Coventry Spring And Engineering Company Ltd vs Arci Ltd

Raj Mani Chauhan, J

This Appeal under Section 18(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short the SARFAESI Act) has been directed by the original applicants (for convenience hereinafter referred to as the appellants) against the impugned judgment and order dated 3rd June, 2011 passed by Mr. Irshad Hussian, the learned Presiding Officer (learned P.O.), Debts Recovery Tribunal (DRT), Nagpur, in Transferred Securitisation Application (T.S.A.) No. 73/2010 (Securitisation Application (S.A. No. 71/2007)](Coventry Spring and Engineering Company Ltd. v. Assets Reconstruction Company (India) Ltd. (ARCIL), whereby the learned Presiding Officer has dismissed the aforesaid S.A. in the following terms :

"(1) T.S.A. No. 73/10 is dismissed.

(2) The action of respondent No. 1 is confirmed. The action for sale of properties by respondent No. 1 in favour of respondent No. 6 is also confirmed.

(3) Respondent No. 6 is allowed to deal with these properties and carry on its business in whatsoever manner as per their desire respondent No. 6 is declared absolute owner of these properties situated at Alampur as well as at Nagpur as respondent No. 6 had already paid sale proceeds.

(4) All the charges and claims are satisfied by this order in favour of respondent No. 6 in respect of movable and immovable properties of Alampur Unit as well as Nagpur Unit.

(5) LA. No. 166/11 filed by the proposed intervenor, Conventry Springs Ltd. is decided by passing separate order, whereby I.A. No. 166/11 is rejected.

No order as to costs."

The relevant facts giving rise to the present Appeal may be, briefly stated, as under:

"The appellant No. 1 is a public limited company duly incorporated under the provisions of the Companies Act, 1956 (hereinafter referred to as the company) which carries on various business including that of acquiring and to start engineering workshop with the purpose of manufacturing iron steel and other metal products, specially springs of every description and sizes, jigs, tools, implements, spring doors, bed stands, etc. The company was incorporated on 16th May, 1952 at Calcutta. The company had its manufacturing units at Alampur (Howrah) situated at J.L. No. 25, in Mouza Alampur, P.S. Sankrail, District Howrah, (West Bengal) and at Nagpur situated at Unit D-2, M.I.D.C. Industrial Area, at Hinga, Nagpur (Maharashtra). The company availed various credit facilities sanctioned by the respondent No. 4, the SICOM Limited, against creation of charge over the movable and immovable properties of Nagpur unit which had got the first charge. The company further availed various credit facilities sanctioned by the respondent No. 3, the State Bank of India (SBI), against creation of charge over the movable and immovable properties of Alampur and Nagpur unit. The SBI had second charge over Nagpur property. The SICOM Ltd. later on assigned the debt of the appellant No. 1 company to the appellant No. 2, Conventry Coil-O-Matic (Haryana) Limited. The appellant No. 3, Prakashmal Bafna, the appellant No. 4, Mr. Ashokmal Bafna, the appellant No. 5, Mr. Narendramal Bafiia and the appellant No. 6, Mr. Shri Rajendra Bafna who were the directors of the appellant No. 1 stood guarantors to the credit facilities availed by the appellant No. 1 Company. Admittedly, the appellant No. 1 could not maintain its account as regular. Consequently, the respondent No. 1 classified its account as Non Performing Asset (N.P.A.) and proceeded under the SARFAESI Act to cover its dues."

The Authorized Officer of the respondent No. 3, the State Bank of India, on 19th August, 2004 issued demand notice under Section 13(2) of the SARFAESI Act to the appellant No. 1 indicating outstanding dues as Rs. 5,36,96,882.76 and called upon the appellant No. 1 to pay the outstanding dues within 60 days from the date of issuance of notice. The appellant No. 1 after receiving the aforesaid notice sent its reply to the respondent No. 3 on 13th August, 2004. The respondent No. 3 again on 13th August, 2004 issued demand notice to the appellant No. 1 through its Advocates, Sandersons & Morgans, indicating outstanding dues as Rs. 5,52,70,413.76 and called upon the appellant No. 1 to pay the outstanding dues within 60 days from the issuance of the notice. The appellant No. 1 vide its letter dated 3rd September, 2004 replied to the aforesaid notice.

The respondent No. 3 on 30th March, 2005 assigned the debt of the appellant No. 1 along with underlying securities in favour of the respondent No. 1, Assets Reconstruction Company India Limited (ARCIL) through the deed of assignment. The respondent No. 1 on 26th July, 2006 through its Advocate, Khaitain & Co., again issued demand notice under Section 13(2) of the SARFAESI Act to the appellant No. 1 indicating total outstanding dues as Rs. 6,96,58,955/- and called upon it to pay the outstanding dues within 60 days from the date of issuance of the notice. The appellant on 10th September, 2006 replied to the aforesaid demand notice issued by the Advocate of the respondent No. 1.

The respondent No. 1 thereafter on 7th November, 2006 appointed one Mr. Dhananjay S. Achrekar as its Authorized Officer. Admittedly, the appellant Nos. 1, 3 to 6 could not pay the amount as demanded by the Advocate of the respondent No. 1 through his demand notice. The respondent No. 2, Usha Martin Finance, acting as holder of power of attorney on behalf of the respondent No. 1, on 18th December, 2006 filed an application under Section 14 of the SARFAESI Act before the District Magistrate at Howrah to take over the physical possession of the secured assets of Alampur unit and hand over the same to the Authorized Officer of the respondent No. 1. The Additional District Magistrate (Gen.), Howrah vide order dated 29th March, 2007 allowed the aforesaid application filed by the respondent No. 2. The appellant No. 1 challenged the aforesaid order passed by the Additional District Magistrate (Gen.) at Howrah by filing Writ Petition No. 8287 (W) of 2007 before the Hon'ble High Court of Calcutta. The Hon'ble Court dismissed the Writ Petition observing that the appellant may approach to the DRT for redressal of its grievances.

It is undisputed that the appellant No. 1 had not paid statutory dues payable towards the Provident Fund of the employees, therefore, the respondent No. 5, the Provident Fund Commissioner, Nagpur, on 25th July, 2007 issued warrant of attachment to attach the movable and immovable properties of the appellant's unit at Nagpur. The Assistant Provident Fund Commissioner, the Recovery of Nagpur unit in pursuant to the warrant of attachment attached the immovable and movable properties of the appellant No. 1's Nagpur unit on 29th May, 2007 and prepared Panchanama and inventory of the movables attached by him. One Mr. Indranil Chatterjee, representing the respondent No. 2 (i.e. constituted attorney of the respondent No. 2) on 30th May, 2007 published advertisement in the newspaper 'Economic Times* inviting intending purchasers to purchase the assets of the appellant No. 1 on "As is where is" and "As is what is" basis. The Employees Provident Fund Organization at Kolkata on 25th July, 2007 ordered for attachment of the immovable property of the appellant No. 1's unit at Alampur.

The respondent No. 2 as power of attorney holder of the respondent No. I on 25th August, 2007 took over physical possession of the Nagpur unit of the appellant No. 1 and prepared Panchanama as well as the inventory of the movables found there. He also pasted the possession notice on the building of the unit. The Authorized Officer thereafter on 29th August, 2007 took over the physical possession of Alampur unit in pursuant to the order dated 29th March, 2007 passed by the Additional District Magistrate with the cooperation of the authorized signatory of the District Magistrate. The Authorized Officer had issued sale notice to the appellant No. 1 on 30th August, 2007 as per requirement of the Rule 8(6) and the Rule 6(2) of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as the Rules), through Registered Post A.D. which was received by Mr. P.M. Bafna on 8th September. 2007.

The appellants being aggrieved by the measures taken by the respondent No. 1 under Section 13(4) of the SARFAESI Act including demand notice issued by the advocate of the respondent No. 1 under Section 13(2) of the SARFAESI Act filed Appeal/Securitisation Application (S.A) No. 71/2007 on 8th October, 2007 under Section 17 of the SARFAESI Act in DRT-II, Mumbai.

During pending aforesaid S.A., the respondent No. 1 on 23rd October, 2007 sold Alampur unit and on 24th October, 2007 sold Nagpur unit of the appellant No. 1 to the respondent No. 6 by way of private treaty. The appellant thereafter amended their S.A. challenging the validity of the sale conducted by the respondent Nos. 1 and 2 in favour of the respondent No. 6.

The appellant in the aforesaid S.A. has challenged the demand notice issued by the respondent No. 1 through its Advocate under Section 13(2) of the SARFAESI Act, the measures taken by the respondent No. 1 under Section 13(4) of the SARFAESI Act including the validity of the sale, inter alia, on the following grounds :

"(i). The appellants have challenged the validity of the demand notice on the ground that the demand notice under Section 13(2) of the SARFAESI Act issued by the Advocate of the respondent No. 1 did not indicate crystallized dues. The demand notice also did not indicate when the account of the appellant No. 1 became N.P.A. in fact, the account of the appellant No. 1 had never become N.P.A., therefore, neither the State Bank of India nor its assignee, the respondent No. 1 could issue demand notice under Section 13(2) of the SARFAESI Act. The demand notice also does not contain the details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of the secured debt, therefore, the demand notice issued by the Authorized Officer of the respondent No. 1 is invalid.

(ii) The appellant No. 1 had replied to the demand notice raising its objections but the respondent No. 1 did not deal with its reply/objection and communicated its decision to the appellant No. 1 as contemplated under Section 13(3-A) of the SARFAESI Act which is mandatory.

(iii) The Authorized Officer had taken over possession of the Alampur unit on the basis of the order dated 29th March, 2007 passed by the Additional District Magistrate (Gen.), Howrah. But, the respondent No. 2, the power of attorney holder of the respondent No. 1, without asking the appellant No. 1 for handing over the possession of the Alampur unit straight way approached to the District Magistrate by filing application under Section 14 of the SARFAESI Act to hand over the possession of the Alampur unit. The Authorized Officer of the respondent No. 1 had taken physical possession of the Nagpur unit on the gun point with the help of muscle men breaking open the sealed locks put by the Provident Fund Commissioner. The appellant No. 1 has lodged a complaint with the concerned Police Station complaining that the Authorized Officer had taken over forcible possession of the unit. The respondent No. 1 and its Authorized Officer did not publish the possession notice in two newspapers, one in vernacular language within 7 days from the date of taking over possession of Nagpur unit. The respondent No. 1, therefore, had taken possession of both the units contrary to the rules.

(iv) The Authorized Officer before selling two units did not get the Suit property properly valued through a Government approved valuer, rather he sold the unit on old valuation report while the appellant No. 1 itself had got the Nagpur unit valued which was more than Rs. 22 crores. The sale of Nagpur unit alone could be sufficient to satisfy the dues of the respondent No. 1, therefore. Alampur (Howrah) property was not required to be sold. The Authorized Officer of the respondent No. 1 conducted the sale by way of private treaty which was a pre-meditated sale. The respondent No. 1 before conducting the sale on 23rd October, 2007 of Alampur unit had entered into agreement with BMW Industries Ltd. under which the BMW Industries Ltd. had paid more than Rs. 8 crores to the respondent No. 1. The respondent No. 1 had agreed to pay the dues of BMW Industries Ltd. selling the secured asset. It fact, Mr. Pritesh Vijaykumar Bansod who was director of the respondent No. 6 had been the director of BMW of Shri Harsh Ramgopal was Advocate of respondent No. 6. They at the time of taking over possession of the Nagpur unit were present there. They were present at the time the respondent No. 2 as holder of Power of Attorney of the respondent No. 1 took over the possession of Nagpur unit and prepared inventory of the movable properties found there and prepared Panchanama, too. The respondent No. 6 is the sister concern of BMW. In this way it was a premeditated sale which was conducted by the Authorized Officer by way of private treaty in a fraudulent manner. Both the units were sold by the Authorized Officer at a throwaway price.

(v) The Authorized Officer did not serve advance notice of 30 days to the appellant No. 1 of the proposed sale as contemplated under the Rules 6(2) and 8(6) of the Security Interest (Enforcement) Rules, 2002 (in short the Rules).

(vi) The Authorized Officer had sold not only the mortgaged property in favour of the respondent No. 6 but he had sold the agricultural plots too situated at Alampur (Howrah) which cannot be subject to sale under the SARFAESI Act. The Authorized Officer has sold the employees' quarters and other movable properties of Alampur unit which were not mortgaged by the appellant."

The appellant on the aforesaid grounds have, inter alia, prayed for quashing the demand notice issued by the Advocate of the respondent No. 1 under Section 13(2) of the SARFAESI Act and the measures taken by the Authorized Officer of the respondent No. 1 under Section 13(4) of the SARFAESI Act. The appellants have also prayed for setting aside the impugned sale conducted by the Authorized Officer in favour of the respondent No. 6.

The respondent Nos. 1 and 6 resisting the S.A. filed by the appellant have filed separate affidavits in reply. The respondent No. 1 had filed affidavit of one Mr. Alok Dave, its Vice-President, in reply to the S.A. The deponent in his affidavit had denied the averments made by the appellant in their S.A. The deponent had stated that the appellant No. 1 had availed various credit facilities sanctioned by the respondent No. 3, the State Bank of India, creating charge over the movable and immovable properties both of Alampur and Nagpur units.

The respondent No. 3 had got first charge over the properties of Alampur unit and second charge over Nagpur unit. The respondent No. 3 vide deed of assignment dated 30th March, 2005 assigned the debt of the appellant No. 1 along with underlying securities in favour of the respondent No. 1 which is a Company incorporated under the Companies Act and registered as Securitisation Company pursuant to the Section 3 of the SARFAESI Act. The appellant No. 1 failed to repay the amount of credit facilities sanctioned by the respondent No. 3 as per credit facility agreement, therefore, the respondent No. 3 classified its account as N.P.A. in accordance with the RBI guidelines. The respondent No. 1 as assignee of the respondent No. 3 through its Advocate issued demand notice on 26th July, 2006 under Section 13(2) of the SARFAESI Act to the appellant No. 1 indicating outstanding dues as Rs. 6,96,58,955/- due as on 30th June, 2006. The respondent No. 1 called upon the appellant No. 1 to pay the outstanding dues within 60 days from the date of issuance of the notice but the appellant No. 1 instead of paying the amount raised frivolous objections which were dealt with by the respondent No. 1. The respondent No. 1 communicated to the appellant No. 1 as to how he had raised frivolous objections. The respondent No. 1 had issued demand notice which satisfied the requirement as provided under Section 13(2) of the SARFAESI Act.

The deponent has further stated that appellant had challenged the validity of the demand notice by filing Writ Petition in the Hon'ble High Court of Calcutta which was dismissed by the Hon'ble Court. The appellant carried the matter before the Hon'ble Apex Court by filing SLP which, too, was dismissed by the Hon'ble Apex Court Since the appellants did not pay the outstanding dues as indicated in the demand notice, consequently the Authorized Officer of the respondent No. 1 after informing the Police Station, MIDC, Nagpur, peacefully took over the possession of the Nagpur unit on 25th August, 2007 in the presence of the representative of the appellant No. 1 and its security guards who allowed the Authorized Officer of the respondent No. 1 to enter into premises of the unit. The Authorized Officer after taking over peaceful physical possession of the Nagpur unit prepared panchnama as well as the inventory of the movable properties found there. He handed over the unit to BMW Industries Ltd. as custodian which put its security guards for the security of the unit. The appellant No. 1 never had informed that the Central Provident Fund Commissioner and Employees State Insurance Corporation (E.S.I.C.) have initiated proceedings to recovery their dues.

The deponent has further stated that the Authorized Officer thereafter on the basis of the order passed by the Additional District Magistrate (Gen.) at Howrah vide order dated 29th March, 2007 took over the physical possession of Alampur unit on 29th August, 2007. The Authorized Officer after taking over possession of Alampur unit appointed BMW Industries Ltd. as custodian of the unit which posted its security guard for the security of the unit. The Authorized Officer after taking over physical possession of the units of the appellant No. 1 published possession notice in two daily newspapers as per the requirements under the Rules. He had also sent possession notice to the appellant No. 1. The deponent has further stated that the Authorized Officer thereafter on 30th August, 2007 sent sale notice to the borrower and the guarantors. The sale notice was published by the Authorized Officer in the newspapers too. The Authorized Officer invited expression of interest from such parties who can show their interest in purchasing the secured assets. The Authorized Officer on 12th October, 2007 at 11.00 a.m. received bids in sealed envelopes which were opened by him on the same date at 2.00 p.m. After opening the envelopes containing the bids, the bid the respondent No. 6, Galvanotek Industries Private Limited, was found to be the highest. Consequently the respondent No. 6 was declared as successful purchaser. Alampur unit was sold for Rs. 4.80 crores and Nagpur unit was sold for Rs. 2.80 crores. The Authorized Officer issued Sale Certificate in favour of the respondent No. 6 on 17th October, 2007 for Alampur property and sale certificate for Nagpur property 24th October, 2007 which were registered in the office of Sub-Registrar of Assurances. The respondent No. 6 paid an amount of Rs. 1,86,53,151/- to the Asstt. Provident Fund Commissioner and Recovery Officer, Employees Provident Fund, Nagpur and an amount of Rs. 13,67,263/- to the Recovery Officer, Employees State Insurance Corporation, Nagpur. The respondent No. 1 on 18th January, 2008 assigned its residual interest in the two units in favour of BMW Industries which too assigned it in favour of Parash Goods Private Limited.

The deponent has challenged the jurisdiction of the DRT, Mumbai, on the ground that one of the secured assets i.e. Alampur unit is situated in District Howrah (West Bengal), therefore, DRT, Mumbai, has got no jurisdiction to entertain and decide the S.A. filed by the appellant. The S.A. filed by the appellants if barred by time, too. The deponent has specifically denied parawise submissions made by the appellants in their S.A. The deponent has denied that the respondent Nos. 1 and 2 had issued any advertisement of sale of the secured assets in the Economic Times on 30th May, 2007, The deponent has also denied that the Authorized Officer of the respondent No. 1 had taken over the forcible possession of the Nagpur unit, rather he had taken over the possession of Nagpur unit in the presence of the representative of the appellant No. 1 and its security guards who allowed him entry to the unit. The deponent has denied that the agricultural plots at Alampur were sold by the Authorized Officer under the SARFAESI Act. He has stated that although the sold plots bear revenue numbers in the recovery records, but they were not being used for agricultural activity. Alampur unit is located on the aforesaid plots where no agricultural activity is being done since long, rather the entire plots were being used for the industrial activities related to the unit, therefore, those plots could be sold by the Authorized Officer under the SARFAESI Act. The deponent has further denied that the Authorized Officer had sold the unsecured assets of the appellant No. 1 in favour of the respondent No. 6.

The deponent has further stated that the respondent No. 1 through its Advocates, Khaitan & Co., had issued demand notice dated 26th July, 2006 under Section 13(2) of the SARFAESI Act to the borrower calling upon it to pay the outstanding dues within 60 days from the date of issuance of notice but it could not pay the amount as per the demand notice, therefore, the Authorized Officer of the respondent No. 1 proceeded under Section 13(4) of the SARFAESI Act. The Authorized Officer took over physical possession of the secured assets in accordance with the provisions under the SARFAESI Act as well as the Rules framed thereunder. The Authorized Officer had obtained valuation report of the secured assets and he on 30th August, 2007 sent notice under Rule 6(2) and the Rule 8(6) of the Rules to the appellant No. 1 informing it that the secured asset will be sold after 30 days. The Authorized Officer of the respondent No. 1 had sold the secured assets in favour of the respondent No. 6 in transparent and fair manner. The deponent has denied the contention of the appellant that it was a premeditated sale which was conducted in a fraudulent manner colluding with BMW Industries Limited and the respondent No. 6. The Authorised Officer conducted the sale following the provisions under the Rules 6 and 8 of the Rules. The deponent has sought for dismissal of the S.A. filed by the appellants.

The respondent No. 6 filed affidavit of one Mr. Kedarnath Barnwal its Director in reply to the aforesaid SA filed by the appellant. The deponent has challenged the locus of the appellant to file the present S.A. on the ground that the secured assets belongs to the appellant No. 1 Company. But the Company is under liquidation. Therefore, the appellant. No. 1 itself cannot file SA rather the Company is to be represented by the Official Liquidator. The appellant No. 1 therefore has got no locus standi to file the S.A. The respondent No. 1 after issuing demand notice to the appellant No. 1 under Section 13(2) of the SARFAESI Act, proceeded under Section 13(4) of the SARFAESI Act. All the measures contemplated under Section 13(4) of the SARFAESI Act including sale has been completed. Therefore, the S.A. filed by the appellant has become infructuous and is liable to be dismissed. The respondent No. 6 is bona fide purchaser of the secured asset for value. It after purchasing the secured asset had discharged the liabilities of EPF dues, Employees State Insurance Corporation's dues and other statutory dues payable by the appellant No. 1 It has made the unit running after having incurred huge expenses towards maintenance and overhauling of machines, maintenance of factory building, servants, residential quarters, etc. In view of all these facts, the impugned sale cannot be set aside.

The deponent has further stated that as per contention of the appellant the Agricultural plots lying in Alampur have been sold by the authorized Officer but the fact is otherwise Although, the plots sold by the Authorized Officer are recorded in the Revenue Record as agricultural plots, but no agricultural activity is being carried out on those plots since long, rather the aforesaid plots were being used for activities relating to the Industrial Unit of the appellant No. 1. The deponent has stated that the Authorized Officer of appellant No. 1 following the procedure as provided under the SARFAESI Act as well as Rules has conducted the sale in favour of respondent No. 6. The deponent has stated that the measures taken by the Authorized Officer of appellant No. 1 under Section 13(4) of the SARFAESI Act as well as the impugned sale conducted by him is in accordance with the provisions under SARFAESI Act as well as Rules. The deponent has sought for the dismissal of the S.A. filed by the appellant.

The parties in support of their contention have filed affidavits and documentary evidence. The S.A. was pending in DRT-II, Mumbai. During the course of final arguments, the learned Counsel for the parties were of the view that one of the secured properties is situated at Nagpur, therefore, DRT, Nagpur, has jurisdiction in the matter. The learned Presiding Officer, DRT-II, Mumbai, consequently with the consent of the parties returned the S.A. to the appellants for presentation in DRT, Nagpur. The appellant thereafter presented the S.A. in the DRT, Nagpur, where it was registered as T.S.A. No. 73/2010.

The learned Presiding Officer after hearing the learned Counsel for the parties while passing the final judgment formulated as many as following 12 points for determination:

"(i) Whether this Tribunal is having jurisdiction to entertain and adjudicate the matter?

(ii) Whether S.A. is barred by limitation?

(iii) Whether the loan was sanctioned by respondent No. 3 to the appellant No. 1 company whether the documents were executed by the borrower as well as guarantors?

(iv) Whether satisfaction of the charge in respect of immovable properties was signed on form No. 17, under Section 138 of Companies Act, by the Authorized Officer of respondent No. 3.

(v) Whether respondent No. 32 was authorized to assign the debts and secured assets particularly in respect of immovable properties at Alampur Unit as well as at Nagpur Unit to respondent No. 1 ARCIL?

(vi) Whether respondent No. 2 i.e. Usha Martin was rightly authorized by respondent No. 1 and/or respondent No. 3 as Enforcement Agent?

(vii) Whether notice under Section 13(2) can be issued by respondent No. 3 and or respondent No. 1 through Advocates and/or this notice is to be signed only by Authorized Officer?

(viii) Whether applicant have made proper representation in terms of Section 13(3-A) of SARFAESI Act and whether replies were properly sent by respondent No. 1/respondent No. 3 to the applicant No. 3 Company and its directors/guarantors?

(ix) Whether notice was sent for possession and sale of the properties and/or published in the newspaper and proper procedure has been adopted?

(x) Whether assignment deed executed by respondent No. 3 in favour of respondent No. 1 requires registration and stamp duty?

(xi) Whether Alampur property is an agricultural land and whether it can be enforced in view of the provisions of Section 31 of SARFAESI Act?

(xii) Whether the action of respondent No. 1 in selling the property in favour of the respondent No. 6 is proper?"

The learned Presiding Officer decided point Nos. 1, 3 to 9 in the affirmative. The learned Presiding Officer held that the S.A. filed by the appellants is within time and decided point No. 1 in negative. As regards point No. 10, the learned Presiding Officer held that the respondent No. 1 company is registered as trust as well as also registered under the provisions of SARFAESI Act. Therefore, no registration is required as well as the stamp duty. Regarding point No. 11, the learned Presiding Officer held that Alampur property is recorded as agricultural plot in the revenue record. But the appellants failed to show that agricultural activities were being carried out on the aforesaid plots, rather the evidence available on record shows that the unit of appellant No. 1 was established on the aforesaid plots and the land was being used relating to the activity of the unit. The learned Presiding Officer in view of the law laid down by the Hon'ble High Court as well as by the Hon'ble Apex Court in cases referred in the judgment held that since the appellants have failed to prove that the land was being used for agricultural purpose, rather the land was being used for the industrial purpose. Therefore, the respondent No. 1 Bank could proceed against those plots under the SARFAESI Act for realization of its dues by selling the those plots. The learned Presiding Officer held that the Authorized Officer of respondent No. I had sold the secured asset following the statutory provisions under the SARFAESI Act as well as the Rules framed thereunder. Therefore, the sale conducted by the Authorized Officer was perfectly valid. In view of the findings on the aforesaid points, the learned Presiding Officer did not find any merit in the T.S.A. filed by the appellants. Consequently, the learned Presiding Officer vide impugned judgment and Order dated 3rd June, 2011 dismissed the aforesaid T.S.A.

The appellants being aggrieved by the aforesaid judgment and order passed by the learned Presiding Officer have preferred the present Appeal. The Appeal has been resisted by the respondent Nos. 1 and 6.

Heard the learned Counsel for the parties and perused the materials available on record.

It is undisputed that the appellant No. 1 had availed various credit facilities sanctioned by the respondent No. 3 State Bank of India. The appellant had created equitable mortgage of Alampur (Howrah) and Nagpur properties in favour of respondent No. 3 to secure the amount of credit facilities availed by it. It had also hypothecated the plant and machinery and other immovable properties of the two units i.e. Alampur and Nagpur Unit in favour of the respondent No. 3. It is also undisputed that the appellant No. 1 committed default in repayment of the instalments of the amount of credit facilities availed by it. It is also undisputed that the Authorized Officer of respondent No. 3 had issued demand notice under Section 13(2) of the SARFAESI Act to the appellant on 9th August, 2004 indicating outstanding dues of Rs. 5,36,95,782.76 and called upon appellant Nos. 1, 3 to 5 to pay the outstanding dues indicated in the notice within 60 days from the date of receipt of notice. It is also undisputed that the respondent No. 3 vide Deed of Assignment dated 30th March, 2005 had assigned the debt of appellant in favour of the respondent No. 1 (ARCIL). The respondent No. 1 through its Advocate, Khaitan & Co., on 26th July, 2006 also issued demand notice under Section 13(2) of the SARFAESI Act to the borrower indicating outstanding dues of Rs. 6,96,58,955/- and called upon it to pay the outstanding dues within 60 days from the date of receipt of notice.

Although the appellant has challenged the impugned order on several grounds, but at the appellate stage, the learned Counsel for the appellant did not dispute the action taken by either respondent No. 3 or the respondent No. 1 up to the stage of issuing demand notice. The learned Counsel for the appellant at the appellate stage confined his arguments on the following points:

"(i) The physical possession of Nagpur and Alampur properties were not taken by Authorized Officer of respondent No. 1 in accordance with statutory provisions under the SARFAESI Act as well as the Rule 6 and the Rule 8 of the Rules.

(ii) The Authorized Officer has conducted the sale of the secured asset in violation of Rules 6(1)(2) and 8(5), (6), (8) of the Rules.

(iii) The impugned sale conducted by the Authorized Officer of the respondent No. 1 was pre-meditated sale which was conducted by him in collusion with BMW Industries Ltd. and Galvanotek Industries Private Limited, the respondent No. 6 in a fraudulent manner at throwaway price.

(iv) The Authorized Officer of the respondent No. 1 had sold agricultural properties of Alampur Unit. He even sold the non-mortgaged properties."

The first contention of the learned Counsel for the appellant is that the Authorised Officer had taken over the physical possession of Alampur property on the basis of order dated 29th March, 2007 passed by the Additional District Magistrate (Gen.), Howrah on the application filed by the respondent No. 2, Usha Martin Finance Limited, holder of power of attorney of the respondent No. 1, under Section 14 of SARFAESI Act. The learned Counsel contended that Section 14 of SARFAESI Act provides that where the possession of secured asset is required to be taken by the secured creditor or if any of the secure assets is required to be sold or transferred by secured creditor under the provision of this Act, the secured creditor may, for the purpose of taking possession or control of any such secured assets, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured or other documents relating thereto may be situated or found, to take possession thereof. The learned Counsel contended that the Chief Metropolitan Magistrate or the District Magistrate is persona designata. The power under Section 14 of the SARFAESI Act can be exercised by the Chief Metropolitan Magistrate or the District Magistrate only as the case may be not by any other officer on their behalf. The learned Counsel contended that it may be argued on behalf of the respondent Nos. 1 and 6 that the District Magistrate as used under Section 14 of the SARFAESI Act includes Addl. District Magistrate who enjoys the same power as the District Magistrate. It may be also argued that the Addl. District Magistrate on the basis of delegation of power by District Magistrate can exercise the power as the District Magistrate. But the SARFAESI Act is special statute which empowers the Chief Metropolitan Magistrate or the District Magistrate only to exercise conferred on them under Section 14 of the SARFAESI Act. The statute does not provide for any proviso for delegation of power by the Chief Metropolitan Magistrate or the District Magistrate. Nowhere in the SARFAESI Act, it is provided that the District Magistrate will include Addl. District Magistrate. Therefore, only Chief Metropolitan Magistrate of the District Magistrate as the case may be can exercise the power under Section 14 of the SARFAESI Act. No other authority can exercise such power. Therefore, the order passed by the Addl. District Magistrate for taking over the physical possession of the Alampur property was, without jurisdiction and nullity in the eyes of law. On the basis of such order, the possession taken over by the Authorized Officer of the Alampur property is not in accordance with law and is illegal. The learned Counsel in support of his argument has placed reliance on a case Manjudevi R. Somani v. Union of India, IV (2013) BC 694 (DB) : AIR 2013 Guj. 242, decided by the Division Bench of Hon'ble High Court of Gujarat.

The learned Counsel further contended that as regards physical possession of Nagpur property taken over by the Authorized Officer is concerned, the Recovery Officer and PF Commissioner Nagpur on 25th May, 2007 had issued warrant of attachment to attach the movable and immovable properties of Nagpur unit. The Nagpur properties were accordingly attached by the Assistant PF Commissioner/Recovery Officer, Nagpur Unit on 29th May, 2007. The Asst. P.F. Commissioner prepared Panchanama and put his lock on the factory premises and sealed the same. Thereafter, Authorized Officer on 25th August, 2007 with the help of Police and muscle men took over the physical possession of the Nagpur property at the gun point by breaking open the locks put by the Asst P.F. Commissioner. The learned Counsel contended that secured creditor may take over the physical possession of the secured assets in two ways under the SARFAESI Act.

(i) He can take over the physical possession of the secured assets with the consent of the borrower/mortgager. If the borrower/mortgagor allows the Authorized Officer to take over the possession of the secured asset, Authorized Officer can take over the physical possession of the secured asset.

(ii) In case, the borrower/mortgager refuse to hand over physical possession of secured assets, the secured creditor has to invoke the provision under Section 14 of the SARFAESI Act i.e. he can move an application before the Chief Metropolitan Magistrate or the District Magistrate as the case may be for taking over the possession of secured assets.

The learned Counsel contended that secured creditor cannot take the law in his own hands. He cannot take over the physical possession of the secured assets by force. In this case, the respondent No. 2 Usha Martin as holder of power of attorney on behalf of respondent No. 1 had taken over forcible possession of the secured asset i.e. Nagpur property on the gun point with the help of muscle men. Mr. Prakash Bafna director as well as authority holder of appellant No. 1 on the same date i.e. on 25th August, 2007 lodged a complaint with the Police of MIDC Police Station, Higna Road, Nagpur, regarding forcibly taking over possession of Nagpur Unit by the respondent No. 2. Therefore, physical possession taken over by the respondent No. 2 of the Nagpur property is illegal. The measures taken by the respondent No. 2 under Section 13(4) of the SARFAESI Act in taking over the physical possession of the secured asset of Nagpur property is illegal. The learned Counsel in support of his argument has placed reliance on a case Clarity Gold Pvt. Ltd. v. State Bank of India, III (2012) BC 416 (DB) : AIR 2011 Bom. 42 decided by the Division Bench of Hon'ble High Court of Bombay.

The learned Counsel further contended that as per requirement of Rule 8(2) of the Rules the possession notice is to be published in two newspapers one in vernacular language within seven days from the date of taking over possession of the secured asset. In this case, the possession notice regarding Alampur property was published on 30th August, 2007 only in one paper 'Aajkal' which was in Bengali language i.e. vernacular language. But he had not published the notice in English newspaper. No possession notice as contemplated under Rule 8(2) of the Rules was published by the respondent No. 2 regarding Nagpur property. The possession taken over the Authorized Officer and the respondent No. 2 of the two secured assets i.e. Alampur and Nagpur properties was not in conformity with the Rule 8(2) of Cue Rules. Therefore, the action of the Authorized Officer and the respondent No. 2 is vitiated and liable to be quashed.

The second contention of the learned Counsel is that in the present case, the Authorized Officer has conducted the sale of the secured asset by way of private treaty. The learned Counsel contended that Rule 6(1) of the Rules provides as many as four modes for selling the movable secured asset and these modes are:

"(a) by obtaining quotations from the parties dealing in the secured assets or otherwise interested in buying such assets;

(b) by inviting tenders from the public;

(c) by holding public auction;

(d) by way of private treaty."

Likewise, Rule 6(1), Rule 8(5) of the Rules provides the same mode for selling the immovable secured assets.

The learned Counsel contended that it is well-settled principle of law that the secured asset has to be sold by the secured creditor or his Authorized Officer in a manner which can fetch the best possible price as the same will be in the interest of the borrower as well as the secured creditor. Normally, the secured asset should be sold by obtaining quotation from the persons dealing with the similar secured assets or by inviting tenders from the public or holding public auction so that the maximum number of intending purchasers may participate in the sale who may offer highest price on the competition basis. If the secured creditor or Authorized Officer adopts aforesaid three modes to sell the secured assets and that sale fails only then they, with the consent of the borrower, can proceed to sell the secured assets by way of private treaty. The Legislature had been conscious enough to prescribe the aforesaid mode of sale in the Rules to make the sale more transparent.

The learned Counsel contended that in this case, the impugned sale was pre-mediated sale with the collusion of BMW Industries Ltd. and the purchaser respondent No. 6. The learned Counsel contended that there had been agreement on 17th August, 2007 between the respondent No. 1 ARCIL and BMW Industries Ltd. where the BMW Industries Ltd. had paid more than Rs. 8 crores by way of advance to the ARCIL which was to be adjusted by the ARCIL out of sale proceeds of the secured assets. The learned Counsel contended that the respondent No. 2 had taken over the physical possession of the secured asset of Nagpur property on 25th August, 2007. It had got Panchanama prepared on the spot. Out of the Panches of the Panchanama, two Panches were Mr. Pritesh Vijaykumar Bansod and Hrsbram Gopal Bansal. They were Advocates of the respondent No. 6, Mr. Pritesh Vijaykumar Bansod had also been directors of both respondent No. 6 and BMW Industries Ltd. The respondent No. 6 is none else but the sister concern of BMW Industries Ltd.

The third contention of the learned Counsel is that Howrah and Nagpur properties were sold by the Authorized Officer for Rs. 7,60,00,000/- but the Authorized Officer had not fixed any reserve price. The immovable Nagpur property was sold by the Authorized Officer for Rs. 2,50,00,000/- and movable property for Rs. 30,00,000/- while the appellant had got the movable and immovable properties of Nagpur unit valued through Government approved valuer. The Nagpur property alone was worth for more than Rs. 22 crores. The Authorized Officer therefore as contemplated under Section 8(5) of the Rule was required to sell only Nagpur property which could satisfy the entire outstanding dues of respondent No. 1. But the Authorized Officer colluding with BMW Industries Ltd. and respondent No. 6 sold the property in an unfair and fraudulent manner that too at throwaway price. Therefore, the impugned sale conducted by the Authorized Officer is vitiated and liable to be cancelled.

The fourth contention of the learned Counsel is that the Authorized Officer, as per the requirement of Rules 6(2) and 8(6) of the Rules, had to serve advance notice of 30 days of the proposed sale to the borrower. The notice has to indicate the mode of sale which is going to be followed by the Authorized Officer, the reserve price of the property to be sold, date and time of the sale. It has been contended by the respondent No. 1 that it has sent the advance notice to the borrower as contemplated under Rules 6(2) and 8(6) of the Rules on 30th August, 2007. But the notice did not contain the details as pointed by him. Therefore, the notice sent by the respondent No. 1 is not in conformity with the Rules 6(2) and 8(6) of the Rules. The respondent No. 1 has alleged that it had issued letter of expression of interest dated 1st October, 2007 but it was not served to the appellant No. 1. The learned Counsel contended the compliance of advance notice of 30 days to the borrower of the proposed sale is mandatory as contemplated under Rules 6(2) and 8(6) of the rules. The learned Counsel in support of his argument placed reliance on the following cases:

"(i) Manoj D. Kapasia v. Union of India, III (2005) BC 592 (DB) : 2005(2) Bankers Journal 593, decided by the Hon'ble High Court of Bombay.

(ii) Swastik Agency v. State Bank of India, Bhuvneshwar, AIR 2009 Orissa 147, decided by the Hon'ble High Court of Orissa."

The fifth contention of the learned Counsel is that Rule 8(8) of the Rules provides that the sale by any method other than public auction or inviting tender from public shall be on such term as may be settled between the parties in writing. As per requirement under this rule, the terms of the sale was to be settled by the Authorized Officer, in writing, with consultation of the borrower, but the respondent No. 1 has not filed any settled term which had been reduced in writing. The learned Counsel contended that the appellant was entitled to have notice of proposed sale and method of the sale as well as date of sale as well as reserve price for which his assets are going to be sold, so that he can redeem the mortgage or he could bring buyer of his own choice who could offer appropriate market price. The Authorized Officer neither consulted the appellant No. 1 nor informed it regarding the mode of sale, reserve price of the secured asset and date of sale. Therefore, the sale is vitiated and liable to be cancelled. The learned Counsel in support of his argument has placed reliance on following cases.

(i) A. Varalakshmi v. The Chief Manager, Punjab National Bank, Asset Recovery Management Branch (ARMB), Chennai, (MANU/TN/1074/2012) decided by the Hon'ble High Court of Madras.

(ii) J. Rajeev Subramaniam v. Pandyas, AIR 2012 Mad. 12, decided by the Hon'ble High Court of Madras (Madurai Bench).

The sixth contention of the learned Counsel that admittedly the Alampur property consist of so many revenue plots which are recorded as agricultural land in the revenue record. The respondent No. 1 on 26th August, 2006 through its Advocates, Khaitan & Co., issued demand notice under Section 13(2) of the SARFAESI Act to the borrowers indicating outstanding dues of Rs. 6,96,58,955. The notice is supported with relevant annexure. In Annexure 2 contains the details of immovable properties wherein it is mentioned piece and parcels of land admeasuring 12, 1875 acres situated at Alampur on National Highway No. 6, ANDUL Distt. Howrah, appertaining to Dag Nos. 202, 206, 207, 208, 209, 190/625, 190, 191, 205, 204, 203, 97, 98, 100, 101, 141, 38, 39, 41, 42, 92, 93, 104, 201, 208, 209, and 210 under various Khatians within Mouza Alampur registered in the name of Coventry Spring and Engineering Company Limited and piece and parcels of land admeasuring 609055 sq. metres at Plot No. D-2 in the Nagpur Industrial Area of MIDC within the village limits of Wadi Taluka within District Nagpur abutted and abounded on the North by plot No. D-2/A on the south by plot Nos. D-1/A and D-1.

The respondent No. 3 got the valuation report dated 29th March, 2003 relating Alampur, Howrah property through Government valuer, copy of the valuation report reflects as many as 23 plots as 'Sali Land' (agricultural land). The report is supported with the map. From perusal of the map it appears that only some plots are covered and major plots are open. All the plots in Alampur were not used for the industrial purpose rather most of the plots were used for agricultural purpose. Therefore, the respondent could not sell those plots under the SARFAESI Act. The sale of the agricultural plots by the Authorized Officer is in contravention of the SARFAESI Act. The learned Counsel also contended some of the immovable properties like servant quarters and some of the movable properties which were not mortgaged were also sold therefore the impugned sale is invalid and liable to be cancelled.

Per contra, the learned Counsel for the respondent Nos. 1 and 6 supporting the impugned judgment and order passed by the learned Presiding Officer firstly contended that the S.A. filed by the appellants was barred by time. The learned Counsel contended that the appellants had initially filed S.A., in the DRT-II, Mumbai, but at the time of final hearing of the S.A. the appellants felt that the DRT-II, Mumbai, had got no jurisdiction to entertain and hear the S.A. Consequently, the appellants withdrew the S.A. and filed the same in the DRT, Nagpur, which was barred by time. But the appellants had not filed any application before the learned Presiding Officer, DRT, Nagpur, for condonation of delay. The learned Counsel contended that the period spent by the appellants before the DRT-II Mumbai, will not be excluded for computation of period of limitation. The S.A. filed by the appellant in DRT, Nagpur, was a fresh S.A. although they had filed the S.A. after return of the S.A. by the DRT-II, Mumbai. But S.A. filed by them in DRT, Nagpur, cannot be treated in continuation of S.A. filed in DRT-II, Mumbai. The appellants were, therefore, required to move application for condonation of delay as the S.A. filed by them was barred by time. But, they did not move any such application. The S.A. filed by the appellants was liable to be dismissed, inter alia, on the ground of limitation too.

The second contention of the learned Counsel for the respondent No. 1 is that as regard the legality of the physical possession of the secured assets taken over by the Authorized Officer of the respondent No. 1 is concerned, the Authorized Officer of the respondent No. 1 had taken over the physical possession of the Alampur property on the basis of order passed by the Additional District Magistrate, Howrah on the application filed by the respondent No. 2 Usha Martin in the capacity of holder of power of attorney on behalf of the respondent No. 1 under Section 14 of the SARFAESI Act. Although Section 14 of the SARFAESI Act provides that Chief Metropolitan Magistrate or the District Magistrate, as the case may be, on the application of the secured creditor may take over the physical possession of the secured asset to be handed to him and the application filed by the respondent No. 2 under Section 14 of the SARFAESI Act was finally disposed of by the Additional District Magistrate, Howrah. But the Additional District Magistrate, Howrah, enjoyed the same power as the District Magistrate. The District Magistrate includes the Additional District Magistrate, therefore, the order passed by the Additional District Magistrate shall be deemed to be order passed by the District Magistrate. The Authorized Office of the respondent No. 1 had taken over the physical possession of the secured assets i.e. Alampur property on the basis of the order passed by the Additional District Magistrate under Section 14 of the SARFAESI Act, therefore, the action of taking over physical possession of Alampur property by the Authorized Officer of the respondent No. 1 is in accordance with law which does not suffer from any illegality.

As regards the possession of another secured assets i.e. Nagpur property by the respondent No. 2 is concerned, the advocate of respondent No. 1 had issued demand notice under Section 13(2) of the SARFAESI Act to the borrower to pay the outstanding dues within 60 days from the date of the issuance of the notice. The borrower/appellant No. 1, could not pay the amount as per the demand notice, therefore, the respondent No. 2 as holder of power of attorney on behalf of respondent No. 1 on 25th August, 2007 reached at Nagpur property to take over the physical possession of the property. The representatives of the respondent No. 1 as well as the security guards of respondent No. 1 were present there. They allowed the officers of respondent No. 2 to enter into the secured premises and take over the physical possession of the same. Consequently, the respondent No. 2 took over physical possession of the secured asset and prepared Panchanama on the spot. He also prepared inventory of the movable properties found there. He sent copy of the panchanama and copy of the inventory of the movable properties to the borrower. The respondent No. 2 had not taken over the physical possession of the Nagpur property by force, rather its officer, with the consent of the representative of the appellant No. 1, had taken over the physical possession of the Nagpur property, therefore, the action of the Authorized Officer cannot be said to be illegal.

The third contention of the learned Counsel for the respondent No. 1 is that the appellants have challenged the sale conducted by the Authorized Officer on the ground the Authorized Officer of the respondent No. 1 had not obtained valuation of the Suit property. He had not fixed reserve price. He had not served any advanced notice of 30 days of the proposed sale to borrower as contemplated under the Rules 6(2) and 8(6) of the Rules before the conducting the sale. The Authorised Officer had conducted the sale by way of private treaty which was a pre-meditated sale. The Authorized Officer had sold the secured assets colluding with BMW Industries Limited and the purchaser, the respondent No. 6 on a very low price.

The learned Counsel contended that as regards the valuation is concerned the respondent No. 3, the State Bank of India, had already obtained valuation of the Alampur (Howrah) property through P.K. Mukherjee and Associates, Kolkata, a Government approved valuer. Mukherjee had submitted valuation report on 29th May, 2003. The respondent No. 1 got Nagpur property also valued. The sale has been conducted by the Authorized Officer on the basis of the two valuation reports. The learned Counsel contended that although it was a sale by way of private treaty, but such mode of sale is permissible under the Rule 6(1)(d) and the Rule 8(5)(d) of the Rules. The learned Counsel contended that Rule 8(8) of the Rules provides that the sale by any methods other than public auction or public tender, shall be on such terms as may be settled between the parties, in writing. The word 'parties' as used under the Rule 8(8) of the Rules, refers to the parties of the sale is secured creditor or his Authorized Officer and the intending purchaser not the borrower. The learned Counsel in support of his argument has placed reliance on unreported judgment dated 31st January, 2013 in case Mr. Alex Kuruvilla v. Oriental Bank of Commerce, (Notice of Motion No. 2778 of 2009 in Suit No. 1910 of 2009) decided by the Hon'ble High Court of Bombay. The Authorized Officer, in the instant case had conducted the sale on the terms and conditions settled with the purchaser. Although the appellants had alleged as it was pre-meditated sale, but there is no reliable evidence on record to show that it was a pre-meditated sale which was conducted by the Authorized Officer in a fraudulent manner with the collusion of the respondent No. 6. In feet the Authorized Officer had sold the secured asset for proper market price in fair and transparent manner which does not suffer from any illegality.

The fourth contention of the learned Counsel is that as regards compliance of Rule 6(2) and Rule 8(6) of the Rules is concerned, the appellants have alleged that no advance notice under the Rule 6(2) and Rule 8(6) of the Rules had been served by the Authorized Officer to the borrower before 30 days of the proposed sale but this submission of the learned Counsel for the appellant is incorrect. The learned Counsel contended that an advance notice of 30 days was sent by the Authorized Officer to the appellant on 30th August, 2007. The appellant No. 1 had admitted the receipt of such notice, but he has contended that the envelope contained only blank paper which is incorrect. In fact Authorized Officer of the respondent No. 1 had given advance notice to the borrower informing him that secured assets will be sold after 30 days. In this way, the appellant No. 1 had clear information about the proposed sale of the secured assets. The Authorized Officer had conducted the sale complying with the provisions under the Rules 6(2) and 8(6) of the Rules.

The learned Counsel further contended that the appellant had challenged the sale on the ground that the agricultural plots at Alampur had been sold by the Authorized Officer which are not covered under the SARFAESI Act and, therefore, the impugned sale is illegal and is liable to be quashed. The learned Counsel contended that although the plots sold by the Authorized Officer bears revenue plot Numbers which are recorded as agricultural pots in the revenue records but no agricultural activity was being done on the aforesaid plots since long, rather the aforesaid plots were being used for activities relating to the industrial unit at Nagpur. The plots, for all the practical purposes, had ceased to be agricultural plots. The use of those plots, for all the practical purposes, had been converted as non-agricultural plots, but for the entry in the revenue records. The learned Counsel contended that if the agricultural plots are not being used for the agricultural purposes, rather they are being used for non-agricultural purposes, they cease to be agricultural plots and can be sold under the SARFAESI Act. The learned Counsel in support of his argument has placed reliance on the following cases:

"(i) Commissioner of Income Tax, West Bengal, Calcutta v. Raja Benoy Kumar Sahas Roy, 466 Income Tax Reports 1957, decided by the Hon'ble Apex Court.

(ii) D. Ravichandran v. Manager, Indian Overseas Bank, (2006) 132 Comp. Cas. 803 (Mad.), decided by the Hon'ble High Court of Madras.

(iii) Gajula Exim (P) Ltd. v. Authorized Bank, Andhra Bank, IV (2008) BC 274 : AIR 2008 A.P. 184, decided by the Hon'ble High Court of Andhra Pradesh."

The learned Counsel contended that the Authorized Officer has conducted the sale following the Rules provided under the Rules 6 and 8 of the Rules which is a perfectly legal sale.

I have given anxious consideration to the rival submissions advanced by the learned Counsel for the parties. After going through the evidence on record as well as after going through the relevant provisions relating to the measures to be taken by the secured creditor or the Authorized Officer under Section 13(4) of the SARFAESI Act as well as under the Rules which lay down the procedure to be followed by the Authorized Officer for conducting the sale of movable and immovable assets, I find force in the submission of the learned Counsel for the appellants.

Before dealing with the matter on merit, I would like to deal with the first contention of the learned Counsel for the respondent Nos. 1 and 6 regarding limitation.

As regards limitation:

The learned Counsel for the respondent Nos. 1 and 6 have raised preliminary objection that the S.A. filed by the appellants is barred by time. The learned Counsel contended that the appellants initially had filed S.A. in DRT-II, Mumbai, but at the time of final hearing they realized that the S.A. should have been filed in DRT, Nagpur, within whose jurisdiction one of the secured assets i.e. Nagpur property is situated. The appellants therefore withdrew the S.A. filed by them in DRT-II Mumbai, and filed the same before DRT, Nagpur. The time spent during the pending S.A., before DRT-II, Mumbai will not be excluded for computation of limitation, rather the same could be a ground for condoning the delay. The learned Counsel contended that the learned Presiding Officer although has given a finding that the S.A. is not barred by time, but the finding of the learned Presiding Officer is contrary to the law. The period of limitation will not be computed from the date when S.A. was returned to the appellant for presentation before the DRT, Nagpur rather the period of limitation will be computed from the date when the appellant felt aggrieved by the measures taken by the secured creditor or its Authorized Officer.

From a perusal of impugned judgment passed by the learned Presiding Officer it appears that the Presiding Officer, inter alia has framed point No. 2 as follows for determination :

"Whether the S.A. is barred by limitation?"

The learned Presiding Officer has dealt with the above point and observed that the sale of Alampur property was conducted by the respondent on 23rd October, 2007 and of Nagpur property on 24th October, 2007. While the appellants had filed S.A. on 8th October, 2007 before the DRT-II, Mumbai where the opposite parties filed their replies. The S.A. was returned by DRT-II, Mumbai on 6th July, 2010 for presentation before the DRT, Nagpur. The appellants filed the S.A. in DRT, Nagpur on 15th July, 2010. The learned Presiding Officer in view of the law laid down by the Hon'ble Apex Court in case Indian Overseas Bank v. Ashok Saw Mills, HI (2009) BC 640 (SC) : VI (2009) SLT 10 : (2009) 8 SCC 363, has held that the S.A. filed by the appellants is within the period of limitation.

The appellants did not challenge the aforesaid finding recorded by the learned Presiding Officer by filing any cross-appeal or cross-objections. Although the appellants at the appellate stage supporting the impugned order passed by the learned Presiding Officer, DRT can challenge the finding recorded by the learned Presiding Officer on any issue which is against them without filing any cross-Appeal of cross-objection. But the learned Presiding Officer on account of pending S.A. in DRT-II, Mumbai as well as the law laid down by the Hon'ble Apex Court in case Indian Overseas Bank v. Ashok Saw Mills, has held that the S.A. filed by the appellants is, within time. The aforesaid finding of the learned Presiding Officer, DRT, Nagpur, in my opinion, does not suffer from any error which does not call for any interference. The preliminary and objection raised by respondent Nos. 1 and 6 is not acceptable.

Now, I would like to deal with the rival contentions raised by the learned Counsel for the parties on merit.

In this case, the appellants have challenged the illegality of the measures taken by the secured creditor i.e. physical possession taken over by the Authorized Officer/holder of power of attorney of the respondent No. 1 of secured assets i.e. Alampur property and Nagpur prime property as well as the impugned sale conducted by the Authorized Officer on the grounds as mentioned above. The Rule 6 of the Rules provides the procedure to be followed by the secured creditor or his Authorized Officer to sell the movable secured assets and the Rule 6 of the Rules for sale of the immovable secured assets. It will be relevant to refer the aforesaid rules for proper appreciation of the matter in issue for consideration before this Tribunal which are being extracted below :

"6. Sale of movable secured assets--

(1) The Authorized Officer may sell the movable secured assets taken possession under Sub-rule (1) of Rule 4 in one or more lots by adopting any of the following methods to secure maximum sale price for the assets, to be sold--

(a) obtaining quotation from parties dealing in the secured assets or otherwise interested in buying such assets; or

(b) inviting tenders from the public; or

(c) holding public auction; or

(d) by private treaty.

(2) The Authorized Officer shall serve to the borrower a notice of thirty days for sale of the movable secured assets, under Sub-rule (1):

Provided that if the sale of such secured asset is being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice in two leading newspapers, one in vernacular language, having sufficient circulation in that locality by setting out the terms of sale, which may include:

(a) details about the borrower and the secured creditor;

(b) description of movable secured assets to be sold with identification marks or number, if any, on them;

(c) reserve price, if any, and the time and manner of payment;

(d) time and place of public auction or the time after which sale by any other mode shall be completed;

(e) depositing earnest money as may be stipulated by the secured creditor;

(f) any other thing which the Authorized Officer considers it material for a purchaser to know in order to judge the nature and value of movable secured assets.

(3) Sale by any methods other than public auction or public tender, shall be on such terms as may be settled between the parties in writing.

Sale of immovable secured assets--

(1) Where the secured asset is an immovable property, the Authorized Officer shall take or cause to be taken possession, by delivering a possession notice prepared as early as possible in Appendix-IV to these rules, to the borrower and by affixing the possession notice on the outer door or at such conspicuous place of the property.

(2) The possession notice as referred to in Sub-rule (1) shall also be published, as soon as possible, but if any case not later than seven days from the date of taking possession, in two leading newspapers, one in vernacular language having sufficient circulation in that locality, by the Authorized Officer.

(3) In the event of possession of immovable property is actually taken by the Authorized Officer, such property shall be kept in his own custody or in the custody of any person authorized or appointed by him, who shall take as much care of the property in his custody as an owner of ordinary prudence would, under the similar circumstances, take of such property.

(4) The Authorized Officer shall take steps for preservation and protection of Suit property and insure them, if necessary, till they are sold or otherwise disposed of.

(5) Before effecting sale of the immovable property referred to in Sub-rule (1) of Rule 9, the Authorized Officer shall obtain valuation of the property from an approved valuer and in consultation with the secured creditors, fix the reserve price of the property and may sell the whole or any part of such immovable Suit property by any of the following methods--

(a) by obtaining quotations from the persons dealing with similar Suit property or otherwise interested in buying the such assets; or

(b) by inviting tenders from the public; or

(c) by holding public auction; or

(d) by private treaty.

(6) The Authorized Officer shall serve to the borrower a notice of thirty days for sale of the movable Suit property, under Sub-rule (5):

Provided that if the sale of such Suit property is being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice in two leading newspapers, one in vernacular language, having sufficient circulation in that locality by setting out the terms of sale, which may include--

(a) the description of immovable property to be sold, including the details of the encumbrances known to the secured creditor;

(b) the secured debt for recovery of which the property is to be sold;

(c) reserve price, below which the property may not be sold;

(d) time and place of public auction or the time after which sale by any other mode shall be completed;

(e) depositing earnest money as may be stipulated by the secured creditor;

(f) any other thing which the Authorized Officer considers it material for a purchaser to know in order to judge the nature and value of movable Suit property.

(7) Every notice of sale shall be affixed on a conspicuous part of the immovable property and may, if the Authorized Officer deems it fit, put on the web-site of the secured creditor on the Internet.

(8) Sale by any methods, other than public auction or public tender, shall be on such terms as may be settled between the parties in writing."

As regards the possession--

From a perusal of record it appears that the respondent No. 2, Usha Martin Finance Limited holder of power of attorney of the respondent No. 1, had moved application under Section 14 of the SARFAESI Act before the District Magistrate, Howrah, for taking over possession of the Alampur property which was allowed by the Additional District Magistrate, Howrah, vide order dated 29th March, 2007. The Authorized Officer on the basis of the aforesaid order took over physical possession of the Alampur (Howrah) property on 29th August, 2007. At this stage it will relevant to go through the provision under Section 14 of the SARFAESI Act which reads as under:

Chief Metropolitan Magistrate or District Magistrate to assist the secured creditor in taking over possession of the secured asset--

(1) Where the possession of any secured assets is required to be taken by the secured creditor or if any of the secured asset is required to be sold or transferred by the secured creditor under the provisions of this Act, the secured creditor may, for the purpose of taking possession or control of any such secured asset, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other document relating thereto may be situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or, as the case may be, the District Magistrate shall, on such request being made to him--

(a) take possession of such asset and documents relating thereto, and

(b) forward such assets and document to the secured creditor.

(2) For the purpose of securing compliance with the provisions of Sub-section (1), the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or cause to be used such force, as may, in his opinion, be necessary.

(3) No act of the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of this section shall be called in question in any Court or before any authority.

In view of aforesaid provisions the secured creditor or his Authorized Officer may move an application before the Chief Metropolitan Magistrate or the District Magistrate as the case may be for taking over possession of the secured assets to be handed over to him. The words Chief Metropolitan Magistrate or the District Magistrate as used under Section 14 of the SARFAESI Act is persona designata. The SARFAESI Act itself does not provide that the power to be exercised by the Chief Metropolitan Magistrate or the District Magistrate under Section 14 of the Act may be delegated to any other officer. If there is no provision in Act for delegation of power under Section 14 of the SARFAESI Act to any other office, any other officer could not exercise such power.

The Hon'ble High Court of Gujarat in case Manjudevi R. Somani v. Union of India (supra) has held that where the order under Section 14 of the SARFAESI Act has been passed by the Additional Chief Metropolitan Magistrate, such order will be without jurisdiction and will be nullity in the eyes of law. The Hon'ble Court has also observed that the power vested in the Chief Metropolitan Magistrate under Section 14 of the SARFAESI Act cannot be assigned to Additional Chief Metropolitan Magistrate. The order passed by Chief Metropolitan Magistrate empowering Additional Chief Metropolitan Magistrate to entertain and decide application under Section 14 of the SARFAESI Act would be without jurisdiction.

On the basis of the law laid down by the Hon'ble High Court of Gujarat in the aforesaid case, as well as in view of the provisions under Section 14 of the SARFAESI Act only the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, is the competent authority who can pass the order under Section 14 of the SARFAESI Act. In this case, the order under Section 14 of the SARFAESI Act for taking over possession of Alampur property was passed by the Additional District Magistrate who had got no power to pass an order under Section 14 of the SARFAESI Act, therefore, the order passed by the Additional District Magistrate for taking over possession of the secured asset i. e. Alampur (Howarh) property was without jurisdiction which was nullity and non est in the eyes of law. Therefore, on the basis of such order, the Authorized Officer could not take over physical possession of the Alampur property.

As regards the possession of Nagpur property, the appellants have contended that the respondent No. 2 had taken over physical possession of the Nagpur property on gun point with the help of muscle men and Police force without invoking the provision under Section 14 of the SARFAESI Act.

The deponent, Shri Alok Dave, in para 9 of his affidavit filed on behalf of the respondent No. 1 has stated that as per the instructions of the Authorized Officer of the respondent No. 1, the respondent No. 2 informed vide its letter dated 25th August, 2007 to the MIDC Police Station, Nagpur, regarding the intention of the respondent No. 1 to take over physical possession of the secured assets of the Company as per the provisions under the SARFAESI Act. He has further stated that on 25th August, 2007 the Authorized Officer of the respondent No. 1 took peaceful physical possession of the property and duly intimated the local MIDC Police Station. The representative and the security guards of the appellant No. 1 allowed the respondent No. 2 to enter into the factory premises and to take over physical possession of the secured asset. However, the deponent has not named any representative of the appellant No. 1 who had allowed the respondent No. 2 or its men to take over physical possession of the secured asset/industrial unit. The Panchanama as well as the inventory of the movable properties prepared by the Authorized Officer on the spot also do not bear the signature of any representative of the appellant No. 1.

On the other hand, Mr. Prakash Bafna, appellant No. 3 the authority holder of the appellant No. 1, on the same date i.e. 25th August, 2007 had lodged a complaint before the In-charge of the Police Station, M.I.D.C. Hingna Road, Nagpur, contending that Mr. Dhananjay S. Archekar with 90 men illegally took possession of the above stated premises by force on gun point. They have jumped over the gate and broken open the locks to gain the entry. They have broken Provident Fund Department's and Employee State Insurance Corporation's seal without any authority.

Mr. Prakash Bafna vide letter dated 27th August, 2007 informed the Provident Fund Commissioner that the respondent No. I had taken forcible physical possession of the movable and immovable properties of Nagpur unit which was sealed by the P.P. Authorities. The Commissioner, Provident Fund was impleaded as respondent No. 5(B) in the S.A. Mr. Prasanna N. Muley, Assistant Provident Commissioner (Legal), Regional Office, Nagpur has filed counter-affidavit accepting that Mr. Prakash Bafna, vide his letter dated 27th August, 2007 had informed that the respondent No. 1 had taken forcible physical possession of the Nagpur unit. The movable and immovable properties of Nagpur units were under the attachment of the P.F. Commissioner which were not released. The affidavit filed by Mr. Prasanna N. Muley supports the contentions of the appellants.

In view of the facts as mentioned above, it appears that the appellants had not voluntarily handed over possession of the Nagpur unit to respondent No. 2 Usha Martin Finance Limited, the holder of power of attorney on behalf of respondent No. 1 had the appellants voluntarily handed over the possession of the Nagpur unit, the power of attorney holder was not required to inform the Police. If the appellants were not ready to hand over physical possession of the Nagpur unit to the holder of power of attorney of respondent No. I voluntarily they were expected to take a legal recourse under Section 14 of the SARFAESI Act to take over possession of the secured assets as they had done for taking over physical possession of Alampur property. Keeping in view of the entire facts and attending circumstances of the case, the contention of the appellants appears to be true that the power of attorney holder of respondent No. 1 Usha Martin Finance Limited had taken forcible physical possession of the Nagpur unit.

In case Clarity Gold Pvt. Ltd. v. State Bank of India (supra), the Hon'ble High Court of Bombay has held that where the borrower/mortgagor does not voluntarily hand over the possession of the secured asset to the secured creditor, the secured creditor cannot take the possession by force. The secured creditor cannot be permitted to take the law in its own hands in taking over the possession of the secured asset. He has to invoke the legal provision under Section 14 of the SARFAESI Act to take over the possession of secured assets. The relevant observation of the Hon'ble Court finds place on Para 19 of the judgment which is being extracted below:

"19....If the borrower hands over possession voluntarily to the secured creditor in pursuance of a notice under Section 13(4), it would be open to the secured creditor to take possession. But if possession is not voluntarily handed over, the secured creditor cannot take the law into his own hands and secure vacant possession by taking recourse to the Police machinery. In such an event, the only remedy that is available is to seek an appropriate order from the Chief Metropolitan Magistrate, or as the case may be, the District Magistrate......"

In view of the law laid down by the Hon'ble High Court of Bombay it is well settled that the respondent No. 2, holder of power of attorney on behalf of the respondent No, 1 (secured creditor) could not forcibly take over the possession of the secured assets i.e. Nagpur property.

From a perusal of Rule 8(1) and Rule 8(2) of the Rules as referred above, it appears that the Rule 8(1) provides about taking over the possession of the secured assets by the Authorized Officer as well as delivery of possession notice. Rule 8(2) of the Rules provides that the possession notice as referred to in Sub-rule (1) shall also be published in two leading newspapers, one in vernacular language having sufficient circulation in that locality, by the Authorized Officer not later than 7 days from the taking over of the possession. The appellants have contended that the respondent No. 1 has not published any possession notice as required under Rule 8(2) of the Rules. The deponent Mr. Alok Dave, the Assistant Vice-President of the respondent No. 1, in his affidavit in reply has denied the aforesaid contention of the appellants. He in Para 11 of his affidavit has stated as follows:

"11. I say and submit that on 30th August, 2007, and 31st August, 2007 the respondent No. 2 on behalf of the respondent No. 1 published the possession notices in Nagpur and Kolkata respectively in two daily newspapers as envisaged under Rules. I say that the respondent No. 1 and the respondent No. 2 sent the possession notices to borrower and at all the available addresses Of the promoters and guarantors of the borrower."

If the above statement of the deponent is taken to be correct at its face, it appears that no name of the two newspapers, one in vernacular language, has been mentioned by the deponent in which such notice was published. The deponent has not disclosed the date on which the possession notice was published. The above statement of the deponent appears to be too vague to be believed. It will be worthwhile to mention here that during the course of arguments, it was found that no such possession notice which is said to have been published by the respondent No. 1 was available on the record. The learned Counsel for the respondent No. 1 was allowed an opportunity to file the cutting of the newspaper showing publication of the possession notice. Even then the learned Counsel of the respondent No. 1 could not file any such paper publication. The possession notice regarding Alampur property was published in one newspaper i.e. 'Ajkal' which is in vernacular language but no notice was published in English language newspaper.

In case Swastik Agency v. State Bank of India (supra) the Hon'ble High Court Orissa has held that where a statute or the statutory rules framed thereunder provides that, a particular act has to be done in a particular manner such act has to be done in same manner. The High Court has observed that the Rule 8(2) of the Rules provides that the possession notice as referred to in Sub-rule (1) shall also be published, as soon as possible but in any case not later than seven days from the date of taking possession, in two leading newspapers, one in vernacular language having sufficient circulation in that locality, by the Authorized Officer. If there is no compliance of the aforesaid statutory provision, even the confirmed sale can be set aside. The relevant observation of the Hon'ble Court finds place in Para 75 of the judgment which reads as under:

"75......Non-compliance of statutory requirements of publication of possession notice and auction notice in vernacular language rendered the statutory requirement as farce. There should be purposeful compliance of the provisions of law and it cannot be reduced to an empty formality. The requirement to cause publication in "vernacular language" in the newspaper is fundamental and the statutory requirement which cannot be compromised. It is not for the borrower or guarantor to establish that non-publication of the said notices in "vernacular language" in the newspaper has caused any prejudice to its cause. It is for respondents to establish that non-compliance of the statutory requirements had not caused any prejudice at all. Proof of prejudice is unnecessary where requirement of statutory provision is mandatory. "It ill-comes from a person who has denied justice that the person who has been denied justice is not prejudiced". Vide S.L. Kapoor v. Jagmohan, AIR 1981 SC 136 and State of U.P. v. Shatrughan Lal, AIR 1998 SC 3038."

As held above by the Hon'ble High Court, Orissa, compliance of Rule 8(2) of Rules is mandatory which contemplate publication of possession notice by the Authorized Officer in local daily newspapers one in vernacular language within seven days from the possession. In this case the appellants have challenged the compliance of Rule 8(2) of the Rules, therefore, burden to prove this fact was on the respondents. The respondent No. 2 has undisputed failed to prove that it had published possession notice in accordance with the provisions contemplated under the Rule 8(2) of the Rules in two local daily newspaper one in vernacular language.

In view of the above discussion, I am of the considered view that the respondent No. I/his Authorized Officer had taken over possession of the secured assets i.e. Alampur and respondent No. 2 Usha Martin acting as holder of Power of Attorney on behalf of respondent No. 1 had taken physical possession of Nagpur properties in fragrant violation of the rules, therefore, the action of the respondent No. 1 or his Authorized Officer or his holder of power of attorney in taking over possession of two secured assets Alampur (Hawrah) and Nagpur (Maharashtra) is vitiated and is liable to be quashed.

As regards Validity of the Sale:

The appellants have challenged the validity of the impugned sale on the following grounds:

"(i) The Authorized Officer before conducting the sale did not obtain update valuation report of secured assets from the approved valuer, rather he had sold the secured asset for throw away price.

(ii) The Authorized Officer had not served advance notice of 30 days of the proposed sale as per requirement of Rule 6(2) and the Rule 8(6) of the Rules which are mandatory.

(iii) The Authorized Officer had sold the secured asset by way private treaty in violation of the Rule 8(8) of the Rules.

(iv) The Authorized Officer had sold the agricultural plots situated at Alampur (Hwrah) which are not covered under the SARFAESI Act.

(v) The sale conducted by the Authorized Officer was pre-mediated sale colluding with BMW Industries Ltd. and Galvanotek Industries Private Limited, the respondent No. 6."

The appellants have contended that the respondent No. 1 had not obtained the latest valuation report of the secured assets through a Government approved valuer. He had sold the secured assets at a throwaway price. From a perusal of records it appears that the respondent No. 3, the State Bank of India, had got the valuation of the secured asset of Alampur Property through P.K. Mukherjee and Associates, Kolkata, a Government approved valuer who submitted his report on 29th May, 2003. The valuer had reported value of the non-agricultural property as Rs. 341.40 lacs and the value of the agricultural land as Rs. 225.29 lacs. There is no valuation report on record to show the valuation of Nagpur property. On the other hand, the appellants have got the Nagpur property valued through Mr. P.S. Khedkar, a Government approved valuer. The valuer submitted his report on 28th June, 2005. The valuer has reported present market value of land, building, plant and machinery, furniture and fixtures, office equipment and miscellaneous items as Rs. 31,35,72,000/- and saleable assessed value as Rs. 22,91,55,400/-.

The Alampur property was sold by the Authorized Officer on 23rd October, 2007 and the Nagpur property was sold on 24th October, 2007. The Alampur property was sold by the Authorized Officer on a stale valuation report which was of the year 2003. It is undisputed that the value of the immovable property has been accelerating day-by-day. The Authorized Officer in all fairness was expected to get Alampur property valued before conducting the sale. On the other hand, the valuation report submitted by the appellants regarding Nagpur property shows the valuation of the property as on 28th June, 2005. The respondent No. 1 has not filed any valuation report in rebuttal to the aforesaid valuation report submitted by the appellants. Rule 8(5) of the Rules provides that the Authorized Officer before effecting the sale of the immovable property shall obtain valuation of the property from on approved valuer and in consultation with the secured creditor fix the reserve price of the property to be sold. He may sell the whole or part of the Such immovable secured asset. The Authorized Officer did not obtain the latest valuation report of the secured assets which could reflect the real saleable value of the secured asset of Alampur unit. In view of the facts of the case it appears that the Authorized Officer did not get the secured assets properly valued and sold the same at a very low price.

As regards the compliance of the Rule 6(2) and the Rule 8(6) of the Rules by the Authorized Officer is concerned, both the rules provide that Authorized Officer shall serve to the borrower a notice of 30 days for the sale of the secured asset. These provisions are meant to enable to the borrower to redeem the mortgaged property as well as to enable him to know as to how and in what manner as provided under the Rule 8(5) of the Rules his secured assets are going to be sold. The notice should also indicate the reserve price and the date of sale so that the borrower can clearly know for what amount his secured assets are going to be sold. The respondent Nos. 1 and 2 have alleged that the Authorized Officer of the respondent No. 1 had sent notice on 30th August, 2007 to the appellant No. 1 as contemplated under the Rule 6(2) and the Rule 8(6) of the Rules through registered post which was received by Mr. Prakash Bafna on 8th September, 2007. The copy of the aforesaid notice is available on record which reads as under:

"As you are aware, upon failure of Borrower to comply with the notice issued under Section 13(2) of the SARFAESI Act to Borrower on 26th July, 2006 the undersigned as Authorized Office of Asset Reconstruction Company (India) Ltd. acting in its capacity as trustee of Aricil-SBSP-001-V Trust (hereinafter referred to as "Aricil") has taken over the possession of Borrower's secured movable assets and immovable properties situated at Nagpur on 25th August, 2007 and at Alampur on 29th August, 2007 under Section 13(4) of the SARFAESI Act read with the Security Interest (Enforcement) Rules, 2002 ('said Rules').

We hereby give you notice under Rules 6(2) and 8(6) of the said Rules, that the Authorized Officer will be selling, pursuant to provisions of the SARFAESI Act read with said Rules, the said secured movable assets and immovable properties and that the Authorized Officer will accordingly take steps so as to complete the sale any time after expiry of thirty days from the date of this letter."

From a perusal of aforesaid notice it appears that on date of sale, no reserve price, no mode of sale is mentioned therein. On the basis of the aforesaid notice the borrower was unable to understand when his secured assets are going to be sold. He was unable to understand whether his property is going to be sold for proper value or not. The aforesaid notice issued by the Authorized Officer of the respondent No. 1 appears to be too vague to treat compliance in letter and spirit by the Authorized Officer of Rule 6(2) and the Rule 8(6) of the Rules. In case Manoj D. Kapasia v. Union of India (supra) decided by the Hon'ble High Court of Bombay and in case Swastik Agency v. State Bank of India, Bhuvneshwar (supra) decided by the Hon'ble High Court of Orissa, the Hon'ble Courts have specifically held that the compliance of the Rule 6(2) and the Rule 8(6) of the Rules is mandatory. The notice dated 30th August, 2007 issued by the Authorized Officer of the respondent No. 1 in the instant case is not complete notice as contemplated under the Rule 6(2) and the Rule 8(6) of the Rules, therefore, the aforesaid notice is invalid.

In this case the Authorized Officer of the respondent No. 1 had conducted the sale by way of private treaty. The modes of sale of secured movable and immovable assets as provided under the Rule 6(1) and Rule 8(5) of the Rules are the same which are as follows:

"(a) by obtaining quotations from the parties dealing in the secured assets or otherwise interested in buying such assets;

(b) by inviting tenders from the public;

(c) by holding public auction;

(d) by way of private treaty."

Although the Authorized Officer of the secured creditor has to conduct the sale under the SARFAESI Act without intervention of the Tribunal, but he had to conduct the sale in a transparent and fair manner. The Legislature although has empowered the Bank and Financial Institution to sell the secured asset under the SARFAESI Act to recover its dues but has put the certain cheques and balances laying down the rules to be followed by the secured creditor or his Authorized Officer while conducting the sale. The Authorized Officer is expected normally to conduct the sale by any of the three modes provided in Rule 6(1) (a) to (c), and Rule 8(5)(a) to (c) of the Rules. If the first three modes fail, only then the Authorized Officer should opt for sale by way private treaty. The purpose of sale of the secured asset to realize maximum sale price which will be in the interest of the borrower as well as in the interest of the secured creditor. The sale by way of public auction or by inviting tenders is meant to enable the public at large to participate in the sale, so that the secured asset can fetch the highest price. The Authorized Officer, in this case without opting other three modes, straightaway opted to conduct the sale by way of private treaty with consultation of the appellant No. 1 borrower.

The Rule 8(8) of the Rules provides that the sale by any method other than the public auction or public tender shall be on such terms as may be settled between the "parties in writing". The learned Counsel for the appellants contended that the Authorized Officer before conducting the sale as per the requirements of the Rule 8(8) has to settle the terms of sale with the consultation of the 'parties' which include the secured creditor, intending purchaser and the borrower. The borrower cannot be excluded for settling such terms of sale in writing. If the borrower is excluded he will be unable to know for what price the secured asset is going to be sold. The borrower in a sale by way of private treaty is, therefore, a necessary party to get the terms of sale settled in writing. The learned Counsel in support of his argument has placed reliance on following cases :

"(i) A. Varalakshmi v. The Chief Manager, Punjab National Bank, Asset Recovery Management Branch (ARMS), Chennai (supra).

(ii) J. Rajiv Subramaniam v. Pandiyas (supra)."

On the other hand, the learned Counsel for the respondent Nos. 1 and 6, contended that as provided under the Rule 8(8) of the Rules. The terms of sale by way of private treaty are to be settled between the parties. The word "parties" as used under Rule 8(8) of the rules include the secured creditor or his authorised officer and the intending not the borrower. The learned Counsel in support of his arguments has placed reliance on an unreported judgment in Notice of Motion 2778 of 2009, Mr. Alex Kuruvilla v. Oriental Bank of Commerce, decided by the Hon'ble High Court of Bombay (supra).

Incase Varalakshmiv. Chief Manager, Punjab National Bank (supra) the Hon'ble Court of Madras has dealt with Rule 8(8) of the Rules. The Hon'ble Court has held that the sale of secured asset by way of private treaty is permissible under the law, only condition is that it shall be on such terms as settled between the parties in writing. Therefore, it is clear that the presence of debtor and his willingness is essential.

In case Rajiv Subramaniam v. Pandiyas (supra) the Hon'ble High Court of Madras, Madurai Bench has held that, sale of secured assets by way of private treaty is permissible only on the condition that it shall be on such terms as settled between the parties in writing. The presence of debtor and his willingness in writing are essential. Sale of property by nationalized Bank under the guise of treaty without any written treaty from debtors is illegal.

In case Mr. Alex Kuruvilla v. Oriental Bank of Commerce, the Hon'ble High Court of Bombay has held the word "parties" used under the Rule 8(8) of the Rules means secured creditor and intending purchaser not the borrower.

It is well settled principles of law that the Authorized Officer while selling the secured assets has to sell the same in a transparent and fair manner which can fetch the best possible price. The borrower should be acquainted with the mode of sale, date of sale and reserve price of the property. If this principle is accepted, the principle of law laid down by the Hon'ble High Court of Madras in the two cases referred above appears to be correct. I am, therefore, of the view that the terms of the sale by way of private treaty shall be settled and reduced in writing by the Authorized Officer with the consultation of the borrower too.

In this case, assuming that the borrower is not required to be a party in settling the terms of the sale in writing, even the respondent No. 1 is required to show that the Authorized Officer has settled the terms of the sale in writing before selling the secured assets which was brought to the notice of borrower i.e. appellant No. 1. The respondents have not filed any document to show that the Authorized Officer had settled the terms of the sale in writing. The respondent No. 1 thus has failed to prove that the impugned sale was conducted by its' Authorized Officer after compliance of the Rule 8(8) of the Rules.

The appellants have contended that the Alampur property consisted of agricultural plots which could not be sold by the Authorized Officer, under the SARFAESI Act, even then those plots were sold by the Authorized Officer, therefore, the sale is thus nullity and liable to be quashed. From a perusal of the impugned judgment and order passed by the learned Presiding Officer it appears that the learned Presiding Officer has dealt with the issue and has held although some of the plots of Alampur Unit have been recorded as agricultural land in the revenue record, but they were not being used for agricultural purposes rather they were being used for the purposes relating to the activities of the industrial unit. Therefore, the plots cannot be said treated as agricultural plots for the purpose of SARFAESI Act.

The learned Counsel for the appellants contended that the aforesaid finding of the learned Presiding Officer is contrary to the evidence available on record. The learned Counsel contended that the agricultural plots are not mentioned in the demand notice issued by the Authorized Officer of respondent No. 3 as well in the demand notice issued by the Advocate of the respondent No. 1 under Section 13(2) of the SARFAESI Act. But the agricultural plots in Alampur (Howrah) have been sold by the Authorized Officer. The learned Counsel contended that the valuation report of Alampur property itself shows two separate valuation one valuation of non-agricultural land and other agricultural land. The valuation report also indicates as may as 23 plots as agricultural plots. The learned Presiding Officer, ignored this documentary evidence. The finding of the learned Presiding Officer is therefore perverse.

On the other hand, the learned Counsel for the respondents contended that although certain plots in Alampur (Howrah) are recorded as agricultural plot in the revenue record but the actual use of those plots is not for agricultural purposes rather they were being used for the purpose connected with the activities of the industrial unit. Those plots are not covered under the SARFAESI Act. The Authorized Officer could sell those plots under SARFAESI Act. The learned Counsel in support of his arguments has placed reliance on cases Commissioner of Income Tax, West Bengal, Calcutta v. Raja Vinaykumar Sahasrai (supra) and D. Ravindran v. Manager Indian Overseas Bank (supra).

There is no quarrel on the settled legal principle that if the agricultural plots are not being used for the agricultural purposes, rather they are being used for non-agricultural purposes, those, plots cannot be treated as agricultural plots and they can be sold under the SARFAESI Act. The dispute in the instant case is about the nature of use of the agricultural plots. The valuation report conducted by P.K. Mukherjee and Associates, Calcutta, reflects that there are as many as 23 plot numbers which are 'Sally Land' i.e. agricultural plots. The valuer has reported the valuation of non-agricultural land and agricultural land separately. The learned Presiding Officer did not consider this important piece of evidence while deciding the nature of the sold plots which are recorded as agricultural plots. In view of the facts of the case, the learned Presiding Officer was required to ascertain the actual nature of use of the plots which are said to be agricultural plots. It could be ascertained this fact by issuing commission and calling report from him. But, the learned Presiding Officer only on the basis of affidavits has determined the nature of the plot as non agricultural plots. The finding of the learned Presiding Officer, therefore, in my opinion is not based on reliable evidence. The finding of the learned Presiding Officer that the plots recorded as agricultural plots in the revenue record are not being used for agricultural purposes is not based on evidence which is perverse and liable to be quashed.

The appellants have alleged that the impugned sale conducted by the Authorized Officer was pre-meditated sale colluding with BMW Industries Limited and respondent No. 6, Galvonotek Industries Pvt. Ltd. The learned Counsel for the appellants contended that one Mr. Pritesh Vijaykumar Bansod and one Mr. Harish Ramgopal Bansal were Advocates of respondent No. 6, Galvonotek Industries Private Limited, Mr. Pritesh Vijaykumar Bansod was earlier director of BMW Industries Limited and later on became director of respondent No. 6. Both of them had signed the Panchanama when the respondent No. 2 had taken over the possession of the Nagpur property. The respondent No. 1 on 17th August, 2007 had entered into an agreement with the BMW Industries Limited who had advanced an amount of Rs. 8,10,29,585/- to respondent No. 1. The respondent No. 1 had agreed to adjust the amount out of the sale proceeds of the Nagpur property. The respondent No. 6, Galvonotek Industries Pvt. Ltd., is the sister concern of the BMW Industries Limited. The respondent No. 6 after purchasing the secured assets obtained loan of Rs. 6 crores sanctioned by the respondent No. 3, the State Bank of India. It had mortgaged the Nagpur property in favour of respondent No. 3 All these facts go to show that it was pre-mediated sale which was conducted by the Authorized Officer in a fraudulent manner colluding with the BMW Industries Limited and respondent No. 6, Galvonotek Industries Pvt. Ltd. The sale is, therefore, vitiated and liable to be quashed.

On the other hand, the learned Counsel contended that the Rule 8(5) of the Rules provides sale by way of private treaty. The terms and conditions of the sale were between the secured creditor and the intending purchaser on 1st October, 2007. The Authorized Officer has sold the property on the basis of valuation report. The appellants were well aware of the process of sale. Therefore, the impugned sale cannot be said to have been conducted by the Authorized Officer in a fraudulent manner.

Having considered the rival submissions advanced by the learned Counsel for the parties, I find that the sale conducted by the Authorized Officer was pre-mediated sale colluding with the BMW Industries and respondent No. 6 Galvonotek Industries Pvt. Ltd. for the following reasons:

"(i) The Authorized Officer after taking over the possession of both the units at Alampur (Howrah) as well as Nagpur Unit left the units in the custody of BMW Industries Limited;

(ii) It is not in dispute that Mr. Pritesh Vijaykumar Bansod had been director of the BMW Industries Limited and later on became director of respondent No. 6, Galvonotek Industries Pvt. Ltd.

(iii) The respondent No. 6, Galvonotek Industries Pvt. Ltd. is said to be sister concern of the BMW Industries. Mr. Pritesh Vijaykumar Bansod and one Harish Ramgopal Bansal, Advocates, had been witnesses to the Panchanama when the respondent No. 2 had taken over possession of Nagpur property as holder of power of attorney of respondent No. 1.

(iv) There is no documentary evidence to show that the Authorized Officer had fixed the reserve price of the property to be sold before the sale was conducted.

(v) The appellants were unaware of the mode of sale to be adopted by the Authorized Officer and date of sale.

(vi) The respondent No. 1 after selling the secured assets left the residual in the custody of BMW Industries,

(vii) The respondent No. 6 after purchasing the secured asset had obtained loan sanctioned by the respondent No. 3 State Bank of India."

All the facts narrated above clearly indicate that it was a pre-meditated sale which was conducted by the Authorized Officer in collusion with the BMW Industries and respondent No. 6. Galvonotek Industries Pvt. Ltd. The Authorized Officer did not conduct the sale in a fair and transparent manner. The impugned sale is, therefore, vitiated and liable to be cancelled.

From a perusal of record, it appears that one Indranil Chatterjee on behalf of respondent No. 2, Usha Martin Finance Limited, on 30th May, 2007 published a notice inviting expression from the reputed parties interested in acquiring financial assets in respect of engineering company engaged in manufacture of railway and locomotive components in eastern and Central India with large manufacturing capacity. The transaction will be 'as is and where is basis' and 'as is what is basis'. From perusal of the aforesaid notice, it appears that no date of sale, no mode of sale, no reserve price have been mentioned therein.

The respondents have denied aforesaid notice. If respondents have disowned this notice, there is no other notice informing the public at large to approach the respondent No. 1 for purchasing the secured assets. The respondent No. 1 has alleged that it had issued a notice on 1st October, 2007. From a perusal of the aforesaid notice, it appears that it was confidential and meant for private circulation only inviting invitation of expression of intents. This notice cannot be termed as public notice. There is no evidence on record to show that the Authorized Officer had published any notice informing the public at large to sell the secured asset by way of private treaty so that the people may approach to the respondent No. 1 and submit their offer to purchase the secured assets. In such a situation it can be inferred that the secured assets would have not fetched the best possible price.

As observed above, it is established that the respondent No. 1 had taken over the possession of the secured assets without following the statutory provisions and rules. The Authorized Officer of the respondent No. 1 had sold the secured assets in fragrant violation of the Rules 6 and 8 of the Rules.

From perusal of the impugned judgment and order passed by the learned Presiding Officer it appears that the learned Presiding Officer has not dealt with the vital issues as referred above. The impugned judgment and order passed by the learned Presiding Officer is, therefore, bad in the eyes of law and liable to be quashed. As observed above, the measures taken by the Authorized Officer/holder of Power of Attorney of respondent No. 1 under Section 13(4) of the SARFAESI Act including the impugned sale of the secured assets conducted by the Authorized Officer is contrary to law/rules. Therefore, the measures taken by the Authorized Officer/holder of Power of Attorney of respondent No. 1 under Section 13(4) of the SARFAESI Act including impugned sale is liable to be quashed and the appellant is entitled to get possession of secured assets restored back. Accordingly the Appeal filed by the appellants along with the S.A. deserves to be allowed.

ORDER

The Appeal is allowed with costs.

The impugned judgment and order dated 3rd June, 2011 passed by the learned Presiding Officer, DRT, Nagpur, in T.S.A. No. 73/2010 (S.A. No. 71/2007) (Coventry Spring & Engineering Company Ltd. v. Assets Reconstruction Company (India) Ltd. (ARCIL), is set aside.

Consequently, T.S.A. No. 73/2010 (S.A. No. 71/2007) filed by the appellant is allowed. The measures taken by the Authorized Officer/holder of Power of Attorney of the respondent No. 1 in taking over possession of the secured assets i.e. Alampur (Howrah) and Nagpur properties are quashed. The impugned sale of the secured assets i.e. Alampur property (Howrah) and Nagpur property (Maharashtra) conducted by the Authorized Officer of the respondent No. 1 in favour of the respondent No. 6 is also quashed.

The respondent Nos. 1 and 6 are directed to restore the possession of the secured assets back to the appellant No. 1 within 30 days from the date they receive copy of this order.