Calcutta High Court (Appellete Side)
Sk. Abdul Sabir vs Idbi Bank Ltd. And Others on 24 January, 2018
Author: Arindam Sinha
Bench: Arindam Sinha
1
l
10 24.01.18
suman
Ct.4
W.P. 30668 (W) of 2016
Sk. Abdul Sabir
Versus
IDBI Bank Ltd. and others
Mr. N. Srinivas
Mr. Debdut Mukherjee
Mr. Joydip Mukherjee
...for the petitioner
Mr. Suddhasatva Banerjee
Mr. Debasish Chakraborty
Mr. Sukanta Ghosh
...for respondent Bank
Mr. Aniruddha Roy Mr. P. Pal ...for respondent nos. 3 and 4 This writ petition is at the instance of a person covered under the definition of borrower given in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI, Act). Petitioner stood guarantor for principal borrower, the latter having defaulted in repaying the borrowings and interest. A cold storage situated in District-Burdwan was mortgaged by the guarantor in support of his guarantee. The property was secured for repayment of the loan. The bank issued sale notice dated 31st January, 2016 for sale of the secured property. Respondent nos. 3 and 4 are the successful auction bidders. Their bid 2 was accepted by the bank and upon deposit of earnest money, they were given time to put in the balance. They did not deposit the balance within time. The bank forfeited the earnest and cancelled the sale. It proceeded to issue another sale notice dated 8th April, 2016.
Some time in May, 2016, respondent nos. 3 and 4 had applied to Debts Recovery Tribunal-I for, inter alia, quashing letters dated 9th March, 2016 and 11th May, 2016 issued by the bank forfeiting earnest money deposited by them. By order dated 20th May, 2016 the said application was allowed. Respondent nos. 3 and 4 thus became auction purchasers of the secured property.
The borrower challenged the subsequent sale notice in Debts Recovery Tribunal-II since the said Bench had territorial jurisdiction in respect of the secured property. This application was made on 8th June, 2016. By order dated 16th June, 2016 Debts Recovery Tribunal-II set aside the second sale notice dated 8th April, 2016 with direction for issuance afresh. The borrower then appears to have got wind of what had happened in the other Tribunal regarding his mortgaged property as sold in auction. He approached Debts Recovery Tribunal-I for recalling its order dated 20th May, 2016. The said Tribunal by order dated 10th November, 2016 rejected the application on the ground that remedy of the borrower was to 3 file an appeal as he not having been a party to the SARFAESI application, could not invoke review jurisdiction of the Tribunal. The borrower then moved this Court for interference against the said order dated 10th November, 2016 as one having been made without authority of law.
Mr. Srinivas, learned advocate appeared on behalf of petitioner. He relied on a decision of a learned Single Judge of this Court in the case of Elements Coke Pvt. Ltd. vs. UCO Bank reported in 2009 (3) CHN 273, particularly to paragraph 34 in which the learned Judge was of the view that:-
"Since the action under section 13 (4) of the said Act is in the nature of execution proceeding, the Tribunal within whose territorial jurisdiction the secured assets situate, is the only competent Tribunal whose jurisdiction can be invoked for filing an application under section 17 of the said Act as the cause of action for the second phase of this chapter wholly arises within the jurisdiction of the said Tribunal."
He also relied on a judgment of a Full Bench of Delhi High Court in the case of Amish Jain & Another v. ICICI Bank Ltd. reported in 2013 (1) Debt Recovery Tribunal Cases (DRTC) 70 and submitted, the said Court upon considering, inter alia, Elements Coke (supra) had held accordingly. He relied on paragraph 29 which is set out below:
"For all the aforesaid reasons, we set aside the 4 judgment of the Division Bench in Indira Devi supra and hold that an Appeal/application under Sec. 17(1) of the SARFAESI Act can be filed only before the DRT within whose jurisdiction the property /secured asset against which action is taken is situated and in no other DRT."
Lastly, he relied on the case of Sri Siddeshwara Co-operative Bank Ltd. vs. Sri Ikbal decided by Supreme Court reported in (2013) 10 SCC 83. He relied on paragraph 14 which is extracted below:
"14. A reading of sub-rule (1) of Rule 9 makes it manifest that the provision is mandatory. The plain language of Rule 9(1) suggests this. Similarly, Rule 9(3) which provides that the purchaser shall pay a deposit of 25% of the amount of the sale price on the sale of immovable property also indicates that the said provision is mandatory in nature. As regards balance amount of purchase price, sub-rule (4) provides that the said amount shall be paid by the purchaser on or before the fifteenth day of confirmation of sale of immovable property or such extended period as may be agreed upon in writing between the parties. The period of fifteen days in Rule 9(4) is not that sacrosanct and it is extendable if there is a written agreement between the parties for such extension. What is the meaning of the expression "written agreement between the parties" in Rule 9(4)? The 2002 Rules do not prescribe any particular form for such agreement except that it must be in writing. The 5 use of the term "written agreement" means a mutual understanding or an arrangement about relative rights and duties by the parties. For the purposes of Rule 9(4), the expression "written agreement" means nothing more than a manifestation of mutual assent in writing. The word "parties" for the purposes of Rule 9(4) we think must mean the secured creditor, borrower and auction-purchaser."
He submitted, Debts Recovery Tribunal -I did not have jurisdiction to receive, try or determine the SARFAESI application. He referred to sections 17(1) and (7) of the SARFAESI Act and sections 19(25) and section 22 of the Recovery of Debts and Bankruptcy Act, 1993 (DRT Act) to submit, the SARFAESI application could only have been made in Debts Recovery Tribunal -II. Power of review was with Debts Recovery Tribunal-I and when upon discovery his client had moved the latter, the same had refused to recall its order. Such refusal was without authority of law since it had the power of review and its earlier order dated 20th May, 2016 was made without jurisdiction.
Mr. Banerjee, learned advocate appeared on behalf of the Bank and submitted, the borrower has efficacious alternative remedy. The borrower is seeking to move this Court on barred remedy. The sale notice 6 under which the sale came to be confirmed was never challenged by the borrower. He relied on several cases, first of which being a decision of Supreme Court in Hira Lal Patni vs. Sri Kali Nath reported in AIR 1962 SC 199, on paragraph 4. He submitted, the SARFAESI application and order made on it was in the nature of execution proceedings. The sale notice never having been challenged, the validity of the order made in relation to it in execution proceeding could also not be challenged on the ground that the Tribunal lacked inherent jurisdiction in the sense that it could not have seisin of the case because the said matter was wholly foreign to its jurisdiction.
He then relied on the case of United Bank of India vs. Satyawati Tondon and others decided by Supreme Court and reported in (2010) 8 SCC 110, in particular to paragraphs 36, 43 and 55. Paragraph 55 is quoted below:-
"It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and the SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks 7 and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection."
Next he relied on the case of Bahrein Petroleum Co. Ltd. versus P. J. Pappu and another dealt with by Supreme Court and reported in AIR 1966 SC 634, in particular to paragraphs 2, 3 and 4 therein for declaration of law regarding waiver of territorial jurisdiction as permissible under section 21 of the Code of Civil Procedure and otherwise. Lastly, he relied on a judgment of a learned Single Judge of this Court in the Case of M/s. N. B. C. C. Ltd. v. M/s. Patel Construction Co. reported in 97 CWN 462 also on the point that challenge to a decree alleging the same to be nullity before the executing Court must show that jurisdiction, alleged to be absent, must be inherent jurisdiction. According to him, Debts Recovery Tribunal- I could not be said to lack inherent jurisdiction since it is discharging its functions in the matter of recovery of loans and advances granted by banks by applying both the SARFAESI as well as the DRT Acts. Mr. Banerjee sought to distinguish Siddeshwara Cooperative Bank Limited (supra) by relying on paragraphs 23 and 27. 8
Mr. Roy, learned advocate appeared on behalf of auction purchasers. He relied on paragraphs 5.7 to 5.11 of his clients' SARFAESI application (copy of which was handed up) as pleadings for the reliefs sought, of setting aside the forfeiture of his clients' earnest money by the Bank. He submitted the Tribunal was correct in being of the view that petitioner's remedy lay in appeal and that remedy is alternative and efficacious remedy. In this context he adopted the submissions made on behalf of the bank. He relied on the case of Kalabharati Advertising vs. Hemant Vimalnath Narichania & Ors. decided by Supreme Court and reported in (2010) 9 SCC 437, in particular to paragraphs 12, 14 and 29 to submit, it is settled legal proposition that unless the statute/rules so permit, review application is not maintainable in case of judicial/quasi-judicial orders. According to him, that would mean strict adherence to the statutory provisions for exercise of jurisdiction of review. Such was duly done by the Tribunal. Petitioner not being entitled to invoke that jurisdiction cannot thereby move this Court for intervention in exercise of power under Article 226 of the Constitution of India. He also relied on the case of CESC Ltd. & Anr. vs. Kalavanti Doshi Trust & Ors, decided by a Division Bench of this Court reported in (2011) 1 CHN 182, 9 particularly to paragraph 13 to submit, it is now well settled law that a Writ Court should not, by invoking jurisdiction under Article 226 of the Constitution of India, revive a barred remedy. On this count too, he adopted the submissions made on behalf of the bank.
Order dated 16th June, 2016 made by Debts Recovery Tribunal - II to set aside subsequent sale notice dated 8th April. 2016 was passed ex parte as against the bank. The reason for which the same was passed appears from the portion extracted below:-
"I find that the said notice is 30 days' prior notice issued under Rule 8 (6). There is no mention of date and time of sale of the property. Therefore, this is expected that another notice under Rule 9(2) of the Rules shall be issued by the Bank. There is no reason and ground to pass any order in respect of the said notice. This is clarified that the sale of the property cannot be made on the basis of this notice as the date and time of sale has not been mentioned in this notice. The Respondent Bank is under obligation to issue a fresh Sale Notice under Rule 9(2) to inform about date and time of the sale. This appears to the Tribunal that the 10 matter involves Rs.13.42 Crores and the Respondent Bank issued the said notice under Rule 8(6)".
Neither auction purchasers nor bank brought fact of cancellation of earlier sale notice dated 31st January, 2016 to the notice of Debts Recovery Tribunal - I when they obtained order for extension of time for making deposit by auction purchasers under the earlier since cancelled sale notice. Even if it is not inferred that auction purchasers knew cancellation of earlier notice, the bank caused suppression of a fact before Debts Recovery Tribunal - I notwithstanding the said order dated 16th June, 2016 was passed ex parte against it. The said ex parte order did not revive the cancelled sale notice. There was direction for issuance afresh.
Petitioner had made two applications before Debts Recovery Tribunal - I, one for condonation of delay and the other for recalling of order dated 20th May, 2016. In paragraph-19 of recalling application, petitioner had alleged fraud. The said paragraph is extracted below:-
"Patently, the said order dated May 20, 2016 has been obtained by the concerned parties by misleading this Hon'ble Tribunal. In actual point of fact, fraud has been perpetrated on this 11 Hon'ble Tribunal, as would appear from the following particulars of fraud:
i. The parties appearing before this Hon'ble Tribunal at the hearing held on May 20, 2016 had made no endeavour to bring to the notice of this Hon'ble Tribunal that while the applicant in the proceedings before this Hon'ble Tribunal was seeking to claim rights under a sale notice published on January 31, 2016, the bank had not only cancelled such sale but had also proceeded to sell the said immovable property by the purported notice dated April 8, 2016.
i. Thus, this Hon'ble Tribunal was deliberately kept in the dark by the parties appearing before this Hon'ble Tribunal on May 20, 2016 as to the fact that the sale process initiated by the notice published on January 31, 2016 had been irreversibly cancelled and as such, no question of enforcement of any right in respect of such sale process could or did arise.
i. The parties appearing before this Hon'ble Tribunal on May 20, 2016 were clearly 12 aware of the position that if the said sale notice dated April 8, 2016 had been brought to the notice of this Hon'ble Tribunal, no order would have been passed in favour of the applicants in the section 17 application before this Hon'ble Tribunal.
i. The parties to the application before this Hon'ble Tribunal were also clearly aware of the fact that in view of the default on the part of the purchasers, the question of your petitioner suffering any adverse order by reason of not having challenged the sale initiated by the notice dated January 31, 2016 could not and did not arise. i. Patently, also, none pointed out that this Hon'ble Tribunal did not have jurisdiction in the matter".
Order XLVII in the Code of Civil Procedure, under Rule (1) provides, inter alia, any person who, from the discovery of new and important matter or evidence which, after the exercise of due diligence was not within his knowledge or could not be produced by him desires to obtain a review of the order made against him, may apply for a review of judgment to the Court which passed the order. Sub-sections (1) and (7) of section 17 13 in SARFAESI Act provide for any person aggrieved by any of the measures referred to in sub-section (4) of section 13, taken for recovery of secured debts, may make an application to the Debts Recovery Tribunal having jurisdiction in the matter and save as provided in that Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the application in accordance with provisions of DRT Act and Rules made thereunder. While sub-section (2) in section 22 of DRT Act expressly provides for, inter alia, Tribunal to review its decisions exercising same powers as are vested in a Civil Court under the Code of Civil Procedure, sub-section (25) in section 19 of the said Act also permits Tribunal to make such orders and give such directions as may be necessary or expedient to give effect to, inter alia, prevent abuse of its process or to secure ends of justice.
Debts Recovery Tribunal - I relied upon Debts Recovery Tribunal (Procedures) Rules, 1993 to be of the view that petitioner could not have applied for recalling of its order since he not being a party to the SARFAESI application made by auction purchaser, could not invoke review jurisdiction. In doing so, it lost sight of substantive provisions of law, to rely on procedural rules. It completely skirted the issue of jurisdiction raised by petitioner both by averment and submissions 14 before it. Paragraph -5 of the impugned order is set out below:-
"Ld. Advocate Mr. Amitava Das for the Borrower submitted that, the Auction Purchaser while moving an application under SARFAESI Act has not made any endeavor to make the Borrower as a party to the proceedings. This Tribunal deliberately kept in dark while passing order dated 20/05/16 that Sale Notice dated 31/01/16 has been cancelled by the Bank and an intimation was sent and a fresh Notice dated 08/04/16 has been issued. Hence, no order was required to be passed in this regard by this Tribunal. The order obtained by the purchaser by keeping this Tribunal in dark regarding subsequent Notice of sale".
Petitioner having had brought to notice of the Tribunal that sale notice dated 31st January, 2016 stood cancelled by the bank and a fresh notice dated 8th April, 2016 had been issued, the Tribunal ought to have applied its mind to the notices and property sought to be dealt with thereby. By the impugned order the Tribunal has refused to recall its order made pursuant to cancelled sale notice. Upon recalling application having had been made, the delay explained on 15 subsequent discovery by petitioner who was not party, the Tribunal was obliged to first give reasons regarding why it would not recall such an order. Extract of petitioner's pleadings and submissions made on his behalf in the Debts Recovery Tribunal - I militate against an inference of waiver.
On behalf of auction purchasers it was submitted that when they received the letters from the bank forfeiting their earnest, such letters having had been issued by the authorized officer whose office is within the local limits of jurisdiction of Debts Recovery Tribunal - I, they duly moved that Tribunal on their cause of action having arisen thereby. Perusal of their application, however, does not reveal disclosure of any cause of action. Averments made in paragraphs 5.7 to 5.11 of their SARFAESI application are in the nature of mercy plea, for extension of time. No illegality was alleged. Debts Recovery Tribunal - I by its order dated 20th May, 2016 made on SARFAESI application of auction purchasers had confirmed the sale by saying, obviously at the instance of the parties before it who were auction purchasers and the bank, as follows:-
"Considering the above contention of the parties, the sale has not been challenged by the borrower or any other person and there is delay 16 in depositing part of the sale consideration. In the above circumstances, the sale is confirmed subject to deposit of interest for the delayed period @ 12% per annum to the Defendant Bank. The Applicant is directed to deposit the amount due and payable on account of interest within a period of one week hereof. Thereafter, the sale certificate would be issued".
The above would have been a correct finding on facts if in the mean time the bank had not cancelled the sale notice dated 31st January, 2016. True it is the borrower had not challenged the same. The bank having had cancelled that sale notice and issued afresh, it gave justifiable cause to petitioner to assail the same, before the Tribunal having jurisdiction, as vague. Bank and auction purchases did not dispute that Debts Recovery Tribunal - II had territorial jurisdiction over the secured property. The contention raised both by bank and auction purchasers on the fact of since cancelled sale notice dated 31st January, 2016 not having had been challenged by borrower caused the Tribunal to rely upon irrelevant material.
The case at hand comes squarely in the situation contemplated in paragraph 14 of Sri Siddeshwara Co- operative Bank Ltd.(supra). Had the bank and auction 17 purchasers taken borrower into confidence and arrived at an agreement in writing between themselves for the extension to be granted to auction purchasers, the present situation would not have arisen. It appears there was no litigation between bank and petitioner prior to petitioner having had challenged bank's subsequent sale notice dated 8th April, 2016. As such the bank ought not to have proceeded in the manner it did. The provisions of the said Acts give wide powers to banks and tribunals in the matter of recovery. It is regrettable that in spite thereof such tactics have been resorted to. The judgments relied upon by bank and respondent nos. 3 and 4 against interference are not applicable to this case.
In view of aforesaid, this Court finds sufficient reason to interfere. Debts Recovery Tribunal - I acted without authority of law, in complete non-application of mind and upon consideration of irrelevant material. The impugned order dated 10th November, 2016 and order dated 20th May, 2016 are both set aside and quashed. The bank must act in terms of directions made in order dated 16th June, 2016 or assail it, if permissible in law. The writ petition is allowed as above.
( Arindam Sinha, J. ) 18