Andhra HC (Pre-Telangana)
Smt. P.Sudha Lakshmi, W/O. Praveen ... vs 1.Bank Of India, Boduppal Branch, Plot ... on 16 April, 2018
Equivalent citations: AIR 2018 HYDERABAD 137, (2019) 1 ANDHLD 297 (2018) 4 CURCC 136, (2018) 4 CURCC 136
Author: J.Uma Devi
Bench: J.Uma Devi
HONBLE SRI JUSTICE V.RAMASUBRAMANIAN AND HONBLE Ms. JUSTICE J.UMA DEVI
Writ Petition No.2314 of 2018
16-4-2018
Smt. P.Sudha Lakshmi, W/o. Praveen Reddy, Aged about 40 years, R/o. Plot No.216, Lakshminagar Colony, Boduppal, Hyderabad P
1.Bank of India, Boduppal Branch, Plot Nos.12&13, Anushareddy Sai Manisha Reddy Mansion, Veera Reddy Nagar, Boduppal, R.R.
2.Koti Praveen Kumar, S/o. Yadaiah, Aged 35 years, Business, H.No.11-5-207, Bhavani Nagar, Moosapet, Hyderabad-500 018 Res
Counsel for Petitioner:Mr. Ambadipudi Satyanarayana
Counsel for Respondent No.1: Smt. V.Dyumani,
Standing Counsel
Counsel for Respondent No.2: ---
<Gist:
>Head Note:
? Cases referred:
1. (2013) 10 SCC 83
HONBLE SRI JUSTICE V.RAMASUBRAMANIAN
AND
HONBLE Ms. JUSTICE J.UMA DEVI
Writ Petition No.2314 of 2018
Order: (per V.Ramasubramanian, J.)
Challenging an order of the Debts Recovery Tribunal
dismissing an application for setting aside a sale conducted
by the Bank under the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act,
2002, the petitioner has come up with the above writ petition.
2. Heard Mr. Ambadipudi Satyanarayana, learned
counsel for the petitioner and Smt. V.Dyumani, learned
Standing Counsel for the 1st respondent/Bank.
3. The 2nd respondent is the auction purchaser. He was
made a party to the appeal S.A.No.996 of 2017 filed by the
petitioner before the Debts Recovery Tribunal under
Section 17 of the Act. It is stated that despite service of
notice, he did not appear before the Tribunal.
4. Even before this Court, notice was ordered to the
2nd respondent/auction purchaser. Though the Court notice
returned unserved with an endorsement Not claimed returned
to sender, the personal notice sent by the counsel for the
petitioner by speed post, appears to have been delivered,
as seen from the tracking system. Therefore, we have taken
up the writ petition for hearing. But he has not chosen to
enter appearance.
5. The petitioners husband availed facilities
from the 1st respondent/Bank and the account became
a non-performing asset. The petitioner guaranteed the
repayment of the loan and also offered her house property as
security.
6. After the account became a non-performing asset, the
Bank issued a demand notice under Section 13(2) of the Act
on 16-9-2014. It was followed by a possession notice dated
18-5-2015.
7. A notice under Rule 8(6) and Rule 9(1) of the Security
Interest (Enforcement) Rules, 2002, dated 18-9-2015, was
issued followed by an E-Auction notice dated 26-9-2015. The
E-Auction notice was challenged by the petitioner in
W.P.No.37565 of 2015. While ordering notice, this Court
directed the petitioner to pay the entire amount due to the
Bank with interest and directed the Bank not to confirm the
sale if such payment was made. But the payment was not
made and the writ petition was dismissed on 16-6-2016 for
non-prosecution.
8. As a consequence, the Bank confirmed the auction,
received the balance of sale consideration and issued a Sale
Certificate dated 29-01-2016. The Bank also approached the
Chief Metropolitan Magistrate by way of an application under
Section 14 in Crl.M.P.No.836 of 2015 and took possession.
9. Challenging the sale certificate issued on 29-01-
2016, the petitioner filed an appeal in S.A.No.46 of 2016 on
the file of the Debts Recovery Tribunal-I, Hyderabad. It was
transferred to Debts Recovery Tribunal-II and renumbered as
S.A.996 of 2017.
10. After hearing, the Tribunal dismissed the
application on the ground that there was no infringement of
the Statutory Rules, in the manner of conduct of the auction.
Aggrieved by the dismissal of the application, the petitioner
has come up with the above writ petition.
11. The short ground on which the petitioner challenges
the Sale Certificate dated 29-01-2016 and the order of the
Tribunal confirming the sale is that there has been a gross
violation of Rule 9(3) and 9 (4) of the Security Interest
(Enforcement) Rules, 2002.
12. Rule 9 of the Security Interest (Enforcement) Rules,
2002, as it stood as in October, 2015, the date of conduct of
auction sale in this case, before its amendment in the year
2016, read as follows:
9. Time of sale, issues of sale certificate and delivery
of possession, etc.
(1) No sale of immovable property under these rules
shall take place before the expiry of thirty days from the
date on which the public notice of sale is published in
newspapers as referred to in the proviso to sub-rule (6) or
notice of sale has been served to the borrower.
(2) The sale shall be confirmed in favour of the
purchaser who has offered the highest sale price in his bid
or tender or quotation or offer to the authorised officer and
shall be subject to confirmation by the secured creditor:
Provided that no sale under this rule shall be confirmed, if
the amount offered by sale price is less than the reserve
price, specified under sub-rule (5) of rule 9: Provided
further that if the authorised officer fails to obtain a price
higher than the reserve price, he may, with the consent of
the borrower and the secured creditor effect the sale at
such price.
(3) On every sale of immovable property, the
purchaser shall immediately pay a deposit of twenty-five
per cent of the amount of the sale price, to the authorised
officer conducting the sale and in default of such deposit,
the property shall forthwith be sold again.
(4) The balance amount of purchase price payable
shall be paid by the purchaser to the authorised officer on
or before the fifteenth day of confirmation of sale of the
immovable property or such extended period as may be
agreed upon in writing between the parties.
(5) In default of payment within the period mentioned
in sub-rule (4), the deposit shall be forfeited and the
property shall be resold and the defaulting purchaser shall
forfeit all claim to the property or to any part of the sum for
which it may be subsequently sold.
(6) On confirmation of sale by the secured creditor
and if the terms of payment have been complied with, the
authorised officer exercising the power of sale shall issue a
certificate of sale of the immovable property in favour of the
purchaser in the form given in Appendix V to these rules.
(7) Where the immovable property sold is subject to
any encumbrances, the authorised officer may, if he thinks
fit, allow the purchaser to deposit with him the money
required to discharge the encumbrances and any interest
due thereon together with such additional amount that may
be sufficient to meet the contingencies or further cost,
expenses and interest as may be determined by him.
(8) On such deposit of money for discharge of the
encumbrances, the authorised officer may issue or cause
the purchaser to issue notices to the persons interested in
or entitled to the money deposited with him and take steps
to make the payment accordingly.
(9) The authorised officer shall deliver the property to
the purchaser free from encumbrances known to the
secured creditor on deposit of money as specified in sub-
rule (7) above.
(10) The certificate of sale issued under sub-rule (6)
shall specifically mention that whether the purchaser has
purchased the immovable secured asset free from any
encumbrances known to the secured creditor or not.
13. It is clear from sub-rules (3) and (4) of Rule 9
(i) that the purchaser, upon sale of immoveable property,
should immediately pay a deposit of 25% and (ii) that the
balance of purchase price shall be paid on or before the
15th day of confirmation of sale or such extended period as
may be agreed upon in writing between the parties.
14. The expression parties appearing in Rule 9(4) was
interpreted by the Supreme Court in Sri Siddeshwara
Cooperative Bank Ltd. v. Ikbal to mean (i) the secured
creditor, (ii) the borrower and (iii) the auction purchaser.
In order to get over the said interpretation, the word parties
was substituted by the words purchaser and the secured
creditor by an amendment to the rules that came into effect
on 04-11-2016.
15. Keeping the above statutory provision in mind,
let us come back to the facts of the present case, as projected
by the 1st respondent/Bank. In paragraph-10 of the counter
affidavit, the 1st respondent has stated as follows:
10. It is submitted that the E Auction was
conducted on 29-10-2015. The auction purchaser paid the
EMD of Rs.5.00 lakhs on 23-10-2015 and deposited 25% of
the bid amount including after deducting the EMD on
05-11-2015 with Boduppal Branch and kept with sundries.
In view of the interim orders in W.P.No.37565 of 2015, the
Sale Confirmation letter was issued on 09-11-2015 and the
auction purchaser paid 75% of the bid amount on
29-01-2016 and bank has issued Sale Certificate
subsequently and registered the same. It is humbly
submitted that there is no irregularity in conducting the
auction and the allegations contra are not true.
16. From the portion of the counter affidavit extracted
above, it is clear that there were two violations. They are:
(i) that the purchaser paid 25% of the bid amount only after
seven days viz., on 05-11-2015 despite the auction having
been conducted on 29-10-2015 and (ii) that the purchaser
paid the balance 75% after 50 days viz., on 29-01-2016,
though the Sale Confirmation Letter was issued on
09-11-2015.
17. Thus, there is a clear violation of two prescriptions
one contained in sub-rule (3) and another contained in sub-
rule (4) of Rule 9. It is pertinent to note that before the 2016
amendment to the rules, any extension of time beyond a
period of 15 days from the date of confirmation of sale, for the
payment of the balance 75%, should be by way of an
agreement in writing between the parties. In this case, the
Bank does not even plead, at least for the sake of formality
that there was any agreement in writing between the Bank
and the auction purchaser. As a matter of fact, by virtue of
the interpretation given by the Supreme Court in Sri
Siddeshwara Cooperative Bank Ltd. V. Ikbal to the words
parties appearing in Rule 9(4), the Bank ought to have
entered into a tripartite agreement in writing with the
borrower and the auction purchaser. Since the declaration of
law made by the Supreme Court in the said case was made
on 22-8-2013 (date of judgment in Siddheswara case) and
since the auction in this case was conducted only after the
said date i.e., on 29-10-2015, the Bank is expected to know
the law and the Bank should have entered into a tripartite
agreement on 09-11-2015, the date of issue of the
confirmation letter or at least on 24-11-2015 the date of
expiry of 15 days from the date of confirmation, for the grant
of extension of time up to 29-01-2016. Let us assume for a
minute that the Bank was ignorant of the interpretation given
by the Supreme Court to the word parties. Even then, the
Bank should have at least had an agreement in writing with
the auction purchaser, since even without the interpretation
of law given by the Supreme Court, this necessity was there
by way of statutory prescription. But it is not the case of the
Bank, in their counter affidavit that they had an agreement in
writing at least with the auction purchaser. Hence, there is a
clear violation of the statutory prescription in the manner in
which the sale was confirmed.
18. In any case, the leverage available under rule 9(4) to
grant extension of time to pay the balance 75%, is not
available under rule 9(3) for payment of the first 25% of the
bid amount. No extension of time is possible for payment of
the first 25%, since sub-rule (3) of rule 9 does not provide for
this. The reason is that if payment off 25% is not made
immediately as stipulated in sub-rule (3), the property is
required to be sold forthwith again.
19. Unable to overcome the defects in the process of
sale, the learned Standing Counsel for the Bank raised two
different objections viz., (i) that as against the impugned order
of the Debts Recovery Tribunal, the petitioner ought to have
gone before the Debts Recovery Appellate Tribunal and (ii)
that the petitioner already made a challenge to the auction
notice before this Court and failed and hence she may not be
entitled to challenge the sale before the Tribunal.
20. Insofar as the first objection is concerned, we do not
think that it is open to the 1st respondent/Bank to raise such
an objection. It is true that the petitioner could have gone
before the Debts Recovery Appellate Tribunal. But the
availability of alternative remedy is not always a bar, at least
for the exercise of the jurisdiction under Article 226 of the
Constitution of India. The restraint is self-imposed and not
statutorily imposed. When even on admitted facts, going by
the very pleadings of the 1st respondent/Bank, things are as
clear as crystals, pointing to a very clear violation of the
statutory prescription, it is wholly unjust to close our eyes to
the blatant violation and send the petitioner to the Debts
Recovery Appellate Tribunal.
21. Insofar as the second objection is concerned, the
dismissal of the writ petition challenging the auction notice
will not stand in the way of the petitioner questioning the
subsequent conduct. When an auction notice is challenged,
the scrutiny is confined to Rule 8(6) and Rule 9(1) alone. But
after the auction is concluded, Rules 9(3) and 9(4) come into
play and if there are any infringement of the stipulations
contained therein, such violations become a subsequent
cause of action. A challenge to an auction notice is completely
different from a challenge to the conduct of the Bank after the
auction, if it is not in conformity with sub-rules (3) and (4) of
Rule 9. Therefore, both the objections of the 1st respondent/
Bank are ill-founded.
22. Unfortunately, the Debts Recovery Tribunal brushed
aside the blatant statutory violations on the part of the
Authorised Officer in the matter of sale. In one paragraph, the
Tribunal rejected the contention revolving around Rule 9(4),
as without any substance. In fact, the reasoning in
paragraph-12 of the order of the Tribunal is actually without
substance. Hence, the order is liable to be reversed.
23. The property now sold is a house property and the
petitioner has been making a cry that she is a cancer patient
tossed between the Bank and the hospital. Therefore,
we cannot close our eyes to the blatant violation of the Rules
and drive the petitioner mercilessly out of this Court merely
on the ground of availability of an appellate remedy before the
Debts Recovery Appellate Tribunal.
24. In view of what is stated above, the writ petition
deserves to be allowed. Accordingly, it is allowed, the order of
the Tribunal is set aside, the Sale Certificate issued on
29-01-2016 is set aside and the Bank is directed to recover
possession from the 2nd respondent and keep the same in
their custody, within a period of 4 (four) weeks from the date
of receipt of a copy of this order. It will be open to the Bank
thereafter to initiate action afresh in accordance with law for
the recovery of dues. The miscellaneous petitions, if any,
pending in this writ petition shall stand closed. No costs.
___________________________
V.RAMASUBRAMANIAN, J.
_______________ J.UMA DEVI, J. 16th April, 2018.