Partly allowed

Ms Shree Handa Ornaments v. Jammu and Kashmir Bank Limited

DRT18 Mar 2023SA/219/2022

Case brief

AI extract

What is this about?

In a securitization application challenging the sale of a secured asset under the SARFAESI Act, the Debts Recovery Tribunal held that the sale by private treaty was invalid because the auction notice was not properly published in Hindi. The application was partly allowed.

What did the court decide?

The sale was set aside. The purchaser is directed to deliver possession back and refund the deposited money with interest at 6% per annum. The bank may sell again as per law.

Ms Shree Handa Ornaments versus Jammu and Kashmir Bank Limited — Banking and Recovery | DRT (2023)

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SA No.219/2022

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DEBTS RECOVERY TRIBUNAL.I, CHANDIGARH

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SA No.21912022 M/s Shree Handa Ornaments Vs. The Jammu and Kashmir Bank Limited

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18.03.2023 Item No.4

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Present: Sh.Ashok Malik, Counsel for the Applicant. Sh.Amit Rishi, Counsel for respondent bank.

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lws Shree Handa ornaments (Applicant) has filed the present Securitization Application, against Authorized Officer, Jammu and Kashmir Bank Limited (Respondent).

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Admittedly, in the year 2010, Applicant had availed cc Limit of Rs.l50 lacs and Term Loan of Rs.80 lacs from the Respondent. To secure the loan,

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Applicant had created the security interest in respect of following properties: -

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l. Land measuring 06 Kanals 06 Marlas (standard 04 Kanals) under Khasra No.59 min, Khata No.87l89, Khewat No.7/7 in mouza Jhandoia, Tehsil and District Reasi standing in the name of Sh. Prabhat Kumar Handa S/o Late Sh. Shadi Lal Handa R/o H.No.l4, Jullaka Mohalla, JainBazar, Jammu.

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) Land measuring 06 Kanals 06 Marlas (standard 04 Kanals) under Khasra No.59 min, Khata No.87/89, Khewat No.7/7 in mouza Jhandoia, Tehsil and District Reasi standing in the name of Sh. Sonu Alis Kali S/o Parbhat Kumar Handa R/o H.No.14, Jullaka Mohalla, JainBazar, Jammu.

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J. Land measuring 06 Kanals 06 Marlas (standard 04 Kanals) under Khasra No.59 min, Khata No.87/89, Khewat No.7/7 in mouza Jhandoia, Tehsil and District Reasi standing in the name of Sh. Sunil S/o Sanji Ram R/o Nomnath Tehsil Hira Nagar, District Kathua.

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Land measuring 06 Kanals 06 Marlas (standard 04 Kanals) under Khasra No.59 min, Khata No.87/89, Khewat No.7/7 in mouza Jhandoia, Tehsil and District Reasi standing in the name of Sh. Rohit Bhatt Kali S/o Jai Parkash Bhat R/o Srinagar, A/P Radio Colony Panjtinhi Jammu.

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On 3L07.2014, Bank had issued the notice under Section 13(2) of the Sartaesi Act, informing that the account of the Applicant^had been^{declared NP} on 31.03.2014. The applicant has alleged that^{his account waswronglydecl}

Page I of6

SA No.21912022

NPA. Further, bank had issued notice under Section l3(4) of the SARFAESI Act. Applicant has also challenged the possession notice. It is alleged that the possession notice was published in English newspaper only. Further, the possession notice was not pasted on the secured property. The bank had charged excessive interest on the loan. Applicant had also filed civil suit for declaration, which is pending in the Civil Court. Applicant had also made an OTS proposal and made payment of l0o/o of the outstanding amount. However, bank did not consider the same. No valuation of the property was conducted. On these facts, Applicant filed the present SA for setting aside notice under Section 13(4) dated 22.08.2017; notice under Section 13(2) dated 31.07 .2014 and auction notice dated 23.08.2022.

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4, In reply, Bank has alleged that the borrower has misrepresented and concealed the facts. Applicant did not make the payment as per the repayment schedule. Accordingly, the account was declared NPA on 31.03.2014. The applicant was granted the following credit facilities: -

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Facilitiesenhancedin2013	Sanctioned amount	Outstanding amount
CashCreditfacilityavailedby	Rs.3,97,00,000/-	17,15,00,000/-
M/sShreeHandaOrnaments
throughitsproprietorLakesh
Handa
CashCreditFacilityavailedby	Rs.1,50,00,000/-	Rs.7,60,66,4571-
Ivf/sSumitOrnamentsthroughits proprietorSumit Handa
Term LoanFacility	80,00,000/-	1,91,02,188/-
TotalOutstanding ason31.07.2022		Pis.26,66,68,6451-

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Applicant had executed all^{the relevant documents. The rate of interest}

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was charged properly. Since,^{the Applicant did not make the payment,the bank} initiated SARFAESI^{proceedings.Thepossessionnoticewas publishedon} 23.08.2017 in Daily^{Excelsiorand Amar Ujala. The propertywas put to auction} seven times, as mentioned below:^-

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Page 2 of6

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SA No.21912022

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S.No.	DateofAuction	Amount of Auction	Remarks
1	10.tl.20t7	385.00Lacs	No BidReceived
2.	04.10.2018	375.48Lacs	NoBidReceived
J.	01.12.2018	337.93Lacs	No BidReceived
4.	29.01.2019	300.38Lacs	No BidReceived
5.	08.01.2021	255.00Lacs	NoBidReceived
6.	27.09.2021	141.00 Lacs	No BidReceived
7.	08.11.202r	127.00Lacs	No BidReceived

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However, no bid was received. Accordingly, Bank sold the^property by private treaty over and above the rate of last bid dated 08.11.2021for Rs.1,30,25,000/- to Shree Sanatan Dharam Partap Sabha, Srinagar,^Kashmir.The trust had deposited Rs.32,56,250/- i.e. 25Yo on 08.08.2022 &^{10.08'2022and} balance 75o/o amorxrting to Rs.97,69,000/- on 02.09.2022. Bank^{had followed} proper procedure for the sale. During the pendency of the SA, IA No.90012022 was filed by the applicant for setting aside the sale. Accordingly, there^{is no merit} in the present SA and the same be dismissed.

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6-A. During the pendency of the SA, on the^{applicationof the SA applicant,} notice was issued and served upon the auction^{purchaser. However,it did not put} in appearance.

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I have heard Mr.Ashok Malik,^counsel for^{the applicant and Mr. Amit} Rishi, counsel fbr the Respondent bank.

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Mr. Malik, counsel for the Applicant^{has arguedthat the Bank has not} followed proper procedure for effecting^{the sale. No sale by private treaty can be} effected by the bank without^{puttingthe property to auction. In the present case,} though, bank had put the^property to^{auction,yet, it had not followed proper} procedure for effecting the sale by^public auction.^{The sale notice was published} Page 3 of6

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SA No.21912022

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in a Hindi newspaper but the notice was in English and on account of the nonpublication of the notice in Hindi, intending buyers did not bid for the same. Reliance was placed by Mr Malik on the^judgment of Hon'ble Orissa High Court in'Swastik Agency & others versus State Bank of India & others: AIR 2009 Orissa 147'. Mr. Malik submitted that since the bank did not follow^proper procedure for effecting the sale by auction, the sale effected by the bank to Shree Sanatan Dharam Partap Sabha, Srinagar, Kashmir would be treated as first sale. However, Hon'ble Bombay High Court in Parteek Pardeep Aggarwal versus Union of India, Writ Petition No.5858 of 2020' has held that no first sale by private treaty can be effected.

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Mr. Malik further argued that bank also did not get the property valued properly. [n fact, the property was sold at a throwaway price. The market value of the property was Rs.22 lacs per kanal. Accordingly, the value of the^property is more than Rs.5.50 crores. However, the Bank sold the^property by^{privatetreaty} for Rs.130.25 lacs. That apart, in the^publication the description of^{the property} was not given properly. The law is well settled that, though, the^{bank may sellthe} property, yet, it must ensure that the sale is effected at the^{maximumprice.} Winding up his arguments, Mr.Malik submitted that^{since the sale is bad in law,} the same be set aside.

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Per contra, Mr Rishi, counsel^{for the respondentbank submitted thatas} per the SARFAESI Act, Bank can effect^{the sale by private treaty. In the} SAR1'AESI Act, it is nowhere^{mentioned that the sale by private treaty shouldbe} preceded by e-auction. Further, the^{bank had got the property valued.The} applicant never challenged^{earlier auction notices.Accordingly, he is debarred} from challenging the auction^{which did not materialize. Mr. Rishi submitted that} since the applicant did^{not make the payment, the bank had no alternative but to} sell the secured^{asset. Mr. Rishisubmitted that there is no substance in the}

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SA. Accordingly,^{the samebe dismissed.}

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Page 4 of 6

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SA No.21912022

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ll. I have considered the rival contentions.

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Admittedly, in the^present case,^{the bank sold the property by private} treaty. Hon'ble Bombay High Court^{in'MrParteek Pardeep Aggarwalversus} Union of India, Writ Petition No.5858^{of 2020'hasheld has under:-}

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" ln the light of obove reasoning and conclusions, we hold that amended Rules S(S) of the Security^{Interest(Enforcement)} Rules, 2002 as amended by Notification being^{GSR1046 (E) dated} 3'd November 2016 is constitutional^{by readinginto the samethat} sale by private treaty can be conducted^{only after sale by inviting} tendersfrom the public or sale by holding^{public auctionfails"} Xxx.

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There is no denying the fact^that in^{the present case earlier the bank had} put the property to auction. However, for^{putting the secured asset to auction,} bank was supposed to^publish the same^{in two newspapers. In the presentcase,} though, the bank published the auction^notice in^{Hindinewspapff; yet, the notice} was published in English language. It^{was not published in Hindi language.} Hon'ble Orissa High Court in'swastik^Agency &^{othersversusState Bank} India & others: AIR 2009 Orissa^{147'in similarcircumstancehas heldas under:-}

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"That the illiterate mass do not read the contents the notice in English as they do^{not understand English.} Even though they have financial^{potentialtheir chance to} participate in the public tender or bid^{would be deprt} for^{this reoson.The High Court ruled that such publication} would not serve any^{purpose and isfatal to the sale"}

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In view of the^{above, the sale by private treaty in the present case would} be treated as sale without^{therebeing auction.Had the bank made} publication of the auction, it^{may havegot a buyer at a higher price. I am of} considered view that the^{action of the bank in selling the property by private} treaty in the^present case^{was not in consonancewith law. I am also of the} considered view that there^{is no force in the contention of Mr Rishi that since} applicant had not challenged^{the earlier auctions, it has waived its right}

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Page 5 of6

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SA No.21912022

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challenge the same. The circumstance that bank^{did not follow proper procedure} in conducting the earlier auction has affected the sale by^{privatetreaty.} Accordingly, I hereby set aside the sale. In view of^{the above,SA is allowedto} the extent that the sale is set aside. The^{purchaser is directed to deliverthe} possession back to the bank and bank is directed to refund the money deposited by the buyer with interest @ 6% per annum from the date^{the buyerhas made the} payment, till the date of payments. It is made clear that this would^{not debar the} bank from selling the property as^per law. All the^{pending IAs,} if^{any, are also} disposed of, accordingly.

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File be consigned to record room after due compliance.

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arang) fesiding Officer DRT-I, Chandigarh

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Pronounced in open court Manoj/18.03.2023

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Ms Shree Handa Ornaments v. Jammu and Kashmir Bank Limited

Case brief

What is this about?

What did the court decide?

Ms Shree Handa Ornaments v. Jammu and Kashmir Bank Limited

Case brief

What is this about?

What did the court decide?

What the court decided

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