H.K. Srikanthan Setty vs Bank Of Baroda And Ors.

Tarun Kumar Kaushal, J

The appellant has challenged the order dt. 06.03.2013 of Debts Recovery Tribunal, Bangalore in SA 433/2012 whereby SA was dismissed and sale notice dt. 25.05.2010 and subsequent proceedings are affirmed.

According to appellant, the necessary facts in short are that on 24.08.2005 appellant availed housing loan of Rs. 8 lakhs from Vijaya Bank for purchase of the plot in question and agreed for repayments in four years in equated monthly instalments of Rs. 11,600/- p.m. The loan was granted against mortgaged security of some plot in question which was allotted to the appellant by Bangalore Development authority. In the event of default bank classified the account to be NPA. In first round of hearing on 20.04.2009, respondent bank issued a sale notice which was challenged by the appellant in SA 40/2009 and appeal was disposed of with the direction to parties to regularise the loan account. Due to some ailment of parents appellant failed to make repayments thereafter also. The bank issued another sale notice on 09.09.2009 by fixing the auction sale on 12.10.2009. The appellant was not available in station. Hence, R2, Smt. Jayalakshmi wife of appellant/guarantor preferred appeal 553/2009 to challenge the second sale. That appeal was also disposed of. In third round bank issued a sale notice on 25.05.2010 for auction to be conducted on 11.06.2010. The appellant has challenged that sale notice in SA 433/2012. The appellant has challenged the sale notice and subsequent proceedings (i.e.) sale, before Presiding Officer mainly on the grounds that bank has sold the property for a lesser and meagre amount because valuation of the property is more than Rs. 41,83,000/- and bank did not obtain recent valuation report in third round of sale notice.

The Presiding Officer vide impugned order has dismissed the appeal observing that bank had taken all mandatory necessary pre-cautions and complied the Rules of SARFAESI Act and fair market price in good faith.

The appellant has challenged the order mainly on the grounds that bank has failed to issue clear 30 days sale notice because sale notice was issued on 25.05.2010 and sale was conducted after 16 days (i.e.) on 11.06.2010. Hence sale is bad in law. The bank has failed to produce proof of service of sale notice dt. 25.05.2010 on the appellant. The bank published the sale notice in newspaper directly adopting the mala fide shortcut. This is illegal. The bank has sold the property to auction purchaser in a mala fide manner and for lesser price to R3, Mr. M.S. Raghu who is professional auction purchaser of bank properties and had collusion with bank managers. The bank has deliberately reduced the values of the property in third round without obtaining a fresh report from Registered Valuer under Wealth Tax Act.

On the other hand, supporting the impugned order, counsel for respondent bank and subsequent purchaser of the property submitted that in SARFAESI appeal these grounds have never been raised that sale notice was issued with a gap of less than 30 days and service was not effected to the appellant. These are all the new grounds taken for the first time in this case. In fact everything has happened under notice and knowledge of the appellant. Ultimately, plot in question has been sold by auction purchaser, R3, Mr. M.S. Raghu who is subsequent purchaser in the year 2015. It has been re-sold to the present respondent/purchaser who is in lawful possession and a bona fide purchaser.

On careful perusal of pleadings of parties, submissions of counsel of parties and record, it becomes clear that appellant obtained loan for purchase of plot of Bangalore Development Authority on 24.08.2005. The loan was sanctioned for Rs. 8 lakhs in the year 2005, security value of property was Rs. 18,60,000/-. On 01.08.2008, bank issued a demand notice U/S. 13(2) of SARFAESI Act for recovery of a sum of Rs. 7,28,882/-as on 24.07.2008. It is true that appellant continued to pay some EMIs during last three years but ultimately he was not at regular repayments. In such a situation, it does not inspire the confidence that no technical operations are entertained in respect of lapse and classification of NPA or propriety of demand notice. The default attitude is an admitted fact of the appellant. The repayments are lacking sincerity. On 25.10.2008, bank had issued possession notice U/S. 13(4) of SARFAESI Act for recovery of sum of Rs. 7,28,882/-. In the meanwhile, the appellant made a deposit of Rs. 40,000/- to avail some protection for the time being.

In third round, sale has been conducted on the basis of valuation report dt. 13.12.2008 which was issued by one Mr. S.R. Nandakumar, Registered Valuer but there is no record that he was registered valuer under Wealth Tax Act or not. He was a panel valuer of the banks. The property in question is an open plot. Its valuation is Rs. 28,80,000/- as on 13.12.2008. But stressed value was fixed as Rs. 23 lakhs. In all three attempts of sale reserve price was fixed only Rs. 23 lakhs. Lesser valuation or fixing the lower price for sale is two different things. At time fixing the lesser fair price are attractive for purchase by some other persons. Ultimately it will be seen whether sale has been conducted according to law and in fair manner or not. The auction was finalised in third round itself indicates that there had been some problems in finding a proper bidder. It is true that successful auction purchaser, R3, Mr. M.S. Raghu had various experiences of purchase of bank properties in auction but by itself sale cannot be set aside if it is not defected otherwise. At the worse, it can be presumed for a moment that Mr. M.S. Raghu always remain in search of bank auctioned properties but if record reveals that in third round property has been purchased at a fair price according to market value then this argument can be ignored.

During the course of arguments it was transpired that R3, Mr. M.S. Raghu sold this property to Mr. S. Nagesh for a sum of Rs. 28,80,000/- within six months of purchase. It is also important to note that on 21.10.2015, Smt. Geetha Nagesh sold the property to Mr. S.A. Srinivas for an amount of Rs. 48,00,000/- under registered sale deed. The chronology reveals that for recovery of a sum of Rs. 7 or 8 lakhs on 11.06.2010, property was sold to R3, Mr. M.S. Raghu for a sum of Rs. 23,35,000/-. The bank had adjusted some amount from some other person and there was delay of few days also. On 22.07.2010, R3, Mr. M.S. Raghu sold the property to Mr. S. Nagesh for a sum of Rs. 28,80,000/- meaning thereby he earned a profit of Rs. 5,55,000/-. On 21.10.2015, Mrs. Geetha Nagesh sold the property to R5, Mr. S.A. Srinivas for a sum of Rs. 48 lakhs.

The property in question is an open plot allotted by Bangalore Development Authority physically to the appellant in the year 2005, not only after 10 years, rather even today plot is lying vacant. In this back drop, the following technical objections are looking into then it can be safely presumed and inferred that appellant has not come in a bona fide manner. At the most it can be understood that appellant was inclined to purchase a plot for Rs. 18,60,000/- from Bangalore Development Authority with the help of bank finance and made certain payments and admittedly repayments are irregular. On 11.06.2010, bank auctioned the property to recover a sum of Rs. 23,35,000/-. It means after adjustment of loan amount, (i.e.) payment of Rs. 8 lakhs, when surplus money is lying with bank which appellant could receive happily with interest. Plot is still lying open and nobody has constructed any structure over it. Then it was sold to Mr. Nagesh and thereafter it was sold to Mr. S.A. Srinivas, the last purchaser had spent Rs. 48 lakhs in 2015.

In this back drop, setting aside of bank auction conducted on 11.06.2010 will lead to so many problems to so many persons without caring for subsequent interest, subsequent purchasers, except appellant, who may get some more money. This is not the object of availing housing loan from the banks and that too for purchase of plots from development authorities. If earning the profit is only the object then, to some extent everybody is acting like a real estate agent. Hence this angle is better to be ignored in this case. In view of the facts and circumstances of this case it can be safely be inferred and presumed that on the date of sale bank had proceeded in a bona fide and fair manner and sold the plot at market rate. The legal objections of mode of service of sale notice and time gap of notice and sale being less than 30 days are not of much consideration in view of the facts and circumstances of the case. The Presiding Officer has discussed the matter elaborately and reached to the correct conclusions.

As discussed above, the appeal is devoid of substance and is dismissed. Impugned order is hereby affirmed. The bank is directed to receive pre-deposit amount and to deal with it according to law. [Dictated to PA, transcribed by him, corrected, signed and pronounced by me in open court, on this 4th Day of March, 2020]