Allowed

Asr Export Mills v. Union Bank of India

DRT16 Aug 2024SA/350/2024

Case brief

AI extract

What is this about?

Union Bank of India challenged an auction sale. Auction purchasers sought cancellation of the sale certificate and refund of consideration. The Tribunal cancelled the sale certificate, directed the bank to refund proceeds within 30 days, and allowed the borrower's appeal as infructuous.

What did the court decide?

Sale certificate cancelled; bank directed to refund entire sale consideration within 30 days; balance proceeds retained by bank for borrower's dues; borrower's appeal disposed as infructuous.

Asr Export Mills versus Union Bank of India — Banking and Recovery | DRT (2024)

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Memo D.No.5275/2024 in SA No.350/2024

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FAIR ORDER

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IN THE DEBTS RECOVERY TRIBUNAL AT COIMBATORE

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DATED THIS 16^th DAY OF AUGUST, 2024

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PRESENT: SEEMA SINHA

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[PR. DISTRICT & SESSIONS JUDGE - Retd] PRESIDING OFFICER (I/C)

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Memo D.No.5275/2024

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SA No.350 / 2024

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M/s ASR Export Mills, Represented by its Proprietor Mr. A. Shundharen, S/o Athianna, No.70-C, Pirivu Road, Mekkadu, Sankari West-637 703.

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..... Applicant

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The Authorized Officer, Union Bank of India, Asset Recovery Branch, PB No.8, 235, Oppanakkara Street, Coimbatore-641 001. --- Defendant-1 /Defendant Bank

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B. Olivannan, S/o Balakrishnan, No.147-B, 6^th Street, Sakthi Nagar West, Thindal, Erode-638 012.

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V. Sarvanan, S/o Vadiappan, No.L-4, Sidco Industrial Estate, Erode-638 001. …. Petitioners / Defendants 2&3

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Appearance of Advocates:

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Mr. S. Suresh -- Counsel for Petitioner in Memo /Defendants 2 & 3 Mr. J. Gowri Sankar -- Counsel for Applicant Mrs Sowmya Sitaram --- Counsel for Defendant Bank

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Memo D.No.5275/2024 in SA No.350/2024

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A Memo has been filed by Defendants 2 & 3 (Auction Purchasers) which was heard in the presence of Counsel for Defendants 2 & 3 and Counsel for Applicant and 1^st Defendant Bank and upon hearing the arguments of the counsels and having stood over for consideration till this day, this Tribunal delivered the following:

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ORDER

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This memo has been filed by the defendants 2 & 3 (Auction Purchasers) stating therein that, on the basis of the auction sale notice of the 1^st Defendant Bank and after making reasonable enquiry, these defendants participated in the E-Auction sale conducted by the 1^st Defendant Bank on 30.04.2024. The bid of these Defendants, for a sum Rs.7,08,50,000/- (Rupees Seven Crore Eight Lakhs and Fifty Thousand only) was accepted by the 1^st Defendant Bank. These defendants also paid the sale price of Rs.7,08,50,000/- as per the terms and conditions of the auction sale.

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It is further submitted that, on the basis of the payment of the total sale price by these Defendants, the 1^st Defendant Bank executed a sale certificate dated 07.05.2024 in favour of these Defendants and also delivered symbolic possession of the auctioned property to these Defendants. Further for payment of the sale price, these defendants have availed loans from their banks for the purchase of the subject property and are paying interest to the banks. The 2^nd Defendant has already paid about Rs.3.90 lakhs to his bank, for the loan of Rs.4.53 crores, availed by him from the sanctioned loan.

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It is further submitted that, this Hon’ble Tribunal vide order dated 27.05.2024 granted an interim order of status quo on condition that the Applicant herein should deposit a sum of Rs.6.40 crores being the entire outstanding within 10 days and the same was complied by the Applicant herein and the interim order was continued by this Hon’ble Tribunal. Since, Applicant has paid the amount as directed by this Hon’ble Tribunal and there

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Memo D.No.5275/2024 in SA No.350/2024

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is an interim order operating against us. These Defendant being an bonafide purchaser for valuable consideration and having invested a huge money of Rs.7,08,50,000/- cannot wait indefinitely to enjoy the property and to pay the interest for the amount which they have borrowed. Hence these Defendants decided to return the Sale Certificate and seek for return of money from the 1^st Defendant Bank. Now these Defendants are returning the Original Sale Certificate along with this Memo.

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Hence, these petitioners prayed to direct the 1^st Defendant Bank to accept the Original Sale Certificate issued in favour of these Defendants and return the sum of Rs.7,08,50,000/- (Rupees Seven Crore Eight Lakhs and Fifty Thousand only) deposited by these Defendants immediately and thus render justice.

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On the other hand a Reply to the Memo filed by the Applicant stating that, the applicant have challenged the sale notice issued by the Defendant Bank. The Hon’ble DRT Coimbatore had issued the order to deposit the entire outstanding amount as per the sale notice. As per order of this Tribunal, the Applicant had already paid entire outstanding amount as per sale notice by way of demand draft No.424016 of amount of Rs.75,00,000/- (Seventy Five Lakhs only) and demand draft No.424071 amount of Rs.5,65,20,000/- (Five Crores Sixty Five Lakhs and Twenty Thousand only).

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Now, Defendants-2 and 3 have decided to surrender the sale certificate. So the Hon’ble DRT kindly ordered to release the property. Further, Applicant has requested to record this memo and thus render justice.

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On the other hand, the counsel for Defendant Bank has vehemently opposed the submission of auction purchasers/ Defendants 2 & 3 by filing a counter stating that, there is seeking a direction to the Defendant Bank to accept and cancel the Original Sale Certificate issued in favour of the Petitioners/Defendants 2 & 3 and return the sum of Rs.7,08,50,000/deposited by these Petitioners/Defendants 2 & 3, is unsustainable in law and

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Memo D.No.5275/2024 in SA No.350/2024

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on facts. Further, defendant bank has submitted the chronological order from loan availed by the Applicants and date of NPA, demand notice, possession notice and upto 6^th sale notices (already 5 sale notices are failure).

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Further, it is submitted that, in the 6^th Sale Notice dated 08.04.2024 fixing the date of e-auction sale on 30.04.2024. Auction sale was successful and B.Olivannanm, (S/o.Balakrishnan) and V.Saranavan, (S/o.Vadiappan), the Petitioners/Defendants 2 & 3 herein, have been declared as the highest bidders, who paid the entire bid amount of Rs.7,08,50,000/- and sale certificate was issued in their favour on 07.05.2024.

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Out of the sale consideration amount of Rs.7,08,50,000/- received from the Petitioners/Defendants 2 & 3 towards the sale of the Application mentioned property, as the sale certificate was issued and auction proceedings having been completed, an amount of Rs.6,63,85,723.58 (which was due and payable by the Applicant as on 22.05.2024) was appropriated to the CC loan account of the Applicant and the balance amount of Rs.44,64,277.42 is kept in a no lien account pending adjustment of TL account since status quo order passed by the Hon’ble DRT, Coimbatore dated 27.05.2024 was received.

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It is also submitted that, at this stage, after the above said sale certificate was issued and also after the completion of the auction proceedings, the Applicant had come up with this SA No.350/2024, challenging the Sale Notice dated 08.04.2024 and the e-auction sale dated 30.04.2024. A conditional order was passed on 27.05.2024, directing the Applicant herein to pay the outstanding amount as mentioned in the Sale Notice dated 08.04.2024, viz., a sum of Rs.6,40,00,000/- on or before 06.06.2024, which shall be kept in a suspense account by the Defendant bank and directing to maintain Status quo in the case.

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In pursuance of order of the Hon’ble DRT dated 27.05.2024, the amount of Rs.6,40,20,000/- was paid by the Applicant herein on 01.06.2024, which amount is retained by the 1^st defendant in a sundry account, since the loan

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Memo D.No.5275/2024 in SA No.350/2024

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dues of the Applicant had been already adjusted with the sale consideration received due to circumstances mentioned above, viz., completion of auction proceedings.

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Hence, Respondent Bank submitted that, the sale held on 30.04.2024 was successful, the sale was confirmed in favour of the highest bidder/auction purchaser and sale certificate was also issued to the Auction purchasers/Petitioners herein. Thus, the sale having been completed, nothing survives in this Sale Notice dated 08.04.2024.

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This Respondent further submits that a sale certificate is a legal document issued by the authorized officer of the bank or financial institution after the sale of a secured asset through a public auction. The sale certificate certifies that the sale has been conducted in accordance with the provisions of the SARFAESI Act and that the ownership of the asset has been transferred to the highest bidder.

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Further, Respondent Bank submitted that, the Action purchaser seeks for a direction to the Defendant bank to cancel the Sale Certificate issued in favour of the Petitioners and return the sale consideration paid by them. It is respectfully submitted that cancellation of a sale certificate is a rare occurrence and can happen only on the Non-fulfillment of terms and conditions. If the highest bidder fails to fulfill the terms and conditions of the auction as mentioned in the sale notice, the sale certificate can be cancelled. For example, if the highest bidder fails to make the payment within the stipulated time, the sale certificate can be cancelled. In the instant case, the entire sale consideration has been received and only thereafter, sale certificate has been issued. Under the above said circumstances, cancellation of the sale certificate is unsustainable.

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Further, submitted that, the sale having been confirmed, sale certificate being issued and sale proceedings having been appropriated and adjusted towards the dues, the entire auction/sale proceedings having come to a

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Memo D.No.5275/2024 in SA No.350/2024

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finality, it is beyond the banking scope of this Respondent to reverse the entire proceedings by cancelling the sale certificate and returning the amounts to the petitioners.

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Further, this respondent wishes to bring to the notice of this Hon’ble Tribunal that there remains a balance of Rs.44,64,277.42 in the no lien account (being the auction consideration less appropriation towards CC loan account) as against the amount due by the borrower to this respondent of a sum of Rs.52,17,716/- (which comprises of the dues in the TL account + Interest thereon + further expenses and legal charges). While it is submitted that it is beyond the banking scope to reverse the appropriation and pay the auction proceeds to the auction purchaser by cancelling the sale, it is humbly pleaded that if the Hon’ble Tribunal deems it fit to pass an order in favour of the Petitioner/Auction Purchaser to cancel the sale, then this Hon’ble Tribunal may be pleased to issue such order subject to the borrower depositing the entire balance amount of Rs.52,17,716/- to the bank. Hence, Respondent Bank has prayed for dismissal of Memo with costs.

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Having heard the parties and after considering the entire facts and circumstances of the case, the Petitioners / Defendants 2 & 3 have filed this memo and prayed to cancel the sale certificate and issue a direction to the Respondent Bank to refund the entire sale amount. The Applicant already complied with the conditional order amount passed by this Tribunal. Defendant Bank has kept the amount in suspense account and the balance amount of sale proceeds also lying in interest bearing no-lien account.

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At this juncture, petitioners have invested for huge money of Rs.7,08,50,000/- and paying the interest continuously. Further, these Petitioners / Defendants 2 & 3 have decided to return the Sale Certificate (yet to be Registered) as litigation is pending and seeks for return of money from the 1^st Defendant Bank. Hence, without going into the merits of the case and for the safeguard of the auction purchaser and applicant as well as for bank,

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Memo D.No.5275/2024 in SA No.350/2024

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memo filed by the auction purchasers/Defendant Nos.2 & 3 in SA No.350/2024 is hereby disposed off with the following directions:

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(i) Sale Certificate (already surrendered by the auction purchasers) issued by the Respondent Bank is cancelled. Further, Respondent Bank is directed to refund the entire amount to the petitioners/auction purchasers paid by them within 30 days from the date of receipt of this order.

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(ii) Further, Respondent Bank is directed to adjust the entire amount inclusive of interest paid by the borrowers as per the conditional order imposed by this Tribunal.

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(iii)Further, Respondent Bank is entitled to adjust the balance amount of sale proceeds (after adjustment of loan account) of Rs.44,64,277.42 in the borrowers loan account.

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(iv)After adjustment of aforesaid amounts, the Respondent Bank is entitled to proceed as per law for the remaining dues, if any.

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(v) Main prayer of the Applicant is that, to quash the E-Auction sale scheduled to be held on 08.04.2024 and further proceedings. Now, sale and sale certificate is cancelled. Hence, nothing survives in this appeal as infructuous.

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In result, memo stand allowed and SA stand disposed. No costs.

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(Dictated to Assistant, taken down, transcribed, typed by him corrected and pronounced by me in the open court this the 16^th day of August, 2024)

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Sd/(SEEMA SINHA) PRESIDING OFFICER

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Asr Export Mills v. Union Bank of India

Case brief

What is this about?

What did the court decide?

Asr Export Mills v. Union Bank of India

Case brief

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