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Bank of Baroda, Kanpur v/s M/s. Lakshmi Defence Solutions Limited, Kanpur

    Regular Appeal No. 48 of 2017

    Decided On, 18 January 2021

    At, Debts Recovery Appellate Tribunal at Allahabad


    For the Appellant: Sunil Bhalla, Advocate. For the Respondent: P.K. Gupta, Advocate.

Judgment Text

1. This appeal has been preferred under section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of the Security Interest Act, 2002 (hereinafter referred to as “The SARFAESI Act”) against the interim order dated 27.01.2017 passed by the Presiding Officer, DRT, Allahabad in S.A. No. 372 of 2016 filed by the respondent, wherein the application filed by the respondent for appointment of the Commissioner was allowed.

2. The brief facts of the matter are, that the respondentcompany was granted certain credit facilities by the appellant–Bank through its Directors, to which the equitable mortgage over the immovable property was created by the borrower and the plant and machinery as well as the raw material, finished and semi finished goods were hypothecated with the appellant-Bank. As the borrower could not maintain the financial discipline in terms of the loan agreement, the account was declared as NPA. The appellant-Bank filed an original application No. 538 of 2015 for recovery of Rs. 13,25,42,923/- along with pendentelite and future interest, which was decreed vide judgment dated 08.12.2016.

3. During the pendency of the O.A., the appellant-Bank issued a demand notice dated 23.01.2015 under section 13(2) of the SARFAESI Act. The symbolic possession of the property was taken on 05.05.2015 by issuing the possession notice under section 13(4) of the SARFAESI Act and the physical possession of the immovable and movable properties was also taken on 28.03.2016 in furtherance of the order dated 28.08.2015 passed by the District Magistrate, Fatehpur under section 14 of the said Act. The Factory Manager namely Rajendra Singh had written a letter dated 19.09.2016 to the appellant-Bank stating that at the earliest, the factory and its entire machinery be sold and loan amount be liquidated. Thereafter, e-auction notice dated 25.09.2016 was issued by the appellant-Bank scheduling the auction of the movable and immovable properties on 05.11.2016.

4. The respondent-borrower filed the S.A. No. 372 of 2016 before the Tribunal below challenging the e-auction notice dated 25.09.2016 praying to quash the e-auction notice dated 25.09.2016 and restore the possession of the property.

5. During the pendency of the S.A., the respondent filed an application for appointment of the Advocate Commissioner, which was allowed by the impugned order directing the parties to propose and suggest the name of local commissioner within two days. Being aggrieved by the said order, the present appeal has been preferred by the appellant-Bank.

6. Learned counsel for the appellant submitted that the physical possession of movable and immovable property was taken on 28.03.2016 in presence of Rajendra Singh, the representative of the respondent. No objection whatsoever was raised at that time nor DM’s order was challenged and even no application for appointment of the Advocate Commissioner was filed for a period of more than nine months after filing the S.A. Thus, the application was filed with the intention to prolong the matter.

7. It was further contended that no specific details of goods were given by the S.A.-applicant and there is no provision for appointing the Advocate Commissioner in the SARFAESI proceedings. The Tribunal below has erred in observing that if the goods are sold by the Bank, it would be threat to the internal security of nation, which was never pleaded nor supported by any evidence. The O.A. filed by the Bank has already been decreed against the S.A.-applicant, in which the mortgage of the property and hypothecation of goods were found to be proved. Therefore, the order impugned be set aside.

8. On the contrary, the learned counsel for the respondent submitted that it was mentioned in the S.A. that the inventory was not properly prepared and the goods lying in the factory were made for supply to the defence department, which are not the ordinary goods. The findings recorded in the O.A. cannot be considered in the proceedings of the S.A. and no prejudice would be caused, if the Advocate Commissioner prepares the list of inventory. Therefore, the Tribunal below has passed the just and proper order in the interest of justice. Hence, the appeal be dismissed.

9. Having heard the learned counsels for the parties and considering the material available on record, it is apparent that the respondent has filed the S.A. challenging the auction sale notice dated 25.09.2016. Although, the relief was sought to set aside the sale notice alongwith the entire proceedings of the Bank, but no specific pleading was made and no relief was sought with regard to any irregularity in taking symbolic possession or physical possession. Further, the DM’s order dated 28.08.2015 was also not assailed. The stand of the Bank that the physical possession was taken and the inventory was prepared in presence of representative Rajendra Singh, was not denied by the S.A.-applicant. The same Rajendra Singh has filed an affidavit alongwith the Advocate Commissioner’s application, wherein it has not been stated that he was not present at the time of physical possession of the properties. It is also a matter of record that no pleadings whatsoever were made for Advocate Commissioner in the S.A. and the application was filed after more than nine months, that too without mentioning the specific details of the goods, which were alleged to have not been included in the inventory. Thus, it appears that the application was filed just to take a chance in order to prolong the matter under this pretext, otherwise, the S.A.-applicant might have raised the objection at the time of physical possession or at the time of filing of S.A. Further, the respondent has not placed on record any evidence showing that any representation was given to the Bank after taking possession, whereas it was contended that many representations were given to the bank.

10. Secondly, the appointment of Advocate Commissioner be ordered sparingly. However, no commissioner can be appointed to act as witness for the cause of the party, particularly, the SARFAESI proceedings, wherein there is no explicit provision for appointment of Advocate Commissioner and the procedure adopted for adjudication/trial is summery in nature. In an application filed under section 17 of the SARFAESI Act, the Tribunal is required to examine the steps taken by the Bank, as to whether those are in accordance with the SARFAESI Act and the Rules made thereunder or not. If the Bank had left any lapses, while taking possession of the property or preparing the inventory list, then it would face the consequences, but the Tribunal cannot direct that in what manner the inventory is to be prepared or to appoint the Advocate Commissioner for preparing the fresh inventory list.

11. Thirdly, the Tribunal below, while passing the interim order dated 02.11.2016, has emphatically observed that the S.A.-applicant has not challenged the possession notice or proceedings of the possession and had only challenged the auction sale notice. Therefore, unless the pleadings were amended with regard to possession notice or for irregularity in preparation of inventory, this issue was not required to be dealt with without pleading. Further, the O.A. has been decreed by the selfsame Presiding Officer observing that the Bank has proved the mortgage of property, hypothecation of goods and disbursement of loan. Thus, because of hypothecation, the said goods are also subject matter of the execution of the O.A., which is to be executed by the Recovery Officer in furtherance of the decree passed in the O.A.

12. Lastly, it is also noteworthy to state that the Tribunal below has observed about the nature of goods stating that it may cause threat to national security, as the goods are ballistic shields and were prepared for supply to the defence department, but no such pleading was made in the application filed by the S.A.-applicant that the goods are of such hazardous nature or can only be sold to defence department. If such was the position, the respondent was free to point out these aspects at the time of physical possession. Besides, this is the duty of the Bank to take necessary precaution an

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d to follow the requisite procedure, as required for such goods at the time of auctioning the goods to the auction purchaser, in case these may create any danger to the public or auctioning of those goods is prohibited under any law. But the Tribunal cannot act as supervisory authority of the Bank, who is competent to auction the property under the SARFAESI Act. 13. In view of the above, the order impugned is not sustainable and accordingly, the same is set aside. The appeal is allowed with no order as to costs. 14. The matter pertains to the year 2016 and a huge amount of the appellant-Bank is involved, therefore, the Tribunal below is directed to decide the S.A. as expeditiously as possible, preferably within three months from the date of receipt of this order. 15. A copy of this order be sent to the parties as well as the DRT concerned and be also uploaded on the e- DRT portal.