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Judgment
R. S. Kulhari, Chairperson
Both the appeals have been preferred 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 order dated 26.04.2018 passed by the Tribunal below, which are being decided by this common order, as the facts and issues involved in both the cases are the same.
The factual matrix of the case as gathered from the record is that the respondent No. 1-Parasram Phatey had executed the sale deed in favour of the respondent No. 2-Mukesh Prasad for the subject property on 15.09.2002. Thereafter, the respondent No. 2 availed the credit facilities from the appellant-Bank and mortgaged the said property to secure the loan. The respondent No. 1 also stood as guarantor in personal capacity. The borrowers failed to maintain the satisfactory account, therefore, the account was declared as NPA and the Bank filed an application on 14.10.2004 for issuance of the recovery certificate under the Madhya Pradesh Lok Dhan Adhiniyam, 1987 for recovery of Rs. 13,30,666/- (for short "RRC Proceedings").
It appears that after issuance of the recovery certificate, the mortgaged property was attached by the Tehsildar and thereafter, it was auctioned in favour of the respondent No. 4 (Appellant in Appeal Sr. No.266/2019). The proceedings were challenged by the respondent No. 1 before the Hon'ble High Court, Madhya Pradesh by filing writ petition No. 4037/2007 on the ground that he had entered into an agreement with Mukesh Prasad for repurchase of the property on 15.04.2004. The Hon'ble High Court deferred the issuance of sale certificate subject to deposit of Rs. 1.00 lac vide order dated 18.04.2007. However, the respondent no. 1 failed to deposit the same, hence the sale certificate dated 10.09.2007 was issued in favour of the auction purchaser and possession was also handed over later-on.
In the meantime, the Bank has also issued the demand notice under section 13(2) of the SARFAESI Act and obtained the order dated 15.04.2008 from the District Magistrate (DM). The physical possession of the properties was handed over to the auction purchaser on 6.3.2013 and 22.03.2013 respectively through Tehsildar, which was challenged by the borrowers by filing S.A. No. 98/2013 before the DRT.
During the pendency of the S.A., the Hon'ble High Court quashed the RRC proceedings of the Bank vide order dated 08.12.2016. Thereafter, the Tribuanl below vide impugned order in S.A. quashed the DM's order dated 15.04.2008 and directed the auction purchaser to handover the physical possession of the property to the borrowers and further directed that the Bank shall charge the interest only @ 8.45% w.e.f. 01.04.2006 and the dues shall be paid by the borrowers in EMIs of two years starting from the day, the physical possession is handed over to the borrowers. Being aggrieved by the said order, the Regular Appeal No. 86/2018 has been filed by the appellant-Bank and the Appeal Dy. No. 266/2019 by the Auction Purchaser.
Heard the learned counsels for the parties and perused the record.
At the outset, it was brought to the notice of this Tribuanl that after decision on the S.A., the auction purchaser filed a recall/review application No. 867/2019 before the Hon'ble High Court against the dismissal of RRC proceedings with a prayer to afford an opportunity of hearing to him. Thereafter, the Hon'ble High Court restrained the parties from disturbing the possession of the auction purchaser on the subject property. Thus, all the appearing counsels concede that the issue of possession and the sale of property in question are pending consideration before the Hon'ble High Court, in which the status quo order 28.06.2019 has also been passed. Thus, in view of the submission, this Tribuanl is of the view that the issue of possession including the validity of DM's order dated 15.04.2008 as well as the sale of the property cannot be adjudicated in this appeal at this stage in view of the order of the Hon'ble High Court.
Now the question for consideration before this Tribuanl remains about other findings, whereby the Tribunal below has reduced the rate of interest and allowed the borrowers to pay the loan in EMIs within two years. In this regard, the learned counsel for the appellant Bank submits that no such pleading was there in the S.A. to challenge the rate of interest or for restructuring of the loan. Even otherwise, the Tribuanl below has no jurisdiction to pass such order in the SARFAESI proceedings, wherein only the steps taken by the Bank are to be examined, as to whether those are in accordance with the provisions of the statute or not. Therefore, this part of the impugned order is not sustainable.
Learned counsel for the auction purchaser, while supporting the arguments of the learned counsel for the Bank, contended that the auction purchaser is in possession of the property, therefore, if the order impugned is complied with and the S.A.-applicants opt to deposit the amount in accordance with order, then it will adversely affect the rights of the auction purchaser vested in the subject property.
On the other hand, the learned counsel for the borrowers submitted that the Bank has conducted the proceedings in utter violation of the provisions of the statute, therefore, the Tribuanl below has rightly reduced the rate of interest and fixed the EMIs considering the circumstances of the case.
Having heard the learned counsels for the parties and considering the material available on record, it is revealed that the SA-applicants had sought the relief for quashing the DM's order dated 15.04.2008 and the demand notice and the possession notice issued under the SARFAESI Act. The other relief was for cancellation of the auction proceedings, but nowhere it was pleaded that the Bank has charged any excessive interest or they were willing to liquidate the loan in EMIs or ready to redeem the property. Even it was not pleaded that any special cost be awarded under section 19 of the SARFAESI Act because of any apparent lapse on the part of Bank.
However, without there being any pleading, the Tribunal below has directed the Bank to charge the interest @ 8.45% per annum as applicable to the housing loan and also allowed to pay the outstanding in EMIs within two years. This relief was given merely on the basis of the prayer made during the arguments before the Tribunal. As per settled proposition of law, no relief can be granted without any pleading and the prayer, because it causes prejudice to the opposite party, as they have got no opportunity of rebuttal in their defence. Thus, the relief so given is not sustainable on this ground alone.
Secondly, in the application filed under section 17 of the SARFAESI Act, the Presiding Officer, DRT is required to scrutinize and examine, as to whether the steps taken by the Bank were in accordance with the provisions of the section 13 of the Act or not? There is no inherent jurisdiction with the Presiding Officer, DRT in SARFAESAI proceedings to issue direction for restructuring of the loan or to reduce the rate of interest from the contractual rate per the loan agreement. This way also, the Tribuanl below has travelled beyond its jurisdiction. Thus, the order impugned is not sustainable to the extent as stated above.
Accordingly, both the appeals are partly allowed and the impugned order dated 26.04.2018 is set aside to the extent, whereby the Tribuanl below has ordered to charge the specific rate of interest and allowed the SA-applicants to pay the outstanding dues in EMIs of two years. No order as to costs.
A copy of this judgment be forwarded to the parties as well as to the DRT concerned and be also uploaded on the e-DRT portal.