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2016 DIGILAW 1694 (ALL)

Afsar Khan v. Central Bank of India

2016-05-03

V.K.MATHUR

body2016
JUDGMENT : V.K. Mathur, Chairperson. The present appeal has been preferred by the Appellants-Borrowers under Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the 'SRFAESI Act') against the order dated 27th April 2015 passed by the learned DRT, Allahabad wherein the Securitization Application No. 423/2014 filed by the Appellants was dismissed on the ground of delay. 2. The brief facts of the present case are that the present Appellants were sanctioned a term loan of Rs. 3.00 lacs by the Respondent-Bank for business. The Respondent-Bank had issued a demand notice dated 6th November, 2012 too the Appellants-Borrowers under Section 13(2) of the SRFAESI Act for a sum of Rs. 4,83,655/- plus interest. Therefore, the possession notice under Section 13(4) of the SRFAESI Act was issued by the Bank on 29th January, 2013. It was further stated that the sale notice was issued to the Appellant on 8th July, 2014 by the Respondent-Bank and the same was published in two newspapers scheduling the auction of the property in question on 13th August, 2014. 3. The Appellants preferred a Writ Petition No. 50108/2014 before the Hon'ble High Court, Allahabad challenging the sale notice dated 8th July, 2014 which was dismissed as withdrawn on 17th September, 2014 by the Hon'ble High Court. 4. It was further stated that the said writ petition filed by the Appellants was withdrawn by the Counsel but the same was not communicated to the Appellants by the Counsel. 5. It was further averred that the Appellants had received a letter dated 29th August, 2014 from the Respondent-Bank wherein it was stated that the property in question have been sold for a sum of Rs. 8.19 lacs. Thereafter, the Appellants contacted the office of the Respondents-Bank to get the particulars/papers regarding the auction sale but the same was not provided by the Respondent-Bank. 6. It is further stated that under the RTI the Appellants were informed vide letter dated 31st October, 2014 that the property has been sold to the Respondent No. 3 for a sum of Rs. 8.19 lacs and the sale certificate has been issued on 26th August, 2014. 6. It is further stated that under the RTI the Appellants were informed vide letter dated 31st October, 2014 that the property has been sold to the Respondent No. 3 for a sum of Rs. 8.19 lacs and the sale certificate has been issued on 26th August, 2014. It is further stated that the Respondent-Bank had not provided any information with regard to the sale consideration and as such the certified copy of the registered sale certificate was received by the Appellants on 20th November, 2014 from the Sub-Registrar-III, Kanpur Nagar. 7. The Appellant No.1 after receiving the requisite papers on 20th November, 2014 met his Counsel on 22nd November, 2014 for filing the securitization application and for want of money the Appellant No. 1 returned to Kanpur and after arranging the money, he again came to Allahabad on 9th December, 2014 and filed the securitization application No. 423 of 2014 on 11th December, 2014 before the DRT, Allahabad. The Tribunal below vide impugned order dated 27th April, 2015 dismissed the Securitisation Application on the ground of delay. Being aggrieved by the said impugned order, the Appellants have preferred the present appeal under Section 18 of the SRFAESI Act, 2002. 8. The learned Counsel for the Appellants Borrowers submitted that the learned DRT has erred in dismissing the securitization application of the Appellants on the ground of delay. It was contended that the Appellants had explained the delay. It was also submitted that on account of non-compliance of Rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as 'Rules',) the auction sale of the mortgaged property in favour of the Respondent No. 3 by the Respondent-Bank be set aside. It was averred that the Respondent-Bank had auctioned the property at an inadequate price. It was prayed that the impugned order dated 27th April, 2015 cannot be sustained and the auction sale of the mortgaged property be set aside. 9. The learned Counsel for the Appellants placed reliance in the case of Himalayan Coop. Group Housing Society v. Balwan Singh, 2015 (7) S.C.C. 373 regarding client-lawyer relationship, nature and scope, wherein it was held that lawyers should follow the client's instructions rather than substitute their judgment for that of the client. 9. The learned Counsel for the Appellants placed reliance in the case of Himalayan Coop. Group Housing Society v. Balwan Singh, 2015 (7) S.C.C. 373 regarding client-lawyer relationship, nature and scope, wherein it was held that lawyers should follow the client's instructions rather than substitute their judgment for that of the client. The case of Lachhman Dass v. Jagat Ram, 2007 (10) S.C.C. 448 cited by the Counsel relates to right of preemption and the right to hold property. 10. The learned Counsels for the Respondent-Bank and Respondent No. 3-Auction purchaser submitted that the learned DRT below has rightly dismissed the securitization application of the Appellants. The Appellants had preferred the securitisation application on 11th December 2014 after an undue delay, without sufficient cause after the receipt of the sale notice dated 8th July, 2014 and auction sale of the mortgaged property on 13th August, 2014. The Respondent-Bank complied with the Rules 8 and 9 of the 'Rules' issued sale certificate to the Respondent No. 3-Auction Purchaser on 26th August, 2014 and registered sale deed was executed on 9th October, 2015. The Respondent No. 3 is bona fide purchaser of the property and the Appellants are not entitled to redeem the property after confirmation of sale and execution of sale deed. It was prayed that the appeal filed by the Appellants be dismissed with costs. 11. Heard the learned Counsels for the parties and perused the record of the case. 12. In the present matter, the Respondent-Bank had issued a demand notice dated 6th November, 2012 to the Appellants-Borrowers under Section 13(2) of the SRFAESI Act for a sum of Rs. 4,83,655/- plus interest (Exhibit R-1 of reply). As the Appellants failed to repay the demand, the possession notice under Section 13(4) of the SRFAESI Act was issued by the Bank on 29th January, 2013 and publication of the said notice was made on the 30th January, 2013 in two leading newspapers and also affixed on the conspicuous part of the property in question (Exhibit R-2) as required under Rule 8(1) and 8(2) of the 'Rules'. 13. Since the Appellants failed to liquidate the dues of the Respondent-Bank, the Bank obtained valuation report dated 2nd June, 2014 (Exhibit R-2) and thereafter, sale notice dated 8th July, 2014 under Rule 8(6) of the 'Rules' was issued to the Appellants. 13. Since the Appellants failed to liquidate the dues of the Respondent-Bank, the Bank obtained valuation report dated 2nd June, 2014 (Exhibit R-2) and thereafter, sale notice dated 8th July, 2014 under Rule 8(6) of the 'Rules' was issued to the Appellants. The Respondent-Bank published E-auction notice in two leading newspapers on 8th July, 2014 and also affixed the same on the conspicuous part of the mortgaged property fixing the auction on 13th August, 2014 (Exhibit R-2) 14. It is an admitted that the Appellants, who are the borrowers filed a Writ petition No. 50108 of 2014-Afsar Khan and another v. State of and another, before the Hon'ble High Court, Allahabad challenging the auction sale notice dated 8th July, 2014 issued by the Respondent-Bank. The Hon'ble High Court as per order dated 17th September, 2014 dismissed the writ petition as withdrawn. 15. The Appellants preferred a securitization application No. 423 of 2014 on 11th December, 2014 under Section 17(1) of the SRFAESI Act before the DRT, Allahabad challenge the auction sale process of the Bank. The application under Section 17(1) of the SRFAESI Act was filed on 11th December, 2014 whereas the period of limitation as provided under Section 17(1) of the SRFAESI Act is 45 days from the date on which measures under Section 13(4) of the SRFAESI Act have been taken. 16. It is also to be noticed that even after the order dated 17th September, 2014 of the Hon'ble High Court, after the permission was given to the learned Counsel for the Appellants to withdraw the writ petition, the Appellants have filed the securitization application on 11th December, 2014 after a delay of three months. 17. The Apex Court in case of Esha Bhattacharjee v. Raghunathupur Nafar Academy & Ors., (2013) 12 S.C.C. 649 had laid down the principles regarding condonation of delay which are as under: - "xxx (v) Lack of bona fides imputable to a party seeking condonation of delay is a significant and relevant fact; (vi) The concept of liberal approach has to encapsulate the conception of reasonableness and it cannot be allowed a totally unfettered free play; xxxx (ix) The conduct, behaviour and attitude of a party relating to its inaction or negligence are relevant factors to be taken into consideration. It is so as the fundamental principle is that the Courts are required to weigh the scale of balance of justice in respect of both parties and the said principle cannot be given a total go up by in the name of liberal approach; xxxx (xviii) The increasing tendency to perceive delay as a non-serious matter and, hence, lackadaisical propensity can be exhibited in a nonchalant manner requires to be curbed, of course, within legal parameters." 18. The learned Counsel for the Appellants contended that the Appellants have stated in the delay condonation application that the Appellants filed the writ petition No. 50108 of 2014 challenging the auction sale notice dated 8th July, 2014 wherein auction sale was to be conducted on 13th August, 2014 which was dismissed as withdrawn by the Hon'ble High Court, Allahabad on 17th September, 2014. It was also stated that the writ petition was withdrawn by the Counsel of the Appellants but the Appellants were not informed. Thereafter, the Appellants received a letter dated 29th August, 2014 issued by the Respondent-Bank stating that the mortgaged property had been sold for a sum of Rs. 8,19,000/-. The Appellants filed RTI application wherein the Bank sent information letter dated 31st October, 2014 regarding sale of property to the Respondent No. 3 and a copy of sale certificate dated 26th August, 2014. The Appellants after receiving the copy of the registered sale certificate by the office of the Sub-Registrar Kanpur on 20th November, 2014 met their Counsel on 22nd November, 2014 to file the securitization application and the Appellants after collecting the expenses filed a securitization application before DRT on 11th December, 2014 and as such the delay be condoned. 19. The Appellant No. 1-Afsar Khan has stated in his affidavit in support of delay condonation application that the Respondent-Bank had issued the sale notice dated 8th July, 2014 to the Appellants. Thereafter, the Appellants challenged the said sale notice dated 8th July, 2014 before the Hon'ble High Court, Allahabad in writ petition No. 50108 of 2014 which was dismissed as withdrawn on 17th September, 2014. The Appellants have further stated that the writ petition was withdrawn by the Counsel of the Appellants but the same was not informed to the Appellants and the Counsel was assuring that as and when any order may be passed, the same would be provided to the Appellants. The Appellants have further stated that the writ petition was withdrawn by the Counsel of the Appellants but the same was not informed to the Appellants and the Counsel was assuring that as and when any order may be passed, the same would be provided to the Appellants. This contention of the Appellants regarding not informing the Appellants cannot be said to be truth-worthy as the Appellants have levelled, in my opinion, false and baseless allegations against their own Counsel in the High Court who is also an officer of the Court. The Appellants has the knowledge of the sale notice dated 8th July, 2014 which was challenged before the Hon'ble High Curt. The filing of RTI application on the basis of which information was received by the Appellants on 31st October, 2014 and thereafter, meeting the Counsel on 22nd November, 2014 and filing the securitization application before the DRT below on 11th December, 2014 cannot be treated as sufficient reason to condone the delay in this matter. 20. Therefore, in view of the law laid down in Esha Bhattacharjee v. Raghunathpur Nafar Academy (supra) and from the conduct of the Appellants, it cannot be said that the Appellants were prevented by any just cause to present the securitization application before the DRT within time. Thus, in the present case there are serious latches and negligence on the part of the Appellants in presenting the appeal before the DRT, Allahabad. The delay in the present case cannot be mechanically considered since delay has not been properly, satisfactorily and convincingly explained. 21. In view of the above discussion, the securitization application of the Appellants filed before the DRT, Allahabad under Section 17(1) of the SRFAESI Act is barred by limitation. 22. It is an admitted fact that the Appellants after receipt of the Sale Notice dated 8th July, 2014 challenged the same before the Hon'ble High Court in Writ Petition No. 50108 of 2014 which as per order dated 17th September, 2014 was dismissed as withdrawn. Thereafter, the Appellants filed the securitization application before the DRT, Allahabad on 11th December, 2014 after delay challenging the auction sale process of the Respondent-Bank. 23. Thereafter, the Appellants filed the securitization application before the DRT, Allahabad on 11th December, 2014 after delay challenging the auction sale process of the Respondent-Bank. 23. It is relevant to note from the record of the case that the sale Notice dated 8th July 2014 under Rule 8(6) of the 'Rules' was sent by registered post on 8th July, 2014 to the Appellants as per photocopy of receipts affixed on the sale notice. The sale notice was duly published in two newspapers 'Dainik Jagaran' and "the pioneer" on 8th July, 2014 fixing the E-auction on 13th August, 2014 and the notice was also affixed on the conspicuous part of the mortgaged property (Exhibit R-4). Thus, there is due compliance of mandatory provision of Rules 8(6) and 8(7) of the 'Rules' by the Respondent-Bank. 24. In the present case, the mortgaged property was auctioned on 13th August, 2014 and the Respondent No. 3-auction purchaser had deposited the earnest money and 25% of the sale price amounting to Rs. 8,19,000/- and the remaining sale amount within stipulated period as per record filed along with sale certificate dated 26th August, 2014 (Exhibit No. R-2). As such the Respondent-Bank had complied with Rule 9(3) and 9(4) of the 'Rules'. Thus, the contention of the learned Counsel for the Appellants regarding non-compliance of the mandatory provisions of Rules 8(6), 8(7), 9(3) and 9(4) of the 'Rules' cannot be accepted. 25. In Indian Bank v. Blue Jaggers Estates Limited, (2010) 8 S.C.C. 129 , the Hon'ble Supreme Court has observed as under: "25. The Court cannot lose sight of the fact that the Bank is a trustee of public fund. It cannot compromise the public interest for benefiting private individuals. Those who take loan and avail financial facilities from the Bank are duty-bound to repay the amount strictly in accordance with the terms of the contract. Any lapse in such matters has to be viewed seriously and the Bank is not only entitled but duty-bound to recover the amount by adopting all legally permissible methods. Parliament enacted the act because it was found that legal mechanism available till then was wholly insufficient for recovery of the outstanding dues of Banks and financial institutions." 26. Any lapse in such matters has to be viewed seriously and the Bank is not only entitled but duty-bound to recover the amount by adopting all legally permissible methods. Parliament enacted the act because it was found that legal mechanism available till then was wholly insufficient for recovery of the outstanding dues of Banks and financial institutions." 26. In the present case, merely because the Appellants have stated that the reserve price of the property fixed was less, in the absence of challenge at the relevant time and not raising objection, would not be sufficient to set aside the auction sale. The auction cannot be held on the ground that it has fetched inadequate price. The sale price was not less than the reserve price and the Respondent no. 3-Auction purchaser had immediately paid 25% of the amount of sale price. The learned Counsel for the Appellants has also not pleaded any ground of fraud or submitted any evidence in this regard. 27. In the instant case in hand, the Appellants-Borrowers have not exercised the right of redemption under Section 13(8) of the SRFAESI Act as there was no impediment on the part of the Appellants to settle their dues since after the issuance of sale notice on 8th July, 2014 which had been challenged before the Hon'ble High Court, Allahabad in Writ Petition No. 50108 of 2014. As such when the Appellants had not approached the Respondent-Bank with regard to the repayment of due amount to redeem the mortgaged property, the Appellants have lost the right of redemption. 28. In the facts and circumstances of the present case, once the sale certificate (Exhibit-R-5) was issued to the Respondent No. 3-Auction Purchaser on 26th August, 2014 after accepting the bid and the sale was confirmed as per the provisions of the SRFAESI Act and further sale was registered on 9th October, 2014, the auction purchaser has became the absolute owner of the property and as such the right in relation to the property vests with the auction purchaser. The sale of the secured asset in public auction as per the provisions of the SRFAESI Act and Rules, which has come to a logical end after issuance of a sale certificate, is a complete and absolute sale for the purpose of SRFAESI Act as has been held in the case of Smt. Sadhana Shukla v. Debts Recovery Appellate Tribunal, Allahabad, 2015 (1) D.R.T.C. 489 (All). Thus, the auction sale of the mortgaged property by the Respondent-Bank consequent to the issuance of sale notice is held to be legally valid. 29. In view of the above discussion, there is no illegality in the impugned order dated 27th April, 2015 passed by the learned DRT, Allahabad dismissing the securitization application filed by the Appellants-Borrowers on the ground of delay. Even on merits, in the present case, the Appellants are not entitled to set aside the auction sale. 30. Consequently, there is no merit in the present appeal which is dismissed and the interim order passed earlier is vacated. The parties to bear their own costs.