LIC Housing Finance Ltd. vs Om Parkash And Ors.

J.M. Malik, J

The main controversy in this appeal revolves around the question whether the learned DRT rightly set aside the auction sale in this case. This order shall decide the above mentioned two appeals which arise out of a judgment dated 30.11.2010 rendered by Mr. A.K. Jain, Presiding Officer, DRT-I, Chandigarh. Vide the impugned order, the learned trial Court set aside all subsequent proceedings in pursuance of the notice under Sections 13(2) and 13(4) of the SRFAESI Act. The Bank was given permission to proceed against the borrowers for recovery of debt as per law. Aggrieved by that order, the first appeal has been filed by LIC Housing Finance Ltd. (hereinafter referred to as 'LIC') and the second appeal has been filed by one Smt. Urmila Kumari, purchaser of the property in dispute from the auction purchaser.

LIC sanctioned a housing loan in the sum of Rs. 4.50 lakh in favour of Mr. Om Parkash Jangra and his son Mr. Anil Kumar. Shri Om Parkash Jangra created equitable mortgage of property bearing No. 1735, New Geeta Colony, Mirzapur Road, Hisar, Haryana in favour of LIC. On 22.8.2005, LIC issued notice under Section 13(2) of the SRFAESI Act. Although, the stand set up by Shri Om Parkash Jangra throughout has been that he was never served with the notice under Section 13(2) of the SRFAESI Act, yet, his reply dated 9.9.2005, sent in response to the said notice has been placed on the record. Thereafter, LIC sent possession notice and also got it published in the newspapers, which was also served upon Shri Om Parkash Jangra and his son on 20.3.2006. LIC sent public notice for sale and got it published in the newspaper on 15.11.2006, which was also served upon Shri Om Parkash Jangra and his son.

LIC auctioned the property in question to one Mr. Vijay Kumar Takkar, Advocate, on 23.1.2007. LIC also executed registered sale certificate in his favour on 9.3.2007. The physical possession of the property in question was delivered to the auction purchaser on 10.3.2007. Mr. Vijay Kumar Takkar, subsequently, sold the property and executed registered sale deed in favour of Mrs. Urmila Kumari, the appellant in the second appeal, and also handed over the vacant physical possession of the said property to her on 13.12.2007. Smt. Urmila Kumari carried out certain construction work in the said property and has been living there since 17.12.2007.

In the meantime, one Shri Om Parkash, son of Shri Shobha Ram instituted a civil suit for permanent injunction against Shri Om Parkash Jangra and LIC, seeking restraint orders against sale/auction proceedings initiated by LIC on the basis of sale notice published on 15.11.2006. The case of Shri Om Parkash, son of Shri Shobha Ram was that Shri Om Parkash Jangra had agreed to sell the property in question to him for a sum of Rs. 2 lakh vide agreement dated 21.12.2002. Shri Om Parkash Jangra the borrower, filed a Securitisation Application (S.A.) before the tea(sic)ed DRT on 15.2.2008. Aggrieved by the order passed by the learned DRT in the said S.A., the instant appeals have been filed.

I have heard the Counsel for the parties. The learned Counsel for both the appellants made the following submissions. It was argued that the defence set up by Shri Om Parkash Jangra was that he was never served with the notice under Section 13(2) of the SRFAESI Act. Attention of the Court was invited to the reply dated 9.9.2007 sent by Shri Om Parkash Jangra himself to the said notice. The defence set up by Shri Om Parkash Jangra in para 5(viii) of his application under Section 17 of the SRFAESI Act runs as under:-

That no notice under Section 13(2) or Section 13(4) was ever served on the appellant. The appellant has only been able to get one copy of the notice of demand under Section 13(2) from the office of the Respondent No. 2 which is undated and does not even state when the alleged loan account became NPA or was ever an NPA. Copy of the alleged notice under Section 13(2) which was never served in the appellant is Annexure A-3. The respondent Nos. 1 and 2 officials never disclosed the factum of having initiated the action under securitization act. The appellant is not wilful defaulter and due to the attitude of the respondents in not releasing the amount of the sanctioned loan the present situation has arisen. In fact the loan was disbursed in June, 2003 and the instalments were being regularly deposited for the first few months but the respondents did not release the balance amount of loan.

The Counsel for LIC conceded that copy of the notice under Section 13(2) of the SRFAESI Act on record is undated. In reply to the query raised by the Court as to how the Court can presume the date of notice under Section 13(2) of the SRFAESI Act to be 22.8.2005, he pointed out that in the possession notice issued later on the date of notice under Section 13(2) of the SRFAESI Act had been mentioned as 22.8.2005 and, therefore, the Court could presume that the said notice was sent on 22.8.2005. He, however, did not show any record of the Bank which may suggest that the said notice was actually sent on 22.8.2005. It is, therefore, apparent that the Bank does not have any record to show that the notice was issued on 22.8.2005.

Secondly, the said notice under Section 13(2) of the SRFAESI Act does not state as to when the alleged loan account was classified as NPA or was ever an NPA account. It mentions that the borrowers have committed default in repayment of loan and committed serious irregularity in the payment of EMIs. It also mentions that "As on date, you are liable to pay an amount of Rs. 204158.28/-..." However, the date has not been mentioned. The borrowers were called upon to pay the amount within 60 days from the date of notice. This goes to show the negligence, inaction and passivity on the part of LIC. Consequently, the abvoe said notice is invalid and bad in law.

Moreover, no evidence was adduced before the Court in proof of having served the said notice upon the borrowers. Postal receipts in proof of sending the notice to the borrowers through registered post were never produced. It is, therefore, apparent that notice was not actually served upon the borrower.

The case of the borrowers is that they were able to get one copy of the said notice from the office of LIC and the LIC has produced the reply dated 9.9.2005 sent by the borrowers through their Advocate. However, LIC has failed to show that the provisions of Section 13(3A) were complied with. There is no evidence which may go to show that the objection or representation made by the borrowers was considered and if LIC had came to the conclusion that such objection/ representation was not acceptable or tenable, it did not communicate within one week of receipt of such objection or representation the reasons for non-acceptance of objection/representation to the borrowers. This is a mandatory provision of law which was ignored by LIC for the reasons best known to it.

The learned Counsel for both the appellants vehemently argued that the provisions of Section 13(4) were strictly complied with and there had been no violation of Rules 8(1) and 8(2) of the Security Interest (Enforcement) Rules, 2002.

I find no force in this argument as well. LIC had published notice for sale of the property in newspapers, namely, Nabhchor and Dainik Bhaskar. It is pertinent to note that the notice was published in English language in Hindi edition of Dainik Bhaskar. By no stretch of imagination it can be said that the mandatory provision regarding publication of notice in a newspaper in vernacular language was complied with by publishing it in English language in a Hindi language newspaper. The learned trial Court has cited an authority in support of his finding in this regard, which is reported in Swastik Agency and Others v. State Bank of India, AIR 2009 Orissa 147. Consequently, I am unable to find any error in the finding recorded by the learned trial Court in this respect.

Now I turn to the question of inadequate price which was fetched in the auction proceedings. The learned trial Court has also observed that the reserve price was fixed at Rs. 3 lakh and the property was auctioned at Rs. 3,00,001/- which created a flavour of doubt in the mind of the learned trial Court. In this respect, the learned Counsel for the appellants invited my attention to the copy of the plaint filed by Shri Om Parkash, son of Shri Shobha Ram, against Shri Om Parkash Jangra and LIC wherein he had alleged that Shri Om Parkash Jangra had agreed to sell the property for a sum of Rs. 2 lakh to the plaintiff. In this case Shri Om Parkash Jangra could not be served and he was proceeded against ex parte. Ultimately, the said suit was dismissed as the trial Court held that alternative remedy was available.

However, I find no merit in this argument. The order passed by the learned trial Court cannot be faulted. It is surprising to note that the borrowers were given loan in the sum of Rs. 4.50 lakh on 16.5.2003 The value of the property should have been more than this amount in the year 2003. No Bank/Financial Institution will ever accept mortgage of a property of lesser value than the money it advanced. Secondly, it is also surprising to note that the certificate of sale was issued to Shri Vijay Kumar Takkar on 23.1.2001 and he did not retain the property for a year. He further sold the property in favour of Smt. Urmila Kumari vide registered sale deed dated 13.12.2007, The property was sold hurriedly. It seems the auction purchaser did not want to get himself involved in the litigation. It is apparent that the actual value of the property was more than Rs. 5 to 7 lakh.

In view of the discussion made above, I find no merit in the appeals. Accordingly, they are dismissed with costs. Counsel's fee as per Bank norms. Smt. Urmila Kumari, appellant in the second appeal is hereby directed to return the property to LIC within three months from today, LIC is directed to return the amount received in the auction in the sum of Rs. 3,00,001/- and pay interest @ 8% simple from the date of receipt of the said amount till the date it is actually given to Smt. Urmila Kumari. She can participate in the next bid. Nothing will preclude LIC from proceeding against the mortgaged property afresh under the SRFAESI Act. LIC can retain the possession of the property till it is re-auctioned. Nothing will preclude the borrowers in participating the auction proceedings or from paying the outstanding dues of LIC, under Section 13(8) of the SRFAESI Act.

Copies of this order be furnished to the parties as per law and another copy be sent to the learned DRT.