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Yati Agro Product and Others V/S United Bank of India and Others.

    S.A. No. 368/2016

    Decided On, 04 May 2017

    At, Debts Recovery Tribunal Kolkata


    For Petitioner: A.K. Dhandhania, J. Chowdhury, S. Mitra and R. Seal, Learned Counsels And For Respondents: S. Pal Chowdhury, Learned Counsel

Judgment Text

1. Applicants, Yati Agro Product and others filed the present Application (SA) under Section 17 of the SARFAESI Act being SA/368/22016 on 20.09.2016 against Respondent Bank and its authorized officer and concerned Branch, taking cause of auction/limitation from sale notice dated 26.07.2016 published by the Respondent Bank for sale of Applicants' property. This may be recorded that as per sale notice dated 26.07.2016 sale was conducted on 30.08.2016 while the SA has been filed on 20.09.2016.

2. In brief, the Applicants raised following objections:

(i) Applicant No. 1 is a partnership firm. Applicants No. 2 to 5 are partners and Applicant No. 6 is the guarantor. Applicant No. 1 is engaged in business of Mini Rice Mill. Applicants have admitted having availed financial facilities from Respondent Bank, Nutunganj Branch, Burdawn, sanctioned to them vide sanction letter dated 04.08.2009. Applicants have also admitted that business of Applicants suffered setback as the demand for export of cash crop dipped all of a sudden from 2012-2013. Incentive for export of rice was withdrawn by the Govt. Therefore, the account became bad. Respondent issued demand notice dated 13.10.2014 and thereby demanded Rs. 20,84,811=85 (Rupees twenty lakhs eight four thousand eight hundred eleven and paise eight five) and further interest with effect from 01.10.2014 (copy of demand notice is annexed at page 56 of the SA). Applicant could not comply the said demand notice. Applicants informed the Respondent Bank orally the bad financial condition and constrains of working capital. Respondent Bank did not give any support to the Applicants. Subsequently, Respondent Bank issued possession notice dated 06.02.2015 under section 13(4) of the Act. Applicants have submitted that said possession notice was in respect of Applicants' landed properties i.e. (1) land, building and factory shed, office, and other super structure situated at Mouza Sehara, P.S. Raina, district Burdawn, J.L. No. 55, R.S. Khatian No. 407, L.R. Khatian No. 2166, 3036, 3037, 3038, 3448, 3391, 3392 & 3393, Plot No. 71 & 75, total area of the land 0.49 1/2 acre under Sehara Gram Panchayat vide title deed No. I-3969 of 2008, I-4037 of 2008, I-495 of 2009 and I-1553 of 2012, in the name of Yati Agro product and, (2) landed property in Khatian No. C.S. 170 R.S. 118 LR 182 & 620 Plot No. RS & LR 180 Bastu area 0.02 acre property in the name of Smt. Gita Rani Ghosh" Sad notice has been published in the newspapers also, copy annexed at Annexure D.

(ii) Applicants approached the Respondent Bank and requested for grant for some time. Applicants also requested to allow repayment as prayed by them in their letter dated 16.12.2015. Respondent Bank did not accept the request made by Applicants. Another notice dated 04.03.2016 was issued by Respondent Bank recalling the advances. Applicants mentioned that Respondent Bank has filed an OA against them being O.A. No. 230/2016 in this Tribunal.

(ii) Applicants have further stated that Responded had agreed and assured the Applicants that a compromise settlement shall be approved for Rs. 1.30 crore and Applicants were directed to bring a probable buyer. However, all of sudden on 30.06.2016 Respondent Bank took physical possession of the property without notice to the Applicants. Respondent Bank did not produce copy of District Magistrate's order. Respondent Bank did not make any inventory and Panchnama. Applicants sent a letter dated 01.07.2016 to Respondent Bank and to police authority in this regard, copy of letter is annexed. Applicants also filed a Writ Petition before Hon'ble High Court at Calcutta being W.P. No. 12206(W) of 2016. Hon'ble High Court disposed of the said Writ Petition vide order dated 15.07.2016 holding that Applicants may seek their remedy before the Tribunal, copy of order is annexed at page 63 of the SA.

This may be recorded that despite Hon'ble High Court's order dated 15.07.2017, Applicants filed the present SA (SA/368/2014) on 20.09.2016 (after two months), challenging the sale of the property conducted on 30.08.2016.

(iii) Applicants have alleged that physical possession has been wrongly taken by Respondent Bank. Respondent Bank did not produce District Magistrate's order. Respondent Bank did not prepare Panchnama. Therefore, no further action can be taken by Respondent Bank. Applicants also stated that as physical possession of the property has been taken unlawfully, sale notice dated 26.07.2016 issued by Respondent Bank is bad in law and sale conducted on 30.08.2016 is also bad in law. Applicants represented to the Respondent Bank vide letter dated 15.09.2016 seeking status of the sale which has not been respondent.

(iv) Applicants filed supplementary affidavit on 06.04.2017 wherein they made further allegations against the sale conducted by Respondent Bank on 30.08.2016. In the said supplementary affidavit, Applicants referred to the order dated 22.09.2016 passed by this Tribunal. Applicants alleged that reserve price of the property has been fixed very low (at throw away price) and the property has been sold illegally much below fair market value. Along with the said affidavit, Applicants annexed a report in respect of plant and machineries, shed and building and value thereof.

3. This may be recorded that matter was taken up for hearing on 22.09.2016 Learned Counsel for Respondent Bank submitted that sale has already been conducted on 30.08.2016, sale certificate has been issued and physical possession of the property has been given to the auction purchaser. This Tribunal in the interest of justice vide order dated 22.09.2016 directed the Respondent Bank not to register the sale certificate. The matter was taken up for final argument on 30.03.2017 (Respondent Bank filed affidavit in opposition on 30.03.2017. However, Applicants' Counsel took adjournment as his Senior Counsel was not available. Matter was again taken up for final argument on 06.04.2017. Applicants' Counsel submitted that Applicants are ready and willing to pay Rs. 1.20 crore within four weeks (the sale was held for Rs. 1.08 crore). Learned Counsel for Respondent Bank and auction purchaser both raised objection to the above proposal/submission. However, This Tribunal directed the Applicants to deposit Rs. 1.20 crore within one week. Respondent Bank was directed to keep the said amount in separate no lien account. Thereafter, the matter was taken up on 13.04.2017 for final argument. Applicants' Counsel informed that Applicants could not deposit Rs. 1.20 crore as directed vide order dated 06.04.2017 and Learned Counsel sought for extension of time which was declined by the Tribunal.

4. Respondent Bank in their affidavit in opposition on 30.04.2017. In the affidavit in opposition responded as under:

(i) Credit facilities of Rs. 1.63 crore were granted to Applicants vide sanction letter dated 08.08.2009. As a security for the said credit facilities, Shri Amarnath Dey, Sri Samir Kumar Dey, Sri Uttam Kumar Maji and Sri Umapad Ghosh created equitable mortgage of land of rice mill along with land and building in Respondent Bank's favour. Applicants availed aggregate credit facilities of Rs. 2,19,96,000/- (Rupees two crore nineteen lakhs ninety six thousand) but they did not maintained the account as per agreed terms. The account became NPA on 30.09.2014. Respondent bank issued demand notice dated 13.10.2014 under Section 13(2) of the Act. Applicants did not comply the notice. The account of Applicants had been irregular for long and Applicants failed and neglected to regularize the same inspite of sufficient opportunities given them. Respondent Bank has charged interest correctly as agreed by Applicants and as per RBI guidelines. Respondent Bank issued possession notice dated 06.10.2015 under Section 13(4) of the Act. The possession notice has been correctly issued and published in the newspapers which has been admitted by Applicants. The demand notice dated 13.10.2014 has been issued prior to filing of Section 19 Application (OA) against the Applicants herein.

(ii) Respondent Bank obtained District Magistrate's order dated 26.11.2015 under Section 14 of the Act and physical possession was taken on 30.06.2016. Inventory and panchnama were prepared while taking physical possession of the property, a copy of the same has been annexed to affidavit in opposition. Respondent Bank issued sale notice under Rule 8(6) dated 12.07.2016 and thereby informed the Applicant and other borrowers that property shall be sold on 30.08.2016. Reserve price was fixed at Rs. 108 crore and has been mentioned in the sale notice. Said reserve price has been fixed as per valuation report obtained by Respondent Bank from the Bank's approved valuer. Sale notice was also published in two newspapers on 26.07.2017, and the same was affixed in conspicuous part of the property, copy of sale notice is annexed. Respondent Bank has mentioned that sale was conducted on 30.08.2016 correctly.

(ii) Respondent Bank has mentioned that while taking physical possession of the property under District Magistrate's order on 30.06.2016, entire proceedings were recorded in videography, and if required they can produce the CDs of the same. District Magistrate's order has been affixed on the spot while taking possession. The factory was closed and none for the Applicants was present while taking possession. Respondent Bank has submitted that authorized officer prepared the Panchnama and inventory and copy of same have been sent to Applicants by post.

(iii) Respondent Bank has submitted that while fixing the reserve price, the value of plant and machineries has been taken into account and accordingly, the reserve price was fixed. Respondent Bank has sold the Rice Mill as a whole which includes fixed assets lying therein. The property has been sold on 30.08.2016 for Rs. 1,08,80,000/- (Rupees one crore eight lakhs eighty thousand) sale has been confirmed and sale certificate has been issued.

(iv) Respondent Bank mentioned that Applicants did not raise any objection against possession notice under Section 13(4) dated 06.02.2015, no objection raised either to District Magistrate' order dated 26.11.2015 or physical possession taken on 30.06.2016. The sale notice was issued on 26.07.2017 but the Applicants have filed the present SA after completion of sale held on 30.08.2016. Learned Counsel for Respondent Bank submitted that there is no irregularity or lacunae in the steps taken by the Respondent Bank under the SARFAESI Act and has prayed for dismissal of the SA.

5. On behalf of the auction purchaser, affidavit in opposition has been filed on 13.03.2017. In the affidavit in opposition, the auction purchaser has mentioned that after issuance of sale certificate and physical possession taken by them, they found that plant and machineries were absolutely in deprecated condition. They found that vital parts of the plant and machineries were missing. The rice mill was not in workable condition. Auction purchaser spent Rs. 12 lakhs for repairing and maintenance of plant and machineries. The auction purchaser purchased further plant and machineries worth Rs. 8.17 lakhs. They had to purchase a generator for electricity purpose for Rs. 4.50 lakhs and paid outstanding electricity bill for Rs. 50,007/- to State Electricity Board. The auction purchaser paid Rs. 2 lakhs for labour charges. They invested Rs. 10 lakhs for paddy buying as raw materials. The auction purchaser has stated that they had to take a sum of Rs. 20 lakhs on high interest borrowing from a private party. The auction purchaser had to dispose of their agricultural land for arranging the fund. Auction purchaser annexed copies of documents in support of their pleadings. They have stated that sale is valid and the sale may be allowed to be continued with them.

6. I have heard the submissions made by Learned Counsel for the parties and carefully gone through the papers and affidavits filed by the parties. My observations and findings are as under:

(i) This is on record that demand notice under Section 13(2) was issued on 13.10.2014. Thereafter, possession notice under Section 13(4) was issued on 06.02.2015. Respondent Bank has taken physical possession on 30.06.2016 under District Magistrate's order dated 26.11.2015 under Section 14 of the Act. Inventory and Panchnama has been prepared on the date of physical possession, copies have been annexed. Photograph showing affixation of notice has been annexed. The Applicants have not challenged/disputed the Section 13(4) notice dated 06.02.2015 or the District Magistrate's order dated 26.11.2015 under Section 17 of the Act within the limitation period under Section 17 of the Act. Hence, there is no scope of adjudication of any issue in the said notices in the present SA which has been filed on 20.09.2016 challenging the sale conducted on 30.08.2016.

(ii) The sale notice under Rule 8(6) was issued on 12.07.2016, a copy is annexed to affidavit in opposition. The same has been dispatched to the Applicants and other

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guarantors, copy of postal receipts are annexed to the affidavit in opposition. E auction sale notice was published in two newspapers on 26.07.2017 fixing the date of sale on 30.08.2016. Copy of valuation report has also been annexed, which shows that distress value of the property is Rs. 1.07 crore. In the said valuation report The value of plant and machineries has been added. Thus, reserve price of the property at Rs. 1.08 crore was fixed correctly. The property has been sold for Rs. 1,08,80,000/- (Rupees one crore eight lakhs eighty thousand) above the reserve price. (iii) Consideration of the submission made by Applicants' Counsel, the Applicants were given an opportunity and directed to deposit Rs. 1.20 crore vide order 06.04.2015 to save their property. However, the Applicants failed to deposit the said amount. 7. In view of above discussion and findings, I pass the following order: I do not find any reason or ground to intervene in the steps taken by Respondent Bank under SARFAESI Act. Applicants have not been able to prove any substantial ground to invoke the provisions of Section 17 of SARFAESI Act. The present SA being S.A. No. 368 of 2016 is liable to be dismissed, hence dismissed, no order for cost. Interim orders stand vacated/withdrawn. Copy of the order be given/sent to parties. File be consigned to Record Room. Order pronounced today on 04th May, 2017 in open Tribunal.