Sri Devappa And Anr. vs Authorised Officer, State Bank Of India And Ors.

1) The present SA is filed by the Appellants, seeking to quash/set aside the impugned sale notice dated 18.07.2019 issued by the Respondent Bank and sale proceedings dated 08.08.2019 in respect of the schedule property for recovery of Rs.11,60,367/- (Rupees eleven lac sixty thousand three hundred and sixty-seven only) as on 18.07.2019 along with  future interests, charges, costs, expenses, etc.

2) The case of the Appellants in a nutshell is that, the Appellants availed Housing Loan of Rs.13,00,000/- during the  year 2007 from the Respondent Bank. It is the contention to the Appellants that they have paid sufficient amount to the \ loan accounts with up-to-date interest till now and have deposited Rs.25,00,000/- to term loan accounts, after merger of State Bank of Mysore with the State Bank of India and have also deposited Rs.10,00,000/- to the loan account and another sum of Rs.1,07,000/- on 17.01.2019. It is further contended that the Appellants have deposited Rs.2,50,000/-as per the interim order passed by this Tribunal in S.A.No.227 /2019. It is further contended that the said S.A. came to be dismissed as infructuous on 05.07.2019 as the sale has not taken place and the Respondent Bank issued the impugned sale notice vide Annexure-Al fixing the date of auction on 08.08.2019. Appellants further contended that they approached the Respondent Bank for paying Rs.4 lac to the loan account, but the bank refused to receive the amount on 30.07.2019, 05.08.2019 and 07.08.2019. It is the further contention of the Appellants that the Respondent Bank colluding with the Auction Purchaser sold the property illegally on 08.08.2019. The loan liability is only Rs.11,60,367/- as per the impugned sale notice, but the value of the property is nearly Rs.125 lac. It is alleged that the Respondent Bank has orally told that the property has been sold. Appellant contended that the Appellants are ready and willing to pay the entire loan amount. The grounds urged by the Appellants are, the Respondent Bank has not followed the act and rules at the time of sale proceedings and has not furnished any documents of sale of the property; the act of the Respondent is highly illegal and arbitrary and is against the principles of natural justice; Respondent Bank has not given/issued proper statement of account of the Appellants and has claimed excess amount; Respondent Bank failed to serve demand notice, possession notice and also sale notice to the Appellants in respect of the schedule property; the Appellants have executed sale agreement to the third party and deposited into the loan account the advance amount of Rs.10 lac received, but have not executed sale deed in favour of third party and agreement holder has filed a case before the civil court, Mysore which is pending; Respondent Bank has not followed sub-rule (a) Rule 6 of the Security Interest (Enforcement) Rules, 2002; Respondent Bank has not mentioned the encumbrance of the schedule property as per the rules; Respondent Bank has not served 30-day sale notice; even 1st sale notice dated 29.05.2019 also has not been served with 30-day notice; Respondent Bank in sale notice dated 29.05.2019 has mentioned loan due amount of Rs.12,51,023/- as on 29.05.2019; the Appellants have filed appeal and deposited Rs.2,50,000/- as per the orders of the Tribunal in S.A.No.227 /2019 and now the loan due amount mentioned in the impugned sale notice is Rs.11,60,367/- as on 18.07.2019, which is illegal; reserve price mentioned in the sale notice is very low; Respondent Bank failed to obtain proper valuation of the schedule property before issuing the sale notice; the present value of the property is Rs.1,25,00,000/-, but the bank has sold it for a sum of Rs.71,62,879/- which is illegal; the Respondent Bank created their own statement of loan accounts illegally and increased the rate of interest; bank has not followed the RBI rules and circulars; RBI has decreased the rate of interest in respect of Housing loan account, but bank has not followed the same; Respondent Bank has not mentioned the particulars of the sale notice in the notice and also nature of residential building and measurement of building; Respondent Bank has taken the physical possession of the property during April 2019, but has mentioned in the sale notice "bank has taken the symbolic possession; Respondent Bank has not properly calculated interest amount in respect of Housing Loan account and has claimed exorbitant interest and not mentioned the terms and conditions of sale notice and Respondent Bank has not followed the sub-sections (A), (B), (C) and (D) of Section 26 of SARFAESI Act before initiating the recovery under the Act. In view of the above facts and grounds, the Appellants have prayed to quash/set aside the impugned sale notice dated 18.07.2019 in respect of the schedule property.

3) In response to the notice, 1st Respondent Bank appeared through its counsel and statement of objections to the main appeal with list of documents containing photocopies of documents which are marked as Annexure-R1 to R18. Respondent Bank has, inter alia, contended that the appeal which is based on totally false, frivolous, vexatious and untrue averments is just not maintainable both in law as well as on facts of the case; hence the same is liable to be dismissed in limine. The Appellants have approached this Tribunal with unclean hands and misrepresented the facts to gain sympathy and are not at all entitled for any relief, whatsoever, from the hands of this Tribunal. It is contended that the Respondent Bank had granted the credit facilities to the Appellants, after the Appellants executed requisite documents and equitable mortgage of the schedule property in favour of the Respondent Bank. It is contended that the Appellants have defaulted in repayment as agreed and the loan account was classified as Non-Performing Asset (NPA) on 07.03.2018 as per the norms and guidelines issued by Reserve Bank of India. As the borrowers failed to repay the amount due Respondent Bank issued demand notice dated 29.05.2018 vide Annexure-R1 under Section 13(2) of the Act to the borrowers and sent the demand notice to the Appellants by Speed Post, which came to be returned as "UNCLAIMED". Hence the Respondent Bank got the said demand notice published in two newspapers on 12.06.2018 vide Annexure- R3. As the dues were not cleared by the Appellants, the Respondent Bank initiated further action under Section 13(4) of the Act by issuing possession notice dated 11.09.2018 vide Annexure-R4 and the possession notice sent to the Appellants by Speed Post was returned vide Annexure-R5. The Respondent Bank also published the possession notice in two daily newspapers on 12.09.2018 vide Annexure-R6 as required under law and also affixed the possession notice on the property vide Annexure-R7 and thus the Respondent Bank took symbolic possession of the property. It is further contended that the Respondent Bank approached the Deputy Commissioner/ Magistrate, Mysore District and affixed the order dated 16.03.2019 obtained from the Learned Magistrate vide Annexure-R8 on the schedule property. Subsequently, the Respondent Bank issued e-auction sale notice dated 29.05.2019 vide Annexure-R9, fixing the sale on 04.07.2019 which was challenged by the Appellants before this Tribunal in S.A.No.227/2019 wherein this Tribunal granted interim order of stay directing the Appellants to deposit a sum of Rs.2,50,000/-. On the next date of hearing, the Respondent Bank appeared in the said matter and submitted that the sale as scheduled had not taken place for want of bidders and hence this Tribunal dismissed the said appeal as infructuous on 05.07.2019 vide Annexure-R12. Respondent Bank has produced photocopies of postal acknowledgements vide Annexure-Rl0 and newspaper publications of sale notice vide Annexure-R11. It is further contended that as the Appellants were still due to the extent of approximately Rs.11,60,367/-, the Respondent Bank issued the impugned sale notice dated 18.07.2019 by fixing the sale on 08.08.2019 vide Annexure-R13. The said notice was sent to the Appellants by Speed Post which was duly served upon them vide Annexure-R14. The Respondent Bank published the impugned sale notice in two leading newspapers on 19.07.2019 vide Annexure-R15. The sale as scheduled was held and the Sale Confirmation Letter dated 08.08.2019 and Sale Certificate dated 19.08.2020 were issued to the successful bidders i.e. Respondents No.2 and 3 herein vide Annexures-R16 and 17 respectively. The 1st Respondent Bank in its statement of objections has further contended to the relevant averments made in paragraphs 5.1 to 5.5 of facts of the case of the appeal memo, stating that all the notices and actions taken by the Respondent Bank under the provisions of the Act were well within the knowledge of the Appellants, yet the Appellants chose to remain silent and slept over their rights and it is only when the first sale notice was issued by the Respondent Bank, the Appellants knocked the doors of this Tribunal. It is further contended that the Appellants have executed sale agreement in favour of a third party in respect of the schedule property without informing the Respondent Bank, which is unlawful, as the schedule property is a secured asset of the Respondent Bank and the Appellants during the subsistence of the mortgage have no liberty to enter into any agreements in respect of conveyance of the schedule property to third parties. The documents produced by the Respondent Bank show that the Appellants have received the sale notice on 20.07.2019 and hence their contention that they received the sale notice on 27.07.2019 fails. Prior to the issuance of impugned sale notice, the Respondent Bank has got the schedule property valued from the Government approved valuer who is on the panel of the Respondent Bank and according to his report vide Annexure- R18, the reserve price for the schedule property was fixed as Rs.71,62,879/- and therefore the contention of the Appellants that the schedule property was undervalued/sold for very less price is completely false, baseless and bereft of truth. Respondent Bank further contended that the Appellants have preferred an application for redemption of the sale. The Appellants now cannot claim redemption of the sale as the Respondent Bank has already issued the sale certificate and the Appellants had the option of redemption before the date of publication of sale notice and not any time later, in view of which, the application of the Appellants for redemption does not survive for consideration and is liable to be dismissed outright. Respondent Bank further contended that the Respondent Bank has not only proceeded against the Appellants as per law with due care and diligence, that too after providing ample opportunities to the Appellants to clear the loan, but also that it has maintained proper accounts, accounted for all the remittances made to the loan account and has gone strictly as per the terms and conditions of the loan and thus it has acted well within the ambit of the relevant law of the land. With the above objections, the Respondent Bank has prayed for the dismissal of the appeal, with exemplary costs, in the interest of justice and equity.

4) During the pendency of the case, the Appellants filed I.A.No.1967 /2019 for impleading the Auction Purchasers as Respondents No.2 and 3 which came to be allowed and in response to the notice, Respondents No.2 and appeared through their counsel and jointly filed their statement of objections to the appeal memo. The impleaded Respondents contended that the appeal filed by the Appellants is based on totally false, frivolous and vexatious and untrue averments and is not maintainable both in law and on facts of the case and hence the appeal is liable to be dismissed in limine and the Appellants are not at all entitled for any relief, whatsoever, from the hands of this Tribunal. It is further contended that the 2nd Respondent who was keenly looking out for a good property in Mysore participated in the e-auction sale and was declared as the successful bidder for an amount of Rs.72,12,879/-. After payment of bid amount, the Respondent Bank issued sale certificate on 19.08.2019 in favour of the Respondents No.2 and 3. 2nd Respondent further contended that he has legally participated in the e-auction sale process without collusion with the Respondent Bank and when such being the case, the Appellants have approached this Tribunal with baseless allegations, causing immense trouble to the Respondents No.2 and 3. It is further contended that in spite of being the successful bidder and having paid the entire bid amount, the impleaded Respondents are restrained from registering the schedule property only by the action taken by the Appellants by approaching this Tribunal. The Appellants who have knocked the doors of this Tribunal after the sale has taken place have no right even to redeem the sale as the Respondents No.2 and 3 are in receipt of the sale certificate and the 2nd Respondent has sold another property for purchase of the schedule property. It is the contention of the 2nd Respondent that he would not be willing to part with the schedule property which has been acquired through a legally established process. Taking the above contentions, the impleaded Respondents i.e. Respondents No.2 and 3 have prayed for the dismissal of the appeal. They have further prayed to permit them to register the schedule property in their names and to direct the Respondent Bank to assist them in the registration process, in the interest of justice and equity. 5) During the pendency of the case, the Appellants filed I.A.No.2750/2019 with affidavit for redemption of the property under Section 13(3) of SARFAESI Act, 2002. The Appellants have expressed their intention to close all the litigations with the Respondent Bank by clearing the outstanding loan amount of Rs.9,56,030/- as on 08.08.2019 along with further interest thereon. The Appellants have further prayed that after payment of full dues to direct the Respondent Bank to restore their property by way of redemption. 6) 1st Respondent Bank filed its statement of objections to the redemption application-I.A.No.2750/2019 filed by the Appellants, contending, inter alia, that the Appellant is entitled to seek redemption of the schedule property prior to the publication of sale notice by the Respondent Bank, that too by payment of the entire outstanding dues. It is further contended that in the case on hand, the very appeal preferred by the Appellants would not survive as the appeal has been filed challenging the sale notice, after the sale had taken place. As on date, the right of the Appellants for redemption ceases to exist by virtue of Section 13(8) of the SARFAESI Act. The Appellants could have taken shelter under the said provision by payment of the entire loan dues prior to the date of sale and not any time later. The Appellants have failed to exercise their right of redemption, much less until the issuance of the sale certificate. It is further contended that the sale certificate issued on 19.08.2019 has been registered on 30.10.2019 and the physical possession along with the title deeds of the schedule property has been handed over to the Respondent No.2, the Auction Purchaser. In the light of these circumstances and the reasons as set out above, the 1st Respondent Bank has prayed for the dismissal of the above I.A. filed by the Appellants for redemption of property, in the interest of justice and equity. 7) On the above background, I have gone through the records, written arguments filed by both sides, additional written arguments filed by the Appellants and heard the arguments advanced by Learned Counsels appearing for both sides; and the following points arise for my consideration: a) Whether the Appellants have made out the case to allow the appeal? and b) To what relief, the parties are entitled? REASONS 8) The present appeal is filed by the Appellants for quashing and setting aside the impugned sale notice dated 18.07.2019 and sale proceedings dated 08.08.2019. The contentions/grounds raised by Appellants are that the Appellants were very regular and prompt in making their repayments; the Appellants executed sale agreement to third party and received the advance of Rs.10 lac and deposited entire amount of Rs.10 lac to the loan account and have also deposited Rs.1,07,000/- on 17.01.2019 to the loan account and further deposited Rs.2,50,000/- in compliance 9' the interim order passed by this Tribunal in S.A.No.227/2019 which came to be dismissed on 05.07.2019 as infructuous since sale has not taken place; the Respondent Bank has not served the sale notice dated 18.07.2019 in time; the Appellants have received the said notice on 27.07.2019; Respondent Bank colluding with the Auction Purchaser sold the property illegally on 08.08.2019 for a lesser value; reserve price mentioned in the impugned sale notice is very low and Respondent Bank failed to obtain proper valuation of the schedule property before issuing the sale notice and the impugned sale notice has not been issued as per the provisions of the Act and rules and hence the act of the Respondent Bank is highly illegal, arbitrary, unfair and against the principles of natural justice. 9) Rebutting the above contentions of the Appellants, Respondent Bank has produced copy of demand notice dated 29.05.2018 issued under Section 13(2) of the Act vide Annexure-Rl; proof of service of demand notice on the Appellants vide Annexure-R2; copies of paper publications of demand notice dated 29.05.2018 as required under the provisions of the Act and rules in two leading newspapers dated 11.06.2018 vide Annexures-R3; copy of possession notice dated 11.09.2018 issued under Section 13(4) of the Act vide Annexure-R4; proof of service of possession notice on the Appellants vide Annexure-R5; copies of paper publications of possession notice as required under the provisions of the Act and rules in two leading newspapers viz. The New Indian Express, English daily and in vernacular language in Kannada Prabha, Kannada daily both dated 12.09.2018 vide Annexure-R6; copies of photographs showing affixture of possession notice on the secured asset vide Annexure-R7; copy of the order passed by the Learned Deputy Commissioner/District Magistrate dated 16.03.2019 vide Annexure-R8; copy of sale notice dated 29.05.2019 vide Annexure-R9, proof of service of sale notice on the Appellants vide Annexure-R10; copies of paper publications of sale notice dated 29.05.2019 as required under the provisions of the Act and rules in two leading newspaper vide Annexure-R11; copy of Final Order dated 05.11.2019 passed in SA No.227 /2019 vide Annexure-R12; copy of sale notice dated 18.07.2019 vide Annexure-R13, proof of service of sale notice on the Appellants vide Annexure-R14; copies of paper publications of sale notice dated 18.07.2019 as required under the provisions of the Act and rules in two leading newspapers vide Annexure-R15; copy of sale confirmation letter vide Annexure-R16; copy of sale certificate vide Annexure-R17 and copy of valuation report vide Annexure-R18. The Appellants in Para-2 of the appeal memo have contended that they have executed a sale agreement in favour of a third party in respect of schedule property. This act of the Appellants is unlawful as the schedule property is a secured asset of the Respondent Bank. The 1st Respondent Bank in its statement of objections has rightly pointed out that the Appellants during the subsistence of the mortgage have no right or liberty to enter into any agreements in respect of conveyance of the schedule property to third parties, that too without approval or even informing the Respondent Bank. Respondent bank had afforded the Appellants many opportunities to clear the bank dues and get the schedule property redeemed. But the Appellants have failed to make use of the opportunities afforded. The Appellants had been served with the copy of the sale notice and the Appellants could have scouted for buyers for better price if property was to fetch better price, which has not been done in this case. Hence Appellants cannot contend that property would have fetched higher price. The Respondent bank has also complied with other requirements and filed proofs of such compliances.

10) Respondent No.2-Sri B. Narasimhaswamy, son of late B. Bheema Sankar and Smt. Jayalakshmi S, wife of Sri B. Narasimhaswamy, who are Auction Purchasers who have successfully participated in auction have paid full price and obtained sale certificate on 19.08.2019 in respect of schedule property vide Annexure-R17. 1st Respondent Bank in its statement of objections to the redemption application at Page-3, Para-8 has contended that, ".... the physical possession along with the title deeds of the schedule property have been handed over to the Respondent No.2, the Auction Purchaser."

11) The Applicants have also filed I.A.No.2750/2019 on 16.12.2019 for redemption of the schedule property. As the schedule property was sold on 08.08.2019 by following the rules and procedures as stated supra and sale was confirmed upon payment of 25% of the bid amount on 08.08.2019, the sale certificate was issued in favour of Respondents No.2 and 3 on 19.08.2019 upon full payment of sale price, the I.A. for redemption is found to be not made in time or exercised in time by the Applicants herein as they are expected to redeem the property before publication of the sale notice under Section 13(8) of the SARFAESI Act which is done on 19.07.2019 by publication of notices by Respondent No.1 vide Annexure-R15. Hence, I.A.No.2750/2019 cannot be considered as the redemption is sought much later to the forfeiture of the right of redemption on 19.07.2019.

I.A.No.2750/2019 is, therefore, liable to be dismissed and is hereby dismissed.

12) Thus considering all the facts and circumstances of the case and evidence produced by the parties, this Tribunal comes to the conclusion that Respondent bank has complied with the requirements of the provisions of the SARFAESI Act and Security Interest (Enforcement) Rules, 2002 in conducting the measures challenged herein; hence the appeal filed by the Appellants is without merit and is, therefore, liable to be dismissed and is hereby dismissed. I, therefore, pass following:

ORDER

In the result, S.A. No.272/2019 stands dismissed.

Interim order, if any, stands vacated.

Pending IAs, if any, also stand closed as infructuous.

There will be no order as to cost.

(Dictated to the Stenographer, after its transcription and necessary corrections, signed and pronounced by me in the Open Court on this 15th of June 2020)