Partly allowed

Indian Overseas Bank v. M/ S K. K. Enterprises and Anr.

DRAT4 Jul 2023REGULAR APPEAL/16/2022

Case brief

AI extract

What is this about?

The Debts Recovery Appellate Tribunal allowed the bank's appeal against an order that set aside its SARFAESI actions. The Tribunal set aside the lower order for failure to consider key documents regarding the land's nature, holding the case fit for remand.

What did the court decide?

The impugned order is set aside and the appeal is allowed; the matter is remanded to the Tribunal to decide afresh after considering relevant documents and affording a full hearing.

Indian Overseas Bank versus M/ S K. K. Enterprises and Anr. — Banking and Recovery | DRAT (2023)

¶1

IN DEBTS RECOVERY APPELLATE TRIBUNAL, ALLAHABAD Regular Appeal No. 16/2022

¶2

Indian Overseas Bank, having its Head Office at 763, Anna Salai, Chennai-600002, its Regional Office at H-23 Doctor Colony, Kankarbagh, Patna-800020 through its authorized officer.

¶3

……….....……………………...…………………………………………….Appellant Versus

¶4

M/s K.K. Enterprises, through its Proprietor Nitin Kumar S/o Mr. Naresh Kumar Singh, R/o Sipara N.H.83, Patna Gaya Road, Patna-800020

¶5

Siemens Construction Corporation, through its partner, Rakesh Ranjan, B-9, Abhiyanta Nagar, Patna-800025

¶6

………………………………………………………………………….…Respondents

¶7

Advocates who appeared in this case

¶8

For the Appellant-Bank Shri P.K. Bajpai, Advocate For the respondent-Borrower Shri S. R. Sinha, Advocate For the respondent-Auction Shri. Saurav Suman along Purchaser with Shri Kushal Kant, Advocates

¶9

JUDGMENT

¶10

Date of Decision: 04.07.2023

¶11

JUSTICE R. D. KHARE, CHAIRPERSON

¶12

The present appeal has been filed under section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short “the SARFAESI Act”) against the order dated 25.09.2019 passed by the Presiding Officer, DRT, Patna, whereby the Securitization application No. 90/2018 filed by the respondent no. 1-borrower was allowed.

¶13

The brief facts of the case are that the appellant-Bank had granted the credit facility to the respondent no. 1- borrower and in order to secure the loan, the respondent-borrower stood as guarantor and created mortgage over the property in question, for which a registered mortgage deed was executed on 05.04.2013.

¶14

¶15

Since the borrower did not repay the loan, therefore, the account was classified as NPA and a demand notice dated 04.01.2017 for a sum of Rs. 1,62,94,806/- along with interest. Since the borrower did not pay any heed to the said demand, therefore, symbolic possession of the secured asset was taken by the bank by taking recourse to section 13(4) of the SARFAESI Act and the possession notice was issued on 10.03.2017, which was affixed and published in two newspapers on 11.03.2017, copies of which are placed at page nos. 91, 92, 93, 94 & 95 of the memo of appeal.

¶16

It is averred that after issuance of demand notice, the respondent-Bank filed an original application being O.A. No. 410/2017, which was decreed and recovery certificate was issued for Rs. 1.52 crores plus interest and other charges. Hence, the demand notice for Rs. 1.62 crores and odd has become infructuous. Thereafter, the sale notice dated 16.05.2018 was issued for auctioning the property in question.

¶17

The respondent no. 1-Borrower challenged the entire action of the Bank including sale notice dated 16.05.2018 by filing the S.A. No. 90/2018. It appears that the said sale could not be materialized, therefore, the second auction sale notice dated 08.02.2019 was issued by the Bank scheduling the auction of the property in question to be held on 25.02.2019, which was challenged by the borrower by filing the I.A. No. 16/2018. The property was sold for a sum of Rs. 2,89,48,500/-. After deposit of sale consideration, the sale certificate dated 23.05.2019 has been issued in favour of the respondent no. 2-auction purchaser. The Tribunal below vide order impugned has allowed the

¶18

¶19

S.A. of the borrower and set aside the possession notice dated 10.03.2017, E-auction sale notice dated 16.05.2018, E-auction sale held on 25.02.2019 and sale certificate issued in favour of the auction purchaser, holding that the entire SARFAESI actions on the agricultural land are illegal and violated the provision of section 13(1)(i) of the SARFAESI Act. Being aggrieved by the said order, the present appeal has been filed by the appellant-Bank.

¶20

Learned counsel for the appellant submitted that the only question involved in the present case is, as to whether the property in question is an agriculture land or not. It is argued that the property in question is not an agriculture property and even if it is assumed for the sake of argument that it is an agriculture property, but the borrower has put the said property on mortgage to secure the loan, therefore, the same can be legally termed as non-agricultural land, hence there is no infirmity in mortgaging the same. The leaned counsel has relied upon a judgment passed by the Hon’ble Apex Court in Civil Appeal Nos. 2928-2930 of 2018-ITC Ltd. Vs. Blue Coast Hotels Ltd. and Ors., decided on 19/03/2018 and has referred to para 40 of the said judgment.

¶21

Learned Counsel for the appellant further submitted that the property in question is not an agriculture land and at the time of availing the credit facility, the respondentborrower had submitted the asset and liability statement on 23/04/2013 before the appellant-bank, photocopy of which has been appended as Annexure No. 3 to the supplementary affidavit dated 11/04/2022 filed on behalf of the appellant bank, wherein at page no. 34 of

¶22

¶23

the said affidavit, nature of the property has been described in column 7 of the Head B.1-immovable property as residential property. As such the property in question is not an agriculture land.

¶24

The learned Counsel for the appellant has also drawn attention of this court at page no. 109 of the memo of appeal, which is copy of mortgage deed dated 05/04/2013 and has stated that it is a registered mortgage deed, by which the property in question was mortgaged by the respondent-borrower in favour of the appellant-Bank at the time of availing the loan facility, which shows that the said property was mortgaged with the Bank by the borrower at the time of advancement of the loan for securing the same considering the said property to be non-agricultural one.

¶25

The learned counsel for the appellant has again drawn attention of this court to the valuation report, which is at page no. 124 of the memo of appeal. The column No. 8 of the said report deals with the area details of the property, wherein under Head remarks, it has been stated by the valuer that “the property in question is a residential vacant land”, which was previously used for the purpose of agriculture. It is, therefore, argued that only on this vague remark recorded by the valuer, the Tribunal below has passed the order impugned relying upon the same and has held that the property in question is an agriculture land.

¶26

The learned counsel for the appellant has next drawn attention of this court to the annexure 4, which is a circle rate list (at page no. 39), of the supplementary affidavit dated 11/04/2022 and has referred to Sr. No. 160 of the said list and has argued that the valuer has

¶27

¶28

assessed the value of the said land as developing land. The said list itself shows that the property in question is not an agriculture land.

¶29

It is also contended on behalf of the appellant that the local area at Dariyabad was notified by the Government of Bihar as residential property and copy of the map has been appended as Annexure no. 1 to the supplementary affidavit, which also shows that the property in question is not an agricultural land. The learned counsel for the appellant has relied upon a judgment passed by the Hon’ble Kerela High Court in Sharda Flour Products Pvt. Ltd. Vs. Dhanlaxmi Bank Ltd., 2019 (1) Bankers’ Journal 630.

¶30

The learned counsel for the appellant has further drawn attention of this court to the rejoinder affidavit, wherein it has been brought on record that the borrower has executed the sale deed in the same area treating that the said property is not an agricultural land, which itself shows that the property was not agricultural land, therefore, the appeal may be allowed and the order impugned may be quashed.

¶31

Learned counsel for the respondent-borrower has argued that the mortgaged property was an agricultural property, therefore, it will not come within the preview of the SARFAESI Act and has referred to page no. 109, which is mortgage deed executed between the parties and has further drawn attention of this Court to clause no. h of the said deed (at page no. 115 of the paper book) to show that the mortgage property is an agricultural land, on which crop has been shown to be grown.

¶32

¶33

The learned counsel for the respondent-borrower has also drawn attention of this Court to page no. 105, 106 and 126 of the paper book, which are photographs and has argued that from the said photographs it is clear that the various crops were growing on the land in question. It is next submitted that the mortgage deed was prepared by the Bank itself, which was in dominating position, therefore, it is not open for the Bank to contest that the property in question is nonagriculture land. It is, therefore, prayed that the order impugned does not require any interference of this Hon’ble Tribunal, hence the appeal filed by the Bank may be dismissed with heavy cost.

¶34

The learned counsel for the auction purchaser has submitted that he is adopting the arguments as advanced on behalf of the appellant by adding two more points. The learned counsel has referred to para 14 of the judgment impugned, which records that at the time of creation of mortgage over the property in question, it was the residential property. It is lastly contended that once the Tribunal below has recorded that nature of the said property was not agricultural, then subsequently it cannot be held by the Tribunal below that the same is an agriculture land. A reliance has been placed by the learned counsel upon a judgment passed by the Hon’ble Apex Court in K. Sridhar Vs. M/S Raus Constructions Pvt. Ltd. & Ors. 2022 LiveLaw (SC) 13 and has referred to Para 7 of the said judgment in support of his contention.

¶35

Heard the learned counsels for the parties and perused the record.

¶36

¶37

The main question involved in the present case is, as to whether the property mortgaged by the borrower with the Bank is an agricultural land or not?

¶38

It is undisputed that the said property was mortgaged by the respondent no. 1-borrower with the Bank and in this regard, a mortgage deed was executed by the borrower in favour of the Bank on 05.04.2013, which is placed from page nos. 109 to 120 of the memo of appeal.

¶39

The learned counsel for the appellant has referred to the para no. 40 of the judgment passed by the Hon’ble Supreme Court in ITC Ltd. Vs. Blue Coast Hotels Ltd. (Supra), wherein the fact was that the mortgaged property comprised of the whole of the debtor’s Hotel property including agricultural land, on which the debtor was to develop Villas. The total land, on which the Goa Hotel was located, measures 1,82,225/- sq. meters and only 2335 sq. meters were kept for growing vegetables, fruits, shrubs and trees for consumption of the Hotel. The facts of the said judgment is entirely different to the present facts of the case, as the property mortgaged in the present case is having area of 1.70 acres, which is approximately three (03) Beeghas. It is also observed from the valuation report dated 24.04.2018 that the said land is an open land. The annexure No. 5 at page no. 40 of the supplementary affidavit filed by the appellantBank shows that there is a crop standing on the land in question and behind that some construction is also being seen. Annexure no. 4 of the supplementary affidavit filed by the appellant is a publication of the minimum rate of the land of the concerned State, whereas it appears to be of subsequent date to the mortgage created in the

¶40

¶41

year 2013. The annexure no. 2 of the supplementary affidavit filed by the Bank is a land reforms law, which does not show that the property in question is an agriculture land. The annexure no. 1 of the supplementary affidavit filed by the Bank is of subsequent date i.e. 30.10.2017, as the property in question was mortgaged in the year 2013. These documents/evidences have not been dealt with by the Tribunal below, whereas the same ought to have been considered by the Tribunal below while deciding the case finally.

¶42

So far as the reference made by the learned counsel for the appellant with regard to the column-8 of the valuation report dated 24.04.2018 is concerned, in the said column, the valuer has given his remarks “residential vacant land A/p used as agriculture”. In this regard, it is observed that the said report was obtained in the year 2018, which is much after the date of creation of mortgage over the present land. It is stated that the conversion of the land is done by the Revenue Authority of the concerned State Government and not any other authority or person. In this regard, the Khatauni of revenue record is relevant for the purpose of ascertaining the nature of the land, but it appears that the said document has neither been produced by either of the parties before the Tribunal below nor before this Appellate Tribunal, whereas the same was very important document to ascertain that the property mortgaged is an agriculture land or not? If the Tribunal below had called for the same at the time of deciding the case finally, definitely, the decision would have been different. For arriving at the correct conclusion, this

¶43

¶44

document is also required to be examined by the Tribunal below.

¶45

So far as the possession certificate dated 15/07/2008 is concerned, in the said certificate, a remark has been given by the issuing authority that the land is suitable for residential. The said remark is only an observation of the issuing authority. If the said authority had given its remark that the property is an agriculture land, then there would not have been any doubt that the land is not an agriculture land, whereas there is no any finding of the Tribunal below on the same, therefore, the same is also needed to be considered by the Tribunal below for determining that the land in question is an agriculture property or not?

¶46

From the impugned order, it is observed that the Tribunal below has not considered any documents/evidence as referred to above, but only on the basis of photographs filed by the S.A.-applicant and photocopies of the photographs filed by the Bank, the SARFAESI actions of the Bank have been set aside holding that the property in question is an agricultural land.

¶47

It has been contended on behalf of the appellant that at the time of applying for cash credit facility, the respondent no. 1(borrower) had offered his property for sanction of the loan and the Bank once got the said property verified by its paneled expert with regard to its nature, valuation etc. and thereafter considering the said property as secured asset for sanctioning of the cash credit facility, entered into a mortgage deed dated 05.04.2013. It is, thus, argued that the Bank after verification of the property offered by the borrower as secured asset accepted the same and entered into the

¶48

¶49

mortgage deed and sanctioned the loan. It is further contended that once the financial discipline was not maintained by the borrower, the Bank initiated the proceedings under the SARFAESI Act by issuing notices under section 13(2) and 13(4) of the said Act etc. and following due procedure of law, auctioned the property on 25.02.2019.

¶50

It is further argued that thereafter, the borrower filed a S.A. No. 90/2018 on 23.05.2018, wherein it was briefly pleaded that the property, which is secured asset, is an agricultural land, as the same does not come under the purview of the SARFAESI Act, therefore, no auction can take place under the said Act. It is also argued that the borrower himself had offered the said property as secured asset and it was got scrutinized by the Bank and the same was accepted as secured asset and the mortgage deed was executed and signed by the borrower, but it appears that the same has not been considered by the Tribunal below while passing the order impugned, whereas it ought to have been examined by the Tribunal below for ascertaining the nature of the property in question.

¶51

It is further to be examined, as to whether the respondent no. 1-Borrower after offering the property as secured asset, which was verified by the Bank and was accepted as such for sanction of the aforesaid loan, as the same was also utilized by the Borrower, can assail at that stage claiming the property to be agricultural, against which the proceedings were drawn by the Bank for recovery of the amount due and thereby putting the Bank at loss, which had incurred the public money in initiating the proceedings for recovery of the amount

¶52

¶53

from the borrower and in arranging the auction of the property in question.

¶54

It was lastly contested on behalf of the respondentAuction Purchaser that the proceedings initiated by the respondent no. 1(borrower) could not be sustained in the eye of law because of its own conduct and stand of the Bank supporting the borrower is itself contrary to the verification done by the Bank by its own paneled expert.

¶55

It is clear from the order impugned that the Tribunal below has not considered the facts/documents as discussed above, whereas the same ought to have been considered by the Tribunal below for arriving at the correct conclusion that the property in question is an agriculture land or not, therefore, in my opinion, it is a fit case, which may be remanded back to the Tribunal below for considering it afresh.

¶56

Accordingly, the order impugned is set aside. Consequently, the appeal is allowed and the case is remanded back to the Tribunal below for deciding it afresh in accordance with law without being influenced by the observations made hereinabove after affording proper opportunity of hearing to the parties concerned.

¶57

A copy of this judgment be forwarded to the parties as well as the DRT concerned and be also uploaded on e- drt portal.

¶58

Chairperson

¶59

VN Giri

¶60

Indian Overseas Bank v. M/ S K. K. Enterprises and Anr.

Case brief

What is this about?

What did the court decide?

Indian Overseas Bank v. M/ S K. K. Enterprises and Anr.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

All orders in this case

Similar cases

Central Bank of India and Anr. versus M/ S Narmada Marketing and Anr.

Brij Mohan Chopra versus State Bank of India and Ors.

Brij Mohan Chopra versus State Bank of India and Ors.

Shri Naresh Soni and Ors. versus Bank of Baroda

Shri Rajendra Soni and Ors. versus Bank of Baroda

India Infoline Housing Finance Ltd. versus ShRI Rajveer Singh Bhadauriya and Anr.