advocatemmmohan

My photo

ADVOCATEMMMOHAN -  Practicing both IN CIVIL, CRIMINAL AND FAMILY LAWS,Etc.,

WELCOME TO LEGAL WORLD

WELCOME TO MY LEGAL WORLD - FOR KNOWLEDGE IN LAW & FOR LEGAL OPINIONS - SHARE THIS

Wednesday, November 9, 2016

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002-when another application was filed under Section 17(1) of the Act, the cause of action was different. At an earlier point of time, the issuance of notice as well as notice for sale of the flat had been challenged, whereas the subsequent application had been filed after the auction had been held. The cause of action in respect of both the applications was not same and therefore, in our opinion, the second application for a different cause of action was maintainable.=2016 Dec.http://judis.nic.in/supremecourt/imgst.aspx?filename=44294 - OASIS DEALCOM PVT. LTD. Vs. KHAZANA DEALCOMM PVT.LTD. & ORS. ANIL R. DAVE, UDAY UMESH LALIT

                                                              NON-REPORTABLE


                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION

                    CIVIL APPEAL Nos.10676-10677 OF 2016
                     (@ SLP (C) No. 32638-32639 of 2011)






M/s Oasis Dealcom Pvt. Ltd.                         ….Appellant


                                VERSUS



Khazana Dealcomm Pvt. Ltd. & Ors.            ...Respondents



                       J U D G M E N T



ANIL R. DAVE, J.

1.    Leave granted.

2.     The  present  appeals  are  directed  against  the   judgment   dated
24.08.2011 rendered by the High Court of Calcutta, whereby  the  High  Court
has dismissed the revision petition filed by  the  appellant  under  Article
227 of the Constitution  of  India  and  affirmed  the  order  of  the  Debt
Recovery Appellate Tribunal, Calcutta.



3.    The facts of the case, in a nutshell, are as under :

Respondent nos. 2 and  3  are  the  principal  shareholders,  directors  and
persons in charge of Respondent No.1 Company.  Respondent No. 4  (ING  Vysya
Bank) had granted financial assistance to Respondent nos.1 to 3  by  way  of
“Cash Credit facility”.  In consideration of the aforesaid loan,  Respondent
nos.1 to 3 had furnished security in terms of  (a)  Hypothecation  of   Book
Debts, (b) Equitable mortgage of residential flat bearing no.  1-C  at  7/1,
Queens Park, Kolkata-700019 and (c) pledge of LIC Policy for an assured  sum
of Rs.8 lakh in name of Respondent No.3.

4.    Respondent nos. 1 to 3 defaulted in the  repayment  of  the  loan  and
thus, the account was classified as “Non-performing Asset” with effect  from
1.12.2008 in accordance with the directions of Reserve Bank of India. As  on
31st December, 2008, a sum of Rs.37,01,758.49 (Rupees Thirty seven lakh  one
thousand seven hundred  fifty  eight  and  forty  nine  paise),  along  with
applicable interest @ 15% per  annum  and  penal  interest  was  outstanding
against the said Respondents.

5.    Accordingly, a notice dated 17th January, 2009 under  Section  13  (2)
of  The  Securitisation  and  Reconstruction   of   Financial   Assets   and
Enforcement of Security Interest Act, 2002 (hereinafter referred to as  “the
Act”) read with Rule 9 of the Security Interest  (Enforcement)  Rules,  2002
(hereinafter referred to as “the Rules”) was served  upon  Respondent  nos.1
to 3 calling upon them to pay the   aforementioned  sum  along  with  future
interest within 60 days from the date of the said notice and they were  also
instructed not to create any third party interest in the secured  assets  by
way of sale, lease or otherwise. The aforesaid notice was  duly  replied  to
by Respondent No.1 Company vide letter dated 14th March, 2009  by  disputing
the amount and requesting Respondent no. 4 bank  to  give  certain  credits.
Respondent no.4 gave a reply vide its  letter  dated  20th  March,  2009  to
letter dated 14th March, 2009 by asserting that notice dated  17th  January,
2009 had been correctly issued as per the provisions of Section  13  (2)  of
the Act.

6.    It is apposite to state that Respondent No.  4  bank  vide  possession
notice dated 10th August, 2009 took “symbolic possession”  of  the  property
in question i.e. Residential Flat No. bearing 1C  (1st  Floor)  situated  at
premises no. 7/1, Queens Park, Kolkata-700019 (hereinafter  referred  to  as
“the flat”) which was in the names of Respondent nos. 2 and 3.

7.    Being aggrieved by said notice dated  10th  August,  2009,  Respondent
nos. 1 and 3 preferred application no.92/2009 under Section 17 of Act,  2002
on 15th September, 2009 against Respondent no.4 bank  by  stating  that  the
act of taking symbolic possession of  the  flat  in  question  was  illegal,
without jurisdiction and was in violation of the Act  and  Regulations  made
thereunder, primarily for the reason that no advertisement was published  in
the newspaper in terms of Rule 8 (2) of the Rules and no  possession  notice
under Rule 8 (1) was affixed on the said  property  and  hence,  prayed  for
quashing of notice dated 17th January, 2009 and also for quashing all  steps
taken under the Act.

8.    Taking cognizance of the aforesaid application, the learned  Presiding
Officer,  DRT,  Kolkata  vide  order  dated  17th  December,  2009  directed
Respondent nos.1 and 3 to pay a sum of  Rs.15  lakh  before  26th  December,
2009 and directed the Respondent bank to maintain  status-quo  and  in  case
the borrowers fail to deposit the  said  sum  before  the  stipulated  date,
Respondent no. 4 bank would be at liberty  to  proceed  in  accordance  with
law.

9.    Being dissatisfied with the order dated 17th December, 2009 passed  by
the DRT, Kolkata, Respondent nos.1 and 3 filed a Petition under Article  227
of the Constitution of India before the High Court and the High  Court  vide
order dated 24th December, 2009 modified the order passed by the DRT to  the
extent that instead of paying a sum of Rs.15 lakh to the  bank  before  26th
December, 2009, bank guarantee  for  Rs.10  lakh  be  furnished  before  2nd
January, 2010 and the hearing was adjourned to 4th January, 2010.

10.   On 4th January, 2010, when the matter was taken  up  before  the  High
Court, an adjournment was sought for by the borrowers and it  was  submitted
on behalf of the Respondent bank that bank  guarantee  for  Rs.10  lakh,  as
ordered, had not been furnished by the borrowers.

11.   In the light  of  the  aforestated  situation,  Respondent  no.4  bank
issued a  notice  dated  4th  January,  2010  for  auctioning  the  flat  by
referring to an earlier auction notice dated 10th November, 2009, which  had
been  published  in  newspapers  “The  Statesman”  (English)  and   “Aajkal”
(Bengali).  The auction was to take place  on  6th  January,  2010  and  the
reserve price of the flat was Rs.1,48,00,000/-(Rupees one crore forty  eight
lakh only).

12.   In terms of the  aforestated  notice  dated  4th  January,  2010,  the
Appellant (M/s Oasis Dealcom Pvt. Ltd) submitted its  bid  to  purchase  the
flat, who was the sole bidder.  Respondent no.4 bank, vide its letter  dated
6th January, 2010 accepted the bid for a sum of Rs.1,48,00,000/- and on  the
same day, confirmed the  sale  in  terms  of  the  provisions  of  the  Act.
Respondent no.4 bank vide letter dated 9th January, 2010 also issued a  sale
certificate in favour of the Appellant as per Rule 9 (6) of the Rules.

13.   On 11th January, 2010, when the Petition came up  for  hearing  before
the High Court, it  was  noticed  that  the  bank  guarantee  had  not  been
furnished by the borrowers in terms of its order dated 24th  December,  2009
and the Respondent bank had sold the property in question to  the  Appellant
company.

14.   When the matter was placed before the Debt Recovery  Tribunal  on  7th
January, 2010, the Tribunal recorded the fact that the flat  had  been  sold
and therefore, virtually the proceedings had become  infructuous.   However,
the matter was adjourned to 5th  March,  2010,  to  enable  the  parties  to
complete the pleadings.  However, on  14th  January,  2010,  the  Respondent
borrowers filed an application for depositing the amount payable but on  the
same day,  taking  judicial  notice  of  the  subsequent  developments,  the
Tribunal dismissed the said application as it had become infructuous.

15.   In the  aforestated  circumstances,  the  Respondent  borrowers  filed
another application under Section 17(1) of the Act challenging the  validity
of the demand notice dated 17th January, 2009 and  sale  of  property  which
had taken place in January 2010 in  pursuance  of  the  aforestated  notice.
The Tribunal ordered to maintain status-quo as on 28th January, 2010.

16.   Being aggrieved by the order of the Tribunal, Writ Petition No.169  of
2010 was filed by the present Appellant i.e. the auction purchaser, but  the
High Court disposed of the Petition as the matter  was  pending  before  the
Tribunal.  Ultimately, the Tribunal passed an order dated  10th  June,  2010
in O.A. No.4 of 2010  setting  aside  the  sale  certificate.   However,  it
permitted the borrowers to make  payment  within  three  weeks  and  if  the
amount was paid within three weeks, the bank  was  directed  to  refund  the
purchase money to the Appellant with 8% interest thereon.

17.   Being aggrieved by the said order, the Appellant filed  Writ  Petition
No.7087 of 2010 challenging the validity of the order dated 10th June,  2010
passed by the Tribunal and the said petition was disposed of with a  liberty
to the Appellant to approach the Debt Recovery Appellate Tribunal.

18.   By an order dated 18th February, 2011,  the  Debt  Recovery  Appellate
Tribunal confirmed the order passed by the Tribunal observing that  material
irregularities had been committed in conducting the auction sale and in  the
circumstances,  the  auction  purchaser  as  well  as  the  respondent  bank
separately challenged the validity of the said order  dated  18th  February,
2011 before the High Court and the High Court confirmed the order passed  by
the Debt Recovery Appellate Tribunal by an order dated 24th August, 2011.

19.   Being aggrieved by the said judgment  and  order  dated  24th  August,
2011, the present appeals have been filed by the auction purchaser .

20.   The Appellant was represented by one of its Directors,  Shri  Agarwal,
who appeared in person.  He submitted that the amount of purchase price  had
already been paid and as  the  entire  proceedings  had  been  conducted  in
accordance with the provisions of the Act as well as  the  Rules,  the  High
Court committed an error by setting aside  the  auction  sale.   He  further
submitted that there was neither any fraud nor any illegality in  conducting
the auction of the flat. He  also  submitted  that  necessary  notice  under
Section 13 had already been issued to the Respondent borrowers  and  as  the
borrowers had  failed  to  make  payment  after  publication  of  notice  in
newspapers as per the provisions of the  Act  as  well  as  the  Rules,  the
property in question had been  sold  by  holding  an  auction.   He  further
submitted that the price offered by the Appellant was just and fair,  though
nobody else had participated in the bid.  According to him,  wide  publicity
had also been given to the auction.  In view of the  fact  that  the  entire
amount had been paid, according to him, the sale ought not to have been  set
aside.  He further submitted that sufficient opportunity had been  given  to
the borrowers to make the payment at an earlier point of time, but they  had
failed to make payment of  their  dues  to  the  creditor  bank.   Moreover,
according to him, the borrowers had also failed to furnish  bank  guarantee,
as directed earlier and the said  fact  had  been  duly  considered  by  the
Tribunal at an earlier point of time and as  the  borrowers  had  failed  to
furnish the bank guarantee, the creditor  bank  had  rightly  confirmed  the
sale in favour of the Appellant company.

21.   On the other hand, the learned counsel for  the  Respondent  borrowers
had submitted that several serious irregularities had been committed by  the
bank in conducting the auction.  Requisite notice, as required  as  per  the
Rules, had not been given and he had supported  the  judgment  delivered  by
the High Court.  According to him, if for any reason  the  auction  sale  is
postponed, the entire process for holding  the  auction  should  be  started
afresh and as no fresh notice was given before conducting the  auction,  the
sale effected by the bank was  absolutely  improper  as  held  by  the  High
Court.  He had thus supported the reasons assigned by  the  High  Court  for
setting aside the auction sale.

22.   On behalf of the Respondent bank, the learned counsel  submitted  that
the bank  was  prepared  to  accept  the  amount  due  and  payable  by  the
respondent borrower and in that event it would return  the  amount  received
from the Appellant along with interest thereon,  as  directed  by  the  High
Court.

23.   Upon hearing the learned counsel  and  going  through  the  concurrent
findings of fact arrived at by the Debt Recovery Appellate Tribunal as  well
as the High Court, we have no doubt about the  fact  that  undue  haste  was
made by the creditor bank in holding the auction.  The creditor  bank  could
have waited for some time when  the  proceedings  were  pending  before  the
Tribunal as well as  the  High  Court  before  conducting  the  auction  and
confirming the sale.  We do not find any reason to  disturb  the  concurrent
findings arrived at by the Debt Recovery Appellate Tribunal as well  as  the
High Court about the irregularities committed in holding the auction.

24.   A submission had been made on behalf of the Appellant that the  second
application filed under Section 17 of  the  Act  was  not  maintainable  and
therefore, it ought not to have been entertained by the Tribunal.    We  are
not in agreement with the said submission for the reason that  when  another
application was filed under Section 17(1) of the Act, the  cause  of  action
was different.  At an earlier point of time, the issuance of notice as  well
as notice for sale of the flat had been challenged, whereas  the  subsequent
application had been filed after the auction had been held.   The  cause  of
action in respect of both the applications was not same  and  therefore,  in
our opinion, the second application for a  different  cause  of  action  was
maintainable.

25.   In the circumstances,  we  do  not  intend  to  disturb  the  judgment
delivered by the High Court.  However, looking at the nature  of  litigation
faced by the auction purchaser, we modify the  order  and  direct  that  the
amount already paid by the  auction  purchaser  shall  be  returned  to  the
auction purchaser with simple interest at the rate  of  10%  till  the  said
amount is paid.

26.   In exercise of our powers under Article 142  of  the  Constitution  of
India, we further direct that before 30th November, 2016, the creditor  bank
shall give intimation of the total amount payable by the  borrowers  (  i.e.
principal amount and interest, including penal interest, if any) as  on  1st
December, 2016 and if the said amount is not paid by  the  borrowers  before
10th day of December, 2016, it would be open to the creditor  bank  to  sell
the flat by holding an auction, without giving any  further  notice  to  the
borrowers but after giving a 30 days’ public notice  for  the  sale  of  the
flat in one English leading newspaper and in one local newspaper, so  as  to
recover its dues.

27.   The appeals are disposed of in terms of the  aforestated  modification
with no order as to costs.


                                                              ……………………………..J
                                                   (ANIL R. DAVE)


                                                              ……………………………..J
New Delhi.                                   (UDAY UMESH LALIT)
NOVEMBER 8, 2016.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.