Dismissed

M/S.Rbr a Funds, v. Balasubramaniam

Madras HC4 Mar 2011CONT P/1099/2009

Case brief

AI extract

What is this about?

In a contempt case concerning a bank's failure to auction non-residential properties first as directed by a prior order. The court held the bank's action was not wilful disobedience due to subsequent encumbrance on the non-residential property but directed the withdrawal of the auction notice and clarified the bank's rights to auction available assets.

What did the court decide?

Contempt petition dismissed; Clarification granted allowing the bank to auction available properties; Auction notice withdrawn.

M/S.Rbr a Funds, Vs Balasubramaniam — Contempt of Court | Madras HC (2011)

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

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(CONTEMPT JURISDICTION)

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FRIDAY, THE 4th DAY OF MARCH, 2011 THE HON'BLE MR.JUSTICE D.MURUGESAN AND THE HON'BLE MR.JUSTICE B.RAJENDRAN

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CONTEMPT PETITION NO.1099 of 2009 and M.P.NO.1 OF 2010 in C.R.P.No.(NPD) No.2824/2008 *************** CONTEMPT PETITION No. 1099 OF 2009:

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1)M/s.RBR A Funds, Rep. by its proprietor, R.P.Ramakrishnan, 33/20, Ramalingam Layout, KPN Colony, 4th Street, Tirupur.

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2)M/s.Vijaya Finance, Rep. by its Proprietrix P.Parvatham, 33/20, Ramalingam Layout, KPN Colony, 4th Street, Tirupur.

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3)R.P.Pandurangan, 33/20, Ramalingam Layout, KPN Colony, 4th Street, Tirupur. ... Petitioners Vs Balasubramaniam, The Authorised Officer, Karur Vysya Bank Ltd., Kumaran Road, Tirupur 641 601. ... Respondent

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MISCELLANEOUS PETITIONS NO.1/2010:

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https://hcservices.ecourts.gov.in/hcservices/ The Authorised Officer, The Karur Vysya Bank Ltd., Kumaran Road, Tiruppur. ... Petitioner

1)M/s.RBR A Funds,

Rep. by its Proprietor Sri.R.P.Ramakrishnan, No.33/20, Ramalingam Layout,

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KPN Colony, 4th Street, Tiruppur.

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2)M/s.Vijaya Finance,

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Rep. by its Proprietrix P.Parvatham, No.33/20, Ramalingam Layout, KPN Colony, 4th Street, Tirupur.

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3)R.P.Pandurangan,

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No.33/20, Ramalingam Layout, KPN Colony, 4th Street, Tirupur. ... Respondents

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Contempt Petition No.1099 of 2009 praying that this Court be pleased to punish the respondent herein for wilfully disobeying the order of this Hon'ble Court dated 22/08/2008 and made in C.R.P.(NPD).No.2824 of 2008. Miscellaneous Petition 1 of 2010 in CRP(NPD)No.2824/08 praying that this Hon'ble Court may be pleased to clarify the order dated 22.08.2008 in C.R.P.(NPD) No.2824 of 2008 that since there is no non residential property of the Principal borrowers is available and also not the subject matter of the CRP, it may be clarified that the bank is well within the right to proceed against the properties of the Principal borrowers.

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The above Contempt Petition and Miscellaneous Petition

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coming on this day before this Court for hearing in the presence of Mr.B.Ravi Raja, Advocate for the Petitioners in Contempt Petition and Respondents in Miscellaneous Petition; and of M/s.A.L.Somayaji, Senior Advocate for

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https://hcservices.ecourts.gov.in/hcservices/

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Mr.A.V.Radhakrishnan, Advocate for the respondent in

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Contempt Petition and petitioner in Miscellaneous Petition;

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and upon reading the petition and affidavit of R.P.Ramakrishnan, filed in Contempt Petition; and the

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Counter Affidavit of M.Balasubramanian, filed in Contempt Petition; and the petition and affidavit of S.Ravi, filed in Miscellaneous Petition; and the Affidavit of S.Ravi,

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filed in Miscellaneous Petition; the Court made the following order:-

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The petitioners herein have availed loan facility with

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the Karur Vysya Bank Limited. Admittedly, the petitioners

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could not repay the loan amount and therefore, the bank proceeded to recover the amount due and payable by them by invoking the provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as SARFAESI Act) and issued notice under Section 13 (4) of the

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Act. Challenging the same, the petitioners have filed O.A. (S) No. 76 of 2006 before the Debts Recovery Tribunal, which was dismissed on 20.02.2007. As against the same, Appeal in IN (SARFAESI) No. 160 of 2007 was filed before

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the Debts Recovery Appellate Tribunal and the same was also

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dismissed on 31.07.2008. Aggrieved by the same, the petitioners have filed CRP (NPD) No. 2824 of 2008 before this Court and the same was disposed of on 22.08.2008. The

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relevant portion of the order dated 22.08.2008 is extracted https://hcservices.ecourts.gov.in/hcservices/ as follows:-

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"20. Taking into consideration the facts and circumstances, we are of the view that in case the respondent-Bank want to auction sale any of the secured asset, should first take steps for the auction-sale of the non-residential property (ies) in question and may auction-sell the residential property (ies) in question lastly, if the total due amount (s) are not recovered.

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At the stage of auction-sale, if any illegality comes to the notice of the petitioners- borrowers, it will be open for the petitioners-borrowers to move before the appropriate forum.

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Let a copy of this order be handed over to the learned counsel appearing for the parties/ parties immediately.

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The Civil Revision Petition is disposed of in terms of the aforesaid observations/directions. But in the facts and circumstances of the case, there shall be no order as to costs. The miscellaneous petition is closed."

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Subsequently, the respondent herein effected a news paper publication on 11.02.2009, publishing the sale notice, for

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sale of the residential apartments. By the said notification, the respondent herein invited sealed tenders to be sent on or before 17.03.2009 and that it will be

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opened on 18.03.2009 at the bank premises. It was stated that as per the notification, the respondent also held a public auction. According to the petitioners, such a publication of notice for sale of the residential premises https://hcservices.ecourts.gov.in/hcservices/ and the subsequent auction held in the bank premises are

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against the spirit and tenor of the order dated 22.08.2008

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passed by this Court in CRP (NPD) No. 2824 of 2008.

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According to the petitioners, the A and B Schedule described properties are residential buildings, C Schedule described property is a non-residential property and 'D' schedule property is an agriculture property. The title

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deeds relating to 'C' property, belonged to one Sengoda Chettiar, were deposited with the petitioners by the said Sengoda Chettiar for valuable consideration and the petitioners in turn re-deposited the same with the respondent bank. As the 'C' schedule described property is only a non-residential property, as per the directions of this Court in CRP (NPD) No. 2824 of 2008 dated 22.08.2008,

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the bank ought to have brought the 'C' schedule property by

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auction at the first instance. Further, the third petitioner herein also addressed a letter dated 06.05.2009 to the bank specifically requesting to bring the 'C' Schedule property in public auction at the first instance. The third petitioner also challenged the notice issued

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under Section 17 (2) by the bank before the Debt Recovery Tribunal by filing S.A. No. 30 of 2008, which was dismissed against which he had also filed M.A. No. IN SA 195 of 2009

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before the Debts Recovery Appellate Tribunal, Chennai. Due to the pendency of the above said applications, the bank

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did not conduct the auction. While so, during May 2009,

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the petitioners were informed by an advocate commissioner https://hcservices.ecourts.gov.in/hcservices/ appointed by the learned Chief Judicial Magistrate,

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Coimbatore in CMP No. 263 of 2009 dated 15.05.2009 that the

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residential properties described as 'A' and 'B' schedule was to be handed over to the bank as per the orders of the Court. According to the petitioners, the bank had obtained the order dated 15.05.2009 in CMP No. 263 of 2009 without

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disclosing the earlier order passed by the Division Bench

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of this Court in CRP (NPD) No. 2824 of 2008 dated 22.08.2008. Therefore, the petitioners have filed Crl.OP No. 10721 of 2009 before this Court and obtained an interim order on condition to deposit Rs.50 lakhs on or before 10.07.2009, but they could not comply with the same. Ultimately the Crl.OP No. 10721 of 2008 was dismissed as withdrawn on 30.07.2009. If really the bank is interested in recovering the amount from the petitioners, it ought to have brought the 'C' schedule property for auction first as per the order dated 22.08.2008 in CRP (NPD) No. 2824 of 2008, but the bank sought to bring the residential properties for auction sale. In any event, the action of

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the bank in bringing the residential properties for auction sale before bringing the non-residential property for auction sale is per se illegal and contrary to the order dated 22.08.2008 in CRP (NPD) No. 2824 of 2008 thereby the respondent had committed contempt of orders of this Court.

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A statutory notice was issued to the

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contemnor/respondent herein by this Court, pursuant to https://hcservices.ecourts.gov.in/hcservices/ which, a detailed counter affidavit was filed contending

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that the respondent had no intention to disobey the order of this Court. The respondent would only contend that though this Court, in the order dated 22.08.2008 in CRP (NPD) No. 2824 of 2008 had directed the bank that nonresidential building has to be brought under auction at the

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first instance, due to subsequent developments, the nonresidential or commercial property could not be brought to auction sale. According to the respondent, the owner of the non-residential property had given the same property as security with Indian Bank without the knowledge of the respondent for the loan availed by M/s. Chennai Tyres and therefore, Indian Bank had filed O.A. No. 204 of 2007 against Sengoda Chettiar. These information were also provided by the owner Sengoda Chettiar by a letter dated 19.05.2009 to the respondent bank. It was also informed that the said Sengoda Chettiar had filed an Insolvency Petition before the II Additional Subordinate Judge, Erode and the same is still pending. Therefore, the bank was not

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in a position to bring the commercial or non-residential property for auction at first. As the owner of the non-

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residential property namely Sengoda Chettiar himself had

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stated that the property was subjected to litigation and the bank could not take any action against that property, the bank could not proceed against that property. On the

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other hand, the debt due to the bank remained unsettled for https://hcservices.ecourts.gov.in/hcservices/ a long time. Therefore, when the non-residential property

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could not be brought to auction sale and there is impossibility of performance due to subsequent development, they have brought the residential properties for auction sale to realise the amount due and payable by the borrowers to recover the huge arrears of loan amount. Such an auction was brought by the respondent under the bonafide impression.

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the earlier order dated 22.08.2008 made in C.R.P. (NPD) No.

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property of the principal borrowers is available and also not the subject matter of the CRP, it may be clarified that

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the bank is well within the right to proceed against the properties of the principal borrowers. In the

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clarification petition, the respondent sought clarification

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to the effect that inasmuch as the non-residential properties are not available for realising the loan amount,

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they may be permitted to bring the residential properties for auction.

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detail. The learned counsel for the petitioners would contend that the petitioners have brought to the notice of this Court in C.R.P. (NPD) No. 2824 of 2008 as to the

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availability of non-residential property for realising the https://hcservices.ecourts.gov.in/hcservices/ dues to the bank, knowing fully well that the bank may

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proceed with the residential property. Inspite of the specific directions issued by this Court not to proceed with the residential property, before bringing the nonresidential property for auction sale, the respondent attempted to take possession of the residential property and therefore the respondent is liable to be punished.

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The learned senior counsel appearing for the contemnor/ respondent herein would mainly contend that as

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the non-residential property is not available for bringing

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it in auction due to subsequent development, the respondent

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could not bring that property for auction. Even though there is a specific direction by this Court that nonresidential property has to be brought on auction sale first for realisation of the amount payable by the borrowers, since the non-residential property was subjected

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to litigation by its owner Sengoda Gounder, the respondent

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could not proceed further with that property. The learned senior counsel for the respondent also brought to the

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notice of this Court that the owner of the non-residential property re-mortgaged the non-residential property with

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Indian Bank, they in turn filed O.A. No. 204 of 2007 before

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the Debts Recovery Tribunal, Chennai, the owner also filed Insolvency Petition and the Official Assignee had taken possession of the non-residential property, therefore, it

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is no longer possible for the respondent bank to bring that https://hcservices.ecourts.gov.in/hcservices/

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property for auction. The learned senior counsel for the

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respondent would further contend that even after the order

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passed by this Court, by letter dated 22.01.2009 and 15.04.2009, the Bank called upon the guarantor/owner of the non-residential property to hand over possession of the property for which, he sent a reply dated 19.05.2009

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wherein he had stated that the non-residential property owned by him is in dispute and he also prepared to pay the balance amount, after the amount due from the borrowers are

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recovered as he is only a guarantor. Inasmuch as the nonresidential property in question is under litigation, the

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bank was unable to bring it for auction sale. The learned senior counsel further submitted that the respondent had tendered his unconditional apology and that the respondent

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ought to have come forward with a petition for clarification of the earlier order even before bringing the residential property for auction sale, but the application

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was filed only after filing of the present contempt petition. Therefore, the learned senior counsel for the

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respondent would pray that the clarification petition in

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M.P. No. 1 of 2010 may be allowed and the respondent be

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exonerated from contempt proceedings. It is further

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submitted that there was no intention on the part of the

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respondent, much less wilful intention to disobey the earlier order passed by this Court. If at all there is any

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violation of the order passed by this Court, it cannot be

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https://hcservices.ecourts.gov.in/hcservices/

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construed as wilful violation or disobedience of the order

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passed by this Court and he prayed for dismissal of the contempt petition.

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On consideration of the submissions made by the learned senior counsel for the respondent, it is clear that even though the bank was fully aware of the order passed by

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this Court prohibiting them from bringing the residential

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property for auction sale, they have proceeded to take possession of the residential property mortgaged by the petitioners, without even filing an application for clarification. When the non-residential property or commercial building is not feasible of bringing for auction on the ground it was encumbered or it is unavailable, the respondent ought to have brought to the notice of this Court by filing appropriate application, but without doing so, the respondent ought not to have proceeded with the residential properties mortgaged with the bank by the petitioners and it amounts to disobedience of the order passed by this Court. But at the same time, this Court has

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to take into consideration as to whether such noncompliance of the order passed by this Court, on the part of the respondent is wilful or wanton.

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The learned senior counsel for the respondent submitted that the respondent was not aware of the fact at that time that the non-residential property was subjected

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to litigation and the owner of the non-residential property https://hcservices.ecourts.gov.in/hcservices/ had filed an Insolvency Petition, however, on coming to

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know about the encumbrance created over the non-residential

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property, under a bonafide impression, in order to recover the amount from the borrower and to safeguard the interest

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of the bank, the respondent proceeded to bring the residential property for auction sale. We find force in

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the argument of the learned senior counsel for the respondent. However, the respondent ought not to have indulged in such an act before filing appropriate application before this Court seeking clarification. No doubt, now, the respondent has filed a clarification petition pending this contempt petition. It is not known as to what prevented the respondent to file such a clarification petition before filing of the contempt petition by the petitioners. In any event, we feel that the inadvertence on the part of the respondent has to be eschewed as the disobedience committed by the respondent cannot be construed as a wilful disobedience warranting us to proceed against the respondent with contempt

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proceedings. Even otherwise, now that the respondent had filed M.P.No. 1 of 2010 to clarify the order passed by this Court in CRP No. 2824 of 2008 and also tendered

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unconditional apology, there is no wilful disobedience.

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It is pertinent to point out here that the

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petitioners/borrowers conveniently not brought to the

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notice of the bank regarding the encumbrance created in the https://hcservices.ecourts.gov.in/hcservices/ non-residential property until the bank wrote a letter to

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the owner of the non-residential property. Only

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thereafter, the bank came to know that the commercial property is entangled in a litigation, especially when the owner of the property had even filed an Insolvency Petition. Under those circumstance, we hold that the

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action of the bank officials, though is not correct,

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definitely, it is not a wilful disobedience of the order passed by this Court in CRP (NPD) No. 2824 of 2008 dated 22.08.2008 warranting us to initiate contempt proceedings against the respondent. However, we would like to make it

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clear that the original auction notice dated 11.02.2009

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published in the newspaper calling for tenders has to be withdrawn by the bank besides the respondent himself had

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stated in the affidavit that the bank would withdraw the same.

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As far as M.P. No. 1 of 2010 is concerned, at the

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time when the order was passed by this Court in in CRP (NPD) No. 2824 of 2008 dated 22.08.2008, this Court

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directed the bank to proceed with the non-residential

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property first based on the submissions made by the

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petitioners that the commercial property is very much

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available for realising the dues to the bank. Whereas, now

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it is brought to the notice that the commercial property was subjected to litigation and the owner of that property

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also filed an Insolvency Petition and it is pending. Under https://hcservices.ecourts.gov.in/hcservices/

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those circumstance, we clarify that the petitioners in

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M.P.No. 1 of 2010 namely the Bank is at liberty to take necessary steps as are necessary to bring all or any of the properties which are available for realising the dues of the borrowers as per law and the order passed by this Court in in CRP (NPD) No. 2824 of 2008 dated 22.08.2008 is

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clarified to that extent. M.P. No. 1 of 2010 is ordered accordingly.

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In the result, the Contempt Petition is dismissed and
the clarification petition is ordered. No costs.
Witness the Hon'ble Thiru M.YUSUF EQBAL, the Chief
Justice of High Court at Madras, as aforesaid, this the 4th
day of March, 2011.
SD/-
DEPUTY REGISTRAR (OS)
//Certified to be true copy//
Dated at Madras this the day of 2011.
COURT OFFICER (O.S.)

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From 25^th Day of September 2008 the Registry is issuing certified copies of the orders/judgments/Decrees in this format.

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https://hcservices.ecourts.gov.in/hcservices/

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SMV.

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CONTEMPT PETITION No.1099/2009 and M.P.NO.1/2010 in C.R.P.No.(NPD) No.2824/2008

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THE HON'BLE MR.JUSTICE
D.MURUGESAN
AND
THE HON'BLE MR.JUSTICE
B.RAJENDRAN
ORDER
DATED : 04/03/2011
FOR APPROVAL : 28/04/2011
APPROVED ON : 29/04/2011

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