Madras High Court
M.Janardhanam vs 3 N.Rajasekar on 15 June, 2021
W.P.No.12554 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 15.06.2021
CORAM :
THE HON'BLE MR.SANJIB BANERJEE, CHIEF JUSTICE
AND
THE HON'BLE MR.JUSTICE SENTHILKUMAR RAMAMOORTHY
W.P.No.12554 of 2021
M.Janardhanam .. Petitioner
Vs
1 The Debt Recovery Appellate Tribunal (DRAT)
rep. by its Registrar
4th Floor, Indian Bank Circle Office
No.55, Ethiraj Salai, Chennai.
2 The Assistant General Manager/
The Authorised Officer
State Bank of India
Stressed Assets Recovery Branch
Red Cross Building, 2nd Floor, No.32
Montieth Road, Egmore
Chennai - 600 008.
3 N.Rajasekar .. Respondents
Prayer: Writ Petition filed under Article 226 of the Constitution of India
for issuance of a Writ of Certiorari to call for the records of the first
respondent, viz., Debt Recovery Appellate Tribunal (DRAT) at
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W.P.No.12554 of 2021
Chennai, culminating in its impugned common order dated
22.3.2021 passed in R.A.(S.A.) Nos.104 and 105 of 2017 and quash
the same.
For Petitioner : Mr.Arun Anbumani
For Respondents : Mr.M.L.Ganesh
for 2nd respondent
: Mr.E.Omprakash
Senior Counsel
for M/s.Karan and Uday
for 3rd respondent
ORDER
(Order of the Court was made by the Hon'ble Chief Justice)
This is another instance of a borrower seeking to delay the
inevitable and cling on to the property furnished by way of security
despite having failed to repay the debt.
2. Indeed, this borrower does not recognise his status as a
borrower and seeks to make a distinction between the persons who
obtained the credit facilities from the secured creditor and the
petitioner herein who furnished the security. In law, however, there is
no distinction as even under the Contract Act, 1872 the liability of a
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W.P.No.12554 of 2021
guarantor is co-extensive with that of a borrower. Further, the
Securitisation and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002 makes no distinction between a principal
debtor and a guarantor and clubs the two together within the fold of
the definition of "borrower".
3. The facts are not in much dispute. A loan was obtained
from the respondent secured creditor in 2006 to the tune of Rs.55
lakh. A land measuring approximately 3.36 acre was furnished by
way of security. The borrowers failed to repay the loan as per the
terms and upon the account turning NPA, the secured creditor
adopted measures under the Act of 2002. On August 1, 2007, a
notice was issued under Section 13(2) of the Act calling upon the
debtors to repay a sum of Rs.65,11,681.50p that was outstanding
as at July 31, 2007. Upon no repayment being made, a possession
notice was issued on September 4, 2008 under Section 13(4) of the
Act. The authorised officer of the secured creditor issued a sale
notice on October 13, 2010 fixing the date of auction on November
18, 2010.
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4. In between, there was a one-time settlement offer that was
made by the bank and the borrowers, true to form, played ducks
and drakes with the secured creditor after depositing a paltry
amount.
5. The secured asset was valued by the secured creditor in
May, 2009. The valuation indicated by the government approved
valuer and chartered engineer was Rs.1.50 crore as the fair market
value and the distress sale value was Rs.1.20 crore.
6. No further valuation of the property was made immediately
prior to the sale notice being issued in October, 2010. It is the
perceived delay of about 17 months between the preparation of the
valuation report and the sale notice that the petitioner sought to
urge as his principal ground to assail the auction sale of the
property. The property was sold at Rs.2.07 crore. The auction-
purchaser is the third respondent herein.
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W.P.No.12554 of 2021
7. There does not appear to be any credible grievance that the
petitioner herein was not aware of the initial notice issued by the
secured creditor under Section 13(2) of the Act or of the
subsequent notice of possession issued under Section 13(4) of the
Act. Indeed, it is evident that the petitioner was aware of the
impending sale as the petitioner had due knowledge of the sale
notice dated October 13, 2010. It is not even the petitioner's case
that after noticing the figures indicated in the sale notice of October
13, 2010, the petitioner protested to the secured creditor or its
authorised officer regarding the valuation of the land or the reserve
price indicated therein. The petitioner did nothing, waited for the
auction to be conducted and, thereafter, challenged the auction sale
by way of proceedings before the Debts Recovery Tribunal. Even
though the principal plank of the petitioner's grievance was that the
property had been sold at a gross undervalue, the petitioner did not
put even the amount at which the sale was conducted on the table
to show the petitioner's bona fides. It must also not be lost sight of
that the petitioner failed to abide by the initial notice of demand
issued under Section 13(2) of the Act and even the subsequent
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W.P.No.12554 of 2021
one-time settlement offer by the bank in early 2010. The wild
goose chase that the petitioner wants to engage the Court in, is of
the petitioner not really being the beneficiary of the credit facilities
and the petitioner having been a party to the transaction only by
furnishing the security. That, however, is of no consequence and
utterly irrelevant in the context.
8. The Debts Recovery Tribunal found in favour of the
petitioner herein. However, the order of such Tribunal dated April
8, 2015 is trifle short on reasons, if there are any reasons to be
found therein at all. The primary ground that weighed with the
Debts Recovery Tribunal appears to be that the secured creditor did
not file a typed-set of documents and, therefore, an adverse
inference had to be drawn against the secured creditor. Such line
of reasoning cannot be appreciated, particularly in the light of the
admitted facts that due notice under Section 13(2) of the Act had
been issued, a further possession notice under Section 13(4) of the
Act was served on the borrowers, and a sale notice was published
on October 13, 2010 before the auction sale was conducted on
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November 18, 2010. In between, there was the one-time
settlement proposal that had been initially accepted by the principal
debtors but was not followed through by making the requisite
payment within the time indicated. In the light of such glaring
facts, the accidental or deliberate omission on the part of the
secured creditor to file a typed-set of documents could not have
made any difference and the Debts Recovery Tribunal appears to
have been moved by irrelevant considerations in setting aside the
auction sale. The conclusion of the Debts Recovery Tribunal that the
secured asset should not have been sold in entirety is unsustainable
in the light of the admitted position that the mortgaged asset was
the entire 3.36 acre of land. Merely because the law enables the
secured creditor to sell the whole or part of the property, a legal
obligation to sub-divide and sell a part of the mortgaged asset
cannot be imposed.
9. The auction-purchaser and the secured creditor carried the
matter in appeals before the Debt Recovery Appellate Tribunal. The
common order impugned was passed on March 22, 2021. The
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Appellate Tribunal noticed that valuation reports of contiguous
properties had been relied upon by the petitioner herein. However,
the Appellate Tribunal found that the secured creditor had duly
obtained a valuation report and there was no material for the
Appellate Tribunal to come to a conclusion that the property had
been sold for a lesser price in a mala fide manner. The Appellate
Tribunal noticed that against the distress valuation of Rs.1.20 crore
as indicated in the valuation report, the property fetched more than
Rs.2 crore. The Appellate Tribunal also observed that the petitioner
herein "never offered or paid the equivalent sum of sale amount or
the total outstanding amount ... either before this Tribunal or to the
Bank."
10. The Appellate Tribunal disregarded the present petitioner's
contention that the property ought to have been divided and sold
and the entirety of the property need not have been put up for sale
since the bank's claim was much less. Indeed, it has to be noticed
that the bank had adjusted its dues out of the sale proceeds
received from the auction-purchaser and had even returned the
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W.P.No.12554 of 2021
balance amount in excess of Rs.80 lakh to the petitioner herein,
which the petitioner refused to accept.
11. In the order impugned dated March 22, 2021, the
Appellate Tribunal held that at or prior to the sale being confirmed
in favour of the auction-purchaser, it was the duty of the borrower
to offer or pay the actual sale amount or the total dues, whichever
was less, to the bank to thwart the sale certificate being made over
and the transaction being concluded. The Tribunal noticed that the
petitioner herein had not resorted to any such course of action. In
the case in hand, not only has the sale certificate been issued, but
the registration has also taken place.
12. The petitioner relies on judgments reported at AIR 2009
Orissa 147 (Swastik Agency v. State Bank of India); AIR 2014 MP
125 (Anita Sadana v. Baljinder Kaur), and (2020) 4 BC 112 (Alpine
Pharmaceuticals Private Limited v. Andhra Bank) to sustain the
grounds urged to have the auction sale annulled and the order
impugned passed by the Debt Recovery Appellate Tribunal set
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aside.
13. In Swastik Agency, the Court observed that the valuation
undertaken by the secured creditor was improper since the offer
received at the auction was more than three times the valuation. It
also appears from paragraph 69 of the report that a further factor
that weighed with the Court was that despite a previous direction to
the secured creditor to reconsider the stand taken by it, the secured
creditor appears to have brushed aside the same and observed that
the sale of the property had already taken place. It is also evident
that the sale notice in that case had not been published in Odia
language and the Court found such failure to be fatal as it deprived
persons not knowing the English language of the opportunity to
participate in the auction.
14. The reasons given in support of the judgment in Swastik
Agency case do not appeal and may not be relevant in the present
context. Though the petitioner emphasises that there was a huge
gap between the date of the valuation report and the actual conduct
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of the sale, a period of 17 months does not appear to be so much of
a hiatus for the valuation report to be found to be obsolete or
irrelevant. At any rate, if such had been the case, the petitioner
herein ought to have been diligent and protested the price fixed or
the reserve price indicated in the sale notice contemporaneously.
In the absence of such measure by the petitioner and further upon
the petitioner failing to put in the much lesser amount that his
property fetched at the auction sale, the challenge to the sale
appears to have been the usual gimmick that borrowers in this
country resort to to make creditors run round in circles and behave
as if it is the debtor's fundamental right not to repay the credit
facilities obtained.
15. As far as the judgment in Anita Sadana case is concerned,
again the reasoning does not appeal, inter alia, on the ground that
the order does not reveal the great change in the valuation for the
Court to find that the distress sale valuation of the property was not
appropriate.
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W.P.No.12554 of 2021
16. As far as the other judgment in Alpine Pharmaceuticals
Private Limited case rendered by the High Court of Telangana is
concerned, the Court in that case found the gap of about six
months between the date of the valuation report and the date of
sale to be enormous. The judgment also does not indicate the
difference in valuation during such period. Ordinarily, a six-month
or even a twenty-month gap between the valuation report and the
conduct of the sale would not be actionable and may not excite a
Court to reject the valuation altogether, unless other cogent
grounds are indicated.
17. In the present case, the petitioner has relied on the
valuations obtained of what the petitioner says to be comparable
and nearby plots. Some of such valuations do, indeed, indicate a
much higher valuation than what had been indicated in the
valuation report that was made the basis of the auction sale by the
secured creditor in this case, but it is evident that the market price
indicated in the relevant documents are comparable to the market
price indicated in the valuation report in the present case. It is also
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W.P.No.12554 of 2021
a matter of which judicial notice has to be taken, that of late it has
become the practice to inflate circle rates with a view to augment
the revenue of the State. At any rate, some of the comparable
prices and figures that the petitioner has cited pertain to smaller
pieces of land and it is common knowledge that the price fetched by
a larger tract of land may not be comparable to the unit price
fetched by a much smaller plot.
18. At the end of the day, it has also to be kept in mind that
there is limited authority which is available to the Court at this
stage. This Court does not sit in appeal over the decision of the
Debt Recovery Appellate Tribunal. The limited scope of judicial
review that is available permits the Court to look into the decision-
making process, rather than the decision itself; unless the decision
appears to be absurd to the meanest mind. The Appellate Tribunal
has taken relevant considerations into account and has given cogent
reasons in support of its order setting aside the order passed by the
Debts Recovery Tribunal. The Appellate Tribunal did not find any
mala fides on the part of the secured creditor. The Appellate
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Tribunal found that the petitioner's conduct was not bona fide and
the petitioner had not put any money on the table either at the
initial stage or at a later stage before even the Appellate Tribunal
for canvassing the fanciful arguments that it carried to such forum.
19. For the reasons aforesaid, the order impugned dated
March 22, 2021 does not appear to be unreasonable or
objectionable. The petitioner had several opportunities to remedy
the breach, inter alia, at the stage of the notice under Section 13(2)
of the Act and subsequently at the stage of the possession being
taken over by the secured creditor and even when the sale notice
was issued or the sale was completed, but the sale certificate was
not issued. True to the expected conduct of an Indian borrower,
the petitioner herein did not reach for his pocket at any of such
stages and cannot now be rescued out of the morass of his own
creation.
W.P.No.12554 of 2021 fails. The petitioner will pay costs
assessed at Rs.20,000/- each to the auction-purchaser and the
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secured creditor. By way of abundant caution, the interim order
passed at the receiving stage of the petition on June 10, 2021
stands vacated and W.M.P.No.13335 of 2021 is dismissed.
(S.B., CJ.) (S.K.R., J.)
15.06.2021
Index : Yes
sasi
To:
1 The Registrar
Debt Recovery Appellate Tribunal (DRAT)
4th Floor, Indian Bank Circle Office
No.55, Ethiraj Salai, Chennai.
2 The Assistant General Manager/
The Authorised Officer
State Bank of India
Stressed Assets Recovery Branch
Red Cross Building, 2nd Floor, No.32
Montieth Road, Egmore
Chennai - 600 008.
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W.P.No.12554 of 2021
THE HON'BLE CHIEF JUSTICE
AND
SENTHILKUMAR RAMAMOORTHY, J.
(sasi)
W.P.No.12554 of 2021
15.06.2021
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