1. Instant petition has been filed by the petitioners praying for the issuance of a writ in the nature of Certiorari for quashing the letter dated 16.8.2017 bearing no. SARB/IB/329 (Annexure P-8) and further for the issuance of a Writ of Mandamus commanding respondents no.1 to 4 to comply and act upon the letter bearing no. SARB/IB/817 dated 27.2.2017 (Annexure P-7). It has been further prayed that during the pendency of the present petition the respondents be restrained from confirming the sale as well as not to change the nature of the property auctioned i.e. plot no.9 measuring 695 sq. yards comprised in Khasra No.54//25/1, 57//5/1, khata no.566/587, 567/588 situated at Dhandari Kalan, Ludhiana and plot bearing no.9 measuring 100 sq. yards bearing Khasra No.25/1, Khata no.294/334 as mentioned in the jamabandi for the year 1981-82 situated at Dhandari Kalan, Ludhiana.
2. As per the facts narrated in the petition, respondent no.3 i.e. State Bank of India Branch Link Road, near Cheema Chowk, Ludhiana advanced a financial assistance i.e. cash credit (Hypothecation) amount limit of Rs.4,60,000/- (Rs. Four Lacs and Sixty Thousands only) cash credit and Rs.12,40,000/- (Rs.Twelve Lacs and Forty Thousand only) to the petitioner no.1 firm and petitioners no.2 and 3 stood as guarantors by mortgaging their landed properties i.e. plot bearing no.9 measuring 695 sq. yards and plot bearing no.9 measuring 100 sq. yards. It has further been spelled out that at the time of advancing the loan petitioner no.1 firm was a partnership concern whereas w.e.f. 30.4.2016 it became the proprietorship concern and Sh. Naveen Kumar became its sole proprietor. The relevant document in this regard is annexed as Annexure P-1.
3. It has been further contended that petitioner firm was regularly paying the installments as agreed upon in the agreement but without any rhyme and reason the accounts of petitioner firm were declared as Non Performing Asset (NPA) by the respondents in violation of the guidelines issued by the Reserve Bank of India. The respondent bank while initiating proceedings under the SARFAESI Act (herein after to be referred to as the Act) issued a demand notice dated 17.10.2012 under Section 13(2) of the Act vide which a demand of Rs.13,82,826.10P (Rs. Thirteen Lacs Eighty Two Thousand Eight Hundred Twenty Six and Paise Ten only) was raised. A copy of the same is annexed with the petition as Annexure P-2. It has further been contended that the outstanding amount shown in the notice under Section 13(2) of the Act is Rs.13,82,826.10 P, whereas the financial assistance advanced was Rs.17,00,000 (Rs. Seventeen Lacs only) and hence there was no occasion with the respondents to declare account of the petitioner firm as N.P.A. It is further contended that the petitioner firm approached the respondent authorities for settlement under the One Time Settlement Scheme (O.T.S) on 15.10.2013 by offering an amount of Rs.14,32,826.10P but the same was rejected. Having rejected the offer of Scheme of the petitioner firm the respondent bank made a publication for the E-auction of the mortgaged properties on 29.10.2013 for carrying out sale of the same on 2.12.2013. It had been asserted that the outstanding amount was shown to be Rs.24,99,000/- and the reserve price of the mortgaged properties was shown as Rs.47,26,000/- in respect of plot measuring 695 sq. yards and Rs.11,90,000/- in respect of the plot measuring 100 sq. yards, which according to the petitioners were on a very lower side. It has further been asserted that though the auction of plot measuring 100 sq. yards was sufficient enough for the recovery of the total outstanding dues but the respondent bank in a highly malafide manner carried out auction of both the mortgaged properties totally in violation of the statutory provisions.
4. It is further contended that petitioner no.1 filed Securitization application before the D.R.T.-II, Chandigarh (herein after to be referred to as the Tribunal) bearing S.A. No.383 of 2013 vide which the notice for auction was challenged on various grounds and the application came up for hearing before the Tribunal on 2.12.2013. The Tribunal vide its interim order of the even date allowed the sale to go on but the bank was directed not to confirm the sale till the next date of hearing. Resultantly, both the mortgaged properties were auctioned on 2.12.2013 at the reserve price. Respondent no.5 Simran Singh became successful in purchasing the properties. However, due to the interim order passed by the Tribunal the sale remained unconfirmed due to the pendency of the S.A filed by the petitioner.
5. It has been vehemently contended by learned senior counsel appearing on behalf of petitioners that during the pendency of the Securitization Application before the Tribunal the respondent bank made an offer of a new O.T.S and the same was accepted by them on 27.2.2017 which is annexed with the petition as Annexure P-7. He has contended that not only this O.T.S was accepted by them but in pursuance to the same they have deposited 5% of the amount and the balance 20% was also deposited before 27.3.2017 but to their utter surprise the same was cancelled by the respondent bank unilaterally vide their order dated 16.8.2017 which is annexed at Annexure P-8.
6. Hereinafter both the S.As filed by the petitioners were dismissed by the Tribunal vide its order dated 17.5.2017. Resultantly, the respondent bank cancelled the O.T.S arrived at between the parties on 27.2.2017 on the premise that as after the dismissal of the S.As there is no stay on the confirmation of sale of the properties put to E-auction by the respondent bank on 2.12.2013 and hence the scheme entered into by the bank stands cancelled. It was further mentioned that 25% of the O.T.S amount deposited by the petitioner would be returned after deducting the legal expenses incurred by the bank on the S.As filed before the Tribunal. Aggrieved by the cancellation of the O.T.S arrived at by the petitioners and the bank, the petitioners filed the instant petition for the redressal of their grievance.
7. Respondents no.2 to 4 filed their written statement wherein it has been contended that the petitioner did not make any effort to clear the outstanding dues and despite repeated efforts made by the bank no seriousness was shown by the petitioner in repaying the loan and hence the bank had no other option than to invoke the legal remedies available under the Act. It has been contended that the respondent bank had to file O.A No.358 of 2011 for the recovery of Rs.17,61,362/-. The bank has mentioned that the sale could not be confirmed due to the interim stay granted by the Tribunal on the confirmation of the sale and after dismissal of both the S.As there was no occasion for the bank not to confirm it. It has been further asserted that the S.As filed by the petitioners were dismissed on 17.5.2017 but there was no challenge whatsoever to the dismissal of these S.As by the petitioners and thus the dismissal order attained finality, the petitioners not having assailed it further. However, the bank has taken a categoric stand in their reply that they had absolutely no objection in case the petitioner could compensate the auction purchaser to his satisfaction and the bank was concerned only with the recovery of money due.
8. To fortify his contentions, learned counsel representing respondents no.2 to 4 has relied upon Agarwal Tracom Pvt. Ltd. Vs. Punjab National Bank & others,2018 1 RCR(Civil) 88, Amiti Gupta and others Vs. State Bank of India and others,2019 4 RCR(Civil) 204, United Bank of India Vs. Satyawati Tondon and others,2013 AIR SC 3413 and Authorized Officer, State Bank of Travancore and another Vs. Mathew K.C, (2018) 2 RCR(Civ) 1.
9. Respondent no.5 i.e. auction purchaser has filed his separate written statement wherein he has mentioned that the entire amount of the auction money stands deposited with the bank and pursuant to the same the sale has been confirmed. He has further clarified that the certificate of sale was issued and possession of both the properties had also been delivered to him by the bank. The copies of the letter dated 5.9.2017 regarding confirmation of sale and certificate of sale dated 14.9.2017 pertaining to both the properties has been placed on record as Annexures R-5/1 and R5/2. It has further been contended that all the actions taken under the Act suffer from no illegality. Further as both the S.As filed by the petitioners were dismissed by the Tribunal and the same not having been assailed further had attained finality and thereafter the sale has been confirmed and the certificate of sale issued to him. Learned counsel representing respondent no.5-auction purchaser has contended that he had borrowed the money from the bank for the payment of auction money and due to the pending litigation, he is suffering for having no fault on his part. In nutshell he has contended that he is a bonafide purchaser of the properties and the auction conducted suffers from no illegality whatsoever.
10. We have heard counsel for the parties and gone through the complete records.
11. Learned senior counsel representing the petitioners has vehemently argued that in the light of the overwhelming records made available there is no illegality on the part of the petitioners as they were regularly paying the installments in accordance with the agreement arrived at with the respondent bank. It is relevant to observe that both the loans in question were advanced by the bank on 27.6.2005 as evident from Annexure R-2/2 annexed with the written statement filed on behalf of respondents no.2 to 4. Learned counsel, though, has asserted that petitioners were regular in repaying the installments but from the record made available it is evident that both the loans were declared as N.P.A by the respondent bank on 30.9.2010 and 31.12.2010. The properties mortgaged with the bank i.e. plot measuring 695 sq. yards and that of 100 sq. yards were put to auction on 2.12.2013 i.e. after a lapse of about 3 years since both the accounts having been declared N.P.A. Before this the notice under Section 13(2) of the Act was also issued wherein a demand of Rs.13,82,826.10P was raised. Though, the petitioner made an offer of One Time Settlement Scheme on 15.10.2013 but the same was not accepted by the bank. The next contention of learned senior counsel is that auctioning both the properties was beyond the legal norms as the outstanding amount raised by the bank was Rs.24,99,000/-, whereas the mortgaged properties i.e. plot measuring 695 sq. yards was valued at Rs.47,26,000/- and that of 100 sq. yards was valued at Rs.11,90,000/- and hence auctioning both the properties was totally illegal and obnoxious. In support of his contentions he has relied upon the judgements of Vasu P.Shetty Vs. Hotel Vandana Palace and others, (2014) AIR SC 1947 and Ambati Narasayya Vs. M.Subba Rao and another, (1990) AIR SC 119. Learned senior counsel has vehemently contended that in view of the law laid down by the Hon'ble Apex Court the compliance of Rule 9 (2) of the Act has been violated by the petitioners.
12. From a complete analysis of the events it is evident that though both the loans were advanced to the petitioner in 2005 but the same were declared N.P.A in 2010. This in itself is self speaking that the petitioner was not complying with the terms and conditions of the agreement regarding repayment. The bank had initiated the proceedings under the Act by issuing the notice under Section 13(2) of the Act on 17.10.2012 wherein a demand of Rs.13,82,826.10P was raised as the petitioner did not fulfill the conditions. The bank had no other option than to proceed for the auction of the mortgaged properties. The publication regarding the same was made on 29.10.2013 and the date of the sale was fixed to be 2.12.2013. As a result the sale by E-auction took place on 2.12.2013. As the confirmation of the sale was restrained by the Tribunal and hence the same remained pending till the final decision of the Tribunal. Hereinafter the O.T.S was arrived at between the petitioner and the bank on 27.2.2017 but the same was canceled by the bank on 16.8.2017 for the reason that the S.As filed were dismissed by the Tribunal on 17.5.2017 and the petitioner made no endeavor to challenge the same. It is pertinent to note that neither the outstanding loan was cleared by the petitioner nor the order of dismissal dated 17.5.2017 were further challenged. Hence the conduct of the petitioner is totally remiss in discharging his obligations towards the bank. Hence, the bank was well within its domain to cancel the O.T.S dated 27.2.2017 and proceed in accordance with the statutory provisions of the Act. However, we find a force in the argument raised by the senior co
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unsel representing the petitioner that the bank was only interested in recovering the amount due towards it and not in selling out both the mortgaged properties. From the factual aspect put on record the outstanding amount of the bank was shown to be Rs.24,99,000/- whereas the value assessed of the mortgaged properties i.e. plot measuring 695 sq. yards was of Rs.47,26,000/- and that of plot measuring 100 sq. yards was Rs.11,90,000/-. With the bare glance on the same, we are unable to comprehend why both the properties were put to auction by the bank for the recovery of Rs.24,99,000/-. This amount could have been recovered through the auction of the single property i.e. plot measuring 695 sq. yards. This action of the bank is totally contrary to the judicial pronouncements relied upon by learned senior counsel representing the petitioners. 13. In the totality of the circumstances, we find that the action of the bank in selling both the properties for the recovery of the amount due was not justified and hence the auction of the plot measuring 100 sq. yards is set aside, whereas that of plot measuring 695 sq. yards is confirmed. Out of the consideration of the plot measuring 695 sq. yards the bank would retain its outstanding dues whereas rest of the amount would be refunded to the petitioner. 14. In view of the findings recorded above, the instant petition is partly allowed in the aforesaid terms.