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TMI Blog2021 (12) TMI 173X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of the mortgaged asset, namely, plot No. 66/B-1, Phase-I, IDA Jeedimetla, Quthbullapur Mandal, Medchal Malkajgiri District, Hyderabad, Telangana (hereinafter referred to as the 'Subject Property') as being in violation of the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as the 'SARFAESI Act' and the 'Rules' respectively). 3. Aggrieved by the said judgment, the present appeals have been preferred by M/s. Arce Polymers Private Limited, (for convenience, we would refer M/s. Arce Polymers Private Limited as the 'Second Purchaser') who had purchased the property from the original auction purchaser, namely, Basa Chandramouli; and by the Bank. 4. The impugned judgment had formulated five points for consideration, which read: "(a) Whether the 1st respondent Bank had an obligation to comply with Section 13(3A) of the Act and give a response to the petitioners' representation dt.01.11.2016 and whether the Debts Recovery Tribunal was correct in holding that there was no such obligation on the part of the 1st respondent Bank? (b) Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016 and 6th November 2016 the Borrower wrote letter(s) in which, while accepting defaults and nonpayment, it had enlisted reasons for not being able to adhere to the payment schedule, namely, delay in commencement of production of pharmaceuticals due to the requirement of renewal of licenses from different statutory bodies, and policy changes by M/s. Singareni Collieries Company Limited, their prime customer, disqualifying them from participating in the tenders. The bank was requested to grant further moratorium of twelve months. (vii) The letters dated 1st and 6th November 2016, do not profess being a reply or objection to the notice dated 1st August 2016 issued by the Bank under Section 13(2) of the SARFAESI Act. (viii) On 7th November 2016, the Bank informed the Zonal Manager of the Recovery Management Department, in re the proposal submitted by the Borrower for restructuring the term loan, extension of the moratorium period and induction of fresh capital, with the following stipulations: "Sub : NPA A/c M/s Alphine Pharmaceuticals Pvt Limited - Request for restructuring of Term Loan and extension of moratorium period. Ref : Company Letter dated 06.11.2016. With refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.10 Total 1.87 1.79 1.91 0.10 Company informed that though they are running the unit with low capacity production i.e. Rs. 3 to 4 lakhs per month the fixed expenses and interest charges are amounting to nearly Rs. 5.00 lakhs per month by which they are incurring losses. Company vide their letter dated 06.11.16 informed that they will to remit Rs. 6.00 lakhs by 15th of this month in the OCC account to bring the liability in the OCC account within the limit and infuse Rs. 60.00 lakhs within three months by which the Working capital liquidity problem will be solved and can execute the orders on hand / to be procured. It is also informed that they have approached M/s Singareni Collieries Company Ltd authorities to reconsider the eligibility of the company in participation of tenders as the erst while firm M/s Alphine Pharmaceuticals was acquired by them and converted to limited company. Now the company is requesting us to restructure the Term Loan limit with further gestation of 12 months and is planning to remit Rs. 6.00 lakhs by 15th of this month in the OCC account to bring the liability in the OCC account within the limit and permit them to operate the OCC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l possession of the secured asset on 3rd May 2017 through Advocate Commissioner appointed by the court. (xii) On 1st June 2017, the Bank issued notice under Rule 6(2) read with Rule 8(6) of the Rules informing the Borrower that the Subject Property was being put to auction with a reserve price of Rs. 2,78,10,000/- (Rupees two crores seventy eight lakhs ten thousand only). The Borrower was given an option to repay the amount due along with interest so that the auction could be halted. (xiii) The Borrower did not respond to this letter. It neither protested nor made any payment. (xiv) The auction held on 6th October 2017 did not fructify as no bidder came forward to purchase the Subject Property. (xv) On 20th October 2017, 8th November 2017 and 17th November 2017, the Borrower made representations for regularisation of the account. The last letter dated 17th November 2017 refers to meetings with senior officers of the Bank on 30th October 2017, 6th November 2017 and 8th November 2017 and that the Bank had agreed to restructure the Borrower's account upon furnishing of additional collateral security of Rs. 50,00,000/- (Rupees fifty lakhs only) for which the Borrower had been a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the earlier auctions no bidder had participated, the Bank reduced the reserve price from Rs. 2,78,10,000/- (Rupees two crores seventy eight lakhs ten thousand only) to Rs. 2,60,00,000/- (Rupees two crores sixty lakhs only). Yet again, the Borrower did not respond. It neither questioned the sale notice, the reduction in reserve price, nor made any payment. (xxi) In the auction held on 11th September 2018, two bidders had participated and the Subject Property was sold at a bid price of Rs. 2,91,20,000/- (Rupees two crores ninety one lakhs twenty thousand only) to Basa Chandramouli. On 14th September 2018, sale confirmation letter was issued to Basa Chandramouli. On 27th September 2018, after Basa Chandramouli had made the total payment, the sale certificate was issued. 6. In October 2018, the Borrower approached and filed a petition before the Debts Recovery Tribunal challenging the enforcement proceedings in respect of the Subject Property including all steps taken right from issue of notice under Section 13(2) of the SARFAESI Act. 7. The Debts Recovery Tribunal, Hyderabad by its judgment dated 1st July 2019 dismissed the Borrower's application holding that the Bank had foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the decision of the Bombay High Court in Blue Coast Hotels Limited v. IFCI Limited and Another, 2016 SCC OnLine Bom 2663 which decision on challenge became the subject matter of the appeal and decision of this Court in ITC Ltd. (supra), the High Court held that there is no specific provision or mandate under Section 13(3A) of the SARFAESI Act that the representation of the Borrower to the demand notice under Section 13(2) should be filed within a period of sixty days from the date of notice. The impugned judgment also refers to the letter dated 7th November 2016 to observe that the Chief Manager of the Bank had recommended deferring of action under the SARFAESI Act with the intent that the unit running in the Subject Property should be granted benefit of deferment of action. The Bank had proceeded to issue possession notice on 3rd March 2017 under Section 13(4) of the SARFAESI Act long after receipt of the representations dated 1st/6th November 2016, but without making any reference to the aforesaid representation. Accordingly, on the first point, the High Court concluded that there had been a violation by the Bank of its mandatory statutory duty under Section 13(3A) of the SARFA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor had proceeded to recover the dues. Paragraph 31 and 32 of the decision in ITC Ltd. (supra) record as under: "31. From the above, it is clear that the creditor was induced by the debtor not to take action against them through assurances and promises. The creditor appeared to have entered into negotiations for the settlement of the dues and even accepted cheques in repayment much after the notice [Dated 26-3-2013] under Section 13(2) and after the debtor's letter of representation [Dated 27-5-2013] . Many opportunities were granted by the creditor to the debtor to repay the debt which were all met by proposals for extension of time. Eventually, the debtor even executed "A Letter of Undertaking [On 25-11-2013] " acknowledging the right of IFCI to sell the assets in the case of default. 32. In these circumstances, we have no doubt that the failure to furnish a reply to the representation is not of much significance since we are satisfied that the creditor has undoubtedly considered the representation and the proposal for repayment made therein and has in fact granted sufficient opportunity and time to the debtor to repay the debt without any avail. Therefore, in the fact a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence bars the Borrower from complaining of violation. 15. The question of waiver of mandatory requirement of a statute was considered by this Court in depth in Commissioner of Customs, Mumbai v. Virgo Steels, Bombay and Another, (2002) 4 SCC 316 by referring to a catena of judgments beginning from the judgment of the Privy Council in AL.AR. Vellayan Chettiar (Decd.) and Others v. Government of the Province of Madras, Through the Collector of Ramnad at Madura, and Another AIR 1947 PC 197 wherein it was held that though notice under Section 80 of the Code of Civil Procedure, 1908 is mandatory, the suit would not be bad if the non-issuance of notice is waived by the party for whose benefit the provision has been enacted. Similarly, in S. Raghbir Singh Gill v. S. Gurcharan Singh Tohra and Others, (1980) Supp SCC 53 the argument that the requirement of Section 94 of the Representation of Peoples Act, 1951 cannot be waived was rejected observing that a privilege conferred or a right created by a statute, if it is solely for the benefit of a party, the said party can waive it. However, where a provision enacted is founded on public policy, the courts would be slow to apply the doctrine o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er or injunction which may have been sought." De Smith's Judicial Review, Eigth Edition (2018), at page 1006 Relief may be granted in respect of one aspect and not others. The general approach, therefore, is that a complainant who succeeds in establishing unlawfulness of an action is entitled to a remedial order, but the court has discretion in the sense of determining what is fair and just to do in a particular case. This discretionary aspect of grant of relief even with reference to post litigation events has been highlighted in Beg Raj Singh v. State of U.P. and Others, (2003) 1 SCC 726 wherein it was held as under: " 7. Having heard the learned counsel for the petitioner, as also the learned counsel for the State and the private respondent, we are satisfied that the petition deserves to be allowed. The ordinary rule of litigation is that the rights of the parties stand crystallized on the date of commencement of litigation and the right to relief should be decided by reference to the date on which the petitioner entered the portals of the court. A petitioner, though entitled to relief in law, may yet be denied relief in equity because of subsequent or intervening ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2017, but this did not fructify into an acceptable settlement. The Bank having lost faith could not rely on the Borrower. Only thereafter, the Bank proceeded with the auctions under the SARFAESI Act on 28th March 2018 and 14th June 2018. The Borrower then kept silent. As the earlier auctions failed, the Bank issued notice dated 20th August 2018 informing the Borrower about the fourth auction to be held on 11th September 2018 at a reduced reserve price. The Borrower challenged the actions taken by the Bank after the Subject Property had changed hands and third party interests had been created. Taking into consideration the entire facts of the case, which perspicuously reflect disingenuous conduct on part of the Borrower to gain indulgence, unfulfilled assurances and promises, their unwillingness to pay, and in light of the law laid down by this Court, we are of the view that the Borrower has waived and is estopped from challenging violation of Section 13(3A) of the SARFAESI Act and hence, the first issue is decided in favour of the Bank. Given the aforesaid position, we do not think we are required to examine the second point, i.e. whether in an application under Section 17 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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