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Judgment
Ashok Menon, Chairperson
The dismissal of the Securitisation Application (S.A.) No. 36 of 2021 by the Debts Recovery Tribunal-I, Mumbai, vide judgment dated 25.11.2021 is impugned by the applicant in this appeal.
The aforesaid S.A. was filed by the appellant as the sole proprietor of Shree Ganesh Electricals and Plywood, under Sec. 17 (1) of the Securitisation & Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”, for short) challenging the Sarfaesi measures initiated by the first respondent Canara Bank for recovery of debt allegedly due from the appellant by proceeding against one of the secured assets being shop No. ASH-2 situated in the building named “Lotus Heights”, Aquem, Margao 403601, Goa (subject property) mortgaged to secure a loan availed by the appellant from the bank.
The appellant alleges that he had borrowed ₹98 lakhs sanctioned on 9th May 2017 from the first respondent bank for running his business as proprietor of M/s Shree Ganesh Electricals. To secure the debt, the appellant created an equitable mortgage of shop Nos. ASH-2 and ASH-5 in the address mentioned above. The appellant received the letter on 04.12.2018 from the bank informing him that renewal of the proposal was not possible as repayment was overdue and that the credit facility would be recalled. As per the statement of the bank, ₹99,41,225/-was due, as of 30.06.2019. The demand notice was issued on 22.11.2019 under Sec. 13(2) of the SARFAESI Act to the appellant informing him that his account was classified as a non-performing asset (NPA) on 29.09.2019 and called upon the appellant to pay ₹1,08,15,368/-. The appellant had several meetings with the officers of the bank requesting them to restructure the debt as he was facing financial difficulties in his business. To tide over his financial difficulties, the appellant was forced to let shop No. ASH-2 to Mr Ramesh Kumar under a leave and license agreement on 28.11.2019. The appellant received a notice on 05.02.2020 intimating to him about the bank intending to take symbolic possession of the secured assets unless he paid ₹1,12,95,307/-. Thereafter, the bank issued a sale notice on 12.12.2020 intimating the appellant about the intended auction sale on 20.03.2020 at the reserve price of ₹58,00,000/-. The appellant responded to the sale notice by sending a letter on 19.02.2020 to the bank undertaking that he would be depositing ₹35 lakhs forthwith and would also clear the entire outstanding dues by the end of March 2020. He requested that the proposed auction sale be cancelled given the offer made by him. In compliance with the offer, the appellant had also deposited a total sum of ₹36 lakhs between 26.02.2020 and 02.03.2020. The bank had orally assured that the loan account would be regularised and the auction sale called off. The licensee Ramesh Kumar had also addressed the bank with a letter dated 18.03.2020 informing that he was in possession of shop No. ASH-2 and was conducting business therein. However, behind the back of the appellant, the bank proceeded with the auction sale on 20.03.2020 and the subject property was sold to the 2nd respondent for a sum of ₹1,58,10,000/-. The appellant thereafter, sent a letter on 01.04.2020 to the bank raising his grievances about the sale. The appellant contended that the valuation of the secured asset was not appropriately done and that the property was sold at the throwaway price. In support of this allegation, the appellant had got the shop room valued by an approved valuer who opined that the market price of the shop room was ₹4,19,00,000/-and that it would fetch a distress value ₹3,09,00,000/-. The bank had thereafter obtained an order on 07.09.2020 under Sec. 14 of the SARFAESI Act to take physical possession of the subject property. The said order is not in accordance with the law as the bank has not disclosed the entire facts and circumstances in the application and the accompanying affidavit. The appellant had also raised the contention that the mortgage was not registered and that the loan documents do not disclose the existence of a valid mortgage. Hence there is no security interest created by the appellant and hence the Sarfaesi measures could not have been initiated. The appellant had approached the Hon’ble High Court of Bombay, Goa bench seeking relief. The High Court had vide order dated 15.04.2020 granted interim protection to the appellant considering the fact that there was a lockdown and that the bank had undertaken not to take any precipitous steps till the application was filed before the D.R.T. Thereafter, the appellant filed the S.A. before the D.R.T. on 20.03.2021, seeking to quash and set aside the order, the order dated 07.09.2020 passed by the District Magistrate under Sec. 14 of the SARFAESI Act as, being illegal, arbitrary, bad in law and in violation of the rights of the appellant. The memorandum dated 04.03.2021, passed by the Mamlatdar to take possession of the subject property was also sought to be quashed. The appellant had also sought to quash and set aside the auction sale of the subject property conducted on 20.03.2020 and the Sale Certificate dated 10.08.2020 registered on 13.08.2020. The appellant had also sought to quash and set aside the demand notice dated 22.11.2019 under Sec. 13 (2) of the SARFAESI Act, and also the possession notice dated 05.02.2020.
Per contra the respondent bank had opposed the S.A. by filing a detailed reply contradicting all the allegations made in the S.A. by the appellant. It was contended that the appellant had received the demand notice on 25.11.2019, but did not respond to it or raise any objections. He neither sent any reply to the notice period possession notice was issued to the appellant under Sec. 13 (4) of the SARFAESI Act on 05.02.2020 and the symbolic possession of the secured assets was taken on the same date. The copy of the possession notice was served on the appellant and published in two newspapers on 11. 02.2020. The property was got valued through an empanelled valuer who filed the valuation report on 10.02.2020. Likewise, the auction sale notice was issued to the appellant on 12.02.2020 which was delivered to him on 14.02.2020, the sale notice was also published in newspapers on 19.02.2020. Though the appellant had approached the bank on receipt of the sale notice, he never raised any objection. The appellant failed to redeem the mortgage under Sec. 13 (8) of the SARFAESI Act. The auction proceeded on 20.03.2020 and the bid submitted by the sole bidder for the subject property ₹61,58,10,000/-was accepted and the sale was confirmed on the next date. After making a payment of 25% of the sale consideration, the auction purchaser requested an extension of time to pay the balance of 75%, given the lockdown. The loan account was closed because of the recovery made and the excess amount received by way of the sale was deposited in the appellant’s current account maintained in the name of his proprietorship. The respondent contended that the S.A. was not filed within the period of limitation and therefore, on that ground also the S.A. needs to be dismissed. Concerning the letter dated 01.04.2027 by the appellant to the bank, it is stated that a reply was sent to the appellant by the bank on 07.04.2020. The bank denies having given any oral assurance to the appellant about the auction sale. The challenge to the valuation of the property is also denied by the bank. It is stated that in case the property could be sold for a higher value per the valuation report relied upon by the appellant, he could have persuaded someone to participate in the auction and bid for a higher value. The fact that there was only one bidder for the property indicates that the property was valued properly.
On considering the rival arguments placed before the D.R.T. and on perusal of documents, the D.R.T. dismissed the S.A. vide the impugned order. The appellant is aggrieved and hence in appeal.
The important questions for consideration in this appeal are whether the appellant has succeeded in establishing the defects to the Sarfaesi action initiated by the bank. In the appeal memorandum, the appellant has pleaded certain facts which were not part of the pleadings in the S.A. The appellant has contended that an amount of ₹32,155/- was debited towards charges allegedly paid to the bank’s counsel in the writ petition from the appellant’s account. According to the appellant, this is illegal. No such pleadings were taken in the S.A. It is also contended that the demand notice under Sec. 13(2) dated 22.11.2019 was never served on the appellant. It is further stated that the signatures of the appellant’s wife on the acknowledgement cards are forged. She does not know how to write English and used to sign only in Hindi. The purported signatures of the appellant’s wife on the acknowledgement cards are in English and therefore apparently forged. The appellant did not take up this plea before the D.R.T. in the S.A. There was no plea before the D.R.T. about non-service of notice under Sec. 13(2). The burden of proving any forgery is on the appellant and he has neither pleaded it in the S.A., nor did he take any action to prove his contention. In fact, after receipt of notice, he had admittedly approached the bank with a proposal of restructuring and settlement. Similar is the contention raised regarding the possession notice and the sale notice. There is no pleading taken up by the appellant in the S.A. regarding these objections which have surfaced for the first time in the appeal memorandum.
The appellant would contend that the possession notice as well as the sale notice were published in two newspapers one of which was in Marathi. Konkani is the vernacular language of Goa and therefore, the publication should have been made in a Konkani newspaper.
It is true that Rules 8(2), 8(6) and 9(1) of the Security Interest (Enforcement) Rules, 2002 insist on publication being made in two newspapers one of which should be in the vernacular. The Ld. Counsel appearing for the respondent has produced a notification under the Goa, Daman and Diu Official Language Act, 1987 (Act No.5 of 1987) dated 23.04.1987 wherein Sec. 1(3)(1) provides thus:
“(1) With effect from such date as the Administrator may, by notification, appoint, Konkani language shall, subject to the provisions contained in sections 34 and 35 of the Government of Union Territories Act, 1963 (Central Act 20 of 1963), be the official language for all or any of the official purposes of the Union territory, and different dates may be appointed for different official purposes:
Provided that the Administrator may, by like notification, direct that in case of the Goa District the Marathi language, and in case of Daman Diu Districts, the Gujarati language, shall be used for all or any of the official purposes and different dates may be appointed for different official purposes:
Provided further that nothing contained in this sub-section shall be deemed to affect the use of Marathi and Gujarati languages in educational, social or cultural fields:
Provided further that the Government shall not, in grating aid to any educational or cultural institutions, discriminate against such institution only on the grounds of language;
(2) Nothing contained in sub-section (1) shall preclude any person from submitting any representation for the redress of any grievances to any officer or authority of the Union territory in any of the languages used in the Union territory.”
The word “vernacular” means the language or dialect spoken by the ordinary people in a particular country or region. There is no dispute that Marathi is also a language apart from Konkani in the state of Goa. Both the languages are written in Devanagari script and therefore, it could be read by anyone who knows either of the languages. Hence, this objection though taken only in the appellate stage cannot be countenanced even on merits.
The appellant alleges that he had made a representation after receipt of the sale notice to the bank on 19.02.2020 requesting an OTS proposal offering to clear the entire dues by March 2020. The proposal was rejected by the bank. The auction sale was conducted on 20.03.2020. The bank cannot be forced to accept an OTS proposal. The viability of an OTS proposal is to be decided by the creditor alone. (See Bijnor Urban Co-operative Bank Ltd. vs. Meenal Agarwal (2023) 2 SCC 805).
The appellant has objected to the insufficiency of the reserve price fixed for the auction sale. The appellant also relied upon a valuation report he obtained on 14.03.2020. This indicates that the appellant was in possession of the valuation report even before the date of the auction sale. He has not raised any objection regarding the insufficiency of the property's value in his letter dated 19.02.2020. The bank had already obtained a valuation report from an approved valuer on 10.02.2020 and the appellant has not raised any objection about that. In the valuation report submitted by the appellant, the property is valued at ₹5,47,00,000/- and the distress value is shown as ₹4,37,00,000/- for both shops. In the S.A., the market value shown by the appellant ₹4,19,00,000, and the distress value is shown as ₹3,09,00,000/-. In the appeal memorandum, the appellant states that the D.R.T. had failed to consider the market value of the subject property as ₹4,28,31,529/- and the forced sale value as ₹3,42,50,823/-. The appellant is not sure about his valuation of the property and he has come up with contradictory values for the property. It is pertinent to note that there was only one auction bidder who participated in the auction. Had there been so much difference in the valuation of the property, it would have attracted more bidders to participate in the auction. The appellant could not persuade anyone to participate in the auction to bid the property for a higher price than what was offered by the second respondent. Hence, the objection taken by the appellant on this count is not sustainable.
The appellant had also taken up a plea in the appeal that there is a violation of Rule 9(1) by not giving 30 days' notice. It is seen that the notice was served on 14.02.2020 and publication was made on 19. 02.2020 and the sale was conducted on 20.03.2020 which indicates that there was sufficient notice. It is also pertinent to note that the appellant had after receipt of the notice the appellant had approached the bank with the proposal of settlement and was, therefore, aware of the sale notice.
The Ld. Counsel has relied upon the decision of the Hon’ble Supreme Court in Ram Kishun and Ors Vs. State of Uttar Pradesh & Ors. (2012) 11 SCC 511 to argue for the proposition that the valuation of the property and fixing of the reserve price is vital in any sale and would, therefore, be a material irregularity in case the valuation is not proper. For the reasons stated above, it is already found that there is no infirmity in fixing the value of the property.
Once the sale notice is issued, the borrower loses his right to redeem the property given the latest decision of Celir LLP Vs. Bafna Motors (Mumbai) Pvt. Ltd. & Ors. (2024) 2 SCC 1. The Ld. Counsel appearing for the respondent has relied upon the decisions in Shakeena & Ors. Vs. Bank of India & Ors. (2021) 12 SCC 761 and S Karthik and Ors vs. N Subhash Chand Jain & Ors. AIR 2021 SC 4559 to argue for the proposition that the right of redemption is not available to the appellant.
The Ld. Counsel has pointed out that the second respondent auction purchaser was provided with a loan by the second respondent to facilitate the purchase of the property which would also indicate a suspicion concerning the whole transaction. He relies on the decision of K.T. Unnikrishnan vs. The Authorised Officer, UCO Bank & Ors 2018 SCC OnLine Ker. 692 to support his argument. The facts of the case are not identity and the observation made in that decision was by the facts and circumstances of that case.
The Ld. Counsel appearing for the respondent points out that by withdrawal of the excess amount received in the auction and deposited in the account of the appellant indicates a waiver of his right to dispute the auction. The Ld. Counsel relies on the decision of the Hon'ble Madhya Pradesh High Court in Smt. Swati Patel Vs Bank of India & Ors. Writ Petition No. 239 of 2013.
Hence, for the foregoing reasons, there are no merits in the appeal and resultantly the appeal is dismissed.