B. Arun vs Indian Bank and Another

M. Venugopal, J.—The Petitioner has filed this writ petition praying for an issuance of writ of certiorarified mandamus in calling for the records on the file of the Respondents, leading to the auction sale dated 18th. July, 2009 conducted by them in regard to the properties of the Petitioners viz., 8 shops and 2 flats situated at Plot No. C-14, Door No. 134, New No. 4, 40th Street, Naganallur, Chennai 600061 and one flat measuring 1450 sq. ft. bearing Flat No. 4-D, 4th Floor, Door No. 20, New No. 25, Thirumurthy Street, T. Nagar, Chennai 600017 and to quash the same and consequentially directing the Respondents to accept the offer made by the Petitioners in regard to the auction sale and execute the sale deed in favour of their nominees.

The case of the Petitioners is that they have approached the second Respondent, Indian Bank, Guindy Branch and obtained a credit facility in the year 1990 by way of over draft for a limit of Rs. 50 lacs and they were in the business of construction of flat and were regularly processing the said loan facility till 1997 and, subsequently, due to fall in business and heavy financial constraints (sic) they could not service the loan regularly but continued to pay interest till 2001 regularly and the second Respondent has filed O.A. No. 1250 of 1998 against the Petitioners and when they along with some of the creditors approached the second Respondent and sought for One Time Settlement at Rs. 85 lacs the second Respondent/Indian Bank had accepted the said OTS and a memo of compromise for Rs. 85 lacs was filed before the Debts Recovery Tribunal in O.A. No. 1250 of 1998 in and by which the Petitioners had to pay a sum of Rs. 20 lacs on or before 30th January, 2001 and the balance to be paid with simple interest at 12% per annum from 1st April, 2001 till 31st December, 2001.

It is the further stand of the Petitioners that pursuant to the said one time settlement one of the Petitioner''s creditors Salim Builders who was interested in taking over the ''B'' and ''C'' Schedule properties in possession notice dated 20th June, 2008 had approached the second Respondent/Bank and offered to deposit Rs. 18 lacs provided the title deeds of the said properties are released to them and that the Bank had also agreed to the said offer and gave a letter pursuant to which a sum of Rs. 18 lacs has been deposited by them with the second Respondent in terms of the OTS compromise memo. But, the second Respondent/Bank had not released the documents to Salim Builders as a result of which the other creditors who had offered to pay balance amount of Rs. 67 lacs had backed out and because of the non-cooperative attitude of the Bank the Petitioners could not repay the One Time Settlement amount as per schedule.

According to the Petitioners, till 2008 they have paid nearly Rs. 70 lacs to the second Respondents/Bank which was credited by the Bank towards interest and penal interest and that they had constructed and sold flats in the properties and the purchaser of flats had also approached the second Respondent/Bank and paid the amounts and also obtained letters for releasing their respective shares and added further the Petitioners in 2007 approached the second Respondent/Bank with an offer of one time settlement at Rs. 17.5 lacs and deposited a sum of Rs. 17.5 lacs in a no lien account with the Bank for consideration of their proposal and the second Respondent/Bank by its letter dated 11th September, 2007 accepted the one time settlement on condition that Rs. 17.5 lacs which were deposited by the Petitioners in no-lien account would be credited to the loan account immediately and the balance sum would be paid within 90 days. The Petitioners pursuant to the one time settlement paid a further amount of Rs. 12.5 lacs and sought permission from the second Respondent/Bank for sale of ''E'' Schedule property and for sale of two flats and eight shops in ''A'' Schedule property in order to pay the balance one time settlement sum. The Respondents refused to furnish any reply taking advantage of the Petitioners bad situation and caused a notice u/s 13(2) of the SRFAESI Act, 2002 on 27th March, 2008 calling upon them to pay a sum of Rs. 4,53,20,070.91 within 60 days failing which they threatened to take possession of the properties as per Section 13(4) of the Act.

The Petitioner had paid more than Rs. 90 lacs to the Respondents/Bank though there was some breaks in the payment due to financial crunch. However, the Petitioners made an offer of one time settlement of Rs. 155 lacs in March, 2009 and the same was accepted by the Bank on 27th April, 2009 and Bank directed them to pay the said sum on or before 29th May, 2009.

The contention of the Petitioners is that they had arranged the purchasers for purchasing the properties which were mortgaged with the Bank namely 8 shops and 2 flats situated at Plot No. C-14, Door No. 134, New No. 4, 40th Street, Nanganallur, Chennai 600061 and one flat measuring 1450 sq. ft. bearing Flat No. 4-D, 4th Floor, Door No. 20, New No. 25, Thirumurthy Street, T. Nagar, Chennai 600017 and approached the Respondents with prospective purchasers who offered to purchase the aforesaid two items of properties at Rs. 46 lacs and Rs. 70 lacs respectively and requested the Bank to accept the payment of Rs. 116 lacs being made by the purchasers and offered to pay the balance amount within a month''s time, but the Respondents refused their offer and brought the said two items of properties in tender-cum-auction sale on 18th July, 2009 by proceedings dated 12th June, 2009 and for the first item of the property i.e., for the 8 shops a reserve price of Rs. 20 lacs was fixed and for Flat-A the price was fixed at Rs. 14 lacs and Flat-B the price was fixed at Rs. 12 lacs and in regard to the second item the reserve price for the flat at Thirumurthy Street was fixed at Rs. 56 lacs and again the Petitioner approached the Bank and requested them to accept their offer since the same was much higher than the reserve price quoted by them. But, the Respondent Bank had failed to consider their request and the properties were brought to auction on 18th July, 2009 and even though the purchasers were brought by the Petitioners with firm offers they filed their tender and the entire auction was stage managed by the Respondents and none of the bidders were allowed to participate in the auction and that the Respondents pre-arranged a purchaser of their choice who alone was permitted to bid and the first item namely eight shops were sold for a paltry sum of Rs. 20,10,000/- and the second item the flat at Thirumurthy Street was sold for a sum of Rs. 61 lacs and the other flats were not sold since there were no bidders.

As a matter of fact, the Respondent had ignored the offer of the Petitioners in respect of the 8 shops and 2 flats which was higher than the reserve price and they had accepted the bid for Rs. 20,10,000/-. In regard to the flat at Thirumurthy Street, though quoted Rs. 70 lacs they had accepted bid for Rs. 61 lacs. In the appeals filed by the certain flat owners before the Debts Recovery Tribunal-II. Chennai the Petitioners along with bidders appeared and requested the Tribunal to direct the Respondents not to confirm the auction sale dated 18th July, 2009 and to direct them to accept their offer of Rs. 46 lacs and Rs. 70 lacs respectively. The Tribunal gave a direction to produce a demand draft for 120 lacs and in meanwhile, orally instructed the Bank not to confirm the auction sale.

Continuing further, the Petitioners produced the demand draft for Rs. 120 lacs along with the letters from the purchasers expressing their willingness to purchase the first item at Rs. 46 lacs and second item at Rs. 70 lacs and a further sum of Rs. 4 lacs was also paid. At that time, the Respondents informed that the Petitioners had to pay a sum of Rs. 173 lacs as one time settlement within one month in order to settle the entire claim and requested the Respondents to receive the demand draft for Rs. 120 lacs and execute the sale deed in favour of the purchasers who had deposited the demand draft in respect of the aforesaid two items of property which were brought to auction and promised to pay the balance one time settlement amount within one month. But, the Respondents refused to receive the demand drafts for Rs. 120 lacs and insisted on payment of the entire Rs. 173 lacs as one time settlement of the entire dues. The Petitioner submitted demand draft for Rs. 1 crore and Rs. 20 lacs and whereas the property sold by the Respondents fetched only Rs. 81 lacs.

Expatiating the arguments, the learned Counsel for the Petitioners contends that the action of the Respondents in conducting an auction on 18th July, 2009 was totally a farce one and was stage managed by them and there was an offer for 120 lacs in respect of the properties, the Respondents had accepted illegally an offer of Rs. 81 lacs for the same properties from the third parties which was a clear case of colourable exercise of power and when the Petitioners were granted a month''s time to pay the sum of Rs. 173 lacs towards one time settlement in the meeting held on 24th July, 2009 which was communicated to the Debts Recovery Tribunal-II, Chennai by the Chief Manager Thiru Chezhian, the Petitioners had a month''s time to pay the balance of Rs. 53 lacs and the Respondents could not refuse to receive an amount of Rs. 120 lacs and in fact the Petitioners made their offer of Rs. 116 lacs in respect of the properties even prior to the auction sale and this was not considered by the Respondents and when the Petitioners produced the draft for Rs. 120 lacs as directed and even after production of the said amount the Respondents could not refuse to receive the same and insisted on accepting the lower bidder for the same property and when Respondents receive a sum of Rs. 120 lacs then they would get Rs. 40 lacs more for the very same properties and, therefore, prays for allowing the writ petition.

In the counter filed by the Respondent Bank, it is inter alia stated that Aarthi Builders of which the Petitioner is the partner borrowed a sum of Rs. 50 lacs during 1990 and the Bank filed O.A. No. 1250 of 1998 against the borrowers, guarantors mortgagors, etc., for the loan amount with interest in respect of the immovable properties mortgaged with the Bank and the borrower gave one time settlement proposal in February, 2001, and Bank accepted on certain terms and conditions specifying that 50% of the agreed Rs. 85 lacs should be paid on or before 31st March, 2001 and the balance with simple interest at 12% per annum before 30th September,, 2001 and the borrower never complied with the terms of the one time settlement sanction and not a single paisa was paid and the compromise lapsed and further, a second proposal was given in 2007 and a sum of Rs. 17.5 lacs was received pursuant thereto and the second proposal was accepted by the Bank on certain terms and conditions including on payment of the one time settlement amount less Rs. 17.5 lacs within 90 days and accept the payment of further amount of Rs. 12.50 lacs no amount was ever paid in terms of acceptance letter and no payment was received from Mr. Salim and the second compromise also lapsed on account of the failure of the borrowers to make the payment as agreed and an extension of time was sought for by the Petitioners on 16th February, 2008 agreeing to pay a sum of Rs. 110 lacs within 21st February, 2008 and since the Petitioners being a chronic defaulter the Bank had not granted any extension of time and, therefore, a notice u/s 13(2) of the SRFAESI Act, 2002 to all persons concerned was issued on 27th March, 2008 and on their failure to remit the amount on demand possession notice was issued on 20th June, 2008.

It is also submitted by the Respondents that the Petitioners gave a third proposal in March, 2009 offering Rs. 150 lacs in full and final settlement of the claim and the Respondents in order to provide one more opportunity accepted the same on condition of remittance of entire sum on or before 28th May, 2009 and that no payment was made towards the one time settlement amount and on the same date the Respondents informed the Petitioners about the cancellation of the settlement.

The stand of the Respondents is that the proceedings initiated in respect of the sale of the property under the SRFAESI Act, 2002 and in terms of the auction notice sealed tenders were received from 4 bidders in respect of the third item of the auction notice and 7 bidders in respect of first item of the said notice and there was no bidder in respect of the second item and the auction proceedings were conducted in a meticulous manner and the highest offer in respect of both the properties were accepted and the third party purchasers also submitted their tenders and participated in the auction but they did not bid the highest amount and that the entire proceedings were videographed and after the auction sale, any offer by a third party even for a higher sum could not be accepted when the highest bid in the auction was accepted and in view of the third party successful auction bidders'' interests were involved and they had not agreed to the Petitioner''s proposal.

Apart from the above, on behalf of the Respondents is submitted that in the proceedings before Debts Recovery Tribunal-II, Chennai certain flat owners challenged the Securitization Notice issued by the Respondent No. 1 in regard to the eight items of the properties the Petitioners approached the Tribunal for directing the Bank to accept a proposal for payment of Rs. 120 lacs without any proposal for the payment of balance of Rs. 53.31 lacs agreed to be paid after negotiation and since the Tribunal was not seized of the 4th proposal for one time settlement the Tribunal had not passed any order or gave any directions. Inasmuch as the Petitioners imposed certain conditions before the Tribunal when they produced the demand draft of Rs. 120 lacs stating that Bank should keep the said sum of Rs. 120 lacs in a no-lien account and further that the Bank should execute sale deeds in favour of his proposed third party purchasers and release documents of title to them, etc., these conditions were not acceptable to the Respondents and they had not agreed for the same. Also in regard to the very same properties, the auction was held and the successful bidders were awaiting confirmation and any private sale or negotiation in respect of the said very same property could not be legally sustainable and tenable one and certainly the same would only land the Bank in a series of litigations, etc., and therefore, the offer of the Petitioners was not accepted.

The pith and substance of the contention of the Respondents is that the Petitioners after committing default to adhere to the payment schedules in respect of the one time settlement proposals had no legal right to seek the indulgence of this Court for cancellation of the sale and acceptance of the proposal in issue and as on date Rs. 723.4 lacs are due to the Bank and the writ petition lacks bona fides.

On a careful consideration of the respective contentions, we are of the considered view that the Petitioners cannot demand for a private sale as a matter of right when the earlier auction proceedings are admittedly pending before the Tribunal awaiting confirmation of sale from the successful bidders, the fast track procedure under the draconian SRFAESI Act, 2002 cannot be allowed to be derailed in any manner and, moreover, when the Petitioners are defaulters in respect of the earlier four one time settlement proposals, they cannot seek the discretionary power of this Court by adopting a recourse to the Article 226 of the Constitution of India praying for the reliefs of calling for the records from the file of the Respondents in regard to the auction sale conducted by them on 18th July, 2009 in respect of properties more fully described in the petition, etc., since the High Court does not act as an Appellate Authority and viewed from that angle, the writ petition is devoid of merits and same is hereby dismissed in furtherance of substantial cause of justice.

In fine, for the foregoing reasons we dismiss the writ petition without costs. Consequently connected miscellaneous petitions are also closed. However, the dismissal of this writ petition does not preclude the Petitioners to approach the appropriate forum for redressal of their grievance.