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Judgment
R. D. Khare, Chairperson
The present appeal has been filed under section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short “the SARFAESI Act”) against the judgment and order dated 30.05.2019 passed by the DRT, Allahabad, whereby the securitization application filed by the appellants was partly dismissed.
The brief facts of the present case are, that the appellants were granted certain financial credit facilities by the respondent-Bank. In order to secure the said facilities, the appellants-Borrowers created equitable mortgage over their property and deposited the sale deed with the respondent-Bank. Since the borrowers did not maintain the financial discipline in terms of the loan agreement, therefore, the accounts were classified as NPA on 15.07.2015 and the demand notice dated 18.10.2015 was issued under section 13(2) of the SARFAESI Act for a sum of Rs. 72,05,881/-along with further interest. Thereafter, the borrowers made a representation dated 08.12.2016 to the Bank, stating that they would regularize the account by 31.03.2017, which was done by them and deposited the amount due with the Bank and the accounts of the borrowers became regularized, but in the meantime, the respondent-bank moved an application on 20.12.2016 under section 14 of the SARFAESI Act before the District Magistrate, Allahabad for obtaining the order to take physical possession of the property in question, which was allowed on 31.01.2017.
It appears that the borrowers again failed to adhere to the terms of the loan agreement, therefore, the accounts were classified as NPA on 06.07.2017 and fresh demand notice under section 13(2) of the SARFAESI Act was issued on 31.07.2017 for a sum of Rs. 70,62,665/- along with interest w.e.f. 01.07.2017. Since the borrowers did not pay any heed to the demand raised by the Bank, therefore, symbolic possession of the property in question was taken by the Bank by issuing possession notice on 05.10.2017 under section 13(4) of SARFAESI Act, which was published in the newspaper on 11.10.2017.
It also appears that the borrowers challenged the possession notice before the Hon’ble High Court by filing the Writ-C No. 52129/2017, which was dismissed vide order dated 08.11.2017 on the ground of alternative remedy. Thereafter, the A.D.M. Allahabad issued a notice dated 23.01.2018 pursuant to the order dated 31.01.2017 passed by the District Magistrate under section 14 of the SARFAESI Act directing the appellants to hand over the physical possession on 30.12.2017, otherwise the possession would be taken forcefully on 02.02.2018. The order dated 23.01.2018 passed by the ADM was challenged by the appellants before the Hon’ble High Court by filing the Writ-C No. 4381/2018, which was dismissed vide order dated 02.02.2018 being not maintainable.
It transpires that in the meantime, the sale notice dated 21.11.2017 was issued scheduling the auction to be held on 27.12.2017, whereas the sale notice was published on 20.11.2017 itself. The property was sold for a sum of Rs. 56,10,000/- and the sale certificate was issued on 11.01.2018, which was registered on 20.02.2018 in favour of the respondent no. 2-Auction Purchaser.
The appellants-Borrowers filed the securitization application under section 17 of the SARFAESI Act before the Tribunal below on 23.02.2018 challenging the proceedings from the stage of issuance of notice under section 13(2) of the SARFAESI Act till the stage of publication of the auction sale and consequential proceedings thereof.
The Tribunal below vide impugned order partly allowed the said S.A. holding that the respondent-Bank has successfully proved on the record that the respondent-Bank has rightly classified the loan account as NPA on 06.07.2017 in terms of the RBI guidelines and notices issued under section 13(2) and 13(4) of the SARFAESI Act, 2002 as well as sale notice were duly served upon the appellants as per rule 3, 8(1), 8(2), 8(6) and 9 of the Rules, 2002, but the order passed by the District Magistrate, Allahabad was quashed, observing that the no opportunity of hearing was given to the appellants. Being aggrieved by the said order, the present appeal has been filed by the appellants.
Learned counsel for the appellants has argued only on two points, which are as under:-
8.1 It was contended that the housing loan for Rs. 35.00 lacs was sanctioned on 01.03.2014 and another housing loan was sanctioned for Rs. 21.50 lacs on 15.05.2015 as well as an overdraft limit for Rs. 12.50 lacs was also sanctioned on 27.05.2015. It was further contended that the no amount relating to the over draft limit account could be disbursed as per sanctioned letter dated 27.05.2015 as the account of the housing loan of the appellants was already declared as NPA on 15.07.2015. It was also contended that no statement of account regarding the over draft limit sanctioned on 27.05.2015 has been brought on record either before the Tribunal or before this Appellate Tribunal. As such the disbursement pursuant to the over draft limit is fictitious because once the account was declared as NPA, no disbursement could have been made.
8.2 The next argument was that the property was undervalued and sale has been effected on the distress value at the very first instance which is not permissible under law. It was therefore prayed that the auction proceedings of the Bank may be quashed.
Learned counsel for the respondent-Bank submitted that the issue with regard to disbursement of the amount of over draft limit was never raised by the appellant before the Tribunal below nor any finding has been recorded by the Tribunal below in this regard, therefore, the same cannot be raised at this stage.
The learned counsel for the respondent-Bank further submitted that the contention of the appellant that no amount pertaining to overdraft limit could have been disbursed is not tenable because the first demand notice was withdrawn on account of being regularized by the appellant and thereafter the second demand notice dated 31.07.2017 was issued after declaration of the account as NPA on 06.07.2017, it is therefore, prayed that the appeal may be dismissed with cost.
Learned counsel for the respondent-Auction purchaser submitted that the auction was conducted on 27.12.2017, in which he was declared as highest bidder, the sale was confirmed and the sale certificate was issued in favour of the auction purchaser on 11.01.2018. It is further contended that he has deposited entire sale proceeds in accordance with law and pursuant to that, the sale certificate was issued as well as sale deed was executed by the Bank in favour of the auction purchaser on 20.02.2018, but till date possession of the property has not been handed over by the Bank to the auction-purchaser. The learned counsel also submitted that the Tribunal below has rightly held that there is no defect in the process undertaken by the respondent-Bank towards sale and its confirmation. It is, therefore, prayed that the appeal of the appellant may be dismissed with heavy costs, as he has purchased the property in the year 2017 and has deposited the entire auction amount within the time specified as per law.
Heard the learned counsel for the parties and perused the record.
It is observed from the order impugned as well as the contents of the S.A. that the question of disbursement pursuant to overdraft limit account was not raised by the appellant before the Tribunal below nor any finding in this regard has been given in the order impugned, therefore, the appellant cannot raise the said issue directly at the appellate stage. Therefore, the contention of the appellant in this regard is rejected.
So far as the question with regard to sale of the property at the distress value is concerned, the sale notice was issued on 21.11.2017 scheduling the auction of the property in question on 27.12.2017, which was published in the newspapers on 20.11.2017 fixing the reserve price of Rs. 56.00 lacs, whereas the property was sold for a sum of Rs. 56,10,000/-.
It is to be seen that the valuation report dated 02.11.2017 filed as Annexure No 1 at page no 172 of the paper book shows that the market value of the property in question was assessed to be Rs. 68,71,084/- and the distress sale value Rs. 56.00 lacs, as realizable value of Rs. 62.00 lacs. The said valuer is a registered valuer of the Central Government and also registered under Income Tax Wealth Tax Act for immovable property.
It is not disputed that the in business/commercial transaction, especially in the matter of public auction, the main object is to achieve maximum value of the property, which is sought to be auctioned, so that the entire outstanding dues can be liquidated. If the maximum price is not achieved in the public auction, the basic purpose of the auction would stand defeated because in most of the cases, there is single security. It is further to be noted that the dues to be liquidated is a public money and no asset can be permitted to be auctioned at lower price.
As per settled proposition of law, the respondent-Bank cannot sell the property at the distress value at the very first instance. The value of the property can be reduced gradually in case of not turning of prospective bidder. It is also stated that fetching the market price or better price would be in the interest of the Bank and also would be in the interest of the owner of the property, but in the present case it appears that the Bank has acted in a very casual manner and has sold the property at throwaway price. The Bank ought to have first tried to fetch the maximum value fixing the reserve price at the market value, which was assessed by the valuer of the Bank. The Court is the custodian of the interests of the borrower and its creditors. Hence it is the duty of the Court to see that the price fetched at the auction is an adequate price even though there is no suggestion of irregularity or fraud. Thus the auction sale is not sustainable. Besides it, there are some other irregularities, but those have not been pressed by the appellant.
In view of the above, the order impugned dated 30.05.2019 is partly set-aside with regard to the sale notice dated 21.11.2017 and subsequent steps thereof and the remaining part of the impugned order shall remain intact. Further, the respondent-Bank is directed to return the auction sale amount along with interest @ 8% per annum from the date of deposit till the date of payment within 15 days from the date of this order. In case of non deposit of entire outstanding amount by the appellant-borrower within a month, the respondent-Bank shall be free to proceed for recovery of its dues from the stage of issuance of sale notice.
Accordingly, the appeal is disposed of with no order as to cost.
A copy of this judgment be forwarded to the parties concerned as well as the DRT concerned and be also uploaded on the e-drt portal.