State Bank Of Bikaner & Jaipur vs Naresh Kumar And Ors.

Ranjit Singh, J

The impugned order passed by the Tribunal below on 9th December, 2011 which is under challenge in this appeal, may appear to be an innocuous in nature as seemingly an application filed by respondent No. 2 (respondent No. 4 before the Tribunal below) was for preponing the case. In the same application, prayer of for quashing the sale notice, issued on 18th January, 2011 is also introduced. The Tribunal below while issuing notice on this application obligingly a stayed implementation of its own earlier order passed on 30th November, 2011. Usually such thing is rarely noticed where the tribunal would decide to stay the operation of its earlier order that too without hearing the respondent Bank, which is a necessary party and had been proceeding to effect recovery of its dues, One may have to dig deep to find the reasons in this regard. Leaving this aspect aside, let us first take notice of the facts to see if the impugned order can be sustained.

The appellant Bank had granted cash limit to the extent of Rs. 35 lacs to respondent No. 2, which is sole proprietorship concern of Sudhir Makkar. For this facility, mother of Sudhir Makkar namely Smt. Shanta Rani (now deceased) stood as a guarantor and created an equitable mortgage of her property bearing No. 200/15, Jaccumpura, Gurgaon (Haryana). The equitable mortgage was created by depositing of sale deed dated 3rd March, 1977 on 28 December, 2004 as a collateral security.

As per the appellant Bank, respondent No. 2 deliberately and willingly did not adhere to the financial discipline and committed defaults in the aforesaid loan account and consequently the loan account was classified as NPA on 31st December, 2005. Thereupon, the appellant Bank issued a demand notice dated 24th February, 2006 under Section 13(2) of the Securitization and Reconstruction of Financial Asset and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the SARFAESI Act) calling upon respondent No. 2 and his mother, who at that time was alive, to clear the liability within sixty days. On the date of notice, liability standing was to the extent of Rs. 39,37,765/-. Despite service, respondent No. 2 and his mother failed to comply with the demand. The appellant, therefore, took symbolic possession of the secured asset on 30th October, 2006 This was followed by taking physical possession of the secured asset on 7th March, 2007, Document in this regard has been referred to in this appeal.

Aggrieved against the above action of the Bank, the guarantor Smt. Shanti Rani and her son respondent No. 2 herein filed S.A. No. 12 of 2007 before the Debts Recovery Tribunal-I, Chandigarh seeking restoration of possession of their property. As per the applicants, the appellant Bank had taken illegal possession of the property which, according to them, had not been mortgaged. Respondent No. 2, who was one of the applicants in the S.A. claimed that he acquired the said property vide an unregistered will alleged to have been executed in the year 1992 by his grandmother Smt. Tulsi Bai. The applicants in the S.A. accordingly challenged the validity of the notice under Sections 13(2) and 13(4) of the SARFAESI Act The Tribunal below admitted the S.A. on 20th March, 1997 and issued notice, but declined to grant any ex parte interim relief.

In response to the notice, the Bank appeared before the Tribunal below and filed reply. In its written statement, the Bank claimed that it had not taken possession of the property No. EP-201/15. Jaccumpura, Gurgaon as was alleged in the S.A. To resolve the dispute in this regard, the Tribunal below appointed a Local Commissioner, vide its order dated May 15, 2007, to inspect both the properties and to file his report. The Local Commissioner submitted his report on June 2, 2007 confirming that on the spot there is only one property in possession of respondent No. 2 and board of property No. EP-201, Jaccumpura, Gurgaon was freshly painted and installed Later on, it transpired that respondent No. 2, who had claimed this property on the basis of Will, as averred in the S.A., had already executed a gift deed in favour of his wife Smt. Sunita Makkar on September 29, 2005 which is much prior to the filing of the S.A. in the year 2007, When this fact came to the notice of the appellant Bank, the Bank filed an additional reply and placed on record the gift deed as well Taking into account the facts as aforementioned, the Tribunal below came to form a view that respondent No. 2 had not approached the Tribunal with clean hands and had based his claim by concealing the material facts The Tribunal below accordingly declined the prayer of interim relief. The Tribunal below, however, directed the applicants in the S.A. to implead Smt. Sunita Makkar in whose favour gift deed dated September 29, 2005 had been executed. Respondent No. 2 neither took any steps to implead said Smt. Sunita Makkar nor the Tribunal has bothered to ensure compliance of its direction.

Since there was no interim protection granted to the respondent No. 2 herein, the appellant Bank published sale notice in January, 2008 for putting the secured asset to sale, which was fixed for February 11, 2008. Respondent No. 2 and other applicants in the S.A. then filed Interim Application No. 26 of 2008 before DRT-I, Chandigarh for staying of the auction. The said IA came up for hearing on February 8, 2008. The Tribunal below directed the appellant Bank to receive tenders, open the same and prepare an inventory of the tenders so received, but restrained the Bank from confirming the sale in favour of any successful bidder. The Bank complied with the said directions and came back before the Tribunal on 3rd March, 2008 to report that it had not received any tender in response to the above-said sale notice. The IA filed by respondent No. 2 and others was accordingly disposed of as having been rendered infructuous.

The S.A. filed by the respondent was posted for final arguments, which could not be heard till September 17, 2008. In the meantime, state Bank of Patiala with which respondent No. 2 had also mortgaged the property No. EP-201, Jaccumpura, Gurgaon filed another S.A. against the appellant Bank before the DRT-III, Delhi claiming that the appellant Bank had taken illegal possession of the above mentioned property, which was actually mortgaged with the State Bank of Patiala. This S.A. came for hearing before the Tribunal at Delhi, and the Tribunal disposed of the same without issuing notice to the appellant Bank. Strangely the Tribunal directed the appellant Bank to return possession of the property to the State Bank of Patiala within a period of seven days, failing which the State Bank of Patiala was given liberty to take over the possession of the said property.

This order of the DRT Delhi in fact came as God-sent gift for respondents herein. The State Bank of Patiala took over possession of the property from the appellant Bank respondent No. 2 settled the issue with the State Bank of Patiala and retrieved the possession of the secured asset from the said Bank some time in the year 2009. This arrangement was perfectly to the liking of respondent No. 2 and suited his interest as well. Having seen successful in this manner, he did not pursue his SA No. 12/2007 filed by him along with his mother and abandoned the same. This SA was listed for final hearing on various dates and ultimately was dismissed for non-prosecution on November 2, 2010. In this manner, respondent No. 2 succeeded in effectively stalling the proceedings initiated by the Bank against the property which he had mortgaged with the appellant Bank.

Once this happened, the appellant Bank published a fresh sale notice dated January 18, 2011 in respect of the same asset, which were mortgaged with the appellant Bank. The appellant Bank received six bids including a bid from respondent No. 3, who is now impleaded as proforma respondent. She (respondent No. 3) is impleaded as performa as she unsuccessfully participated in the inter se biding with respondent No. 1.

The record of the case shows that at the time of opening the bids on March 4, 2011, respondent No. 1 along with the wife of respondent No. 2 appeared and insisted on his participation in the bidding process. His request, however, was declined as he had not complied with the conditions entitling him to participate in the bid. In this process, respondent No. 3 was declared as the highest successful bidder having offered a sum of Rs. 24,50,000/- against the reserved price of Rs. 24,30,000/-. Sale was also confirmed in her favour on March 14, 2011. This time, respondent No. 1 has been made to come forward to file another SA No. 52 of 2011 before the DRT-I, Chandigarh on March 16, 2011. Prayer made in this S A was for setting aside the sale in favour of proforma respondent No. 3 on the plea that the applicant in this SA (respondent No. 1) was willing to pay 25% of the higher amount to the final bid amount offered by respondent No. 3. Respondent No. 1 claimed that he is emotionally attachment to the secured asset as this property was sold by his father to Smt. Shanta Rani, who had stood as a guarantor for the loan taken by her son respondent No. 2 from the appellant Bank.

This time again, the Tribunal below did not issue any notice to the Bank and passed an ex parte interim order directing the Bank to consider the offer of respondent No. 1 and to have inter se bidding between the successful bidder respondent No. 3 and respondent No. 1 herein. Why this was done really can not be made out. If not the Bank, at least respondent No. 3 ought to have been put to notice and heard before passing this order as sale had even been confirmed in favour of respondent No. 3. Without putting the Bank to any notice, the appellant Bank was directed to file status report before finalizing any buyer and confirming the sale. The Tribunal below also passed the order for the parties to maintain status quo till May 18, 2011. It seems that respondents have been shown extraordinary indulgence by the Tribunal below.

The appellant Bank, for some reasons, could not conduct inter se bidding on October 14, 2011 and prayed for some more time to comply with the order dated March 16, 2011 passed by the Tribunal. On this date, borrower respondent No. 2 was present alongwith Counsel and requested the Tribunal to allow him to participate in the inter se bidding to be conducted by the appellant Bank. Oral request of respondent No. 2 was instantly accepted by the Tribunal as is seen from the order dated October 14, 2011. Respondent No. 2 had the capacity to participate in interim biding but was not ready to discharge the loan liability.

Complying with these directions, the appellant Bank issued notice dated October 15, 2011 to the respondents herein informing that inter se bidding shall be conducted on October 20, 2011. Immediately on October 17, 2011 respondent No. 2, through his wife sent a photocopy of the application for One Time Settlement offering to settle the loan account for a lump sum amount of Rs. 34,50,000/- against the outstanding amount of Rs. 60,77,106/- plus interest accruing thereon. The said application was, however, considered and rejected on November 24, 2011. In the mean while, inter se bidding was held on October 20, 2011 where respondent Nos. 1 and 3 had participated. Respondent No. 2 did not turn up to participate in the inter se bidding despite having obtained permission to participate in the inter se bidding.

The inter se bidding was accordingly conducted between respondent Nos. 1 and 3. Respondent No. 1 was declared as a successful bidder as he offered a sum of Rs. 38,10,000/-. Respondent No. 1, thereafter paid 25% of the bid amount as an earnest money and the balance amount was required to be deposited within 15 days. Instead of depositing the balance amount, the respondent No. 1 wrote a letter raising objections with respect to Clauses 1 and 2 of the notice of inter se bidding alleging that the same is illegal and sought extension of time to deposit balance 75% of the bid amount. This apparently was a subtle move to withdraw after having interfered in the process of auction and having successed in frustrating the same as well as the recovery.

The appellant Bank replied to the said communication The Bank also filed status report in regard to the inter se bidding on 30th November, 2011. On this date of hearing, respondent Nos. 2 and 3 were present. After perusing the status report, the Tribunal below directed that upon confirmation of the sale, respondent No. 1 would deposit balance 75% of the bid amount and the appellant would then issue sale certificate in his favour. The sale was confirmed on 8th December, 2011.

As soon as the letter of confirmation of sale was issued in favour of respondent No. 1, respondent Nos. 2 and 4 filed an application under Order 39 Rules 1 and 2 read with Section 151 of the Code of Civil Procedure for preponing of the S.A. and for quashing sale notice dated January 18, 2011 and setting aside the inter se bidding dated October 20, 2011. Mind you this move is made after ousting respondent No. 3 who had otherwise been the successful bidder. Besides this, prayer was made to issue directions to the appellant to reconsider OTS proposal dated October 17, 2011. It was alleged in the said IA that the guarantor/owner of the secured asset had died prior to the issuance of sale notice and no notice was issued to the legal representatives of Smt. Shanti Rani. Before entertaining such a prayer, the Tribunal failed to take note that respondent No. 2 had throughout been appearing in the proceedings before the DRT and had sought permission to participation in the inter se bidding as well. He is the legal heir of the guarantor. He ought to have disclosed this fact himself. In this background, there was hardly any necessity to serve any notice on the L.Rs. of Smt. Shanta Rani, even if she had died as interest of the L.Rs. was well defended by respondent No. 2 The Tribunal below was also required to consider if earlier the fact of death was pointed out before the Tribunal or to the appellant This fact appears to have been purposely withheld by respondent No. 1 and has made use of this fact to move to this application with an aim to effectively frustrate the sale and the recovery, Unfortunate would it be to notice that the tribunal failed to apply itself is the case properly and has played into the hands of the respondent borrowers, etc. In the bargain, respondent No. 2 has been able to succeed in his illegal designs to bring the recovery process to a complete halt.

I.A. No. 1002 of 2011 filed by respondent No. 2 came up for hearing on 9.12.2011, It was justifiably pleaded by the Bank that this application was filed in collusion with respondent No. 1, who had been successful in the inter se bid. This time again the Tribunal below neither issued any notice in this IA nor made the respondent to serve copy thereof in advance on the appellant Bank. This application was apparently filed with an aim to avoid payment of 75% of the bid amount now required to be deposited as per the directions issued by the Tribunal below on 30.11.2011. It is on record that respondent No. 1 is the real cousin brother of respondent No. 2. The Tribunal below appears to have given a blind eye to this fact available on record. The entire game therefore was clear that respondent No. 1 and respondent No. 2 were acting in connivance with each other. The Tribunal below without any justification choose to stay the operation of own order November 30, 2011 and that too ex parte without giving any notice and hearing to the appellant Bank which had interest in the property and was in the process of recovery of the loan amount. Aggrieved against this order, the present appeal is filed.

Notice in this appeal was issued and operation of the impugned order so far as it related to the stay of implementation of the order dated November 30, 2011 was held in abeyance. Counsel for the appellant would point out that respondent No. 1 declined to make payment against which the appellant Bank approached the Tribunal. The Tribunal below declined to interfere holding that this Tribunal had stayed operation of the order dated November 30, 2011. No proceedings thereafter have been held before the Tribunal below ever since then, respondent Nos. 1 and 2 are now just seeking adjournments in the S.A. which is pending before the Tribunal below.

It is noticed that another attempt was made by respondent No. 2 to stall recovery of the amount by the Bank while the present appeal was pending before this Tribunal. The Counsel appearing for respondent No. 2 made a statement before this Tribunal on March 13, 2013 that he has given a fresh proposal for settlement of the matter in a sum of Rs. 43 lacs. Counsel for the appellant Bank, at that stage, pointed out that the amount due against respondent No. 2, was more than one crore. This Tribunal, thereafter, directed respondent No. 2 to deposit a sum of Rs. 25 lacs to show his bona fide in case he really was interested in the settlement. This was also ordered without prejudice to his rights. Despite that respondent No. 2 failed to deposit any amount. It is, thus, clear that at each and every stage respondent No. 2 has made an illegal attempt to interfere to stall the process of recovery of the amount by the Bank. He has been successful in his illegal designs because the Tribunal below apparently dealt with him with kids gloves.

I have perused the complete set of orders passed in this case. The entire history of the case and its progress has been noticed above. First attempt on the part of the respondent No. 2 was to mislead the tribunal below by stating that the property mortgaged was different. The appellant Bank did well in finding out the actual position and could point out before the Tribunal below that he had already gifted away this property to his wife. From this, the Tribunal below should have realized the real intention on the part of the respondent No. 2 or at least should have made out when report from the Local Commissioner was received. It was clear sufficiently that the respondent No. 2 was making every attempt to mislead the Tribunal. Due to some undisclosed reasons, the Tribunal conveniently allowed itself to be mislead. The Tribunal apparently has always dealt with respondent No. 2 with some kindness. Why it did so? It can not be made out. To an extent, interference by State Bank of Patiala also acted to save respondent No. 2. The Tribunal at Delhi ought to have issued notice to the present appellant Bank before issuing any direction to handover possession of the secured asset to the State Bank of Patiala.

The appellant Bank apparently has behaved in a proper and dignified manner by handing over possession to the State Bank of Patiala. The respondent No. 2 took advantage of this situation and settled with the State Bank of Patiala to retrieve the possession of the property which ought to have gone to the appellant Bank from whom the possession was taken. The appellant Bank was left to fend for itself and had to start the process afresh. When the fresh process was about to see some finality towards the recovery of the amount, the kindness of the Tribunal came to check the recovery process. The result is that only amount received by the Bank so far is 25% of the auction amount which was paid by respondent No. 1 after inter se bidding.

When the case came up for hearing before this Tribunal on 22nd May, 2014, the Counsel appearing on behalf of respondent No. 1 was given a clear option to choose either to pay 75% of the remaining bid amount and take the property being the highest bidder or to opt out and leave the property in case he is having some complaint about the title. Counsel for respondent No. 1 did state that the respondent No. 1 would be interested in taking the property as he had emotional attachment with the same but only if it is given to him with clear title. Respondent No. 1 ought to have examined all these aspects before opting to participate in inter se bidding. The respondent No. 1 can very well opt out if he is of the view that title is not clear. The Counsel for the respondent No. 1 then prayed for time to seek instructions. Accordingly, the case was kept for today. Today, the Counsel has appeared in the morning at 10.30 a.m. and has stated before me that the respondent No. 1 is only interest in the property in case clear title is given to him and otherwise, he is not interested in taking this property. This submission is noticed. At that stage, another Counsel Mr. M.K. Chaudhary had appeared on behalf of respondent No. 2, who had not put in appearance on the previous day, i.e., on 22nd May, 2014. Mr. M.K. Chaudhary stated that he would obtain no objection from all the legal heirs of Smt. Shanta Rani. This submissions is also noticed. Counsel for respondent No. 1 has not offered any response. The Counsel were told to appear when the case is taken up at its turn. When the case is called at its turn, none appears for the respondent Nos. 1 and 2, To be fair to these Counsels, the transactions as these had taken place are noticed above.

I have considered the submissions made before me. I have very minutely perused the record. The first OA filed by respondent No. 2 along with his mother was abandoned by him once he was able to take possession of the property from the State Bank of Patiala. This necessitated the appellant Bank to initiate fresh action under the SARFAESI Act. This action was put to challenge by respondent No. 1, who is none other than the real cousin brother of respondent No. 2. He was able to successfully stall the proceedings for recovery by the Bank. The Tribunal below in this case has been passing various orders without affording opportunity of hearing to the appellant Bank. While auction of the property had been completed, respondent No. 1 herein moved an application through Counsel, Mr. Diwan Sharma, and the Tribunal passed the order for conducting inter se bidding. No doubt, respondent No. 1 had made an offer which was more than the bid amount, but it ought to be realized that this was a response once the bid was finalized. It is easy for any one to stand up and make a bid more than whatever may have been offered by the highest bidder. The appellant Bank still complied with the order passed by the Tribunal and permitted inter se bidding. Strangely, the Tribunal below even accepted the oral request made on behalf of respondent No. 2 and allowed him to participate in the inter se bidding vide its order dated 14th October, 2011. It is a different matter that even after obtaining this order, respondent No. 2 did not participate in the inter se bidding. The respondent No. 1 succeeded as he had given the highest bid for the property. He had deposited 25% of the bid amount Having deposited this amount, one excuse after another is being made for not making payment of the balance amount. The impugned orders passed by the Tribunal has been of help to the respondents in not only stalling the recovery but has resulted in bringing the whole process to a naught.

In an application filed for preponing the case and for quashing the sale notice that too once when both respondent Nos. 1 and 2 had participated in the bid as permitted by the Tribunal below, was an action, which would sound highly unjustified and uncharitable. The Tribunal below at least should have given a thought to conduct of respondents before staying operation of its own order just after a few days of having passed it. What was the need to show this indulgence? The very purpose of recovery of dues for which these Acts have been enacted stands frustrated. If the Tribunal below had not been so kind to the respondents, the appellant Bank would have realized the loan amount. The things as these stand now is that the respondent No. 1 is wanting to withdraw as this can be made out from the statement made by the Counsel for respondent No. 1 who appeared in the morning. Respondent No. 1, in any event is left with no right to claim on the basis of his bid as he has failed to deposit 75% of the balance amount of bid within stipulated period. It is high time to bring an end to his tactics in helping respondent No. 2. In any case by no stretch of imagination the impugned order operation of which has already been stayed, can be sustained. The impugned order therefore, must go. The Bank must be given freedom to proceed with the property in accordance with law. The Tribunal below has virtually interfered in the process at every stage. The appellant Bank need to be liberated from the shackles. It would be at liberty to deal with 25% of bid amount deposited by respondent No. 1 in accordance with law. The appellant Bank may put the property in question to fresh auction but in accordance with law. It is made clear that this time respondent Nos. 1 and 2 would not be permitted to participate in auction or in the auction process. The Tribunal would restrain itself from entertaining any application by respondent Nos. 1 and 2 or any one else. It any application is entertained or stay is granted, then it shall be intimated to the Registrar of this Tribunal for information. The appeal is accordingly allowed.

Since limited relief claimed in the S.A. filed by respondent No. 1 was to seek permission to participate in the auction, which is now render meaningless and infructuous the SA itself seems to have been rendered infructuous. The Tribunal below would keep this aspect in view while dealing with the S.A. henceforth.