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Judgment
JUSTICE R. D. KHARE, CHAIRPERSON
The present appeal has been filed under section 18 of the Securitization and Reconstruction of Financial Asset and Enforcement of Security Interest Act, 2002 (hereinafter referred to as "the SARFAESI Act") against the judgment dated 06.04.2024, whereby the Securitization Application No. 346/2023 filed by the appellants has been dismissed.
Brief facts of the matter are that the appellant no. 1 is a proprietorship firm, which was granted certain credit facilities through its proprietor-appellant no. 2. In order to secure the said facility, the appellant no. 2 as well as Shri Piyush Tiwari created an equitable mortgage over their property being House No. 127/628 situated at Plot No. 628, Block 'S', Juhi Garha, Kanpur Nagar by depositing original title deed with the respondent-Bank. Since the borrowers did not maintain the financial discipline, therefore, the account was classified as NPA on 03.06.2022 and a demand notice dated 20.09.2022 was issued u/s 13(2) of the SARFAESI Act for a sum of Rs.70,22,648.31, against which the objection dated 19.11.2022 was filed by the appellant no. 2, which was disposed off/rejected by the respondent-Bank vide order/letter dated 26.11.2022. Thereafter, possession notice dated 21.11.2022 was issued u/s 13(4) of the said Act and symbolic possession of the property was taken by the Bank and the said notice was published in two newspapers on 23.11.2022. Subsequently, auction sale notice dated 25.04.2023 was issued, which was published in two newspapers on 27.04.2023 scheduling the auction of the property for 30.05.2023 and the property was sold for Rs.70,85,000/- and after receipt of entire sale consideration, the sale certificate was issued by the Bank on 10.11.2023 in favour of the auction purchasers.
It appears that in the meantime, the respondent-Bank obtained an order dated 19.08.2023 from the CMM, Kanpur Nagar u/s 14 of the SARFAESI Act.
The appellants-borrowers have challenged the entire SARFAESI actions of the respondent-Bank initiated under the SARFAESI Act including the sale notice dated 25.04.2023 and e-auction dated 30.05.2023, which has been dismissed vide order impugned holding that there is no procedural lapse on the part of the respondent-Bank in undertaking the SARFAESI actions against the appellants. Being aggrieved by the said order, the present appeal has been filed by the appellants.
Learned counsel for the appellants submitted that the demand notice u/s 13(2) dated 20.09.2022 was neither issued nor served upon Piyush Kumar Tiwari, who is mortgager of the property in question in the present case, as Rule 3(4) of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as "the Rules, 2002") requires service upon all the borrowers. Learned counsel has referred to page no. 47 of the memo of appeal, which is copy of the demand notice dated 20.09.2022 issued u/s 13(2) of the SARFAESI Act and has stated that the said notice has only been issued to the appellants and not to Piyush Tiwari. It was thus contended that the same is liable to be quashed and its subsequent actions also.
Learned counsel further submitted that the appellant no. 2 filed objection on 19.11.2022 to the demand notice, which was rejected by the Bank vide letter dated 26.11.2022, copies of which are placed at page no. 154 & 156 of the memo of appeal, but the respondent-Bank issued the possession notice on 21.11.2022, which was prior to the disposing of the objection u/s 13(3-A) of the SARFAESI Act, but the Tribunal below has neither considered nor given any finding on the same. It was further contended that the property in question was sold at throwaway price of Rs.70.85 lacs, whereas the market value of the same is more than Rs.1.60 crore as per the valuation report dated 15.04.2024, copy of which is annexed as Annexure No. 4 to the affidavit filed along with the memo of appeal. It was further contended that a property having area of approximately 56.25 sq. yards situated in the same locality, where the property in question is situated, has been sold for Rs.41.00 lacs on 29.08.2023, copy of the said sale deed dated 29.08.2023 is annexed as Annexure No. 6 to the said affidavit filed along with memo of appeal. It was also contended that the property in question is having area of 225 sq. yards, which has been sold for Rs.70.85 lacs, whereas 56.25 sq. yards was sold for Rs.41.00 lacs, thus it is proved that the property in question has been sold at very low price, as such the sale is liable to be quashed on this ground alone.
Learned counsel also submitted that the auction sale was fixed for 30.05.2023, but 10% amount of EMD was deposited by the auction purchaser on 01.06.2023. In support of the same, learned counsel has referred to page no. 10 of the counter affidavit filed by the auction purchasers. It was further contended that EMD is to be tendered along with the bid, otherwise the same cannot be considered. It was further contended that there is also non-compliance of Rule 9(3) of the Rules, 2002, as 25% of the bid amount was deposited on 01.06.2023. It was thus contended that the auction sale in favour of the auction purchaser is null and void and the same is liable to be quashed. It was, therefore, prayed that the order impugned may be set aside, as the finding of the Tribunal below with regard to the actions taken by the respondent-Bank is contrary to the facts and evidence on record and the appeal may be allowed.
Learned counsel for the respondent-Bank submitted that admittedly, Shri Piyush Tiwari is mortgagor/guarantor to the credit facilities granted by the Bank to the appellants, but the issue of non-service of notices upon Shri Piyush Tiwari was never raised by the appellants in the S.A. before the Tribunal below, therefore, the same cannot be raised and adjudicated for the first time in the present appeal, as Shri Piyush Tiwari was neither party in the S.A. nor in the present appeal. It was further contended that despite of it, the Bank has filed the demand notice as well as postal receipts, by which the said notice was sent/served to Shri Piyush Tiwari.
Learned counsel further submitted that the respondent-Bank had taken symbolic possession on 21.11.2022 and S.A. was filed on 24.05.2023, which is much beyond the prescribed period of limitation of 45 days, that too without any application for condonation of delay, so the issues pertaining to the demand notice dated 20.09.2022 and objection dated 21.11.2022 cannot be agitated and adjudicated at this highly belated stage.
Learned counsel also submitted that the representation/objection dated 19.11.2022 against the demand notice dated 20.09.2022 was served upon the Bank on 21.11.2022 beyond the period of 60 days and by that time, the Bank had already taken symbolic possession on 21.11.2022. It was thus contended that the contention of the appellant that the possession notice was issued prior to disposing off the objection of the appellants is incorrect, as the objection was disposed off vide reply dated 26.11.2022.
It was further contended on behalf of the respondent-Bank that the possession notice dated 21.11.2022 was duly served, affixed and published in the newspapers on 23.11.2022, copies of which have been filed as Annexure No. 1 to the supplementary affidavit filed by the Bank. It was also contended that prior to issuance of the sale notice dated 25.04.2023, the respondent-Bank has got the property in question valued from its approved valuer and obtained the valuation report on 29.11.2022 and thereafter, auction sale notice dated 25.04.2023 was issued, served and published in the newspapers on 27.04.2023 and the property was sold and the auction purchasers have deposited entire bid amount within the extended period in compliance of Rule 9(3) & 9(4) of the Rules, 2002. In support his contention, he has referred to Annexure No. 2 to the counter affidavit filed by the Bank, which are the true copies of statement of account showing deposit of auction sale amount by the bidders and sale certificate dated 10.11.2023. It was lastly contended that the appellants are willful defaulters and despite repeated demands and notices, they did not repay the huge outstanding dues of the Bank and the property has already been sold and third party right has been created over the property in question, so the appellants have no legal right to remain in the physical possession of the property in question. It was, therefore, prayed that the appeal may be dismissed with heavy costs.
Learned counsel for the respondents-auction purchasers has adopted the arguments of the learned counsel for the respondent-Bank adding further that they are bonafide purchasers of the property in question and have deposited the entire sale consideration in accordance with the Act and Rules made thereunder. It was, therefore, prayed that the appeal may be dismissed with heavy costs.
I have considered the rival contentions of the learned counsels for the parties and perused the material available on record.
So far as the service of demand notice upon Shri Piyush Kumar Tiwari, who is admittedly, guarantor/mortgagor of the property in question, is concerned, it is to be seen that the demand notice was issued on 20.09.2022, which was sent to the borrowers namely Ashish Tiwari and Piyush Tiwari on 20.09.2022, copies of postal receipts are affixed on the said demand notice, one is filed by the appellant at page no. 151 of the memo of appeal and another, which pertains to Piyush Kumar Tiwari, is filed at page no. 12 of the reply filed by the respondent-Bank. The contention of the appellants that the demand notice issued to Piyush Tiwari was not filed before the Tribunal below and the same has been filed for the first time before this Tribunal is not tenable, because Piyush Tiwari was not party before the Tribunal below and the question of service of the same was also not raised by the appellants before the Tribunal below, therefore, there was no occasion for the Bank to file the same before the Tribunal below. However, the demand notice pertaining to Piyush Tiwari was also sent on the same date, on which the demand notice of Ashish Tiwari was sent, thus it cannot be said that no demand notice was sent to Piyush Tiwari. It can also be said that despite service of demand notice, Piyush Tiwari has never come forward to challenge any proceedings of the Bank, from which it can be inferred that he was not aggrieved from any action of the Bank. Thus the Tribunal below has rightly held that the demand notice was properly served upon the borrowers and as such there is no irregularity or infirmity in issuing/serving the demand notice to the borrowers.
The next contention of the appellants that the possession notice was issued before disposing off the objection dated 29.11.2022 of the appellants, is also not tenable, as the possession notice was issued on 21.11.2022 and the objection u/s 13(3-A) of the SARFAESI Act was filed by the appellants on 19.11.2022, which was received by the Bank on 21.11.2022 and the same was disposed off by the Bank vide letter dated 26.11.2022. Thus it is clear that the said objection was filed after expiry of 60 days as given in the demand notice dated 20.09.2022 for liquidating the dues. As such the said objection cannot be taken into consideration. However, the said objection was considered and disposed off by the Bank vide letter dated 26.11.2022. As per the Rules, 2002, the objection u/s 13(3-A) filed by the borrower is to be considered and decided by the Bank within 15 days from its receipt, but there is no rule that before disposing off the same, either it was filed beyond the period of 60 days, the bank cannot proceed u/s 13(4) of the said Act. In the present case, the aforesaid possession notice was issued after expiry of 60 days, which is mandated for the purpose of liquidating the dues of the Bank by the borrowers. If the representation u/s 13(3-A) of the SARFAESI Act is filed beyond the period of 60 days, there is no compulsion upon the Bank to consider and decide the same. Thus the contention of the appellant that before deciding the representation dated 19.11.2022 filed by the borrowers, the possession notice issued on 21.11.2022 is illegal and void, is not tenable, hence rejected.
So far as the contention of the appellant that possession notice is not addressed to anyone including the appellants, therefore, the same is liable to be set aside, is concerned, the possession notice issued by the Bank is at page no. 27 & 28 of the paper book and the same was sent to the appellant no. 2 as well as Piyush Tiwari, copy of the postal receipt is affixed at the notice itself. The said notices show that the possession notice was sent to the appellant no. 2 as well as Piyush Tiwari on 22.11.2022. The possession notice is issued in the format as prescribed under the Act and Rules made thereunder and the said format does not contain such coloumn in which address of the concerned party is mentioned. However, it is known to the Bank, to whom the notices are to be sent and accordingly, the notices are sent/served. In the present case, the possession notice was affixed at the conspicuous place of the property in question and sent to the borrowers on 22.11.2022 and also published in the newspapers on 23.11.2022, copies of which are placed at page no. 176 and 177 of the paper book, thus there is no violation of Rule 8(1) and 8(2) of the Rules, 2002.
With regard to valuation of the property in question, it is to be seen that prior to issuance of sale notice dated 25.04.2023, the respondent-Bank had got the property in question valued from its approved valuer and the valuation report was received by the Bank on 29.11.2022, copy of the said report is placed at page no. 32 of the rejoinder filed by the appellants. As per the said valuation report, the market value of the property in question was assessed to be Rs.78.44 lacs and realizable value of the same Rs.70.60 lacs and the distress value Rs. 63.54 lacs. In this regard, the contention of the appellants is that the market value of the same is more than Rs.1.60 crore. In this regard, the appellants has filed a valuation report dated 15.04.2024 in respect of the same property and the same is of the same valuer. It appears that the respondent-Bank has sold the property in question on the basis of the valuation report dated 29.11.2022, as the date of valuation report is stated by the Bank to be 29.11.2023 in its reply, whereas the correct date is 29.11.2022. As such the property in question was sold on the basis of the valuation report, which was received more than one year back. On each and every interval of six months, the property gets its new value on higher side. The valuation report dated 29.11.2022, on the basis of which, the property has been sold, and the latest valuation report dated 15.04.2024 obtained by the borrowers, both are prepared/issued by the same valuer namely Bharat & Associates, but between them, there is a gap of more than 1.5 years. As per the latest valuation report dated 15.04.2024, the market value of the property is Rs.1.60 crore, realizable value Rs. 1.44 crore and the distress value Rs.1.29 crore, thus there is much difference in the value of the property of more than double. If the Bank prior to sale of the property i.e. on 30.05.2023 had got the property in question valued, the property would have definitely been sold over and above the price, on which the same has been sold. In nutshell, it can be said that Bank has sold the property without getting the property valued from the approved valuer and as such there is clear violation of Rule 8(5) of the Rules, 2002. On this count alone, the auction sale dated 30.05.2023 is liable to be set aside
It has been contended on behalf of the appellant that auction purchaser has not deposited any amount of EMD prior to the auction sale dated 30.05.2023, whereas the same was to be deposited prior to the date of sale i.e. 30.05.2023. In this regard, the details with regard to deposit of auction amount filed by the auction purchaser along with their reply is relevant. However, the said contention has not been controverted by the respondent-Bank. The details filed by the auction purchasers with regard to deposit of auction amount show that 25% of the bid amount was deposited by the auction purchasers on 01.06.2023, which includes 10% EMD. If the EMD amount was already deposited, 15% of the bid amount had been deposited by the auction purchasers after acceptance of their bid, but the details submitted by the auction purchasers clearly show that the total 25% of the bid amount was deposited on 01.06.2023, thus it is clear that there was no EMD amount deposited by the auction purchasers prior to e-auction sale dated 30.05.2023. On this count also, the auction sale is liable to be set aside.
So far as the compliance of Rules 9(3) & 9(4) of the Rules, 2002 is concerned, the same have been complied with by the auction purchasers, which is evident from the statement of account filed by the respondent-Bank at page no. 15 to 20 of the reply filed by the Bank.
In view of the discussions as recorded above, the auction sale dated 30.05.2023 pursuant to the sale notice dated 25.04.2023 and its subsequent actions are set aside. Consequently, the order impugned is set aside to the extent of auction sale dated 30.05.2023 and its subsequent actions, but the rest part of the order impugned shall remain intact. The appeal filed by the appellant is accordingly disposed off with no order as to costs.
The respondent-Bank is directed to refund the auction amount to the auction purchasers along with interest @ 8% p.a. simple within 15 days from today after taking back the possession of the property in question, if the possession is already handed over to them.
The respondent-Bank is further directed to provide the calculation of the outstanding amount to the appellants-borrowers within 15 days from today, who shall pay the same within 30 days thereafter.
In case, the appellants-borrowers fail to deposit the amount within the stipulated period as mentioned above, the respondent-Bank would be free to proceed for recovery of its dues in accordance with law from the stage of getting the property in question valued from its approved valuer.
A copy of this judgment be forwarded to the parties as well as the DRT concerned and be also uploaded on the e-DRT portal.