Ruchir S/O Sharad Goenka vs Girish S/O Gangadhar Agrawal And ...
2017 Latest Caselaw 4121 Bom

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            IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                      NAGPUR BENCH, NAGPUR

              CIVIL REVISION APPLICATION NO. 115 OF 2014

            Ruchir s/o Sharad Goenka, 
            Aged Adult, Occ.:  Business 
            R/o New Radhakisan Plots, 
            Goenka Nagar, Akola                                                 ....... PETITIONER.
                                                                                         
                       ...V E R S U S...

 1]         Girish s/o Gangadhar Agrawal, 
            Age-Adult, Occ.: Business, 
            R/o Maratha Nagar, Akola, 
            Tq.& District-Akola.

 2]         Vigyan s/o Girish Agrawal, 
            Age- Adult, Occ.: Business, 
            R/o Maratha Nagar, Akola, 
            Tq.& District-Akola.

 3]         Sudhir Ramnivas Gupta, 
            Age-Adult, Occ.: Business, 
            R/o New Radhakisan Plots, 
            Opp. Agrasen Bhavan, Akola, 
            Tq. & District-Akola.

 4]         Satyanarayan Bhagwandasji Goenka, 
            Age-Adult, Occ.: Business, 
            R/o Goenka Nagar, Tq. & District-Akola.

 5]         M/s Baheti Automobiles, 
            A partnership firm, 
            through its partners 
            Kamalkishore Fulchand Baheti

 6]         Kamalkishore Fulchand Baheti, 
            Age-Adult, Occ.: Business

 7]         Ramesh s/o Fulchand Baheti,
            Age-Adult, Occ.: Business




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 8]         Sandeep s/o Kamalkishore Baheti,
            Age-Adult, Occ.: Business 

            No. 5 to 8 R/o Near Shivaji Park
            Akola, Tq. & Dist. Akola.

 9]         Baheti Cycle Company, 
            Through partner 10-16, 
            Having its Business at Tilak Road, 
            Ground Floor, Bombay Lodge Building,
            Akola,Tq. & District-Akola.

 10]        Nitin s/o Ramesh Baheti, 
            Age-Adult, Occ.: Business

 11]  Nilesh s/o Ramesh Baheti, 
      Age-Adult, Occ.: Business

 12]  Yogesh s/o Kalamkishore Baheti, 
      Age-Adult, Occ.: Business

 13]  Sau. Meena w/o Nitin Baheti, 
      Age-Adult, Occ.: Business

 14]  Sau. Neha w/o Nilesh Baheti, 
      Age-Adult, Occ.: Business

 15]  Baheti Enterprises, 
      A Partnership firm, 
      through its partner, 
      Nilesh s/o Ramesh Baheti

 16]  Baheti Mopeds, 
      A partnership firm 
      Though its partner, 
      Chandradevi Kamalkishore Baheti...

                         [CRA is dismissed against R.No.17
                         vide Registrar (J) order dated 
                         28.6.2016].




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            Respondents no. 10 to 16 
            R/o Tilak  Road, Ground floor, 
            Bombay Lodge Building, Akola.

 17]  Subhash Gopisan Gandhi, 
      Age-Adult, Occ.: Business, 
      R/o Old City, Khamgaon, 
      District-Buldhana.

 18]  Baheti Agro Services, 
      C/o Baheti Cycle Company, 
      Tilak Road, Akola.

                       [CRA is dismissed in default
                       against R.Nos. 16, 18 & 19 
                       vide Registrar (J) Order dated 
                       6.9.2016]

 19]  Baheti Agro Services, 
      C/o Baheti Automobiles, 
      (Hero Honda Showroom), 
      R/o Opp. Shivaji Park, Akot Road, 
      Akola,Tq. & District-Akola.

 20]  Kamalkishore Baheti (HUF), 
      through its Karta-Kamalkishore 
      Baheti, Age-Adult, Occ.: Business

 21]  Yogesh Kamalkishore Baheti (HUF) 
      Through its Karta-Yogesh Baheti, 
      Age-Adult, Occ.: Business 
            No. 20 to 21 R/o Opp. Shivaji Park,
            Akot Road, Akola, Tq. & District-Akola.

 22]        Mr. Ramesh s/o Ramkisanji Sarda, 
            Age-Adult, Occ.: Business, 
            R/o Ganesh Talkies Road, 
            R/o Nanded, Tq. & District-Nanded

 23]  Kamalkishore Bhagwandasji Heda, 
      Age-Adult, Occ.: Business, 
      R/o Gavha, Tq. Manora, District-Washim.



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 24]  Tansukh Himmatlal Parekh, 
      Age-Adult, Occ.: Business, 
      R/o Nanabhai Plots, Akola, 
      Tq. & District-Akola

 25]  Satish Mahavirprasad Jhanjhari, 
      Age-Adult, Occ.: Business, 
      R/o New Mondha, Parbhani, 
      Tq. And District-Parbhani.

 26]  The Akola Urban Co-operative Bank Ltd., 
      Through its Authorised Officer, Jankalyan, 
      Behind Government Milk Scheme, 
      Akola.                         .......RESPONDENTS.

 -------------------------------------------------------------------------------------------
          Shri. S. C. Mehadia, Advocate for Appellant.
          Shri. M. G. Sarda, Advocate for Respondent no.1. 
          Shri. P. P. Kothari, Advocate for Respondent no.24. 
          Shri. A. R. Deshpande, Advocate for respondent no.26.


            CORAM:  DR. (SMT.) SHALINI PHANSALKAR-JOSHI, J.

DATE : 6 th JULY, 2017.

ORAL JUDGMENT

Legality, validity and propriety of the order dated

14.10.2014 passed by Principal District Judge, Akola in

Miscellaneous Civil Appeal No. 15/2014 arising out of the order

21.12.2013 passed below Exh.86 in Insolvency Petition No.

1/2008 passed by the Civil Judge, Senior Division, Akola, is

challenged in the Revision.

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2] Brief facts of the revision are to the effect that:

Respondent nos. 1 to 4 herein had filed Insolvency

Petition before trial Court under Section 7 of the Provincial

Insolvency Act, 1920 against respondent Nos. 5 to 17. During

pendency of the said petition, respondent no.1 filed an application

at Exh.86 under Order-I Rule-10 of the Code of Civil Procedure for

addition of party and under Order-VI Rule-17 read with Section

151 of the Code of Civil Procedure for amendment of Insolvency

Petition. It was contended by respondent no.1 that the present

applicant, in collusion with Akola Urban Co-operative Bank

Limited, Akola and the debtors, purchased the property mentioned

in para-13-A of the application, as per sale certificate dated

20.5.2011. It was further alleged that the Akola Urban Co-

operative Bank could not have given go-bye to the insolvency

proceedings and the bank ought to have claimed its dues in

insolvency petition itself. It was further submitted that the said

property was already attached by Sales Tax Department for

recovery of amount of Sales Tax dues. Thus, respondent nos. 5 to

7 in collusion with the Akola urban Co-operative Bank by making

a show of taking action under the provision of the Securitisation

and Reconstruction of Financial Assets and Enforcement of

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Security Interest Act (SARFAESI), 2002, sold the property to the

applicant and hence, it was necessary to join both the applicant

and the Akola bank as party respondents in the insolvency

petition.

3] This application came to be resisted strongly by the

present applicant contending that applicant is a bona fide

purchaser for value and, therefore, the transaction entered into by

him cannot be challenged in insolvency petition. It was submitted

that the property purchased by him in the auction was the secured

asset of the Akola bank and as the debtor M/s Baheti Automobiles

failed to repay the amount of loan, interest etc. to the bank and as

the account became N.P.A., the bank issued notice under Section

13(2) of the SARFAESI Act and Rule-9 of the Security Interest

(Enforcement) Rules, thereby demanding the amount. As the

amount was not paid in pursuance of the notice, the bank has

taken the possession of the property in exercise of powers

conferred on the bank under the provisions of Section 13(2) of the

Securitisation Act. Thereafter, bank published a notice under

Section 8(1) of the Security Interest Rules. That notice was widely

published in the newspaper, as required by law and thereafter

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following due procedure, the bank has sold the property to the

applicant for valuable consideration of Rs. 3.25 crores. An amount

of Rs.16,25,000/- was paid by the applicant towards stamp duty

and Rs.30,000/- towards registration fees. Thus, it was submitted

that the bank has acted within its power to dispose of the

mortgaged property for realization of its dues and the applicant

being the bona fide purchaser of the said property, in the

insolvency petition his transaction of purchase of property cannot

be challenged.

4] Further it was submitted that, as the property was

sold by bank by auction under the provisions of SARFAESI Act, the

jurisdiction of the Civil Court is expressly barred as per Section 34

of the said Act.

5] On this application, the learned trial Court heard both

the parties and by its order dated 21.12.2013 allowed the

application holding that, whether the transaction of the purchase

of the property by applicant was bona fide and in good faith can

be decided only after trial. It was also required to be examined

while deciding the insolvency petition, whether the transfer of

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immovable property was made by the debtor with intent to defeat

or delay his creditors and transferors and hence it was held that

the impleadment of the bank and the applicant was necessary to

resolve the dispute involved in the case.

6] As regards the jurisdiction of the Civil Court, it was

held that as the proceeding was under the provisions of Insolvency

Act, Civil Court alone has jurisdiction to determine the good faith,

bona fides or mala fides, if any, in the transaction whereby the

original respondents have sold the property mortgaged to the

bank. Hence, it was held by the trial Court that presence of the

applicant and the bank was very much necessary.

7] The applicant challenged the said order before the

District Court, Akola by preferring Misc. Appeal No. 15 of 2014.

However, learned first appellate Court rejected the said appeal by

holding that it was for the trial Court to decide whether the

property belonged to the respondents and whether transfer would

be an act of insolvency. It was further held that as the Akola bank

is already made party to the insolvency proceeding and it has not

challenged the said order, for the proper protection of transfer of

the property made in favour of the applicant and to protect the

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rights of the applicant himself his joining as party respondent was

much more necessary and hence, impugned order passed by the

trial Court adding the applicant as party was legal. Accordingly,

the appeal came to be dismissed.

8] While challenging the impugned order passed by trial

Court and the confirmed by the First Appellate Court, learned

counsel for applicant has submitted that, both the Courts below

have failed to properly appreciate the scope of insolvency

proceeding. It is submitted that under the insolvency proceeding

only the voluntary transfers can be challenged under Section 53

the Act and not involuntary transfers of the property, like the

present one, where the Akola bank has attached and sold the

property in auction to applicant for recovery of its dues. It is

submitted that when the applicant is the bona fide purchaser of

property for valuable consideration, his transaction could not be

challenged in insolvency proceeding, hence his becoming party to

the suit is not necessary. Further, it is submitted that as the sale

has taken place under the provision of SARFAESI Act, Civil Court

has no jurisdiction to set aside the auction sale. Hence, according

to learned counsel for the applicant the impugned order passed by

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the trial Court and confirmed by the first appellant Court of

impleading the applicant in the insolvency proceeding as party is

not legal and correct. It is, therefore, required to be quashed and

set aside.

9] Per contra, learned counsel for respondent no.1 has

supported the impugned order of the lower Courts and challenged

the maintainability of Revision itself by submitting that it is

against the order passed under Order-I Rule-10 and Order-VI

Rule-17 of the Code of Civil Procedure. Hence, no Revision can lie

against it. According to him, the reasons which are given by the

trial Court and first appellant Court are sufficient to show that the

presence of the applicant is necessary in the proceeding in order

to protect his interest also, as the Akola bank is already joined in

the proceeding and therefore, according to him, no interference is

warranted in the impugned order of the trial Court, especially

when it is not deciding the rights of the parties finally.

10] In the light of these submissions advanced before me

by learned counsel for the parties, the first and foremost point

arising for my consideration is whether the present revision is

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maintainable because according to learned counsel for respondent

no.1, as the order under Order-I Rule-10 or Order-6 and Ruke-17

CPC does not terminate the proceedings pending before the trial

Court, such order cannot be the subject matter of the revision.

However, in my considered opinion, as rightly submitted by

learned counsel for applicant, so far as applicant is concerned, the

order passed by trial Court and confirmed by the first appellate

Court, has the effect of proceedings against him coming to an end

and therefore, in respect of the applicant, such order can be the

subject of the revision.

11] As per undisputed factual position on record, in order

to recover its dues from the Non Performing Account of M/s

Baheti Automobiles, the Akola Urban Co-operative Bank Limited,

which was a secured creditor of the property has, after adopting

due procedure, as laid down under section 13(4) of the SARFAESI

Act attached the property of M/s Baheti Automobiles and

thereafter issuing and publishing the notice under Rule-8(c) of the

Security Interest Enforcement Rules, sold the paid property by

auction. In the said auction, the applicant has purchased it for

valuable consideration of Rs.2.35 crore. He has also paid the

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requisite stamp duty and registration charges and under the

provisions of SARFAESI Act only, he has become the owner of the

said property. Therefore, transaction under which the applicant

has become the owner of the property is not a voluntary

transaction of sale of property but it is an involuntary transaction

which was conducted by the bank of Akola, to recover its dues

from the debtor- Baheti Automobiles. The question raised for

consideration is whether in such a case, when the transaction is

involuntary or compulsory acquisition of the property by bank and

its sale by the bank is, on the face of it also, bona fide for valuable

consideration, whether such truncation can be the subject matter

of insolvency proceeding?

12] In this respect, the provisions of section 53 of the

Insolvency Act are relevant which are as under:

"53.... Avoidance of voluntarily transfer:

"Any transfer of property not being a transfer made before and in consideration of marriage or made in favour of a purchaser of incumbrancer in good faith or for valuable consideration shall, if the transferor is adjudged insolvent (on a petition presented) within two years after the date of the transfer, be voidable as against the receiver and may be annulled by the Court".

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13] Therefore, it is clear that as per this section, only

voluntary transfer can be the subject matter of insolvency

proceeding, if it is proved that such voluntary transfer was not

made in good faith or for valuable consideration, Involuntary

transfer or compulsory acquisition and auction sale of the property

cannot become subject matter of the insolvency proceeding, even

assuming that there was absence of good faith. The very title of

section 53 suggests that it is applicable to only voluntary transfers.

14 ] Herein the case, the property was sold in auction by

the bank and that too, after following all the requisite procedure

laid down under the provisions of SARFACIE Act. The property

was, also, sold for valuable consideration. In such circumstances,

when the property is not voluntarily transferred, the question of it

being the subject matter of insolvency proceeding does not arise at

all. Such property, which is compulsorily acquired in auction sale,

by following due process of law, therefore, cannot be challenged

or set aside under Section 53 of the Act as the said section speaks

of the avoidance of voluntarily transfers. In these type of

transactions, which are compulsory acquisition and conducted by

auction sale, the Court cannot look into aspect whether it was in

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good faith and for valuable consideration. Those aspects are

already taken care of by the provisions under which the auction

sale has taken place through the authority provided under the

particular law. Here, in the present case, as the property was sold

by the bank and purchased by the applicant under the provisions

of SARFAESI Act, the authorities prescribed under the said Act

had taken proper care to ensure that it is bona fide and for

valuable consideration. Therefore, as the applicant has become

the auction purchaser under the provisions of SARFAESI Act, his

transaction cannot be the subject matter of the Insolvency

Proceedings.

15] In such situation, if transaction itself cannot be

cannot be questioned in insolvency proceeding, there is no question

of joining the applicant in the insolvency proceeding.

16] Moreover, as the applicant has become the owner of

the property by way of auction purchase under the provisions of

SARFAESI Act, the bar under Section 34 of the said Act can

definitely be attracted, if the transaction executed under the

provisions of SARFAESI Act is sought to be challenged before the

Civil Court. The legal position is well settled that section 34 of

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SARFAESI Act contains express bar to the jurisdiction of Civil

Court in respect of challenge to any measures taken under Section

13(4) of the SARFAESI Act. Herein, admittedly, the transaction

was under the provisions of Section 13(4) of the SARFAESI Act.

Hence, the jurisdiction of the Civil Court is expressly barred even

to decide whether the auction sale was in good faith and for

valuable consideration. If at all respondent no.1 has any grievance

about the same, the proper remedy is available to him to

challenge it before the appropriate authority under the SARFAESI

Act but the jurisdiction of the Civil Court cannot be invoked in

view of the express bar contained Section 34 of the SARFAESI Act.

Otherwise, in every auction sale conducted under the provisions of

SARFAESI Act, the jurisdiction of the Civil Court will be invoked,

on the bare averments that the transaction was not in good faith,

and on the plea that, only Civil Court can decide bona fides and

otherwise. The very object and purpose of the SARFAESI Act

would be then frustrated, which has sought to give finality to the

measures taken under the said Act. Therefore, on this count also

the application filed by the respondent no.1 challenging the

transaction of purchase of the property by the applicant should

have been rejected by the trial Court and the first appellate Court.

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17] As regards the submission of learned counsel for

respondent no.1 that in order to give go-bye to the dues by the

Sale Tax Department, the property was sold by Akola bank to the

applicant, in my considered opinion, this contention also cannot

be raised in the Civil Court. As stated above, if respondent no.1 is

having grievance on that score, then he should have raised that

contention when notice under Rule-8 was issued and published.

According to learned counsel for respondent no.1, he has raised

that grievance but nothing has happened which indicates that it

was not found to be worth considering. In such situation when the

Sales Tax Department which has attached the property is also not

making any grievance and when bank of Akola Urban Co-

operative Bank has, after adopting proper procedure sold the

property under SARFAESI Act and the applicant has acquired the

same, as the transaction is involuntary and under the SARFAESI

Act, such tarnation cannot be the subject matter of insolvency

petition.

18] Therefore, the impugned order passed by the trial

Court and confirmed by the First Appellate Court of impleading

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the applicant as necessary party to the proceeding cannot be just,

legal and correct. The Revision therefore, succeeds and allowed.

The impugned order of the trial Court which was

confirmed by the District Court is quashed and set aside to the

extent of applicant as bank of Akola Urban Co-operative Bank

Limited, Akola has not challenged it.

JUDGE

RGIngole