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Judgment
JUSTICE R. D. KHARE, CHAIRPERSON
The present appeal has been preferred by the appellant-Bank under section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short "The SARFAESI Act") against the order dated 04.04.2024, whereby the S.A. No. 30/2020 filed by the respondents-borrowers has been allowed by the Tribunal below.
Brief facts of the matter are that various credit facilities were granted by the appellant-Bank to the respondent no.1-company through its directors respondent no. 2 & 3. In order to secure the same, the respondents no. 1 & 2 stood as guarantors as well as created equitable mortgage over their property in question. Since the borrowers did not maintain financial discipline, therefore, the accounts were classified as NPA on 29.06.2013 and a demand notice dated 22.07.2013 was issued by the appellant-Bank under Section 13(2) of the SARFAESI Act for a sum of Rs.1.19 crores and odd plus interest and other charges from 01.07.2013. Since the respondents-borrowers did not pay any heed to the said demand, therefore, the possession notice dated 01.11.2013 was issued u/s 13(4) of the said Act and thereafter, sale notice dated 06.07.2014 was also issued. The respondents-borrowers challenged the said proceedings before the Tribunal below by filing S.A. No. 01/2014, which was disposed off vide order dated 22.10.2014.
It appears that besides above proceedings, the appellant-Bank had filed an Original Application No. 595/2014 before the Tribunal below, which was decreed vide judgment dated 02.06.2017 and the recovery certificate was accordingly issued and the same was instituted as RC case No. 32/2017 before the Recovery Officer against the respondents no. 1 & 2.
It further appears that the appellant-Bank pursuant to the demand notice dated 22.07.2013 and possession notice dated 01.11.2013 had attempted several times to auction sell the secured assets, but the same was not materialized for want of bidders. However, the appellant-Bank issued a fresh auction sale notice on 17.01.2020 scheduling the auction of the property in question on 12.02.2020.
The respondents-borrowers challenged the aforesaid auction sale notice before the Tribunal below by filing the S.A. No. 30 of 2020, which was allowed vide order impugned setting aside the auction sale of the property in question and its subsequent actions. Being aggrieved by the said order, the present appeal has been filed by the appellant-Bank.
Learned counsel for the appellant-Bank submitted that the respondents-borrowers had earlier filed a S.A. No. 01 of 2014 challenging the demand notice, possession notice and sale notice before the Tribunal below, which was allowed and auction sale notice was set aside affirming the process of the Bank up to Section 13(4) of the SARFAESI Act and the same has never been challenged by the borrowers, therefore, the same has attained finality, hence the borrowers cannot be permitted to raise the said issue again in the present appeal.
Learned counsel further submitted that the appellant-Bank had filed an O.A. No. 595/2014 before the Tribunal below, which was decreed vide judgment dated 02.06.2017 upholding the mortgage of the property in question to be valid. It was also contended that the respondents-borrowers while availing the credit facilities had executed the loan documents and created mortgage over the property in question and also hypothecated the movables in favour of the appellant-Bank. It was further contended that the appellant-Bank had specifically raised the objection while filing the reply to the S.A. of the borrowers that the S.A. is not maintainable as Jitendra Kumar Jiwan was not authorized through Board Of Resolution by all the Directors of the company nor he was holding any power of attorney and the Bank has complied with the mandatory provisions of the Aact and Rules made thereunder prior to proceeding for auction sale of the secured assets.
Learned counsel also submitted that One Time Settlement proposal filed by the borrowers was accepted by the Bank vide sanction letter dated 28.03.2018 for an amount of Rs. 50.00 lacs against the total outstanding of Rs. 2.21 crores and odd and the same was required to be deposited up to 30.06.2018, as Rs.5.00 lacs as upfront amount and Rs.20.00 lacs on or before 31.03.2018 and remaining Rs.25.00 lacs on or before 30.04.2018 and further there was a stipulation that in case of default, the OTS offer under the Scheme shall stand cancelled and the entire dues will be recovered after adjusting the amount deposited by the borrower, if any, under the scheme towards the dues, but the same could not be complied with by the borrowers, therefore, the said OTS stood automatically cancelled. It was further contended that the request for extension of time made by the borrowers was declined by the Bank for the reason that the OTS was entered into a specific SWABHIMAN Scheme, which was for a limited period and as such the borrowers were required to pay the entire outstanding dues of the Bank. In support of his contention, learned counsel has relied upon a judgment passed by this Tribunal in Appeal Dy. No. 453/2019-Bank of Baroda Vs. M/s Drill Tube Well Co. & Ors. decided on 10.11.2020.
Learned counsel further submitted that the finding of the Tribunal below that Bank has not filed any valuation report is incorrect, as the Bank had specifically mentioned in the sale notice dated 17.01.2020 about fixing the reserve price on the basis of valuation report dated 14.05.2019. It was further contended that since the borrowers had not pleaded in their S.A. about non-compliance of Rule 8(5) of the Rules, 2002, therefore, there was no occasion for the Bank to bring on record the latest valuation report obtained by bank on 14.05.2019. It was further contended that the appellant-Bank had tried to sell the property several times, but the same could not succeed for want of bidders, but the present auction was conducted openly amongst the public and the borrowers were free to produce prospective buyer to fetch any higher amount, but they did not do so at the relevant time. It was also contended that there is no bar in selling the property at reserve price to a single bidder as provided under Rule 9(2) of the Rules, 2002.
Learned counsel further submitted that the appellant-Bank has issued the sale notice under Rule 8(6) in the format as provided under the Act and there is no illegality or infirmity in the same.
It was also canvassed on behalf of the appellant that the Tribunal below has erred in considering the order dated 24.06.2021 passed by the Recovery Officer that the dues remain satisfied, because the Recovery Officer after considering the auction sale amount of Rs.65.00 lacs directed the Bank to consider the payment of Rs.30.00 lacs as full and final satisfaction of the dues of the Bank. It was thus contended that the Tribunal below has travelled beyond its jurisdiction and has hampered all the proceedings initiated by the Bank under the SARFAESI Act, hence the order impugned is not sustainable in the eye of law. It was, therefore, prayed that the order impugned may be set aside and the appeal filed by the appellant may be allowed.
Learned counsel for the respondents-borrowers submitted that the appellant-Bank has not served the demand notice, possession notice and sale notice upon the borrowers and also without getting the property valued from the approved valuer, the property in question has been sold by the appellant-Bank. It was further contended that considering these facts of the case, the Tribunal below has rightly quashed the proceedings of the Bank vide order impugned, thus the same does not call for any interference by this Tribunal and the appeal filed by the appellant may be dismissed with heavy costs.
Having heard the learned counsels for the parties and considering the material available on record, undisputedly, the credit facilities were granted by the Bank to the respondents-borrowers, which were disbursed and availed by the borrowers. It is also not disputed that the borrowers had challenged the demand notice, possession notice and sale notice by filing the S.A. No. 01/2014 and the Tribunal below has allowed the same vide order dated 22.10.2014 and the sale notice dated 06.07.2014 was set aside by affirming the process of the Bank up to the proceedings initiated under Section 13(4) of the SARFAESI Act by the Bank, as the bank was directed to proceed afresh with regard to the sale of the property in question. The said order has never been challenged by any of the parties before any court of law, therefore, the same has attained finality, thus the borrowers cannot be permitted to raise the said issue in the present proceedings of the case.
The main controversy involved in the present case is, as to whether the Tribunal below has rightly set aside the auction sale conducted by the Bank or not?
The first issue is with regard to the valuation of the property in question. Admittedly, no valuation report was filed by the appellant-Bank before the Tribunal below. The contention of the appellant that there was no pleading in this regard, therefore, there was no occasion for filing the same before the Tribunal below is not tenable, because there was an objection on behalf of the borrowers that the property has been sold at throwaway price, which is well related to the valuation of the property in question. In this regard, the page no. 102 of the paper book is relevant, which is copy of the valuation report, on the basis of which the reserve price was fixed by the Bank while issuing the sale notice dated 17.01.2020. The said report shows that the valuation of the property was got done on 14.05.2019, whereas the property was going to be auctioned on 12.02.2020. Thus the property in question was got valued before 9 months from the date of present sale, which could not be considered by the Bank for fixing the reserve price in the present sale because the value of the property is changed at every interval of six months. If the appellant-Bank had got the property valued before the present sale, the reserve price fixed in the present case by the Bank would have definitely been more than that, but the Bank did not do so, therefore, it can be said that the Bank has not got the property in question valued from the approved valuer prior to the present sale, which clearly violates Rule 8(5) of the Rules, 2002. Thus the Tribunal below has rightly held that the Bank did not go for fresh valuation (in fact there was no valuation, much less on record) and proceeded with the sale of the secured assets, as it is causing serious prejudice to the applicant. On this count alone, the auction sale conducted by the Bank on 12.02.2020 pursuant to the sale notice dated 17.01.2020 is liable to be quashed.
With regard to the sale notice dated 17.01.2020, it is stated that the said sale notice was issued under Rule 6(2) read with Rule 8(6) of the Rules, 2002, copy of which is placed at page no. 87 of the paper book. While going through the said notice, it is found that the auction was proposed for sale of immovable property and not for the movable property. No doubt, there are separate provisions in the Act and Rules made thereunder for selling the movable and immovable properties. Rule 6(2) is meant for sale of movable assets and Rule 8(6) is meant for sale of immovable property, but in the present case, the sale notice was issued by the Bank for auction of the immovable property under both the Rules i.e. Rule 6(2) and Rule 8(6) of the Rules, 2002, which cannot be done, as the format of sale of movable properties is given under Appendix II-A and format of sale of immovable property is given under Appendix IV-A. As such the sale notice with regard to auction of movables and immovable cannot be issued together. Thus it can be said that the sale notice dated 17.01.2020 was not issued in accordance with the Act and Rules made thereunder. Hence the Tribunal below has rightly held that the respondent-Bank was required to frame the notices as per Rules and in the format as provided in the Schedule.
With regard to sale on the reserve price, it is stated that since it has already been held in the preceding paragraph of this order that the property was not got properly valued by the Bank before effecting the sale, then the said issue becomes redundant, hence the same is not required to be dealt with.
So far as the One Time Settlement, which was sanctioned by the Bank vide letter dated 28.03.2018, is concerned, it is stated that the same could not be complied with by the respondents-borrowers, as it is evident from the letter dated 20.02.2019, copy of which is placed at page no. 71 of the paper book. The Tribunal below vide order impugned has taken note of the order dated 24.06.2021 passed by the Recovery Officer in RC Case No. 332/2017 and held that the outstanding of the Bank remains satisfied, but in my opinion, the order of the Recovery Officer dated 24.06.2021 does not speak about the full and final figure. Further, as per sanction letter, the total amount was payable by the borrowers to the Bank as Rs.50.00 lacs, but para 17 of the order of the Recovery Officer says otherwise, therefore, the said issue is left open for the parties to get the same clarified by the Recovery Officer of the Tribunal below, who has passed the aforesaid order.
In view of the discussions as recorded above, the order impugned does not call for any interference by this Tribunal. Consequently, the appeal filed by the appellant-Bank is dismissed 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.