Andhra Pradesh High Court - Amravati
Sri Veera Venkata Satya Traders vs The State Of Ap on 4 December, 2019
Author: J. Uma Devi
Bench: J. Uma Devi
1
MSRM,J & JUD,J
W.P.No.6420 of 2019
THE HONOURABLE SRI JUSTICE M. SEETHARAMA MURTI
AND
THE HONOURABLE MS. JUSTICE J.UMA DEVI
WRIT PETITION No.6420 of 2019
ORDER:(Per Honourable Sri Justice M.Seetharama Murti) This writ petition, under Article 226 of the Constitution of India, is filed by the petitioners seeking verbatim the following relief:
"...to issue a Writ, Order or direction more particularly one in the nature of Writ of Mandamus declaring the E auction notice dated 19.02.2019 and postponement of e auction sale notice dated 28.03.2019 auctioning the petitioners A, C and D schedule properties more particularly mentioned in the notice issued by the 3rd respondent as illegal, arbitrary, unjust, against to the fundamental rights guaranteed under the Constitution of India particularly Art. 300A, apart from violation of principles of natural justice and consequently to set aside the same and to pass such other order or orders as this Hon'ble Court may deems fit, just and proper in the circumstances of the case."
2. We have heard the submissions of learned counsel for the petitioners; of learned standing counsel for State Bank of India appearing for respondent nos.1 and 2; and of Sri Siva Bhami Reddy, learned counsel for respondent no.5. Respondent No.3 is the Recovery Officer, Debts Recovery Tribunal, who conducted auction; and, the respondent nos.4 to 6 are non-official respondents.
3. I have perused the material record.
4. The case of the writ petitioners is this:
The first petitioner is a partnership firm. The second petitioner is its Managing Partner and the third petitioner is wife of the second petitioner. 2
MSRM,J & JUD,J W.P.No. 6420 of 2019 The other petitioners are sons of the second and third petitioners. The first petitioner is running a rice mill. It was purchased somewhere in the year, 1996. In the year 2008, an overdraft for an amount of Rs.18,00,000/- was obtained from the second respondent/bank vide account No.30363813635. Towards the said facility, two separate agricultural landed properties, the rice mill and the land on which the rice mill is in existence were mortgaged with the second respondent-bank. The petitioner No.1 was paying instalments towards interest. While so, in the year, 2010, for reasons beyond the control of the petitioners, they could not pay the instalments. As such, the mill was locked by the bank. The business was thus, got closed. Hence, the loan amount could not be repaid. Though the petitioners approached the respondent No.2/bank on several occasions to settle the matter amicably and requested to open the lock put on the mill in order to carry on the business and clear the loan amount and also eke out livelihood of the petitioners, the respondent No.2-bank has not shown any mercy and failed to take into consideration the pathetic situation of the petitioners. While so, the respondent No.2-bank filed O.A.No.112 of 2013 on the file Debts Recovery Tribunal, Visakhapatnam. The same was allowed and a recovery certificate was issued. Later Execution Proceedings were initiated in R.P.No.147 of 2014 for recovery of Rs.32,10,379.44 paise with interest and costs. At that juncture, one time settlement scheme was entertained by the respondent- bank. The matter was settled for Rs.29,00,000/-. The said amount was paid by taking loans from the respondent No.4. The amount paid was very much received by the bank; and, the bank confirmed the same vide letter, dated 21.03.2019. Out of said Rs.29,00,000/-, Rs.5,00,000/- has been paid in the 3 MSRM,J & JUD,J W.P.No. 6420 of 2019 name of the petitioner No.1 concern by way of a Demand Draft, dated 12.03.2019, and Rs.24,00,000/- has been paid, on 20.03.2019 and on 21.03.2019, from his account by the respondent No.4 who is a relative of the petitioners. The counsel for the bank filed a memo before the Tribunal, on 22.03.2019, duly praying the Tribunal to cancel the auction sale which was proposed to be held on 22.03.2019. These petitioners paid the entire amount and hence, the memo was filed before the Tribunal by the counsel for the bank. With a mala fide intention and to cause loss to the petitioners, the respondent-bank auctioned the properties of the petitioners without issuing any notice to the petitioners. The petitioners came to know of the same through third parties and secured necessary papers. A perusal of the auction notice published, on 19.02.2019, in news paper discloses that the sale price was fixed at Rs.5,000/- per cent and that the reserve price for 'A' schedule property has been fixed at Rs.1,74,000/-. In the said auction, a bid has been confirmed in favour of a single bidder and was finalized for Rs.1,79,000/-.
Similarly, schedule C and D properties have also been auctioned contrary to law. In the year 2008, valuation report has been obtained for the properties under mortgage. Insofar as 'A' schedule property is concerned, Rs.9,80,000/- has been mentioned as its value. After taking into consideration, the depreciation of the value of the machinery, the price was fixed at Rs.6,00,000/-. However, with a mala fide intention and in an arbitrary way and without following the procedure, upset price for the machinery was fixed at Rs.1,74,000/-. The second schedule of the Income Tax has to be followed by the bank as it applies to the auction procedure. Sale shall be by public auction to the highest bidder and shall be subject to the confirmation by the Officer concerned. Only one bidder participated in the auction and has given 4 MSRM,J & JUD,J W.P.No. 6420 of 2019 one cant; yet the auction was finalized in his favour. All the facts disclose that the bank has not followed the procedure while auctioning the properties and that the auction is held contrary to law. The auction was once cancelled. After cancellation of the auction, fresh auction notification and fresh notices were not given. Only by postponement notice, the respondent-bank auctioned the petitioners' properties by adopting their own procedure contrary to law. Being the highest bidders, respondent nos.4, 5 and 6 became the auction purchasers. To the knowledge of the petitioners, no sale certificate has been issued so far and the respondent nos. 5 and 6/successful bidders have not paid the amount so far. The possession of the agricultural land i.e., 'C' and 'D' schedule properties is continuing with the petitioners as the physical possession of the same has not been taken. The procedural guidance in the decisions of the Hon'ble Supreme Court and High Court is not followed. The respondent-bank and the recovery officer acted hand in glove and auctioned properties in a manner not known to the law. If the sale certificates are issued to the auction purchaser, the petitioner suffers serious and irreparable loss. The bank as well as the recovery officer played fraud on the petitioners. The respondents/bank had given back the OTS amount without taking any consent and that too after the auction is conducted. Hence, the present Writ Petition is filed.
5. The case of the bank as stated in the affidavit of the Manager of the Bank, in brief, is this:
Petitioner no.2 approached respondent no.2 for financial facilities in the form of cash credit for the purpose of meeting the working capital requirements of petitioner no.1-firm. The bank considered and sanctioned cash credit loan of Rs.18,00,000/-. The said loan was secured by equitable 5 MSRM,J & JUD,J W.P.No. 6420 of 2019 mortgage of the rice mill and agriculture lands and personal guarantees of petitioner nos.3 to 5. Petitioner nos.2 to 5 deposited their title deeds with an intention to create equitable mortgage on the property by way of collateral security for the amounts due to the bank. Petitioner no.2 has deposited his title deeds with an intention to create equitable mortgage in favour of the bank and petitioner no.3 deposited her original title deed with an intention to create equitable mortgage by deposit of title deeds over schedule properties vide memorandum of deposit recording creation of mortgage by deposit of title deeds. The bank also renewed the financial facility vide letter, dated 27.07.2009. After availing the facilities, the petitioners failed to maintain the accounts in terms of sanction and failed to respond to the repeated reminders of the bank. They failed to discharge the debt. As such their account was classified as non-performing asset (NPA). Accordingly, the bank filed O.A.No.112 of 2013 before the Debts Recovery Tribunal, Visakhapatnam, for recovery of Rs.27,12,916.44 paise together with interest and costs. The said OA was allowed, on 05.08.2014. Recovery Certificate, dated 11.09.2014, was issued. Recovery proceedings were initiated in RP.No.147/2014 for recovery of Rs.32,10,379.44 paise with interest and costs. Proclamation of Sale-Cum-
e- Auction Sale Notice, dated 12.02.2019, for auction sale of the properties belonging to petitioner nos.2 to 5 were issued fixing the date of auction as 22.03.2019. On that day, the amount due was Rs.61,19,745.23 paise with interest calculated up to 22.03.2019. On 21.03.2019, i.e., one day prior to the proposed e-auction sale, petitioner no.2 approached the bank and submitted a letter. In that letter, he made a request to consider his proposal for one time settlement by offering to pay Rs.29,00,000/- against the total dues; and, in order to lend credence to his proposal, petitioner no.2 also 6 MSRM,J & JUD,J W.P.No. 6420 of 2019 deposited the said amount in his personal account. The Branch Manager forwarded the said proposal to the higher authorities for sanction and approval. Thereafter, as auction was scheduled to be held on 22.03.2019, the bank filed a memo, on 22.03.2019, in the above recovery proceedings, stating that the petitioners herein approached the bank, on 21.03.2019, with a OTS proposal and that the same was submitted to the higher authorities for sanction and as such, the auction proposed to be held on 22.03.2019 may be ordered to be cancelled or postponed by 15 days; and accordingly, the proposed e-auction was postponed to 08.04.2019. Respondent no.3/Recovery Officer issued paper publication informing the public about the postponement of e-auction sale. It was mentioned therein that e-auction sale scheduled on 22.03.2019 in respect of schedule 'A' to 'D' properties (movable and immovable) on the website of e-auction provider as per sale proclamation/e- auction sale notice, dated 12.02.2019 are hereby postponed to 08.04.2019 respectively at the request of the bank for postponement and that all the other terms and conditions stated in the e-auction sale notice, dated 12.02.2019 shall remain unchanged. Subsequently, the authorities concerned, vide letter, dated 01.04.2019, informed that the compromise/OTS proposal is declined for the reasons that a decree has already been passed in favour of the bank and that the amount outstanding is fully secured and that it can be liquidated from the sale proceedings of the mortgage property. The committee has felt that the compromise offer in this case is very low and that it is not acceptable as the bank would be incurring loss, if the proposal for one time settlement is accepted and that the borrower is not willing to pay Rs.12,33,000/- incurred by the bank towards charges. The said fact was communicated to petitioner no.2 vide letter, dated 01.04.2019. Having come 7 MSRM,J & JUD,J W.P.No. 6420 of 2019 to know that the request for one time settlement is declined, petitioner no.2 came to the bank and made a request for closure of his personal account, in which he deposited Rs.29,00,000/- and requested to transfer the same to account No.042623200000659, which is in the name of Sri Lakshmi Ganapathi Steels. As per his request, the amount was transferred and remaining balance of Rs.4,417/- was paid to the petitioner in the form of Banker's cheque. Petitioners know all the facts. But, they came to the Court with unclean hands. The reserve price of 'A' schedule property was fixed as Rs.1,74,000/- and bid was knocked down for Rs.1,79,000/- and there is no irregularity and illegality in the auction conducted for schedule A, C and D properties. The bank obtained latest valuation reports by the bank's authorized valuer. As per the valuation reports, dated 05.01.2019 and 04.01.2019, the upset prices of the properties were fixed. The auction was conducted in conformity with the Second Schedule of Income Tax Act and there is no illegality. Respondent nos.4, 5 and 6 became the highest bidders. They paid the entire amount. However, due to the orders granted in the writ petition, sale certificates could not be issued to them. So far as 'A' schedule property, there was only a single bid. 'B' schedule property was not auctioned. There are five bidders each for schedule C and D properties. There is not even a prima facie case for the petitioners. The allegation that the OTS amount was given back without taking consent does not arise. Hence, the writ petition may be dismissed.
6. Respondent no.5, who is one of the auction purchasers, in the counter affidavit filed by him, stated that he participated in the auction; that he became successful auction purchaser of C and D schedule properties in the e- auction conducted on 08.04.2019; that he purchased 'C' schedule property for 8 MSRM,J & JUD,J W.P.No. 6420 of 2019 Rs.9,30,000/- and 'D' schedule property for Rs.42,60,000/- and that he paid 25% of the e-auction amount of C and D schedule properties; the balance amount later; that he complied with all e-auction conditions and that the bank has to issue a sale certificate to him and register the same in respect of both the properties; that when the bank was about to issue sale certificate for getting registration of 'C' and 'D' schedule properties in his favour, the petitioners approached this Court and obtained interim orders and that the contentions of the petitioners are false. He supported the other contentions of the respondent/bank that are stated in the counter affidavit of the Branch Manager and inter alia pleaded that for payment of the bid amounts, he ran from pillar to post and secured the amounts with considerable interest rates and that he cannot be put to hardship when there are no valid and sufficient grounds made out by the petitioners.
7. The petitioners filed reply affidavit reiterating their pleaded case and by relying upon the memo filed by the second respondent-bank before the Debts Recovery Tribunal. He stated that the proceedings rejecting one time settlement are not served upon the petitioners and that the petitioners never requested the bank to close the account and transfer the amount as stated in the counter affidavit of Branch Manager and that respondent no.2/bank has not stated any legal or valid grounds justifying the auction proceedings.
8. Learned counsel for the petitioners advanced arguments in line with the pleadings of the petitioners, which are stated supra, in detail. Learned standing counsel for the respondent no.2/bank also advanced arguments in line with the pleadings of the respondent no.2/bank and brought to the notice of the Court that all the necessary documents are filed and invited the 9 MSRM,J & JUD,J W.P.No. 6420 of 2019 attention of the Court to the contents of all the documents that are filed including copy of proclamation of sale-cum-e auction notice, copies of bid history, copies of valuation reports and copies of statement of accounts. Learned counsel for the respondent no.5 reiterated the case pleaded by respondent no.5 in his counter.
9. I have given earnest consideration to the facts and submissions.
10. Apart from undisputed fact about availment of loan facilities and the fact of mortgaging the properties, what is to be noticed is that the loan account is admittedly declared as a non-performing asset and O.A.No.112 of 2013 was filed by the bank against the petitioners on the file of Debts Recovery Tribunal for recovery of the amount and the said O.A.No.112 of 2013 was allowed by an order, dated 05.08.2014 and later a recovery certificate was issued on 11.09.2014 and that thereafter, recovery proceedings were initiated and the bank fixed a date for auctioning the mortgaged properties (movables and immovables). In the said backdrop, having come to know that the properties are scheduled to be auctioned, on 22.03.2019, petitioner no.2 approached the bank and offered to settle the matter and made one time settlement proposal by offering to pay Rs.29,00,000/-. Adverting to the said proposal, the respondent No.2/bank issued letter, dated 21.03.2019, stating verbatim as follows:
'We accept the deposit of Rs.29,00,000/-, which is deposited in Managing Partners' personal account. We consider your request for one time settlement of Rs.29,00,000/- and will be sent to appropriate authority for approval. After approval from the authority, your deposit amount will be appropriated towards the loan amount.' 10 MSRM,J & JUD,J W.P.No. 6420 of 2019 10.1 Further a memo, dated 22.03.2019 is filed in the matter pending before the Debts Recovery Tribunal stating verbatim as follows :
"The CHR bank herewith submit that the CDRs in the above RP approached the CHR Bank and settled the RC amounts under OTS for Rs.29 lakhs as per the Norms of the Bank and RBI and paid the entire amount by 21.03.2019 into the Bank and the OTS proposal was duly submitted to the higher Authorities for sanction. Hence, the CHR bank herewith submit that the proposed Auction to be conducted on 22.03.2019 for the schedule properties become infructuous and not necessary in the afore said circumstances hence the Auction sale may be ordered to be canceled or postponed for 15 days and FS petition will be filed in bank and direction may be given to the CHR bank to refund/revert the EMD amounts to the Bidders participated forth with.
The CHR bank will file the FS petition and direction to close the RP and return the Original documents by CDRs at the time of availing the loan in the R.P.No.147 of 2014 in O.A.No.112/2013. Hence, this memo."
10.2 In view of the contents of the above said letter, dated 21.03.2019 of respondent no.2/bank and particularly the contents of memo, dated 22.03.2019, filed by the learned standing counsel appearing for the bank before the Debts Recovery Tribunal, the core contentions of the writ petitioner are as follows: The Bank approved the one time settlement and issued a letter and filed a memo as well before the Debts Recovery Tribunal and that in the memo, it is also stated that the bank will filed F.S. petition and requested for direction to close the Recovery Petition and return the original documents deposited by the CDR at the time of availing the loan. Hence, the subsequent action of the respondents-bank is illegal and that the 11 MSRM,J & JUD,J W.P.No. 6420 of 2019 bank having accepted the one time settlement illegally auctioned the properties.
10.3 Per contra, the case of the bank is as follows:
'The auction sale after following the procedure was fixed on 22.03.2019. As on that date, the amount due was Rs.61,19,745-23 paise (interest included up to 22.03.2019). However, one day prior to the auction, that is, on 21.03.2019, the petitioner No.2, having approached the bank, made a proposal for one time settlement by offering an amount of Rs.29,00,000/- and deposited the said amount in his personal account. The Branch Manager not having authority to accept the proposal, forwarded the proposal to higher officials for sanction and approval. In view of the said proposal, memo was filed before the Debts Recovery Tribunal either to cancel or to postpone the auction. The contents of the letter and the memo make it clear that one time settlement proposal is not accepted and is forwarded for approval to higher authorities. If one time settlement proposal is accepted, the bank would not have issued a letter and file the memo with the above contents.' 10.4 A plain and harmonious consideration of the contents of letter and the memo make it manifest that one time settlement is not approved as being contended by the petitioners and that it is only forwarded to the higher officials by the Branch Manager for approval. It is also to be noted that after the one time settlement proposal was not accepted, according to the contentions of the bank, the same was communicated to the petitioners vide letter, dated 01.04.2019 and that after receiving the said letter, the petitioners made a request for closure of the account, in which the amount 12 MSRM,J & JUD,J W.P.No. 6420 of 2019 was deposited and requested for transfer of the amount to Sri Lakshmi Ganapathi Steels and that request was accepted and the amount was transferred to the account of the said concern and remaining amount of Rs.4,417/- was paid to the petitioners by way of banker's cheque and that later the recovery officer issued paper publication postponing the auction by stating that all the conditions of the auction will be the same. In the reply affidavit, the petitioners contended that they did not receive the letter aforesaid, from the bank. But, the petitioners accept that the bank refunded the money deposited towards one time settlement proposal and that the signature on the copy of the letter was obtained on 08.04.2019. All the facts and circumstances when considered cumulatively show that the contention that one time settlement proposal has been accepted cannot be countenanced.
11. Dealing with the next set of contentions, it is to be noted that the petitioner contends that the auctions subsequently held, that is, after postponement of the auction is illegal and the auctions are held contrary to the procedure. One of the contentions is that after postponement, fresh notice is not issued to enable the petitioners to make payment and save the property. Per contra, the case of the bank is that when sale does not take place and when the reasons for sale not taking place are attributable to the borrower, then this secured creditor can effect sale or transfer on any subsequent date by relying upon the notification issued earlier and that therefore, in view of the settled law, the contention is not tenable. These and other contentions related to the illegality and irregularity of the sale and sale procedure are either pure questions of fact or mixed questions of fact and law and that therefore, the said issues ought to have been raised by the 13 MSRM,J & JUD,J W.P.No. 6420 of 2019 petitioners, if aggrieved, before the Debts Recovery Tribunal as the Debts Recovery Tribunal is competent to decide all such issues. Moreover, the bank filed all material documents before this Court. The learned standing counsel for the bank invited the attention of the Court to the contents of all the documents that are filed including copy of proclamation of sale-cum-e auction notice, copies of bid history, copies of valuation reports and copies of statement of accounts. On a perusal of the said documents, this Court does not find any grounds warranting interference by exercising jurisdiction under Article 226 of the Constitution of India and therefore, it is appropriate to leave the matters to be examined by a proper forum or a tribunal in the event of the petitioners taking appropriate remedial measures.
12. In this setting, it is apt to note that since the other claims of the writ petitioners are pure and complex questions of fact, this Court need not resolve the said claims by resorting to adjudication of the complex issues of fact, as questions of the said nature require detailed examination and are to be determined by an appropriate forum in an appropriate proceeding, after full-fledged trial/enquiry. The same principle also extends to matters involving mixed questions of fact and law. A petition under Article 226 of the Constitution cannot be converted into a quasi-judicial proceeding or a suit to resolve the instant factual controversies. And, in general, disputed question of fact is not investigated into in a writ petition of this nature. Hence, in the considered view of this Court, there is no need to resolve the other complex factual controversies between the parties to the lis in this writ petition and it is for the appropriate forum to resolve the issues, which are complex factual issues. Therefore, it is appropriate to leave the rest of the controversy to be resolved in an appropriate proceeding by an appropriate forum/tribunal. In 14 MSRM,J & JUD,J W.P.No. 6420 of 2019 that view of the matter, it is for the petitioners to seek the remedy, which the law permits, from an appropriate forum/tribunal. Therefore, this Court is of the considered view that it is not proper to record any findings by deeply examining the complex facts, as the other issues being sought to be raised are to be decided by a competent forum, after taking into consideration the evidence, which is required for resolving the dispute, provided the party/parties interested approach the competent forum for appropriate remedies, which they desire to seek.
13. In the result, the Writ Petition is disposed of reserving liberty to the petitioners to approach the Tribunal or any other appropriate forum, within three weeks from the date of receipt of a copy of this order and initiate appropriate proceedings seeking the remedies, which the law permits, in regard to the issues, which are left open in this order without going into the merits of the same. Till such time, the interim order, which is granted in this writ petition and which is in force till today, shall continue to operate. It is made clear that in case the petitioners fail to approach the Tribunal or a forum and obtain any interim orders within the time stipulated supra, the respondents 1 to 3/bank shall be at liberty to proceed further in the matter, however, in strict accordance with the procedure established by law.
No order as to costs.
As a sequel, pending miscellaneous petitions, if any, shall stand dismissed.
_________________________ M. SEETHARAMA MURTI, J _____________ J.UMA DEVI, J 15 MSRM,J & JUD,J W.P.No. 6420 of 2019 4th December, 2019 ikn 16 MSRM,J & JUD,J W.P.No. 6420 of 2019 THE HONOURABLE SRI JUSTICE M. SEETHARAMA MURTI AND THE HONOURABLE MS. JUSTICE J.UMA DEVI WRIT PETITION No.6420 of 2019 04.12.2019 ikn