State Bank Of India vs Ravi Kant And Ors

P.K. Bhasin, J

State Bank of India is challenging the order dated 25th January, 2016 passed by the Debts Recovery Tribunal-I, Chandigarh (DRT) in Securitisation Application No. 240/2013(3A) whereby the DRT allowed the said S.A. filed by three persons under Section 17(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). That S.A. was filed by three persons, namely, Ms. Sharmila, Mr. Sunil Kumar Rana and Mr. Anil Singh Rana, who are respondent Nos. 1 to 3 in both these appeals, to save their properties from being sold in public auction by the State Bank of India in exercise of its rights under SARFAESI Act to recover crores of rupees from its borrower, Society for Education and Research, which is a Society. This Society, in which the said Sunil Kumar Rana, Anil Singh Rana and husband of Sharmila were office bearers, had availed of financial facilities of crores of rupees from the appellant Bank and re-payment whereof was secured by the said three security applicants, namely, Sharmila, Sunil Kumar Rana and Anil Singh Rana by way of mortgage of their properties in Sonepat and Karnal (Haryana). The borrower Society had also mortgaged one of its properties. The borrower Society failed to repay the Bank's money as per the terms of loan and consequently its account was declared Non-Performing Asset. Thereafter the Bank initiated steps to auction the mortgaged assets including the properties mortgaged by the three security applicant-guarantors. The three guarantors felt that the Bank should have first attempted to recover its dues by selling the property mortgaged by the borrower Society value of which was sufficient to liquidate the Bank's entire dues. So they approached the DRT which, however, declined any interim relief to them. The Bank then sold the property of guarantor Sharmila only in Sonepat to respondent Ravi Kant but the Bank could not sell the properties of the borrower Society and other two guarantors.

However, during the pendency of the S.A. the DRT which had earlier declined any interim relief to the security applicants-guarantors as well as the borrower Society stayed further proceedings in respect of auctioned house of Sharmila on an application moved by her in the S.A. As a result of that order dated 15th July, 2015 physical possession of Sharmila's house could not be taken over by the Bank and delivered to the auction purchaser. Finally, the DRT disposed of the S.A. vide impugned order dated 25th January, 2016 directing the Bank to first proceed against the assets of the borrower Society.

I am re-producing below the impugned order dated 25th January, 2016 since it gives the background facts. My special attention was drawn from both sides to the highlighted lines. That order reads as under:

"1. The applicants, who are guarantors, have filed this application under Section 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (The SARFAESI Act, 2002) challenging the action taken by the respondent Bank under the SARFAESI Act.

Briefly stated facts are that the applicants had stood as guarantor for the financial limits availed by respondent No. 3, 'Society for Education and Research'. During the course of time, there started infighting between the members of the Society. It has been stated that the applicants were interacting with the Bank individually as well as on behalf of the society. But suddenly the Bank without issuance of any demand notice against the co-applicant and others, straightaway carried out publication of demand notice in newspaper dated 28.7.2011 thereby enforcing right against the land of the society as well as alleged mortgage over collateral security being residential houses of applicants (Exh. A2). In order to settle the account, the Society proposed for One Time Settlements (OTS) to which Bank replied vide letter dated 8.6.2012 accepting the OTS for a sum of Rs. 5,63,01,993/- as on 31.5.2013. Thereafter the Society vide letter dated 30.7.2012 asked for the break up amount of OTS stating that they had already deposited Rs. 1,12,37,325/- (Exhs. A4 and A5). It has also been stated that as per letter dated 30.7.2012, the amount outstanding was Rs. 425 lakh as per OTS Settlement therefore, they sent draft of Rs. 5.50 lakh along with letter dated 30.7.2012, (Exh. A6). Thereafter, a further amount was paid by the society and a such a total sum of Rs. 2,14,65,563 stood deposited with the Bank after date of NPA as on 5.8.2013. It has been stated that despite above payments made to the Bank, the Bank declared the amount NPA and issued notice dated 16.6.2011 claiming a sum of Rs. 5,95,88,235/- as on 28.2.2011 and the OTS fell through due to the fact that certain break ups which are called for by the Society were not given by the Bank.

Thereafter, the Bank without issuance of any possession notice prepared inventory and Panchnama of immovable property of the society and issued letter to the applicants dated 24.9.2013 stating that symbolic possession of mortgage assets of the society had been taken over on 9.9.2013 (Exh. A9). Due to infighting between members, college was not being run properly, a general body meeting dated 13.10.2013 was called and it was decided to hand over charge of the institution to the Bank so as to reduce liability (Exh. A11). Despite that the management of the society has not taken any steps for handing over possession of the college to the Bank and applicants apprehend that the internal differences inter se the management, the interest of the students would be jeopardized.

The Bank maliciously and without issuing possession notice proceeded under Section 14 of the Act and approached the District Magistrate by letter dated 12.2.2013 for taking over physical possession of the properties situated at Kamal and Sonepat (Exh. A12), Thereafter the Bank with its recovery agent came to the residential house of the applicant on 24.10.2013 and demanded physical possession of the house. The applicants under the given circumstances were forced to issue cheques of Rs. 10 lakh to the officials of Bank who threatened that in case a further sum of Rs. 1.5 crore is not arranged and paid within 10 days the physical possession of residential house would be taken over and also possession notice dated 24.10.2013 upon the property (Exh. A13). The applicants have stated that order under Section 14 from the District Magistrate has been obtained by concealing the facts that no possession notice was issued and no proceedings under Section 13(4) were initiated.

The applicants have thus challenged the action of the Bank on the ground that no demand notice was ever served upon the applicants which seized their rights under Section 13(3A), no possession notice has been served or affixed on the conspicuous place of the property and no publication as per Rule 8(2) has been done by the Bank. The applicants have also objected to declaring the amount being NPA in Notice under Section 13(2) and for approaching the District Magistrate under Section 14 by concealing the facts and have thus prayed that the action initialed by the Bank be set aside and SA be allowed.

The respondent Bank in its Reply has stated that the Application filed by the applicants is false, frivolous and fictitious which is an abuse of process of law. It has been stated that the respondent Bank has already preferred an application under Section 19 of RDDB & FI Act against the applicants as well as respondent No. 3 and other guarantors in loan account of respondent No. 3 to the tune of Rs. 6,47,41,046/-.

It has been stated that the Bank has meticulously followed provisions of SARFAESI Act while serving notice under Section 13(2) dated 16.6.2011 as well as while taking symbolic possession of mortgaged properties. The notice was duly sent to applicants as well as other guarantors and principal borrower both by way of Registered cover on 18.6.2011 as per postal receipt on record. Moreover, the applicants themselves have placed on record a copy of publication made in the local daily (Exhs. R1 and R2). It has been stated that after issuance of notice under Section 13(2), reply by defaulters was sent through Advocate (Exh. R3). On their request One Time Settlement proposal was accepted but the defaulters failed miserably to comply with the terms and conditions of the proposal as the Society did not pay the instalments by 30.9.2013. Therefore, the Bank was left with no alternative but to proceed further under Section 13(4) of the Act. The respondent Bank after obtaining permission from District Magistrate proceeded for taking possession of the demised properties. The Bank has also denied the charges that the notice was neither affixed nor published as per provisions of the Act. In fact the Bank complied with all the provisions as is appeared from the Exh. R6 to Exh. R9 which are photographs of affixation of notice and publication thereof in the newspapers.

The Bank has further stated that it has initiated action against the defaulters/borrowers/guarantors strictly as per the law and that the applicants have failed to prove any illegality or irregularity on the part of Bank. Therefore, the S.A. be dismissed.

The applicants have filed rejoinder to the reply filed by the respondent Bank denying the pendency of the OA for want of knowledge. It has been reiterated that publication of demand notice does not contain full description of properties. Further, demand notice mentioned in the publication Annexure A2 dated 28.7.2011 is dated 28.2.2011 whereas the Bank has annexed on record the demand notice dated 16.6.2011 and no such notice dated 28.2.2011 has been placed on record. No possession Notice under Section 13(4) was ever served or delivered upon applicant Nos. 2 and 3 and there is no averment in this regard too from the Bank whereas the Bank straightaway allegedly published the possession notice (Exhs. RB and R9). Moreover, the District Magistrate was approached by concealing the fact of OTS between the parties, which is illegal. It is settled preposition in law that till the OTS proposal is as such not withdrawn or cancelled the same would continue to operate and subsist. Hence, Bank had no right to proceed against the properties.

The Auction purchaser has also filed Reply to the S.A. stating that he had participated in the auction of the property which was held on 18.7.2014 and had purchased the property for an amount of Rs. 82.88 lakh for which 25% of bid amount was deposited on 18.7.2014 and balance sale consideration on certificate has also been issued in his favour. It has been further stated that nowhere in the sale notice it was mentioned that SA is pending or any SARFAESI proceedings, the sale deed was got executed and registered. The auction purchaser has further stated that the objection of the appellants that the property of guarantor cannot be sold or the properly of the principal borrower be sold first has no ground. It is the option of the secured creditor to proceed against any of the secured assets to recover its dues. Since the liability of the guarantor is co-extensive, the objection that property of guarantor cannot be sold does not hold ground. He has thus prayed that since he has paid entire consideration, the objection that property of guarantor cannot be sold does not hold ground. He has thus prayed that since he has paid entire consideration amount within the time frame as per law, the sale stands confirmed in his favour and sale deed executed and registered, the SA filed be dismissed.

Applicants have marked Exh. A1 to Exh. A14 on their side and the respondent Bank has marked Exhs. R1 to R16 on its side.

The Counsel for the applicant No. 1 has argued that the society which is respondent No. 3 had raised a loan in which the applicant is a guarantor. Being a professor in the said institution, the applicant was under influence of the director who was also his mentor and guide and in pure values of the society signed the documents as a guarantor whereby he was shown a rosy picture to become a Vice President. Admittedly the society took a loan for imparting education to 500 under-graduate and postgraduate engineering students. There arose some dispute between the members, in the larger interest of the society as the applicant himself had got trapped after mortgaging his right over the residential property which is only residential house. The respondent Bank who was approached by the society for settlement and on failure to adhere to the terms of the settlement by the society, proceeded straightaway against the residential property of the applicants, instead of taking same action against the commercial property of the society which could have been sufficient to discharge the entire liability of the respondent Bank. Not only this the applicant when came to know that the applicant Nos. 2 and 3 who are the treasurer and office bearer of the society particularly Chairman of the Society/President of the society name Dr. Shakti Singh has approached the respondent Bank for settlement giving and also offered all necessary help to the respondent Bank for its recovery, the respondent Bank fraudulently and mercilessly approached the District Magistrate for taking physical possession of the property of the applicants without disclosing the fact that the society has backed out from the settlement proposal. It is admitted fact that there was NPA on 16.6.2011 whereby an amount of Rs. 5.96 crores approx, was shown to be due as on 28.2.2011 for which the society kept on paying to reduce their liability and during the proceedings has substantially paid an amount of Rs. 2,14,00,563/- but the Bank issued a possession notice against the residential property of the applicant only and proceeded effectively against the same without touching the property of applicant Nos. 2 and 3 and further showing the land of the society as an agriculture land. The grievance of the applicant who has also filed intervening applications was to prove that she was trapped in such a way that the Bank and the so called residents and members have been successful in getting her property of the society and to sell the same. The Bank did not proceed against the main property and only this small house sold at a throw away price during the proceedings to the sole bidder for an amount for Rs. 82.88 lacs whereas valuation of the property was almost Rs. 2.00 crores. The applicants were even ready to compensate the auction purchaser and prayed that their house should be saved as main properties of the societies in the shape of large campus including all infrastructures and duly mortgaged with the respondent hank, is still untouched.

Applicant also pointed out other irregularities as the Rule 8(6) has not been followed, no notice of sale has been served to the applicants and that no laid down procedure/guidelines have been followed by the Bank as per their pleadings.

On the other side, the Counsel or the respondent Bank has argued that since the account of the society was declared NPA, the Bank had no other alternative to recover the dues and following its dues procedure the Bank had issued a notice under Section 13(2) on 16.6.2011 and subsequently possession notice issued on 29.10.2013. Not only this the respondent Bank has duly followed the procedure as is clear from Ann. R/1, Ann. R/2 and Ann. R/3, that the notices were duly served, published and affixed.

In fact Counsel for the respondent Bank has tried to prove that the society which has approached the Bank for one-time settlement, failed to comply with the terms and conditions and ultimately being in default the respondent Bank has rightly proceeded against all the properties including the properties of the societies but could not be successful in taking possession of the property or to sell them. The Counsel for the Bank further argued that applicant cannot take advantage of their own wrongs by not sticking to the repayment schedule and thereafter disobeying terms and conditions of one time settlement as per Ann. A/8 by which the applicants were to deposit 1/4th of the settlement amount by 30.9.2013 and to obtain consent decree in O.A. filed by the respondent Bank for issuance of the recovery certificate. The respondent also taken the preliminary objection of non-joinder of the necessary parties as the society has not approached this Tribunal for any such action since the society who entered into a settlement in terms of the policy of the respondent Bank, did not deposit agreed instalments and by virtue of their own conduct the action under Section 13(4) was initiated and the guarantor being defaulters is equally liable for the entire dues as the respondent Bank has argued that the applicant who stood guarantor to the credit facilities availed by the respondent No. 3 society by way of term loan and other facilities in the years 2008 and 2009 to the tune of Rs. 2.30 crores and Rs. 4.40 crores, herself has mortgaged property having agreed to be jointly and severely liable for repayment of the outstanding amount and therefore when the applicant has failed to point out any irregularities on the part of the respondent Bank in initiating of SARFAESI proceedings except for raising the issue of some inter se disputes among the members and office hearers, they cannot now ask for any relief as the applicants as well as the other guarantors who were so called trustee painted a rosy picture of the society for availing the credit facilities from the respondent Bank. Since the proceedings were in the knowledge of the applicants as the respondent No. 3 society was duly being informed and was reciprocating the notice as well as the correspondence, now the applicants cannot take benefit of any such inter se dispute which is otherwise not in the knowledge of the respondent Bank. So far as the procedure which has to be followed by the Bank, the Bank has initiated and completed the process as per rules and there is no violation for the recovery of its dues from the duly charged/mortgaged property, hence this S.A. should have to be dismissed which is false frivolous and fictitious and abuse of the process of the law. The respondent hank has also annexed Ann-R/1 to Ann. R/9 to prove that procedure followed by the Bank as the notices were duly served through registered post for which the receipts along with publication with photographs, affixation has been placed on record.

On the other hand side Counsel for the auction purchaser stated that there was auction of the property by giving a sale notice dated 13.6.2014 for which auction held on 18.7.2014 for reserve price of Rs. 82.78 lacs. The respondent No. 4 in response to public notice participated in the auction and made a deposit in terms of the conditions and purchased the property for an amount of Rs. 82.88 lacs. Counsel for the auction purchaser further stated that the auction purchaser deposited entire amount within 15 days i.e. 28.8.2014, the sale has been confirmed on 2.1.2014, sale certificate stand issued and the sale deed has also been executed on 5.1.2013 in his favour. The Counsel for the Auction purchaser further argued that to purchase this property wife of the respondent No. 4 had sold her own residential house and after the sale of the same had get the sale deed registered for the name of her husband for the properly purchased in auction form the respondent Bank and prayed that since the entire sale proceed has been deposited and stated that the auction purchaser deposited entire amount within 15 days i.e. 28.8.2014, the sale has been deposited and the applicant being a guarantor cannot take an advantage for misconceived contention that the property of the principal borrower should be sold first whereas it is settled proposition of law that the secured creditor has every right to proceed against any property/secured assets directly against the guarantors without taking action against the borrowers property first and also relied upon certain judgments and prayed the SA should have to be dismissed.

I have heard both the Counsel at length and perused the record.

Before proceeding further, few facts are necessary to be mentioned in this case. The applicant Smt. Sharmila who had filed this SA along with applicant Nos. 2 and 3 had already been left abandoned when reached at the mid of proceedings as the applicant No. 1 from the very beginning pleaded that she was being trapped and attempts have been made to deprive her of property as she had stood guarantor at the behest of her husband who was once student of President/Chairman of the society and it was ultimately found that not only respondent No. 3 but applicant Nos. 2 and 3 also detached themselves from the proceedings. During the proceedings, it has clearly transpired that it was only applicant No. 1 who was pleading her case whereas none came forward from applicant Nos. 2 and 3 which confirmed that trap has been laid by the Society with the help of applicant Nos. 2 and 3 who are still treasurer of the Society.

The applicant No. 1 is a guarantor and husband of the applicant No. 1 was serving as a professor in the same institution, since the initiation of the proceedings stating that he is ready to cooperate with the Bank but being trapped now in such a way that the mighty resourceful defaulters who are running the institution after availing crore of rupees, did not cooperate with the Bank, and deliberately defaulted OTS terms so that the property of the applicant guarantor could be sold first, reducing the recoverable amount and liability substantially and they will, thereafter settle the accounts. During the course of proceedings, number of interim applications have been filed by the respondent Bank as well the applicant particularly when it transpired that the Bank who is showing over enthusiasm in selling this residential property is not going against the main defaulters and the Bank was directed to serve the respondent No. 3 even by way of publication along with photographs of the defaulters which is a common practice whereby Bank publishes photographs of even small defaulters. It also transpired that the Bank officers kept on delaying the process; either showing clarification of the order or burden upon the Bank for publication or non-availability of the photographs of the defaulters and ultimately showing that they proceeded against the residential property of applicant No. 1 only but could not be able to sell the major property. Certainly the applicants cannot be absolved of liability being a guarantor which is joint and several but could the Courts should close eyes that the institutions which are availing facilities by projecting rosy pictures and having considerable security to the tune of hundred crore of rupees available to the Bank, be spared or could be considered as beyond the reach of the Bank? In fact mercy, pleadings of the applicants who are ready to cooperate with the Bank at every step and even ready to pay the charges of the publications did not yield results and fell flat on deaf ears of the officers of the Bank who seems reluctant to proceed either against the concerned President Shri Shakti Singh or any other defaulter along with applicant Nos. 2 and 3 who are now living lavish life as reflected during the course of proceedings.

In fact when the applicants have approached this Court by filing an intervening application a detailed order was passed by my predecessor on 15.7.2014 where the same contentions were raised that the Bank will first sell the property of the society covered in lot No. 1 in the sale notice which reads as under:

"The pleas of the applicant regarding non-service of the notice under Section 13(2) as well as Section 13(4) will be decided at the time of final adjudication more so when the applicant has not taken these please of service of notice under Section 13(2) as well as notice under Section 13(4) at the time of arguing matter on interim relief on 8.11.2013. Since the learned Counsel for the respondent Bank has stated respondent Bank will first sell the property of Society covered in Lot No. 1 in the Sale Notice and only if either no bidder for same is available or outstanding are left after sale of this property, property of the applicant in Lot No. 3 would be auctioned, one of the objection of the applicant stands accepted by the respondent Bank. The sale of the applicant's properties will be subject to the outcome of SA. Accordingly, I No. 7089/14 stand disposed of."

It was only on the assurance of the Bank that they will proceed first against the primary security of borrower which is sufficient to discharge entire liability, therefore, it was ordered that the sale of the applicant's property will be subject to the outcome of the SA. I myself duly convinced that the Bank has shown no courage or taken any action against the properties of the society or the property of applicant Nos. 2 and 3, instead they kept on chasing the applicant No. 1/guarantor particularly the residential property whereas still the large amount is recoverable and ultimately projected that they have made attempt to sell the property of the Society but could not be successful. But why the Bank has not sold or taken possession of the other residential property of applicant Nos. 2 and 3, who are still functioning in the same society as informed during proceedings.

We are constrained to say that the particular Bank who in its other cases has bent upon to crack the smallest defaulters even, has failed against these big fishes who are resourceful, politically well connected defaulters who have given proposal on 11.5.2013 as per Annexure R5 but did not honour the same and left applicant No. 1 at the mercy of the Bank. The purpose of every sale is to fetch maximum price of the property in a transparent and bona fide manner. Since Courts are having its inherent powers to reopen even to confirmed sale even if it has been established that there is no fraud but certainly any type of irregularity is found in totality as in this case, the best price after due publicity is missing. Moreover, it is the valuation of the property which has been reduced by the Bank considerably between two sales as the applicant has placed on record valuation which is much higher in comparison to filed by the Bank. Moreover, the Bank has failed to establish about the compliance of Rule 8(6) as sale notice has not been properly served upon the applicant. Moreover, it cannot be ignored that it was the sole auction purchaser who came forward even on the second time for the purchase of property against whom the applicant has made allegations of habitual and professional purchaser dealing in sale of properties of DRTs only.

Hence, in the light of the above discussion, arguments and documents put forth by respective Counsel, I am satisfied that the Bank in totality has not proceeded against the properties in an honest manner as per their commitment before the Court to recover dues firstly from the prime properties of the main borrower/society.

Hence, sale is hereby set aside with the directions to the Bank to put all mortgaged properties on sale and firstly recover the amount due from prime properties of the borrowers/society and in case there is shortfall, then that should be made good from residential property.

SA is allowed as above. Any application pending stands disposed of.

Order Dasti to the concerned parties.

File be consigned to record.

Dated: 25.1.2016

Sd/-

Presiding Officer

DRT-I, Chandigarh"

Since the auction purchaser Ravi Kant could not get possession of the property purchased by him he sought refund of the auction money from DRT by filing an application (MA No. 14/2016) in the aforesaid S.A. of the guarantors after its disposal vide impugned order dated 25th January, 2016. That application was quite strangely allowed vide order dated 4th May, 2016 which is also under challenge at the instance of the Bank and is also being reproduced below:

"MA 14 of 2016

This application has been filed for refund of money as well as compensation by the Auction Purchaser in S.A. 240 of 2013 which was allowed vide order dated 25.1.2016.

The Counsel for the applicant argued for refund of amount of auction money paid under account of various heads as the applicant Auction Purchaser is no more ready to buy the property and played that the money deposited by the applicant should be returned as it was not on his sweet will but under compelling circumstances as the SA has been allowed with the directions that the recovery should be effected firstly from the property of the principal borrower instead of guarantor which is sufficient to recover the entire dues of the Rank.

On the other hand side, Counsel for the respondent Bank has stated that since the above orders are under challenge in Appeal No. 105 of 2016 therefore, it has not attained finality and neither any refund at this stage can be claimed by the present applicant nor any such directions can be given at this stage by this Tribunal. Counsel for the Bank also rejected that since the Bank has tightly put the property on sale without any discrepancy in the process and applicants had deposited the amount on their own will and thereafter the Bank has also deposited 22% of sale amount to the income tax department for the tax deducted at source, therefore, this amount cannot be refunded, particularly when there is no irregularity or illegality by the answering respondent Bank.

Heard, perused the record. Before parting with the order, have perused orders dated 25.1.2016 whereby SA was allowed in favour of the SA applicant. Not only this Hon'ble DRAT vide order dated 18.6.2015 has also clarified the same, which is reproduced as under:

"...Since the Tribunal has protected the respondents with liberty to proceed with the property of principal borrower, there is hardly any need to change this position because the Bank has not been able to auction the property of principal borrower. The Bank can continue with the efforts to sell the property of the principal borrower. However, the Tribunal below can be directed to make endeavour to decide the SA within a period of three months from the date of receipt of copy of this order. It is so ordered."

Meaning thereby that the Bank who earlier also went on appeal against the order, their appeal was disposed of with those observations. Further, it was not merely on the sweet will of the applicant that they are claiming refund but this demand arose from the outcome of judicial order passed in the S.A. Therefore, there should not be any hitch before the Bank to refund the amount. Moreover, for refund of amount which the Bank has deposited on account of Tax Deducted at Source, the Bank can conveniently take up with the concerned department as per rules, for further refund of the same. Since once the auction has already been set aside by allowing the S.A. and the Bank has sufficient primary properties of the borrower to recover its dues, there left no purpose to retain the amount of auction purchaser.

Therefore, in the light of the above discussions and on the basis of order passed by the Tribunal and Hon'ble DRAT the MA is allowed The applicant is directed to approach the Authorised Officer for refund of the amount. The authorised officer is directed to take up with the Income Tax Deptt. Accordingly for refund of the amount deposited by the Bank with regard to Tax Deducted at Source.

MA allowed. File be consigned to record.

Sd/-

Presiding Officer

DRT-I, Chandigarh"

Feeling aggrieved by these orders of the DRT the State Bank of India had filed separate appeals which were, however, heard together since common questions were involved and are now being disposed of also together by this common order.

The appellant Bank's grievance is that the two orders passed by the DRT being in the teeth of the judgment of the Hon'ble Supreme Court in the case of Union Bank of India v. Satyawati Tandon, III (2010) BC 495 (SC) : VI (2010) SLT 52 : (2010) 9 SCR 1 amount to perverse orders. In that judgment the Apex Court had clearly upheld the right of the Banks and financial institutions/secured creditors to proceed to sell any of the properties mortgaged by their debtors to secure the repayment of the loans advanced to them and the guarantor could not say that the Banks should first sell the properties of the principal borrower and then only touch the properties of guarantors. This was exactly what the guarantor Sharmila in the case in hand wanted the Bank to do and the learned Presiding Officer has accepted that contention of Sharmila.

Learned Counsel for the appellant Bank drew my attention to the following paras of the judgment in Satyawati Tandon's case (supra) wherein while rejecting the guarantor's argument that the Bank has first to proceed against the principal borrower under SARFAESI Act before proceeding against the mortgaged properties of guarantor, it was observed by the Hon'ble Supreme Court as under:

"14. The question whether the appellant could have issued notices to respondent No. 1 under Section 13(2) and (4) and filed an application under Section 14 of the SARFAESI Act without first initiating action against the borrower i.e., respondent No. 2 for recovery of the outstanding dues is no longer res integra. In Bank of Bihar Ltd. v. Damodar Prasad, (1969) 1 SCR 620, this Court considered and answered in affirmative the question whether the hank is entitled to recover its dues from the surety and observed:

"It is the duty of the surety to pay the decretal amount. On such payment he will be subrogated to the rights of the creditor under Section 140 of the Indian Contract Act, and he may then recover the amount from the principal. The very object of the guarantee is defeated if the creditor is asked to postpone his remedies against the surety. In the present case the creditor is Banking company. A guarantee is a collateral security usually taken by a Banker. The security will become useless if his rights against the surety can be so easily cut down.''

In State Bank of India v. M/s. Indexport Registered & Ors., 1992 (SLT Soft) 293 : II (1992) BC 243 (SC) : (1992) 3 SCC 159, this Court held that the decree-holder Bank can execute the decree against the guarantor without proceeding against the principal borrower and then proceeded to observe:

"The execution of the money decree is not made dependent on first applying for execution of the mortgage decree. The choice is left entirely with the decree-holder. The question arises whether a decree which is framed as a composite decree, as a matter of law, must be executed against the mortgage property first or can a money decree, which covers whole or part of decretal amount covering mortgage decree can be executed earlier. There is nothing in law which provides such a composite decree to be first executed only against the [principal debtor]."

In Industrial Investment Bank of India Limited v. Biswanath Jhunjhunwala, VI (2009) SLT 625 : IV (2009) BC 574 (SC) : (2009) 9 SCC 478, this Court again held that the liability of the guarantor and principal debtor is co-extensive and not in alternative and the creditor/decree-holder has the right to proceed against either for recovery of dues or realization of the decretal amount.

In view of the law laid down in the aforementioned cases, it must be held that the High Court completely misdirected itself in assuming that the appellant could not have initiated action against respondent No. 1 without making efforts for recovery of its dues from the borrower-respondent No. 2."

The learned Counsel for Sharmila, who has felt completely dejected by other two guarantors deserting her in this legal battle, had submitted while supporting the order dated 25th January, 2016 of the DRT, and which submission was the only submission pressed into service on behalf of Sharmila at the time of hearing of the appeals, that there is no infirmity in the direction given by the DRT to the appellant Bank to realise its money from the borrower Society which is being managed by the big and politically strong people instead of bringing the small guarantor like her on road. It was submitted that unless the principal borrower's property is sold she may even otherwise be not able to recover her money from the borrower Society in exercise of her legal right of subrogation as recognised by the Hon'ble Supreme Court also in its judgment in Satyawati Tandon 's case (supra).

As far as the borrower Society and other two guarantors are concerned they have felt satisfied with the decision of the DRT and, therefore, feeling convinced that no adverse orders could be passed against them have been sitting on the fence and watching this legal battle being fought by the Bank and one guarantor whose house stood already said.

In fact, I was informed that during the pendency of these appeals the borrower Society and the Bank have once again arrived at settlement. When the Counsel for the Bank was asked as to why then these appeals were being prosecuted the answer was that unless the Bank receives the entire money under the settlement from the borrower Society, which has the history of backtracking and not honouring the terms of settlement and which fact had been noticed even by the Presiding Officer of the DRT in the impugned order dated 25th January, 2016, the appeals cannot be withdrawn but the same could be kept pending to see whether the borrower this time honours the settlement terms or not. Then the Counsel for the auction purchaser raised an objection that these appeals cannot be kept pending endlessly as auction purchaser's money to the tune of approximately one crore was lying blocked for about three years and, therefore, the appeals should be heard on merits and decided one way or the other. Counsel for the other parties then agreed to argue and accordingly advanced their arguments.

In my view, the submissions made on behalf of the guarantor Sharmila that her house could not have been sold without first selling the borrower Society's property which had also been mortgaged could not have been accepted by the learned Presiding Officer of DRT in view of the above quoted views of the Apex Court in Satyawati Tandon's case (supra) and it cannot be accepted that the learned Presiding Officer was not aware of that binding precedent which is quite often cited before DRTs. This Tribunal has come across similar orders having been passed in other matters also by DRTs whereby the Banks are told not to proceed to sell residential properties of the guarantors without first selling the mortgaged assets of the principal borrowers. This trend is quite disturbing as it violates the command of the highest Court of the land.

In my view, the learned Presiding Officer in the present case has committed a very serious illegality in giving the impugned directions to the Bank and setting aside the sale of the guarantor's house as the impugned directions passed against the Bank are in the teeth of the verdict of the Apex Court which under no circumstances could be ignored. Of course, the Presiding Officer may be right in his observations expressed in the impugned order dated 25th January, 2016, which have been highlighted also by me, that the Bank was not interested in touching the property of the principal borrower as also of the other two guarantors but for that reason no benefit could be showered upon the third guarantor by directing the Bank not to proceed further in respect of her property which already stood auctioned in favour of Ravi Kant. He could have, however, passed such directions which would have taken care of his own firm belief that the Bank was helping the 'big fish'.

If the Presiding Officer was so much perturbed by the conduct of the Bank in sparing the 'big fish' he ought to have ensured that is not done and public money to the tune of crores of rupees is recovered from the borrower as well as the guarantors and the properties mortgaged by all of them. The amount fetched by sale of Sharmila's property was around 88 lacs only whereas the amount due from the borrower Society was more than six crores. So, even if all the properties of the guarantors had been sold the dues of the Bank would not have been recovered in full. So, asking the Bank not to touch the property of Sharmila even after it had been auctioned in favour of Ravi Kant was not a decision which is permissible in law. It is significant to notice here that the Bank had in any case made attempts to first sell the property of the borrower Society, as was assured by it before the DRT on 15.7.2014 during the pendency of the S.A. and as was also claimed by it before this Tribunal also and which fact had not been refuted by anyone, and when that property filed to attract any buyer only then guarantors' properties were put up for auction, The Bank was not obliged to give that assurance to the DRT but it voluntarily gave and that assurance could not have subsequently been used against it at a later stage of the same proceedings and sale of guarantor Sharmila's property could not have been set aside by the DRT on the ground that her property could not have been put to auction at all unless the Bank was successful in selling borrower's property and its sale proceeds were insufficient to clear the entire dues of the Bank.

Not following the judgment of the Apex Court or even ignoring to take notice of that by a Presiding Officer of a Tribunal which is the lowest form in the judicial hierarchy is a serious matter and cannot be approved of by this Tribunal. There is no question of ignoring the decision of the Supreme Court even if the Bank was not touching the so-called big fish, as has been observed by the learned Presiding Officer of the DRT in his order dated 25th January, 2016. The DRT has in fact brought the matter to a situation where even the negligible amount which the Bank has succeeded in recovering from the sale of one of the mortgaged properties has been ordered to be returned to the auction purchaser and as far as the bigger property of the borrower Society, value of which is stated to be over ten crores, is concerned the Bank has not been able to find any buyer for that and from the record it is not clear as to why the property in Karnal mortgaged by the other two guarantors, who appear to have lost all interest in this legal battle, was not sold. The grievance of the lady guarantor Sharmila is that the Bank is now colluding with the powerful people in control of the Society to deprive her of her only residential house so that she and her family comes on the road while the powerful borrowers are not touched and the recovery of public money to the tune of crores of rupees remains stalled on the bogus plea of the Bank that other properties are not fetching buyers and in fact even her property has been sold for a very less price. However, ignoring these pleas raised by the guarantor Sharmila instead of setting them aside the DRT should have confirmed the action of the Bank.

The learned Presiding Officer has no doubt taken note of the fact that the Bank is shielding the big fish but then did nothing to see that that does not happen. The DRT has all the powers and in fact more than even the Civil Courts possess, to ensure that the Banks or for that matter the borrowers/guarantors/mortgagors do not succeed in their nefarious designs of stalling recoveries of public money. However, for this reason the sale of the house of one of the guarantors Sharmila could not be set aside only on the ground that principal borrower's properties were not being sold.

In view of the legal position laid down by the Apex Court in Satyawati Tandon 's case the order dated 25th January, 2016 passed by the DRT cannot be sustained and is liable to be reversed and the Bank's appeal against that order deserves to be allowed.

As far as the auction purchaser Ravi Kant is concerned, his grievance expressed by his learned Counsel during the course of hearing of these appeals was that even though he genuinely wanted to purchase the property of the guarantor Sharmila and had paid its full price in the year 2014 and sale deed had also been executed in his favour but since the DRT has cancelled the sale and the Bank has also challenged that decision of the DRT it is not certain when this fight will come to an end. Therefore, he had decided to request the DRT to direct the Bank to refund the auction money paid by him he could not wait anymore to get possession of the property and to keep almost a crore of rupees blocked due to this endless legal battle. Learned Counsel for the auction purchaser submitted that in these circumstances the auction purchaser had approached the DRT in the disposed of S.A. of the guarantors for giving direction to the Bank to return his money and the learned Presiding Officer of the DRT had very rightly passed an order, which was well within its powers, to order refund of the auction money by the appellant Bank to the auction purchaser and accordingly Bank's appeal challenging that order is liable to be dismissed.

Since the property of guarantor Sharmila was sold by the Bank under the SARFAESI proceedings and if the Bank for any reason could not succeed in delivering possession to the auction purchaser, he could not have moved any application in the guarantor's disposed of S.A. to obtain any order for release of auction money, more particularly, when the order of the DRT setting aside the auction was not acceptable to the Bank. Therefore, the impugned order passed by the DRT on a miscellaneous application in a disposed of S.A. moved by the auction purchaser could not have been passed. If the auction purchaser, who as per the security applicants was a property dealer and not a genuine purchaser, was aggrieved because of non-delivery of possession of the property purchased by him he could have had recourse to independent legal remedies against the Bank. That he did not do and instead he took a shorter route by approaching the DRT with a miscellaneous application which could not be done since the property was sold by the Bank and was not a Court conducted auction. Similarly, at the instance of the auction purchaser in a disposed of matter the DRT could not have directed the Authorised Officer to approach the Income Tax authorities to refund the TDS amount deposited by the Bank out of the sale proceeds of the auction of the guarantor's property. These kind of directions are a hurdle in the expeditious recovery of public money which was the object behind the enactment of SARFAESI Act and they do not advance justice. This view gets support from a decision of the Hon'ble Supreme Court in Standard Chartered Bank v. Dharminder Bhohi & Ors., VIII (2013) SLT 313 : IV (2013) BC 407 (SC) : 2013(15) SCC 341 wherein it was held that DRTs do not have inherent powers to pass any kind of orders which have the effect of delaying the recoveries of public money. Same view was taken even by a Division Bench of Hon'ble Delhi High Court in (W.P. (C) 7158/2014, in the case of "Ms. Satnam Agri Products Ltd. & Ors. v. Union of India & Ors." decided on 10 December, 2014.

Therefore, the appeal filed by the Bank against the order of the DRT directing the Bank to refund the auction money to the auction purchaser is also liable to be allowed.

Both the appeals are accordingly allowed and the impugned orders dated 25.1.2016 and 8.5.2016 passed by DRT-I, Chandigarh stand set aside.

However, before I part with this matter, I would also like to address the grievance of the guarantor Sharmila to the effect that the appellant Bank is not catching hold of the powerful people involved in this matter as borrowers and other two guarantors and in collusion with them the Bank is bent upon dispossessing her from her only residential house and by not taking any steps to liquidate the assets of the borrower Society the Bank is also bent upon ensuring that she does not get subrogated also.

As noticed already, the learned Presiding Officer himself has also observed in the impugned order dated 25.1.2016 that the Bank is not mustering courage to touch the powerful persons involved and is only after the property of a small guarantor. I have already observed that the DRTs cannot feel helpless even when it comes to the conclusion in some cases that the Bank is helping borrowers and not touching their properties,

In my view, the learned Presiding Officer of DRT, considering the fact that in the S.A. of the guarantors principal borrower as well as the auction purchaser were also before him, ought to have invoked the provisions of Section 17(7) of the SARFAESI Act read with Section 19(18) and (25) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. Section 17 of SARFAEST Act, which was invoked by the three guarantors reads as under:

"17. Right to appeal

(1) Any person (including borrower), aggrieved by any of the measures referred to in Sub-section (4) of Section 13 taken by the secured creditor or his authorised officer under this Chapter, may make an application alongwith such fee, as may be prescribed to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measure had been taken:

Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.

Explanation--For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under this sub-section.

(2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in Sub-section (4) of Section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder.

(3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in Sub-section (4) of Section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management of the business to the borrower or restoration of possession of the secured assets to the borrower, it may by order, declare the recourse to any one or more measures referred to in Sub-section (4) of Section 13 taken by the secured creditors as invalid and restore the possession of the secured assets to the borrower or restore the management of the business to the borrower, as the case may be, and pass such order as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under Sub-section (4) of Section 13.

(4) If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under Sub-section (4) of Section 13, is in accordance with the provisions of this Act and the rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force, the secured creditor shall be entitled to take recourse to one or more of the measures specified under Sub-suction (4) of Section 13 to recover his secured debt.

(5) Any application made under Sub-section (1) shall be dealt with by the Debts Recovery Tribunal as expeditiously as possible and disposed of within sixty days from the date of such application:

Provided that the Debts Recovery Tribunal may, from time-to-time, extend the said period for reasons to be recorded in writing, so, however, that the total period of pendency of the application with the Debts Recovery Tribunal, shall not exceed four months from the date of making of such application made under Sub-section (1).

(6) If the application is not disposed of by the Debts Recovery Tribunal within the period of four months as specified in Sub-section (5), any part to the application may make an application, in such form as may be prescribed, to the Appellate Tribunal for directing the Debts Recovery Tribunal for expeditious disposal of the application pending before the Debts Recovery Tribunal and the Appellate Tribunal may, on such application, make an order for expeditious disposal of the pending application by the Debts Recovery Tribunal.

(7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the rules made thereunder.

Relevant parts of Section 19 of RDDBFI Act read as under:

"19. Application to the Tribunal

(1) Where a Bank or a financial institution has to recover any debt from any person, it may make an application to the Tribunal within the local limits of whose jurisdiction--

(a) the defendant, or each of the defendants where there are more than one, at the time of making the application, actually and voluntarily resides, or carries on business, or personally works for gain; or

(b) any of the defendants, where there are more than one, at the time of making the application, actually and voluntarily resides, or carries on business, or personally works for gain; or

(c) the cause of action, wholly or in part arises.

(18) Where it appears to the Tribunal to be just and convenient, the Tribunal may, by order--

(a) appoint a receiver of any property, whether before or after grant of certificate for recovery of debt;

(b) remove any person from the possession or custody of the property;

(c) commit the same to the possession, custody or management of the receiver;

(d) confer upon the receiver all such powers, as to bringing and defending suits in the Courts or filing and defending applications before the Tribunal and for the realization, management, protection, preservation and improvement of the property, the collection of the rents and profits thereof, the application and disposal of such rents and profits, and the execution of documents as the owner himself has, or such of those powers as the Tribunal thinks fit; and

(e) appoint a Commissioner for preparation of an inventory of the properties of the defendant or for the sale thereof.

(20) The Tribunal may, after giving the applicant and the defendant an opportunity of being heard, pass such interim or final order, including the order for payment of interest from the date on or before which payment of the amount is found due up to the date of realization or actual payment, on the application as it thinks fit to meet the ends of justice.

(25) The Tribunal may make such orders and give such directions as may be necessary or expedient to give effect to its orders or to prevent abuse of its process or to secure the ends of justice."

These powers have been given to the DRTs to do complete and real justice and not mere paper justice in the matters coming before them. All the proceedings in cases coming before the DRTs either under SARFAESI Act or RDDBFI Act have to end only after it has been ensured by the Presiding Officers that complete and real justice in the matter of expeditious recovery of public money has been done.

These appeals being continuation of the original proceedings I feel that what the learned Presiding Officer of the DRT ought to have done, instead of sermonising about the role of the Bank in protecting its defaulter borrowers/guarantors/mortgagors, but has not done should be, done by the Appellate Tribunal. Otherwise, justice will not be complete in the facts and circumstances of this case.

I have already observed that in view of the order passed by the learned Presiding Officer of DRT the property of the borrowers continues to be in its possession and public money is blocked. DRT has also set aside the auction of one property of one guarantor and directed the Bank to return the auction money and the other two guarantors have also walked out of the legal battle and in that way all the defaulters have become the beneficiary of the generosity showered upon them by the learned Presiding Officer while the interest of the public exchequer has been totally sidelined thereby defeating the very object for which SARFAESI Act was enacted by our Parliament.

Accordingly, while rejecting the case of the guarantor Sharmila that her property could not have been sold by the Bank without selling the borrower's property first and taking note of her grievance which appears to be justified that the Bank is not keen to recover its money, which really is public money, I direct the appellant Bank to ensure that possession of the property of the guarantor Sharmila auctioned by it is delivered to the auction purchaser and in case the auction purchaser decides not to take its possession, then this Tribunal having held that he could not have approached the DRT for refund of his money in the S.A. of Sharmila, that amount will be forfeited, in case the borrower's property is required to be sealed, the Bank would be at liberty to do that also as it is benefiting from the fact that Bank is claiming that its property cannot be sold because of want of willing buyers. The Bank will also ensure that possession of the borrower's property is also taken over within a month and then sold. In this way, thus, complete justice will be done to the public exchequer which has so far been the casualty due to the totally unsustainable orders passed by the learned Presiding Officer of DRT. The Bank shall submit a report to this Tribunal within a week after the expiry of one month's period for being considered by this Tribunal whether the directions given above have been complied with or not. In case the Bank fails to submit its report as directed above within one week from the date of expiry of one month's period from today, the Registrar shall place the matter before the Tribunal for further necessary directions to ensure that complete justice is done in the matter and nobody succeeds in thwarting the attempt in that regard.