Dismissed

M/S Navda Health Care Ltd. v. Canara Bank and Anr.

DRAT11 Sept 2024

Case brief

AI extract

What is this about?

The tribunal dismissed the appeal filed by a borrower challenging the disposal of its guaranteed property under the SARFAESI Act. The court held that the impugned orders complied with procedural requirements, the auction purchaser fulfilled deposit obligations, and the borrower failed to show any infirmity in the lower tribunal's decision after multiple missed installment opportunities.

What did the court decide?

The appeal was dismissed with no order as to costs, upholding the auction sale and the lower tribunal's order.

M/S Navda Health Care Ltd. versus Canara Bank and Anr. — Banking and Recovery | DRAT (2024)

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IN DEBTS RECOVERY APPELLATE TRIBUNAL, ALLAHABAD

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Appeal Dy No. 604/2022

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M/s Navada Health Care Ltd. House No. 2, Sapan Bagh Dayalbag, Agra through its Director Sri Prashant Tyagi S/o Sri Ram Prakash Pachauri R/o House No. 2 Sapan Bagh Dayalbag Agra, U.P.

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.………....………………………...……………………………………………...Appellant

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Versus

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Canara Bank Branch Dayal Bagh Agra through its Branch Manager.

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Authorized Officer, Canara Bank, Regional Office, Agra.

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Smt. Afroz, W/o Abdul Ajij, R/o Ahata Bhanna Mal Compound, Gandhi Market, District-Etah-207001.

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

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Advocates who appeared in this case

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For the appellant Shri Rajneesh Pratap Singh, Advocate For the respondent- Bank Shri Maneesh Mehrotra, Advocate For the respondent-Auction Shri V. K. Shukla, Advocate Purchaser

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JUDGMENT

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Date of Decision: 11.09.2024

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JUSTICE R. D. KHARE, CHAIRPERSON

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The present appeal has been filed under section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short “the SARFAESI Act”) against the judgment dated 28.07.2022, whereby the S.A. No. 41 of 2021 filed by the appellant has been dismissed.

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The brief facts of the matter are that the appellantCompany was granted open cash credit facility for Rs. 90.00 lacs by the respondent-Bank through its director Shri Prashant Tyagi in the year 2017. In order to secure the same, Shri Ram Prakash Pachauri and Smt. Munni

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Devi stood as guarantors and created mortgage over their property in question with the respondent-Bank. The borrower-company did not repay the amount as per the loan agreement, therefore, the account was classified as NPA on 02.05.2019 and demand notice dated 03.07.2019 was issued under section 13(2) of the SARFAESI Act for a sum of Rs. 92,23,467/- along with interest as on 30.06.2019. Since the borrowers did not pay any heed to the said demand, therefore, the respondent-bank took the symbolic possession of the property in question by issuing possession notice dated 17.09.2019 under section 13(4) of the said Act and the same was published in the newspapers on 19.09.2019. Thereafter, the auction sale notice was issued scheduling the auction for 20.12.2019, which was challenged by the appellant before the Hon’ble High Court by filing Writ-C No. 41539 of 2019. The Hon’ble High Court vide order dated 16.12.2019 disposed off the said writ petition with direction to the appellant to deposit Rs. 25.00 lacs on or before the 19.12.2019 and rest of the amount in three equal monthly installment i.e. on 31.03.2020, 30.06.2020, 30.09.2020, 31.12.2020 and the recovery proceeding during this period was directed to be remained in abeyance.

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It appears that the appellant-Borrower again approached before the Hon’ble High Court by filing Writ-C No. 528 of 2020, which was disposed off with direction to the appellant to deposit Rs. 10.00 lacs on or before 15.01.2020 with the respondent-Bank and the rest of the amount in four equal installments at the interval of three months i.e. 15.04.2020, 15.07.2020, 15.10.2020 and 15.01.2021 respectively. It was further directed that the auction/recovery proceedings during the said period shall

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remain in abeyance, but both the orders were not complied with by the appellant.

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It is averred that thereafter auction sale notice dated 21.12.2020 was issued scheduling the auction of the property in question to be held on 30.01.2021, which was challenged by the appellant-Borrower by filing the S.A. No. 41/2021 before the Tribunal below on the ground that Rules 9(3) and 9(4) of the Security Interest (Enforcement) Rules, 2002 have not been complied with and the order under section 14 was passed without affording opportunity of hearing to the appellant. The respondent-Bank filed reply dated 15.03.2021 to the said S.A. Thereafter, the respondent-Bank again issued sale notice dated 18.03.2021 fixing the auction on 08.04.2021 and the property was sold and sale certificate dated 17.05.2021 was issued in favor of the respondent no. 3-Auction Purchaser. The said sale notice was challenged by the borrowers by filing amendment application dated 07.06.2021 along with impleadment application dated 08.07.2021, which is filed as annexure no. 9 at page no. 114 to 151 of the memo of appeal and the same was allowed.

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During the pendency of the aforesaid S.A., the respondent-Bank filed an application dated 10.01.2020 before the D.M. under section 14 of the SARFAESI Act, which is at page no. 153 to 158 of the memo of appeal and the same was decided vide order dated 18.05.2022 (at page no. 166 to 168 of the memo of appeal). The said order was also challenged by the borrower by filing amendment application dated 30.05.2022, which is at page no. 169 to 202 of the memo of appeal, before the

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Tribunal below and the same was allowed by the Tribunal below.

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The Tribunal below vide order impugned has dismissed the S.A. holding that the property has been auctioned in accordance with law and the order dated 18.05.2022 under section 14 of the SARFAESI Act was passed by the D.M. after giving opportunity of hearing to the appellantBorrower and considering the reply of the S.A. applicant. Being aggrieved by the said order, the present appeal has been filed by the appellant-Borrower.

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Learned counsel for the appellant submitted that there are procedural irregularities in the proceedings undertaken by the respondent bank, but the Tribunal below has not considered the same. The learned counsel further submitted that Rs. 10.00 lacs was deposited by the appellant on 14.11.2022 in pursuance of the order dated 09.01.2020 passed by the Hon’ble High Court in Writ Petition No. 528/2020, which is annexed at page no. 16 of the reply of the respondent bank. If the said amount was considered, the account of the appellant would not have been declared as NPA. The second procedural irregularity is that the subsequent sale notice was issued for Rs 96.00 lacs, whereas it should have been issued for Rs 86.00 lacs, because Rs 10.00 lacs had already deposited, hence the Tribunal below has committed error in passing the order impugned.

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The learned counsel also submitted that the appellant had approached the Hon’ble High Court by filing multiple writ petitions and also approached before the Bank, but no opportunity was given by the Bank. The learned counsel further submitted that opportunities were given by the

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Hon’ble High Court, but on account of demonetization and Covid 19 situation etc., the needful could not be done within the time stipulated. However, it was submitted that the appellant is still ready to deposit the amount due so that his property can be saved. The learned counsel also submitted that the right of redemption cannot be exhausted, if the appellant is ready to deposit the amount due.

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It was also argued by the learned counsel for the appellant that the property has been undervalued and the said property having worth Rs 2.00 crores has only been auctioned for Rs 90.00 lacs and odd.

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The learned counsel for the appellant has relied upon the judgment passed by the Hon’ble High Court in Writ- C no. 22594 of 2022-Shipra Hotels Limited And Anr. Vs. State of U.P. And 3 others, decided on 25.11.2022 and has referred to its para 52, wherein it has been held that the order passed by the District Magistrate u/s 14 has to be duly served upon the borrower before taking any steps for his forcible dispossession. The learned counsel stated that in the present case, no such time was given nor any notice was served, therefore, action of the respondent-Bank is in clear violation of law as laid down by the Hon’ble High Court in the aforesaid matter.

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It was lastly contended that against the amount due as indicated by the Bank Rs. 95.00 lacs, the appellant has deposited Rs 97.00 lacs, which was more than the amount due as indicated against the appellant.

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Learned counsel for the respondent bank submitted that the order u/s 14 was passed by the District Magistrate after giving opportunity for hearing to the appellant. The

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appellant has raised all the objections before the District Magistrate and the same was duly considered. It was further contended that the appellant filed several petitions before the Hon’ble High Court and the orders passed in those petitions are on record. The Hon’ble High Court had directed the appellants to make payment in installments, but the same was not complied with by the appellants.

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It was lastly contended that so far as the valuation is concerned, the bank had advertised the sale notice 5 times for auction of the property, but the appellant did not come forward to liquidate the dues, therefore, the argument raised by the appellant with regard to valuation of property in question cannot be sustained. The bank has proceeded for auction of the property as per the latest valuation report obtained from the approved valuer, which is on record. At the end, it was contended that once the property has been auctioned, sale has been confirmed, sale deed has been executed and possession has also been given, then appellant-borrower/mortgagor cannot be permitted to claim the right of redemption of the property in view of the principle as laid down by the Hon’ble High Courts as well as the Hon’ble Apex Court in Celir LLP Vs. Bafna Motors (Mumbai) Pvt. Ltd. and others, 2023 SCC Online SC 1209.

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In rejoinder, it was argued that the appellant is not seeking any right of redemption, but has stated that the amount of Rs 10.00 lacs was deposited and if the same had been considered, the account of the appellant would not have been declared as NPA. Further the bank had issued 6 auction sale notices to auction the property at undervalued price without following the procedure of law in the year 2021. It was therefore, prayed that the order

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impugned may be set aside and the appeal may be allowed.

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The learned counsel for the respondent-bank lastly urged that the argument as raised by the appellant before this Tribunal has never been pleaded by them before the Tribunal below. It was therefore prayed that the order impugned does not call for any interference by this Tribunal and the appeal may be dismissed with heavy costs.

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Having heard the learned counsels for the parties and considering the material available on record, it is undisputed that the appellant had challenged only auction sale notice before the Hon’ble High Court as well as the Tribunal below and the issues as raised before this Tribunal with regard to the the classification of the loan account as NPA, demand notice and the possession notice were neither pleaded nor argued by the appellant before the Tribunal below, therefore, the same cannot be permitted to be raised directly before this Tribunal.

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So far as the valuation of the property is concerned, the respondent-Bank issued five auction sale notices i.e. on 11.11.2019, 23.2.2019, 24.08.2020, 30.12.2020 and 03.02.2021, but the sale could not be materialized and there is nothing on record to show that the appellantborrower has ever come forward to liquidate the dues or to produce prospective buyer, who could offer better price than the reserve price fixed by the Bank. Besides it, the Hon’ble High Court had given two opportunities vide its orders dated 16.12.2019 and 09.01.2020 passed in the writ petitions filed by the appellant as mentioned above to liquidate the dues in installments, but both the orders

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have not been complied with by the appellant. It is general practice of the Bank that if the property is continuously being put to auction and no bid is being received, then there is no option but to reduce the reserve price of the property. In the present case, the Bank has attempted five times to sell the property in question, but the same failed, therefore, reserve price of the property in question was gradually reduced, which is not against the provisions of the Act and rules made thereunder. Hence, contention of the learned counsel for the appellant that the property in question has been sold by the Bank at undervalued price, is not tenable.

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It was contended by the learned counsel for the appellant that 25% and remaining 75% of the bid amount have not been deposited by the auction purchaser in view of Rules 9(3) and 9(4) of the Security Interest (Enforcement) Rules, 2002. In this regard, it is to be seen that several auction sale notices were issued as detailed in preceeding paragraph of this judgment, but the same could not be materialized for one reason or the other. However, the Bank issued 6^th auction sale notice dated 18.03.2021 scheduling the auction of the property in question for 08.04.2021, in which the respondent no. 3 was declared as highest bidder and more than 25% of the bid amount including the EMD was deposited on the same day and thereafter, sale was confirmed by the Bank vide letter dated 08.04.2021 directing the auction purchaser to deposit remaining 75% of the bid amount within 15 days. Pursuant to it, the auction purchaser deposited Rs. 35.00 lacs on 15.04.2021 and for the rest amount, she requested the respondent-Bank vide letter dated 20.04.2021 for extension of time till 29.05.2021 and the same was

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extended by the competent authority vide letter dated 26.04.2021 for depositing the balance amount upto 29.05.2021. Accordingly, the respondent No. 3-auction purchaser deposited the balance amount on 15.05.2021, which is much prior to the expiry of the extended period i.e. 29.05.2021. Thus, the contention of the learned counsel for the appellant that the auction amount has not been deposited by the auction purchaser in time is not sustainable.

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With regard to the order dated 18.05.2022 passed by the ADM, Agra under section 14 of the SARFAESI Act, it is to be seen that the respondent-bank filed an application dated 10.01.2020 under section 14 of the SARFAESI Act before the Court of Collector/District Magistrate, Agra, which was subsequently transferred to ADM (F&R), Agra vide order dated 16.01.2021 and the same was registered. In the said case, the appellant appeared and filed a detailed reply dated 20.04.2022 through its counsel. The ADM, Agra allowed the said application vide order dated 18.05.2022 stating therein that the application filed under section 14 is not decided on the basis of the merit and demerit of the case, unless there is any legal impediment, whereas the ground taken in the reply filed by the appellant was with regard to the merits of the case, which could not be considered and decided by the ADM, Agra under section 14 of the said Act. Therefore, the appellant cannot say that the ADM, Agra has not considered the issue raised by the appellant while passing the order dated 18.05.2022 under section 14.

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The contention of the learned counsel for the appellant that the order passed by the ADM under section 14 has

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not been served upon the borrower before taking any steps for his forcible dispossession, is also not tenable, because the impugned order dated 18.05.2022 passed by the ADM, Agra itself shows that the appellant had appeared and argued the case before the Court of ADM, Agra, therefore, the appellant cannot say that it was not aware about the aforesaid order, by which possession of the property in question was ordered to be taken. The appellant itself has admitted in para 47 of its written submission that the respondent issued the public notice dated 13.07.2023 and sealed the premises in question.

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It was also contended by the learned counsel for the appellant that despite being interim order dated 12.09.2022 of this Tribunal, the respondent-Bank issued the aforesaid notice and sealed the premises. It appears that the present appeal was dismissed as not maintainable for want of pre-deposit vide order dated 19.04.2023 passed by this Tribunal. Thereafter a restoration application was filed by the appellant and the same was allowed vide order dated 14.07.2023 and the appeal was restored, but the interim order as granted earlier was not reinstated. Therefore, the contention of the appellant that the possession was taken during currency of the interim order dated 12.09.2022 of this Tribunal is also not sustainable.

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In view of the above, there is no infirmity and illegality in the order impugned passed by the Tribunal below. Accordingly, the appeal is dismissed with no order as to costs.

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

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CHAIRPERSON

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VN GIRI

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M/S Navda Health Care Ltd. v. Canara Bank and Anr.

Case brief

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M/S Navda Health Care Ltd. v. Canara Bank and Anr.

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