Soni Srivastava vs Allahabad Bank

Mr. Shree Chandrashekhar, J. - Seeking quashing of sale notice dated 08.07.2015, auction sale dated 20.08.2015 and order contained in letters dated 06.07.2015 and 26.08.2015, the present writ petition has been filed.

The brief facts of the case are that, M/s Eastern India Cements Private Limited carries on business of manufacture and supply of cement. The company approached the respondent-Allahabad bank for financial assistance and the bank sanctioned Cash Credit Limit of Rs. 20,00,000/- and Term Loan of Rs. 2.00 crores. Subsequently, Cash Credit Limit was enhanced to Rs. 60,00,000/-. The petitioner is one of the directors of M/s Eastern India Cements Private Limited and she is a guarantor for the loan extended to the company by the respondent-Allahabad Bank. Subsequently, the loan account was declared N.P.A. and the respondent-Bank served noticed on 22.09.2014 under Section 13(2) of Securitization and Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (SARFAESI Act, 2002) and demanded payment of Rs. 3,26,70,716.00/-. After issuing notice under Section 13(4) on 28.07.2015, possession of the secured properties was taken. The respondent-Bank issued Sale Notice dated 16.04.2015 fixing date of auction on 20.08.2015. The petitioner offered Rs. 40,00,000/- which was reserve price for one of the properties for release of collateral security however, the respondent-Bank demanded Rs. 60.37 lakhs for release of the said properties (property in question). In the auction which took place on 20.08.2015, the single bid of the respondent no. 4 for Rs. 40.10 lakhs was accepted. The petitioner thereafter, offered to pay Rs. 45 lakhs against the auction sale price of Rs. 40.10 lakhs however, the respondent-Bank asked the petitioner to liquidate the entire loan amount of Rs. 3,57,48,250.00/- with costs and charges for cancelling the auction sale.

Heard the learned counsel for the parties and perused the documents on record.

Mr. Rajesh Kumar, the learned counsel for the petitioner referring to Rule 60 to the Second Schedule of the Income Tax Act contends that the petitioner has deposited the auction sale price within 30 days of the date of auction sale which took place on 20.08.2015 and therefore, the respondent-Bank must release the property in question to the petitioner. Referring to correspondence dated 06.07.2015 from the respondent-Bank, the learned counsel submits that for release of one of the secured properties, the respondent-Bank cannot insist upon payment of the entire outstanding amount.

As against the above. Mrs. A.R. Choudhary, the learned counsel for the respondent-Allahabad Bank submits that in terms of Section 13(8) of the SARFAESI Act, 2002, the borrower was required to deposit the entire loan amount within 30 days of the sale or transfer as the case may be, which the petitioner has failed to do. It is contended that under Rule 60, the defaulter is required to pay the amount specified in "proclamation of sale", within 30 days from the date of sale.

Insofar as, challenge to the direction contained in letter dated 06.07.2015 is concerned, in view of the auction sale conducted on 20.08.2015, the same has been rendered infructuous. Moreover, in terms of extant policy/guidelines of the Bank, the petitioner did not deposit 25 % of the value to the charged security and therefore, her offer was not accepted. Now adverting to the rival contentions on the interpretation of Rule 60 to the Second Schedule of the Income Tax Act, I am of the opinion that the said provision is applicable after the auction sale is conducted whereas, Section 13(8) of the SARFAESI Act, 2002 can be invoked by the borrower immediately after the auction sale notice is issued. Both the provisions are intended at providing an opportunity to the borrower to retain the secured assets. During the course of hearing, the learned counsel for the petitioner admitted that the petitioner could have participated in the auction and, it is an admitted position that the petitioner did not participate in the auction sale. After conclusion of the auction sale, she came forward and offered Rs. 45,00,000/-. Rejecting such an effort by a borrower, in "Prakash Industries Ltd. v. Development Credit Bank Ltd. and Another" reported in (2002) 6 SCC 424, the Hon''ble Supreme Court affirmed the High Court''s view rejecting a higher offer by the borrower-company. Considering the facts of this case, I am not inclined to interfere in the matter. The question whether one of the secured assets can be released on payment of the auction-price for such property need not be gone into. The learned counsel for the petitioner informs the Court that the petitioner in pursuance of order dated 04.09.2015 has deposited Rs. 40,10,000/-. The amount deposited by the petitioner shall be refunded to the petitioner within one week. The writ petition stands dismissed.