Dismissed

Saptatara Agro Products Private Ltd. v. Indian Overseas Bank

DRT9 Nov 2022SA/1/2022

Case brief

AI extract

What is this about?

In this securitisation application under the SARFAESI Act, the applicant challenged the bank's auction sale of its factory premises on grounds including improper reduction of reserve price, deficient notice periods, and alleged lack of confirmation. The Debts Recovery Tribunal examined these procedural complaints and found no violation. The court ruled that the reserve price reduction was justified due to previous failed auctions and admitted validity of the valuation report, and confirmed that requisite notice periods were met. Ultimately, the tribunal held the procedure was strictly compliant with the Act and Rules.

What did the court decide?

Application for quashing the auction sale and sale certificate dismissed with costs; Possession remains with the auction purchaser; Interlocutory application treated as disposed.

Saptatara Agro Products Private Ltd. versus Indian Overseas Bank — Specific Performance | DRT (2022)

¶1

Presented on: 13.12.2021 Registered on: 03.01.2022 Decided on: 09.11.2022 Duration: Y M D 0 10 27

¶2

IN THE DEBTS RECOVERY TRIBUNAL AT PUNE (Before Shri Dilip G Murumkar, Presiding Officer) SECURITISATION APPLICATION No.01/2022

¶3

1. M/s. Saptatara Agro Products Private Limited

¶4

Regd. Off: 1037, Suryakamal Mahadev Nagar, At Post Koregaon, Taluka – Koregaon, District-Satara 415 501. Through its Directors:

¶5

a) Mr. Rahul Shashikant Barge b) Mr. Suryakant Raosaheb Barge c) Mr. Vidya Dattatray Jadhav d) Mr. Shailendra Tanaji Patil e) Mr. Prithviraj Jagannath Kadam

¶6

… Applicant

¶7

Versus

¶8

Authorised Officer, The Indian Overseas Bank Asset Recovery Management Branch, 915/B, Aryabhushan Bhavan,

¶9

1^st Floor, F.C. Road, Deccan Gymkhana, Pune: 411 004.

¶10

The Indian Overseas Bank Satara Branch,

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Platinum Heights, Radhika Road, Karanje, Turf, Satara: 415 002.

¶15

Mr. Yashwant Anadrao Bhosale Building No.D-4, Flat No.501, Swapanangari, Udyamnagar, Pimpri, Pune – 411 018

¶16

Mr. Vijay Shivajirao Barge At Post Koregaon, Taluka – Koregaon, District-Satara 415 501.

¶17

Mrs. Rashmi Kishore Pawar A/4, Sadguru Housing Society, Near Shivaji Housing Society, Senapati Bapat Road, Shivajinagar, Pune – 411 016.

¶18

... Defendants

¶19

APPEARANCES

¶20

For the Applicants	Mrs. Madhuri R Vaidya - Advocate
For Defendant Nos.1 and 2	Mrs. Sudha Koloti - Advocate
For Defendant No.3	Mr. Yogesh Mehta – Advocate

¶21

TOTAL CLAIM AMOUNT –Rs.7,39,36,387/-.

¶22

JUDGMENT

¶23

(Delivered on 9^th November, 2022)

¶24

By the present Securitisation Application filed under Section 17(1) of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short `SARFAESI Act’), the applicant M/s. Saptatara Agro

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Products Private Limited (for short `Saptatara Agro’) has claimed the following reliefs:

¶29

a. The E auction conducted by defendant No.1 in favour of the defendant No.3 on 30/10/2021 as per Notice dated 29/10/2021, of the property i.e. all that piece and parcel of the land including factory shed admeasuring 428.12 sq.mtrs. being constructed thereon along with Plant and Machineries situated at non-agriculture land admeasuring 6400.00 sq.mtrs out of survey No.664 at Village Shirambe and within the Registration Sub District Koregaon, District Satara (for short `suit property’) or any such sale may kindly be quashed and set aside.

¶30

b. The sale certificate issued and registered by defendant No.1 in favour of defendant No.3 on 16/11/2021 at Sr. No.3358/21 with the Registrar of Assurance Koregaon District Satara, of the suit property may kindly be quashed and set aside and cancelled.

¶31

c. The defendant No.3 be directed to restore the possession of the defendant No.1 on cancellation of the said sale.

¶32

d. The defendant No.1 be directed to consider the sale of the suit property in favour of the Purchaser who is ready

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and willing to pay a much higher price than that offered by the defendant No.3

¶37

e. The defendant No.3 be restrained from transferring, alienating, creating third party interest and or parting with the actual physical possession of the suit property to third party, including its agents, assignees, servants during the pendency of the present SA.

¶38

f. The defendant No.3 be permanently restrained from transferring, alienating, creating third party interests in the suit property either by themselves, their agents, servants, assigns or through any other person.

¶39

The facts elucidated in the Application and Rejoinder can be summarized as under:

¶40

The applicant, Saptatara Agro had taken financial assistance from defendant No.2 bank by securing the suit property i.e. factory premises and other properties. As the applicant failed to repay the loan, the defendant No.1, Authorised Officer of defendant No.2 bank issued Demand Notice dated 17^th August, 2015 and demanded the applicant to pay Rs.31,51,772/- as un-debited interest and to discharge liability of Rs.3,99,52,107/-. The applicant could not comply

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this Demand Notice and therefore, in the month of February, 2016 the defendant bank took symbolic possession of the suit property. Thereafter, the applicant gave OTS proposal to the defendant bank and OTS proposal for Rs.2,45,00,000/- was sanctioned to the applicant. Though, applicant deposited Rs.10 Lakhs towards OTS settlement, it failed to repay the remaining amount of OTS and therefore, the defendant bank withdrew the said OTS by letter dated 2^nd December, 2019.

¶45

It is further contended that the defendant bank issued Sale Notice of the suit property i.e. factory premises by fixing the Reserve Price of Rs.1,60,00,000/- in the year 2019 but no bid was received. Therefore, again Sale Notice dated 3^rd March, 2021 was issued by keeping the same Reserve Price but bid was not received. Thereafter, on 15^th September, 2021 again Sale Notice was issued by reducing the Reserve Price to Rs.1,40,50,000/-, even then bid was not received.

¶46

The defendant bank again issued disputed Sale Notice by way of e-auction on 13^th October, 2021 by reducing the Reserve Price to Rs.1,05,00,000/-and served the same to the applicant. The sale of the suit property i.e. factory premises was conducted on 29^th October, 2021 and

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sold it to defendant No.3, Auction Purchaser Mr. Yashwant Anadrao Bhosale for Rs.1,14,00,0000/- and on 30^th October, 2021 Sale Certificate was issued which later on registered on 16^th November, 2021. The details of the auction sale of suit property i.e. factory premises to defendant No.3 was not intimated to the applicant.

¶51

It is further contended that defendant No.2 reduced the Reserve Price of the suit property i.e. factory premises from Rs.1,40,50,000/- to Rs.1,05,00,000/- within seven days from earlier Sale Notice, though value of the suit property was more than Rs.2 Crores.

¶52

Further, the applicant had buyer for purchasing the suit property for Rs.2,50,00,000/- which was much higher than the sale price offered by defendant No.3, Auction Purchaser. Thus, defendant Nos.1 and 2 in collusion with defendant No.3 had disposed of the suit property i.e. factory premises at very less amount to defendant No.3.

¶53

The publication of e-auction Sale Notice dated 13^th October, 2021 was also not made. Thus, defendant Nos.1 and 2 violated Rule 8(5) of the Security Interest (Enforcement)

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Rules, 2002. Further, defendant Nos.1 and 2 without following due procedure for taking possession of the suit property i.e. factory premises and without giving notice of the same to the applicant has taken possession of suit property by obtaining the signature of one of the Directors who had no authority by Board of Directors by way of Resolution to handover possession of the same. Thus, defendant No.3, Auction Purchaser has taken possession of the suit property i.e. factory premises from Mr. Prithviraj Jagannath Kadam, one of the Directors and not from the bank. Further, no order under Section 14 of SARFAESI Act has been obtained by defendant bank. Further, the bank officers were present at the time of handing over possession of the suit property i.e. factory premises but they purposefully have not signed the possession receipt.

¶58

Thus, defendant Nos.1 and 2 have illegally sold out the suit property i.e. factory premises to defendant No.3, Auction Purchaser by violating provisions of the SARFAESI Act and Rules made under Security and Interest (Enforcement) Rules, 2002. Therefore, the applicants have claimed aforementioned reliefs.

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Defendant Nos.1 and 2 by filing Reply (Exhibit-6A) resisted the application. It is contended that auction sale procedure of suit property i.e. factory premises was started in the month of June, 2018 till 7^th October, 2021. The defendant bank attempted eight times to sell the property but bids were not received. On 13^th October, 2021 again Auction Sale Notice was issued and it was published in the newspaper as per Rules and two bids were received and sale was confirmed in favour of defendant No.3 being highest bidder and Sale Certificate was issued in his favour on 30^th October, 2021 after payment of entire amount of sale.

¶63

It is contended that defendant No.2 bank had given sufficient opportunity to the applicant to settle the account by way of bringing purchaser and offering OTS but it failed to make it materialized. The defendant bank has adopted the procedure for sale of suit property i.e. factory premises in accordance with the provisions of the SARFAESI Act and Security Interest (Enforcement) Rules. It is further contended that on 1^st November, 2021 the applicant through its Director Mr. Prithviraj Jagannath Kadam who has been authorized by the applicant Company voluntarily handed

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over vacant and peaceful possession of the suit property i.e. factory premises to the Auction Purchaser in presence of the witnesses and at that time the defendant No.1, Authorised Officer of defendant No.2 bank was not present and was on leave from 31^st October, 2021 till 14^th November, 2021 and had gone to his hometown in Madhya Pradesh. But now the applicant has filed false affidavit of Mr. Prithviraj J Kadam and Mr. Rahul Barge denying this fact. Thus, the applicant has waived its right over the secured asset and now estopped from taking any action in respect of the same.

¶68

Further, it is contended that the symbolic possession of the suit property i.e. factory premises was taken on 22^nd February, 2016 and the present application is filed after period of six years which is time barred. More so, when property was put to auction for last eight times, the applicant never raised any objection and now as the defendant bank is able to sell the property, the applicant has challenged the same with dishonest intentions to obstruct the recovery proceeding of the bank. Though, the Sale Notice dated 13^th October, 2021 was served on the applicant but it never approached the defendant bank with proposal

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to repay the dues before auction and also not challenged Reserve Price mentioned in the Sale Notice.

¶73

Further, it is contended that the applicant has been informed about sale details by issuing letter. Thus, there is no substance in the allegations made by the applicant. Therefore, application may be dismissed.

¶74

The defendant No.3, Auction Purchaser by filing Reply (Exhibit-6B) resisted the application. It is contended that on 1^st November, 2021 the applicant itself has voluntarily handed over the actual and physical possession of the suit property i.e. factory premises to him. Therefore, the applicant is estopped from challenging the same as it has waived its rights.

¶75

Rest of the contentions taken by this defendant are similar to that of defence taken by defendant Nos.1 and 2.

¶76

The following points arises for my determination and I record my findings thereon as under:-

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(1) Whether the defendant bank sold out suit property i.e. factory of the applicants to defendant No.3 Auction Purchaser against procedure under

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SARFAESI Act and therefore, sale is illegal?

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(2) What Order?

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FINDINGS:

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Point No.1 – In the Negative.

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Point No.2 – As per final Order.

¶86

REASONS:

¶87

POINT Nos.1 & 2: I heard arguments of all the parties. The applicants have filed Written Arguments at Exhibit-15 and relied on following Authorities:

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(1) ITC Limited Vs. Blue Coast Hotels Ltd. (2018 SCC Online 237)

¶89

(2) Authorized Officer, Indian Overseas Bank and another Vs. Ashok Saw Mill (2009 (10) SRJ 584)

¶90

(3) P. Vijayakumari and Others Vs. Indian Bank (MANU/SC/0341/2018)

¶91

The defendant No.3 Auction Purchaser has submitted Written Arguments at Exhibit16 and relied on following Authorities:

¶92

(1) Dwarika Prasad Vs. State of Uttar Pradesh and others (2018 DGLS(SC) 158)

¶93

(2) Shakeena Vs. Bank of India and others (2019 DGLS(SC)

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(3) ARCE Polymers Private Limited Vs. M/s Alphine Pharmaceuticals Pvt. Limited and others (2021 DGLS(SC) 884)

¶99

(4) M/s. M.R.F. Ltd. Vs. Manohar Parrikar and others (2010 (0) Supreme (SC) 395)

¶100

(5) K. Kumara Gupta Vs. Sri Markendaya and Sri Omkareswara Swamy Temple and Ors. (AIR 2022 Supreme Court 1220)

¶101

(6) Sea Poly Plast India Pvt. Ltd. and others Vs. Union of India and others (2012 (2) BCR 139)

¶102

(7) M/s. Kay Jay Industries (P) Ltd., Vs. M/s. Asnew Drum (P) Ltd., [AIR 1974 SC 1331]

¶103

(8) Valji Khimji & Company Vs. Official Liquidator of Hindustan Nitro Products (Gujarat) Ltd. (2008 DGLS(SC) 1069)

¶104

(9) Bijnour Urban Co-operative Ltd. V/s. Meenal Agarwal (2021 DGLS (SC) 969)

¶105

The defendant Nos.1 & 2 bank submitted Written Arguments at Exhibit-17 and relied on following Authorities:

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(1) M/s. Kayjay Industries (P) Ltd., Vs. Asnew Drums (P) Ltd., [(1974) 2 SCC 213]

¶110

(2) Sea Poly Plast India Pvt. Ltd. and others Vs. Union of India and others (2012 (2) Mh.L.J. 690)

¶111

(3) M/s. Tansimi Educational Society Vs. Punjab National Bank (SCC Online 3018)

¶112

(4) Kerala Financial Corporation Vs. Vincent Paul and another [(2011) 2 SCC 171]

¶113

(5) ARCE Polymers Private Limited Vs. M/s Alphine Pharmaceuticals Pvt. Limited and others (Civil Appeal No.7372/2021 decided on 03/12/2021)

¶114

(6) Shakeena Vs. Bank of India and others (Civil Appeal No(s). 8097-8098/2009 decided on 20^th August, 2019).

¶115

The Advocate for all the parties reiterated their case in the arguments.

¶116

The sale of suit property i.e. factory has been challenged by the applicants mainly on three grounds:

¶117

(1) Sale was conducted within short period by reducing the Reserve Price without reason and sold suit property at lowest price without obtaining

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Valuation Report.

(2) Sale Notice issued and published was not of prescribed 15 days period.

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(3) The sale was not confirmed after accepting bid.

¶124

Thus, according to the applicants the defendant bank has violated Rule 8(5) and 9(1) and (4) along with the Proviso of Security Interest (Enforcement) Rules, 2002.

¶125

At the outset, I deal with first ground of challenge:

¶126

According to the applicants, the Notice of disputed auction sale was issued on 13.10.2021 and sale was scheduled on 29.10.2021 but earlier said Auction Notice was issued on 15.09.2021 of which sale was scheduled on 07.10.2021. Further, in earlier Auction Sale Notice, Reserve Price was fixed as Rs.1,40,50,000/- whereas in disputed Auction Sale Notice, Reserve Price was fixed as Rs.1,05,00,000/- . Thus, within short period, Reserve Price was reduced by more Rs.35,00,000/- without any reason. Further, Valuation Report before disputed Sale dated 29.10.2021 was not obtained. Thus, the defendant bank has violated Rule 8(5) of Security Interest (Enforcement) Rules.

¶127

At this juncture, on plain reading of Rule 8(5), it

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appears that for every auction Valuation Report is not required because Valuation Report obtained is valid for one year as per Rule 37(2) of Debts Recovery Tribunal Regulations, 2015. In the present case, admittedly, Valuation Report dated 25.02.2021 was obtained by defendant bank for sale of suit property i.e. factory which was valid for one year.

¶132

Further, as per Rule 8(5), the Authorized Officer is empowered to fix Reserve Price on the basis of Valuation Report and in consultation with secured creditor.

¶133

Admittedly, before disputed sale, the defendant Bank has attempted to sell the suit property for eight times but no bidder had participated. Therefore, the defendant bank after having considered these facts and circumstances might have reduced Reserve Price and there is no illegality in it.

¶134

Further, the applicants have candidly admitted that they had received Notice of disputed sale which was served upon them on 13.10.2021. If they would have disputed reduction in the Reserve Price by the defendant bank, they would have questioned the same before sale. However, they kept idle till sale procedure is completed. Thus, I find no

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substance in this ground of challenge.

¶139

Now, I deal with second ground of challenge: No doubt, as per Proviso of Rule 9(1) of Security Interest (Enforcement) Rules, 2002 if sale of immovable property by any one of the methods specified by Sub-Rule 5 of Rule 8 fails and sale is required to be conducted again, the Authorized Officer shall serve, affix and publish Notice of Sale of not less than 15 days to the borrower, for any subsequent Sale.

¶140

In the present case, the applicants who are borrowers have candidly admitted that they have been served with Auction Sale Notice of disputed Sale on 13.10.2021. The defendant Nos.1 and 2 bank have produced Public Notices published in the newspaper along with the List attached to their Statement of Objections (Exhibit-6(A)) which shows the same fact. The disputed Sale was conducted on 29.10.2021 i.e. after 15 days. Therefore, I find no substance in this ground of challenge.

¶141

Now, I deal with third ground of challenge:

¶142

The facts on record shows Auction Sale of suit property

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was held on 29.10.2021 and two bidders had participated and suit property was sold at the bid price of Rs.1,14,50,000/- to the defendant No.3 Mr. Bhosale being highest bidder.

¶147

According to the applicants, Sale was not confirmed by issuing letter to defendant No.3 Auction Purchaser by the defendant bank, however, defendant Nos.1 and 2 bank has produced copy of e-mail dated 29.10.2021 along with List attached to IA No.1166/2022 glaringly shows that Sale Confirmation intimation was communicated to the defendant No.3 Auction Purchaser by e-mail. So also, another bidder was also intimated about the refund of their Earnest Money Deposit (EMD) through e-mail on the same date. After receipt of Confirmation Intimation, the defendant No.3 Mr. Bhosale, on 30.10.2021 had made total payment and Sale Certificate was issued which was later on registered on 15.11.2021. Therefore, there is no violation of Rule 9(4) as well as Proviso of Sub-Rule 2 of Security Interest (Enforcement) Rules. Thus, I find no substance in this ground of challenge also.

¶148

Though the applicant in the Application made allegations

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about taking possession of suit property by defendants illegally, they have not challenged possession in this proceeding. No relief about declaration of possession procedure as illegal is claimed in this Application.

¶153

Admittedly, the possession of suit property was hand over by Mr. Prithviraj Kadam, one of the Directors of the applicant Company on 30.10.2021. According to defendants, the applicants have handed over possession of suit property i.e. factory to defendants voluntarily. Per contra, according to applicants, Mr. Prithviraj Kadam, had not given authority by Resolution of Board of Directors to hand over possession of suit property to defendants.

¶154

Mr. Prithviraj Kadam & Mr. Barge by filing Affidavits dated 08.03.2022 resile from acts of handing over possession of suit property to defendants by stating that the defendants obtained his signature by misrepresenting Mr. Kadam.

¶155

If really, they would not have voluntarily handed over possession of suit property to the defendants, they would have taken action immediately either by sending Notice to the defendants or filing complaint to concerned

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Authority. Therefore, an inference could be drawn that Mr. Kadam & Mr. Barge filed these Affidavits afterthought which are devoid of consideration. Consequently, I hold that the applicants have voluntarily handed over possession of suit property i.e. factory to the defendants.

¶160

According to the applicants, they were trying to settle the accounts during Sale Notices were issued and possession was taken by the defendant bank by following legal procedure. Further, OTS proposal was made and its period of repayment as per OTS was valid. However, the correspondence between the applicants and defendant bank glaringly shows that applicants were given sufficient opportunity to repay the loan through OTS but they failed to comply the same.

¶161

In view of these observations, I hold that defendant Nos.1 and 2 bank and its Authorized Officer have followed prescribed procedure under SARFAESI Act and sale dated 29.10.2021 of the suit property i.e. factory is valid. Therefore, the applicants are not entitled for reliefs as claimed.

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Hence, by answering these points accordingly, I pass the following order:

¶166

ORDER

¶167

A. The Application is dismissed with costs.

¶168

B. The Interlocutory Application No.627/2022 filed by the defendant No.3 Auction Purchaser is also treated to be disposed of in view of disposal of main Application.

¶169

Pronounced in open Court.

¶170

Sd/- (Dilip G Murumkar) Place : Pune Presiding Officer Date : 09.11.2022 Debts Recovery Tribunal, Pune

¶171

(SA No.01/2022)

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Saptatara Agro Products Private Ltd. v. Indian Overseas Bank

Case brief

What is this about?

What did the court decide?

Saptatara Agro Products Private Ltd. v. Indian Overseas Bank

Case brief

What is this about?

What did the court decide?

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