Partly allowed

M/s. Rayan Pharma Limited v. State Bank of India

Andhra Pradesh HC15 Jun 2023WP/1373/2018

Case brief

AI extract

What is this about?

The High Court dismissed a writ challenging the Debt Recovery Appellate Tribunal's dismissal of a secured creditor's appeal as barred by limitation. The Court held that the limitation period was correctly calculated and novelty was absent as the issue was thoroughly debated previously.

What did the court decide?

W.P.No.1373 of 2018 was dismissed and W.P.No.38438 of 2017 was allowed, holding that the DRT acted without jurisdiction.

M/s. Rayan Pharma Limited Vs State Bank of India — Cheque Dishonour | Andhra Pradesh HC (2023)

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THE HON’BLE SRI JUSTICE D.V.S.S.SOMAYAJULU

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And

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THE HON’BLE SRI JUSTICE V. SRINIVAS

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WRIT PETITION Nos.1373 of 2018 and 38438 of 2017

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COMMON ORDER:

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With the consent of learned senior counsels appearing for the respective parties viz., Sri N. Subba Rao and Sri Damalapati Srinivas, both the writ petitions were taken up for hearing.

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Sri N. Subba Rao, learned senior counsel argued the matter in detail in the lead case W.P.No.1373 of 2018. Learned counsel submits that the writ petitioners are questioning the orders passed by the Debt Recovery Appellate Tribunal, Kolkata, in Appeal No.77/2017/862, dated 15.12.2017. The said appeal was dismissed confirming the order passed by the Debt Recovery Tribunal, Visakhapatnam in S.A.No.84 of 2012, dated 08.04.2015. The 1^st petitioner, according to the learned senior counsel is a company involved in pharmaceutical business. The issue involved in this Writ Petition is about the procedure followed by the 1^st respondent Bank under the Securitisation and

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Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short “SARFAESI Act”). It is argued that the procedure stipulated in the Rules for effecting the sale of the property was not followed. The plant and the machinery in the factory were not properly auctioned. In the first instance property was also sold contrary to the rules. It is also submitted that the machinery was not properly maintained before it was sold. It is also argued that once the auction was fixed on 17.08.2011, W.P.No.24977 of 2011 was filed for directing the respondents to accept the request to pay the loan amount. This was dismissed by an order dated 20.01.2012 while giving liberty to the writ petitioner to question the auction.The copy of the order was received on 25.01.2012 and the S.A.No.84 of 2012 was filed on 12.03.2012 since 10.03.2012 is a 2^nd Saturday and 11.03.2012 is a Sunday. It is argued that S.A. filed on 12.03.2012 is within time. The order copy of the High Court in the Writ Petition was received on 25.01.2012 and if 45 days is reckoned from this date, learned senior counsel submits that the S.A. was filed

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within time. It is his contention that the DRT,

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Visakhapatnam, overlooked the legal and factual issues raised about the procedure to be followed in a sale, the procedures under the Rules and also failed to appreciate the issue of limitation that has been raised and has wrongly decided the issue of limitation. It is argued that the limitation should only be counted from the date on which the certified copy is received. Learned senior counsel also relies upon the case law to argue that the sale was not properly conducted; there was collusion and the reserve price was not properly fixed and that even if there was a delay the same can be condoned. Section 14 of the Limitation Act is also relied upon for arguing that the time spent in pursuing of a case in a Court which does not have jurisdiction, should also be excluded from the computation of time.

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For the respondents 1 and 2 the counter affidavit is filed and an argument in line with the counter affidavit is advanced by the learned standing counsel Sri K.M.Krishna Reddy. The allegation that the provisions of the SARFAESI Act and the Rules were not followed is denied. It is also denied that there was any collusion in the sale of the

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property. The allegations about the machinery being sold with meagre price after they were not cared for / maintained caring etc., is also vehemently denied. It is also pointed out that the High Court in W.P.No.24977 of 2011 passed a clear order holding that the petitioners have wrongly invoked jurisdiction of the writ court. The date of auction was fixed as 17.08.2011 and the writ petition was filed on 05.09.2011, thereafter these 17 days are already lost. It is submitted that the application is barred by time and that the Court did not commit any error.

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For respondents 3 to 7 learned senior counsel argues

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the matter and points out that very seriously disputed questions and facts are raised in the writ petition. It is also pointedout that there is no evidence available to supportthe contentions urged bythe writ petitioners. It is pointed out that the sale was confirmed in favour of the respondents 3 to 7 on 17.08.2011 and the sale certificate was also issued on 05.09.2011. A registered document was also executed in favour of the successful bidders on 23.01.2012. It is vehemently argued that due process was followed and the rules were adhered to. It is also pointed out that the

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machinery had virtually no value at the time of the auction. It is also stated that the application is per se barred by time. It is also brought to the notice of this Court that a fresh securitisation application under section 17 of the SARFAESI Act was filed with a delay of 1334 days. It is therefore submitted that on one way or the other the writ petitioners aretrying to stall the process. Learned senior counsel also relies upon Vasu P. Shetty v Hotel Vandana Palace and

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Others¹ and Consolidated Engineering Enterprises v Irrigation Department² to argue that time spent in pursing the case in High Court cannot be waived as it is not a genuine litigation. It is pointed out that the conditions stipulated under section 14 of the Limitation Act are not applicable. The learned standing counsel for the bank also relied upon this judgment and the judgment reported in Santosh Kumar v Ashok Chand³ and Avneesh Chandan Gadgil v Oriental Bank of Commerce⁴ to argue that Section 5 of the Limitation Act is not applicable to an appeal filed.

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1(2014) 5 SCC 660

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2(2008) 7 SCC 167

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32021 SCC OnLine 117

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4 2021 SCC OnLine SC 117

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5) After hearing the case, this Court notices that the

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following dates are important:

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i) 17.08.2011 – Confirmation of Sale / Auction.

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ii) 05.09.2011 – Sale Certificate

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iii) 20.01.2012 – Final Order in W.P.No.24999 of 2011

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iv) 12.03.2012 – S.A. No.84 of 2012 filed by the petitioners before DRT, Visakhapatnam.

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v) 08.04.2015 – Final Order in S.A.No.84 of 2012

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vi) 23.04.2015 – New Application filed before DRT, Visakhapatnam.

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vii) 08.05.2015 – Appeal No.77/2017/862 filed before DRAT, Kolkata

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viii) 14.11.2017 – W.P.No.38438 of 2017 filed by the auction purchasers.

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ix) 15.12.2017 – Final Order in Appeal No.77/2017/862

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x) 18.01.2018 – W.P.No.1373 of 2018 filed by the borrowers.

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1. It is clear that the petitioners were aware of their

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rights and remedies and had the benefit of legal advice all through. In addition, this Court also notices that the DRT while disposing SA No.84 of 2012 has gone intothemerits of the matter. It has framed two questions or points for determination, which are as follows;

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a) Whether the auction was conducted in accordance with the procedure laid down under the Act and the Rules?

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b) Whether the case is barred by time?

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1. As far as the 1^st issue is concerned the tribunal noted

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that the valuation reports were obtained before the auction was conducted. The approved valuer did not suggest that only a part of the property should be sold. The writ petitioners did not also gave any proposal or insist for sale of the part of the property after the Section 8(6) notice was received. It is also noticed by the Tribunal that in the absence of any material evidence the Court cannot come to a conclusion that a part of the schedule property alone could be sold. The writ petitioners did not also produce evidence to show that the market value of the property is Rs.4 Crores. The reserve price fixed at Rs.1-05 crores and the property was ultimately sold for Rs.2-07 crores. The statutory notices were published before the sale was affected. Ultimately, it is concluded that the bank did not made any mistake or illegality in the sale. With regard to limitation also the Tribunal notice that the auction was conducted on 17.08.2011 and the sale certificate was issued on 05.09.2011. The appeal should have been filed, according to the DRT, within 45 days from this date. Even

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otherwise the W.P.No.24977 of 2011 was dismissed on 20.01.2012, and if the time is reckoned from this date it was held that the appeal should be filed on or before 05.03.2012. The Tribunal also noticed that no evidence is filed to show that the order copy was received on the particular date. In the Appeal No.77/2017/862 on the ground of limitation the case was dismissed confirming the order of the DRT. This Court also notices that the essential issue raised and considered was about the limitation. After considering the law on the subject, the Chairman, DRAT came to the conclusion that the time for obtaining a certified copy can be excluded if filing of the certified copy is necessary for the appeal to be entertained. It was held that a certified copy is not needed to file the Writ. Considering the case and the order in the writ petition passed by the High Court, the appellate tribunal came to the conclusion that the case is barred by time.

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If the order passed in W.P.No.24977 of 2011 is considered, the Division Bench clearly noted that in the earlier round of the litigation also the High Court refused to interfere with the order passed by the District Collector

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under Section 14 of the Limitation Act and gave liberty to the writ petitioner to file appeal, but the writ petitioner didnot file the appeal and in the mean while the auction was completed. Again it was noted that the petitioner has alternative remedy for filing an appeal assailing the auction. Therefore, he was given liberty to file an appeal before the jurisdictional tribunal.

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In the opinion of this Court for filing SA before the DRT the certified copy of this order was not really necessary. An S.A. could have been filed within limitation relying upon the liberty given by the Court to file the Appeal. It is not as if the writ petitioner was not aware of the consequences, the sections, rights etc. The earlier litigation / writs makes it clear that the petitioner had the benefit of legal advise. Therefore, in the opinion of this Court, the writ petitioner cannot rely upon the alleged delay in the delivery of the certified copy to state that the period has to be excluded. There is no clear evidence also of the actual date of delivery of the said order. A reading of the order reveals that prior to W.P.No.24977 of 2011 the petitioners had also filed W.P.No.27019 of 2007 and also W.P.No.7278 of 2008.

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This would clearly reveal that the petitioner was aware of the provisions of law and also the time limits specified. Therefore, in the opinion of this Court, the DRAT did not commit any error in rejecting the appeal on the ground of limitation.

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On the issue of Section 14 of the Limitation Act and the exclusion of time spent this Court has serious doubt about the applicability of the sameto the facts of this case. Whether delay due to the writ filed contrary to statutory provisions would actually enure to the benefit of the writ petitioner, is an issue that is to be debatable. This Court, however, agrees with the findings of the DRAT on this aspect also as the issue of due diligence / good faith / defect of jurisdiction etc., are not really argued.

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For the other issues, which were so vehemently argued by the learned senior counsel for the writ petitioner there is no documentary evidence in support of the contentions about the failure to follow the procedures; about the sale of one item of the property being enough; about the machinery not being taken care of etc. Even in the original proceedings before the DRT, Visakhapatnam in

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S.A.No.84 of 2012 the same was commented upon. Therefore, while this Court has no quarrel with the large volume of case laws cited, the fact remains that there is no evidence to support the contentions. Therefore, this Court cannot come to the aid of the writ petitioner on this issue also.

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Both on the question of law and on fact, it is held that the petitioner is not entitled to any relief. Accordingly, W.P.No.1373 of 2018 is, therefore, dismissed.

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As far as W.P.No.38438 of 2017 is concerned it is writ filed for a prohibition declaring that the proceedings inI.A.No.308 of 2015 in UN No.S.A.No._____ of 2015 as illegal.

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The facts are also reproduced in the earlier writ petition. The prayer in the unnumbered securitisation appeal is to set aside all the measures, including the auction conducted on 17.08.2011, and also to set aside the sale certificates issued to respondents 3 to 7 and an issue is also raised about the classification of the account as NPA. This is assailed by filing the writ petition for prohibition, which was filed immediately after the notice in the

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application to condone the delay of 1334 days was received by the writ petitioner (I.A.No.308 of 2015).

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This Court has heard learned counsel for the writ petitioners and the learned counsel for the respondents including the learned senior counsels. Very same arguments were advanced in this matter also. The very reading of the facts, this Court notices that the respondents have already filed S.A.No.84 of 2012 questioning the auction to be held on 17.08.2011. Certain grounds were urged before the DRT, Visakhapatnam for questioning the same. Writ petitioners have also filed W.P.No.27019 of 2007 and also W.P.No7278 of 2008. Lastly, he has filed W.P.No.24977 of 2011. In the order passed in W.P.No.24977 of 2011 it was clearly noted by the Division Bench that in the earlier round of litigation itself the option was given to the present respondent Nos.3 and 4 to file an appeal under Section 17 of the Act. They did not file an appeal and in the mean while the auction was conducted, thereafter liberty was given to the present respondents 3 to 4 to file an appeal questioning the auction dated 17.08.2011. This order was passed on 20.01.2012. It

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transpires that the auction was conducted, sale certificate was issued and registration was also done in favour of the auction purchasers-present writ petitioners.

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The question, therefore, is should the respondents 3 and 4 be permitted to again raise the issues of the auction notice and action sale. In the opinion of this Court, permitting the respondents 3 and 4 to reagitate these issues would amount to an abuse of the process of the Court. The law on the issue is clearly well settled. As submitted by the learned counsel for the writ petitioner, instead of numbering the delay condonation application, the DRT must have decided on the question of maintainability. Reading of the application filed before the DRT would clearly show that there is a reference to Writ Petition No.24977 of 2011, S.A.No.84 of 2011 etc. There is also a reference to an appeal filed and its dismissal. In these circumstances, in the opinion of this Court, the DRT should have applied its mind to the very maintainability of the case instead of taking the case on file and ordering the notice in the delay condonation petition. This would again open up another round of litigation. In the opinion of this Court, this is a

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clear case of action which is lacking any jurisdiction and the DRT, in the opinion of this Court, by ordering notice the DRT has acted without jurisdiction. Therefore, this Writ Petition is allowed as there is a need to bring quietus to this issue. A sale conducted in auction in 2012 is still the subject matter of various cases on the one ground or the other. In the opinion of this Court the DRT itself should have done this without ordering notice. Therefore, this Writ Petition is allowed.

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Accordingly, W.P.No.1373 of 2018 is dismissed and W.P.No.38438 of 2017 is allowed. There shall be no order as to costs. 18) Consequently, miscellaneous applications pending in these Writ Petitions, if any, shall also stand dismissed.

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_________________________________ JUSTICE D.V.S.S.SOMAYAJULU

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______________________ JUSTICE V.SRINIVAS

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Date:15.06.2023 Ssv

M/s. Rayan Pharma Limited v. State Bank of India

Case brief

What is this about?

What did the court decide?

M/s. Rayan Pharma Limited v. State Bank of India

Case brief

What is this about?

What did the court decide?

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