Punjab National Bank vs Om Educational & Charitable Trust

Ranjit Singh, J

Appellant Punjab National Bank has approached this Tribunal with the instant appeal challenging the order passed by DRT-I, Chandigarh whereby the notice dated 11.2.2012 under section 13(2), possession notices dated 30.4.2012 and 22.5.2012 and the sale notices dated 12.6.2012 and 14.9.2012 issued by the appellant bank under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, the SARFAESI Act) have been quashed by the Tribunal below.

The facts noticed, in brief, are that on 26.3.2008 the appellant bank had granted certain credit facilities to respondent No. 1 M/s Om Educational and Charitable Trust in the nature of term loan of Rs. 575 lacs. The credit facilities were inter alia secured by first charge on block assets of respondent No. 1 by way of hypothecation of machinery and equipments and other fixed assets as also mortgage by way of deposit of title deed of land measuring 92 kanal 4 marla situated in village Dhaurang, District Yamunagar, Haryana and by personal securities of respondents 2 to 4. Additional Term Loan of Rs.175 lacs was granted on 18.5.2009. Yet another term loan of Rs.688 lacs on 3.12.2009 and OD Limit of Rs.280 lacs on 31.8.2010 were also granted and securities created were extended for these loans as well.

The respondent failed to pay the installments of the term loans and liquidate the overdraft within the stipulated period. They also failed to service the interest payable and thus committed financial indiscipline as also contravention and breach of the terms and conditions governing the credit facilities. The bank accordingly classified the credit facilities as Non Performing Asset (NPA) on 30.9.2011. Between October 2011 and January 2012, the appellant bank wrote numerous letters calling upon the respondents to deposit the overdue amount and to regularize the same, but to no avail. Vide their letter dated 30.12.2011, the respondents assured the appellant bank that they would deposit a sum of Rs.1.10 crore up to 10.2.2012 and requested the bank not to initiate recovery proceedings till the said date. It is in this background that on 11.2.2012 the appellant issued demand notice under section 13(2) of the SARFAESI Act demanding Rs.15,93,00,554/- along with future interest thereon w.e.f. 1.10.2011 till full payment of the amount. The demand notice was duly served upon the borrowers, including respondent No. 1. No compliance of this demand was made. Instead, the respondent borrower made a representation on 5.4.2012 raising frivolous contentions in opposing the demand notice dated 11.2.2012. The appellant bank rejected the representation dated 5.4.2012 and communicated the same through their letter dated 13.4.2012. On 22.5.2012, the appellant took symbolic possession of the secured assets strictly in accordance with rule 8 of the Security Interest (Enforcement) Rules, 2002 (for short, the Enforcement Rules).

In order to frustrate the statutory proceedings initiated under the SARFAESI Act, the respondents herein instituted a collusive civil suit (No. 124/2012) titled as Ms. Mohit Singla & 2 Ors. V. M/s Asian Institute of Management & Technology & 11 Ors. before the Additional District Judge, Yamunanagar. In the suit, the respondent sought a declaration and permanent injunction against the appellant. This suit was dismissed on 26.5.2012 with the observation that the said suit had been filed collusively on behalf of respondents herein to forestall the recovery proceedings under the SARFAESI Act.

The appellant bank, thereafter, on 12.6.2012, forewarned the respondents that it would be constrained to cause the sale of the secured assets if the respondents did not comply with the demand notice. On 10.7.2012, respondent instituted a Securitization Application (S.A.155/2012) before DRT at Chandigarh. On that very day, the Tribunal granted an ex parte status quo order. It is alleged that a wrong representation was made on behalf of the respondents that the counsel of the appellant I caveator was out of country from where he was likely to return on 26.7.2012 and further that his clerk had refused to accept the caveat notice. It was further urged that various officers had refused the service when they were contacted by the counsel for the respondents in this regard.

The appellant bank appeared and filed a comprehensive reply on 30.7.2012 rebutting each and every allegations levelled, but the Tribunal still extended the status quo order and adjourned the case to 26.9.2012. Aggrieved against the orders dated 10.7.2012 and 31.7.2012, the appellant bank instituted appeal (No. 297/2012) before this Tribunal on 14.8.2012. This Tribunal stayed the operation of the orders dated 10.7.2012 and 31.7.2012. In this back ground, the appellant issued notice dated 14.9.2012 for putting the secured assets to sale. Two applications, I.A. 633/2012 praying for early hearing and I.A. 634/2012 for setting aside the order dated 27.8.2012, were filed in Appeal No. 297/2012 filed by the appellant. This Tribunal declined to interfere in the impending sale pursuant to the sale notice dated 14.9.2012, but issued direction to the Tribunal below to make an endeavour to dispose of the S.A. by 15.10.2012. Despite this position, the respondents instituted I.A. 1026/2012 in the S.A. filed by them before the Tribunal below, seeking quashing of the sale notice dated 14.9.2012. This application was instituted on 26.9.2012 even when this Tribunal had shown no inclination to interfere in the sale notice on 21.9.2012. The Tribunal below issued notice to the appellant for 3.10.2012. On 10.10.2012, the respondents made their submission that the intervening event would necessitate amendment of the S.A. filed by them. The Tribunal granted liberty to the respondents to file an application for amendment and adjourned the hearing to 12.10.2012. This application accordingly was moved on 12.10.2012. The appellant would allege that this was with ulterior motives to frustrate the implementation of the order dated 21.9.2012 passed by this Tribunal and was only to frustrate the impending auction sale. The Tribunal below allowed the prayer to the extent it sought to introduce the amendments corresponding to the subsequent events and at the same time deferred the auction sale which was fixed for 15.10.2012. The reason given in support of this action was that there were chances of amicable out-of-court settlement and the respondents would pay to the appellant a sum of Rs.1.10 crores within a period of 15 days for the appellant to consider their request for upgrading the account on mutual agreed terms and conditions. Appellant rightly felt aggrieved against the deferment of the auction sale and instituted another appeal before this Tribunal on 7.11.2012. The matter was then heard by this Tribunal. In the meantime, pleadings were completed before the Tribunal below. The appellant also filed written submissions before the Tribunal below on 10.12.2012. The Tribunal has passed the final order on 14.12.2012 quashing the demand notice and the sale notice as already noticed. In this back ground, the Appeal No. 297/2012 filed by the appellant was disposed of by this Tribunal as having become infructuous and so was the fate of Appeal No. 398/2012. Appellant has now assailed the order dated 14.12.2012 through the present appeal.

Reply has been filed by the respondents. It is stated that in relation to the first charge and the alleged mortgage had its worth more than Rs. 20 crores and the declaration of account as NPA on that particular date is against the provisions of the SARFAESI Act. The respondents have justified the impugned order dated 14.12.2012 to be legal and correct. As per the respondents, the notice issued under section 13(2) of the SARFAESI Act was illegal as the account was never NPA on 30.9.2011 as claimed by the bank. The main stress of the respondents in the reply filed is that the bank had admitted that in relation to the first charge and the alleged mortgage was having its worth more than Rs. 20 crores and so the declaration of the account as NPA was against the provisions of the SARFAESI Act.

I have heard the learned counsel for the parties. Counsel for the bank would contend that while passing the final order dated 14.12.2012, the Tribunal below has violated the mandate of the orders passed by this Tribunal on 27.8.2012 and 21.9.2012 if not in letter but in spirit. The counsel would contend that the impugned order is violative of the sacrosanct principle of judicial propriety and discipline as it belittled against the spirit and the mandate of the order of this Tribunal passed in Appeal 297/2012. To continue his onslaught, the counsel would further submit that the impugned order is in complete oblivion of earlier two appeals instituted by the appellant and thus would show a judicial impropriety. It is also urged that the Tribunal below did not appreciate the correct legal position that the account was rightly and justly declared as NPA.

I have perused the impugned order passed by the Tribunal below. The Tribunal has noticed the issues which would require adjudication, at the very beginning of the impugned order and thereafter has taken up the objections ultimately to arrive at a conclusion to quash the notice under section 13(2), notices of possession and sale etc. The first issue which was considered by the Tribunal was whether the account of the respondent was NPA as per the definition given under section 2(o) of the SARFAESI Act. After noticing the contentions of the parties, the Tribunal has made reference to judgement relied upon by the parties and then has considered the definition of the NPA as given in section 2(o) of the SARFAESI Act. The finding is that the plain reading of the above definition makes it clear that an asset has to be sub-standard, doubtful or loss asset for classifying the same as NPA. The Tribunal has then referred to the definition of term sub-standard asset as given in Master Circular DBOD NO.BP.BC.9/21.04.048/2012-13 dated 2.7.2012. The definition of substandard asset is noticed and it is observed that an asset to be substandard, the current net worth of the borrower/guarantor or the current market value of the security charged would not be enough to ensure recovery of the dues to the banks in full. The Tribunal, thereafter, has observed that in the instant case the current market value of the security charged (movable/immovable assets) is approximately Rs.18.62 crore, as evident from the reserve price fixed for these assets in the sale notice dated 14.9.2012, as compared to outstanding dues of Rs.15.93 crore. It is accordingly observed that the current market value of the security charged being sufficient to ensure recovery of the dues of the bank in full, the assets could not be declared as sub-standard in terms of the Master Circular of the RBI. On this basis, a demand of Rs.15,93,00,554/- was made in the notice under section 13(2) of the SARFAESI Act. There being no mention of other defaults in other account brought out in the reply, the Tribunal has held that the account being not sub-standard, the notice issued under section 13(2) of the SARFAESI Act was bad in law and this is un-sustainable.

Since the tribunal has made reference to a Circular dated 2.7.2012, and has relied thereon, the counsel for the appellant has made reference to another Circular dated 1.7.2011, which according to the counsel is relevant. This defines the NPA as under:-

2.1 Non Performing Assets

2.1.1. An asset, including a leased asset, becomes non-performing when it ceases to generate income for the bank.

2.1.2. A non performing asset (NPA) is a loan or an advance where;

i. interest and/or instalment of principal remain overdue for a period of more than 90 days in respect of a term loan,

ii. the account remains 'out of order' as indicated at paragraph 2.2 below, in respect of an Overdraft/Cash Credit (OD/CC),

iii. the bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted,

iv. the instalment of principal or interest thereon remains overdue for two crop seasons for short duration crops,

v. the instalment of principal or interest thereon remains overdue for one crop season for long duration crops,

vi. the amount of liquidity facility remains outstanding for more than 90 days, in respect of a securitization transaction undertaken in terms of guidelines on securitization dated February 1, 2006.

vii. in respect of derivative transactions, the overdue receivables representing positive mark-to-market value of a derivative contract, if these remain unpaid for a period of 90 days from the specified due date for payment.

2.1.3. Banks should, classify an account as NPA only, if the interest due and charged during any quarter is not serviced fully within 90 days from the end of the quarter.

2.2 'Out of Order' status

An account should be treated as 'out of order' if the outstanding balance remains continuously in excess of the sanctioned limit/drawing power. In cases where the outstanding balance in the principal operating account is less than the sanctioned limit/ drawing power, but there are no credits continuously for 90 days as on the date of Balance Sheet or credits are not enough to cover the interest debited during the same period, these accounts should be treated as 'out of order'.

2.3.'Overdue'

Any amount due to the bank under any credit facility is 'overdue' if it is not paid on the due date fixed by the bank.

4.1 Categories of NPAs

Banks are required to classify nonperforming assets further into the following three categories based on the period for which the asset has remained nonperforming and the reliability of the dues:

i. Substandard Assets

ii. Doubtful Assets

iii. Loss Assets

4.1.1. Substandard Assets

With effect from 31 March 2005, a substandard asset would be one, which has remained NPA for a period less than or equal to 12 months. In such cases, the current net worth of the borrower/guarantor or the current market value of the security charged is not enough to ensure recovery of the dues to the banks in full. In other words, such an asset will have well defined credit weaknesses that jeopardise the liquidation of the debt and are characterized by the distinct possibility that the banks will sustain some loss, if deficiencies are not corrected.

4.1.2. Doubtful Assets

With effect from March 31, 2005, an asset would be classified as doubtful if it has remained in the substandard category for a period of 12 months. A loan classified as doubtful has all the weaknesses inherent in assets that were classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, - on the basis of currently known facts, conditions and values - highly questionable and improbable.

4.1.3. Loss Assets

A loss asset is one where loss has been identified by the bank or internal or external auditors or the RBI inspection, but the amount has not been written off wholly. In other words, such an asset is considered uncollectible and of such little value that its continuance as a bankable asset is not warranted although there may be some salvage or recovery value.

As per the counsel for the appellant, Statutory Central Auditors while conducting audit of the loan account observed that the loan pertaining to the Overdraft facility was restructured on 30.8.2010 and further overdraft of Rs. 280 lacs was allowed to meet the regular expenditure. This was to be brought into credit by bullet payments in the first week of February and August every year. The said loan account never reflected credit balance. On the contrary, the amount withdrawn was utilized for service of interest in the term loan accounts and, therefore, the said account remained overdrawn/overdue since February 2011. This term loan account No. lI was overdue for more than 90 days as interest for the month of June 2011 was not serviced. As per clause 2.1.2 reproduced above, NPA is a loan or an advance where interest and/or installment of principal remains overdue for a period of 90 days in respect of term loan. In this back ground, reference is made to cause 4.2.7 of the Circular, which provides that asset classification has to be borrower-wise and not facility-wise. This provision reads as under:-

4.2.7 Asset Classification to be borrower-wise and not facility-wise

i) It is difficult to envisage a situation when only one facility to a borrower/one investment in any of the securities issued by the borrower becomes a problem credit/investment and not others. Therefore, all the facilities granted by a bank to a borrower and investment in all the securities issued by the borrower will have to be treated as NPA/NPI and not the particular facility/investment or part thereof which has become irregular.

It is accordingly submitted that the Tribunal below has wrongly appreciated and interpreted that the credit should essentially be classified as sub-standard, doubtful or loss asset in order to classify as NPA under section 2(o) of the SARFAESI Act. The definition itself provides that the classification of credit facilities as NPAs as regard to the bank and financial institution is to be done in accordance with the directions and guidelines relating to the classification of assets issued by the Reserve Bank of India. Clause 2.1.2 of the Circular dated 1.7.2011 (reproduced above) clearly stipulates that assets become non-performing when it ceases to generate income for the bank. The term loan would become NPA if the interest or installment of the principal become overdue for a period of 90 days. Overdraft I cash credit facility would become NPA if the account remains out of order. The credit facilities thus are to be classified as NPA if the interest due and charged during any quarter is not serviced fully within 90 days from the end of the quarter. Clause 2.2 of the Circular reproduced above clearly provides that an account should be treated as 'out of order' if the outstanding balance remains continuously in excess of sanctioned limit/drawing power and in cases where the outstanding balance in the principal operating account is less than the sanctioned limit /drawing power but there are no credits continuously for 90 days as that on the date of Balance Sheet or credits are not enough to cover the interest debited during the same period. It is in this context stated that the account became 'out of order' and overdue when the respondents did not bring the same in the credit in February 2011 as per the terms of sanction. The respondents also did not deposit any amount from out of the fee and other moneys received from the students for the session July - September 2012. It is alleged that the respondents had opened account with other banks to transact banking business. It is also urged that the Tribunal has wrongly relied upon a Circular dated 2.7.2012 in the background that the credit facilities were classified as NPA on 30.9.2011, even before the issuance of this Circular. This Circular, in my view, thus could not have been considered and applied for any purpose in the instant case.

There is a substance in the submission made by the counsel for the appellant that the concept of NPA is fiscal in character and was formulated in the year 1993 by the Reserve Bank of India in order to define the contours of the principles of income recognition and classification by the banks and financial institutions. The SARFAESI Act, per se, does not reformulate the concept of income recognition and has placed reliance upon the guidelines and directives promulgated by the Reserve Bank of India. The counsel is justified in saying that the construction of the provision contained in section 2(o) of the SARFAESI Act can be done in an impeccable harmony with the directions formulated by the Reserve Bank of India. If one see the Circular dated 1.7.2011, this clearly provides that after classification of credit facility as NPA the bank and financial institution would be required to further categorize the same as substandard, doubtful or loss assets.

The finding returned by the Tribunal that the credit facilities could not classified as NPA unless the same were classified or categorized as sub-standard, doubtful or loss assets apparently is misplaced and misconceived. In this regard, a reference can be made to an order made by the Hon'ble Delhi High Court in M/s Holystar Natural Resources Pvt. Ltd. & Anr. vs. Union of India & Anr.,. A view is that the RBI guidelines are to be taken into consideration while considering the definition of NPA as given in section 2(1)(0) of the SARFAESI Act. It is held that the power to issue guidelines has rightly been vested in the regulator and that particular institution as the said regulator would understand the need of the institution. The Court has also held that the proposition that if the differentiation is rational, having regard to the objects sought to be achieved, then such- differentiation is not discriminatory. In this background the Court has observed that the reading of RBI guidelines dated 1.7.2013 make it amply clear that every NPA would fall either in the category of sub-standard or doubtful or loss asset. Thus, the submission that sub-standard account may not fall within the definition of NPA is not correct as in all cases where there has been a default in the payment of the interest or principal beyond 90 days, the account would be sub-standard and would also be covered by the definition of NPA. This would make the position clear misconceivedly appreciation by the Tribunal.

Similarly, the counsel for the appellant would find fault with the finding returned by the Tribunal that where availability of the security or net-worth of the borrower has been taken into consideration to hold that the account was wrongly declared as NPA. The counsel would rely on clauses 4.2.3 and 4.2.9 of the Circular dated 1.7.2011, which read as under:-

4.2.3 Availability of security / net worth of borrower/guarantor

The availability of security or net worth of borrower/guarantor should not be taken into account for the purpose of treating an advance as NPA or otherwise, except to the extent provided in Para 4.2.9, as income recognition is based on record of recovery.

4.2.9 Accounts where there is erosion in the value of security/frauds committed by borrowers

In respect of account where there are potential threats for recovery on account of erosion in the value of security or non-availability of security and existence of other factors such as frauds committed by borrowers it will not be prudent that such accounts should go through various stage of asset classification. In case of such serious credit impairment the asset should be straightaway classified as doubtful or loss asset as appropriate:

i. Erosion in the value of security can be reckoned as significant when the realizable value of the security is less then 50 per cent of the value assessed by the bank or accepted by RBI at the time of last inspection, as the case may be. Such NPAs may be straightaway classified under doubtful category and provisioning should be made as applicable to doubtful assets.

ii. If the realizable value of the security, as assessed by the bank/approved valuers / RBI is less than 10 per cent of the outstanding in the borrower accounts, the existence of security should be ignored and the asset should be straightaway classified as loss asset. It may be either written off or fully provided for by the bank.

The Tribunal, in my view, has completely ignored the relevant clauses of the circular noted above. Clause 4.2.3 clearly states that the availability of security or net-worth of the borrower / guarantor should not be taken into account for treating an advance as NPA or otherwise, (except to the extent provided in clause 4.2.9,) as income recognition is based on the record of recovery. Perusal of clause 4.2.9 would show that where there is erosion in the value of the security and existence of other factors such as frauds committed by the borrowers, it will not be prudent that such account go through various stages of asset classification. In such cases of serious credit impairment, the assets should be straightaway classified as doubtful or loss asset. That there are and can be instances where the assets in the loan account are so inter-locked and suffer from such infirmities, as may render the liquidity of the same extremely difficult and doubtful. In this back ground, the finding by the Tribunal that against the assets valued at Rs.18.62 crores the loan amount was only Rs.15.93 crores to say that the account could not have been declared as NPA is apparently misconceived and misplaced. If the value of the mortgaged assets are more, obviously a part of it could be utilized to recover the amount. It may need appreciation here that generally while granting the credit facilities the bank would look to secure such facilities with the property which has a value more than what is the loan amount. If we accept this interpretation, then no loan amount may remain safe.

The Tribunal has also gone into other issues like whether the penal interest could have been charged and capitalized on the amount demanded or whether the possession notice was properly served or not. It was urged by the respondents that the penal interest was charged and capitalized and hence the amount demanded under section 13(2) of the SARFAESI Act was not payable. This fact was denied by the appellant bank and it was specifically urged that the bank had not applied the interest contrary to the guidelines of the bank and the Reserve Bank of India. Further plea was that the interest has been charged as per the agreement and the contract between the parties and the secured creditor is entitled to charge the contractual rate of interest. Faced with this denial, the respondents seem to have changed their stand a bit. In rejoinder, the respondents had contended that charging of exorbitant interest and obnoxious expenses would tantamount to extortion and hair-splitting, which cannot be allowed. Whether the interest charged was as per the contractual rate or whether the charged interest was exorbitant or obnoxious ultimately was not decided by the Tribunal. The Tribunal went into the statement of account and came to the conclusion that the bank had charged penal interest, which had been added to monthly balance of each month. The submission made by the bank that whatever penal interest had been debited into the account had been simultaneously recovered is held to be false without any discussion in this regard. The Tribunal, thereafter, made reference to some judgments and held that the notice under section 13(2) of the SARFAESI Act, demanding the amount as mentioned therein to be not sustainable in this ground.

I find that the Tribunal had not properly and validly appreciated all, the pieces of evidence while arriving at this conclusion. No allowance is found to have been given to the submission that the interest charged was at the contractual rate and that the same was not in any manner contrary to the guidelines of the bank and the Reserve Bank of India. This aspect has not been found discussed by the Tribunal in any manner. Thus, an important piece of assertion and evidence ought to have been considered but has been ignored by the Tribunal. Tribunal below was expected to find if the interest charged was at contractual rates or if it was contrary to guidelines issue by RBI, I am unable to sustain this part of the finding of the Tribunal below as it has ignored the evidence and material pleaded before it.

I am also not impressed by the manner in which the Tribunal has dealt with the issue of the service of possession notice on the respondents. It was pleaded by the respondent/applicants that the bank had not published the possession notice in two leading newspapers. The submission also was that the said notice was also not personally served as required rule 8(1) of the Enforcement Rules. The bank had denied this fact that the possession notice was not delivered as per rule 8(1) of the Enforcement Rules. It was further asserted that the notice was affixed on the conspicuous part of the premises by the authorized officer of the bank and possession notices were published in the two leading newspapers, i.e. 'The Tribune' in English and 'Dainik Bhaskar' in vernacular language Hindi. The bank had also relied upon the photographs of affixation of the possession notice on the premises, which was on the record of the Tribunal below. Here again, the Tribunal below apparently has not properly appreciated the evidence led by the parties. It has held that the delivery of possession notice as well as affixation of the possession notice was mandatory. There cannot be any dispute with this observation that where statute requires a party to do certain things in certain way, then those things must be done in that way. Without any further discussion, the Tribunal has come to this conclusion that the notice was not delivered as per rule 8(I) of the Enforcement Rules. This finding that possession notice having not been delivered to the borrower, would render the notice bad in law and so liable to be quashed is recorded without discussing the evidence and material placed before the Tribunal. It would thus be difficult to uphold this part of the 'finding as well. This finding has been abruptly recorded without appreciating the evidence and the stand of the bank which was categorical in nature that the possession notice was delivered as per rule 8(1) of the Rules. It was also the stand of the bank that notice was duly affixed on the secured asset and photographs in this regard had been produced. The notice had also been published in two newspapers. In this back ground, simply stating that notice has not been served under rule 8(1) seems to be an abrupt conclusion reached by the Tribunal. In my view, the Tribunal below failed to appreciate that respondents had filed objection, which was rejected by the bank. If the notice had not been served on them, could they have come to know of the notice to file objection? This aspect seems to have completely escaped the notice of the Tribunal below and would render this part of the finding to be bad.

As already noticed, I am not impressed with the submissions made on behalf of the respondents that the reserve price of the property available against the recoverable amount being more, the account could not have been declared NPA. In this context the finding returned by the Tribunal below that the appellant bank could not have put the residential property of the guarantor for sale when the prime property having more reserve price was available, would not impress me. The Tribunal, in my view, failed to appreciate that the bank had a right to proceed against all the secured assets and it could not be asked to proceed in any manner as was found convenient or justified by the Tribunal in this regard.

It was then pleaded that the reserve price of the property had not been fixed with due concurrence of the authorized officer, which was said to be in violation of rule 8(5) of the Enforcement Rules. Rule 8(5) of the Enforcement Rules makes a provision that before effecting sale of the immovable property the authorized officer shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor, fix the reserve price. The rule then provides the method in which such immovable secured assets can be sold in part or in whole. Simply stating that value of the property of the guarantor was very low and the prime immovable security was sufficient to recover the dues was not appropriate ground to curtail the right of the bank to proceed against the property which had been mortgaged by the guarantors.

I have not been able to appreciate as to how the action of the bank to lay hands on the property of the guarantor could be termed illegal, arbitrary, mala fide and against the provisions of the SARFAESI Act. It ought to be realized that if the notice amount could be recovered from part of the property, the bank would have easily not gone ahead with the sale of the other properties. In this view of the matter, the Tribunal was not justified in thwarting the attempts of the bank to recover its due from the property which was mortgaged to secure the loan and the amounts due in question.

Some other observations have also been made in regard to the interest of students and college reputation, or for not having full particulars of the secured asset in the notice. In my view, once I am not upholding the view of the Tribunal below in setting aside the notice, these issues which are just irritants would not call for any adjudication.

In view of the detailed discussion above, I am unable to uphold the impugned order. Accordingly I will set aside the impugned order giving liberty to the bank to proceed against the secured assets in accordance with law.

Before parting with this judgment, I would wish to observe that certain orders passed by the Tribunal below may give an impression that such orders were passed to render the appeals filled by the Bank infructuous. Judicial propriety demands that when a higher forum is seized of an issue and has stayed the order passed by a Tribunal dealing with the case, it should wait for the outcome of the lis pending before higher forum. This Tribunal had stayed the operation of status quo order passed by the Tribunal below and had not granted interim relief of stay of sale as prayed by the respondents but still the Tribunal below had gone ahead to grant the same relief thereafter by observing that there was scope of amicable settlement. Thereafter no mention is found made to any such settlement and the observation that the respondents are going to deposit amount of over 1 crore is found to be a false alarm. Not only that, the Tribunal below has gone ahead to allow the main S.A. when this Tribunal was dealing with the appeals filed by the Bank against the interim orders. As a result these appeals pending before this Tribunal were rendered infructuous. Such an approach does not reflect well on the system and can convey some misconceived impressions. Judicial impropriety calls for much greater restraint which should be maintained to lend credence to judicial system.

Parties to bear their own cost.

Copy of this order be furnished to the parties as per law.