Delhi High Court
Franco Leone Limited And Ors vs Punjab And Sind Bank on 29 October, 2021
$~19
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 29th October, 2021
+ CM(M) 684/2021 & CM No.35081/2021 (for Stay), CM
No.38650/2021 (delay of 2 days in filing rejoinder)
FRANCO LEONE LIMITED AND ORS ..... Petitioners
Through: Mr. Kirti Uppal, Senior Advocate
with Mr. Sidharth Chopra, Mr.
Navneet, Mr. Aditya Awasthi and Ms.
Riya Gulati, Advocates.
versus
PUNJAB AND SIND BANK ..... Respondent
Through: Ms. Seema Gupta, Advocate.
CORAM:
HON'BLE MR. JUSTICE AMIT BANSAL
[VIA VIDEO CONFERENCING]
AMIT BANSAL, J. (Oral)
1. The present petition under Article 227 of the Constitution of India
impugns the auction notice dated 1st September, 2021 and consequential
proceedings emanating therefrom under the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002 (SARFAESI Act).
2. Brief facts leading up to the filing of the present petition are that the
petitioner no.1 (petitioner company), of which petitioners no. 2 to 4 are
directors, availed various credit facilities from the respondent bank. To avail
such credit facilities, the petitioner company had mortgaged 12 properties
Signature Not Verified
Signed By:ARUNA
KANWAR
Signing Date:31.10.2021
17:32:28
with the respondent bank. On 31st March, 2018, the account of the petitioner
company was declared to be Non Performing Asset (NPA) and a demand
notice dated 5th May, 2018 was issued to the petitioners by the respondent
bank under Section 13(2) of the SARFAESI Act, calling upon the petitioners
to make payment of Rs.46,13,45,410.39/-. The petitioners, from 26th
October, 2018 to 31st February, 2020, sought permission of the respondent
bank to sell a few of the properties to repay their dues. Finally, on
24th February, 2021, the petitioners proposed a One Time Settlement (OTS)
payment of Rs.30,00,00,000/- in respect of their dues. In the meanwhile,
consequent to the respondent bank taking steps under Section 13(4) of the
SARFAESI Act to take possession of the mortgaged properties, the
petitioners, vide letter dated 29th November, 2018, handed over possession
of property bearing no. 11786/6, Ground Floor, Sat Nagar, Karol Bagh, New
Delhi-110005. Vide letter dated 23rd August, 2021, the respondent bank
requested the petitioners to improve their OTS proposal to match it with the
Recovery Management Policy of the bank. In response to the letter by the
respondent bank, the petitioners requested a copy of the bank policy to
improve their offer, however, the respondent bank issued the impugned
auction notice dated 1st September, 2021 to sell 8 out of the 12 mortgaged
properties of the petitioners.
3. The present auction notice was challenged by the petitioner by way of
filing a Securitization Application, being SA No.119/2021 before the Debts
Recovery Tribunal-II (DRT) on 24th September, 2021. Notice on the said
application was issued to the bank, returnable for 27th September, 2021. On
27th September, 2021, the Presiding Officer was on leave and the matter was
Signature Not Verified
Signed By:ARUNA
KANWAR
Signing Date:31.10.2021
17:32:28
adjourned to 1st October, 2021. The term of the Presiding Officer ended on
30th September, 2021.
4. Since there was no Presiding Officer available on 1st October, 2021,
the petitioner filed the present petition. The petition was listed before this
Court on 5th October, 2021, when it was adjourned for 6th October, 2021, for
parties to verify whether or not the DRT has a Presiding Officer to hear the
aforesaid SA, when both the parties confirmed that currently there is no
Presiding Officer at any of the Debt Recovery Tribunals in Delhi.
5. Notice was issued in the present petition on 06th October, 2021 and it
was directed that the respondent bank could auction the two properties that
are subject matter of the present petition, however, the sale conformation
was not to be carried till the next date of hearing. Reply and rejoinder have
been filed and both counsels for parties were heard on 28th October, 2021
and 29th October, 2021.
6. It is contended by the learned senior counsel appearing on behalf of
the petitioner that Rule 8(6) and Rule 8(7) of the Security Interest
(Enforcement) Rules, 2002, which are mandatory in nature, have not been
complied with. Reference in this regard has been made to the judgment of
the Supreme Court in Mathew Varghese v. M. Amritha Kumar and Ors.
(2014) 5 SCC 610, to contend that individual notice under Rule 8(6) has to
be given to the borrower and the said provisions are mandatory. Relying
upon the aforesaid judgment, it is submitted that no individual notice in the
present case has been sent to the petitioner. He further states that the auction
notice dated 01st September, 2021 nowhere provides the time and place of
auction. Even though there is a reference in the aforesaid auction notice to
certain newspapers as enclosures, however, the same has not been supplied
Signature Not Verified
Signed By:ARUNA
KANWAR
Signing Date:31.10.2021
17:32:28
to the petitioner.
7. Next, senior counsel for the petitioner has drawn my attention to the
letter dated 23rd August, 2021 of the respondent bank, whereby the One
Time Settlement (OTS) proposal on behalf of the petitioner of
Rs.30,00,00,000/- was rejected and the petitioner was advised to make a
better offer. In response, the petitioner vide letter dated 31st August, 2021
asked the respondent Bank to furnish its policy so that the petitioner could
made a better offer. The said policy referred to in the letter dated 31st
August, 2021 was never provided to the petitioner.
8. Per contra the counsel appearing on behalf of the respondent bank
has drawn attention of this Court to various documents to show that:
(i) the total outstanding amount as on date is more than Rs.72,43,00,000/-,
as noted in the auction notice;
(ii) the petitioners have admitted their account to be NPA vide letter dated
31st August, 2021 and that they would be required to sell the properties to
repay the outstanding amount and therefore, the petitioner could not have
any objection to the respondent bank holding a public auction in which the
petitioner or any other person could also participate;
(iii) the petitioners themselves had handed over the possession of the
Karol Bagh property to the respondent bank, as evidenced from the
communication dated 29th November, 2018. Accordingly, the petitioners
cannot have any objection to the aforesaid properties being auctioned;
(iv) the total loan sanctioned to the petitioner was for a sum of
Rs.44,70,00,000/- which was secured by way of mortgage of 12 properties,
out of which 8 were put for auction and only in respect of two properties,
Signature Not Verified
Signed By:ARUNA
KANWAR
Signing Date:31.10.2021
17:32:28
bids have been received by the respondent bank, namely, properties located
at Karol Bagh and Noida;
(v) the auction notice specifically notes that the newspaper publications in
Financial Express and Jansatta were enclosures to the aforesaid notice. The
relevant portions of the aforesaid newspapers with regard to the said
publication have also been filed with the reply, which gives full detail in
respect of time, place and date of the auction. The aforesaid newspaper
publication was duly sent to the petitioner along with the sale notice;
(vi) it has been admitted in the petition that the auction notice was received
on 04th September, 2021 and nowhere has it been stated that the aforesaid
notice was without enclosures; and,
(vii) Sale banner was also affixed at the two properties in question at Karol
Bagh and Noida and at the residential premises of the petitioners in Meera
Bagh.
9. Attention of this Court has also been drawn to details of the e-auction
proceedings, whereby the highest bids of Rs.42,48,000/- in respect of the
Karol Bagh property and Rs.2,83,65,000/- in respect of the Noida property
have been received, whereas the petitioner has offered only Rs.1,72,51,000/-
in respect of the Noida property. Both the aforesaid bids are in excess of the
reserved price fixed by the respondent bank in respect of the aforesaid
properties.
10. The present petition is being entertained only on account of the non-
functioning of the DRT and the urgency of the relief sought.
11. Having heard the counsels for the parties and having gone through the
record, this Court is not inclined to interfere with the auction process carried
out by the respondent bank.
Signature Not Verified
Signed By:ARUNA
KANWAR
Signing Date:31.10.2021
17:32:28
12. There is merit in the contention of the respondent that all mandatory
provisions of the SARFAESI Act and the rules framed thereunder have been
fully complied with by the respondent bank. There is no reason to
disbelieve the respondent bank that the auction notice along with the
enclosed newspapers was duly sent to the petitioners 30 days before the
auction date. The petitioners themselves in paragraph (v) of the petition, at
page 17 of the electronic file has admitted that the impugned auction notice
dated 01st September, 2021 was received by the petitioner on 04th
September, 2021, which was more than 30 days before the proposed auction
date. Counsel for the petitioner has contended that the said notice was not
accompanied by the newspapers as the date, time and place of the auction
was provided in the said newspaper and not in the aforesaid notice.
However, counsel for the respondent bank is correct in her submission that
if that were the case, then the petitioner ought to have protested about the
non-receipt of the enclosures, since the sale notice specifically mentioned
the enclosures.
13. The photographs filed by the respondent bank along with its reply
clearly demonstrate that the sale banners containing the time, date and place
of auction were duly affixed not only at the properties in question but also at
the residential premises of the petitioners. Therefore, the judgment in
Mathew Varghese (supra) would not come to the aid of the petitioner in the
present case.
14. The fact of the matter is that when the petitioners did not have the
financial resources to repay the bank and wanted to sell the properties in
question to repay the loan of the respondent bank, the petitioners cannot
object to the auction conducted by the respondent bank in respect of the
Signature Not Verified
Signed By:ARUNA
KANWAR
Signing Date:31.10.2021
17:32:28
aforesaid properties. If the petitioners so desired, they could have
participated in the auction. However, the fact remains that they did not
participate in the auction and the price which they were willing to offer in
respect of the said properties was much less than the price fetched in the
auction.
15. As regards the ground taken with respect to non-receipt of the OTS
policy, the counsel for the respondent bank has contended that the said
policy is not a public document and the bank is not bound to disclose the
same. Yet, the relevant portions of the said policy has been reproduced in
the reply filed by the respondent bank before this Court, wherein it is stated
that the objective of the policy is to receive maximum amounts that can be
recovered from the borrower. In the present case, as per the respondent
bank, the amount due currently is more than Rs. 74,00,00,000/-. The sale of
the aforesaid two properties would recover only a sum of Rs.3,26,00,000/-. I
am also informed that after the conclusion of the hearing on 28th October,
2021, a fresh OTS proposal was made on behalf of the petitioners to the
respondent bank. Counsel for the respondent bank, on instructions states
that the said proposal has been rejected by the bank as the same was well
below the amount due.
16. In view of the above, no grounds for interference are made out. The
petition along with the accompanying applications are dismissed.
17. Interim order passed on 6th October, 2021 stands vacated.
AMIT BANSAL, J.
OCTOBER 29, 2021
dk
Signature Not Verified
Signed By:ARUNA
KANWAR
Signing Date:31.10.2021
17:32:28
