Allowed

Sfpl Crop Life Science Private Limited v. Union Bank of India

DRT17 Apr 2023SA/73/2022

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal dismissed the applicant's securitization application challenging the bank's sale of secured assets. The Tribunal allowed the bank's interlocutory application to confirm the sale, finding the objections regarding notice, publication, and valuation lacking in merit and founded on delays.

What did the court decide?

Interlocutory application for confirmation of sale was allowed; Securitization Application was dismissed with no order as to costs; sale permitted to be confirmed.

Sfpl Crop Life Science Private Limited versus Union Bank of… — Banking and Recovery | DRT (2023)

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Presented on: 22.02.2022 Registered on: 28.02.2022 Decided on: 17.04.2023 Duration: Y M D 01 01 25

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IN THE DEBTS RECOVERY TRIBUNAL, AT AURANGABAD SECURITIZATION APPLICATION No.73/2022

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SFPL Crop Life Science Private Limited Through its director, Mr. Ashish Subhashchandra Karwa, Gut no. 80, Bhokardhan Road, Jalna. Pin-431 203 M.S. Email id : [email protected]

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… Applicant

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Versus

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Union Bank of India, Through its Authorised Officer, Mr. Rohit Kumar Pradhan, Having its branch office at: UBI Jalna Branch, Pitti Complex, Nehru Road, At PO & District Jalna431203. MS, Email Address: [email protected]

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Mr. Mukund Subhashchandra Karwa Age: Major, Occu.: Business, Address: Plot. No. l70/P & l7l, CTS No. ll494/B-171, Lane One, Shree Krushna Rukmani Nagar, Jalna 43 1203.

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Email : [email protected]

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3. Mr. Ashish Subhashchandra Karva

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Age: Major, Occu.: Business, Address: House no. 11494/B-171, Lane One, Shri Krushna Residency,

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[APK] (SA No.73/2022) Page 1 of 44

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Rukmani Nagar, Near Warkad Hospital, Jalna-431 203. Email : [email protected]

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Mr. Anup Subhashchandra Karwa Age: Major, Occu.: Business, Address: Plot. no. 170/P & 171, CTS No. 11494/B, House No. I l494lB171, Lane One, Shree Krushna Rukmani Nagar, Jalna 43 1203. Email : [email protected]

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Mrs. Kaushalya Subhashchandra Karwa Age: Major, Occu.: Business, Address: Plot. no. l70/P & 17l, CTS No.1494/B, House No. 11494/B-171, Lane One, Shree Krushna Rukmani Nagar, Jalna - 431 203.

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Mr. Sharad Gaganbishan Lahoti. Age: Major, Occu.: Business, Address: 14, Sukh Shanti Nagar, Mantha Road, Jalna 431203.

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Email: [email protected]

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Gauri Agrotech Products Private Limited. Through its Director, Mr. Mukundram Jugalkishor Mantri, Gut no. 79, Gundewadi, Bhokardan Road, Jalna – 4310203.

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… Respondents

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APPEARANCE

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For the Applicant Mr. R.F. Totla - Advocate For Respondent No.1 bank Mr. A.A. Mishra – Advocate For Respondent no.7 auction Mr. S.R. Vakil – Advocate purchaser For respondent nos. 2 to 6 None

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Shri Vimal Gupta Presiding Officer

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JUDGEMENT PRONOUNCED ON : 17.04.2023

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JUDGMENT

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The matter was listed for argument on interlocutory applications on 15^th April, 2023 when the applicant insisted that the securitisation application be also disposed of along with the interlocutory applications and other parties have no objection to same hence the matter was heard at length and the orders are pronounced today in open court.

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This is an application under sub-section (1) of Section 17 of The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short “the 2002 Act”) and the Security Interest (Enforcement) Rules (for short “the said Rules”).

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The present Securitization Application is filed by the Applicant challenging the action of the respondent bank for setting aside the order dated 27. 10.2021 passed by the Hon'ble District Magistrate under Section 14

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Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the subsequent notice dated 17.01.2022 issued by the Tahsildar, Jalna.

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The facts of the case are as under:

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(i) The applicant submits that, the Respondent bank had sanctioned credit facilities, namely Cash Credit of Rs. 7,50,00,000/- to the Applicant for the purpose of meeting its working capital requirements, from the Respondent Bank by hypothecation of land admeasuring 3 Hector 74 R bearing Gut no. 80, Bhokardhan Road, Jalna, 431203,

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(ii) The applicant submits that, the credit facility granted to the Applicant was further extended vide sanction letter dated 26^th June 2020.

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(iii) The applicant submits that, the Respondent bank classified the loan account of the Applicant as NPA on 31^st March, 2021 and thereafter without issuing notice under section 13(2) has issued notice dated 29^th June, 2021 under Section l3(4) of the SAPSAESI Act, 2002 which was pasted on the wall

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of the premises of the secured assets on 07^th July, 2021 and also published the same in newspaper dated 09^th July, 2021.

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(iv) The applicant submits that, one of the Guarantors Mr. Mukund Subhash Chandra Karwa has filed the Securitisation Application no. 78 of 2021 in which the present Applicant is joined as Respondent, seeking to quash and set aside the impugned illegal actions.

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The respondent no.1 bank and respondent no.7 appeared and filed its reply vide Exhibit-08 & 12 denying all the contentions made in the securitisation application and prayed to dismiss the securitisation application.

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(i) In this matter the arguments have been heard.

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(ii) On the last date of hearing the arguments were heard on the amendment application. The amendment was allowed only qua objection to 30 days’ notice not been given. Non-publication of sale notice qua nonvaluation of the property before putting the property to auction as per rules. Any other averments or additional pleas or documents which the applicant is

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trying to insert are not taken on record and the Tribunal will consider only the three objections permitted to be raised.

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(iii) The copy of the sale notice and valuations have been filed. It is contended that the sale notice has been published in the two leading newspapers. The valuation has already been provided which was done in August, 2022.

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(iv) The counsel for the applicant submits that the bank does not get the right to take law its own hand and reject the proposal of settlement.

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(v) The counsel for the applicant further submitted that he has given Rs.50,00,000/- (Rupees Fifty Lacs only) cheque alongwith proposal which was promptly rejected by the bank. The banks are the worse than money lenders.

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(vi) The further contention of the applicant is that three sale notices i.e. sale notice dated 24^th February, 2022, 27^th July, 2022 and the sale notice dated 16^th January, 2023 was withdrawn by the bank hence cannot be counted as any attempt and 30 days’ notice is mandatory.

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(vii) The learned counsel for the applicant further submits that if the respondent-bank was unsuccessful in selling these properties for six attempts that is not the fault of the borrower and that cannot be counted as any sale or attempt to sale as no bidders participated which shows that none is interested in buying. Though towards the end of the arguments he submitted that the purchaser was keeping an eye on the property and has taken the property at throwaway price. It is contended that the said purchaser has also participated in the auction earlier but nothing is on record that the purchaser participated in the auctions earlier.

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(viii) The only contention with respect of the sale of 10^th March 2023 is threefold: 1. 30 days’ notice not given 2. Sale notice is not published in two leading newspapers 3. valuation of the property is not done prior to conducting the auction.

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(ix) Applicant is trying to travel beyond its pleading and to submit that Business Standard is not widely circulated newspaper in Jalna and is published from Pune. The stand of applicant was that sale notices are

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not published now he says it is published in Pune newspaper. The newspaper published in Pune has wide circulation even in Jalna. The counsel for purchaser also submitted that they came to know of Auction from reading the same newspaper.

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(x) Further allegation was made that the valuation shows the fair market value at around Rs.10-12 Crores whereas the property has sold for Rs.8,20,00,000/(Rupees Eight Crores Twenty Lacs only). It can be seen from the chart annexed by the applicant itself in Interlocutory Application No.463/2022 that 10 attempts were made by the respondent-bank and the value of the property came to be reduced from Rs.11,45,67,000/- to Rs.8,20,00,000/- (Rupees Eight Crore Twenty Lacs only) so the ground taken by the applicant that the valuation is not correct and bank has wrongly conducted the auction are not sustaintable.

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(xi) So far as the observations made in the order dated 11^th August, 2022 are concerned, they were in respect of sale to be conducted vide notice dated 27^th July, 2022 which was withdrawn by the bank and

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accordingly the orders out lived its life. The Tribunal asked the Counsel for the Bank as to why he filed this application when the said notice was not under challenge, he submitted that as an abundant precaution it is done.

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The counsels for the parties request for permission to file the written synopsis by 2.30 p.m. accordingly permission is granted.

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The applicant has filed short written synopsis as under:

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1. No service of Demand Notice:

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(i) As per the Companies Act, a Company and its directors are distinct and separate entities. A director of a company cannot be said to be acting for and on behalf of the company owing to a company's separate legal existence which has due recognition in law.

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(ii) It is necessary to note that no demand notice under section 13(2) was served on the borrower company and the same is matter of record. That the notice dated 6th April 2021 purporting to be demand notice under section 13(2), was never served on the

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borrower company and the same is abundantly clear from a bare perusal of the same and as such sale of the Bank on 10th March 2023 cannot be permitted to be confirmed as it is in violation of mandatory provision of section 13(2) of the SARFAESI Act. And as the notice was not served on the borrower, therefore the entire further action will be vitiated.

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(iii) That, due to non-service of notice, Applicant has lost an opportunity under section 13(3)A which goes to the root of the matter. Addressing notice to the company is mandatory and admittedly no notice is issued to the Applicant Company and therefore the same is not a mere technical objection but a legal objection.

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(iv) That, thereafter notice dated 29^th June 2021 was directly issued under section 13(4) (Exhibit-F, Pg. 82) on the borrower company.

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(v) That, in the notice under section 13(2) there are no details or breakup of the amount and as such is bad in law and the said point is covered by the judgment dated 17^th February 2023 passed by the High Court of Gujarat in Special Application No. 2676 of 2023

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M/s Abaj Foods Private Limited v. The Authorized Officer Punjab National Bank.

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2. Mortgage deed by Subhash Fertilizer Private Limited:

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(i) In this respect, kindly peruse order dated 11^th August 2022 passed by Hon'ble Tribunal and order dated 27^th March 2023.

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(ii) That, in fact the SA itself was required to be placed for final hearing on 29^th March 2023 as per orders of this Hon'ble Court but for the reasons best known to the office, SA is not kept for final hearing which is having serious legal grounds to set aside the action of the Bank under section 14 itself.

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(iii) Taking the IA along-with SA will be the proper course to decide the matter even as per order dated 27th March 2023 otherwise giving the license to the Bank to confirm the illegalities keeping the SA pending will be grave injustice on the borrower and will increase the litigation.

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3. Symbolic possession notice;

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(i) The Respondent Bank issued notice dated 7^th July 2021 thereby intimating symbolic possession of the

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Applicant's properties. The purported notice dated 7^th July, 2021 is again defective as the same includes additional properties of the Applicant which are not mentioned in the notice under section 13(2). More particularly "Stock at A-25, MIDC Jalna" incorporated thereunder does not find a mention in the properties on which the Respondent Bank intended to proceed against the Applicant Company.

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4. Proceedings before District Magistrate:

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(i) The Respondent Bank only to usurp the properties of the Applicant Company and in flagrant violation of the provisions of the SARFAESI Act and Rules made thereunder filed an application before the District Magistrate, Jalna to obtain orders under section 14 of the Act to take possession of the Applicant's properties.

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(ii)

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(ii) That, the Respondent Bank has even made false statement in the affidavit appended to its application under section 14 and the same is a fallacy that goes to the root of the matter thereby making the entire action of the Respondent Bank a nullity.

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(iii) Firstly, the Respondent Bank in the pleadings and affidavit before the Hon'ble District Magistrate has falsely stated that notice under section 13(2) was duly served on all the borrowers (Para 10, Page 122 and Para 6 Page 127 of SA No. 73 of 2022). However, the said notice was not served on the Applicant Company itself as has been made clear hereinabove.

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(iv) Secondly, the Respondent Bank for the reasons best known to it suppressed from the Hon'ble District Magistrate the objections raised by the Respondents to the demand notice under section 13(2) (Para 6, Page 127 of SA no. 73 of 2022). It is submitted that an interim reply dated 10th May 2021 (Exhibit R-4, Page 19. 21 of Reply of Mukund Karwa) and final reply dated 9th June 2021 (Exhibit R-4, Page 22-30) is issued in response to the notice u/s 13(2) dated 6th April 2021. So also reply dated 20th May 2021 (Exhibit R-5, Page 31-33) was issued by Mr. Anup Karwa to the demand notice dated 6th April 2021.

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(v) Thirdly, the first mortgage deed executed in the year 2009, which finds due reference in the supplemental

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deed of mortgage dated March 2015, was never placed before the Hon'ble District Magistrate.

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(vi) Lastly, the Respondent Bank in its application under section 14 has failed to place on record any authority letter of the authorised officer empowering the said person to file the proceedings against the Applicant.

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5. Purported sale dated 10th March 2023:

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(i) That, the sale alleged to have been conducted by the Respondent Bank in respect of the Applicant's property is prima-facie illegal, unlawful and arbitrary let alone being in violation of the provisions of the SARFAESI Act and Rules made thereunder.

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(ii) Firstly, no valuation as is mandatory under Rule 8(5) of the Security Interest (Enforcement) Rules was done by the Respondent Bank against the said properties. That the valuation done in the year 2018 by the Respondent Bank through one Mr. M.A. Abbassi valued the property at Rs.18,60,00,000/(Rupees Eighteen Crore Sixty Lakhs). However, the

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Bank fixed reserve at Respondent price Rs.8,20,00,000/- for the property and the same was sold to Gauri Agro Tech Products Private Limited at the reserve price. In such circumstances it is abundantly clear that the Respondent Bank has caused great financial loss to the Applicant Company and in collusion with the auction purchaser, sold the valuable property at a throwaway price.

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(iii) Today Bank has placed valuation report on record which is dated 19^th August 2022 and sale is on 10th March 2023 so this valuation report will not be helpful to the Bank to carry out the sale without any fresh valuation and that is the requirement of Rule 8(5) of the Security Interest (Enforcement) Rules, 2002. More so the alleged valuation is dated 19th August 2022 and on the last page three valuations are given and it is also mentioned that he has inspected the property on the same date which further confirms that the said valuation is nothing but an attempt to grab the valuable property of the borrower at throwaway price. The judicial note can be taken that the earlier valuation was of Rs. 18.60

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crores and now bank has put the reserve price at Rs.8.20 crores and bank is not coming and filing the reply and documents on record in-spite of the orders of this Hon'ble Tribunal to file affidavit in reply. In such circumstance adverse inference must be drawn as per section 114 g of Evidence Act against the Bank that if the record is produced it will go against the Bank and if affidavit is filed, Bank will be in trouble for filing the false affidavit and therefore intentionally they are suppressing the facts and trying to obtain orders from this Hon'ble Court.

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(iv) It is pertinent to note that, the Respondent Bank in the O.A. No. 270 of 2021 filed against the Applicant which is pending before this Hon'ble Tribunal has stated the valuation of the property to be Rs. 18,60,00,000/-. Assuming without admitting that the valuation of the property as on today stands at the said price, the Respondent Bank cannot in the year 2023 sell the said property at a price of Rs.8,20,00,000/- contrary to its own stand.

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(v) Secondly, as is required under Rule 8(6), notice of 30 days was not issued by the Respondent Bank

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before proceeding with the auction dated 10th March 2023. That, notice of e-auction dated 22nd February 2023 was issued to the Applicant and thereafter e-auction was conducted on 10^th March 2023. Mathew Varghese V/s M. Amrith Kumar and Ors. (2014) 5 SCC 610

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(vi) That, the alleged notice dated 22^nd February 2023 is served on Applicant on 25^th February 2023 and sale was conducted on 10^th March and the same is in violation of the Security Interest (Enforcement) Rules, 2002 and the Applicant is relying on the judgment dated 18^th May 2022 passed by Hon'ble High Court of Kerala in Writ Petition (C) No. 27485 of 2021. The same is a legal ground and law is not required to be pleaded.

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(vii) That, the alleged sale on 10^th March is in violation of Rule 9(1) and Rule 8(5) and therefore sale cannot be confirmed.

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(viii) Thirdly, the Respondent Bank has only mentioned that the notice of e-auction was published in two newspapers. However, the Respondent Bank has neither placed the newspaper publications on record

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nor has stated the date of such publication made by it. Therefore, there exists every apprehension that the said mandatory requirement was also not fulfilled by the Respondent Bank.

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(ix) That, Rule 8(6) mandates the paper publication should be in largely circulated newspaper. In this case the Bank has today for the first time placed on record the circulation in business standard published at Punc and there is no wide circulation at Jalna. Moreso, Bank has not filed any proof to show that both the papers are widely circulated in the locality where the property is situated. The other newspaper is Dainik Tarun Bharat which is not published at Jalna. This attempt of the Bank was in collusion with the purchaser who has also intentionally avoided to file the reply in-spite of being made party as Respondent No.7 to the SA. Writ Petition No. 3789 of 2017 High Court of Madras in the case of Padmavathy v. Authorized Officer Dhanlaxmi Bank and Ors.

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(x) It is the duty of the Bank to satisfy the Hon'ble Tribunal with data that it is largely circulated newspaper in the locality. Merely filing a paper on

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the day of hearing and even if those publications are seen, same cannot be read out in the newspapers. Several other properties were incorporated and this attempt was made by the Bank only to favour the purchaser who are having hand in gloves with the Bank.

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(xi) That before putting reserve price of Rs.8.20 Cr there is no valuation report or affidavit as to how the Bank has arrived at the figure and more so Rule 8(5) mandates that the authorised officer shall obtain valuation of property from approved valuer meaning thereby prior to sale it is expected and more particularly when the Bank decides it to reduce the reserve price below the distress value. It is not the license given to the Bank or the authorised officer to fix the price at its own whims otherwise the Bank and malafide purchaser being hand in gloves will take the benefit of borrower who is already in difficult situation to grab his property.

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(xii) That, earlier order dated 11^th August 2022 that Bank should not confirm the sale is passed in SA and it cannot be treated as being order in any particular

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prior sale and more so the nature of the order regarding objection of section 13(2) notice to Subhash Fertiliser and Sushil Karwa relates to SA and in that background order was passed and therefore bank has filed the IA for confirmation of sale and in para 3 thereof, very cautiously reproduced the order dated 11th August 2022 and why the Respondent Bank is before the Tribunal seeking permission to confirm the sale.

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(xiii) In the said application Bank has referred in para 6 regarding deposit of title deeds and equitable mortgage dated 26^th March 2015 meaning thereby there is no earlier mortgage and the said mortgage is executed by an individual which is at page 41 of the SA and not by the Company. On this count also, sale cannot be permitted to be confirmed.

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(xiv) That, at the time of renewal, condition was put to bring the personal guarantee of Mr. Sushil Karwa and corporate guarantee of M/s Krishidhan Seeds which is as per letter dated 26.06.2020 which is filed on record at page no 115 of the IA 463 of 2023 and relevant portion at page 117. There is no notice to the said two guarantors.

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(xv) That, as the bank was not filing reply affidavit and therefore applicant has filed an application for interrogatories i.e. IA 462 of 2023 and delivered the interrogatories. This Hon'ble Court vide order dated 29^th March 2023 observed that if Respondent Bank wants to file the reply to the IA, same can be done but till today no reply has been filed and thus it is requested to draw an adverse inference, since if the interrogatories are answered the Respondent Bank would be put to difficult situation and is misusing its powers and therefore interrogatories are not answered.

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(xvi) While putting property for auction Bank was required to disclose the factum of pending litigation and the same is considered in the judgment dated 30th November 2022 in Writ Petition (C) 465 of 2021 S.K. Bakshi v. Punjab National Bank and Ors.

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(xvii)That, even if SA is taken for hearing along-with IA will not cause prejudice to any party and serve the interest of justice.

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(xviii) That Bank as well as Borrowers are cautiously coming to the Tribunal for confirmation of sale and

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not to confirm the sale. In such circumstances, there is no copy to interpret the earlier order whether it relates to any particular sale because nothing such is written in an order. On the contrary if such view is taken then it will amount to review of its own order without being called for any party who have understood the order in its proper spirit. Even Bank is not submitting that their application is misconceived or by misinterpreting an order dated 11^th August 2022. Even there is no such argument of purchaser, in such circumstance if it is held that it is not in SA and in respect of particular sale the same will be injustice to the borrower and the benefit will be taken by the Bank officers and the alleged purchaser. Moreso, considering this amendment is permitted to the SA and amendment is also carried out. In such circumstances it will be interest of justice to decide the SA itself along-with IA.

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6. OTS proposal:

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(i) That, the Applicant on 9th April 2023, has submitted OTS proposal to the Respondent Bank offering to make payment of an amount of

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Rs.8,50,00,000/- and also handed over cheque for an amount of Rs.50,00,000/- in lieu of the same.

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(ii) The said proposal was rejected by the Respondent Bank on 12^th April 2023 stating that the amount offered by the Applicant was not sufficient.

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(iii) It is pertinent to note that the said proposal offers an amount over and above the principal amount of Rs.8,00,00,000/-.

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WITHOUT PREJUDICE:

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(i) That, the friends and relatives of the borrower were and are ready to purchase the property above an amount of Rs.8.20 crores but they could not get and opportunity because there was no proper publication in newspapers in the local area and as such the interested persons could not get the knowledge of the same.

¶129

(ii) Today itself the borrower will arrange to deposit and amount of Rs.50 lakhs and will request this Hon'ble Tribunal to take matter immediately for mediation so that Bank will get the proper price.

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The respondent no.1 bank has filed short written synopsis

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as under:

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(i) The conduct of the Applicant in waiting till the10^th auction to get materialised and then approach this Hon’ble Tribunal with the present Application. That it is not in dispute that the Applicant was not aware regarding the auction notice dated 22/02/2023. That before the amendment application could have been filed the Auction purchaser, respondent no.7 has paid entire sale proceeds of RS 8 crores 20 lakhs on 23/03/2023.

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(ii) That out of 10 auctions it is admitted that only 3 auctions were withdrawn but as far as the remaining auctions are concerned the same failed due to want of bids. Admittedly there is no denial by the applicant regarding the knowledge and the service of auction notice. That it is 10^th sale & 15 days sale notice is served to the applicant which is not at all denied by the applicant.

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(iii) That, the valuation report submitted by the bank is produced on record which provides for the distress value. Respondent has carried out the valuation of secured assets on 19/08/2022. That the reserve price was set considering the previous failed auction as

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well as the power and the authority vested in the hands of authorised officer to reduce the valuation in the case of non-participation in the auction by the bidders. That the respondent is also placing reliance on the judgment of “ K.Kumara Gupta Versus Sri Markendaya and Sri Omkareswara Swamy Temple &Ors which has held that “ Public Auction - Under normal circumstances, unless there are allegations of fraud and/or collusion and/or cartel and/or any the material irregularity or illegality, the highest offer received in the public auction may be accepted as a fair value. Otherwise, there shall not be any sanctity of a public auction .”

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(iv) That as far as section 13(8), Rule 8(6) and Rule 9(1) is concerned despite of ample opportunities for the applicant to redeem the property, the applicant has failed to avail the said opportunity.

¶139

(v) The respondent bank has served notice of E-Auction sale dated 22^nd February, 2023 to the Applicant wherein the sale is scheduled on 10^th March, 2023. The notice was also published in two newspaper i.e. Tarun Bharat & Business Standard. The bank after

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attempting for more than nine times lastly on 10^th March, 2023 bank has received the bid. That in the present sale bid was received from Gauri Agro Tech Products Pvt. Ltd. for Rs.8.20 Cr.

¶142

(vi) The respondent Bank has proceeded against the applicants and guarantors meticulously adhering to the statutory provisions contained in the Securitization & Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as elucidated by the Hon’ble Supreme Court in cases like Mardia Chemicals & Others V/s. Union of India [AIR 2004 [S.C.2371] and Transcore V/s. Union of India [AIR 2007 SCW 389] and therefore the applicant has no cause of action to file such application for staying action taken by the respondent Bank and proceeding further for recovering its due.

¶143

The respondent no.7 Auction Purchaser has filed written synopsis as follows:

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(i) Before touching anything on merits the respondent purchaser is heavily placing its reliance on the Supreme Court Judgment passed in the matter of

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[APK] (SA No.73/2022) Page 26 of 44

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“ Arce Polymers Pvt. Ltd. vs M/S Alphine Pharmaceuticals Pvt” which indeed squarely covers the facts of the present Securitization application. That kindly consider the conduct of the Applicant in waiting till the 10^th auction to get materialised and then approach this Hon’ble Tribunal with the present Application. That it is also pertinent to note that the Securitization Application was filed assailing the District Magistrate order and subsequently now trying to challenge the auctions. That it is not in dispute that the Applicant was not aware regarding the auction notice dated 22/02/2023 and that the amendment application challenging the said auction notice was filed only on 28/03/2023. That before the amendment application could have been filed the Auction purchaser, respondent no.7 on 23/03/2023 had deposited entire sale proceeds of Rs.8,20,00,000/-.

¶147

(ii) That the as per the pleadings made in IA 463/2023 seeking amendment and more specifically on page No.5 the chart has been provided wherein the auction details are mentioned. That the out of 10 auctions it is admitted that only 3 auctions were

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withdrawn but as far as the remaining auctions are concerned the same failed due to want of bids. That as far as the present case is concern the provisions of Rule 9(1) will be applicable which states that 15 day’s prior notice should be served upon the borrower. Admittedly there is no denial by the applicant regarding the knowledge and the service of auction notice. That argument that 30 days clear notice is required is misconceived and is not correct proposition of law.

¶150

(iii) That, as far as the valuation of the property is concerned, the valuation report submitted by the bank is produced on record which provides for the distress value. That auction purchaser states that the reserve price was set considering the previous failed auction as well as the power and the authority vested in the hands of authorised officer to reduce the valuation in the case of non-participation in the auction by the bidders. That the respondent No.7 is also placing reliance on the judgment of “ K. Kumara Gupta Versus Sri Markendaya and Sri Omkareswara Swamy Temple & Ors which has held that “ Public Auction - Under normal circumstances,

¶151

[APK] (SA No.73/2022) Page 28 of 44

¶152

unless there are allegations of fraud and/or collusion and/or cartel and/or any other material irregularity or illegality, the highest offer received in the public auction may be accepted as a fair value. Otherwise, there shall not be any sanctity of a public auction .”

¶153

(iv) That as far as section 13(8), Rule 8(6) and Rule 9(1) is concerned despite of ample opportunities for the applicant to redeem the property, the applicant has miserably failed to avail the said opportunity or has failed to exercise the right of redemption. For every auction the applicant was afforded an opportunity. That as on today also no statement is coming for liquidating the dues, in fact during the oral arguments the counsel for the Applicant has admitted that they do not have funds. As far as the proposal which is rejected by the bank is concerned, the Applicant has offered mere Rs 50 lakhs as token amount and had sought 6 months’ time to deposit the remaining amount. That considering this approach of the applicant borrower, grave prejudice and injustice will be caused to the present auction purchaser as he is out of pocket for an amount of Rs. 8,20,00,000/-.

¶154

[APK] (SA No.73/2022) Page 29 of 44

¶155

(v) That the Hon’ble Supreme Court in the matter of Mathew Varghese Vs. M.Amritha Kumar & Ors . examined the procedure required to be followed by the banks or other financial institutions when the secured assets of the borrowers are sought to be sold for settlement of the dues of the banks/financial institutions. The Court examined in detail the provisions of the SARFAESI Act, 2002. The Court also examined the detailed procedure to be followed by the bank/financial institutions under the Rules, 2002. This Court took notice of Rule 8, which relates to Sale of immovable secured assets and Rule 9 which relates to time of sale, issue of sale certificate and delivery of possession etc. With regard to Section 13(1), this Court observed that Section 13(1) of SARFAESI Act, 2002 gives a free hand to the secured creditor, for the purpose of enforcing the secured interest without the intervention of Court or Tribunal. But such enforcement should be strictly in conformity with the provisions of the SARFAESI Act, 2002. That the respondent auction purchaser states that there are no lacunas or defects in the auction process adopted by the bank.

¶156

[APK] (SA No.73/2022) Page 30 of 44

¶157

(vi) That as far the order dated 11.08.2022 is concerned the same was assailing the auction date 27/07/2022 by which the auction was scheduled on 12/08/2022. That in respectful submission the auction never took place on 12/08/2022, rather the said sale notice was withdrawn by the respondent bank. That to interpret the order dated 11/08/2022 as it will apply to all subsequent sale published in future, is misconstrued and is not correct appreciation of the order.

¶158

(vii) That it was unnecessary for the respondent bank to file IA 425/2023, as there was no impediment for the bank to confirm the sale on 23/03/2023 when the entire amount was deposited. That the bank should have confirmed the sale and should have handed over the peaceful possession of the secured asset, subject matter of auction sale.

¶159

(viii)The respondent Bank has proceeded against the applicants and guarantors meticulously adhering to the statutory provisions contained in the Securitization & Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 as elucidated by the Hon’ble Supreme Court in cases

¶160

[APK] (SA No.73/2022) Page 31 of 44

¶161

like Mardia Chemicals & Others V/s. Union of India [AIR 2004 [S.C.2371] and Transcore V/s. Union of India [AIR 2007 SCW 389] and therefore the applicant has no cause of action to file such application for staying action taken by the respondent / Bank and proceeding further for recovering its due. “THE MAIN OBJECT which is sought to be achieved by the SARFAESI Act is to reign / controlling the defaulting borrowers / guarantors from deliberately delaying the obligatory repayment of their debt to bank. So, the application deserves to be dismissed on this count also. That the Hon’ble Tribunal shall direct the respondent bank to confirm the sale forthwith and issue sale certificate along with possession, enabling the respondent No.7 to register the same as per law.

¶162

Heard the matter at length by all the parties. I have gone through the record and contents therein and observed as follows:

¶163

(i) The objections taken by applicant are ill founded and the only purpose of such objections is to delay the recovery of the bank as no effort were made by the

¶164

[APK] (SA No.73/2022) Page 32 of 44

¶165

applicant earlier to settle the matter when the bank was not successful in selling the property. This shows that the applicant was sitting on the fence just to cross in case somebody comes and purchase the property and his application challenging the sale has come only after the bank has moved an application permitting them to confirm the sale.

¶166

(ii) The applicant is relying on the observations made by the tribunal in respect of the name of the company Subhash Fatarizers Private Limited because in the said notice it was stated that the property belongs to Subhash Fertilizer Private limited and not to SFPL Crop Life Science Private Limited. The applicant has mislead this tribunal as it was not disclosed by him that the name of the company has been changed and the present applicant is non but Subhash Fertilizers Private Limited only with changed name.

¶167

(iii) When the name of the company changes it is not required that in all the records which are previous records the name of the company will have to be changed.

¶168

(iv) The clarification given by the applicant bank about

¶169

[APK] (SA No.73/2022) Page 33 of 44

¶170

change of the name and the certificate of incorporation are taken on record which shows that the name the name of the Subhash Fertilizers Pvt. limited was changed to SFPL Crop Life Science Private Limited.

¶171

(v) The securitisation application filed by the Applicant is only challenging possession taken by the Bank and restoration of the same and not quashing 13(2) notice thus it is admitted position that there is no challenge to notice under section 13(2) not even on the ground of non-service.

¶172

(vi) The contention of the applicant that they have not received the 13(2) notice is also not well conceived because applicant who is signing on behalf of the company has received such notice. There is no contention that the notice was not received by the applicant who is the director of the company contesting the matters.

¶173

(vii) The district magistrate has categorically noticed that the 13(2) notices have been served. Even otherwise the challenge to 13(2) notice is beyond the limitation in the present SA.

¶174

[APK] (SA No.73/2022) Page 34 of 44

¶175

(viii)The Applicant was only permitted to the amendment qua three points

¶176

(a) No thirty days notice is given for sale

¶177

(b) Sale notice not published in two leading newspapers

¶178

¶179

(ix) But the amended securitisation application contended much more than that and the documents placed with it can not be read but still in the interest of justice they will be dealt with.

¶180

(x) The contention of the applicant that the sale notice was not published into two leading newspapers is also ill founded the bank has published a notice in two newspapers one in English and one in vernacular language. The applicant is trying to make a mountain out of mole as he now feels that the property has been has been sold and the bank will recover the dues and balance amount which will have to be paid by him so he wishes to compromise the matter at sale price or nearby but it is too late in the day.

¶181

(xi) The settlement could have been done when symbolic possession was taken, it could have been done when

¶182

[APK] (SA No.73/2022) Page 35 of 44

¶183

physical possession was taken, it could have been taken when ten sale notices were issued but the applicant kept on enjoying the failure of Bank in not able to sell the property.

¶184

(xii) Very interestingly the offer made by the applicant is of rupees 8.50 crores but from where he will pay is not clear. Further and another contention that their friends and relative could not participate in the auction because it was not published in the widely circulated newspapers is not correct. The contention now raised on the basis of judgment of high court that rule has not been complied with no 15 days notice has been given and law is not to be pleaded. It is correct that law is not to be pleaded but when you plead a wrong legal proposition and stick to the same as in present case the applicant has stated that thirty days notice is not given despite reading the provision is today’s again he stood his ground.

¶185

(xiii) He submitted that he has received a notice dated 22^nd February, 2023 on 25^th February, 2023 which is not supported by any documentary evidence on the contrary the letter written by them opposing

¶186

[APK] (SA No.73/2022) Page 36 of 44

¶187

the sale also does not contain any such a averment. There is no date in that letter. The objection letter placed by the applicant themselves shows that and an inference has to be drawn that was served immediately on them and they have taken objection to the sale by threatening the bank of contempt but no legal point was raised objecting and stating that mandatory notice is not given. Even while arguing the application same contention of 30 days notices were raised on the ground that the earlier auction withdrawn or auctions are failed and as such the applicant is to get thirty days notice.

¶188

(xiv)The arguments advanced by the applicant that “That, the friends and relatives of the borrower were and are ready to purchase the property above an amount of Rs.8.20 crores but they could not get and opportunity because there was no proper publication in newspapers in the local area and as such the interested persons could not get the knowledge of the same.” Shows that the applicant/borrowers do not wish to keep the ownership of the property and want the property to be sold to some of their relatives. They could have made them participate in auction.

¶189

[APK] (SA No.73/2022) Page 37 of 44

¶190

Moreover, they also wish to sell the property at Rs.8.20 crores only thus the valuation of property is justified. If the value of property was Rs.18 crores they should have redeemed it by now.

¶191

(i) The manner in which the applicant is now agitating on service of the demand notice but in the present securitisation application and or in the securitisation application No. 78/2021 moved by the director in his individual capacity does not seek a relief of quashing of the 13(2) notice on any of the ground, thus now it does not have mouth to say anything.

¶192

(ii) The objection to the 13(2) was raised through advocate and were replied by the bank giving the date of NPA and other details. The contention that the Subhash Fertilizers Pvt. Ltd. mortgaged the property and nor the present applicant is ill founded and misleading because the present application is nothing but Subhash Fertilizers Pvt. Ltd. with changed name.

¶193

(iii) In the present securitisation application the symbolic possession notice is being challenged but when the physical possession has been taken it is duty of the

¶194

[APK] (SA No.73/2022) Page 38 of 44

¶195

applicant to intimate the Tribunal and convince the Tribunal as to what prejudice has been caused and what basis they are seeking restoration of physical possession. Nothing has been pleaded in the securitisation application about prejudice. Allegations has been levelled against the District Magistrate, against the valuer and the bank officers. It appears that only the applicant and its directors are truthful and all other are up in arms to grab the property.

¶196

(iv) The valuation of the property was done on 10^th August, 2022 and the bank was correct in relying upon such a valuation as it is not an old valuation. If the valuation of the property is of Rs.18.60 crore then why the applicant is trying to settle the matter for Rs.8.50 crores. They could have very well bought a buyer before the bank who was ready and willing to purchaser the property for Rs. 18.60 crores but the applicants submit that they want to purchase the property for Rs. 8.20 Crore and odd amount.

¶197

(v) The judgment of Hon’ble Kerala High Court passed in a Writ Petition (c) No. 27485/2021 dated 18^th

¶198

[APK] (SA No.73/2022) Page 39 of 44

¶199

May, 2022 on which the applicant relies does not apply to the present case as notice of sale was served well in time and no 30 days was required and only 15 days notice was required and it is evident that the objection to the sale was taken and they were served the clear 15 days notice and said objection would have been raised but they threatened the bank.

¶200

(vi) The notices have been published in two leading newspapers. The contention of the applicants is that the newspapers in which the notices were published are not the leading newspapers but has not supported with any evidence and it cannot be expected that all the newspapers are published from the place where the property is situated.

¶201

(vii) The contention of the applicant is that the order dated 11^th August, 2022 that the bank should not confirm the sale was in relation to sale notice dated 27^th July, 2022. Further contention that at the time of renewal a condition was put to bring the personal guarantee of Mr. Sushil Karwa and corporate guarantee of M/s Krishidhan Seeds Pvt. Ltd. was to be taken but no notice was issued to them.

¶202

[APK] (SA No.73/2022) Page 40 of 44

¶203

(viii)A Tribunal cannot look into the sanction letter and there is nothing on record to show that they have given the guarantees. Though it was not pleaded in the oral arguments but it is stated that, the bank should have disclosed the pending litigation. Pending litigation effects the purchaser and it is submitted by them that they were well aware about the pending litigation.

¶204

(i) The auction purchaser has also filed written synopsis and submits that it was only after entire sale proceedings, entire auction amount was deposited, this application for setting aside the sale was filed.

¶205

(ii) The auction purchaser relied upon “K . Kumara Gupta Versus Sri Markendaya and Sri Omkareswara Swamy Temple & Ors.” In which has held that “Public Auction - Under normal circumstances, unless there are allegations of fraud and/or collusion and/or cartel and/or any other material irregularity or illegality, the highest offer received in the public auction may be accepted as a fair value. Otherwise, there shall not be any sanctity of a public auction.”

¶206

(i) The bank has argued the mater and has also filed

¶207

[APK] (SA No.73/2022) Page 41 of 44

¶208

written synopsis and submits that this was the 10^th auction and it is for the first time after the sale has been done, the applicants are trying to say that they want to settle the matter. It has been proved in favour of auction purchaser. There is nothing on record to show that any prejudice is caused to the applicants.

¶209

(i) The Tribunal is of opinion that as recorded above the notice issued under section 13(2) is duly served as recorded by the District Magistrate even otherwise 13(2) notice is not under challenge.

¶210

(ii) All these years, they have not offered money to the bank under OTS or to get the property redeem but only after when the property is sold, they have come with all sort of excuses. The quashing of 13(2) has not been sought either in the present securitisation application or in the securitisation application no. 78/2021 on any ground whatsoever.

¶211

(iii) If the Tribunal entertains such borrowers, who are willfully evading their liabilities in guise of some legal provisions then none of the property of the bank can be sold. Till now the applicant has made bank toil

¶212

[APK] (SA No.73/2022) Page 42 of 44

¶213

for recovery have making them to chase and fight the legal battle for the money advanced to the borrowers helping them in raising their business, injustice will be done to the public money, if such borrowers are granted relief. Not only the applicant is evading its liability but also his untruthful in making the pleadings when it comes to the change of the name of the company. Such loan defaulters who tries to mislead the Tribunal cannot be granted any relief.

¶214

(iv) Notice of sale was served, instead of threatening the bank of contempt they could have made an attempt of settlement with the bank. But no such attempt was made for settlement. Instead a threat was issued to the Bank.

¶215

(v) The Tribunal is of opinion there is no interim orders qua the sale, the bank could have proceeded ahead. However, the learned counsel for the respondent bank submits that as an abundant precaution and in view of the letter of threat issued by the applicants they have moved such an application.

¶216

In view of the above facts and circumstances and that loan availment is admitted, default is admitted and subsequent

¶217

[APK] (SA No.73/2022) Page 43 of 44

¶218

non-payment is accepted and all the actions of the bank are not pleaded to be against the law and I pass the following order:

¶219

ORDER

¶220

A. Securitisation Application no. 73/2022 is dismissed with no orders as to costs.

¶221

B. The interlocutory application no. 425/2023 moved by the bank for confirmation of sale is allowed and permit to confirm the sale and continue with their Securitisation action.

¶222

B. All other interlocutory applications stand disposed off accordingly.

¶223

C. File be consigned to record room.

¶224

Copy of the order be uploaded on the website and free copy be sent to all the parties.

¶225

(Vimal Gupta) Presiding Officer Debts Recovery Tribunal, Aurangabad.

¶226

[APK] (SA No.73/2022) Page 44 of 44

Sfpl Crop Life Science Private Limited v. Union Bank of India

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Sfpl Crop Life Science Private Limited v. Union Bank of India

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