M.Chokalingam v. The Authorised Officer, Indian Bank, Park Town Branch, No.53, Raja Muthiah Road, Chennai-600 003 & Ors.

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 30.07.2009CORAM:THE HONOURABLE MR.JUSTICE P.K.MISRAANDTHE HONOURABLE MR.JUSTICE R.SUBBIAHWrit Petition No.127 of 2009and M.P.No.1 of 2009M.Chokalingam ..PetitionerVs.1. The Authorised Officer, Indian Bank, Park Town Branch, No.53, Raja Muthiah Road, Chennai-600 003.2. Uma Maheswari(R2 impleaded suo motu as per Order of Court dt.19.06.2009 in W.P.No.127/2009) ..RespondentsWrit petition filed under Article 226 of the Constitution ofIndia, to issue a Writ of Certiorari, calling for the records of the1st respondent bank in Sale Notice dated 06.12.2008 bearing land inS.F.No.202/1 of T.S.No.11/1300 and 1301 and quash the same asarbitrary, illegal and unconstitutional.For Petitioner : Mr.A.L.Somayaji,Senior Counsel for Mrs.Anand Gomathy SivakumarFor Respondents: Mr.Jayesh Dolia for M/s.Aiyar & Dolia for R1ORDERR.SUBBIAH, J.,The writ petitioner is a guarantor in respect of the creditlimit availed by one M/s.Octogen Iron and Steels Indian PrivateLimited from the respondent bank. This present writ petition hasbeen filed by him to issue a writ of Certiorari, calling for the https://hcservices.ecourts.gov.in/hcservices/ records of the respondent bank in sale notice dated 06.12.2008bearing land in S.F.No.202/1 of T.S.No.11/1300 and 1301 and quash thesame. According to the petitioner, since the loan account turnedinto Non-Performance Asset, the bank had issued a demand notice dated03.12.2007 under Section 13(2) of the Securitisation andReconstruction of Financial Assets and Enforcement of SecurityInterest Act, 2002 (hereinafter referred to as "SARFAESI Act"),claiming a sum of Rs.52,18,560.80. On expiry of the 60 days from thedemand notice, the respondent bank had proceeded to issue possessionnotice under section 13(4) of the SARFAESI Act on 19.02.2008. Thoughthe petitioner made several payments to the bank including a sum ofRs.10 lakhs paid on the date of possession notice, the respondentbank has not given credit to any of the amounts paid by thepetitioner. Even in the possession notice, the same amount ofRs.52,18,560/- was mentioned as an outstanding. Hence, an appealunder Section 17 of the SARFAESI Act was filed by the petitionerbefore the Debts Recovery Tribunal-II, Chennai and he had sought fora stay of further proceedings pursuant to the notice issued by thebank under section 13(4). While the Debts Recovery Tribunal grantingstay in the said application, passed a conditional order on10.03.2008, directing the petitioner to pay a sum of Rs.6 lakhs on orbefore 29.04.2008.2. It is the further case of the petitioner that though theconditional order was passed directing the writ petitioner to pay asum of Rs.6 lakhs, the petitioner was able to pay only a sum of Rs.2lakhs by 29.04.2008. Hence, he filed an application for extension oftime for a further period of three weeks to pay the balance amount,but the said application was rejected by the Debts Recovery Tribunal-II and the interim stay granted was vacated. After the stay wasvacated, the petitioner had paid another sum of Rs.4 lakhs by twodemand drafts dated 06.05.2008 and 17.06.2008. However, therespondent bank proceeded to issue a sale notice dated 27.05.2008 tobring the entire mortgaged property for sale. Even in the salenotice, the outstanding amount was mentioned only as Rs.52,18,560/-though the sum of Rs.16 lakhs had been paid by the petitioner from19.02.2008 i.e.from the date of possession notice issued undersection 13(4) upto 17.06.2008. The bank had brought the entire 12cents of property for sale with an upset price of Rs.82 lakhs on01.07.2008. Thereafter, the petitioner had filed an application forstay before the Debts Recovery Tribunal-II Chennai, seeking not toconduct the auction on 01.07.2008 and by order dated 30.06.2008, thepetitioner was directed to deposit a sum of Rs.18 lakhs within threeweeks. On being aggrieved, he had preferred CRP 2183 of 2008 beforethis Court and this court granted an order of interim stay only upto22.07.2008, by which time the condition was not complied with.Thereafter, once again, the property for brought for sale by therespondent bank on 27.08.2008. Since in the revision petition, thepetitioner was directed to approach the Debts Recovery Tribunal, thepetitioner filed I.A.No.556 of 2008 seeking stay of sale which was https://hcservices.ecourts.gov.in/hcservices/ to be held on 27.08.2008. In the said application, the Debts RecoveryTribunal passed a conditional order that the petitioner should pay asum of Rs.18 lakhs within a period of six weeks by two instalments inequal proportion of the amount (1.e., by Rs.9 lakhs + Rs.9 lakhs).Even though he has complied with the first part of the conditionalorder, he has not complied with the second part. Therefore, he filedan application in S.A.No.28 of 2008 for extension of eight weeks'time to comply with the second part of the conditional order dated28.08.2008. When the said application came up before the DebtsRecovery Tribunal, Chennai, on 13.10.2008, the Tribunal granted 10days' time to deposit the balance amount. Since the Tribunal had notgranted sufficient time as prayed for to pay the balance amount, thepetitioner filed C.R.P.No.3537 of 2008 before this Court, but thesame was dismissed, granting 15 days' time to make the payment of thebalance amount. Due to extraneous circumstances, the petitioner wasunable to make the payment and thereafter, the respondent bank hasbrought the property for sale again on 09.01.2009 with an upset priceof Rs.75 lakhs by reducing Rs.10 lakhs less than the earlier upsetprice. In fact, the sale notice issued by the bank again reflectsthe dues at Rs.52,18,560/-. Though the respondent bank has recoveredmore than Rs.25 lakhs out of Rs.52,18,560/-, in the sale notice, thebank is maintaining the due amount to the extent of Rs.52 lakhs andodd, without deducting any of the subsequent payments. Further,without any rhyme or reason, the respondent bank has reduced theupset price to Rs.75 lakhs as stated supra from Rs.85.2 lakhs. Thus,by contending that the action of the bank is arbitrary,highhandedness, whimsical and unilateral, the present writ petitionhas been filed to quash the sale notice dated 06.12.2008.3. The main contention of the learned counsel for the petitioneris that the action of the bank, which has unilaterally reduced theupset price without giving any notice to the petitioner and withoutobtaining any valuation report as well as failure to give credit tothe earlier payments made by the petitioner, is illegal and as such,the sale notice dated 06.12.2008 has to be quashed. He has alsosubmitted that under Rule 8 of SARFAESI Rules, in the valuationreport the upset price of the property has to be fixed and thevaluation report should be obtained from the authorised officer ofthe respondent bank. In the instant case, no such valuation reportwas obtained before reducing the upset price. Further as per Rule 9(6) of the SARFAESI Rules, the property has to be sold for thesecured debt. Though several payments were made, no proper credit wasgiven by the respondent bank, which could be evident from theoutstanding amount as shown under the sale notice. Hence, the salenotice is liable to be quashed.4. Per contra, the learned counsel for the respondent banksubmitted that on previous occasions, i.e.two times, the property wasbrought for sale, but the auction could not take place as the writpetitioner had obtained stay from the Tribunal for holding the https://hcservices.ecourts.gov.in/hcservices/ auction. Though in the earlier sale notice dated 01.07.2008, thereserve price was fixed at Rs.85.32 lakhs, on the basis of thevaluation report by the approved valuer dated 21.02.2008, the auctionprice was fixed at Rs.60.02 lakhs. Though the respondent bank hadreduced the price in subsequent sale conducted on 09.01.2009 to Rs.75lakhs on account of the steep fall in property prices, the valuer hasnot fixed the value below the auction value estimated by the valuer.Further, even if any excess amount after the adjustment of the duesof the bank, the residue of the money shall be paid to the personentitled thereto according with his rights and interests. Therefore,no prejudice would be caused to the petitioner by the sale of theproperty. Thus, he prayed for the dismissal of the writ petition.5. Heard the learned counsel for both sides and perused thematerials.6. From the submissions made by the learned counsel for bothsides, we understand, the main grievance of the writ petitioner iswith regard to the failure to give credit towards the payments madeby him while mentioning the outstanding amount in the sale notice andalso the reduction of the upset price from Rs.85 lakhs and odd toRs.75 lakhs. The dispute raised by the writ petitioner can beagitated only before the Debts Recovery Tribunal under SARFAESI Act.Though a writ petition may not be appropriate remedy to solve thedispute of this nature, as alternative remedy is available inexceptional cases involving equitable principle, the Court canentertain the writ petition in the circumstances as appearing in thiscase. 7. The main contention of the learned counsel for thepetitioner is without giving credits to the payments effected by thewrit petitioner, sale notice was issued on 27.05.2008 mentioningthe outstanding amount as Rs.52,18,560/. Further, the original upsetprice fixed for Rs.85,00,000/- in earlier sale notice was reduced toRs.75,00000/- in the subsequent sale notice without obtainingvaluation report. Therefore, the grievance of the writ petitioner isthat the sale notice is defective. In our considered opinion, Section13(8) gives a right to the borrower, to tender the outstanding amountwith costs, charges and expenses any time before the sale. Under suchcircumstances the borrower/Debtor must be in a position to know theactual outstanding amount. Though there are some justification inthe submission made by the learned counsel for the respondent thatthe upset price mentioned in the sale notice was not reduced belowthe auction price fixed at Rs.60.02 lakhs, he was not in a positionto give any acceptable explanation for not giving credit to thepayments effected by the petitioner while mentioning the outstandingamount in the sale notice except saying, even if there is any excessamount, after the adjustment of the dues of the bank, the residue ofthe money shall be paid to the person entitled thereto. The purposeof giving sale notice is not only to sell the property in auction but https://hcservices.ecourts.gov.in/hcservices/ also to give an opportunity to the borrower to know the actualoutstanding amount to enable him to tender the amount before thesale. Therefore, the bank should specify the actual outstandingamount as on date of the issuance of the sale notice. Hence, we arenot inclined to accept the submission made by the learned counsel forthe respondent bank that if there is any excess amount after theadjustment of the dues of the bank the residue of the money shall bepaid to the person entitled thereto. Hence, we are of the view thatthe sale notice is defective in nature and under such circumstances,the petitioner is entitled to agitate the same under section 17 ofthe SARFAESI ACT before the Debts Recovery Tribunal. As far the caseon hand is concerned, the property was already sold in the auctionheld on dated 09.01.2009. The auction purchaser has also depositedthe auction amount by way of cheque and handed over the same to thecounsel for the respondent bank. At this juncture, when the matterwas posted in the list on 22.07.09 for 'being mentioned', arepresentation was made by the petitioner that she has brought ademand draft for Rs.25,00,000/- in favour of the respondent bank andtherefore, sought for a direction to the bank to accept the demanddraft. She further submitted that the petitioner would be in aposition to pay the balance amount including the amount towardscompensation to the auction purchaser within a reasonable period. Itwas further submitted by the learned counsel for the petitioner thatthe secured debt property, being the residential property, herrequest may be considered sympathetically. But an objection wasraised by the learned counsel for the respondent bank to consider therequest of writ petitioner since the auction amount was already paidby the auction purchaser8. But, in our considered opinion, since substantial amount hasalready been paid and further, the property, being a residential one,the request of the learned counsel for the petitioner is just andreasonable and it could be accepted. Hence, we direct the bank toreceive the Demand Draft brought by the learned counsel for thepetitioner in favour of the bank to the value of Rs.25,00,000/- andthe petitioner is also directed to pay the balance amount to therespondent bank by 10.08.2009. On such payment, the cheque handedover by the auction purchaser shall be returned by the bank to theauction purchaser. Since the auction purchaser had already depositedRs.18 lakhs, being 25% of the auction amount, on the date of auctionand the said amount is lying unutilised, the petitioner is directedto pay interest at the rate of 15% on the said deposited amount fromthe date of deposit of the auction amount till the date of makingpayment to the auction purchaser on or before 10.08.2009. On failureto make the payments as directed supra, the sale certificate may beissued in favour of the auction purchaser. https://hcservices.ecourts.gov.in/hcservices/ With the above observation the Writ Petition is disposed of. Nocosts. Consequently, connected M.P.is closed.sd/-Asst.Registrar/true copy/Sub Asst.RegistrarglTo The Authorised Officer, Indian Bank, Park Town Branch, No.53, Raja Muthiah Road, Chennai-600 003.+ 1 c.c. to Ms.Ananda Gomathy Sivakumar, Advocate. S.R.No.33380. W.P.No.127 of 2009MSM (CO)GSK 07.08.2009.