M/s Divyalok Associates & Anr. vs Authorized Officer, Bank Of Baroda (Formerly Vijaya Bank) & Anr.

JUSTICE R. D. KHARE, CHAIRPERSON

The present appeal has been filed under section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short "SARFAESI Act") against the order dated 08.12.2020, whereby the S.A. No. 659/2019 filed by the appellants-borrowers has been dismissed by the Tribunal below.

Brief facts of the matter are that the appellants were granted certain credit facilities, to which the appellant no. 2 created equitable mortgage over his property by depositing original title deed with the respondent-Bank. Since the borrowers did not maintain the financial discipline, therefore, the accounts were classified as NPA on 31.07.2019 and a demand notice dated 01.08.2019 was issued under section 13(2) of the SARFAESI Act for a sum of Rs.86,55,566.22. Since the borrowers did not pay any heed to the said demand, therefore, the possession notice dated 15.10.2019 was issued under section 13(4) of the SARFAESI Act.

The appellants-borrowers challenged the demand notice and possession notice before the Tribunal below by filing S.A. No. 659/2019 on 26.11.2019 and during the pendency of the said S.A., the respondent-Bank issued auction sale notice dated 06.11.2019, which was challenged by the appellants by way of Amendment Application, but for want of bidders, the said auction sale could not materialize. Since the said sale has not taken place, therefore, the Tribunal below vide impugned order dated 08.12.2020 dismissed the S.A. no. 659/2019 as having become infructuous. Being aggrieved by the said order, the Regular Appeal no. 33/2022 has been filed by the appellants-borrowers.

The present misc. appeal has been filed by the appellants under the aforesaid provisions against an Interlocutory Order dated 22.02.2021, whereby the interim relief sought by the appellants in S.A. no. 88/2021 has been declined by the Tribunal below.

Brief facts of the said case are that after dismissal of the earlier S.A. no. 659/2019 filed by the appellants, the respondent-Bank issued fresh auction sale notice dated 02.02.2021 scheduling the auction of the property on 24.02.2021, which was challenged by the appellants before the Tribunal below by filing S.A. No. 88/2021 along with interim relief for restraining the respondent-Bank from auctioning the property on 24.02.2021. The Tribunal below vide order impugned has declined the interim relief sought by the appellants for restraining the Bank from auctioning the property in question. Being aggrieved by the said order the Misc..Appeal no. 08/2022 has been filed by the appellants.

Learned counsel for the appellants submits that the R.A. No. 33/2022 filed by the appellants does not pertain to the auction sale dated 24.02.2021, as it has been filed against the dismissal of the S.A. to the extent of possession notice dated 15.10.2019. It was further contended that the Tribunal below without deciding the legality and illegality of the demand notice and possession notice has dismissed the earlier S.A. as having become infructuous S.A. on the ground that pursuant to the auction dated 27.11.2020 no bid was received, which is not sustainable because in the said S.A. legality and illegality of the demand notice and possession notice were also challenged.

Learned counsel further submitted that the respondent- Bank issued e-auction notice dated 02.02.2021 and the same was published in the newspaper namely “Hindustan” on 05.02.2021 scheduling the auction of property on 14.02.2021, whereas against the sale of the property for Rs.68,55,556.22, the appellants had already deposited Rs.19.95 lacs after issuance of the demand notice, therefore, the e-auction notice is not sustainable.

It was lastly contended that the Tribunal below without considering the arguments of the appellants based on documentary evidence and facts of the case has rejected the interim relief on the basis of oral submission of the Bank. It was thus contended that the impugned order dated 22.02.2021 may be set aside and the respondent- bank may be restrained from taking physical possession of the property in question.

Learned counsel for the respondent-Bank submitted that there are 4 loan accounts of the appellants, against which two properties have been mortgaged. It was further contended that pursuant to the sale noticed dated 02.02.2021, the property was sold on 24.02.2021 for a sum of Rs.60.02 lacs and the said sale has also been confirmed in favour of the respondents-auction purchasers.

Learned counsel further submitted that the Tribunal below vide order dated 08.12.2020 has decided finally the action of the Bank up to the possession notice, hence the same is barred by constructive res-judicata. It was further contended that when the order dated 08.12.2020 was passed, the borrowers did not object to the same, hence they are estopped from questioning the legality of the same, as their action amounts to waiver. It was lastly contended that the demand notice and possession notice are properly served, pasted and published in the newspapers in accordance with the Acts and rules made thereunder. It was, therefore, prayed that both the appeals filed by the appellants may be dismissed with heavy costs.

Having heard the learned counsels for the parties and considering the material available on record, the first Securitization Application being S.A. no. 659/2019 was filed against the demand notice and possession notice and later on, the sale notice by way of amendment application. Admittedly, pursuant to the first sale notice, no bid was received by the Bank. Thus the challenge of sale notice in the said S.A. has become infructuous, but the legality and illegality of the demand notice and possession notice was yet to be adjudicated, but the Tribunal below without considering it has dismissed the S.A. as being rendered infurtuous in respect of all cause of actions of the Bank, which could not be done. As such the Tribunal below has erred in dismissing the said S.A. as having become infructuous against the demand notice and possession notice issued by the Bank. Thus the order impugned is liable to be set aside. Accordingly, the same is set aside to the extent of setting aside the said S.A. against the demand notice and possession notice. Consequently, the Regular Appeal No. 33/2022 is liable to be allowed and the case is liable to be remanded back to the Tribunal below to decide the S.A. on merits qua the challenge of demand notice and possession notice issued by the Bank.

So far as the Miscellaneous Appeal No. 08/2022 is concerned, it is to be seen that the same has been filed against an interim order, by which the interim relief sought by the appellants for restraining the Bank from auctioning the property has been declined by the Tribunal below. As per para 15 of the written submissions of the respondent-Bank, pursuant to the auction sale notice dated 02.02.2021, the property has been sold for a sum of Rs.60.02 lacs and the sale has been confirmed in favour of the respondents no. 3 & 4-auction purchasers after receiving the entire sale proceeds. Since the property has been sold and auction sale has been confirmed, therefore, the interim relief as sought by the appellants with regard to restraining the Bank from auctioning the property in question has become redundant. Consequently, the Misc. Appeal no. 08/2022 deserves dismissal as having become infructuous.

In view of the discussions as recorded above, the impugned order dated 08.12.2020 passed in S.A. No. 659/2019 is set aside to the extent of dismissing the S.A. of the appellants qua the challenge of demand notice and possession notice and the case is remanded back to the Tribunal below to decide it afresh in accordance with law without being influenced by the observations made hereinabove, after affording proper opportunity of hearing to the parties concerned. Since the property has been sold and the sale has been confirmed in favour of the respondents-auction purchasers, therefore, the relief sought by the appellants with regard to restraining the Bank from auctioning the property on 24.02.2021 has become redundant, therefore, the impugned order dated 22.02.2021 passed by the Tribunal below in S.A. No. 88/2021 is not required to be interfered by this Tribunal. Consequently, the Misc. Appeal No. 08/2022 deserves dismissal.

Accordingly, both the appeals filed by the appellants stand disposed off with no order as to costs.

A copy of this judgment be forwarded to the parties as well as to the DRT concerned and be also uploaded on e-DRT Portal.