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TMI Blog2018 (12) TMI 1987X X X X Extracts X X X X X X X X Extracts X X X X ..... ance to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the "SARFAESI Act"), has deposited the entire bid amount at the auction held on 28.06.2017, yet the possession of the property has not been handed over to him, despite lapse of nearly one and a half year and level best efforts made by him. 4. It has been submitted by the Counsel for the petitioner that the petitioner has participated in the e-auction sale in respect of property "land Plot No. 384 M, House No. 12/2, measuring 3060 sq.ft., situated at Village - Payagipur, Pargana - Meeranpur, Tehsil - Sadar, District - Sultanpur" in the name of Vinod Kumar Pandey s/o Shri Ram Murti Pandey, against recovery of sum of Rs. 31,89,156/- with interest expenses thereon due on M/s Farmer Agro Traders through its proprietor Vijay Kumar Pandey. In the auction notice dated 25.5.2-17, the reserve price of the property was fixed as Rs. 60 Lacs. The petitioner with an intention to participate in auction proceedings deposited Rs. 6 lakhs known as Earnest Money Deposit (hereinafter referred to as "EMD") with the opposite party number 2, through a cheque bearin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which provides for refund of EMD/Sale Proceeds in Part or Full. The relevant portion of the Policy reads as under:- "If under noted exceptional conditions bank can consider refund of EMD/sale proceeds deposited by the successful bidder. a. If any defect is found in the title of the mortgager of the property under sale. b. If bank is not able to deliver physical possession of the property beyond 6 months from the auction date due to restrain/conditional order passed by Court/DRT or any other valid reasons justifying such refund. c. To comply with the DRT/Court orders" 10. Counsel for the petitioner has emphasized and relied upon the aforesaid Policy and submitted that the respondents have failed to deliver physical possession of the property for last one and a half year without any valid reason and justification and therefore, as per Policy of the respondent Bank, the petitioner is entitled for refund of the entire amount with damages. 11. Rebutting the allegations of the petitioner, the Counsel for the Bank has submitted that the petitioner is not entitled for the reliefs as sought for by the petitioner and submitted that petitioner has an equally efficacious alterna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lows:- a. That property situated at land Plot No. 384 M, House No. 12/2, measuring 3060 sq.ft., situated at Village - Payagipur, Pargana - Meeranpur, Tehsil - Sadar, District - Sultanpur of one Vinod Kumar Pandey was sought to be auctioned by the respondent bank to realize outstanding loan amount of Rs.31,89,580/- b. The symbolic possession of the said property was taken on 27/01/2017 and a sale notice was published in 2 newspapers on 25/05/2017 fixing 28/06/2017 for auction. c. The petitioner deposited the Earnest Money of Rs. 6 lakhs, by means of cheque number 000862 entitling him to participate in the said auction. d. The petitioner participated in the auction proceedings which were held on 28/06/2017, and his bid for Rs. 60 lakhs was declared as highest and successful by the respondent bank. e. As per terms and conditions of the auction, the petitioner deposited the balance of 25% of the bid amount i.e Rs. 9 lakhs on the same day, and deposited 75% of the remaining amount i.e Rs.44,40,000/-on 12/07/2017 and also Rs. 60,000 in income tax office on 15/07/2017, in this way the entire auction price of Rs.60.00 lakhs was paid within the time prescribed. f. Till date the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the measures taken by the bank referred to in sub-section 4 of Section 13. 19. Even if, it is assuming that an application under the present set of the circumstances was maintainable before the Debt Recovery Tribunal (hereinafter referred to as "the DRT"), the powers of the DRT in this regard have been spelt out in sub-section (2) to subsection (7) of SARFAESI Act , which would inadequate to redress the grievance of the petitioner in the present circumstances. Section 17 of the SARFAESI Act is reproduced as follows:- "17. Application against measures to recover secured debts.- (1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, may make an application along with such fee, as may be prescribed, to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measure had been taken. Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower. Explanation- For the removal of doubts, it is hereby declared that the comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one or more of the measures specified under sub-section (4) of section 13 to recover his secured debt. (4A) Where- (i) any person, in an application under subsection (1), claims any tenancy or leasehold rights upon the secured asset, the Debt Recovery Tribunal, after examining the facts of the case and evidence produced by the parties in relation to such claims shall, for the purpose of enforcement of security interest, have the jurisdiction to examine whether lease or tenancy,- (a) has expired or stood determined; or (b) is contrary to section 65A of the Transfer of Property Act, 1882 (4 of 1882); or (c) is contrary to terms of mortgage; or (d) is created after the issuance of notice of default and demand by the Bank under sub-section (2) of section 13 of the Act; and (ii) the Debt Recovery Tribunal is satisfied that tenancy right or leasehold rights claimed in secured asset falls under the sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause (d) of clause (i), then notwithstanding anything to the contrary contained in any other law for the time being in force, the Debt Recovery Tribunal may pass such order as it deems fit in accordance with the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase may be and pass any such other direction as it becomes appropriate and necessary in relation to any of the recourse taken by secured creditor under sub- section (4) of Section 13. 21. The manner and procedure, in which the secured assets have to be disposed of, has been detailed in the Rules, 2002, and especially in Rule 8 and 9 of the said Rules. For ready reference Rule 8 and 9 are quoted below:- "8. Sale of immovable secured assets.- (1) Where the secured asset is an immovable property, the authorised officer shall take or cause to be taken possession, by delivering a possession notice prepared as nearly as possible in Appendix IV to these rules, to the borrower and by affixing the possession notice on the outer door or at such conspicuous place of the property. (2) The possession notice as referred to in sub-rule (1) shall also be published in two leading newspapers, one in vernacular language having sufficient circulation in that locality, by the authorised officer. (3) In the event of possession of immovable property is actually taken by the authorised officer, such property shall be kept in his own custody or in the custody of any person authorised or appointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sale, issues of sale certificate and delivery of possession, etc.- (1) No sale of immovable property under these rules shall take place before the expiry of thirty days from the date on which the public notice of sale is published in newspapers as referred to in the proviso to sub-rule (6) or notice of sale has been served to the borrower. (2) The sale shall be confirmed in favour of the purchaser who has offered the highest sale price in his bid or tender or quotation or offer to the authorised officer and shall be subject to confirmation by the secured creditor: Provided that no sale under this rule shall be confirmed, if the amount offered by sale price is less than the reserve price, specified under sub-rule (5) of rule 9: Provided further that if the authorised officer fails to obtain a price higher than the reserve price, he may, with the consent of the borrower and the secured creditor effect the sale at such price. (3) On every sale of immovable property, the purchaser shall immediately pay a deposit of twenty-five per cent. of the amount of the sale price, to the authorised officer conducting the sale and in default of such deposit, the property shall forthwit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... custody of any other person appointed by him, and it shall be his duty to take steps for preservation and protection of the secured interest. The rules further provides for obtaining the valuation of the property by the approved valuer and the secured asset also to fix reserve price of property by methods provided for in sub rule (5) by obtaining quotations, tenders, public auctions or by private treaty, and in case the secured asset is being sold by inviting tenders or holding public auction the secured creditor shall have the notice published in two leading newspapers having sufficient circulation clearly stating the terms for sale including description of the immovable property to be sold, the detail of encumbrances known to the secured creditor, the reserve price and place of public auction, deposit of earnest money, and any other thing which the Authorised Officer considers it material for a purchaser to know in order to judge the nature and value of the property. 24. Rule 9 of the aforesaid Rules provides for time of sale, issue of sale certificate and delivery of possession apart from other mandatory guidelines. Further, sub-rule (9) of Rule 9 provides that the Authorised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstalments towards sale money in terms of memorandum of understanding. The Hon'ble Supreme Court in paragraph number 31 of the said judgement have stated that the auction purchaser is one such person who is aggrieved by the action of the secured creditor in forfeiting their money, and found that the action of secured creditor in forfeiting the deposit made by the auction purchaser is part of the measures taken by the secured creditor under section 13 (4) and, therefore, the High Court was justified in dismissing the writ petition on the ground of availability of alternate remedy. 30. So far as the present case is concerned, there is no dispute between the auction-purchaser and the Bank with regard to any of the measures under section 13 (4) of the SARFAESI Act read with rule 8 and 9 of the Rules, 2002. Here, the petitioner, who is a auctionpurchaser has deposited the entire amount of bid and the Bank has issued a sale certificate dated 15/07/2017, wherein it has been recorded that "the undersigned acknowledges the receipt of the sale price of Rs. 60 lakhs in full and handed over the delivery in possession of the schedule property". The said sale certificate issued under rule 9(6) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l include details as set forth in sub-clause (a) to (f). Subclause 6 (f) of Rule 8 provides for publishing of "any other thing which the authorised officer considers it material for a purchaser to know in order to judge the nature and value of the property". In these circumstance, a duty is cast upon the Authorized Officer to publish all details with regard to the property, whether the property has any encumbrances or not, whether the property is a vacant property or is tenanted, whether there is any other charge on the said property, and all other details which is material for the purchaser to know in order to judge the nature and value of the property. 35. In the present case, the advertisement does not disclose any such detail about the property from which it can be easily inferred that the same is in possession of some third-party, or that there is a litigation pending or for some material reason, it would be difficult to obtain the vacant possession of the property. A joint reading of section 13 (4) of the SARFAESI Act and Rule 9 (clauses 9 and 10) would clearly show that the Authorised Officer, shall deliver the property to the purchaser, free from all encumbrances, on depos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion of the property would be difficult or near impossible. In the aforesaid circumstances the respondent Bank cannot take umbrage of the clause "as is where is" "as it is where it is" in order to deny physical possession of the auction property to the petitioner and to non-suit him. In other words, the respondent cannot shirk away the statutory responsibility to deliver possession of the property free from all encumbrances, to the person who was paid full consideration for the said property. 39. Accepting the contention of the Bank would be absolutely inequitable, wholly arbitrary and may on the contrary permit withholding of necessary information by the secured creditor in relation to its valuation in order to seek a higher price of the property. If such an advantage is permitted, it would directly affect the credibility of the entire process and the object of the SARFAESI Act, which is sought to be achieved. 40. The third-party, who comes forward to purchase the secured asset must have the confidence that he would get the property at the earliest and in case, considerable long time is consumed in transferring the property not only it would defeat the purpose of the Act but wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he delivery in possession of the scheduled property". 45. From the facts narrated above, it can easily be inferred that the petitioner has been put in a very helpless situation which compelled him to take refund of the entire consideration of Rs. 60 lakhs as more than 17 months have elapsed but possession of the property has not been delivered to him. It has been informed by the petitioner that he had taken a cash credit limit of Rs. 65 lakhs from HDFC Bank to whom, he is paying interest @ 12% per annum plus miscellaneous charges, and further an amount of Rs. 15 lakhs was taken as loan from Muthut Finance, where also he is paying interest @ 16%. 46. As discussed above, it was a duty of the respondent Bank to deliver vacant possession of the secured asset to the petitioner within a reasonable time. Having failed to deliver possession, the petitioner has rightly exercised his option to get refund of the bid amount deposited with the Bank along with interest and damages. As noticed above, in the Recovery Management Policy 2017- 2018 there is a provision of refunding the amount of EMD/sale proceeds, if the Bank is not able to deliver physical possession of the property beyond six mon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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