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Madhya Pradesh High Court · body

2014 DIGILAW 52 (MP)

Anita Sadana v. Baljinder Kaur

2014-01-09

D.K.PALIWAL, S.K.GANGELE

body2014
JUDGMENT D.K. Paliwal, J. The Writ petition No.3368/2012 preferred by Smt. Anita Sadana (auction purchaser) and W.P. No.3676/2012 preferred by State Bank of India are being disposed of by this common order as both the writ petitions have been preferred under Article 227 of the Constitution of India for quashing of the order Annexure P-1 passed by respondent No.-4 Debts Recovery Appellate Tribunal, Allahabad in appeal No. R-54/11 dated 12.03.2012 confirming the order passed by respondent No.-3 Debts Recovery Tribunal, Jabalpur in S.A. No.66 /2010 dated 24.02.2011, allowing the appeal of the respondent Baljinder Kaur. 2. For the purpose of consideration of the matter the facts stated in W.P. No.3676 are being mentioned. 3. The erstwhile State Bank of Indore, Gurudwara Chowk-Agra, Bombay Road, Shivpuri merged into the State Bank of India. The respondent No.-1 Smt. Baljinder Kaur borrowed money and mortgaged her house property. However she failed to pay dues as per the agreement. The petitioner bank claimed outstanding amount of Rs. 4,18,649/- from the borrower vide notice under Rules 6 and 8 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (SARFAESI ACT). Earlier a notice dated 29.05.2007 was issued for recovery of Rs. 3,58,967/- under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The amount was not paid by respondent No. 1 in stipulated time, thereafter a notice was served dated 23.08.2007 under Section 13(4) of SARFAESI Act. The possession of property was taken. The said notice was published in the newspapers on 28.08.2007 under Rule 8(2) of the Security Interest (Enforcement) Rules 2002. Thereafter it was open for the bank to auction the property for recovery of the dues. A sale proclamation under Section 13(4) was published on 11.09.2009 by which it was notified that the property shall be put to auction on 10.10.2009. It is further stated that the property was valued by the qualified valuer of the bank. Valuation report dated 30-08-2007 was submitted vide Annexure P/3. After following the due procedure, the auction of the mortgaged house property took place on 10.10.2009. In the auction three bidders participated. One of them was the petitioner of W.P No.3368/2012, Smt. Anita Sadana. The bid of Smt. Anita Sardana of Rs.7,70,000/- was the highest, hence the bid of Anita Sadana was accepted and the sale certificate was accordingly issued. After following the due procedure, the auction of the mortgaged house property took place on 10.10.2009. In the auction three bidders participated. One of them was the petitioner of W.P No.3368/2012, Smt. Anita Sadana. The bid of Smt. Anita Sardana of Rs.7,70,000/- was the highest, hence the bid of Anita Sadana was accepted and the sale certificate was accordingly issued. The same was registered in the office of the Sub-Registrar Shivpuri on 7.11.2009. The original document of title of the said property was handed over to Smt. Anita Sadana. The amount of auction was received by the bank which was more than the amount of dues payable by the borrower, hence after making recovery of the dues the excess amount of Rs.2,73,369/- has been returned to the borrower vide bankers cheque No. 349320 dated 5.11.2009 which was accepted by the borrower. It is further stated that borrower respondent No.-1 got an order dated 8.10.2009 from the Consumer Protection Forum Shivpuri whereby the bank was directed to accept the overdue amount of the house loan including the penal interest if deposited before the proceedings of auction. However, the respondent No.-1 borrower filed an appeal before the D.R.T. Jabalpur for quashing the sale certificate. The appeal was allowed vide order dated 24.02.2011 Annexure P/2 against both the petitioners of Writ Petition No. 3676/2012 and Writ Petition No. 3368/2012. The bank challenged the order before the D.R.A.T. at Allahabad which has been dismissed vide order dated 12.03.2012 Annexure P/1. Being aggrieved from the aforementioned order both the Writ Petitions have been preferred. 4. Both the Writ Petitioners have submitted that the impugned orders Annexure P/1 and P/2 are contrary to law therefore liable to be quashed. It is further submitted that both the Tribunals have observed that bank have failed to comply with the Rule 8(5) of the Security Interest (Enforcement) Rules 2002. However the bank has not violated the said Rules. The valuation report of the qualified Panel is on record. It is further submitted that the valuation report dated 10.05.2010 submitted by the borrower, valuing property of Rupees twenty four lacs ought not to be relied upon in context with the auction which took place in the year 2009. This valuation report is also imaginary and superfluous and not based on sound principles of valuation. It is further submitted that the valuation report dated 10.05.2010 submitted by the borrower, valuing property of Rupees twenty four lacs ought not to be relied upon in context with the auction which took place in the year 2009. This valuation report is also imaginary and superfluous and not based on sound principles of valuation. It is further submitted that publication of the auction notice in Nai Duniya and Navbharat daily newspapers dated 11.09.2009 by the bank has been overlooked by the learned Tribunals and wrong findings have been given regarding non-publication of auction notice. It is further submitted that two notices were issued by the bank before auctioning the property under Rules 6 & 8 of the Security Interest (Enforcement) Rules 2002 which has been received by the borrower. In both the notices value of the property was mentioned Rs.7,65,000/- The borrower has not raised any objection regarding the valuation of the property even after receipt of the notices. Both the Tribunals have not considered this important aspect. It is further submitted that after issuing of the auction certificate the deed was executed on 7.11.2009 then the offer willingness of the borrower to liquidate the dues have wrongly been considered. The case filed by the borrower before DRT barred by limitation. The condonation of delay by DRT is arbitrary. The undue haste exercised by both the tribunals are apparent from the fact that it has been mentioned that there was sole bidder Smt. Anita Sadana. It is submitted that there are as many as three bidders of which Smt. Anita Sadana's bid was highest one. Thus both the learned Tribunals have ignored the vital facts of the case. It is further submitted that the learned Appellate Tribunal imposed the costs of Rs. 50,000/- in arbitrary manner. There is no reason to impose such costs on the petitioner. Hence prayed for quashment of the order. 5. Learned counsel for the respondents have submitted that compliance of mandatory Rule 8(5) of the Security Interest (Enforcement) Rules 2002 has not been made. Hence, D.R.T. Jabalpur has rightly allowed the prayer of respondent Baljindar Kaur. 6. We have considered the submissions of the learned counsels and carefully perused the orders and the documents. 7. The crucial issue which requires consideration is whether the Rule 8(5) of the Security Interest (Enforcement) Rules 2002 has been complied before auction. 8. Hence, D.R.T. Jabalpur has rightly allowed the prayer of respondent Baljindar Kaur. 6. We have considered the submissions of the learned counsels and carefully perused the orders and the documents. 7. The crucial issue which requires consideration is whether the Rule 8(5) of the Security Interest (Enforcement) Rules 2002 has been complied before auction. 8. Rule 8(5) of the Security Interest (Enforcement) Rules 2002 reads as under : '(5) Before effecting sale of the immovable property referred to in sub-rule (1) of Rule 9, the authorised 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 person 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. 9. From the plain reading of the aforesaid rule, it is crystal clear that before auctioning the property the valuation report has to be called. It further provides that the authorized officers shall also fix the reserve price of the property in consultation with the secured creditor. 10. It is contended by the learned counsel for the petitioner that the valuation report was obtained from a qualified valuer Ranjan K. Raina, B.E.(Civil) LLB; M.I.E.; F.I.V.; M.I.C.A. Registered valuer (Govt. of India). As per the said report the Distress Sale Realizable Value of the property was Rs. 7,65,000/-. The learned D.R.T. and D.R.A.T., have overlooked the said report. The said report is Ex. R/3 before D.R. A. T. Allahabad. 11. On going through the order passed by the learned D.R.T. it appears that no valuation report was produced before D.R.T. Though it was submitted before D.R.A.T. that the valuation report was produced but D.R.A.T. has found that no application for filing the valuation report has been moved by the bank before the Tribunal. The D.R.A.T. has recorded the specific finding that in absence of any application on behalf of the bank for taking the said document on record and merely filing of the said document along with memo of appeal, the document as such cannot be accepted. The D.R.A.T. has recorded the specific finding that in absence of any application on behalf of the bank for taking the said document on record and merely filing of the said document along with memo of appeal, the document as such cannot be accepted. If for the sake of argument it is assumed that the valuation report Ex-P/3 was obtained, even then it cannot be held that Rule 8(5) of the Security Interest (Enforcement) Rules 2002 has been complied with because Annexure R/3 is of dated 30.08.2007 while the sale proclamation was published on 11.09.2009 i.e. after two years of receipt of valuation report. It is common knowledge that the market value of the house property go up day-by-day. As per the valuation report dated 30.08.2007, Ex- P/3 the valuation of the house was mentioned as Rs. 9,00,000/-. The word 'value' means intrinsic worth or cost or price for sale of a thing/ property. The value of the property on the date of sale proclamation on 11.09.2009 must have gone considerably on 11.09.2009. 12. In the matter of Kerala Finance Corporation v. Vineet Paul (2011)4 SCC 171 : ( AIR 2011 SC 1388 ), the State has not made rules for sale of property. Hon'ble Apex Court has issued guidelines for sale of property. The guideline IV to VIII are as under : (iv) A highest bidder in public auction cannot have a right to get the property or any privilege, unless the authority confirms the auction-sale, being fully satisfied that the property has fetched the appropriate price and there has been no collusion between the bidders. (v) In the matter of sale of public property, the dominant consideration is to secure the best price for the property to be sold. This can be achieved only when there is maximum public participation in the process of sale and everybody has an opportunity of making an offer. It becomes a legal obligation on the part of the authority that property be sold in such a manner that it may fetch the best price. (vi) The essential ingredients of sale are correct valuation report and fixing the reserve price. In case proper valuation has not been made and the reserve price is fixed taking into consideration the inaccurate valuation report, the intending buyers may not come forward treating the property as not worth purchase by them. (vi) The essential ingredients of sale are correct valuation report and fixing the reserve price. In case proper valuation has not been made and the reserve price is fixed taking into consideration the inaccurate valuation report, the intending buyers may not come forward treating the property as not worth purchase by them. (vii) Reserve price means the price with the public auction starts and the auction-bidders are not permitted to give bids below the said price i.e. the minimum bid at auction. (viii) The debtor should be given a reasonable opportunity in regard to the valuation of the property sought to be sold, in absence thereof the sale would suffer from material irregularity where the debtor suffers substantial injury by the sale. From the aforesaid guidelines, it is evident that before sale of the property is confirmed the valuation report has to be taken and all endeavours should be made before confirming the auction sale that the property has fetched the best price. 13. In Navalkha and Sons v. Sri Ramanya Das and others, AIR 1970 SC 2037 , the Apex Court while dealing with the confirmation of sale by Court held that there must be a proper valuation report, which should be communicated to the judgment-debtor and he should file his own valuation report and the sale should be conducted in accordance with law and after confirmation of sale and issuance of sale certificate. Court cannot interfere unless it is found that some material irregularity in the conduct of sale has been committed. The Court further held that it should not be a forced sale. A valuer's report should be as good as the actual offer and the variation should be within limit. Such estimate should be done carefully. The Court further held as under : 'The condition of confirmation by the Court operates as a safeguard against the property being sold at inadequate price whether or not it is a consequence of any irregularity or fraud in the conduct of the sale. In every case it is the duty of the Court to satisfy itself that having regard to the market value of the property the price offered is reasonable. Unless the Court is satisfied about the adequacy of the price the act of confirmation of the sale would not be a proper exercise of judicial discretion....'. 14. In every case it is the duty of the Court to satisfy itself that having regard to the market value of the property the price offered is reasonable. Unless the Court is satisfied about the adequacy of the price the act of confirmation of the sale would not be a proper exercise of judicial discretion....'. 14. Similar view has been reiterated by the Apex Court in Chairman, Indore Vikas Pradhikaran v. Pure Industrial Coke and Chemicals Ltd. and others, AIR 2007 SC 2458 and Commissioner of Municipal Corporation, Shimla v. Prem Lata Sood and others, (2007) 11 SCC 40 : [AIR 2007 SC (Supp) 272]. On the basis of valuation report Annexure R/1 it cannot be said that it fetched the best price of the house property. 15. The learned counsel for the petitioner contended that no period is provided under Rule 8(5) of the Security Interest (Enforcement) Rules 2002, for obtaining the valuation report. True it is but, it doesn't mean that the valuation report, howsoever it is old can be taken into consideration. In our opinion the valuation report must be obtained before a reasonable period of proclamation of auction because the value of the house property is going up with the passage of time. In the instant case, the valuation report Annexure P/3 was obtained about two years prior to the publication of the sale proclamation of the property and on the basis of value of the property as on 30/07/2007 the reserve price of the house property has been fixed for auctioning the same cannot be taken into consideration. 16. In Anil Kumar Shrivastava v. State of U.P. and another, AIR 2004 SC 4299 , the Hon'ble Apex Court considered the scope of fixing the reserve price and placing reliance on its earlier judgment in Duncans Industries Ltd. v. State of U.P. and others, AIR 2000 SC 355 , explained that reserve price limits the authority of the auctioneer. The concept of the reserve price is not synonymous with valuation of the property. These two terms operate in different spheres. An invitation to tender is not an offer. It is an attempt to ascertain whether an offer can be obtained with a margin. The valuation is a question of fact, it should be fixed on relevant material. The concept of the reserve price is not synonymous with valuation of the property. These two terms operate in different spheres. An invitation to tender is not an offer. It is an attempt to ascertain whether an offer can be obtained with a margin. The valuation is a question of fact, it should be fixed on relevant material. The difference between the 'valuation' and 'reserve price' is that, fixation of an upset price may be an indication of the probable price which the property may fetch from the point of view of intending bidders. Fixation of the reserve price does not preclude the claimant from adducing proof that the land had been sold for a low price'. 17. In view of aforesaid analysis the submissions of the learned counsel for the petitioners that valuation report was obtained, reserve price was fixed and petitioner was apprised therefore the rule 8(5) of Security Interest (Enforcement) Rules, 2002 were strictly complied with in bringing property for sale are devoid of any merits therefore cannot be accepted. There is no need to consider the other submissions raised on behalf of the petitioner because both the petitions are liable to be dismissed on the sole ground of non-compliance of Rule 8(5) Security Interest (Enforcement) Rules, 2002. 18. The Hon'ble Apex Court in Lachhman Dass v. Jagat Ram and others, (2007) 10 SCC 448 : (AIR 2007 SC (Supp) 1169) has held that a right to hold property is a constitutional right as well as a human right. A person cannot be deprived of his property except in accordance with the provisions of statute. As noticed above the petitioner Bank has not complied with the mandatory rule we do not find any illegality and perversity in the orders passed by both the Tribunals. However the DRAT has imposed a cost of Rs 50,000/- on the petitioner Bank. There is no whisper on which ground the same has been imposed. We see no reason for imposition of cost. Therefore the direction with regard to imposition of cost is unsustainable. Hence it is quashed. Both the petitions are disposed of accordingly. No order as to costs. Order accordingly.