AI Structured Summary
Not yet generated for this judgment
Judgment
Justice P.R. Ramachandra Menon
APPENDIX
PETITIONER''S EXHIBITS:-
EXT.P1
Copy of The Sale Notice Published In Indian Express Daily On 20/03/2012.
EXT.P2
Copy of The Representation Filed By The 2nd Respondent Before The 1st Respondent Dated 19/04/2012.
EXT.P3
Copy of The Encumbrance Certificate.
RESPONDENT''S EXHIBITS & ANNEXURES:-
ANNEXURE R1A
Copy of The Minutes of The Sale Dated 23/04/2012.
ANNEXURE R1B
Copy of The Receipt Dated 03/05/2012 Issued By The Respondent Bank To The Petitioners On Remittance of The Balance Bid Amount.
EXT.R2A
Copy of The Order in O.P. No. 1339/2010 of The Honourable Family Court, Thrissur.
EXT.R2B
Copy of The Encumbrance Certificate No. 6367/2010 Dated 09/09/2010 Showing The Attachment Issued By Angamaly Sub Registry.
EXT.R2C
Copy of The Order in O.P. No. 1336/2010 Dated 20/11/2011 Before The Family Court, Thrissur.
EXT.R2D
Copy of The Order MC. No. 18/2011 of Family Court, Thrissur.
EXT.R2E
Copy of The Fir Registered By The Kalady Police In Crime No. 505/2010 Dated 16/08/2010.
EXT.R2F
Copy of The Attachment Order Dated 03/08/2010 in I.A. No. 5078/2010 in O.P. No. 1336/2010 of The Honourable Family Court, Thrissur.
EXT.R2G
Copy of The Attachment Notice Dated 07/08/2010 Along with Schedule in I.A. No. 5078/2010 in O.P. No. 1336/2010 of The Honourable Family Court, Thrissur.
EXT.R2H
Copy of The Charge Sheet Submitted By Kaladi Police Before The Jfcm Court, Perumbavoor.
Whether the confirmation of sale conducted in tune with the provisions of SARFAESI Act is ''automatic'', once the highest bidder deposits the bid amount, if it is above the ''upset price'' notified? Does the Secured Creditor has any say in granting or refusing the confirmation, particularly when there was only one bidder, who offered something just above the upset price, or can the Secured Creditor refuse to give confirmation, opting to have a resale to attract more bidders and to fetch more value for the property in the best interest of all concerned. This is the core issue involved in this case. One Jiji Paul (who is not a party to this writ petition) had availed two loans from the first respondent Bank creating security interest over his property having and extent of 8.15 Ares (20 cents) in Manjapra Village of Ernakulam District. After creating the mortgage and availing the loan in the year 2002, the repayment was not effected promptly, under which circumstance, the account was declared as ''NPA'' and the Bank proceeded with steps under the SARFAESI Act for causing the property to be sold in public auction. Ext.P1 notification dated 16.3.2012 was published in ''The New Indian Express'' daily dated 20.3.2012 and elsewhere, notifying the sale to be held on 23.4.2012.
Pursuant to Ext.P1 sale notice, the writ petitioners who were living abroad, through their power holder, submitted a tender quoting an amount of Rs. 25,65,000/-(Rupees twenty five lakhs and sixty five thousand) as against the upset price fixed by the Bank at Rs. 25,64,000/-(Rupees twenty five lakhs sixty four thousand). It is seen from the pleadings and proceedings, that it was the ''sole tender'' received, which came to be accepted by the authorised officer, when the petitioners satisfied 25% of the bid amount then and there, as prescribed. As admitted by the petitioners, they were informed by the Bank, that there were some Court attachments as well over the property, with regard to which the petitioners were however not much concerned, as the attachments were of subsequent dates after creating the mortgage in favour of the Bank. After satisfying the remaining portion of the bid amount, they demanded the authorised officer to issue the Sale Certificate, which was not acceded to, stating that the petitioners had to clear the amount due under the Court attachment as well and had to produce certificate lifting the attachment ordered by the Family Court, Thrichur in favour of the second respondent, who is the separated wife of the defaulter/borrower.
According to the petitioners, the power holder was made to sign some blank documents by the Bank, wherein the ''minutes'' of the sale is stated as wrongly recorded and the petitioners have been required to satisfy the amount in respect of the Court attachments, which cannot be a subject matter of sale under the SARFAESI Act. Once the bid amount is satisfied within time, the sale is complete in all respects and Sale Certificate has to be issued; with regard to which no discretion is vested upon any authority, including the Secured Creditor Bank. The scope of confirmation as contemplated under the statute, to be given by the Secured Creditor, is stated as only to ensure that the sale is conducted complying with all the procedural formalities and nothing more. The delay/refusal on the part of the concerned authorities/Bank in confirming the sale and issuing the Sale Certificate is under challenge in this writ petition.
Pursuant to the notice on admission issued by this Court, the respondent Bank has filed a statement giving the factual particulars and the chronology of events. The second respondent, on projecting the grievance as to the liability to be discharged by the defaulter/borrower (who is none other than her husband, against whom the second respondent has obtained a decree of divorce, decree for return of the properties and also an order for maintenance), the Bank had alerted the petitioners about the attachment and necessity to clear the amount due under the attachment. It was accordingly, that such a stipulation was put forth to have the sale conducted and the petitioners very much agreed to the same. But, after conducting the sale, the petitioners took a U-turn and refused to discharge the liability as specifically endorsed in the minutes of the sale. It is not a dispute as to the rights of the Bank under a mortgage, over the attachment procured at the instance of a third party, but a question whether the bidder was informed as to the particular circumstances and whether the bidder has satisfied the requirement/stipulation made by the Bank in this regard. It is also pointed out that the necessity to comply with the requirement as to the payment to be effected in the Family Court, Thrichur causing the attachment to be lifted, as given in Annexure R1(a) minutes, is also discernible from the entry and endorsement made by the Bank receipt dated 03.05.2012 while accepting the balance bid amount, clearly mentioning that acceptance is subject to lifting of attachment as cited in the sale minutes. After having participated in the bid, agreeing to such terms and effecting the payment accordingly, it is no more open for the petitioners/bidders to take a U-turn and contend something else, referring to the priority rights of the Bank over the rights of strangers, is the contention.
The second respondent has also filed a counter affidavit describing the actual facts and figures and the sequence of events, particularly, as to the litigation between her and the defaulter/borrower/(her husband) whose property was caused to be sold in public auction as per Ext.P1 sale notice. It is stated that, since the marital bond had irretrievably broken down, she has been granted a decree of divorce as borne by Ext.R2(a) verdict dated 20.12.2011 in O.P.No.1339/2010 of Family Court, Thrissur. As per Ext.R2(c) order dated the same day in O.P. No. 1336/2010, the Family Court, Thrissur has also ordered return of various amounts by the husband, against whom the decree of divorce has been granted. The Family Court, Thrissur also awarded monthly maintenance to the second respondent and minor children as per Ext.R2(d) order dated 20.09.2011 in M.C. No. 18/2011. The liabilities under different heads as above led to the attachment of the property of the defaulter as ordered by the Family Court, Thrissur, which was entered in the relevant records by the Sub Registry, as borne by Ext. R2(b) Encumbrance Certificate dated 09.09.2010. The second respondent contends that the petitioners are acting hand-in-glove with the borrower, and they are neighbours and thick friends, having much financial dealings in between and further that they are very well aware of the various proceedings pursued by the second respondent including the attachment ordered by the Family Court.
The petitioners have filed a reply affidavit virtually reiterating the contentions in the writ petition and asserting that they are not legally bound to satisfy the liability in respect of the attachment ordered by the Family Court and are entitled to obtain the Sale Certificate, having satisfied the entire bid amount. The second respondent has filed an additional counter affidavit also producing Ext.R2(f) to R2(h), which are copies of the attachment order and the attachment notice along with the schedule forming part of the proceedings before the Family Court, Thrissur and also the charge sheet filed by the Kalady Police before the JFCM, Perumbavoor in respect of the offences including u/s 498 A against the estranged husband of the second respondent. The petitioners have filed an additional reply affidavit as well.
The Learned Counsel for the petitioners submits that the rights and liberties of the Secured Creditor to effect sale of the property over which security interest is created are absolute and it is in no way affected by any encumbrances or attachment. In the instant case, the mortgage was in the year 2002, while the Family Court attachment/decree was obtained only in the year 2010. This being the position, the rights and liberties of the secured creditor are in no way effected by the Court attachment and as a natural consequence, the sale effected by the Bank has to be treated as absolute. The petitioners admittedly having satisfied the entire sale consideration are stated as entitled to obtain the Sale Certificate. The legal position has already been declared by this Court as per the judgment reported in Housing Development Finance and another v. Sub Registry Officer and Others (2011 KHC 851). Reliance is also placed on the verdict rendered by the Apex Court reported in Vannarakkal Kallalathil Sreedharan Vs. Chandramaath Balakrishnan and Another, . The Learned Counsel further submits that, neither the SARFAESI Act nor the Security Interest (Enforcement) Rules, does/do contemplate the writing of any ''minutes'' as in the case of Ext.R1(a) and the same cannot place any hurdle on the way of the petitioners in getting the property conveyed as per a valid Sale Certificate. Reference is also made to the decision reported in Francis Vs. Navodaya Kuries and Loans (P.) Ltd. and Others, . It is pointed out by the Learned Counsel that, Ext.P1 sale notification stands in tact, which does not refer to any such condition as of lifting of the attachment or as to the payments to be effected in respect of such cause. The attachment, if at all any, is only to be ignored, more so, in view of the law declared by this Court reported in Iyyunni v. Anto ( 1994 (1) KLT 583). It is stated that the entire liability of the Bank under the loan stands cleared by virtue of the deposit of the sale price by the petitioners and as such, the Bank is bound to confirm the sale. It is contended that confirmation is ''automatic'', as discernible from the terminology under Rule 8(6), 9(2) and 9(7) of the Security Interest (Enforcement) Rules, more so, when the attachment, by itself, is not an encumbrance.
The Learned Counsel for the respondent Bank submits that the idea and understanding of the petitioners, that confirmation is ''automatic'', is totally alien to the Scheme of the statute. Even if a person turns to be the highest bidder, unless the same is accepted by the Bank, the sale cannot be confirmed. The factum of turning to be the highest bidder, only gives the right for acceptance of the bid, by the authorised officer; which always is subject to confirmation of the secured creditor, as discernible from Rule 9(2). The Learned Counsel submits that, the ''Authorised Officer'' is only an employee of the Bank, who is totally different from the entity, ''Secured Creditor'' and confirmation has to be given by the Secured Creditor, which depends upon various circumstances. The Learned Counsel points out that, before the sale was effected on 23.4.2012, the Bank received Ext.P2 representation dated 19.4.2012(produced along with the reply affidavit dated 20.07.2012 filed by the petitioners in response to the additional counter affidavit filed by the second respondent) preferred by the second respondent, referring to the proceedings before the Family Court and the attachment obtained to her referring to the ''actual market value'' of the property. It was after considering the facts and figures as above, that the petitioners were specifically told about the attachment and the amount due to the second respondent from the defaulter, in turn necessitating the satisfaction of the said amount as well and to have the attachment lifted. This was done prior to the opening of the tender and was agreed by the petitioners as well as borne by Ext.R1(a) minutes of the sale. It is also pointed out that there was only "one tender" (submitted by the petitioners) and after opening, the petitioners satisfied the due amount within time, which was accepted as per Ext.R1(b) receipt. The specific condition to have the attachment lifted was incorporated in Ext.R1(a) minutes and acceptance of the bid amount subject to this condition was specifically endorsed in Ext.R1(b) receipt. Having participated in the bid and satisfied the amount subject to the terms as above, the petitioner cannot be heard to say that no confirmation by the Secured Creditor is necessary to have the sale confirmed.
The Learned Counsel for the Bank submits that there is no dispute with regard to the law declared by this Court and also by the Apex Court as to the scope of attachment by Civil Courts or as to the better priority rights of the Secured Creditor and hence the judgments cited on behalf of the petitioners do not have any application. The issue involved herein is something different, i.e., whether the petitioners, having participated in the bid proceedings (sole tender) subject to the condition let known by the Bank as to the necessity to satisfy the amount covered by the attachment as well, can it be given a ''go-bye'', to compel the Bank to confirm the sale in favour of such person. Reliance is also sought to be placed on the decision rendered by the Division Bench of the Punjab and Haryana High Court as reported in Harminder Singh and Another Vs. Punjab and Sind Bank, ; which is an authority on the point, holding it in favour of the Bank. It is also pointed out that there is no violation of any fundamental right of the petitioners, but for involvement of a contractual right and the condition stipulated by the Bank having not been complied with, the petitioners cannot seek for the reliefs prayed for. It is also asserted with reference to the contents of the counter affidavit that, there is absolutely no basis for the wild allegation raised from the part of the petitioners, that some ''blank papers'' were got signed from the petitioners, at the time of sale, leading to the creation of Ext.R1(a) ''minutes''. It is stated that the ''minutes'' were written then and there, in presence of the ''Authorized Officer'' of the Bank and also the witnesses concerned.
With regard to the sale of the property pursuant to Ext.P1 sale notice, Clause ''7'' says that the "sale is subject to confirmation by the secured creditor" and that the authorised officer reserves rights to reject any tender or to cancel or postpone the sale without assigning any reason thereof. This tender condition is not under challenge and this being the position, unless and until confirmation is given by the Secured Creditor, no right flows from the sale proceedings. It is always open for the Authorised Officer to reject, cancel or postpone the tender without assigning any reason. This being the position, if the Bank has got a grievance that the condition stipulated as to the lifting of the attachment or such other understanding is not given effect to by the bidder, who was specifically told of the same, the Bank is very much at liberty to invoke Clause ''7'' to have the tender cancelled and to go for a fresh tender. Even otherwise, it is settled law that, merely for the reason that a person happens to be the highest/lowest tenderer, as the case may be, it does not give any ''vested right'' to have the tender finalized in the name of such person.
Another aspect to be noted is that, while issuing Ext.P1 tender itself, it was categorically mentioned under Clause ''4'' that, after opening the tenders, the intending bidders may be given an opportunity, at the discretion of the Authorized Officer, to have internal bidding among them, to enhance the offer price. This by itself shows that, it was always open to have insisted for a better sale price, than the reserve price shown in the notification or the amount quoted by the persons concerned in the tender, though above upset price. This is with intent to see that maximum amount is procured in the sale proceedings. This clause is also not under challenge and as such, it is always open for the Authorized Officer or for the Bank to go for a fresh tender, if the stipulation in Ext.R1(a) ''minutes'' and Ext. R1(b) receipt is not given effect to, by invoking ''Clause 7''.
Coming to the rule position, Rule ''8'' deals with the sale of the immovable secured assets; Sub rule (5) of which stipulates the sale of the whole or any part of the property either by:
a. obtaining quotation;
b. inviting tenders from the public;
c. holding public auction or
d. by private treaty.
Sub rule (6) of Rule ''8'' mentions about the necessity to serve ''30'' days notice and if sale is by way of inviting tender from the public or by holding public auction, proper publication in two leading dailies, including one in vernacular, is provided, stipulating:
a. the description of the property, including the details of the encumbrances known;
b. extent of secured debt;
c. the reserve price below which the property may not be sold;
d. time and place of public auction;
e. depositing of earnest money as stipulated;
f. such other conditions as the authorized officer consider it significant.
Issuance of Sale Certificate, Delivery of possession etc, are dealt with under Rule ''9'' which reads as follows:
Time of sale, issues of sale certificate and delivery of possession, etc:-
(1) No sale of immovable property under these rules shall take place before the expiry of thirty days from the date on which the public notice of sale is published in newspapers as referred to in the proviso to sub-rule (6) or notice of sale has been served to the borrower.
(2) The sale shall be confirmed in favour of the purchaser who has offered the highest sale price in his bid or tender or quotation or offer to the authorised officer and shall be subject to confirmation by the secured creditor: Provided that no sale under this rule shall be confirmed, if the amount offered by sale price is less than the reserve price, specified under sub-rule (5) of Rule 9:
Provided further that if the authorised officer fails to obtain a price higher than the reserve price, he may, with the consent of the borrower and the secured creditor effect the sale at such price.
(3) On every sale of immovable property, the purchaser shall immediately pay a deposit of twenty-five per cent of the amount of the sale price, to the authorised officer conducting the sale and in default of such deposit, the property shall forthwith be sold again.
(4) The balance amount of purchase price payable shall be paid by the purchaser to the authorised officer on or before the fifteenth day of confirmation of sale of the immovable property or such extended period as may be agreed upon in writing between the parties.
(5) In default of payment within the period mentioned in sub-rule (4), the deposit shall be forfeited and the property shall be resold and the defaulting purchaser shall forfeit all claim to the property or to any part of the sum for which it may be subsequently sold.
(6) On confirmation of sale by the secured creditor and if the terms of payment have been complied with, the authorised officer exercising the power of sale shall issue a certificate of sale of the immovable property in favour of the purchaser in the form given in Appendix V to these rules.
(7) Where the immovable property sold is subject to any encumbrances, the authorised officer may, if he thinks fit, allow the purchaser to deposit with him the money required to discharge the encumbrances and any interest due thereon together with such additional amount that may be sufficient to meet the contingencies or further cost, expenses and interest as may be determined by him.
(8) On such deposit of money for discharge of the encumbrances, the authorised officer may issue or cause the purchaser to issue notices to the persons interested in or entitled to the money deposited with him and take steps to make the payment accordingly.
(9) The authorised officer shall deliver the property to the purchaser free from encumbrances known to the secured creditor on deposit of money as specified in sub-rule (7) above.
(10) The certificate of sale issued under sub-rule (6) shall specifically mention that whether the purchaser has purchased the immovable secured asset free from any encumbrances known to the secured creditor or not.
From the above, it is evident that Rule 8(6) (c) only mentions about the publication of ''reserve price'' below which the property may not be sold, which in no way can be construed to mean that, once the ''reserve price'' is satisfied by any person who is participating in the bid, it will be the end of it and the Secured Creditor will be bound to confirm the sale. This is more evident from the terminology used under Sub rule (2) of Rule 9, where it is categorically mentioned, that the ''confirmation'' in favour of the purchaser who has offered ''highest sale price'' shall be subject to the confirmation by the Secured Creditor.
The 1st proviso of Sub rule (2) of Rule 9 shows that no sale under the Rule shall be confirmed, if the amount offered by sale price is less than the reserve price specified under Sub rule (5) of Rule 9. (Rule 9 appears to be wrongly referred to in place of ''Rule 8''). The position becomes more clear from Sub rule (6) of Rule 9, which shows that, on confirmation of sale by the Secured Creditor and if the terms of payment have been complied with, the Authorized Officer shall issue the Certificate of Sale in favour of the purchaser. It is only on such event, it becomes necessary to specify in the Sale Certificate issued under Sub rule (6) mentioning whether the purchaser has purchased the immovable secured asset free from any encumbrances known to the Secured Creditor, or not. Reading of the above provisions together gives a clear idea as to the Scheme of the Statute, which even by the farthest stretch of imagination, cannot be read and understood, as to mean that the ''confirmation'' to be given by the Secured Creditor is ''automatic''.
Once the valuation of property fixing the reserve price is done under Rule 8(5) and the same is notified, including by paper publication, pointing out the ''reserve price'' below which the property will not be sold as provided under Rule 8(6), it does not give any vested right to the participating bidder who quotes just ''one rupee above'' the upset price, to have the sale confirmation in his name. The role of the Secured Creditor is not that of a ''scare crow'' or a silent spectator. The practice and procedure prescribed is not to make it an empty formality, in the matter of granting confirmation. It is always open for the Secured Creditor who is in fact, ''duty bound'', to see that maximum sale price is procured in respect of the secured assets, not only for that the liability of the Secured Creditor is satisfied, but also to ensure that the balance generated reaches the hands of the owner of the property, to enable him to meet the other liabilities, if any, or to remain with him as the left over ''asset.'' Merely for the reason that the price quoted by the bidder is just adequate to satisfy the liability of the Secured Creditor, it is not enough to discharge the obligation/duty cast upon the Secured Creditor while giving confirmation of the sale. There has to be proper application of mind with regard to the nature, lie and location of the property, the potential value, proximity to road and commercial/such other establishments, the chance to obtain better price, necessity to have more advertisements to attract more bidders etc. Admittedly, in the instant case, there was only one tender, the one submitted by the petitioners; which by itself takes no competition and the chance to have the best offer. This being the position, this Court declares that the Secured Creditor is not bound to grant confirmation automatically, without examining all these facts and figures and it is always open for the Secured Creditor to reject the offer and to go for a better one, with wider publicity. In the above facts and circumstance, the relief sought for by the petitioners to direct the first respondent Bank to grant Confirmation and to cause issuance of the Sale Certificate pursuant to sale conducted on 23.04.2012 is not liable to be entertained. It is open for the petitioners, either to give effect by the ''understanding'' between the Bank and the petitioners as reflected from Ext.R1(a) ''Minutes'' and R1(b) ''Receipt'' or to get back the amount deposited by them, which is still to be appropriated by the Bank. If the petitioners want to pursue the first course, it shall be let known to the first respondent Bank within ''one week'' from the date of receipt of a copy of this judgment, failing which it will be open for the first respondent Bank to proceed with further steps by re-notifying the sale, giving wider publicity. On such event, the amount deposited by the petitioners shall be returned to the petitioners without any deductions immediately, at any rate within two weeks, if no option is forthcoming as to the 1st course within one week as aforesaid. Writ petition fails and it is dismissed accordingly.