Dismissed

K Paramasivam v. Karur Vysya Bank

DRT8 May 2025SA/17/2024

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal dismissed an application challenging a concluded auction sale under the SARFAESI Act. The court held that the properties were not agricultural as they were used for a theme park and industrial purposes, rendering Section 31(i) inapplicable. Furthermore, the sale price exceeded the reserve price, and no fraud was established, so the sale could not be set aside.

What did the court decide?

The sale concluded on 18.09.2024 was upheld as valid; the applicants' Section 17 petition was dismissed; parties bear own costs.

K Paramasivam versus Karur Vysya Bank — Banking and Recovery | DRT (2025)

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IN THE DEBTS RECOVERY TRIBUNAL –I AT CHENNAI

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Dated this 8^th Day of May, 2025

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PRESENT: SHRI A.S.JAYACHANDRA

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Presiding Officer

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S.A.No.17 of 2024

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1. Mr.K.Paramasivam,

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S/o Mr.Karuppannan No. 119, Bhavani Main Road, Erode-638 004.

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2. Mr.P.Sathyamoorthy,

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S/o Mr.K.Paramasivam No. 119, Bhavani Main Road, Erode-638 004.

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3. Maharaja Refineries, A partnership firm, Rep by its Partner Mrs. S. Saradha No. 125, Bhavani Road, Erode- 638 004.

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4. Mr.S.Saradha

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W/o Mr.P.Sathiyamoorthy, No.119, Bhavani Main Road, Erode-638 004.

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. . . Applicants

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Versus

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1. The Authorized Officer/Chief Manager,

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Karur Vysya Bank, Asset Recovery Branch, R.S.No. 170/9, Uthankudi Village, Near Mattuthavani Bus Stand, Madurai-625 107

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2. M/s. P.S. Govindaswamy Naidu & Sons Charities Post Box No. 1609 Peelamedu, Coimbatore – 641 004.

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3. Mrs. A. R. Subramaniam Educational Trust, 12, Jothy Theatre Road Tiruppur – 641 601. . . . Defendants

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Ld. Counsel for Applicant :- Ld. Sr. Counsel Sh.P.V.Balasubramaniam a/w Sh.P.J.Sri Ganesh, Sh.Jayaprakash & Sh.P.J.Rishikesh & Sh.SPS Nithyan Ld. Counsel for Defendant No.1 :- Sh. R.Venkatesan & Sh.Krishna Ld. Counsel for Defendant No.2 :- Sh. Manjunath Karthikeyan Ld. Counsel for Defendant No.3 :- Sh.K.Raj Kumar

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: - O R D E R - :

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The applicants have assailed the concluded sale held on 18.09.2024 consequent to the sale Notice dated 12.08.2024 issued by the 1^st defendant. While filing the petition u/s 17 of the SARFAESI Act, the defendant 2 and 3 were no parties to the litigation. However, the IA No. 169/2024 filed by the Applicant to implead the defendants 2 and 3 the same was allowed by an order dated 19.12.2024 and, thus the defendant 2 and 3 are impleaded.

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FACTS OF THE CASE:-

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1.0 The Applicants are the borrowers. They have availed the credit facilities in the names of the following entities:-

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a) Sri Maharaja Refineries – Partnership firm.

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b) Sri Maharaja Industries – Proprietary concern of K. Paramasivam

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c) Sri Maharaja Enterprises – Proprietary concern of P Sathyamoorthy.

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1.1 It is pleaded that towards the repayment of the loans, they have mortgaged many properties mentioned in the schedule along with other guarantees executed by various entities including Sri Maharaja Theme Park and Resorts Pvt. Ltd. Due to the various reasons the accounts were declared NPA by the Defendant No. 1 Bank on 08.02.2017, 21.02.2017, 30.06.2017 respectively. Thereafter, demand notice was issued which was duly replied, the reply was not considered and the Bank initiated

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various proceedings including approaching the Ld. NCLT, Chennai. The Corporate guarantee issued by the Maharaja Theme Park and Resort Pvt. Ltd. was invoked and thereafter corporate insolvency process was also initiated and the company is under liquidation. The applicants challenged the concluded sale on the following grounds:-

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(i) The Sale deed is arbitrary, illegal.

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(ii) The agricultural properties which were exempted under the Act is sold. (iii) Selling the agricultural land is per se illegal and is liable to set aside.

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(iv) Section 31(i) of the Act precludes the sale of the agricultural properties and is against the Doctrine of legitimate expectation.

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(v) The rejection of the claim of the applicant and guarantors on this aspect by the Bank is against the principles of natural justice.

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(vi) The sale Notice is not preceded by the due procedure under the Act and the Rules.

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(vii) The classification of the accounts as NPA as against the RBI guidelines.

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(viii) The property is undervalued. On 30.03.2016, the Bank valued the properties Rs. 242 crores and the reserve price now fixed is Rs. 243.69 crores.

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(ix) The secured assets are not registered as per the Act. The amount shown in the sale Notice as outstanding dues is incorrect.

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(x) Property is not properly described.

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CONTENTION OF DEFENDANT NO. 1

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2.0 In its reply statement, the Defendant No.1 Bank submits that “M/s. Maharaja Industries is a Proprietary Concern wherein K. Paramasivam is the Sole Proprietor. The family of Paramasivam has got other Associate Concerns viz. M/s. Sri Maharaja Enterprises, represented by Sole Proprietor P. Sathyamoorthy, a Partnership Firm M/s. Sri Maharaja Refineries, represented by its Partners Sathyamoorthy and Sarada and M/s. Maharaja Theme Parks and Resorts Pvt. Ltd. The facilities availed by Sri Maharaja Industries is guaranteed by Sathyamoorthy, Parameswari, Dharanidharan and M/s. Maharaja Theme Parks and Resorts Pvt. Ltd. This defendant submits that

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the Applicant availed Credit Facilities from the defendant-bank as per the Sanction Letter dated 14.06.2013 and in evidence thereof, loan documents were executed by the Applicant and the Guarantor and Mortgagors in favor of the defendant-bank. The said Sanction Letter was renewed and fresh Facilities were also granted as per the Sanction Letter dated 31.03.2013. Subsequently the fresh Facilities were availed and loan documents dated 25.06.2014 were executed by the Applicant, Guarantors and the Mortgagors. Subsequently, as per the Sanction Letter dated 24.11.2014, Credit Facilities were availed by the Applicant and also availed irrevocable Import Documentary Credits for meeting the business requirements. This defendant submits that the terms and conditions of the Sanction Letter as well as the loan documents have to be adhered by the Applicant as well as the Guarantors and Mortgagors.

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2.1 This defendant submits that the subject immovable properties were mortgaged by Paramasivam, Sathyamoorthy, Parameswari, Dharanidharan, and M/s. Sri Maharaja Theme Parks and Resorts Pvt. Ltd. in favor of the defendant-bank by depositing the Title Deeds on 07.03.2005, 23.04.2012, 14.06.2013, 25.06.2014 and 06.10.2016 and thereby securing the Credit Limits availed by M/s. Sri Maharaja Industries , M/s. Sri Maharaja Refineries and M/s. Sri Maharaja Enterprises. The deposit of Title Deeds has been confirmed subsequently by various registered Memorandums executed by the Mortgagors. Thus, the defendant –bank is the secured creditor.

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2.2 It is also pleaded that the Applicant did not follow the terms in repayment of the amounts due and payable on the stipulated dates and the accounts were classified on 08.02.2017 following the RBI guidelines. The non following of the RBI guidelines is denied. The applicant had not acceded to the forensic audit and the request of the Bank for the same was summarily rejected by the borrowers and its sister concerns with an ulterior object. It is further submitted that the demand Notice dated 08.03.2017 was issued and same was not complied. A reply is received

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dated 14.04.2017 with untenable contention the same was duly answered vide reply dated 26.04.2017. The applicant devised a rejoinder dated 02.05.2017 with an ulterior object.

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2.3 The applicant has also moved the Hon'ble High Court in W.P. No. 13002 to 13004 challenging the demand notice and the same was also dismissed. The Defendant Bank took possession on 18.08.2017 by following all the procedure laid down in the Act and the Rules. The allegation that the Rules were not followed is denied.

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2.4 The other contention that the Bank had already filed OA 160/2017 and simultaneously issued the present proceedings under the SARFAESI Act as illegal cannot be accepted since the law provides for the same. The contention of the applicant is that there is no valid mortgage in denied. It is submitted that defendant bank had followed the Security Interest (Enforcement) Rules, 2002.

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2.5 The contesting defendant submits that the averments of the applicant that the lands are agricultural in nature are denied. It is brought to the notice that the applicant has already leased the properties under the registered documents no. 2594/2004 in favour of Shri Maharaj Theme Park and Resorts Pvt. Ltd. for carrying on non – agricultural purposes which had put up super structures and recreation facilities. The registration of mortgages will evidently corroborate that the loans were obtained for business purpose and not for agricultural purposes.

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2.6 As regards the under valuation, these defendants refutes the same. It is contented that the property was duly valued by an approved valuer and the same was sold over and above the reserve price at Rs.353,86,00,000/- to the successful bidders namely P.S.Govindaswamy Naidu and Sons charities and A.R. Subramaniam Educational Trust. The sale certificates were duly registered on 01.10.2024 and 04.10.2024.

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2.7 The Defendant further submitted that the applicant had already filed two applications in TSA 37 and 44/2023 which were disposed by this Tribunal. The very grounds urged therein are being repeated in the present SA. It is submitted that the applicants have lost the rights of redemption as provided under section 13(8) of the SARFAESI Act. The present SA is hit by res-judicata. Thus, the defendant prays for dismissal of the SA.

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CONTENTION OF THE RESPONDENT NO.2

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3.0 The auction purchaser Respondent No. 2, Trust in its reply submits that pursuant to the e-auction Notice dated 09.08.2024 participated in the e-auction held on 18.09.2024 and emerged the successful bidder concerning the properties at lot 1 and lot 2. Lot 1 was purchased for Rs. 220, 31, 00,000/- as against the reserve price of Rs.169,31,00,000/-. Likewise, lot -2 was purchased at Rs.77,55,00,000/- as against the reserve Rs.70,55,00,000/-. The lands were used for recreational purposes and these defendants obtained the sale certificate dated 01.10.2024.

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3.1 The second defendant further submits that the applicants have lost the rights of redemption and nothing survives to be adjudicated. The reliefs cannot be granted which are based on unfounded and unsubstantiated allegations, the second respondent prays for dismissal of the SA.

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CONTENTION OF THE 3RD DEFENDANT.

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4.0 The third defendant submits that SA is not maintainable either in Law or on facts. The applicant had suppressed the material facts. In the auction held on 18.09.2024, the third defendant emerged as successful bidder in respect of the vacant land converted into house sites for residential purposes and sale certificate is issued for the total sale consideration of Rs.56,00,000/-, which is now in its possession. The sale certificate is duly registered in its favour which is the bonafide purchaser in the auction. It is submitted that there were no irregularities in the auction. The contention that the property is agricultural in nature is denied

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submitting that they were leased out to recreation purposes in favour of Maharaja Theme Park and Resorts Pvt. Ltd. This defendant purchased the house site which is not agricultural in nature and further submits that the SA be dismissed.

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POINTS FOR DETERMINATION

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5.0 With completion of pleadings and hearing the Ld. Counsel, the following point arises for consideration as under:-

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“Whether the sale concluded on 18.09.2024, under the sale Notice dated 12.08.2024 is liable to set aside as null and void?”

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ANSWER TO THE POINT FOR DETERMINATION:-

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6.0 The Ld. Sr. Counsel for the Applicant during course of the arguments vehemently submits that the sale held consequent to the impugned notification is fraught with many illegalities. The applicant had relied on the two valuation reports dated 20.01.2016 and 30.03.2016 and also the certificate of proprietorship certificates of Paramashivam and partnership deed dated 01.04.1998. In the additional list of Documents, the Adangal Records of the lands belonging to the applicants for the years 2006-2022 and further the letter to the Bank addressed by the applicant dated 19.09.2024 is relied. The Ld. Sr. Counsel had relied on the following rulings:-

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(i) Muhammed Basheer vs Kannur District Co-op Bank reported in 2010 SCC OnLine Ker 538

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(ii) J. Malliga vs Union Bank of India reported in 2010(4) CTC 710.

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(iii) Eshwar Purushothaman Gardens vs Indian Bank reported in (2012) 5 MLJ 571.

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(iv) Prema & another vs. the authorized office SBI WP No 10271/2014 of Madras High Court Date of disposal on 05.06.2024.

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(v) Indian Bank & another vs K. Pappi Reddiyar & another in 2018(18) SCC 252.

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(vi) K. Sreedhar vs Raus Constructions Pvt. Ltd. 2023 (11) SCC 169.

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6.1 These rulings are urged to contend that the agricultural properties could have never been sold under SARFAESI Act.

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6.2 The Ld. Counsel for the applicant had also relied on the following rulings to canvas that the properties sold under the Act with improper and undervalued reports cannot be held as legal.

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(i) Divya Manufacturing Company vs Union Bank of India reported in 2000(6) SCC 69.

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(ii) Palpap Ichini Software International Ltd. vs. M/s. Indian Bank reported in AIR2012 Madras 90.

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(iii) Rajiv Subramaniyam & another vs Pandiyas & others reported in 2011-3-L. W808.

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(iv) Mathew Varghese vs. Amirtha Kumar and others reported in 2014(5) SCC 610.

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(v) Vasu P. Shetty vs. Hotel Vandana Palace reported in (2014) 5 SCC 660.

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6.3 In the written arguments it is contented that the properties are undervalued. In the SA page 109 of the Annexure are relied. The lot No.1 prescribed reserve price at Rs.169.31 crores and lot No. 2 at Rs.70.55 Crores. The ld. Counsel had invited the attention of the Tribunal the sale Notice dated 09.08.2024. He demonstrates that these properties are undervalued in view the valuation report dated 30.03.2016 had shown the value of the property as Rs.219,86,35,000/-. The Ld. Sr. Counsel had argued that the properties are grossly undervalued. Though the property is shown as agricultural land, the same was dropped. In such a scenario, the property should have been viewed as industrial in nature. Had it been done so, the property could have fetched more than Rs.500 crores.

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6.4 On the other hand, the Ld. Counsel for the defendant bank refuting the allegation submits that the property is sold much higher than the reserve price. The reserve price was fixed at Rs.234 crores and the same was sold for the Rs.353 crores. It is submitted that the valuation reports obtained pertaining to the properties are furnished at pages 69 to 105 of the first set of Documents. The valuation report dated 01.07.2024 at pages 69 to 87 specify that the guideline value at

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Rs.61,99,29,192.96 /- and the open market value is Rs.245,11,60,000/-. The realizable value is Rs.220,60,36,000/-. It is submitted that the above valuation report dated 01.07.2024 pertains to the properties located in survey numbers S.F. Nos. 573/1F, 571/2, 572/2, 573/4B, 573/4B, 573/4, 580/1B2, 2B2, 580/2D, 577/1, 567/2B, 573/3, 577/2, 580/2F, 573/1, 573/1H, 573/1G, 565, 580/2F1, 573/2B, 573/11, 565/1, 580/1A1 of Neelambur Village presently in Sulur Thaluk and Coimbatore District owned by Sathyamoorthy and Paramashivam and leased out to Maharaja Theme Parks and Resorts Ltd.

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6.5 The main contention of the applicant is that the property is undervalued. To understand this contention; the documents furnished by the applicants are seen. In the valuation report relied by them at 21 to 49, the total value of the properties is arrived by one T. Sivasamy, Chartered Engineer. The property is put to valuation shows that the forced sale value at Rs. 225 crores. The same is dated 20.01.2016, the same comprises of certain structures of Theme Park and Resorts for which the photographs are produced from page 38 to 47. It is also seen from the valuation report produced by the applicants that at column 15 of page 24, while answering “if it is agricultural land any conversion of house sites is contemplated” for which the valuer says „not applicable‟. The abstract of the value of the buildings consists of nearly 18 non- agricultural and commercial aspects viz., Office Block 14,65.16,650, Entrance Place, Open Theatre, Kids World, Food Court, Dashcar shed, Tower-4 Slide Ride, Tower -3 Slide Ride, Tower -2 Slide Ride, Toilet No. 1, Toilet No. 2, Toilet No. 3, Toilet No. 4, Substation Building, Snack Bar, Service, Work Shop Building, Labour Quarters, Toilet Etc. Land Development, Cost of Amenities and Services Works. This shows that the property is occupied by M/s. Maharaja Theme Park and Resorts Ltd. the reference in the valuation report of the Engineer also finds the same. It is the joint ownership of several persons and the property is connected to the National Highway and it is surrounded by many commercial establishments and industries, and a residential lay out as could be seen from Para 9 of the report.

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6.6 The other valuation report relied by the applicant is dated 30/03/2016 at page 49 to 90 also is that of properties consisting of land, buildings and machineries. The photographs of buildings and machineries are from page 80 to 88. The name of the owner is Maharaja Theme Park. The total extent is 43.703 acres. The value of the land is shown as Rs.196,66,35,000/-. The abstract value of the buildings is shown as Rs.23,49,00,000/- and machineries at Rs.2,60,00,000/-.

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6.7 After going through the above valuation reports, the following facts emerge inexorably on record:(i) The valuation report obtained in the month of January and March, 2016 are obtained the behest of M/s Maharaja Theme Park and Resorts Ltd.

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(ii) The valuation reports speaks much of the development done on the land like the buildings put up, the recreational implants and the structures, certain roller coaster and water jumping machines and complete entertainment park.

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(iii) The valuation reports hovers around the approximate value and speaks of the realizable/forced sale value at Rs. 225 crores (of Valuer Shivasamy).

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(iv) The second valuation report also speaks of forced value at Rs. 219, 86,00,000/-. (Page No. 74 of SA).

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(v) Thus the forced market value according to the both the reports are between Rs. 219 to 225 crores.

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6.8 In the index of the Documents furnished by the Defendant Bank, the valuation report is produced which is dated 01.07.2024 and 03.07.2024. After perusal of the same, this Tribunal is constrained to note the following:-

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(a) The forced sale value is about Rs.196 crores and the present market value is Rs. 245 crores and realizable value is Rs.220 crores. (This report is by Best Associates at pages 69 to 87 consisting of the photos of the Theme Park.

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(b) The second valuation report dated 03.07.2024 obtained through Murugu and Company is also perused which is pages 88 to 105. This shows that the market value at about Rs.242 crores and realizable value about Rs.218 crores and force sale value at about Rs.193 crores approximately.

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6.9 After having noted the above valuation reports, the gist of the same, the contention of the applicant is to be understood on the submission that the properties grossly undervalued.

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6.10 The Sale Notification produced dated 09.08.2024 comprises of four lots. Among these lot 1 reserve price is Rs.169,31,00,000/-. The same sold for Rs.220,31,00,000/-.

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6.11 Lot 2 is sold which reserve price of Rs.70,55,00,000/-. Thus the total value of lot 1 and 2 is sold for Rs.297.86 crores.

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6.12 The third defendant had purchased the property bearing site No. 77 measuring 3,200 sq ft. for the value of Rs.56 lakhs. This is at lot No. 3. The reserve as per the Sale Notice Rs.53 lakhs.

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6.13 The valuation report of the Bank at page 79 of the Documents filed shows this property is having guideline value at Rs.10.68 lakhs and present market value at Rs.58.40 lakhs and forced sale value at Rs. 46.72 lakhs and the realizable value at Rs.52.56 lakhs. This valuation of lot No. 2 is not much in dispute.

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6.14 What is in dispute is with regard to the reserve price of the entire four lots. As noted above, Thus the forced market value according to the both the reports relied by the applicant is between Rs.219 to Rs.225 crores.

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6.15 The properties are sold for a total sum of Rs.353.86 crores. Considering the value at which the properties are sold and by the valuation reports furnished by the applicant himself showing the forced value between Rs.219 to Rs.225 crores it is highly un-understandble as to how the applicant could rally by submitting that the properties are grossly undervalued.

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6.16 The Ld. Counsel for the Applicant relies on the rulings noted in the foregoing paragraphs in Divya Manufacturing (Supra) , the DB of the Hon'ble Supreme Court had noted that the in the peculiar context of the facts where the appellant intended

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to purchase the properties at Rs.37 lakhs and at the intervention of the Court he increased to Rs.1.3 crores. It was held that it is the duty of the Court to see that the price fetched at the auction is an adequate price even though there is no suggestion of irregularities or fraud. In the said case, the liquidator was directed to take steps for obtaining proper order of the Court to sell the property by calling tenders afresh fixing the reserve price at Rs. 2 crores. The ruling is distinguishable on facts. The sale was not set aside and the same is not rendered, adjudicating the provisions of SARFAESI Act.

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6.17 The Ruling in Palpap Ichinichi (Supra) the Hon'ble Madras High Court held that in the absence of any bidders and after reducing and re-fixing the market value and the upset price, the property was sold to another by reducing the reserve price quoting it as Rs.2.42 Crores. In that case there was a successful bidder at Rs.3.15 Crores, but the amount was not paid. Thereafter the price was reduced. Taking note of the peculiar situation, our Hon'ble High Court held that the Bank being a responsible body, having vide powers under the SARFAESI Act is expected to conduct the procedure in a bonafide manner. It noted the following:-

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22. The Authorized Officer is none other than the officer of the Bank. The auction was conducted at the premises of the respondent Bank. Admittedly there were no other bidders. In case the Bank was having an idea to purchase the property, they should have given prior intimation to the borrower. The fact that there is no statutory prohibition against the secured creditor taking part in the auction, will not enable them to purchase the property by re-fixing the market price as well as the reserve price and to purchase the property at such reduced rate. This is absolutely not the intention of the law makers while enacting the SARFAESI Act.

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Thus this ruling is distinguishable on facts. In the present case, the reserve price is not reduced and the auctioning Bank itself has not purchased the property.

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6.18 In the ruling of Rajiv Subramaniam (Supra) , the Hon'ble High Court noted that the borrowers had sought for time and had paid certain sums and prayed for extension of time to make the balance payment. The properties were split and some of the movables were sold. Thereafter, under the guise of treaty sold the property as per the SARFAESI Act the sale certificate issued was challenged, which was allowed

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under certain terms. The writ appeal is dealt in the said case. The issues framed in

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the writ appeal are mentioned in Para-13 of the ruling as under:

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“13. In the light of the submissions of the learned Senior Counsel appearing for the appellants and the respondents the following points arise for consideration are:-

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1) Whether this Court is not entitled to exercise its jurisdiction under Article 226 of the Constitution of India?

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2) Whether the consent letter given by the petitioners would tantamount to consent or authorization in favour of the bank authorities to go for private negotiation without knowledge of the writ petitioners?

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3) Whether the writ petitioners were duly represented by GE-WINN MANAGEMENT & CO. and the SARFAESI Rules 8(5) and 8(8) have been followed?”

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6.19 After discussing the facts and law on the subject, the Hon'ble High Court had come to the conclusion that:

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“36 As discussed earlier, the bank authorities have not properly exercised their jurisdiction and not followed the procedure contemplated under Rule 8(5) and Rule 8(8) of the Security Interest (Enforcement) Amendment Rules, 2007. We are really at a loss to understand as to how on 08.12.2006, all of a sudden, the appellants have come forward with the money and paid the same and gone away with the auction property for just Rs.10,000/- over and above the upset price, to satisfy the requirement of Section 9(2) of the SARFAESI Act. Therefore, this aspect would certainly give room to suspect the bona fides of the bank authorities and to hold that they have not properly and fairly exercised their jurisdiction. If really on 08.12.2006, the bank officials were not inclined to grant time for the writ petitioners to make payment, the next option open to the bank authorities is only to hold a public auction or to obtain quotations from persons dealing with similar secured assets or otherwise interested in buying such assets or by private treaty. But, as already discussed, we are of the considered opinion that it is not established before this Court that the properties have been sold by private treaty as contemplated under Rule 8(5) of the Security Interest (Enforcement) Rules, 2002. If at all, in the event of failure on the part of the writ petitioners to make payment, it is open to the bank authorities to resort to any one of the methods contemplated under Section 8 of the Security Interest (Enforcement) Rules, 2002 and not in the method resorted to by them. Anyhow, the writ petitioners also had not paid the amount. Though an option was given by the Court on 21.04.2007, on that day also, the writ petitioners have not made payment.

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37 Thus, the amount due to the third respondent bank from the writ petitioners is Rs.123 lakhs with interest. Since the writ petitioners had deposited the amount together with interest before the Court, the matter is remitted back to the third respondent bank to realize the amount from the writ petitioners.”

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Thus this ruling is also not helpful to the Applicants.

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6.20 The other ruling relied by the Ld. Counsel for the Applicant in Mathew Varghese (Supra) dealt with the mandatory period of thirty days notice to the borrower in selling the property and also the requirement of the secured creditor to

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follow statutory provisions of Rules 8 & 9 of Security Interest (Enforcement) Rules, 2002. It noted that Section 13(8) of the Act clearly stipulates that the mortgagor retains the full rights to redeem the property by tendering all the dues to the secured creditor at any time before the date fixed for sale. (Para-39).

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36. . . . . . However, under Section 13(8), it is clearly stipulated that the mortgagor, i.e. the borrower, who is otherwise called as a debtor, retains his full right to redeem the property by tendering all the dues to the SECURED CREDITOR at any time before the date fixed for sale or transfer. . . . . ”

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In the instant case the Defendant Bank in its list of documents had produced the pre-sale notice at Sl.No.8 Page – 36 to 55 clearly notifying the intimation to redeem the property available to the borrowers under Section 13(8) of the Act. The Applicant has not agitated the ground that there was no compliance of Section 13(8) of the Act. In view of the above, the ruling relied by the Ld. Counsel for the Applicant is inapplicable to the present set of facts.

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6.21 In the ruling Vasu Shetty (Supra) it is held that the Rules 8 & 9 of the Security Interest (Enforcement) Rules, 2002 is for the benefit of the borrower and there is no waiver of mandatory requirement of the above rules either express or implied on the part of the borrower. In the instant case, there is no complaining of the nonconformity of the said rules and thus this ruling is also not helpful to the Applicant.

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6.22 On the other hand the Ld. Counsel for the Defendant Bank had relied on the following citations:-

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Celir LLP Vs. Bafna Motors (Mumbai) MANU/SC/1042/2023,

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Celier LLP Vs. Sumathi Prasad Bafna, MANU/SC/1343/2024,

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Bajarang Shuamsundar Aggarwal Vs. Central Bank of India, 2019 SCC Online SC 1173, K.Sridhar Vs. Rao‟s Constructions MANU/SC/0011/2023,

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Kay Jay Industries Pvt. Ltd. Vs. Asnew Drums Pvt. Ltd. MANU/SC/0012/1974,

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Sadhashiv Prasad Singh Vs. Harender Singh MANU/SC/0019/2014,

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Silicon Valley Auto Components Vs. Indian Bank MANU/TN/1445/2014 and

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Valji Kimji & Company Vs. Official Liquidator, MANU/SC/3408/2008.

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6.23 In Celir LLP Vs. Bafna Motors (Supra) the Hon'ble Supreme Court was dealing with the issue of the sale certificate having been confirmed could withhold the same and enter into the private agreement with the borrower for redemption of mortgages, which stood extinguished upon publication of notice of auction. The Hon'ble Supreme Court had noted the following:-

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63. We are of the view that the failure on the part of the borrower in tendering the entire dues including the charges, interest, costs etc. before the publication of the auction notice as required by Section 13(8) of the SARFAESI Act, would also sufficiently constitute extinguishment of right of redemption of mortgage by the act of parties as per the proviso to Section 60 of the Act 1882. Furthermore, in the case on hand, there was no claim for right of redemption by the borrower either before the publication of the auction notice or even thereafter. The borrowers entered into the fray only after coming to know of the confirmation of auction. Be that as it may, once the Section 13(8) stage was over and auction stood concluded, it could be said that there was an intentional relinquishment of his right of redemption under Section 13(8), whereby the Bank declared the appellant as the successful auction purchaser having offered the highest bid in accordance with the terms of the auction notice.

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It was also held that the confirmation of the sale by the bank under Rule 9(2) invests the successful auction purchaser with a vested right to obtain the sale certificate in accordance with Rule 9(6). It was also held that with the unamended Rule 13(8) the right of the borrower to redeem the secured asset was available till the sale or transfer of such secured asset.

¶139

6.24 In Celier LLP Vs. Sumathi Prasad Bafna (Supra) , the issues for determination

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are found in the Page 109 of the judgement as under:-

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“109. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the following questions fall for our consideration: -

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I. Whether any act of contempt could be said to have been committed by the respondent nos. 1 to 4 respectively of the judgment and order dated 21.09.2023 passed by this Court in Civil Appeal Nos. 5542-5543 of 2023? In other words, whether the respondents herein in light of the aforesaid decision of this Court were duty bound to cancel the Release Deed dated 28.08.2023 and hand over the physical possession along with the original title deeds of the Secured Asset to the petitioner herein?

¶143

II. Whether, the proceedings arising out of S.A. No. 46 of 2022 could have continued after this Court’s judgment and order dated 21.09.2023 directing the issuance of the Sale Certificate of the Secured Asset to the petitioner herein? In other words, whether the petitioner by virtue of the Sale Certificate dated 27.09.2023 is said to have acquired a clear title to the said property?

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III. Whether the transfer of the Secured Asset in favour of the Subsequent Transferee by way of the Assignment Agreement dated 28.08.2023 is hit by lis pendens? In other words, whether the absence of any registration in accordance with Section 52 of the TPA as amended by the State of Maharashtra renders the lis pendens inapplicable?”

¶146

Para 135 of the said ruling is as under:-

¶147

“135. The ‘Henderson Principle’ is a foundational doctrine in common law that addresses the issue of multiplicity in litigation. It embodies the broader concept of procedural fairness, abuse of process and judicial efficiency by mandating that all claims and issues that could and ought to have been raised in a previous litigation should not be relitigated in subsequent proceedings. The extended form of res-judicata more popularly known as ‘Constructive Res Judicata’ contained in Section 11, Explanation VII of the CPC originates from this principle.”

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6.25 Perhaps the Ld. Counsel for the Defendant wanted to urge this point at Para 135 above to advance his cause that the matter is already decided by this Tribunal in TSA No.37 & 44 of 2023. In its reply it is contended that the same grounds are also urged in the present application, which be not entertained.

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6.26 In the ruling of Kay Jay Industries Pvt. Ltd.(Supra) , the Hon'ble Supreme Court had found that there was no material irregularity in the conduct of the sale causing injury to the judgement debtor. The objections to the sale were dismissed.

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6.27 In the ruling of Sadhashiv Singh (Supra) at Para-14 the Hon'ble Supreme Court noted that the entire deliberation at the hands of the High Court were based on offers and counter offers, inter-se between Allahabad Bank on the one hand and objector Harender Singh on the other, whereas the rights of Sadhashiva Prasad Sinha, the auction purchaser was not at all taken into consideration. It noted that Harender Singh had created unbelievable story with the connivance of his brother to save the property in question. The Hon'ble Supreme Court held that High Court ought not to have interfered with the matter and the Ld. Single Judge rightly dismissed the WP filed by the Harender Singh who was the borrower. Thus the High Court has set aside the orders passed in LPA. The auction purchasers‟ rights were protected.

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6.28 In Silicon Valley (Supra) our Hon'ble High Court had held that mere description of the land as agricultural land would not suffice, but it must be an

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agricultural land, which is said to be either actually used or ordinarily used or meant

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to be used for agricultural purposes. It is held in Para-14 as under:-

¶155

“14. Further, it is not in dispute that in the secured asset, the petitioners have constructed a pucca huge building with swimming-pool and a tennis court and for this purpose, it is not brought to the notice of this Court whether the petitioners have applied for conversion of a portion of agricultural land into non-agricultural land. In fact, the Honble Supreme Court has evolved as many as 13 factors/indicators in order to hold a land as an agricultural land which are extracted as under.

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"(1) Whether the land was classified in the revenue records as agricultural and whether it was subject to the payment of land revenue?

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(2) Whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time?

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(3) Whether such user of the land was for a long period or whether it was of a temporary character or by way of a stop-gap arrangement?

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(4) Whether the income derived from the agricultural operations carried on in the land bore any rational proportion to the investment made in purchasing the land?

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(5) Whether the permission under section 65 of the Bombay Land Revenue Code was obtained for the non-agricultural use of the land? If so, when and by whom (the vendor or the vendee)? Whether such permission was in respect of the whole or a portion of the land? If the permission was in respect of a portion of the land and if it was obtained in the past, what was the nature of the user of the said portion of the land on the material date?

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(6) Whether the land, on the relevant date, had ceased to be put to agricultural use? If so, whether it was put to an alternative use?

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Whether such cesser and/or alternative user was of a permanent or temporary nature?

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(7) Whether the land, though entered in the revenue records, had never been actually used for agriculture, that is, it had never been ploughed or tilled? Whether the owner meant or intended to use it for agricultural purposes?

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(8) Whether the land was situate in a developed area? Whether its physical characteristics, surrounding situation and use of the lands in the adjoining area were such as would indicate that the land was agricultural?

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(9) Whether the land itself was developed by plotting and providing roads and other facilities?

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(10) Whether there were any previous sales of portions of the land for non-agricultural use?

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(11) Whether permission under section 63 of the Bombay Tenancy and Agricultural Lands Act, 1948, was obtained because the sale or intended sale was in favour of a non-agriculturist? If so, whether the sale or intended sale to such non-agriculturist was for non-agricultural or agricultural user?

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(12) Whether the land was sold on yardage or on acreage basis?

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(13) Whether an agriculturist would purchase the land for agricultural purposes at the price at which the land was sold and whether the owner would have ever sold the land valuing it as a property yielding agricultural produce on the basis of its yield?

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15. The petitioners have filed number of documents such as adangal extract, income tax returns, photographs and certificate issued by VAO to establish that the secured asset is an agricultural land and therefore claimed that no security interest can be created therein and the same has to be excluded under the provisions of the SARFAESI Act. We are not in agree with the claim of the petitioners inasmuch as the above said documents themselves cannot be held to be conclusive proof (since the said documents are yet to be tested) that the secured property is an agricultural land and the claim of the petitioners will have to be established in a proper trial that too when the respondent/bank has been consistently disputing the nature of the land.”

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6.29 In Valji Khimji (Supra) , the Hon'ble Supreme Court had held that when the auction sale is advertised in well known newspapers having vide circulation all eligible persons can come and bid for the same, and they will be themselves be to blame if they do not come forward to bid at the time of the auction. They cannot ordinarily later on be allowed after the bidding is over to offer a higher price. (Para32). It also held therein that the ruling in “Divya Manufacturing Company” cannot be treated as laying down any absolute rule that a confirmed sale can be set aside in all circumstances. (Para-29)

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6.30 It is relevant to note that the Ld. Counsel for the Applicant had relied on Divya Manufacturing also as above. After having gone through the case law on either side, it must be said that a concluded sale unless and until is pleaded to be based on fraud cannot be set aside. In instant case, it is argued that the property is sold at the unacceptable valuation reports. This Tribunal after comparing the valuation reports filed by the Applicants and that of the Defendant No.1 Bank finds that there is not a huge difference in the valuation arrived at by the Bank. Furthermore, the ruling of the Pegasus Assets Reconstruction Ltd. Vs. Haryana Concast Limited & Ors. MANU/SC/1489/2015 wherein the Hon‟ble Supreme Court had held as under:-

¶174

“32. On considering the submissions of parties, we find that the sale confirmed in favour of M/s. Venus Realcon for Rs.32 crores does not require any interference particularly at the instance of Petitioner-Vinod Rajaliwala. There was no illegality or irregularity established against the conduct of auction and once it is found that the offer of Rs.32 crores was a fair offer in a competitive bid conducted fairly and the offer has been accepted and the sale confirmed, it would not be proper for this court to undermine the value of such auction sale conducted not only by the secured creditor but also by the Official Liquidator who was

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¶176

permitted to be associated with the whole process of finding out of valuation as well as the conduct of sale. M/s. Venus Realcon has rightly placed reliance upon the judgments of this court in the case of ValjiKhimji& Co. vs. Official Liquidator of Hindustan Nitro Product (Gujarat) Ltd. 2008(9) SCC 299 and Vedica Procon Private Limited vs. Balleshwar Greens P. Ltd., 2015(8) SCALE 713. In ValjiKhimji, the law was enunciated in Paragraph 28 in the following words:

¶177

“If it is held that every confirmed sale can be set aside the result would be that no auctionsale will ever be complete because always somebody can come after the auction or its confirmation offering a higher amount. It could have been a different matter if the auction had been held without adequate publicity in well-known newspapers having wide circulation, but where the auction-sale was done after wide publicity, then setting aside the sale after its confirmation will create huge problems. When an auction- sale is advertised in well-known newspapers having wide circulation, all eligible persons can come and bid for the same, and they are themselves to be blamed if they do not come forward to bid at the time of the auction. They cannot ordinarily later on be allowed after the bidding (or confirmation) is over to offer a higher price. Of course, the situation may be different if an auction-sale is finalized, say for Rs.1 crore, and subsequently somebody turns up offering Rs.10 crores. In this situation it is possible to infer that there was some fraud because if somebody subsequently offers Rs.10 crores, then an inference can be drawn that an attempt had been made to acquire that property/asset at a grossly inadequate price. This situation itself may indicate fraud or some collusion. However, if the price offered after the auction is over which is only a little over the auction price, that cannot by itself suggest that any fraud has been done.”

¶178

33. In Vedica Procon’s case (supra) the aforesaid view was noticed and after considering many judgments in Paragraph 39, the Court approved the view taken in Navalkha and Sons vs. Sri Ramanya Das &Ors., 1969 (3) SCC 537 that there is a discretion in the Company Court either to accept or reject the highest bid before an order of confirmation of sale is made. However, once the Company Court is satisfied that the price is adequate, the subsequent higher offer cannot be a ground for refusing confirmation. The price of immoveable property keeps on varying depending upon the market conditions and availability of a buyer. Such fluctuations may attract fresh higher offers but normally such offers cannot be made the basis for reopening the confirmed sale which was otherwise valid. In the present case, we are satisfied that the sale made in favour of M/s. Venus Realcon does not require any interference. There is no good reason why the full price paid by Venus Realcon should be ordered to be refunded with interest etc. and possession which was delivered to Venus Realcon at the time of sale should be disturbed after passage of so much time. In such circumstances, while granting leave in SLP(C) Nos.117-118, the consequent Civil Appeals are hereby dismissed but without any order as to costs. The money deposited in this case by the intervener M/s. Himalayan Infra Projects Private Limited should be refunded to it forthwith along with interest accrued thereupon. “

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6.31 Further at the cost of repetition this Tribunal notes that the property was sold at Rs.353,86,00,000/- to the successful bidders both by selling both lots. In view of the realized price being higher than the reserve price, this Tribunal does not see any element of fraud or the infraction of the security interest rules and the law governing the subject. Therefore, the arguments of the Ld. Counsel for the Applicant that the properties are sold at much a lower value than the market price cannot be accepted in view of the clear position of law as held by the Hon'ble Supreme Court in Pegasus

¶180

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Assets Reconstruction Ltd. (Supra) that in so far as no illegality or irregularity in conducting the auction having been established and further after finding out that the properties were sold at a fair sum in a competitive bid, this Tribunal is unable to set aside the sale conducted by the Defendant No.1 Bank on this ground.

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6.32 As far as the contention that the property was agricultural in nature and could not have been sold under the SARFAESI Act, both the Ld. Counsels relies on the latest ruling of the Hon'ble Supreme Court in the matter of K.Sreedhar Vs. Raus Constructions Pvt. Ltd. 2023 (11) SCC 169 . This ruling has discussed all the rulings on this subject namely ITC Limited Vs. Blue Coast 2018 SCC Online SC 237 , Pappi Reddiyar Vs. Indian Bank (Madras) , Indian Bank Vs. K.Pappi Reddiyar 2018 SCC Online SC 925 . The relevant observations of the Hon'ble Supreme Court in K.Sreedhar is that the mere mentioning in the Revenue Records as agricultural land is not sufficient to attract 31(i) of the SARFAESI Act. It should have ought to be used actually as agricultural lands at the time of creation of security interest. It is also observed in Para – 36 by quoting ITC Vs. Blue Coast Hotels case 2018 (15) SCC 1999 that since no security interest can be created in respect of agricultural land and yet it was so created goes to show that the parties did not treat the land as agricultural land and that the debtor offered the land as security on this basis.

¶183

6.33 Para-36 of the ruling of the K.Sreedhar (Supra) is very concussive on this point. After scrutiny of the documents furnished on both the sides, it is seen that the security interest is duly registered with CERCSAI showing the names of the Applicants as the executors of the Security Interest, which is filed by the Defendant Bank as additional documents.

¶184

6.34 Though the Applicant has also filed the Income Tax returns and the adangals. However, the observations of the Hon'ble Supreme Court in Para-36 of K.Sreedhar (Supra) cannot be ignored. It is at the cost of repetition this Tribunal notes that since no security interest can be created in respect of agricultural land and yet it was so created goes to show that the parties did not treat the land as agricultural land

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and that the debtor offered the land as security on this basis. Furthermore, it is undisputed from both the sides that the property in question is fully developed and used as a theme park for recreational activities and the Xerox copies of the photographs enclosed with the valuation reports produced by the very Applicant shows that there are fixtures, machineries, buildings and many other equipments as detailed in Page 69 to 75 of the documents furnished in SA by the Applicant and further the character of the property as depicted in Page 59 to 68 of the SA. After going through the same, this Tribunal finds that there are dodge cars, flying jets, down time boogies, hopping frogs boogies, Mushroom Mania, Sumo Coaster, Sky swings, Sun Droma, Cardoon Surfer, Junior Roller Coaster – mini train, Space shooeter, Flower wheel, Pendulum Ship, Crown Carousal, Toddler Train, Audio Video equipment, Air Conditioners and General Machinery.

¶187

6.35 Thus, it can be easily concluded that the property cannot be held as agricultural in nature and the intention of the parties, if inferred properly especially in the wake of one entity namely Cineplex a theatre and entertainment business organization having also challenged the sale notification in the capacity of a sublessee in SA No.15/2024, which this Tribunal disposed by the final order dated 06.05.2025, wherein the obstructor Applicant in SA 15 / 2024 having pleaded certain facts that the properties were leased out to the principal lessee, which subsequently subleased under an unregistered lease deed, the properties have lost the character of it being agricultural in nature. Suffice to say that the contention of the Applicant that the sale concluded be set aside on this ground cannot be entertained.

¶188

6.36 Further, in Celir LLP Vs. Bafna Motors,(Supra) the Hon'ble Supreme Court observed as under:-

¶189

“Para-86:- Thus, what is discernible from above is that, it is the duty of the courts to zealously protect the sanctity of any auction conducted. The courts ought to be loath in interfering with auctions; otherwise it would frustrate the very object and purpose behind auctions and deter public confidence and participation in the same.”

¶190

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7.0 In view of the aforesaid position of law, this Tribunal is not persuaded to accept the contention of the Ld. Sr. Counsel appearing for the Applicants that the property sold is in contravention to the provisions of Section 31(i) of the SARFAESI Act. Hence the following:-

¶192

SA No.17/2024 stands dismissed. Parties to bear their own costs. Copy of the orders be communicated to the contesting parties by the Registry as per Rules.

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Sd/- (A.S.JAYACHANDRA) PRESIDING OFFICER DRT-I, CHENNAI

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(Dictated to PS, who directly typed in the system, corrected, signed and pronounced by me on this 8^th Day of

¶195

May, 2025)

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K Paramasivam v. Karur Vysya Bank

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K Paramasivam v. Karur Vysya Bank

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