Dismissed

G Corp Lotus Mall Private Limited v. Axis Bank

DRT9 Nov 2023SA/7/2023

Case brief

AI extract

What is this about?

This bench jointly disposed of a possession notice challenge and a sale notice petition. The court rejected claims regarding guarantor liability based on prior findings. It dismissed the sale challenge primarily as beyond limitation, noting the applicant failed to prosecute earlier proceedings in good faith.

What did the court decide?

Application challenging the sale notice dated 26.07.2022 is dismissed as barred by limitation. The earlier possession notice challenge is also dismissed.

G Corp Lotus Mall Private Limited versus Axis Bank — Banking and Recovery | DRT (2023)

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IN THE DEBTS RECOVERY TRIBUNAL –I AT CHENNAI

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Dated this 9^th Day of November, 2023

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PRESENT: SHRI A.S.JAYACHANDRA

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Presiding Officer

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T.S.A. No.11 of 2022 And

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S.A. No.7 of 2023

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T.S.A. No.11 of 2022

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G.Corp Lotus Mall Private Limited Having Regd Office at: #40/1A, 7^th Floor, Bassappa Complex, Lavelle Road, Bangalore – 560 001. [By the Ld. Sr. Counsel Shri. Om Prakash a/w Ld. Counsel Shri.D.Raja & Shri.B.Rajesh] . . . Applicant

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Versus

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M/s.Axis Bank Limited,

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Having Regd. Office at:‚Trishul‛, 3^rd Floor, Opp. Samartheswar Temple, Law Garden, Ellis Bridge, Ahmadabad 380006. [By the Ld. Sr. Counsel Shri. Arun Pandiyan a/w Ld. Counsel Shri.E.James and Shri. Ashish]

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M/s.Lotus Shopping Centers Private Limited, Having its Regd. Office at: Door No.15-8-441/50, Shop No.46, 1^st Floor, Yenepoya Mall, Kadri Road, Mangalore – 575003. [Exparte dt. 06.03.2023] . . . Defendants

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S.A. No.7 of 2023

. . . Applicant

Versus

M/s.Axis Bank Limited, Rep. by its Vice President Corporate Banking Branch, 2^nd Floor, Express Building, Queens Road, Bangalore – 560001.

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The Authorised Officer, M/s.Axis Bank Limited, Corporate Banking Branch, 2^nd Floor, Express Building, Queens Road, Bangalore – 560001. [By the Ld. Sr. Counsel Shri. Arun Pandiyan a/w Ld. Counsel Shri.E.James and Shri. Ashish]

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M/s.Lotus Shopping Centers Private Limited, Repd. By its Liquidator, Mr. Sanjay Kumar Mishra, Door No.15-8-441/50, Shop No.46, 1^st Floor, Yenepoya Mall, Kadri Road, Mangalore – 575003. [Exparte dt. 06.03.2023]

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M/s. Anushka Construction Private Limited,

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No.100/1, City Centre, Opp. Town Hall, JC Road, Bangalore – 560002. [By the Ld. Sr. Counsel Shri. Srinath Sridevan, Shri. G.L.Viswanath a/w Ld. Counsel Shri. Surya Teja]

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. . . Defendants

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: - O R D E R - :

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By this final order, TSA 11/2022 and the consecutive application in SA No.7/2023 is being disposed of together since the relief sought in SA 7/2023 would remain a sequel to the relief urged in TSA 11/2022. Therefore, this common order arises from the same set of facts and the grounds urged common to both the applications.

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This application challenging the possession notice dt 12.2.2020 issued by the 1^st defendant was initially filed before the Ld DRT-1, Bangalore. Consequent to the change in the pecuniary jurisdiction, the ld DRT-1 Bangalore had transferred the matter to this Tribunal. After transfer, this Tribunal also issued notices. D1 appeared through the Counsel and Defendant no-2 remained exparte as per the order dt 6.3.2023.

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1.0 FACTS LEADING TO THE CASE

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1.1 The applicant company submits that the 2^nd defendant company which owns immovable property at Mangalore intended to put up a Shopping mall there, with an estimated cost of Rs.301 crores. Towards this project, the 2^nd defendant approached the 1^st defendant bank for a term loan of Rs.150 crores which was sanctioned on 4.12.2012. The 1^st defendant asked the 2^nd defendant to furnish collateral security with 100% coverage for which the 2^nd defendant approached the applicant.

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1.2 This applicant agreed to stand as a guarantor for the said loan and also agreed to offer the collateral security on the immovable property bearing Sy. Nos.15/2 and 16, measuring 6.775 Acres, Situated at Kenchanahalli Village, Kengeri Hobli, Bangalore South, Bangalore. It is pleaded that the 2^nd defendant assured the applicant that they would get substitution of collateral security with lease rent

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discount and release the corporate guarantee which was also given by the applicant within 2 years, failing which the 2^nd defendant would indemnify the applicant.

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1.3 It is also pleaded that the 1^st defendant through its letter dt 27.12.2012 revised the sanctioned letter of the loan and stipulated that the loan amount would be disbursed after partial collateral security ensuring 125% collateral coverage. The 2^nd defendant created mortgage of its property on 16.2.2013 under a registered deed.

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1.4 This applicant had also executed certain documents in favour of the bank creating collateral security on 20.2.2013 at the request of 2^nd defendant. It is the case of the applicant that the guarantee executed was restricted to the value of the collateral security which is approximately Rs.95,91,36,750 only. Thereafter 2^nd defendant executed the memorandum of understanding dt 15.2.2013.

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1.5 As per the terms of the MOU dt 15.2.2013 the applicant approached the 2^nd defendant for release of the collateral security but the same was dodged on the pretext that they would release the collateral security upon completion of the project and after D2 executing the creation of lease rent discounting with defendant no-1.

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1.6 Applicant submits that the defendant no-1 issued a public notice dt 6.9.2018 found in the Udayavani Kannada Newspaper and the New Indian Express issues at the behest of the interim resolution professional appointed by the ld NCLT. The public notice records that the defendant no-1 initiated the proceedings against defendant no-2 and the IRP was appointed as per law.

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1.7 Upon enquires with the 2^nd defendant, the applicant came to know that defendant no-1 released the partial funds and because of this the project was not completed in the anticipated time. It also came to the knowledge of the applicant that the 2^nd defendant was forced to borrow money from another financier, lest the 2^nd defendant’s loan is not classified as NPA. Therefore 2^nd defendant raised

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additional loan of Rs.55 crores which was granted by the defendant no-1. The ever greening of the loan and delay in classification of NPA is against the RBI guidelines.

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1.8 It is also pleaded that this applicant came to know that the 2^nd defendant had also arranged a co guarantor which is a company by name Lingamaneni landmark Developers Private Limited (LLDPL) which stood as co guarantor by offering the immovable property and godowns measuring 21,446 square yards situated at Atmakuru Village of Guntur District, A.P.

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1.9 Consequent to the public notice dt 6.9.2018, this applicant filed a claim before NCLT as a financial creditor. Since there was no resolution plan forthcoming, the 2^nd defendant was ordered to be liquidated by the orders of NCLT dt 18.7.2019 and the liquidator is appointed.

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1.10 However the 1^st defendant issued a demand notice against this applicant dt 11.6.2019 calling upon the applicant to pay a sum of Rs.190,30,58,067/- alleging that the 2^nd defendant defaulted in repayment of the loan which account is classified as NPA as on 15.7.2017(As pleaded in Para-xviii of the TSA 11/2022).

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1.11 The applicant contends that the defendant bank released the 100% loan even without 100% collateral security as per the sanction letters. It is also pleaded that 2^nd defendant on 2.7.2014 requested for additional funding of Rs.70 crores against which defendant no-1 sanctioned Rs.20 crores on 16.1.2015 and extended the date of ‚commencement of commercial operations date‛ of the shopping mall project. This extension is alleged as fraudulent and the document is backdated. The defendant no-1 gave more importance to the recovery of interest than the success of the project. The additional funds procured from the private financier were adjusted towards the repayment of interest. On 24.5.2017 bank sanctioned Rs.55 crores and repaid the private financiers which was never disclosed to this applicant. This applicant was categorised as a defaulter. The 2^nd defendant defaulted ever since 2014 which fact was not intimated to the applicant. The further sanction of term loan-II on

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25.4.2017 was sanctioned despite default in the payment of Term Loan- I Term Loan-II was given to retire the NBFC borrowing to refinance the loan of defendant no-1. With these developments applicant submits that the 1^st defendant exceeded the limits and norms agreed under the initial sanction letter and violated the contractual obligations with this applicant.

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1.12 It is also pleaded that outstanding amount of Rs.190 crores sanctioned to the 2^nd defendant is capable of realising by selling the project property itself, which is worth more than Rs.300 crores. The defendant no-1 with a malifide intention to harass this applicant initiated SARFAESI proceedings.

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1.13 The applicant replied the demand notice. The bank rejected the contentions of this applicant vide their letter dt 11.7.2019 and issued the possession notice dt 12.2.2020. This notice is challenged in the instant application on the following:-

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2.0 GROUNDS

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2.1 The applicant contends that the initiation of the possession notice is arbitrary, illegal and the entire liability if any of this applicant is restricted to Rs.95,91,36,750/and therefore the possession notice issued demanding Rs.190,30,58,067/- as on 31.5.2019 is illegal and has no basis.

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2.2 It is also urged that defendant no-1 bank had released the funds despite the 2^nd defendant not ensuring 100% coverage in spite of the additional guarantee executed by M/s.Lingamaneni landmark Developers Private Limited.

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2.3 It is also pleaded that defendant no-1 as on 23.5.2014 disbursed Rs.100 crores as per the modified sanction letter dt 27.12.2012. Thereafter the bank stopped disbursement on the ground that 2^nd defendant failed to provide 100% collateral security. There is a clear collusion between the defendant 1 and 2 in not informing

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the applicant about change in the terms of the loan. Thus there is a breach of obligations of the agreement between the applicant and the defendant no-1 bank.

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2.4 It is also urged that this applicant cannot be held liable for any default after 23.4.2014 as per section 133 of the Contract Act. The applicant is not liable to pay the amount demanded in the possession notice. The default was committed by the borrower in the month of May 2014 and the defendant bank slept over till July 2017 by not classifying the loan as NPA. The applicant further submits that clause 3 of the deed of guarantee is also breached by the defendant no-1 and there is no liability to discharge the guarantee by this applicant.

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2.5 It is further submitted that the collateral security offered by the applicant was to be released back upon completion of the project by September 2014. Any extension or modifications to the original terms are not binding on this applicant as per section 135 of Contract Act. It for the lapses on the part of the defendant no-1 bank itself the project was delayed and the terms altered which does not bind this applicant.

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3.0 THE REPLY OF THE DEFENDANT NO-1

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3.1 In the statement of objections filed by the defendant no-1, the bank contends that defendant no-2 had maintained a current account since the year 2007. It requested for sanction of loan to a project and requested sanction of Rs.163 crores. Since the promoters of D2 were not from India, the bank made it clear that the exposure will be secured with collateral security equivalent to exposure to upfront. By the letter dt13.8.2012 bank sanctioned Rs.150 crores in principle. It made it clear that the debt equity ratio would be at 0.99:1. Final sanction of loan of Rs.150 crores as Term loan-I was accepted by the defendant no-2 as per the sanction letter dt 4.12.2012. The terms of loan were very clear. On 7.12.2012 defendant no-2 requested for revision of percentage of collateral security from 100% to 50% and also sought

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for revision of the rate of interest. The said request was considered and modification of the sanction letter of the term loan-I was issued dt 27.12.2012, which was accepted by D2. As per the modification instead of 100% collateral security upfront, it was agreed to disburse the loan on proportionality on the basis of 125% collateral security. Thus the terms of the loan agreement dt 2.1.2013 for a sum of Rs.150 crores came into force. The defendant no-2 was required to complete the documentation, create securities and comply with pre disbursement conditions. Thus the respondent no-2 agreed to create security of which the applicant is agitating. The deed of guarantee and the deed of mortgage was thus created by the applicant.

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3.2 The bank further submits that the defendant no-2 had also provided the commercial property as security belonging to Lingamaneni landmark Developers Private Limited on 23.4.2014. The case of the bank is that applicant created collateral security worth Rs.122 crores on 23.4.2014 and the Bangalore land parcel valued at Rs.95.91 crores and Guntur land parcel at Rs.26.49 crores thus Rs.97.50 crores was sanctioned as TL-I.

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3.3 It is the defendant no-2 who made representations that they would sell the Bangalore land parcel to generate the liquidity and also to sell the entire project to Black Stone. To keep the account afloat and to prevent the sale of Bangalore property defendant no-2 had taken additional loan of 55 crores on 25.4.2017 .

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3.4 The defendant no-2 defaulted and hence this defendant no-1 approached the Ld NCLT in CP(IB) No-66/BB/2018. The same was admitted vide order dt 30.8.2018. Insolvency resolution professional was appointed. Further by an order dt 18.7.2019 liquidation was ordered.

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3.5 This bank issued demand notice dt 11.6.2019 in terms of the deed of guarantee and deed of mortgage. A separate notice dt 11.6.2019 is also issued invoking the deed of guarantee. The same was replied by the applicant by making frivolous and untenable allegations. The same were rejected. Keeping in mind the

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purpose of collateral security, the possession notice is issued on 12.2.2020 which is also published in New Indian Express and Kannada Praba as required under Rule 8(2) of SIE Rules. Sale notice was also issued dt 27.2.2020 as per rule 8(6). It is their contention that bank had followed all the provisions of SARFAESI Act and Rules.

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3.6 While traversing on Para wise allegations of the application, the defendant no1 bank submits the circumstances leading to modification sanction letter of TL-I. It reiterates that applicant had executed the deed of mortgage and the deed of guarantee in respect of the Bangalore property.

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3.7 This bank is not a privy to any of the understanding between the Applicant and with Defendant No.2. It submits that the applicant was very much aware of the terms and conditions of TL-I and the modified sanction letter of TL-I. It is their case that once the entire collateral security of Rs.150 crores has been received, the entire loan would be disbursed to D2.

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3.8 The bank denies the allegations that the liability of the applicant is limited to Rs.95.91 crores only and the deed of mortgage nor the guarantee does not specify the same. The liability of the applicant is limited to the value of the Bangalore land parcel as per clause 20 of the deed of guarantee. The Market value of Bangalore property is between Rs.134,15,00,000 to Rs.141,34,00,000 as per the valuation reports obtained at the time of sanction.

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3.9 The bank also submits that it is not a privy to the memorandum of understanding between the applicant and defendant no-2. It denies that bank had only released partial funds by which the project was not completed in time. Since the defendant no-2 could not arrange 100% collateral security upfront, the entire loan of Rs.150 crores was modified to the extent that the loan would be proportionately released and the same would be in proportion to 125% collateral security. Only on 23.5.2014 the defendant no-2 disclosed that the cost escalation of the project and cost overrun due to design and regulatory requirements which were not attributable

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to this bank. Defendant no-1 has promptly disbursed the entire amount in proportion to the collateral security furnished by D2. The defendant no-2 could not provide the additional securities and thus the loan was not disbursed proportionately in accordance with TL-I sanction letter.

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3.10 It is the case of the bank that the overrun cost of the project was not met by unsecured interest free-funds which is a condition under TL-I sanction letter, the defendant no-2 was unable to service the EMIs. The respondent no-2 was introduced to Shriram Finance and Piramal reality Pvt Ltd to help in short term funding. It is at the request of the defendant no-2 such option was availed. The allegation of evergreening is baseless and the discretion is according to the master circular of the Reserve Bank of India. Therefore there is no violation of any provisions of RBI guidelines.

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3.11 Defendant no-2 provided the Guntur land parcel and availed additional facilities from M/s Shriram finance and Piramal Reality.

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3.12 The order of the Ld NCLT was appealed before the NCLAT and the same was dismissed. The applicant is a related party of defendant no-2. Mr.Ajantha Shetty was a director both in applicant and defendant no.2 Companies. The other common directors are Mr.Thomas Quinn and Prakash Mehra. The present application is motivated to defeat the rights of this defendant.

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3.13 The demand notice was issued on 11.6.2019 by following all the procedures. There was no unilateral decision. There are no grounds to seek discharge of the obligations under the deed of guarantee. The RBI circular dt 14.8.2014 permitted the banks to fund interest during construction on account of delay in the completion of the project and the cost overruns. Defendants 1 and 2 had a meeting on 14.12.2014 and additional term loan of Rs.20 crores was deliberated and sanction letter dt 14.1.2015 was issued as term loan (TL-II). The EMIs were to commence from October ‘2015. Despite all the support given by the defendant no-1, there were defaults in

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EMI and interest payments under the TL-I. The acknowledgement of debt dt 26.4.2017 is clear with regard to the dues of Rs.143,02,40,456/-. Applicant cannot plead the ever-greening of the loan. Applicant has not discharged its liability under the deed of guarantee.

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3.14 This defendant further points out that as per the clause 20 of the deed of guarantee this applicant is liable for the entire amount outstanding and clearly agreed to ‚the guarantor expressly waives notice of such excess drawl.‛

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3.15 It is also submitted that the answering defendant is not required to intimate the applicant about the default of borrower under the clause 6 of the guarantee agreement which specifically says that the bank has the liberty without notice to the guarantor to exercise its rights under the facility documentation. The clause 6 is reproduced in the statement of objections. Clause 9 of the guarantee deed is also pressed which empowered the freedom of borrower to avail further loans. Likewise clause 23 is also reproduced to which the guarantor agreed. It reads ‚the guarantor shall not be entitled to the right conferred on sureties notwithstanding contained in sections 133,135, 139 and 141 of the Indian Contract Act 1872‛. Thus it is pleaded that the applicant cannot seek waiver under the Act. The liability of the guarantor includes the value of the Bangalore land parcel and all the interest, premium on prepayment, cost and expenses as per clause- 20. Therefore it is not limited only to a Rs.95,91,36,750/-.

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3.16 There is no obligation to intimate the applicant about the defaults of the borrower. This applicant failed to be diligent and failed to follow up the status of the project. There are certain repetitions in the statements of objections. However the defendant no-1 prays for dismissal of the application.

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4.0 This matter is transferred to this Tribunal owing to the change in the pecuniary jurisdiction and this Tribunal directed the applicant to take notice to the defendants. Thereafter defendant no-1 is represented through the Counsel and defendant no-2 is

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place exparte vide order dt 6.3.2023. On 1.11.2023 the ld Counsel for the applicant submits that notices were duly served to the liquidator of the defendant no-2 and the matter is taken up after hearing the contesting parties.

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5.0 Heard the Ld Senior Counsel Sh.Om Prakash appearing for the applicant. The written synopsis is also filed on behalf of defendant No.1. The Ld Senior Counsel Sh.Aravind Pandian had submitted the arguments. Both the parties have filed their written submissions also.

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6.0 The applicants prayer is to set aside the possession notice dt 12.2.2020. From the order sheet it is seen that there is no stay order of further proceedings by the defendant no-1 bank. The authrorised representative of the defendant no-1 company has filed the affidavit of compliance along with the documents to show that all the procedures were followed as contemplated under the SARFAESI act and the Security Interest (Enforcement) Rules, 2002 which would be discussed in the course of this order.

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7.0 Having gone through the pleadings, documents furnished by the parties and the written arguments and further keeping in mind the arguments at the bar the only point that arises for consideration in this application is:-

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‚Whether the measures taken by the secured creditor is in accordance with the provisions of the SARFAESI Act and Rules or not? What order?‛

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8.0 Answers to the Point:-

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8.1 In order to establish the plea of the applicant that the amount of due mentioned in the possession notice i.e Rs.190,30,58,067/- as on 31.5.2019 cannot be the liability of this applicant being the guarantor, the Ld Senior Counsel for the applicant had invited the attention of this Tribunal to the sanction letter, the modification letter, the deed of guarantee and other documents.

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8.2 It is submitted that the deed of guarantee dated 20.02.2013 is the basic document by which the applicant had executed the guarantee to the limited extent. He insists that Para-20 of the guarantee deed is the concussive point which clears the entire doubt. The Possession Notice issued specifying the amount of debt as binding to be at Rs.190,30,58,067/- as on 31.05.2019. This amount is the rallying point for the dispute. According to the Ld. Sr. Counsel for the Applicant, the liability is fixed at Rs.95,91,36,750/- only along with the incidental costs mentioned therein. Therefore he submits that the amount mentioned in the Possession Notice is highly arbitrary and against the documents entered into between the parties. Para – 20 of the guarantee deed is reproduced for the proper understanding of the dispute.

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‚The liability of the Guarantor hereunder shall be to the extent of the value of the collateral property present estimated value being Rs.95,91,36,750/- plus all interest, premium on prepayment or on redemption, costs, expenses and other monies payable by the Borrower to the Bank under the Facility Documentation or any other letter or deed. Should there be any excess drawings of the said Credit facility by the Borrower over and above the initial limit sanctioned to the Borrower, for any reason whatsoever, the Guarantor shall be liable for the entire amount outstanding and the Guarantor expressly waive notice of such excess drawal.‛

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8.3 The Ld. Sr. Counsel Shri. Om Prakash submits that in view of the clause 20, the liability cannot be fastened more than what is specified in the agreement.

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8.4 On the other hand in the written arguments furnished by the Defendant and much argued by the Ld. Sr. Counsel Shri. Aravind Pandian for the Bank, it is controverted that the communication dated 11.06.2019 itself had specifically notified to the borrower and the guarantors about the Term Loan facility of Rs.150 Crores, sanctioned to the borrower dated 04.12.2012 modified on 27.12.2012 and further modified on 14.01.2015. He further submits that the same made it clear that the borrower was sanctioned with short term loan on 25.04.2017, which is called as credit

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facilities. It is further notified to this applicant that equitable mortgage of the title deeds by way of deposit was created and the liability cannot be weaned away. It is also pointed out that both the guarantors were put to notice that if they were to fail to clear the demanded sum, the bank would initiate the proceedings of foreclosure and sale of the mortgaged immovable properties and 15 days time is given to the guarantors, failing which legal proceedings were cautioned.

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8.5 In the written arguments, the Defendant No.1 Bank submitted that the account of the 2^nd Defendant was classified as NPA on 15.06.2017 and demand notice was issued on 11.06.2019. This applicant made an untenable reply to the demand notice vide their letter dated 26.06.2019. The Bank vide its letter dated 11.07.2019 had duly replied the applicant that they have considered the reply and rejected the contentions that the guarantee deed stood discharged. It invited to the clauses of the guarantee deed dated 20.02.2013 and notified that the applicant undertook to pay the bank all the amounts payable by the borrower under the facility documentation together with interest and other charges. It also made clear that the guarantee is the continuing one and to remain in force and effect until the credit facilities have been repaid to the complete satisfaction of the bank. It further informed the applicant that the borrower has committed the defaults and as a guarantor the liability remains jointly and severally.

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8.6 The Ld. Sr. Counsel also argues that the defendant bank had issued the demand notice after completing all the formalities and by complying the procedure as prescribed under Rule 8(1) and (2) of the SIE Rules, of which the same will be dealt separately.

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8.7 The Ld. Sr. Counsel for the Bank submitted that the demand notice is issued concerning the TL-1 loan only. The mortgage extended only to TL-1. He further submits that the applicant cannot now evade the obligations under the deed of mortgage.

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8.8 It is also further argued by the Defendant that the amounts received from LLDPL were adjusted to TL-2 based on a settlement with the other mortgager namely LLDPL. The Respondent Bank is entitled and justified to adjust the amounts as per the settlement reached, which specified ‚towards any of the outstanding amounts payable by Lotus Shopping Centres Pvt. Ltd.‛ and thus met the obligations towards TL-2. According to the Defendant bank, this applicant cannot question nor has the locus. It is also made clear in the written argument that the applicant failed to argue this SA for more than three years before the Ld. Predecessor DRT, Bangalore and the intention was only to delay the enforcement action. The Ld. Sr. Counsel prays for dismissal of the application.

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8.9 In view of the above Rival contentions argued by the Ld. Sr. Counsel on both the sides, this Tribunal is to find out whether there has been any limited liability to the extent of Rs.95,91,36,750 only arising out of the deed of guarantee dated 20.02.2013 executed by the present applicant. Copy of the deed of guarantee is furnished at Annexure A4 to the application. The Ld. Sr. Counsel Sh. Om Prakash submits that Section 133 of the Contract Act discharges the guarantor if there is any variance or alteration in the terms of contract between the principal and the creditor, without the guarantors consent. According to him there was variance in the contract, since the borrower who had failed to provide 100% collateral security faced the stoppage of disbursement of further loan by the bank. At that juncture itself i.e. during 27.12.2012 the bank ought to have declared the loan account of the 2^nd Defendant as NPA. There was collusion between the Defendants. It is submitted that the guarantee deed provides that in case of the creditor committing any act inconsistent with the rights of the guarantor or fails to perform any Act that his duty to the guarantor requires him to do in such an eventuality the guarantee is discharged – as pleaded in the Page-24 of the application.

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8.10 It is seen from the recitals at Para-d of the guarantee deed that the guarantor at the request of the borrower and in consideration of the credit facility to the

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borrower, agreed to execute the guarantee deed. The guarantor agreed to indemnify the bank towards the dues and the monies payable under the loan agreement.

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8.11 Para-5 of the stipulations in the guarantee deed shows that the bank would be at liberty without the consent or concurrence of the guarantor to vary, alter or modify the terms and conditions of the credit facility documents or the security documents. It is also specified therein that the bank is at liberty to dispense with or release any of the securities furnished or required to be furnished by the borrower and the liability of the guarantor shall in no manner affect such variations alterations and modification, waivers or dispensation, etc.

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8.12 Para-9 of the guarantee deed shows that the guarantor agrees and declares that the borrower would be at his liberty to avail further loan from the bank or any other financial institution in addition to the credit facility already granted. Para-10 of the deed further makes it clear that the guarantee would remain in force and effect notwithstanding any arrangement which may be reached between the bank and the other guarantors from the liability. Para-17 further makes clear that the guarantee deed is irrevocable and the obligations of the guarantor shall not be conditional on the receipt of any prior notice by the guarantor or by the borrower and the demand notice by the bank as provided under this deed would be the sufficient notice to the guarantor.

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8.13 The Ld. Sr. Counsel Sh. Om Prakash emphasises on Para-20 of the guarantee deed and submits that the estimated value of the properties mortgaged is the limit of the guarantee. The said Para-20 of the deed reads as under at the cost of repetition.

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redemption, costs, expenses and other monies payable by the Borrower to the Bank under the Facility Documentation or any other letter or deed. Should there be any excess drawings of the said Credit facility by the Borrower over and above the initial limit sanctioned to the Borrower, for any reason whatsoever, the Guarantor shall be liable for the entire amount outstanding and the Guarantor expressly waive notice of such excess drawal.‛

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8.14 Para-20 itself makes it clear that the extent of the value of the collateral property. Present (the then) estimated value is shown along with the other incidentals expressed therein. It is also makes it clear that should there be any excess drawings by the borrower over and above the initial sanctions for any reason whatsoever, the guarantor consented to be liable for the entire amount outstanding and that the guarantor expressly waives notice of such excess drawal.

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8.15 Furthermore, stipulation 23 of the agreement had waived the rights under Section 133 to 135, 139 & 141 of the Indian Contract Act. The Applicant Company had clearly read these stipulations before signing this guarantee deed. Section 133 of the Contract Act mandates that any variance made without the sureties consent in terms of the contract between the principal and the creditor discharges the surety as to transactions subsequent to the variance. In the initial contract itself the guarantor had given consent to the variance or variations to the description of the borrower and the bank as could be seen from stipulation 9 and further confirmed that the guarantee deed shall not be affected or vitiated in any manner in case of the borrower availing further loan or other facilities from the Bank. This being the initial contract to which the guarantor had consented to allowing both the borrower and the bank and permitting them to cause variance to the terms of the initial credit facility documents, cannot now plead or otherwise contend that the variance alleged is without the consent of the guarantor – Applicant.

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8.16 It is also seen, the stipulation at Para-23 of the deed makes it clear that the parties to the deed were aware of the legal position and the guarantor had volunteered to the conditions concerning his rights under Sections 133 to 135, 139 & 141 of the Contract Act. Having allowed the bank to grant additional credit facilities, to the borrower under the very deed of the guarantee, as stipulated in Para-5 and 9 of the guarantee deed, now cannot contend that the Bank had granted additional facilities without the consent of the present Applicant either in granting the TL-2 facilities or ever greening of the account without the knowledge of this Applicant. It is relevant to note and quote the legal position from Page 1157 of the Indian Contract Act, Manohar & Chitaley, 1^st Edition (2014) [S.33N2] to the notes of Section 133 of the Contract Act reads as under:-

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‚The rights of the surety as laid down under Chapter VIII of the Contract Act can be varied by entering into a contract and would be subject to the terms of such contract. The surety by an agreement can given up the rights available to him under Sections 133, 134, 135, 139 and 141 of the Contract Act provide that it is not hit by S.23 thereof. Such consent is being entered into between the principal debtor and the creditor. In other words the surety can waive his rights available to him under the various provisions contained in Chapter VIII of the Contract Act by making provisions in the contract agreement to that effect. Such an agreement would not be opposed to public policy because public policy is not to defeat the debt of the creditor but to ensure that the money of the creditors secured and recoverable in accordance with law.

¶117

Where the cause in the guarantee agreement clearly stipulated that notwithstanding any variation made in terms of the arrangement of any composition between the bank and borrower, the guarantor shall not be relieved or discharged of his obligations under the guarantee and in the event of such variation or composition or promise the guarantor shall be deemed to have consented the same. It was held that by the use of the expression ‚The guarantors shall be deemed to have concented to the same‛ in clause of the guarantee agreement it could be said that the

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¶119

guarantor had agreed to waive his rights available under Sections 133, 137, 139 & Section 141 of the Contract Act.

¶120

Consequently on variation made in the terms of the Contract unilaterally by the borrower with the bank, guarantor cannot plead discharge of surety.‛

¶121

8.17 The Ld. Sr. Counsel Shri. Om Prakash contends that the liability is clearly stipulated at Rs.95,91,36,750 plus the other incidentals as mentioned in Para-20. The sentence at Para-20 is that the liability of the guarantor shall be to the extent of the value of the collateral property, present estimated value being Rs.95,91,36,750/plus the other incidentals. What is to be understood from such employment of the words is that the guarantor’s liability shall be to the extent of the value of the collateral property. The then value was Rs.95,91,36,750/- plus the other incidentals as on 20.02.2013. The guarantor allowed to such an extent of the value of the property. The value of the property fluctuates according to the market conditions and changing times. Therefore, having mentioned that the present value estimated does not fixes forever the value mentioned therein. This Tribunal is unable to accept that the liability is limited to the figures mentioned therein. In fact the liability of the applicant was allowed to vary from time to time according to the market conditions as per the guarantee deed. Thus the issue regarding the liability of the guarantor to the sum mentioned in Para-20 cannot be accepted as limiting to the same to the fixed value of the property as on the date of the guarantee deed agreement and Para-20 of the deed having allowed such variations to which the applicant is a party, he cannot plead otherwise to accept his contention.

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9.0 Measures :-

¶123

9.1 The first contention of the Applicant is that the there is no proof of delivery / service of the Possession Notice. The second contention is the affixture is not in accordance with Rule 8(1) of the SIE Rules. The Ld. Sr. Counsel appearing for the applicant states that there has been no compliance of Rule 8(1) of SIE Rules. Rule

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¶125

8(1) mandates the authorised officer to take the possession by delivering the Possession Notice prepared as nearly as possible in appendix IV to the borrower and by affixing possession notice on the outer door or at such conspicuous place of the property. Rule 8(2) also mandates that the same shall be also be published as soon as possible and not later than seven days of taking possession in two leading newspapers including the one in vernacular. Rule 2(A) provides for service of such notices through electronic mode in addition to the procedure under sub-rules (1) and (2).

¶126

9.2 In the written submissions filed by the Defendant No.1 it is submitted that the Possession Notice dated 12.02.2020 was issued to the applicant and was also sent through e-mail on 14.02.2020. The same was also dispatched through the Registered Post and was delivered.

¶127

9.3 In the affidavit of compliance filed by the Defendant No.1 is perused. The contentions are examined. Page 115 of the application is the copy of the possession notice which is dated 12.02.2020. The documents produced by the Defendant No.1 shows that on 14.02.2020 a letter is addressed by the Authorised Officer to the Applicant, which copy is sent through Speed Post and copies are also addressed to the liquidator of Defendant No.2 Company and its Directors. It is also seen from Page – 15 of the compliance affidavit that an e-mail is addressed to the Applicant Company, which copy is produced. Rule 2(A) is complied. Page – 23 shows that the same was dispatched on 19.02.2020 by speed post and the acknowledgement is at Page-24.

¶128

9.4 The Publications were done in the Indian Express dated 17.02.2020 and Kannada Publication at Page – 35 is also produced by the Respondent. As regards publication, it is submitted in Para-8 of the affidavit of the AR, that such publication was effected in New Indian Express and Kannada Prabha issues dated 17.02.2020. Copies of the same are produced at Annexure A5. After perusal of the documents,

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¶130

this Tribunal is unable to accept the contentions of the Ld. Sr. Counsel that there has been violation of Rule 8(1) and 8(2) of the SIE Rules. The contention that there is no proof of delivery of the Possession Notice is dispelled by the acknowledgement under speed post produced. Furthermore there are no specific grounds urged with regard to the non delivery of the possession notice.

¶131

9.5 As regards affixation of the Possession Notice as per Rule 8(1), this Tribunal perused the affidavit of compliance at Page – 25. It shows the photographs and Page-27 shows that a display board is installed at the schedule property and the photographs have the date of taking the same as 12.02.2020 at Page-31. Copy of the Possession Notice so affixed is at Page-32A and the Mast Head of the newspaper ‚Deccan Herald‛ of the issued dated 12.02.2020 is held across the photo at Page-32 of the affidavit of compliance filed by the Defendant No.1. It cannot be said that there has been no affixture as contended by the Applicant. In this context the Defendant No.1 relied on Mahesh Industries Pvt. Ltd. And Others V. Karur

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Vysya Bank Ltd. (2019 SCC Online All 4946) to canvass that once the receipt, publication and affixation of Possession Notices admitted or to put it different not denied by the petitioners, there is no obligation on the bank to prove the affixation.

¶133

9.6 It is also pointed out in the written arguments filed by the Defendant No.1 that this applicant did not argue the matter for more than three years after filing of the petition in the month of March 2020 before the Ld. DRT, Bangalore till it was transferred to this Tribunal. From the Order Sheet of the Ld. Predecessor Tribunal, it is seen that no stay is granted with regard to the further proceedings by the Defendant NO.1 Bank pursuant to the Possession Notice.

¶134

9.7 Though in the written arguments, it is contended that there is no compliance of Rule 9, this Tribunal is concerned with the Possession Notice only, which is challenged on the non compliance of the procedure under Rule 8 of the SIE Rules on the main plank of the quantum of liability. The same is examined in terms of the

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¶136

guarantee deed as above. This Tribunal finds that there has been no affront caused to any of the provisions under SIE Rules. In view of the above, this Tribunal is unable to sail with the contentions of the applicant to allow the application to quash the possession notice dated 12.02.2020. Consequently, the following

¶137

: - O R D E R - :

¶138

TSA 11 of 2022 stands dismissed. Parties to bear their own costs. Copy of the order be communicated to the parties concerned.

¶139

The sequel application in SA No.7/2023 is taken up for disposal, which is filed with the same set of facts.

¶140

SA No.7 of 2023

¶141

10.0 Facts in SA 7/2023 :

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10.1 The facts leading to the issuance of Possession Notice dated 12.02.2020, is already discussed in TSA 11/2022. Thereafter, the defendants 1 & 2 herein had issued the sale notice dated 26.07.2022 and the sale concluded on 19.08.2022. The successful bidder is the 4^th Defendant.

¶143

10.2 The applicant challenges the sale notice as well as the sale held on 19.08.2022 and prays for declaring the same as null and void. It is submitted that this application is filed on 30.03.2023 after the period of limitation. The Applicant contends that it has challenged the earlier sale notice dated 10.08.2021 issued by the 2^nd Defendant in WP No.15632/2021 before the Hon’ble High Court of Karnataka and obtained an interim order, which was complied. Thereafter the said writ petition was dismissed by an order dated 16.03.2023 with a liberty to approach this Tribunal to challenge the measures under SARFAESI Act. As such it is pleaded

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that the period spent in pursing the remedy before the Hon’ble High Court be excluded.

¶146

10.3 The facts leading to the Possession Notice is already discussed. However, it is pleaded while the (SA 95/2019) renumbered as TSA 11/2022 was still pending, the 1^st Defendant issued a Public Sale Notice dated 10.08.2021 undervaluing the property at Rs.101.25 Crores, while the market value stood at Rs.250 Crores. The said action was challenged in WP 15632/2021 before the Hon’ble High Court. The said order disposing the WP dated 16.03.2023 is also produced. The prayer therein is as follows:

¶147

‚This Writ Petition is filed under Articles 226 and 227 of the Constitution of India Praying to Quash the Notice dated 10.08.2021 vide Annexure-P. Issued by R-1. Quash the notice dated 11.06.2019 vide Annexure-L Issued by R.1 and Etc.‛

¶148

10.4 However the writ petition was disposed of as not maintainable and it is pleaded that liberty is given to the applicant to urge all the grounds before this Tribunal. Hence the present petition challenging the sale notice dated 26.07.2022 and to hold that the consequent sale held on 19.08.2022 as null and void.

¶149

11.0 GROUNDS :-

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(a) The measures taken are without jurisdiction, lack merits and are untenable.

¶151

(b) SIE Rules not followed.

¶152

(c) The mortgage is limited as per the terms of 1^st Loan of Rs.150 Crores, for which the applicants executed the deed of guarantee limiting their liability to the specific extent.

¶153

(d) Respondents fraudulently inserted the clauses in the deed of guarantee dated 20.02.2013 and the same are unjust and illegal. The applicant cannot be held liable for the liability exceeding Rs.60 Crores term loan based on the letter of credit.

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(e) The deed of guarantee cannot be read in isolation and can only be read in conjecture with the simple mortgage by way of deposit of title deeds. The applicant was kept in dark with regard to the external financial transactions of the borrower. It is also pleaded that clause 3 of the deed guarantees to the extent of Rs.150 Crores which was sub limited as two categories i.e. letter of credit and buyers credit at Rs.60 Crores. The buyers credit is not explained. Therefore, Letter of credit to the extent of Rs.60 Crores is the only limit. Clause 9 of the deed of guarantee is fraudulently inserted by the first defendant. Though the agreement was executed for Rs.150 Crores, the reading of clause 3 clearly indicates that what has been agreed to be advanced is Rs.60 Crores and in future the Rs.60 Crores. Therefore this is against the public policy unenforceable in view of the Sec 23 of Indian Contract Act.

¶156

(f) The applicant waived the rights available to him under Sections 133 to 135, 139 & 141 of the Act by introducing clause 23, which is illegal and void.

¶157

(g) Measures under Section 13(4) of the Act could be invoked when there is a defined loan amount. The applicant cannot be termed as defaulter. The 3^rd Defendant (Borrower) has enough assets and the applicant was kept in dark with regard to other loan transactions.

¶158

(h) Mere inclusion clause 9 of the guarantee deed cannot attract Section 128 of the Contract Act.

¶159

12.0 Reply by Defendant No. 1 & 2 :-

¶160

12.1 In the reply it is contended that:

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(a) The applicant filed the WP being aware of the jurisdiction of DRTs

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(b) Present application is barred by limitation.

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(d) The earlier application challenging the Possession Notice was not argued for three years.

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(e) Earlier filed multiple SAs before DRT, Bangalore challenging multiple sale notices.

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(f) Applicant approached the Hon’ble High Court despite having knowledge of the alternate remedies open to him.

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(g) Exparte stay was obtained dated 14.09.2022 in the WP, now vacated.

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(h) The present application is beyond the limitation period of 45 days from the date of measures taken i.e. 26.07.2022. The applicant cannot take shelter in the backdrop of writ petition.

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(i) While the application challenging the possession notice was pending no interim order was granted in favour of the applicant to stall the sale and he failed to argue the matter. At page 7 of the said SA, the applicant had stated that he is willing to settle the account.

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(j) Earlier filed three SAs bearing Nos. 199, 226 and 280 of 2021 challenging the sale notices dated 15.07.2021, 10.08.2021, 06.08.2021 and SA No.332/2021 concerning the sale notice dated 13.10.2021. Having challenged earlier the sale notices, malafidely and in a fraudulent manner delayed the process of recovery. In fact an advance copy was served to challenge the same before the DRT, Bangalore also, which was also the subject matter in IA No.1/22 in WP. He has not filed the requisite court fee before the DRT.

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(k) Present application is liable to be dismissed for not disclosing the earlier SAs.

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(l) Applicant has brought contradictory averment as afterthought mis interpreting the deed of guarantee.

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13.0 While giving the elaborate facts of the case and grounds, it is emphasised that the auction was finalised to the bidder Def. No.4 and received sale consideration of Rs.82,12,00,000/- after deducting 1% of the TDS and the same is confirmed in favour of the Def. No.4 on 28.03.2023. The Defendants 1 & 2 could be

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successful only in the sale conducted after several attempts and sale notices having been issued earlier remained in futility. The D3 and the present applicant are having common directors.

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14.0 It is submitted that the WP No.15632/2021 was dismissed by an order dated 16.03.2023 observing the conduct of the applicant who was dodging the issue and no adverse observations were made against the D1 & D2 in the final order. Sale was concluded on 28.03.2023 and sale certificate was registered bearing No.BMH-113793-2022-23 Stored in C.D.No.BMHD1886 of Book-I before the Office of the SubRegistrar Bommanahalli Bangalore.

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14.1 It is submitted that relief is not maintainable since sale took place prior to filing of the application. It is also submitted that a balance of Rs.68,14,77,914/along with interest is still the balance owed by the applicant with respect to TL-1. All the averments made in the petition are denied as not binding and that the true accounts revealed that there is still a balance and the proceeds are adjusted to TL.1 only. This Defendant explains the terms and meanings and effect of the terms of the guarantee deed in a detailed response. The documents annexed with the reply consists of the copies of the final order in WP 15632/2021, the earlier pleadings in the SAs filed by the applicant and the advance copy of the unnumbered IA which intended to challenge the sale notification, the sale certificate dated 28.03.2023, the details of the loan application and various other documents including the copy of the publication of the sale notices published in financial express and Kannada newspaper Samyukta Karnataka.

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15.0 Reply of the 4^th Defendant :-

¶180

15.1 The 4^th Defendant submits that it is a construction company invested a sum of Rs.81,12,00,000/- in the sale conducted and also spent the other expenses as a

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bonafide purchaser. This Defendant is not bound to examine the merits and he cannot be subjected to vicissitudes of litigation as held by the catena of decisions.

¶183

15.2 However it was submitted that the present SA is filed belated as an abuse of process of law to trample the rights of this Defendant. The chronology of events is furnished. The impugned sale notice is 27.06.2023. IA was filed before the Hon’ble High Court of Karnataka to amend the prayers on 05.01.2023. The WP was dismissed on 16.03.2023 the present SA is filed on 30.03.2023. Thus defendant submits that the sale notice ought to have been challenged on or before 09.09.2022. Despite the knowledge, he did not approach this Tribunal till 30.03.2023. It is made clear that the liberty granted if any by the Hon’ble High Court was to the extent of the prayers contained in the said WP. There was no extension of time granted by the orders of the Hon’ble High Court. The in-ordinate delay of 202 days cannot be condoned by this Tribunal.

¶184

15.3 This Defendant in his reply had also summarised the facts of the case which are superfluous on record. The observations of the Hon’ble High Court is also culled out.

¶185

15.4 It is submitted that this Defendant had paid the entire bid amount and the sale certificate dated 28.03.2023 is issued in its favour. This defendant prays for dismissal of the SA.

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16.0 REJOINDER :-

¶187

16.1 In the rejoinder the facts are reiterated by the applicant. It is submitted that the 1^st Defendant received certain sums from the corporate guarantor and the total recovery is Rs.157 crores. Despite the same Defendants 1 & 2 are dragging the assets of this Applicant. The IA filed in the writ petition shows that applicant challenged the sale of the properties and also the possession notice by an order 12.09.2022 first defendant was restrained from entering into any private negotiation

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subject to this Applicant depositing Rs.10 Crores. When this applicant approached they came to know about the auction held on 26.07.2022 in favour of the 4^th Defendant. This information was concealed to the applicant which proceeded with the sale reducing the value of the property. This applicant filed another application before the Hon’ble High Court of Karnataka for stay of further proceedings including the confirmation of sale dated 26.07.2022. The Hon’ble High Court by an order 28.09.2022 restrained the first defendant from confirming the auction sale till the next date of hearing. This order was extended till the next date of hearing. An amendment application was also filed in the WP.

¶190

16.2 Filing of writ petition cannot be termed as a tactic to initiate false litigation. Every effort was made to get the matter listed.

¶191

16.3 It is also contended that there was no security interest is created as per the rejoinder. It is contended that the averment of defendants that this SA is filed beyond the period of limitation is incorrect since the writ petition was dismissed directing the applicant to approach this Tribunal.

¶192

16.4 In both the rejoinders filed to the WS of D1 & D2 and that of the D4 the applicant justifies the actions and further submits that the WP filed before the Karnataka High Court empowers and reserves the liberty with the applicant to urge all the grounds before this Tribunal in challenging the sale notification.

¶193

17.0 Heard the Ld. Sr. Counsel Shri. Om Prakash for the applicant. On behalf of D1 & D2, the Ld. Sr. Counsel Shri. Aravind Pandiyan along with the Counsel on record have submitted their arguments. The D4’s case is argued by the Ld. Sr. Counsel Shri. Srinath Sridevan and G.L.Viswanath along with the briefing counsel Shri. Suriya Teja. Perused the pleadings and records. The written submissions of the arguments are also perused.

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18.0 Points for consideration :-

¶196

In the above context and after hearing the Ld. Sr. Counsel on either side the following points arise for consideration in this application.

¶197

(a) Whether the application is barred by limitation and what order?

¶198

19.0 Answers to the Points – (a) :-

¶199

19.1 Section 17(1) of the SARFAESI Act Provides for the Limitation in Challenging

¶200

the measures initiated under the SARFAESI Act.

¶201

Section 17(1) reads as under:-

¶202

(1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, 1[may make an application along with such fee, as may be prescribed] to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measures had been taken:—

¶203

The Act is very clear. The application is to be filed before the DRT within 45 days from the date on which such measure had been taken.

¶204

20.0 The Ld. Sr. Counsel Shri. Om Prakash appearing for the petitioner submits that this petition is not barred by limitation in view of the orders of the Hon’ble High Court in WP No.15632/2021 disposed on 16.03.2023. The Ld. Counsel Points out that the Hon’ble High Court had reserved the liberty with the Petitioner to urge all the grounds before this Tribunal. He refers to Para-15 of the said order.

¶205

‚In the light of the aforesaid conduct of the petitioner, the petition stands disposed holding it to be unentertainable, reserving liberty to the petitioner to urge any of the grounds before the DRT. The Bank is at liberty to take the sale to its logical conclusion bearing in mind the observations made in the course of the order.‛

¶206

¶207

20.1 On the other hand the Ld. Sr. Counsel appearing for the Defendants 1 & 2 and also Defendant No.4 points out to the Para-13 & 14 of the said order, which reads as under:-

¶208

‚13. The allegation is that the property is being sold on inadequately low price and the reserve price has gone on decreasing from sale to sale. The reserve prices as reduced are as follows:

¶209

"(i) Reserve price as on 15-02-2021 -`123.975 Cr.

¶210

(ii) Reserve price as on 26-03-2021 -`112.50 Cr.

¶211

(iii) Reserve price as on 30-08-2021 -`101.25 Cr.

¶212

(iv) Reserve price as on 15-11-2021 -`101.25 Cr.

¶213

(v) Reserve price as on 23-12-2021 -`91.13 Cr.

¶214

(vi) Reserve price as on 21-02-2022 -82.02 Cr. (vii) Reserve price as on 26-04-2022 -82.02 Cr. (viii) Reserve price as on 05-07-2022 -`82.02 Cr.

¶215

(ix) Reserve price as on 19-08-2022 -`82.02 Cr."

¶216

The contention is that the valuation report was taken only once which was on 31-12-2012 and prior to auction notice there was no valuation report taken of the property. It is this that the learned senior counsel would submit that it would become the foundation for maintainability of the petition at the hands of this Court. The objection to the said contention is that the sale has taken place on 19-08-2022 and the buyer is one M/s Anushka Constructions Private Limited. The 1st respondent/Bank made several attempts prior to the aforesaid sale to auction the property. The auction sales were conducted on 29th January, 2021; 9th March, 2021; 10th August, 2021; 6th September, 2021; 13th October, 2021; 3rd December, 2021; 28th January, 2022; 8th April, 2022; 15th June, 2022 and 26th July, 2022. In all these attempts of sale, there were no bidders. It is only in the sale that was conducted on 19-08-2022 the Bank has been successful in finding a bidder and the auction became successful after multiple failed attempts. It is trite that the standard practice is reduction of 10% in the reserve price if there is no bidder comes forward for particular reserve price. Prima facie, I find no statutory aberration committed by the Bank in reduction of the reserve prices. The Bank having not found a buyer on several attempts finds one in the last attempt who has also deposited the amount that is required and a submission is made that he is ready and willing to deposit the entire amount.

¶217

Be those submissions as they may, what requires to be noticed is the conduct of the petitioner. The petitioner has presented the subject writ petition on 23-08-2021. The matter was not moved for its listing. For almost one year, the matter was at the stage of clearing of office objections. At the

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¶219

same time, the petitioner has knocked the doors of the Debts Recovery Tribunal ('DRT' for short) by filing several petitions challenging several sale notices in relation to collateral security in S.A. No.199 of 2021; S.A.No.226 of 2021; S.A.No.280 of 2021; and S.A.No.332 of 2021. None of these facts have been divulged in the petition. When those proceedings were pending consideration before DRT, an application is moved in I.A.No.I of 2022 seeking stay of auction proceedings that was held on 19-08-2022. The petitioner has not disclosed several proceedings filed before the DRT. Even on the present sale notice, the petitioner has preferred an application before the DRT and the learned senior counsel appearing for the Bank would submit that a copy of the petition has also been served on the Bank for it having been filed before the DRT. None of these facts are placed on record by the petitioner. On this solitary ground that the petitioner has not divulged several proceedings filed before the DRT calling in question several sale notices and those proceedings being pending before the DRT would alone become enough circumstance to deny entertainment of the present writ petition. The intention of the petitioner appears to be to dodge the issue as long as possible and as far as possible. Therefore, on this solitary ground of non- divulgence of aforesaid facts, I decline to entertain the petition. The petitioner is anyway before the DRT in several proceedings. The grounds that are urged in this petition can always be urged before the DRT and the DRT is well within its jurisdiction to consider all those grounds in support of the grievance of the petitioner.‛

¶220

20.2 The Ld. Sr. Counsel for the contesting defendants also point out that these observations regarding the conduct of the petitioner and that the finding of the Hon’ble High Court that there is no statutory aberration committed by the bank in reduction of the reserve price, etc., were sought to be expunged by the applicants, for which an application is filed before the Hon’ble High Court and the same was also dismissed. In the written submission, the D1 contends that ‚No liberty was granted by the Hon’ble High Court to file fresh SA as has been done by the applicant in the present case‛ and further submits that the relevant order disposing the review petition filed by the applicant in RP No.334/2023 disposed by an order dated 27.07.2023 has noted that the observations made in Para-14 of the final order cannot be deleted as ‚plethora of reasons are rendered by this Court while disposing the petition, as to why the writ was not entertainable‛

¶221

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20.3 The conduct of the Applicant is commented and the same remains glaringly on record. Now to answer the Point at (a) as to whether the petition is filed in time or not is to be adjudicated independently.

¶223

20.4 The Writ Petition was held to be not maintainable and Para-15 of the order of the Hon’ble High Court in WP 15632/2021 dated 16.03.2023 specifies that ‚in the light of the aforesaid conduct of the petitioner, the petition stands disposed holding it to be unentertainable reserving liberty to the petitioner to urge any of the grounds before DRT. The Bank is at liberty to take sale to its logical conclusion bearing in mind the observations made in the course of the order.‛

¶224

20.5 It is clear that the writ petition was filed challenging the notice dated 10.08.2021, and the notice issue dated 11.06.2019. The subject matter in the present SA is with regard to the legality of the sale notice dated 26.07.2022. The applicant contends that by the observations of the Hon’ble High Court liberty is granted by the High Court and the time spent in pursuing the remedy be excluded for the computation of the limitation period. The Ld. Sr. Counsel for D1 submits that the WP was filed by the Petitioner knowing fully well that it is a wrong forum. He submits that the exclusion of time under Section 14 of the Limitation Act is applicable to only bonafide mistakes and the same is not available to the applicant.

¶225

20.6 The contesting Defendants counsel relied on Para-24 of the Orders of the Hon’ble DRAT, Chennai in P.Sathya Soul Raj Vs. Housing Development Finance Corporation Limited (2023) SCC Online DRAT 155 . Para – 24 of the Orders of the Hon’ble DRAT is pressed into service which reads:

¶226

‚On a scrutiny of the entire material, I am of the considered view that Tribunal below has not committed any error in not giving benefit of Section 14 of Limitation Act, 1963, to Appellant and Order of Tribunal below do not suffer from any illegality, therefore, the same cannot be interfered with.‛

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¶228

The Ld. Sr. Counsel Shri. Om Prakash submits in the above matter a writ petition is filed and the same is subjudice before the Hon’ble High Court of Kerala.

¶229

21.0 The Ld. Sr. Counsel appearing for the D4 relied on the ruling of the Hon’ble Supreme Court in M.P. Steel Corporation Vs. Commissioner of Central Excise (2015) 7 SCC 58 and further submits that the Hon’ble High Court of Karnataka has not granted any liberty to file a fresh SA. It only permitted the applicant to raise additional grounds in the pending SA i.e. TSA No.11/2022 (Old. No.SA 95/2020). Therefore he submits that the present application is barred under limitation, which is filed beyond 45 days. He points out to the finding of the Hon’ble Supreme Court shows that the limitation act is not applicable to the Tribunals, which are quasi judicial bodies.

¶230

21.1 The ruling is perused. ‚It is clear that this judgement at Para-31(as reported in Indian Kanoon & Para – 35 of the SCC)

¶231

‚31. This judgment is in line with a large number of authorities which have held thatSection 14should be liberally construed to advance the cause of justice – see:Shakti Tubes Ltd. v. State of Bihar, (2009) 1 SCC 786 and the judgments cited therein. Obviously, the context ofSection 14 would require that the term ‚court‛ be liberally construed to include within it quasi-judicial Tribunals as well. This is for the very good reason that the principle ofSection 14is that whenever a person bonafide prosecutes with due diligence another proceeding which proves to be abortive because it is without jurisdiction, or otherwise no decision could be rendered on merits, the time taken in such proceeding ought to be excluded as otherwise the person who has approached the Court in such proceeding would be penalized for no fault of his own. This judgment does not further the case of Shri Viswanathan in any way. The question that has to be answered in this case is whether suits, appeals or applications referred to by the Limitation Actare to be filed in courts. This has nothing to do with ‚civil proceedings‛ referred to in Section 14 which may be filed before other courts or authorities which ultimately do not answer the case before them on merits but throw the case out on some technical ground. Obviously the word ‚court‛ in Section 14 takes its colour from the preceding words ‚civil proceedings‛. Civil proceedings are of many kinds and need not be confined to suits, appeals or

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applications which are made only in courts stricto sensu. This is made even more clear by the explicit language ofSection 14by which a civil proceeding can even be a revision which may be to a quasi-judicial tribunal under a particular statute.‛

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21.2 It is also held that the Limitation Act including Section 14 would not apply to appeals filed before the quasi judicial Tribunals such as the Collector (Appeals) mentioned in Section 128 of the Customs Act. It also stated at Para-38 as reported in SCC that ‚However this does not conclude the issue. There is authority for the proposition that even where Section 14 may not apply, the principles on which Section 14 is based, being principles which advance the cause of justice would nevertheless apply. We must never forget, as stated in Bhudan Singh Vs. Nabi Bux (1970) 2 SCR 10 that justice and reason is at the heart of all legislation by Parliament.‛

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21.3 In the present case, the applicant approaching this Tribunal, constituted under the Recovery of Debts and Bankruptcy Act, 1993, which is vested with the powers as a civil court in discharging the functions as per Section 22(2) of the RDB Act and further considering Section 19(25) of the said Act in order to secure the ends of justice, is empowered to apply the principles of Limitation Act as opined by the Hon’ble Supreme Court.

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22.0 Now the principles of Section 14 of the Limitation Act are to be looked into:-

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22.1 Requirements of Section:-

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‚In order to attract the application of section 14(1) of the Limitation Act, 1963, the party, seeking its benefit, must satisfy the Court that:

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(a) It (party seeking benefit of section 14(1) of the Limitation Act, 1963) as plaintiff was prosecuting another civil proceeding with due diligence;

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(b) The earlier proceeding and later proceeding relate to the same matter in issue and

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(c) The former proceeding was being prosecuted in good faith in a Court which from defect of jurisdiction or other cause of a like nature, is unable to entertain it‛

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To be more explicit and exhaustive-

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(a) The suit must be between the same adversaries to both the litigation.

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(b) The plaintiff should have been prosecuting with due diligence and/or good faith.

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(d) In a court of first instance, or appeal or revision.

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(e) Both the proceeding (i.e. between the same adversaries) should pertain to the same matter.

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(f) The previous civil proceedings should not be entertainable by the Court, because of a defect of jurisdiction or other cause of like nature.

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The identity of the matter in issue, due diligence and good faith of the petitioner and the absence of jurisdiction or other cause of a like nature, in the court which entertained the prior litigation are essential requisites for an application under section 14(1). If the above mentioned essential requisites are present and the conduct of the person is bonafide i.e. he has established his good faith, and he has been prosecuting with due diligence another civil proceeding, he is entitled to the benefit of this section or else he cannot take advantage of it.‛ (T.R.Desai – Commentary on the Limitation Act Page No.333 & 334 – 11^th Edition – Universal Law Publishing)

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23.0 With the above standards required for examining the eligibility of any party seeking shelter under Section 14 of the Limitation Act must satisfy certain conditions mentioned above. The present case is being examined with the above standards.

¶252

23.1 No doubt the present Applicant has filed the writ petition. The prayers in WP 15632/2021 are to quash the notice issued dated 11.06.2019. As could be seen from Page – 2 of the above Order, it is also seen from the first para of the order of

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the Hon’ble High Court that this applicant (Petitioner) had called in question the notice dated 10.08.2021 issued by the Defendant Bank under the SARFAESI Act. The notice challenged was the sale notice issued under Rule 8(6) of SIE Rules. Admittedly the sale notice questioned in the instant application is dated 26.07.2022.

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23.2 It is found that the earlier proceeding does not relate to the same matter in issue, since the sale notice dated 26.07.2022 is not challenged before the Hon’ble High Court.

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23.3 The other condition is that the applicant was prosecuting the former proceedings in good faith. Whether there was good faith or not on behalf of the Applicant is a matter to be seen from the pleadings. Though the applicant contends that it was filed in good faith and pursued so, it is flagrantly seen that in the past this applicant had challenged four sale notices. This fact is drawn from the Para-21 of the reply filed by the Defendant No.1. The sale notices dated 15.08.2021, 10.08.2021, 06.09.2021 and 13.10.2021 were challenged before the DRT, Bangalore in SAs No.199, 226, 280 & 332 of 2021 respectively. The Order sheets of these SAs are also filed as Annexures to the reply statement of Defendant No.1. The filing of these SAs are not denied by the Applicant. Thus it can be held that the applicant was aware and had the knowledge about the forum of law appropriate to lay such challenge. In view of the above it cannot be said that the applicant company was pursuing the writ petition in good faith. If this condition is not satisfied, the benefit of Section 14 of the Limitation Act cannot be extended to the Applicant.

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24.0 Furthermore, from the Para-24 of the statement of objections of Defendant No.1, an advance copy of the application challenging the sale notice dated 26.07.2022 intended to be filed before the DRT, Bangalore was served on the Defendant No.1. It is submitted that the applicant has merely presented this SA before the DRT and not paid the requisite court fee on account of which the application was not taken up for hearing. The copy of the advance notice is filed as

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Annexure D with the reply statement. The same is perused. It is at Pages 214 to 216 of the volume of objections. The advance copy served contains the pleadings under Section 17(1) of the SARFAESI Act filed by the very applicant. The prayer found in such pleadings is to quash the sale notice dated 26.07.2022 and for other reliefs. The subject matter is the same. The said petition served as Advance Copy bears the dated 17.08.2022.

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24.1 It is not known why the applicant had not prosecuted the said SA despite having served the advance copies to the defendant Bank. Therefore the contention of the Ld. Sr. Counsel appearing for the contesting Defendants that the actions of the applicant would show that the applicant was aware of the appropriate forum which adumbrates that he had consciously did not pursue the litigation before the DRT Bangalore to which he served the advance copies on the Defendant Bank is logical.

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25.1 The Ld. Sr. Counsel Shri. Srinath Sridevan submits that no liberty is given in the orders of the Hon’ble High Court to file the present SA afresh. The sale took place on 19.08.2022. It is pointed out in the reply of Defendant No.1 that at the time of filing of the IA No.1/2022 in the writ petition, the Defendant No.1 intimated the applicant of the sale and the applicant choose to wait for almost four weeks before even presenting the Interlocutory Application seeking to stay the completion of the sale. (Para-7 of the Reply of D1).

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25.2 It is also submitted that this applicant obtained an exparte order dated 14.09.2022 in IA No.1/2022. It is also stated that the said Interim Order now stands vacated. (Para-8 of the Reply of D1). These facts are not controverted. Suffice it to say that the applicant was conscious of the sale that took place and he had prepared the pleadings to approach the DRT, Bangalore for which advance copies were also served to the Defendant No.1. In this context it becomes very difficult to hold that the applicant had prosecuted the former litigation in good faith.

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26.1 However, the main plank on which the sale is challenged herein being the limited liability to the transaction being a guarantor in the terms mentioned in the deed of agreement is already discussed in the foregoing TSA 11/2022, which does not require repetition herein. The applicant having consciously subjected himself to such of the variations and having waived his rights under the Contract Act cannot take a stand that the clause 3 of the deed indicated to advance Rs.60 Crores only to the borrower.

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27.1 The Other ground that the first defendant unlawfully invoked clause 23 of the deed of guarantee by which the applicant waived his rights under the provisions of the Contract Act cannot be accepted for the reasoning spelt out in disposing TSA 11/2022 herein.

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28.1 Furthermore, following the ruling of S.Karthik and Others Vs. N.Subash Chand Jain and Others reported in (2022) 10 SCC 641, case at Para 118, 119 and 120, which cannot be ignored in the instant case. The relevant paragraphs are:

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‚118. It is further relevant to note that, this Court in the case of Dwarika Prasad (supra) and in the case of Shakeena (supra) held that the right to redemption stands extinguished on the sale certificate getting registered.

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119. We will have to take into consideration the purpose with which the SARFAESI Ac t came to be enacted. Unlike international banks, the banks and financial institutions in India did not have power to take possession of securities and sell them. It was, therefore, noticed, that it had resulted in slow pace of recovery of defaulting loans and mounting levels of nonperforming assets of banks and financial institutions.

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120. It was also noticed that there were certain areas in which the banking and financial sector did not have a level playing field as compared to other participants in the financial markets in the world. It was further noticed that the existing legal framework relating to commercial transactions had not kept pace with the changing commercial practices and financial sector reforms. As such, the SARFAESI Ac t was enacted with the purpose for securitization and empowering banks and financial institutions to take possession of the securities and to sell them without the intervention of the Court.‛

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28.2 In the instant case, the Defendant No.4 submits that the sale certificate is also issued. It is submitted in the written submissions of the 4^th Defendant at Para 4.3 that this Defendant awaited the outcome of the WP No.15632/2021 and only after the same was dismissed by the Hon’ble High Court, which permitted the bank to take the sale to its logical end, the 4^th Defendant obtained the sale certificate dated 28.03.2023. Considering the ruling of S.Karthik (Supra) this Tribunal is of the opinion interference at this stage would be against the principles of law laid down in Janak Raj Vs. Gurdial Singh (Reported in AIR 1967 SC 608) as rightly urged by the Ld. Sr. Counsel appearing for the Defendant No.4. The relevant observation of the point of law at Para-27 of the said ruling is:-

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‚For the reasons already given and the decisions noticed, it must be held that the appellant-auction purchaser was entitled to a confirmation of the sale notwithstanding the fact that after the holding of the sale the decree had been set aside. The policy of the Legislature seems to be that unless a stranger auction-purchaser is protected against the vicissitudes of the fortunes of the suit, sales in execution would not attract customers and it would be to the detriment of the interest of the borrower and the creditor alike if sales were allowed to be impugned merely because the decree was ultimately set aside or modified. The Code of Civil Procedure of 1908 makes ample provision for the protection of the interest of the judgment-debtor who feels that the decree ought not to have been passed against him. On the facts of this case, it is difficult to see why the judgment- debtor did not take resort to the provisions of O.XXI r. 89. The decree was for a small amount and he could have easily deposited the decretal amount besides 5 per cent of the purchase money and thus have the sale set aside. For reasons which are not known to us he did not do so.‛

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29.1 The Ld. Sr. Counsel appearing for Defendant No.1 relied on three rulings apart from the ruling of the Hon’ble DRAT, which is stated to be subjudice before the Hon’ble High Court of Kerala. The rulings relied are Consolidated Engineering

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Enterprises and Ors. Vs. Principal Secretary-MANU/SC/7460/2008 concerning the conditions to be satisfied to invoke the benefit under Section 14 of the Limitation Act. It is emphasised that prior proceeding had been prosecuted with due diligence and good faith. He had also relied on Sarv Hitkari Educational Society Vs. Punjab National Bank & Ors. (2020 (213) AIC 829 , to drive home the point that the repeated reduction of the bid price is done considering the valuation of the property on failure of previous auctions. He had also relied on Sowmya Engineering Vs. Chief Manager, Indian Bank of the Karnataka High Court Order in WP 37363/2015 that sub-rule 5 of Rule 8 of the Rules does not contemplate to get a fresh valuation report for each and every sale notice.

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29.2 This Tribunal cannot be oblivious to the position of law rendered by the Hon’ble Supreme Court in Bank of Baroda Vs. Parasaadilal Tursiram Sheetgrah (P) Ltd., (2022)6 SCC 496, which observes as follows:-

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12. The reason for providing a time limit of 45 days for filing an application underSection 17 can easily be inferred from the purpose and object of the enactment. In Transcore v. Union of India and Anr. 3 this Court held that theSARFAESI Act is enacted for quick enforcement of the security. It is unfortunate that proceedings where a property that has been brought to sale and third-party rights created under the provisions of the Act, have remained inconclusive even after a decade.

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29.3 In view of the above rulings and after considering the grounds urged in the SA though the earlier petition was not prosecuted in good faith, this Tribunal does not find merits in setting aside the measures initiated by the D1 & D2. Thus Point (a) for consideration is answered holding that the present SA cannot be entertained extending the benefits under Section 14 of the Limitation Act and the Petition also lacks merits. Hence the following:-

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: - O R D E R - :

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SA 7 / 2023 stands dismissed. Parties to bear their own costs. Original signed copy of this joint final order be kept in TSA No.11/2022 and a copy be kept in the other file.

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The order be communicated to the parties concerned.

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Sd/(A.S.JAYACHANDRA) PRESIDING OFFICER DRT-I, CHENNAI

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(Dictated to PS, on the system who typed and corrected, signed and pronounced by me on this 9^th Day of

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November, 2023)

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G Corp Lotus Mall Private Limited v. Axis Bank

Case brief

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G Corp Lotus Mall Private Limited v. Axis Bank

Case brief

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