2018 (9) TMI 1600 - HC - Indian Laws

Recovery proceedings - Sale of mortgaged properties for recovery of loan amount - The companies contend that the upset price in auction is ludicrously low; they also maintain that one property answers the description of agricultural land. So Section 31 of the SARFAESI Act bars its sale. Do the petitioners have an efficacious alternative remedy to challenge the DRT s Ext.P1 order? - Held that - The petitioners questioned the Bank s recovery proceedings before the Tribunal. Faced with an adverse order, they chose to file this writ petition, rather than invoke Section 18 filing an appeal before the Debt Recovery Appellate Tribunal. The petitioners defend their choice of forum, claiming that they have raised here a jurisdictional question. The alternative remedy, the petitioners maintain, does not affect the case prospects. This plea could have been probed, but the Bank came forward to repel the petitioners case on merits, too. True, the Bank did take a plea about the alternative remedy-only after a fashion - Much time spent on hearing the case on merits, I reckon it is imprudent for me to shun adjudication on this count the alternative remedy - this issue needs no answer. Does the alleged undervaluation affect the sale of the secured assets? - Held that - Curious is the petitioners plea. They pleaded, as noticed by the DRT, that they had sold all the mortgaged properties (4 items) to various persons for ₹ 1,52,35,000/-. So the DRT observed that the sale price of all the four properties by the petitioners themselves was very much below the Reserve Price of the 1st item in the auction. In the writ petition, too, this pleading remained unamended or explained, as rightly contended by the Bank s counsel. So I find this issue against the petitioners the Bank did assign valid reasons for the upset price it fixed. Did the Bank bring to sale any agricultural land, violating Section 31 of the Act? - Held that - Thekkemukkalil Company (a) does not answer the description of an agriculturist; (b) does not cultivate the land; (c) derives no income from agriculture; (d) does not have agriculture as an object; and (e) did not inform the Bank that the secured asset is an agricultural land. So it does not fit into the niche Blue Coast Hotels created to protect genuine agriculturists - the debtor s last gasp effort to save the property with endless excuses and plethora of pleas should wilt in the judicial gaze. A salutary provision aimed at protecting poor peasants cannot aid corporate concerns camouflaged as agriculturists. Here, the companies induced the Bank to lend, offered property, kept the Bank in dark about the alleged nature of the property, bargained with the Bank, borrowed time, and finally, driven to wall, cried foul. Petition dismissed.

Summary

Issues Involved:
1. Efficacious alternative remedy to challenge the DRT's order.
2. Alleged undervaluation affecting the sale of secured assets.
3. Sale of agricultural land in violation of Section 31 of the SARFAESI Act.

Issue-wise Detailed Analysis:

Issue No.I: Efficacious Alternative Remedy
The petitioners challenged the Bank's recovery proceedings in SA No.90 of 2018 before the Tribunal and, after an adverse order, filed this writ petition instead of appealing to the Debt Recovery Appellate Tribunal under Section 18. They argued that the writ petition is maintainable due to a jurisdictional question. The Bank countered this by addressing the case on merits. Given the extensive time spent on merits, the court deemed it imprudent to avoid adjudication based on the alternative remedy, thus leaving this issue unanswered.

Issue No.II: Alleged Undervaluation
The Bank fixed the reserve price for the secured assets based on multiple valuations, including those from its panel valuers and government records. The petitioners contended that the properties were undervalued. However, the Bank justified its valuation process, which involved comparing different valuations and selecting the highest. The court noted that the petitioners themselves had sold the properties for a price significantly lower than the reserve price set by the Bank. Thus, the court found the Bank's valuation process reasonable and dismissed the petitioners' claim of undervaluation.

Issue No.III: Sale of Agricultural Land
The petitioners claimed that one of the properties was agricultural land, which is exempt from the SARFAESI Act under Section 31. The court examined various documents, including the company's Memorandum and Articles of Association, balance sheets, and the Advocate Commissioner's report. The court found that the company did not engage in agricultural activities and had not informed the Bank that the property was agricultural land. The court referred to several precedents, including Blue Coast Hotels, which emphasized that the exemption under Section 31 is meant to protect genuine agriculturists. The court concluded that the petitioners did not meet the criteria for this exemption, as they were not engaged in agriculture and had not disclosed the nature of the property to the Bank.

Conclusion:
The court dismissed the writ petition, finding no merit in the petitioners' claims regarding the undervaluation of the properties and the classification of the land as agricultural. The court highlighted that the SARFAESI Act's exemption for agricultural land is intended to protect genuine agriculturists, not corporate entities attempting to evade their obligations.