1. The present appeal has been preferred under Section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short “the SARFAESI Act”) against the order dated 11.11.2019 passed by the Presiding Officer, DRT, Jabalpur, whereby the securitization application filed by the respondent Nos. 1 to 10 was allowed and the proceedings conducted by the Bank were quashed.
2.The relevant facts of the matter in brief are, that the respondent No. 1-company availed certain credit facilities through its directors-respondent Nos. 2 to 4 from the appellant-Bank as well as from the respondent Nos. 11 & 12 as members of the consortium. The appellant-Bank was the lead Bank of the consortium. The respondent Nos. 2 to 7 stood as guarantors in their personal capacity and the respondent Nos. 8 to 10 were the Corporate Guarantors. The guarantors have deposited the title deeds of the properties situated in the State of Madhya Pradesh and Rajasthan to further secure the loan. Since the borrowers/guarantors failed to adhere to the terms of the loan agreement, therefore, the appellant-Bank issued the demand notice dated 29.08.2016, to which the representation dated 24.10.2016 was submitted by an Advocate. The appellant-Bank wrote a letter dated 09.11.2016 to the Advocate concerned asking for providing the valid authorization from all the parties concerned to enable the Bank to send the para-wise reply to the representation. However, no authorization letter was submitted, hence the Bank closed the matter and conveyed to the Advocatevideletter dated 21.01.2017.
3.It appears that the appellant-Bank has not acted further on the basis of the said demand notice dated 29.08.2016 and issued a recall notice to the borrowers on 26.11.2016. Reply to the said notice was also submitted by the borrowers. Thereafter, a fresh demand notice dated 2.8.2017 for Rs. 219,06,84,216.87 was issued, to which a representation dated 28.09.2017 was submitted by the Counsel stating to have been submitted under the ‘instruction’ of the respondent Nos. 1 to 10. The appellant-Bank before deciding the representation wrote a letter dated 21.10.2017 to the Advocate primarily denying the contents of the representation and asked for providing the valid authorization in order to maintain the confidentiality of the borrowers/guarantors. However, no proof of valid authorization was provided by the Advocate concerned. Thus, the Bank has not proceeded further upon the said representation submitted by the Advocate.
4.The borrowers did not deposit any amount in response to the demand notice, therefore, possession notices were issued under Section 13(4) of the SARFAESI Act and the symbolic possessions of the properties were taken on 28.02.2018 and 9.3.2019. Thereafter, the physical possession of some of the properties was also taken in furtherance to the order passed by the D.M. under Section 14 of the SARFAESI Act. The respondents-borrowers challenged the proceedings of the Bank by filing S.A. before the Tribunal below.
5.During the pendency of the S.A., the Bank issued sale notice for auction of some of the properties to be held on 27.02.2019. The borrowers filed an interim application before the Tribunal below for interim relief. The Tribunal belowvideits order dated 27.02.2019 directed the Bank not to confirm the sale and not to issue the sale certificate pursuant to the auction, subject to deposit of Rs. 25.00 lacs in the loan account and Rs. 5.00 lacs in Bharat Ke Veer Fund within 10 days on or before 9.3.2019. The borrowers have not deposited any amount in compliance of the direction of the Tribunal below. Hence the Bank issued the sale certificate in favour of the auction purchasers (respondent Nos. 13 to 17) on 30.03.2019, 2.4.2019 and 3.4.2019 respectively.
6.The amendment application filed by the borrowers was allowed by the Tribunal belowvideits order dated 14.10.2019, which was challenged by the appellant-Bank by filing the Appeal No. 382/2019. However, the S.A. was finally decided by the Tribunal below on 11.11.2019 observing that the Bank has not decided the representation filed by the Advocate on behalf of the respondents-borrowers. Accordingly, allowed the S.A. only on this sole ground without deciding the other issues raised in the S.A. and directed the Bank to restore the possession within a month. Being aggrieved by the said order, the present appeal has been filed by the appellant-Bank.
7.Learned Counsel for the appellant submitted that the Tribunal below vide order dated 27.02.2019 has granted the interim relief in favour of the borrowers restraining the Bank from confirming the sale subject to deposit of certain amount. The appellant-Bank has complied with the order, but the respondent-company has not deposited any amount and enjoyed the interim relief. Thus, the S.A. applicants/respondents were not entitled to be heard on merits in the S.A. The objection was taken by the Bank by way of additional reply and also stressed upon at the time of arguments, but the Tribunal below has not dealt with this objection and decided the S.A. on merits, therefore, the S.A. could have been dismissed on this count. In support of this contention, the learned Counsel for the appellant has relied upon the following judgments:
(A) Appeal (Civil) No. 3827 of 2007-M/sPrestige Lights Ltd.v.State Bank of India,VII (2007) SLT 440=III (2007) CLT 296 (SC), decided on 20th August, 2007 (Hon’ble Supreme Court).
(B) W.P. (C) No. 4539 of 2021-Sheikh M. Maroofv.Phoenix ARC Pvt. Ltd. & Ors,decided on 22.04.2021 (Hon’ble Delhi High Court).
8.With regard to merit of the case, it was contended that the alleged representation was submitted by an Advocate claiming to have been authorized by the borrowers, but no authority letter has been filed along with the representation nor on being askedvideletter dated 21.10.2017. Earlier also, the self-same Advocate Mr. Satish Agarwal had submitted the representation and the authorization was sought for by the Bank. Yet no authorization was submitted and the same practice was again adopted. The Bank could not share the vital informations of the borrowers with a third party in order to maintain the confidentiality. Further, any notice given by the Advocate under instruction of the client cannot be equated with the representation/objection filed against the demand notice and only the borrower can file the representation as prescribed under Section 13(3-A) of the SARFAESI Act. Thus, the Bank was not required to act upon the unauthorized representation of the Advocate.
9.On the contrary, the learned Counsel for the respondent Nos. 1 to 10 contended that although the borrowers have not deposited the amount in compliance of the order dated 27.02.2019, but the principle laid down in the judgments referred to by the Counsel for the appellant-Bank is not applicable, because this Appellate Tribunal has not directed the borrowers to deposit any amount.
10.On merits of the case, the learned Counsel contended that the representation was submitted by the Advocate under instructions of the borrowers, which is equal to the authority. There is no bar under Section 13(3-A) of the SARFAESI Act for submission of representation through Advocate. The Bank itself follows the procedure, whereby it issues the recall notice to the parties through Advocates, as it was done in the present case (page No. 338).
11.It was also contended that on earlier representation, the Bank had sought the authorization from the Advocate and thereafter wrote another letter to the effect that the representation could not be considered for want of authorization, but with regard to representation in question, the Bank has sought the authorization beyond 15 days of the submission and thereafter slept over the matter and has not communicated that the representation could not be considered. Since the representation was not decided, which is mandatory requirement of law, hence the Tribunal below has rightly set aside the proceedings of the Bank.
12.I have given my thoughtful consideration to the rival contentions of the learned Counsels for the parties and perused the record.
13.It is undisputed that the Tribunal belowvideorder dated 27.02.2019 directed the Bank not to accept the balance sale amount and confirm the sale and also not to issue the sale certificate subject to deposit of Rs. 25.00 lacs in the loan account and Rs. 5.00 lacs in Bharat Ke Veer Fund by the borrowers within 10 days. The Bank has obeyed the order of the Tribunal below, but the respondents-borrowers have not complied with the direction for deposit of Rs. 25.00 lacs in the loan account. Thus, it is clear that the borrowers have enjoyed the fruits of the interim relief and have not followed the directions for deposit of the amount.
14.The Hon’ble Supreme Court in the judgment ofM/s Prestige Lights Ltd.v.State Bank of India(supra) has held that such litigant is not entitled to be heard on merits. The Hon’ble Division Bench of Delhi High Court it its recent judgment passed inSheikh M. Maroofv.Phoenix ARC Pvt. Ltd.(supra) relying upon the judgment of the Hon’ble Supreme Court has affirmed the judgment of the DRAT, Delhi, wherein the Appellate Tribunal has not only dismissed the appeal, but also directed to dismiss the S.A. pending before the DRT for non-compliance of the direction given by the learned DRAT. Thus, it is settled proposition of law that a party, who enjoys the fruit of the interim relief and does not want to comply with the direction of the Tribunal, is not entitled to be heard on merit and the S.A. or the appeal may be dismissed on this count alone.
15.In the instant case, the Bank has categorically raised this objection in the additional reply filed before the DRT on 19.10.2019 and the same was contended at the time of argument. The judgment of the Hon’ble Supreme Court was also referred to, but the Tribunal below has not pondered over this aspect, whereas it ought to have dismissed the S.A. for non-compliance on the basis of the judgment passed by the Hon’ble Supreme Court inM/s Prestige Lights Ltd.v.State Bank of India(supra).
16.The argument that the principle laid down in the above two judgments is not applicable in the present set of the facts, is not tenable, because firstly, the Bank has raised the issue before the Tribunal below itself. Secondly, it is not necessary that the same Tribunal should direct for deposit of the amount as held by the Hon’ble Division Bench of Delhi High Court inSheikh M. Maroofv.Phoenix ARC Pvt. Ltd.(supra), in which the S.A. of the Tribunal below was also dismissed along with appeal on account of non-compliance of the directions given by the DRAT in appeal. Thus, the principle laid down in both the judgments is squarely applicable in the facts of the present matter.
17.Coming to the merits of the case, admittedly, the representation against the demand notice dated 2.8.2017 was submitted by an Advocate Mr. Satish Agarwal and no authorization letter was submitted despite being asked by the Bankvideits letter dated 21.10.2017. Earlier also, the representation was filed by the same Advocate on 24.10.2016 in response to the demand notice dated 29.08.2016 without any authorization. The learned Advocate has not responded to the letter dated 9.11.2016 written by the Bank asking for proper authorization. However, the said demand notice was withdrawn. Thus, the proceedings became infructuous, but the fact is relevant on the point that the Advocate concerned was aware that he was required to submit the authorization letter along with the second representation, but for the reason best known to him, he has not filed any authorization along with the representation dated 28.09.2017 nor has responded to the letter dated 21.10.2017 of the Bank, whereby the Bank sought the authorization in order to maintain the confidentiality. In my considered view, the Bank has rightly asked for the valid authorization letter from the Advocate concerned.
18.Firstly, the language of Section 13(3-A) of the SARFAESI Act prescribes the term “borrower” to make any representation or raise any objection on receipt of the notice under Section 13(2) of the SARFAESI Act. The term “borrower” cannot be treated to include the Advocate of the borrower. Thus, it is the borrower, who can raise the objection or file the representation before the secured creditor in response to demand notice.
19.Secondly, if a liberal construction is taken that the representation may be filed through an Advocate, yet the law of notice or practice and procedure of the notice given by the Advocate cannot be applied on the representation submitted on behalf of the borrower. The instructions given to the Counsel cannot be equated to the authorization. Similarly, the recall notice or any other notice issued under instruction of the client or the secured creditor cannot be treated at par with the representation/objection raised on behalf of the party. While dealing with the objection, the Bank has to deal with each and every aspects of the matter, which were raised in the representation. Thus, in the process, the various confidential informations are also required to be pondered over. Such confidential information cannot be shared with the third party including the Advocate without any proper authorization in this behalf, otherwise, the Bank may be held liable for leakage of confidential information without authority.
20.The practical difficulty may be illustrated by way of an example. In a given case, if more than one Advocate without any authority file representations against the same demand notice raising same or separate issues, then to whom the Bank will respond and to which extent? The borrowers may raise objection that how the representations on behalf of the Advocates were entertained without authority and how their confidential informations were shared with the third party, then it would cause another complication in the matter. Therefore, the Bank in the present case was well within its right to direct the learned Advocate to file authorization letter before deciding the objections. It is not understandable that what was the harm in submission of authorization. It appears that the same was purposely not submitted with a view to take undue advantage of such technicalities. Since no authorization letter was submitted, therefore, the representation submitted by the Advocate could not be treated as valid representation and the Bank has not committed any fault in not considering the representation submitted by the Advocate.
21.The contention that the representation of the Advocate was not responded within 15 days, is also not tenable. The Bank has conveyed vide letter dated 2.9.2016 to the borrowers that their account has been migrated from the Commercial Branch, Indore to Stressed Assets Management (S.A.M.) Branch, Bhopal. The same information was also given to their Advocate Mr. Satish Agarwalvideletter dated 27.10.2016. These communications were not disputed by the borrowers. As such the Advocate Mr. Satish Agarwal was supposed to make the representation before the S.A.M. Branch, Bhopal instead of Commercial Branch, Indore
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. Yet the representation in question dated 28.09.2017 was sent to the Commercial Branch, Indore, which goes to show that the borrowers were intentionally making the correspondence with the wrong entity in order to take any benefit of delay with regard to such representation. However, the Commercial Branch, Indore has forwarded the representation to Bhopal, which was received there on 6.10.2017. Thus, the representation would be treated to have been received by the Competent Authority on 6.10.2017. Thereafter, the same was dealt with and communicated on 21.10.2017 to Mr. Satish Agarwal, Advocate ‘denying the contents of the letter primarily’ and requesting to provide a copy of the authorization so as to enable the Bank to send the para-wise reply. As such it cannot be said that the letter/representation was not dealt with within 15 days. Had the authorization letter been filed by Advocate, the representation would have become valid on that day and the stipulated period of 15 days would have been started therefrom. Since no authorization letter was sent by the Advocate concerned, therefore, no further action was required to be taken by the Bank on the said letter/representation and it was not necessary to again convey to the Advocate about non-consideration of the representation. 22.The Tribunal below has not considered these factual and legal aspects in right perspective, therefore, the order impugned is not sustainable. 23.Accordingly, the appeal is allowed and the impugned order dated 11.11.2019 is set aside. No order as to costs. 24.A copy of this judgment be forwarded to the parties as well as to the DRT concerned and be also uploaded on the e-DRT portal.