Eider Pwi Paging Ltd. And Ors. vs Canara Bank And Ors.

S.N.H. Zaidi, J

This appeal has been directed against the order dated 3.10.2011 passed by the learned Presiding Officer of DRT-I, Chandigarh, dismissing Appeal No. 7/2010 preferred under Section 30(1) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short 'RDDBFI Act') by the appellants herein and directing the Recovery Officer to proceed for the recovery of the outstanding dues as per law in R.C. No. 362/2004. The order dated 30.9.2010 passed by the learned Recovery Officer in the aforesaid R.C., whereby proclamation of sale has been made, has also been challenged in this appeal. It appears that the O.A. No. 137/2002--Canara Bank v. Eider PWI Paging Ltd. & Ors. filed by the respondent Bank was allowed by the DRT on 25.8.2004 and an R.C. for the recovery of Rs. 1,39,16,545/- along with pendente lite and future interest thereon @ 15% per annum with quarterly rests and costs was issued. The Recovery Officer, vide order dated 30.9.2010 passed in R.C. 362/2004 ordered for the auction sale of House No. 3069, Sector 21-D, Chandigarh belonging to the appellant No. 2 herein, fixing reserve price of the property as Rs. 4,29,11,000/-. The auction sale was scheduled to be held on 22.11.2010. The appellants challenged the said order of the Recovery Officer before the DRT in Appeal No. 7/2010 mainly on the ground, firstly, that it was made ex parte without complying with the mandatory requirement of service of notice envisaged under Rule 53 of the II Schedule to the Income Tax Act, which is similar to Rule 66(2) of Order 21 of the Code of Civil Procedure, or without affording any opportunity of hearing or fixing any date for settling the terms and conditions before the proclamation of sale; and secondly, that the property in question was not mortgaged in the loan account and since it was the sole dwelling house of the guarantor, therefore, it was exempted from attachment and sale under Section 60(1)(ccc) of the CPC as amended in its application to the States of Punjab, Haryana and Chandigarh. The property in question was auctioned for Rs. 4,34,50,000/- in favour of respondent Nos. 2 and 3 herein, who were also impleaded as respondents in the appeal before the DRT.

It also appears that against the interim order dated 9.11.2010 passed by the learned DRT in Appeal No. 7/2010 the appellants herein preferred Appeal No. 434/ 2010 under Section 20 of the RDDBFI Act before this Tribunal and also challenged the order dated 30.9.2010 of the Recovery Officer. The said appeal was, however, dismissed in limine on 24.11.2010 at the admission stage.

The learned DRT did not find any merit in the contentions of the appellants and after holding that notice for sale dated 12.4.2005 was issued by the Recovery Officer in pursuance of the order dated 21.12.2004 and since between 12.4.2005 and 30.9.2010 the Counsel for the appellants/JDs appeared on several dates before the Recovery Officer, therefore, it could not be said that the appellants/JDs did not have notice/knowledge of the intended sale of the property in question; and, that no substantial injury was inflicted upon the appellants, dismissed the appeal by the impugned order dated 3.10.2011. Aggrieved by the aforesaid order, the appellants have filed this appeal.

I have heard Mr. Pallav Saxena, learned Counsel for the appellants and Ms. Seema Gupta, learned Counsel for the Caveator/ respondent Bank at length on the point of admission of the appeal and perused the record.

It appears that the appellants are repeatedly agitating in this appeal that the property in question was not mortgaged qua the loan account of appellant No. 1, the principal borrower as this question had already been decided by this Tribunal in Appeal No. 434/2010. The averments of the Bank in Para 5.7 of the O.A. and its reply in Para 7 of the written statement of the appellants are relevant, which are reproduced as under:

5.7 That to secure repayment of the amount that may be due from defendant No. 1 against the Bank Guarantee as above. Defendant No. 5 Mr. A.K. Sinha and defendant No. 6 M/s. Eider Financial Services Ltd. mortgaged their respective properties as detailed hereunder:

Property Mortgaged:

A. H.No. 3096, Sector 21-D, Chandigarh owned by Mr. A.K. Sinha, defendant No. 5

B. xxx xxx xxx

C. xxx xxx xxx

Proof of Creation of Equitable Mortgage along with List of Title Deeds Deposited:

A. Letter evidencing deposit of Title Deed of H.No. 3096, Sector 21-D, Chandigarh is Exhibit A/16. List of Title deeds deposited and Schedule of property is Exhibit A/17.

B. xxx xxx xxx

C. xxx xxx xxx"

The contents of Para 5.7 being the matter of record and fact are admitted.

The admission of the contents of Para 5.7 of the O.A. by the appellants in their written statement clearly shows that the house in question of appellant No. 2 was mortgaged with the Bank in respect of the loan account of appellant No. 1. The dismissal of the appeal by this Tribunal rejecting the contention of appellants disputing the factum of mortgage of the house in question operates as res judicata against the appellants under Section 11, CPC and the same cannot be agitated again in the present appeal, as order dated 24.11.2010 of this Tribunal passed in Appeal No. 434/2010 has admittedly attained finality.

The argument that the property in question, being the main residential house of the guarantor, was protected under Section 60(1)(ccc) of CPC was not pressed by the learned Counsel for the appellant before the learned DRT.

Mr. Pallav Saxena vehemently argued that Rule 53 of II Schedule to the Income Tax Act, which is pari materia to Rule 60(2) of Order 21, CPC mandates for service of notice before issuing the proclamation of sale and since the mandatory requirement of service of notice was not complied with before passing the impugned order dated 30.9.2010, therefore, the entire recovery proceedings pursuant to the said order is bad in law. This contention has been repelled by Ms. Seema Gupta submitting that in compliance of the aforesaid provisions notice was issued to the appellants and they appeared through Counsel before the Recovery Officer on several dates prior to the order dated 30.9.2010 was made.

It is a settled principle of law that where a power is given to do certain things in certain way the things must be done in that way or not at all. Other methods of performance are necessarily forbidden, AIR 1936 PC 253 and AIR 1980 S.C. 326. Admittedly, service of notice is a necessary step before proceeding with the proclamation of sale. The purpose of notice is to enable the judgment-debtor to offer his estimate of the value, as he is the person who better knows its value and to publicize on his part, canvassing and bringing the intending bidders at the time of sale. The Hon'ble Apex Court, in the case of Desh Bandhu Gupta v. N.L. Anand & Rajinder Singh, I (1994) BC 45= (1994) 1 SCC 131, has observed that:

9....It would be broached from yet another angle. The compulsory sale of immovable property under Order 21 divests right, title and interest of the judgment-debtor and confers those rights, in favour of the purchaser. It thereby deals with the rights and disabilities either of the judgment-debtor or the decree-holder. A sale made, therefore, without notice to the judgment-debtor is a nullity since it divests the judgment-debtor of his right, title and interest in his property without an opportunity. The jurisdiction to sell the property would arise in a Court only where the owner is given notice, of the execution for attachment and sale of his property. It is very salutary that a person's property cannot be sold without his being told that it is being so sold and given an opportunity to offer his estimate as he is the person who intimately knew the value of his property and prevailing in the locality, exaggeration may at time be possible.

A perusal of the copies of the order-sheets from 24.2.2005 to 30.9.2010 of the proceedings of R.C. No. 362/2004 filed by the appellants goes to show that Mr. S.C. Pasricha had put in appearance on behalf of CDs on various dates from 14.7.2005 and continued to appear between 2005 and 2010 before the Recovery Officer. Mr. Saxena further submitted that Mr. Pasricha had filed his Vakalatnama on behalf of the appellants herein, who were CD Nos. 1 and 5 in the recovery proceedings, only on 20.12.2010 and prior to that date Mr. Pasricha was representing other CDs than the appellants. Mr. Saxena, however, failed to demonstrate that prior to 20.12.2010 Mr. Pasricha had not filed his Vakalatnama on behalf of the present appellants or was not representing them before the Recovery Officer. There is a legal presumption of the correctness of records prepared in accordance with law, unless rebutted. Since the order-sheet shows that the appellants herein were represented by their Counsel Mr. S.C. Pasricha prior to the making of impugned order dated 30.9.2010, therefore, the contention that the appellants/JDs were having no notice/knowledge of the recovery proceedings prior to the issuance of proclamation of sale has no substance.

The submission of Ms. Seema Gupta, the learned Counsel for the respondent Bank, is also worth consideration that Rule 61 of Schedule II to the Income Tax Act provides for setting aside the sale of immovable property on the ground of non-service of notice or irregularities, by moving an application to the Tax Recovery Officer, but proviso (a) thereof bars the setting aside of sale on any such ground unless the Tax Recovery Officer is satisfied that the applicant has sustained a substantial injury by reason of non-service or irregularity. She further submitted that similarly Rule 90 of Order 21, CPC provides for setting aside the sale on the ground of irregularity, but Sub-rule (2) thereof lays down that the sale shall not be set aside on the ground of irregularity or fraud unless, upon the facts proved, the Court is satisfied that the applicant has sustained substantial injury by reason of such irregularity or fraud. It is argued by Ms. Gupta that the appellants had neither moved any application for setting aside the sale before the Recovery Officer either under Rule 61 of Schedule II to the Income Tax Act or under Rule 90 of Order 21, CPC nor they established to have sustained any substantial injury. The learned DRT while considering this aspect of the matter, in the impugned order, has rightly observed that during the pendency of the appeal one M/s. Ary Developers, an intending bidder, who offered to purchase the property in question for Rs. 5.15 crores, was impleaded as a party and was asked to deposit 25% of the offered amount by 24.12.2010, but it failed to do so even after extension of time and since the property in question was sold for an amount of Rs. 4,34,50,000/- against the reserve price of Rs. 4,29,11,000/- as per valuation report from the approved valuer, therefore, the appellants cannot be said to have sustained any substantial injury when the third-party bidder had failed to deposit the amount more than the bid amount. The impugned order of the learned DRT does not appear to be suffering with any illegality which may warrant the interference of this Tribunal in appeal.

In view of the above, the appeal being devoid of merit, is dismissed in limine. Copies of this order be furnished to the parties as per law and another copy be sent to the learned DRT.