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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 18.03.2021 passed by the Tribunal below, which are being decided by this common order, as the facts and issues involved in both the cases are same and similar.
Briefly stated facts of the matter as taken from the Appeal Dy. No. 162/2021 filed by the Bank are, that the respondent no. 1-company was granted financial assistance by the appellant-Bank. In order to secure the loan, the borrowers created mortgage over the immovable property by depositing the title deed and hypothecation of the plant and machinery with the Bank, as also the personal guarantee of the respondents no. 2 to 4. The borrowers did not repay the loan in terms of the loan agreement, hence the Bank issued the demand notice dated 23.03.2011 under section 13(2) of the SARFAESI Act for a sum of Rs. 1,20,96,399/- followed by the possession notice dated 18.06.2011 under section 13(4) of the said Act. Since the borrowers did not pay any heed to the demand raised by the Bank, therefore, the Bank issued sale notice for auction of the property on 31.07.2015.
The borrowers challenged the sale notice by filing S.A. No. 536 of 2016 before the Tribunal below, which was dismissed in default vide order dated 22.11.2017. However, the said sale was not materialized for want of bidders. The Bank issued another sale notice fixing the date of auction for 24.01.2018, which was also challenged by the borrowers by filing S.A. No. 40/2018 and the same was dismissed vide order dated 17.12.2018 by the Tribunal below for want of bids.
In the meantime, the Bank obtained the order dated 24.11.2018 from the District Magistrate, Agra under section 14 of the SARFAESI Act, which was served to the borrowers on 10.01.2019 for taking physical possession of the property on 15.01.2019.
The appellant-Bank further issued the auction sale notice for auction of the property on 30.01.2019. The borrowers challenged the proceedings of the Bank including the said sale seeking interim relief for stay of sale and to restrain the bank from taking possession under the order of the DM dated 24.11.2018 by filing the S.A. No. 43 of 2019. The said S.A. was dismissed by the Tribunal below vide order dated 30.01.2020, which was not challenged by the borrowers.
It is averred that the appellant-Bank again issued and published the sale notice on 22.08.2020 scheduling the auction of the property on 22.09.2020. The borrowers challenged the said sale notice including the order dated 24.12.2018 passed by the DM, Agra under section 14 of the SARFAESI Act by filing the present S.A. stating inter-alia that the actions taken by the Bank are contrary to the Rules 6(2), 8(1), 8(2), 8(6) and 9 of the Rules, 2002. Further, alleged that the order dated 24.12.2018 was passed by the DM, Agra without impleading the SA-applicants. However, due to non-proper service of the said notice to the borrowers, another sale notice dated 27.11.2020 was issued by the Bank for auctioning the movable and immovable properties on 23.12.2020 and the properties were sold. After deposit of sale price, the sale certificate was issued on 7.1.2021 and the sale deed has been executed in favour of the respondent no. 6-auction purchaser and physical possession has also been handed over on 22.01.2021.
The SA-applicants filed an amendment application in the pending S.A., which was allowed by the Tribuanl below. The supplementary reply to the amended S.A. was also filed by the Bank.
The Tribunal below vide impugned order allowed the S.A. of the borrowers quashing the auction sale dated 23.12.2020, the subsequent proceedings thereof including the order dated 24.12.2018 passed by the DM and held that the Bank has violated the mandatory provision by not serving the notice under the Rule 6(2) of the Rules, 2002 for movable properties and the DM has passed the order without affording opportunity of hearing to the SA-applicants. Further, the Bank was directed to return the auction money to the auction purchaser and restore the possession of the subject property to the SA-applicants within four weeks from the date of the order. Being aggrieved by the said order, the Regular No. 07/2021 has been preferred by the Bank and the Regular Appeal No. 08/2021 by the auction purchaser.
Learned counsel for the Bank submitted that the valuation report was obtained for both the movable and immovable assets and those were shown in the sale notice dated 27.11.2020 and the separate reserve prices were fixed for movable and immovable assets, but due to typographical error, the provision of Rule 6(2) of the Rules, 2002 could not be mentioned and in place of Rule 8(6), the Rule 8(5) was mentioned, whereas in publication of sale notice, both the provisions of Rules 6(2) and 8(6) were rightly typed. No prejudice has been caused to the borrowers by this clerical mistake and the same is liable to be ignored.
The next contention was that the issue of challenging the order dated 24.12.2018 of the DM was indisputably time barred after receipt of the same on 10.01.2019 and challenging the same in earlier S.A. No. 43/2019. The same was again challenged in the present S.A. after a delay of 572 days without any explanation for such inordinate delay. No relief can be granted on a time barred issue. This aspect was not considered by the Tribuanl below, therefore, the order impugned is not sustainable.
Learned counsel for the auction purchaser, while adopting the arguments of the learned counsel for the Bank, further added that since the order of the DM was challenged in the S.A. No. 43/19, so it was hit by the principle of constructive res-judicata to challenge it again in the present S.A. The Tribuanl below has granted the relief on a time barred issue. Further, no relief was prayed for by the borrowers even in the amended S.A. for setting aside the sale notice dated 27.11.2020 and the auction sale dated 23.12.2020, yet both the actions were set aside. No relief can be granted without any prayer, as laid down by the Hon'ble Supreme Court in the following judgments:-
A. State of Maharashtra & others Vs. Narmada Estates Private Limited & Ors. (2010) 12 SCC 419.
B. Union Public Service Commission and another Vs. Naseer Ud Din Wani and others, (2011) 14 SCC 143.
C. Ranbir Singh Vs. Executive Engineer (2011) 15 SCC 453.
It was further contended that the auction purchaser was a bonafide purchaser of the assets. No fault has been attributed on his part. The sale deed has been executed and the possession has also been handed over to the auction purchaser, therefore, the sale has become final and it cannot be cancelled at this stage. In support of his contention, the learned counsel has relied upon the following judgments passed by the Hon'ble Supreme Court:-
A. Bombay Dying & MFG. Co. Ltd. Vs. Bombay Environmental Action Group, (2006) 3 SCC 434.
B. H.S. Goutham Vs. Rama Murthy and anothers, (2021) 5 SCC 241.
On the contrary, the learned counsel for the borrowers contended that the valuation report was not obtained from expert valuer and the name of the borrower-company in valuation is also not correct nor any date of inspection has been mentioned, therefore, it cannot be treated as proper valuation report. It was further contended that the sale notice for movable property is required to be issued under Rule 6(2) of the Security Interest (Enforcement) Rules, 2002 (in short "the Rules, 2002") and that of for immovable property is required to be issued under Rule 8(6) of the Rules, 2002. Thus, the Bank ought to have issued the separate sale notices and instead, a single sale notice was issued and even in that notice, the Rule 6(2) has not been mentioned. It was not a typographical mistake, but a substantial procedural irregularity, therefore, the Tribuanl below has rightly set aside the sale on the basis of the defective sale notice.
With regard to the prayer clause, it was replied that though the specific date of notice dated 27.11.2020 was not mentioned, but in clause II(a) of para 6, the relief for "quashing the entire consequential actions" was sought in the amended S.A., therefore, no relief was given without any prayer.
Learned counsel has also canvassed that the DM's order dated 24.12.2018 was passed without giving any opportunity of hearing to the borrowers. Even the borrowers were not made party in the application filed by the appellant-Bank, therefore, the Tribuanl below has rightly set aside the DM's order in view of the judgment passed by the Hon'ble High Court, Allahabad in Writ -C No. 38578 of 2018-Kumkum Tentiwal Vs. State of U.P. & Ors., decided on 11.12.2018.
With regard to the limitation aspect, the learned counsel has tried to defend that an application for condonation of delay was filed by the borrowers stating the facts therein. The Tribunal below has observed that the S.A. was maintainable for consideration of the DM's order, therefore, it was maintainable and since both the parties have argued the issue of DM's order on merits, therefore, it would be deemed that the delay was condoned.
Having heard the leaned counsels for the parties and considering the material available on record, it is apparent that the Tribuanl below has set aside the proceedings of the Bank on two grounds, first that the sale notice was not issued as per the requirement of Rule 6(2) of the Rules, 2002 and the second that the DM has not provided any opportunity of hearing to the borrowers.
In so far as the issue of sale notice is concerned, no doubt the provision of issuance of sale notice for movable is there in Rule 6(2) and for immovable property, it is there under Rule 8(6) of the Rules, 2002. No specific proforma has been provided under the appendix attached to the Rules. The description is required to be mentioned in the sale notice as provided under the Rules itself. Thus, generally, the separate sale notices may be issued mentioning the respective provisions. If a combined sale notice is issued, then the specific description of the property, as also the provisions of the rules is required to be mentioned. In the instant case, a combined sale notice has been issued, but the description of the immovable properties and the movable properties (plant and machinery) has separately and distinctly been given. The reserve prices have also been stated separately. Thus, it cannot be said that by issuing a combined sale notice, the Bank has committed any grave irregularity, because it has not caused any prejudice to the borrowers, who were well aware about their properties and the reserve prices fixed for those assets.
Mentioning of the provisions i.e. Rule 8(5) instead of Rules 8(6) and 9(1) instead of Rule 6(2) is apparently a typographical error, which is evident from the fact that the said sale notice was published in the newspapers mentioning the correct provisions of Rules 8(6) and 6(2) of the Rules, 2002 (page No. 318 and 319 of the paper book). Thus, the correct provision was mentioned in the publication of the sale notice for the public at large. The wrong mentioning or non-mentioning of the provision of rule cannot be a ground for quashing the entire process. It can be a minor irregularity, which does not go to the root of the dispute nor it caused any prejudice to the borrowers. Such irregularity is liable to ignored, as laid down by the Hon'ble Supreme Court in Civil Appeal No. 3413 of 2020-M/s L&T Housing Finance Limited Vs. M/s Trishul Developers and Anr., decided on 27.10.2020, wherein it is held as under:-
"19............such action taken thereof cannot be held to be bad in law merely on raising a trivial objection which has no legs to stand unless the person is able to show any substantial prejudice being caused on account of the procedural lapse as prescribed under the Act or the rules framed thereunder.......".
Although the Tribuanl below has not set aside the proceedings on the basis of the valuation report and that finding has not been challenged by filing cross appeal by the borrowers, yet the arguments were advanced before me, therefore, the same is required to be answered. In valuation report dated 2.8.2020, the name of borrower was mentioned as "Maa Vaishno Cold Storage (P) Ltd." instead of the correct name "Maa Vaishno Cold Warehouse (P) Ltd., but there is no dispute on the address and location mentioned in the report. Thus, mere mentioning of partial wrong name of the borrower-company in the valuation report, cannot be treated as defective. This minor clerical mistake is again covered under the principle laid down by the Hon'ble Supreme Court in M/s L&T Housing Finance Limited Vs. M/s Trishul Developers (Supra). The borrowers have not submitted any alternate valuation report so as to substantiate their version that the properties were not properly valued. The assets were sold over and above the reserve prices, therefore, it cannot be said that the properties were sold in any throwaway price.
Coming to the issue of DM's order dated 24.12.2018, admittedly, the borrowers have raised this issue in S.A. No. 43/2019 filed on 8.1.2019 and the interim relief was also sought for restraining the Bank from taking possession in compliance of the DM's order. Thus, it is proved that the DM's order was well within the knowledge of the borrowers, which is further fortified by the fact that in the application dated 6.9.2020 filed for condonation of delay, the borrowers have mentioned at para 2 that the order under section 14 of the SARFAESI Act "was furnished on 10.01.2019". Therefore, the limitation to challenge the order started from 10.01.2019, whereas the issue was again challenged on 6.9.2020 with a delay of 572 days and treating the same as delay, the borrowers have filed an application for condonation of delay. The issue of DM's order being barred by limitation has been categorically raised before the Tribuanl below not only at the time of final arguments, but also at the time of proceedings conducted on 6.1.2021, wherein the learned counsel for the Bank not only raised the issue of maintainability but also submitted that "the order passed by the DM is barred by limitation also".
It is a matter of record that the Tribuanl below vide order dated 17.02.2021 observed that the S.A. filed by the borrowers assailing the order dated 24.12.2018 passed by the D.M. is maintainable, but has not passed any order, as to whether this issue was within limitation neither in the order dated 17.02.2021 nor in the final impugned order dated 18.03.2021, nor the inordinate delay was condoned by any specific order assigning any reason. Thus, it appears that the Tribuanl below has misconstrued the aspect of limitation and maintainability of the issue for adjudication.
As stated above, the DM's order was served on 10.01.2019 and before that the borrowers were having knowledge of the same, which finds place in the S.A. No. 43/2019 filed on 8.01.2019. The interim relief against the said order was also sought. The sale notice was also under challenge. Since the sale was not materialized for want of bid, therefore, the said S.A. became infructuous to the extent of sale notice, but the borrowers were free to agitate the issue with regard to the DM's order in that S.A. itself. However, the S.A. was dismissed on 30.01.2020 for non prosecution and the borrowers have never bothered to get the same restored. No reason whatsoever has been stated in the application for condonation of delay, as to why the DM's order was not pursued in the earlier S.A. and even thereafter, why the said order was not challenged before the issuance of sale notice dated 22.08.2020.
It is true that the DM's order dated 24.12.2018 was not adjudicated on merit in the S.A. No. 43/2019 and only an interim relief was sought. The S.A. was ultimately dismissed in default, therefore, the doctrine of res-judicata is not applicable for adjudication of this issue. Hence, the S.A. was maintainable for adjudication purpose and the Tribunal below has rightly held so, but the maintainability does not ipso-facto bring the issue within limitation nor it be treated as condonation of delay. No issue can be decided without condonation of delay nor any relief can be granted against such issue, which is barred by limitation. The borrowers have failed to explain the inordinate delay of 572 days with a convincing reason much less sufficient one to satisfy this Tribunal for condonation of the same. It appears that the borrowers have waited till the issuance of fresh sale notice and again challenged the DM's order despite service of the same on 10.01.2019 to take a chance that some relief may be granted on this aspect, but the Tribuanl below has erred in deciding this issue on merit, which was barred by limitation and it ought to have been dismissed on the ground of limitation.
The other pertinent aspect of this appeal is that the SA was filed for setting aside the sale notice dated 22.08.2020, which otherwise became infructuous. Thereafter, the amended S.A. was filed, in which the reference of the fresh sale notice dated 27.11.2020 was given in the pleading, but the relief clause was not amended to the extent that the sale notice dated "27.11.2020" and the auction dated "23.12.2020" be set aside. The reference in para 6(ii)(a) was made to set aside the "impugned sale notice published in the newspapers", but without giving any date, it would be read in the context of sale notice dated 22.08.2020 as mentioned in clause 6(1) of the relief clause. No relief can be granted, unless it is specifically prayed for, as laid down by the Hon'ble Supreme Court in State of Maharashtra Vs. Narmada Estates Private Limited, Union Public Service Commission Vs. Naseer Ud Din Wani and Ranbir Singh Vs. Executive Engineer (Supra). Thus, the Tribuanl below has granted the relief beyond the prayer.
It is also worthwhile to mention that the borrowers have never shown any interest for liquidation of outstanding nor were inclined to exercise their right of redemption at the relevant time and allowed the Bank to proceed for auction of the mortgaged/hypothecated properties. Now the sale has become absolute after execution of sale deed and handing over of the possession. Thus, it cannot be disturbed at this belated stage. This view is supported by the judgments passed by the Hon'ble Supreme Court in Civil Appeal No. 000148/2018-Dwarika Prasad Vs. State of Uttar Pradesh and others, decided on 06.03.2018 and in H.S. Goutham Vs. Ram Murthy (Supra). The Tribunal below has not considered the issues and the aspects involved in the S.A. in right perspective, hence the order impugned is not sustainable.
In view of the discussions and observations made hereinabove, both the appeals are allowed and the impugned order dated 18.03.2021 is set aside. No order as to costs.
A copy of this judgment be placed in both the files and forwarded to the parties as well as to the DRT concerned and be also uploaded on the e-DRT portal.