Canara Bank vs T.S. Ravishankar And Anr.

The present appeal is filed U /s. 30(1) of the Recovery of Debts and Bankruptcy Act, 1993, by the appellants to set aside order of Confirmation of Sale dated 12/02/2019 and Sale Certificate dated 12/02/2019 issued by Recovery Officer, ORT- II, Bengaluru, and for any order /direction deemed fit by the Tribunal to meet the ends of justice.

It is the case of the appellant that, it had filed OA No.888/2017 against respondent No.1 herein for recovery of Rs.14,19,775/- and the OA was allowed vide order dated 28/04/2018 directing the Respondent No.1 pay the said sum with interest at the rate of 12.900/o per annum compounded monthly rests from the date of filings of OA till its realization. Accordingly, the Recovery Certificate No.462/2018 dated 01/06/2018 was issued and forwarded to the Recovery Officer, DRT-11 for recovery of outstanding dues from the Respondent No.1. The appellant has produced copy of Recovery Certificate vide Annexure-'A'. The Recovery Officer initiated the proceedings against Respondent No.1 in DRC No.462/2018 by issuing Demand Notice and the Respondent No.1 appeared before the Recovery Officer on 27/01/2018 and sought adjournments to file necessary documents/ papers. The Respondent No.1 thereafter sought adjournments on 09/10/2018, 22/11/2018 and accordingly the Recover Officer acceded to the request of the Respondent No.1. It is further submitted that, on 31/12/2018 the Respondent No.1 appeared before the Recovery Officer and admitted his liability to pay the amount mentioned in the Recovery Certificate and Respondent No.1 consented to cooperate with the Recovery Officer to sell the hypothecated property. The copy of the Order-sheet has been produced vide Annexure-'B'. It is further submitted that, on 31/01/2019 at the request of Respondent No.l, the Recovery Officer has issued Sale Proclamation for selling the hypothecated property i.e. No.KA-51-8-0045, Toyota Fortuner Car of white colour. Certified copy of Sale Proclamation dated 31/01/2019 is produced vide Annexure- 'C'. The appellant has further stated that, the Recovery Officer has fixed the reserve price at Rs.1,50,000/- for a vehicle which is worth around Rs.19 lac in the year 2015 as per Valuation Report obtained by the applicant. It is further stated that, the Recovery Officer has not obtained any Valuation Report of the hypothecated asset before fixing the reserve price and the Recovery Officer seems to have relied upon a Memo filed by the Respondent No.1 stating that the vehicle is more than 10 years old and it would only fetch a maximum of Rs.2 lac. The Valuation Report obtained by the Bank and certified copy of Memo dated 29/10/2018 filed by the Respondent No.1 are produced vide Annexure-'D' and 'E'. It is further stated by the appellant that, the Sale Proclamation of 31/01/2019 noting the presence of Sri Sudarshan Joshi, the Chief Manager of ARM Branch of the appellant and he has also stated that the Bank has no objection to the auction being conducted. The appellant further stated that, on the said date of hearing Sri Sudarshan Joshi has not appeared before the Recovery Officer and the Bank has not consented to the hypothecated Car being auctioned. The appellant states that, it got to know about the auction about hypothecated vehicle only when the Sale Certificate was issued. The appellant further stated that, while bringing a property whether movable or immovable, any Authority /Officer to follow due process of law in fixing the reserve price. The reserve price cannot be fixed as per the whims and fancies of the Recovery Officer without obtaining the Valuation Report. The appellant being aggrieved by the arbitrary manner in which the auction was conducted by the Recovery Officer filed a Memo on 12/02/2019 before the Recovery Officer and sought for setting aside of the entire sale proceedings and initiation of fresh sale proceedings. The certified copy of the Memo dated 12/02/2019 is produced vide Annexure-'F'. It is further statement of the applicant that, even though a memo was filed on 12/02/2019 objecting to the auction, the Recovery Officer has taken the Memo on record only on 13/02/2019 and it is evident from the Order-sheet that the Recovery Officer has attempted to manipulate the dates in the Order-sheet to enable him to confirm the sale in favour of the Respondent No.2. Thus, in spite of the Bank filing the afore- mentioned Memo, the Recovery Officer has confirmed the Sale hypothecated vehicle in favour of the Respondent No.2 herein who submitted a bid of Rs.1,60,000/- by issuing order of Confirmation of Sale of movable property dated 12/02/2019. On the same date, the Recovery Officer has also issued Recovery Certificate on 12/02/2019 in favour of the Respondent No.2. The certified copies of order of Confirmation of Sale and Sale Certificate are produced vide Annexure-'G' & 'H'. In the Order-sheet maintained by the Recovery Officer, it is evident that Sri Sudarshan Joshi has appeared on 12/02/2019 and filed an objection, the Recovery Officer has kept the sale in abeyance till "issue of valuation of vehicle is resolved". Thereafter even on 20/02/2019, the Recovery Officer refused to set aside sale proceedings but has only kept the sale under abeyance. It is further stated that, the Recovery Officer in fact, issued letter to the Regional Transport Officer, Bengaluru for transferring the vehicle to the Respondent No.2's name on 12/02/2019.

The Appellant Bank being aggrieved by the order of Confirmation of Sale and Certificate of Sale both dated 12/02/2019 issued by the Recovery Officer -II, Bengaluru has preferred this appeal inter-alia on the following grounds:

1) The impugned order has been passed without application of mind and it is arbitrary, mala fide, perverse and hence same be set side aside.

2) The Recovery Officer has not obtained Valuation Report of the vehicle before fixing the reserve price and hence the entire sale proceedings will have to be set aside as there is no basis for fixing the reserve price and thereby the entire sale proceedings stands vitiated.

3) A bare perusal of the Order-sheet maintained by the Recovery Officer shows that he has committed various procedural improprieties and has colluded with the Respondent No.1 in fixing the reserve price. Thus, the whole proceedings reeks of mala fides and has to be set aside.

4) The Recovery Officer has noted the presence of Sri Sudarshan Joshi, Chief Manager of the appellant on 31/01/2019 even though he was not present before the Recovery Officer on the said date. The subject case pertains to Devanahalli Branch of the appellant Bank and Sri Sudarshan Joshi is not in any way connected to the subjected case and wrongly the Recovery Officer has also stated that no objection has been give Bank by the Bank in order to suit his convenience and sell the property without the knowledge of the Bank,

5) It is established procedural norm that when reserve price is not fixed on the basis of Valuation Report, the Authority has to take consent of both the parties to arrive at a convenient reserve price. In the instant case, the Recovery Officer has unilaterally fixed the reserve price without consent of the appellant.

6) The valuation of the hypothecated vehicle is around Rs.19.68 lac as per the Valuation Report obtained by the appellant in the year 2015 and when there being so, the Recovery Officer could not have fixed the reserve price at Rs.1,50,000/-. Even the Respondent No.l in his Memo dated 29/10/2018 stated that the hypothecated vehicle can be sold for a sum of Rs.2 lac and thus even the Certificate Debtor stated that the vehicle can be sold for a higher value, the Recovery Officer could not have fixed the reserve price at Rs.1.50 lac.

7) The auction has been conducted in a hurried manner as Sale Proclamation was issued on 31/01/2019 Paper Publication was issued on 01/02/2019 and the sale was confirmed on 12/02/2019 and thus the action was completed within 12 days which clearly indicates that only the buyers propped up by the Respondent No.l have participated in the auction.

8) As per the Rule-11 of Schedule II of the Income Tax Act, the Recovery Officer has to adjudicate any objections raised before him regarding the sale of movable/immovable properties and in the instant case, the Recovery Officer has refused to adjudicate on the objections raised by the appellant Bank, but only kept the sale under abeyance till the issue of valuation is resolved.

Notice of the appeal was sent and served on the respondents, and when they were called out, they remained absent and placed exparte.

The appellant Bank has produced copies of the documents to prove its case by way of Annexures-'A' to 'H'.

Arguments of learned counsel for the appellant Bank was heard and perused the records of the case.

Following points arise for my consideration:

1) Whether the appeal filed by the appellant is to be allowed by quashing and setting aside the order of Confirmation of Sale and Sale Certificate both dated 12/02/2019?

2) To what relief, the parties are entitled?

For the following reasons, I answer the above-referred points in the following manner:

REASONS

Point No.1. The appellant Bank has challenged the order of Confirmation of Sale and Sale Certificate issued by the Recovery Officer along with other documents. Though the notice was sent and served on the respondents, they remained absent and they were placed Exparte. The appellant Bank has produced all documentary evidence in support of its appeal and main contention that the hypothecated vehicle was sold for a lower amount, without taking latest valuation by the Recovery Officer. There are also other contentions that the objections raised by Appellant Bank were not considered, and the auction was rushed through by Recovery Officer without following due procedure. These contentions are not rebutted as respondents preferred to remained exparte, and therefore these contentions are deemed to have been admitted. Though recovery of public money is of paramount importance, the actions initiated in execution of Recovery Certificate for recovery of certificate dues have to be in accordance with the rules, which in the instant case are found to be not followed, leading to the present appeal by the certificate holder Bank.

Considering all these aspects, the appeal deserves to be allowed by setting aside the confirmation of sale and issuance of sale certificate, as there is an implied admission by the respondents by not contesting the appeal as stated supra.

I, therefore pass following:

ORDER

The appeal stands allowed by quashing and setting aside  the order of Confirmation of Sale dated 12/02/2019 and  consequently quashing and setting aside the Sale Certificate dated 12/02/2019 passed by the Recovery Officer, DRT-11, Bengaluru. Respondent No.2 shall deliver back the hypothecated vehicle with all documents to the appellant Bank against payment of amount paid by him by the Recovery Officer within 15 days from the date of communication of this order by appellant.

There will be no order as to cost.

(Dictated to the Steno, transcribed by him and after necessary correction signed and pronounced by me in the Virtual Court on this the 12th day o June, 2020).