M/S Koelee Sportswear Inc. Thru ... vs Canara Bank And Another
2017 Latest Caselaw 4299 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

AFR
 
Judgment reserved on 25.08.2017
 
Judgment delivered on 13.09.2017
 
Case :- WRIT - C No. - 10300 of 2015
 

 
Petitioner :- M/S Koelee Sportswear Inc. Thru Prop. Kamal Kant Jain
 
Respondent :- Canara Bank And Another
 
Counsel for Petitioner :- Manu Khare
 
Counsel for Respondent :- Siddharth,Ankur Gupta,Manoj Kumar Singh,Megha Pandey,S.C.,Vinay Shankar
 

 
Hon'ble Mahesh Chandra Tripathi,J.

Heard Shri Munish Malhotra along with Shri Manu Khare, learned counsel for the petitioner. Shri Siddharth appears for first respondent. Shri Manoj Kumar Singh appears for second respondent.

M/s Koelee Sportswear Inc. through its proprietor Sri Kamal Kant Jain is before this Court assailing the order dated 29.01.2015 passed by the Debts Recovery Appellate Tribunal, Allahabad (DRAT) in Appeal Sr. No.112/2014 (M/s Koelee Sportswear Inc. v. Canara Bank & Anr.).

The petitioner, who is a borrower, has filed an S.A. before the Debts Recovery Tribunal, Lucknow (DRT) challenging the action initiated by the bank under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) leading to the sale of the property by way of auction. The DRT had dismissed the S.A. on the ground that earlier the petitioner had approached to the Division Bench of this Court and the sale by auction of the property has been held pursuant to the orders passed by the High Court and as such there was no occasion for entertaining the said S.A. and the DRT had refused to interfere in the said proceedings. The same has impelled the petitioner to approach to the DRAT but the DRAT has also rejected the claim set up by the petitioner vide impugned order dated 29.01.2015.

The factual matrix of the case, which has emerged from the record, is that the petitioner is the proprietor of the firm namely M/s Koelee Sportswear Inc. The firm is situated in Special Economic Zone (SEZ), which is dealing in manufacturing and export of garments. It is thus claimed that the petitioner was entitled to duty free import and export of the products manufactured by the petitioner and has been exporting to garment industry. It is claimed that the firm was also entitled to various exemptions like customs, excise duties, CST, Local Sales Tax and Income Tax etc.

The petitioner was granted financial assistance from the first respondent in the year 2006 against which he had mortgaged his property bearing No.167 NSEZ, Noida and Plot No.129-G/64, NSEZ, Noida in US $ by offshore banking unit. It is also claimed that the petitioner has made reference to some Libor rate which was varying from 0.34-0.51 etc. In the present matter the account of the petitioner was classified as NPA on 26.11.2010. On the very next day i.e. on 27.11.2010 the bank had issued a notice under Section 13 (2) of SARFAESI Act demanding an amount of US $ 2,52,425.07 at the notional rate Rs.1,13,59,128/-. In response to the said notice the petitioner had filed detailed objection under Section 13 (3) (a) of the SARFAESI Act. The same was responded by the bank on 10.02.2011. The grievance of the petitioner was that at no point of time his objections were dealt strictly as per the provisions contained under the SARFAESI Act. Immediately, thereafter, the petitioner informed to the bank on 19.2.2011 that whatever the response has been furnished by the bank, the same was vague and evasive. The same was also responded by the bank on 7.3.2011.

It appears from the record that there was active deliberation between the parties for settlement and in this regard the petitioner had submitted proposal for settlement on 31.7.2011. Thereafter, the petitioner had agreed for sale of his property bearing Plot No.129-G/64, NSEZ, Noida. It is contended that the said offer was extended to the bank as this was sufficient to liquidate the outstanding dues. Finally the said property was sold by the bank for a sum of Rs.1,00,10,000/-. After the sale of the said property, the petitioner approached to the bank to release the title document of the second property but instead of returning the same the bank had proceeded to issue another notice under Section 13 (4) of the SARFAESI Act on 12.11.2013 against the second property i.e. Plot No.167, NSEZ, Noida. The said action has been subjected to challenge in Writ Petition No.69007 of 2013 (M/s Kdelee Sportswear Inc. Thru' Prop. v. State of U.P. & Ors.). The said writ petition was disposed of by the Division Bench of this Court vide order dated 13.12.2013 with following observations:-

"Heard learned counsel for the petitioner and Sri Siddharth, learned counsel appearing for the Bank.

On the request made by learned counsel for the petitioner, this writ petition has been taken up today.

By this writ petition, petitioner has prayed for quashing the notice dated 12.11.2013 by which the Bank has issued sale notice for sale of the property of the petitioner for liability of Rs. 93,71,197/-+interest and other expenses .

Petitioner's case is that in proceedings under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, petitioners one property was already sold and now for the balance amount, notice has again been issued to the petitioner for sale of second property in which auction is to take place on Monday i.e. 16.12.2013.

Sri Siddharth, learned counsel for the Bank submits that in spite of several informations, sent to the petitioner, he never appeared before the Bank for settlement.

It is submitted that Bank may consider any proposal of the petitioner for settlement in case it is submitted to the Bank before the auction by 16.12.2013

Learned counsel for the petitioner submits that petitioner shall submit an appropriate offer for settlement before the Bank and appear before the Bank on 16.12.2013.

In view of the aforesaid, we are of the view that end of justice be served in giving liberty to the petitioner to submit proposal for settlement by 16.12.2013.

In event, petitioner submits proposal before the Bank, the Bank shall not proceed to confirm the auction, if any, to be held to 16.12.2013. We further provide that the proposal of the petitioner may be processed and settlement may be entered, if any, within a period of one month thereafter.

We further make it clear that in event no settlement is entered, it shall be open for the Bank to proceed in accordance with law.

The writ petition is disposed of.

Copy of the order may be given to the learned counsel for the petitioner today on payment of usual charges."

In response to the directives issued by the Division Bench of this Court the petitioner had submitted his proposal for settlement with the bank before the scheduled auction date i.e. 16.12.2013. However, the same has been declined by the bank and the auction took place on 16.12.2013 and it is claimed that the same was confirmed in favour of the second respondent. The said action of the bank had been assailed in SA before the DRT and finally the claim set up by the petitioner was rejected by DRT vide order dated 15.4.2014 with observation that once the petitioner has challenged the action so initiated by the bank under Art.226 of the Constitution of India before the Division Bench of this Court and since the petitioner had already availed the remedy against the action so initiated by the bank, as such on the same facts and circumstances no reprieve could be extended to the petitioner and consequently the DRT has rejected the claim set by the petitioner. The order dated 15.4.2014 was subjected to challenge before the DRAT on the ground that the claim set up by the petitioner was not rightly appreciated by the DRT and the claim has also been set up that while disposing of the aforementioned writ petition, at no point of time the High Court had considered the matter on merits and as such the ground taken before the DRT was liable to be considered and decided on merits of the case. In this backdrop, the DRAT has proceeded to examine the record and observed that once the petitioner had approached the High Court by way of writ petition to assail the sale/ possession notice dated 12.11.2013, then consequently the ground that notice under Section 13 (2) of SARFAESI Act, could not sustain and moreover his representation in response to the said notice under Section 13 (3) (a) had not been dealt properly, the same cannot sustain. The claim of the petitioner has been rejected by the DRAT vide impugned order dated 29.1.2015 on the ground that the High Court did not relegate the petitioner to alternative remedy to file SA to assail the validity of notice dated 12.11.2013 but on the other hand the High Court decided to entertain the petition and had disposed of the same after hearing the petitioner as well as the respondent-bank.

Before the DRAT an objection was also raised by the bank that at no point of time the petitioner had raised any ground of challenge to auction, whereas the only ground of challenge in the SA was on the basis of notice under Section 13 (2) of SARFAESI Act only to the extent that the same was bad and the order rejecting his representation being vague and evasive. The said ground has already been taken by the petitioner in writ jurisdiction. Since there was no challenge raised to the auction sale and the challenge in SA was on the ground, which was already raised in the writ petition, in this backdrop, the DRAT was of the opinion that no useful purpose would be achieved or served by remanding the case back to the DRT and accordingly the appeal was rejected by the DRAT vide impugned order dated 29.01.2015.

In this backdrop, Shri Munish Malhotra assisted by Shri Manu Khare, learned counsel for the petitioner has vehemently urged before this Court that the DRAT had failed to appreciate the correct facts and the entire action so initiated by the bank is per se bad. He further makes submission that in response to the notice dated 27.11.2010 under Section 13 (2) of the SARFAESI Act, the petitioner had submitted detailed response on 25th January, 2011. While submitting the response a categorical stand was taken by the petitioner that as he was classified as SEZ Unit and presently working in NSEZ, therefore, in terms of the Central Government Notification, he was entitled to certain privileges and benefits being 100% export unit working in SEZ. While submitting response the petitioner had also taken stand that being an exporter of hosiery product and exporting to the US market, various credit facilities had also been extended and the bank had also agreed to accord WCTL as well as OCC/ ODBD limit @ 6 months libor +450 bps. The claim has also been set up before the bank that being the 100% export unit, which is generating foreign exchange, the petitioner was also availing the credit facility in foreign exchange. Much emphasis has been placed to the fact that the petitioner had started banking facilities with the off-shore banking unit (OBU) as per the norms of the SEZ guidelines issued by the Central Government. It is contended that the bank has taken some unilateral decision to close the OBU branch in SEZ in the year 2009 and the foreign exchange account of the petitioner was converted in Indian domestic loan. Serious objection was also taken by the petitioner that unilaterally the bank has proceeded to close OBU unit and transferred all the account of Industrial Finance Branch in NSEZ Noida. In this backdrop, neither any communication was made nor any consent was obtained from the petitioner for closing down OBU and transferred all the account to the Industrial Finance Branch. On account of closure of OBU unit, certain privileges, which were extended to the petitioner to maintain the account in foreign currency were also ceased and the said action also prejudiced the interest of the petitioner. While submitting objections precise ground was also taken that the bank had claimed interest at the rate of 17.5% per annum and as per the contract between the parties the bank had sanctioned rate of interest at the rate of 6 months libor + 250 bps and as such it had been claimed that the exorbitant interest at the rate of 17.5% per annum was contrary to the contract between the parties. As such it is contended that the notice under Section 13 (2) of SARFAESI Act was bad in law.

Learned counsel for the petitioner submits that once detailed objection has been filed by the petitioner, the bank in most casual manner had taken preliminary objection that in response to the notice under the SARFAESI Act, the objection under Section 13 (3) (a) of the SARFAESI Act was liable to be submitted either personally or through his Advocate to whom the notice under Section 13 (2) has been issued for the purposes in question. He has also indicated and placed reliance on the letter dated 31st July, 2011, which has been sent by the petitioner to the bank. Through this letter the petitioner had informed to the Chief Manager, Canara Bank that the bank had equitable mortgage in its favour with regard to factory building constructed on Plot No.167, NSEZ, Noida and Plot No.129-G/64, NSEZ Noida. It was also informed that the Plot No.167, NSEZ Noida had been valued by the bank's own valuer for a sum of Rs.1.36 crores, which was quite conservative value and the said property could easily fetch far more than it had been valued by the bank and as such the petitioner himself had volunteered that the property in question may be revalued as per the prevailing market rate at the relevant point of time. The petitioner also relied on the sale of adjoining property at the rate of Rs.15,000/- per sq. yard and as such for the auction proceedings full transparently may be ensured. The petitioner while submitting letter dated 31st July, 2011 had taken precise stand that since the property bearing no.129-G/64, NSEZ, Noida itself was sufficient to meet the outstanding of the bank, accordingly the property bearing no.167, NSEZ, Noida should not be brought within the purview of sale and meanwhile the petitioner may be permitted to allow to continue its manufacturing activity from the said property without any hindrance from the bank.

In this backdrop, Shri Munish Malhotra, learned counsel for the petitioner submits that even though the categorical stand was taken by the petitioner while submitting successive response to the bank but the conduct of the respondent bank was not upto the mark. He has also placed reliance on the letter dated 16.1.2012 annexed as annexure no.9 to the writ petition, whereby the bank has informed to the petitioner in reference to the letters dated 31.7.2011 and 28.11.2011, that the competent authority had fixed the reserve price of the property at Plot No.129-G/64, NSEZ, Noida at Rs.165 lacs and a categorical endorsement was made that the bank was going on for possession and sale of the property at Plot No.129-G/64, NSEZ, Noida. He has also placed reliance on notice dated 06.09.2012 (appended as Annexure No.10 to the writ petition) under Section 13 (4) of the SARFAESI Act read with Rule 8 (6) of the Security Interest (Enforcement) Rules, 2002, which relates to sale of Plot No.129G/64, NSEZ, Noida and the reserve price was shown as Rs.125 lacs. Much emphasis has been place on second last paragraph of the said letter, which is as under:-

"Please note that we had deferred sale of the property at plot no.167 NSEZ Noida, keeping in view your request that the property at Plot No.129G/64, NSEZ Noida is sufficient to meet the outstanding dues of the Bank. Hence we had proceeded for taking possession of the property at Plot No.129G/64, NSEZ Noida and its sale as per the provision of SARFAESI Act. In the present circumstances, the competent authority has advised to proceed under SARFAESI Act against the property at plot no.167 NSEZ Noida as well, if this time auction fails and liability of the borrower is not liquidated. Accordingly, we shall be acting in the matter."

It is contended that inspite of reserve price of Rs.125 lacs the property in question was sold for Rs.100.10 lacs. Thereafter, on 12.11.2013 the respondent bank had again issued notice under Section 13 (4) of the SARFAESI Act for sale of the property bearing Plot No.167, NSEZ, Noida with a reserve price of Rs.80 lacs. He submits that in this backdrop the petitioner had no other option except to approach to this Court and assail the notice under Section 13 (4) of the SARFAESI Act dated 12.11.2013 for selling the property bearing Plot No.167 NSEZ, Noida in the aforementioned writ petition. The same was disposed of by the Division Bench with observation that the bank may consider any proposal of the petitioner for settlement in case it is submitted to the bank before the auction i.e. 16.12.2013. Pursuant to the said direction, the petitioner submitted its proposal to the bank, however, the same had been rejected and the said property i.e. Plot No.167, NSEZ, Noida had been sold for Rs.90.20 lacs.

In this backdrop, learned counsel for the petitioner has vehemently contended that from the very beginning the petitioner has taken a precise objection qua the rate of interest. Between the parties the agreed rate of interest was 6 months libor + 250 bps. It is suggested that statement of account as well as demand notice under Section 13 (2) of the SARFAESI Act, which was given to the petitioner way back in the year 2010 amply prove that the respondent bank in most arbitrary manner had asked the exorbitant rate of interest. The same very act was contrary to banking norms and rules and at no point of time the objection so filed by the petitioner under Section 13 (3) (a) of the SARFAESI Act has ever been decided by the bank on merit. Either one pretext or the other the same was turned down. He also submits that the said application/ objection has never been decided by the Authorised Officer of the bank. An objection was also raised that the first property, which was sold @ Rs.1.10 crores was undervalued.

Even on merits of the case, he submits that the sale notice in the matter was received by the petitioner on 10.12.2013, wherein the bank itself has fixed the sale of property on 16.12.2013 and as such the mandatory provisions of Rule 8 (6) of the Security Interest (enforcement) Rules, 2002, which accord 30 days notice time, have not been followed. As such only on this point the entire proceeding, which was taken under the SARFAESI Act by the bank, is liable to be set aside.

Learned counsel for the petitioner also indicated that no doubt the sale notice dated 12.11.2013 was subject matter of challenge in Writ Petition No.69007 of 2013 but at no point of time the Division Bench of this Court has restrained the petitioner to agitate the matter before the appropriate forum as has been provided under the SARFAESI Act. It is submitted that principle of resjudicata would not be attracted in the present matter and on the wrong notion the DRT as well as the DRAT have turned down the claim of the petitioner and as such this Court should come for rescue and reprieve of the petitioner.

Per contra, Shri Siddharth, learned counsel for the bank has vehemently contended that in the present matter admittedly the petitioner had assailed the sale notice, which was published on 12.11.2013 before the Division Bench of this Court in Writ Petition No.69007 of 2013 and after the submissions of the parties, the Court had disposed of the writ petition asking the petitioner to settle the matter with the bank within one month's time. The order further provides that in case there is no settlement arrived at between the parties, the bank may proceed further in accordance with law. In response to the directives issued by this Court the petitioner had submitted settlement proposal and volunteered to deposit a meager amount of Rs.5 lacs against the outstanding amount of Rs.97 lacs. In such situation, the bank had no other option except to turn down the proposal so submitted by the petitioner and only thereafter the bank had proceeded to confirm the sale.

In this backdrop, Shri Siddharth, learned counsel for the bank submits that thereafter the petitioner could not be accorded any right to assail the action so initiated by the bank before the DRT. He submits that the petitioner had challenged the notice dated 12.11.2013 and in case the notice under Section 13 (2) of the Act was not proper or that the objection raised by the petitioner in response to the notice under Section 13 (2) was not properly considered by the bank, but once consequently notice under Section 13 (4) was subjected to challenge before the Division Bench of this Court and finally the Court has given way out to the petitioner to submit an appropriate offer for settlement before the bank on or before 16.12.2013 and finally the offer for settlement had been turned down by the bank, then the petitioner should not be accorded liberty to assail the validity of notice under Section 13 (2) of the SARFAESI Act before the DRT and as such the DRT as well as DRAT have rightly turned down the claim set up by the petitioner. He further makes submissions that maximum the petitioner could challenge the proceeding under Section 13 (4) of the Act specially could challenge the auction sale, which was held on 16.12.2013. At no point of time the petitioner had raised any ground of challenge to the said auction proceedings but contrarily the petitioner has only assailed the proceedings under Section 13 (2) of the SARFAESI Act. In absence of proper pleading and ground in SA, the DRT had rightly rejected the claim and the same has rightly been affirmed by the Tribunal.

He has also placed reliance on various provisions contained in Code of Civil Procedure (CPC) but at the same time he submits that even though the provisions of CPC would not be attracted but the same is persuasive in nature and at no point of time the principles of natural justice has been violated in the matter and as such no interference is required in the matter and the writ petition is liable to be dismissed.

Shri Manoj Kumar Singh, who appears for the second respondent, has moreover reiterated the arguments as advanced by Shri Siddharth, learned counsel for the bank. He further makes submissions that his client is bonafide auction purchaser and his right may be protected.

Heard rival submissions and perused the record.

On the matter being taken up on 25.2.2015, the Court has proceeded to pass detailed order according interim protection in favour of the petitioner, the relevant portion of which is reproduced as under:-

"............Learned counsel for the petitioner submits that instead of dismissing the petitioner's appeal he should have given time to amend the appeal by inserting some necessary amendments therein but the Tribunal had directly dismissed the appeal only on the ground that the petitioner-appellant has not raised any ground of challenge to the auction sale. Though during the course of hearing, this objection was raised orally and was considered also by the Tribunal. He further informs that the respondent bank has issued a notice dated 23.2.2015 to the petitioner which has communicated the decision to take the possession of the petitioner's property bearing Plot No. 167, NSEZ, Noida on 25.2.2015 at 10.00 A.M. It is further stated that so far as the substantial amount of loan is concerned, that has been recovered by selling out the petitioner's one property and only the interest part remains which is being disputed by the petitioner, therefore, the matter requires determination by this Court.

Three weeks' time as prayed by Mr. Siddharth, learned counsel for the respondent no. 1 is allowed to file counter affidavit.

Issue notice to respondent no. 2.

List on 26.3.2015.

In the meanwhile, the respondents are restrained from taking over the possession of the petitioner's property bearing Plot No. 167, NSEZ, Noida, till the next date of listing."

The aforesaid interim order is still continuing and as such it is apparent that at no point of time the possession was ever taken by the respondents.

In order to appreciate the controversy in hand, it would be relevant to have a glance on the order passed by the Division Bench of this Court in Writ-C No.69007 of 2013, wherein notice dated 12.11.2013, which has been issued for sale of the property of the petitioner for liability of Rs.93,71,197/- plus interest and other expenses has been challenged. The aforesaid notice has been assailed on the ground that one property of the petitioner was already sold and now for the balance amount, notice has again been issued to the petitioner for sale of second property in which auction was scheduled to take place on 16.12.2013. In this backdrop, the Court had proceeded to ask the petitioner to submit appropriate offer for settlement before the bank before 16.12.2013. The Division Bench of this Court further proceeded to observe that in the event the petitioner would submit proposal before the bank, the bank shall not proceed to confirm the auction, if any. The operative portion of the said judgment dated 13.12.2013 is again quoted as under:-

"..........In view of the aforesaid, we are of the view that end of justice be served in giving liberty to the petitioner to submit proposal for settlement by 16.12.2013.

In event, petitioner submits proposal before the Bank, the Bank shall not proceed to confirm the auction, if any, to be held to 16.12.2013. We further provide that the proposal of the petitioner may be processed and settlement may be entered, if any, within a period of one month thereafter.

We further make it clear that in event no settlement is entered, it shall be open for the Bank to proceed in accordance with law.

The writ petition is disposed of.

Copy of the order may be given to the learned counsel for the petitioner today on payment of usual charges."

In response to the direction, the petitioner had submitted proposal but the same was turned down by the bank and it had further proceeded under the SARFAESI Act. Once the proposal was turned down by the bank, the petitioner had preferred S.A. No.6 of 2014 before the DRT, Lucknow. In order to appreciate the controversy in hand, whether the proper claim has been set up by the petitioner or not, it would be relevant to extract the relevant paras of the S.A. as under:-

"5. That the said unilateral conversion of the foreign exchange account to India Domestic Loan Account resulted in, unilaterally modifying the terms and conditions of the credit facilities granted to the petitioner. Since the closure of the OBU unit, further resulted in ceasing the privileges to the petitioner to maintain the account in foreign currency, the respondent bank, after closure of the OBU unit started charging the normal domestic rate of interest to the petitioner account as result of which the petitioner was charged at an exorbitant rate of interest i.e. 17.5% p.a. The petitioner's account was converted into "normal packing credit account" converting the petitioner foreign account into Indian Rupee account which resulted into numerous hardships.

6. That it is further submitted that the petitioner at no point of time consented to converting foreign exchange account to the Indian Rupee account, however, the respondent bank without seeking the consent of the petitioner converted their own status from ''OBU unit' to ''industrial finance branch' this causing prejudice to the petitioner by charging the domestic rate of interest @ 17.5% p.a.

7. That the petitioner was surprised to receive the alleged notice u/s 13 (2) of SARFAESI Act, dated 27.11.2010, whereby claiming the outstanding as 1,13,59,128/- as the petitioner's account was declared NPA. The petitioner was further shocked to learn that the respondent bank has charged the exorbitant rate of interest @ 17% p.a. against the Libor rate + 250 bps. The copy of the notice dated 27.11.2010 is annexed as Annexure A-1.

8. That it is pertinent to mention here that the account of the petitioner became allegedly NPA because of charging the exorbitant rate of interest without the consent of the petitioner and change of terms and conditions contrary to the agreement between the parties. Had the respondent charged Libor rate of interest, the petitioner's account would not have been NPA.

9. That the petitioner immediately filed its objection u/s 13 (3) (a) of the SARFAESI Act, inter-alia objecting the conversion of the petitioner foreign exchange account into normal domestic account as well as raised an objection of charging the exorbitant rate of interest. The petitioner categorically raised the objections of closure of OBU branch of the respondent bank and unilaterally transferring of the petitioner account into industrial finance branch. It is further submitted that the said conversion amounts to the novation of contract without consent of the petitioner and thus not enforceable against the petitioner. The copy of the objection u/s 13 (3) (a) is annexed as Annexure A-2.

10. that the petitioner did not receive any response to the objections filed u/s 13 (3) (a) of the SARFAESI Act.

11. That the petitioner had submitted the two properties bearing Plot No.167, NSEZ, Phase-II Noida (U.P.) and bearing Plot No.129G/64, NSEZ, Phase-II, Noida (U.P.) as collateral securities.

12. That after the petitioner filed its objections u/s 13 (3) (a) of the SARFAESI Act, the petitioner was called upon by the respondent bank for settlement and after some negotiation, the petitioner submitted the proposal dated 31.07.2011 wherein petitioner, in order to buy peace agreed for sale of the property bearing Plot No.129G/64, NSEZ, Phase-II, Noida on the terms and conditions that the property may be sold at the prevailing market price which was more than Rs.15000 per sq. yard. It was also agreed that after the sale of the aforesaid property, the respondent bank shall release the second property bearing Plot No.167, NSEZ, Phase-II Noida, as the aforesaid property itself was sufficient to liquidate the outstanding dues of the bank.

13. That the respondent bank further agreed that the bank shall not initiate any proceedings u/s 13 (2) of the SARFAESI Act, with regard to any other assets either hypothecated or mortgaged to the bank. The copy of the proposal dated 31.07.2011 is annexed as Annexure A-3.

14. That the said proposal was duly accepted by the respondent bank and it was conveyed to the petitioner that against the said proposal the bank has valued the reserve price of the property bearing Plot No.129G/64, NSEZ, Phase-II, Noida as Rs.165 lacs and accordingly the bank proceeded with sale of the property in pursuance to the proposal of the petitioner.

15. That to the utter surprise of the petitioner, the petitioner was conveyed that since the bank was unable to sell the property at the reserve price of Rs.165 lacs therefore, the same was reduced to Rs.100 lacs and accordingly the petitioner was made to agree to sell the said property for Rs.1.01 crore (Rupees One Crore and Ten Thousand only). Though the petitioner was surprised however it was conveyed to the petitioner that in order to buy peace and with the understanding to release all other assets including the property bearing Plot No.167, NSEZ, Phase-II, Noida, the petitioner agreed for such sale."

Finally the Presiding Officer, DRT vide order dated 15.4.2014 has rejected the said S.A. only on the pretext that the auction notice dated 12.11.2013 was subjected to challenge in the Writ Petition No.69007 of 2012, the same was disposed of on 13.12.2013 with an observation that in case the petitioner submits an appropriate offer for settlement to the bank before the auction date i.e. 16.12.2013, the same would be considered and if the offer is not satisfied, the bank would be at liberty to proceed according to law. The DRT observed that since the petitioner has already availed the remedy against the action of the bank before the High Court, therefore, the said S.A. (Securitization Application) is not maintainable at this stage and the same was dismissed. The same was also subjected to assail before the DRAT, Allahabad being Appeal No.112 of 2014. While preferring the appeal, detailed averment has been made in the grounds taken by the petitioner and the same are reproduced as under:-

"A) Because, the learned DRT failed to appreciate the fact that the Hon'ble High Court of Allahabad had not disposed of the writ petition filed by the appellant deciding the merits of the case.

B) Because, the learned DRT failed to appreciate the fact that the Hon'ble High Court of Allahabad has not disposed of the writ petition on the ground that the appellant was not entitled to the relief sought.

C) Because, the learned DRT failed to appreciate the fact that before the Hon'ble High Court the contentions of the respondent bank were that the appellant had not approached the bank for settlement and in the light of giving settlement opportunity, the petition was disposed off without getting into the merit of the case.

D) Because, the learned DRT failed to appreciate the law that the principle of resjudicata will not apply to the facts of the present case as the writ petition filed by the appellant was not disposed off on merits by a speaking order.

E) Because, the learned DRT failed to appreciate the fact that till today the objections of the appellant has not been dealt with on merits by any of the forums.

F) Because, the learned DRT failed to appreciate the fact that the respondent bank had not complied with the SARFAESI Rules as contemplated under the SARFAESI Act.

G) Because, the learned DRT failed to appreciate the fact that the respondent bank has breached their promise as per the settlement and is estopped by the principles of promissory estoppel."

Finally the DRAT has turned down the appeal vide impugned order, the relevant portion of which is reproduced as under:-

"........Once the challenge raised by the appellant was entertained in a writ petition and the said petition was disposed of with liberty to the appellant to seek settlement, no Tribunal under the jurisdiction of the said High Court can go contrary to the direction issued by the High Court permitting the bank to go ahead with the sale and confirm the sale if agreement was not reached between the parties.

It will be totally inappropriate for this Tribunal to permit the appellant to reagitate this challenge raised in the writ petition where the Tribunal below or this Tribunal may have to act contrary to the directions issued by the High Court. I, therefore, do not find any fault with the action of the Tribunal in not considering the challenge on those grounds which were available to the appellant when he filed writ petition before the Hon'ble High Court.

There is, however, substance in the submission made by the counsel for the appellant that the Tribunal below at least was required to go into the grounds of challenge to the auction sale which was held on 16.12.2013, as the direction by the High Court to the bank was to act in accordance with law. As per the counsel, he would certainly be entitled to raise a challenge to the auction if the same was vitiated on any ground or was held in violation of the provisions of the statute.

I was inclined to remand the case back to the Tribunal on this aspect to consider the challenge raised by the appellant to the auction and the manner and procedure adopted by the bank to hold this auction sale. The counsel for the bank at this stage would point out that the appellant has not raised any ground of challenge to the auction as such and the only ground of challenge raised in the S.A. was on the basis of notice under section 13 (2) of the SARFAESI Act being bad or the order rejecting the representation being vague etc., which are the grounds raised in the writ petition. The counsel for the appellant could not point out to any pleadings where any challenge has been made to the auction sale except for making a reference to the prayer for setting aside the judgment passed by the Tribunal below. No prayer is even made which can be taken as a challenge to the auction as such. The plea by the counsel for the appellant that the grounds of the challenge as noticed in the impugned order were raised on the basis of pleadings has not impressed me. It was for the appellant to plead that the grounds of violation of conducting this auction sale for which the bank could be put to notice and then the4 issue could have been adjudicated. Since there is no challenge raised to the auction sale and the challenge in the S.A. was on the ground which was raised in the writ petition, no purpose would be achieved or served by remanding the case back to the Tribunal below.

I, therefore, find no merit in the appeal and would dismiss the same."

In the present matter, the petitioner had received financial assistance from the bank against the equitable mortgage of property bearing Plot No.167, NSEZ, Noida and Plot No.129G/64, NSEZ, Noida. He was availing the credit facility from the respondent bank in foreign exchange. The record further revealed that the respondent bank closed the off-shore banking unit (OBU) in NSEZ and converted the same in Industrial Finance Branch. Much emphasis has been placed that in the off-shore banking unit the petitioner was availing lower interest rate than the normal banking norms. Initially an objection was made by the petitioner that after closure of its OBU unit, the respondent bank started charging normal domestic rate of interest and in arbitrary manner the petitioner's account was converted into "normal packing credit account". Finally the respondent bank classified the petitioner's account as NPA on 26th November, 2010 and immediately thereafter on the next day i.e. 27th November, 2010 issued notice under Section 13 (2) of SARFAESI Act, whereby the outstanding amount of Rs.1,13,59,128/- had been shown. In response thereof the petitioner had filed detailed objection under Section 13 (3) (a) of the SARFAESI Act on 25.1.2011 and it is pleaded before this Court that at no point of time the objection so made by the petitioner under Section 13 (3) (a) of the SARFAESI Act has been dealt in detail with cogent reasons by the respondent bank, even though the petitioner just to buy peace had offerred that property bearing Plot No.129-G/64, NSEZ, Noida may be sold at prevailing market price and further requested to the bank for release of the second property bearing Plot No.167, NSEZ, Noida. It is contended that even though initially the reserve price was much higher but the property in question was sold at meager amount of Rs.1.10 crores. In this backdrop, he has approached to the bank for release of the document of second property but in most arbitrary manner the respondent bank had proceeded to issue notice under Section 13 (4) of SARFAESI Act for sale of second property bearing Plot No.167, NSEZ, Noida. The said action has been assailed in Writ Petition No.69007 of 2013. As has been indicated above, the aforementioned writ petition was disposed of asking the petitioner to submit proposal for settlement by 16.12.2013. Admittedly no settlement took place and the bank has proceeded further in the matter. Being aggrieved with the aforesaid sale of the second property, the petitioner preferred an appeal before the DRT, Lucknow for setting aside the sale held on 16.12.2013. The DRT, Lucknow has rejected the appeal. The said order was subjected to challenge before the DRAT but the same was also turned down by the impugned order.

From bare perusal of the order passed by the DRT as well as the DRAT, it is apparent that once Division Bench of this Court had intervened in the matter and directed for settlement of the proposal and once the same was declined, the DRT was of the opinion that the proceeding under Section 13 (2) could not be agitated any further.

It is a well settled position of law that a word or sentence cannot be picked up from a judgment to construe that it is the ratio decidendi on the relevant aspect of the case. It is also a well settled position of law that a judgment cannot be read as a statute and interpreted and applied to fact situations. An eleven Judge Bench of Hon'ble Apex Court in the case of H.H. Maharajadhiraja Madhav Rao Jivaji Rao Scindia Bahadur of Gwalior & Ors. v. Union of India, (1971) 1 SCC 85 held as under:

"It is difficult to regard a word, a clause or a sentence occurring in a judgment of this Court, divorced from its context, as containing a full exposition of the law on a question when the question did not even fall to be answered in that judgment."

The same view was also reiterated by the Apex Court in the case of Commissioner of Income Tax v. Sun Engineering Works (P.) Ltd. (1992) 4 SCC 363. Further, a three Judge Bench of the Apex Court in the case of Union of India v. Dhanawanti Devi & Ors., (1996) 6 SCC 44 held as under:

"9. It is not everything said by a Judge while giving judgment that constitutes a precedent. The only thing in a judge's decision binding a party is the principle upon which the case is decided and for this reason it is important to analyse a decision and isolate from it the ratio decidendi. According to the well-settled theory of precedents, every decision contains three basic postulates - (i) findings of material facts, direct and inferential. An inferential finding of facts is the inference which the Judge draws from the direct, or perceptible facts; (ii) statements of the principles of law applicable to the legal problems disclosed by the facts; and (iii) judgment based on the combined effect of the above. A decision is only an authority for what it actually decides. What is of the essence in a decision is its ratio and not every observation found therein nor what logically follows from the various observations made in the judgment. Every judgment must be read as applicable to the particular facts proved, or assumed to be proved, since the generality of the expressions which may be found there is not intended to be exposition of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found. It would, therefore, be not profitable to extract a sentence here and there from the judgment and to build upon it because the essence of the decision is its ratio and not every observation found therein. The enunciation of the reason or principle on which a question before a court has been decided is alone binding as a precedent. The concrete decision alone is binding between the parties to it, but it is the abstract ratio decidendi, ascertained on a consideration of the judgment in relation to the subject matter of the decision, which alone has the force of law and which, when it is clear what it was, is binding. It is only the principle laid down in the judgment that is binding law under Article 141 of the Constitution. A deliberate judicial decision arrived at after hearing an argument on a question which arises in the case or is put in issue may constitute a precedent, no matter for what reason, and the precedent by long recognition may mature into rule of stare decisis. It is the rule deductible from the application of law to the facts and circumstances of the case which constitutes its ratio decidendi."

In order to understand and appreciate the binding force of a decision it is always necessary to see what were the facts in the case in which the decision was given and what was the point, which had to be decided. As such the concrete decision alone is binding between the parties to it. Therefore, I am of the considered opinion that while disposing of the aforementioned writ petition, at no point of time, the issue was decided by the Division Bench of this Court. The SARFAESI Act itself is a self-contained Act and all remedial measures are given thereunder and in such situation the valuable rights of the petitioner could not be taken away.

In Mardia Chemicals Ltd. & Ors. v. Union of India & Ors., (2004) 4 SCC 311 the Supreme Court upheld the constitutional validity of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) as well as Security Interest (Enforcement) Rules, 2002, except the deposit of 75% as pre-condition of filing the appeal in Debts Recovery Tribunal under Section 17 of the Act. It was held that the proceedings under Section 17 are not an appellate proceedings but rather an initial action, which is brought before a forum prescribed under the Act and is like a suit under the CPC in the Court of first instance.

In Transcore v. Union of India & Anr., (2008) 1 SCC 125 following Mardia Chemical's case the Supreme Court held that it was not necessary to withdraw the DRT application before proceeding under the SARFAESI Act (NPA Act). The object behind both Section 13 of the SARFAESI Act, and Section 17 read with Section 19 of the DRT Act is the same, namely for the recovery of debts. There is no inherent or implied inconsistency between the remedies provided under the two Acts.

The Mardia Chemical's case and Transcore's case were followed by the United Bank of India v. Satyawati Tandon & Ors., (2010) 8 SCC 110 in which the Supreme Court reminded the High Court not to interfere with the proceedings under the SARFAESI Act, in view of alternative remedy provided under Section 17 (1) of the Act, in which expression 'any person' includes even guarantor or any other person, who may be affected by the action taken under Section 13 (4) or Section 14 of the Act.

The DRAT was also of the opinion that at no point of time any proper pleading was made and in the absence thereof no intervention was required in the matter.

A bare perusal of the pleading set up by the petitioner before the DRT as well as before the DRAT, it is patently clear that all sorts of objections were raised by the petitioner for arbitrary action taken by the bank but at no point of time the petitioner's objections under Section 13 (3) (a) have ever been decided on merit by the bank. The order passed by the Division Bench nowhere indicates or suggests that principle of resjudicata would be attracted in the matter.

The SARFAESI Act itself is a self-contained Act and the petitioner had every right to agitate the action so initiated under the SARFAESI Act before the DRT and such valuable rights cannot be denied to the petitioner in such a cursory manner.

In the aforesaid facts and circumstances, the order passed by the DRT as well as the order passed by the DRAT are set aside. The writ petition is allowed. The matter is remitted back to DRT to consider and decide the matter on merits of the case in accordance with law afresh.

Order Date :- 13.09.2017

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