Dismissed

M S Bhavana Farms v. Bank of Baroda

DRT10 Feb 2023SA/116/2022

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal dismissed an appeal challenging a sale notice and sale certificate issued by Bank of Baroda. The Tribunal held the appeal was time-barred and the Appellant failed to redeem the mortgage before the sale date.

What did the court decide?

Appeal S.A.No.116/2022 dismissed; Interim order vacated.

What the court decided

M S Bhavana Farms versus Bank of Baroda — Company and Corporate | DRT (2023)

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II{ THE DEBTS RECOVERY^{TRIBUNAL-I, KARNATAKA} AT BENGALURU

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Dated this the loth day of^{February 2023}

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Present: Sri IMTIAZ ALI

Presiding officer

S.A.No.116/2022

BETWEEN:

M/s Bhavana Farms,

Residing at House No.296,

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16th cross, Sadashivanagar, Bangalore-560 080

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Represented by its Partner

lvlr N. Sreenivasa

APPELLANT

AND:

Bank of Baroda, Zonal Stressed Asset,

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Recovery Branch, /-' Floor, v[aya lowers, 4112, M.G. Road, Bangalore-560 001 Represented by its

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Authorized officer

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Mr Dinesh R,

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S/o Mr Ramachandra, Aged about 44^years, Residing at No.81, 14th Main Road, 16th cross, 4th Sector, HSR Layout, Bengaluru-560 102

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Smt. N. layalakshmi, w/o late Narayana Setty, Aged about 79^yearc, Residing at No.2O8,2nd Main Road, Mahalakshmi Layout, Bangalore-560 086

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RESPONDENTS

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Counsels on record/appeared for: : Sri D.R. Ravishankar Appellant Respondent No.1 : Sri Vignesh Shetty Respondent No.2 : Sri Adun Rao

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S.A.No.116/2022

FINAL ORDER

The Appellant has filed the^present appeal under Section 17(1) of the SARFAESI Act, 2002 (for short 'Act'), seeking for^q uashin g/setting aside the impugned sale notice dated 01.03.2021 and sale certificate dated 07.o4.2O2L issued by the Respondent No.1 Bank in respect of the schedule property for recovery of Rs.1,26,89,808.55 from the Appellant / borrower(s) / 9 ua ranto r(s)/Corporate guarantor(s) together with interest thereon, charges, cost, etc.

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The facts leading to the^present appeal in a nutshell are that, the Appellant is a borrower who availed a loan of Rs.1.00 crore from the Respondent Bank in the^year 2015 by creating a charge over the schedule^property worth Rs.10 crore in favour of the Respondent Bank. Appellant contended that the Respondent Bank classified the account as NonPerforming Asset on 30.03.2019; issued demand notice dated 05.07.2019 under Section 13(2) of the Act making a demand of Rs.1,03,76,9631-; thereafter issued^{possessionnotice} dated 09.12,2019 by mentioning Rs.1,03,76,963/-; as^sale did not take^place even after issuance of several sale^notices, Respondent Bank issued afresh the impugned sale^notice dated 01.03.2021 by fixing 22.03.2021^{as the date of sale by} mentioning the total dues of Rs.1,26,89,808/-^upto 28.02.2O2L^plus interest. The Appellant^{challengedthe said}

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sale notice in W.P.No,5464/2O21 before the^Hon'bleHigh Court of Karnataka which came to be^{disposed of by its order} dated 10.08.2021^{(inadvertently} mentioned as^28.09.2021) by hearing both the^{parties giving} liberty to the Appellant to approach the Debts Recovery Tribunal by filing an appeal within a^period of three weeks from the date of receipt of certified copy of the order of the Hon'ble High Court, and extended the interim order^granted on O9.O4.2O21 till then. It is stated that for the sale held on 22.03.202L^pursuant to the impugned sale notice dated 01.03.2021^pertaining to the loan transaction covered under Section 13(2) notice, the reserve price of Rs.6.21 crore fixed was a resultant situation of an arbitrary undervaluation with a single bidder participation; it was sought to be confirmed in favour of 2nd Respondent and a sale certificate was^purportedly issued on O7.O4.2O21 vide Annexure-A6. It is also stated that the Hon'ble High Court of Karnataka vide its order dated 09.04.2021 in WP No.6464l292t (GM-RES) recording that Rs.54 lakhs would be paid and to pay the balance amount within the stipulated time as undeftaken had given interim direction stating that sale certificate should not be registered. It is also stated that the said amount of Rs.54 lakhs recorded to be paid is stated to have been^paid and reported to the court on 16.04.2021 and the amount of Rs.1.26 crore in relation to the account of the Appellant-Bhavana Farms is

s.A.No.u612022

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stated to have been^paid vide Annexure-A10 dated 15.O4.2O2L and the secured asset which was sought to be brought for auction in relation to the secured loan of the Appellant stood fully discharged before the registration of the sale certificate. It is further contended that when the matter was listed before the Hon'ble Court on lt.O6.2O2l, impleading application to implead the Auction Purchaser was allowed and the Auction Purchaser was^permitted to^file objection statement and I.A.No.3/2021 filed by the Respondent Bank seeking vacating of interim order was rejected by an order dated 23.06.2021. The Hon'ble High Court disposed of the writ with liberty to the Appellant to^urge all the contentions before DRT and seek appropriate^relief under Section 17 of the SARFAESI Act^within 3^{weeks from} the date of receipt of the copy of the^order on^10.08.2021. Being aggrieved by the said order^{passedby the Hon'bleHigh} Court of Karnataka in Writ Petition^{No.646412021, the} Appellant preferred Writ Appeal in W.A.No.946/2O21^before the Division Bench challenging the order^{passedby the} Learned Single ludge and the Division^{Benchhad affirmed the} orders of the Learned Single^{Judge vide its order dated} 2B.lO.2O2l^produced and marked at Annexure-A11.^The Appellant has, inter alia, urged several^{groundscontending} that the right of redemption of a^{mortgageis a rightin equity} which cannot be defeated except^{in the manner contemplated}

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under law. The Appellant in support of its case has placed reliance on the^judgments passed by the Hon'ble Supreme Court in the matters of :

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1. Narain Das Karsondas Vs S.A. Kamton and another reported in L977(3) SCC Pg 247; and

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1. Dwarika Prasad Vs State of UP 2018 SCC Online 183;

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Appellant further contended that redemption of a mortgage debt in as much as whether the mortgage or a secured asset is given in lieu of repayment of a particular debt and if the said amount stands paid, then the moftgage automatically stands discharged and there is no requirement of a formal order being passed by any court as the obligation on the property to be a security for a debt is non-existing on such date. In that view of the matter, the total amount as claimed by the Bank having been paid, the debt having been discharged, mortgage stood redeemed and the security agreement became unenforceable. It is further stated that right to redeem being kept alive by virtue of the interim orders passed by the Hon'ble High Court dated L5.O4.2O2| and L6.O4.2021, the question of sale certificate being registered at this stage would not arise. Yet another contention which was sought to be raised before the Hon'ble High Court by the Respondent Bank was that there is yet another loan by Vaishnava Structures to the extent of another

5.A.No.776/2O2?

Rs.1.00 crore and this would in no manner affect the discharge of the mortgage created in respect of the loan borrowed by the Appellant. The Appellant has drawn the attention of the Tribunal to the definitions of security agreement and security interest by reproducing Sections 2(zb) and 2(zf) of the Act. The other grounds urged by the Appellant are, valuation of property worth about Rs.9 crores is undervalued at Rs.6.20 crores; Rule B and the amended provision of Rule 9 would indicate that wherever valuation of the property is undertaken, the notice period to the borrower would be 30 days. It is only where a second sale is brought on the basis of the same valuation, the amendment reducing the said period to 15 days under the proviso to Rule 9 would be applicable; however, once a fresh valuation is done, it becomes mandatory that 30 days notice is to be issued. Appellant contended that this has been violated by the Respondent Bank. Other grounds are, the sale notice has not been affixed as required under law; Respondent Bank without considering the fact that, selling a portion of the property in itself is sufficient to clear the dues had sold the entire property on 22,03,2021; since the Respondent Bank has issued only sale certificate which is not registered according to their own submissions, title to the property has not been discharged and the title to the property is free from any encumbrance and remains with the Appellant. It is further

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contended that the^{proceeding initiated by the Respondent} Bank under the Act and^{Rulesis highly arbitrary, illegaland} unlawful and the same is^{not maintainable in law sustainable} on facts. In view of the^{foregoing contentions and grounds,} the Appellant has sought to set^{aside the impugnedsale} notice dated 01.03.2021 and the^{sale certificate dated} 07.O4.2O2L to meet the^{endsof justice.}

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Upon service of notice, the^{1tt RespondentBank} entered appearance^{throughits counsel andsubsequently} filed detailed objections to^{the appeal, inter alia,contending} that the Appellant being^{a partnershipfirm representedby its} partner Sri N. Srinivas and Smt. S. Uma^{who are borrower} and^guarantor respectively^{was sanctioned credit facility in the} form of Baroda Trader^{Loan to the tune of Rs.1.00crore after} execution of various^{loandocumentsincluding creationof} equitable mortgage^{by way of deposit of title deed mortgaging} the schedule^{property towardsthe security forthe} repayments of loan^{availed'When the borrower andthe} guarantor failed and neglected to^{comply with the terms and} conditions stipulated^{in the sanction letter as well as loan} documents, the^{Respondent Bank classifiedthe loanaccount} as Non-Performing^{Asset on 31.03.2019 as per the RBI} guidelines; issued demand notice^{dated 05'07'2019 under} Section 13(2) of the^{Act demandingthem to pay the}

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outstanding loan amount of Rs.1,03,76,693/- within 60 days; duly served the notice; when the requirement of demand notice was not complied by the Appellant, Respondent Bank issued possession notice dated 09.12.2019 under Section 13(4) of the Act and took constructive possession of the secured asseu affixed the possession notice on the conspicuous part of the secured asset; published the possession notice in two leading newspapers namely'Deccan Herald', English Edition and Prajavani, Kannada Edition under the provisions of the Act and the Rules; when the Appellant and guarantor failed to repay the dues in spite of several attempts, Respondent Bank obtained the valuation of the property from the approved valuers, fixed the reserve price. Pursuant thereto, the Respondent Bank complying with every action as required under the SARFAESI Act and Rules, proceeded to sell the mortgaged property through e-auction vide sale notice dated 01.01.2020; duly published the sale notice in newspapers; conducted e-auction on 06.02.2020; affixed the sale notice on the conspicuous part of the schedule property; fixed the reserve price for the said auction at Rs.B.45 crores, but the same could not be held for want of bidders. It is further contended that several e-auctions conducted on various dates thereafter - nine attempts - with reduced reserve prices failed. It is further contended that the Respondent Bank again proceeded with the sale of the

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mortgaged property vide impugned sale notice dated 01.03.2021 fixing reserve^price of Rs.6,21,00,000/-^on 22.O3.2O2L wherein the^{RespondentNo.2 participatedand} stood as highest bidder and^{paidRs.1,55,37,5OO1-being25olo} of the bid amount including^{EMD amountand sale was} confirmed in the name of Auction^{Purchaser Respondent No.2} herein vide letter of confirmation of^{sale dated 23.03.2021} and on^payment of sale^{price in full, sale certificatedated} 07.O4.2o2L came to be issued^{in favourof RespondentNo.2.} It is contended that in^{complianceof order/s passedby the} Hon'ble High Court of^{Karnataka,the said salecertificate} could not be registered^{at that time, however, on vacation of} such order/s, the said sale^{certificate was registered on} 08.11.2021 which^{was duly informedto the Appellant through} mail dated 06.t1-.2O2l^{vide Annexure-R8. Respondent Bankin} its 11th attempt succeeded^{in sellingthe securedasset in the} auction and satisfied^{its claim. Itis contendedthat the} Respondent Bank^{in every auctions conducted,the sale notice} for intimation of^{such actions was duly sent to the borrower} and^guarantors in^{the account.During such auctions, the} Appellant kept silent^{and never raised any objectionsas} regards the auction^{conducted by the RespondentBank'In} the^present sale^{too, the Appellantdespite havingknowledge} was least bothered to^{safeguard the interest ofthe} Respondent Bank,^{but on the contrary when the sale got}

s.A.No.11612022

confirmed and after the issuance of sale certificate in question, the Appellant with the sole intention to cause prejudice and loss to the Respondent Bank as well as to the Auction Purchaser has filed such purported writ to further harass the Respondent Bank. Respondent Bank further contended that the Appellant failed to deposit the dues payable to the Respondent Bank in terms of Section 13(8) of the 2002 Act as applicable at the relevant time and did not challenge the notices till 10 auctions before the date of auction despite ample opportunity was given to them in that behalf. Whereas, the auction was conducted on 22.03.2O2L and the Auction Purchaser being the highest bidder was issued sale certificate on O7.O4.2O21 upon payment of the consideration amount. With issuance of sale certificate, it is urged that the sale transaction in favour of Auction purchaser had become final. Accordingly, Section 13(8) of the Act mandates tender of the dues by the debtor/borrower to the secured creditor at any time before the date fixed for sale which in this case was 22.03.2021. Sub-section (8) has undergone a change and has been made more stringent, requiring tender of dues to the secured creditor together with all costs, charges and expenses incurred by him at any time before the "date of publication of notice,, for public auction or inviting quotations or tender from public and private treaty for transfer by way of lease, assignment or sale of the

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secured assets. Therefore, on the date of filing of the^present application, the entire^proceedings under Section 13(4) of the Act have come to an end and become final by issuance of sale certificate under sub rule (7) of rule 9 of the rules on 07.O4.2O2t and the Auction Purchaser is vested with rights in relation to the^{property purchased} in auction on issuance of sale certificate and he has become the absolute owner of the property. Therefore, the present application is not sustainable in law and the same is liable to be set aside. With respect to the contention of the Appellant with regard to registration of the^property, the Respondent Bank referred to the^judgments in the matter of Arumugham S and two others Vs C.K. Venugopal Chetty and five others and B. Arvind Kumar Vs Government of India and others and contended that sale certificate issued in favour of the Appellant does not require any registration in view of Section 17(2)(xii) of the Registration Act as the same has been^{granted pursuant} to the sale held in^public auction by the Authorized Officer under SARFAESI Act.

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As it has been stated by the Hon'ble Supreme Court of India that in Shakeena Vs Bank of India^(SCC Online SC 1059) that A fortiorari, it must follow that the Appellants have failed to exercise their right of redemption in the manner known to law, much less until the registration of the sale. Thus, the

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action of the Appellant is based upon false and frivolous assertions of law and against the principles of natural justice,

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It is further contended that the Appellant is filing one after another applications/petitions in different forums leading to multiplicity of proceedings and frustrating the very framework of legal system. By these a pplications/petitions, the Appellant is making up false, baseless and reckless allegations as and by way of afterthought, in an attempt to keep the subject property out of the process initiated against them under the said Act of 2002. Respondent Bank contended that the Hon'ble Supreme Court in Civil Appeal (Arising out of SLP(C) Nos.4981-4982 of 2010) Indian Bank Vs Blue Jaggers Estates Ltd and others has held that "Those who take loan and avail financial facilities from the bank are duty bound to repay the amount strictly in accordance with the terms of the contract. Any lapse in such matters has to be viewed seriously and the bank is not only entitled but duty bound to recover the amount by adopting all legally permissible methods. The Parliament enacted the Act because it was found that legal mechanism available till then was wholly insufflcient for recovery of the outstanding dues of banks and flnancial institutions."

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In respect of the valuation of the property, the Respondent Bank refers to the^judgment of Hon'ble Supreme

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Court in the matter of Anil Kumar Srivastava^{vs State of} tt.P. and another wherein it is held "that the^expressions "value of propefty" and "upset^price" are not synonymous^but have different meanings. That the term^{"upsetprice" means} lowest selling^price or reserve^{price. That unfoftunatelyin} many cases, the word "value" has been used^{with reference to} upset price. That the sale^has to^{commence at the higher} price and in the absence of bidders, the^price will have to be progressively brought down till it reaches the upset^price. That the upset^price is fixed to^{facilitate the conductof the} sale. That fixation of^{upset price does not precludethe} claimant from adducing^{proofthat the land is sold for a low} price." It is further contended that Section 13(8)^{of the Act} mandates tender of the^{dues by the debtor/borrowerto the} secured creditor at^any time^{before the date fixed for sale} which in this case was^{22.03.2O21,but the Appellant did not} come forward to settle its^{liabilities towardsthe Respondent} Bank. Therefore, the entire^{proceedingsunder Section 13(4)} of the Act have come^{to an end andbecomefinal, by issuance} of sale certificate under^{sub rule (7) of rule 9 of the rules on} 07.04.2021 in favour^{of the AuctionPurchaser.}

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Respondent Bank denying the^{statementsmade in} crounds 5.10 of the^{appealmemo as totally frivolous,} baseless and misconceived^{contends that there are three}

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other connected loan facilities sanctioned/availed^againstthe mortgage of same security and the^present total outstanding balance in the following accounts is Rs.1,96,20,513.91:

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1. OD loan under A/c No.1011040000051 in the name of Vaishnavi Structures Private Limited for an amount of Rs.1 crore.

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1. Housing Loan under A/c No.10110600001686 in the name of Mrs Bhavana S for an amount of Rs.95,00,000/-.

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1. nl-RRe Loan under A/c No.10110600001687 in the name of Mrs Bhavana S for an amount of Rs.5,00,000/-.

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It is further submitted that the key partners and mortgagors in the said account are also having liabilities towards the bank in three other accounts having total outstanding liabilities of Rs.56,52,679.81 as on 31.05.2021. The said accounts also declared as non-performing asset owing to the willful default and financial indiscipline by the borrower. Therefore, the Bank has right to recover the above outstanding Bank's dues in respective accounts for satisfaction of the personal liability from the sale proceed of the auctioned property. It is further contended that there is no illegality in reducing the reserve price and the same is permitted under law and the property was valued by an authorized valuer and there are no faults in the same. Respondent Bank contends that it has followed

s.A.No.11612022

every law and rules without any single laches to be specified and the present application is prima facie not maintainable. In view of the above facts and contentions, Respondent Bank has prayed for the dismissal of the appeal memorandum with exemplary costs.

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Upon service of notice, the 2nd Respondent who is Auction Purchaser entered appearance through his counsel and subsequently filed detailed objections to the appeal memorandum, inter alia, contending that the Hon,ble High Court of Karnataka granted liberty to the Appellant to approach this Tribunal by filing an appeal within a period of three weeks. Further, the time period has been fixed only to put the Appellant on terms by granting conditional liability and the Hon'ble High Court has not condoned delay, has not extended limitation, and has not directed that the appeal would be heard without reference to delay. As such, the appeal will also have to be tested on the ground of limitation. The Appellant has challenged the sale notice dated OL.O3.2O2I and the sale certiflcate dated 07.04.2021 issued by the Respondent No.1 Bank. As such, the period of 45 days prescribed under Section 17(1) of the SARFAESI Act, 2OO2 has expired and the present appeal is well beyond limitation and is liable to be dismissed. The other grounds, inter alia, urged by Respondent No.2 are, the Appellant has not made

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5.A.No.116/2022

payment within the time specified in Section 13(8) of the Act and hence the Appellant is not entitled to the relief sought; there was no interim order restraining the registration of the sale certificate on 08.11 .2021 as is apparent from the judgment of the Hon'ble High Court and the record of proceedings before this Tribunal; sale of the schedule property has finally concluded in favour of the Respondent No.2 and title to the same has^passed to the^Respondent No.2; upon transfer of title to the^{schedule propertythe} Respondent No.2 by way of the sale^{certificate,"no secured} asset" remains; any right to^{redemptionof the mortgagein} respect of the schedule^property stood^{extinguishedon the} issue of the sale certificate on^{07.04.2O21 and without} prejudice to the above, in the very least on registration of^the sale certificate on 08.11.2021.^{In terms of the same, when} the right to redemption^{is itself lost, the Appellantwould have} no right in respect of the^{schedule propertyand hence the} Appellant is not entitled to^{any relief in the present} proceedings; the alleged sums were^paid by the^Appellant after the^{period prescribed} in^{Section13(B) of the Act and} hence tender of such^{amount would have no consequence;} schedule^property has^{been brought to auction on many} occasions and it is only^now that^{it has been purchased by} Respondent No.2^{paying huge sum of Rs.6,21,50,000/- and} the Respondent No.2 being^{a bona fide purchaser, his interest}

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is required to be^protected; as per the^judgment dated 28.O9.2O2t of the Hon'ble High Court of Karnataka in W.A.No.94612021, the interim order restraining registration of the sale certificate was extended for a^period of four weeks from the date of the said^judgment dated 28.09.2021 and it expired on 26.10.2021. As such, there is no interim order in force restraining the registration of sale certificate. Respondent No.2 denies that the title to the property is free from any encumbrance and remains with the Appellant and the Respondent No.2 is the absolute owner, having complete title to the schedule property pursuant to the registration of sale certificate on 08.11.2021. In view of the above contentions and grounds, Respondent No.2 has prayed for the dismissal of the present appeal with costs.

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On the above background, I have gone through the available records, heard the arguments addressed by Learned Counsels appearing for both the sides, written arguments filed by the Appellant. The following points arise for my consideration

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(a) Whether the Appellant has made out the case to allow the appeal? and

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(b) To what relief, the parties are entitled?

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REASONS

After hearing the Learned Counsels of both the^parties and also on^going through the available^{materialson record, it} is observed that the Appellant has admitted^{availing of loan} from the Respondent Bank, loan^{account becomingNPAon} 30.03.2019, issuance of demand^{noticeand possession notice} under Sections 13(2) and 13(4)^{of the Act respectively,} issuance of several sale notices^{prior to issuance of the} impugned sale notice dated^{01.03.2021fixing sale on} 22.03.202L and issuance of sale^{certificate dated 07.04.2021} in favour of Respondent No.2.^{The sale notice under} challenge issued by the^{Respondent Bank to sell the schedule} property is its eleventh attempt. The^{Appellant insteadof} approaching the Debts^{RecoveryTribunalchallengingthe} impugned sale notice^{chose to file Writ Petition before the} Hon'ble High Court of^{Karnatakaat Bangalorein W'P'} No.6464l2}2l on 29.03.2021^{whichcame to be disposedon} 10.08.2021 reserving the^{liberty to the Appellant herein to} urge all contentions^{before the DRT and seek appropriate} relief under Section 17 of^{the SARFAESIAct within three} weeks from the date of^{receipt of the said order. The} Appellant obtained the^{certified copy of the said orderon} O2.Og.2O2l. As^per the^{order of the Hon'ble High Court of} Karnataka in W.P.No.5464l2O2t,^{the Appellant shouldhave} approached the DRT^{before 23'09.2021 on which day 3-week}

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period granted expired. The Appellant instead challenged the order dated 10.08.2021 passed by the Hon'ble High Court by filing a writ appeal in W.A.No.946l2021 on 07.09.2021 which was also disposed by the Hon'ble High Court on 28.09.2021 affirming the order passed by the Learned Single Judge in W.P.No.6464l2O2L. ln the said writ appeal, Hon,ble High Court granted liberty to the Appellant herein to approach the Debts Recovery Tribunal by filing an appeal within a period of three weeks from the date of receipt of certified copy of the order passed on that day and extended the interim order for a period of four weeks granted by the Hon'ble High Court in W.P.No.646412021 directing the Respondent Bank not to register the sale certificate. The Appellant obtained certified copy of the order passed in the said writ appeal on 18.10.2021. The Learned Single Judge while granting interim direction recorded in the order that a sum of Rs.54,00,000/shall be paid to the Bank on that day and an undertaking in the form of an affidavit shall be filed to pay the balance money on or before L5.04.2O2L. Appellant in the appeal memo has contended that the said amounts have since been paid and repofted the same to the court on 16.04.2021. The main contention of the Appellant is that the total amount as claimed by the Bank having been paid, the debt having been

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discharged, the mortgage stood^{redeemed and the security} agreement became unenforceable.^{Refuting thesaid} contention, Respondent^{Bank contended that Section 13(8) of} the Act mandates tender^{of the dues by the debtor/borrower} to the secured creditor at^{any timebefore the date fixed for} sale which in this^{casewas 22.03.2021.Sub-section (8) has} undergone a change and^{has been made more stringent,} requiring tender of^{dues to the secured creditor togetherwith} all costs, charges^{and expensesincurredby him at any time} before the "date of^{publicationof notice" for public auction} or inviting^{quotations or tender frompublicand private treaty} for transfer by way^{of lease, assignment or sale of the} secured assets.^{Therefore, on the dateof filing of the present} application, the^{entire proceedings underSection 13(4) of the} Act have come^{to an end and becomefinal by issuanceof sale} certificate under^{sub rule (7) of rule 9 of the rules on} 07.04.2021.

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In the^{judgment passedin W'A' No'946/2021,the} Learned Judges^{have observedstatingthal, "Nothinghas} been placed^{on rccord to demonsttateas to why an} altemative temedy^{of appeal is not efficacious, in the facts} and circumstances^{of the case. All contentions taised in the}

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writ appeal catT as well be raised in an appeal befote the Debts Recovery Tribunal. Besides that, the Leamed Single tudge^{in exetcise of discretionaryjurisdictionhas tefused to} interfere in the mattet and has rclegated the Appellant to the altemative rcmedy of an appeal. A diuision bench of this coutt in 'KSRTC YS. I(ARNATAKA STATE TRANSPORT AUTITORIIy, ILR 1983l{AR 436 has held that it may not be apprcpriate to intetfere with the disctetion exetcised by the Leamed SingleJudge in an inta Coutt appeal unless it is shown that exetcise of discretion is atbittary. ft is not the case of the Appellant that exetcise of the discretion by the Leamed Singletudge is arbitraty.',

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Further, in the order/judgment passed by the Hon'ble High Court of Karnataka in aforesaid Writ Petition/Writ Appeal, regarding condonation of delay, nowhere it is mentioned to exclude the time taken by the Appellant in prosecuting the above Writ Petition and Writ Appeal while computing the period of limitation in filing the application under Section L7 of the Act before the Tribunal. The Appellant in the present S.A. has challenged impugned sale notice dated 01.03.2021 and also sale certificate dated

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07.O4.2O2L. The Appellant has not^{preferred the application} under Section 17 of the SARFAESI Act within the^limitation period prescribed under the Act. There is a delay of L97 days in respect of sale notice and 160 days^{in respectof sale} certificate. The Appellant has not chosen even to^file condonation of delay application. On the said^groundalone, the present S.A. is liable to be dismissed. The argument^of the Counsel for the Appellant is that^{the period} of^limitation from 15.03.2020 to O2.1O.2021 be excluded as^{per order of} the Hon'ble Supreme Court. If that^{is so, even then, if we} count the date from 03.10.2021 after^{excludingthe aforesaid} period, then also, there was delay in filing the^present appeal, which was filed on 22.L2.2O21.^{No reasonable,} satisfactory or even a^{properexplanation} for^seeking condonation of such delay as stated^{was given by the} Appellant. The decisive factor^{in condonationof delay is not} the length of delay but sufficiency of a^satisfactory explanation. Therefore, such delay in^{filing the appeal cannot} be condoned. The limitation^{periodof 45 days as mentioned} in SARFAESI Act, 2OO2, has been^{extendedby the Hon'ble} Apex Court from time to time in suo^{moto WritPetition (Civil)} No.3 of 2020. However, the Appellant^{is not protected by the} same because such^{protection is only availableto the vigilant} litigant. The actions and inactions of^{the Appellant proved}

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that the Appellant had been sleeping on the rights. However, even if the delay is condoned having regard to the order of the Hon'ble Supreme Court as per submission of the Appellant's side, the Appeal lacks merit. The Appellant borrowed a sum of Rs.1 crore from the Respondent Bank and is represented by one of the partners of that Partnership Firm, which deals in the business of floriculture. The schedule property which was mortgaged with the Bank for availment of the loan in question bears No.17(old No,315), 15th Cross, Sadashivnagar, Bengaluru. However, the Appellant and the Guarantors to the aforesaid loan had failed to make payment to the Respondent Bank as a result of which the account of Bhavna Farms was declared as Non-Performing Asset on 30.03.2019 by the Respondent Bank. Demand Notice dated 05.07.2019 was issued to the Appellant's side under Section 13(2) of the SARFAESI Act by which they are required to make payment to the Bank within 60 days. Annexure-R1 is the Demand Notice. The said Demand Notice was delivered and the same would be evident from the track consignment record produced by the Respondent Bank. In spite of service of notice, the borrower and the guarantor neglected to make payment of the outstanding dues payable to the Respondent Bank. Finding no other option, the Respondent Bank issued Possession Notice dated 09.12.2019 under Section 13(4) of the SARFAESI Act and obtained constructive possession of

S.A.No.116/2022

the schedule^{property. The Possession Noticewas also} affixed on the conspicuous^{portion of the scheduleproperty'} A copy of such Possession^{Notice is produced by the} Respondent Bank and^{track consignmentrecordshows} delivery of the Possession^{Notice. The saidPossession Notice} was also^published in two^{daily newspapersdated} IO.12.2}lg viz. "Deccan^{Herald" and "Prajavani".Thereafter,} the Respondent Bank by^{Noticedated 01.01.2020intimated} the borrower and the^{guarantor that sale of the schedule} property would take place on 06.02.2020^{through e-auction} and the reserve^price of^{Rs.8.45crore was fixed. However,} on that day the^{property could not be sold for want of bids.} After that, another^{notice dated 01.03'2021 was issued by} the Respondent Bank intimating^{the borrowerand the} guarantor that the sale of the schedule^{property would take} place on 22.03.2021 and reserve^{price was fixed at Rs.6.21} crore. The e-auction was^{held and sale of the schedule} property was confirmed in favour of the^{auction purchaser for} a sum of Rs.6,21,50,000/-.^{Thus, itis seen that the} Respondent Bank i.e. secured^{creditor classified the loan} account as non-performing^{asset and thereafter whenno} repayment was coming, the^{RespondentBank initiatedthe} recovery^{proceedingsunder the SARFAESIAct. Auctionwas} conducted on several^{occasions,but failed due to want of} bids. It was at the^{11th auction, the sale took place and}

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Auction Purchaser deposited the required amount and subsequently the sale was confirmed in favour of the Auction Purchaser. It is, no doubt true, that the exercise of right of redemption is permissible before the execution of the sale in favour of the Auction Purchaser. In that view of the matter, once the sale was complete, it was not open to the Appellant to exercise the equity of redemption. The Respondent Bank stated that they have followed all the Sections and Rules and given ample opportunity to the Appellant, but the Appellant failed to comply with the^provisions of Section 13(8) of the SARFAESI Act. In the^present case, it is apparently clear that the Appellant failed to comply with the^provisions of Section 13(8) of the SARFAESI Act. The statute says that it is only where the dues of the secured creditor are^{tenderedtogether} with costs, charges and expenses before the^{date fixed for} sale that the secured asset is not to be sold. It is noticed that the Appellant's side took no steps, whatsoever, to^{pay the} outstanding dues to the Respondent Bank. It^mustfollow that the Appellant has failed to exercise the right^of redemption in a manner known to law until the sale was confirmed in favour of the Auction^{Purchaser.Therefore,it is} not^possible at this stage to re-open the entire^auction process. Further, the amended Section 13(8) of the SARFAESI Act has come into force in the^{year 2016 and the} same will certainly stare at the face of the^{Appellant. As per}

S.A.No.116/2022

the amended provision, stringent condition has been stipulated that the tender of dues to the secured creditor together with all costs, charges and expenses incurred by it shall be at any time before the date of publication of notice for public auction. That event happened before the institution of the subject appeal filed by the Appellant. In terms of the amended Section 13(B) of the SARFAESI Act, once the notice under Rule 9 of the Security Interest (Enforcement) Rules, 2OO2 is published, the right of redemption stands extinguished. In effect, in the present case, though the notice under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002 was issued on 01.03.2021 at the 1lth auction stipulating a 15-day notice period, it is of no practical utility to the Appellant as the opportunity to exercise the right of redemption given to the Appellant thereunder stood extinguished on 01.03.2021 when the notice under Rule 9 of Security Interest (Enforcement) Rules, 2002 was published on 01.03.2021. The Respondent Bank initiated the recovery proceedings under the SARFAESI Act, issued demand notice, took possession, conducted 11th auctions and before the 11th auction, the Respondent Bank obtained fresh valuation and kept reserve price of Rs.6,21,00,000/-. It was at this eleventh auction, the Respondent Bank could sell the secured asset on 22.03.2021. Then, the Respondent Bank after

S.A.No.116/2022

confirming the sale issued the sale certificate on 07.O4.2O2L. It was contended by the Respondent Bank that they followed all the law and rules and the last auction notice was as per Rules 8(6) and 9(1) of the Security Interest (Enforcement) Rules, 2002 as the earlier auctions failed, the Respondent Bank opted fresh valuation, then fixed reserve^price for the 11th auction. The valuation originally was of Rs.7,20,3O,OOO/on 24.02.2021 and at the time of 11th auction, fresh valuation was Rs.6,20,0O,246.25 on 12.Ot.2021 when earlier ten auctions failed. The securing of the best^possible by the secured creditor would be beneficial to both the^parties, but ideal situation does not arise in the auction, the Respondent Bank could get a buyer at the 11th auction and as such, the Appellant cannot make an issue of the valuation report.^Asa matter of fact, Section 13 of the SARFAESI Act is a complete code in itself in enforcement of security interest and the Appellant did not^participate in the auction sale.^{Further, the} Appellant also did not abide by the^{procedureunderSection} 13(B) of the SARFAESI Act. Despite availing^sufficient opportunity to^pay the due amounts, the^{Appellant has failed} to do so and as such, the right of the^{Appellant to seek} redemption stood forfeited. On the^{other hand,the Auction} Purchaser acquired legal and equitable^{rights on issuance of} sale certificate, which^{got furthercemented with passage of} time.

¶146

S.A.No.116/2022

¶147

¶148

Coming to the^question of issuance of sale notice at the 11th attempt, it is seen that 15 days' notice has been given to the Appellant. As provided under Rule 9(1) of the Security Interest (Enforcement) Rules, 2002, it^{is mandatory} in nature for serving, affixing and^publishing a notice of¹⁵ days for subsequent sale and the said requirement^{was met} by the Respondent Bank. The Appellant had availed a^loan and at the time of sanction of the loan, the^propertyin question was moftgaged in favour of the Respondent Bank. Then, the borrower committed default in the repayment of this financial facility^granted by the Respondent Bank.^Notice under Section 13(2) of the SARFAESI Act was issued. Even possession notice was also issued, affixed and published in two newspapers as required under the law. Thereafter, Authorized Officer of the Respondent Bank under the SARFAESI Act^proceeded to sell the^property in^question. Property could not be sold in first attempt and the efforts were fructified only when it was^put to auction at the 11th time. First notice of auction was issued on 01.01.2020 fixing the auction date on 06,02.2020. Reserve^price was fixed at Rs.8,45,00,000/-. The notice, admittedly, was for more than 30 days. Nobody came forward to^participate in the auction and the exercise went into futility. In this way, several auctions were held, but sale could not take^place due to want

S.A.No.116/2022

of bids. At the 11th auction held on 22.03.2021, the highest offer was received in a sum of Rs.6,21,50,000/- which was more than the reduced reserve price. Accordingly, the bid was accepted by the Respondent Bank. The Auction Purchaser paid 25o/o of the bid amount and subsequently deposited the balance amount. On receiving the full consideration as^per the auction, sale certificate was issued. Thus, in this instant case, the Appellant knows the material fact and is conscious of the legal rights in that matter, but fails to take up the matter at the earliest stage of the SARFAESI proceedings cohducted by the Respondent Bank while dealing with ten numbers of unsuccessful auction attempts, it certainly created an effective bar of waiver against the Appellant. The Respondent Bank then brought the secured asset for sale at the 11th attempt by inviting tenders while sale notice dated 01.03.2021 was also^given to the Appellant, The Appellant herein has neither objected to the said sale notice nor challenged the same earlier. Thus, the sale was held on 22.03.2021 in which Respondent No.2 herein was declared as successful bidder. Despite knowledge of the sale in^question, the Appellant was least bothered to safeguard the interest in the^property in^question. Subsequently, the sale in^questiongot confirmed and sale certificate was issued on 07.04.2021. The Respondent No.2 the successful bidder has complied with all the terms and

¶153

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¶155

conditions of sale, as a^{result of which sale was confirmedin} his favour. Upon issuance of the sale^{certificate,the salehas} become final. Till such^period, the^{borrowerhas never} intended to redeem the^property, nor has shown^{any interest} in depositing the loan amount, It is undisputed^{that the sale} in question was the eleventh sale,^{therefore,Respondent} Bank was required to serve 15 days' sale^notice to^the borrower/ guarantor before the auction of the^property, which was done.

¶156

With regard to the^question of non-^{reg istration of the} secured asset with the CERSAI,^{one couldsay} that^Section 26-D would not vitiate^proceedings that^were in^progress before its effective date. So far the^present case^is concerned, on examination of the materials on^record, it^is seen that security was executed vide^{DocumentNo'GNR-1-} 03217 -2OO 15-¹ 6 dated^{07 .} ll.2O^{15 before the Su b- Registra r,} Gandhinagar, Bangalore. Therefore,^{there was compliance} with Section 26-D for the security interest and^the requirement of registration was fulfilled.

¶157

¶158

The Appellant has urged that description of the property in question shown by the Respondent Bank in the notice issued under Section 13(2) of the SARFAESI Act and possession notice issued under Section 13(4) of the

¶159

S.A.No.116/2022

¶160

¶161

SARFAESI Act as well as sale notice and sale certificate do not match with each other. On^going to different documents having, description of the mortgaged^property, it can be seen that there was no material difference in description of the mortgaged property at different stages. The secured asset was correctly described with the measurement of 2440 sq.ft. in all the documents. Had there been any anomalies in the description of the measurement of the total area of the secured asset and existence of building over it, the Appellant could have^pointed out the same at the earliest while receiving the demand notice,^possession notice and several sale auction notices. But the Appellant did not take any steps with this regard and as such, the contention raised by thb Appellant did not have any force. A bare look of the description shows that sometime measurement of East to West boundary was shown as 51 feet in the demand notice wherein in the possession notice, the sale notice and the sale certificate, the measurement was^given from East to West boundary as 61 feet, but the total area was shown as²⁴⁴⁰ sq.ft. Such description is not likely to mislead anybody as Municipal No., Ward No. with description of the boundaries and the names of the owners and the location, etc.,^are specially mentioned. The mistake of scale^relating to^{51 and} 61 feet would not, therefore,^goes to the root of the^matter as to invalidate entire action taken under Section^{13(2) of}

5.A.No.11612022

the SARFAESI Act. The^{mortgaged propertyhas been} specifically described at different^stages and^{there is no} material different in the description of the^mortgaged property except the measurement as 51 feet is described somewhere and as 61 feet elsewhere.^{Therefore, the sale} that was conducted by the^{Respondent Bank cannot be held} to be illegal on the^ground of that description^{of the property} to be sold does not match with each other.

¶167

¶168

So far the grant of interim order is concerned, it^is seen that the Tribunal was^pleased to^{grant an interim order} dated 13.06.2019 in connection^{with the LA. No.1703/2019} arising out of S.A.No.299/2019 till the next date^{and the} same was extended from time to time for a^{limited period} which was operative upto 29.09.2020. The said^interim order granted earlier by this Tribunal was never extended thereafter till 25.05.2022. The Respondent Bank through^its Authorized Officer sold the mortgaged^property vide auction sale dated 22.03.2021. On that date, the interim order granted earlier by this Tribunal was not operative. Thus, the Authorized Officer of the Respondent Bank has sold the mortgaged property when the interim order was not operative. Therefore, the auction sale cannot be held to be illegal on the ground that it was conducted in violation of the interim order granted by this Tribunal. Hence, the auction

s.A.No.u6l2022

sale of the moftgaged^property conducted by the Authorized Officer of the Respondent Bank cannot be said to be illegal and void, as it was conducted during the^period when the interim order was not operative.

¶174

Coming again to the^question of^publication of sale notice in^question, it is seen that the Respondent Bank has published the same in English as well as in vernacular language which is very much legal as^per the^provisions of the SARFAESI Act. Therefore, no^prejudice has been caused to the Appellant. Compliance of such mandatory requirement cannot vitiate the proceedings. For recovery of certain amount, the Respondent Bank has sold the^property in^question for an amount of Rs.6,21,50,000/- and adjusted the amount outstanding^payable by the Appellant's side which is less than the 50o/o of the amount realized, Admittedly, there are several loan accounts availed by the Appellant's side. It was also an admitted fact that the Respondent Bank has sanctioned loan to one M/s Vaishnavi Structures Private Limited and^M/s Bhavana Farms on the same day after taking into consideration the value of the^property in^{question.The loans} were sanctioned by equally dividing the security of the secured asset. Thus, two loans taken by^{the Appellant's side} on different accounts on the same^{property kept as security} for both the loans. When both the loan accounts^{became non-}

S.A.No.116/2022

{

performing assets, the Respondent Bank as^per SARFAESI Act will settle the loan accounts certainly by selling the^property in question. Of course, it will be a different situation^when two banks sanctioned loans on the same^property, then both the banks will have an agreement called^pari-passu charges which means the lead bank will have the first say on the security, but here in this case, it was the only bank i.e. Bank of Baroda who had^granted the loans to the above-mentioned accounts by^getting mortgage of the same^{propertyin favour} of the Bank. So, the Respondent Bank has first charge over the property in^question and they have accordingly realized less than 50o/o of the sale amount of the^property in^question towards recovery of one of the said loan accounts. In order to enforce the security interest created in favour of the Respondent Bank, the bank as^per the^provisions of SARFAESI Act issued demand notice as well as^possession notice to the borrower, but the borrower did not come forward to settle their liability. Finding no other alternative, the Respondent Bank proceeded further and conducted sale of the mortgaged property for the realization of the outstanding dues payable to the Respondent Bank. As stated above, the Respondent Bank initially made attempts for ten times in order to sell the property in question, but failed due to want of bids. In every auction, sale notice was sent to the borrower and guarantor, but the Appellant kept silence and never raised any objections

5.A.No.116/2022

y'.*

as regard to the conduct of the auction sale by the Respondent Bank. Despite availing sufficient opportunities, the Appellant failed to come forward and pay the outstanding dues. On 01.03.2021, the 11th sale notice was issued and the sale was conducted on 22.03.2021, but despite knowledge of the sale auction notice, the Appellant was not bothered to safeguard the interest in the property. It was only when the sale got conflrmed and after issuance of sale certificate dated 07,O4.2O2L, the Appellant approached the court of law and the Appellant has a right to redeem the property in question prior to such issuance of sale notice, auction sale confirmation of sale, issuance of sale certificate, etc., but the Appellant did not avail the right to redeem the property in question. As such, when the sale in question was complete, it was not open to the Appellant to exercise the equity of redemption. Due to stipulation of stringent condition that the tender of dues to the secured creditor together with all costs, charges, expenses, etc., incurred by the bank shall be at any time before the date of publication of sale notice, the Appellant cannot now at this stage avail the right for redemption of the secured asset. Having said thus, in the peculiar facts and circumstances of the present case, this Tribunal does not deem it fit necessary to dilate further on the argument that the registration of the sale certificate in relation to the auction conducted under the SARFAESI Act is essential. Similarly, it is

S.A.No.116/2022

not necessary to examine other^{grounds urged by the} Appellant, considering the conclusion^{of this Tribunal that the} Appellant has failed to make a^{valid and legal tender to the} bank.

¶190

¶191

It is also observed that the^{Appellant,who was well} aware of the impugned^{Sale Notice,has not taken any steps} for bringing a buyer^{for a higher pricewhen it is allegedthat} the property has been^{sold for a song. The Appellantitselfhas} admitted in the^{appeal memothat the RespondentBank has} issued sale notice^{several times.The Appellanthas not} challenged those^{previous sale notices issued by the} Respondent Bank.^{It is also a fact that the propertycould not} be sold in the^{auctionsales conductedby the Respondent} Bank ten times^{earlier to recover its dues in an accountwhich} has been a Non-Performing^{Asset since 30'03'2019'Whenthe} Respondent^{Bank tookmeasures for sale of the schedule} property in its eleventh attempt,^{the Appellant is questioning} the measures^{even without preferring an appealwithin the} limitation^{periodprescribed under the Act and Appellantused} to file applications/petitions^{one after another in different fora} leading to multiplicity^{of proceedingsand frustrationof very} framework of legal^{system. This only showsthat the Appellant} is somehow bent^{upon obstructingthe measurestakenby the}

S.A.No.116/2022

Respondent No.1 which are found to have been initiatedⁱⁿ compliance with the^provisions of the Act and rules. The case laws relied by the Appellant are not applicable to the facts of this case, as the Tribunal hearing SARFAESI appeal is not required to follow the exhaustive^provisions as the measures taken by the Respondent Bank are in the nature of enforcement of security interest^proceedings and what^is expected by the Tribunal is to see whether there^has been^any violation in compliance of the^provisions of SARFAESI Act and Rules. It is also stated by the Respondent Bank that there are three connected loan facilities sanctioned/availed against the moftgage of same security, viz. OD loan A/c No.1011040000051 in the name of Vaishnavi Structures Private Limited for an amount of Rs.1 crore; Housing^Loan under A/c No.10110600001686 in the name of Mrs Bhavana^S for an amount of Rs.95,00,000/- and HL-AAA Loan under A/c No.10110500001687 in the name of Mrs Bhavana S for an amount of Rs.5,00,000/-. It is further stated by Respondent Bank that the key^partners and mortgagors in the said account are also having liabilities towards the bank in three other accounts having total outstanding liabilities of Rs.56,52,579.81 as on 31.05.2021. Those who take loan and avail financial facilities from the bank are duty bound to repay

¶196

S.A.No.116/2022

¶197

¶198

the amount strictly in accordance with the terms of^the contract. Any lapse in such matters has to be^viewed seriously and the bank is not only entitled but duty bound to recover the amount by adopting all legally^permissible methods. The Parliament enacted the Act because it was found that legal mechanism available till then was wholly insufficient for recovery of the outstanding dues of banks and financial institutions. Respondent Bank has, thus,^proved that the measures taken are in accordance with the^provisions of the SARFAESI Act, 2OO2 and the Security Interest (Enforcement) Rules, 2002 and therefore this Tribunal hereby declares and holds that the measures taken by Respondent Bank in enforcement of security interest are valid. Further, the Appellant has approached this Tribunal under Section 17 of the SARFAESI Act, 2002, challenging the impugned sale notice dated 01.03.2021 and the sale certificate dated 07.04.2021 with a delay, that too without filing any condonation of delay application. Viewed from all angles, the appeal filed by the Appellant fails and is therefore liable to be dismissed and is hereby dismissed. I, therefore,^pass following:

¶199

¶200

ORDER

¶201

In the result, S.A.No.116/2022 is dismissed.

s.A.No.116/2022

'.1

Interim order, if any, stands vacated. Pending IAs, if any, also stand closed.

¶207

There will be no order as to cost.

¶208

(Dictated to the Stenographer, after its transcription and necessary corrections, signed and pronounced by me in the Open Court on this 10th day of February 2023)

¶209

(}9

¶210

\inoo'

¶211

(rMTrAZ ALr) PRESIDING OFFICER DRT-I, BENGALURU

¶212

*ashfr

M S Bhavana Farms v. Bank of Baroda

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M S Bhavana Farms v. Bank of Baroda

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