Partly allowed

M S Chelpuru Brothers Cloth Stores v. Union Bank of India

DRT5 Sept 2023SA/276/2022

Case brief

AI extract

What is this about?

Applicants challenged an auction sale and attempted physical possession of secured property by a bank. The Tribunal held that procedural violations in the Rules, 2002 invalidated the auction, but dismissed the challenge regarding physical possession as no active stay existed at that time.

What did the court decide?

Setting aside of auction sale and consequent sale certificate; refund of sale consideration to the auction purchaser with interest; direction to bank to conduct fresh auction

M S Chelpuru Brothers Cloth Stores versus Union Bank of India — Banking and Recovery | DRT (2023)

¶1

IN THE DEBTS RECOVERYTRIBUNAL- IAT HYDERABAD

¶2

DATED THIS THE sTI.J DAY OF SEPTEMBER,2023

¶3

PRESENT: GUMMADI GOPICHAND, PRESIDING OFFICER

¶4

SA.No.93 &276oF 2022

¶5

SA.No.93 of 2O22:-

¶6

M/s. Chelpuru Brothers Cloth Stores, Rep. by its Managing Partners, Chelpuru Harish Kumar & Chelpuru Shashi Kiran, H.No.8- 10- 16, Besides Ashok Electricals, JPN Road, Warangal.

¶7

Mr. Chelpuru Harish Kumar, S/o. Ch. Hema Kumar, aged 33 years, Gender: Male, Occ: Business, R/o.H.No. 15-7-48, Ramannapet, Warangal.

¶8

Mr. Chelpuru Sashi Kiran, S/o. Ch. Anand Kumar, aged 27 years, Gender: Male, Occ: Business, R/o.H.No. 15-7 -48, Ramannapet, Warangal.

¶9

Applicants.

¶10

Tersus

¶11

Andhra Bank, presently known as Union Bank of India, rep. by its Authorized Officer, Fathima Nagar, L Catholic, Fathima Nagar, Warangal_5O6004.

¶12

Mr. M. Sampath Kumar, S/o. Venkataiah, Aged 53 years, Gender: Male, Occ: Business, R/o.H.No.8- 1 2-80, Pinnavari Street, PNB Lane, JPN Road, Warangal - 506002. Respondents.

¶13

(Respondent No.2 is impleaded.ed. as per Counsel for the Appticants V. Rauinder. Counsel for Respond.ent No. 1 V. Sethu Madhaua Rao. B. Aruna. Counsel for Respondgnt rbp SEp ZW

¶14

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¶15

SA.Nos.93 & 276 of 2022

¶16

SA.No.276l2022:-

¶17

1.	M/s.ChelpuruBrothersClothStores, Rep. byitsManagingPartners, Chelpuru Harish Kumar &Chelpuru ShashiKiran,H.No.8-10-16, Besides Ashok Electricals,JPNRoad,Warangal.
2.	Mr. Chelpuru HarishKumar, S/o.Ch.HemaKumar,aged33 years, Gender: Male, Occ:Business, R/o.H.No.15-7-48,Ramannapet,Warangal.
3.	Mr. ChelpuruSashiKiran, S/o.Ch.Anand Kumar,aged27 years, Gender:Ma1e,Occ: Business, R/o.H.No.15-7-48, Ramannapet,Warangal. Applicants.
Ver	sus
1.	Andhra Bank,presentlyknownas UnionBankofIndia,rep.byits Authorized Officer, FathimaNagar, LCatholic,FathimaNagar,Warangal-506004.
2.	Mr.M. SampathKumar, S/o.Venkataiah, Aged53years,Gender: Male,Occ:Business, R/o.H.No.8- 12-80, PinnavariStreet, PNBLane, JPN Road, Warangal-506002. Respondents.
	(RespondentNo.2is impleadededasper Ordersin IA.No.18/2023,dt.07.02.2023)
	CounselfortheApplicants : CounselforRespondentNo.1 : CounselforRespondentNo.2 : SiV.Rauinder. SriV.SethuMadhauaRao. Ms.B.Aruna.

¶18

Since parties in both the SAs and the subject property involved in both the SAs are one and the same, Common Order is being passed in both the SAs:-

¶19

SA.No.93/2022 is ntea [,v th€ 4pS1'( SARFAESI Act, 2002, challenging the^{-:flroceedings} the 1"t Respondent

¶20

SA.Nos.9j & 276 ol 2022

¶21

Bank under the said Act against the application schedule property, including the auction of the application schedule property conducted by the lst Respondent Bank pursuant to the Notice dt.02.1L.2819, issued under Rules 8(6) & 9(1) of the Security Interest (Enforcement) Rules,2OO2.

¶22

SA.No.276l2022 is filed by the Applicants u/s.17 of the SARFAESI Act challenging the action of the 1st Respondent Bank to take physical possession of the application schedule property u/s.14 of the SARFAESI Act, in pursuance of the orders dt.18.10.2022, passed by the Ld. Chief Judicial Magistrate, Warangal, in Crl.M.P.No.90/ 2022.

¶23

The averments made by the Applicants in sA.No.93l2022, in brief, are as under:-

¶24

The lst Applicant firm availed financial facilities from the lst Respondent Bank by creating security interest over the application schedule property in favour of the lst Respondent Bank. Thereafter, due to demonetization effect and also implementation of GST, the business of the Applicants got effected and payment of roan instalments fell in arrears and the lst Respondent Bank sent Demand Notice u/s.13(2) of the SARFAESI Act on 01.08.2019 calling upon the Applicants to pay entire outstanding dues of Rs.l,1g,90,og2l-.After receipt of the said notice, the Applicants apprclached the 1st Respondent Bank and by explaining the prevailing market conditions, requested the lst Respondent Bank for grant of time for settling the dues under ors, to which the 1st Respondent Bank stated that it would look into the matter and it would get back.

¶25

ii) But, the l"t Respond.ent Bahkr6n qg.17.2otg, served a Notice of intended sale dt:02. tr.2olg o.rllhJ:,,Applicants, wherein it is stated that the^'application schedule- p.ope.ty would be put to auction on 22.ot do.zoS.Rr?8F ,.".iF-j, "i ,n" said notice, the

¶26

't '''- "'-t'i::+' '",... ' j:. ': : ;.y,i"i'.7'$i'-',' '.:i t.: D?i:E*i W. ".^j-a];;_:;!#"

¶27

SA.Nos.93 & 276 ol2022

¶28

Applicants again approached the 1"t Respondent Bank and requested time for bringing their loan account within the sanctioned limits but, the 1st Respondent Bank did not consider the same and proceeded for the auction of the application schedule property. Aggrieved by the said action of the lst Respondent Bank, the Applicants preferred Wp.No.1l34 of 2O2O before the Hon'ble High Court for the State of Telangana and the Hon'ble High Court while leaving it open for the Applicants to avail the remedies under the SARPAESI Act, disposed of the writ petition vide order dt.21.O3.2022 granted interim stay to enable the Applicants to approach this Tribunal.

¶29

iii) The Authorized officer of the l st Respondent Bank without satisfying the ingredients that are necessary for declaration of the subject loan account as NpA and without allowing the Applicants to make good the dues within few months in the light of circumstances prevailing the market, has highhandedly proceeded for the auction of the application schedule property without following the due procedure laid down under the SARFAESI Act. The lst Respondent Bank has not followed Rule 8(1) & (2) of the Security Interest (Enforcement) Rules, while issuing the Possession Notice. The lst Respondent Bank has arso failed to furnish detailed valuation, reserye price, date and time of sale and thereby violated Rules g(5) & g(6) of the Rules, 2002. Hence, the SA.

¶30

The 1st Respondent Bank filed its Reply Statement denying all the adverse allegations made in the SA. The contentions of the lst Respondent Bank, in brief, are as under:-

¶31

The Applicant No.1 ,,llrm, by its partners i.e., Applicants No.2 & 3, availed OCC Rs.80.0O lakhs and Term Loan of Rs.4O.OO lakhs from Respondent against

¶32

the security of 2i Thereafter, the

¶33

SA.Nos.93 & 2/6 oJ 2022

¶34

loan account of the Applicants became NpA on 22.O6.2019 and the 1st Respondent Bank initiated proceedings under the SARFAESI Act, by issuing Demand Notice dt.01.08.2019 and recalled the entire loan amount and despite receipt of the said notice, the Applicants did not come forward to pay the loan amount. So, the 1st Respondent Bank issued possession Notice dt. 15.10.2019 and took symbolic possession of the application schedule property and the said notice was also published in two leading newspapers. Finally, the l"t Respondent Bank issued Sale Notice dt.12.12.2019 fixing the auction of the application schedule property on 22.O1.2O2O.

¶35

ii) Aggrieved by the said Sale Notice dt.t7.l2.2otg, the Applicanrs filed WP.No. ll34l2o2o before the Hon,ble High Court for the State of Telangana and the Honble High Court vide order dt.2l.O1.2O2O, granted stay of confirmation of sale proposed to be held on 22.O1.2O2O subject to petitioner/Applicant depositing 25o/o of the amount mentioned in the Sale Notice within four weeks from the date of order. The Applicants have not complied with the said orders but, mislead the Honble Court that they have deposited the 25%o of the amount mentioned in the sale notice i.e., Rs. 1,1g,90,0g2/_. F.inally, the Hon'ble High Court disposed of the said writ petition vide order dt.21.O3.2022 granting 30 days time to the petitioner/Applicant to approach the jurisdictional DRT u/s.17 of the SARFAESI Act and continued the stay granted earlier for the said period of 30 days.

¶36

iii) The filed and made 2sVo amount and this Tribunai..ifter p the Honble High Courr in Wp.No. 1134 l2 stay sale the

¶37

¶38

SA.Nos.g3 & 276 ol 2022

¶39

Applicants to issue urgent notice to the Respondents and posted the matter to 24.05.2022 for filing of proof of service by the Applicants. But, the Applicants have neither issued any urgent notice to the 1st Respondent Bank nor have complied with the orders of the Hon'ble High Court. In the meanwhile, the I st Respondent Bank confirmed the sale of the schedule property in favour of the auction purchaser and issued Sale Certificate in his favour on 16.05.2022. The lst Respondent Bank contended that the Applicants herein by misleading the Court/Tribunal got the said stay orders behind the back of the 1"t Respondent Bank and accordingly prayed for the dismissal of SA.No.9 312022.

¶40

The 2"d Respondent-auction purchaser reported no Reply Statement on his behalf.

¶41

During the course of hearing or SA.No.93/2 022 and when the matter was coming up for arguments on behalf of the Applicants, there was no representation on behalf of the Applicants even though three adjournments were granted to them. so, on 05.07.2022, this Tribunal dismissed the said SA.No.93/2022 for default. The Appricants fired MA.No.27 122 for setting aside the dismissal order dt.05.02.2022 and, to restore SA.No.93/2022 to file. While the said MA.No.2Zl22 is pending, the lst Respondent Bank approached the Ld. chief Judicial Magistrate, warangal and fired crl.M.p.No.90 /2022 on rg.or.2022 seeking orders u/s.14 of the SARFAESI Act, for taking physical possession of the application schedule property. Later, MA.No.27 12022 fi|ed by the Applicants was allowed by this Tribunal vide order dr.31.1O.2O22 and SA.No.93 12022 was restored to file. Aggrieved by the action of.:the...t:.Reep,qna"nt Bank u/s. 14 of the SARFAESI Act to take physical po.gsession of the schedule property, the Applicants filed SR.llo.276'12022 og1,,09.1 1.2022. In the meanwhile, Ld. CJM, waranghtfffr er'&a.. it.itz. to.zozz, appointed Advocate Commissione.,fop.trkirrg physicql $9s6"ssion of the schedule property. '."...\r l. , . .,i,' . ,-.;..- . ). '-.-"':j- *:- '--,:-''

¶42

SA.Nos.93 & 276 ol2022

¶43

SA.No.276l2022:-

¶44

The Applicants, while reiterating their averments in SA.No.91l2O22, have further averred in SA.No.276 12022 that, this Tribunal while allowing MA.No.27 12022 in SA.No.93l2022 vide order dt.31.1O.2022, has extended the status quo orders granted on 3O.O9.2O22, till 25.11.2022 but, the lst Respondent Bank by suppressing the said fact obtained orders from the Ld. CJM, Warangal in Crl.M.P.No.9O 12022 u/s. 14 of the SARFAESI Act and got issued notice from the Advocate Commissioner appointed by the Ld. CJM, Warangal in Cr1.M.P.No.90 12022, for taking physical possession of the application schedule property and so, the action of the 1"t Respondent Bank is totally illegal. It is further averred that, as per the orders of the Hon'ble High Court dt.2t.Ot.2O2O in Wp.No. 1t3412020, the Applicants deposited an amount of Rs. 15.00 lakhs out of Rs.30.00 lakhs (25oh of Rs. 1,18,90,0821-l and later before this Tribunal in SA.No.93/2022, the Applicants have deposited 6 Demand Drafts of different dates amounting to Rs.69,89,500 l- and this Tribunal while disposing of MA.No.27 12022 passed orders in IA.No. 141112022 directing the Applicants to deposit the said 5 DDs amounting to Rs.69,89,500 l- into the interest bearing no-lien account with the 1st Respondent Bank and thus till today, the Applicants have deposited with the lst Respondent Bank a sum of Rs.g4,g9,50O/- out of Rs. 1,18,90,O821- and the balance remains to be paid to the l"t Respondent Bank is only Rs.30,00,4821-. It is also averred that, the lst Respondent Bank has not issued any notice to the Applicants u/s. 14 of the SARFAESI Act and so violated the said provision of the SARFAESI Act and further the notice affixed by the Advocate Commissioner on the schedule property does not speak about the Crl.M.P.No.90 /2022, in which he yas.,._3Pp.3inted as Advocate Commissioner. So, rhe Applicanrs prayed for.seiJrrits aside the acrion of the l"t Respondent Bank to take"'physicai..;!.S.ssession of the application schedule property.

¶45

,l ,^

¶46

SA.Nos.93 & 276 of 2022

¶47

¶48

The 1st Respondent Bank filed its Reply Statement in SA.No.276l2022 reiterating its version taken in SA.No.93/2022 and further contended that, the Applicants have failed to comply interim orders d,t.2l.Ol.2O2O passed by the Hon"ble High Court in IA.No.O2l2020 in WP.No.1134 l2O2O and so the benelrt of stay of confirmation of sale, as per the conditional orders passed by the Hon'ble High Court, is not available to the Applicants. By misrepresenting that the Applicants have complied with the interim orders, they got disposed of the writ petition and obtained extension of interim orders for a period of 30 days, from the Hon'ble High Court. It is also contended that, the Applicants again made a misrepresentation before this Tribunal in lA.No.377 12022 in SA.No.93l2022 that they have complied with the interim orders of the Hon'ble High Court and obtained stay of aii further proceedings, including registration of sale certificate in favour of the auction purchaser. The writ petition was disposed of by the Hon'ble High Court on 21.03.2022 granting 30 days time to the Petitioner/Applicant to approach this Tribunal and seek appropriate orders. So, the sale was confirmed only vide letter dt.22.04.2022 and the auction purchaser paid the balance bid amount on 29.04.2022 and the Respondent Bank issued the Sale Certificate on 16.05.2022. It is further contended that, SA.No.93l2O22 liled by the Applicants was dismissed by this Tribunal for default on OS.OZ.2O22 and so the interim orders of stay granted by this Tribunal stood vacated on 05.O7.2022. The Respondent Bank Iiled Crl.M.P.No.9Ol2022 on 18.07.2022 before the ld. CJM, Warangal and obtained orders dt.18.1}.2022, ie., appointment of Advocate Commissioner for taking physical possession of the application schedule property and MA.No.27 12022 filed by the Applicants for setting aside the dismissal order dt.05.07.2022 in SA.No.93/2022 was allowed by this Tribunal only on 31.10.2022-,, So, thq lst Respondent Bank contended that, the Applicants have riot approached thiq..sribunal with clean hands and accordingly prayed for; tfre $jgmi.pal of EA.No.276/2022. :' ij#

¶49

SA.Nos.93 & 276 oJ 2022

¶50

9 . The 2"4 Respondent-auction purchaser filed his Reply Statement in SA.No.276/2022, by sailing with the version of the 1"t Respondent Bank. The further contentions of the 2nd Respondent in brief, are that, he purchased the application schedule property vide Sale Certificate dt.16.O5.2022, issued by the 1"t Respondent Bank after being declared as successful bidder in the auction conducted on 22.01.2020, for a total bid amount of Rs. 1,47,52,000/ - as against the Reserve Price of Rs.97,20,0O0/- fixed by the 1st Respondent Bank. It is also contended that, the misrepresentation made by the Applicants before the Hon'ble High Court that they have complied with the interim orders of the Hon'ble High Court and also making same false statement in their affidhvit filed before this Tribunal and obtaining interim orders from this Tribunal itself establishes the malafide intention of the Applicants and they have further concocted a false story and filed Tender Apolog, Affudavit before this Tribunal. So, the 2nd Respondent contended that the Applicants are not entitled to any relief from this Tribunal in view of various contradictions, concealments, misrepresentation and misstatements made by them and accordingly prayed for the dismissal of 54.No.27612022.

¶51

During the course of arguments in both the SAs i.e., SA.No.93/2022 and SA.No.27612022, Ld. Counsels appearing for both sides l-rled their respective written arguments.

¶52

Now, the points that arise for consideration are,-

¶53

i) Whether the Applicants have established any valid grounds for setting aside the auction sale of the application schedule property conducted by the 1st Respondent Bank on 22.O1.2022

¶54

-4'1^:, t,;', rpurstreiY{.(o the Sale Notice dt. 17.12.2019, which is under - .-..i , ,,:^{..- ..}

¶55

ac crratte" get'19, $$ .No.9 3 / 2022?

¶56

,"P ii)i (. U..betHS the-APplicants have established any valid grounds for setting action of the 1st Respondent Bank to take

¶57

SA.Nos.93 & 276 of 2022

¶58

¶59

physical possession of the application schedule property in pursuance of the order dt.I8.10.2O22, passed by the Ld. CJM, Warangal in Crl.M.P.No.2O 12022, which is under challenge in SA.No.276l2022?

¶60

iii) To what relieP

¶61

Polnt No.(il:-

¶62

Ld. Counsel for the Applicants in his written arguments reiterated the version of the Applicants as stated supra. He further contended that, the Applicants have been paying the loan instalments regularly and the loan accounts were within the sanctioned limits as on 22.06.2019, which is evident from the statement of account filed by the lst Respondent Bank in SA.No.93/2020 and as such the classification of loan account of the Applicants by the lst Respondent Bank on 22.06.2019 itself is illegal and arbitrary and even after the classification of the loan account, the Applicants paid the loan instalments and the 1"t Respondent Bank ought to have considered the proposal of the Applicants lor settling the loan account under OTS. Ld. Counsel also argued that the stamp of the firm and the signature appearing on the copy of Possession Notice filed by the 1"t Respondent Bank towards acknowledgement of receipt of said notice, are different from the stamp of the firm and the signature appearing on the copy of Demand Notice filed by ths 1st Respondent Bank, which clearly manifests that the 1st Respondent Bank has forged the stamp and signature on the Possession Notice to claim service of the said notice personally and further, the photographs filed by the 1st Respondent Bank towards affixture of the said notice do not show date and time and so, theae isyiplation ,q'i. of Rule 8(1) & (2) of the Rules, 2OO2. Ld. Counsel further conter{{s. itrat, the lst Respondent Bank ought to have issued separate Posse'ssio4 Notice for movables as per Rule 4(1) of the Rule$ ?OpA qql the io'i?."pondent Bank has failed -t to do so. Ld. Cot!,4sel also contended that the l"t Respondent Bank

¶63

.^.- .^,,:;.. '" 1;. ;r: 1 7";,.t'i ....:,r:.r.,f f ii.-^. ..,.., -.----:.;: '--

¶64

SA.Nos.g3 & 276 of 2022

¶65

¶66

has failed to obtain correct valuation of the schedule property and the copy of purported valuation report dt. 15.10.2019, filed by the l"t Respondent Bank is only a letter issued by the valuer for payment of fee for revaluation of the schedule property and the 1"t Respondent Bank did not file any detaiied valuation report and further, the l"t Respondent Bank has fixed reserve price of the schedule property at a very low price as against the present value of the property, which is worth of Rs.8.00 crores and so, there is a violation of Rule 8(5) of the Rules, 2OO2. Ld. Counsel further argued that, the lst Respondent Bank did not serve Rule 8(6) notice on the Applicants and the signature appearing on the copy of the alleged Rule 8(6) notice dt.02.1 1.2019 filed by the lst Respondent Bank, towards service of the said notice does not belongs to the Applicants and the names appearing on the postal receipts filed by the 1"t Respondent Bank are no way connected to the loan transaction between the Applicants and the lst Respondent Bank and further from the copies of photographs filed by the 1st Respondent Bank towards affixture of sale notice, it is not clear as to which notice was affixed and on which date at what time and so, the l"t Respondent Bank has violated Rule 8(7) of the Rules,2002 and the lst Respondent Bank has also not followed Rule 9(1) of the Rules, 2002, while issuing the sale notice. Ld. Counsel further submitted that the alleged misrepresentation regarding compliance of interim orders before the Hon'ble High Court and this Tribunal was done by the previous Counsel for the Applicants and the Applicants after coming to know about the same, changed the earlier counsel and engaged the present Counsel and filed Tender Apologz Affidavit before this Tribunal and that the Applicants have aiready deposited substantial amounts with the 1st Respondent Bank during the pendency of the above SAs and that they are ready and willing to settle the entire dues by paying 'tfie.r-.balance amount. Ld. Counsel further contended that the while the "i*Lr." qr.,o orders granted by this Tribunal in SA.No.93/ 2Q22 are subsisting the lst Respondent Bank illegally obtained o.,a.r"'rl.,i[,Ji3tr,. S4nrAESr Act, from the Ld. .1 CJM, Warangal for-' taking physical .pbSbession of the schedule

¶67

¶68

SA.Nos.93 & 276 oJ 2022

¶69

property and so the said action is liable to be set-aside. So, Ld. Counsel for the Applicants prayed for setting aside all the measures taken out by the 1st Respondent Bank against the application schedule property, including the auction of the schedule property. Ld. Counsel for the Applicants, in support of his contentions, placed reliance on the following decisions:-

¶70

Decision of the Hon'ble High Court of Orissa in " sutastik Agency and Ors., Vs. State Bank of India, Main Branch and Ors.", reported in AIR 2019 Ori 747;

¶71

ii) Decision of the Hon'ble High Court of Telangana in WP.No. 11435 ol 2O2l - Amme Sisailam Vs Union Bank of India, decided on t7.o8.2022;

¶72

iii) Decision of the Hon'ble High Court of Andhra Pradesh in WP.No.8155 of2018 - Sn Sai Annadhata Polymers and another Vs. The Canara Bank, rep. by its Branch Manager, Madanapalle, decided on 27.06.2018.

¶73

Per contra, Ld. Counsel for the lst Respondent Bank, while reiterating the version of the lst Respondent Bank, as stated supra, further argued that after the loan account of the Applicants became NPA on 22.06.2019, the lst Respondent Bank by duly following the procedure as laid down under the SARFAESI Act and the Ruies made thereunder issued Demand Notice, Possession Notice and Sale Notice and that only after obtaining the valuation of the schedule property from the approved valuer dt. 15.10.2019, wherein the market value of the property is mentioned as Rs. 1,07,80,000/-, the lst Respondent Bank fixed the reserve price of the schedule property as Rs.97,02,000/- and the sold the property tn favour of the 2nd Respondent for a price of Rs. 1,47,52,0001- aad so, itcannot be said that the property was sold for a lesser price ,3s alleged- by the Applica,nts. It is further contended I^{1. (..,t} i/^l

¶74

that, the sale was.confirirred by"t6e 1.1 Respondent Bank in favour of

¶75

.:.- :::.a

¶76

''. , ;^-.,..,'''' .:-:": , -":4.-,r - , ...^{t- '}

¶77

SA.Nos.93 & 276 ol2022

¶78

¶79

the 2nd Respondent-auction purchaser after lapse of 30 days time granted by the Honble High Court to the Applicants herein for approaching this Tribunal and so also the 1"t Respondent Bank approached the Ld. CJM, Warangal u/s. 14 of the SARFAESI Act, 2OO2, for taking physical possession of the schedule property, at which time there was no stay granted by this Tribunal was subsisting as by that time, the SA.No.93/2020 was dismissed for default. Ld. Counsel further contended that the Applicants did not communicate to the 1st Respondent Bank about the status-quo orders passed by this Tribunal in MA filed by them for restoration of SA.No.93 l2O2O. Ld. Counsel also contended that, the Applicants misrepresented before the Hon'ble High Court as well as before this Tribunal that they have complied with the interim orders passed by the Hon'ble High Court, which is nothing but a fraud, and as such they are not entitled to seek any relief and in this regard, Ld. Counsel for the lst Respondent Bank placed his reliance on the following decisions:-

¶80

i) Decision of the Hon'ble Supreme Court in "5.P. Chengaluaraga Naidu (Dead) by L.Rs., Vs. Jagannath (Dead) bg L.Rs., and Ors.", reported in AIR 1994 SC 853;

¶81

ii) Decision of the Hon'ble Supreme Court in "Bank of Baroda and Ors., Vs. Parasaadilal TLtrsiram Sheetgrah Put. Ltd and Ors.", reported in2022 (ll ADJ2a6;

¶82

Ld. Counsel for the 2"d Respondent-Auction Purchaser in his written arguments reiterated the version of the 2"d Respondent as stated supra and while sailing with the version of the 1"t Respondent Bank, he further contended that, the 2nd Respondent purchaser the schedule property in the auction conducted by ths 1"t Respondent Bank and upon paymen t of 25o/o of^-tfre laie^{'.go4oideration,} the l^st Respondent Bank confirmed the sale in favour ofjtAU" Z,o Respondent, at which time, no stay granted by the Ho4lple HigtiliCourt was subsisting and -,'!1 " !

¶83

after SA.No.9 312022 was dismisscil for defhult and upon payment of

¶84

SA.Nos.93 &²⁷⁶ ol²⁰²²

¶85

¶86

balance sale consideration, the 1st Respondent Bank has issued Sale Certificate in favour of the 2"a Respondent. He further contended that, the Demand Notice and Possession Notice were served on the Applicants in the year 2019, so the Applicants cannot dispute and challenge the said proceedings in the present SAs, which are filed at a belated stage. He also argued that, a party who secures an order but does not comply with the duties it is required to^perform cannot take advantage when such order is not complied or obeyed by other^party and the Applicants having failed to comply with the interim orders passed by the Hon'ble High Court and having misrepresented before the Hon'ble High Court that they have complied the said orders, are not entitled to seek any relief. Ld. Counsel for the 2nd Respondent in support of his contentions, placed reliance on the following decisions:-

¶87

i) Decision of the Honble High Court for the State of Telangana in WP.Nos.23804, 23805, 25432 of 2018, decided on 18.O1.2022; and

¶88

ii) Decision of the Hon'ble Supreme Court in 'A. Venkatasubbiah Naidu Vs. S. Challappan and Ors.", reported in AIR 2000 SC 3032.

¶89

There is no dispute regarding the fact that the l"t Applicant firm, represented by Applicants No.2 & 3, availed loans from the 1st Respondent Bank by mortgaging the application schedule^property as security. The Applicants themselves admitted that due to unfavourable market conditions during demonitization and^GST implementation their business got affected and payment of loan instalments fell in arrears. However, the Applicants again taken a^plea that the loan accounts were within the sanctioned limits and that the 1"t Respondent ndi-i!. has illegallyq'd}g.ssified the loan accounts as NPA -^,'d., .,.

¶90

on 22.06.20191' which is totally hradbntradictory statement. The Applicants harle a1so. stated t\at after receipt of Demand Notice dt.o1.08.2019,,.they have approdched^'tl.re i't Respondent Bank and

¶91

.._ i --_

¶92

SA.Nos.93 & 276 oJ²⁰²²

¶93

¶94

requested for time for settling the dues under OTS. If really, the accounts were maintained as per the terms of sanction, the Applicants would have certainly raised objections for classifying the loan accounts as NPA, which they did not do. Further, the Applicants have also not raised any objections to the Demand Notice dt.01.08.2019, issued u/s. 13(2) of the SARFAESI Act, by the 1st Respondent Bank. So, I do not find any substance in the contention of the Applicants that the 1st Respondent Bank has illegally classified the loan accounts as NPA.

¶95

The next contention raised by the Applicants is that, Possession Notice dt. 15.10.2019 was not served on the Applicants and that copies of photographs filed by the 1"t Respondent along with its Reply Statement, do not reveal date and time of affixture of the said notice on the schedule property and that the lst Respondent has not followed the procedure while taking publication of the Possession Notice in the newspapers and so, the lst Respondent Bank has violated Rule 8(1) & (2) of the Rules, 2002. The further contention of the Applicants is that, the stamp of the lst Applicant firm and the signature of the partner appearing on the copy of Possession Notice dt. 15.10.2019, filed by the 1st Respondent Bank in its material documents, does not belong to the lst Applicant firm as the stamps of the 1"t Applicant and signatures of the Partners endorsed on copy of the Demand Notice dt.01.08.2019, towards receipt of the said notice are totally different and that the stamp and signature of the partner appearing on the Possession Notice are forged. I have perused the copy of Possession Notice dt. 15.10.2019 fiied by the 1"t Respondent Bank and on the said notice, there appears 1"t Applicant's firm stamp and signature of one of the Partners of the said firm. So also, copy of Demand Notice d1.01.08.2019 filed by the lst Respondent Bank bears the signatures of the Managing Partners of the 1",^-$ppl.rgant along with their |,,^... signatures. There is every possibility of having firm's stamps with different fonts and style:hfid$[flege$ because the lirm's stamp appearing on the Po.sqessign Notice is apptl4{ng different from the i.^r..'1,. ..-, i-: i.-.,,.:.r, ,:..,.. -

¶96

,:..,.. - . r,.;;. '.:. ,'.;ili '' --+-:.;::;:-;:. .i

¶97

SA.Nos.93 & 276 o12022

¶98

stamp that affixed on Demand Notice, it cannot be said that^{the stamp} appearing on the Possession Notice is a forged one. Similarly,^after careful examination, I do not find any much difference in^the signatures of the Partner appearing on the Possession Notice^{and the} Demand Notice. So, it cannot be said that, the Possession^Notice dt. 15.10.2019 has not been served on the Applicants. The copies^of photographs filed by the 1"t Respondent Bank clearly depict that the Possession Notice dt. 15.10.2019 was affixed on the schedule^property. Rule 8( 1) of the Rules , 2OO2 contemplates affixture of^Possession Notice on the outer door or at such conspicuous^place of the^property and the said rule provision does not include date and time.^{So, merely} because date and time are not depicted on the af{ixture^{of Possession} Notice, it cannot be said that the lst Respondent Bank^{has violated} Rule 8(1) of the Rules, 2002. Further, the lst Respondent^Bankhas also filed copies of publication of Possession Notice dt. 15.10.2019ⁱⁿ Hans India and Namasthe Telangana newspapers^{dt. 15.10.2019and} so it is very clear that the 1st Respondent Bank has duly^{followed Rule} 8(2) of the Rules, 2002.

¶99

The further contention of the Applicants is that, the lst^Respondent Bank has failed to serve Notice prior to sale as contemplated^under Rule 8(6) of the Rules, 2OO2 and that, the copy of Rule 8(6)^Notice dt.02.11.2019, filed by the l"t Respondent Bank bears^{a signature of} some third-party, towards receipt of the said^{notice and from} that^it cannot be said that the said notice has been^{served on the Applicants.} It is also the contention of the Applicants that, the copies of^postal receipts filed by the lst.R6spon@.,9agk to establish service of^Rule 8(6) notice, pertains to some 'other'Fb. {s9ns but not the^Applicants herein and so, there is no^{properservi-c.e} rpf^{Rule 8(6)noticeon the} 'r^{1 ::'' t'i':; I} APPlicants. :1 ' j" 'ii'.,'^Ji"'

¶100

Admittedly, the Applican{afreSlff.fifeO^WP.No.1l34 l2O2O^beforethe Hon'ble High Court'S:!|GSUt" of Telangana^{challengingthe Rule} \..'-,'',-

¶101

8(6) Notice dt.02.1 l.2O1g ariil'the action of the I"t^{Respondent Bank}

¶102

SA.No'g3 & 276 ol 2022

¶103

¶104

in proceeding with auction of the schedule property on 22.O1.2O2O vide paper publication. So, it is very clear that the Applicants are having knowledge of Rule 8(6) Notice dt.02.11.2019 and the proposed auction of the schedule property by the l"t Respondent Bank on 22.O1.2O2O. So, I do not hnd any merits in the contention of the Applicants that Rule 8(6) notice dt.02.1 l.2ol9 has not been served upon them.

¶105

As regards the contention of the Respondents No. 1 & 2 that in view of the misrepresentation made by the Applicants before the Hon'ble High Court that they have complied with the interim orders, even though they have not complied, the Applicants are not entitled to any relief and the contra contention of the Applicants that the said misrepresentation was made by the earlier Counsel for the Applicants and that they have Iiled Tender Apolory Affidavit before this Tribunal are concerned, both parties have to approach the Hon'ble High Court to address their grievance.

¶106

The next crucial contention raised by the Applicants is that, the^1"t Respondent Bank has failed to obtain valuation of the schedule property before proceeding for the sale and it has sold the schedule property, which is worth of Rs.8.00 crores, for a meagre price. Per contra, the lst Respondent Bank contended that, it has fixed the reserve price of the schedule property as Rs.97,O2,OO0/- basing on the valuation report dt. 15.10.2019, issued by the valuer, wherein the value of the schedule property has been shown as Rs. 1,07,80,000/^- and the property was sold in favour of the 2"d Respondent for Rs. 1,47,52,000/ -, which is even more than the value mentioned^by the valuer. But, it is contended by the Applicants that the^purported Valuation Report dt. 15.10.2019, ret-if-Il,qpon ..,.... by the 1"t Respondent Bank, which is filed in,its material aocffib4ts, cannot be treated as a Valuation Report q!.a11 and it iS only a tettet-'issued by the Valuer^for I r, . .. fee payment ol Revaluati6ri Rtpbrtr i <sup>.:;. .,! have^perused the said Valuation Report dt. 15.lo.20l-9 filed by the 1s Respbudent Bank in its material ... f:r. r-ft .' -:.i.'

¶107

.trt,,,'. "^. :;".':, t:],,=i ' -,r;,

¶108

SA.Nos.gi & 276 ol2022

¶109

documents. Undoubtedly, it is only a letter dt. 15.10.2019, issued by Ln. Jogu Umapathi, Chartered Engineer & Approved Valuer to the lst Respondent Bank for the fee payment of revaluation and he claimed the fee of Rs.5,000/- showing the value of the schedule propert5r as Rs. 1,07,80,000/-. Other than the said letter dt. 1S.10.2019, issued by the Valuer, no Valuation Report has been filed by the lst Respondent Bank despite a specilic plea taken by the Applicants that the l st Respondent Bank has failed to obtain valuation of the property before proceeding for sale, as mandated under Rule 8(5) of the Rules, 2002. It is also not clear from the said valuer's letter dt. 15.10.2019, as to whether the value of the property shown as Rs. 1,07,80,000/- is market value or realizable value or distress value. No proper valuation report, showing details of inspection of property conducted by the valuer, the locality of the property situated, the condition of the property, government value of the property etc., has been filed by the l"t Respondent Bank. So, I am constrained to hold that, the 1st Respondent Bank has failed to comply with Rule 8(S) of the Rules, 2002.

¶110

As regards the contention of the Applicants that, the photographs filed by the 1st Respondent Bank towards affixture of Sale Notice on the application schedule property do not reflect that it was the Sale Notice that was affixed, so there is a violation of Rule 8(7) of the Rules, 2002, by the 1"t Respondent Bank, is concerned, indeed from a perusal of the said photographs filed by the lst Respondent Bank it is not at all clear as to which notice is said to have been affixed on the schedule property as they are not at all legible. So, I hold that the 1st Respondent Bank has failed to establish affixture of Sale Notice on the secured asset as contemplated under Rule 8(7) of the Rutes, 2002.

¶111

_; _i

¶112

1. So, in view of violation of Rulas 8i$j' 8(7) of the Rules, 2002 committed by the^{,l s.Respondent} Bank proceeding for the sale of the application scb&ule,propfifV, |*am opinion that the auction sale of the applicafirtl6n schedule property. held on 22.01.2022 is liable

¶113

S'a.Nos.93 &^{276 ol 2022}

¶114

¶115

to be set-aside and SA.No'9312022^is liable to be allowed. AccordinglY, this point is answered^{in favour of} the Applicants and^againstthe Respondents.

¶116

Polnt No.lll)t

¶117

zJ. Insofar as the contention^{raised by the Applicants in SA'No'27612022} that the 1st Respondent^{Bank has illegally and highhandedly obtained} orders dt.La.lO.2022^{u/s. 14 of theSARFAESIActin} Crl.M.P.No.90 12022, from^{Ld. CJM, Warangal during subsistenceof} status^quo orders^{granted by this Tribunal is concerned, it is a matter} of record that^SA.No.93 12022,^{wherein stay orders were granted,was} dismissed by this Tribunal^{for defaulton 05'07'2022' The 1"t} Respondent filed Crl.M.P.^No.9O 12022^{before the Ld' CJM,Warangai} onlB.oT.2022i.e.,afterdismissaloftheSA.No.g3l2022fordefault. So, it cannot be^{said that, the 1"t RespondentBank hasproceeded} u/s. 14 of the^{SARFAESI Act, during subsistence any stay orders'} LaterwhentheApplicantslrledMA.No.2Tl2022toset-asidetheorder of dismissal for default^{dt.os.o7.2022 and to restore sA.No.93/2022} to file, this Tribunal,^{during the course of hearing of the said MA,} directed the 1"t^{RespondentBank to maintainstatus-quo vide order} dt.3O.Og.2O22 and^{later while allowingthe said MA on 3L'1O'2o22,} extended the^{interimorders.EventhoughLd' CJM, Warangalpassed} orders appointing^{Advocate Commissionerfortakingphysical} possession of the schedule^{property on 18 10'2022 and the Advocate} commissioner issued^{notice for taking physical possessionof the} schedule property, it^{is amatter of record that the Advocate} Commissioner has^{not taken possessionof the schedule property'So'} I do not find any^{illegalityin the action of the lst Respondent Bank in} approachedLd.CJM,Warangalu/s.14oftheSARFAESIActfortaking physical possession of^{the sched.rri"-irrgpqtty So, SA'No'276/2022} filed by the^{Applicants challenging tf," i";don of the lst Respondent} Bank to take^{physicStposses+Qn of'r1he scheduleproperty u/s'14 of} the SARFAESI^{Act, i$iable to be dismisse$:ar,rd accordinglythis point}

¶118

....^'';-.,,]'- ,., ,^{:rr' .,'..i',,"} ,

¶119

¶120

5A.Nos.93 & 276 of 2022

¶121

is answered against the Applicants and in^{favour of the1st} Respondent Bank.

¶122

Point No.(iii):-

¶123

In the result, following orders are^passed:-

¶124

i) SA.No.93 12022 is allowed by setting^{aside the auctionsale of} the application schedule^{property conducted by the1"t} Respondent Bank on 22.O1.2O2O and^{the consequentialSale} certificate dt.16.05.2022, issued in^{favour of the2nd} Respondent. However, the 1"t^{RespondentBank is at libertyto} proceed for the sale of the secured asset^{afresh in accordance} with law. The 2"d Respondent^{is entitledto refund of entire sale} consideration deposited by him^{with the 1st Respondent Bank} with interest @ 60/o^p.a., simple^{from the date of deposittill the} date of refund and the 1"t^{Respondent Bank is directedto} refund the amount within^{1 month from the date of this order.}

¶125

ii) SA.No.27 6 I 2022 is dismissed.

¶126

iii) The Interlocutory Applications,^{pendingin both the SAs, if any,} stand disposed of.

¶127

iv) No order as to costs.

¶128

Communicate a copy^{of this order to the partiesconcerned.}

¶129

(Dctoted to the^priuate Secretary, transcribed bg^{him,corrected,signed and pronounced bgmein the open court on} tlrr.s the 5'1' rlat1 t>J'Sept<'rrtber,^2O2-)).

¶130

¶131

sd/-
(G. GOPICHAND)
PRESIDING OFFICER
TRU
Asst'

M S Chelpuru Brothers Cloth Stores v. Union Bank of India

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M S Chelpuru Brothers Cloth Stores v. Union Bank of India

Case brief

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