Dismissed

Mira Exports v. Bank of India

DRAT26 Sept 2023REGULAR APPEAL/5/2021

Case brief

AI extract

What is this about?

The Debt Recovery Appellate Tribunal dismissed an appeal challenging an e-auction sale. The court upheld the lower tribunal's finding that the sale remained valid despite a pending One Time Settlement offer and ruled that the asset was not agricultural land because its commercial nature was established by the time security interest was created.

What did the court decide?

Appeal dismissed with costs. Pending interim applications closed.

Mira Exports versus Bank of India — Banking and Recovery | DRAT (2023)

¶1

RA (SA) 5/2021

¶2

IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT CHENNAI

¶3

Dated the 26^th of September, 2023

¶4

PRESENT: Hon’ble Mr. Justice S. Ravi Kumar CHAIRPERSON

¶5

RA (SA) 5/2021

¶6

¶7

(SA 10/2018 on the file of DRT-Coimbatore)

¶8

Between

¶9

M/s. Mira Exports,

¶10

Rep. by its Proprietor Mrs. R. Ganthimathi, 214/4, Nandhavana Thottam,

¶11

Kovai Pirivu, Alukkuli,

¶12

Gobichettipalaaym-638 456.

¶13

Mrs. R Ganthimathi, Wife of Thangaraj, No.7, CKS Nagar, Gobichettipalaaym,

¶14

Erode District – 608 452.

¶15

… Appellants

¶16

AND

¶17

The Authorised Officer, Bank of India, Asset Recovery Department, ‘STAR’ House, 324, Oppanakara Street, Coimbatore – 641 001.

¶18

¶19

RA (SA) 5/2021

¶20

Bank of India,

¶21

Rep. by its Branch Manager, Tiruppr SME Branch, Gopichettypalayam Erode District – 638 452.

¶22

K.P. Moutheeswaran, S/o K.K. Palanisamy, Door No.203 (2), Merkku Thottam, Chellamuthu Nagar, Kottupullampalayam Village, Gobi Taluk, Erode District.

¶23

K.K. Palanisamy,

¶24

S/o K. Andappa Gounder

¶25

Door No. 203, Merkku Thottam, Chellamuthu Nagar, Kottupullampalayam Village, Gobi Taluk, Erode District.

¶26

……… Respondents

¶27

Counsel for Appellants. : Mr. Om Prakash Sr. Advocate for Mr.S. Rajmakesh Counsel for R1& R2 : Mr. F.B. Benjamin George Counsel for R3 & R4 : Mr. M. Sivavarthanan

RA (SA) 5/2021

ORDER

This Appeal is against Order dated 13.01.2020 of DRT, Coimbatore, in SA 10/2018.

¶32

Brief facts leading to this Appeal are as follows:-

¶33

Appellant herein filed SA 10/2018 questioning E-auction Sale conducted on 15.12.2017, contending that One Time Settlement (OTS) proposal was pending, in spite of that, Bank proceeded with Sale and that the property sold is an agricultural land, and SARFAESI proceedings cannot be initiated, for these reasons, prayed for setting aside the E-auction Sale conducted on 15.12.2017, and restore free possession to Appellant, and also to direct the Bank to accept the balance money from Appellant and accept OTS as proposed in Letter dated 21.11.2017.

¶34

¶35

RA (SA) 5/2021

¶36

This Application is resisted by Bank and Auction Purchaser, contending that settlement Letter dated 21.11.2017, is not acted upon and Appellant has not fulfilled the obligations. They also contended that Schedule property is not an agricultural land, and it is a working Unit, and Bank rightly invoked the provisions of SARFAESI Act, 2002.

¶37

On a consideration of contentions and rival contentions of both parties, with reference to documents relied on by both of them, Tribunal below dismissed the Securitisation Application; aggrieved by which, present Appeal is preferred.

¶38

Arguments are advanced on behalf of Appellant, Bank and Auction Purchasers at length, and all the parties also filed Written Submissions reiterating the oral submissions. All the parties also referred to several rulings in support of their respective contentions.

¶39

¶40

RA (SA) 5/2021

¶41

On a scrutiny of Written Submissions and pleadings of parties, main issue is about the nature of property. According to Appellant, it is an agricultural property, thereby exempted under Section 31 (i) of SARFAESI Act, 2002, and according to Bank and Auction Purchasers, it is not an agricultural land as on the date of creating security interest, and it is a working Unit consisting of building and land. The second dispute is, according to Appellant, the property is sold during pendency of OTS offer, and therefore, the Sale is not valid. These two are main issues.

¶42

As seen from pleadings in Securitisation Application, Appellant mainly harped on the issue of OTS proposal, therefore, first, I shall take up that aspect.

¶43

Learned Senior Advocate for Appellant submitted that, Appellant, through her husband, approached Respondent Bank for settlement, and they were keen on settling the loan account. He submitted, after issuance of Sale Notice dated

¶44

¶45

RA (SA) 5/2021

¶46

07.11.2017, Appellant received a Notice for OTS dated 21.11.2017, which the Appellant received on 05.12.2017, and on receiving the same, Appellant started to arrange funds, and Appellant was under the impression that the Bank may not proceed with Sale of property in pursuance of Sale Notice dated 07.11.2017 and that Appellant paid a sum of Rs.10 Lakhs on 04.01.2018 as per OTS proposal.

¶47

In reply to this, Advocate for Respondent Bank submitted that last Sale Notice was issued on 07.11.2017 fixing auction on 15.12.2017, in the meantime, Bank rolled OTS Scheme for all the loans, and the same was communicated on 24.11.2017 stating that the same is communicated without prejudice to the pending SARFAESI proceedings. He submitted that Appellant is aware of auction date, and if they are really interested in settling the account, Appellant should have reacted immediately before Sale date. He submitted, Appellant simply slept over the matter and waited till the outcome of Sale, and only on

¶48

¶49

RA (SA) 5/2021

¶50

conclusion of Sale in favour of Auction Purchasers, after issuance of Sale Certificate, Appellant tendered 10% of outstanding on 04.01.2018. He submitted, even those payments were received without prejudice to SARFAESI action and towards part settlement of residual dues. He submitted, Demand Drafts are not encashed. He submitted that Appellant deposited Rs.1.25 Crores with DRT, but withdrew the same after dismissal of SARFAESI Application. DRT permitted Bank to adjust Rs.60 Lakhs available with them, towards residual dues, therefore, the auction in favour of Auction Purchasers cannot be impeached. He further submitted, only in cases of fraud or collusion, a concluded Sale can be set aside, but not in other cases. He submitted that there is no plea of fraud or collusion nor any material in those lines, therefore, objection of Appellant is not tenable.

¶51

Advocate for Respondent Nos.3 and 4 adopted the

¶52

arguments of Bank’s Advocate, and submitted that, they are bona fide purchasers.

¶53

¶54

RA (SA) 5/2021

¶55

As seen from record, this issue of OTS is also raised before Tribunal below, and Tribunal below considered this aspect in paras 11 to 16, in detail, and also with reference to case law. From the material, it is clear that no settlement has been arrived at under OTS Letter dated 21.11.2017. As rightly pointed out by Advocate for Bank, when Appellant is aware of auction date, and even according to admitted case

¶56

of Appellant, OTS Letter was received by them on 05.12.2017, on receipt of such Letter, minimum expected from Appellant is to immediately approach the Bank and make some down payment before auction date, so that, the weapon of auction on the neck of Appellant can be removed. But for the reasons best known to Appellant, after the Sale Certificate is issued, 5% of proposed OTS amount is paid. From the documents, it is clear that those Demand Drafts were not encashed and Demand Drafts were received without prejudice to already initiated SARFAESI action. Considering the entire materials, including the documents, Tribunal below overruled the objection of Appellant on the

¶57

¶58

RA (SA) 5/2021

¶59

issue of OTS, I do not find any wrong or wrong appreciation in the findings of Tribunal below, on the issue relating to

¶60

OTS, therefore, this point is answered against the Appellant.

¶61

Second issue raised by Appellant is that secured asset is an agricultural land thereby exempted under Section 31 (i) of SARFAESI Act, 2002. Learned Senior Advocate for Appellant submitted that the identity of property is wrongly noted and M/s. Mira Exports situated abutting to the secured asset, is a different property. He submitted, the entire land comprising in old Survey No. 289 and under new Survey No. 214/4, Alukkuli Village, Gobichettipalayam Taluk, Erode District, which is a total extent of 6 acres 50 cents. He submitted, out of this, in 3 acres 26 cents, M/s. Mira Exports, Garments Manufacturing Unit is in existence, and the remaining 3 acres 24 cents is a Coconut Farm, which is the secured asset in this case. He submitted the documents produced before DRT would clearly reveal that the land in 3 acres 24 cents, is only a Coconut Farm,

¶62

¶63

RA (SA) 5/2021

¶64

which is an agricultural land, therefore action of Respondent Bank under Securitization Act, cannot be sustained. He referred to many documents including some photographs to support his arguments that the land in 3 acres 24 cents is an agricultural land.

¶65

On the other hand, Advocate for Bank submitted that

¶66

there is no dispute that total extent of entire land was 6 acres 50 cents, out of which, 3 acres 24 cents, was one part and remaining part was 3 acres 26 cents. He submitted, according to Appellant, M/s. Mira Exports, is in 3 acres 26 cents, and the remaining 3 acres 24 cents, is an agricultural land, but the documents produced on behalf of Appellant for both these lands, would refer, properties as agricultural land. He submitted that loan was availed for commercial purpose and Valuation Reports dated 09.04.2011 and 14.04.2011 confirms existence of buildings in secured asset. He submitted that these two valuation reports were obtained at the time of sanctioning of loan. He further submitted, all other documents referred to by Learned Senior Advocate for

¶67

¶68

RA (SA) 5/2021

¶69

Appellant are long after the Sale, and the prime consideration to decide the nature of land, is the date of creating security interest. He submitted, the loan is availed in the year, 2011, and in the same year, security interest is created. He submitted, considering these valuation reports, Tribunal below rightly held that it is not an agricultural land, and those findings cannot be interfered with.

¶70

Advocate for Auction Purchasers submitted that Statutory applications submitted by Appellant for registration as dealer under CST Act, show that there are building in the disputed property measuring 3 acres 24 cents showing it as land for manufacturing activity. He submitted, even security bond given before Commercial Tax Officer also shows the very same property as 3 acres 24 cents consisting buildings. Besides these documents, there are many other documents to show that 3 acres 24 cents consisting buildings also, used for manufacturing activity, therefore, it cannot be termed as agricultural land, and

¶71

¶72

RA (SA) 5/2021

¶73

Tribunal below rightly discarded the objection of Appellant with regard to the nature of land.

¶74

I have perused the material papers and also all the documents referred to by all the parties. Most of the documents referred to relate to subsequent events namely alleged trespass reported in alleged criminal proceedings in crime number 268/2018 in Kadathur Police Station, at Erode District, and rough sketch etc., relating to that crime.

¶75

As rightly pointed by Advocate for Bank, in order to know the nature of land, the date of creation of security interest, is the criteria, and if on that date, it is an agricultural land, all the subsequent documents may be taken as corroborating piece of evidence.

¶76

As already referred to above, security interest is created in 2011, and in the same year, in the applications furnished to Government departments, this 3 acres 24 cents, is referred as land with building. In fact, in Securitization

¶77

¶78

RA (SA) 5/2021

¶79

Application itself, in the Schedule, Appellants themselves have referred this 3 acres 24 cents as land and building, which means secured asset consists of buildings. As seen from the documents produced before Tribunal below, which were also referred in the Order, buildings in the Schedule land are referred as manufacturing Unit.

¶80

Though several judgements are referred to by all the parties, in view of judgement of Hon’ble Supreme Court in ITC Ltd. Vs. Blue Coast Hotels Ltd & Ors., reported in (2018) 15 SCC 99, there is no necessity to refer to other judgements. In Blue Coast Hotels Ltd. , Hon’ble Supreme Court, in para 36 of its judgement, held as follows

¶81

“36. The purpose of enacting Section 31(i) and the the term land” assume meaning of “agricultural significance. This provision, like many others is intended to protect agricultural land held for agricultural purposes by agriculturists from the extraordinary provisions of this Act, which provides for enforcement of security interest without intervention of the Court. The

¶82

¶83

RA (SA) 5/2021

¶84

plain intention of the provision is to exempt agricultural land from the provisions of the Act. In other words, the creditor cannot enforce any security interest created in his favour without intervention of the Court or Tribunal, if such security interest is in respect of agricultural land. The exemption thus protects agriculturists from losing their source of livelihood and income i.e. the agricultural land, under the drastic provision of the Act. It is also intended to deter the creation of security interest over agricultural land as defined in Section 2 (zf) 36. Thus, security interest cannot be created in respect of property specified in Section 31.

¶85

37. ……………… ……… ”

¶86

From a reading of the above para, it is very clear the exemption is to protect the agriculturists from losing their very source of livelihood and income through agricultural land. Here admittedly, the loan is for commercial purpose and it is not the case of Appellant that their source of livelihood is on the agricultural produce realized from Schedule land. So, in view of above judgement of Hon’ble

¶87

¶88

RA (SA) 5/2021

¶89

Supreme Court, any length of argument from the Appellant’s side, without any plea and evidence to show that the Appellant lost their source of livelihood and income on the agricultural land in view of the Securitization action, would not help Appellant.

¶90

Learned Presiding Officer has dealt with every aspect touching the nature of land, and came to a right conclusion. In fact, most of the submissions of Appellant herein, are nothing but reiteration, that were advanced before DRT, and adding factor here is, about subsequent events. As already referred to above, to decide the nature of land, the crucial date is, the creation of security interest, and subsequent events may be in corroborating nature, but they cannot be taken as main evidence.

¶91

On a scrutiny of entire materials, I am of the considered view that the Tribunal below has not committed any error in dismissing the Securitization Application and

¶92

¶93

RA (SA) 5/2021

¶94

there are no grounds to interfere with the well reasoned Order of DRT, Coimbatore.

¶95

For the above reasons, it is held that Appeal is devoid

¶96

of merits and is liable to be dismissed.

¶97

In the result; Appeal RA (SA) 5/2021 is dismissed, with

¶98

costs. All pending IAs, if any, stand closed.

¶99

[Dictated to Athistamani, PS, transcribed by her, corrected, signed and pronounced by me in open court, this 26^th of September, 2023]

¶100

[ Justice S. Ravi Kumar] CHAIRPERSON

¶101

Mira Exports v. Bank of India

Case brief

What is this about?

What did the court decide?

Mira Exports v. Bank of India

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

Mr K Ramasamy versus Ao,Arcil

V S Senthil Kumar versus State Bank of India

M/s. V.K.S. Agro Foods Hi-Tech Rice Industry versus Idbi Bank

Sri Laxmi flour mills company versus South Indian Bank

V.S.Rajendran versus SBI

M/s.Medicare Pharma & Ors. versus Canara Bank