Madhya Pradesh High Court
Smt. Pinky Mundra vs Debts Appellate Recovery Tribunal At ... on 9 December, 2021
Author: Pranay Verma
Bench: Pranay Verma
1
High Court Of Madhya Pradesh
DIVISION BENCH: HON'BLE SHRI JUSTICE SUJOY PAUL
HON'BLE SHRI JUSTICE PRANAY VERMA
M.P. No.5688/2019
(CENTRAL BANK OF INDIA Vs THE DEBTS RECOVERY APPELLATE TRIBUNAL AT ALLAHABAD AND
OTHERS)
M.P. No.246/2021
(SMT. PINKY MUNDRA Vs. DEBTS APPELLATE RECOVERY TRIBUNAL AT ALLAHBAD)
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Shri Dheeraj Singh Panwar, learned counsel for Central Bank of India
in M.P. No. 5688/2019
Shri Sunil Kumar Sharma, learned counsel for Central Bank of India
in M. P. No. 246/2021
Shri Akshat Agrawal, learned counsel for the borrowers in both the
petitions.
Shri Hitendra Tripathi, learned counsel for the Auction Purchasers in
both the petitions.
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ORDER
(Delivered on this 09th day of December , 2021) PER PRANAY VERMA, J Since both theses petitions are directed against the same order passed by the Debts Recovery Appellate Tribunal, Allahabad, they have been heard together and are being decided by a common order.
02. The facts of the case reveal that Central Bank of India, (the "Bank") had sanctioned a loan of Rs.108.50 Lacs to the borrower M/s. Porwal Agro Facilities whose partners were Sunil Porwal, Mayank Porwal, Smt. Padma Devi and Smt. Shrikanta Devi Porwal. It appears that default was made by the borrowers in the matter of re-payment of the loan amount. Consequently, notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and 2 Enforcement of Security Interest Act, 2002 ('the Act, 2002') was issued against the borrowers on 11.05.2015. The said notice is stated to have been served upon Mayank Porwal on 28.05.2015, upon daughter of Late partner Sunil Porwal on 03.06.2015 and upon Smt. Shrikanta Devi Porwal on 06.06.2015. The notice was also received by Mayank Porwal on 28.05.2015 on behalf of late Sunil Porwal, Padma Devi and Smt. Shrikanta Devi Porwal as power of attorney holder. However, despite service of notice upon them the borrowers failed to repay the outstanding loan amount as per the notice.
03. The Bank hence on 12.08.2015 issued possession notice under Section 13(4) of the Act, 2002 read with Rule 9 of the Security Interest (Enforcement) Rules, 2002 as regards the mortgaged properties of the borrowers. Subsequently, on 04.09.2015 auction notice was published by the Bank for sale of the mortgaged properties scheduling the same for 07.10.2015. Challenging the aforesaid proceedings, Mayank Porwal, Smt. Shrikanta Devi Porwal and Swati Dabkara, heir of deceased partner Sunil Porwal, ("the borrowers) preferred a Securitisation application under Section 17(1) of the Act, 2002 before the Debt Recovery Tribunal, Jabalpur, contending inter alia that no clear notice of thirty days was given by the Bank in terms of Rule 8 (6) of the Rules, 2002, that Rule 8 (7) has not been complied with, that procedure prescribed under Rule 8 (1) and Rule 8 (5) has not been followed while putting the properties in auction, that valuation of the properties has been arbitrarily made and only one of the property was sufficient for satisfying the entire outstanding loan amount but both the properties have been put to auction and that the entire proceedings initiated by the Bank are illegal.
04. The auction of the mortgaged property as published was held on 07.10.2015 and the Bank informed the DRT that with regard to property No.2 i.e. 3 land bearing Kharsa No. 2528. P.H. No.33, District Neemuch a bid has been received. The DRT ordered that sale with regard to property No.2 shall be subject to final outcome of the S.A. on 08.10.2015, the Bank issued sale confirmation letter in favour of the auction purchasers and they were directed to deposit the balance amount of the purchase price within a period of 15 days i.e. by 23.10.2015. The sale was also made subject to outcome of the S.A. By their letter dated 21.10.2015 the auction purchasers prayed for extension of time for payment of the balance amount by two months. The prayer was allowed by the Bank and the auction purchasers deposited the balance sale price within the extended period of time. The sale certificate was issued in favour of the auction purchasers on 30.11.2015 and sale deed was registered in their favour on 16.12.2015 followed by delivery of physical possession of the property to them on 16-12-2015.
05. On 04.10.2016, an application was filed by the borrowers for amendment of their S.A. for challenging the sale proceedings and the sale certificate which was allowed. The auction purchasers were also permitted to be impleaded as parties. The Bank contested the Securitisation Application by filing its reply submitting that as borrowers had failed to repay the loan amount, their account was classified as a non performing asset on 31.03.2015 and accordingly notice under Section 13 (2) of Act, 2002 dated 11.05.2002 was served upon them and the guarantors. However, they failed to make repayment of the outstanding dues hence possession under Section 13(4) of the Act, 2002 of the mortgaged properties was taken over on 12.08.2015. The possession notice was served Humdust upon the borrowers and the guarantors. The same was also pasted on conspicuous part of the mortgaged properties and was published in two daily newspapers on 18.08.2015. Thereafter e-auction was published in the daily 4 newspapers on 04.09.2015 wherein auction of the mortgaged property bearing Khasra No.2528 along with structure was notified. In the auction proceedings the auction purchasers were declared as successful bidders who deposited the entire bid amount of Rs.1,40,64,000/- and consequently sale certificate was issued in their favour. It was hence submitted that there has not been any irregularity in the proceedings under taken by the Bank.
06. By order dated 23.04.2018, the DRT allowed the SA filed by the borrowers and set aside the possession notice dated 12.08.2015, the auction notice dated 04.09.2015 and sale certificate dated 30.11.2015 and directed the auction purchasers to hand over physical possession of the property to the Bank with further direction to the Bank to restore the same to the borrowers. It held inter alia :
(i) that no postal receipts or acknowledgment has been filed by the Bank to prove delivery of possession notice,
(ii) that the monthly bill dated 01.09.2015 issued by Blue Sky Courier filed by Bank at the time of hearing does not lead to conclusion as to what was actually sent and whether the same was delivered,
(iii) that name of Smt. Shrikanta Porwal was also not mentioned therein hence possession notice was not delivered to the borrowers as per Rule 8(1),
(iv) that the auction sale notice reveals that only land was put to auction but sale certificate has been issued for the entire property i.e. land along with construction.
(v) that plea of Bank that though separate valuation was obtained but consolidated reserve price was fixed for entire property cannot be 5 accepted because details of constructed area and land should have been mentioned separately in the auction notice,
(vi) that auction purchasers did not pay the balance amount within 15 days and it was accepted beyond that period without consent of borrowers in violation of Rule 9(4), and
(vii) that the same is merely a procedural irregularity and auction purchasers cannot be held guilty for the same.
07. Being aggrieved by the order aforesaid the Bank as well as the auction purchasers both preferred separate appeals before the Debts Recovery Appellate Tribunal, Allahabad. The appeal preferred by the Bank was confined primarily as regards the proceedings of the S.A. as had been conducted before the DRT and as regards the illegalities and irregularities committed by the borrowers in preferring the SA before the DRT. These grounds were also taken by the auction purchases in the appeal preferred by them who however also challenged the order passed by the DRT on merits. It was also submitted by them that in case the sale proceedings were to be set aside, it was incumbent upon the DRT to have directed for refund of their amount by them with interest.
08. By the impugned order dated 01.10.2019, the DRAT has rejected the contentions of the Bank as well the auction purchasers as regards the procedural irregularities which had allegedly taken place during the proceedings of the S.A. It has also held that there has not been any deficiency or illegality on part of the borrowers in preferring the S.A. before the DRT. In para 19 of the order, the DRAT has proceeded to consider the merits of the case by observing that the same is being done as the order of DRT is under challenge though its findings were neither pleaded nor argued on behalf of the Bank. It has held that the Bank has not placed 6 any proof with regard to delivery of possession notice to the borrowers/guarantors which is a mandatory requirement under Section 13(4) of the Act, 2002. The sale notice was issued for auction of plot measuring 0.627 hectares whereas sale certificate was issued also for all parts and parcels of residential property including construction. No proper description of the property was given nor separate reserve price was indicated in the sale notice. 75% amount of sale price was deposited after 15 days from confirmation of sale and consent of borrowers/mortgagor Mayank Porwal was not taken hence there has been non-compliance of Rule 9(4). In consequence both the appeals have been dismissed.
09. Learned counsel for the Bank submit that the impugned orders are illegal and contrary to law. The entire order passed by DRT was challenged by the Bank before the DRAT hence it was incumbent upon the DRAT to have considered the legality of the order on merits in details, whereas it has mainly considered the appeal of Bank as regards the challenge made to the competency of the borrowers to prefer the S.A. before the Tribunal and the irregularities committed in the proceedings and has not dealt with merits of the case as an Appellate authority is obliged to. The findings recorded in the impugned orders are contrary to the relevant legal provisions and have been arrived at cursorily without taking into consideration the entire material available on record. It is further submitted that even if specific grounds on merits have not been raised by the Bank in the appeal or in these petitions, then also this Court in exercise of powers under Article 227 of the Constitution of India can go into and examine the legality of the impugned orders and pass appropriate orders as may be deemed fit in the interest of justice. As regards merits of the case, reliance has been placed upon the decision of the Hon'ble Apex Court in cases of Dwarika Prasad vs State of U.P . and another 7 [2018 (5) SCC 491], General Manager, Sri Siddeshwara Co-Op.Bank Ltd. & another vs Sri Ikbal & Ors [2013 (10) SCC 83], and S. Karthik & Ors N. Subhash Chand Jain & Ors., Civil Appeal No.5920/2021 decided on 23.09.2021 to submit that upon registration of the sale deed in favour of the auction purchasers, the mortgagor's rights of redemption stands extinguished.
10. Learned counsel for the auction purchasers has adopted the arguments of learned counsel for the Bank and has further submitted that in the appeal preferred by the auction purchasers before the DRAT, the order passed by the DRT had been specifically challenged on merits also as is evident from their appeal memo. The DRAT has only considered the appeal memo of the Bank to observe that findings of the Tribunal have not been challenged on merits. In any case, if the auction proceedings were to be set aside, the auction purchasers were entitled for refund of the amount paid by them to the Bank with interest regarding which no orders have been passed by the authorities below. Reliance has been placed upon the decisions cited by the learned counsel for the Bank.
11. Per contra, learned counsel for the borrowers has submitted that there was flagrant violation of the provisions of the Act, 2002 and the Rules 2002. Notice under Section 13(4) was not served upon the purchasers as is mandatorily required. No proof of service of notice was furnished by the Bank before both the Tribunals. In view of violation of mandatory provisions the entire proceedings stand vitiated. Only land was put to auction but the sale certificate has been issued also in respect of the structure/building standing thereupon which was impermissible. The balance amount of the auction price was received by the Bank from the auction purchasers after expiry of stipulated period of 15 days without consent of the borrowers in violation of Rule 9(4). These findings have categorically been recorded by the 8 authorities below which on the basis of the record, are not liable to be interfered with. Reliance has been placed by him on the decision of Hon'ble Supreme Court in the case of Allahabad Bank and others vs Bengal Paper Mills Co. Ltd. And others [2004 (8) SCC, 236], Allahabad Bank and others vs Bengal Paper Mills Co. Ltd. and others [1999 (4) SCC 383], Union Bank Of India vs Official Liquidator and others [2000 (5) SCC 274], Central Bank Of India vs Ravindra And Ors [2002 (1) SCC 367] Authorized Officer, Indian Overseas Bank & Anr. Vs Ashok Saw Mill [2009 (8) SCC 366], Kanungo Filling Station and another vs. State Bank of India and others W.P. No.2175/2012 decided on 22.08.2013, Central Bank of India vs M/s. Jain Mineral Water W.P. No.1991/2019 decided on 18.02.2019, Swastik Agency and Others vs. State Bank of India, Bhuneshwar & others [AIR 2009 Orr 147], General Manager, Sri Siddeshwara Co-Op.Bank Ltd. & another vs Ikbal & Ors [2013 (10) SCC 83] and Chinnammal & Ors vs P. Arumugham & Anr [1990 (1) SCC 513] to submit that in the facts and circumstances of the case, the auction purchasers are not entitled for any interest on the amount deposited by them with the Bank. Their conduct in these proceedings even otherwise disentitles them to any relief.
12. No other point was urged. We have heard the learned counsel for the parties at length and have perused the record. The DRT had recorded a finding that recovery proceedings are vitiated on account of non-furnishing of proof by the Bank as regards delivery of possession notice under Section 13(4) of the Act, 2002 read with Rule 8(1) of the Rules 2002. A perusal of the record reveals that in their reply averments had been made by the Bank before the DRT as regards service of possession notice of upon borrowers/guarantors. Certain documents had also been placed by the Bank before the DRT in proof thereof. The order passed by the DRT shows that it has only cursorily glanced through the documents filed by the Bank as 9 regards service of notice. Though it has mentioned the Rules as regards service but does not appear to have undertaken the exercise of application of various requirement of the Rules qua the facts of the present case. It has only taken into consideration the documents filed by the Bank at the time of hearing of the S.A. as regards service of possession notice upon the borrowers by courier mode. We also notice that Bank had specifically pleaded that possession notice was served as required under the Rules individually upon the borrowers/guarantors as well as by Humdust and affixation and by publication. It appears that those documents were not produced by the Bank before the DRT though their existence had been specifically pleaded by it. The DRT as well as the DRAT in the available fact situation of the case, ought to have expected from the Bank to produce the documents regarding service of possession notice if it was of the opinion that such proof had been made available. It is not a case where service of notice has not even been pleaded to have been effected . On the contrary, such plea has been made, though not supported by specific material and documents. The bank thus deserves to be granted an opportunity to produce the relevant documents in support of its stand.
13. The finding of the DRT that only land was put to auction but sale certificate has been issued in favour of the auction purchasers in respect of the entire property including the construction also appears to be without taking into consideration the contentions of the Bank as raised before it. In the reply submitted by the Bank, it had been specifically stated that valuation had been made and only thereafter auction notice had been published inter alia for the land bearing Khasra No.2528 area 0.267 hectare on 07.10.2015 along with structure and the auction proceedings had been carried out on the basis of said auction notice hence there was no illegality in the matter of issuance of sale certificate to the auction purchasers mentioning that the same is with respect to the entire property. The DRT does not 10 appear to have perused the documents in this regard and has arrived at a finding that because of sale certificate being issued in respect of the entire property, whereas the auction notice having been issued only in respect of the land, the proceedings are bad. This findings has also been affirmed by the DRAT on the same reasonings.
14. Both the authorities below have totally failed to take into consideration the exact property that was put to auction upon valuation of the same having been done by the Bank particularly when it has been the stand of the Bank that valuation as was done of the property was only upon inclusion of the structure etc. standing thereupon. The finding is of the sale certificate being contrary to the auctioned property without going into the entire fact situation of the case. In any case, it has also not been taken into consideration as to whether only for the reason of the sale certificate not being in conformity with the auction notice, the entire auction proceedings would be vitiated. Only upon recording of a finding as has been done the entire proceeding have been declared illegal without expecting from the Bank to substantiate its pleadings by documentary evidence. The bank hence deserves to be granted an opportunity to produce relevant documents in this regard also.
15. The DRT had recorded a specific finding to be effect that non- compliance with provisions of Rule 9(4) of the Rules, 2002 is merely a procedural irregularity and auction purchasers cannot be held guilty for the same to direct forfeiture meaning thereby that the ground taken by the borrowers of acceptance of balance bid amount by the Bank after the period of 15 days without their consent rendering the proceedings as illegal had been declining to be accepted. This finding was not challenged by the borrowers before the DRAT hence it was not open for the DRAT to have entered into this aspect of the matter and to record a finding that there has been violation of provisions of Rule 9(4) of Rules, 2002 rendering recovery proceedings as illegal.
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16. Considering the nature of dispute between the parties, the stakes involved, and for a fair an just determination of all the disputes, the DRT ought to have ensured that the entire material was placed before it for proper adjudication. The documents produced before the DRT as well as DRAT ought to have been appreciated in their proper perspective by them. The DRT has, however, failed to do so and the DRAT has also, in a very cursory manner, affirmed the findings of the DRT which is highly improper. In view of the factual controversies as are involved in this case we deem it fit and proper that the DRT ought to consider the material already on record in a proper detailed manner and the Bank deserves to be granted an opportunity to place such further documents on record as may be deemed fit in proof of their pleadings.
17. We are inclined to issue such directions in exercise of powers under Article 227 of the Constitution of India by taking aid of the decision of the Hon'ble Supreme Court in the case of Surya Dev Rai vs Ram Chander Rai & Ors [2003 (6) SCC 675], wherein it has been held as under:
22. "Article 227 of the Constitution confers on every High Court the power of superintendence over all courts and tribunals throughout the territories in relation to which it exercises jurisdiction excepting any court or tribunal constituted by or under any law relating to the armed forces. Without prejudice to the generality of such power the High Court has been conferred with certain specific powers by clauses (2) and (3) of Article 227 with which we are not concerned hereat. It is well settled that the power of superintendence so conferred on the High Court is administrative as well as judicial, and is capable of being invoked at the instance of any person aggrieved or may even be exercised suo motu. The paramount consideration behind vesting such wide power of superintendence in the High Court is paving the path of justice and removing any obstacles therein. The power under Article 227 is wider than the one conferred on the High Court by Article 226 in the sense that the power of superintendence is not subject to those technicalities of procedure or traditional fetters which are to be found in certiorari jurisdiction. Else the parameters invoking the exercise of power are almost similar."
24. "The difference between Articles 226 and 227 of the Constitution was well brought out in Umaji Keshao Meshram v. Radhikabai [1986 Supp SCC 401]. Proceedings under Article 226 are in exercise of the original jurisdiction of the High Court while proceedings under Article 227 of the 12 Constitution are not original but only supervisory. Article 227 substantially reproduces the provisions of Section 107 of the Government of India Act, 1915 excepting that the power of superintendence has been extended by this article to tribunals as well. Though the power is akin to that of an ordinary court of appeal, yet the power under Article 227 is intended to be used sparingly and only in appropriate cases for the purpose of keeping the subordinate courts and tribunals within the bounds of their authority and not for correcting mere errors. The power may be exercised in cases occasioning grave injustice or failure of justice such as when (i) the court or tribunal has assumed a jurisdiction which it does not have, (ii) has failed to exercise a jurisdiction which it does have, such failure occasioning a failure of justice, and (iii) the jurisdiction though available is being exercised in a manner which tantamounts to overstepping the limits of jurisdiction."
18. Further in the matter of Ramesh Chandra Sankla Etc. V. Vikram Cement Etc. [AIR 2009 SC 713], it was held as under:
"81. The power of superintendence under Article 227 of the Constitution conferred on every High Court over all courts and tribunals throughout the territories in relation to which it exercises jurisdiction is very wide and discretionary in nature. It can be exercised ex debito justitiae i.e. to meet the ends of justice. It is equitable in nature. While exercising supervisory jurisdiction, a High Court not only acts as a court of law but also as a court of equity. It is, therefore, power and also the duty of the Court to ensure that power of superintendence must "advance the ends of justice and uproot injustice"."
19. Thus in exercise of power under Article 227 of the Constitution of India, this Court can exercise jurisdiction to meet the ends of justice and while doing so it can also act as a Court of equity. The purpose is to advance the ends of justice and uproot injustice. Such power can be exercised even suo moto particularly when there has been an apparent failure of justice. The paramount consideration is paving the path of justice and removing any obstacles therein. Tested on the anvil of the aforesaid principles, we find that before the authorities below there has been a total failure of justice. The proceedings have been conducted in such a manner that ends of justice have been defeated. The parties 13 have acted in such a manner that the truth has remained suppressed and determination has been made only on the basis of skeletal facts brought on record which were wholly insufficient for a fair and proper adjudication of the controversies involved. Thus, the orders under challenge cannot be allowed to stand.
20. As a result, the petitions are allowed. The impugned order dated 01.10.2019 passed by the Debt Recovery Appellate Tribunal, Allahabad as well as the order dated 23.04.2018 passed by the Debt Recovery Tribunal, Jabalpur are hereby set aside and the matter is remanded back to the Debt Recovery Tribunal, Jabalpur for decision afresh in accordance with law and in view of our observations as made herein above. There shall be no order as to costs.
(SUJOY PAUL) (PRANAY VERMA)
JUDGE JUDGE
jyoti
Digitally signed by JYOTI
CHOURASIA
Date: 2021.12.09 14:02:39
+05'30'