2020 (4) TMI 881 - HC - Indian Laws

Maintainability of petition - Alternative remedy to entertaining of the writ petition - Recovery proceedings - It is contended by the first respondent that the first petitioner failed to repay the outstanding loan amounts and that it was constrained to initiate proceedings under the Act against the petitioners and the secured asset - time limitation. Alternative remedy no bar to entertaining of the writ petition - HELD THAT - There is no dispute that though there is a remedy of appeal under section 18 of the Act before the Debts Recovery Appellate Tribunal challenging the impugned order of the Tribunal since there is no Chairman appointed to the Debts Recovery Appellate Tribunal at Kolkata (which has jurisdiction over the Tribunal) and since parties have to file the said appeal at the office of the said Appellate Tribunal at Kolkata and then proceed to Allahabad where the In-Charge Debts Recovery Appellate Tribunal is functioning for any relief we are of the opinion that the said appellate remedy is not an effective alternative remedy - this is a fit case to entertain the writ petition against the impugned order passed by the Tribunal. Whether the SA is barred by limitation? - HELD THAT - Having withheld the said information from the petitioners the first respondent cannot be permitted to plead the bar of limitation because it would amount to allowing the first respondent to take advantage of its own wrong which is impermissible in law - Having suppressed that the auction was conducted on June 14 2018 successfully and that the second respondent was the highest bidder from the petitioners the first respondent cannot plead that the S. A. was filed beyond the period of 45 days from the sale on September 4 2018. Whether there is a waiver by the petitioners of rights under the SARFAESI Act 2002? - HELD THAT - The Tribunal had also held that there was a waiver by the petitioners of their right to contend about illegality if any committed in the conduct of e- auction on June 14 2018 by the first respondent-bank - In the instant case also though the first respondent-bank did not disclose to the petitioners about the sale in the e-auction held on June 14 2018 to the second respondent as soon as the Advocate-Commissioner s notice dated August 10 2018 was received by the petitioners they filed the S. A. on September 4 2018. There is nothing in the conduct of the petitioners to suggest that they had waived any rights under the statute or the rules made thereunder. Therefore this plea of the first respondent-bank about waiver by the petitioners of their rights under law is rejected. Non-compliance with rule 8(6) - HELD THAT - No material has been produced by the first respondent-bank that it had complied with the service affixture and publication of the possession notice dated November 15 2017 and notice dated February 21 2018 under rule 8(6) and service and affixture of notice dated May 5 2018. Strangely the Tribunal gave no finding on these aspects. This is clearly erroneous. The writ petition allowed with costs of 25, 000 to be paid to the first petitioner by the respondents.

Issues Involved:

1. Delay in Loan Disbursement
2. Declaration of Loan Account as NPA
3. Issuance of Demand Notice under Section 13(2) of the SARFAESI Act
4. Issuance of Sale Notice under Rule 8(6) of the SARFAESI Rules
5. Conduct of E-Auction and Sale Confirmation
6. Compliance with Rule 9 of the SARFAESI Rules
7. Limitation Period for Filing S.A.
8. Waiver of Rights by Petitioners
9. Validity of Possession Notice and Notices under Rule 8(6)
10. Proportionality of Sale of Secured Asset

Detailed Analysis:

1. Delay in Loan Disbursement:
The petitioners approached the first respondent-bank for an OCC credit facility and a term loan. However, the first respondent did not release the term loan in time, making the business situation of the petitioners unviable and disabling them from participating in government tenders for printing textbooks.

2. Declaration of Loan Account as NPA:
Due to the delay in loan disbursement, the loan account of the first petitioner became a Non-Performing Asset (NPA) on May 31, 2017.

3. Issuance of Demand Notice under Section 13(2) of the SARFAESI Act:
The first respondent-bank issued a demand notice under Section 13(2) of the SARFAESI Act on June 3, 2017, stating that the petitioners had to pay ?25,55,410.96 towards the OCC loan account and term loan account.

4. Issuance of Sale Notice under Rule 8(6) of the SARFAESI Rules:
The first respondent-bank issued a notice under Rule 8(6) of the SARFAESI Rules on February 21, 2018, informing about the proposed sale of the secured asset and fixing the reserve price at ?58,86,000.

5. Conduct of E-Auction and Sale Confirmation:
The petitioners contended that the e-auction notice dated May 13, 2018, was defective as the liability mentioned was ?10,76,373, but the property with a reserve price of ?58.86 lakhs was put up for sale. The first respondent conducted an e-auction on June 14, 2018, where the second respondent was declared the successful bidder. The sale confirmation letter was issued on June 25, 2018.

6. Compliance with Rule 9 of the SARFAESI Rules:
The court found that the first respondent-bank did not comply with Rule 9 of the SARFAESI Rules. The sale confirmation letter should have been issued on the day of the sale itself, but it was delayed until June 27, 2018. The second respondent was also allowed to pay the balance consideration beyond the stipulated 15 days, indicating collusion between the bank officials and the auction purchaser.

7. Limitation Period for Filing S.A.:
The court held that the plea of limitation raised by the first respondent-bank was not valid. The petitioners were not informed about the result of the auction held on June 14, 2018, and therefore, the S.A. filed on September 4, 2018, was within the limitation period.

8. Waiver of Rights by Petitioners:
The court rejected the plea of the first respondent-bank that the petitioners had waived their rights under the SARFAESI Act. The petitioners filed the S.A. as soon as they received the Advocate-Commissioner's notice dated August 10, 2018.

9. Validity of Possession Notice and Notices under Rule 8(6):
The court found that the first respondent-bank did not comply with the service, affixture, and publication of the possession notice dated November 15, 2017, and the notice dated February 21, 2018, under Rule 8(6). Consequently, the order of Crl. M.P. No. 328 of 2018 by the Chief Metropolitan Magistrate, Hyderabad, under Section 14 of the SARFAESI Act was declared invalid and set aside.

10. Proportionality of Sale of Secured Asset:
The court held that the first respondent-bank's action of putting up the entire secured asset for sale to recover dues of ?10,76,373 was not bona fide. The property with a reserve price of ?58.86 lakhs was disproportionate to the dues, and the sale was set aside on this ground.

Conclusion:
The writ petition is allowed with costs of ?25,000 to be paid to the first petitioner by the respondents. The order dated July 25, 2019, in S.A. No. 182 of 2018 of the Debts Recovery Tribunal-I, Hyderabad, is set aside. The sale confirmation made on June 25, 2018, of the subject property in favor of the second respondent is declared invalid and set aside. The order in Crl. M.P. No. 328 of 2018 of the Chief Metropolitan Magistrate, Hyderabad, under Section 14 of the SARFAESI Act is set aside. The second respondent's gift deed dated September 26, 2019, is declared null and void, and respondents Nos. 2-5 are directed to hand over vacant possession of the subject property to the petitioners within 4 weeks from the date of receipt of the order.

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