Allowed

Ms Hotel Rajalaxmi v. Orissa Gramya Bank

DRT11 Mar 2024SA/69/2022

Case brief

AI extract

What is this about?

A Debt Recovery Tribunal allowed an application under SARFAESI Act, setting aside an auction sale notice and the subsequent sale because the bank failed to issue individual notices to all borrowers and guarantors as required by Rules and failed to obtain a fresh valuation before the auction.

What did the court decide?

Set aside the auction sale notice dated 12.04.2022 and the subsequent sale; directed bank to redeliver possession; applicants to deposit auction amount with interest.

Ms Hotel Rajalaxmi versus Orissa Gramya Bank — Banking and Recovery | DRT (2024)

¶1

BEFORE THE DEBTS RECOVERY TRIBUNAL, CUTTACK PRESENT: - SRI JITENDRA PRASAD SINGH,

¶2

PRESIDING OFFICER.

¶3

S.A. No.69 OF 2022

¶4

DATE OF DELIVERY OF ORDER:11.03.2024

¶5

M/s. Hotel Rajalaxmi, Represent by its Partners, Sri Debadatta Pati and Sri Bibhudatta Pati, At- Hemsurpada, PO/Dist-Angul.

¶6

Sri Bibhudatta Pati, aged about 49 years, S/o- Rajkishore Pati, Partner of M/s. Hotel Rajlaxmi, At- Hemsurpada, PO/Dist-Angul.

¶7

Sri Debadatta Pati, aged about 53 years, S/o- Rajkishore Pati, Partner of M/s Hotel Rajlaxmi, At- Hemsurpada, PO/Dist-Angul.

¶8

…. Applicants

¶9

-Versus-

¶10

Odisha Gramya Bank, represented by its Chairman-Cum-General Manager (Advance) having its Head Office At- Gandamunda, Khandagiri, Bhubaneswar, Dist.-Khurda. IFSC Code-I0BAOROGBOI, 0671-2353029, Pin Code-751030.

¶11

Regional Manager, Odisha Gramya Bank, Dhenkanal Region, Dhenkanal-759001, IFSC Code-I0BAOROGBOI

¶12

Senior Manager, Odisha Gramya Bank, Angul Branch, At-Hanuman Bazar, Amalapada, 6^th Lane, PO/Dist.-Angul-759125.

¶13

The Collector, Angul, At/P.O./Dist.-Angul, Pin-759122.

¶14

The IIC, Angul, At/PO/Dist.-Angul Police Station, At/P.O/Dist-Angul, Pin-759122.

¶15

Bikram Kishore Sahu, S/o late Damodar Sahu, At-Anand Bazar, Karadagadia, PO-Hulurisingha, PS/Dist.-Angul,PIN-759132

¶16

…. Respondents

¶17

Counsel for the Applicant: - Sri Mitalee Jesthi

¶18

Counsel for the Respondent No.1 to 3:-Sri Tuna Sahu

¶19

Counsel for the Respondents No.4 & 5:- None

¶20

Counsel for the Respondent No.6:Shri S. Rath

¶21

JUDGEMENT

¶22

This is an Application filed by the applicants under Section 17(1) of the Securitisation of Financial Assets and Enforcement of Security Interest Act, 2002, initiated by the Respondents No.1 to 3 against the applicants praying to set aside the E-auction sale notice dated 2.04.2022 and set aside the letter dated 06.12.2023 under Annexure-16 holding that the possession taken over by the Respondent Bank on 19.12.2023 and further to set aside the auction held on 13.05.2022 being under valued taking into account the valuation report under Annexure-18 and for other reliefs.

¶23

The brief facts of the case as made out in the SARFAESI Application by the applicant is that the Respondent No.3 Bank continuously approached the Applicant No.2 & 3 for giving business to the Bank by way of availing loan. As per the request of the Respondent Bank the Applicant No.2 & 3 submitted some required documents of the land and building for verification and after utmost satisfaction, the Respondent Bank sanctioned the Term Loan in favour of the Applicants on 17.02.2012. The two sisters namely, Mrs. Nibedita Pati & Mrs. Jharana Pati @ Pany, were the guarantor to the property comprising of land and building situated at Mouza-Angul Town, Sabik Khata No. 209, Sabik Plot No. 304, Hal Khata No. 432/173. Hal Plot No. 304/2013 are Ac.0.030 decimals under Angul Tahasil. The said property was mortgaged to the Bank for the purpose of availing financial assistance. The Respondent Bank on 25.05.2015 issued demand notice calling upon the Applicants to pay the outstanding loan amount and on 20.08.2015 issued notice U/s. 13(4) of the SARFAESI Act, 2002 and challenging the same the Applicants had approached the Hon’ble High Court in W.P.(C) No. 16784 of 2015 which was disposed on 08.01.2016. The Bank by exercising power under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002(hereinafter called SAFAESI Act) took possession of the mortgaged property and conducted e-auction on 19.07.2017.

¶24

The sisters, who were the co-owner of the property and guarantor to the loan advanced to M/s. Rajlaxmi Hotel filed S.A. No. 73 of 2017 before the Learned Debt Recovery Tribunal, Cuttack challenging the E- Auction conducted by the Respondent Bank. The Learned Tribunal after hearing all the parties, including the auction purchaser, by a detailed order dt.26.05.2018 set aside the e-auction conducted by the Respondent bank and further directed the Respondent bank to re-deliver possession to the Applicants within one month from the date of the order.

¶25

Further the learned Tribunal also directed that the amount deposited by the auction purchaser was to be refunded with interest to the auction purchaser and same be debited from the loan account of the Applicants. However, the Respondent Bank did not refund the money so deposited by the auction purchaser immediately after the order and it is only on 09.02.2022 the Respondent Bank refund the money to the auction purchaser. Because of the delay in refund by the Respondent bank the amount carried interest for period of more than 3 years 8 months, which was ultimately borne by the Applicants. Therefore, interest on Rs.1,48,26,800/- should be borne by the Respondent Bank. After the aforesaid Judgment of the learned Tribunal the Applicant No.3 requested the Respondent bank to rephase the loan account. In response to the aforesaid communication, the bank vide its letter dtd. 27.12.2018 informed Applicant No.3 to the effect that the Respondent bank has challenged the order dtd. 26.05.2018 of the Learned Debt Recovery Tribunal, Cuttack before the Hon’ble Debt Recovery Appellate Tribunal, Kolkata and accordingly did not accede the prayer of Applicant No.3. In the meantime the Appeal No.205 of 2018-19 filed by the Respondent Bank before the Learned Debt Recovery Appellate Tribunal, Kolkata was dismissed by the learned Appellate Tribunal thereby confirming the order dtd. 26.05.2018 of the Learned Debt Recovery Tribunal Cuttack. In the meantime, one of the guarantor namely Jharana Pati @ Pany, and the co-owner of the property requested the Respondent Bank to disclose the overdue amount in order to enable her to clear the same. The Respondent Bank in its turn vide its letter dtd.15.05.2019 informed the guarantor namely Jharana Pati @ Pany, to the effect that the Respondent Bank has already responded to the letter dtd. 10.10.2018 sent by Debadatta Pati namely Applicant No.3 vide Respondent bank’s letter dtd. 27.12.2018. In the meantime the Respondent bank filed W.P.(C) No.6927 of 2019 before the Hon’ble High Court of Orissa, Cuttack challenging the order dtd. 08.01.2019 passed by the Learned Debt Recovery Appellate Tribunal, Kolkata in appeal Case No. 205 of 2018, confirming the order dtd. 26.05.2018 passed by the Learned Debt Recovery Tribunal Cuttack in SA No. 73 of 2017. However, the Hon’ble High Court vide order dtd. 27.09.2010 disposed of the writ petition directing the Respondent bank to approach the learned Tribunal for compliance of its order. In pursuance to the foresaid Order dtd. 27.09.2019 of this Hon’ble Cout, the Respondent Bank filed MA. No. 2365 of 2019 before the Learned Tribunal in the disposed of S.A. No.73 of 2017. The Learned Tribunal vide order

¶26

dtd. 23.12.2020 after hearing all the parties, including the auction purchaser directed the Respondent bank to regularize the account of the Applicants as per the guidelines of Reserve Bank of India and further the Applicants was directed to pay the amount regularly and to run the business. The disposal of the aforesaid M.A. No.2365 of 2019 was intimated to the Respondent Bank by the learned Advocate of the Applicants on 25.01.2021. The Respondent Bank vide its communication dtd. 16.02.2022 informed the Applicants to clear the total dues within 7 days of the receipt of the letter failing which SARFAESI Action will be initiated to recover the bank dues. Further the Applicant No.3 vide its communication dtd. 21.02.2022 informed the Respondent Bank that till January, 2022 the said account was showing surplus of Rs.18 lakhs and thereafter suddenly on 16.02.2022 letter has been issued by the Respondent Bank demanding a sum of Rs.2,97,62,241/- to be paid by the Applicants within 7 days. The Applicant No.3 further urged upon the Respondent bank to comply the direction given by the Learned Tribunal in M.A. No. 2365 of 2019.In response to the aforesaid communication of the Applicants, the Respondent Bank informed that it had already moved the Learned Debt Recovery Appellate Tribunal, Kolkata challenging the order dtd. 23.12.2020 of the Learned Debt Recovery Tribunal, Cuttack and further in the said communication, the Applicant No.3 was advised to repay the total dues immediately. The Respondent bank has published the E-Auction Sale Notice on 12.04.2022 in English Newspaper, Indian Express, thereby fixing the date of auction to 13.05.2022. The Respondent Bank is over reaching its powers and is bent upon harassing the Applicants. Despite clear direction of the Learned Debt Recovery Tribunal, Odisha, Cuttack and the Hon’ble Debt Recovery Appellate Tribunal, Kolkata, the Respondent Bank did not rephrase/restructure the account of the Applicants, rather the Respondent Bank is proceeding in violation of the statutory provisions laid down under the SARFAESI Act, 2002 and the RBI Guidelines.

¶27

It is further stated that the property of the Applicants are of high value. The market value of which is definitely much more than the demand amount of the Respondent Bank. Therefore, the sale of high value property at a low price is only with an intention to harass the Applicants. It is further stated that the Applicant submits that the SARFAESI Act 2002 and Rules framed there under being a special statute, any action under the same has to be carried out strictly in accordance with the procedure devised therein or not at all.

¶28

The Bank has authority to conduct the auction despite its challenge before Hon’ble Debts Recovery Appellate Tribunal, the secured creditor is required to comply with all statutory prescription enumerated in the rule, which includes the valuation certificate from the approved valuer. No valuation has been done in the year 2022, before putting the property to auction, under annexure-13. In other words, if the statute wants something to be done, in a particular manner, it has to be done in that particular manner and other mode are forbidden.

¶29

The Respondent Bank has in between moved the collector, Angul against the Applicants U/s.14 of the SARFAESI Act, 2002 and is taking help of the Respondent No.4 to take over possession of the Hotel i.e. Land & Building of the Applicants. The Respondent-Bank took over possession of the sole source of income of the Applicants on 19.12.2023, even when the S.A. No. 69/2022 is pending adjudication before this Hon’ble Tribunal challenging the E-auction dt. 13.05.2022, which took place during the pendency of the Appeal before the Hon’ble DRAT, Kolkata, as a result of which the Respondent No.6 being the single bidder is the auction purchaser.

¶30

The Auction Purchaser in this auction is the same single bidder who was the auction purchaser and single bidder in the earlier auction, which has been set-aside by the Hon’ble DRT, Cuttack and upheld by the Hon’ble DRAT, Kolkata. There is no other person who has participated in the bid. The purpose of holding the auction was to provide a platform to maximum number of bidders so that the best price of the property could be fetched. “However being the sole participant in an auction does not bestow upon any entity, a public law entitlement in asserting the right of being so rewarded with”, the Division bench of the Orissa High Court ruled.

¶31

The Respondent Bank moved before the Collector Angul U/s.14 of the SARFAESI Act, 2002 and finally on 26.08.2023, the Collector, Angul passed an order. The said Order dt. 26.08.2023 passed by the Collector, Angul was challenged by the applicants before the Hon’ble High Court in W.P.(C) No. 32071/2023. The said Writ Petition was disposed of on 12.10.2023 with certain direction. Thereafter the Respondent Bank was silent and all of a sudden on 06.12.2023 sent a Letter bearing No. ROD/CMS/121/2023 to the Applicants, received on 08.12.2023 for peaceful vacation and pre-intimation for physical possession of the securities charged to the Bank, wherein the Respondent-Bank demanded

¶32

to vacate the mortgage property peacefully along with domestic and personal belongings and hand over the secured asset before 17.12.2023 failing which the Respondent-Bank shall take steps for vacation on/after 18.12.2023. The Applicant also approached the Hon’ble High Court in W.P.(C) No. 40608/2023, but there also the concerned Bench did not function till 19.12.2023. On 19.12.2023 in the afternoon the Respondent bank took over possession of the secured asset, even when the matter was pending before this Hon’ble Court and on 20.12.2023 the matter was listed before the Hon’ble High Court. Finally the W.P.(C) No.40608/2023 before the Hon’ble High Court was disposed of on 11.01.2024 with certain directions.

¶33

The current valuation of the secured asset/mortgaged property by a registered bank Panel Valuer makes it clear that the Respondent Bank has under-valued the property, which at present has high market value. Hence the applicants have filed the instant SA under Section 17(1) challenging the illegal, and arbitrary action of the Respondent Bank.

¶34

Notices were issued to the Respondents to show cause as to why the relief prayed for by the applicant be not granted. On receipt of the notice, the defendants No.1 to 3 appeared and filed their counter. None appeared for the Respondents No.4 & 5. The auction purchaser has been impleaded as Respondent No.6 vide order dated 16.01.2024, though appeared and not filed counter till date.

¶35

Respondent No.1 to 3 filed counter and contended that the loan account was classified as NPA on 31.03.2015 due to non-payment of the instalments as per the terms of the sanction. In accordance to the provisions of the Statute, the bank has issued the Demand Notice U/s.13(2) of the SARFAESI Act, 2002 on 30.05.2015 by demanding of Rs.1,47,80,690.00 as on 30.05.2015.Despite issuance of the Demand Notice, as the Defaulters did not pay back the entire outstanding dues of the bank, the bank has proceed further in the matter by issuing the Possession notice U/s.13(4) of the SARFAESI Act, 2002 on 20.08.2015 and the same was published in the newspapers as well as pasted in the most conspicuous part of the mortgaged property. The authorized officer has assumed the symbolic possession of the property. Being aggrieved with the issuance of the Possession notice U/s.13(4) of the SARFAESI Act, 2002, the present Applicant has filed the Writ Petition before the Hon’ble High Court of Orissa vide W.P.(C) No.16784/2015. The said Writ Petition has been disposed of on 08.01.2016 with a direction to the present Applicants to deposit Rs.10 lakhs in two equal monthly instalments within

¶36

a period of two months and rephased the loan account. The applicant deposited Rs.10 lakhs within time but did not make any proposal for rephasement of the loan. In such circumstances, as the applicant did not comply with the direction of the Hon’ble High Court of Orissa and did not communicate any proposal for rephasement of the loan account, the Bank has approached the learned Collector-cum-District Magistrate, Angul and obtained the Order for taking physical possession. Accordingly, Physical Possession of the property was taken on 17.03.2017. On dt. 14.06.2017, the bank has notified the e-auction Notice for the first time by fixing auction to 19.07.2017. Being aggrieved, On dt. 14.07.2017, the present Applicants have approached the Hon’ble High Court of Orissa by filing Writ Petition for the second time, vide W.P.(C) No.13873/2017, by challenging the E-Auction notice dated 14.06.2017 which was disposed of with a direction to the applicant No.2 and 3 deposit Rs.60,00,000/and also make a settlement with the bank and on deposit of Rs.60,00,000/- the physical possession will be handed back, but, despite of having been granted such an opportunity, the Applicant did not deposit the amount as such did not comply with the Order passed by Hon’ble High Court of Orissa. Auction fixed to 19.07.2017 failed due to nonparticipation of bidders. In such circumstances, the bank has notified the E-auction notice for the second time fixing the date of auction to dt. 03.11.2017. As the Applicant No.2 and 3 did not comply with Order dt. 14.07.2017 passed by Hon’ble High Court of Orissa very cunningly they sat silently while the sisters, who are the guarantors in this loan a/c have approached this Hon’ble Tribunal by filing the SARFAESI Application vide S.A. No. 73/2017 and the Hon’ble DRT, Cuttack vide Order dt. 02.11.2017 directed to the SARFAESI applicants to deposit Rs.25 lakhs on or before 02.12.2017 as well as passed the direction that the E-auction sale shall continue but the same shall not be confirmed until further order. On dt. 03.11.2017, the 2^nd E-auction Sale was successfully held for Rs.1,48,26,800.00 in favour of the highest bidder. Due to non-payment of Rs.25 lakhs as directed by the Hon’ble Tribunal, on dt. 08.01.2018, the interim order was vacated and liberty was given to the bank to proceed further as per law. On dt. 20.01.2018, Sale certificate was issued in favour of the successful auction purchaser. In such circumstances, on dt.26.05.2018, the S.A. No.73/2017 was disposed of by setting aside the E-auction Sale dt. 03.11.2017, as because the Hon’ble Tribunal found out that sufficient 30 days time have not been given and also directed the Applicant to pay the entire overdue amounts on or before 25.12.2018 for

¶37

regularization of the loan a/c. But, the fact remains that, this being the subsequent Auction Sale, the bank needed to give 15 days time period from the date of issuance of Auction Sale Notice to the date of fixing of Auction Sale. So, the bank has preferred the Appeal before the DRAT, Kolkata. After passing of such Order dt. 26.05.2018, the Applicant No.1 & 2 have taken back possession of the Hotel Rajalaxmi unit forcibly on 01.07.2018 from the bank authorities. In the meanwhile, after passing of Order dt. 26.05.2018 the applicant has communicated a letter to the bank, wherein, going beyond the terms of Order dt.26.05.2018, the applicant requested the bank for rephasement of the Loan A/c. The Order dt. 26.05.2018 does not speak about rephasement of the loan a/c instead directed for regularization of the loan a/c. The bank with the intention not to linger the dispute and to provide the opportunity to the defaulter to discharge the liability has communicated a letter to the Applicant on dt. 27.12.2018 by referring the letter dt. 10.10.2018 by indicating in it the entire overdue amount to be paid by the applicant to the tune of Rs.1,66,87,403/- for regularization of the loan a/c. Thereafter, on dt. 08.01.2019 the Hon’ble DRAT Kolkata has disposed of the Appeal No.205/2018 filed by the bank by confirming the Order dt. 26.05.2018 passed by the DRT, Cuttack. Being aggrieved, the bank also filed a writ petition vide, W.P.(C) No.6927/2019 by challenging the order dt. 26.05.2018 of DRT, Cuttack and order dated 08.01.2019 passed by DRAT, Kolkata which was disposed of on 27.09.2019 with a direction that since the grievances of the petitioner and auction purchaser is noncompliance of the learned Tribunal order, it is open to them to approach the learned Tribunal again for compliance of its order. Earlier, the SARFAESI Applicants (M/s. Hotel Rajlaxmi represented its partner namely Bibhudata Pati and Debadutta Pati) issued a letter dt. 10.10.2018 demanding for rephasement of the loan a/c. But after being made aware by the bank that the direction was for regularization of the loan by paying entire overdues, and after being informed by the bank regarding the exact overdue amount, the defaulters did not pay, but in a cunning manner, the sister guarantor namely Smt. Jharana Pati issued a letter dt. 10.05.2019 again asking for rephasement of loan a/c. The bank also communicated its reply on 15.05.2019. Again the bank approached to the Tribunal by filing MA. 2365/2019 on the strength of the order passed by the Hon’ble High Court in W.P.(C) No.6927/2019, the DRT, Cuttack disposed the application on 23.12.2020 filed by the bank in MA No.2365/2019 with a further direction to bank to regularize the account

¶38

after contract/instalment period is over. In this case, the repayment period was for a period of 84 EMI’s i.e. commencing from May 2013 which is ended in May, 2020. As repayment period was not even available then how can the a/c be regularized and operated in a regular manner and which is not permissible under law. So, the bank has filed the DRAT Appeal vide Appeal No.296/2021 by challenging the order passed by DRT, Cuttack dt. 23.12.2020. The said appeal is pending for disposal and now the case is posted to 01.02.2024 before the DRAT, Kolkata. However, Auction amount with interest was returned to the auction purchaser also. On 06.12.2021 Bank also filed DRT OA vide Dy. No. 916/2021 corresponding to OA No.109/2022 filed U/s.19 of the RDB Act against the petitioners, guarantors and mortgagors for recovering a sum of Rs.2,79,72,930.75p with future interest and costs.

¶39

Thereafter, on dt. 16.02.2022 the bank has issued a letter to the Defaulters/applicants as well as guarantors/mortgagers stating therein that the entire balance has become overdue as because the repayment period as per the sanction letter is over and also advised the defaulters to pay back the entire dues of Rs.2,97,62,241 as on 11.02.2022 within a period of 7 days failing which the bank shall proceed in the SARFAESI action for recovery of dues. Instead of paying back the dues of the bank, in a very cunning manner, the Applicant has issued a letter dt. 21.02.2022, stating therein that since a/c is showing the surplus of Rs.18,00,000/- they were to be issued the NOC and return of Title documents. In such circumstances, the bank has also issued the letter by way of reply dt. 24.02.2022, and clarified that the a/c was showing a surplus of Rs.18,00,000/- as the bid amount of the earlier auction sale was deposited which has now been returned back along with interest. In the said letter the bank again advised the Applicant to pay back the entire dues of the bank.

¶40

Despite several opportunities, the chronic defaulters did not pay back the dues of the bank as per the demand notice, hence the bank has again notified the auction notice again issued for the claiming of Rs.2,97,62,241/- and by fixing the date of auction to 13.05.2022 wherein reserve price was fixed Rs.2,13,75,000.00 under the SARFAESI Act, 2002 Act based on valuation report of the approved valuer of the bank.

¶41

On 13.05.2022, the E-auction Sale was successfully held for Rs.2,14,55,000/- in favour of auction purchaser Sri Bikram Kishore Sahoo and thereafter, on dt. 03.06.2022, after payment of the entire bid

¶42

amount, the Sale Certificate was issued in favour of the successful auction Purchaser namely Shri Bikram Kishore Sahu, S/o: Damodar Sahu, At/Po:Hulurisingha, Dist: Angul. In such circumstances, on dt. 04.07.2022, the applicants No.1 to 3 again filed a writ petition vie W.P.(C) No.7591/2022 which was disposed of with a direction to seek their remedy in accordance with law. In such circumstances, the Physical Possession of the property has already been taken by virtue of the Order dt. 26.08.2023 passed by the learned Collector-cum-District Magistrate, Angul for taking over the physical possession of the property. Accordingly, the Physical possession of the property has been taken and delivered to the successful Auction Purchaser, namely- Bikram Kishore Sahoo on dt. 19.12.2023.

¶43

The order dated 26.08.2023 issued by the learned Collector U/s. 14 of the SARFAESI Act, 2002 is within the four corners of the statute. As such there is no illegality or irregularity in the Order dt. 26.08.2023 passed by the learned Collector-cum-District Magistrate, Angul for taking over the physical possession of the property. After taking the order from the learned Collector, Angul, the Authorized Officer has issued a letter to the SARFAESI Applicant to handover the peaceful possession of the secured assets on or before 19.12.2023 as per the notice dated 06.12.2023 issued by the Authorized Officer.

¶44

Since, there was no impediment on the bank to proceed in the matter and the regularization issue is pending before the Hon’ble Appellate Tribunal for adjudication, the bank has proceeded further in the matter by notifying the E-auction Sale notice for the third time on dated 12.04.2022 fixing the date of auction 13.05.2022 wherein reserve price was fixed at Rs.2,13,75,000/-. The said notice was communicated to all borrowers/mortgagors/guarantors to the loan a/c. Aggrieved with the issuance of this Auction sale notice dated 12.04.2022 the present Applicants has filed this present SARFAESI Application. On dated 13.05.2022, Auction was successfully held for Rs.2,14,55,000/- in favour of auction purchaser Sri Bikram Kesari Sahoo. On dated 03.06.2022 Sale certificate was issued in favour of the Auction purchaser Shri Bikram Keshari Sahu, S/o: Damodar Sahu At/Po: Hulurisingha, Dist: Angul after deposit of the entire bid amount. The Physical Possession of the property has been delivered to the Auction purchaser on dated 19.12.2023 on the strength of the Order passed by the learned Collector-cum-District Magistrate, Angul, on dated 26.08.2023. In accordance with the provisions of the statute, the Bank has conducted the valuation by the

¶45

approved panel valuer of the Bank within a period of 1 year prior to the Auction Sale notice dated 12.04.2022. The valuation was duly conducted on dated 30.07.2021 and since the Auction Sale had remained unsuccessful twice, to attract the bidders the Reserve Price of the property was fixed at Rs.2,13,75,000/- taking into consideration the forced sale value of Rs.2,00,00,000/-. The valuation of the property was conducted on the basis of the approved building plan which is Ground Floor, first Floor and the Second Floor. The building plan was approved by the Talcher-Angul Meramanadali Development Authority (Tamda) Angul, which is the authority for the same, on dated 27.05.2010 for Construction of S+2 (Residential) Boarding building under Plot No. 304/2013, Khata No. 432/587.The valuation report prepared on dated 20.12.2023 by the Applicant is null and void and may not be taken into consideration. The valuation report dated 20.12.2023 has not been prepared for any financial institution as such the bank cannot be forced to accept such valuation report prepared at the behest of the Applicants. The building approval plan was for G+2 which is Ground Floor, First Floor and the Second Floor. But, the valuation report dated 20.12.2023 has been prepared by indicating that the valuation is for G+3, i.e. Ground Floor, First Floor the Second Floor and the third floor. It is the humble submission of the Bank that the third floor is the illegal construction and cannot be taken into consideration of the valuation report dated 20.12.2023.The valuation report has been prepared on dated 20.12.2023, after one and half years of the Successful Auction Sale. It is also doubtful how the valuation was conducted as the Applicant was not at all in possession of the said property from 19.12.2023 and the valuer has purportedly increased the value of the property without verifying the land and building, and by sitting at office at Bhubaneswar has prepared such faulty valuation report, hence, the valuation report dated 20.12.2023 is a concocted/created documents and as such may not be relied upon by this Hon’ble Tribunal.

¶46

Regarding the allegation of the applicant that only a single bidder has participated in the E-auction Sale dated 13.05.2022. The Bank humbly submits that multiple bidders, i.e. two in number, had participated in the E-auction Sale conducted on dated 13.05.2022.Furthermore, as per the Statue, i.e. Section 14(3) of the SARFAESI Act, 2002, No act of the Chief Metropolitan magistrate or the District Magistrate done in pursuance of this section shall be called in question in any court or before any authority as the order of the Collector

¶47

is a consequential action arising out of the possession notice. Section 13(2) and 13(4) has not been disturbed in any manner as the said measures are intact till the 3^rd Auction was notified by the Authorized Officer. The applicants again filed a writ petition vide W.P.(C) No.7591/2022, challenging the e-auction Sale dated 13.05.2022, which was disposed of with a direction to seek their remedy in accordance with law. At every stage of the SARFAESI proceeding the applicants as well their sisters have filed cases in various forums to hinder the SARFAESI proceeding for recovery of huge amount of public money. The applicants have approached the Hon’ble High Court of Orissa multiple times by filing writ petitions as indicated above, the applicants no.2 and 3 have approached the Consumer Forum vide CC No.79/2023 as well as the sister of the Applicants No.2 and 3 have approached the Civil Court, Angul by filing civil suit vide CS. No.463/2022 by making bank a party and praying for stalling of SARFAESI Action of the bank. The matters are still pending before the Consumer forum and the Civil Court.

¶48

Regarding the prayer of the Applicant for the regularization of the loan a/c, the said prayer of the Applicant is under adjudication before the Hon’ble DRAT, Kolkata. Furthermore, as the contractual time period for repayment of dues has already been over/lapsed on May, 2020, then the direction for regularization of the loan a/c after repayment schedule is over itself becomes contrary to the terms of the contract. It is the settled position of law, decided by the Hon’ble Apex Court that-

¶49

“The Courts cannot rewrite or create a new contract between the parties and have to simply rely on the terms and conditions of the agreement as agreed between the parties while deciding a dispute between the parties”.

¶50

Heard both the Counsels and perused the record.

¶51

On the perusal of the pleadings of the rival parties, the following issues arise for consideration:-

¶52

(i) Whether the bank has issued individual auction sale notice and published the sale notice before the sale of the property under Rule 8(6) & 9(1) of the Security Enforcement Rules 2002 as per provisions of law?

¶53

(ii) Whether the mortgaged property has been valued properly before sale of the property?

¶54

(iii) Whether the auction purchaser is the single bidder and the same in the earlier auction?

¶55

(iv) Whether the applicants are entitled to the reliefs as claimed?

¶56

7 . Issue No.(i) Whether the bank has issued individual auction sale notice and published the notice before the sale of the property under Rule 8(6) & 9(1) of the Security Enforcement Rules 2002 as per provisions of law?

¶57

The contention of the applicant is that the applicants are challenging all other action from the stage of notice under Section 13(2) of the SARFAESI Act and in continuation to the same the purported steps taken U/s Section 13(4) of the SARFAESI Act, 2002 based on which the Respondent Bank has proceeded to have enforced the said property in question. The Respondent bank has published the E-Auction Sale Notice on 12.04.2022 in English Newspaper, Indian Express, thereby fixing the date of auction to 13.05.2022 without valuation of the property in the year 2022. The applicant in his written submission stated that 30 days mandatory individual auction notice under Rule 8(6) of the SARFAESI (Enforcement) Rules, 2002 have not been sent to the guarantors and cosharers of the property. It is also stated that no individual notice has been sent neither to the applicants/borrowers nor to the guarantors. It is also contended that if the Bank has authority to conduct the auction despite is challenge before the Hon’ble DRAT, the secured creditor is required to comply with all statutory prescription enumerated in the Rule, which includes the valuation certificate from the approved value. No valuation has been done in the year 2022, before putting the property to auction under Annexure-13. If the statute wants something to be done, in a particular manner, it has to be done in that particular manner and other modes are forbidden. It is also contended that the SARFAESI Act, 2002and Rules framed thereunder being a special statute, any action under the same has to be carried out strictly in accordance with the procedure devised therein.

¶58

The contention of the Respondent Bank is that the loan account was classified as NPA on 31.03.2015 due to non-payment of the instalments as per the terms of the sanction. In accordance to the provisions of the Statute, the bank has issued the Demand Notice U/s.13(2) of the SARFAESI Act, 2002 on 30.05.2015 by demanding of Rs.1,47,80,690.00 as on 30.05.2015.Despite issuance of the Demand Notice, as the Defaulters did not pay back the entire outstanding dues of the bank, the bank has proceed further in the matter by issuing the Possession notice U/s.13(4) of the SARFAESI Act, 2002 on 20.08.2015 and the same was published in the newspapers as well as pasted in the most conspicuous part of the mortgaged property. Despite several opportunities, the chronic defaulters did not pay back the dues of the bank as per the demand notice, hence the bank has again notified the auction notice again issued for the claiming of Rs.2,97,62,241/- and by

¶59

fixing the date of auction to 13.05.2022 wherein reserve price was fixed Rs.2,13,75,000.00 under the SARFAESI Act, 2002 Act based on valuation report of the approved valuer of the bank. As, there was no impediment on the bank to proceed in the matter and the regularization issue is pending before the Hon’ble Appellate Tribunal for adjudication, the bank has proceeded further in the matter by notifying the E-auction Sale notice for the third time on dated 12.04.2022 fixing the date of auction 13.05.2022 wherein reserve price was fixed at Rs.2,13,75,000/-. The said notice was communicated to all borrowers/mortgagors/guarantors to the loan a/c.

¶60

From the perusal of the record it is seen that the notice under Section 13(2) which is annexed as Annexure-3 to the counter of the Respondent Bank has been to the applicants. It is further evident from the record that Annexure-4 to the counter of the Respondent Bank which is possession notice dated 14.08.2015 bears the signature of Debadatta Pati and the same has been published in Newspapers.

¶61

From the perusal of the record it is seen that the Respondent Bank though has averred at para 14 of its counter filed on 06/03/2024 that the sale notice was communicated to all borrowers/mortgagors/guarantors to the loan a/c but no documentary evidence has been filed in this regard. From the perusal of the sale notice annexed as Annexure-13 in SA shows that sale notice dated 12.04.2022 and date of sale is 13/05/2022 which shows that there is clear 30 days notice. With regard to personal notice to all the borrower/guarantors under Rule 8(6) no evidence has been filed by the Respondent Bank in both the counters. Hence this Tribunal is of the opinion that Rule 8(6) has not been complied by the Respondent Bank. It is further held that publication of sale notice under Rule 8(6) is mandatory requirement and any deviation from it renders the sale void ab-initio. Accordingly Issue No.(i) is answered.

¶62

Issue No.(ii) Whether the mortgaged property has been valued properly before sale of the property?

¶63

The contention of the applicant is that the property of the Applicants are of high value. The market value of which is definitely much more than the demand amount of the Respondent Bank. Therefore, the sale of high value property at a low price is only with an intention to harass the Applicants. It is also further contended that the current valuation of the secured asset/mortgaged property by a registered bank Panel Valuer makes it clear that the Respondent Bank has under-valued the property, which at present has high market value.

¶64

The contention of the Respondent Bank is that the Bank has authority to conduct the auction despite its challenge before Hon’ble Debts Recovery Appellate Tribunal, the secured creditor is required to comply with all statutory prescription enumerated in the rule, which includes the valuation certificate from the approved valuer. No valuation has been done in the year 2022, before putting the property to auction, under Annexure-13. After taking a fresh valuation report from the approved valuer of the Bank the reserve price of the mortgage property was fixed for Rs.2,13,75,000/-. It is further contended that in accordance with the provisions of the statue, the Bank has conducted the valuation by the approved panel valuer of the bank within a period of one year prior to the auction sale notice dated 12.04.2022. The valuation was duly conducted on dated 30.07.2021 and since the auction sale had remained unsuccessful twice, to attract the bidders the reserve price was fixed at Rs.2,13,75,000/- taking into consideration the forced sale value of Rs.2,00,00,000/-. The valuation of the property was conducted on the basis of the approved building plan which is Ground Floor, first Floor and the Second Floor. The building plan was approved by the Talcher-Angul Meramanadali Development Authority (Tamda) Angul, which is the authority for the same, on dated 27.05.2010 for Construction of S+2 (Residential) Boarding building under Plot No. 304/2013, Khata No. 432/587.The valuation report prepared on dated 20.12.2023 by the Applicant is null and void and may not be taken into consideration.

¶65

The valuation report dated 20.12.2023 submitted by the applicants has not been prepared for any financial institution as such the bank cannot be forced to accept such valuation report prepared at the behest of the Applicants. The building approval plan was for G+2 which is Ground Floor, First Floor and the Second Floor. But, the valuation report dated 20.12.2023 has been prepared by indicating that the valuation is for G+3, i.e. Ground Floor, First Floor the Second Floor and the third floor. It is the humble submission of the Bank that the third floor is the illegal construction and cannot be taken into consideration of the valuation report dated 20.12.2023.The valuation report has been prepared on dated 20.12.2023, after one and half years of the Successful Auction Sale. It is also doubtful how the valuation was conducted as the Applicant was not at all in possession of the said property from 19.12.2023 and the valuer has purportedly increased the value of the property without verifying the land and building, and by sitting at office at Bhubaneswar

¶66

has prepared such faulty valuation report, hence, the valuation report dated 20.12.2023 is a concocted/created documents.

¶67

From the perusal of the valuation report filed by the applicants under Annexure-18 it is evident that the valuation report is not for any financial institution, hence it cannot be considered as the valuation to be considered by the Respondent Bank. Further more the valuation is dated 20.12.2023 which shows that the market value of the property is Rs.4,44,00,000.00 and distressed sale value is Rs.3,77,40,000.00 whereas Respondent Bank relied on the valuation report dated 30.07.2021 whereas it is shown that the market value is RS.2,25,00,000.00 and Forced sale value is Rs.2,00,00,000.00.The Bank has not controverted the valuation report submitted by the applicants by affidavit or otherwise. Since the report obtained by the Guarantors is also prepared by the approved valuer of the Respondent bank. The difference between two reports is remarkably more less two times which goes to show that the Bank has not obtained the proper valuation reported, fixed lower reserve price and sold the property in lesser values causing loss the applicants.

¶68

From the perusal of the record it is seen that the Respondent Bank has relied on the valuation report dated 30.07.2021 and the sale notice dated 12.04.2022 fixing the sale on 13.05.2022. If the Bank would have taken the fresh valuation of the property, then it might have been more that the valuation report dated 30.07.2021 enabling the Respondent Bank to get more price for the said property. Hence it is evident that the Respondent Bank has not taken fresh valuation of the property before sale of the property which violates Rule 5 the Security Interest (Enforcement) Rules, 2002. Accordingly issue No.(ii) is answered.

¶69

Issue No.(iii) Whether the auction purchaser is the single bidder and the same in the earlier auction?

¶70

The contention of the applicants is that the Auction Purchaser in this auction is the same single bidder who was the auction purchaser and single bidder in the earlier auction, which has been set-aside by the Hon’ble DRT, Cuttack and upheld by the Hon’ble DRAT, Kolkata. There is no other person who has participated in the bid. The purpose of holding the auction was to provide a platform to maximum number of bidders so that the best price of the property could be fetched. “However being the sole participant in an auction does not bestow upon any entity, a public

¶71

law entitlement in asserting the right of being so rewarded with”, the Division bench of the Orissa High Court ruled.

¶72

The contention of the Respondent Bank is that multiple bidders, i.e. two in number, had participated in the E-auction Sale conducted on dated 13.05.2022.

¶73

From the perusal of the record it is seen that Annexure-12 to the counter filed on 06/03/2024, it is evident that two bidders participated in the bid namely Arun Agrawal and Bikram Kishore Sahoo and Bikram Kishore Sahoo being the highest bidder sale certificate has been issued in his favour. Hence the said contention that there is single bidder in the auction held on 13/05/2022 holds no good. But it is a fact that the auction purchaser in this auction is same as per SA No.73/2017.Accordingly Issue No.(iii) is answered.

¶74

Issue No.(iv) Whether the applicants are entitled to the reliefs as claimed?

¶75

The applicants relied on the following decisions in support of their case.

¶76

(i) (2014) 5 SCC 610 i.e. Mathew Varghese Vrs. Amritha Kumari on the point of conditional set aside of sale and indivisual notice to borrower mandatory.

¶77

(ii) (2014) 5 SCC 651 i.e. J. Rajiv Subramaniyyam & another vrs. Pandiyas & others

¶78

(iii) (2014) 5 SCC 660 i.e. Vasu P. Sethy Vrs. Hotel Vadnana Palace & others

¶79

(iv) (1999) 6 SCC 755 i.e. Allahabad Bank Vrs. Radha Krishna Maity & others on the points of principles of natural justice.

¶80

From the perusal of the record it is seen that there is no dispute with regard to the notices under Section 13(2) and 13(4). The main contention of the applicant is that no sale notice under Rule 8(6) has been issued to the applicants and no proper valuation has been made by the Respondent Bank before sale of the property violating the provisions of SARFAESI Act. In this regard this Tribunal has passed the judgment in SA No.73/2017 and allowed the SA which has been affirmed by the Hon’ble DRAT, Kolkata and so also by the Hon’ble High Court of Orissa wherein the property involved is the same.

¶81

In view of the aforesaid discussion made above, and the issues already answered in the preceding paragraphs and the decisions relied on by the applicants, the instant SA bearing SA No.69 of 2022 is allowed in favour of the applicants declaring the auction sale notice dated

¶82

12.04.2022 fixing the date of sale 13/05/2022 are hereby set aside. Accordingly Issue No.(iv) is answered.

¶83

O R D E R

¶84

In the result, S.A. No.69 of 2022 is allowed in favour of the applicants declaring the auction sale notice dated 12.04.2022 fixing the date of sale 13/05/2022 are hereby set aside and accordingly sale is set aside. Respondent Bank is directed to redeliver the possession of the property to the applicants within one month from the date of this order.

¶85

The applicant in their written notes of submission has stated that the applicants are ready and willing to deposit the entire auction amount i.e. Rs.2,14,55,000/- within a period of one month to retain their ancestral property as the revenue records till date have also not been changed and he Record of Right still remains in the name of the applicants and guarantors. In the circumstances, applicants are directed to deposit the auction amount deposited by the auction purchaser along with interest at fixed deposit rate within one month from the date of this order so as to enable the Respondent Bank to refund the said amount along with interest to the auction purchaser.

¶86

Regarding the prayer of the Applicants for the regularization of the loan a/c, the said prayer of the Applicants is under adjudication before the Hon’ble DRAT, Kolkata, hence this Tribunal cannot adjudicate the said issue at this stage.

¶87

Since the main SA is disposed of, hence all the IAs, pending, if any, stands disposed of and interim order, if any, stands vacated.

¶88

Let a copy of this order be supplied to the parties forthwith as per rules.

¶89

Let the file of SA No.69 of 2022 be consigned to the record room. This order is dictated and corrected by me and pronounced in the open Court under my signature, this the 11^th day of March, 2024.

¶90

(Jitendra Prasad Singh) Presiding Officer.

Ms Hotel Rajalaxmi v. Orissa Gramya Bank

Case brief

What is this about?

What did the court decide?

Ms Hotel Rajalaxmi v. Orissa Gramya Bank

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

Dhruba Charan Das versus Punjab National Bank

Debendra Nath Das versus Union Bank of India

K Anasuya and Others versus Bank of Maharashtra