one in vernacular language having sufficient circulation in the locality by setting out the terms of sale and description of property secured, reserve price, time, place of public auction, deposit of earnest money and other miscellaneous things. It was thus contended that, if the notice is not published in two newspapers, then it is a clear violation of Rule 8(6) of the Rules, 2002. Hence, it was contended that the sale notice dated 07.06.2023 is liable to be set aside.
It was further contended that the order passed u/s 14 can only be examined by the Debts Recovery Tribunal u/s 17 of the Act and Tribunal below after recording the cogent reason returned the findings in para 88 of the impugned order, which is sustainable in the eye of law.
It was lastly contended that the issue of limitation goes to the route of matter and the Tribunal below has already examined the issue of limitation and thereafter, decided the S.A. on merits. It was further contended that the contention of the appellant that the S.A. was barred by limitation, is not correct, as the finding recorded by the Tribunal below in this regard is correct and appellant-FI has failed to point out any perversity in the impugned order.
It was next contended that the answering respondent specifically had pleaded before the Tribunal with regard to the excessive interest charged by the appellant-Bank and also filed the documents prepared by the Chartered Accountants, which was not controverted by the appellant-Bank, therefore, the Tribunal below has rightly returned the findings and passed the impugned order. It was, therefore, prayed that the appeal filed by the appellants may be dismissed with heavy costs.
Having heard the learned counsels for the parties and considering the material available on record, it is to be seen that the account was declared as NPA on 20.09.2022 and demand notice was issued on 22.09.2022 followed by possession notice dated 30.11.2022, thus it appears that the first cause of action arose for the respondents-borrowers on 30.11.2022, but the S.A. was filed on 03.03.2023 before the Tribunal below. As such the S.A. was filed by the borrowers beyond the period of 45 days as prescribed under the Act and Rules made thereunder.
While going through the order impugned, it is found that the Tribunal below has not given any cogent or sufficient reason for condoning the delay while passing the order impugned, but it has discussed the merits of the case in detail and condoned the delay pointing out the irregularity or infirmity in the process adopted by the appellant-FI under the SARFAESI Act, which is not sustainable in the eye of law. It is further stated that if any petition is filed beyond the period of limitation, it is the duty of the court to consider and decide the said issue first because any order passed in a time barred case is considered to be null and void.
However, the length of delay is not material, if there is sufficient or cogent reason for the same. In order to decide the delay in the present S.A., the Tribunal below ought to have firstly seen, as to when the S.A. applicants/borrowers came to know about the proceedings of the appellant, but the Tribunal below did not do so, instead on the basis of the merits of the case, it has condoned the delay without giving any cogent or sufficient reason, whereas the fact that after classification of the accounts as NPA, the demand notice dated 22.09.2022 was sent to the borrowers on 22.09.2022 through registered post. The postal receipts as well as its tracking reports are at page no. 154 to 168 of the paper book. As per the tracking reports filed from page no. 156 to 167, the demand notice was delivered to the respondents-borrowers on 26.09.2022. Thereafter, the possession notice was issued on 30.11.2022 and the same was dispatched to the borrowers on 03.12.2022. Postal receipts as well as its tracking reports are placed from page no. 174 to 184, which clearly shows that the said notice was served upon all the borrowers on 06.12.2022. Thus it appears that the borrowers for the first time came to know about the proceedings of the appellant on 06.12.2022, but the Tribunal below has not considered these aspects of the matter while condoning the delay vide order impugned, instead it has condoned the delay on the ground that there is non-compliance of the mandatory provisions of the Act and Rules made thereunder, which could not have been considered prior to deciding the issue of limitation, because only on the basis of merits of the case, delay cannot be condoned, as it may be one of the reasons for the same. The delay can be condoned, if there is sufficient or cogent reason, but the Tribunal below has not given any reason while condoning the delay vide order impugned. Thus on this count alone, it is a fit case for remand and the order impugned is liable to be quashed.
Since the present case is being remanded back on the ground of non-deciding the issue of limitation properly by the Tribunal below, therefore, no other issues involved in the present case are required to be dealt with by this Tribunal.
In view of the aforesaid, the order impugned is set aside and the case is remanded back to the Tribunal below for deciding it afresh including all the issues involved in accordance with law without being influenced by any of the observations made hereinabove after affording opportunity of hearing to the parties concerned.
The appeal filed by the appellant is accordingly disposed off with no order as to costs.
A copy of this judgment be forwarded to the parties as well as the DRT concerned and be also uploaded on the e-DRT portal.