Tax Management India. Com
                            Law and Practice: A Digital eBook ...
TMI - Tax Management India. Com
Case Laws Acts / Rules Notifications Circulars Tariff/ ITC HSN Forms Manuals News SMS Articles Highlights
        Home        
 
Extracts
Home List
← Previous Next →

Hemalatha Ranganathan Versus The Authorised Officer Indian Bank, Chennai

2012 (8) TMI 1098 - MADRAS HIGH COURT

Action sale - Invalid Sale - provisions of the SARFAESI Act - Held that:- In the case on hand, the Authorised Officer conducted the auction proceedings and later issued an order of confirmation, in total violation of the order passed by this Court. As observed by the Supreme Court in All Bengal Excise Licensees' Association [2007 (3) TMI 799 - SUPREME COURT OF INDIA] it is the duty of the Court to set the wrong right and not allow the perpetration of the wrong doing. We, therefore, by following .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r against a dead person, the impugned order passed by the learned Chief Metropolitan Magistrate on such factual background also must be set aside. - Order on the file of the learned Chief Metropolitan Magistrate, Egmore, Chennai is set aside. The learned Chief Metropolitan Magistrate is directed to put the petitioner in vacant possession of the property by deputing the very same Commissioner or another Advocate Commissioner within two weeks from the date of receipt or production of a copy of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Chowdhary K.K.SASIDHARAN, J Introductory: The collusive sale made by the Authorised Officer, Indian Bank in favour of a person, who was not even a bidder and the conduct of auction proceedings, in spite of the stay granted by this Court, restraining the Bank from proceeding further with the sale and the subsequent action taken by the Authorised Officer, to take possession of the property by approaching the learned Chief Metropolitan Magistrate, Egmore, under Section 14 of the Securitisation and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

The sister of the petitioner appears to have mortgaged her limited right in the property bearing Door No.7, M.G. Ramachandran Road, Kalashetra Colony, Besant Nagar, Chennai-90 in favour of the Bank. The Bank later initiated proceedings in O.A.No.1044 of 1999 before the Debts Recovery Tribunal (hereinafter referred to as "DRT") against the borrower and guarantor. The Original Application was allowed on 27 November 2008. Thereafter, the Bank initiated recovery proceedings by issuing not .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

0. During the currency of the interim order of stay granted by DRAT, the Bank issued an auction notice proposing to sell the property on 7 January 2011. This made the petitioner to file a writ petition in W.P.No.354 of 2011 before this Court challenging the auction proceedings. 4. The writ petition came up for consideration on 7 January 2011 and after hearing the counsel for the Bank, the Division Bench was pleased to pass an order directing the DRAT to take up the application in I.A.Nos.1117 an .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, Police and Advocate Commissioner came to the subject premises on 28 July 2011 and made an attempt to take possession of property. This made the petitioner's mother to file a writ petition before this Court in W.P.No.18342 of 2011. This Court having found that possession was illegally taken from Mrs. Rajalakshmi, passed an order on 10 August 2011 directing the Authorised Officer to hand over vacant possession to her. Since the said order was not complied with, the petitioner filed a Contemp .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

etropolitan Magistrate, Egmore, permitting the Bank to take possession of the property from late Rajalakhsmi. The petitioner having found that the Authorised Officer without disclosing the true facts and suppressing material particulars and impleading a dead person obtained an order, filed this writ petition challenging the order dated 22 February 2012 on the file of the Chief Metropolitan Magistraqte. Defense: 7. The Authorised Officer has filed a counter affidavit on 14 June 2012 in answer to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

regarding the name and address of the successful bidder, the amount fetched in the auction and other relevant particulars. The learned counsel further contended that the Authorised Officer by suppressing the material particulars obtained an order from the learned Chief Metropolitan Magistrate and that too in the name of a dead person and as such the order is liable to be quashed. 9. When it was found that the Authorised Officer filed an evasive reply, we directed him to produce the Auction file .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

violation of the mandatory provisions of the SARFAESI Act and the Rules made thereunder besides the terms and conditions of the auction notification issued by the Bank. The Authorised Officer confirmed in the name of a third party, accepted 75% of the sale consideration after a period of eighteen months and ultimately sold the property to yet another person. Discussion: 12. The earlier order passed by the Magistrate was set aside by this Court primarily on the ground that the person in possessio .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tioner in vacant possession of the property. The said order was ultimately complied with after the receipt of notice in the contempt proceedings. 13. Mrs. Rajalakshjmi died thereafter and the petitioner succeeded to the estate. The Authorised Officer, in the meantime, filed a fresh petition before the learned Chief Metropolitan Magistrate in Crl.M.P.No.821 of 2012 under Section 14 of the SARFAESI Act in the name of Mrs. Rajalakshmi, in spite of the fact that she died as early as on 10 December 2 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

h names and addresses :- There were totally (5) five bidders :- The said bidders' details are as follows : 1.R. Ravi Kumar New No.25, Old No.13, Solai Aman Koil Street, Chennai 600 007. 2.R.Jayaraj 882/6, M.T.H. Road, Padi, Chennai 600 050. 3.Mrs.Varalakshmi, W/o B.Kumar No.24/69, Nehru Street, Kanagam, Chennai 600113. 4.S.Kanan Tender submitted without any details (disqualified). 5.B.Subramani 20/62, North Mada Street, Padi, Chennai 600 050. (iii) Name and addresses of successful bidder :- .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ekaran, No.106/A, Kumarappa Mudali Street, Nungambakkam, Chennai 600 034 and accordingly, the sale was confirmed in the name of C.A. S.Manisekaran and a confirmation of sale letter was received by the said C.A. S.Manisekaran and accordingly, the same was acknowledged on 07.01.2011 at 1.25 p.m. (vi) Date on which 25% bid amount was deposited :- Total sum of ₹ 28,75,000/- being the 25% of the bid amount was tendered as follows :- Rs.11,12,000/- was tendered along with tender form as Demand D .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he was required to register the sale certificate. C.A. S.Manisekaran had accordingly paid the balance amount together with interest amount vide cheque dated 11.06.2012 paid a sum of ₹ 1,20,00,000/- to and in favour of Indian Bank, ARMB Hyderabad. C.A. S.Manisekaran, had vide letter dated 11.06.2012 nominated one Mrs.V.Padmavathy, aged about 63 years W/o.Thiru.R.Vadivelu, Old No.5, New No.7, Ganesh Nagar, Anna Nagar, Cuddalore 607 001 and requested to execute the sale certificate of the su .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ate and details of registration: Sale Certificate was registered to and in favour of Mrs.V.Padmavathy, aged about 63 years W/o, Thiru.V.Vadivelu. Old No.5, New No.7, Ganesh Nagar, Anna Nagar, Cuddalore 607 001 on 14.06.2012. x.Whether the property was given possession and if so the person to whom the possession was given : Physical possession of the subject premises was received from the Advocate Commissioner on 14.04.2012 and the same was handed over to the Auction purchaser viz., Mrs.V.Padmava .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

has already been sold in favour of Thiru Manisekaran issued an order appointing an Advocate Commissioner to take possession of the property. 16. Since the Authorised Officer obtained an order from the Magistrate suppressing the material facts, including the basic fact that Thiru Manisekaran never participated in the auction process, we consider it necessary to analyse the entire background facts of this case. 17. The Bank issued a notification on 7 January 2011 proposing to sell the subject prop .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of the standing counsel for the Bank. The auction was conducted at the office of the Bank at Egmore, Chennai hardly four kilometres from the seat of the High Court. In spite of the order restraining the Bank from confirming the bid and the communication of the order by phone by the Standing Counsel for the Bank, the Authorised Officer confirmed the bid in favour of Thiru B. Subramani on 7 January 2011. The learned counsel for the Bank on instructions submitted that the interim order was made kn .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ank to issue the sale certificate in favour of the nominee. The date of the letter was corrected as 7 January 2011. There is no indication as to the actual time of receipt of the said letter by the Authorised Officer. The confirmation letter proceeds as if Thiru S. Manisekaran himself took part in the auction and the sale was concluded in his favour for a sum of ₹ 1,15,00,000/-. The subsequent correspondence exchanged between Thiru S. Manisekarn and the Authorised Officer shows that 75% of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e amount in spite of the ultimatum given by the Bank. The amount was deposited only on 11 June 2012 and it was readily accepted by the Authorised Officer not withstanding the mandatory condition that the amount should be deposited within fifteen days of confirmation. 20. The auction notification issued by the Bank does not contain any provision permitting the successful bidder to nominate a person to take the property after paying the balance amount. Similarly, there was no provision giving disc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

fficer received a letter from Thiru B.Subramani and issued the letter of confirmation in the name of Thiru S.Manisekaran. 22. The conditions of auction, more particularly, clause 23 provides that no time extension for making payment after the stipulated period will be granted nor shall the successful bidder be allowed to make part payments. 23. Clause 40 of the auction notification provides that on confirmation of sale by the Bank and upon payment of the full amount of purchase price, the Author .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

l bidder. 25. The sale is Governed by the provisions of the SARFAESI Act and the Rules made thereunder. "(a) Rule 9(2) of the Security Interest (Enforcement) Rules 2002 provides that the sale shall be confirmed in favour of the purchaser, who has offered the highest sale price in his bid and shall be subject to confirmation by the secured creditor. (b) Rule 9(3) provides that the purchaser shall immediately deposit 25% of the amount of the sale price with the Authorised Officer conducting t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ives power to the Authorised Officer to issue sale certificate indicating the sale of the immovable property in favour of the purchaser as per the form given in Appendix V to the Rules. (f) Rule 9(9) provides that the Authorised Officer shall deliver the property to the purchaser free from encumbrances. " 26. The provisions quoted above clearly gives an indication that the Authorised Officer has no power to issue the order of confirmation or Sale Certificate in favour of the nominee of auct .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ted without further notice. Therefore, it is clear that the Authorised Officer has not reserved any right to extend the time limit for deposit of balance 75% of the bid amount. Even though the order of confirmation was given in favour of Thiru S.Manisekaran on 7 January 2011 and he was directed to pay the balance amount by 22 January 2011, the fact remains that the amount was deposited only on 11 June 2012 and that too after identifying a person to purchase the property. 28. It is therefore, evi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ts Recovery Appellate Tribunal 2011(6) CTC 369, in the context of Rule 57(1) and (2) of II Schedule to the Income Tax Act, 1961 which is made applicable to the sale under the Recovery of Debts Due to Banks and Financial Institutions Act. We made the position clear in paragraph 26 of the said judgment that in case the auction notification does not contain a provision for extension of time for depositing 75% of the amount, the recovery officer has no authority to give further time. Paragraph 26:- .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

iod of 15 days; (iv) in the event the conditions of the sale notice provide for such extension and on the strength of the same if any extension is granted, the same can be tested before the Competent Authority on the ground of arbitrary exercise of power, unjustifiable for extraneous consideration or on the ground of malafide in the given facts and circumstances of the case." 30. The fact that the auction purchaser failed to deposit 75% of the bid amount on or before 22 January 2011 would r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

me, indicates that the payment was made by none other than Mrs. V.Padmavathy. This clearly proves the undue interest shown by the Authorised Officer. 32. The Authorised Officer assisted Thiru S.Manisekaran and Mrs. V.Padmavathy to conduct a profitable real estate business at the cost of Bank and the State Because of the illegal action of the Authorised Officer permitting transfer of sale confirmation and ultimately issuing the Sale Certificate in favour of a total stranger, who never participate .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

informed of the restraint order only at 1.25 p.m. It is therefore clear that at least from 1.25 p.m. on 7January 2011 he had the knowledge of the direction given by this Court. Therefore, in all fairness, he should have maintained the status quo thereafter. However, very strangely in spite of the communication of the order of stay on 7 January 2011, the Authorised Officer accepted the bids, conducted auction among the bidders, recognised the nominee of Thiru B. Subramani and issued the letter o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he Supreme Court in Ram Kishun & Ors. v. State of U.P. & Ors. (2012(5) Scale 673) observed that the Authorised Officers of the Banks should not behave like property dealers and dispose of the secured assets in any unreasonable or arbitrary manner in flagrant violation of the statutory provisions. 35. The present case is a classic example as to how the Authorised Officers of the Banks are dealing with the secured assets, by misusing the enormous power at their command. 36. The Supreme Cou .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ct and Rules made thereunder. 37. The view taken by the Supreme Court in United Bank of India v. Satyawati Tandon (2010 (8) SCC 110) that the action taken under Section 14 of the SARFAESI Act is appealable under Section 17(1) of the Act was reiterated in Kanyalal Lalchand Sachdev v. State of Maharashtra (2011(2) SCC 782. 38. The transfer of property to the third party purchaser was made under Section 13(6) of the SARFAESI Act. The Authorised Officer made a false statement before the Chief Metrop .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of 2012 does not contain any details with regard to the earlier proceedings. Even though the earlier order passed by the Magistrate under Section 14 of the SARFAESI Act was set aside primarily on the ground that the deceased person was shown as a party in possession of the property, the fact remains that the subsequent application in Crl.M.P.No.821 of 2012 was also filed against a dead person. 40. The property was sold on 7 January 2011 presumably for the distress value prevailing as on that dat .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

om the highest bidder to issue the Sale Certificate in favour of a third party. The sale should be confirmed in the name of the highest bidder and not in the name of his nominee. The privity of contract would only be between the successful bidder and the Bank. The sale certificate should be issued only in the name of the successful bidder in whose favour the letter of confirmation was issued. The question of further sale of the property would arise only after registration of the sale certificate .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d order was duly communicated to the learned Chief Metropolitan Magistrate. The Bank thereafter approached the Magistrate with an application in Crl.M.P.No.821 of 2012. The very same learned Magistrate has considered the subsequent application and passed an order on 22 February 2012 appointing an Advocate Commissioner to take possession of property. The learned Magistrate in the factual background of the case should have asked for better particulars from the Bank. The order passed by the learned .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ders under Section 14 of he SARFAESI Act in the routine manner and as a matter of course. The Advocate Commissioners appointed by the Court were given liberty to take the assistance of police, to break open the lock and to take forcible possession of property. The Banks are projecting a case of artificial urgency and need to invoke Section 14 of the SARFAESI Act, without taking independent action to take possession. 44. The Magistrate must be satisfied that the intervention of the Court is neces .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nmates to take the cooked food or uniforms and books of school going children. Therefore, in normal circumstances, it is not necessary to order police protection and permission to break open the lock and similar other drastic steps at the first instance. It is always open to the Magistrate to issue suitable directions to execute the order under Section 14 depending upon the report filed by the Advocate Commissioner after the initial inspection. 45. The Authorised Officer in utter disregard of th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rt passed an interim order to the effect that the parties will be at liberty to process the applications for grant of licences for excise shops but no final selection in respect of such shops shall be made without obtaining specific leave of the Court. However, the excise department issued licences in violation of the interim order passed by the High Court. The matter was thereafter taken up before the High Court by way of a Contempt Petition. The learned Single Judge of the High Court dismissed .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r said: "34. It is settled law that a party to the litigation cannot be allowed to take an unfair advantage by committing breach of an interim order and escape the consequences thereof by pleading misunderstanding and thereafter retain the said advantage gained in breach of the order of the Court. Such violations should be put an end to with an iron hand.......... 38. In the instant case, the respondents have conducted the auction quite contrary to and in violation of an injunction order pa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tice and public interest. 39. As rightly observed by the Full Bench of the Madras High Court in Century Flour Mills Ltd. that as a matter of judicial policy the court should guard against itself being stultified in circumstances like this by holding that it is powerless to undo a wrong done in disobedience of the Court's orders." Invalid Sale: 47. In the case on hand, the Authorised Officer conducted the auction proceedings and later issued an order of confirmation, in total violation o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the Authorised Officer of the Bank violated the mandatory provisions of the SARFAESI Act and the Rules made thereunder and suppressed material particulars and made false statements to take possession of property stating that it was sold to Mr.S.Manisekaran not withstanding the fact that he was not a bidder and obtained an order against a dead person, the impugned order passed by the learned Chief Metropolitan Magistrate on such factual background also must be set aside. Conclusion: 49. In the r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

Discussion Forum
what is new what is new
 


|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.