Mour Marbles Industries Pvt Ltd ... vs Bank Of India And 2 Ors
2016 Latest Caselaw 1228 Bom

     suresh                                          903-WP-770.2016.doc

              IN THE HIGH COURT OF JUDICATURE AT BOMBAY




                                                                        
                  ORDINARY ORIGINAL CIVIL JURISDICTION
                      WRIT PETITION NO.770 OF 2016




                                                
     1. M/s. Mour Marbles Industries Pvt. Ltd.,
         having its office at 14, Kyeto Industries




                                               
         Estate, Andheri (E), Mumbai-400 059.

     2. Gopallal Madanlal Mour, 
         residing at 501/502, Krishna Alankar




                                    
         CHS Ltd., Tejpal Scheme, Road No.5,
         Vile Parle (E), Mumbai-400 057.
                             
     3. Sanjay Gopallal Mour, 
         residing at 501/502, Krishna Alankar
                            
         CHS Ltd., Tejpal Scheme, Road No.5,
         Vile Parle (E), Mumbai-400 057.

     4. Mrs. Ashadevi Gopallal Mour,
      


         residing at 501/502, Krishna Alankar
         CHS Ltd., Tejpal Scheme, Road No.5,
   



         Vile Parle (E), Mumbai-400 057.                 ....  Petitioners

              - Versus -





     1. Bank of India,
         Sion Branch, 
         29, Amba Bhavan, Sion Circle,
         Mumbai-400 022.





     2. The Authorised Officer,
         Bank of India, Sion Branch,
         29, Amba Bhavan, Sion Circle,
         Mumbai-400 022.

     3. Arvind Mithailal Jain, 
         Indian Inhabitant having his address


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      suresh                                             903-WP-770.2016.doc

        at 1/301, 3rd Floor, Gulshan Bldg.,




                                                                           
        Juhu Cross Road Lane, 
        Andheri West, Mumbai-400 005.                       ....  Respondents




                                                   
     Mr. Pravin Samdani, Senior Counsel with Mr. Mayur
     Khandeparkar & Mr. M.G. Agre i/by Mr. Girish B. Kedia




                                                  
     for the Petitioners.
     Mr. S.U. Kamdar, Senior Counsel with Mr. O.A. Das for 
     Respondent No.1-Bank.
     Mr. Nitin Thakkar, Senior Counsel with Dr. Milind Sathe,




                                        
     Senior Counsel & Mr. Tejpal S. Ingale for Respondent No.3.


                         
                              ig        CORAM: S.C. DHARMADHIKARI &
                                                 G.S. KULKARNI, JJ.

DATE : APRIL 05, 2016

ORAL JUDGMENT (Per S.C. DHARMADHIKARI, J.):

1. This petition under Article 226 of the Constitution of

India is directed against an interim order which has been passed

on 25-2-2016 by the Presiding Officer of the Mumbai Debts

Recovery Tribunal-III, below Exhibit-01 in Securitisation

Application No.77 of 2016.

2. Since we have extensively heard the senior counsel

appearing for the parties and perused the pleadings with their

assistance, we formally admit this petition. Rule. All respondents

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waive service. With their consent, we pass this final order.

3. This order shall be taken as continuation of the

earlier directions issued by us, but so as to complete the chain of

events we are narrating some essential facts.

4. The petitioners before us are a private limited

company and its share-holders/Directors. They had availed of

various credit facilities from the first respondent-Bank and

created mortgage and hypothecation in respect of the properties,

more particularly described in the Schedule annexed and

marked as Annexure-A to the securitisation application.

5. The first respondent to this petition is the Bank of

India, which is a nationalized Bank and the second respondent is

its authorised officer. The third respondent is the auction

purchaser and claiming to have a right vested in him by virtue of

a concluded sale of the immoveable property.

6. The petitioners received a notice under section 13(2)

of the Securitisation and Reconstruction of Financial Assets and

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Enforcement of Security Interest Act, 2002 (for short,

"SARFAESI Act") dated 3-4-2014. The amount demanded

thereunder is Rs.10,83,80,819/-. The petitioners claim to have

paid Rs.90.26 lakhs after receipt of this notice.

7. Be that as it may, we are not concerned with the

factual materials as the matter is still pending before the Debts

Recovery Tribunal, Mumbai. The petitioners claim to have made

a proposal for settlement and on receipt of the same the

respondent-Bank, through its officer, has sought to take formal

possession in respect of residential premises at Vile Parle,

Mumbai and factory premises on 30-4-2015 and 14-5-2015.

8. Thereafter, some meetings are stated to have been

held and the settlement proposal was followed by another letter

of 9-5-2015, under which a sum of Rs.1,00,00,000/- was

deposited/paid by the petitioners through a well-wisher. The

petitioners' proposal was pending and there was some

correspondence. Eventually, on 19-9-2015 a communication

from the Bank, copy of which is at page 45 of the paper-book,

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was received and which, according to the petitioners, stipulates

the amount and dates of payment. The last instalment of Rs.300

lakhs and interest @ 9.95% simple from 15-9-2015 had to be

paid by 31-3-2016. Thereafter, a post-dated cheque was to be

submitted for balance One Time Settlement (OTS) amount on

acceptance of the letter. Thus, the Bank informed the petitioners

that the compromise offer of Rs.10.50 crores towards the

settlement is accepted by the Competent Authority on the terms

and conditions stated in this letter. This letter itself is addressed

without prejudice.

9. The petitioners state that they were in the process of

arranging funds. They were raising funds by meeting some

prospective purchasers and they admitted that they could not

release the instalments as per the letter dated 19-9-2015, but

they were ready and willing to pay the compromise amount

along with interest for the delayed period on or before

31-3-2016.

10. In the meanwhile, action under Section 14 of the

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SARFAESI Act was initiated by filing an application to the

Collector & District Magistrate, Diu and Daman at Silvassa. The

petitioners are also not disputing that a letter was addressed by

the Bank on 23-11-2015 (page 46 of the paper-book) informing

them that if the petitioners failed to pay the stipulated amount

of Rs.200 lakhs within seven days from the date of receipt of

that letter, their compromise proposal will stand revoked and

necessary recourse for recovery of dues will be taken.

11. The petitioners state that they made necessary

attempts but the Bank was unwilling to accommodate them. In

the meanwhile, on 11-1-2016 a notice under Rule 8(6) of the

SARFAESI Rules was issued in respect of the land and building

and factory premises along with open plot of land situated at

Village Naroli, Dadra & Nagar Haveli, Silvassa. Exhibit-J to the

paper-book is a copy of this notice. The petitioners also relied on

on a public notice issued on 15-1-2016, and particularly para 2

thereof to claim that physical possession was not taken by the

Bank in accordance with law, they were intending to dispose of

the property and invited bids and proposal for the same. The

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petitioners claim that they objected to this e-auction, scheduled

on 15-2-2016, by their letter dated 4-2-2016 and asserted that

the physical possession having not been taken, they would be in

a position to clear the dues, as agreed, on or before 31-3-2016.

Then reliance is placed upon a letter dated 6-2-2016, copy of

which is at page 54 of the paper-book, and it states that since

the petitioners have failed to abide by the terms and conditions

of the OTS, that one time settlement proposal is rejected/the

offer in that behalf is revoked. Nothing, therefore, binds the

Bank. However, reliance is placed on para 5 of this letter which,

according to the petitioners, gave them time to pay the dues till

14-2-2016.

12. The petitioners claim that despite their readiness and

willingness, the Bank purported to go ahead with the e-auction.

The Bank has failed to respond to the petitioners' letter dated

16-2-2016. The petitioners also relied upon a personal visit to

the Bank. They also relied upon some arrangement which the

Bank Officer suggested of opening another account in the Sion

Branch of the Bank and to deposit the amount in separate

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Savings Account of the said Bank and upon the offer of one time

settlement being revived and/or considered, the amount will be

accepted by the Bank. The petitioners assert that despite earlier

letters the petitioners were allowed to open such a Bank account

and they have deposited therein a sum of Rs.5 crores on

23-2-2016, much prior to the impugned order.

13.

It is in these circumstances, that the petitioners filed

the securitisation application on 22-2-2016 and an affidavit in

reply was filed by the Bank to the same in which the Bank

claimed that it has sold the factory premises along with the plant

and machinery of the petitioners for Rs.5,42,84,000/- and the

open piece of land for Rs.1,98,90,000/- and the purchasers have

paid the entire consideration of Rs.5,42,84,000/- and part

payment in respect of the open land. Exhibit-O is a copy of this

reply. Thereafter, there is a further affidavit filed by the Bank

and in which, according to the petitioners, the Bank disclosed

the valuation of the properties. The petitioners complain that

though as per the OTS proposal the amount is Rs.9,50,00,000/-

and interest @ 9.95% p.a. for the delayed payment, a sum of

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Rs.5 crores having been deposited, the Bank acted unreasonably

and unfairly. The Presiding Officer, in these circumstances,

should have protected the petitioners. More so, when the

physical possession of the immoveable properties is still with the

petitioners and the same has not been obtained.

14. When this petition was moved on the earlier

occasion, namely, on 8-3-2016, we heard the counsel appearing

for the parties and recorded that a sale certificate which was to

be issued has not been issued. It could not have been issued till

18-3-2016. That is how the petitioners request to continue the

order of protection against dispossession was granted.

15. After having considered this request and noted the

statement of Mr. Samdani, learned senior counsel appearing for

the petitioners, that the Bank can utilise and credit the sum kept

in a no lien account by the petitioners, namely, a sum of

Rs.5 crores and the Bank would not be bound by any condition

imposed by the petitioners on it, each of such conditions are

given up as not pressed. This Court also recorded the statement

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of Mr. Samdani, that on or before 15-3-2016 the petitioners

would be depositing a sum of Rs.1.5 crores with the Bank of

India. It is on this basis that the direction not to issue sale

certificate and no steps be taken to dispossess the petitioners

was issued. That direction was issued in terms of the order

passed on 8-3-2016, and particularly para 8 thereof.

16.

On 23-3-2016 we noted the request of the parties

that the Chairperson of the Debts Recovery Appellate Tribunal,

Mumbai, is not available. If the petitioners desire to approach

that Tribunal, even then the appointment of such Chairperson

being not notified, the request to continue the protection in

terms of the earlier order was considered. The petitioners were

to deposit a sum of Rs.3.47 crores in this Court on or before

2-4-2016.

17. The matter was posted today.

18. Today, we are informed by Mr. Samdani, learned

senior counsel appearing for the petitioners, that a sum of

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Rs.3.47 crores has been deposited by a Pay Order drawn in the

name of the Prothonotary & Senior Master. Mr. Samdani has

submitted that the order passed by the Presiding Officer is

erroneous on facts and in law. The learned Presiding Officer

should have appreciated that there is no compliance with

Section 13(8) of the SARFAESI Act, inasmuch as no physical

possession was taken by the Bank before the sale was

announced. He next submitted that as far as the earnest money

instalments are concerned, the determination thereof is against

a distress value. The sale itself is not held in pursuance of the

Rules nor there is a valuation obtained of the immoveable

properties, as also the moveables. Thus, unless physical

possession is taken, there could have been any sale and

assuming, without admitting, that the same could have been

announced, in any event, the sale without prior valuation is bad

in law. He also submits that the conduct of the Bank is such that

even though the sale certificate has not been issued, it having

been restrained from taking physical possession of the

properties, it does not wish to allow the petitioners to redeem

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the mortgage debt. Although the petitioners have brought in

Rs.10.97 crores, which is the original OTS amount, the

petitioners would also arrange to deposit a sum of Rs.69.97

lakhs, which is the amount said to have been sacrificed by the

Bank. That would be deposited and conditional upon the same

the petitioners should be protected, meaning thereby, the

ad-interim protection by this Court should be continued till the

matter is decided by the Debts Recovery Tribunal.

19. Mr. Kamdar, learned senior counsel appearing for

the respondent-Bank submitted that writ jurisdiction cannot be

utilised to claim revival of a one time settlement proposal, which

has been revoked by the Bank as far back as on 23-11-2015. It

has now come to an end. The petitioners are, admittedly,

defaulters. The defaulters cannot now insist on an opportunity

being given to them to redeem the mortgage debt, that could

not have been sought in the light of Section 13 of the SARFAESI

Act, and particularly the language of sub-section (8) thereof.

Mr. Kamdar emphasised that if the dues of the secured creditors

together with costs, charges and expenses incurred are secured

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at any time before the date fixed for sale or transfer, the secured

assets shall not be sold or transferred by the secured creditors

and no further steps shall be taken by him for transfer or sale of

that secured assets. Mr. Kamdar submits that there were two

valuation reports which were obtained. The petitioners whole

conduct should be evaluated wherein instead of abiding by the

terms and conditions of the OTS, they deposit a sum in a no lien

account, and that too much after the revocation date. Once the

sale is concluded, there is no question of redemption of the debt.

Now only a formal act remains to be completed. There is no

right in the property upon confirmation of the sale. Mr. Kamdar

has submitted that if defaulters are allowed to utilise the Court

process in this manner, that would send a wrong message. Once

the Bank is making a sincere and genuine effort to recover huge

amounts which are outstanding and payable, then, this Court in

its writ jurisdiction should not intervene.

20. Mr. Kamdar has also relied upon the affidavit filed in

reply to the petition, as also the additional affidavit tendered

today. Mr. Kamdar submits that by the additional affidavit, the

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petitioners' attempt to now revive the OTS proposal has been

turned down. Mr. Kamdar submits that an interim order has

been passed by the Presiding Officer and which is based on

relevant and germane factors. There is no prima facie case in

favour of the petitioners nor is there any balance of convenience.

The Bank and the purchaser will suffer irreparable loss and

injury if this Court were to intervene in its discretionary,

equitable jurisdiction at such a belated stage. Consequently, the

writ petition be dismissed.

21. Mr. Thakkar, learned senior counsel appearing for

respondent No.3-auction purchaser relies upon a Judgment of

the Hon'ble Supreme Court in the case of Sagar Mahila

Vidyalaya, Sagar Vs. Pandit Sadashiv Rao Harshe and others,

reported in (1991) 3 SCC 588 to submit that now the sale stands

concluded and confirmed. The issuance of a sale certificate in

favour of the auction purchaser is mandatory but the granting of

this certificate is a ministerial act and not a judicial one. In such

circumstances, no extension can be granted of time to redeem

the debt. The facts as on the date of the sale are relevant and

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once this indicate that all opportunities to settle the dues of the

Bank are offered but they were not available, then, the OTS

cannot be revived. Then the auction purchaser's right also

deserves to be protected. For these reasons, he submits that the

petition be dismissed.

22. We have extensively considered these contentions

only because the petitioners had no opportunity to challenge the

interim order of the Presiding Officer in appeal before the Debts

Recovery Appellate Tribunal. Though such a Tribunal is in

existence at Mumbai, presently it is without any Chairperson.

We have impressed upon the Government in distinct

proceedings that in a City like Mumbai it is extremely important

that appointment to the post of Chairperson should be made

well in advance. If it is anticipated on account of illness or death

of a Chairperson holding the office, then within a reasonable

time of such an event steps ought to be taken and the

Chairperson appointed. We are assured by none other than the

learned Additional Solicitor General in those proceedings that

steps would be taken to appoint a regular Chairperson and in

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the absence thereof, the learned Chairperson from the other

Debts Recovery Appellate Tribunal would hold a sitting in

Mumbai to dispose off urgent cases. Unfortunately, that

Chairperson has also demitted office. Presently, the Debts

Recovery Appellate Tribunals at Mumbai, Delhi and Chennai are

stated to be without such Chairperson and the selection process

is on but the appointment is yet not notified. It is in these

circumstances, that any ad hoc tentative arrangement in the

present matter is bound to prejudice the parties. Once the

remedy under Section 18 of the SARFAESI Act is not available in

the above circumstances, then, it would not be proper for us to

express any conclusive opinion on the rival contentions.

23. However, it is important to bear in mind and the

learned Presiding Officer appears to have missed the same that

this is a case where prima facie arguable issues have been raised.

The learned Presiding Officer had before him affidavits and

pleadings and he has passed an eight page interim order. Rather

he would have been well advised to dispose off the proceedings

themselves and finally. He could have by the process that we are

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now contemplating balanced the rights and equities.

24. The issues that arise for consideration are that there

was admittedly a default by the petitioners, but the Bank was

ready and willing to consider, without prejudice to its legal

rights, a one time settlement proposal. That was conditional.

The terms and conditions thereof are set out in a communication

to the petitioners and equally the OTS amount is determined.

That was to be cleared in instalments. The Bank, on 23-11-2015,

revoked this proposal and which was in any event, according to

it, conditional. Even thereafter what we find is and as rightly

emphasised by Mr. Samdani, correspondence has been

entertained at the behest of the petitioners and the petitioners

were informed that if they abide by their statements made

earlier and make arrangement to deposit an amount by

16-2-2016, no steps would be taken in pursuance of the notice

under Section 13(2) of the SARFAESI Act. The physical

possession of the immoveable property was not taken, and

undisputedly. As to what impact can it have on a sale and which

was conducted on account of the alleged default of the

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petitioners will have to be considered by the Tribunal and

finally. Whether the petitioners are right in their contention that

the sale cannot be announced and finalised when such physical

possession of the immoveable property is not taken, or whether

the Bank is not required to take such steps, must be decided in

the backdrop of the facts and circumstances peculiar to this case

and the applicable legal provisions. Today, even if the Bank

claims that the sale is conclusive and there is no violation of the

legal provisions in that behalf, still it is for the Presiding Officer

to determine whether right of redemption, as claimed by the

petitioners, is lost or whether Section 13(8) can be construed to

mean that such a right is available despite the sale and till there

is a transfer in favour of the auction purchaser of the secured

assets. That transfer prima facie has to be brought about by

issuance of a sale certificate. As far as the legal provisions and

prevalent in the State of Maharashtra are concerned, such a

certificate requires registration. We do not know whether such

provisions as are in force in the State of Maharashtra would

apply to the present sale or not. All these are, as noted above,

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vital issues and which would have to be considered by the

Presiding Officer. Once they are required to be considered and

also the impact of the legal provisions, so also whether the

issuance of such a sale certificate is a ministerial act only or

otherwise, then, we are of the view that the rights and equities

can be balanced and protected by continuing the ad-interim

order passed by this Court which restrains the Bank from issuing

the sale certificate, as also taking physical possession of the

properties, till the Securitisation Application No.77 of 2016 is

heard and disposed off. We order accordingly. We direct that the

learned Presiding Officer to whom this matter is assigned shall

make an endeavour and dispose off the application finally within

a period of three months from the date of receipt of a copy of

this order.

25. Though we continue our earlier orders, we impose

one more condition on the petitioners and that in addition to the

amounts which they have paid/deposited without prejudice to

the rights and contentions of the parties before us, they must

deposit a sum of Rs.70 lakhs within a period of four weeks from

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today. If this condition is complied with, then, our order passed

on 8-3-2016 shall continue and will remain operative till the

securitisation application is disposed off in accordance with law.

A default in compliance with the statement made shall result in

an automatic vacation of our ad-interim protection.

26. We clarify that we have expressed no opinion on any

of the contentions raised before us. They are noted and

emphasised only to determine the issues and which, to our

mind, make out a prima facie case. Since these were arguable

points, we, in order to continue the ad-interim protection have

made certain observations. Each of them would be treated as

tentative and prima facie for the purpose of disposal of the

petition. They shall not bind the Presiding Officer in any

manner. He shall decide the application strictly in accordance

with law.

27. At this stage, Mr. Thakkar, appearing on behalf of

the auction purchaser, states that this Court should incorporate

a condition even on the petitioners if the petitioners demand

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justice. Even their conduct, according to him, should not be free

from any blemish. They should not abuse this order or the

earlier orders and induct somebody else in the property or allow

some third parties the use of the factory premises and the

moveables. He emphasises that the tenor of the petition is such

that money has been raised by the petitioners from some private

parties, stated to be well-wishers, it can very well be that they

have been inducted in the premises.

28. This sentiments are also echoed by Mr. Kamdar.

When all this was put to Mr. Samdani, he stated that the

petitioners have not inducted anybody else in possession of the

properties which are mortgaged to the Bank nor will they

transfer the immoveable properties or the properties which are

the subject-matter of the sale notice, nor induct any third parties

in possession of the same. When we impose such a condition

based on the statement of Mr. Samdani, we direct that within a

period of one week from today the petitioners and each of them

shall file written undertaking in this Court to the above effect

that no third party rights have been created in relation to the

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secured properties or the properties which are the subject-matter

of the sale notice nor would they create any third party rights in

any manner until the proceedings before the Tribunal are

disposed off finally. Let such an undertaking be filed and copies

thereof be duly supplied to the Bank as also to the auction

purchaser. This would be without prejudice to the rights and

contentions of the parties. However, our order passed today

shall be conditional upon furnishing such an undertaking. In

order to enable Mr. Samdani and the petitioners to file such an

undertaking, we would continue our ad-interim order for a

period of ten days. On furnishing of the undertaking, the

ad-interim order would continue till compliance of the condition

to deposit the additional sum of Rs.70 lakhs. If both the

conditions are complied with, the ad-interim order shall

continue to operate as an interim order during the pendency of

the securitisation application.

29. The petitioners shall also implead the auction

purchaser as party respondent to the securitisation application.

The petitioners are also permitted to add grounds to the

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securitisation application in terms of the I.A. No.806 of 2016,

handed in. If this application is on the file of the Tribunal, then

that stands allowed in the above terms. All proceedings and

copies of the amended application shall be served on the

contesting parties within one week from today. We are passing

this order only to avoid multiplicity of proceedings and simply

because both Mr. Kamdar and Mr. Thakkar complain that copy

of this application was never served on them or their clients. If

we allow now this application to be taken up first, that would

only delay the proceedings and to the detriment, particularly of

the interest of the auction purchaser.

30. The Tribunal shall decide the securitisation

application uninfluenced by any of the tentative prima facie

observations in its own order.

31. The writ petition is allowed in the above terms. No costs.

(G.S. KULKARNI, J.) (S.C. DHARMADHIKARI, J.)