Dismissed

Kunidena Lalitha v. State Bank of India

DRAT20 Aug 2024MISC APPEAL/8/2023

Case brief

AI extract

What is this about?

The Tribunal rejected the miscellaneous appeal challenging the dismissal of an amendment application. The court held the DRT lacked jurisdiction to inquire into the source of auction purchase funds, tax payments, or benami transactions under Section 17 of the SARFAESI Act, dismissing the appeal. (Anil Kumar Srivastava, Chairperson, DRAT Kolkata)

What did the court decide?

The miscellaneous appeal and the amendment application were dismissed with no order as to costs.

Kunidena Lalitha versus State Bank of India — Banking and Recovery | DRAT (2024)

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA

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Misc. Appl. No. 08 of 2023

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(Arising out of I.A. 1481 of 2022 in S.A. 247 of 2019 in DRT-II Hyderabad)

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THE HON’BLE JUSTICE SHRI ANIL KUMAR SRIVASTAVA, CHAIRPERSON

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20.08.2024

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Smt. KUNIDENA LALITHA residing at D. No. 5-6, Plot 16, Survey No. 402, Raikal Village, Farooqnagar Mandal, R. R. District, Telangana State

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--Vs--

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STATE BANK OF INDIA having office at Stressed Assets Recovery Branch, D. No. 1-8-563/1, 1st Floor, Opp. Sandhya Theatre, RTC X Road, Chikkadpally, Hyderabad.

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R. Sheshagiri Rao residing at Villa No. 140, LIG BHEL, Ramachandrapuram, Sanga Reddy Dist. OCC Business.

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.. Respondents

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For Appellant : Mr. Rakesh Sanghi, ld. adv.

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For Respondent : Ms. Mekhla Kanji, ld. adv. for bank Mr. Nemani Srinivas, ld. adv. for auction purchaser.

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THE APPELLATE TRIBUNAL :

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Heard learned counsel for the appellant as well as learned

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counsel for the respondent bank and auction purchaser and perused the records.

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Instant M.A. has arisen against an order dated 27.02.2023

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passed by learned DRT-II Hyderabad dismissing the I.A. No. 1481

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of 2022 in S.A. 247 of 2019 (Smt. Kunidena Lalitha Vs. State

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Bank of India) which was filed by the appellant herein. Pending

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S.A., I.A. was filed before the learned DRT for amendment of the pleadings and prayer in the S.A.

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As far as facts of the matter are concerned, S.A. 247 of 2019 was filed the appellant before learned DRT challenging the auction sale notice dated 18.07.2019 and the auction sale dated 05.08.2019. It appears that, pending S.A., secured assets were auctioned for an amount of Rs.82.00 lakhs in favour of respondent no.2, Sri R. Sheshagiri Rao, the auction purchaser. Auction purchaser was impleaded as opposite party.

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Thereafter, the appellant moved an I.A. 1481 of 2022 for amendment in the pleadings and prayer of the S.A. to the effect that auction purchaser has illegally deposited the bid amount. Further, it is stated that amendment is being sought as the sale consideration was deposited against the provisions of the Prohibition of Benami Property Transactions Act, 1988. No legitimate source of income was disclosed by the appellant, which is against the Section 2(9) of the Prohibition of Benami Property Transactions Act, 1988. Further, amendment was sought to the effect that the bank is carrying out thousands of auctions of

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secured assets without paying any Capital Gains Tax and the Income Tax. Appellant would file a Writ Petition seeking a writ of Mandamus to the Income Tax authorities to conduct a comprehensive probe into the multi-million capital gains tax default. Another ground is taken that the bank is transferring secured assets illegally without having any right to transfer the property under Transfer of Property Act as proposed in Para V(g) of the amendment application.

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Opposition was filed by the respondent no.2, auction purchaser, as well as the bank before learned DRT. Learned DRT after hearing the learned counsel for the parties dismissed the amendment application placing reliance upon Para 21 of the judgement of Full Bench of the Hon’ble Madras High Court in

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M/s. Lakshmi Shankar Mills Pvt. Ltd. & Ors etc. Vs.

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Authorised Officer/Chief Manager, Indian Bank & Ors.

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reported in AIR 2008 Madras 181.

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Learned DRT has observed that in an application u/s 17 of

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the SARFAESI Act, 2002 Tribunal is duty bound to see whether the secured creditor has initiated measures against its securities according to the provisions of the SARFAESI Act (hereinafter

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referred to as Act) or not? Proposed amendment pertaining to use of black-money or benami-money by the auction purchaser

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as such amendments sought for cannot be looked into in the application filed u/s 17 of the Act since the same are out of the scope of jurisdiction of the Tribunal. Accordingly, I.A. was dismissed.

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Feeling aggrieved by this order, appellant preferred the

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appeal.

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Learned counsel for the appellant submits that learned DRT has erred in rejecting the amendment application as substantial issues have been raised by the appellant which goes to the root of the matter regarding the jurisdiction of DRT. Learned DRT has to determine the source of money being deposited by the auction purchaser. Learned counsel has placed reliance on Section 23 of the Indian Contract Act, 1872 read with Section 6(h) of the Transfer of Property Act, 1881. It is further submitted that learned DRT should not look into the merits of the matter at the time of disposing of the amendment application.

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It is further submitted by the learned counsel for the

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appellant that banks are auctioning the properties without paying

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necessary taxes which is against the law. Respondent auction purchaser has used black-money in depositing the bid amount. This issue has to be looked into by the learned DRT. Learned counsel has placed reliance upon Section 106 of the Indian Evidence Act.

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Per contra, learned counsel for the respondent bank submits

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that learned DRT has rightly rejected the amendment application as no ground in the proposed amendment is made out by the

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appellant. Learned DRT has to decide the application u/s 17 of the Act as far as it relates to the issue regarding the measures undertaken by the secured creditor u/s 13(4) of the Act. The amendment application is beyond the jurisdiction of the Tribunal. Learned counsel has placed reliance upon the judgement of the

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Full Bench of the Hon’ble Madras High Court in M/s. Lakshmi Shankar Mills (supra).

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Learned counsel for the auction purchaser submits that opposition to the amendment application was filed before the learned DRT. Further, regarding the fact narrated by the appellant that auction purchaser has not disclosed the source of income, learned counsel has placed reliance on Section 101 of the

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Evidence Act and submits that when a person is to prove the existence of any fact before any Court, it is said that the burden of proof lies on that person. It is further submitted that learned

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DRT has no jurisdiction to enter into the area which are trying to be canvassed by the appellant by way of filing an amendment application.

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At the very outset, I would like to observe that scope of adjudication of the DRT is defined in catena of judgements pronounced by Hon’ble Apex Court as well as Hon’ble High Courts. In the Full Bench judgement in M/s. Lakshmi Shankar Mills (supra) Hon’ble Madras High Court has held in Para 21 as

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under :

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“21. As can be seen from the Statement of Objects and Reasons of the Securitization Act, the main purpose of the Securitization Act, and in particular Section 13 thereof, is to enable and empower the secured creditors to take possession of their securities and to deal with them without the intervention of the Court. Therefore, in an application under Section 17, the Tribunal is concerned only with the validity of the acts of the secured creditor in taking possession of the securities and dealing with the same under Section 13. In our opinion, the Division Bench has rightly held that all such grounds, which would render the action of the bank/financial institution illegal, can be raised before the Tribunal in the proceedings under Section 17. It is for the Tribunal to decide in each case whether the action of the bank was in accordance with the provisions of the Act and legally sustainable. However, we hasten to add that while considering the question of validity of the action of the bank, it is not necessary for the Tribunal to adjudicate the exact amount due to the secured creditors. In other words, the purpose of an application under Section 17 is not the determination of the quantum of claim per se as the Tribunal is concerned with the issue of the validity of the measures taken by the banks/financial institutions under Section 13(4). In our opinion, the judgment of the Division Bench in

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Mison Leathers Ltd., lays down the law correctly and does not require any reconsideration.”

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The main purpose of the Securitization Act is to enable and

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empower the secured creditors to take possession of their securities and to deal with them without intervention of the Court. This is a special enactment having overriding effect over

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the other general law as provided u/s 35 of the Act. Section 35 of the Act provides that notwithstanding anything inconsistent therewith contained in any of the law for the time being in force or any instrument having effect by virtue of any such law. Meaning thereby the provisions of the Act are having superseding effect over the other Acts notwithstanding the fact that they are

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in force. Hence, powers of the bank as far as auction sale is concerned are duly recognized by this Act.

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Further, Section 17 of the Act provides that any person including the borrower is entitled to raise his plea before the DRT

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for any grievance against the secured creditor. The aggrieved party may file an application u/s 17 of the Act challenging any of the actions of the secured creditor undertaken u/s 13(4) of the

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Act. It means that actions of the secured creditor undertaken u/s

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13(4) of the Act can be challenged by any person or borrower

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aggrieved before the DRT. DRT have jurisdiction to decide the same in accordance with law.

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As far as impugned order is concerned, an application is filed

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by the appellant for amendment of the pleadings and prayer which relates to the source of money deposited by the auction purchaser. Consequently, allegations were levelled against the respondent State Bank of India for transferring the secured assets without paying Capital Gains Tax or Income Tax. As far as

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jurisdiction of DRT is concerned, DRT has no jurisdiction to look into the source of money deposited by the auction purchaser or whether the bank has deposited taxes or not? For that if any action is required, law will take its own course. Appellant may move appropriate application before appropriate forum in

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accordance with law.

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In Basavaraj Vs. Indira & Ors. [(2024) 3 SCC 705]

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Hon’ble Apex Court has reiterated the law laid down in M.

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Revanna Vs. Anjanamma [(2019) 4 SCC 332] wherein it was

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held that an application for amendment may be rejected if it seeks to introduce totally different, new and inconsistent case or changes the fundamental character of the suit. Further, Order 6

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Rule 17 CPC prevents an application for amendment after the trial

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has commenced unless the Court comes to the conclusion that despite due diligence the party could not have raised the issue. The burden is on the party seeking amendment after commencement of trial to show that in spite of due diligence such amendment could not be sought earlier. It is not a matter of right.

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In the present case burden lies upon the appellant to show

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that in spite of due diligence they could not brought the fact on record earlier. Due diligence has to be pleaded and proved by the appellant, but in the amendment application no source of information or knowledge regarding the proposed amendment is mentioned by the appellant. Proposed amendment relates to use

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of black-money in payment of sale price in the auction proceeding. The appellant has not pleaded a single word as to how he came no know about the fact or what is the source of information? Accordingly, in view of the law laid down by the Hon’ble Apex Court as referred to above proposed amendment is also not to be allowed.

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As far as scope of adjudication is concerned, DRT has no

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jurisdiction to look into these issues. DRT cannot entertain such plea as raised by the appellant in the form of Public Interest

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Litigation. Tone and tenor of the amendment application would show that bank was selling out the secured property without paying taxes illegally, which relief cannot be granted or have been entertained by the DRT. DRT has no jurisdiction to entertain such type of relief in the form of a public interest litigation.

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Learned DRT has no jurisdiction to enter into the merits of

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the matter. Appellant has moved a frivolous and mischievous application before the learned DRT. Accordingly, learned DRT rightly dismissed the amendment application on the issue of

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jurisdiction.

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On the basis of the discussion made above, I am of the considered view that impugned order does not suffer from any illegality or irregularity. The Misc. appeal lacks merit and is liable to be dismissed.

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