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2024 DIGILAW 2154 (ALL)

Sandhya Mishra v. Punjab National Bank

2024-09-27

ALOK MATHUR

body2024
JUDGMENT : Hon'ble Alok Mathur, J.-Heard Sri A.K. Srivastava, learned counsel for the petitioner as well as Sri J.S. Pandey, Advocate holding brief of Sri Sanjai Singh, learned counsel for respondent Nos. 1 and 2. 2. In the light of proposed order notice to private respondents is dispensed with. 3. By means of present writ petition the petitioner has approached this Court challenging notice dated 1.8.2024, which has been issued in pursuance to order dated 30.7.2024, passed by the Debt Recovery Tribunal, Allahabad whereby he has been impleaded in the proceedings pending before the Tribunal. 4. It has been submitted by learned counsel for the petitioner that proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ''the Act, 2002''), initiated by the respondent-Bank against borrower namely respondent No. 3 as well as guarantor respondent No. 4 before the Debt Recovery Tribunal, Allahabad (hereinafter referred to as ''the Tribunal'') under the Act, 2002. Respondent Nos. 3 and 4 moved securitisation application before the Tribunal assailing the proceedings under Section 13(2) and 13(4) of the Act, 2002 initiated by the respondent-Bank, who by that time has taken possession of the secured assets. 5. Before the Tribunal, while the proceedings were pending, the respondent-Bank has put the secured assets to auction and it is the petitioner who, in pursuance of the said auction was the successful bidder and auction was settled in his favour and sale-deed was also registered in his favour on 18.3.2023. When respondent Nos. 3 and 4 came to know about the auction of secured assets by the Bank, they moved an application in the pending securitisation application numbered as Securitisation Application No. 577 of 2021, seeking relief from the Tribunal for setting aside the sale notice dated 30.10.2021 and also assailed the entire proceedings initiated by the respondent-Bank under the Act, 2002. They have also challenged the notice issued under Section 13(2) and 13(4) of the Act, 2002. 6. Before the Tribunal, it was submitted by the borrower as well as guarantor that dispute has occurred as certain benefits were granted by the State Government in respect to the loan, where Rs. They have also challenged the notice issued under Section 13(2) and 13(4) of the Act, 2002. 6. Before the Tribunal, it was submitted by the borrower as well as guarantor that dispute has occurred as certain benefits were granted by the State Government in respect to the loan, where Rs. 7,00,000/- was deposited directly to the Bank, but the Bank failed to credit the said amount in the loan account of the borrower and consequently, were aggrieved by the excess amount sought to be recovered by the respondent-Bank. According to the borrower the dispute was also settled before the Lok Adalat where the respondent-Bank had agreed to receive an amount of Rs. 8,25,000/- against entire loan taken by the borrower and in pursuance to the settlement an amount of Rs. 1,65,000/- was also deposited by the borrower with the respondent-Bank. 7. It is further alleged before the Tribunal that remaining amount can be deposited the respondent-Bank had illegally and arbitrarily issued auction notice and sold the secured assets for Rs. 18,00,000/- while it was the allegation that secured assets were worth more than Rs. 1.5Crore. 8. When the borrower has obtained knowledge with regard to the auction being settled in favour of petitioner, he tried to obtain details, but the respondent-Bank did not cooperate and details were not supplied and when he found out the details of the petitioner he moved an application for impleadment stating that petitioner was necessary party inasmuch as the secured assets have been auctioned in his favour and hence he was necessary party to the proceedings. It is on hearing respondent Nos. 3 and 4 that the Tribunal has allowed the application for impleadment and also issued notice to appear and file his response. It is against the said order passed by the Tribunal dated 30.7.2024 and 1.8.25024 the petitioner feeling aggrieved has filed the present writ petition. 9. It has been submitted by learned counsel for the petitioner that once the secured assets have been auctioned, then right of redemption cannot be exercised by the borrower as right of redemption can be exercised only till the date of publication of auction notice and right of borrower stand extinguished and such right even if vested in the borrower cannot be exercised by him at this stage and accordingly, no such order can be passed by the Tribunal. In this regard he submits that the issuance of notice itself is arbitrary and contrary to the provisions of law. In support of his submission he has relied upon the judgment of Hon'ble Supreme Court in the case of Celir LIp v. Bafna Motors (Mumbai) Pvt. Ltd. passed in Civil Appeal No. 5542 - 5543 of 2023 (decided on 21.9.2023), wherein the Apex Court has discussed the aforesaid proposition of law in detail and it has been held that right of redemption can be exercised only till publication of auction notice. 10. Learned counsel for the respondent-Bank has submitted that the Bank has proceeded in accordance with law and does not dispute the fact that secured assets have been auctioned in favour of petitioner. 11. I have considered the rival submissions and perused the record. 12. The facts of the present case are not disputed inasmuch as the proceedings under the Act, 2002 were initiated by the respondent - Bank against the borrower as well as guarantor. Notice under Sections 13(2) and 13(4) of the Act, 2002 were issued and consequently order under Section 14 of the Act, 2002 were also passed where possession of the secured assets was taken by the respondent Bank on 22.12.2022. The borrower as well as guarantor had approached the Tribunal in November 2021 by filing a securitisation application under Section 17 of the Act, 2002 and assailed the proceedings initiated by the respondent-Bank for realisation of outstanding amount due to them. 13. Before the Tribunal, respondent Nos. 3 and 4 have urged that the Bank has acted fraudulently and also did not honored the settlement arrived before the Lok Adalat where amicable settled was arrived at and further that without giving any notice to borrower they have proceeded to auction the secured assets. It is during the said proceedings that an application for impleadment of petitioner was moved which was allowed. 14. Accordingly, the issue raised for consideration before this Court is as to whether the petitioner who is the auction petitioner of the secured assets was necessary or proper party, and whether the debt recovery Tribunal has committed any error in impleading him in the proceedings before the Tribunal at the behest of the borrower 15. We have heard the counsel the parties and perused the record. We have heard the counsel the parties and perused the record. There is no dispute with regard to the facts that the secured assets have been auctioned in favour of petitioner who has deposited entire amount of consideration and sale-deed has also been registered in his favour. 16. Apart from the above, there is no dispute with regard to the fact that respondent Nos. 3 and 4 have exercised their statutory right for assailing the auction conducted by the respondent-Bank under Section 17 of the Act, 2002, before the Tribunal and proceedings initiated at the behest of borrower were pending before the Tribunal when the secured assets were sold. 17. Securitisation application under Section 17 of the act of 2002 was filed by the borrower by respondent No. 3 and 4 levelling allegations against the respondent No. 1&2 bank and praying for setting aside of the order dated 30.10.2021 and sale notice dated 19.9.2021 and further they had also challenged the notices under Section 13(4) as well as under Section 13(2) of the act of 2002. The securitisation application has been numbered as 577 of 2021 and has been filed sometimes in November 2021 to taking possession of the secured assets, and also before the date of publication for auction. 18. A perusal of the Securitisation Application Preferred by the borrower would indicate that though there is an averment that he is ready and willing to pay the amount settled between the parties, but the said application cannot be said to be an application for redemption of mortgage under Section 60 of the Transfer of Property Act, in as much, the prayer made in the said application is limited to the challenge of the proceedings initiated by issuance of notices under Sections 13(2) and 13 (4) of the act of 2002. 19. According to provisions of Section 17(3) of the Act of 2002 it is provided that in case the Debt Recovery Tribunal comes to a conclusion that the measures taken by the bank are contrary to the provisions of the act and rules made thereunder it can require restoration of the possession of the secured assets to the borrower and also pass such other orders it may consider appropriate and pass necessary orders in relation to any action taken by secured creditor. Section 17 (3) of act of 2002 is as under : ''6 [(3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub-section (4) of Section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management or restoration of possession, of the secured assets to the borrower or other aggrieved person, it may, by order,? (a) declare the recourse to any one or more measures referred to in sub-section (4) of Section 13 taken by the secured creditor as invalid; and (b) restore the possession of secured assets or management of secured assets to the borrower or such other aggrieved person, who has made an application under sub-section (1), as the case may be; and (c) pass such other direction as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under sub-section (4) of Section 13.]'' 20. Submission of petitioner that once auction notice has been published, right of redemption ceases, accordingly the Tribunal cannot pass any effective orders reversing the secured assets back in the hands of borrower. This Court has also gone through the judgment of the Apex Court in the case of Celir LIp v. Bafna Motors (Mumbai) Pvt. Ltd. Law has been laid down duly considering the right of redemption of the borrower, in light of provisions of Sections 60 to 65 of the Transfer of Property Act read with provisions of Section 13(8) of the act of 2002. There is no doubt with regard to legal proposition that right to redemption exists only till the stage of publication of notice, but in the present case the right of redemption has not been exercised on behalf of respondent No. 3 and 4 after publication of the notice for auction of the secured assets, rather, an application under Section 17 has been filed assailing the action of the bank in proceedings under the provisions of Section 13(2) and 13(4) the act of 2002 21. Further a perusal of the scheme provided for under Section 17 of the act of 2002 with regard to the procedure to be followed by the debt recovery Tribunal makes it clear that the said application has to be decided within a period of 60 days from the date of filing of the said application, and in case the same is not disposed within a 4 months, any party can make an application to the appellate Tribunal for a direction to the debt recovery Tribunal for expeditious disposal of the application pending before the debt recovery Tribunal. Therefore, the debt recovery Tribunal is expected to proceed with expedition in dealing with application under Section 17 of the act of 2002 as per the scheme of the act. 22. It has further been provided in sub-section 4 of Section 17 of act of 2002 that in case the application is rejected the secured creditor shall be entitled to take recourse to any of the measures specified under sub-section 4 of Section 13 including sale of the secured assets including sale as provided in Section 13(4)(a). It is open to the borrower to contend before the Debt Recovery Tribunal that the bank has not followed the statutory prescription as per Section 17(4) of the Act of 2002, and the Tribunal is bound to duly consider any such plea taken by the borrower. 23. From the aforesaid discussion with regard to the provisions of Section 13 (4) read with Section 17 (4) of the act of 2002 it is clear that the debt recovery Tribunal has sufficient powers to deal with the grievances of the borrower raised in his application under Section 17 of the act of 2002, to the extent that it can hand over the possession back to the borrower and passed any order which it may consider appropriate in relation to the records taken by the secured creditor, including setting aside of the auction proceedings. It is in light of the aforesaid discussion that this Court is of the considered view that merely because the bank has conducted the auction during the pendency of the proceedings under Section 17 of the act of 2002, without waiting for the decision of the said application would not render the said proceedings infructuous, rather the Tribunal can certainly pass suitable orders in favour of the borrower in case he can make out a case in this regard. Merely because the Bank has chosen to auction the secured assets, could not by itself non suit the borrower or result in abatment of proceedings before the Tribunal. 24. At the risk of repetition, it is observed that the facts of the present case are clearly distinguishable from the judgment of Apex Court in the case of Celir LIp v. Bafna Motors (Mumbai) Pvt. Ltd. inasmuch as right of redemption has not been exercised by the borrower rather in the present case the borrower has exercised his right under Section 17 of the act of 2002 challenging the procedure followed by the bank under Section 13(2) and is 13(4) of the act of 2002. The application was clearly filed prior to initiation of steps for auction by the respondent - Bank. The securitisation application filed at the behest of borrower was pending before the Tribunal when the respondent-Bank auctioned the secured assets. There is no doubt that there was no restrain order from the Tribunal against the respondent-Bank hence they proceeded in accordance with law and accordingly they have proceeded with the auction of the property. 25. In the facts of the present case, there is no doubt that borrower has initiated proceedings challenging the auction conducted by the Bank while exercising power under Section 13(2) and 13(4) of the Act, 2002 and accordingly, entire proceedings initiated by the Bank were under consideration before the Tribunal and pending adjudication. Mere auction cannot nonsuit the borrower and accordingly this Court is of the considered view that Tribunal would be within its competence to duly adjudicate the application under Section 17 of the Act of 2002 and passed necessary orders in accordance with law irrespective of the fact that the bank has proceeded to auction the secured assets in the meanwhile. Mere auction cannot nonsuit the borrower and accordingly this Court is of the considered view that Tribunal would be within its competence to duly adjudicate the application under Section 17 of the Act of 2002 and passed necessary orders in accordance with law irrespective of the fact that the bank has proceeded to auction the secured assets in the meanwhile. It is relevant to observe that in case the Tribunal holds the auction of secured assets by the Bank was illegal, or infirm due to non-following any statutory provision, then they can set aside the proceedings initiated by the Bank but merely because auction has been conducted, cannot came in the way of returning finding in favour of borrower. 26. No other ground has been raised by the petitioner. 27. It is in the aforesaid circumstances this Court is of the considered view that there is no doubt that the petitioner was necessary and proper party before the Tribunal and no effective orders could have been passed considering the prayer made by the borrower, until and unless petitioner was made party before the Tribunal and he being given opportunity of hearing inasmuch as possession of secured assets have been settled in favour of petitioner and sale-deed has been registered. Accordingly there is no infirmity in the order of the Tribunal dated 30.7.2024 whereby the petitioner has been impleaded, and further there is no infirmity in the notices being issued to him by order dated 1.8.2024 asking him to file his reply. In fact the Tribunal has granted full opportunity to the petitioner to present his defence and oppose the claim of the borrower. The petitioner would have full opportunity to raise all the grounds in opposition to the claim of the borrower, which will be adequately considered and decided by the Tribunal, but he cannot be allowed to pre-empt any action by the Tribunal and seek to absolve himself from any prospective order to be passed by the Tribunal which may have the effect of setting aside of the auction proceedings. 28. In the light of above, this Court is of the considered view that petitioner is necessary and proper party before the Tribunal and in this regard there is no error in the impugned order. Accordingly, the writ petition being devoid of merits if dismissed.