Shri Lakshmi Hardwares vs K. Kailasam and Others <BR>The Authorised Officer, Canara Bank Vs The Chairman, Debt Recovery Appellate Tribunal and Others

K. Suguna, J.—W.P. No. 27569 of 2012 is filed challenging the order dated 7.8.2012 passed by the Debt Recovery Appellate Tribunal in R.A. (SA) No. 131 of 2011. According to the learned counsel for the petitioner, the second respondent and his wife jointly availed a credit facility from the petitioner bank on 20.9.2004; the bank sanctioned to the borrowers a sum or Rs. 69,40,000/- on 10.5.2005; the bank also sanctioned a further sum of Rs. 33,39,000/- for the construction of Green House, drip irrigation system and cultivation of capsicum; the borrowers also secured the same inter alia by the mortgage of properties, both agricultural as well as non-agricultural; however, the borrowers defaulted in repayment of the said credit facilities; on 27.9.2008, the bank classified the account as a Non-Performing Asset (NPA); subsequent to this, a demand notice was issued on 20.10.2008 to the borrowers and even after this, payment was not made; on 25.3.2009, the bank took possession of the land and building located at Perunthurai Village by issuing a possession notice and as the borrowers did not respond positively, on 22.5.2009, the Authorised Officer issued sale notice fixing the auction on 25.6.2009; aggrieved by the said sale notice, the second respondent has filed SARFAESI application along with the interim application u/s 17 of the SARFAESI Act before the Debt Recovery Tribunal, Coimbatore; the said application was numbered as S.A. No. 65 of 2009, wherein, conditional order was granted directing the borrowers to pay a sum of Rs. 25,00,000/- in two instalments; aggrieved against the same, the borrowers filed W.P. No. 11229 of 2009 before this Court; this Court disposed of said writ petition by directing the Debt Recovery Tribunal to dispose of the SARFAESI application before the end of August 2009; however, that application was dismissed by the Debt Recovery Tribunal. It is the further stand of the petitioner that on 22.1.2010, one more sale notice fixing the auction on 25.2.2010 was issued; the said sale notice was received by the borrowers; however, the sale was postponed to 5.3.2010; further, on 1.3.2010, the first respondent filed a writ petition in W.P. No. 4322 of 2010 before this Court praying for a writ of mandamus forbearing the bank from conducting public auction either on 5.3.2010 or any other subsequent date; however, auction was conducted on 5.3.2010 and since only one bidder had participated in the auction, who is the third respondent herein, the property was sold to the third respondent for a sum of Rs. 65,07,000/- on 5.3.2010 and the auction purchaser also deposited sums of Rs. 9,75,000/- and Rs. 7,000/- by way of two separate demand drafts towards 25% of the bid amount; the Deputy General Manager of the bank confirmed the sale on 13.3.2010 and the same was made known to the auction purchaser on 18.3.2010 wherein a proclamation of confirmation of sale was issued and the same was received by auction purchaser in April 2010; the second respondent herein filed SARFAESI application before the Debt Recovery Tribunal, Coimbatore and on 31.5.2011, the SARFAESI application was dismissed and as against the same, the second respondent filed an appeal in R.A. (SA) No. 131 of 2011 before the Debts Recovery Appellate Tribunal, Chennai and the same was allowed by order dated 7.8.2012; aggrieved by the same, the petitioner herein filed this writ petition.

According to the learned counsel for the petitioner, the Debt Recovery Appellate Tribunal, Chennai, has allowed the appeal on the ground that no public notice has been given with regard to the said sale that took place on 5.3.2010. But, according to the learned counsel for the petitioner, three sale notices were issued (i.e.) 1st notice on 21.5.2009, in one Tamil daily and in one English daily and also subsequent to this, another sale notice was issued on 22.1.2010 and according to them, this is a final sale notice and as per the said sale notice, those who deposit a sum of Rs. 6,50,000/- as Earnest Money Deposit alone are eligible to participate in the auction. According to the learned counsel for the petitioner, the third respondent alone was the bidder, consequently, the auction was narrowed down with the borrowers and the third respondent herein and at the request of the second respondent herein, the sale was postponed on 5.3.2010 and on that date, since the third respondent was the only bidder, who participated in the auction, the bid was confirmed in his favour and subsequently, confirmation of sale certificate was also given. It is the stand of the learned counsel for the petitioner that the sale in favour of third respondent was also confirmed by proclamation of sale dated 18.3.2010; but, in spite of such a confirmation of sale, the Debt Recovery appellate tribunal gave a finding that confirmation of sale has not been done by the petitioner bank and also no public notice has been given with regard to the sale that took place on 5.3.2010 and yet another ground on which the Debt Recovery Appellate Tribunal has allowed the appeal is based on the valuation certificates dated 23.4.2007 and 29.4.2005; but, as far as the finding of the Tribunal is concerned, it is erroneous, since, the valuation report was obtained as early as in the year 2007, consequently, this finding, prima facie, is erroneous.

Yet another stand taken by the learned counsel for the petitioner is that only at the request of the second respondent, the sale which was fixed on 25.2.2010, was postponed to 5.3.2010; in spite of second sale notice, no offer was made; subsequently, only for the third sale notice, the third respondent had made his offer; under such circumstances, the question of issuing another sale notice does not arise; apart from this, when the offer is limited with a single bidder, there is no need to issue another sale notice and after making request for postponement of the sale from 25.2.2010, the second respondent is estopped from raising any remarks with regard to the postponement of the sale. On these grounds, the learned counsel for the petitioner has sought setting aside the order of the Debt Recovery Appellate Tribunal.

On the other hand, according to the learned counsel appearing for the second respondent, viz., the borrower, as far as the case in hand is concerned, the sale was postponed to 5.3.2010 and the object of issuing public notice is to invite more offers to get a higher sale price for the property in question. Relying on Rule 9(1) of the Security Interest (Enforcement) Rules, 2002, the learned counsel for the second respondent has submitted that no sale of immovable property can be made before the expiry of 30 days time from the date of sale notice; but, in this case, no sale notice has been issued with regard to the sale that took place on 5.3.2010; further, as per the stand of the petitioner also, the third respondent is the only bidder who had complied with the condition imposed in the sale notice; as per Rule 9(3) of the said Rules, immediately on the date of the sale, i.e., on 25.2.2010, the third respondent should have deposited 25% of the amount of the sale price to the Authorised Officer, but just to facilitate the third respondent and to accommodate him, the sale was postponed to 5.3.2010; further, no power has been given under the Act for the postponement of sale by the Authorised Officer; in the absence of such power, postponement of sale to 5.3.2010 itself is illegal. Yet another stand taken by the learned counsel for the second respondent is that as per Rule 9(2), confirmation of sale should have been made by the secured creditor and in this regard, he has relied on the orders of the Debt Recovery Tribunal, wherein, it is held as follows:

A reading of the above rule clearly reveals that the Authorised Officer is duly bound to confirm the sale in favour of the purchaser who has offered highest sale price in the bid.

But, according to the learned counsel for the second respondent, the confirmation of sale was not done by the petitioner herein. Further, according to him, even the sale notice was not affixed in the property in question and consequently, the order of the Debt Recovery Appellate Tribunal has to be upheld.

According to the learned counsel for the third respondent, the third respondent will abide by the orders of this Court.

We have considered the above submissions of the respective learned counsel.

A perusal of the impugned order passed by the Debt Recovery Appellate Tribunal would reveal that no public notice has been given for the sale that took place on 5.3.2010. This is not disputed by the learned counsel for the petitioner also. Now, the stand taken by the petitioner is that only at the request of the second respondent, the sale was postponed. In support of the stand the learned counsel for the petitioner has relied on the affidavit filed by the second respondent in the earlier writ petition, viz., W.P. No. 4322 of 2010 which has been enclosed at page No. 13 of the typed set of papers, the relevant portion of which reads as follows:

I submit that in mean time the respondent herein issued auction notice on 22.1.2010 in his proceedings No. 47 CR SAF 889/2010, dated 22.1.2010 whereby fixed the auction date on 25.2.2010 after knowing that I approached the bank and remitted Rs. 2.5. Lakhs and made a request to postpone the auction for three months for enabling me to settle the entire dues. The respondent also promised that they are going to conduct public auction in the month of May 2010 and asked me to show my bona fide for repayment accordingly I paid Rs. 2.5 lakhs but, but the respondent bringing my property for public auction on 5.3.2010, but, no written orders has been furnished or published.

Further, the interim prayer sought in the said writ petition which reads as follows:

Grant an order of interim injunction, restraining the respondent from conducting public auction pursuant to the order passed by the respondent in his proceedings No. 46 CR SAF 889/2010, dated 22.1.2010 either on 5.3.2010 or any other subsequent date pending disposal of the above writ petition.

also reveals that the second respondent is well aware of the sale fixed on 5.3.2010. Even as per paragraph No. 12 of the affidavit extracted above also, the petitioner herein had assured to conduct public auction in the month of May 2010. However, the affirmed fact is that the sale took place in March 2010. Apart from this, the stand of the learned counsel for the petitioner that only at the request of the second respondent, the sale has been postponed to March 2010 can be accepted partially in view of the averment in the affidavit filed in support of the earlier writ petition, viz., W.P. No. 4322 of 2010. But, with regard to the fixing the sale in the month of March 2010, there is no averment even in the said affidavit also and with regard to fixing the valuation, today, the learned counsel for the petitioner had submitted that the valuation report of 2007 was produced before the Debt Recovery Appellate Tribunal, but, the same was not taken note of. But, unfortunately, no such ground is taken in the affidavit filed in support of the writ petition. This writ petition is filed by the Manager of a nationalised bank, without even an averment to that effect. That apart, the learned counsel for the petitioner bank is also not in a position to confirm as to the date on which the 2007 report was filed before the Tribunal. Further, the other ground on which the relief was given is that the sale notice has not been affixed in the property in question. But, with regard to this also, though, according to the learned counsel for the petitioner, it was complied with and it was brought to the notice of the Tribunal, no such averment has been made in the affidavit filed in support of the writ petition. Besides, no proof of this stand taken before the Debt Recovery Appellate Tribunal also is brought to the notice of this Court. As far as postponement of sale is concerned, the stand of the petitioner is that at the request of the second respondent only, the same was postponed. Whether at the request of the second respondent, the sale was postponed or otherwise, the procedure contemplated under Rule 9(1) of the Security Interest (Enforcement) Rules, should have been followed. As held by the Tribunal, when the object of the notice is to invite more offers to the property in question, the argument of the learned counsel for the petitioner that since as per the earlier sale notice, only the third respondent had complied with the condition of deposit of Earnest Money Deposit, the question of issuing another notice does not arise, cannot be accepted. Without issuing sale notice, the sale could not have been conducted at a later date. Under such circumstances, we are of the opinion that as on date, as held by the Tribunal, though the Authorised Officer has the power to postpone the sale, he has to follow the procedure contemplated under the statute after duly informing the general public. Besides, as per the finding of the Tribunal, the sale notice has been affixed in the bank''s notice board at Coimbatore, whereas, the property is at Perunthurai. We are informed that the distance between these two places is about 50 kms. Before this Court, the petitioner bank submitted that the sale notice was affixed even in Perunthurai also. But, to prove the same, no document has been produced either before this Court or before the Debt Recovery Appellate Tribunal. But, the stand of the petitioner is that in support of the stand taken, necessary documents were filed before the Tribunal. Under such circumstances, we are of the considered view that the impugned order dated 7.8.2012 cannot be allowed to stand. Consequently, we set aside the same and the matter is remitted back to the Debt Recovery Appellate Tribunal to give an opportunity to the petitioner as well as to other respondents herein to enable them to mark relevant documents in support of the stand taken by them.

However, though the impugned order passed by the Debt Recovery Appellate is set aside, the petitioner bank is directed to pay costs of Rs. 25,000/- (Rupees Twenty Five Thousand only) to the second respondent within a period of two weeks from the date of receipt of a copy of this order. This costs is imposed for the reason that the learned counsel for the petitioner took a stand that the petitioner has filed a document with regard to the valuation report of the year 2007 before the Tribunal. But, the same has not been filed before this Court. That apart, as per the stand of the learned counsel for the petitioner bank, the auction purchaser was issued with proclamation of confirmation of sale and the same was served on him. But, unfortunately, no proof is filed before this Court and no ground is made in support of the writ petition to that effect.

According to the learned counsel for the petitioner bank, if the Debt Recovery Appellate Tribunal as well as Debt Recovery Tribunal indexes the documents filed before them by the petitioner as well as the respondents, it will be convenient for reference with regard to the documents filed before them. We are accepting the stand of the learned counsel for the petitioner and hence, both the Debt Recovery Appellate Tribunal and Debt Recovery Tribunal shall index the documents filed before them by, both by the petitioner as well as the respondents, in order.

The Debt Recovery Appellate Tribunal is directed to dispose of the matter within a period of three months from the date of receipt of a copy of this order. In the event of failure on the part of the petitioner to pay costs of Rs. 25,000/- to the second respondent within the stipulated time, the Debt Recovery Appellate Tribunal need not take up the matter. W.P. No. 24806 of 2012 is filed to quash the order of the Debt Recovery Appellate Tribunal in R.A. (SA) No. 131 of 2011 dated 7.8.2012. In view of the above order passed in W.P. No. 27569 of 2012, the order impugned in W.P. No. 24806 of 2012 also is set aside. However, in view of our order passed in the earlier writ petition, viz., W.P. No. 27569 of 2012, remitting the matter back to the Debt Recovery Appellate Tribunal, though the order impugned in this writ petition is quashed, the petitioner in this writ petition, viz., W.P. No. 24806 of 2012 is not entitled for the consequential benefits of the order.

With the above observations, the writ petitions are disposed of. No costs, Connected Miscellaneous Petitions are closed.