Dismissed

Smt. Gurram Sujatha, v. Authorised Officer

Andhra Pradesh HC24 Mar 2023WP/14903/2019

Case brief

AI extract

What is this about?

The Court dismissed two writ petitions challenging an order by the DRAT, Kolkata, which remanded SARFAESI auction matters to the DRT. The Court upheld the Tribunal order, finding that an external fact of property encroachment discovered during valuation justified remitting the case for a site inspection and fresh evidence to ensure substantial justice under Order XLI Rule 33 CPC.

What did the court decide?

Writ petitions dismissed; interlocutory applications closed; no costs.

Smt. Gurram Sujatha, Vs Authorised Officer — Arbitration | Andhra Pradesh HC (2023)

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HON’BLE SRI JUSTICE U. DURGA PRASAD RAO AND HON’BLE SRI JUSTICE B.V.L.N. CHAKRAVARTHI

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Writ Petition Nos.14902 & 14903 of 2019

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COMMON ORDER: ( Per Hon’ble Sri Justice U. Durga Prasad Rao)

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W.P.No.14902 of 2019 is filed by the petitioner challenging the appellate

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order dated 08.08.2019 in appeal No.192/2017 passed by the Debts Recovery

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Appellate Tribunal, Kolkata (for short, ‘the DRAT, Kolkata ’), arising out of S.A.No.107/2016 on the file of the Debts Recovery Tribunal, Visakhapatnam (for short, ‘the DRT, VSKP ’), allowing the appeal and remanding the matter to DRT, VSKP with certain directions.

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Whereas W.P.No.14903/2019 is filed against the appellate order dated

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08.08.2019 in appeal No.191/2017 passed by the DRAT, Kolkata, arising out of S.A.No.108/2016 on the file of DRT, VSKP allowing the appeal and remanding the matter to DRT, VSKP with certain directions.

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Both the above appeals were disposed of by the common order dated 08.08.2019.

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2. Shorn of prosaic details, the relevant facts germane for deciding the present two writ petitions are thus:

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(a) As stated supra, the common order was passed by DRAT, Kolkata in appeal Nos.191/2017 and 192/2017 filed by the present respondents 1 & 2, who are the Authorised officer and the Branch Manager respectively of S.B.I,

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Inkollu Village, Prakasam District. The aforesaid two appeals arose out of

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orders dated 04.10.2017 passed by the DRT, VSKP in S.A.No.107/2016 and S.A.No.108/2016 filed by the present writ petitioners.

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3. S.A.No.107/2016 and S.A.No.108/2016 were filed by the present writ

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petitioners seeking to set aside the auction sale conducted on 14.03.2016 by the respondents 1 and 2 herein. After enquiry, the DRT, VSKP allowed both the S.As vide separate orders dated 04.10.2017 on the following main findings:

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(i) Having issued separate demand notices and separate possession notices in respect of loan accounts of M/s. Vasavi Cold Storage and M/s. Sri Chandana Cold Storage Pvt. Ltd., the respondent Bank officials fixed common reserve price for both loans together and sold the secured properties of both loans in one auction sale and such clubbing of properties and conducting single sale is against the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, ‘the SARFAESI Act’) and hence, the sale is illegal.

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(ii) The respondent Bank has not issued prior notice under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002 to the borrowers before conducting sale and due to non-following of the mandatory rule, sale became illegal.

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(iii) There is no proper answer from the bank as to why the subsidy amount of Rs.50.00 lakhs each was not credited to the loan accounts and if such subsidy was credited to the loan accounts, the outstanding loan amount of both the loans would not exceed Rs.2.00 Cr, in which case, sale of property covered by M/s. Vasavi Cold Storage would alone be enough to discharge both the loans.

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4. As stated supra, aggrieved by the above orders in S.A.No.107/2016 and

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S.A.No.108/2016, the respondents 1 & 2 herein filed appeals 191/2017 and

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192/2017 and by a common order dated 08.08.2019 both the appeals were allowed and S.A.Nos.107/2016 and 108/2016 are remanded back to the DRT, VSKP, with the following observations:

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(i) As per the note appended to the valuation report dated 05.02.2016, Vasavi Cold Storage and Chandana Cold Storage Pvt. Ltd. are adjacent properties with a single compound wall under the ownership of Smt. Gurram Sujatha and they were constructed not as per the boundaries of respective sites. For convenient sake, the Chandana Cold Storage Pvt. Ltd. main building encroached into the site of Vasavi Cold Storage by 783.59 sq. yards and due to this reason single valuation is done for both the cold storages. While deciding the SAs, the said fact was not taken into consideration by the Tribunal below. The bank has filed internal note and site plan of both properties in the appeals demonstrating the encroachment which were not produced before the lower Tribunal. Hence, for the purpose of substantial justice it is appropriate to appoint an Advocate Commissioner for site inspection and obtain a report so as to find out actual situation of the properties. The fact of encroachment on adjacent property has

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a material bearing on the issue of joint sale of the properties and in this regard both parties should be given fair opportunity for adducing the evidence (emphasis supplied).

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(ii) The reply filed on behalf of the bank in the S.A. reflects that copies of the postal acknowledgments dated 10.02.2016 were filed before the Tribunal below. Copy of the memo is placed at Page 7 of the affidavit in reply on behalf of the bank. Copies of respective ADs are also placed on record at page 34, but the Tribunal below has not considered these documents while deciding the SAs. Apart from this, the track record issued by the Post Office has also been filed in these appeals, but the same were not filed before the Tribunal below.

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(iii) The issue of adjustment of subsidy was not categorically pleaded in the SAs. So there was no occasion for the bank to clarify this aspect. The guidelines produced before the Appellate Tribunal were not filed before the Tribunal below and hence, there was no occasion to consider the same and finding was recorded without considering those documents.

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5. With the above observations, the Appellate Tribunal set aside the impugned orders in SAs and remanded back the matter to the Tribunal below with a direction to appoint an Advocate Commissioner for site inspection of the properties and to submit a comprehensive report before the Tribunal below and with a further direction to the Tribunal to afford an opportunity to all the parties to adduce evidence with regard to all the issued involved in the matter and then decide the SAs afresh in accordance with law without being influenced in any manner by the observation made by the Appellate Tribunal.

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Hence, the present writ petitions.

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6. Heard arguments of Smt. V.Dyumani, learned counsel for writ petitioners, and Sri K.B.Ramanna Dora, Standing Counsel for respondents, and Sri P.Sai Surya Teja, counsel for 3^rd respondent.

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7. Both the learned counsel reiterated their pleadings before the Tribunals below in the present writ petitions. While it is the contention of the petitioners that the Appellate Tribunal committed a grave error in setting aside the orders of the lower Tribunal and remitting the matter back, the respondents sought to justify the order of the DRAT, Kolkata on the submission that the factum of encroachment by M/s. Chandana Cold Storage Pvt. Ltd. into the adjacent site of M/s. Vasavi Cold Storage was an event which was discovered during the physical inspection of the

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properties for preparing valuation report and that situation compelled the bank to issue a common sale notice for both loans as the guarantors are similar in both the matters. It is also argued that the acknowledgments for issuance of notice under Rule 8(6) were also filed before the Tribunal, which was not considered. In those circumstances, the Appellate Tribunal in order to do substantial justice allowed the SAs and remanded the matter back to the lower Tribunal with certain directions which is perfectly justified in the eye of law.

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8. The point for consideration is whether there are merits in the writ petitions to allow?

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9. Point : We gave our anxious consideration to the facts, law and orders of the DRAT, Kolkata. The main contention of the borrowers is that clubbing of two loans and conducting a common sale is illegal. However, the Appellate Tribunal having considered the formidable contention of the respondent bank that Smt. Gurram Sujatha is the owner of the total land admeasuring Ac.1.39 cents, out of which Ac.1.00 cents pertains to M/s. Vasavi Cold Storage and Ac.0.39 cents pertains to M/s. Chandana Cold Storage Pvt. Ltd. and Smt. Gurram Sujatha, who is the Managing Director of M/s. Chandana Cold Storage Pvt. Ltd. and Managing Partner of M/s. Vasavi Cold Storage constructed two cold storages on the same land, but while so constructing, M/s. Chandana Cold

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Storage Pvt. Ltd. encroached 11.70 cents into M/s. Vasavi Cold Storage and the said fact was detected, when the bank authorities visited the site for valuation of the properties and in such fact situation, where the properties were insegregable, they could not conduct two separate sales, came to the opinion that in order to do substantial justice in the appeals, an Advocate Commissioner has to be appointed for site inspection and to prepare the report. The Appellate Tribunal noted that the fact of encroachment on adjacent property has a material bearing on the issue of joint sale of the properties and therefore, both parties should be given fair opportunity to adduce evidence.

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10. We must say, there is no illegality or irregularity in the above conclusion of the Appellate Tribunal, as in the present peculiar fact situation, which allegedly came to the notice of the respondent bank only before the preparation of valuation report, the Appellate Tribunal perhaps exercising its power under Order XLI Rule 33 CPC, considered it apposite to appoint an Advocate Commissioner to prepare a comprehensive report, has, set aside the orders in SAs and remanded the matter back to the lower Tribunal for appointment of Advocate Commissioner and to permit parties to adduce evidence on all the issues involved in the matter.

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11. So far as the issuance of notice under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002 to the borrowers is concerned, the

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Appellate Tribunal having observed that the reply filed on behalf of the bank reflected that the copies of the postal acknowledgments dated 10.02.2016 were filed before the Tribunal below and copies of respective ADs were also placed on record at page 34, however, the Tribunal below did not consider those documents and the track record issued by the Post Office was also filed in the appeals, ultimately ordered that the Tribunal shall afford an opportunity to all the parties to adduce evidence with regard to all the issues involved in the matter and then decide the SAs afresh. This direction can also be said to have been issued by the Appellate Authority for doing complete justice in the matter. Precisely, the Appellate Tribunal, having taken the totality of the facts and circumstances decided to afford an opportunity to both parties to adduce further evidence in the matter coupled with inviting the Advocate Commissioner’s report. Thus, the order of the Appellate Tribunal shall be viewed in the context of its exercising power under Order XLI Rule 33 CPC to do complete justice.

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12. The scope and ambit of Order XLI Rule 33 CPC has been delineated in a number of decisions.

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(i) In The State of Punjab v. Bakshish Singh¹ , the Apex Court held

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thus:

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1 MANU/SC/0650/1998 = AIR 1999 SC 2626

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` 8. This provision gives very wide power to the appellate court to do complete justice between the parties and enables it to pass such decree or order as ought to have been passed or as the nature of the case may require notwithstanding that the party in whose favour the power is sought to be exercised has not filed any appeal or cross-objections.

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9. The discretion, however, has to be exercised with care and caution and that too in rare cases where there has been inconsistent findings and an order or decree has been passed which is wholly uncalled for in the circumstances of the case. The appellate court cannot, in the garb of exercising power under Order XLI Rule 33, enlarge the scope of the appeal. Whether this power would be exercised or not would depend upon the nature and facts of each case (emphasis supplied).”

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(ii) In K.Muthuswami Gounder v. N.Palaniappa Gounder² , the

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Apex Court held thus:

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12. Order XLI Rule 33 enables the appellate court to pass any decree or order which ought to have been made and to make such further order or decree as the case may be in favour of all or any of the parties even though (i) the appeal is as to part only of the decree; and (ii) such party or parties may not have filed an appeal. The necessary condition for exercising the power under the Rule is that the parties to the proceeding are before the court and the question raised properly arises one of the judgment of the lower court and in that event the appellate court could consider any objection to any part of the order or decree of the court and set it right. We are fortified in this view by the decision of this Court in MANU/SC/0039/1987 : (1988) 1 SCR 679. No hard and fast rule can be laid down as to the circumstances under which the power can be exercised under Order XLI Rule 33 C.P.C. and each case must depend upon its own facts. The rule enables the appellate court to pass any order/decree which ought to have been passed. ”

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2 MANU/SC/0559/1998 = AIR 1998 SC 3118

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(iii) In Siri Nath v. Karam Singh Mehal Singh³ , the High Court of

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Punjab and Haryana observed thus:

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“ 6. Resort to the provisions of O.41, R. 33 is not required to be liberally exercised but only in exceptional cases. Where the ends of justice so demand, the Court has the right to mould the relief by passing any decree or order which ought to have been passed despite the fact that the other side has not filed any appeal or cross-objections. The general proposition of law as laid down by the learned single Judge that no relief could be granted regarding the enhancement of interest was, therefore, contrary to the provisions of law.”

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(iv) In addition to above, the Apex Court in Om Prakash Gupta v,

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Ranbir B.Goyal⁴ , has held that the Court can take note of the subsequent events and mould the relief accordingly. It observed thus:

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“11. The ordinary rule of civil law is that the rights of the parties stand crystalised on the date of the institution of the suit and, therefore, the decree in a suit should accord with the rights of the parties as they stood at the commencement of the lis. However, the Court has power to take note of subsequent events and mould the relief accordingly subject to the following conditions being satisfied : (i) that the relief, as claimed originally has, by reason of subsequent events, become inappropriate or cannot be granted; (ii) that taking note of such subsequent event or changed circumstances would shorten litigation and enable complete justice being done to the parties; (iii) that such subsequent event is brought to the notice of the Court promptly and in accordance with the rules of procedural law so that the opposite party is not taken by surprise. In Pasupuleti Venkateswarlu Vs. Motor & General Traders - AIR 1975 SC 1409 this Court held that a fact arising after the lis, coming to the notice of the Court and having a fundamental impact on the right to relief or the manner of moulding it and brought diligently to the notice of the Court cannot be blinked at. The Court may in such cases bend the rules of

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3 MANU/PH/0022/1995 = AIR 1995 P&H 84

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4 (2002) 2 SCC 256 = 2002 SCC Online SC 96

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procedure if no specific provision of law or rule of fair play is violated for it

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would promote substantial justice provided that there is absence of other

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disentitling factors or just circumstances (emphasis supplied). The court speaking through Krishna Iyer, J. affirmed the proposition that the court can, so long as the litigation pends, take note of updated facts to promote substantial justice. However, the court cautioned: (i) the event should be one as would stultify or render inept the decretal remedy, (ii) rules of procedure may be bent if no specific provision or fair play is violated and there is no other special circumstance repelling resort to that course in law or justice, (iii) such cognizance of subsequent events and developments should be cautious, and (iv) the rules of fairness to both sides should be scrupulously obeyed . ”

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13. In the light of above jurisprudence, the order of the Appellate Tribunal, in

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our view, cannot be found fault. We find no merits in the writ petitions.

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14. Accordingly, these Writ Petitions are dismissed. No costs.

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As a sequel, interlocutory applications pending, if any, shall stand closed.

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U. DURGA PRASAD RAO, J

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