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Judgment
R. D. Khare, Chairperson
This appeal has been preferred under section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of the Security Interest Act, 2002 (hereinafter referred to as The SARFAESI Act) against the order dated 11.05.2017 passed by the Presiding Officer, DRT, Lucknow, whereby the DRT, Lucknow allowed the S.A. No. 21/2007 filed by the respondent nos. 3 to 6.
The brief facts of the matter are, that the respondent no. 2-firm was granted financial assistance by the respondent no. 1-Bank in the year 1996 through its partners, for which various security documents were executed between the borrowers and the Bank. In order to secure the said facilities, Late V. N. Kapoor, J. N. Kapoor and A. N. Kapoor stood as guarantors in their personal capacity as well as created equitable mortgage over their property in question. The respondents-Borrowers did not adhere to the terms of the loan agreement, therefore, the account was classified as NPA and demand notice dated 26.12.2002 was issued under section 13(2) of the SARFAESI Act for a sum of Rs. 1,56,61,641.17. Since the borrowers did not pay any heed to the said demand, hence possession notice dated 31.12.2003 was issued under section 13(4) of the SARFAESI Act and symbolic possession of the property in question was taken.
It appears that Late V. N. Kapoor, J. N. Kapoor and A. N. Kapoor being guarantors/mortgagors challenged the possession notice before the Tribunal below by filing the S.A. No. 21/2004 on 12.02.2004 for setting aside the same. The said S.A. was pending as defective upto the year 2007 for want of court fee.
It transpires that during the pendency of the aforesaid S.A., an auction sale notice dated 07.11.2005 was issued, which was published in the newspapers on the very same day i.e. 07.11.2005 inviting the tenders/bid from the general public to be opened on 08.12.2005. The property was sold for Rs. 76.05 lacs and after deposit of sale consideration, the sale certificate dated 15.02.2006 was issued in favour of the appellant-Auction Purchaser.
It is averred that the guarantors/mortgagors filed a writ petition no. 1121 of 2007 before the Honble High Court, Lucknow Bench, which was disposed off vide order dated 28.02.2007 directing that in case the petitioner files the appeal, the same shall be registered by the O.P. No. 1 and decided expeditiously, say by 15th March 2007.
It also appears that the appellant was neither arrayed as party in the S.A. nor in the aforesaid writ petition, but the appellant was made party in the S.A. pursuant to the order dated 23.04.2007 passed by the Tribunal below on the application moved by the appellant through her counsel.
It further transpires that despite several notices and requests sent by the appellant, the respondent-Bank did not hand over the physical possession of the property in question, therefore, the appellant preferred a writ petition no. 4439/2009 against the respondent-Bank, which was disposed off vide order dated 16.09.2011 with direction that since the property in question has not been delivered till date, although the money was deposited in 2006, it would be opened for the petitioner to claim the interest accruing thereon from the date of deposit till the date of delivery of possession. The respondent-Bank and District Magistrate concerned shall ensure the delivery of possession within a period of four weeks from the date of receipt of a copy of this order.
It also transpires that in the aforesaid writ petition, a review petition no. 348/2011 was filed by the original owner of the property in question, in which the Honble High Court vide order dated 03.02.2012 directed the parties to maintain the status quo qua the transfer of the property in question subject to deposit of Rs. 1.50 crores within two weeks. The said order has been complied with, therefore, the Honble High Court vide order dated 12.08.2013 disposed off the said review petition directing the Tribunal below to dispose off the S.A. No. 21/2007 within the time frame as prayed for by the parties, particularly in view of the fact that the amount deposited by both the parties are held-up due to pending litigation.
It also transpires that during the pendency of the S.A., the original applicants of the S.A. i.e. V. N. Kapoor expired on 28.06.2008, J. N. Kapoor expired on 27.08.2012 and respondent no. 3 Smt. Kiran Anand has been substituted as legal heir of Late V. N. Kapoor, respondent no. 4-Sangeeta Khosla, the respondent no. 5-Karishma Arora and the respondent no. 6- Mohit Khanna have been substituted as legal heirs of Late J. N. Kapoor and thereafter the proceedings were started.
It also appears that the respondent no. 3-Kiran Anand filed an amendment application dated 16.02.2017 with a prayer to amend the S.A. No. 21/2007, against which the objection was filed by the appellant. The Tribunal below vide its order dated 12.04.2017 disposed off the said amendment application with observation that no fruitful purpose will be served by incorporating the details of auction sale in the said S.A. and the point agitated will be considered at the time of final arguments.
The Tribunal below vide order impugned has allowed the S.A. of the respondents-borrowers and set aside the demand notice, possession notice, auction sale notice and sale certificate on the ground that the demand notice and the possession notice have been issued under the repealed provisions of the Securitization and Reconstruction of Financial Asset and Enforcement of Security Interest (2nd) Ordinance, 2002. Being aggrieved by the said order, the present appeal has been filed by the appellant-Auction Purchaser.
Learned counsel for the appellant submitted that the Tribunal below has allowed the securitization application filed by the original owner of the property in question setting aside the demand notice, possession notice, auction sale notice as well as sale certificate and directed the applicant (respondent no. 3 in the present appeal) and the respondent-Bank to hand over the possession of the secured asset to the original owners of the property in question within a period of two months from the date of the judgment and order. The respondent-bank was further directed to refund the sale proceeds deposited to the auction purchaser along with simple interest @ 6% per annum from the date of deposits till the date of actual payment.
Learned counsel for the appellant has drawn attention of this court to annexure no. 8 at page no. 126 of the memo of appeal, which is an order dated 16.09.2011 of the Honble High Court, Lucknow Bench, Lucknow and has argued that the appellant had filed a Misc. Bench No. 4439/2009 Dr. Sarita Chaudhary Vs. Indian Overseas Bank and the Honble High Court vide order dated 16.09.2011 was pleased to dispose off the said writ petition with direction to the respondent-Bank to deliver the possession of the secured asset to the petitioner (appellant) within four weeks from the date of receipt of the order.
It was further contended on behalf of the appellant that the original owner of the property in question preferred a review petition defective no. 348 of 2011 and the Honble High Court, Lucknow Bench, Lucknow passed an order on 03.02.2012, copy of which has been appended as annexure no. 9 at page 127 of the paper book, whereby the respondents were directed to file objection to the review petition and it was noted that the original owner of the property under auction shall deposit Rs. 1.50 crores towards satisfaction of the auction consideration deposited by the writ petitioner - Dr. Sarita Chaudhary in the present case and the status quo order was passed. A reference has been drawn to the order dated 12.08.2013 passed by the Honble Allahabad High Court, Lucknow Bench, copy of which has been appended as annexure no. 10 at page no. 128 of the memo of appeal, by which the review petition was disposed off with direction that the S.A. pending before the DRT be decided within specified time and amounts deposited by the parties were directed to be deposited in fixed deposit scheme. Thereafter by order impugned, the S.A. has been decided and the amount deposited by the appellant has been directed to be refunded with 6% interest per annum simple from the date of deposit till the date of actual payment. It was lastly contended that the rate of interest awarded by the Tribunal below is much below to the prevalent rate of interest of the Bank.
Learned counsel for the respondent-Bank submitted that the amount deposited by the auction purchaser was appropriated in the NPA account and the amount deposited by the borrower, who is real owner of the property in question, was kept in no lien account. Thereafter, when the review application was decided by the Honble High Court, Lucknow Bench, Lucknow vide order dated 12.08.2013, the amount deposited by the borrower, who is real owner of the property in question, was kept in fixed deposit scheme and when the S.A. was decided by the Tribunal below, the said amount, which was to be refunded to the auction purchaser, has been refunded from the amount, which was put in fixed deposit. It is thus admitted that the amount deposited by the auction purchaser has been paid to the appellant-auction purchaser on 28.09.2017 and no further amount is liable to be paid.
It was next contended by the counsel for the respondent-bank that the order for depositing the amount in fixed deposit scheme was passed in the year of 2013 and the amount was refunded to the auction purchaser on 28.09.2017, therefore, even if any amount is payable to the auction purchaser (appellant}, that is for the extra period only.
Learned counsel for the respondent no. 3 contended that the account was settled in the year 2018 and entire amount has been paid and no dispute remains thereafter, hence the present appeal has become infructuous and third partys right has also been created over the property in question.
Having heard the learned counsels for the parties and considering the material available on record, there is no dispute with regard to the setting aside the demand notice dated 26.12.2002, possession notice dated 31.12.2003 auction sale notice dated 07.11.2005 and sale certificate dated 15.02.2006.
The only grievance of the appellant in the present case is that the rate of interest awarded by the Tribunal below over the auction amount is very less.
It is to be seen that the auction sale notice was issued on 07.11.2005 scheduling the auction of the property in question for 08.12.2005. The property was sold for Rs. 76.05 lacs and after deposit of entire sale amount, the sale certificate was issued in favour of the appellant on 15.02.2006. Since the respondent-Bank did not handover the physical possession of the property in question, the appellant-auction purchaser moved a writ petition no. 4439/2009 before the Honble High Court against the respondent-Bank, which was allowed by the Honble High Court vide order dated 16.09.2011(at page no. 126 of the paper book), wherein it was held that since the auction money was deposited in 2006, therefore, it would be left for the petitioner to claim the interest accruing thereon from the date of deposit till the date of delivery of possession and further, the respondent-Bank and the District Magistrate concerned was directed to ensure the delivery of possession within a period of four weeks from the date of receipt of the said order. Against the said order, a Review Petition no. 348/2011 was filed by the original owner of the property (borrower) in which status quo qua the transfer of possession of the property in question was granted by the Honble High Court vide order dated 03.02.2012 (at page no. 127 of the paper book) subject to deposit of 1.50 crore. However, the said Review Petition was finally disposed off vide order dated 12.08.2013 (at page no. 128 of the paper book) directing the parties to maintain status quo regarding the possession and disposal of the property in question till the Tribunal decides the present S.A. and also directed that the Tribunal below shall dispose off the application within the time frame as prayed for by the parties, particularly in view of the fact that the amounts deposited by both the parties are held up due to pending litigation.
It is admitted by the respondent-Bank in para 12 of its reply that the bid amount of Rs. 76.05 lacs deposited by the appellant was appropriated in the NPA account on 02.02.2006. In sub para c of para 18 of the said reply, it is stated by the Bank that the amount of Rs. 1.50 crore deposited by the borrower pursuant to the order dated 03.02.2012 passed by the Honble High Court in Review Petition No. 348/2011 was kept in no lien account and later on the said amount was kept in the form of FDR pursuant to the final order dated 12.08.2013 passed by the Honble High Court in the said Review Petition.
The Tribunal below vide order impugned setting aside all the proceedings of the Bank directed the respondent-Bank to return the auction amount to the auction purchaser along with interest at the rate of 6% per annum from the date of deposit till the date of actual payment is made and accordingly the same was complied with on 28.09.2017. From the order impugned, it is observed that the rate of interest awarded by the Tribunal below is contrary to the facts and the circumstances of the case as discussed above. Apparently the respondent-Bank has enjoyed both the amounts deposited by the appellant and the borrower. While awarding the rate of interest on the auction amount, the Tribunal below ought to have considered that the amount deposited by the auction purchaser was appropriated in the loan account of the borrower, hence it can be said that the said amount was fetching the rate of interest, which was applicable in the said account. Pursuant to the order of the Honble High Court, the amount deposited by the borrower was kept in no lien account and later on the same was kept in FDR in pursuance of final order of the Honble High Court passed in review petition of the borrower, but it is seen that the Tribunal below has not considered these aspects of the matter and has awarded the interest @ 6%, which is not in consonance either of FDR or the contractual rate of interest prevalent in the account, in which the auction amount was deposited. Besides it, all the proceedings of the Bank have been quashed on fault/negligence of the Bank and Bank has accepted the same by not filing any appeal against the same, therefore, the auction purchaser cannot be made to suffer any loss for the mistake/negligence committed by the Bank. So far as the contention of the respondent-Bank that the Bank was also pursuing the matter to deliver the possession of the property in question to the appellant is concerned, the same does not pertain to the awarding of rate of interest awarded by the Tribunal below.
In view of the submissions advanced between the parties, this court is of the considered opinion that the order impugned requires modification with regard to the quantum of interest, which is liable to be paid to the appellant. The appeal is accordingly allowed and the order impugned is modified to the extent that the appellant shall be liable to be paid the interest @ 10% instead of 6% as directed by the Tribunal below. Rest part of the impugned order shall remain intact.
A copy of this judgment be supplied to the parties as well as to the DRT concerned and be also uploaded on e-drt portal.