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2018 DIGILAW 876 (JK)

Neelamber Khullar v. Punjab National Bank

2018-11-03

DHIRAJ SINGH THAKUR, SINDHU SHARMA

body2018
JUDGMENT : Dhiraj Singh Thakur, J. The petitioner appears to have taken a loan, amounting to Rs. 63.50 lacs from the respondent-Bank, which has since been declared as a non-performing asset. It appears that possession of the property was taken after due compliance in terms of Section 13(4) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short “SARFAESI Act”). 2. The Bank with a view to recover the amount outstanding, got the secured asset, which is in the nature of a residential house valued, by a private valuer. The market value of the property was determined at Rs. 3.53 lacs, however, distressed sale value/realizable value of the property was determined at Rs. 282.00 lacs. 3. With a view to sell the secured asset, auction notice was issued on 24.11.2017 in the local newspaper showing the reserve price at Rs. 280 lacs, however, no bidder came forward to participate in the auction process. The Bank yet again issued an auction notice on 03.12.2018 and this time, the reserve price of the property was fixed at Rs. 252 lacs. 4. According to the response filed by the Bank, the reserve price was fixed at Rs. 252 lacs after obtaining the requisite approval. The amount was reduced in view of distressed real-estate market scenario. The reserve price was thus fixed at 10% less than the earlier reserve price. 5. The argument of the learned counsel appearing on behalf of the petitioner was that the Bank had not complied with the provisions of Rule 5 of the Security Interest (Enforcement) Rules, 2002 before reducing the price of the secured asset. It was stated that no notice was issued to the petitioner and that he was not consulted at all. It was further urged that an amount of Rs. 88 lacs only could be claimed by the Bank as outstanding and that the price of the property was four times more than that and therefore, it was urged that a valuable piece of property could not be sold below the market price. 6. Since the main argument of the learned counsel for the petitioner revolves around the procedure for valuing the property, it is necessary to refer to Rule 5 of the Security Interest (Enforcement) Rules, 2002, which envisaged thus:- “5. 6. Since the main argument of the learned counsel for the petitioner revolves around the procedure for valuing the property, it is necessary to refer to Rule 5 of the Security Interest (Enforcement) Rules, 2002, which envisaged thus:- “5. Valuation of movable secured assets:- After taking possession under sub-rule(1) of rule 4 and in any case before sale, the authorized officer shall obtain the estimated value of the movable secured assets and thereafter, if considered necessary, fix in consultation with the secured creditor, the reserve price of the assets to be sold in realization of the dues of the secured creditor.” 7. On a reading of the aforementioned rule, it becomes clear that consultation with the secured creditor is not absolutely necessary before fixing the reserve price of the asset, which is required to be sold in realization of dues of the secured creditor. 8. In the present case, while the valuation as earlier determined by the private valuer was Rs.282 lacs keeping in view the distressed market conditions, yet it is not denied that no bidder came forward to purchase the property in question at that price. Subsequently, the price has been reduced by further 10% at Rs. 252 lacs keeping in view the distressed market conditions after obtaining due approval. Consultation with the petitioner before reducing the reserve price was, therefore, not absolutely necessary. Ultimately, the price of the asset is determined by market forces. There has to be a buyer to pay the price, which is determined by the valuer. Having failed to find such a buyer, the Bank was within its rights to reduce the price with a view to ensure sale of the secured asset to enable them to recover the amount payable by the petitioner. 9. In our opinion, the process of fixing of the reserve price adopted by the respondent-Bank cannot be faulted. The same appears to be legally correct. However, the petitioner would be at liberty to bring a buyer, who would quote his bid against the one quoted by the highest bidder in the auction process. In that eventuality, the respondent would proceed to recover the higher price in regard to the property in question. 10. Disposed of accordingly along with connected IA.