H.P. State Co-Operative Bank Ltd. vs Dechan Dolma

S.N.H. Zaidi, J

The instant Appeal has been directed against order dated 21st October, 2011 passed by the Presiding Officer of D.R.T.-1 Chandigarh on application (I.A. No. 761/2011) filed by the respondent in S.A. No. 145/2011 for directing the appellant Bank to allow her to use two rooms for her residential purposes. The facts of the case indicate that respondent was sanctioned a loan of Rs. 25 lacs on 7th October, 2006 by the appellate-Bank under the Hotel/Loan Scheme of the Bank for the construction of a hotel upon land bearing Khatuni No. Min/68, Khasra No. 207, measuring 0.1870 hectares, situated in Mohal Thapasari Saring, Tehsil Sangla, District Kinnaur (HP), which was also mortgaged with the Bank as collateral security for the repayment of the loan. The loan was to be repaid in 72 EMIs of Rs. 46,500/- in seven years with a moratorium period of one year. The borrower/respondent, however, defaulted in repayment of accrued interest during the moratorium period as well as the EMIs as such the loan account was classified as Non Performing Asset. (N.P.A.) w.e.f. 10th March, 2008 and therefore, a demand notice dated 9th September, 2010, under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, the SARFAESI Act) was issued to the respondent asking her to pay an amount of Rs. 37.24 lacs within the stipulated period of 60 days. The respondent set her representation/objection to that notice through letter dated 24th September, 2020 and 1st October, 2010 requesting for the additional loan of Rs. 15 lacs for completing the construction work of the hotel and also for the supply of the loan documents and complete statement of account depicting the rate of interest and other charges levied to enable her to ascertain the exact liability, with the submission that subject to such documents, she was ready to pay the outstanding dues on her. The respondent got three rooms of the hotel completed and started using them as her residence with all the house hold goods. The appellate Bank, thereafter, took physical possession of the land, including those three rooms and the hotel structure on 2nd August, 2011 after preparation of the inventory of the movable goods/articles.

The respondent filed S.A. No. 145/2011 under Section 17 of the SARFAESI Act challenging the measures taken by the appellant Bank and in pursuance of the direction of the Tribunal below an amount of Rs. 10 lacs was deposited by her with the Bank. The respondent also moved an application (I.A. No. 761/2011) in that S.A., seeking restoration of the possession of two rooms which were being used for residential purposes. The appellant-Bank opposed the prayer by filing reply to that application and the learned Tribunal below disposed of that application by the order impugned dated 21st October, 2011 directing the Bank not to proceed further for selling the property in question subject to payment of Rs. 50,000/- per month by the respondent towards her outstanding liability and also directing the Bank to allow the respondent to use two rooms for her residential purposes within three days. Feeling aggrieved with that order, the Bank has filed the instant Appeal.

Mr. Rajiv Kapoor appearing for the appellant contended that it is wrong to say that three rooms of the hotel structure were being used by the respondent as her only residence though a portion of the same was being used as for residential purposes. He also contended that by allowing the use of two rooms for residential purposes of the respondent as an interim measure, the DRT had in effect allowed the S.A. filed by her. According to him, those rooms could be restored to the respondent only when it is found that the possession thereof was taken wrongly or against the provisions of the Act or the rules made thereunder, which issue is yet to be decided by the D.R.T., but without recording any such finding the Tribunal below has wrongly restored those rooms to the respondent as an interim measure. It was also pointed out that the loan in question was a commercial one, which was sanctioned for the construction of the hotel and not for the residential purposes of the respondent. He also contended that in fact only three rooms were constructed, which were being used by the respondent as her residence and it was wrong to say that she had, got 24 rooms constructed at the site as on the date of taking the possession only three rooms were completed.

Instead of advancing oral arguments Mr. Manu Bakshi filed his written submissions for the respondent. It has been contended that as per Section 13(3A) of the SARFAESI Act, where the borrower makes any representation or raises any objection to the notice issued under Section 13(2) of the Act, the secured creditor is required to consider it and if the representation or objection is found unacceptable, then the reasons thereof shall be communicated to the borrower within one week of the receipt of such representation or objection but, in this case, despite the fact that the respondent had made the representations dated 24th September, 2010 and 1st October, 2010 qua the demand notice, the appellant-Bank did not comply with the aforesaid mandatory provision of the Act and failed to send any communication in respect thereof. It has further been contended that the appellant's contention is false that it did not receive those representations, because the D.G.M. of the Bank had also sent a copy of the respondent's representation dated 24th September, 2010, which was sent to the Chairman of the Bank, along with his letter dated 12th October, 2010 to the Kinnaur District Manager and he was required to look into the matter of the respondent.

It has also been contended on behalf of the respondent that the appellant had suppressed the material facts and had given an impression that only three rooms were constructed by concealing that a three-storeyed superstructure of the hotel, consisting of 24 rooms, was constructed and, though it could not be fully completed but three rooms were completed, which were being used by the respondent as her dwelling for overseeing the construction work of the hotel. In this regard, attention of this Tribunal has been drawn to the valuation report of the property in question (Annexure L to the reply) submitted by the Himachal Consultancy Organization Ltd., which, according, to the respondent, was filed by the Bank itself before the D.R.T. It has also been submitted that besides the deposit of Rs. 10 lacs in pursuance of the order of the D.R.T., the respondent had also deposited Rs. 2.20 lacs subsequent to the order impugned and as such a substantial amount stood deposited with the appellant Bank. It has further been submitted that the respondent was ready to pay the entire amount of debt due on her provided she was supplied with the documents showing her exact liability.

I have considered the submissions of the parties and perused the record.

The contention of the appellant that only three rooms of the hotel project had been constructed does not appear to be correct on facts as the photographs (Annexure-H to the reply) clearly shows the structure of three storeys of the building. The valuation report (Annexure-L to the reply) prepared by the Senior Manager (Project) of the Himachal Consultancy Organization Ltd. for the appellant Bank also shows that the ground floor of the building was having four completed rooms and 4 rooms with attached toilet and bathroom were under construction whereas the first and the second floors were having 16 rooms and were under construction and the superstructure of the building was complete. The said valuation report also reveals that the assessed market value of the land was Rs. 41.14 lacs whereas the valuation of the building and civil work together was of Rs. 72.05 lacs, fixing the total value at Rs. 113.19 lacs and its realizable value at 91.06 lacs. It, therefore, appears that the respondent had started using three out of four completed rooms as her residence from where she was evicted when the Bank took possession of the secured asset along with the structure of the hotel standing thereof. A perusal of the loan sanction letter dated 7th October, 2006 (Annexure A-1) does not reveal that any security interest qua the building of the hotel, for the construction of which the loan was sanctioned, was created in favour of the Bank at the time of sanctioning of the said loan and charge/lien was created only in respect of land though certain restrictions regarding the transfer of the hotel building was envisaged.

The contention of the appellant Bank that it did not receive any representation/objection dated 24th September, 2010 or 1st October, 2010 in response to the demand notice dated 9th September, 2010 issued under Section 13(2) of the Act does not appear to be correct as the letter of the D.G.M. of the appellant Bank, dated 12th October, 2010 (Annexure-A to the reply) sent to the Kinnaur District Manager of the Bank clearly reveals the receipt by the Bank of the said letter. The compliance by sending communication in response thereto within one week from the date of receipt of such representation/objection is mandatory as per Section 13(3A) of the Act. There is nothing on record to suggest that the appellant Bank had complied with the said provision.

The perusal of the order impugned also shows that it was also urged on behalf of the respondent/borrower before the Tribunal that the question whether the respondent Bank could invoke the provisions of the SARFAESI Act was pending before the Hon'ble Apex Court in Writ Petition (Civil) No. 441/2011 wherein the Bank (appellant herein) has been restrained from taking action under the SARFAESI Act. The appellant Bank has not disputed the said fact in ground (d) of the grounds of appeal though it has submitted that the said writ petition does not pertain to Bhagra resort and has admitted that the Bank has been restrained from proceeding under the SARFAESI Act on the facts and circumstances of that case by way of an interim order. Since none of the parties has filed copy of the said writ petition, it cannot be said whether or not the said interim order applies to the appellant Bank in the instant matter.

In view of above, considering the facts and circumstances of the case and also looking to the fact that the respondent had deposited about Rs. 12.20 lacs post issuance of demand notice and the appellant-Bank is in possession of the mortgaged land, which as per valuation report (Annexure-L to the reply) is much more than the amount claimed, the indulgence shown by the Tribunal below directing the appellant to allow the respondent to use two rooms for her residential purposes as an interim measure during the pendency of the S.A. cannot be said to be suffering with any infirmity or illegality and as such this Appeal being devoid of any force is liable to be dismissed. The appeal is accordingly dismissed with no order as to cost. Copy of this order be furnished to the parties as per law and be also sent to the DRT concerned.