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2017 DIGILAW 2107 (RAJ)

Karwa Trading Company v. Bank of Baroda

2017-09-20

AJAY RASTOGI, DEEPAK MAHESHWARI

body2017
JUDGMENT : Ajay Rastogi, J. Instant intra-court appeal is directed against order of the ld. Single Judge dated 12.01.2017 setting aside order of the ld. Debt Recovery Tribunal dated 17.01.2014 confirmed by the ld. Debt Recovery Appellate Tribunal in the appeal preferred by the secured creditor (Bank of Baroda) dated 09.04.2015. 2. The brief facts of the case which are relevant and manifest from the record as alleged are that the respondent-Bank (secured creditor) inter-alia granted term loan of Rs. 100 lakh and cash credit limit of Rs. 95 lakh to the appellant (borrower) inter-alia against the security of two mortgaged properties namely (i) industrial plot situated at Chittor Road, Bundi measuring 500 Sq.Mtrs. and (ii) a residential/housing property situated at 1-Ja-27, Vikas Nagar, Bundi measuring 198 Sq.Mtrs. It reveals from the record that the appellant failed to repay the term loan, as per the terms & conditions of the agreement, the account of the appellant as alleged by the Bank became NPA on 31.10.2012 and in furtherance thereto notice under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short 'SARFAESI Act, 2002') dated 07.01.2013 was served upon the appellant borrower demanding a sum of Rs. 1,85,37,218.80p and the Bank took symbolic possession of the immovable property/residential house and also issued notice under section 13(4) of the SARFAESI Act, 2002 on 22.08.2013 and an application was moved under section 14 of the SARFAESI Act, 2002 which came to be allowed on 08.11.2013 and with the police assistance the Bank took possession of the residential house, which is one of the mortgaged property of the appellant-borrower, on 25.11.2013. The Bank issued a sale notice by public auction of the residential property dated 16.12.2013, with which we are presently concerned on the reserve price of Rs. 48.65 lakh for sale of the secured asset in terms of the procedure prescribed u/R.8 read with R.9 of the Security Interest (Enforcement) Rules, 2002 and the date of auction notified was 20.01.2014. 3. At this stage, the appellant-borrower challenged the action of the Bank by filing Securitisation Application (SA) No.09/2014 under section 17 of the SARFAESI Act, 2002 before the ld.Debt Recovery Tribunal, Jaipur on 11.01.2014 on manifold grounds. Written statement was filed by the Bank to the SA and the matter was taken up by the ld. 3. At this stage, the appellant-borrower challenged the action of the Bank by filing Securitisation Application (SA) No.09/2014 under section 17 of the SARFAESI Act, 2002 before the ld.Debt Recovery Tribunal, Jaipur on 11.01.2014 on manifold grounds. Written statement was filed by the Bank to the SA and the matter was taken up by the ld. Debt Recovery Tribunal for interim relief on 17.01.2014 and it was ordered that if the appellant-borrower deposits Rs. 20 lakh on 20.01.2014 by 12:00 Noon, the Bank shall accept the bids but not finalize the bids/confirm the sale of the secured asset and if the appellant-borrower commits default in payment of balance amount of Rs. 28.65 lakh, the restraint order will be vacated automatically and if the appellant-borrower deposits the reserve price of Rs. 48.65 lakh with the Bank on or before 27.01.2014, the Bank shall deliver the possession of the secured asset along with the original title deeds of the property in question to the borrower. The remittance of full amount of Rs. 48.65 lakh through RTGS & received by the Bank is not disputed. 4. Order of the ld.Debt Recovery Tribunal came to be challenged by the Bank in appeal before the ld.Debt Recovery Appellate Tribunal and the defence of the Bank before the ld.Appellate Tribunal was that in public auction the Bank had received bids ranging from Rs. 61.50 lakh to Rs. 71 lakh and the amount of debt due against the appellant-borrower at that point of time was Rs. 2 Crores and if at all the appellant-borrower is interested or keen to redeem the mortgaged property, he could do so by discharging the entire liability and not by making payment of Rs. 48.65 lakh, as ordered by the ld.Tribunal below and further averred that order of the ld.Debt Recovery Tribunal impugned is in violation of Section 13(8) of the SARFAESI Act, at the same time, counsel for the Bank further stated that the Bank may not find any difficulty releasing the property provided the appellant-borrower is ready to pay a sum of Rs. 71 lakh which is the highest bid available with the Bank and even this amount would not ultimately go to discharge the entire liability outstanding against the appellant borrower but still if the appellant-borrower deposits Rs. 71 lakh, the Bank may not find difficulty to release the subject property in question. 5. 71 lakh which is the highest bid available with the Bank and even this amount would not ultimately go to discharge the entire liability outstanding against the appellant borrower but still if the appellant-borrower deposits Rs. 71 lakh, the Bank may not find difficulty to release the subject property in question. 5. The ld.Debt Recovery Appellate Tribunal considered the material and took note of the rival submissions and in its order dated 09.04.2015 observed that as regards the reserve price (Rs.48.65 lakh) of the property is concerned, that was indisputably deposited by the appellant-borrower before 27.01.2014 and as regards the contention of the Bank that they had received bids ranging from Rs. 61.50 lakh to Rs. 71 lakh, the so-called alleged bidders has failed to deposit the earnest money and that apart to consider the genuineness of the bidder, the Appellate Tribunal called upon the so-called alleged highest bidder who offered the bid of Rs. 71 lakh namely Mr.Rajesh Kumar Nyati to confirm the fact as to whether he is willing to purchase the subject property in question for Rs. 71 lakh, as offered by him but as observed there was no genuine bidder came forward and in the given facts and circumstances, the case of the secured creditor that it is ready to release the property on payment of Rs. 71 lakh offer of Mr.Nyati is without any foundation and the reserve price of the property being deposited by the appellant-borrower, there appears no reason to interfere in the order passed by the ld.Debt Recovery Tribunal and accordingly dismissed the appeal preferred by the Bank. 6. After the matter being heard, the ld.Single Judge of this court set aside both the orders of the ld.Debt Recovery Tribunal and the ld. Debt Recovery Appellate Tribunal under order impugned dated 12.01.2017 primarily for the reason that order passed by the ld. Debt Recovery Tribunal dated 17.01.2014 and confirmed by the ld.Debt Recovery Appellate Tribunal vide order dated 09.04.2015 are in contravention of Section 13(8) of the SARFAESI Act, 2002 which was the subject matter of challenge in the instant intra-court appeal preferred at the instance of the appellant-borrower. 7. Mr. N.K. Maloo, Sr. Debt Recovery Tribunal dated 17.01.2014 and confirmed by the ld.Debt Recovery Appellate Tribunal vide order dated 09.04.2015 are in contravention of Section 13(8) of the SARFAESI Act, 2002 which was the subject matter of challenge in the instant intra-court appeal preferred at the instance of the appellant-borrower. 7. Mr. N.K. Maloo, Sr. Advocate submits that the Bank was always ready to release the property on the offer price received in the bidding process and the cause of filing of the writ petition was only affirmation of releasing the property on Rs. 48.65 lakh and declining the claim of the Bank of Rs. 71 lakh by the ld.Debt Recovery Appellate Tribunal was based on cogent reasons and in the given facts & circumstances when the willingness of the Bank in releasing the property was on payment as per the auction notice would not in any manner contravene the provisions of Section 13(8) of the SARFAESI Act, 2002. Counsel further submits that the provisions of the SARFAESI Act, 2002 8. Counsel further submits that the provisions of the SARFAESI Act, 2002 and the Security Interest (Enforcement) Rules, 2002 made thereunder do not prohibit a borrower to purchase his and the Security Interest (Enforcement) Rules, 2002 made thereunder do not prohibit a borrower to purchase his own property as an auction purchaser on the reserve price, if it is put to auction by the Bank and there is no legal hurdle in getting the property released at least with the permission & supervision of the court. 9. 9. Counsel further submits that cash credit facility was extended by the Bank against security of two immovable properties namely industrial plot situated at Chittor Road, Bundi and a residential/housing property situated at 1-Ja-27, Vikas Nagar, Bundi and the aforementioned industrial plot (building, plant & machinery), for which security interest was created, is still under the charge of the Bank and is having sufficient value to satisfy the alleged dues and deposit of certain amount in the loan account, releasing one collateral security on the reserve price fixed by the Bank does not debar them to realize their rest of the dues by way of continuing the proceedings against other securities where the provisions of Section 13(8) of the SARFAESI Act, 2002 are not attracted and, therefore, in the given facts & circumstances finding recorded by the ld.Single Judge holding the action to be in contravention of Section 13(8) of the SARFAESI Act, 2002 is not sustainable and deserves to be interfered by this court. 10. Mr.R.K.Salecha, Advocate on the other hand while supporting the finding recorded by the ld.Single Judge submits that the appellant-borrower if at all was interested or keen to redeem the mortgaged property, he could do so by discharging the entire liability and this what being mandated under section 13(8) of the SARFAESI Act, 2002 and that apart no bidder could have come forward appears to be for the reason that as per the public auction notice dated 16.12.2013, the date of auction fixed was 20.01.2014 and the appellant-borrower challenged the notice under section 13(2) along with the public auction notice by filing SA under section 17 of the SARFAESI Act, 2002 before the ld.Debt Recovery Tribunal on 11.01.2014 and interim orders were passed by the ld.Debt Recovery Tribunal on 17.01.2014 but still the bids were received from four persons with their offers ranging from Rs. 61.50 lakh to Rs. 71 lakh and the highest amount of bid was offered by Mr.Rajesh Kumar Nyati on 20.01.2014 but because of the pending litigation people ordinarily would not like to come into litigation and that appears to be one of the reason for which Mr.Niyati, who offered a bid of Rs. 71 lakh did not turn up before the ld.Debt Recovery Appellate Tribunal and no adverse inference could be drawn that there was no offer tendered by the bidders in reference to the public auction notice dated 16.12.2013. 71 lakh did not turn up before the ld.Debt Recovery Appellate Tribunal and no adverse inference could be drawn that there was no offer tendered by the bidders in reference to the public auction notice dated 16.12.2013. 11. Counsel further submits that the ld.Debt Recovery Tribunal was not justified in permitting the appellant-borrower to redeem its property on deposit of Rs. 48.65 lakh, which was distress value and reserve price of the property and the auction sale could have been stalled by the appellant-borrower only by clearing the outstanding dues of the Bank together with costs, charges and expenses and not otherwise and it was not justified to stall the auction sale on payment of reserve price which was the offset price of the property put to auction and further submits that if the orders of the ld.Debt Recovery Tribunal and of ld.Debt Recovery Appellate Tribunal being in clear contravention of the mandate of Section 13(8) of the SARFAESI Act, 2002, even their willingness was insignificant and certainly would not be acted upon more so when the appellant-borrower is having such heavy over-dues in his NPA account which has been looked into by the ld.Single Judge in its order impugned needs no interference of this court. 12. We have heard counsel for the parties and with their assistance also perused the material available on record. At the outset we may observe that we have examined the limited issue regarding the process initiated by the Bank in reference to the sale notice by public auction dated 16.12.2013 relating to the residential/housing property (immovable secured asset) of the appellant-borrower and to be more specific, housing property situated at 1-Ja-27, Vikas Nagar, Bundi, for realization of outstanding dues initiated under the provisions of the SARFAESI Act, 2002 followed with the Security Interest (Enforcement) Rules, 2002. 13. It may be further noticed that ordinarily there are three different players; firstly the Bank/Financier (secured creditor), who extended the cash credit facilities; second is the borrower/guarantor who mortgaged the property against security on the basis of which cash credit facility is availed by the borrower and if the account becomes NPA and mortgaged property is put to auction for realization of the outstanding dues by the secured creditor the purchaser, as per the procedure prescribed u/R.8 of the Security Interest (Enforcement) Rules, 2002. 14. 14. In the instant case the borrower has come forward as a purchaser in public auction and it is not that the borrower wants to redeem the property but seeking to be released in favour of the purchaser on payment of the reserve price of the mortgaged property, in terms of the auction notice which in the ordinary course has to be carried out by the secured creditor after following the procedure prescribed u/R.8 read with R.9 of the Security Interest (Enforcement) Rules, 2002. 15. It is not disputed before us that the reserve price, as indicated in the auction notice of the residential/housing property was Rs. 48.65 lakh and that has been remitted by the appellant through RTGS and received by the Bank on or before 27.01.2014, as observed by the ld.Debt Recovery Tribunal in its order dated 17.01.2014 and has been appropriated by the Bank later on towards outstanding dues of the appellant-borrower. 16. It has also come on record & noticed by the ld.Debt Recovery Appellate Tribunal that defence of the Bank was that they had received bids ranging from Rs. 61.50 lakh to Rs. 71 lakh whereas the amount of debt due against the appellant-borrower is almost Rs. 2 Crores and pending proceedings for recording satisfaction and communications of the offer made by few participants including Mr.Rajesh Kumar Nyati, who made the offer of Rs. 71 lakh & shown his willingness to purchase the property, the ld.Debt Recovery Appellate Tribunal requested him to appear but despite opportunity being afforded since he failed to appear, the ld.Debt Recovery Appellate Tribunal doubted the genuineness of the highest bidder who offered Rs. 71 lakh for purchasing the property. 17. 71 lakh & shown his willingness to purchase the property, the ld.Debt Recovery Appellate Tribunal requested him to appear but despite opportunity being afforded since he failed to appear, the ld.Debt Recovery Appellate Tribunal doubted the genuineness of the highest bidder who offered Rs. 71 lakh for purchasing the property. 17. The ld.Single Judge has proceeded on the basis that action is in contravention of Section 13(8) of the SARFAESI Act, 2002 but this fact remained unnoticed that the appellant before us is the borrower, against whom the Bank has initiated recovery proceedings under section 19 of the Recovery of Debts due to Banks & Financial Institutions Act, 1993 before the ld.Debt Recovery Tribunal, Jaipur (OA No.98/2014) and as a borrower he has also challenged the proceedings initiated under section 13(2) of the SARFAESI Act, 2002 by filing application under section 17 of the SARFAESI Act, 2002 before the ld.Debt Recovery Tribunal and the rights of interse parties i.e. borrower & secured creditor/Bank are certainly to be decided in the pending proceedings but as a purchaser, if the immovable property is put to auction after following the procedure prescribed u/R.8 read with R.9 of the Security Interest (Enforcement) Rules, 2002 and the appellant-borrower in the capacity of auction purchaser has deposited the auction price or reserve price, as the case may be, at least the Bank ordinarily is left with no option but to confirm the sale and here the peculiar situation has arisen where the purchaser and the borrower being the same, it is for release of the property which was put to auction to the purchaser & is not redeeming of the property on discharging the entire liability by the borrower which has been observed by the ld.Single Judge while quashing the order of the ld.Debt Recovery Tribunal & confirmed by the ld.Debt Recovery Appellate Tribunal. 18. It is also not disputed that initially when the notice under section 13(2) of the SARFAESI Act, 2002 was served upon the appellant-borrower, the outstanding dues indicated was Rs. 18. It is also not disputed that initially when the notice under section 13(2) of the SARFAESI Act, 2002 was served upon the appellant-borrower, the outstanding dues indicated was Rs. 1.85 Crores and ordinarily if the appellant-borrower is interested or keen to redeem the mortgaged property, he could do so by discharging the entire liability and this what being mandated under section 13(8) of the SARFAESI Act, 2002 but in the instant case and in our considered view Section 13(8) of the SARFAESI Act, 2002 may not be attracted for the reason that if the auction purchaser has come with an offer of reserve price or the auction price as per the auction notice, the secured creditor/Bank has to complete the process as per the procedure prescribed u/R.8 read with R.9 of the Security Interest (Enforcement) Rules, 2002 and to issue a sale certificate and deliver the possession to the auction purchaser but in the instant case a peculiar situation has arisen where as per the sale notice by public auction dated 16.12.2013 the residential/housing property House No.1-Ja-27, Vikas Nagar, Bundi was put to auction with the reserve price of Rs. 48.65 lakh and the auction was to take place on 20.01.2014 and before the Bank could proceed and the prospective bidders may come forward to participate in the public auction, there was an intervention made by the ld.Debt Recovery Tribunal which ordinarily has to be avoided and order came to be passed on 17.01.2014 restricting the appellant-borrower to deposit a sum of Rs. 20 lakh by 20.01.2014 and balance amount of Rs. 28.65 lakh by 27.01.2014. Indisputably, remittance of full amount of Rs. 48.65 lakh has been made to the Bank through RTGS which has been appropriated towards outstanding dues of the appellant-borrower but this fact cannot be ruled out that because of the intervention being made by the ld.Debt Recovery Tribunal, before the date of auction i.e. 20.01.2014 the prospective bidders might have not come forward to offer a fair price of the property put to auction and it is true that the reserve price is the offset price of the property put to auction but a fair realising price of the property which could be achieved in the ordinary course of business has been ruled out because of the intervention made by the ld.Debt Recovery Tribunal much before the public auction took place on 20.01.2014. 19. 19. But at the same time, when the Bank itself has come forward with a defence that on deposit of Rs. 71 lakh, as per the offer made by one Mr.Rajesh Kumar Nyati, the Bank may not have any objection to release the property, we consider it appropriate that in the given facts & circumstances when letters were received from four prospective bidders with their offer ranging from Rs. 61.50 lakh to Rs. 71 lakh and without going into further merits and the reserve price has been deposited by the appellant borrower, the average of the offer bid ranging between Rs. 61.50 lakh to Rs. 71 lakh, comes to approximate Rs. 17 lakh, if is further deposited by the appellant-borrower which indeed has to be appropriated, we find that it will be an adequate sum to satisfy the amount for which the residential/housing property was put to auction and the Bank has also shown its willingness to release the property and in the given circumstances, the appellant-borrower deserves indulgence for release of the property after due compliance of the procedure prescribed u/R.8 read with R.9 of the Security Interest (Enforcement) Rules, 2002. 20. It appears that the ld.Debt Recovery Tribunal has disposed of the SA No.9/2014 filed at the instance of the appellant-borrower on passing the order dated 17.01.2014. We find that it was only in reference to the subject property in question and the SA No.9/2014 as such could not have been finally disposed of by the ld.Debt Recovery Tribunal which certainly has to be heard on merits. 21. Consequently, the instant intra-court appeal is allowed and order of the ld.Single Judge impugned dated 12.01.2017 is quashed and set aside. At the same time, it is directed that if the appellant borrower deposits a further sum of Rs. 17 lakh to the Bank by 30.09.2017, the Bank shall release the property and handover possession along with the tittle deeds of the residential/housing property situated at 1-Ja-27, Vikas Nagar, Bundi to the appellant borrower and the SA No.9/2014 filed by the appellant-borrower before the ld.Debt Recovery Tribunal is restored to its original number to be heard on merits. No costs.