Indian Overseas Bank vs Smt. Banita Swain @ Pattanaik

Anil Kumar Srivastava, Chairperson

THE APPELLATE TRIBUNAL :

Instant Appeal arises against a judgment and order dated 29th September, 2020 passed by Learned Debts Recovery Tribunal, Cuttack allowing the SARFAESI Application No. 34 of 2020 (Smt. Banita Swain @ Pattanaik -vs- Authorised Officer, Indian Overseas Bank & Others) whereby the Learned Debts Recovery Tribunal has allowed the SARFAESI Application and set aside the auction sale dated 12th March, 2019 and also the Sale Certificate issued in favour of Respondent No. 2, namely Smt. Snehalata Sahoo with a direction to the SARFAESI Applicant to deposit a sum of Rs.39,30,000.00 for refunding the same to the auction purchaser. Feeling aggrieved, Applicant Bank preferred the present appeal.

As per the pleadings of the parties, the facts of the matter are that one Narendra Kumar Swain, Proprietor of M/s. Indian Enterpriser, availed a Cash Credit Facilities under Easy Trade Scheme for Rs.20.00 lac upon security created by equitable mortgage of land and building situated at Mouza Nayagarh, Thana District : Nayagarh, Khata No. 1219/168 and 1219/1702, Plot No. 2010/3442 and Plot No. 2010/4633, Area Ac 0.03 decimal and Ac 0.04 decimal standing in the name of Respondent No. 1, vide Credit Sanction Advice dated 30th June, 2010. It was further enhanced to Rs.35.00 lac by Sanction Letter dated 25th September, 2015. Respondent No. 1, namely, Banita Swain, stood mortgagor for the loan amount. Loan account was opened and operated as per the terms and conditions; payment was made by the Bank for repayment but when the same was not complied with, the account was classified as N.P.A. on 30th September, 2017; notice under Section 13 (2) was issued to the Borrower as well as the Guarantor, i.e. the Appellant, to repay the total outstanding dues but the same was not honoured and no representation was made under Section 13 (3A) of the SARFAESI Act, 2002. Subsequent thereafter, the Applicant Bank issued Notice under Section 13 (4) of the Act dated 4th May, 2018 for taking symbolic possession. No application under Section 17 of the act was filed either by the Borrower or the Guarantor. On 25th June, 2018 e-auction sale notice under Section 8 (6) and 9 (1) of the Security Interest (Enforcement) Rules, 2002 was published.

Thereafter, the Borrower, namely, Narendra Kumar Swain, filed a Writ Petition No. 11655 of 2018 before the Hon’ble High Court of Orissa at Cuttack wherein on 12th July, 2018 following conditional order was passed:

“Considering the submissions made, it is directed that in the event the petitioner deposits an amount of Rs. 10.00 lakhs with the opposite parties-Bank within four weeks hence and files an application for OTS/rephasement/regularization of the loan account, the shall be considered by the Bank same sympathetically in terms of its existing guidelines and as has been done in similar other cases and final decision shall be taken thereon within a period of four weeks thereafter.

Till a final decision is taken on the application of the Annexure-3 may continue but the same shall not be finalized.

It is needless to say that if the petitioner does not comply with the direction as specified above or defaults in making payment of the subsequent instalments as would be fixed by the Bank, the Bank shall be at liberty to take finalization of auction.”

Conditions, as enforced by the Hon’ble High Court, were not complied with. Subsequently another order, dated 8th March, 2019 was passed by the Hon’ble High Court of Orissa at Cuttack in W.P.(C) 5346 of 2019 and I.A. 4501 of 2019 wherein following conditional order was passed :

“Considering the submissions made by the learned counsels for the parties, we dispose of this writ petition with an observation that in case the petitioner deposits an amount of Rs.5,00,000/-(rupees five lakhs) before the opposite party-Bank on or before 25th March 2019 and files an application for settlement of her loan account under One Time Settlement Scheme, in such event, her application shall be considered by opposite party-Bank within a period of four weeks from the date of filing of such application and the result thereof shall be intimated to the petitioner. The auction which is fixed to 11th March 2019 may continue, however, same shall not be finalized till the decision is taken by the Bank for settlement of the loan account. Till disposal of her application by opposite party, no coercive action shall be taken against the petitioner.”

Subsequent thereto, e-auction was fixed on 12th March, 2019. Another Writ Petition No. 10567 of 2019 was filed by the Appellant herein wherein the following order was passed:

“The petitioner appeared in person. She submitted that pursuant to the order passed by this Court in 5346 of 2019, she could not deposit the amount as directed by this Court, within the date fixed by this Court, i.e. on or before 25.03.2019. Though she offered to deposit the said amount some days after the date fixed, the bank has not accepted the same due to such delay. She further submitted that till date the property was not auctioned pursuant to the advertisement issued earlier fixing the date of auction to 12.03.2019 and she may be permitted to deposit the said amount of Rs.5,00,000.00 within a period of two days and file an application for settlement of the loan account. Her application for settlement of the loan account may be considered by the opposite party-bank.

Due to the resolution passed by the Orissa High Court Bar Association, the learned counsel for the bank has not appeared, nor the counsel for the petitioner appeared.

Considering the ready and willingness of the petitioner to deposit the amount in respect of the Loan account, we dispose of the writ application with a direction that in case the petitioner deposits Rs.5,00,000/- (rupees five lakhs) before the opposite party-bank on or before 03.07.2013 and files an application for One Time Settlement of the loan account, her application shall be considered by the Bank within a period of two weeks from the date of filing of such application and the decision thereof be communicated to the petitioner accordingly. No coercive action shall be taken on the petitioner till a decision is taken by the bank on the application of the petitioner. In case the petitioner fails to deposit the amount as stipulated above, it is open to the Bank to take consequential step for recovery of the loan amount as per the statutory provision. The above exercise shall be completed on production of the certified copy of the order.”

The order dated 12th March, 2019 was also not complied with. On 3rd July, 2019 an amount of Rs.5.00 lac was deposited by the Appellant in the Bank. Thereafter, Applicant Bank considered the proposal of One Time Settlement and rejected the same vide letter dated 8th July, 2019. Thereafter, the SARFAESI Application was filed on 18th September, 2019. It is also relevant at this stage to mention that prior to filing of the SARFAESI Application another W.P(C) No. 12502 of 2019 was filed by the Appellant before the Hon’ble High Court of Orissa at Cuttack wherein the following order was passed by the Hon’ble High Court on 11th September, 2019:

“Heard learned counsel for the parties.

The grievance of the petitioner, Mo the mother of   the loanee as well as the guarantor, in this Writ Petition she has approached this Court in W.P.(C) No 5346 of 2019 challenging the notice issued by the opposite parties-Bark under Section 13 (2) of the of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, which was disposed of on 08.03.2019 with a direction that in case the petitioner deposits an amount of Rs.5,00,00/- before the opposite parties-Bank on or before 25.03.2019 and flies an application for One Time Settlement of the loan account, in such event her application shall be considered by the opposite party-Bank within a period of four weeks from the date of filing such application. The petitioner could not able to manage the required money within the time stipulated and with much difficulty she has arranged the amount after five days from the stipulated date. Thereafter the petitioner requested the Bank to receive the amount along with the application for One Time Settlement of the loan account. However, the Bank refused to accept the same as the petitioner has not deposited the amount within the time stipulated by this Court.

While the matter stood thus, the opposite parties-Bank issued the possession notice under Section 13 (4) of the Act 2002. Challenging the said notice as well as the e-auction sale notice, the petitioner again approached this Court in W.P.(C) No.10567 of 2019. On 01.07.2019 the matter was taken up for hearing. Since lawyers were abstaining from Court work the petitioner appeared before this Court in person. The said Writ Petition was disposed of on 01.07.2019 with a direction that in case the petitioner deposits a sum of Rs.5,00,000/- before the opposite parties-bank on or before 03.07.2019 and files an application for settlement of the loan account, her application shall be considered by the Bank within a period of two weeks from the date of filing of such application with a rider that the auction, which was fixed may continue, however, the same shall not be finalized till a decision is taken by the Bank for settlement of the loan account. However, instead of considering the application filed by the petitioner for settlement of the loan account, the opposite party No.1-Bank has rejected the same vide letter dated 08.07.2019 under Annexure:9. Hence the Writ Petition.

Learned counsel for opposite parties-Bank submitted that in the meanwhile Sale Certificate has been issued in favour of the auction purchaser and Sale Deed also executed on 17.06.2019.

Learned counsel for the petitioner submitted that the petitioner is a cancer patient. However, she is ready and willing to settle the loan amount within a stipulated time as the mortgaged property is her residential house and she will suffer irreparable loss as she is in possession of the same.

The aforesaid fact is not disputed by the learned counsel appearing for the auction purchaser as well as the Bank.

Since earlier this Court has passed a conditional order, instead of communicating the decision taken on the application filed by the petitioner, the Bank has proceeded for issuance of Sale Certificate as well as execution of the Sale Deed on 17.06.2019. Admittedly, the Bank has taken possession of the property pursuant to Section 14 of the Act, 2002 and prior to the same put the property into auction and created third party interest. The allegation of the petitioner regarding fixation of reserve price of the property at a lower rate as well as possession retained by the petitioner are disputed questions of fact. Thus we are not inclined to go into such disputed questions of fact. However, it is open to the petitioner to approach the Debts Recovery Tribunal for redressal of her grievance, if any, if she is so advised. In such event, the Tribunal may consider the application of the petitioner in accordance with law in condoning the delay in approaching the Tribunal sympathetically as the petitioner has repeatedly approached this Court for redressal of her grievance. The petitioner shall not be dispossessed from the property in question without following process of law.

Accordingly, the Writ Petition is dismissed.”

Thereafter, SARFAESI Application was filed which was allowed by the Learned Debts Recovery Tribunal.

I have heard the Learned Counsel for the Appellant as well as the Learned Counsel for Respondent No. 1, who is the SARFAESI Applicant and the Learned Counsel for Respondent No. 2, the Auction Purchaser and perused the record.

Learned Counsel for Appellant has assailed the judgment and order passed by the Learned Debts Recovery Tribunal on the ground that the Learned Debts Recovery Tribunal has recorded its finding to the effect that the representation under Section 13 (3A) was not considered by the Secured Creditor. Perusal of the SARFAESI Application would show that no plea is taken in the SARFAESI Application by the SARFAESI Applicant, i.e. Respondent No. 1, that any representation under Section 13 (3A) of the SARFAESI Act, 2002 was ever made by the SARFAESI Applicant which was not considered by the Secured Creditor. Hence, the ground taken by the Learned Debts Recovery Tribunal is against the record.

Perusal of the record would show that the Borrower, i.e. Narendra Kumar Swain, and thereafter the SARFAESI Applicant, i.e. Respondent No. 1, Smt. Banita Swain @ Pattanaik, have moved the Hon’ble High Court of Orissa at Cuttack by filing several Writ Petitions, being No. W.P.(C) No. 11655 of 2018, 5346 of 2019, 10567 of 2019 and 12502 of 2019. From the very beginning, i.e. in the Writ Petition No. 11655 of 2018, Hon’ble High Court had granted liberty to the SARFAESI Applicant, Narendra Kumar Swain, the original borrower, who deposited an amount of Rs.10.00 lac and thereafter, a direction to the Bank to sympathetically consider the offer of One Time Settlement but that was not complied with by the Applicant and the amount was not deposited.

Further when Writ Petition No. 5346 of 2019 was moved, vide order dated 8th March, 2019 again the Hon’ble High Court gave option to the present Respondent No. 1, i.e. the SARFAESI Applicant, to make a deposit of Rs.5.00 lac with the Bank and a direction to the Bank to consider the proposal of One Time Settlement but that too was not complied with by the SARFAESI Applicant.

Further when Writ Petition No. 10567 of 2019 was moved, vide order dated 1st July, 2019 again the Hon’ble High Court gave option to the present Respondent No. 1, i.e. SARFAESI Applicant to make deposit of Rs.5.00 lac on or before 3rd July, 2019 and a direction to the Bank to consider the proposal of One Time Settlement sympathetically. At this stage, it would be relevant to mention that prior to this e-auction had already been fixed on 12th March, 2019. But since the petitioner appeared before the Hon’ble High Court in person, this fact was not brought to the notice of the Hon’ble High Court. However, in compliance of the direction of the Hon’ble High Court representation of the Respondent No. 1, i.e. SARFAESI Applicant, was considered by the Secured Creditor and was rejected vide letter dated 8th July, 2015. Further, communication of the decision dated 8th July, 2019 was also made to the Guarantor, Banita Swain.

Thereafter, again an attempt was made by the Respondent No. 1, SARFAESI Applicant, before the Hon’ble High Court by filing Writ Petition No. 12502 of 2019 which was dismissed with liberty to the Applicant to file an application under Section 17 of the SARFAESI Act, 2002. This background is relevant as far as redemption under Section 13 (8) of the Act is concerned. In the case of S. Karthik –vs- N. Subhash Chand Jain reported in (2022) l0 SCC 644. In para 77 Hon’ble Supreme Court has held:

“77. If we look at the facts in the present case, it would show that, every attempt has been made to frustrate the purpose of the SARFAESI Act. Respondent Bank was required to indulge in three rounds of litigation, out of which, the two have reached upto this Court (S.C.)”

Further in the case of Mathew Varghese -vs- M. Amritha Kumar (2014) 5 SCC 610 the The Hon’ble Apex Court held that if the sale certificate is issued, sale cannot be set aside except on the ground of fraud. Further in the case of Dwarika Prasad –vs- State of Uttar Pradesh [(Civil Appeal No. 148 of 2018 (Special Leave Petition © No. 26428 of 2016) dated 6th March, 2018] the Hon’ble Apex Court has placed reliance upon Mathew Varghese -vs- M. Amritha Kumar (2014) 5 SCC 610 wherein it was held that:

“39. When we apply the above principles stated with reference to section 60 of the T.P> Act in respect of a secured interest in a secured asset in favour of the secured creditor under the provisions of the SARFAESI Act and the relevant Rules applicable, under Section 13 (1), a free hand is given to a secured creditor to resort to a sale without the intervention of the Court or Tribunal. However, under Section 13 (8), it is clearly stipulated that the mortgagor, i.e. the borrower, who is otherwise called as a debtor, retains his full right to redeem the property by tendering all the dues to the secured creditor at any point of time before the date fixed for sale or transfer. Under Sub-section (8) of Section 13, as noted earlier, the secured asset should not be sold or transferred by the secured creditor when such tender is made by the borrower at the last moment before the sale or transfer. The said Sub-section also states that no further step should be taken by the secured creditor for transfer or sale of that secured asset. We find no reason to state that the principles laid down with reference to Section 60 of the T.P. Act, which is general in nature in respect of all mortgages, can have no application in respect of a secured interest in a secured asset created in favour of a secured creditor, as all the above-stated principles apply in all fours in respect of a transaction as between the debtor and secured creditor under the provisions of the SARFAESI Act.”

Further in the case of Shakeena -vs- Bank of India 2019 SCC Online Hon’ble Supreme Court 1059 judgment of the Hon’ble Hon’ble Apex Court and B. Arvind Kumar -vs- Government of India, (2007) 5 SCC 745 was relied upon wherein in para 10 of the B. Arvind Kumar it was held as under:

“19. The Court then relied upon the decision of this Court in B. Arvind Kumar -vs- Government of India and applying the principle underlying the said decision concluded that registration of sale certificate was not essential. The Court observed thus: 10.17. The ratio laid down by the Division Bench of this court in Arumugham, S. v. C.K. Venugopal Chetty and the Supreme Court in B. Arvind Kumar V. Government of India, referred supra, squarely applies to the case on hand and we, therefore, have no incertitude to hold that the sale which took place on 19.12.2005 has become final when it is confirmed in favour of the auction purchaser and the auction purchaser is vested with rights in relation to the property purchased in auction on issuance of the sale certificate and he has become the absolute owner of the property. Further, as held by the Division bench of this court in Arumugham, S. -vs- CK Venugopal Chetty and the Supreme Court in B. Arvind Kumar v. Government of India, referred supra, the sale certificate issued in favour of the appellant does not require any registration in view of section 17(2)(xii) of the Registration Act as the same has been granted pursuant to the sale held in public auction by the authorized officer under SARFAESI Act.

10.18. The finding of the learned Single Judge that the sale is not complete without registration of sale certificate, therefore, is not sustainable in law and the same is liable to be set aside.

10.19. If the argument of the borrowers that even after the issuance of the sale certificate, prior to registration, they are entitled to redeem the property is accepted, it would make the provisions of the SARFAESI Act redundant and the very object of the SARFAESI Act enabling the Banks and financial Institutions to realize long term assets, manage problems of liquidity, asset liability mismatch and to improve recovery of debts by exercising powers to take possession of securities, sell them and thereby reduce non performing assets by adopting measures for recovery and reconstruction would fail and would open a pandora's box for the litigations upsetting the sale confirmed in favour of the bonafide auction purchasers, who invested huge money.

10.20. In view of our finding on this point, we hold that the sale of the secured asset in public auction as per section 13(4) of SARFAESI Act, which ended in Issuance of a sale certificate as per rule 9(7) of the Rules is a complete and absolute sale for the purpose of SARFAESI Act and same need not be registered under the provisions of the Registration Act."

Hence, when the SARFAESI Applicant herself approached the Hon’ble High Court again and again and there was delay on her part in complying the conditional orders passed by the Hon’ble High Court now she cannot take advantage of the same, as has been held in S. Karthik (supra).

Further, sale certificate was issued on 12th April, 2019 which was registered on 18th June, 2019 hence in terms of the law laid down by the Hon’ble Apex Court and there is no plea of fraud in terms of the law laid down in terms of the Hon’ble Apex Court, now the Respondent No. 1, i.e. SARFAESI Applicant cannot take advantage nor the mortgage can be redeemed under Section 13 (8) of the Act.

Learned Counsel for Respondent No. 1 vehemently argued that the property was sold at a much less price than the actual price of the property. Learned Counsel submits that a valuation has been assessed on the basis of old valuation report 2013-2016. Learned Counsel has also placed reliance upon the valuation report filed along with the opposition in the appeal by one Gobinda Chandra Patra dated 18th February, 2020. On the basis of this valuation report, Learned Counsel submits that the Learned Valuer has valued the property at Rs.1,17,87,000.00 while the property is sold at a megre amount of Rs.39.30 lac. Per contra, Learned Counsel for the Appellant has placed reliance upon a Valuation Report dated 13th June, 2018 of M/s. Essen Den wherein the valuation was assessed at Rs.39.00 lac.

At the very outset, I am not impressed by the submission made by the Learned Counsel for Respondent No. 1. He has placed reliance upon the valuation report of one Mr. Gobinda Chandra Patra dated 18th February, 2020. This report was not filed before the Learned Debts Recovery Tribunal while the impugned judgment was passed on 29th September, 2020. No reason is shown as to why this report was not filed before the Learned Debts Recovery Tribunal. Further, an evidence or a piece of evidence which was not filed before the Learned Debts Recovery Tribunal, could not be entertained in the appeal although there are provisions under Order 341 Rule 47 of the C.P.C. for filing of additional evidence in the appeal but neither any such application is filed nor any ground is made out to consider the valuation report, which was not filed before the Learned Debts Recovery Tribunal, in appeal. Hence I do not find any ground to take into consideration the submission of the Learned Counsel for Respondent No. 1 for considering the valuation report in the appeal which was not filed before the Learned Debts Recovery Tribunal.

As far as the plea of low valuation of the property is concerned, Learned Counsel has further submitted that where the property was registered, Learned Sub Registry has assessed the Valuation of the property in the year 2019 at Rs.71,44,676.00. In the case of Ballyfabs International Limited & Another -vs- State of West Bengal & Others it has been held by the Hon’ble High Court at Calcutta that any auction which is widely published, the value of the property, as mentioned in the auction sale notice, has to be considered as market value. Accordingly, in terms of the valuation report filed by the Appellant as well as the law laid down by the Hon’ble High Court at Calcutta, I do not find any force in the submission made by the Learned Counsel for Respondent No. 1 that the property is sold for a lesser value than the actual valued.

Learned Counsel for Respondent No. 1 has further submitted that the in the auction sale notice only the land is mentioned and there is no mention of the building standing thereon.

In the loan agreement which was executed by the Respondent No. 1, SARFAESI Applicant, as well as her son Narendra Kumar Swain, who died pending proceedings, equitable mortgage was created in respect of land and building situated at Mouza Nayagarh, Thana District : Nayagarh, Khata No. 1219/168 and 1219/1702, Plot No. 2010/3442 and Plot No. 2010/4633, Area Ac 0.03 decimal and Ac 0.04 decimal. When Respondent No. 1, i.e. SARFAESI Applicant, herself has mortgaged the property, i.e. the land and the building constructed thereat, she is estopped from challenging that only land was mortgaged and not building and hence the mortgaged property could not have been sold but at the same time Learned Counsel further submits that since only plot of land was mentioned in the e-auction notice, value of the property is less.

I do not find any force in the argument made by the SARFAESI Applicant that the value in the e-auction sale notice is less. It is specifically mentioned that the secured assets to be auctioned consists of “All that part and parcel of the property consisting of Land and Building situated at Mouza Nayagarh, Thana District : Nayagarh, Khata No. 1219/168 and 1219/1702, Plot No. 2010/3442 and Plot No. 2010/4633, Area Ac 0.03 decimal and Ac 0.04 decimal, bounded by by North Bijaya Kumar Sahoo, East NAC Road, West Tuku Pattanaik, South Braja Kishore Jena. Property recorded in the name of Banita Patanaik.” Hence it is clear from the record that part and parcel of the property which consisted of land and building, was to be auctioned.

On the basis of the discussion made above, I am of the view that Learned Debts Recovery Tribunal has erred in holding that the e-auction allowing sale was not done in accordance the Provisions of SARFAESI Act 2002 and the relevant Rules. Learned Debts Recovery Tribunal has recorded an illegal finding whereby the SARFAESI Application is allowed. Accordingly, appeal deserves to be allowed and the judgment and order, dated 29th September, 2020, passed by the Learned Debts Recovery Tribunal is liable to be set aside.

ORDER

Accordingly, the appeal is allowed. Judgment and order dated 29th September, 2020, passed by the Learned Debts Recovery Tribunal, Cuttack, is hereby set aside.

No order as to costs.

File be consigned to Record room.

Copy of the order be supplied to Appellant and the Respondents and a copy be also forwarded to the concerned DRT.

Copy of the Judgment/Final Order be uploaded in the Tribunal’s Website.

Order dictated, signed and pronounced by me in the open Court on this the 20th day of January, 2023.