Srinidhi Stone Crushers vs Sujatha

The first petitioner is a proprietorship concern of the second petitioner, engaged in the business of stone crushing since the year 2004. The

petitioners are before this Court assailing the orders of the Debts Recovery Tribunal, (for short ‘DRT’) Bangalore, in S.A.No.671/2012 and the

Debts Recovery Appellate Tribunal at Chennai in R.A.(S.A.)Nos.58/2017 and 59/2017.

The petitioners are borrowers from the first respondent-Bank. The petitioners had availed overdraft facility of Rs.5,00,000/- and FSL facility/term

loan of Rs.30,00,000/-. In that regard, the petitioners had mortgaged property bearing Site No.93, Doddakallasandra, Uttarahalli Hobli, Bangalore

South Taluk, measuring 10192 sq. ft., in favour of the first respondent-Bank.

On default, the Bank initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest

Act, 2002 (for short ‘SARFAESI Act’, 2002). The Bank took possession of the mortgaged property on 28.09.2011. A tender cum auction sale

notice was published by the Bank on 18.09.2012, in two leading newspapers. In terms of the auction notice, the auction was conducted on 31.10.2012

and respondents No.2 and 3 were declared successful bidders, having offered Rs.1.35 crores for the mortgaged property. 25% of the sale price was

remitted by respondents No.2 and 3 on 31.10.2012. The Bank called upon the successful bidders to pay the balance sale consideration within 15 days.

On 13.11.2012, respondents No.2 and 3 tendered a cheque for the balance consideration, along with a covering letter dated 13.11.2012. The first

respondent-Bank issued an acknowledgement dated 15.11.2012, informing respondents No.2 and 3 of having encashed the cheque. However, the

successful bidders were informed that the sale confirmation will be subject to the application filed by the petitioners herein and pending before the

DRT.

The DRT, Bengaluru, dismissed the application filed by the petitioners herein, by order dated 06.02.2013. On 12.02.2013, the Bank executed a

registered sale certificate in favour of respondents No.2 and 3. Respondents No.2 and 3 have produced documents to substantiate their contention that

subsequent to the sale certificate, the khata stood transferred to their name and they have been paying the property tax. A review application which

was filed by the petitioners before the DRT having been rejected, the petitioners approached the DRAT, Chennai, with an appeal which also came to

be dismissed by order dated 12.10.2018. Being aggrieved, the petitioners are before this Court.

Sri Satish M.Doddamani, learned Counsel for the petitioners has raised the following grounds to urge that the impugned orders passed by the DRT

and DRAT are required to be set aside:

i) The valuation of the mortgaged property was secured by the Bank during the first sale notice, on 19.12.2011, but no valuation was made or secured

during the second sale notice.

ii) The sale was conducted on 31.10.2012 and the successful bidders were required to deposit the balance sale consideration on or before 14.11.2012.

When admittedly the cheque issued by respondents No.2 and 3 was encashed on 15.11.2012, the sale could not have been confirmed.

iii) The petitioners had deposited a sum of Rs.12,00,000/- and Rs.8,50,000/- before the DRT and DRAT. The DRT and DRAT should have

considered affording reasonable time to the petitioners to pay the balance outstanding due.

iv) The Bank should have considered disposing of a portion of the property, instead of auctioning the entire property of 10192 sq. ft., to realise only the

outstanding amount that was about Rs.30,00,000/-.

To buttress his contentions, the learned Counsel for the petitioners relies upon a decision of a Division bench of Telangana and Andhra Pradesh

High Court in the case of Pochiraju Industries Ltd., Tamil Nadu Rep. by its Managing Director, Sri P.Sudhakar Vs. Punjab National Bank rep. by its

Managing Director, New Delhi and others, reported in 2018 (2) ALT 128 wherein it was held that it was mandatory for the Bank to secure a fresh

valuation from an approved valuer in terms of Rule 8(5) of The Security Interest (Enforcement) Rules, 2002, (hereinafter referred to as the Rules,

2002) before issuing a fresh sale notice, since the earlier sale notice dated 14.03.2017 came to naught. In a decision of the Debts Recovery Tribunal,

Bengaluru, in the matter of Shri Appannagouda Patil and Anr. Vs. The UCO Bank and Others in S.A.No.81 of 2011, while reiterating the requirement

of obtaining fresh valuation, it was also held that the Bank could have alienated only a portion of the properties and should not have sold the entire

property. The learned Counsel placed reliance on a judgment of the Hon’ble Supreme Court in the case of Ambati Narasayya Vs. M.Subba Rao

and another reported in AIR 1990 SC 119, wherein it was held that the Court could have conveniently demarcated a portion and sold it to recover the

outstanding dues. It was also observed that in all execution proceedings, the Court has to first decide whether it is necessary to bring the entire

attached property to sale or such portion thereof as may seem necessary to satisfy the decree. In Rao Mahmood Ahmed Khan Through Their L.R.

Vs. Shri Ranbir Singh & Ors., reported in AIR 1995 SC 219,5 the Hon’ble Supreme Court had an occasion to consider whether payment of 1/4th

of the amount of auction sale by cheque is a valid tender within the meaning of Rule 285-D of U.P.Zamindari Abolition and Law Reforms Rules,

1952. It was held that if the bid amount which was sought to be paid by cheque was not encashed on the date on which the person was declared

purchaser but on a later date, there was no compliance of Order 21 Rule 84 (C) of the Code of Civil Procedure. The learned Counsel therefore,

submits that the sale made by the respondent-Bank should be declared a nullity.

Per contra, Sri Udaya Holla, learned Senior Counsel appearing for respondents No.2 and 3, the successful bidders, would submit that on facts the

contention of the petitioners may not be correct. It is submitted that as per Section 9 of the General Clauses Act, 1897, the first day when the period is

to commence has to be excluded and when so done, the last date for payment, commencing from 01.11.2012, will end on 15.11.2012. The respondents

had tendered the cheque for balance sale consideration on 13.11.2012 and the same was enchased by the Bank on 15.11.2012. A copy of the

statement of accounts of respondents No.2 and 3 has also been produced to substantiate the fact that there was sufficient bank balance of over Rs.1

crore, as on 13.11.2012.

The learned Senior Counsel appearing for respondents No.2 and 3 would further submit that the conduct of the petitioners should be taken note of,

inasmuch as, the petitioners did not raise objections to the second sale notice. The petitioners were aware of the valuation and the reserve price fixed

by the Bank in the second sale notice. The petitioners never requested or protested the auction of the entire property to recover the amounts overdue.

It was pointed out that the property is an individual site measuring about 10000 sq. ft. and could not be divided to secure the amounts outstanding. It

was also submitted that it is a matter of fact that if the property were to be divided, it would lose its value. It is moreover submitted that the sale

certificate was issued in favour of the respondents on 12.02.2013 and the respondents have put the property to use.

The learned Senior Counsel places reliance on two decisions of the Hon’ble Supreme Court, in the case ofC ommr. of Income Tax, Bombay

South, Bombay Vs. Messrs Ogale Glass Works Ltd., Ogale Wadi, reported in AIR 1954 SC 42 9wherein it was held that a cheque, unless

dishonoured, is payment. The payment takes effect from the delivery of the cheque but is defeated by the happening of the condition i.e., non payment

at maturity. In Jiwanlal Achariya Vs. Rameshwarlal Agarwalla, reported in AIR 1967 SC 1118 it was held that if the cheque is honoured, the date of

the payment of the debt is the date when the cheque was delivered and not the date when it was honoured. For the purpose of Section 20 of the

Indian Limitation Act, 1908 also, the cheque is the payment and the date of the payment is the date of the delivery of the cheque.

We have heard Sri Satish M.Doddamani, learned Counsel for the petitioners, Sri Udaya Holla, learned Senior Counsel for respondents No.2 and 3

and Sri Francis Xavier, learned Counsel for the respondent No.1-Bank.

We may notice on facts that the auction sale was conducted on 31.10.2012. In terms of Sub-Rule (3) of Rule 9 of The Security Interest

(Enforcement) Rules, 2002 (hereinafter referred to as the ‘Rules, 2002’ for short), the purchaser shall immediately i.e., on the same day or not

later than next working day, as the case may be, pay a deposit of twenty five per cent, of the amount of the sale price. The respondents herein have

paid 25% of the sale price on 31.10.2012. Sub-Rule (4) of Rule 9 provides that the balance amount of purchase price payable shall be paid by the

purchaser to the authorized 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 purchaser and the secured creditor, in any case not exceeding three months.

Section 9 of The General Clauses Act, 1897 reads as follows:

Commencement and termination of time. â€

(1) In any [Central Act] or Regulation made after the commencement of this Act, it shall be sufficient, for the purpose of excluding the first in a series

of days or any other period of time, to use the word “fromâ€, and, for the purpose of including the last in a series of days or any other period of

time, to use the word “toâ€​.

(2) This section applies also to all [Central Acts] made after the third day of January, 1868, and to all Regulations made on or after the fourteenth day

of January, 1887.

As rightly contended by the learned Senior Counsel appearing for the respondents No.2 and 3, since the auction sale took place on 31.10.2012, the

period of fifteen days shall commence on 01.11.2012 and end on 15.11.2012. It is also an admitted fact that 14.11.2012 was a holiday. The purchaser

has tendered the cheque on 13.11.2012. There is material to show that sufficient funds were available in the purchasers’ bank account. Tendering

of a cheque towards payment of the balance sale consideration is also one of the modes of payment as held by the Hon’ble Supreme Court, a

creditor may receive a bill or a cheque as a conditional payment of a pre-existing debt i.e., as a payment conditional on the instrument being honoured

on presentation. If the cheque is honoured, the date of payment of the debt is the date when the cheque was delivered and not the date when it was

honoured. On facts, we are of the opinion that the last date for payment of the balance sale consideration was 15.11.2012 and the respondent-Bank

has encashed the cheque on 15.11.2012. Therefore, there is compliance of the Rule.

Even otherwise, we hold that since the purchaser has tendered the cheque for balance sale consideration on 13.11.2012 and 14.11.2012 being a

holiday, the realization of cheque on 15.11.2012, was a legal and valid tender in compliance of Sub-Rule (4) of Rule 9 of Rules, 2002. We are also of

the opinion that even if the cheque was encashed on a subsequent date, after the cheque was presented on 13.11.2012, since Sub-Rule (4) provides

that such ‘period could be extended as may be agreed upon in writing’, the act of presentation of the cheque for realization, well within the

period stipulated, can be treated as an agreement in writing to extend the period. We say so because, it is possible that even when the purchaser

tenders the cheque well within the period, the secured creditor may delay presenting the cheque. If the secured creditor causes the delay, the blame

cannot be shifted on the purchaser. Under such circumstances, the act of presentation of cheque should be construed as an agreement in writing to

extend the period.

On the aspect of auctioning a portion of the mortgaged property, we do not accept the contention of the learned Counsel for the petitioners, since

the petitioners have never requested or raised objections for sale of the entire property. It is only when the mortgagor/borrower makes a request to

sell a portion of the property, does the question of the secured creditor contemplating division and sale of a portion of the property arise. With the

material placed on record, it is not possible to accede to the submissions of the learned Counsel, that the portion of the mortgaged property could have

been sold.

We also hold that there is substance in the argument of the learned Senior Counsel for the respondents that a secured creditor is required to hold

back from taking any further steps only if the borrower tenders the entire amount due to the secured creditor together with all costs, charges and

expenses at any time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer

by way of lease, assignment or sale of the secured assets, as provided in Sub-Section

(8) of Section 13 of SARFAESI Act, 2002. In the present case, the petitioners were not able to tender the entire amount of dues to the respondent-

Bank, as required under Section 13 (8). It is further noticeable that the sale was not confirmed till the disposal of the application before the DRT.

There was ample opportunity for the petitioners to tender the balance outstanding, even before the DRT.

With regard to the contention raised by the learned Counsel for the petitioners that a fresh valuation should have been made by the Bank

immediately prior to the second sale notice, though we are in agreement with the decision of the Division Bench of Telangana and A.P. High Court, in

the case of Pochiraju Industries (supra), on facts, we are guided by the observations of the Apex Court in the case of M/s.Kayjay Industries (P) Ltd.

Vs. M/s.Asnew Drums (P) Ltd. reported in (1974) 2 SCC 21 3wherein it was held that if the Court sales are too frequently adjourned with a view to

obtaining a still higher price it may prove a self-defeating exercise, for industrialists will lose faith in the actual sale taking place and may not care to

travel up to the place of auction being uncertain that the sale would at all go through. The judgment debtor’s plea for postponement in the

expectation of a higher price in the future may strain the credibility of the Court sale itself and may yield diminishing returns as was proved in that very

case. It is also beneficial to take note of the decision of the Apex Court in the case of Valji Khimji And Company Vs. Official Liquidator of Hindustan

Nitro Product (Gujarat) Limited And Others, reported in (2008) 9 SCC 29 9wherein it was held that when there was no allegation of fraud in the

auction conducted by the secured creditor, there is no justification in setting aside the confirmation of sale. In this case too, there is no allegation of

fraud. Moreover, much water has flown under the bridge from the date of sale and this is not a case where the auction could be set aside at this

length of time.

As noted above, the respondent-Bank has executed a registered sale certificate selling the mortgaged property to respondents No.2 and 3, on

12.02.2013 and the purchasers have exercised their rights of ownership including mutation of khata in their name and have been paying the property

tax. It is also stated that they have put the property to beneficial use.

Under these circumstances, we are of the opinion that the writ petition is without merit and is accordingly dismissed.