Karnataka High Court
M/S. S B Valves (India ) Pvt. Ltd vs The Canara Bank on 22 January, 2014
Author: Aravind Kumar
Bench: Aravind Kumar
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IN THE HIGH COURT OF KARNATAKA
DHARWAD BENCH
DATED THIS THE 22ND DAY OF JANUARY, 2014
BEFORE
THE HON'BLE MR.JUSTICE ARAVIND KUMAR
WRIT PETITION NO.100382/2014 (GM-TEN)
BETWEEN
M/S. S B VALVES (INDIA ) PVT. LTD
C-211 MARIYANTIMMASAGAR
I GATE, INDUSTRIAL ESTATE, GOKUL ROAD,
HUBLI,
R/BY ITS MANAGING DIRECTOR
SHRI BASAVARAJ
S/O NARAYANAPPA SARANGI. ..... PETITIONER
(BY SRI HANUMANTHAREDDY SAHUKAR, ADV.)
AND
THE CANARA BANK
TRAFFIC ISLAND BRANCH
COURT CIRCLEM, HUBLI
R/BY ITS ASSISTANT GENERAL MANAGER
& AUTHORISED OFFICER. ..... RESPONDENT
(BY SRI A.P.KAMOJI, ADV.)
THIS WRIT PETITION FILED UNDER ARTICLES 226 & 227 OF
CONSTITUTION OF INDIA PRAYING TO QUASH THE AUCTION
NOTICE DATED 30.12.2013 ISSUED BY THE RESPONDENT BANK
PRODUCED AS ANNEXURE-C AND ETC.,
THIS WRIT PETITION COMING ON FOR PRELIMINARY
HEARING, THIS DAY, THE COURT MADE THE FOLLOWING:
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ORDER
Heard Sri Hanumanthreddy Sahukar, learned counsel appearing for the petitioner and Sri Kamoji, learned counsel appearing for the respondent-Bank. Perused the writ papers.
2. Petitioner has borrowed loan from respondent/bank and undisputedly, said loan amount borrowed by petitioner has been classified as "non- Performing asset" by respondent/bank and it had initiated proceedings before the Debt Recovery Tribunal, Bangalore for recovery of the amount due to it. Debt Recovery Tribunal on adjudication of application has issued a recovery certificate as sought for by the respondent/bank. Pursuant to same, property bearing R.S No.213/2, situated at Anchatageri village, Hubli Taluk measuring 3 acres 2 guntas which had been mortgaged as security for repayment of loan has been brought for sale by respondent Bank. Bank had fixed the :3: reserve price or floor value price at Rs.228.51 lakhs in the auction which was proposed to be held on 15.11.2013. Bank had given paper publication by publishing the same in Vijay Karanataka, Kannada daily news paper which is having largest circulation in the area in which the property is situated. However, there were no participants in the said auction. Again the property was brought for sale and auction was proposed to be held on 04.12.2013. The reserve price fixed was Rs.228.51 lakhs. Publicity to conduct said auction was made through issue of Hand bills or pamphlets. Said auction also did not materialize. The attempts made by the Bank to sell the property has been in vain.
3. Subsequently, on 30.12.2013, respondent-Bank got published a notice in Vijaya Vani, Kannada daily news paper which also has very large circulation in the locality notifying thereunder to conduct auction of the subject property on 31.01.2014, at 3.30 p.m. The floor :4: value or reserve price was fixed at Rs.110 lakhs. Being aggrieved by the fixation of floor price value, petitioner is before this Court challenging the same and contending that it is arbitrary, illegal and without any basis and the Bank could not have fixed reserve price or floor price value at Rs.110 lakhs and it could not have reduced the floor price to Rs.110 lakhs from 228.51 lakhs as fixed earlier. It is also contended that Bank itself had obtained report on 19.04.2013 from its panel valuer whereunder it was stated that the value of the land would be Rs.285.64 lakhs as per Annexure-D. Petitioner also claims to have obtained valuation report from another panel valuer of the respondent/Bank relating to the subject property wherein he has valued the property under auction at Rs.405.21 lakhs and as such it is contended that floor value fixed at Rs.110 lakhs by the Bank in the proposed auction to be held on 31.01.2014 is arbitrary and same is much below the actual market :5: value. It is also contended that Bank has no arbitrary right to reduce the floor value of subject property from Rs.228.51 lakhs to Rs.110 lakhs and said act of respondent-Bank is without any justification. On these grounds, petitioner has invoked extraordinary jurisdiction of this Court under Article 226 of the Constitution of India and is seeking for quashing of auction notice Annexure-C.
4. Undisputedly, petitioner is the debtor and has suffered an order passed by jurisdictional Debt Recovery Tribunal. The Debt Recovery Tribunal, Bangalore has issued recovery certificate in favour of respondent-Bank to recover the said amount. Property mortgaged to respondent-Bank by the petitioner has been brought for sale by auction. In the event of Bank not adhering to provisions of SARFAESI Act in conducting the sale or there being any infraction in this regard, petitioner has an alternate remedy available under SARFAESI Act. :6: Hence, at the stage of auction being conducted by respondent-Bank for recovery of its legitimate dues, this Court would not interfere with said auction in the normal course.
5. After noticing the judgment of City and Industrial Development Corporation Vs. Dosu Aardeshir Bhiwandiwala and others reported in 2009(1) SC 168 the Hon'ble Apex Court in the case of UNITED BANK OF INDIA VS. SATYAWATI TONDON AND OTHERS reported in 2010 (8) SC 110, has cautioned that High Courts should refrain from exercising extra-ordinary jurisdiction when statutory remedies under Debt Recovery Tribunal Act and SARFAESI Act is available and this would be ground to refuse the prayer under Article 226 of the Constitution of India.
6. Apex Court has held that when petitioner is having an alternate remedy available under law, writ Court :7: should refrain from granting any relief under Article 226 of the Constitution of India. It has been held by Apex Court as follows:
"43. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a Petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc., the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are a code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi judicial bodies for redressal of the grievance of any :8: aggrieved person. Therefore, in all such cases, High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute.
44. While expressing the aforesaid view, we are conscious that the powers conferred upon the High Court under Article 226 of the Constitution to issue to any person or authority, including in appropriate cases, any Government, directions, orders or writs including the five prerogative writs for the enforcement of any of the rights conferred by Part III or for any other purpose are very wide and there is no express limitation on exercise of that power but, at the same time, we cannot be oblivious of the rules of self-imposed restraint evolved by this Court, which every High Court is bound to keep in view while exercising power under Article 226 of the Constitution.:9:
45. It is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the Constitution and pass interim order ignoring the fact that the petitioner can avail effective alternative remedy by filing application, appeal, revision, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance.
46. It must be remembered that stay of an action initiated by the State and/or its agencies/instrumentalities for recovery of taxes, cess, fees, etc. seriously impedes execution of projects of public importance and disables them from discharging their constitutional and legal obligations towards the citizens. In cases relating to recovery of the dues of banks, financial institutions and secured creditors, stay granted by the High Court would have serious adverse impact on the financial health of such : 10 : bodies/institutions, which (sic will) ultimately prove detrimental to the economy of the nation. Therefore, the High Court should be extremely careful and circumspect in exercising its discretion to grant stay in such matters. Of course, if the petitioner is able to show that its case falls within any of the exceptions carved out in Baburam Prakash Chandra Maheshwari v. Antarim Zila Parishad AIR 1969 SC 556, Whirlpool Corporation v. Registrar of Trade Marks, Mumbai (1998) 8 SCC 1 and Harbanslal Sahnia v. Indian Oil Corporation Ltd. and others (2003) 2 SCC 107 and some other judgments, then the High Court may, after considering all the relevant parameters and public interest, pass appropriate interim order.
xxx xxx
55. 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 : 11 : 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 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."
7. Sri Hanumanthareddy Sahukar, learned counsel appearing for petitioner by relying upon paragraph 5 of the judgment of the Hon'ble Apex Court in the case of KERALA FINANCIAL CORPORATION VS. VINCENT PAUL AND ANOTHER (2011 SAR (CIVIL) 322) would contend that sale of the properties is to be conducted in the manner prescribed thereunder only as otherwise such sale would be vitiated. The Hon'ble Apex Court was examining the proceedings initiated by the Kerala Financial Corporation against the borrower therein under Section 29 of the State Financial Corporations Act, 1951, and found that State had not framed any Rules or : 12 : guildelines in the form of executive instructions for sale of properties and in the absence thereof, Hon'ble Apex Court directed Kerala Financial Corporation to adhere to the directions issued thereunder which reads as under:
(i) The decision/intention to bring the property for sale shall be published by way of advertisement in two leading newspapers, one in vernacular language having sufficient circulation in that locality.
(ii) Before conducting sale of immovable property, the authority concerned shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor, fix the reserve price of the property and may sell the whole or any part of such immovable secured asset by any of the following methods:
(a) by obtaining quotations from the persons dealing with similar secured assets or otherwise : 13 : interested in buying such assets;
or
(b) by inviting tenders from the
public; or
(c) by holding public auction; or
(d) by private treaty.
Among the above modes, inviting
tenders from the public or holding
public auction is the best method for disposal of the properties belonging to the State.
(iii) The authority concerned shall serve to the borrower a notice of 30 days for sale of immovable secured assets.
(iv) A highest bidder in public auction cannot have a right to get the property or any privilege, unless the authority confirms the auction sale, being fully satisfied that the property has fetched the appropriate price and there has been no collusion between the bidders.
(v) In the matter of sale of public property, the dominant consideration is to secure the : 14 : best price for the property to be sold. This can be achieved only when there is maximum public participation in the process of sale and everybody has an opportunity of making an offer. It becomes a legal obligation on the part of the authority that property be sold in such a manner that it may fetch the best price.
(vi) The essential ingredients of sale are correct valuation report and fixing the reserve price. In case proper valuation has not been made and the reserve price is fixed taking into consideration the inaccurate valuation report, the intending buyers may not come forward treating the property as not worth purchase by them.
(vii) Reserve price means the price with which the public auction starts and the auction bidders are not permitted to give bids below the said price, i.e., the minimum bid at auction.
(viii) The debtor should be given a reasonable opportunity in regard to the valuation of the property sought to be sold, : 15 : in absence thereof the sale would suffer from material irregularity where the debtor suffer substantial injury by the sale.
(emphasis supplied)
8. In the above referred judgment, it was noticed by the Hon'ble Apex Court that State had not framed Rules or guidelines in the form of executive instructions for sale of properties owned by Corporation and as such it held that till formation of such rules or guidelines or orders KFC should adhere to the directions for sale of property owned by it. The paramount consideration would be to ensure that best price for the property to be sold is secured which can be achieved by maximum public participation in the process of sale, so that every body has opportunity of making an offer. In the instant case, reserve price earlier fixed at Rs.228.51 lakhs has not fetched customers and as such, respondent-Bank has fixed the reserve price at Rs.110 lakhs which would be the price with which the public auction starts and : 16 : auction bidders are not permitted to give bids below the floor value or reserve price. If the petitioner is able to secure a customer or a bidder who can offer his bid for the value as proposed by the petitioner itself, it would be needless to state that secured creditor would definitely accept the said bid since earlier attempts by it to auction the property has been in vain.
9. Sri Kamoji, learned counsel for the respondent- Bank has vehemently defended the action of the respondent-Bank in bringing the property in question to auction by fixing the reserve price at Rs.110 lakhs on the ground that earlier attempts to sell the property by fixing the reserved price at Rs.228.51 lakhs has not yielded any positive results and in order to secure the public money, steps have been taken to sell the property by public auction and proceedings being transparent, he seeks for dismissal of the writ petition. : 17 :
10. In the instant case, as already noticed hereinabove, petitioner is a borrower and it had defaulted in payment of monies due to the Bank. In other words, public money due by petitioner to the Bank has not been repaid. Petitioner loan account having been classified as a 'non-performing asset', respondent- Bank has initiated proceedings under the SARFAESI Act to recover the dues. In the earlier auctions conducted, reserve price fixed was Rs.228.51 lakhs i.e., in the auction which was to be held on 15.11.2013 and 04.12.2013. However, in the paper publication that has been issued on 30.12.2013 Annexure-C in the auction proposed to be held on 31.01.2014 at 3.30 p.m (E- auction), reserve price has been fixed at Rs.110 lakhs. The grievance of the petitioner is that value of the property is more than Rs.405.21 lakhs and as such, property in question cannot be sold for a pittance. If value of the property as contended by petitioner is : 18 : Rs.405.21 lakhs, nothing prevents the petitioner from getting a purchaser or a bidder to purchase the property for the said value and clear off the debts due by it to the respondent which even according to petitioner is around Rs.285.71 lakhs as on 31.01.2014 (which was Rs.261 lakhs as on 11.10.2013). However, without taking said recourse, petitioner is attempting to stall the auction proceedings which is not permissible inasmuch as the respondent-Bank being a nationalised Bank which is the custodian of public money is taking steps to recover its dues by auctioning the property through e-auction and the action of respondent-Bank cannot be flawed. Respondent-Bank has adopted one of the course suggested by the Hon'ble Apex Court in United India Assurance case referred to supra namely "Public Auction" by which process there would be larger participation. If at all the auction is to be set-aside for any reason whatsoever, petitioner can take recourse to : 19 : the remedy available under SARFAESI Act and get the sale set aside. However, petitioner cannot be permitted to stall the auction itself under extraordinary jurisdiction of this Court. Hence, for the reasons aforestated, I pass the following:
ORDER
i) Writ petition is hereby dismissed with costs,
ii) Petitioner shall deposit a sum of Rs.10,000/-
towards costs within three weeks from today with respondent-Bank failing which the respondent-Bank would be at liberty to recover the same in accordance with law.
SD/-
JUDGE Jm/-