2009 (11) TMI 500 - HC - Companies Law

Property for auction sale put by bank - failure to discharge the liability by the company - Held that - it is apparent that the contentions raised on behalf of respondent-bank based on provisions of section 17 of the Securitisation Act also need not come in way insofar as the petition is concerned. Even if an alternative statutory remedy is available the court is not precluded from exercising its discretionary jurisdiction in entertaining the petition wherein the challenge to action of the respondent establishes that the same is in violation of statutory provisions. In the circumstances, the action of respondent-bank in rejecting the offer of settlement as well as the tentative decision to dispose of the property in favour of respondent No. 2 for a sum of ₹ 2.15 crore cannot be sustained. Respondent-bank is directed to return the amount of ₹ 2.15 crore deposited by respondent No. 2 within a period of three working days from today along with interest at the rate applicable to a savings account, without waiting for a certified copy of this judgment. Learned advocate for the respondent-bank is directed to intimate the respondent-bank about this direction to ensure compliance by respondent-bank. Respondent-bank is further directed to undertake the process of disposal of the property in question once again in accordance with law, after complying with statutory requirements from the stage of possession notice under section 8(1) of the Rules. It will be open to respondent-bank to consider the proposal of settlement made by the company and negotiate further terms in this regard, if respondent-bank so desires

Issues Involved:
1. Validity of the rejection of the petitioners' offer by the respondent-bank.
2. Compliance with statutory requirements under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the Security Interest (Enforcement) Rules, 2002.
3. Legality of the sale process and the role of respondent No. 2 as a purchaser.
4. Jurisdiction and discretion of the court in the presence of an alternative statutory remedy.

Issue-Wise Detailed Analysis:

1. Validity of the rejection of the petitioners' offer by the respondent-bank:
The court scrutinized the actions of the respondent-bank in rejecting the petitioners' offer to settle the account for Rs. 2.25 crore and the subsequent revised offer of Rs. 2.18 crore. The bank's rejection was based on the lack of a payment schedule and an alleged insufficient offer. The court found that the bank could have negotiated further or requested the petitioners to submit a payment schedule. The court noted that the bank's decision-making process did not reflect prudent banking norms and seemed to be influenced by considerations other than the bank's interests.

2. Compliance with statutory requirements under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the Security Interest (Enforcement) Rules, 2002:
The court emphasized the need for strict compliance with the statutory provisions, highlighting that the respondent-bank failed to adhere to the requirements of rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002. Specifically, the court found that the bank did not issue separate notices under sub-rules (1) and (6) of rule 8, which are mandatory. The court rejected the argument that a consolidated notice suffices, stressing that the statutory scheme requires distinct notices at different stages to ensure transparency and fairness.

3. Legality of the sale process and the role of respondent No. 2 as a purchaser:
The court examined the sale process and the involvement of respondent No. 2, who claimed to be a bona fide purchaser. The court found that the sale was not confirmed in favor of respondent No. 2, as the communication dated 27th July, 2009, indicated that the acceptance was subject to the order of confirmation. Additionally, the court noted that the public notice issued on 10th January, 2009, did not comply with the 30-day notice requirement, rendering the sale process invalid. The court directed the respondent-bank to return the amount deposited by respondent No. 2 with applicable interest and to restart the sale process in accordance with the law.

4. Jurisdiction and discretion of the court in the presence of an alternative statutory remedy:
The court addressed the argument regarding the availability of an alternative statutory remedy under section 17 of the Securitisation Act. The court held that it retains the discretion to entertain the petition, especially when the respondent's actions are in violation of statutory provisions. The court emphasized that substantial justice should prevail over technical procedural pleas.

Conclusion:
The court concluded that the actions of the respondent-bank in rejecting the petitioners' offer and attempting to sell the property for a lesser amount were unsustainable. The court directed the respondent-bank to comply with statutory requirements from the stage of the possession notice and to consider the petitioners' settlement proposal. The petition and the civil application were allowed, and the rule was made absolute to the extent specified.

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