R. Jayanthi vs Authorised Officer And Ors

Sanjib Banerjee, CJ

Much time has been taken by the writ petitioner in questioning an order of the Debts Recovery Tribunal that repelled the writ petitioner's challenge to the measures taken by the respondent secured creditor against secured assets admittedly furnished by the petitioner by way of security as a guarantor to the transaction. There is no dispute that the title deeds pertaining to a property in Ganapathypalayam Village were handed over by the petitioner to Andhra Bank upon due execution of documents. The relevant document is dated June 21, 2010 and the signature of the petitioner appears therein.

The petitioner complains that it was only on or about November 23, 2020 that a notice for the auction-sale of the property was served by Union Bank on the petitioner which revealed that measures had been taken by Andhra Bank earlier in respect of the asset that the petitioner claims not to have been made aware of. It may be noted that the present Union Bank is the resultant entity upon the merger of Andhra Bank with it.

The petitioner claims that the petitioner approached the relevant Debts Recovery Tribunal on December 11, 2020 with a petition under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The petitioner claims that the office in the said Tribunal informed the petitioner that the petition could not be entertained without copies of the notices issued under Section 13(2) and 13(4) of the Act being appended thereto or the notices being produced therewith. The petitioner asserts that she re-presented the petition on November 11, 2020 after stating therein that no such notice under Section 13(2) or 13(4) of the Act had been served on the petitioner.

It is the petitioner's version that the office of the Tribunal informed the petitioner that the matter would be heard on the issue of maintainability on December 14, 2020, whereupon the petitioner also approached the bank with a request to produce the relevant documents since the petitioner did not possess any copy thereof. It is the petitioner's further submission that there is a policy that this bank is not represented in course of hearings on maintainability and, as such, no one represented the Union Bank when the relevant Debts Recovery Tribunal took up the matter on December 14, 2020.

The petitioner says that the petitioner was perturbed since the auction-sale was fixed to be held on December 15, 2020. The petitioner claims to have argued the matter on December 14, 2020, but the copy of the order was apparently uploaded on the website of the relevant Debts Recovery Tribunal in the evening of December 15, 2020, after the auction had already been conducted earlier in the day.

The auction has fetched a bid of about Rs.2.71 crore for the property in question. Apart from the petitioner questioning the consideration at which the auction was closed, the petitioner says that the bank has acted against the petitioner by choosing to proceed against the petitioner's property though the borrower's property was available to be proceeded against. The petitioner insists that since the amount claimed to be due by the bank is in excess of Rs.17.30 crore, the securities furnished by the borrower should have been exhausted before the secured creditor proceeded against any security furnished by the guarantor. Several technical objections have also been raised that the petitioner claims ought to have been addressed by the Debts Recovery Tribunal.

The bank has used a counter-affidavit. The documents disclosed by the bank include a notice dated February 14, 2014 apparently issued under Section 13(2) of the Act and addressed, inter alia, to the petitioner herein, though not at the same address which is indicated in the cause-title herein. The bank has also relied on a possession notice dated May 24, 2014, also issued to the petitioner at the same address that the petitioner has indicated in the cause-title. The bank seeks to make out that the letter of February 14, 2014 was received by the petitioner in person by appending the petitioner's signature on the third page of the letter. As regards the possession notice, the bank says that the postal acknowledgment card was duly returned to the bank by the Department of Posts upon the petitioner receiving the notice on May 28, 2014. The petitioner claims that the bank has used blank papers on which the petitioner's and the borrower's signatures were obtained earlier to give an impression that the notice under Section 13(2) of the Act had been personally received by the petitioner.

It is evident from the sale notice of November 23, 2020, a copy whereof was contemporaneously received by the petitioner, that the notice under Section 13(2) of the Act had been issued by Andhra Bank on February 14, 2014, and a subsequent possession notice was issued apparently dated May 24, 2015. There is an obvious mistake in the year attributed to the possession notice since the possession notice relied upon by the bank bears the date of May 24, 2014.

The petitioner claims that it was the petitioner's case before the Debts Recovery Tribunal that the secured creditor had purported to issue notice for sale of the property without calling upon the petitioner to make good the alleged default on the part of the borrower. It is the petitioner's further contention that no notice under Section 13(2) of the Act or possession notice was ever issued to or received by the petitioner. The petitioner, quite strangely, says that her knowledge of the bank taking any measures under Section 13(4) of the Act was upon her receipt of the sale notice on November 23, 2020 and she applied within reasonable time thereafter by invoking Section 17 of the Act of 2002 on December 11, 2020.

By the order impugned dated December 14, 2020, the Debts Recovery Tribunal recorded that the applicant was a borrower seeking to challenge a sale notice for an auction that was then proposed to be held on December 15, 2020 without relying on the notices under Section 13(2) and 13(4) of the Act which documents were "considered to be a principal and primary document and is fundamental in nature...".

Since the petitioner did not get a chance to urge the grounds of questioning the bank's action before the Debts Recovery Tribunal, she has been afforded an opportunity here. On merits, the petitioner says that the sale-notice of November 23, 2020 fell foul of Rule 9(1) of the Security Interest (Enforcement) Rules, 2002. The petitioner refers to a 30-day notice being contemplated in Rule 9(1) of the said Rules to the borrower and, according to the petitioner, since such notice of November 23, 2020 was the first notice received by the petitioner as guarantor, it could not have been abridged to less than 30 days.

The petitioner also refers to Rule 3 of the said Rules and says that no demand notice was issued to the petitioner's place of residence. The petitioner has disowned the petitioner's signature in the third page of the notice under Section 13(2) of the Act that the bank has relied on and even questions the one on the acknowledgment card that the bank claims was returned by the Department of Posts after effecting service of the possession notice in May, 2014.

The most substantial ground urged by the petitioner is that the secured asset was an agricultural land and could never have been treated as a secured asset nor could it have been sold by a secured creditor in connection with any credit facilities granted by such secured creditor to a borrower.

In response to further queries of the petitioner to Union Bank, a reply was issued to her on February 2, 2021, detailing the steps taken by Andhra Bank. The following appears from such reply of the bank of February 7, 2021.

"2. Your said complaint was duly examined and investigated by us and we wish to inform you as under:

a) Consequent upon classification of the account of the aforesaid company as NPA, Bank invoked the provisions of SARFAESI Act by issuing Demand Notice dated 14.02.2014 under Section 13(2) to enforce all the secured assets/mortgaged properties, including the property owned by you, which is duly acknowledged by you. The Possession Notice dated 24.05.2014 issued under Sec 13(4) of SARFAESI Act was also delivered and duly acknowledged by you on 28.05.2014.

b) All the secured assets/mortgaged properties were put to auction by Andhra Bank on 11.02.2015, 02.11.2015 and 22.12.2015 and auction failed due to want of bidders.

c) Subsequently, 15 days Sale Notice as per Rule 9(1) of Security Interest Enforcement Rules was issued on 23.11.2020 for auction conducted on 15.12.2020 in respect of property including yours, which was sold for Rs.2.71 Crore against the Reserve price of Rs.1.20 Crore. The said auction notice was delivered and duly acknowledged by you on 28.11.2020 and also published in local newspapers on 24.11.2020.

d) With respect to auction dated 18.01.2021 relating to the three other secured assets/mortgaged properties, 15 days Sale Notice as per Rule 9(1) of the Security Interest Enforcement Rules issued on 21.12.2020 is duly acknowledged by you on 26.12.2020 and the Sale Notice was published in Newspapers on 25.12.2020 in terms of provisions of SARFAESI Act and Rules made there under.

e) Please be informed that Branch has obtained two valuation reports from two Board approved valuers before fixing reserve price and putting the properties to sale and from the valuation reports, documentary of land classification and legal opinion, your property is residential land only and not agricultural, as alleged.

f) The amount of Rs.17,32,32,570.20 mentioned in the Auction Sale Notice dated 05.03.2020 was the outstanding dues as on 31.01.2020 where as the amount of Rs.7,90,45,681.00 mentioned in the auction sale notice dated 23.11.2020 was the book balance (principal) as on the date of NPA i.e. 07.02.2014.

g) Please be informed that Bank has not discriminated between the borrower company and you, despite the settled position of law that it is the prerogative of the creditor alone whether to move against the principal debtor first or the guarantor to realize the loan amount.

h) Further, vide its letter dated 07.12.2020, ARMB, Coimbatore has replied to your letter dated 06.12.2020. The information sought by your email dated 15.12.2020 on the details of e-auction was immediately replied by the said branch on the same day.

i) You will appreciate that the action initiated under SARFAESI Act is in terms of the provisions of SARFAESI Act. Despite fully aware of the actions, neither the company nor you repaid the dues to Bank since the year 2014 compelling the Bank to initiate legal action for recovery of Bank's dues."

Rule 3 of the said Rules permits a notice to be addressed to wherever the borrower resides or works for gain or carries on business or the like. In any event, the object of a notice is to make the noticee aware of the contents of the notice and, prima facie, the object is achieved and the onus is discharged upon receipt of the notice being demonstrated. On a visual comparison, the signature appears to be that of the petitioner herein as appearing in the document by which the title deeds were deposited. The similar signature appears in the acknowledgment card pertaining to the notice of possession of May 24, 2014.

Though the petitioner has questioned the veracity of the two key notices, it does not appear that much credence need be given to such contention. There could never have been any motive on the part of the secured creditor to proceed with the measures under the said Act of 2002 without serving any notice on the petitioner herein since the account appears to have been classified as NPA and a huge sum remained due and owing for a substantial period. There is little doubt that the writ petitioner had received the previous notices but had chosen not to take any action and the present yarn spun out by the writ petitioner is only an attempt to explain the previous inaction on her part to challenge the measures taken by the secured creditor under Section 13(4) of the Act.

At any rate, no conclusive finding in such regard needs to be rendered in the present proceedings where the extraordinary jurisdiction of this Court has been invoked under Article 226 of the Constitution, particularly since the order passed by the Tribunal appears to be justified and the conduct of the secured creditor, at least, prima facie, beyond reproach. The petitioner is aware that in proceedings under Article 226 of the Constitution, oral evidence is not received and matters are decided in summary procedure on affidavit evidence. There is little doubt that the petitioner has the temerity of disputing the petitioner's signature on being assured that an extensive trial in such regard cannot be conducted in course of the present proceedings.

The childish ground that is raised by the petitioner to the effect that the secured creditor was wrong in proceeding against the petitioner's assets ahead of the securities furnished by the borrower is exceptionable. It is elementary that the liability of a guarantor is co-extensive with the liability of a borrower and it is for the creditor to choose to proceed against the assets of the principal debtor or the guarantor. The petitioner in her capacity as guarantor can have no grievance on such account. In any event, it is evident from the records that the secured creditor attempted to sell the securities furnished by the borrower but they were either not saleable or no seller evinced any interest therefor.

The most hilarious aspect of the matter is the story that the Court is asked to believe as to the circumstances in which the security came to be furnished. According to the petitioner, the borrower was a tenant and at the mere request of such tenant to help the tenant out, the petitioner was magnanimous in furnishing the petitioner's title deeds pertaining to a valuable immovable property to the creditor against which the tenant obtained a loan.

Implicit in such story is the acknowledgment of the fraud that may have been committed by the petitioner and the facile excuse which is proffered now to try and rob the secured creditor of the asset. The petitioner was aware that the security was to be furnished in connection with a loan obtained by the petitioner's tenant. The petitioner cannot be heard to say that the petitioner was not aware that an agricultural property could not be proceeded against by a bank or financial institution and, as such, an agricultural property would not be accepted as security. The petitioner's present argument that the property was an agricultural land and could never have been sold does not, in such circumstances, hold any water. Further, the records reveal that there is a construction on the land and there may be sufficient basis to the secured creditor maintaining that the land is a residential land.

As far the order impugned dated December 14, 2020 is concerned, there is ample justification therefor. Even though Rule 12 of the said Rules of 2002 and the form of the petition to be filed under Section 17 of the Act do not specifically indicate that copies of the notices of demand and possession need to be appended to the petition or referred to therein, it is obvious that such notices must be referred to and copies thereof included in the documents carried to the Tribunal since these are primary documents on which the cause of action of a person aggrieved, within the meaning of Section 17 of the Act, would arise. Since there is a time limit envisaged in Section 17 of the Act within which a grievance has to be carried to the Tribunal exercising jurisdiction, it is necessary for such primary documents to be referred to and disclosed before the Tribunal for the Tribunal to assess whether the petition before it has been carried within the permitted time or not.

There is no merit in the petition. The audacity of this petitioner warranted a conclusive finding to be rendered on the dishonest stand taken as far as the petitioner's acknowledgments are concerned so that the matter could be followed up to the hilt and perjury proceedings instituted. However, the heavy board of this Court does not permit such time to be expended on one matter, though the petitioner would have deserved every bit of it.

If it is the petitioner's contention that the signatures furnished by the petitioner earlier to Andhra Bank had been misused by the Bank in showing service of the notice of demand and the notice of possession, such submission has to be rejected out of hand. The notice of possession was served through registered post with acknowledgment due and it cannot be the case of the petitioner that he also previously signed the acknowledgment card of the Department of Posts. At any rate, when a person makes over a blank signed paper to another, it amounts to a blanket authority to the other to fill up the blank page in the manner the other chooses.

W.P.No.661 of 2021 is dismissed with costs assessed at Rs.50,000/- (Rupees Fifty Thousand only). The secured creditor and the auction-purchaser will be entitled to the costs in equal share. Such costs should be tendered within four weeks from date; in default, the secured creditor will be entitled to realize the same as part of the credit facilities afforded to the petitioner. W.M.P.Nos.725 and 728 of 2021 are closed.