B. ArunPartnerM/s. Aarthi Builders and Aarthi Investments v. The Authorized Officer/Chief Manager

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 18.09.2009CORAM:THE HONOURABLE MR. JUSTICE ELIPE DHARMA RAOANDTHE HONOURABLE MR. JUSTICE M. VENUGOPALW.P.No.15982 of 2009 and M.P.No.1 & 2 OF 2009B. ArunPartnerM/s. Aarthi Builders and Aarthi Investments,No.4-D, Ellora ApartmentNo.20, Thirumurthy Street,T.Nagar,Chennai-600 017.....PetitionerVs.1.The Authorized Officer/Chief Manager,Indian Bank,Guindy Branch,SIDCO Building,No.131, G.S.T. Road,Chennai – 600 032.2.Indian Bank,Guindy Branch,Rep. By its Chief Manager,SIDCO Building,No.131, G.S.T. Road,Chennai – 600 032.....RespondentsPRAYER: Petition filed under Article 226 of the Constitution of Indiapraying for the issuance of the writ of Certiorarified Mandamuscalling for the records on the file of the respondents, leading tothe auction sale dated 18.07.2009 in respect of the properties of thepetitioners viz., 8 shops and 2 flats situated at Plot No.C-14, DoorNo.134, New No.4, 40th Street, Nanganallur, Chennai – 600 061 and oneflat measuring 1450 sq.ft. Bearing Flat No.4-D, 4th Floor, Door No.20,New No.25, Thirumurthy Street, T. Nagar, Chennai – 600 017 and to https://hcservices.ecourts.gov.in/hcservices/ quash the same and consequentially directing the respondents toaccept the offer made by the petitioners for the auction propertiesand execute the sale deed in favour of the Petitioners nominees.For Petitioner:Mr. L. KishoreFor M/s.K.Sridhar Associates For Respondent:M/s. K.Radhakrishna MurthyO R D E RM.VENUGOPAL, J.The petitioner has filed this writ petition praying for anissuance of Writ of Certiorarified Mandamus in calling for therecords on the file of the respondents, leading to the auction saledated 18.07.2009 conducted by them in regard to the properties of thepetitioners viz., 8 shops and 2 flats situated at Plot No.C-14, DoorNo.134, New No.4, 40th Street, Nanganallur, Chennai – 600 061 and oneflat measuring 1450 sq.ft. Bearing Flat No.4-D, 4th Floor, Door No.20,New No.25, Thirumurthy Street, T. Nagar, Chennai – 600 017 and toquash the same and consequentially directing the respondents toaccept the offer made by the petitioners in regard to the auctionsale and execute the sale deed in favour of their nominees.2. The case of the petitioners is that they have approached thesecond respondent, Indian Band, Guindy Branch and obtain a creditfacility in the year 1990 by way of over draft for a limit of Rs.50lakhs and they were in the business of construction of flat and wereregularly processing the said loan facility till 1997 andsubsequently, due to fall in business and heavy financial constrainsthey could not service the loan regularly but continued to payinterest till 2001 regularly and the second respondent has filed O.A.No.1250 of 1998 against the petitioners and when they along with someof the creditors approached the second respondent and sought for onetime settlement at Rs.85 lakhs the second respondent/Indian Bank hadaccepted the said OTS and a memo of compromise for Rs.85 lakhs wasfiled before the Debt Recovery Tribunal in O.A.No.1250 of 1998 in andby which the petitioners had to pay a sum of Rs.20 lakhs on or before30.01.2001 and the balance to be paid with simple interest at 12% perannum from 01.04.2001 till 31.12.2001.3. It is the further stand of the petitioners that pursuant tothe said one time settlement one of the petitioner's creditors M/s.Salim Builders who was interested in taking over the 'B' and 'C'schedule properties in possession notice dated 20.06.2008 hadapproached the second respondent/bank and offered to deposit Rs.18lakhs provided the title deeds of the said properties are released tothem and that the bank had also agreed to the said offer and gave aletter pursuant to which a sum of Rs.18 lakhs has been deposited by https://hcservices.ecourts.gov.in/hcservices/ them with the second respondent in terms of the OTS compromise memo.But the second respondent/bank had not released the documents to M/s.Salim Builders as a result of which the other creditors who hadoffered to pay balance amount of Rs.67 lakhs had backed out andbecause of the non co-operative attitude of the bank the petitionerscould not repay the one time settlement amount as per schedule.4. According to the petitioners till 2008 they have paid nearlyRs.70 lakhs to the Second Respondent/Bank which was credited by thebank towards interest and penal interest and that they hadconstructed and sold flats in the properties and the purchaser offlats had also approached the Second Respondent/Bank and paid theamounts and also obtained letters for releasing their respectiveshares and added further the petitioners in 2007 approached thesecond respondent/bank with an offer of one time settlement at Rs.175lakhs and deposited a sum of Rs.17.5 lakhs in a no lien account withthe bank for consideration of their proposal and the secondrespondent/bank by its letter dated 11.09.2007 accepted the one timesettlement on condition that Rs.17.5 lakhs which was deposited by thepetitioners in no lien account would be credited to the loan accountimmediately and the balance sum would be paid within 90 days. Thepetitioners pursuant to the one time settlement paid a further amountof Rs.12.5 lakhs and sought permission from the secondrespondent/bank for sale of 'E' schedule property and for sale of twoflats and eight shops in 'A' schedule property in order to pay thebalance one time settlement sum. The respondents refused to furnishany reply taking advantage of the petitioners bad situation andcaused a notice under Section 13(2) of the Securitisation andReconstruction of Financial Assets and Enforcement of SecurityInterest Act, 2002 on 27.03.2008 calling upon them to pay a sum ofRs.4,53,20,070.91/- within 60 days failing which they threatened totake possession of the properties as per Section 13(4) of the Act.5. The petitioners had paid more than Rs.90 lakhs to therespondents/bank though there was some brakes in the payment due tofinancial crunch. However, the petitioners made a offer of one timesettlement of Rs. 155 lakhs in March 2009 and the same was acceptedby the bank on 27.04.2009 and bank directed them to pay the said sumon or before 29.05.2009.6. The contention of the petitioners is that they had arrangedthe purchasers for purchasing the properties which were mortgagedwith the bank namely 8 shops and 2 flats situated at Plot No.C-14,Door No.134, New No.4, 40th Street, Nanganallur, Chennai – 600 061 andone flat measuring 1450 sq.ft. Bearing Flat No.4-D, 4th Floor, DoorNo.20, New No.25, Thirumurthy Street, T. Nagar, Chennai – 600 017 andapproached the respondents with prospective purchasers who offeredto purchase the aforesaid two items of properties at Rs.46 lakhs andRs.70 lakhs respectively and requested the bank to accept the payment https://hcservices.ecourts.gov.in/hcservices/ of Rs.116 lakhs being made by the purchasers and offered to pay thebalance amount within a month's time, but the respondents refusedtheir offer and brought the said two items of properties in tender-cum-auction sale on 18.07.2009 by proceedings dated 12.06.2009 andfor the first item of the property i.e., for the 8 shops a reserveprice of Rs.20 lakhs was fixed and for Flat-A the price was fixed atRs.14 lakhs and Flat -B the price was fixed at Rs.12 lakhs and inregard to the second item the reserve price for the flat atThirumurthy Street was fixed at Rs.56 lakhs and again the petitionerapproached the bank and requested them to accept their offer sincethe same was much higher than the reserve price quoted by them. Butthe respondent bank had failed to consider their request and theproperties were brought to auction on 18.07.2009 and even though thepurchasers were brought by the petitioners with firm offers theyfiled their tender and the entire auction was stage managed by therespondents and none of the bidders were allowed to participate inthe auction and that the respondents pre-arranged a purchaser oftheir choice who alone was permitted to bid and the first item namelyeight shops were sold for a paltry sum of Rs.20,10,000/- and thesecond item the flat at Thirumurthy Street was sold for a sum ofRs.61 lakhs and the other flats were not sold since there were nobidders.7. As a matter of fact the respondents had ignored the offer ofthe petitioners in respect of the 8 shops and 2 flats which washigher than the reserve price and they had accepted the bid forRs.20,10,000/-. In regard to the flat at Thirumurthy Street thoughquoted Rs.70 lakhs they had accepted bid for Rs.61 lakhs. In theappeals filed by the certain flat owners before the Debt RecoveryTribunal – II, Chennai the petitioners along with bidders appearedand requested the Tribunal to direct the respondents not to confirmthe auction sale dated 18.07.2009 and to direct them to accept theiroffer of Rs.46 lakhs and Rs.70 lakhs respectively. The Tribunalgave a direction to produce a demand draft for Rs.120 lakhs and inthe meanwhile, orally instructed the bank not to confirm the auctionsale.8. Continuing further, the petitioners produced the demand draftfor Rs.120 lakhs along with the letters from the purchasersexpressing their willingness to purchase the first item at Rs.46lakhs and second item at Rs.70 lakhs and a further sum of Rs.4 lakhswas also paid. At that time the respondents informed that thepetitioners had to pay a sum of Rs.173 lakhs as one time settlementwithin one month in order to settle the entire claim and requestedthe respondents to receive the demand draft for Rs.120 lakhs andexecute the sale deed in favour of the purchasers who had depositedthe demand draft in respect of the aforesaid two items of propertywhich were brought to auction and promised to pay the balance onetime settlement amount within one month. But the respondents refusedto receive the demand drafts for Rs.120 lakhs and insisted on payment https://hcservices.ecourts.gov.in/hcservices/ of the entire Rs.173 lakhs as one time settlement of the entire dues.The petitioner submitted demand draft for Rs.1 crore and Rs.20 lakhsand whereas the property sold by the respondents fetched only Rs.81lakhs.9. Expatiating the arguments, the learned counsel for thepetitioners contends that the action of the respondents in conductingan auction on 18.07.2009 was totally a farce one and was stagemanaged by them and there was an offer for Rs.120 lakhs in respect ofthe properties, the respondents had accepted illegally an offer ofRs.81 lakhs for the same properties from the third parties which wasa clear case of colourable exercise of power and when the petitionerswere granted a month's time to pay the sum of Rs.173 lakhs towards one time settlement in the meeting held on 24.07.2009 which wascommunicated to the Debt Recovery Tribunal – II, Chennai by the ChiefManager Thiru Chezhian, the petitioners had a month's time to paythe balance of Rs.53 lakhs and the respondents could not refuse toreceive an amount of Rs.120 lakhs and in fact the petitioners madetheir offer of Rs.116 lakhs in respect of the properties even priorto the auction sale and this was not considered by the respondentsand when the petitioners produced the draft for Rs.120 lakhs asdirected and even after production of the said amount the respondentscould not refuse to receive the same and insisted on accepting thelower bidder for the same property and when respondents receive a sumof Rs.120 lakhs then they would get Rs.40 lakhs more for the verysame properties and therefore, prays for allowing the writ petition.10. In the counter filed by the respondent bank it is inter-alia stated that M/s. Aarthi Builders of which the petitioner is thepartner borrowed a sum of Rs.50 lakhs during 1990 and the bank filedO.A.No.1250 of 1998 against the borrowers, guarantors mortgagorsetc., for the loan amount with interest in respect of the immovableproperties mortgaged with the bank and the borrower gave one timesettlement proposal in February 2001, and the bank accepted oncertain terms and conditions specifying that 50 % of the agreed Rs.85lakhs should be paid on or before 31.03.2001 and the balance withsimple interest at 12 % per annumbefore 30.09.2001 and the borrowernever complied with the terms of the one time settlement sanction andnot a single paise was paid and the compromise lapsed and further, asecond proposal was given in 2007 and a sum of Rs.17.5 lakhs wasreceived pursuant thereto and the second proposal was accepted bythebank on certain terms and conditions including on payment of the onetime settlement amount less Rs.17.5 lakhs within 90 days and acceptthe payment of further amount of Rs.12.50 lakhs no amount was everpaid in terms of the acceptance letter and no payment was receivedfrom Mr. Salim and the second compromise also lapsed on account ofthe failure of the borrowers to make the payment as agreed and anextension of time was sought for by the petitioners on 16.02.2008agreeing to pay a sum of Rs.110 lakhs within 21.02.2008 and since thepetitioners being a chronic defaulter the bank had not granted any https://hcservices.ecourts.gov.in/hcservices/ extension of time and therefore, a notice under Section 13(2) of theSARFAESI Act, 2002 to all persons concerned was issued on 27.03.2008and on their failure to remit the amount on demand possession noticewas issued on 20.06.2008.11. It is also submitted by the respondents that the petitionersgave a third proposal in March 2009 offering Rs.150 lakhs in full andfinal settlement of the claim and the respondents in order to provideone more opportunity accepted the same on condition of remittance ofentire sum on or before 28.05.2009 and that no payment was madetowards the one time settlement amount and on the same date therespondents informed the petitioners about the cancellation of thesettlement.12. The stand of the respondents is that the proceedingsinitiated in respect of the sale of the property under the SARFAESIAct, 2002 and in terms of the auction notice sealed tenders werereceived from 4 bidders in respect of the third item of the auctionnotice and 7 bidders in respect of first item of the said notice andthere was no bidder in respect of the second item and the auctionproceedings were conducted in a meticulous manner and the highestoffer in respect of both the properties were accepted and the thirdparty purchasers also submitted their tenders and participated in theauction but they did not bid the highest amount and that the entireproceedings were video graphed and after the auction sale, any offerby a third party even for a higher sum could not be accepted when thehighest bid in the auction was accepted and in view of the thirdparty successful auction bidders interests were involved and they hadnot agreed to the petitioner's proposal.13. Apart from the above, on behalf of the respondents it issubmitted that in the proceedings before Debt Recovery Tribunal –II, Chennai certain flat owners challenged the Securitization Noticeissued by the first respondent in regard to the eight items of theproperties the petitioners approached the Tribunal for directing thebank to accept a proposal for payment of Rs.120 lakhs without anyproposal for the payment of balance of Rs.53.31 lakhs agreed to bepaid after negotiation and since the Tribunal was not seized of the4th proposal for one time settlement the Tribunal had not passed anyorders or gave any directions. Inasmuch as the petitioners imposedcertain conditions before the tribunal when they produced the demanddraft of Rs.120 lakhs stating that bank should keep the said sum ofRs.120 lakhs in a no lien account and further that the bank shouldexecute sale deeds in favour of his proposed third party purchasersand release documents of tittle to them etc., these conditions werenot acceptable to the respondents and they had not agreed for thesame. Also in regard to the very same properties the auction washeld and the successful bidders were awaiting conformation and anyprivate sale or negotiation in respect of the said very same propertycould not be legally sustainable and tenable one and certainly the https://hcservices.ecourts.gov.in/hcservices/ same would only land the bank in a series of litigations etc., andtherefore, the offer of the petitioners was not accepted.14. The pith and substance of the contention of the respondentsis that the petitioners after committing default to adhere to thepayment schedules in respect of the one time settlement proposals hadno legal right to seek the indulgence of this Court for cancellationof the sale and acceptance of the proposal in issue and as on dateRs.723.4 lakhs is due to the bank and the writ petition lacksbonafides.15. On a careful consideration of the respective contentions weare of the considered view that the petitioners cannot demand for aprivate sale as a matter of right when the earlier auctionproceedings are admittedly pending before the Tribunal awaitingconfirmation of sale from the successful bidders, the fast trackprocedure under the draconian SARFAESI Act, 2002 cannot be allowed tobe derailed in any manner and moreover, when the petitioners aredefaulters in respect of the earlier four one time settlementproposals they cannot seek the discretionary power of this Court byadopting a recourse to the Article 226 of the Constitution of Indiapraying for the reliefs of calling for the records from the file ofthe respondents in regard to the auction sale conducted by them on18.07.2009 in respect of properties more fully described in thepetition etc. since the High Court does not act as an AppellateAuthority and viewed from that angle the writ petition is devoid ofmerits and same is hereby dismissed in furtherance of substantialcause of justice.16. In fine, for the foregoing reasons we dismiss the writpetition without costs. Consequently connected miscellaneouspetitions are also closed. However, the dismissal of this writpetition does not preclude the petitioners to approach theappropriate forum for redressal of their grievance.prmSd/Asst. Registrar/true copy/Sub Asst.RegistrarTo,1.The Authorized Officer/Chief Manager,Indian Bank,Guindy Branch,SIDCO Building,No.131, G.S.T. Road,Chennai – 600 032. https://hcservices.ecourts.gov.in/hcservices/

2.Chief Manager, Indian Bank,Guindy Branch,SIDCO Building,No.131, G.S.T. Road,Chennai – 600 032.3.The Presiding Officer, Debt Recovery Tribunal – II Chennai.+ 1 CC to MR. K.Sridhar Associates Advocate SR.48532+ Two CCs Mr. K.Radhakrishna Murthy, Advocate SR. 48634W.P.No.15982 of 2009 and M.P.No.1 & 2 OF 2009PUR(CO)VC906.10.2009)