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Judgment
The appellant no.1 Company(borrower Company) had been availing various financial facilities extended to it by Andhra Bank from the year 2009 onwards and which credit facilities were secured by creation of equitable mortgages of two properties in Pitampura, Delhi.
One of the propertieswas, which only is now the subject matter of the present proceedings,is 170, Deepali, Pitampura, Delhi owned by appellant no.2 who is one of the directors of the said borrower Company. The other property mortgaged by its owner, respondent no.3 herein, is 392, Deepali, Pitampura. Delhi. The borrower Company defaulted in the repayment of lending Bank's money which led to the declaration its account as Non-Performing Asset(NPA) in 2013 followed by issuance of a demand notice dated 10.05.2013 under Section 13(2) of SARFAESI Act demanding Rs. 16,61,91,174.67. After rejecting the reply submitted to that demand notice by the borrower Company Andhra Bank proceeded further to recover its dues by invoking Section 13(4) of SARFAESI Act. Initially it took only symbolical possession of the said mortgaged houses in Pitampura but subsequently had taken physical possession of also no.170. The appellants herein filed a Securitisation Application(S.A.) under Section 17(1) of SARFAESI Act and challenged the measures taken by the Andhra Bank under SARFAESI Act. The measures taken by the Andhara Bank were challenged inter alia on the grounds that there was violation of the relevant provisions of SARFESI Act and the Rules framed thereunder and that the Bank simply wanted to sell their properties and really interested to recover its dues since it was permitting them to sell the properties to interested buyers who were willing to buy at a price which was the actual fair market value.
The prayers made in the S.A. were as under:-
"Under the above facts and circumstances, it is most humbly prayed that this Hon'ble Tribunal may kindly be graciously pleased to issue:
a) Order that Notice under Section 13(4) of the Securitisation and Reconstruction of Financial Assets in Enforcement of Security Interest Act, 2002 and steps taken by the Respondent Bank, w.r.t property bearing No.170, Deepali, Pitampura, ,Delhi-110034 and property bearing No. 392, Deepali, Pitampura, Delhi-110034, thereafter under Securitisation Act are wrongful, illegal and void.
b) Allow the Applicants to sell the aforesaid properties to private parties and to make payments to the Respondent Bank for the NPA amount and interest rate as decided by this Hon'ble Tribunal.
c) Direct the Respondent Bank to release the title deeds of the property bearing No.170, Deepali, Pitampura, Delhi-110034 and property bearing No.392, Deepali,, Pitampura, Delhi-110034 immediately after receipt of money from the Applicants.
d) To award payment of compensation of Rs.10,00,000/- and cost of Rs.50,000/- against Respondent and in favour of Applicant.
e) To pass any other order in favour of Applicant against the Respondent Bank as this Hon'ble Tribunal deemed fit."
That S.A. No.264/2013 is still pending decision in DRT-III, Delhi. Vide order dated 25.07.2013 the DRT had passed an order of status quo in respect of the two mortgaged properties in Pitampura subject to the security applicants paying Rs. 2 crores to the Bank. That interim relief continued for years during which period the appellants had simply been making offers to liquidate the dues of Andhra Bank by offering to sell the mortgaged properties privately and not by public auction. However, nothing concrete had materialised though the learned DRT had been showing them indulgence to enable them to liquidate the dues of the Bank by raising funds by private sale of the properties to the willing buyers of their choice.
It appears that Andhra Bank could not sell its mortgaged assets on its own nor it was willing to accept the offers given by the borrower Company to allow sale of the mortgaged property in question i.e. 170, Deepali, Pitampura. It also appears that the other property no. 392 owned by respondent no.3, who was security applicant no.3 before the DRT, was sold by her and it is not clear from the records as to how that property came to be sold and why she has not joined the other security applicants in the present appeal and why the Bank allowed that to happen. The Bank felt exhausted in its efforts to recover public money itself and so it decided, during the pendency of the S.A., to assign the task of recovery of its dues from the borrower Company to respondent no. 2 herein Prudent ARC . Thereafter, House no. 170, Deepali, Pitampura has been sold on 5th December, 2018. Before that sale the appellants had moved an application, being I.A.No. 1651/2018, before the DRT for stay of auction fixed for 5th December, 2018 but that application was rejected by DRT vide order dated 5th December, 2018 which is now under challenge in the present appeal.
The impugned order dated 5th December, 2018 of the DRT which gives the background of the case is re-produced below:-
"IA no. 1651 of 2018 has been moved on behalf of applicant M/s.SidhaNeelkanth Paper Industries Pvt. Ltd. for staying the auction proceedings to be held today i.e. 05.12.2018 with respect to the property bearing no. 170, Deepali, Pitampura, Delhi-110034 admeasuring 357.66 sq. yds. comprising of basement, ground floor, mezzanine, first, second & third floor and two room set with open terrace above third floor.
In the present application, it is being submitted on behalf of the applicant that the applicant herein has approached the respondent bank with an offer of Rs. 13 crores as private finance for the entire property in question with upfront amount of Rs. 2 crores, satisfying the order dated 25.07.2013, of this Tribunal but the respondent bank did not given any heed and denied the same on the ground that the property was worth more than Rs. 15.77 crores, now the respondent bank had undervalued the property in question and even assigned the debts to the prudent ARC for a lesser amount. The applicant had offered with different amount but respondent bank was not agreed to that. On 10.07.2014, the applicant again brought a prospective buyer for the purchase of the mezzanine floor of the property in question, but the respondent bank was not agreed to that extent and bent upon to sell the said property which is having distress sale value of Rs. 16.36 crores, for a meagre amount by way of auction. Therefore, all the proceedings of the respondent bank/FI are illegal and malafide one. Accordingly, prayed for staying the auction proceedings to be held on today i.e. 05.12.2018 with respect to the property in question.
Notice of the present application given as the present application has been filed merely on 01.12.2018. On behalf of the respondent FI, the Ld. Sr. Advocate argued that the applicant has been litigating under different forums and present application is nothing but delaying tactics to half the recovery proceedings of the respondent FI. The ld. Sr. Advocate has also relied upon various orders passed by the Hon'ble High Court of Delhi in the Writ Petition filed on behalf of one of the guarantor and on behalf of M/s SidhaNeelkanth Paper Industries against the respondent bank. The ld. Sr. Advocate further argued that one the ARC has been permitted to sell the property by way of auction by the Hon'ble Court of Delhi, therefore, the present application cannot be entertained and liable to be dismissed. It is further submitted that the value of the property in question has properly been assessed and nothing variable is there and property put on auction in order to fetch maximum amount and the applicant as well as prospective buyer, if any, is also free to participate in the auction. Therefore, the allegations levelled in the application are totally false and baseless one. Accordingly, prayed for dismissal of the present application.
Heard. Record has thoroughly been perused. Before embarking upon the details discussion, it would be appropriate to mention here in this context that one of the guarantor/mortgagor of the property in question i.e. Saroj Jindal has approached the Hon'ble High Court of Delhi vide Writ Petition No. 6725/2016 title "Saroj Jindal Vs. Andhar Bank" and WP(C) no. 7611/2016 filed by the present applicant i.e. "M/s SidhaNeelkanth Paper Vs. Andhra Bank", wherein it was mentioned that the applicant is ready to settle the matter with Prudent ARC within one week and respondent no. 2 to 6 shall approach the letter for negotiating a settlement and matter was adjourned for 12.10.2017. On 12.10.2017, counsel for respondent ARC stated that the applicant was ready and willing to make a substantial offer for a one time settlement, but they said order was made only a couple of days ago, which has been rejected and made a counter-offer on instructions received from the briefing counsel. The Ld. Counsel on behalf of the petitioners stated that they are not in a position to accept the said counter-offer. Accordingly, it is held that respondent no. have no option but to proceed further with the sale of the subject property either through auction or private treaty, depending on the best price that it can fetch and matter was adjourned for 11.01.2018. On the said date, the applicant i.e. M/s.SidhaNeelkanth Paper has withdrawn the petition. Hence, the petition alongwith pending application dismissed as withdrawn.
Further, one another WP(C) No. 12791 of 2018 filed before the Hon'ble High Court of Delhi title "SidhaNeelkanth Paper Industries Vs. Reserve Bank of India", wherein it was held by the Hon'ble High Court of Delhi is not persuaded to accept that the decision of respondent to execute the assignment is perverse, capricious or arbitrary and further held that the petitioner does not have any locus to challenge the assignment by the respondent no. 2 Accordingly, petition dismissed, though further it is held that "this order should not be construed as an expression of opinion as to the value of the properties in question.' Hence, so far as the question of assignment of the debt to the Prudent ARC by Andhra Bank is concerned, that has already been dealt by the Hon'ble High Court of Delhi. Now, only question of Valuation of the property in question is left.
In the present matter, apparently, the property was put on auction on 16.11.2015, for a reserve price of Rs. 14.61 Crores and thereafter on 30.08.2016, for a reserve price of Rs. 13.51 Crores and subsequently on 24.11.2016, at a reserve price of Rs. 12.45 Crores. As no bid has turned up in that auction, thereafter the property was again put to auction on 09.03.2017, for a reserve price of Rs. 12 Crores, but no bid was reserved. Now the reserve price has been fixed as Rs. 11 Crore approximately as conceded by the Ld. Sr. Advocate for the Respondent FI.
The above said pattern of auction shows that no bid has come, even the property was fixed for Rs. 12 Crores on 09.03.2017, and hence, apparently the valuation has rightly been fixed for Rs. 11 Crores. Even no such document has been placed on record on behalf of the applicant that the reserve price of the property must have been more than that of would have been fixed. Apparently, the applicant is indulged in a forum shopping and apparently failed to show that there was a wrong valuation of the property has hence, no prima facie case has been made out in favour of the applicant for interim injunction for staying the auction. Even, no balance of convenience lies in the favour of the applicant as the matter is lingering on since 2014, the property in question could not be sold and the huge recovery could not be made on the party of the respondent bank' FI till date, as more than Rs. 16 Crores are still due to be recovered from the applicants, rather, the respondent bank/FI is suffering irreparable loss as public money could not be recovered. Hence, no ground made out for interim injunction and the valuation of the property apparently rightly fixed by the respondent FI. Hence, the present application stands dismissed.
Though on behalf of the applicant, the Ld. Counsel for the applicant stated that the applicant is ready to deposit Rs. 2 Crores by way of cheques i.e. cheque no. 729009 dt. 04.12.2018 amounting to Rs. 50 lacs, No. 729010 dt. 04.12.2018 for Rs. 50 Lacs, No. 729011 dt. 10.12.2018 amounting to Rs. 50 Lacs and Cheque no. 729012 dt.10.12.2018 for Rs. 50 lacs towards showing their bonafide for purchasing the property in question. But apparently it is already discussed above that there was offer and counter-offer before the Hon'ble High Court of Delhi and the settlement has already been failed, even OTS proposal ARC. Apart that, the Ld. Counsel for the respondent FI also not ready to accept the same and even otherwise right to redeem has lost once the property has been put on auction has already been initiated and going to be held today, therefore, no case has been made out at this stage for redemption of the property in question, hence there is no logic to deposit the said cheques that are only of Rs. 2 Crore i.e. cheques of Rs. One Crore of 04.12.2018 and other cheques of Rs.One Crore of 10.12.2018. Accordingly, the same are ordered to be returned to the applicant.
In the present matter, on another application i.e. I.A. No. 1652/2018 has been moved on behalf of the applicant requesting to grant the applicant credit for an amount to Rs. 20.45 crores since 29.07.2014 in the loading account. Notice already issued.
Matter be listed on 18.01.2019, date already fixed in the matter for hearing on I.A. No. 1652 of 2018."
From a bare reading of this order of the learned DRT it becomes amply clear that for all these years the DRT has not made any attempt to look into the grounds of challenge to the measures taken by Andhra Bank under SARFAESI Act and instead it has been giving opportunities to the security applicants to bring buyers of house no. 170, Deepali, Pitampura, Delhi as their grievance was that the Bank had been intending to sell the same it at throwaway price and finally it succeeded also in selling at for Rs.12.75 crores in the auction held on 05.12.2018. The grievance of the appellants is that earlier much more price was being offered by the prospective and intending buyers introduced by the appellants but their offers were being declined by the Bank arbitrarily on the ground that value of the property was more than what was being offered. Then how could the Prudent ARC sell it at much less price. That way a huge loss of public money has been caused to the appellants.
Opposing this appeal on behalf of the assignee of the debt by Andhra Bank Mr. Rajeev Mehra, learned senior advocate had submitted that the auction notices issued by Andhra Bank were all issued after filing of the S.A. by the appellants and respondent no.3 but despite that they had neither got their S.A., which was filed to challenge the legality of the measures taken under Section 13(2) and 13(4) of SARFEASI Act by Andhra Bank, amended nor had any fresh S.As were filed to challenge the sale proclamations and the reserve prices fixed thereby and, therefore, the learned DRT ought to have not even entertained the stay application when the property in question was going to be sold on 5. 12.2018 and in any case the impugned order of rejection of stay application is perfectly justified and there is no merit in the challenge thereto since the appellants never ever were keen to clear the dues of the Bank and now of Prudent ARC.
The primary submission of Mr.MuneeshMalhotra, learned counsel for the appellants was that just because the appellants could not pay the Bank's dues AS their property was not permitted to be sold at a price which was being offered by the appellants through some private interested buyers and at that time arbitrarily their offers had been rejected thereby causing huge loss to the Bank since the property has now been sold at a much less price. It was submitted that Bank's own valuer had valued the property no. 170 at more than 20 crores then how could the property be sold with reserve price of 11 crores. It was also submitted that since it was pparant from the records that When it was put to Mr.Malhotra during the course of hearing as to what now has survived in the matter when their property has already been sold and the auction purchaser has been made its owner by execution of necessary documents his answer was that at least the auction purchaser should be directed to maintain status quo and should not be permitted to demolish the property bought by it because if ultimately the appellants succeed in their S.A. and the property in question is demolished and new building is raised it will be impossible to restore status quo ante. Another grievance raised by Mr.MuneeshMalhotra that the learned Presiding Officer was in any case not accusing the appellants of 'forum shopping'. It was argued that if a litigant approaches a higher Court for the redressal of his grievances that does not amount to 'form shopping' and, therefore, if on some occasions the appellants had approached the High Court by filing writ petitions the appellants can be said to have indulged in 'forum shopping' and in a very casual manner the learned Presiding Officer has made such an observation in the impugned order which shows the prejudiced approach of the DRT towards the appellants.
Same submissions were reiterated even in the written arguments filed on behalf the parties. The auction purchaser had also seriously opposed grant of any relief to the appellants primarily on the ground that it had paid almost thirteen crores to buy the property and now it is fully entitled to make use of that property in any way it wants and the DRT was right in rejecting appellants' application for stay and that this appeal is only against that miscellaneous order and the scope of the present appeal cannot enlarged to include challenge to the actual auction sale held on 05.12.2018 during the pendency of this appeal.
After giving my due consideration to the entire aspects of the matter and going through the DRT's record I do not find any merit in this appeal. The appellant had filed the S.A. with the objective of saving the mortgaged properties. One of the two houses has now been sold by respondent no.3 and on 05.12.2018 the other one has been sold by the respondent no.2 herein. However, since the S.A. Is still pending decision before the DRT it will always be open to the appellants to agitate its challenge against the measures initiated by the Bank when S.A. was originally filed. The submissions/grievances raised here that even though the appellant was always ready to bring buyers for the property no. 170, Deepali, Pitampura but their offers were rejected arbitrarily for the reason that value of the property was much more than they were offering but finally same property has been sold at a much lesser price to the purchaser of Prudent's choice ignoring the fact that the Andhra Bank's own valuer had valued the property at more than 20 crores. In case such pleas are raised the learned Presiding Officer will deal with the same in accordance with law and after hearing all the parties including the submission of Prudent ARC that without seeking amendment in the S.A. these pleas could not be raised. The DRT will also keep in mind the following views of the Apex Court made in its judgment in "NaniGopal Paul vs T. Prasad Singh &Ors.", 1995 SCC (3) 579:-
"4. We are of the view that we can take suomotu judicial notice of the illegality pointed out by the Division Bench, committed by the single Judge of the High Court in. bringing the properties to sale. Accordingly, we are of the view that the circumstances are sufficient to vitiate the validity of the sale conducted by the court Receiver as approved by the learned single Judge. Confirmation of sale was illegal. Though, as contended by Sri. Ganesh that normally an application under Order 21 Rule 89 or 90 or under s.48 CPC need to be filed within limitation to have the sale conducted by the court set aside and that procedure need to be insisted upon, we are of the view that this court or appellate court would not remain a mute or helpless spectator to obvious and manifest illegality committed in conducting court sales........"
As far as the grievance of the appellants that in case the purchaser of their property succeeds in demolishing the same their entire legal fight will become meaningless is concerned I do not think that it will be so if the appellants succeed before the DRT in their S.A. Their objections to the very initiation of measures under SARFAESI Act by Andhra Bank including declaration of their account as NPA, issuance of notice under Section 13(2) and then under Section 13(4) are yet to be decided by the learned DRT. In case their challenge to those measures is finally upheld all subsequent proceedings including the auction sale will have to go. The DRT has itself already observed in one of its orders that the auction sale will be subject to the decision of the S.A. Thus it is the conscious decisionofthe auction purchaser to buy a property sold under SARFAESI Act knowing that SARFAESI measures were already under challenge at the instance of the owner of the property which they had decided to purchase. Reference here can be usefully made to the following observations of the Hon'ble Supreme Court in its judgement rendered on 22nd November, 2005 the case of "Competent Authority vsBarangore Jute Factory &Ors." ,Appeal (civil) 7015 of 2005,:-
"...........Each step is a consequence of earlier step and in that sense all the steps are linked to initial Notification for acquisition under Section 3A(1) and (2). This initial Notification has been held to be not in accordance with law. When the foundation goes rest of the edifice falls.........................................."
Thus, the appellants need not worry at this stage as to whether the DRT would be able to restore status quo ante in the event of their succeeding in the S.A. That will be seen by the DRT itself as how to undo what in the interregnum the auction purchaser may do.
I am ,however, in agreement with the submission of Mr.MuneeshMalhotra, learned counsel for the appellants, that the learned Presiding Officer ought not to have commented in the impugned order that the security applicants had indulged in 'forum shopping'. It was submitted that just because a litigant goes to higher forums for the redressal of his grievances it cannot be said that the litigant had indulged in 'forum shopping' and in any case the higher Court can if satisfied observe that litigant approaching it was indulging in 'forum shopping' but certainly a subordinate forum cannot say that by approaching higher forum litigant indulges in 'forum shopping'. I am in agreement with this submission. Such like observations should be avoided unless the same have a strong foundation.
This appeal thus being devoid of merits is dismissed. However, considering the fact that the S.A. is pending for almost six years the learned Presiding Officer of DRT will do well to now dispose it of within a period forytyfive days since pleadings/evidence stage is already over. The matter shall be taken up for fixing the date of arguments by the DRT on 19.08.2019 and in case the next date already fixed in the S.A. is far off the same will stand pre-poned to 19.08.2019.
Records of DRT shall be sent back with a copy of this order.