Dismissed

Sandeep Kabra and Anr. v. Uco Bank and Ors.

DRAT9 Apr 2024REGULAR APPEAL/73/2018

Case brief

AI extract

What is this about?

The Debts Recovery Appellate Tribunal dismissed two appeals filed by UCO Bank and an auction purchaser against a DRT order setting aside an auction sale. The Tribunal held that the Bank violated the unamended Rule 9(4) of the Security Interest (Enforcement) Rules, 2002 by extending the time for depositing the balance purchase price without the borrower's consent, thereby rendering the sale certifi

What did the court decide?

Affirmed the order of the DRT setting aside the auction sale; dismissed both appeals.

Sandeep Kabra and Anr. versus Uco Bank and Ors. — Banking and Recovery | DRAT (2024)

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA

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THE HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA CHAIRPERSON

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Appeal No. 141 of 2018 (Arising out of S.A. 363 of 2015 in DRT-III, Kolkata)

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09.4.2024 UCO Bank … Appellant -VsKakali Sarkar & 3 Others … Respondents Mr. Arjun Mookherjee with Mr. S.N. Patra Bhatta, Learned Counsel for Appellant Mr. A.K. Dhandhania, Learned Senior Advocate with Mr. Prasenjit Pal, for Respondents No. 1 and 4 Mr. Nemani Srinivas with Mr. Avishek Guha and Ms. Akansha Chopra, Learned Counsel for the Respondents No. 2

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With

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Appeal No. 73 of 2018 (Arising out of S.A. 363 of 2015 in DRT-III, Kolkata)

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Sandeep Kabra & Another … Appellants -VsUCO Bank & Another … Respondents Mr. Nemani Srinivas with Mr. Avishek Guha and Ms. Akansha Chopra Learned Counsel for Appellants Mr. Arjun Mookherjee with Mr. S.N. Patra Bhatta, Learned Counsel for the Respondent No.1/ Bank Mr. Prasenjit Pal, led by Mr. A.K. Dhandhania, Learned Senior Advocate, for the Respondent No. 2

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THE APPELLATE TRIBUNAL :

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1. Both the appeals have arisen against same judgment, hence they are being disposed of by a single judgment simultaneously.

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2. Instant Appeal has arisen out of judgment and order dated 23^rd March, 2018 passed by Learned DRT-III, Kolkata in S.A. 363 of 2015 holding that the Bank was not entitled to extend the time to pay the balance purchase amount to the auction purchaser without consent of the Applicant. Accordingly, there was violation of Rule 9 (4) of the Security Interest (Enforcement) Rules, 2002 (un-amended) (hereinafter referred to as the Rules). Accordingly, the sale conducted on 27.8.2015 was set aside. Further directions were issued for restoration of possession after payment of Rs.42.50 lac by the Borrower.

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3. Feeling aggrieved the Bank as well as the Auction purchaser has preferred separate appeals.

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As far as the facts are concerned, the SARFAESI Applicant, Smt. Kakali Sarkar, was running a business under the name of M/s. S.K. General Mart who had availed financial assistance from UCO Bank. Security of the loan was given by the Guarantor Shri Sanjay Sarkar. SARFAESI action was initiated by the Bank as the loan amount was not paid regularly. Notices under Sections 13 (2) and 13 (4) was issued and duly served. Auction sale notice dated 17.7.2015 was issued wherein auction sale was fixed on 27.8.2015. Notices were duly served and published. Auction was held on 27.8.2015 in favour of one Sandip Kabra for an amount of Rs.40.25 lac. 25% of the bid amount was deposited on the same date i.e. 27.8.2025 but the remaining 75% of the bid amount was deposited on 24.9.2015.

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4. SARFAESI Application was filed under Section 17 of the SARFAESI Act, 2002 (hereinafter referred to as the Act) challenging

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SARFAESI action along with the sale which was duly opposed by the Bank. Learned DRT recording the finding to the effect that there is non-compliance of the Rule 13 (4) of the Rules as no consent of the Borrower was obtained for extending the time. Further Learned DRT interpreted the word ‘parties’ which means Secured Creditor, Borrower and the Auction Purchaser. It is further held that 45 days’ time was sought for by the auction purchaser but no consent of the Borrower was obtained to extend the time by 15 days. Admittedly, 75% of the bid amount was deposited after expiry of 15 days time.

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I have heard the Learned Counsel for the parties and perused the record.

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5. The only issue involved in this matter is with regard to the compliance of (unamended) Rule 9 (4) of the Security Interest (Enforcement) Rules, 2002. Rule 9 (4) reads as under :

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“The balance amount of purchase price payable shall be paid by the purchaser to the authorized officer on or before the 15^th day of confirmation of sale of the immoveable property or such extended period as may be agreed upon ion wiring between the purchaser and the secured creditor, in any case not exceeding three months.”

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6. It is an admitted fact that auction was held on 27.8.2015. 25% of the bid amount was paid on 27.8.2015 but 75% of the bid amount was deposited on 24.9.2015 and the sale certificate was issued on 6.10.2015. It is also not in dispute that an application was filed by the Auction Purchaser on the date of sale i.e. 27.8.2015 and sought for fifteen days time to deposit 75% of the bid amount. In the meantime, Borrower wrote a letter to the Bank on 7.9.2015 praying for three months time to clear the entire dues of the Bank; which was replied to by the Bank on 8.9.2015 communicating that if an amount of Rs.72,88,348.00 is not paid by 11.9.2015, sale will be confirmed. Again on 9.9.2015 a request was made to the Bank for extension of time with a prayer that highest bid was Rs.43.00 lac and the Borrowers are agreeable to pay 50% of the same; which letter was subsequently withdrawn on 11.9.2015. On 15.9.2015 again Bank

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communicated to the Borrower to deposit a sum of Rs.72,88,348.00 on or before 24.9.2015 failing which sale shall be confirmed. It would be pertinent to note that on 27.8.2015, after the auction sale was conducted, a letter was sent to the Auction Purchaser, i.e. Santosh Samaddar, to deposit 25% of the bid amount immediately and the balance amount to be deposited within fifteen days time from the date of the letter. Whereas on the same date a request was made by the Auction Purchaser to deposit the balance amount within 45 days. Thereafter, on 7.9.2015 a request was made by the Auction Purchaser for twenty days time to deposit 75% of the amount.

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7. Learned counsel for the appellant would submit that Rule 9(4) of the Rules was amended with effect from 04.11.2016. Learned counsel would submit that amendment was necessitated for clarification of the old Rule 9(4) wherein a provision was made that time can be extended as may be agreed upon in writing between the parties. There was an ambiguity. Hence Rule 9(4) was amended with effect from 04.11.2016 where it was amended by substituting words “as may be agreed upon in writing between the purchaser and the secured creditor, in any case not exceeding three months”. Learned counsel for the appellant would submit that this amendment makes it clear that earlier in un-amended provision intention of the legislature was that consent of the purchaser of secured asset was relevant because borrower would never give his consent for extension of time as borrower will never like that his property be sold out. So, the Legislature decided to amend the provision by specifying and substituting the words “between the purchaser and the secured creditor” in place of the words “between the parties”.

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8. At this stage, Learned Counsel for the Appellant Bank while interpreting Rule 9 (4) places reliance upon the judgment passed by the Hon’ble Apex Court in Sree Sankaracharya University of Sanskrit & Others -vs- Dr. Manu & Another (2023) SCC OnLine 640 and Memon Abdul Karim Haju Tayab, Central Cutlery Stores, Veraval -vs- Deputy

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Custodian-General, New Delhi & Others [(1964) 6 SCR 837 : AIR 1964 SC 1256] and submitted that the subsequent amendment in Rule 4 should be interpreted as explanatory. Provisions of Rule (4) (Old) be read alongwith amended provisions. As far as applicability on this interpretation is concerned, when there is a settled case law by The Hon’ble Supreme Court in Siddhereswara (supra) wherein it is held that the provisions of Rule 9 (4) are mandatory in nature and the word ‘parties’ includes Secured Creditor, Borrower and the Auction Purchaser, hence no reliance can be placed on the judgments as referred by the Learned Counsel for the Appellant Bank.

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9. As far as instant amendment is concerned the amendment was not made with retrospective effect. Further this amendment was not necessitated due to the judgment of the Apex Court wherein some provisions of the Rules were held as un-constitutional. Rather in General Manager, Sri Siddeshware Cooperative Bank Limited & Another -Vs- Ikbal & Others [(2013) 10 SCC 83] Hon’ble Apex Court dealing with unamended Rule 9(4) specifically held in Para 14 as under :

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“14. A reading of sub-rule (1) of Rule 9 makes it manifest that the provision is mandatory. The plain language of Rule 9(1) suggests this. Similarly, Rule 9(3) which provides that the purchaser shall pay a deposit of 25% of the amount of the sale price on the sale of immovable property also indicates that the said provision is mandatory in nature. As regards balance amount of purchase price, sub-rule (4) provides that the said amount shall be paid by the purchaser on or before the fifteenth day of confirmation of sale of immovable property or such extended period as may be agreed upon in writing between the parties. The period of fifteen days in Rule 9(4) is not that sacrosanct and it is extendable if there is a written agreement between the parties for such extension. What is the meaning of the expression ‘written agreement between the parties’ in Rule 9(4)? 2002 Rules do not prescribe any particular form for such agreement except that it must be in writing. The use of term ‘written agreement’ means a mutual understanding or an arrangement about relative rights and duties by the parties. For the purposes of Rule 9(4), the expression “written agreement” means nothing more than a manifestation of mutual assent in

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writing. The word ‘parties’ for the purposes of Rule 9(4) we think must mean the secured creditor, borrower and auction purchaser.”

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This judgement was reiterated by the Hon’ble Apex Court in Varimandugu OBI Reddy -vs- B. Sreenivasulu & Others [(2023) 2 SCC 168] and it was held that :

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“the period which is referred to in Rule 9(4) is not that sacrosanct and may be extended if there is a written agreement between the parties and since parties to the written agreement is not defined in Rule 9(4), this Court was of the view that it covers in its fold the secured creditor, the auction purchaser and the borrower, but later the legislature taking into consideration the judgement of this Court made its intention clear by making an appropriate amendment in Rule 9(4) of the Rules, 2002, which came into effect by a notification dated 3^rd Nov. 2016 effective from 4^th Nov. 2016.”

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10. Admittedly, consent of the borrower was not sought at the time of granting extension of time by the Authorised Officer to the auction purchaser for depositing balance 75% of the bid amount. Provision of Rule 9(4) of the Rules is mandatory in nature. Non-compliance of the mandatory provision nullifies the whole exercise.

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Further, it is the settled principle of law that when a particular procedure is provided to perform in the Act, then that Act should be performed in the prescribed manner only. In Krushna Chandra Sahoo -vs- Bank of India [AIR 2009 Ori 35] Division Bench of the Hon’ble High Court at Orissa held as under:

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“8. A Constitution Bench of the Hon'ble Supreme Court in Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi, AIR 1975 SC 1331 held that the statutory authorities cannot deviate from the statutory provisions and any deviation, if so made, is required to be enforced by legal sanction of declaration by the Courts invalidating such actions in violation of the statutory Rules and Regulations. A similar view had been reiterated by the Apex Court in Ambika Quarry Works etc. -vs- State of Gujarat, AIR 1987 SC 1073; Purushottam -vs- Chairman, Maharashtra State Electricity Board, 1999) 6 SCC 49: 1999 AIR SCW 4747 and Sultan Sadik -vs- Sanjay Raj Subba, AIR 2004 SC 1377.

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9. Therefore, it is evident that when the action of the instrumentalities of the State is not as per the Rules and Regulations and supported by the statute, the Court must exercise its jurisdiction to declare such an act illegal and invalid. It becomes the duty of the Court to ensure compliance of such Rules and Regulations for the reason that they are binding on the authorities. Any order or action done by the authority in violation of the statutory provisions is constitutionally illegal and this cannot claim any sanctity in law. There can be no obligation on the part of the Court to sanctify such illegal act.

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10. When the statute provides for a particular procedure, the authority has to follow the same and cannot be permitted to act in contravention of the same. It has been hither to uncontroverted legal position that where a statute requires to do a certain thing in a certain way, the thing must be done in that way or not at all. Other methods or mode of performance are impliedly and necessarily forbidden. The aforesaid settled legal proposition is based on a legal maxim "Expressiouniusestexclusioalterius", meaning thereby that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner and following other course is not permissible, Vide State of Bihar -vs- J.A.C. Saldanna, AIR 1980 SC 3276; Haresh Dayaram Thakur -vs- State of Maharashtra, (2000) 6 SCC 179: AIR 2000 SC 2281; Prabha Shankar Dubey -vsState of Madhya Pradesh, AIR 2004 SC 486, and Indian Banks' Association -vsDevkala Consultancy Service, AIR 2004 SC 2615.”

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11. As far as Borrower is concerned, it is submitted that the Borrower sought for time on different dates. As has already been observed above, time was granted by the Bank hence the Auction Purchaser was precluded from making payment. There is nothing on record to prove that any communication of extension of time to the Borrower, for making payment, was granted by the Bank. Further record shows that even on the date of auction, Auction Purchaser was not prepared with the money and he sought 45 days time to make 75% of the bid amount which shows that the Auction Purchaser, from the very beginning, was not prepared to make the deposit within 15 days as required under Rule 9 (4) of the Rules. Accordingly, no benefit could be extended to the Auction Purchaser. Even if time was extended or granted by the Bank to Borrower to make the payment,

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such extension or grant of time can in no way be treated as waiver to the Auction Purchaser to make deposit rather under Rule 9 (4). There is no specific or implied waiver on behalf of Bank for making deposit after 15 days. It would also be relevant to note that when the Auction Purchaser makes a request for 45 days to make payment, Bank did not agree for the same. No letter was written by the Bank to the Auction Purchaser that 45 days is granted rather a letter was sent to the effect that Auction Purchaser should deposit 75% of the bid amount within 15 days; that was not complied by the Auction Purchaser. Accordingly, Auction Purchaser cannot take advantage of any time granted to the Borrower by the Bank when there was a fault on behalf of Auction Purchaser to comply the provisions of Rule 9 (4) of the unamended Rules.

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12. No consent, as required under Rule 9 (4) of the Rules, was obtained from the Borrower for extension of time granted to the Auction Purchaser. Accordingly, I am of the considered opinion that there is violation of Rule 9 (4) of the Rules. 13. It would be pertinent to note here that the Learned DRT has issued directions to the Bank with a further direction to the Borrower to make payment of Rs.42.50 lac and deposit the same and the Bank should handover the possession to the Borrower. No appeal is preferred against this order either by the Bank or the Borrower. 14. On the basis of the discussion made above, I am of the considered view that the Learned DRT has not erred in arriving at the conclusion. The appeals lack merits and are liable to be dismissed.

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Accordingly, on the basis of the discussion made above, I am of the view that the impugned order, dated 23^rd March, 2018 passed by the Learned DRT, is passed in accordance with law. Both the appeals deserve to be dismissed.

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O R D E R E D

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The appeals, being Appeal No. 141 of 2018, and Appeal No. 73 of 2018 are dismissed.

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The impugned order dated 23^rd March, 2018 passed by Learned DRT-III, Kolkata in S.A. 363 of 2015 is hereby affirmed.

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Copy of this judgment be placed in the records of Appeal No. 73 of 2018. Copy of the order be supplied to Appellant and the Respondents and a copy be also forwarded to the concerned DRT.

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File be consigned to Record room.

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Order dictated, signed and pronounced in open Court.

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(Anil Kumar Srivastava,J) Chairperson

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Dated: 09^th April, 2024 15 & 14/ac

Sandeep Kabra and Anr. v. Uco Bank and Ors.

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Sandeep Kabra and Anr. v. Uco Bank and Ors.

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