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Judgment
Ranjit Singh, J
The S.A. filed by the appellants to challenge the measures initiated by the respondent Bank for taking possession of the property under Section 13(4) of the SARFAESI Act has been dismissed by the Tribunal below on January 25, 2012. Aggrieved against the same, the appellant borrowers have filed the present appeal. The appellant is a proprietorship concern of Mr. Ramesh Singh Badwal, who is the sole proprietor of the appellant concern and was carrying on bussing of trading televisions and refrigerators, etc. The appellants availed certain credit facilities of Rs. 18 lacs from the respondent Bank and housing loan of Rs. 6 lacs. Due to certain adverse circumstances, the appellants concededly could not repay and adjust the outstanding amount for which the Bank had issued a demand notice on January 30, 2004. The appellants claim that they had made sincere efforts to settle the account through compromise and even had met the AGM and other officials of the Bank where they proposed to pay a sum of Rs. 35 lacs against the demand notice of Rs. 20.20 lacs which was outstanding as on March 31, 2003. Record shows that at one stage the appellant and Bank compromised on 26th December, 2002 as full and final settlement of the outstanding dues on payment of Rs. 23 lacs. The appellants state that they were willing and waiting for the reply from the respondent Bank when it issued sale notice in 'Times of India' dated 28th June, 2006 fixing the auction on 28th July, 2006. The possession notice had been fixed on the shop and residence on 10th March, 2006. As per the appellants, the Bank illegally took physical possession of the running business without taking into account the stocks hypothecated with the respondent Bank and other articles which included personal belongings, book debts and income tax files. This, as per the appellants, was against the spirit of law laid down in the case of M/s. Kalayani Sales Company and Another v. Union of India, 1(2006) BC 1 (DB) =C.W.P. No. 2550 of 2005. The appellants would allege that the Bank did not supply copy of the Panchnama and inventory which was required to be prepared in terms of Rule 4(1) of the SARFAESI Act. The appellants had challenged the action of the Bank in dispossessing them by virtue of notice in term of Rule 8(1) of the Security Interest (Enforcement) Rules, 2002. They would urge that the Bank could not have dispossessed the appellants physically by issuing notice under Section 13(4) as the actual physical possession is to be delivered in terms of Rule 9(6) read with Appendix -V to the Rules.
Relying on the compromise entered into with the Bank on December 26, 2002 before the Lok Adalat, the appellants would state that they were sincere to settle the account but due to adverse circumstances, they could not stick to the schedule of payment. Alleging that the Bank with mala fide intention was bent upon to purchase the building itself and got the impugned order dated 30th December, 2012 passed against the appellants by misquoting the facts. The appellants have now even challenged the compromise on the ground that the compromise was in violation of Order 23 Rule 3 despite having relied upon it. The appellants had accordingly prayed that the respondent Bank be restrained from selling the property at less than the reserved price of Rs. 43 lacs.
The Bank had filed reply to the SA pointing out that the order passed in M/s. Kalayani Sales Corporation had been stayed by the Hon'ble Supreme Court, The Bank would disclose that Mr. Ramesh Singh Badwal was called and asked to sell the property at his own level or to bring buyer who could purchase the property at the reserved price, but he failed to do so. The Bank had also disclosed that the appellant had been issuing different cheques to different parties from the closed account of the Branch for which the Bank had received summon from the Civil Court, Balachaur which included attachment of Rs. 6 lacs. The Assistant Engineer, PSEB, Sub-Division Nawanshahar had also asked for payment of electricity bills amounting to Rs. 21,436/-.
The Bank had even raised the plea that the SA was barred by limitation as it was filed on July 13, 2006 whereas possession notice was issued in March 2006. The Bank had also disclosed before the Tribunal below that the property stood sold in auction on 4th September, 2006 for a sum of Rs. 67 lacs and sale certificate had also been issued in favour of the auction purchaser. The Bank otherwise admitted that it had entered into a compromise with the appellants for a sum of Rs. 23 lacs before the Lok Adalat on December 26, 2002. The appellants had only deposited a sum of Rs. 2.80 lacs but failed to honour the remaining terms of compromise. The appellants had been having verbal discussion with the Bank official with regard to the compromise in June, 2006 but failed to submit any concrete proposal. They also did not deposit any amount with the Bank. As per the Bank, under these compelling circumstances, the Bank had to take action under the SARFAESI Act and, thus, took physical possession of the property under Section 13(4) of the SARFAESI Act. This was followed by sale notice by way of publication fixing auction on July 28, 2006 while following the procedure laid down in the Act. As per the Bank, the property was sold to the highest bidder M/s. Duggal and Company, respondent No. 3.
A separate reply has been filed by respondent No. 3 stating that it had purchased the property in auction through tender in lawful and transparent manner. Respondent No. 3 has denied the allegations that the property was purchased in connivance with the Bank officials being totally baseless. In support of this plea respondent No. 3 would point out that they had purchased the property for a sum of Rs. 67 lacs against the reserved price of Rs. 43 lacs which in itself would be enough to indicate and rule out the possibility of any connivance between the said respondent and the Bank. It was also pointed out that the respondent No. 3 had purchased this property by raising loan from Bank of India for carrying out their own business but was suffering losses due to restraint order passed and the prayer accordingly was to dismiss the SA.
The Tribunal below considered the plea raised on behalf of the appellants has noticed that the appellants had availed this financial assistance in the year 1999 which was 13 years ago. At the time of deciding the SA, the account was declared NPA when the suit for recovery was filed in the year 2002 which was also 10 years ago. Despite compromise reached between the parties on December 26, 2002 the appellants failed to honour the same and it is then that the Bank had issued notice under Section 13(2) on 30th January, 2004. This was followed by possession notice under Section 13(4) in the year 2006. Having noticed all these facts, the Tribunal has viewed that there was no irregularity or illegality in the action taken by the Bank and accordingly had dismissed the SA leading to filing of the present appeal.
When this appeal came up for hearing before this Tribunal on 26th April, 2012, the Counsel for the appellants had made submissions that several objections in respect of auction sale were taken while making oral submissions besides written submission, but these have neither been considered nor discussed in the impugned order by the Tribunal below. In fact, the main ground of attack by the Counsel for the appellants is on the ground that the sale notice was defective as it did not give clear 30 days. The Counsel for the appellants accordingly has mainly concentrated on sale having been conducted in violation of the statutory provisions which issues were not found touched in the impugned order.
The submissions so made were found attractive but the deeper analysis would show the actual position to be some what different. This appeal saw various requests for adjournments on different occasions before being taken up for effective hearing on 30th October, 2014. On this date also, the main limb of submissions advanced by the Counsel for the appellant was that 30 days sale notice was not issued to the appellants while selling the property. The Counsel, at that stage, was asked to show whether this ground has been pleaded in the SA, but the Counsel was unable to show the pleadings. Perhaps he could not show being caught unaware. Finding that the Counsel for the appellants was not ready with the response, the case was adjourned directing the Counsel for the Bank to have instruction whether sale notice in this case was served upon the borrower or not.
On the next date, possibility of settlement was explored and the parties were summoned to see in case issue could be settled. The representative of the appellants did not come present on the date the parties were summoned to appear. The purchaser of the property, however, came present. They were willing and ready to settle and leave the property in case they were appropriately compensated. They were even ready to settle by releasing part of the property proportionately on payment of amount. The attitude of the purchaser was found reasonable. The case had to be adjourned to wait for the representative of the appellants. Negotiation, however, failed when a huge gap was noticed between the demand made by the purchaser and the offer which the appellants had made. Ultimately, this appeal had been taken up for final hearing.
The question whether the appellants had questioned the sale and sale notice again came to the addressed by the appellants. At this stage, it is revealed that the SA filed by the appellants on 13th July, 2006 was for restraining the Bank from selling part of the subject property and to withdraw notice under Section 13(4) and also to restore possession of the shop and residing building to the appellants. Obviously, this SA was filed prior to the sale and so it was filed to challenge only the possession notice when only a notice for auction had been issued. The perusal of the SA and the grounds pleaded therein would show that there was no challenge made in the same so far as the sale or sale notice is concerned.
Pleadings in the SA would show that the appellant had alleged that the Bank was trying to purchase this valuable property by fixing low reserved price at Rs. 43 lacs whereas, the property was stated to be valued at Rs. 1,69,80,000/- as per the valuation report. The ground raised in the appeal to challenge the sale is that the sale notice did not give 30 days clear and no other infirmity or illegality in the sale is raised in the SA. Obviously, if these grounds had not been raised in the SA, these could not have been considered or commented upon by the Tribunal below. Perhaps that is the reason that no discussion is noticed in the impugned order which is now highlighted by the Counsel for the appellants to press his appeal. In fact, the appellant had obtained the interim order of stay on this basis as well.
The Counsel for the appellants, despite opportunity, could not point out to any pleading to show where challenge was made to the sale. The Counsel, however, has referred to rejoinder to urge that this plea was raised and it would be a part of the pleadings. In this regard, the Counsel has referred to Para 10 of the rejoinder. This obviously is in response to the averments made in the reply filed by the Bank that the property had been sold. While denying the averment, it is stated in the rejoinder that the sale had not become final as it would be subject to final outcome of the SA. It is then mentioned that the possession had not been handed over to the auction purchaser in view of the stay order granted by this Tribunal. It is also stated that the auction purchaser had failed to deposit the entire amount within a period of 15 days. Having said so, it is then stated in the rejoinder that, "Apart from this the Applicants were not served with the mandatory sale notice as required by the Security Enforcement Rules applicable in this regard. Furthermore, there was no publication in the newspapers as per the rules and sale has been conducted in violation of the statutory period from the date of publication of the sale notice i.e. period of 30 days." On the basis of this pleading, it is urged that this plea had been raised.
The Counsel for the appellants would urge that the rejoinder is a part of the pleadings and in support has referred to two judgments of the Punjab and Haryana High Court where it is so held. Reliance in this regard has been placed on the cases Rajesh Devan v. Soma Wati Aggarwal, 2008 RCR (Civil) 411. The Court in this case while considering the provisions of Order 6 Rule 2 and Order 8 Rule 2 has observed that replication is part of pleadings and anything which is specifically stated therein for the first time has to be controverted and if the same is not controverted and allowed to pass, it must be assumed that the plea raised in the replication was accepted. In the case of Ajit Singh v. Punjab State Electricity Board, 1998(2) R.C.R. (Civil) 236, the Court while considering the provisions of Order 14 Rules 3 and 5 and Order 6 Rules 1 and 5 has held that replication is part of pleadings. The Court, in this case, was considering the aspect of framing issues in respect of the plea, which was taken in the replication. The Court has held that the plaintiff can claim that this issue be framed.
I have perused the judgment in the case of Rajesh Devan (supra). It is the submission made by the Counsel for the plaintiff/respondent which is noticed wherein he had relied upon the judgment in the case of Saliq Ram v. Shiv Shankar, AIR 1971 P&H 437 holding that the replication is part of the pleadings and anything which is specifically stated therein for the first time, has to be rebutted, The provisions of the CPC in regard to the pleadings cannot strictly apply to the cases under the RDDBFI Act or SARFAESI act. Even if this aspect was required to be rebutted, opportunity ought to have been afforded to the Bank. This part of the pleadings made in the replication obviously would be beyond the prayer made in the SA which was only to challenge the possession notice or to restrain the Bank from proceeding ahead with the sale of the property. Once the factum of sale was disclosed in the reply filed by the Bank, the appellants could be expected to challenge the sale either by filing a separate SA or to amend the SA already filed after taking permission from the Tribunal. Mere mention in the replication even if it be part of pleadings cannot be taken as valid challenge to the sale when prayer made in the SA remained the same as it was initially filed to challenge the possession notice. The plea raised by the Counsel for the appellants to raise this challenge would have to be examined in the light of this background.
The appellants had also placed on record their written submissions which were allegedly advanced before the Tribunal below. Indeed, in these written submissions, challenge is in regard to auction/sale notice being defective and also the objection in regard to the valuation of the property being defective is raised. The pleas raised in the written submissions are beyond the pleadings for which the parties never got any opportunity to contest or otherwise to make pleadings.
Despite the legal position noticed above, I have considered the additional documents which have now been placed on record pursuant to the order passed by this Tribunal. The respondent Bank had issued notice on 10th March, 2006 wherein it was disclosed to the appellants that the authorized officer of the Bank had proposed to sell the assets described in the schedule wherein it is clearly recorded as under:
"Hence, in terms of the provisions of the subject Act and Rules made thereunder, I issue this notice to your to enable you to discharge the amount due to the Bank within 30 days from the date of this notice and take back the assets mentioned in the schedule, failing which the assets will be sold to discharge the liabilities."
A copy of the notice issued in the newspaper has also been placed on record requiring the appellants to lift their articles from the property which had been sold. Notice issued in the newspapers Hindustan Times dated 12th March, 2006 is also on record whereby possession notice was published. Similar notice was published in Amar Ujala newspaper dated 12th March, 2006. Even the sale notice was also published and copy of sale notice so published in English as well as in vernacular language newspapers have been placed on record. The Bank has accordingly denied that there was any violation in issuing possession notice or violation of sale notice.
One of the objections which the respondent Bank has raised in the reply is that the present appeal is not maintainable as the appellants have claimed relief which is beyond the scope of relief claimed in the SA. It is averred that the appellants had filed SA aggrieved against the action of the Bank in taking possession and in the appeal relief claimed is for setting aside the sale, which took place after filing of the SA. It is urged that the appellants had never amended the SA or otherwise challenged the sale. As per the Bank, even the SA filed by the Bank was hopelessly barred by time. The possession was taken on March 10, 2006, whereas the SA was filed in July 2006 i.e. much after the expiry of 45 days. The Tribunal apparently has failed to consider this serious plea raised on behalf of the Bank. I have not been able to locate any application which was filed to seek condonation of this delay. Perhaps no such application was filed or if filed it is not pointed out. In this background, question may raise whether the SA could be heard and decided without condoning the delay in filing the same. This issue may be rendered academic since the Tribunal below has ultimately dismissed the SA on merits.
The Tribunal below has justified in making reference to the pendency of these proceedings where the appellants had obtained cash credit limit of Rs. 12 lacs and housing loan of Rs. 6 lacs in the year 1999. The appellants had mortgaged property measuring 7.50 Marlas comprised in Khasra No. 5356/1967, Khata No. 934/1104. The Bank had filed suit for recovery of Rs. 22,22,855/- in the year 2002. A compromise had reached between the Bank and the borrower on 26th December, 2002 and a compromise decree was passed on 30th December, 2002, After paying a sum of Rs. 2.80 lacs, the appellants failed to adhere to the remaining terms of compromise and, thus, the entire claim amount with interest, costs and charges became due and payable. The Bank had then initiated action under the SARFAESI Act by issuing notice under Section 13(2) on January 30, 2004. The amount claimed in the notice was Rs. 20.20 lacs with interest. On 24th March, 2006, the District Magistrate appointed a Receiver for taking possession of the property. The Bank accordingly took physical possession of the property on 10th March, 2006. The possession notice was published in two newspapers as already noticed. On 12th March, 2006, the Bank had issued notice for sale of the mortgaged property by inviting tenders on 28th June, 2006. Sale notice was published in newspaper Amar Ujala dated 26th June, 2006 and English newspaper dated 28th June, 2006. Nine bids were received from the different parties when the property was sold to respondent No. 3. The SA dated 13th July, 2006 was filed on July 25, 2006. Even the Tribunal below on 18th August, 2006 had passed an order directing the Bank not to deliver possession of the property provided that the appellants deposited Rs. 70,000/- per month in a separate account. The appellants failed to comply with this condition and while taking note of the same, the Tribunal below on 19th February, 2007 vacated the order dated 18th August, 2006. The Bank was accordingly permitted to deliver possession to the auction purchaser.
The appellants then even filed a Writ Petition before the High Court. The High Court issued direction for maintaining status quo in regard to the possession on the condition that the appellant shall deposit a sum of Rs. 10 lacs within two weeks. The appellants even failed to comply with this direction and ultimately the order passed by the High Court stood automatically vacated. The Writ Petition was dismissed on 23rd September, 2007. The appellants still filed an application before the High Court on the ground that the Chairman of the Appellate Tribunal was not holding the Court. It is then that the miscellaneous appeal came to be filed before this Court which was disposed of directing the appellants to deposit a sum of Rs. 10 lacs. In this manner, possession of the ground floor only could be delivered to the auction purchaser.
The SA was finally dismissed on January 25, 2012. The respondent Bank had kept the amount of Rs. 67 lacs in fixed deposit, which has now become Rs. 83,86,981/-. The dues of the Bank with interest are Rs. 65,96,501/-. Rs. 6 lacs out of the sale proceeds have been attached under the orders of Additional Civil Judge, Balachaur. This amount has been deposited with the Civil Judge (Senior Division). In another case titled M/s. Chatha Hire Purchase Co. v. Ramesh Singh Badwal, an order for attachment of Rs. 10 lacs is received. The said amount is accordingly kept for depositing in the Court on receipt of the order. In this manner, it is pointed out that the balance of Rs. 1,82,084/- is still lying with the Bank which the Bank is ready to pay to the appellant.
The submission of the Counsel for the appellant that the disposal of the secured assets could not be done by the authority without complying with the statutory provisions as right to hold the property being constitutional right, on the basis of judgment in the case of Swastick Agency and Others v. State Bank of India, Bhubaneswar & Ors., 2011 (7) R.C.R. (Civil) 1604 is a position of law which is well settled. But, in this case, the appellants have not been able to establish if the secured assets have been sold by way of public tender in violation of the statutory provisions. The authorized officer of the Bank has taken possession by delivering possession notice to the appellants in terms of Rule 8(1). The possession notice was published in two leading newspapers, one in English and the other in vernacular language having sufficient circulation in the locality. The authorized officer had obtained valuation of the property and thereafter had fixed the reserved price. The secured assets were put to sale by inviting tenders from the public. The authorized officer had served notice as required by the Rules. Notice for sale was issued in two leading newspapers having wide circulation in the area. Thus, the submission that the sale was conducted in violation of the Rules cannot be accepted, though I may hasten to add here that such objection as raised by the Counsel for the appellants need not have invited consideration since no such pleas were ever raised in the SA and have been so introduced in oral or written submissions without amending the pleadings or without amending the relief claimed in the SA. Accordingly, I do not find any reason or cause to interfere in the impugned order and would dismiss the appeal. The appeal is dismissed.