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Mekal Infra Project Pvt. Ltd. v/s Prateek Airan

    Appeal Dy. No. 303 of 2019
    Decided On, 06 October 2020
    At, Debts Recovery Appellate Tribunal at Allahabad
    For the Appellant: Kushal Kant, Advocate. For the Respondent: R1 & R2, Wazid Hyder, R3 & R4, S.K. Srivastava, Advocates.

Judgment Text
This appeal has been preferred by the appellant under Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short “the SARFAESI Act”) against the order dated 26.2.2019 passed by the Debts Recovery Tribunal, Jabalpur, whereby the securitisation application filed by the respondent Nos. 1 and 2 was disposed off.

2. The brief facts of the matter are that the respondent Nos. 3 and 4-Bank granted certain credit facilities to M/s. Ashok Kumar Airan through its partners namely Ashok Kumar Airan and Smt. Usha Agarwal. In order to secure the said facilities, they created an equitable mortgage over the property belonging to Usha Agarwal by depositing the title deed with the respondent-Bank. After death of Usha Agarwal, the partnership firm was dissolved and the respondent No. 1 became the sole proprietor of M/s. Ashok Kumar Airan. Since the borrower failed to adhere to the terms of the loan agreement, therefore, the accounts were classified as NPA and the demand notice dated 20.8.2018 was issued under Section 13(2) of the SARFAESI Act demanding a sum of Rs. 75,61,285.78. As the borrower did not pay any heed to the demand raised by the Bank, so the symbolic possession of the property was taken on 4.7.2018 by taking recourse to Section 13(4) of the said Act. Thereafter, the respondent-Bank issued an auction sale notice dated 6.1.2019 scheduling the auction of the property on 13.2.2019 and the same was published in the newspapers on the same day. The property was sold in favour of the appellant-auction purchaser for a sum of Rs. 3.51 crores.

3. The respondent No. 1-Borrower and respondent No. 2 being daughter of Usha Agarwal (sister of respondent No. 1) challenged the entire proceedings of the Bank including the demand notice, possession notice and the auction notice dated 13.2.2019 by filing the S.A. No. 70 of 2019 alleging that the respondent-Bank has not followed the procedures as laid down under the SARFAESI Act. The Tribunal below vide impugned order dated 26.2.2019 disposed off the S.A. finally observing as under:

“In these circumstances, without going into the merits of the case, it is hereby directed that in case the applicants deposit Rs. 10.00 lacs on or before 31.3.2019 and further deposit a minimum of Rs. 10 lacs before the last day of every month and clear the entire outstanding within six months i.e. on or before 31.8.2019, the Bank shall not take any coercive steps against the applicants and the sale shall not be finalized and it shall be subject to deposits in the manner as directed above.”

4. It transpires that the appellant-auction purchaser preferred a Writ Petition No. 5437/2019 before the Hon’ble High Court of Madhya Pradesh against the order dated 26.2.2019 passed by the Tribunal below. The Hon’ble High Court vide its order dated 18.3.2019 stayed the operation of the same. Further, the Hon’ble High Court vide order dated 24.4.2019 directed the appellant to deposit remaining 75% auction amount with the Bank within a week i.e. upto 30.4.2019. Pursuant to it, the appellant deposited the same with the Bank. Thereafter, the writ petition was disposed off vide order dated 28.8.2019 on the ground of alternative remedy. Against the said order, the appellant filed the SLP No. 21487 of 2019 before the Hon’ble Supreme Court, which was also dismissed vide order dated 16.9.2019 directing that “in case the petitioner approaches the DRAT within 15 days from today, we request the DRAT to hear and dispose off the matter as expeditiously as its roster allows”. Thereafter, the present appeal was filed by the appellant seeking setting aside the impugned order dated 26.2.2019, direction to the respondent-Bank to issue sale certificate, execute sale deed and to handover the physical possession of the property in pursuance of the order dated 16.9.2019 passed by the District Magistrate, Indore.

5. Learned Counsel for the appellant submitted that the property was auctioned on 13.2.2019 in favour of the auction purchaser, who had deposited 25% amount in time after confirmation of the sale. The S.A. was filed on 18.2.2019 without arraying the auction purchaser as party. The factum of auction was in the notice of the Tribunal below, yet the impugned order was passed without giving any notice to the auction purchaser. Thus, after depositing of 25% of the amount, a valuable right has been created in favour of the auction purchaser. Hence, the order impugned is liable to be set aside on this ground.

6. Learned Counsel for the appellant has further contended that in compliance of the order of the Hon’ble High Court, the auction purchaser has deposited entire amount. The borrower had never prayed for redemption of the property nor he has deposited the amount in compliance of impugned order of the Tribunal below. Thus, he has lost his right to redeem the property. Further, it was stated on behalf of the borrower before the Tribunal below that the borrower was not interested to fight the legal battle and did not press the issues raised in the S.A., therefore, he has lost his right to be heard on merits. Now, the entire sale price has been deposited, therefore, the auction purchaser is entitle for issuance of sale certificate and for possession of the property.

7. Learned Counsel for the Bank while supporting the arguments advanced on behalf of the auction purchaser, further added that the borrower had not paid any amount before stay granted by the Hon’ble High Court or even after dismissal of writ petition and is creating hurdle in recovery of Bank’s dues, therefore, the action taken by the Bank be affirmed.

8. On the contrary, the learned Counsel for the respondents contended that earlier the amount could not be deposited because of the stay granted by the Hon’ble High Court and thereafter, the auction purchaser approached before the Hon’ble Supreme Court, hence the compliance of the Tribunal below could not be made. However, the borrower is still ready and willing to liquidate the dues, therefore, one more opportunity be granted to him.

9. Learned Counsel has alternatively submitted that the Bank has committed various irregularities in conducting the auction. The demand notice and the possession notice were not served and 25% of the sale price was not deposited in time. All these issues are to be decided in the S.A., therefore, even if the borrower failed to comply with the impugned order of the Tribunal below, the respondents are entitled to get the S.A. adjudicated on merits. Therefore, the matter be remanded back to the Tribunal below to decide it afresh after giving opportunity of hearing to the parties including the auction purchaser.

10. Having heard the learned Counsels for the parties and considering the material available on record, it is apparent that the respondent Nos. 1 and 2 filed the S.A. on 18.2.2019 challenging the entire proceedings of the Bank including the auction held on 13.2.2019. The matter was listed before the Tribunal below on 26.2.2019 and on that day, the learned Counsel for the S.A.-applicants prayed for interim relief. However, the S.A.-applicants have also shown their inclination to clear the dues of the Bank. Thereafter, the Tribunal below without going into the merits of the case directed the S.A.-applicants to deposit the amount in a phased manner as stated above. It is a matter of record that the factum of auction was well within the notice of the Tribunal below, therefore, it was incumbent upon the Tribunal below to direct the S.A.-applicants to array the auction purchaser as respondent. Further the delay in filing the S.A. was condoned without waiting for reply of the Bank and the S.A. was finally disposed off whereas the S.A.- applicants were praying for interim relief.

11. It is thus clear that the Tribunal below has decided the fate of S.A. without providing opportunity of hearing to the auction purchaser whose interest was involved in the matter. Such order is not sustainable and is liable to be set aside.

12. Secondly, the borrower did not comply with the order of the Tribunal below. Although the impugned order was stayed by the Hon’ble High Court on 18.3.2019, but the borrower was free to deposit the amount before the order of stay and also after the dismissal of the writ petition on 28.8.2019 but he has not deposited any amount till date, therefore, he has failed to take advantage of opportunity given to him. Now the interest of the third party auction purchaser has also been created, therefore, the prayer of the borrower cannot be accepted for granting another opportunity to liquidate the dues.

13. Now the question for consideration is as to whether the S.A.-applicants are entitled to be heard on merits?

14. In this regard, though it was contended on behalf of the respondent Nos. 1 and 2 before the DRT that they were not interested in fighting the legal battle but such averment was qualified with the condition that they were ready to deposit the amount on certain terms, which they could not comply with. However, mere failure in depositing the amount in time as per their undertaking/offer, does not disentitle them to get the matter adjudicated on merit. The DRT is required to examine the proceeding of the Bank undertaken under Section 13(4) of the SARFAESI Act and to decide the S.A. as per provision of the Section 17 of the SARFAESI Act. Since the various issues have been raised in the S.A. including service of demand notice and

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possession notice as also argued about the delay in depositing the 25% of the sale price, so all these issues are required to be pondered over by the Tribunal below including the effect of deposit of sale price by the auction purchaser in compliance of the order of the Hon’ble High Court. All these aspects cannot be considered at the appellate stage for the first time because this is not the scope of the present appeal. 15. In view of the above, the impugned order dated 26.2.2019 is set aside and the appeal is allowed in the manner that the Tribunal below shall decide the S.A. afresh in accordance with law after affording opportunity of hearing to all the parties concerned including the auction purchaser and without being influenced by any of the observations made by this Tribunal. No order as to costs. 16. The parties shall appear before the Tribunal below on 5.11.2020 physically or through e-mode. 17. A copy of this judgment be uploaded on the e-DRT portal and be also sent to the DRT concerned. Appeal allowed.