Madras High Court
R.Ravichandran vs V.Ayyappan on 1 August, 2023
WP No.7868 of 2023
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 01.08.2023
CORAM
THE HON'BLE MR.SANJAY V.GANGAPURWALA , CHIEF JUSTICE
AND
THE HON'BLE MR.JUSTICE P.D.AUDIKESAVALU
WP No.7868 of 2023
and WMP No.8117 of 2023
R.Ravichandran ... Petitioner
-vs-
1. V.Ayyappan
2. A.Chithra
3. City Union Bank Limited,
Credit Recovery and Management
Department, "Narayana", Administrative
Office, No.24-B, Gandhi Nagar,
Kumbakonam 612 001. ... Respondents
Prayer: Petition filed under Article 226 of the Constitution of India for
issuance of a Writ of Certiorari to call for the records of R.A. (SA)
No.21 of 2022 on the file of the Hon'ble Debt Recovery Appellate
Tribunal, Chennai, preferred against the order of the Debt Recovery
Tribunal III, Chennai, in S.A.No.87 of 2022 dated 20.05.2022 and to
quash the order dated 29.12.2022 in R.A. (SA) No.21 of 2022 on the
file of the Debt Recovery Appellate Tribunal, Chennai.
For the Petitioner : Mr.A.Navaneetha Krishnan
Senior Counsel
for Mr.Pandi Thennavan
For the Respondents : Mr.Om Prakash, Senior Counsel
for M/s.Abitha Banu
for RR 1 and 2
Page 1 of 12
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WP No.7868 of 2023
: Mrs.Anantha Gomathi Murugesan
for R-3
*****
ORDER
(Made by the Hon'ble Chief Justice)
We have heard Mr.A.Navaneetha Krishnan, learned senior
counsel for the petitioner, Mr.Om Prakash, learned senior counsel for
respondent Nos. 1 and 2 and Mrs.Anantha Gomathi Murugesan,
learned counsel for respondent No.3.
2. The petitioner assails the order passed by the Debt Recovery
Appellate Tribunal thereby confirming the judgment and order passed
by the Debts Recovery Tribunal.
3. The present respondent Nos.1 and 2 filed Securitisation
Application bearing No.87 of 2022 before the Debts Recovery Tribunal-
III, Chennai, thereby challenging the sale notice issued by respondent
No.3 herein under the provisions of the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 (in short 'the SARFAESI Act'). The Debts Recovery
Tribunal allowed the same. The present petitioner, who was the
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WP No.7868 of 2023
highest bidder in the auction, aggrieved thereby filed a Securitisation
Appeal bearing No.21 of 2022 before the Debt Recovery Appellate
Tribunal, Chennai. The Debt Recovery Appellate Tribunal, Chennai,
dismissed the appeal. Aggrieved thereby, the present petition.
4. Shorn of details, the facts necessary to decide the present lis
are culled out as under:
The present respondent Nos.1 and 2 are the borrowers and they
had obtained loan from respondent No.3/bank. The account was
declared as a non-performing asset. The bank initiated proceedings
under the provisions of the SARFAESI Act by issuing notices under
Sections 13(2) and 13(4). Thereafter, the bank proceeded to auction
the secured asset of respondent Nos.1 and 2 herein. On or about
01.02.2022, sale was conducted and the present petitioner was
declared as the highest bidder having offered a sum of
Rs.2,52,00,000/- (Rupees two crore fifty two lakhs only). The
petitioner deposited 25% of the amount viz., Rs.64,00,000/- (Rupees
sixty four lakhs only). The petitioner was required to deposit the
remaining 75% within fifteen days. The petitioner sought extension of
time to deposit the amount. The extension was granted to the
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WP No.7868 of 2023
petitioner to deposit the amount till 02.03.2022. The petitioner could
not deposit the amount by 02.03.2022, as such, again applied for
extension of time to deposit the remaining amount and the time was
extended by the bank upto 20.03.2022.
5. On or about 04.03.2022, on an application filed by the present
respondent Nos.1 and 2, the Debts Recovery Tribunal passed an
interim order. The Debts Recovery Tribunal permitted the present
respondent Nos.1 and 2 to deposit a sum of Rs.30,00,000/- (Rupees
thirty lakhs only) to the credit of the borrowers' loan account on or
before 10.03.2022 and on compliance of the same, the respondent
bank was directed to maintain status quo as on the date of the
compliance. The present respondent Nos.1 and 2 were also directed
to deposit a further sum of Rs.35,00,000/- (Rupees thirty five lakhs
only) to the credit of the loan account within three weeks thereof and
in any case not later than 31.03.2022. On compliance of the second
condition, the Debts Recovery Tribunal observed that there shall be an
interim stay of further proceedings under the SARFAESI Act. It
appears that the present respondent Nos.1 and 2 deposited the
amount as directed by the Debts Recovery Tribunal. On 20.05.2022,
the Securitisation Application of the present respondent Nos.1 and 2
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WP No.7868 of 2023
was allowed. It appears that the petitioner deposited an amount of
Rs.1,49,00,000/- (Rupees one crore forty nine lakhs only) on or about
04.03.2022, however, could not deposit the entire amount. He
deposited the remaining amount in his own savings account on
25.03.2022, that is, Rs.1,03,00,000/- (Rupees one crore three lakhs
only). The Debts Recovery Tribunal, under its judgment and order
dated 20.05.2022, allowed the Sarfaesi Application filed by respondent
Nos.1 and 2. In an appeal filed by the present petitioner, the Debt
Recovery Appellate Tribunal confirmed the order of the Debts Recovery
Tribunal and dismissed the appeal.
6. The learned Senior Advocate for the petitioner strenuously
contends that as per Section 13(8) of the SARFAESI Act, the borrower
loses his right to redeem the property after the date of publication of
notice for public auction or inviting quotations or tender from public or
private treaty for transfer by way of lease, assignment or sale of the
secured assets. In the present case, the date of sale was 01.02.2022.
Till that date, no amount was deposited by respondent Nos.1 and 2, as
such, respondent Nos.1 and 2 lost the right to redeem the property.
After the public notice was issued, respondent Nos.1 and 2 could not
have subsequently deposited the amount for redemption of the
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WP No.7868 of 2023
property. The Debts Recovery Tribunal and the Debt Recovery
Appellate Tribunal failed to consider this aspect in proper perspective
and thereby, arrived at an erroneous conclusion. The learned Senior
Advocate for the petitioner to substantiate his contentions, relies upon
the judgment of the Apex Court in a case of ARCE Polymers Private
Limited vs. Alphine Pharmaceuticals Private Limited, reported in
(2022) 2 SCC 221. Relying upon the same, it is contended that the
borrower did not have any right once the public notice has been issued
and the amount is not deposited by the borrower till the issuance of
the public notice. Reliance is also placed on the judgment of the
Kerala High Court in a case of Sree Gokulam Chit and Finance Co.
Pvt. Ltd. vs. Emil and Eric Hospitality Services, reported in
(2021) 6 KLT 673, so also in a case of Shakeena vs. Bank of
India, reported in 2019 SCC OnLine SC 1059.
7. Mr.Om Prakash, learned Senior Advocate for respondent Nos.1
and 2 and the learned counsel for the third respondent/bank support
the judgment passed by the Debt Recovery Appellate Tribunal and
Debts Recovery Tribunal and submit that the petitioner himself had not
deposited the amount and the respondent Nos.1 and 2 complied with
the orders passed by the Debts Recovery Tribunal scrupulously and no
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WP No.7868 of 2023
default was committed by them and as such, the Debts Recovery
Tribunal and the Debt Recovery Appellate Tribunal rightly passed the
orders. It is further submitted by the learned Senior Advocate for the
borrowers (respondent Nos.1 and 2) that the auction sale was also
challenged on the ground that the valuation of the property was much
less. When the loan was obtained by respondent Nos.1 and 2 in the
year 2015, the valuation of the property was Rs.3.15 crores and the
upset price fixed in the year 2022 was Rs.2.40 crores and the said
property was sought to be sold at Rs.2.52 crores. The same is
absolutely illegal. It is further submitted that the right to redeem is
not lost. No right was created in favour of the petitioner as sale
certificate was never executed. Reliance is also placed on the
judgment of the Hyderabad High Court in a case of Concern
Readymix vs. Authorised Officer, reported in (2019) 1 ALT 698
(DB).
8. We have considered the submissions.
9. The Apex Court, in the case of ARCE Polymers Private
Limited (supra) has observed that on 01.08.2016, the bank issued
notice to the borrower under Section 13(2) of the SARFAESI Act calling
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WP No.7868 of 2023
upon the borrower to discharge its liability. Auction was held on
11.09.2018. In October 2018, the borrower approached and filed a
petition before the Debts Recovery Tribunal. The matter was
dismissed by the Debts Recovery Tribunal. The Apex Court, in the said
case, was required to consider the issue as to whether there was a
waiver on the part of the borrower, i.e., whether the borrower had
waived and was estopped from challenging violation of Section 13(3-A)
of the SARFAESI Act. In the said case, the Apex Court observed that
the borrower wrote letters in which it accepted the default of non-
payment and was requesting to grant further moratorium period of 12
months. Promise was made by the borrower to make the payment,
but the payment was not made. The borrower failed to translate its
promise into action and thereby, the bank issued auction notice. It
was in those facts of the case that the Apex Court observed that the
borrower had waived his right. In the case of Sree Gokulam Chit
and Finance Co.Pvt. Ltd. (supra), the learned Single Judge of the
Kerala High Court in the facts of that case observed that on the date of
publication of notice for public auction, the mortgagor loses his right to
redeem the secured asset. The Court observed that the statute has
given a free hand to a secured creditor to enforce any security interest
without the intervention of the Court. In the case of Shakeena vs
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WP No.7868 of 2023
Bank of India (supra), the Court observed that the borrower failed to
make a valid and legal tender to the respondent bank before the issue
of sale certificate on 06.01.2006, much less registration thereof on
18.09.2007.
10. In the present case, it is not disputed that before the present
petitioner could make the entire payment, the respondent Nos.1 and 2
had deposited the amount as per the directions of the Debts Recovery
Tribunal. A sum of Rs.30,00,000/- (Rupees thirty lakhs only) was paid
as per the directions of the Debts Recovery Tribunal before 10.03.2022
and the remaining amount was deposited on 29.03.2022 as per the
directions. Whereas, the petitioner had not deposited the remaining
75% of the amount till 25.03.2022. It needs to be considered that the
bank had extended the period for the present petitioner to deposit the
remaining 75% of the amount till 20.03.2022 in terms of Rule 9(4) of
the Security Interest (Enforcement) Rules, 2002. However, the
petitioner did not deposit the said amount by 20.03.2022, but
deposited the amount in his own savings account on 25.03.2022. The
same was not within the time prescribed by the bank. As per the
interim order, the order of directing the bank to maintain status quo
was only operative and the proceedings of the Sarfaesi were not
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WP No.7868 of 2023
stayed. There was no impediment for the petitioner to deposit the
entire amount by 20.03.2022, i.e., the extended date directed by the
bank. The petitioner faulted therein.
11. The provisions of Section 13(8) of the SARFAESI Act are
incorporated for the benefit of the bank. That is the right available to
the bank as against the borrower. The present petitioner was the
highest bidder. His rights were not conclusive as he had not deposited
the entire amount and the sale certificate is not issued to him. We
could have considered the case of the petitioner had the petitioner
deposited the entire amount within the stipulated period. However,
the petitioner failed to deposit the entire amount. The fact that twice
he sought extension of time to deposit the amount itself is sufficient to
conclude that the petitioner did not have funds at his disposal when he
had bid in the auction.
12. Be that as it may, the Debts Recovery Tribunal and the Debt
Recovery Appellate Tribunal have exercised the discretion in a plausible
manner. The Debts Recovery Tribunal and the Debt Recovery
Appellate Tribunal have exercised discretion in a plausible and
equitable manner and also as no vested right is accrued in favour of
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WP No.7868 of 2023
the present petitioner, we are not inclined to interfere with the
impugned judgment. In view of the same, the judgment of the Debts
Recovery Tribunal and the Debt Recovery Appellate Tribunal with
regard to the refund of amount with interest to the petitioner also is
upheld.
The writ petition as such is disposed of. There will be no order as
to costs. Consequently, connected miscellaneous petition is closed.
(S.V.G., CJ.) (P.D.A., J.)
01.08.2023
Index : Yes/No
Neutral Citation : Yes/No
sra
To
1. The Registrar,
Debts Recovery Tribunal-III,
Chennai.
2. The Registrar,
Debt Recovery Appellate Tribunal,
Chennai.
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WP No.7868 of 2023
THE HON'BLE CHIEF JUSTICE
AND
P.D.AUDIKESAVALU, J.
(sra)
WP No.7868 of 2023
01.08.2023
https://www.mhc.tn.gov.in/judis
