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Judgment
This appeal has been preferred section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short "the SARFAESI Act") against the order dated 12.04.2016 passed by Presiding Officer, DRT, Jabalpur, whereby the securitization application (S.A.) filed by the borrowers was allowed.
The essential facts in brief are, that the appellant-Bank granted certain credit facilities to the respondent No. 1 through its director respondent No. 2. The loan was secured by the mortgage of movable and immovable properties as well as collateral security created by the borrowers. The borrowers committed default in repayment of the loan, therefore, the appellant-Bank issued the demand notice dated 09.10.2007 under section 13(2) of the SARFAESI Act. Thereafter, the borrowers submitted OTS proposal and in compliance thereof, a sum of Rs. 73.00 lacs was deposited, but the amount was not deposited in time, therefore, the OTS was cancelled and a sum of Rs. 22.96 lacs remained due as on 28.02.2007 as per version of the Bank. Therefore, the Bank issued possession notice dated 24.10.2013 under section 13 (4) of the SARFAESI Act and the symbolic possession of the property was taken, which was challenged by the borrowers by filing the S.A. before the Tribunal below.
During the pendency of S.A., the sale notice was issued on 04.08.2015 fixing the date of auction on 09.09.2015 and the Bank had obtained the physical possession of the property on 24.09.2015. The property was auctioned/sold to the respondent No. 3 for a sum of Rs. 60.00 lacs. After deposit of sale price, the sale certificate is stated to have been issued and the physical possession of the property has also been handed over to the auction purchaser. The borrowers filed amendment application challenging the sale notice and the auction, which was allowed. However, the appellant-Bank has not filed any document and reply with regard to the amendment. The Tribunal below vide impugned order set aside the proceedings of the Bank holding that the possession notice was not properly affixed, the valuation report was not brought on record, physical possession of the property was taken forcefully or without knowledge of the borrowers and the property was sold in utter disregard to the provisions of the statute, accordingly directed the Bank to return the full amount to the auction purchaser and to restore the possession of the property to the borrowers with an option to the borrowers to submit the OTS proposal. Being aggrieved by the said order, the present appeal has been filed by the Bank.
Learned counsel for the appellant submitted that the Tribunal below has not provided an opportunity to produce the documents before it, therefore, the documents with regard to valuation report could not be filed. Further, the possession of the property was taken, as there was no resistance and the factory was open without locks. Only the immovable property was put for auction, therefore, the plot No. 101 was mentioned and the movables were not required to be sold. The amount was deposited in prescribed time by the auction purchaser, hence sale certificate was issued and the possession was handed over. The Tribunal below has not considered these aspects in right prospective. Therefore, the order impugned be set aside.
Learned counsel for the auction purchaser supported the contention of the learned counsel for the appellant-Bank.
Learned counsel for the borrowers submitted that the borrowers have never handed over the possession, rather the Bank Officer has taken the possession forcefully by breaking the locks. The valuation of the property was not properly made and in the sale notice it was not stated that the building, plant and machinery are also to be sold. Thus, it was deliberately stated to be only a plot in order to provide wrongful gain to the auction purchaser. Therefore, there is no infirmity in the impugned order.
Considered the arguments and perused the record.
A perusal of the record reveals that the Bank has furnished the alleged Photocopy of affixation of possession notice dated 24.10.2013, but the same was found to be illegible by the Tribunal below. The photocopies produced before the this Tribunal are also not clear and legible, thus, it cannot be inferred that on what date the possession notice was affixed on the premises as per Rule 8(1) of the Security Interest (Enforcement) Rules, 2002. The affixation of possession notice on the premises is a mandatory requirement. Such type of illegible photograph can be prepared at any time. The Bank has not bothered to submit the original photographs of affixation in order to clarify the same and to prove on record. Therefore, the Tribunal below has rightly concluded that the possession notice was not properly affixed.
With regard to valuation report, admittedly, the same was not submitted by the Bank before the DRT. The reason shown by the Bank is not acceptable, because the amendment application was allowed on 09.10.2015 and opportunity to file reply was given to the Bank, but no reply was filed and the matter was finally decided on 12.04.2016 after about six months. Thus, it cannot be said that the opportunity of filing of documents was not given. Even if, it is presumed that the opportunity was not given, the Bank was free to file appeal before this Tribunal against such denial of opportunity, but no appeal was preferred. Thus, the Tribunal below has rightly recorded the finding that the valuation was not brought on record.
The valuation report dated 14.04.2015 submitted with the memo of appeal can be prepared at any time and may be filed at the time of filing of appeal. Still, if it was prepared on 14.04.2015, the same is not helpful to the Bank. The value of the land is stated to be Rs. 50 lacs and the valuation of building and other cost was Rs. 28.46 lacs, thus, the market value of the property was Rs. 78.46 lacs and the distress value was shown to be Rs. 65 lacs, but the Bank has failed to clarify that on what basis, the reserve price was fixed for Rs. 60 lacs and that too below the distress value. Thus, the reserve price was not fixed properly.
In possession notice dated 24.10.2013, all the part and parcel of the property consisting of lease hold land, building, plant and machinery were indicated showing that all these were taken in possession. Similarly, in the sale notice dated 04.08.2015, the land and building was mentioned, but strangely, only the plot No. 101 was mentioned in the publication of the sale notice. This was a limpid substantial irregularity in publication of the sale notice, because only the persons, who were interested in purchasing the plot, opted to participate in the bid and the persons, who were interested in purchasing a running factory including building, plant and machinery, were not made aware by the said publication. Thus, the publication was made in flagrant violation of the rules and the Bank has not attempted to fetch the maximum value of the property. The building constructed over the land and plant and machinery are part and parcel of the immovable property. The land cannot be auctioned without building constructed over it.
The contention of the Bank that they opted to sell the immovable, is not tenable. If the property is not segregateable, then whole of the property is required to be auctioned and if any surplus money is received, that is required to be refunded to the borrower. Further, the Bank has not made any effort to sell the moveable property, as large numbers of goods were hypothecated. The Bank has allowed to deteriorate the movable property without any cogent reason.
It is also worthwhile to mention that the Bank has not produced any list of inventory prepared at the time of taking possession. The inventory list was prepared in compliance of the order dated 09.10.2015 passed by the DRT. Thus, the possession was not taken in accordance with the provisions of the Rules. This is not the case of the Bank that the physical possession was taken in furtherance of any order of the DM/CMM passed under section 14 of the SARFAESI Act. The borrowers are denying the delivery of possession to the Bank. The argument that the locks were open, is not believable because such a huge premises cannot remain open and unlocked, where the goods are lying in the factory. The Bank can obtain the possession, either when it is willingly handed over by the borrowers or on the basis of order passed under section 14 of the SARFAESI Act. Thus the physical possession was also not taken as per provisions of the statute. The Bank has acted in callous manner without following the mandatory requirement of law and auctioned the property by causing substantial irregularity. As such there is no infirmity in the impugned order warranting any interference.
In view of the above, the appeal is liable to dismissed. Accordingly, the same is dismissed with no order as to costs.
A copy of this judgment be sent to the parties as well as the DRT concerned and be also uploaded on the e-DRT portal.