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2011 (6) TMI 974

..... ishnan, Sr. Counsel for M.V. Venkataseshan, Adv. for R1 and R2 and N. Murugesan, Adv. for R3 JUDGMENT A. Arumugasamy, J. 1. The present writ appeal is filed against the order dated 21.02.2011 passed by a learned Single Judge in W.P. (MD) No. 325 of 2007. The private Respondents in the writ petition are the Appellants herein. 2. The above said writ petition was filed seeking a writ of declaration that the sale certificate issued by the third Respondent bank is null and void and to restore the Petitioners' properties to them. 3. The writ Petitioners are the owners of M/s. Suruthi Fabrics and Pandias Garment Factory extending over 5.51 acres of land which have been pledged in favour of R3-bank authorities to obtain Working Capital Loan and Export Bill Discounting. The Appellants herein/R1 and R2 in the writ petition are the purchasers of the mortgaged property under private treaty. 4. The admitted facts which are necessary for deciding this case are as under: The writ Petitioners mortgaged their property with the third Respondent bank as security for the loan obtained by them. However, they committed default in repayment of the loan. To recover that amount, on 08.06.2005, a notice .....

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..... R3-bank authorities did not inform about the private sale under the "Treaty" agreement. According to the Appellants, under the private negotiation, they have agreed to purchase the property on 08.12.2006 and in pursuance of the agreement, they have paid the sale amount on 15.12.2006. Thereafter, they obtained the sale certificate. Therefore, the issuance of Sale Certificate is in accordance with law. 6. The writ Petitioners have sent a letter dated 11.12.2006 to the third Respondent bank seeking time to make payment and the relevant portion of the said order reads as under: REQUISITION FOR GRANT of TIME PERMISSION FOR SIX MONTHS Please refer to my letter dated 11 Sep 2006. with due regards I express my gratitude for having been considered my all request as per the above quoted letter. As committed by me and with you due concurrence, I have sold the machineries of M/s. Suruthi Fabrices for a cost of ₹ 41 lakhs and the Bus and furnitures for a cost of ₹ 1 laks. In total the sale proceeds of both a sum of ₹ 42 laksh been remitted by me to you on 11 Sep 2006. The Balance dues towards the immovable assets of M/s. Suruthi Fabrics and M/s. Pandiays remains S .....

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..... ted below: Proceedings of the joint meeting held on 08.12.2006 for the sale of the Assets of M/s. Suruthi Fabrics & M/s. Pandyas through Resolution Agents M/s. Ge-Winn Management, Chennai under SARFAESI Act, 2002, Rule of 13. VENUE Branch Premises at AGM's cabin @ 2.00 p.m. .. Referring to the above in the presence of the undersigned it has been decided to effect the sale to M/s. Susee Auutomobiles Pvt. Ltd., Madurai and Smt. Nirmala Jeyabalan, W/o. Shri Jayabalan, No. 4, S.V. Nagar, S.S. Colony, Madurai for a consideration of ₹ 123.10 lakhs (Rupees one crore twenty three lakhs and ten thousand only) against the reserve price of ₹ 123 lakhs and issue Sale Certificate for registration under private treaty. Consequent to issuance of the sale certificate forceful possession had also been taken. 9. Under such circumstances, the writ Petitioners had filed the writ petition seeking to set aside the sale certificate issued by the third Respondent bank and the writ petition has been allowed holding that the writ Petitioners shall return the amount of ₹ 1.41 crores to the Appellants with interest at 9% per annum from April 2007 and that on such payment being made, .....

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..... dia? )Whether the consent letter given by the Petitioners would tantamount to consent or authorisation in favour of the bank authorities to go for private negotiation without knowledge of the writ Petitioners? )Whether the writ Petitioners were duly represented by GE-WINN MANAGEMENT & Company and the SARFAESI Rules 8(5) and 8(8) have been followed? 14. Coming to the first point as to whether the writ Petitioners can invoke Article 226 of the Constitution of India, learned Senior Counsel for the Appellants contended that the debtors / the writ Petitioners herein have straight away invoked the Extraordinary Jurisdiction under Article 226 of the Constitution of India by way of writ, however the SARFAESI Act itself provides a rule to file an application before the competent forum. Hence he prayed that it has to be held that this Court has No. jurisdiction to entertain the matter and sought for dismissal of the writ petition. 15. Learned Senior Counsel for the writ Petitioners / R1 and R2 herein contended that the impugned order came to be passed by way of a reasoned order in the writ petition filed by the writ Petitioners noting that there was gross violation of the principles of n .....

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..... of suppression of facts. He relied on the judgment of the Hon'ble Supreme Court reported in (2010) 2 SCC 114 Dalip Singh v. State of Uttar Pradesh and others, wherein it has been held as under: 20. We have heard the learned Counsel for the parties and scrutinised the record. In our opinion, the appeal is liable to be dismissed only on the ground that the tenure-holder Shri Praveen Singh did not state correct facts in the application filed by him on 8-7-1976 before the prescribed authority for setting aside the ex parte order and the Appellant did not approach the High Court with clean hands inasmuch as, by making a misleading statement in Para 3 of the writ petition, an impression was created that the tenure-holder did not know of the proceedings initiated by the prescribed authority. 18. Learned Senior Counsel for the Appellants relied on the judgment of the Hon'ble Supreme Court reported in AIR 1999 SC 22 Whirlpool Corporation v. Registrar of Trade Marks Mumbai, wherein it has been held as under: 20. Much water has since flown beneath the bridge, but there has been No. corrosive effect on these decisions which though old, continue to hold the field with the result that l .....

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..... ion and after due enquiry, dismissal was followed. Even though an alternative remedy was available, without availing the same, the employer filed a petition before the High Court under Article 226 of the Constitution of India. It has been held that in cases of such nature, alternative remedy will not be a bar to maintainability, and availing of the writ jurisdiction can be entertained. It has been further held that once a writ petition is entertained and determined on merits by High Court, the appellate Court would not, except in rare cases, interfere therewith on the ground of existence of alternative remedy. Even though it has been held that this Court can exercise its jurisdiction / discretion under Article 226 of the Constitution of India, it had arisen under different circumstances. Anyhow, this principle will not be applicable for the present facts of the case. 22. The third judgment that has been relied on by the learned Senior Counsel for R1 and R2 is the one rendered by this Court reported in (2005) 4 M.L.J. 262 MSS Wakf Board College Madurai v. Haji M. Mohamed Ali Jinnah). In this judgment it has been held that when the plea of alternative remedy was not taken before the .....

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..... le, 8(8) notice has been served to the respective parties. 26. The seventh judgment that has been relied on by the learned Counsel for R1 and R2 is the decision of the Hon'ble Supreme Court in the case of Harbanslal Sahnia and Anr. v. Indian Oil Corporation Limited (2003) 2 SCC 107), wherein it has been held that the rule of exclusion of writ jurisdiction by availability of an alternative remedy is only discretionary and it is the discretion of the Court to exercise its powers and not by compulsion. 27. Therefore, from these judicial pronouncements, it is clear that depending upon the facts and circumstances of each case, one has to apply the point of law. In the present set of facts of the case, the writ petition has been filed without going before the DRT. However it is the emphatic case of the writ Petitioners that there is a gross violation of the principles of natural justice citing non-compliance of the Rule and such aspect has also been demonstrated before this Court. Further it is pertinent to note that the earlier batch of writ petitions filed by the parties, subsequently, has been not pressed and those issues in the writ petitions are not the subject matter of the pre .....

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..... bove in the presence of the undersigned it has been decided to effect the sale to M/s. Susee Automobiles Pvt. Ltd., Madurai and Smt. Nirmala Jeyabalan, W/o. Shri Jayabalan, No. 4, S.V. Nagar, S.S. Colony, Madurai for a consideration of ₹ 123.10 lakhs (Rupees one crore twenty three lakhs and ten thousand only) against the reserve price of ₹ 123 lakhs and issue Sale Certificate for registration under private treaty. it is seen that as per the private treaty only, the sale certificate has been issued and the properties of the writ Petitioners have been declared in favour of the Appellants. 33. The first question for our consideration is as to what are the formalities to be adopted when invoking private treaty and effecting a sale on that basis. In this connection, it would be worthwhile to refer to Rule 8(5) of the Security Interest (Enforcement) Rules, 2000 which reads thus: 5. Before effecting the sale of the immovable property referred to in Sub-rule (1) of Rule 9, the authorised officer shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor, fix the reserve price of the property and may sell the whole or any part of .....

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..... and this deviation from the procedure, undoubtedly, goes to the root of the matter. It is very painful to note that the writ Petitioners have given a letter for private negotiation. Under such circumstance, a Nationalised Bank sold one's property under the guise of treaty without any written treaty from the debtors. It is also not known under what authority the Bank Manager has sold the mortgaged property just for ₹ 10,000/-higher than the upset price to satisfy Section 9(2) of the Act believing that this Court will not generally interfere in the DRT cases. The Bank Manager has exceeded his authority for the reasons best known to him. Hence, in this case, the third Respondent bank, a quasi judicial authority, has miserably failed to exercise the powers as contemplated under the SARFAESI Act as expected by the law. When such is the case, the Writ Court has every jurisdiction to exercise its power under Article 226 of the Constitution of India. In such view of that matter, we are of the considered view that the Writ Court has the power to deal with this matter and the same has been rightly exercised by learned Single Judge. Hence, we have No. hesitation to hold that the gro .....

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..... interest at the rate of 9% per annum from April 2007. 36. As discussed earlier, the bank authorities have not properly exercised their jurisdiction and not followed the procedure contemplated under Rule 8(5) and Rule 8(8) of the Security Interest (Enforcement) Amendment Rules, 2007. We are really at a loss to understand as to how on 08.12.2006, all of a sudden, the Appellants have come forward with the money and paid the same and gone away with the auction property for just ₹ 10,000/-over and above the upset price, to satisfy the requirement of Section 9(2) of the SARFAESI Act. Therefore, this aspect would certainly give room to suspect the bona fides of the bank authorities and to hold that they have not properly and fairly exercised their jurisdiction. If really on 08.12.2006, the bank officials were not inclined to grant time for the writ Petitioners to make payment, the next option open to the bank authorities is only to hold a public auction or to obtain quotations from persons dealing with similar secured assets or otherwise interested in buying such assets or by private treaty. But, as already discussed, we are of the considered opinion that it is not established befo .....

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