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2013 DIGILAW 251 (BOM)

Alex Kuruvilla v. Orinetal Bank of Commerce

2013-01-31

ROSHAN DALVI

body2013
Judgment : 1. The plaintiff is the proposed purchaser of the suit flat No.23 with garage No.23 in Chitrakoot Apartment, Altamount Road, Mumbai-400026 belonging to the defendant No.2. The defendant No.2 was the borrower of defendant No.1 bank. The defendant No.3 is the company of the plaintiff in possession of the suit flat. Defendant No.3 has licenced the suit flat from Defendant No.2. The plaintiff has sued for specific performance of the agreement set out in writing by defendant No.1 bank, for transfer of the suit flat to the plaintiff and for protecting the plaintiff's possession therein. In the alternative, the plaintiff has sued for refund of the advance consideration paid by the plaintiff of Rs.1.045 crores with interest as also the differential between the market value of the suit flat on the date of the decree and the agreed consideration for the suit flat under the agreement between the parties of Rs.4.18 crores. The plaintiff has also sued for the usual injunctions against transfer of the suit flat by defendant No.1 to any other party. 2. The plaintiff has applied for the usual injunctions in the notice of motion, appointment of Court Receiver and protection of his possession in the suit premises ie. for an order against disturbance of his possession. 3. What has transpired between the parties is almost wholly admitted. The admitted facts must be first enumerated to understand the respective positions of the parties. Based upon those facts the law granting the plaintiff the right, if any, to claim possession and/or title would be seen to consider the grant of reliefs to the plaintiff. 4. The real contest is between the plaintiff and defendant No.1 bank. The defendant No.2 has not appeared despite service. The defendant No.3 is the company of the plaintiff. 5. Consequent upon a mortgage in favour of defendant No. 1 bank, securitisation proceedings were commenced by the defendant No.1 bank under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Securitisation Act). After the execution of the mortgage, defendant No.2 inducted the plaintiff as his licencee in the suit flat on 26th February, 2001. The licence has expired on 30th November, 2003. The defendant No.3 was the licencee who offered to handover possession on being returned the deposit of Rs.1.25 crores paid to defendant No.2. The defendant No.2 failed to refund the deposit. The licence has expired on 30th November, 2003. The defendant No.3 was the licencee who offered to handover possession on being returned the deposit of Rs.1.25 crores paid to defendant No.2. The defendant No.2 failed to refund the deposit. The plaintiff as the representative of defendant No.3 held over possession in the suit premises. The defendant No.1 bank claims that the plaintiff is an unauthorised occupant. 6. Upon invoking the provisions of Securitisation Act, defendant No.1 bank sought to take possession of the suit flat. The plaintiff, who was in possession of the suit flat as the licencee of defendant No.2 in his capacity as the representative of defendant No.3 offered to purchase the suit flat at the then market value. The defendant No.1 bank sought valuation upon its own terms. The valuation was obtained. The defendant No.1 bank sought to round off the purchase price. The plaintiff consented. On 20th February, 2006 the plaintiff offered to make payment of 25% consideration as advance payment. The plaintiff deposited with the defendant No.1 bank Rs.1.045 crores, which the bank accepted on 3rd May, 2006. The plaintiff and defendant No.1 bank sought to enter into a sale by private treaty under the provisions of the Securitisation Act and the rules framed thereunder. 7. The defendant No.3 had filed a Writ Petition No.2445 of 2005 inter alia against Defendant No.1 bank under which a status-quo order was passed on 11th August, 2005. That status-quo order was required to be modified if the agreement between the parties was to be effectuated for the sale price as per the valuation called for by the defendant No.1 and accepted by the plaintiff. 8. The defendant No.1 bank applied for modification of the status-quo order in the writ petition and for permission to dispose off the suit flat by private treaty to the plaintiff on “as is where is” and “as is what is” basis and also for permission to issue notice of 30 days to defendant No.2 herein under the Securitisation Act. 9. The defendant No.2, despite service, neither appeared in the writ petition nor in the notice of motion to show cause against the application for permission for sale by private treaty. In fact the defendant No.2 did not even appear or take any proceedings before the DRT, Mumbai under the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (RDDB Act). In fact the defendant No.2 did not even appear or take any proceedings before the DRT, Mumbai under the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (RDDB Act). He has not even appeared in this suit. 10. The defendant No.1 filed an affidavit in the writ petition setting out the action taken under Section 13 of the Securitisation Act against the defendant No.2 and the proceedings taken against him before the DRT which resulted in its favour. The defendant No.1 bank also set out that thereafter the plaintiff approached it and had sought to purchase the property for Rs.4.18 crores as aforesaid together with all encumbrances including the right to recover Rs.1.25 crores with interest from defendant No.2 as the refundable deposit under the leave and licence agreement. The defendant No.1 bank set out how valuation was made by their valuers was true and correct and how the plaintiff had offered even more than the valuation. It was stated that the liability of the defendant No.2 would be reduced to that extent upon the offer of the plaintiff which was fair and reasonable and hence entreated the Court to accept the offer and modify the status-quo order to that extent. It further applied, upon modification to proceed with the sale of the flat by private treaty in favour of the plaintiff and stated that it also desired to issue notice of 30 days to defendant No.2 for the proposed sale of the flat by private treaty. It was stated that modification would be in the interest of all the parties. It also stated that the defendant No.2 would not be effected in any manner by the sale except that his liability would be reduced to that extent i.e. by 4.18 crores. The Division Bench of this Court passed its order on the said notice of motion without effecting the possession of the plaintiff herein on 14th July, 2006. 11. The plaintiff has continued in possession. That possession was initially as the licencee of the borrower, defendant No.2. The possession came to be continued by this Court upon the plaintiff's fair and reasonable offer and its acceptance by defendant No.1 subject to the proceedings under the Securitisation Act for sale of the suit flat. 12. 11. The plaintiff has continued in possession. That possession was initially as the licencee of the borrower, defendant No.2. The possession came to be continued by this Court upon the plaintiff's fair and reasonable offer and its acceptance by defendant No.1 subject to the proceedings under the Securitisation Act for sale of the suit flat. 12. Upon such permission the writ petition itself came to be disposed of on 4th August, 2006 protecting the plaintiff's possession against dispossession otherwise than by due process of law. 13. On 24th July, 2006 defendant No.1 bank gave notice to Defendant No.2 setting out its rights as the secured creditor in respect of the secured asset which is the suit flat, towards liability of 5.31 crores of Defendant No.2. It set out how notices under Sections 13(2) and 13(4) of the Securitisation Act came to be issued and symbolic possession was taken by it on 18th October, 2004. It was stated that it was no longer ready to wait to realise its dues and hence proposed the sale of the flat under the Act. It stated about the valuation of the two independent valuers and sought to sell the flat to the plaintiff at the higher valuation; in fact it is slightly higher than the valuation itself. It offered credit to defendant No.2 borrower in his account with the bank towards the sale price. This constitutes the agreement of defendant No.1 bank which the plaintiff has sought to specifically enforce. 14. The defendant No.2 by his Advocate's letter dated 22nd August, 2006 rejected the proposal of the bank to sell the flat for the price of Rs.4.18 crores by private sale (as opposed to public sale). He contended that the sale cannot take place without his consent since the bank did not have the right of private sale. 15. The plaintiff insisted upon the sale by his Advocate's letter dated 6th November, 2006. 16. The defendant No.1 bank instead sought to return the advance amount of 25% of the sale price received by it from the plaintiff upon the ground that the sale was “not materialising at present due to some reasons”. That amount has not been accepted by the plaintiff though the alternative relief in the suit is in that behalf. 17. The plaintiff insists upon the sale. That amount has not been accepted by the plaintiff though the alternative relief in the suit is in that behalf. 17. The plaintiff insists upon the sale. The defendant No.1 bank claims that private sale cannot be effectuated under the provisions of Securitisation Act and the rules framed thereunder. 18. The provisions of the Securitisation Act need no elaboration. They have been resorted to by the defendant No.1 bank since long. Suffice it to state that under Section 13 of the Act the defendant No.1 bank is allowed to take possession of the mortgaged premises of the borrower without the intervention of this Court and by what is called the “non adjudicatory process” in the judgment in the case of TranscoreVs. Union of India (2008) 1 SCC 125 . The non-adjudicatory process for obtaining possession has been set out in Section 13(1) to 13(7) of the Act which run thus: “CHAPTER III ENFORCEMENT OF SECURITY INTEREST “13. Enforcement of security interest. – (1) Notwithstanding anything contained in section 69 or section 69A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act. (2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any installment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section(4). (3) The notice referred to in sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower. (3) The notice referred to in sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower. [(3A) If, on receipt of the notice under sub-section (2), the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within one week of receipt of such representation or objection the reasons for nonacceptance of the representation or objection to the borrower. Provided that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under Section 17 or the Court of District Judge under Section 17A] (4) In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely: – (a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset; (b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset: Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt: Provided further that where the management of whole, of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security or the debt; (c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor; (d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt. (5) Any payment made by any person referred to in clause (d) of sub-section (4) to the secured creditor shall give such person a valid discharge as if he has made payment to the borrower. (6) Any transfer of secured asset after taking possession thereof or take over of management under sub-section (4), by the secured creditor or by the manager on behalf of the secured creditors shall vest in the transferee all rights in, or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset. (7) Where any action has been taken against a borrower under the provisions of subsection (4), all costs, charges and expenses which, in the opinion of the secured creditor, have been properly incurred by him or any expenses incidental thereto, shall be recoverable from the borrower and the money which is received by the secured creditor shall, in the absence of any contract to the contrary, be held by him in trust, to be applied, firstly, in payment of such costs, charges and expenses and secondly, in discharge of the dues of the secured creditor and the residue of the money so received shall be paid to the person entitled thereto in accordance with his rights and interests.” 19. Consequently, under the Act upon the debt becoming NPA the bank is entitled to take symbolic possession and later actual possession of the mortgaged premises of the borrower by the non-adjudicatory process. The objection, if any, are to be considered by the bank itself upon possession being taken. The property vests in the bank and the rights of the borrower get extinguished (see UCO Bank Vs. Kanji Manji Kothari & Co., 2008(3) BCR 290). Upon taking over possession and the bank may sell the secured asset as per the rules 8 and 9 framed under the Act being the Secured Interest (Enforcement) Rules 2002. The relevant parts of Rules 8 and 9 run thus: 8. Sale of immovable secured assets. – (1) Where the secured asset is an immovable property, the authorised officer shall take or cause to be taken possession, by delivering a possession notice prepared as nearly as possible in Appendix IV to these rules, to the borrower and by affixing the possession notice on the outer door or at such conspicuous place of the property. (2) [The possession notice as referred to in sub-rule (1) shall also be published, as soon as possible but in any case not later than seven days from the date of taking possession, in two leading newspapers], one in vernacular language having sufficient circulation in that locality, by the authorised officer. (2) [The possession notice as referred to in sub-rule (1) shall also be published, as soon as possible but in any case not later than seven days from the date of taking possession, in two leading newspapers], one in vernacular language having sufficient circulation in that locality, by the authorised officer. (3) In the event the possession of immovable property is actually taken by the authorised officer, such property shall be kept in his own custody or in the custody of any person authorised or appointed by him, who shall take as much care of the property in his custody as a owner of ordinary prudence would, under the similar circumstances, take of such property. (4) The authorised officer shall take steps for preservation and protection of secured assets and insure them, if necessary, till they are sold or otherwise disposed of. (5) Before effecting sale of the immovable property referred to in sub-rule (1) of rule 9, the authorized officer shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor, fix the reserve price of the property and may sell the whole or any part of such immovable secured asset by any of the following methods: – (a) by obtaining quotations from the persons dealing with similar secured assets or otherwise interested in buying the such assets; or (b) by inviting tenders from the public; (c) by holding public auction; or (d) by private treaty. (6) The authorised officer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets, under sub-rule (5): Provided that if the sale of such secured asset is being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice in two leading newspapers one in vernacular language having sufficient circulation in the locality by setting out the terms of sale, which shall include, – (a) The description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor; (b) the secured debt for recovery of which the property is to be sold; (c) reserve price, below which the property may not be sold; (d) time and place of public auction or the time after which sale by any other mode shall be completed; (e) depositing earnest money as may be stipulated by the secured creditor; (f) any other thing which the authorized officer considers it material for a purchaser to know in order to judge the nature and value of the property. (7) Every notice of sale shall be affixed on a conspicuous part of the immovable property and may, if the authorised officer deems if fit, put on the website of the secured creditor on the Internet. (8) Sale by any method other than public auction or public tender, shall be on such terms as may be settled between the parties in writing. 9. Time of sale, issues of sale certificate and delivery of possession, etc. – (1) No sale of immovable property under these rules shall take place before the expiry of thirty days from the date on which the public notice of sale is published in newspapers as referred to in the proviso to sub-rule (6) or notice of sale has been served to the borrower. – (1) No sale of immovable property under these rules shall take place before the expiry of thirty days from the date on which the public notice of sale is published in newspapers as referred to in the proviso to sub-rule (6) or notice of sale has been served to the borrower. (2) The sale shall be confirmed in favour of the purchaser who has offered the highest sale price in his bid or tender or quotation or offer to the authorized officer and shall be subject to confirmation by the secured creditor: Provided that no sale under this rule shall be confirmed, if the amount offered by sale price is less than the reserve price, specified under sub-rule (5) of rule 9: Provided further that if the authorised officer fails to obtain a price higher than the reserve price, he may, with the consent of the borrower and the secured creditor effect the sale at such price. (3) On every sale of immovable property, the purchaser shall immediately pay a deposit of twenty-five per cent of the amount of the sale price, to the authorised officer conducting the sale and in default of such deposit, the property shall forthwith be sold again. (4) The balance amount of purchase price payable shall be paid by the purchaser to the authorised officer on or before the fifteenth day of confirmation of sale of the immovable property or such extended period as may be agreed upon in writing between the parties. (5) In default of payment within the period mentioned in sub-rule (4), the deposit shall be forfeited and the property shall be resold and the defaulting purchaser shall forfeit all claim to the property or to any part of the sum for which it may be subsequently sold. (6) On confirmation of sale by the secured creditor and if the terms of payment have been complied with, the authorised officer exercising the power of sale shall issue a certificate of sale of the immovable property in favour of the purchaser in the form given in Appendix V to these rules. (emphasis supplied in bold and by underlining) 20. Consequently, the defendant No.1 bank is empowered to take possession of the secured asset by issuing a possession notice to the borrower or affixing it on his property and publishing it in two newspapers. (emphasis supplied in bold and by underlining) 20. Consequently, the defendant No.1 bank is empowered to take possession of the secured asset by issuing a possession notice to the borrower or affixing it on his property and publishing it in two newspapers. After he takes actual possession of the property, the officer of the bank is required to keep it in his custody and take care of the property as an owner. He has to obtain the valuation of the property from a private valuer and get a reserve price fixed for the sale of the property. The property can be sold by 4 methods set out in Rule 5 including public auction and private treaty. The bank has to serve notice (only notice) upon the borrower of 30 days for the sale of the property itself for the sale by public auction. The terms of sale are to be published in the newspapers. 21. Sale by private treaty is to be on the terms settled between “the parties” in writing. 22. Rule 9 applies only to public sale. Such sale has to be 30 days after the public notice is issued to the highest offerer and for atleast the reserve price. If higher than reserve price is not obtainable the sale may be at the reserve price with “the consent of the borrower”. The purchaser would have to deposit 25% of the sale amount immediately and the balance amount within 15 days of the confirmation of sale or an extended period as agreed in writing between “the parties”. A certificate of sale will be issued confirming the sale after such payment terms are complied. 23. On the principle that unequals cannot be treated equally, the rights of the banks are far in excess of the rights of the borrowers which has been held to be constitutionally valid in the case of MardiaChemicals Vs. Union of India 2004(4) SCC 311 . Indeed the constitutional validity of the ostensibly unequal position has been upheld in the interest of the economy of India, which is the object for which the Securitisation Act was enacted. The relevant part of the statement of the objections and reasons of the Act runs thus: “STATEMENT OF OBJECTS AND REASONS The financial sector has been one of the key drivers in India's efforts to achieve success in rapidly developing its economy. The relevant part of the statement of the objections and reasons of the Act runs thus: “STATEMENT OF OBJECTS AND REASONS The financial sector has been one of the key drivers in India's efforts to achieve success in rapidly developing its economy. While the banking industry in India is progressively complying with international prudential norms and accounting practices there are certain areas in which the banking and financial sector do not have a level playing field as compared to other participants in the financial markets in the world. There is no legal provision for facilitating securitisation of financial assets of banks and financial institutions. Further, unlike international banks, the banks and financial institutions in India do not have power to take possession of securities and sell them. Our existing legal framework relating to commercial transactions has not kept pace with the changing commercial practices and financial sector reforms. This has resulted in slow pace of recovery of defaulting loans and mounting levels of non-performing assets of banks and financial institutions. Narasimham Committee I and II and Andhyarujina Committee constituted by the Central Government for the purpose of examining banking sector reforms have considered the need for changes in the legal system in respect of these areas. These Committees, inter alia, have suggested enactment of a new legislation for securitisation and empowering banks and financial institutions to take possession of the securities and to sell them without the intervention of the court.” 24. The special legal provisions by the non-adjudicatory provision came to be enacted for facilitating securitisation of the financial aspects of banks who are empowered on par with International banks to take possession of securities and sell them. 25. The only right of defendant No.2 as the borrower would be the right to file appeal under Section 17 of the Act which is stated to be analogus to a suit (in the case of Transcore supra) and the further appeal of the earlier tribunal from the order of the DRT under Section 18 of the Act, the relevant parts of which run thus: “17. Right to appeal. 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 along with 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 measures 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 sub-section (1) of Section 17] (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 secured assets 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 assets as invalid and restore the possession of the secured assets to the borrower or restore the management of the secured assets 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 subsection (4) of section 13.” 18. Appeal to Appellate Tribunal. Appeal to Appellate Tribunal. – (1) Any person aggrieved, by any order made by the Debts Recovery Tribunal [under section 17, may prefer an appeal along with such fee, as may be prescribed] to an Appellate Tribunal within thirty days from the date of receipt of the order of Debts Recovery Tribunal. [Provided that different fees may be prescribed for filing an appeal by the borrower or by the person other than the borrower:] [Provided further that no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal fifty per cent of the amount of debt due from him, as claimed by the secured creditors or determined by the Debts Recovery Tribunal, whichever is less: Provided also that the Appellate tribunal may, for the reasons to be recorded in writing, reduce the amount to not less than twenty-five per cent of debt referred to in the second proviso.]” 26. Upon the aforesaid admitted facts read with the aforesaid provisions of law the right of the plaintiff to claim specific performance of the agreement of the defendant No.1 bank as enunciated in its affidavit filed in the writ petition mentioned above and the consequential relief of injunction and protection of its possession would be required to be seen. 27. It is contended by Mr. Jagtiani on behalf of the plaintiff that the borrower has almost no role to play in the process of sale which must enure in securing the secured property as otherwise the very purpose of the Securitisation Act would be wholly frustrated. He argued that whenever the expression “borrower” was applicable, the Act as well as the Rules specify it by that terminology. Hence at the specific place where the expression “borrower” is absent, the word “borrower” cannot be read into any other word. This would be reading the statute as a whole and reading it as per its terms. Mr. Jagtiani contended that “the parties” to a contract would be the parties to settle the sale in case of a sale by private treaty under Rule 8(8) of the Rules. It is not for the borrower to settle the terms of the contract, he cannot be a meddler, he is only entitled to the price of the sale which would bring down his NPA and his liability to that extent. It is not for the borrower to settle the terms of the contract, he cannot be a meddler, he is only entitled to the price of the sale which would bring down his NPA and his liability to that extent. He also argued that the term “borrower” was not contemplated in place of the term “parties” in Rule 8(8) and the term “parties” would mean “parties other than the borrower” since the role of the borrower as an owner or a party in possession is largely diluted to the point of extinction as held in the case of UCO Bank (supra). He, therefore, argued that the term “borrower” must be read as specifically excluded in Rule 8(8) so that the sale by way of a conveyance which would be in writing would be only by the parties thereto in case of a sale by private treaty. 28. Mr. Kamat, on the other hand, contended that the sale by private treaty would mean a sale only between two persons without the public and without the stringent provisions applicable to public sale. Hence when a sale by public auction, which would be a transparent mode of sale, is not resorted to the borrower's consent is essential. Of course, any sale, which is a contract of transfer of an immovable property, has to be as per the settlement between the parties executing the sale and has to be in writing. At first blush, therefore, it can be seen that Rule 8(8) would not be required to be enacted, if only that was contemplated. He contended that though the property is to be sold following the special provisions of the Securitisation Act the power of the bank to sell the property does not make the bank an owner of the property upon taking possession and though the property vests in the bank, upon the bank taking possession, it is only for the purpose of selling it so as to pass on a clear title to the auction purchaser. 29. True it is that Securitisation Act is a special legislation being a code in itself for protecting and securing the secured assets of the bank to empower them to take possession and sell those secured assets to recover their NPA. 29. True it is that Securitisation Act is a special legislation being a code in itself for protecting and securing the secured assets of the bank to empower them to take possession and sell those secured assets to recover their NPA. It is for that purpose that the rights of the borrower have been far whittled down under the special legislation than was under the general civil law relating to ownership and possessory rights consequent upon which the right of sale would follow as a corollary. However, a reading of this special act must show the intention of the legislation when specifically the word “borrower” is not used only in Rule 8(8) as against Rule 8(1) and 8(6) and though it is used at all places in the Act itself (see emphasis in bold above). Consequently, possession is obtained from the borrower by a possessory notice delivered to him. The secured asset is sold by one of the 4 modes specified under Rule 8(5) and the borrower has to be only served the notice for sale, but not the permission for sale by private treaty under Rule 8(6) the conduct of the proceedings by the non adjudicatory mode is fully under the control of and in the hands of the bank. The only fetter upon the bank is the legal fetter of obtaining atleast the reserve price. This is so as to obviate any collusion, nepotism or corruption. The objective yardstick for the sale would beget the best price and nothing lower than that. If, for whatever reason, an auction sale cannot take place or is not desired, the bank has powers to sell the secured asset by a private treaty. As it is generally believed that in the absence of auction or a tender or a quotation the best price may not be transparently visible and if indeed lesser than the market price is to be obtained and is conceded by either the bank or the borrower to enforce/discharge the liability and to call it a day, both the bank and the borrower may agree to do so. It is only to that extent that the 2nd proviso to Rule 9(2) sets out a leeway for a lesser price by “consent of the borrower” whose property is to be sold at such less price. However Rule 8(8) does not in terms specify “consent” of the borrower. It is only to that extent that the 2nd proviso to Rule 9(2) sets out a leeway for a lesser price by “consent of the borrower” whose property is to be sold at such less price. However Rule 8(8) does not in terms specify “consent” of the borrower. It instead mentions about “settlement” between the parties. There is no question of any settlement for the right price which is the market price or any price higher than the market price. Hence the borrower would have no role to play in such sale albeit by private treaty. The only aspect with which the borrower is concerned and has interest in is the price. The concept of settlement by private treaty must, therefore, mean and include a settlement for a lesser price specially in view of the nomenclature used by the legislature. 30. It may be that if the expression “parties” in Rule 8(8) means and includes “the bank and the borrower” upon the borrower not consenting or settling the terms of the private sale, the bank must forthwith cause public auction to be held. That would be the test of the price obtained under the private sale. Hence if the bank accepts the borrower's unilateral and unqualified refusal and does not cause public sale to be made at the price offered by the purchaser forthwith, the bank would be liable for breach of its contract with such purchaser. 31. In this case the bank desired to sell the secured asset. The licencee in possession sought to purchase it. The bank sought the price as per its own valuation. The licencee in possession accepted that valuation. The licencee in possession, though not an auction purchaser, paid 1/4th of the purchase price to the bank forthwith. The bank conceded the payment as just and reasonable and in the interest of all the parties not effecting the borrower, defendant No.2 except in reducing his liability. It desired to proceed with the sale. 32. It will have to be seen under the rules whether in that case it proceeded under Rule 8(8) or otherwise. It issued notice of 30 days to the borrower dated 24th July, 2006 in which it notified the borrower, defendant No.2 that it was not ready to wait to realise its dues and had obtained two independent valuations, the higher of which was being invoked. It issued notice of 30 days to the borrower dated 24th July, 2006 in which it notified the borrower, defendant No.2 that it was not ready to wait to realise its dues and had obtained two independent valuations, the higher of which was being invoked. It also called upon the borrower to discharge his liability and offered to credit his account for the price received. It has not invited objections of the borrower. The bank did not have to invite any such objections. There is no provisions in the rules for inviting objections to a sale based upon the valuation for a price higher than the highest valuation. It is not for the borrower to call the shots. He is a defaulter. He has constrained the bank to follow the procedure under the Securitisation Act which is the last remedy of the bank as the secured creditor. He has only to be issued notice of 30 days of the sale of immovable secured assets as per Rule 8(6). The notice dated 24th July, 2006 is such notice. It is not a notice to settle the terms of the agreement between the bank and the purchaser by the borrower. Notice under Rule 8(6) is to be issued for sale of the property under Rule 8(5). The bank has to obtain valuation and fix the reserve price for the sale by the 4 methods specified in Rule 8(5). Hence once the valuation is obtained and the reserve price is fixed, the sale must proceed. That sale can be upon any of the 4 eventualities–quotations, tenders, public auction or private treaty. The borrower has to be informed, and only informed, by a notice of 30 days that the property would be sold. The only liberty that the borrower has is to pay off the entire NPA or the loan so that the sale would not take place. The borrower can have no other right whether the sale is by public auction or by private treaty. Hence even if the sale is by private treaty and it is apparently unjust or at a lesser price the borrower may only be entitled to challenge such sale before the DRT. He cannot settle the terms of the sale as a legal right under Rule 8(8). He was not even called upon to do so in this case. 33. Hence even if the sale is by private treaty and it is apparently unjust or at a lesser price the borrower may only be entitled to challenge such sale before the DRT. He cannot settle the terms of the sale as a legal right under Rule 8(8). He was not even called upon to do so in this case. 33. This right of defendant No.2 as the borrower is to challenge the process undertaken by the bank under Section 13(4) of the Securitisation Act. The measures undertaken by the bank under Section 13(4) are of taking possession including sale of the secured asset. The sale is in any of the 4 modes in Rule 8(5) of the Rules framed under the Act. That includes the sale by private treaty. The right to challenge such sale rules out the right to stop such sale altogether. 34. Consequently the reading of the entire Section 13 relating to the enforcement of security by the bank and Sections 17 & 18 relating to the only right of the borrower to appeal r/w Rule 8 of the Rules framed under the Act setting out the procedure for sale by 4 modes, it is clear that the borrower is referred to as such at all places where reference to the borrower is so made. In Rule 8(8) there is no reference to the term “borrower”. The term borrower cannot be read into Rule 8(8). All that the rule requires is the term of the sale by private treaty to be in writing and not orally made. Hence the parties to the treaty/contract being the Bank and the purchaser must settle their terms in writing. This would assist the borrower in challenging the private sale before the DRT under Section 17 of the Securitisation Act by showing malafides or misfeasance, if any. 35. Construing Rule 8(8) otherwise would set at naught the entire spirit of the Act. It would keep the borrower in the driving seat. It would aid the borrower in calling the shots and delaying the sale of the secured asset. The entire security granted by the Act would turn turtle. The entire purpose and object of the Act would be compromised, merely because it is a private sale and not a public sale. The 4 methods of sale specified in Rule 8(5) would lose their sanctity. 36. The entire security granted by the Act would turn turtle. The entire purpose and object of the Act would be compromised, merely because it is a private sale and not a public sale. The 4 methods of sale specified in Rule 8(5) would lose their sanctity. 36. If only a public sale would merit the strict procedure without the interference of the borrower, all other methods would not have been allowed. A mere facade of a public auction, where none would bid, specially if the purchaser is in actual possession, is not an aspect which can be taken to be in the contemplation of the legislature. Hence 3 other methods were also specified in Rule 8(5). The procedure and the rights emanating from the procedure of sale is the same for all parties. The only specific provision for a sale by private treaty is the exclusion of an oral private contract under Rule 8(8). 37. Mr. Kamat drew my attention to the Division Bench judgment of the Madras High Court in the case of J. Rajiv Subramanian & Anr. Vs. M/s. Pandiyas & Ors. AIR 2012 Madras 2012. The court considered the issue of notice under Section 13(2) and (4) of the Securitisation Act and the consequent sale. The sale was effected by private treaty. It was a tad more than the reserve price of Rs.1.23 crores. The Court considered whether procedure under Rule 8(8) was properly adopted. Setting out Rule 8(8) in para 31 it considered the formalities to be adopted under Rule 8(5). It held in para 33 that aside from the sale by public auction or tender it could be by private treaty as settled between the parties under Rule 8(8) it observed: “The only condition is that it shall be on such terms as settled between all the parties in writing. From this, it is clear that the presence of debtor and his willingness in writing are essential.” 38. It may be mentioned that Rule 8(8) specifies “the parties”. The Court has read the rule as “all the parties”. Accepting the presence of the debtor and his willingness in writing as the essential ingredient of Rule 8(8), the Court accepts that the other two parties would be the bank and the purchaser. The Court then considers the facts of the case. The document showing the willingness of the borrower was not produced. Accepting the presence of the debtor and his willingness in writing as the essential ingredient of Rule 8(8), the Court accepts that the other two parties would be the bank and the purchaser. The Court then considers the facts of the case. The document showing the willingness of the borrower was not produced. Hence, the Court concludes that the procedure under Rule 8(8) was not followed or attempted to be followed. Referring to Rule 9(2) of the rules aforesaid (wrongly shown as Section 9 (2) of the Act) the Court held that the bank manager “exceeded his authority for the reasons best known to him”. The Court doubted the bonafides and hence did not permit the private sale. 39. In the case of A. Varalakshmi Vs. The Chief Manager Punjab National Bank Asset Recovery Management Branch MANU/TN/1074/2012 the reserve price was fixed at Rs.23 lakhs but the sale was for Rs.21 lakhs. The Court again considered Rules 8(8) and 9(2) and hence following the case of J. Rajiv Subramanian (supra) concluded that all the parties should have consented. 40. Both the cases are the kind where the borrower could have successfully challenged the sale before the DRT. Of course, no bank can act malafide, collusively, arbitrarily or mischievously. If that is shown, the Courts would certainly intervene. Even the legislation has made provision for appeal in such cases. This is not one such case. 41. The borrower has sought to enforce the right that never was. His exercise of right is premature. It is prior to the sale. It is not upon being aggrieved by the measures taken by the bank by way of the private sale. The purchaser has offered the best price and submitted to the bank's requirement of valuation. There is no reason why the sale could not take place. In fact even if it did not take place under the colour of a private treaty, it had to be forthwith effected by the bank by way of a public sale by auction. 42. It must be appreciated that the purchaser being in possession would have offered the best price. Better price could not have been contemplated. The bank's action is not only counter productive, but may result in doubts of its transparency and incorruptability. There is no reason, as Mr. Jagtiani argued, to side a total defaulter and to prejudice the faultless plaintiff. It must be appreciated that the purchaser being in possession would have offered the best price. Better price could not have been contemplated. The bank's action is not only counter productive, but may result in doubts of its transparency and incorruptability. There is no reason, as Mr. Jagtiani argued, to side a total defaulter and to prejudice the faultless plaintiff. Hence even if the rule is interpreted as contended by Counsel on behalf of the bank the prima facie case is seen to have been made out by the plaintiff upon the admitted agreement by way of the bank's own affidavit which is sought to be specifically performed and the bank has forfeited its balance of convenience upon it not having taken any steps to cause sale by public auction as soon as sale by private treaty could not be held. That could have called the bluff of the borrower defendant No.2, who was only a meddler in the transaction. If, on the other hand, the bank had caused the sale by private treaty to be effectuated, as per its own agreement by a contract/settlement between “the parties” to the sale, in writing the borrower's right to challenge the sale would have been available to him before the DRT under Section 17 of the Securitisation Act. Defendant No.2 has not appeared before this Court to show how or why the agreement between the bank and the plaintiff should not be allowed. The Court must see that the nationalised bank holding public monies cannot be made not to recover easily recoverable NPA under a misconceived interpretation or by meekly submitting to the dictates of the defaulting borrower who has unilaterally refused the sale after due legal process was followed. 43. Consequently, the plaintiff who has made out a prima facie case of the agreement entered into by the bank as per its affidavit in the Writ Petition and who has offered more than the market price as per the valuation of the bank rounded off must be protected pending the suit. 44. Hence, the following order. ORDER 1. 43. Consequently, the plaintiff who has made out a prima facie case of the agreement entered into by the bank as per its affidavit in the Writ Petition and who has offered more than the market price as per the valuation of the bank rounded off must be protected pending the suit. 44. Hence, the following order. ORDER 1. Defendant No.1 Bank is restrained from selling, alienating, transferring, disposing off or creating any third party rights in respect of the suit flat No.23 and garage No.23 in Chitrakoot Apartment, Altamount Road, Mumbai-400 026 in favour of any person other than the plaintiff and from dispossessing the plaintiff or disturbing his possession as the representative of the licencee of Defendant No.2 therefrom except by due legal process for eviction as licencee. 2. Notice of Motion is disposed of accordingly.