K.R.Shajan Joseph & Anr. vs Indian Overseas Bank & Ors.

The Appellants, who are the Applicants before the Tribunal filed SA 244/2021 seeking the following reliefs:

This SA was contested by the Respondents, and after contest, it was dismissed on 07.10.2024 by Learned Presiding Officer, DRT-I, Ernakulam. Thus, this Appeal.

Reiterating the grounds raised in the grounds of Appeal, Learned Counsel for Appellants submitted that none of the grounds was considered by Learned Presiding Officer, DRT-I, Ernakulam with reference to the documents produced and submissions made.

The classification of account as NPA on 28.02.2020 was wrong, in view order of the Hon’ble Supreme Court of India and the guidelines issued by the Reserve Bank of India.

Appellants received the Demand Notice dated 29.07.2020 claiming a sum of Rs.3,85,00,000/- with interest and sent their objections/representations as to the amount claimed but that was not considered.

Possession Notice is not affixed on the secured asset and the order under Section 14 of the SARFAESI Act was obtained without disclosing the exact amount due as on the date of filing of the Application under Section 14 of the SARFAESI Act.

Learned Advocate Commissioner issued notice on 18.02.2022 and took physical possession of the property on 17.06.2022. The secured asset has 3,600 sq. ft. of building. There are plywood, Glass, mica and hardware items available at the time of taking physical possession by the Advocate Commissioner. Those items are not reflected in the inventory report prepared by the Advocate Commissioner.

The Sale Notice dated 01.11.2021 fixing the date of sale on 10.12.2021 was not properly served on the Appellants. The xerox copy of the returned postal cover shows that it was received by the recipient only on 12.11.2021. This makes it clear that no 30 days’ clear notice was given. During that period, Appellants were tested positive for Covid- 19 and the area in which they were living was sterilized. The Appellants were not in a position to move because of the obstacles imposed by the Government on movement. The mandatory compliance of Rule 8(6) and 9(1) of SIE Rules, 2002 are necessary for sale of the property, i.e. 30 clear days of notice/15 clear days of notice.

The impugned Sale Notice was the 6^th Sale Notice and it was issued on 04.11.2023 fixing the sale on 30.11.2023. The Sale Notice was not served to the borrower, M/s. Timber Glass House. That apart, the Sale Notice was not affixed on the secured asset.

Collusion between the Bank officials and the Auction Purchaser are quite evident from the manner in which, the valuation of the property was fixed and sale was held. The reserve price was fixed at Rs.4,80,00,000/- and the property was sold for Rs.4,80,50,000/- to the Auction Purchaser. Only single bidder participated in the bid process.

Payment of 75% of balance sale consideration was not paid within 15 days of time granted under the SIE Rules 2002. It is the submission of the Respondent Bank that there was an agreement in writing for extension of time for paying the balance sale consideration, and accordingly, the balance sale consideration was paid within the extended time. There is no mention about the date of the agreement in writing, which had been entered between them. That agreement was also not produced before the Tribunal.

With regard to valuation, it is seen from the valuation report that the land and building was valued at low price of Rs.5,58,49,854/-. The value was deliberately undermined and undervalued. The extent of the building and nature of the building was not properly valued and the building was valued only at Rs.27,40,973/-. For 11.94 Ares of land, the value was fixed at Rs.5,31,08,881/-. The Bank’s valuer had taken the value at Rs.44,47,980/- per Are, the basis for which, is not explained in the valuation report. On the other hand, the valuation report produced by the Appellants shows that this valuation report was taken prior to sale. The Appellants’ Valuer adopted guideline value issued by the Government at Rs.19,80,000/- per Are, for arriving the land value at Rs.8,85,00,000/-. The Valuer valued the building at Rs.39,75,000/- taking note of the fact that the building consists of commercial and residential building. Therefore, total value as per the valuation report of the Appellants, comes to Rs.924.75 Lakhs. Compare to this valuation report, the Bank’s valuation report shows that the property was grossly undervalued.

Without any prior consultation, the Sale Notice dated 04.11.2023 was issued on the basis of the valuation report dated 03.11.2023. All these points clearly establish that Bank officials and Auction Purchaser colluded to ensure that the property would be sold for a lesser sum.

Learned Counsel for Appellants drew the attention of this Tribunal to the additional Written Statement filed by the Defendants before DRT stating that the highest bidder had immediately, on the same day, (namely on 30.11.2023) itself remitted 25% of the bid amount (which is inclusive of the Ernest Money Deposit). The balance purchase price was also deposited within the time agreed in writing between the 3^rd Defendant and the secured creditor. The details of the remittances are as follows:-

Learned Counsel for Appellants drew the attention of the documents filed in the form of additional documents by the Respondent Bank to show that the Bank sent a letter dated 04.12.2023 to the Auction Purchaser stating that he was the successful bidder in the sale held on 30.11.2023 and he was required to deposit 25%, i.e. Rs.1,20,12,500/-immediately, but not later than 05.12.2023. He was further required to pay the balance sale consideration within 15 days i.e. on or before 19.12.2023. This communication shows that 25% of the bid amount including 10% EMD amount was not paid either on the date of sale on 30.11.2023 or on the next date i.e. 01.12.2023. The time for making the balance sale consideration was given as per this letter, till 19.12.2023. However, the Auction Purchaser sent an e-mail only on 04.01.2024 seeking extension of time for payment for balance sale consideration till 30.01.2024. The extension letter was not within 15 days time given under Rule for making the balance sale consideration. On the Auction Purchaser, failing to pay the balance sale consideration in time, the Bank should have cancelled the sale and forfeited whatever the amount deposited by the Auction Purchaser. Therefore, for non-payment of 25% of the sale consideration and the balance sale consideration as required under SIE Rules, 2002, requires that sale has to be set aside.

Continuing his submission, Learned Counsel for Appellants submitted that the valuation report produced by Appellants has given the details as to the basis on which the Valuer arrived at valuation. On the other hand, the Bank’s Valuer has not given any reason for arriving at the valuation. Comparatively the value given by Bank’s Valuer is drastically low. That was the reason for selling the property for low price.

In conclusion, Learned Counsel for the Appellants submitted that though these grounds have been raised before Learned Presiding Officer, DRT-I, Ernakulam, Learned Presiding Officer has not considered these aspects with reference to the documents and evidence made available, but, rejected all the grounds and dismissed the Securitization Application. Thus, he prays to set aside the order dated 07.10.2024 passed by the Learned Presiding Officer, DRT-I Ernakulam in SA No. 244/2021 and to allow this Appeal.

In reply, Learned Counsel for Respondent Nos.1 and 2 Bank submitted that SA 244/2021 was initially filed questioning the classification of account as NPA and to set aside the Possession Notice and 1^st Sale Notice dated 01.11.2021. The sale was held only in the 6^th sale attempt. In between, five sale attempts had been made but failed. Without filing an independent Application to challenge the Sale Notices, i.e., Appellants filed amendment Petition, and on the basis of the order passed in amendment application, the impugned sale was challenged. Each measure gives an independent cause of action, and therefore, impugned sale should have been challenged by filing a separate Securitisation Application. Appellants were sitting over the fence and watching the proceedings. The amendment application was not filed within 45 days of sale, and therefore, challenge to sale was not within the period of limitation.

In pursuance of Sale Notice dated 04.11.2023, sale was held on 30.11.2023. This sale was challenged by an amendment Application filed on 06.02.2024, beyond the period of limitation of 45 days either from the date of sale notice or from the date of sale.

With regard to the classification of account as NPA, it is submitted that Appellants are not coming under MSME Scheme. The loan was not availed as MSME loan so as to claim the benefit under MSME Scheme. The registration under MSME portal is required. Only if such registration certificate is produced, any claim on the basis of MSME can be made. No such registration certificate is produced. Therefore, as held by Hon’ble Supreme Court in M/s. Pro Knits Vs. The Board of Directors of Canara Bank and Ors., reported in 2024 INSC 565, Appellants cannot claim the benefit under MSME.

The account was classified as NPA for non-servicing of loan for continuous period of 90 days. Appellants have not produced any material by producing remittance receipt to show service of loan for 90 days prior to classification of account as NPA. The SARFAESI measures had been taken in accordance with law by following the mandatory procedures. Section 13(2) Demand Notice followed by Section 13(4) Possession Notice was issued as required under SIE Rules, 2002.

The claim of the Appellants that Possession Notice was not affixed on the secured asset, is not correct for the reason that Learned Presiding Officer had given a clear finding in para 15 of the impugned order about the affixture of Possession Notice on 11.12.2020 and filing proof of affixture of Possession Notice.

With regard to submissions made by Learned Counsel for Appellants on failure to prove affixture of Sale Notice, Exhibit list annexed with the impugned order shown as Document Nos. 17, 18, 19, 20 and 21, clearly establish that the impugned Sale Notice was served, published and affixed. Therefore, it is not correct on the part of the Appellants to contend that Sale Notice was not served, published and affixed. A clear finding with regard to service of Sale Notice by three means is recorded in para 23 of the impugned order.

Continuing further, Learned Counsel for Respondent Nos. 1 and 2 Bank submitted that the sale could end successful only in the 6^th sale attempt. The reserve price fixed for sale of the property was for Rs.4,80,00,000/- and it was sold to the Auction Purchaser for Rs.4,80,50,000/-. The reserve price was not reduced suddenly. It was gradually reduced in 6^th sale attempt. The reserve price was fixed on the basis of the valuation report obtained prior to the Sale Notice. Appellants have not raised the issue of under-valuation after receiving previous Sale Notices in all the Securitisation Applications filed challenging those Sale Notices. Therefore, the Appellants cannot raise the issue of under-valuation and insufficient pricing now.

It is further submitted that despite previous sale attempts, the Appellants had not taken any steps to pay the loan amount and redeem the property prior to publication of the impugned Sale Notice. He could have arranged to secure a buyer to bid in the sale or for the sale of the property by private treaty with the consent of the Bank. However, this was not done by the Appellants.

It is seen from the valuation report of the Appellants, this report was dated 23.12.2022. It is mentioned in the report that Valuer inspected the property on 22.12.2022, and on the basis of inspection, has given the valuation report. On the other hand, the Bank had taken physical possession of the property on 17.06.2022 itself. The inventory report prepared by Learned Advocate Commissioner shows that the Bank had appointed two security guards to safeguard the property. When the property is in possession of the Bank how could have the Valuer of Appellants visited the property and valued the property. There is no material produced to show that the Appellants had taken consent of the Bank or permission from the Tribunal for the Valuer’s inspection. In the said circumstances, this valuation report cannot be considered a genuine valuation report, as it appears to have been fabricated to suit the needs of the Appellants. It has no evidentiary value at all. By producing cooked up valuation report, it is clear that Appellants approached the Tribunal, without clean hands.

It is reiterated that in the sale held during 6^th sale attempt, claim of the Appellants that the property was under-valued, without sufficient proof of under-valuation and without showing any prejudice on account of sale, cannot be entertained. Even after the sale, there is debt due from the Appellants to the Bank.

Learned Counsel for Respondent Bank would submit that the date of sale was on 30.11.2023, and prior to the date of sale, 10% of the sale amount as EMD i.e. Rs.48,00,000/-was paid as per the terms and conditions of the Sale Notice. Balance sale consideration of Rs.72,15,000/- to meet the requirement of 25% was paid on 30.11.2023 by M/s. Orsan Wood Works account. Thereafter, by a letter dated 04.12.2023, the Bank confirmed the sale in favour the Auction Purchaser and granted time till 19.12.2023 for paying the sale consideration. On 16.12.2023, the Auction Purchaser sent a letter seeking extension of time for payment of balance amount, within 15 days from the date of sale. There were other letters sent on 05.01.2024 and 30.01.2024 for extension of balance payment. The last extension was till 31.01.2024. On 31.01.2024, the Auction Purchaser made payment of all the balance amounts by transfer. Thus, he submitted that the sale was properly held and sale price was paid by the Auction Purchaser within the extended time on the basis of the agreement entered into between the Bank and the Auction Purchaser.

Learned Counsel for Respondent Bank would further submit that 10% of EMD amount was paid on 27.11.2023 through the account of M/s. Orsan Wood Works, in which the Auction Purchaser and his wife are the partners. Last date of payment of EMD was on 29.11.2023. However, payment was made on 27.11.2023. The balance 15% to meet the requirement of 25% of the sale consideration was paid on 30.11.2023 i.e. the date of sale. Remaining balance sale consideration of 75% was paid on different dates as narrated above, but before the date agreed between the Auction Purchaser and the Bank, for completion of payment of balance sale consideration within 61 days. The outer limit for paying the balance sale consideration, with an agreement in writing between the Auction Purchaser and the Bank, is 90 days. Thus, he submitted that the balance sale consideration was paid as agreed between the Auction Purchaser and the Bank. The measures under SARFAESI Act, 2002 had been taken properly, sale was held, sale price was paid, Sale Certificate was issued by following the mandatory provisions of the SARFAESI Act, 2002. Thus, he prayed for the dismissal of the Appeal.

Learned Counsel for the Auction Purchaser supported the submissions of Learned Counsel for the Bank. It is submitted that the Auction Purchaser and his wife are the partners of M/s. Orsan Wood Works. Therefore, EMD amount, 15% of the sale consideration and 75% of the sale consideration was paid through the account of M/s. Orsan Wood Works. Payment made through the account of M/s. Orsan Wood Works would be as good as the payment made by the Auction Purchaser in his individual capacity. Thus, he prayed for the dismissal of the Appeal.

This contention was refuted by Learned Counsel for Appellants and submitted that the Auction Purchaser participated in the auction in his individual capacity. Therefore, EMD amount, 15% of the sale consideration and 75% of the sale consideration should have been paid only by the Auction Purchaser from his individual account and not from the account of Partnership Firm. Thus, he submitted that the sale price paid by M/s. Orsan Wood Works, in lieu of the Auction Purchaser is illegal, non-est and liable to the set aside.

Considered the rival submissions and perused the records.

Copy of the Demand Notice dated 29.07.2020 issued under Section 13(2) of the SARFAESI Act, 2002 shows that the Respondent Bank demanded a sum of Rs.3,98,08,252.62p with further interest at 13.45% compounded with monthly rests. As per this Demand Notice, the account was classified as NPA on 28.02.2020. With regard to the Demand Notice, it is the submission of Learned Counsel for Appellants that the classification of account as NPA is against the guidelines issued by the RBI and the direction of the Hon’ble Supreme Court of India. It is the case of the Respondent Bank that Appellants are not coming under MSME Scheme, and therefore, cannot claim benefit under MSME. The account was classified as NPA for not servicing the loan for continuous period of 90 days. Except bald pleadings that the classification of account as NPA is against the guidelines of the RBI and the direction of the Hon’ble Supreme Court of India, Learned Counsel for Appellants has not produced any facts or figure with regard to sustain the claim that classification of account as NPA as illegal. It is seen from the submission of Learned Counsel for Respondent Bank that since Appellants did not come under MSME Scheme, benefits under MSME scheme cannot be claimed, and there is continuous default on the part of Appellants in paying the loan for continuous period for 90 days. Thus, this Tribunal finds that classification of account as NPA was in accordance with law, and therefore, the Appellants cannot agitate over the classification of account as NPA.

Another submission with regard to Section 13(2) Demand Notice was that the Appellants sent an objection/representation under Section 13(3A) of the SARFAESI Act, 2002 raising objection over the amount claimed in the Demand Notice. However, the copy of the alleged objection/representation sent to the Demand Notice dated 29.07.2020 is not produced before this Appellate Tribunal or before the DRT. Under such circumstance, the submission of Learned Counsel for Appellants that the Appellants submitted objection/representation to the Demand Notice and that was not considered by the Bank, cannot be accepted.

With regard to the Possession Notice, it was submitted that the Possession Notice was not properly served, affixed and published. However, there is a finding on facts recorded by Learned Presiding Officer, DRT-I, Ernakulam that the Possession Notice was published on 11.12.2020 and affixed on the secured asset. The affixture was proved by production of Exhibit B 24 photograph. It is submitted that Section 14 order was obtained without disclosing the exact amount due as on the date of filing of the Securitisation Application. The perusal of Section 14 Application shows that every necessary details including the amount availed as loan facility and due from the Appellants at Rs.4,50,16,819.77p, are clearly stated. As many as 18 Annexure were filed along with Section 14 Application. Therefore, the submission of Learned Counsel for Appellants that Section 14 Application was filed without disclosing the exact amount as on date of filing the Application is not correct, and therefore, this submission cannot be accepted.

On taking possession of movables, it is the submission of Learned Counsel for Appellants that the items such as Plywood, Glass, Mica and Hardware items were deliberately omitted to be listed in the Inventory, and thus, the Bank and Auction Purchaser illegally benefitted from taking possession of those items. This is mere bald allegation, the reason is that, there is no specific details given either in the Securitisation Application or on any other previous occasion with regard to the nature, quantity and value of Plywood, Glass, Mica and Hardware items. No Invoices/bills/Inventories taken by Appellants prior to taking possession by the Advocate Commissioner were produced to show that these items were in fact available in the premises. When possession was taken by Learned Advocate Commissioner, it appears that no objection was taken either to the Commissioner or to the Bank with regard to omission to mention the aforesaid items in the Inventory report. It is admitted that inventory report of the Advocate Commissioner was served on the borrowers and produced before the DRT-I Ernakulam. This plea is raised only in the Securitisation Application after much deliberations and thought and long after the Advocate Commissioner took possession. Therefore, the submission in this regard cannot be accepted.

It is submitted that the Sale Notice dated 01.11.2021 fixing the sale on 10.12.2021 was not properly served on the Appellants, but it was served on 12.11.2021, thus, there was no clear 30 days notice prior to sale was given. However, the perusal of the postal cover shows that an endorsement had been made by the postman that intimation with regard to Sale Notice was served on 03.11.2021, 05.11.2021 and 06.11.2021. Despite that, Appellants had not taken care to receive the Sale Notice, and the Sale Notice was received by the Recipient only on 12.11.2021. It is a mistake on the part of the Appellants to receive the Sale Notice with delay. What is required is to take the Sale Notice to the borrower/guarantor to the address given at the time of availing loan facility, which was rightly done in this case. Therefore, there cannot be any complaint about the non-serving of Sale Notice. That apart, admittedly, Appellants did not challenge any of the measures earlier taken such as issuance of Possession Notice, orders passed under Section 14 of the SARFAESI Act, 2002, and issuance of previous five Sale Notices. When those measures were not challenged, within the time stipulated, it is not open to the Appellants to challenge those measures in subsequent proceedings, concerning issuance of Sale Notice dated 04.11.2023 for sale held on 30.11.2023. By failing to challenge those measures, Appellants have abandoned/waived their right to agitate any issue involved in those measures.

The sale has been successful only during the 6^th sale attempt, with issuance of Sale Notice dated 04.11.2023, fixing the sale on 30.11.2023. It is the case of the Appellants that this Sale Notice was not served on all the parties concerned, especially sale notice was not served on the borrower, M/s. Timber Glass House, and Sale Notice was not affixed.

The perusal of the order of Learned Presiding Officer, DRT-I, Ernakulam shows that the Annexure A XV, Sale Notice dated 04.11.2023 was served on the Applicants 1 and 2 through Annexure B17 and B18. Postal receipt is produced as Annexure B16. Both the Applicants were served on 13.11.2023, though attempt was made for service on 06.11.2023. Since the Appellants have not received on 06.11.2023, it was delivered only on 13.11.2023. Publication of Sale Notice in the newspaper both in English and vernacular language are proved by Annexure B 19 and B 20. Affixture of Sale Notice is proved by Annexure B 21. M/s. Timber Glass House is not the Applicant before the Tribunal nor it was shown as Respondent in the Securitisation Application. Only M/s. Timber Glass House can challenge the non service of Sale Notice. When it has not chosen to challenge the non-service of Sale Notice, Appellants cannot take up a plea that the Sale Notice was not served on M/s. Timber Glass House. The service of Sale Notice by all the three modes to the Appellants by post, by publication in newspaper and affixture on secured asset, had been proved beyond any doubt by the Bank, and therefore, Appellants cannot express any grievance against non-service of Sale Notice.

The next point remains to be considered is valuation of the property and fixation of reserve price. Learned Counsel for Appellants submitted that as per valuation report filed by the Appellants, Appellants’ Valuer adopted guideline value issued by the Government for land at Rs.19.80 Lakhs per Are, for arriving the land value at Rs.8.85 Crores. The building was valued at Rs.39.75 Lakhs and total value was fixed at Rs.924.75 Lakhs. However, the Bank Valuer valued both land and building for only Rs.5,58,49,854/-. This is too low. The reserve price fixed at Rs.4.80 Crores is also too low.

We have already seen that Learned Counsel for Respondent Bank gave reply that when the property was in possession of the Respondent Bank, Appellant’s Valuer could not have visited the property and valued the property. It could be seen from the Inventory report that once the property was taken possession on 17.06.2022, the Bank had appointed two Security Guards to safeguard the property. When that be the case, it is not possible for the Appellants’ Valuer to visit the property for inspection on 22.12.2022, to value the property and give a report. The only possible way to inspect the property when it is in the Bank’s custody was either to get permission from the Bank to inspect the property or from the Tribunal to get valuation done. That is not the case here. Therefore, this Tribunal finds merits in the submission of Learned Counsel for Respondent Bank that the valuation report produced by Appellants is prepared only to suit the convenience of the Appellants’ case. That apart, Appellants have not produced any material to show any notification issued by the Government with regard to guideline value. In the absence of any such notification, no sanctity can be imported to the submission of Learned Counsel for Appellants that the Appellants’ Valuer adopted the guideline value issued by the Government in fixing the land value. In the absence of any comparative valuation worth mentioning, this Tribunal is of the view that the value adopted by the Bank’s Valuer who is an approved valuer under the Wealth Tax Act, cannot be faulted. Therefore, the valuation of the property obtained on 03.11.2023, prior to the sale notice dated 04.11.2023, can be relied for fixing the reserve price and for sale of the property.

It has to be borne in mind that this is not the first sale attempt, but, the 6^th sale attempt. In all the previous five sale attempts, similar exercise had been done and the reserve price naturally got reduced for every failed sale attempt, for want of bidders. That had happened in this case. Since there is no bidder in the earlier attempts, reserve price was fixed at Rs.4.80 Crores and was sold for Rs.4,80,50,000/- legally this sale cannot be found fault with. The Bank cannot do anything if no other bidders participated and only single bidder participated in the sale. The sale is held by issuing notice through post to the borrower/guarantor, by issuing publication in both English and vernacular language and by affixture of Sale Notice on the secured asset. Despite all these attempts, only one bidder participated in the sale process and succeeded. Therefore, we cannot doubt the sale in view of participation of only one bidder.

Another contention raised by Learned Counsel for Appellants is that the Auction Purchase has not paid 25% of the sale consideration and balance 75% of the sale consideration within the time stipulated. A detailed submission was made by both the Learned Counsel appearing for the parties in this regard. It is stated in the additional Written Statement filed by Respondent Bank that the Earnest Money Deposit (EMD) of Rs.48 Lakhs was paid on the date of sale and balance in three instalments within the time agreed between the Bank and the Auction Purchaser. Certain E-mail communications have been produced with regard to the written agreement, part payment of balance sale consideration by M/s. Orsan Wood Works, the partnership firm of the Auction Purchaser. The accounts statement of M/s. Orsan Wood Works is also produced. From the E-mail communications, and the statement of accounts produced, it can be seen that Rs.48 Lakhs was paid on 27.11.2023 and the balance amount in three instalments at Rs.72,15,000/- on 30.11.2023, Rs.3,39,00,000/- on 30.01.2024 and Rs. 21,35,000/- on 31.01.2024. By letter dated 04.12.2023, the Bank sent a letter to the Auction Purchaser directing the Auction Purchaser to pay the balance 75% on or before 19.12.2023. Obviously, it is not correct, for the reason that 25% of the sale price has to be paid on the date of sale itself. In this case, 25% was paid on 27.11.2023 itself. The Auction Purchaser had time till 15.12.2023 to pay the balance sale consideration. It appears that the Auction Purchaser sent a letter dated 14.12.2023 seeking extension of time for paying the balance sale consideration and it was considered. By another letter dated 04.01.2024, Auction Purchaser was given time till 30.01.2024 and by another letter dated 30.01.2024, time was extended till 31.01.2024. Within 31.01.2024, the entire balance sale consideration was paid. Therefore, this Tribunal finds that 25% of sale consideration was paid on 27.11.2023 and balance within 31.01.2024 within the time agreed between the Auction Purchaser and the Bank. Therefore, this Tribunal finds the sale consideration was paid in accordance with law.

On finding that the EMD amount and the sale consideration were paid from the account of the partnership firm of the Auction Purchaser namely M/s. Orsan Wood Works, this Tribunal reopened this Appeal for further hearing.

Learned Counsel for the Appellants and the 1^st Respondent Bank were asked to submit as to whether the payment made from the account of the partnership firm on behalf of the Auction Purchaser is a legal payment.

Learned Counsel for Appellants vehemently argued that the EMD amount and the sale consideration should be paid only by the bidder/successful Auction Purchaser. Nobody else, including the partnership firm in which the Auction Purchaser is a partner, can pay this amount. As per E-auction sale notice dated 16.08.2023, the intending bidders/purchasers were required to transfer the EMD amount using online mode by 24.09.2023 and successful bidders should deposit 25% of the sale price (less EMD amount) immediately on the sale day and not later than the next working day and the balance amount shall be paid within 15 days from the date of confirmation of auction sale.

Rule 9(2) of the SIE Rules, 2002 mandates the confirmation of sale in favour of the purchaser, who has offered the highest price in the bid or tender or quotation. Rule 9(3) of SIE Rules, 2002 requires the purchaser to pay immediately i.e. on the same day or not later than next working day, to pay 25% of the amount, inclusive of EMD. Rule 9(4) of the SIE Rules, 2002 requires only the purchaser to pay the balance amount within 15 days of confirmation of sale. On payment, the sale certificate has to be issued in favour of the purchaser. Thus, he submitted that the E-auction Sale Notice and the aforesaid Rules, make it abundantly clear that, the EMD amount should be paid by the bidder and the balance sale consideration should be paid by the successful bidder/ purchaser. Therefore, the payment made by the Partnership Firm on behalf of the Auction Purchaser, is not a valid payment, and therefore, the sale has to be set aside.

In reply, Learned Counsel for 1^st Respondent Bank submitted that a partnership firm and its partners cannot be distinguished from each other. A partnership firm is an arrangement to do some business by individuals called partners. In the partnership firm, the auction purchaser and his wife are the only partners. Therefore, the payment made by the partnership firm was only on account of the purchase made by the partner/Auction Purchaser. Merely because the payment was not made by the Auction Purchaser’s account, but by his partnership firm account, the sale cannot be set aside. Not only that, the prayer for setting aside the sale was not made within 45 days of sale but beyond the period of 45 days by way of amendment. Though the amendment Application was allowed, that will not empower the Appellants to challenge a measure which is time barred. Unless fraud, collusion, under-bidding and insufficient pricing are made out by pleadings and evidence, the sale cannot be set aside for a technical defect. In support of this proposition, he relied on the decision in Ceril LLP Vs. Sumathi Prasad Bafna reported in 2024 SC 1187.

Learned Counsel for Auction Purchaser also submitted on the same line and she pressed into service the decision in Ashok Bhan, Dalveen Bhandari, JJ. Janatha Textiles & Ors. Vs. Tax Recovery Officer & Anr.,, reported in 2008 12 SCC 582, for the proposition that a bonafide Auction Purchaser’s right has to be protected and the sale cannot be set aside for mere irregularity.

True it is that the E-auction Sale Notice and the Rules discussed above, require that EMD amount should be paid by the bidders and that the balance sale consideration should be paid by the successful bidder/purchaser. In the case before hand, the EMD amount and the balance sale consideration were not paid from the account of the Auction Purchaser, but were paid from the account of partnership firm M/s. Orsan Wood Works, in which he and his wife are the only partners. Despite this Tribunal requiring Learned Counsel appearing for the parties to produce any previous decision of Hon’ble High Court or Hon’ble Supreme Court on this issue, the Counsel appearing for the parties were not in a position to produce any decision on this issue.

The partnership firm is a compendious name for the individuals, who have entered into a partnership. The partnership firm and its partners are not considered separate, in a legal sense. Partnership firm does not have a separate legal entity distinct from the partners. M/s. Orsan Wood Works have two partners, the Auction Purchaser and his wife. Knowingly or unknowingly, instead of paying the EMD amount and sale price from his account, Auction Purchaser mistakenly paid the amount from the partnership account. He could have easily transferred the amount from the account of Partnership Firm to his individual account and then paid EMD/sale price from his account. Unfortunately, that was not done and paid from partnership firm’ account. For this mistake, whether the sale is liable to be set aside is the question that looms large. This Tribunal is of the view that the sale need not to be set aside for this mistake. Reasons are that, the previous five sale attempts had failed for want of bidders. Only in the 6^th sale attempt, the Bank succeeded in selling the secured asset. None of the earlier measures like issuance of Possession Notice, orders passed under Section 14 of the SARFAESI Act and previous five sale notices had been challenged by the Appellants. Even the sale now impugned is not challenged within 45 days of the sale.

The sale had taken place on 30.11.2023, but the amendment Application was filed on 06.02.2024 beyond the period of limitation. Despite that, Learned Presiding Officer chose to allow the Application. When Debts Recovery Tribunals have no power to condone the delay in filing the Securitisation Application, to challenge the measures taken, it goes without saying that the Debts Recovery Tribunals have also no power to allow the amendment Application filed beyond the period of limitation to challenge this sale. In the said circumstances, this Tribunal is of the view that payment of EMD/sale amount by the Partnership Firm of the Auction Purchaser can be accepted.

This Tribunal finds from evidence that the other grounds raised by Learned Counsel for Appellants in the Securitisation Application have no legs to stand, and therefore, those grounds are stand rejected. Therefore, this Tribunal is of the view that, from the facts and circumstances of the case, the sale is not required to be set aside for the mistake committed by not paying the EMD amount/balance sale consideration from the account of partnership firm of the Auction Purchaser instead of the account of the Auction Purchaser.

From the consideration of the material produced in this case and submissions made by Learned Counsel for the parties, this Tribunal finds that sale was held in accordance with law after following the mandatory provisions of the SARFAESI Act, 2002. There is no sustainable ground made out for interfering with the findings of Learned Presiding Officer, DRT-I, Ernakulam. Accordingly, the Order of Learned Presiding Officer is confirmed.

In the result, the Appeal in RA (SA) 120/2025 is dismissed with costs of the Respondents. All pending IAs, if any, stand closed.