Partly allowed

Patumma v. State Bank of India

Kerala HC21 Aug 2014WP(C)/19358/2005

Case brief

AI extract

What is this about?

The Kerala High Court held that the Debt Recovery Appellate Tribunal failed to address legal and factual grounds challenging the DRT order setting aside a sale. The writ petition allowing the appeal was allowed, restoring the matter to the DRAT for reconsideration of specific issues within six months.

What did the court decide?

The appeal before the DRAT (No. 162 of 2011) is restored to its files. The writ petition allowing the appeal is allowed. The status quo of the property is maintained.

Patumma Vs State Bank of India — Banking and Recovery | Kerala HC (2014)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT:

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THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

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THURSDAY, THE 21ST DAY OF AUGUST 2014/30TH SRAVANA, 1936

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WP(C).No. 19358 of 2005 (D)

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AGAINST THE ORDER/JUDGMENT IN OA 319/1998 of DEBT RECOVERY TRIBUNAL, ERNAKULAM DATED 00-00-0000

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PETITIONER(S) :

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PATHUMMA, AGED 69 YEARS, W/O.LATE KOYAMMU HAJI, RESIDING AT THAYYIL HOUSE PUTHANNATHANI, KALPAKACHERY POST, MALAPPURAM DISTRICT.

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BY ADVS.SRI.G.HARIHARAN

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SRI.C.V.MANUVILSAN

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SRI.G.SUDHEER (THURAVOOR) SRI.Y.CONSTANTINE

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RESPONDENT(S) :

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1. THE STATE BANK OF INDIA, REP. BY THE BRANCH MANAGER, STATUE BRANCH, THIRUVANANTHAPURAM.

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2. THE DEBTS RECOVERY TRIBUNAL, ERNAKULAM (KERALA & LAKSHADWEEP) 8TH FLOOR, KSHB BUILDING PANAMPILLY NAGAR, COCHIN-36.

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3. THE RECOVERY OFFICER, DEBTS RECOVERY TRIBUNAL(KERALA & LAKSHADWEEP) 8TH FLOOR, KSHB BUILDING, PANAMPILLY NAGAR COCHIN-36.

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4. T.P.BAVA @ SAIDALIKUTTY, T.P.HOUSE, KALLINGAL, KALPAKANCHERY POST, MALAPPURAM-676 551.

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R2 BY ADV. SRI.P.K.BABU, ADDL.CGSC R1 BY ADV. SRI.R.S.KALKURA R2&R3 BY SRI.JOHN VARGHESE,SC

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THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 21-08-2014 ALONG WITH O.P.(DRT) NO.3500 OF 2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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AMV

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: 2 :

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WP(C).No. 19358 of 2005 (D)

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APPENDIX

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PETITIONER(S) EXHIBITS :

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EXT.P1	:	COPY OF THE ORDER PASSED BY THE HON'BLE COURT IN O.A.NO.918/98 DATED 27.11.2000.
EXT.P2	:	COPY OF THE JUDGMENT MADE BY THIS HON'BLE COURT IN O.P.NO.10025/01 DATED 26.03.2001.
EXT.P3	:	COPY OF THE REPRESENTATION DATED 26.03.2001.
EXT.P3(s)	:	COPY OF THE RECEIPT ISSUED BY THE PROFESSIONAL COURIER DATED 26.03.2001.
EXT.P3(b)	:	COPY OF THE EARLIER REPRESENTATION DATED 19.3.2001.
EXT.P4	:	COPY OF THE NOTICE FOR SETTING SALE PROCLAMATION DATED 24.05.2005 PUBLISHED IN MATHRUBHUMI DAILY ON 01.06.2005.
EXT.P5	:	COPY OF THE REPRESENTATION MADE BY THE PETITIONER BEFORE 3RD RESPONDENT DATED 23.06.2005.
RESPONDE	NTS EX	HIBITS :

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EXT.R1(a)	:	COPY OF THE JUDGMENT IN O.S.NO.13/1985 DATED 14.01.1993 BEFORE THE SUB COURT, TIRUR.
EXT.R1(b)	:	COPY OF THE DECREE IN O.S.NO.13/1985 DATED 14.01.1993 BEFORE THE SUB COURT, TIRUR.
EXT.R1(c)	:	COPY OF THE ONE TIME SETTLEMENT SCHEME FOR THE YEAR 2000.

AMV

Contd...3/-

: 3 :

WP(C).No. 19358 of 2005 (D)

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EXT.R1(d)	:	COPY OF THE ONE TIME SETTLEMENT SCHEME FOR THE YEAR 2003.
EXT.R1(e)	:	COPY OF THE REVIEW APPLICATION FILED BY THE PETITIONER'S SON AGAINST THE JUDGMENT IN O.A.NO.319/1998.
EXT.R1(f)	:	COPY OF THE JUDGMENT IN W.P.(C) NO.6780/04 DATED 10.03.2004.
EXT.R1(g)	:	COPY OF THE REPRESENTATION SEEKING ONE TIME SETTLEMENT DATED 20.03.2004.
EXT.R1(h)	:	COPY OF THE LETTER DATED 07.10.2003 ISSUED BY THE RESERVE BANK OF INDIA.
EXT.R1(i)	:	COPY OF THE JUDGMENT IN CIVIL APPEAL NO.4929/2004 OF THE SUPREME COURT OF INDIA.
EXT.R1(j)	:	COPY OF THE JUDGMENT DATED 16.05.2005.
EXT.R1(k)	:	COPY OF THE JUDGMENT IN WRIT APPEAL NO.1023/05 DATED 15.06.2005.
EXT.R1(l)	:	COPY OF THE VALUATION REPORT IN RESPECT OF 5.50 ARE OF PROPERTY.

/TRUE COPY/

P.A.TO JUDGE

AMV

K.VINOD CHANDRAN, J.

W.P.(C) No. 19358 of 2005 () &

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O.P.(DRT) No.3500 of 2013

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Dated this the 21^st day of August, 2014

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JUDGMENT

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The petitioner is an auction purchaser in a sale under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [for brevity “SARFAESI Act”], who is aggrieved by Ext.P16 order of the Debt Recovery Tribunal, which set aside the sale conducted on 15.06.2010 and Ext.P21 order of the Debt Recovery Appellate Tribunal, Chennai, confirming Ext.P16.

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2.The brief facts, necessary for the disposal of the petition is that M/s.Munavar Films, a partnership firm in which the petitioner is a partner, availed a loan; somewhere in the 1980's and on default; a suit was filed numbered as O.S. No.13 of 1985 before the Sub Court, Tirur. A decree was also passed and an execution petition was filed. On the advent of

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W.P.(C) No. 19358/05 & O.P.(DRT) No.3500/13 2

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Recovery of Debts Due to Banks and Financial Institutions Act, 1993 [for brevity “RDBFI Act”]; the dues being above `10 Lakhs, the matter stood transferred to Debt Recovery Tribunal (Kerala and Lakshadweep) at Ernakulam. Two items of properties mortgaged to the Bank each of 98 cents, one belonging to the petitioner and the other belonging to his mother, another partner; were brought to sale on 15.06.2010.

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3.The first respondent and his mother did not appear before the DRT, but they were aware of the proceedings in so far as, the petitioner's were individually before this Court, in two separate petitions, challenging the proceedings before the DRT. However, no orders enabling the defaulters to interdict the sale proceedings, were passed. In one of the writ petitions, the first respondent was directed to pay `5 Lakhs and also go for an OTS. The

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W.P.(C) No. 19358/05 & O.P.(DRT) No.3500/13 3

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amounts as directed in the interim order were deposited, but the OTS did not fructify for reason of no settlement being possible, after a decree being passed for realisation of debts; as per the guidelines of the RBI.

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4.In any event the properties were brought to sale on 15.06.2010 and the petitioner bid the same, for `1.67 Crores. The entire amounts were deposited on

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29.06.2010 and Ext.P3 confirmation was also issued. Subsequently, an application was filed by the first respondent herein, impleading the petitioner herein as a party respondent under Rule 61 of the Income Tax Rules, 1962, which rules have been adopted by the rules framed under the RDBFI Act.

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5.The irregularity in sale, which was the contention on which Rule 61 application was filed, was considered by the DRT by an elaborate order as is disclosed in

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W.P.(C) No. 19358/05 & O.P.(DRT) No.3500/13 4

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Ext.P16. Having found irregularity, the DRT thought it fit to set aside the sale. However, noticing the mandate in the proviso to Rule 61; directed deposit of the entire dues within a period of three weeks from the date of the order. The DRT also observed that, there was no interdiction in the Bank considering an OTS scheme.

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6.Admittedly by the time, the orders were passed under Rule 61, the first respondent had deposited an amount of 1,86,15,000/- but however, that did not meet up to the dues, even as on the date of sale; which even as per the counter affidavit of the respondent Bank added upto a total of 2.59 Crores.

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7.Subsequently, the Bank having considered the OTS, the petitioners deposited an amount of `30 Lakhs, in full settlement of the dues to the Bank which was to be added to the amounts already deposited, which

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W.P.(C) No. 19358/05 & O.P.(DRT) No.3500/13 5

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also were adjusted to the loan account. Hence, when the dues as on the date of sale was `2.59

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Crores, a settlement was made for `2.17 Crores.

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8.The DRT having set aside the sale, the petitioner herein was before the Debt Recovery Appellate Tribunal [for brevity 'DRAT']. The petitioner's contentions before the DRAT were many fold. The petitioner inter alia contended that, under Rule 61,

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the DRT could not have allowed the application under Section 61 of the IT Rules, unless the deposit was made. On finding the irregularity in sale, it was the argument that, the DRT should have first directed deposit of the total amounts due and only then could have proceeded to allow the application. Even assuming for argument sake; that the application would be considered as allowed only on the compliance of the deposit directed; no such compliance is evident. The first respondent has not

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W.P.(C) No. 19358/05 & O.P.(DRT) No.3500/13 6

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deposited the entire dues, admittedly as is the mandate under Rule 61.

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9.The further contention raised is that when the Bank raised a ground, as early as in 2005, that there could be no settlement arrived at when a decree is passed; the Bank could not have entered into a One Time Settlement when, in fact, the sale itself had been carried out and confirmed in the name of the auction purchaser and the bid amounts had been deposited before the recovery officer.

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10.Arguments were also advanced, with respect to the irregularity in sale; which in fact had to be defended by the respondent Bank or advanced on the basis of the records, by the petitioner herein. The appeal in fact raises all the above grounds and quite a few other grounds too. However the Presiding Officer of the DRAT failed to consider the factual aspects, as

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W.P.(C) No. 19358/05 & O.P.(DRT) No.3500/13 7

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also the legal grounds put forth to challenge the order of the DRT. It is to be noticed that before the DRAT the petitioner was in first appeal and the appellate authority merely presumed in Paragraph 9, that the Presiding Officer of the DRT would have looked into the records and passed the order. No verification of the records were attempted nor were the factual aspects discussed.

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11.The appellate authority in fact, ought to have looked into the records and entered a finding as to the merits, on the ground raised with respect to the irregularity in sale. The legal grounds urged also have not been answered by the DRAT.

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12.This Court in exercise of jurisdiction under Article 226, would not go into the facts, though, definitely the legal issues could have been considered. But when factual grounds are raised in appeal the same

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W.P.(C) No. 19358/05 & O.P.(DRT) No.3500/13 8

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has to be answered and in that context alone, Ext.P21 would stand set aside. The appeal filed before the DRAT being 162 of 2011 shall be restored to its files. The petitioner and the first respondent shall appear before the DRAT on 23.09.2014 and the DRAT shall consider the entire issues specifically noticed in this judgment, as also the grounds raised in the appeal memorandum and arrive at a finding within a period of six months from the date of appearance of the parties. The status quo with respect to the property shall be maintained till the appeal is disposed of. In the nature of the orders passed in O.P.(DRT) No.3500 of 2013, W.P.(C) No.19358 of 2005 filed by the mother of the first respondent stands closed. The parties are left to suffer their costs.

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Sd/K.VINOD CHANDRAN, JUDGE

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AMV/25/08/

Patumma v. State Bank of India

Case brief

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Patumma v. State Bank of India

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