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Judgment
JUDGMENT
R.S. Kulhari, J
Both the abovementioned appeals are arising out of the order dated 23.09.2019 passed by the DRT, Lucknow, whereby the S.A. filed by the borrowers was allowed, hence the same are being decided by this common order.
The essential facts of the matter are, that the Canara Bank (erstwhile Syndicate Bank) granted certain credit facilities to M/s. Arihant Chini Udyog Pvt. Ltd. through its Director-Harish Kumar-Respondent no. 2 in the appeal of the Bank. The loan was secured by the mortgage of land and building of the factory as well as the hypothecation of the plant and machinery. The borrowers committed default in repayment of the loan, hence the Bank issued demand notice dated 07.10.2008 under section 13(2) of the SARFAESI Act for a sum of Rs. 18,23,92,540. The Director of the company-Harish Kumar filed representation under section 13(3-A), which was decided by the Bank. Since the demand notice sent to the borrower-company was returned back with the remark "addressee left", hence the same was published in the newspapers on 21.01.2009, against which the borrower-company through its director Harish Kumar filed objection under section 13(3-A) on 03.02.2009 and the same was disposed off by the Bank vide letter dated 17.02.2009. As no amount was paid by the borrowers despite the demand raised by the Bank, the Bank issued the possession notice dated 21.12.2009 under section 13(4) of the SARFAESI Act and the same was published in the newspapers on 22.12.2009.
The borrowers challenged the possession notice dated 22.12.2009 by filing the securitization application no. 66 of 2010 before the Tribunal below praying to set the proceedings of the Bank.
During the pendency of the S.A., the Bank obtained an order dated 10.05.2010 from the D.M., Muzaffarnagar under section 14 of the SARFAESI Act. Accordingly, the physical possession of the mortgaged/hypothecated properties was taken on 07.10.2010 and the inventory of the movable assets were prepared.
It appears that the Bank published the sale notice dated 29.11.2010 scheduling the auction on 30.12.2010 with the reserve price of the movable and immovable assets of Rs. 10.00 crores. The Bank again published the sale notice on 14.09.2012, fixing the auction on 15.10.2012 with the reserve price of Rs. 5.00 crores for movable and immovable properties, against which the borrower-company filed an application for stay of the auction dated 15.10.2012, which was rejected by the Tribunal below vide order dated 12.10.2012. The said order was challenged by the borrower-company by preferring the writ petition no. 8760 (M/B) of 2012 before the Hon'ble High Court, which was disposed off vide order dated 31.10.2012 on the ground of alternative remedy.
Accordingly, the borrower-company filed an Appeal No. 370 of 2012 before this Tribunal, stating that one Shri Rajendra Kumar is prepared to purchase the property for a sum of Rs. 11.00 crores. This Tribunal vide order dated 29.04.2013 disposed off the said appeal, directing that the property as such shall be sold to Shri Rajendra Kumar and the sale proceeds shall be deposited by him within two weeks from the date of order with the consent of the Bank. Further, it was made clear that in case the amount as such is not deposited by the prospective purchaser, the Bank shall be free to proceed with in accordance with law, which appears not to have been complied with. Ultimately, the Bank issued the e-auction sale notice dated 21.01.2017 and published the same in the newspaper on 22.01.2017 scheduling the auction on 20.02.2017. The immovable property was sold to M/s. Silver Sine Hospitality Pvt. Ltd. for a sum of Rs. 53.30 lacs and the movable to M/s. Owais Enterprises Pvt. Ltd. for a sum of Rs. 2,46,30,000/-. After confirmation of the sale, the entire sale consideration was deposited by the auction purchasers within time and the sale certificates were issued. The sale deed was executed and the possession was delivered by the Bank to the auction purchasers.
The borrower-company filed an amended securitization application stating that the entire recovery proceedings along with the auction sale notice dated 21.01.2017 be quashed.
The securitization application filed by the borrowers was allowed by the Tribunal below vide judgment and order dated 10.07.2017 quashing the auction sale notice dated 21.01.2017 and the sale certificates dated 27.02.2017 as well as the sale deed executed in favour of the auction purchasers. Further, the Bank was directed to proceed afresh from the stage of sale against the applicants-borrowers in accordance with law. The Bank was also directed to refund the sale price to the auction purchasers with interest at the rate of 6% per annum simple.
The appellant-Bank challenged the order dated 10.07.2017 passed by the Tribunal below by filing the Appeal No. 173 of 2017 before this Tribunal, which was allowed vide order dated 29.03.2019 setting aside the impugned order dated 10.07.2017 and the matter was remanded back to the Tribunal below to decide it afresh in accordance with law after considering the documents filed by the Bank and affording opportunity of hearing on all aspects to the parties concerned. Against the said order, the borrowers filed a review application no. 76 of 2019 before this Tribunal, which was decided vide order dated 22.04.2019.
The Tribunal below vide impugned order allowed the securitization application No. 66 of 2010 filed by the borrowers and set aside the entire proceedings of the Bank from issuance of the demand notice holding that the demand notice was not properly published and the sale notice was not individually served to the borrowers. Further, the Bank was directed to restore the physical possession of the secured assets to the borrower and to proceed afresh by issuing fresh demand notice as provided under the Act and Rules, 2002. The Bank was also directed to refund the sale price to the auction purchasers along with interest @ 8% per annum simple from the date of deposit till payment.
Being aggrieved by the said order, the Appeal Dy. No. 361 of 2019 has been filed by the Bank praying that the impugned order dated 23.09.2019 be set aside. The Appeal Dy. No. 407/2019 has been filed by the auction purchasers seeking modification of the same order to the extent that the Bank be directed to refund the sale price alongwith interest @ 12% per annum instead of 8%, security charges, stamp duty, registration charges, misc. traveling charges as well as the litigation costs since 2017.
Heard the learned counsels for the parties.
The learned counsel for the Bank submitted that the Tribunal below vide order dated 10.07.2017 found irregularity with regard to service of sale notice, which was set aside in the appeal. So, the Tribunal was required to decide the issue of sale notice only and was not supposed to re-open the issue of service/publication of the demand notice, that was earlier decided in favour of the Bank.
With regard to the issue of service of demand notice, the learned counsel for the appellant-Bank submitted that the demand notice dated 07.10.2008 was served to the Director-Harish Kumar, applicant no. 2 of the S.A., who had also filed the objection under section 13(3-A) of the SARFAESI Act on 08.11.2008 and the same was decided on 12.11.2008. However, the notice sent at the address of the applicant-company was returned with the remark "addressee left", therefore, as abundant precaution, the demand notice was published on 21.01.2009 in two newspapers. Upon such publication, the borrower-company submitted objection again through its director-Harish Kumar on 03.02.2009, which was also disposed off by the Bank on 17.02.2009. Thus, both the applicants of the S.A. were duly served the demand notice. None of the other guarantors has raised any objection with regard to the service of demand notice nor they have filed any affidavit to this effect. As such no prejudice was caused to the S.A. applicants, even if it is treated that the publication was not made in vernacular language.
It was also submitted that the proof of postal receipts for sending the sale notices and affixation was submitted before the Tribunal below, yet it has failed to appreciate the same and recorded the perverse finding for non-service of sale notice on the borrowers. The next contention was that the possession of the property was taken over by the Bank on 07.10.2010 and the same has been handed over to the auction purchasers in the year 2017 after execution of the sale deed, who are utilizing the same. The borrowers have never intended to liquidate the dues of the Bank, therefore, the sale conducted by the Bank cannot be disturbed at this belated stage. Hence, the appeal filed by the Bank be allowed and the appeal filed by the auction purchasers be dismissed.
It transpires that the contention of the Bank was supported by the auction purchaser in its objection filed before the Tribunal below, contending that there was no infirmity in the procedure adopted by the Bank. However, the learned counsel for the auction purchasers submitted before this Tribunal that the publication of demand notice was not made as per provision of the statute. The notice was required to be served on the applicant-company, which is a separate legal entity different from its Director as laid down by the Hon'ble Calcutta High Court in M.N. Dastur & Company Ltd. and another Vs. Union of India and others (2005) 197 CTR Cal 633, decided on 28.02.2005. It was also submitted that since the publication of demand notice was not made in vernacular language, hence the Bank has violated the procedure as laid down by the Hon'ble Orissa High Court in M/s. Swastik Agency Vs. State Bank of India AIR 2009 Ori 147.
Learned counsel for the auction purchasers has also submitted that the auction purchasers do not want to face the litigation. They are incurring huge amount on security of the premises, therefore, the sale price deposited by them be refunded with interest @ 12% per annum along with expenses incurred on the registration and award the compensation as the auction purchasers are suffering on account of irregularities committed by the bank.
The learned counsel for the borrowers contended that the earlier order dated 10.07.2017 was set aside by this Tribunal and the matter was directed to be decided afresh on all the issues involved in the S.A. Therefore, the Tribunal below has rightly decided all the issues including the issue of service of demand notice.
While supporting the contention of the learned counsel for the auction purchasers, it was canvassed that the Bank was required to publish the demand notice in two newspapers, one in vernacular language, whereas both the publications were made in English language, so the Tribunal below has rightly set aside the demand notice in view of the judgment passed by the Hon'ble Orissa High Court in M/s. Swastik Agency Vs. State Bank of India (Supra). Further reference was made to the judgment of the Hon'ble Allahabad High Court in Writ-C No. 14755 of 2013-Ashok Kumar Vs. Authorized Officer, PNB and others, decided on 10.02.2017, wherein it was held that the Bank has to strictly follow the procedure as laid down under the statute, otherwise the whole proceedings may be quashed from its inception.
The learned counsel has further contended that the Bank has not produced separate sale notice of movable property as required under Rule 6 of the Security Interest (Enforcement) Rule, 2002 and also that the description of the property was differently prescribed at various stages, like Tehsil 'Khatauli' is wrongly mentioned at some places, which is yet another irregularity in conducting the auction of the property.
I have given my thoughtful consideration to the rival contentions of the learned counsels for the parties and perused the record.
The perusal of records indicates that the S.A. was filed by the applicant-company through its Director and by the same Director-Harish Kumar challenging the demand notice dated 07.10.2008 and the possession notice published on 22.12.2009. In the meantime, the physical possession of the property was taken on 07.10.2010 in furtherance of the D.M.'s order dated 10.05.2010. The earlier sale notices could not be materialized, hence the sale notice dated 21.01.2017 was issued scheduling the auction on 20.02.2017. The necessary amendments in the pleadings of the S.A. were made and the objections were also filed by the Bank as well as the auction purchasers. It was also alleged that the property was not properly valued, the property in question was agricultural in nature and the sale notices were not served.
The Tribunal below vide earlier order dated 10.07.2017 observed that the issues of demand notice and the possession notice were time barred and the property in question was saleable under the SARFAESI Act. However, the S.A. was allowed on the ground that the Bank has failed to produce the proof of service of sale notice and affixation of the same over the property. The order dated 10.07.2017 was not challenged by the borrowers or the auction purchasers. However, the Bank filed the appeal before this Tribunal producing the evidence for service of sale notice and affixation thereof. While deciding the appeal, this Appellate Tribunal vide order dated 29.03.2019 set aside the order dated 10.07.2017 and directed the Tribunal below to decide the S.A. afresh after affording opportunity of hearing to the parties. The Bank filed necessary documents before the Tribunal below. Thereafter, the S.A. was decided by the impugned order dated 23.09.2019, which reveals that the other issues were decided against the borrowers, but the S.A. was allowed on two grounds, one, the demand notice dated 21.01.2009 was not published in accordance with law and two, the sale notices were not individually served to all the borrowers.
With regard to the service of sale notice and affixation thereof, admittedly the Bank has produced the postal receipts for sending notices to all the borrowers/guarantors and also the copy of affixation and publication of the sale notice, which are available at page nos. 134 to 139 of the memo of appeal. Moreover, the Tribunal below has also observed at page 12 of the impugned order that the Bank has filed all these documents before the Tribunal below. The borrowers have not contended that they have not received the notices sent through those postal receipts nor the learned counsel for the auction purchaser and the borrowers have seriously raised this issue or disputed the said documents before this Tribunal. Therefore, there was no valid ground before the Tribunal below to infer that the individual sale notice was not served. Thus, the finding qua service of sale notice is perverse and against the available record and the Bank has established the fact that the sale notices were duly served.
Now coming to the issue of service/publication of demand notice, undisputedly the demand notice dated 07.10.2008 was served to the Director-Harish Kumar, who is applicant in the S.A. The representation filed by him was also decided by the Bank. It is also admitted position that the demand notice sent to the borrower-company was returned with the remark "addressee left" and thereafter, the demand notice was published in two newspapers namely "Dainik Jagran" and "Indian Express". Although, the newspaper "Dainik Jagaran" was of Hindi language, but it was published in English. Thus, it can be held that it was not published in vernacular language. However, the question for consideration is, as to whether such publication was required for the demand notice sent to the S.A. applicants or any prejudice was caused to them by not publishing the second publication in Hindi language in Hindi newspaper?
Before proceeding further, it may be stated that since this Appellate Tribunal has set aside the order dated 10.07.2017 of the Tribunal below and while deciding the review petition on 22.04.2019 clarified that the Tribunal below had to decide all the issues involved in the S.A. afresh. Thus, it cannot be said that the Tribunal below has travelled beyond its jurisdiction in deciding the issue of service of demand notice and the possession notice, but the fact cannot be ignored that the self-same P.O. had earlier found that those issues were time barred, then how he has not pondered over this aspect, while deciding it afresh because no such directions were there that the issue of limitation will not be considered.
So far as the finding with regard to non-service of demand notice is concerned, the same also lacks merit. The purpose of issue of demand notice is to raise a demand from the borrowers so that they may arrange to deposit the demanded amount within 60 days. The S.A. applicants have filed a resolution of board that the Director-Harish Kumar was authorized to act on behalf of the company. There is nothing on record that any other Director, except Harish Kumar-applicant, was there, who was required to be served any demand notice. Since Harish Kumar was served the notice, who has also acted on behalf of the Company again after publication of demand notice in the newspapers, hence the Director as well as the company through its Director was duly served the demand notice. The representation was filed on behalf of the applicant-company on 03.02.2009. Thus, the Bank has succeeded in proving the fact that no prejudice was caused to the S.A. applicants by not publishing the demand notice in vernacular language.
I respectfully agree with the principle propounded by the Hon'ble Orissa High Court in case of M/s. Swastik Agency Vs. State Bank of India (Supra) and by the Hon'ble Allahabad High Court in Ashok Kumar Vs. Authorized Officer, PNB (Supra), but these do not render any assistance to the borrowers as the strict compliance of publication in vernacular language is required in case of publication of possession notice and the sale notice as categorically held in the said judgments. The publications of possession notice and the sale notice are being made for wide dissemination of information for the public at large so that the maximum persons may be aware about the possession of the property and also for the sale of the same, but the purpose of publication of demand notice is to make aware the borrower/guarantor only, so that they may approach the Bank for liquidation of the dues or to raise any objection with regard to such demand. Since both the S.A. applicants have filed representations against the demand notice, so the requirement of due service of demand notice has been fulfilled. Hence, any discrepancy in the publication of the demand notice in question does not vitiate the proceeding of the Bank.
There is no denial on the proposition of law that a limited company is a separate legal entity as laid down by the Hon'ble Calcutta High Court in M.N. Dastur & Company Ltd. Vs. Union of India (Supra), but the principle was laid down while deciding the rights of shareholders vis-a-vis the public limited company. However, in the instant case, the S.A. applicant is a private limited company and has been duly represented by its Director-Harish Kumar, another applicant in the S.A. Thus, the finding recorded by the Tribunal below is liable to be set aside.
It is also worthwhile to mention that the issue of non production of sale notice of movable property was not argued before the Tribunal below, so it had no opportunity to decide the same. As such, the same cannot be raised by the borrowers at this appellate stage and that too without filing any cross appeal.
So far as the argument with regard to description of the property in question is concerned, admittedly, at one place Tehsil-Janesth is mentioned, whereas at other place, Tehsil-Khatauli is mentioned, but the borrowers have not raised any objection at any stage that these are two different properties. Only the property in question was put to auction and the possession of the same was handed over. Moreover, in every description, there is no difference in Khasra No. 395, village-Bhoopkheri and Pargana-Khatauli, District Muzaffarnagar. Even otherwise, such issue could have been raised by the auction purchasers, if the property was not identifiable, but the borrower was well aware about its property, which was mortgaged with the Bank.
Besides, the issue of non submission of sale notice for movable property and the minor discrepancy in description of the property are of trivial nature, which do not go to the root cause of the issue involved in the matter and are liable to be ignored. In this regard, the Hon'ble Punjab & Haryana High Court in case of M/s. National Rice and General Mills & Ors. Vs. Bank of India & Ors., AIR 2009 P & H 129 has held that the minor irregularities which do not go to the root cause of the case and had not resulted in any loss to the appellants, are to be ignored, particularly when the appellants have failed to show their readiness to pay the dues with interest.
It is also to be noted that the secured creditor-Bank has demanded the loan amount way back in the year 2008, but the borrowers have never shown their interest in repayment of the loan and are prolonging the litigation under one pretext or the other. Such litigants are not entitled for any relief, even if there is any minor irregularity committed by the Bank in the auction process. This view is fortified by the judgment of the Hon'ble Allahabad High Court in Rafeeq Ahmed Vs. State of U.P. & Ors. AIR 1999 Allahabad 272, in which it has been held that the persons who are not interested in repayment of the loan, must not be permitted to play with the procedure of law.
In view of the above, the impugned order dated 23.09.2019 is not sustainable, hence the same is quashed and set aside. The appeal filed by the Bank is allowed. The appeal filed by the auction purchaser was for modification of the order, in which the expenses and the other charges were demanded, but since the impugned order is set aside and all the actions of the Bank are affirmed, therefore, the possession of the property shall remain with the auction purchasers. As such, the auction purchasers are not entitled for any costs, damages or the compensation. Accordingly, the Appeal No. 407/2019 is dismissed. All the parties shall bear their own costs.
A copy of this judgment be uploaded on the e-DRT portal and be also sent to the DRT concerned.