Bombay High Court
Invent Assets Securitisations And ... vs Bank Of Baroda on 8 August, 2024
Author: A.S. Chandurkar
Bench: A.S. Chandurkar
2024:BHC-OS:11923-DB
WPL-22680-2024.doc
BDP-SPS
BHARAT
DASHARATH
PANDIT
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
Digitally signed
by BHARAT
ORDINARY ORIGINAL CIVIL JURISDICTION
DASHARATH
PANDIT
Date: 2024.08.08
15:31:28 +0530
WRIT PETITION (L) NO. 22680 OF 2024
Invest Assets Securitisations & ]
Reconstruction Private Limited ]
Having its office at Bakhtawar, ]
Suite B Ground Floor, Backbay ]
Reclamation Scheme III, 229, Nariman ]
Point, Mumbai - 400 021 ] .... Petitioner.
V/s
1] Bank of Baroda ]
Having its office at Baroda Bhavan, ]
7th Floor, R.C. Dutt Road, Vadodara - ]
399 007, Gujarat, India. ]
]
2] Kemo Steel Industries Private Limited ]
having its office at Unit No.25, 2nd Floor, ]
Eros Metro Mall, Plot No.8, Sector 14, ]
Dwarka New Delhi- 110 078 ]
]
3] Hans Ispat Limited ]
Having its office at A-1 Skylark ]
Apartment, Opposite Jodhpur Police ]
Station, Near Shivranjani Cross Road, ]
Satellite, Ahmedabad 380 015, Gujarat ]
Also At: ]
72, Palodia (Via Thaltej), Ahmedabad - ]
382115, Gujarat ]
And Also At : ]
Survey No.5/P, 9-13, Village Budharmora]
Bhachau-Bhuj Road, Tal Anjar, District: ]
Kutch, Gujarat. ]
]
4] Shailesh Bhandari ]
An adult, Indian inhabitant, residing ]
1/22
::: Uploaded on - 08/08/2024 ::: Downloaded on - 09/08/2024 10:23:10 :::
WPL-22680-2024.doc
at A-1, Skylark Apartment, Opposite ]
Jodhpur Police Station, Near Shivranjani ]
Cross Road, Satellite, Ahmedabad ]
380015, Gujarat ]
]
5] Mukesh Bhandari ]
An adult, Indian inhabitant, residing at ]
A-1, Skylark Apartment, Opposite ]
Jodhpur Police Station, Near Shivranjani ]
Cross Road, Satellite, Ahmedabad- ]
380015, Gujarat ] ........ Respondents.
----
Mr. Ashish Kamat, Senior Advocate a/w. Mr. Mohit Khanna, Mr. Harsh
Behany, Mr. Gaurav Gandhi, Ms. Prachi Sanghvi i/b HN Legal for the
petitioner.
Mr. Bhaskar Sharma, a/w. Mr. Shailesh Pai for the respondent No.1.
Dr. Abhinav Chandrachud a/w. Mr. Charles D'souza i/b Ms. Mumtaz
Khan for the respondent No.2.
Mr. Shubham Dhamnaskar i/b Phoenix Legal for the respondent Nos. 3
and 4.
----
CORAM: A.S. CHANDURKAR & RAJESH S. PATIL, JJ.
Date on which the arguments were heard : 23/07/2024
Date on which the judgment is pronounced: 08/08/2024
JUDGMENT:
(Per A.S. Chandurkar, J.)
1] In this writ petition filed under Articles 226 and 227 of the
Constitution of India, the petitioner - an assignee has raised a
challenge to the order dated 24/06/2024 passed by the Debts Recovery
WPL-22680-2024.doc
Appellate Tribunal, Mumbai (for short, "DRAT") dismissing the appeal
preferred by the assignee and affirming the order passed by the Debts
Recovery Tribunal-I, Ahmedabad (for short, "DRT") on 31/03/2022
thereby confirming the sale notice dated 24/09/2021.
2] Shri Ashish Kamat, the learned Senior Advocate for the assignee
submits that despite a clear direction being issued by this Court to the
DRAT to consider effect of violation of Regulation 37(1) of the Debts
Recovery Tribunal Regulations, 2015 ("the Regulations", for short), the
DRAT failed to consider the said aspect. According to him, the order of
remand passed by this Court in Writ Petition (L) No.30912 of 2023
(Invest Assets Securitisation & Reconstruction Pvt. Ltd. vs. Bank of
Baroda & Ors.) on 18/12/2023 was clear and it was necessary for the
DRAT to consider the effect of non-compliance of the requirements of
Regulation 37(1) of the Regulations. According to him, on a perusal of
Regulation 37 which deals with sale of immovable property, it was clear
that the Recovery Officer ought to first get the immovable property that
is proposed to be sold, valued by an approved valuer. The Recovery
Officer is also required to issue a proclamation of sale of such property
in Form-22. It is only after completing these steps that the Recovery
WPL-22680-2024.doc
Officer is required to fix the reserve price of the property after hearing
the parties and considering the valuation report which cannot be older
than one year alongwith other attending circumstances. Inviting
attention to the order dated 19/09/2019 passed by the Recovery
Officer, it was submitted that without calling for any valuation report
from an approved valuer and without issuing any proclamation of sale
in Form-22, the Recovery Officer proceeded to fix the reserve price of
the property proposed to be sold. The petitioner as an assignee held
pari passu charge alongwith the 1st respondent, - Bank of Baroda ("the
Bank" for short) and hence it was interested in ensuring that the
subject property was properly valued before it was to be sold in
auction. It was urged that the procedure prescribed under Regulation
37(1) was mandatory in nature which was evident from the use of the
expression "shall" in clause (1). Only after obtaining such valuation
report from an approved valuer could the reserve price be fixed. On
the ground that the mandatory requirement of clause (1) of Regulation
37 had not been followed, it was urged that the sale of the subject
property in favour of the 2nd respondent (" the auction purchaser" for
short) ought to be set aside. Despite urging these aspects before the
DRAT, the learned Presiding Officer failed to consider the effect of non-
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compliance of these mandatory provisions before confirming the
auction sale. The specific direction issued by this Court to consider the
legal effect of such non-compliance was completely ignored. The
object behind having the immovable property valued by an approved
valuer was to ensure that it fetches a proper market price. The
approach of the learned Presiding Officer in ignoring this aspect thus
frustrated the object behind directing a de novo consideration of the
entire matter. As a result, the same conclusion as was recorded earlier
by the learned Presiding Officer on 04/08/2023 had been reiterated.
Moreover, the observations made in paragraph 21 of the impugned
order were uncalled for and without any supporting material. To
substantiate his contentions, the learned Senior Advocate placed
reliance on the following decisions:-
(i) Scientific Instruments Co. Ltd. vs. Collector of
Customs (Valuation Section ) and another, AIR
1976 Cal 38.
(ii) ITC Limited vs. Blue Coast Hotels Limited and
others, (2018) 15 SCC 99.
(iii) State of U.P. and others vs. Babu Ram
Upadhya, AIR 1961 SC 751.
(iv) Ram Kishnu and others vs. State of Uttar
Pradesh and others, (2012) 11 SCC 511.
WPL-22680-2024.doc
(v) Dhirendra Nath Gorai vs. Sudhir Chandra
Ghosh and others, AIR 1964 SC 1300.
(vi) Willie (William) Slaney vs. The State of
Madhya Pradesh, AIR 1956 SC 116.
(vii) Chairman-Cum-Managing Director, Coal
India Limited and others vs. Ananta Shah and
others, (2011) 5 SCC 142.
(viii) State of Punjab and others vs. Dr. R. N.
Bhatnagar and another, (1999) 2 SCC 330.
(ix) Bhaskar Sarachi Aloys Ltd. & Anr. vs. Union
of India & Ors., 2012 SCC OnLine Cal 6436.
(x) Union of India and others vs. Kamlakshi
Finance Corporation Ltd., 1992 Supp (1) SCC 443
(xi) Wasting House Saxby Farmer vs. Workmen,
(1973) 2 SCC 150.
(xii) Shivshankara and another vs. H.P. Vedavyasa
Char, 2023 SCC OnLine SC 358.
It was thus urged that the impugned order dated 24/06/2024 passed
by the DRAT was liable to be set aside and consequently the auction
sale of the secured asset was also liable to be set aside as it had been
effected without complying with the provisions of Regulation 37(1) of
the Regulations.
3] Per contra, Dr. Abhinav Chandrachud, the learned counsel
WPL-22680-2024.doc
appearing for the auction purchaser opposed the aforesaid submissions.
According to him, the assignee failed to raise all these contentions that
were being raised now when the reserve price came to be fixed.
Despite being a party to the proceedings before the Recovery Officer no
objection was raised on the ground that the requirements of Regulation
37 had not been satisfied. After the reserve price was fixed by the
Recovery Officer, the same was required to be reduced on three
occasions as there was no response to the auction notices. Even in the
objection dated 20/09/2021 that was raised by the assignee, this aspect
was not raised. Except for stating that the Recovery Officer failed to
obtain a valuation report of an approved valuer, the assignee failed to
substantiate its contention that the reserve price as fixed was on a
lower side. In absence of any contrary material being brought on
record by the assignee before the DRAT, there was no reason to hold
that the reserve price as fixed did not indicate the true market value of
the secured asset. The failure on the part of the assignee in raising any
objection before the Recovery Officer coupled with the enormous delay
in raising this plea disentitled the assignee to any relief whatsoever. It
was pointed out that the auction sale was conducted on 18/11/2021.
After bid of the auction purchaser was accepted, the sale came to be
WPL-22680-2024.doc
confirmed on 04/04/2022. The auction purchaser was put in
possession on 06/04/2022 and a sale certificate was issued to it on
07/04/2022. It is only thereafter that the assignee has sought to
question the auction sale on technical grounds. The fact that the
reserve price was required to be reduced on three occasions in fact
indicated that as no party was willing to bid for reserve price fixed on
the earlier occasions, it was required to be reduced. This factor
weighed in favour of the auction purchaser rather than the assignee.
Since no consequence of the failure to obtain a valuation report from
an approved valuer resulting in non-compliance of Regulation 37(1)
was indicated in the Regulations, it was clear that the requirements
prescribed were directory in nature and not mandatory. It was thus
submitted that the grounds raised by the assignee did not warrant
acceptance and the writ petition was liable to be dismissed.
4] Mr. Bhaskar Sharma, the learned counsel for the Bank also
opposed the writ petition. It was submitted that the challenge as raised
by the assignee based on Regulation 37(1) was by way of an
afterthought and belated in nature. Referring to the proceedings before
the Recovery Officer as well as the DRT, it was submitted that this
WPL-22680-2024.doc
contention was never raised by the assignee any time before. The
assignee accepted the fact that it had pari passu charge alongwith the
Bank and was satisfied with the same. Without sufficient material in
support of such contention, the assignee sought to challenge the
auction sale. In fact, the assignee did not approach the Court with
clean hands. It failed to place on record various orders passed by the
Recovery Officer dealing with objections as raised by it. Referring to
the grounds raised by the assignee in memorandum of appeal that was
filed before the DRAT, it was submitted that the assignee expressed a
mere apprehension that the secured asset was sold at a value below the
market price. The fair market value of the secured asset was not
indicated by the assignee. It was thus submitted that there was no
reason to interfere with the impugned order.
5] Having heard the learned counsel for the parties at length and
having perused the documentary material on record, we are satisfied
that the DRAT by refusing to grant any relief to the assignee did not
commit any irregularity and that there is no case made out to exercise
discretion in favour of the assignee under Articles 226 and 227 of the
Constitution of India. Our reasons for holding so are :
WPL-22680-2024.doc
(a) Failure on the part of the assignee in raising any
objection to the determination of the reserve price
despite participating in the proceedings before the
Recovery Officer disentitles it to any equitable relief.
The reserve price for selling the secured assets through
public auction came to be fixed by the Recovery
Officer at Rs 44.50 crores on 19/09/2019. The
auction conducted however failed in the absence of any
bids. The Recovery Officer thereafter reduced the
reserve price on 18/02/2020 to Rs 42.50 crores. This
auction too failed for want of bids. Yet again on
22/06/2021, the Recovery Officer brought down the
reserve price to Rs 36.40 crores. In absence of requisite
number of bids, this auction too did not go forward. It
is at this stage that the assignee on 23/09/2021 filed its
objection before the Recovery Officer. A perusal of the
said objection indicates that the same is silent with
regard to non-compliance of Regulation 37(1) or the
inadequacy of the reserve price determined. The
objection merely states that though the assignee had a
WPL-22680-2024.doc
prior pari passu charge, the recovery certificate merely
indicated the charge of the certificate holder alone.
These objections filed by the assignee were considered
by the Recovery Officer on 24/09/2021 after which he
passed an order putting the secured asset for auction at
a reserve price of Rs 32.76 crores. The Recovery
Officer then appointed a Court Commissioner on
18/11/2021 for taking inventory. It is thereafter that
the public auction was held in which the bid of the
auction purchaser at Rs 33.03 crores came to be
accepted. The order dated 24/09/2021 passed by the
Recovery Officer as well as his subsequent orders dated
18/11/2021 and 19/11/2021 were challenged by the
assignee before the Gujarat High Court by filing
Special Civil Application No.17750 of 2021. By an
order dated 15/12/2021, the Gujarat High Court
directed the Recovery Officer to decide the objections
raised by the assignee. The Recovery Officer on
20/12/2021 decided the objections raised by the
assignee. Perusal of the said order indicates that the
WPL-22680-2024.doc
assignee again failed to raise any objection before the
Recovery Officer based on non-compliance of
Regulation 37(1). The prayer made by the assignee for
lifting of the attachment and/or recall of the order of
auction was rejected by the Recovery Officer.
It is thus clear that till the auction was held
and the bid of the auction purchaser was accepted, the
assignee failed to raise any objection whatsoever on
the aspect of non-compliance of Regulation 37(1) of
the Regulations. There is no explanation furnished by
the assignee in this regard.
b] Perusal of the order dated 31/03/2022 passed by
the learned Presiding Officer, DRT indicates that even
therein the assignee did not raise the ground that for
failure to follow Regulation 37(1) of the said
Regulations, the manner of determination of the
reserve price was flawed and the auction held
thereafter was vitiated. The only ground urged in the
said proceedings as can be seen from the judgment
WPL-22680-2024.doc
dated 31/03/2022 is based on the pari passu charge of
the assignee over the subject property. This aspect is
further fortified on perusal of the memorandum of
appeal in Appeal No.20 of 2022 that was filed by the
assignee before the DRAT. Paragraph 6.24 thereof
indicates that the only ground raised in this regard by
the assignee is that it had an apprehension that the
subject property had been sold at a value below the
market price. Except for expressing such apprehension,
there is no reference whatsoever to the failure on the
part of the Recovery Officer to take steps under
Regulation 37(1). The contention based on the failure
to act in accordance with Regulation 37(1) was raised
for the first time before the DRAT in appeal. This is
evident from the prayers made in Interim Application
No.355 of 2022 that came to be filed on 25/07/2022
before the DRAT. The prayer for appointing a valuer
from the list of valuers was made on the premise that
the valuation reports relied upon by the Recovery
Officer did not indicate the fair and actual market value
WPL-22680-2024.doc
of the secured assets. There is no grievance raised in
the Interim Application that the reserve price was fixed
by the Recovery Officer ignoring the mandate of
Regulation 37(1) of the Regulations. We therefore find
that the challenge raised by the assignee based on non-
compliance of Regulation 37(1) was raised quite
belatedly and as an afterthought much after
confirmation of the sale on 04/04/2022, delivery of
possession on 06/04/2022 and issuance of sale
certificate to the auction purchaser on 07/04/2022.
The DRAT decided the said appeal on 04/08/2023 and
while dismissing the same observed in paragraph 8 that
there were no pleadings to demonstrate insufficiency of
the reserve price fixed for the property. It is true that
this order passed by the DRAT was challenged by the
assignee in Writ Petition (L) No.30912 of 2023 and on
18/12/2023 the DRAT was directed to decide the
appeal preferred by the assignee on merits including
the argument raised regarding violation of Regulation
37(1) of the said Regulations. In our view, this aspect
WPL-22680-2024.doc
cannot be considered in isolation but has to be viewed
in the totality of the facts and circumstances on record.
The challenge based on Regulation 37(1) has been
raised belatedly by the assignee. In the interregnum,
rights have accrued in favour of the auction purchaser
which aspect weighs against the assignee.
(c) Assuming that compliance with the procedure
prescribed under Regulation 37(1) of the Regulations is
mandatory in nature and that the reserve price came to
be fixed without obtaining report of an approved
valuer, we are of the considered opinion that the
aforesaid requirement is for the benefit of a creditor.
The beneficiary of such mandatory provision can waive
its rights accruing from compliance of the same. Such
waiver in a given case can be inferred from the conduct
of the beneficiary. The Supreme Court in GM, Sri
Siddeshwara Co-operative Bank Ltd & Anr. vs. Sri Ikbal
& Ors., 2013 INSC 556 has held that a mandatory
provision can be waived by a party or parties for whose
WPL-22680-2024.doc
benefit such provision has been made. Whether there
has been waiver or not depends on the facts of the
case. In the aforesaid case, the question with regard to
compliance with the provisions of Rule 9(1) of the
Security Interest (Enforcement) Rules, 2002 which
indicates procedure for sale of an immovable property
and issuance of sale certificate coupled with delivery of
possession was under consideration. Under Rule 9(1)
sale of an immovable property is not permissible prior
to the expiry of thirty days from the date on which a
public notice of sale is published in the news-papers as
required or the notice of sale is served on the borrower.
The public auction therein was conducted prior to
expiry of period of thirty days, 25% of the sale price
was not deposited within the prescribed period and the
balance amount was not paid before expiry of the 15 th
day from the confirmation of sale. In that context it
was held that though the requirement prescribed under
Rule 9(1) was mandatory, the said provision was for
the benefit of the borrower and it could be waived in a
WPL-22680-2024.doc
given case. The borrower therein accepted the
consideration pursuant to the auction sale beyond the
prescribed period and in that context it was held that
the borrower had waived his right under Rule 9(1) as
well as under Rule 9(3) and Rule 9(4) of the said
Rules.
We have noted hereinabove that the assignee
failed to raise any objection to the determination of the
reserve price on the premise that the same had been
fixed ignoring the mandate of Regulation 37(1).
Undisputedly, this provision is for the benefit of
creditor/assignee of creditor. The conduct of the
assignee which is evident from the record clearly
indicates that it failed to raise any objection in this
regard till the auction sale of the subject property was
confirmed, its possession was delivered to the auction
purchaser and a sale certificate was also issued.
Absence of knowledge of Regulation 37(1) also cannot
be claimed by the assignee. Thus having waived the
compliance of a provision which was for its benefit, we
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find that it is too late in the day to now permit the
assignee to raise this objection at this stage of the
proceedings. It may be mentioned that the assignee
has not brought on record any material to indicate that
the reserve price fixed was on the lower side. There is
no valuation report obtained by the assignee to
substantiate its contention in this regard. In these facts
therefore it is not necessary to specifically refer to the
decisions on which reliance was placed by the learned
Senior Advocate for the assignee on the effect of the
use of the word "shall" in Regulation 37(1).
(d) Much emphasis was placed on the order passed
by the co-ordinate Bench on 18/12/2023 in Writ
Petition (L) No.30912 of 2023 preferred by the
assignee to urge that the DRAT failed to adjudicate
upon the contention raised by the assignee as regards
violation of Regulation 37(1). Paragraph 3 of the
order dated 18/12/2023 on which heavy reliance has
been placed reads as under:-
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"3. Once this is the case we are of the view
that we can dispose of the above Writ
Petition by directing the DRAT to decide the
Appeal filed by the Petitioner herein on
merits including the argument raised
regarding the violation of Regulation 37(1)
of the Debts Recovery Tribunal Regulations,
2015."
The aforesaid direction of this Court indicates that the
DRAT was to decide the appeal preferred by the
assignee on merits including the argument based on the
violation of Regulation 37(1) of the said Regulations.
Perusal of the impugned order passed by the DRAT
does indicate that such contention based on the
violation of Regulation 37(1) was urged on behalf of
the assignee. The learned Chairperson noted that the
subject property was sought to be sold on three
occasions but such steps were not successful for want
of bidders. He noted that the assignee failed to raise
any objection to the fixation of the reserve price on
those occasions. It was further held that the assignee
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as well as the borrower had at no point of time
objected to the insufficiency of the price at which the
subject property was sold. It was of the view that
assignee was more anxious than the borrower in
challenging the same so as to enable the borrower to
continue in possession. On this basis the appeal came
to be dismissed.
Though there is substance in the contention raised
by the learned Senior Advocate for the assignee that
the learned Chairperson failed to deal with the effect of
non-compliance of the requirements of Regulation
37(1), we are of the view that the ultimate dismissal of
the appeal does not deserve to be interfered with. The
learned Chairperson has taken into consideration the
failure on the part of the assignee to object to the
reserve price as determined. The fact that the property
could be sold only at the fourth auction has also
weighed with the learned Chairperson. It is on this
basis that no merit was found in the grounds raised by
the assignee. We find that the ultimate conclusion
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recorded is correct and that in the facts of the case
dismissal of the appeal was warranted.
The learned counsel for the auction purchaser
fairly did not contest the contention raised on behalf of
the assignee that the direction issued by this Court of
considering the effect of violation of Regulation 37(1)
was binding on the Chairperson. There can be no
quarrel with the binding effect of such direction issued
by a superior Court as held in Kamalakshi Finance
Corporation Ltd and Scientific Investments Co. Ltd.
(supra). We however do not find that in the facts of
the present case, the impugned order deserves to be set
aside only on the ground that the said contention had
not been specifically dealt with by the DRAT while
dismissing the appeal. As found by us, the assignee by
its conduct had waived the requirement of compliance
with obtaining the report of an approved valuer before
determining the reserve price. It permitted the
property to be sold in auction, sale to be confirmed,
possession to be delivered to the auction purchaser and
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sale certificate to be issued to it after which such
contention was raised. Hence, even on this count we
do not find that there is any reason to interfere with
the impugned order.
6] For all the aforesaid reasons we do not find that the present is
a fit case for this Court to exercise discretion under Articles 226 and
227 of the Constitution of India in favour of the petitioner. The
challenge therefore fails. The writ petition is dismissed with no order
as to costs.
[ RAJESH S. PATIL, J. ] [ A.S. CHANDURKAR, J.]
