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2023 DIGILAW 392 (GUJ)

AMIR TRADERS v. AUTHORIZED OFFICER BANK OF BARODA

2023-03-01

A.S.SUPEHIA

body2023
ORDER : 1. Draft amendment tendered by learned Senior Advocate Mr.B.S.Patel is allowed in terms of draft. The same shall be carried out forthwith. The orders, along with the list tendered by learned Advocate Mr. Jaimin R Dave, who appears on caveat on behalf of respondent no. 2, are also ordered to be taken on record. 1.1 Rule. Learned advocates appearing for the respective respondents waive service of notice of rule. The writ petition is taken up for hearing today, since both the learned Advocates have argued at length. 2. In the present writ petition, which has been filed under Articles 226 and 227 of the Constitution of India, the petitioners have prayed for quashing and setting aside the order dated 22.02.2023 passed in IA No. 704 of 2022 by the respondent no. 3-Debt Recovery Tribunal, Ahmedabad (DRT). Further, a prayer is made seeking a direction from the respondent no. 1-Bank to handover the secured asset i.e. the resident bungalow of the petitioners. 3. By way of the amended prayer, a further direction is sought against the respondent no. 2 not to transfer land, mortgage or transfer possession of the resident bungalow to any third party. 4. BRIEF FACTS: 4.1. The respondent no. 1-Bank of Baroda filed O.A. Application No. 777 of 2018 on 23.05.2018 before the respondent No. 3-Debt Recovery Tribunal-II, Ahmedabad (DRT) under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993 (for short “the RBD Act”) for recovery of Rs.3,20,27,98.69 in respect of Cash Credit facility of Rs.3 Crore together with interest of 12.15% and penal interest of 2% till date of realization with cost and other relief. The same was disposed of by the judgment dated 30.11.2022 by directing the petitioners to clear the dues within a period of 30 days. 4.2. Thereafter, for the compliance of the judgment and order passed at Annexure-B to the petition, for recovery, the order has been sent to the Recovery Officer, DRT-II, Ahmedabad and R.C. No. 265 of 2022 has been given. The petitioners appeared before the Recovery Officer, DRTII, Ahmedabad. It is asserted that the petitioners have deposited entire dues with interest approximately of Rs.4.25 Crores. 4.3. The respondent no. The petitioners appeared before the Recovery Officer, DRTII, Ahmedabad. It is asserted that the petitioners have deposited entire dues with interest approximately of Rs.4.25 Crores. 4.3. The respondent no. 1-Bank also issued a notice to the petitioner on 17.12.2018 under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short “the SARFESI Act”) for recovery of Rs.3,57,71,151.24. The respondent-bank, thereafter filed and application under section 13(4) of the SARFESI Act for getting the order under section 14 of the SARFESI Act. Thereafter, the petitioners challenged such action of the respondent No. 1 by filing Securitization Application No. 525 of 2019 before respondent No. 3-DRT-II, Ahmedabad. During the pendency of SA No. 525/2019, the petitioners have challenged the E-Auction published in Gujarat Samachar on 14.01.2020. The E-auction was fixed on 25.02.2020. It is the case of the petitioners that they have deposited Rs.1.25 Crores in the respondent no. 1-Bank Loan Account, therefore, respondent No. 3, DRT-II passed order in SA No. 525/2019 restraining the respondent-Bank from proceeding further under the SARFESI Act. 4.4. The petitioners preferred I.A. No. 330 of 2020 for production of valuation report of 2019-20 of the mortgaged property as well as relevant document of loan account statement. The said 1.A. No. 330/2020 is not decided by the respondent no. 3-DRT-II and is pending till today. 4.5. By the Order dated 07.03.2020, passed by the DRT-II in S.A No. 525 of 2019, the respondent-Bank was restrained from proceeding further under the SARFESI Act. It was recorded in the order that the petitioners had deposited an amount of Rs.1.25 crores. 4.6. It appears that the petitioners filed I.A No. 330 of 220 in S.A. No. 525/2019 seeking directions for production of the valuation report of the mortgage property and loan account statement. 4.7. The respondent no. 1-Bank has filed I.A. No. 672 of 2021 on 22.02.2021 for vacating stay order dated 07.03.2020. 4.8. On 14.12.2021, the DRT has recorded the submission of the learned Counsel appearing for the respondent-Bank that e-auction has been scheduled on 28.12.2021. No one appeared on behalf of the petitioners. 4.9. On 25.12.2021, the auction Notice was published by the respondent-Bank to be held on 12.01.2022. On 12.01.2022, the respondent no. 2 was declared to be the successful bidder for the secured asset for an amount of Rs.5,55,40,000/-. 5. No one appeared on behalf of the petitioners. 4.9. On 25.12.2021, the auction Notice was published by the respondent-Bank to be held on 12.01.2022. On 12.01.2022, the respondent no. 2 was declared to be the successful bidder for the secured asset for an amount of Rs.5,55,40,000/-. 5. It is pertinent to note that on 13.01.2022, the DRT-II passed an order permitting the Bank to proceed further with the auction subject to final outcome of S.A Application No. 525 of 2019. Thus, the order dated 07.03.2020 restraining the respondent-Bank from further proceeding under the SARFESI Act got modified. The order dated 13.01.2022 has not been challenged by the petitioners. 5.1. Accordingly, the respondent no. 2 paid the entire sale consideration of Rs.5,55,40,000/- and sale certificate is also issued in his favour. The petitioners have suppressed this fact. 5.2. It appears that the petitioners deposited an amount of Rs.2,10,000/- in the loan account on 25.01.2022 and an amount of Rs.50,000/- was deposited on 27.01.2022. 5.3. Thereafter, the petitioners challenged the auction proceedings in favour of the respondent no. 2 by filing IA No. 237 of 2022. By the order dated 03.02.2022, the DRT-II directed the parties to maintain status-quo. The said order is not produced in the writ petition. 5.4. It appears that the respondent no. 2 questioned the said order before this Court by filing a writ petition being Special Civil Application No. 3870 of 2022, however, this Court relegated the respondent no. 2 to DRT-II, Ahmedabad. Hence, the respondent no. 2 filed I.A. No. 704 of 2022 for vacating the interim order dated 03.02.2022. 5.5. Finally, the IA No. 704 of 2022 filed by the respondent no. 2 for vacating the interim order has been allowed by the impugned order dated 22.02.2023 and the main matter - S.A. No. 525 of 2019 is ordered to be listed for further hearing on 13.03.2023. 5.6 As mentioned in the preceding paragraphs, the Original Application No. 777 of 2018, filed under the RDDB, Act was disposed of and the petitioners were required to clear all the dues within 30 days i.e. Rs.3,20,27,98.69 in respect of the Cash Credit facility of Rs.3 Crore together with interest of 12.15% and penal interest of 2% till the date of realization with cost and other relief. SUBMISSIONS: 6. SUBMISSIONS: 6. Learned Senior Advocate Mr.B.S.Patel has submitted that the impugned order is passed by the DRT-II though the I.A. No. 330 of 2021 filed by the petitioners seeking the valuation report is still pending, hence the impugned order should not have been passed. It is submitted that the DRT has ignored its own order dated 20.12.2022, wherein it is clearly stated that S.A. No. 525 of 2019 will be heard finally and the date was fixed by the respondent no. 3-DRT on 13.02.2023, however, the matter was not taken up for final hearing and the impugned order was passed. It is submitted that in the present matter, there is no outstanding due as per the order and hence, the petitioners having paid the amount as ordered by the judgment passed in O.A. Application No. 777 of 2018, the impugned order could not have been passed. It is submitted that the DRT has incorrectly recorded that the petitioners had not complied with the statement dated 21.02.2020 by not paying the entire dues within a period of 9 months and hence, incorrectly allowed the proceedings with a clarification in the order dated 13.01.2022 to the effect that the auction proceedings shall be subject to the final outcome of S.A. No. 525 of 2019. It is submitted that there is no order passed by the DRT effecting the stay and hence, the impugned order may be set aside. In support of his submissions, he has placed reliance on the judgment of the Apex Court in the case of Mathew Varghese vs. M. Amritha Kumar and Others, AIR 2015 SC 50 . 7. Per contra, learned advocate Mr.Jaimin Dave appearing for the respondent no. 2 has submitted that the writ petition deserves to be dismissed on the ground of suppression of facts. He has submitted that the proceedings under the RDB Act before the DRT have nothing to do with the proceedings of the SARFAESI Act. In support of his submissions, he has placed reliance on the judgment of the Supreme Court in the case of Varimadugu Obi Reddy vs. B. Sreenivasulu and Others, (2023) 2 SCC 168 and has submitted that in fact the petitioners have right to file an appeal under the provisions of Section 18 of the SARFAESI Act against the impugned order. In support of his submissions, he has placed reliance on the judgment of the Supreme Court in the case of Varimadugu Obi Reddy vs. B. Sreenivasulu and Others, (2023) 2 SCC 168 and has submitted that in fact the petitioners have right to file an appeal under the provisions of Section 18 of the SARFAESI Act against the impugned order. It is, thus, submitted that without exhausting the alternative remedy available under the law, the writ petition cannot be entertained. 7.1. Learned advocate Mr.Dave, while placing reliance on the judgment of the Supreme Court in the case of Transcore vs. Union of India, (2008) 1 SCC 125 , has submitted that the pendency of the proceedings before the DRT under the DRT Act cannot in any manner effect the proceedings under the SARFAESI Act. Thus, it is submitted that the petitioners cannot take shelter against the proceedings under the DRT Act. While referring to the judgment of the Supreme Court in the case of Shakeena and Others vs. Bank of India and Others, dated 20.08.2019 passed in Civil Appeal Nos. 8097-8098 of 2009, he has submitted that prior to the amendment of Section 13(8) of the SARFAESI Act, a stringent condition, which has been stipulated that the dues to the creditor together with all costs, charges and expenses incurred by him shall be at any time before the “date of publication of notice” for public auction or inviting quotations or tender from public or private deed for transfer by way of lease assessment or sale of the secured asset has to be done. 7.2 Learned advocate Mr.Dave has submitted that the sale certificate in favour of the respondent no. 2 by the respondent no. 1 dated 24.01.2022 is issued after purchase of the secured asset. He has submitted that in fact the petitioners have not produced the order dated 03.02.2022 passed in S.A. No. 525 of 2019, wherein the respondent-Bank was directed to maintain status-quo possession of the property in question till the next date of hearing i.e. on 03.03.2021. Thus, it is submitted that the writ petition may not be entertained. 8. Learned advocate Mr.Bhaskar Sharma appearing for the respondent no. Thus, it is submitted that the writ petition may not be entertained. 8. Learned advocate Mr.Bhaskar Sharma appearing for the respondent no. 1-Bank of Baroda has submitted that the writ petition is premature since the petitioners have challenged the order dated 22.02.2023 passed in IA No. 704 of 2022, wherein the applicants themselves admitted that their claim made by the respondent-Bank in O.A. No. 777 of 2018 and hence, the same was disposed of by the Tribunal vide judgment dated 30.11.2022. It is submitted that the matter is still at large before the Tribunal and the matter was kept for further hearing on 22.02.2023. Thus, it is submitted that the writ petition may not be entertained. CONCLUSION: 9. The petitioners have assailed the order dated 13.02.2023, wherein the DRT-II, Ahmedabad has allowed I.A No. 704 of 2023 for vacating the interim relief granted vide order dated 03.02.2022, wherein the DRT-II had directed the parties to maintain status-quo. 10. It is pertinent to note that the aforesaid order dated 03.02.2022 has been passed after the auction proceedings were over and the respondent no. 2 was declared as successful bidder on 12.01.2022. The respondent no. 2 accordingly has paid the entire sale consideration of Rs.5,55,40,000/- and hence, is also issued a sale certificate dated 24.01.2022. 11. The petitioners have specifically contended before this Court that the DRT-II has ignored its own order dated 20.12.2022, wherein it is clearly stated that S.A.No. 525 of 2019 will be heard finally and the date was fixed by the respondent no. 3-DRT on 13.02.2023, however, the matter was not taken up for final hearing and the impugned order was passed. The order dated 20.12.2022 passed in S.A No. 525 of 2019 only records the submission of the learned counsel for the parties that the matter may be heard finally, and the DRT-II has observed “In view of the above, the matter is adjourned for hearing on 13.02.2023.” The impugned order cannot be set aside only on the ground that the DRT-II did not hear the matter finally, and instead it has heard I.A No. 704 of 2022 filed by the respondent no. 2 seeking vacating of the interim order. In wake of the fact that the respondent no. 2 seeking vacating of the interim order. In wake of the fact that the respondent no. 2 has been issued the sale certificate, after satisfying the entire sale consideration, there was no reason to extend the interim relief of directing the parties to maintain status-quo. Hence, the aforementioned submission of the petitioners is rejected. 12. The petitioners have not come with clean hands, and have also tried to mislead this Court. By the order dated 30.11.2022 passed in O.A No. 777 of 2018 (under the RDDB, Act), the petitioners were asked to clear all the dues to the tune of Rs.3,20,27,98.69 in respect of the Cash Credit facility of Rs.3 Crore together with interest of 12.15% and penal interest of 2% till the date of realization with cost and other relief. Thus, by 30.12.2022, the petitioners were supposed to deposit the aforesaid amount. The respondent no. 1-Bank has asserted before this Court, that the petitioners did not pay the entire amount as directed vide order dated 30.11.2022, and still the amount remains to be unpaid and amount of Rs.1,50,00,000/- approx. is still due. The Bank statements annexed to the petition reveals that the last payment was paid by the petitioners on 25.01.2022 and 27.01.2022. Thus, a misleading statement has been made before this Court (in grounds ‘l’ & ‘m’ of the petition) with regard to the compliance of the order dated 30.12.2022. 13. The petitioners have also tried to mislead this Court by placing reliance on the judgment of the Apex Court in case of A.K. Patnaik (supra). The said judgment relates to the unamended provision of section 13(8) of the SARFESI Act. The amended provision of section 13(8) of the SARFESI Act read as under: “SECTION 13: Enforcement of security interest “(8) Where the amount of dues of the secured creditor together with all costs, charges and expenses incurred by him is tendered to the secured creditor at any time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets: (i) the secured assets shall not be transferred by way of lease assignment or sale by the secured creditor. (ii) in case, any step has been taken by the secured creditor for transfer by way of lease or assignment or sale of the assets before tendering of such amount under this subsection, no further step shall be taken by such secured creditor for transfer by way of lease or assignment or sale of such secured assets.” 13.1 The Apex Court in the case of Dwarika Prasad vs. State of U.P. 2018 (5) SCC 491 , while interpreting the aforesaid section has held thus: “6. In the present case, the appellant failed to comply with the provisions of Section 13(8). The statute mandates that it is only where the dues of the secured creditor are tendered together with costs, charges and expenses before the date fixed for sale or transfer that the secured asset is not to be sold or transferred. The appellant was aware of the proceedings initiated by the bank for asserting its right to recover its dues by selling the property. The appellant moved the DRT in Securitization Application 176 of 2015. During the pendency of those proceedings, orders were passed by the Tribunal on 1 February 2016 and 3 February 2016. The appellant moved the Allahabad High Court which by its order dated 9 March 2016 restrained the bank and the auction purchaser from executing the sale deed until 15 March 2016. The stay was extended till 28 March 2016 by which date the appellant was to deposit an amount of Rs 7,00,000. The balance was required to be deposited by 30 April 2016. While appellant deposited an amount of Rs 7,00,000 with the bank, he failed to deposit the balance in accordance with the provisions of Section 13(8). Even after the writ proceedings before the High Court was withdrawn, the appellant did not deposit the balance due together with the costs, charges and expenses. The sale was confirmed, a sale certificate was issued and a registered sale deed was executed on 12 April 2016. The appellant failed to ensure compliance with Section 13(8). The right to redemption stands extinguished on the execution of the registered sale deed. The sale was confirmed, a sale certificate was issued and a registered sale deed was executed on 12 April 2016. The appellant failed to ensure compliance with Section 13(8). The right to redemption stands extinguished on the execution of the registered sale deed. This is also the view which has been expressed in the judgment in Mathew Varghese (supra).” The Apex Court has held that “The statute mandates that it is only where the dues of the secured creditor are tendered together with costs, charges and expenses before the date fixed for sale or transfer that the secured asset is not to be sold or transferred.” In the present case, the petitioners were aware of all the proceedings under section 13(2) and 13(4) the SARFAESI Act and after undertaking necessary further steps as per the statute, the respondent no. 2 is already issued a sale certification on 24.01.2022. Hence, as per the observations of the Apex Court, the right of redemption in favour of the petitioners has already extinguished, hence, no direction can be issued against the respondent no. 2 not to transfer land, mortgage or transfer possession of the resident bungalow to any third party. 14. It is also not in dispute that the petitioners have an alternative remedy available to them under section 18 of the SARFESI Act to file an appeal before the DRAT. In case of Varimadugu Obi Reddy vs. B. Sreenivasul, 2023 (2) SCC 168 , the Apex Court has held thus: “34. In the instant case, although the respondent borrowers initially approached the Debts Recovery Tribunal by filing an application under Section 17 of the SARFAESI Act, 2002, but the order of the Tribunal indeed was appealable under Section 18 of the Act subject to the compliance of condition of pre-deposit and without exhausting the statutory remedy of appeal, the respondent borrowers approached the High Court by filing the writ application under Article 226 of the Constitution. We deprecate such practice of entertaining the writ application by the High Court in exercise of jurisdiction under Article 226 of the Constitution without exhausting the alternative statutory remedy available under the law. This circuitous route appears to have been adopted to avoid the condition of pre-deposit contemplated under 2nd proviso to Section 18 of the Act 2002.” 15. We deprecate such practice of entertaining the writ application by the High Court in exercise of jurisdiction under Article 226 of the Constitution without exhausting the alternative statutory remedy available under the law. This circuitous route appears to have been adopted to avoid the condition of pre-deposit contemplated under 2nd proviso to Section 18 of the Act 2002.” 15. In the present case also, it appears that, in order to avoid the precondition of deposit in the appellate proceedings, the present writ petition is filed. Despite, having an alternative remedy of filing an appeal, the petitioners, in the writ petition, have mentioned on oath that they do not have an alternative remedy. Such an approach is not only misleading, but against sanctity of the proceedings before this Court. The petitioners could have mentioned that despite the availability of an alternative remedy, the writ petition is still maintainable under exceptional circumstances, but they have chosen not to do so. The petitioners have approached against the interim order, and the matter is ordered to be listed on 22.02.2023. Thus, the petitioners, in order to see that the respondent no. 2 does not enjoy the fruits of the proceedings are trying their level best to protract the benefit. The writ petition is gross abuse of process of law, and is presented with ill-motive. Hence, the same stands rejected with a cost of Rs.15,000/-,which shall be deposited before the Registry of this Court within a period of two weeks from the date of receipt of the writ of this Court.