High Court
Case Details
2023:AHC:111864-DBNeutral Citation No. - 2023:AHC:111864-DB Reserved on 16.05.2023 Delivered on 22.05.2023 Court No. - 21 Case :- WRIT - C No. - 15805 of 2023 Petitioner :- Deepak Hada And 5 Others Respondent :- Recovery Officer, Debts Recovery Tribunal At Allahabad And Another Counsel for Petitioner :- Ved Prakash,Ashok Kumar Srivastava,Sr. Advocate Counsel for Respondent :- Manish Trivedi Hon'ble Manoj Kumar Gupta,J. Hon'ble Prashant Kumar,J. (Delivered by Hon’ble Prashant Kumar, J) 1. Brief facts giving rise to the instant writ petition are as follows:- One Mr. Madan Lal Hada along with his three sons and wife applied for a loan of Rs.4.59 crores against a property situated at 128/18, Y-Block, Kidwai Nagar, Kanpur (U.P). 2. The respondent no.2, ICICI Bank Limited granted the loan under “Home Equity Scheme”, in this the loan was fully insured under free insurance policy covering the customer of the bank. This was the personal accident policy to cover the main borrower and was linked as an integral part of the loan for which the borrower did not have to pay any premium as the premium for the policy was paid by the bank and was included as part of the entire loan transaction. This insurance policy took care of the entire principal amount, which was disbursed as a loan. As per the insurance policy, the insured principal borrower, who was the first applicant, Mr. Madan Lal Hada was indemnified by the insurance company. 3. The loan of Rs.4.50 crores was disbursed on 27.11.2013, the borrowers were supposed to pay back the entire loan in 120 equal monthly instalments of Rs.6.85,337 crores. 1 4. The officers of respondent no.2 told the petitioners that it is imperative to take the policy from one of its group company, which was ICICI Lombard if they wish to avail the loan. Thereafter, a policy (being policy no.4005/A/74718081/00/000) was issued in the name of ICICI Bank Limited as a policy holder. The insured person was the Home Loan Customer of the ICICI Bank Limited and the policy was for the accidental death. The policy was such that, in case the borrower dies the Insurance Company will pay for the principal outstanding of the loan account as on date of loss. This insurance policy further provides that the maximum liability of the Insurance Company in the event of loss will be restricted to Rs.12 crores in respect of a single loan account. 5. In addition to this the bank forced the borrower to take two additional policies of Rs.2.25 crores each. The petitioners were forced to buy both the policies from the ICICI Lombard, being a group company of the ICICI Bank Limited. In both these policies, the policy holder was ICICI Bank Limited and the name of the insured was Home Loan Customer of the ICICI Bank Limited. The policy was for a period of 5 years. The premium for this was paid by the bank from the loan account. Though the loan was sanctioned for Rs.4.59 crores but only Rs.4.50 crores was disbursed to the petitioners and Rs.9 lacs were paid by the bank for buying the policy. 6. As per the terms of the loan, the borrower paid 20 equal monthly
Legal Reasoning
instalments. The main borrower, Mr. Madan Lal Hada passed away on 20.12.2015. The information of the same was given to the bank, and the bank immediately recalled the loan amount and started recovery proceedings. 7. In all there were 3 policies taken by the borrower, whereas the insured was ICICI Home Loan Customers. As far as the first policy is concerned, the bank was beneficiary and the entire principal amount due on the date of death was to be paid by the insurance company, which was nobody else but a group company of ICICI Bank ( respondent no.2). In the 2 policy it was clearly stated that the claim shall be initiated within three months of the occurrence of the event. For the reasons best known to it, the Bank did not initiate any claim though they being a policy holder and the beneficiary. This fact has been admitted during course of the argument by the counsel for the respondent no.2. 8. The petitioner on 25.04.2016 sent a letter to the bank requesting the bank to provide copies of the loan agreement, copies of the insurance policies and to clarify the name of policy holders and nature of indemnity in the insurance policy but no reply was given by the bank. 9. With regard to other two policies, it was the heirs of the deceased Mr. Madan Lal Hada, who made a claim in regards to the aforesaid policies. The insurance company for the reasons best known to it rejected the claim, so the petitioners herein, who are legal heirs of the deceased filed a complaint before the National Consumer Disputes Redressal Commission (hereinafter referred to as “NCDRC”) being Consumer Claim Case No.796 of 2017. This complaint is pending before NCDRC for last six years. 10. The petitioners had filed some application seeking interim relief in this consumer claim case. NCDRC refused to grant any relief, against that order the petitioners had also filed an Appeal (Civil Appeal-D No.8456 of 2023) before Hon’ble Supreme Court. The Hon’ble Supreme Court while dismissing this appeal on 31.03.2023 was pleased to pass the following direction:- “However, keeping in view the peculiar facts and circumstances of the instant case, we request NCDRC to make an endeavour to decide the appellant’s complaint expeditiously, and if possible, on out of turn basis.” The Consumer Complaint Case was listed on 10.05.2023, before NCDRC, but since the Court was not sitting, it is now listed in June, 2023. 3 Recovery Proceedings 11. Though the interest of the bank was completely secured by the insurance policy, which was taken by ICICI Lombard, which was a group company of the bank, but the bank chose not to initiate any claim on the policies. Had they initiated the claim on the date of death, or on the date the bank withdrew the loan, the outstanding which was only Rs.4.35 crores, would have been paid by the insurance company. 12. Without claiming the money from the insurance company, the bank proceeded to recover the money by filing an application before Debt Recovery Tribunal (in short “DRT”), Allahabad by filing Original Application No.311 of 2016. 13. Before the Debt Recovery Tribunal, the petitioner raised the issue that, the principal amount was completely insured by the insurance company, (which was a group company of the bank) and the bank ought to have made a claim and recover the amount from the insurance company. Though this issue was raised but learned DRT did not get into the issue and left it open for being adjudicated before the appropriate forum. Learned DRT vide its order dated 03.05.2019 was pleased to allow the Original Application filed by the respondent no.2 and ordered payment of Rs.3,98,77,430.60 to the bank along with simple interest at the rate of 12% per annum on reducing balance from the date of filing of the Original Application i.e. 30.05.2016 till the date of realization with costs. 14. Against the order passed by the DRT both the borrower and the bank filed cross appeal before Debt Recovery Appellate Tribunal (in short “DRAT”). The appeal filed by the bank was numbered as S.A. No.49 of 2019, whereas, the appeal filed by the borrower is numbered as Appeal No.199 of 2019. Both the appeals are still pending before the DRAT. 15. Since there was no stay or any kind of interim order in the Appeals pending before the DRAT, the recovery officer proceeded with the execution of decree. 4 Valuation of the Property 16. While the execution was pending before the recovery officer, the bank got the valuation done from one of his own valuers, who valued the property for Rs.5.35 crores. This valuation report was filed before the P.O. on 30.09.2022. Subsequently, the petitioner filed an objection on the valuation on 13.10.2022 and the second objection was filed on 02.12.2022. For ready reference the valuation chart is quoted hereunder:- Sr. No. 1. 3. 4. 2. 5. 2013 2022 (Sept.) 2022 (Dec.) 2018 Petitioners report Year Land Area (sq. ft.) Rate (sq.ft.) Value (Approx) in 8919 8919 8919 Rs.6900 Rs.6000 Rs.6100 Crore Rs.6.15 Crore Rs5.35 Crore Rs.5.44 Crore Reserve Price Rs.7.41 Crore 8919 1,05,000 Rs.14.08 Crore 17. It is worthwhile to mention that the valuation of the property done by the bank at the time of granting loan in 2013 was Rs.6.15 crores. 18. While the matter was pending, the bank also initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and fixed the Reserved Price on the basis of their valuation, where they valued the property as Rs.7.41 crores. 19. On the basis of objection of the petitioners, the learned recovery officer vide its order dated 02.12.2022 held that :- “though the assessment of value of real estate is subject to matter of expert in the field, but anomaly on the fact of record may still be inquired 5 seeking reasonable explanation in as much as depreciation in the real estate should be supported with cogent reason to set off empirical experience of common sense. Ch Bank is accordingly directed to ask for explanation from the valuer of such depreciation. Ch Bank is further directed to inform this Court the details of regulatory authority in relation to the valuer in question.” The petitioners approached this Court by means of writ petition being Writ-C No.2535 of 2023 wherein it had prayed for modifying the order dated 02.12.2022 passed by the recovery officer as well as to setaside the order dated 09.11.2022 passed by the DRAT. This petition was
Decision
disposed of vide order dated 09.02.2023 with the direction to DRAT to consider and decide the petitioners application for stay in accordance with law. The petitioners had also preferred SLP (c) No.4795 of 2023 against the order dated 09.02.2023, which was tagged along with the Civil Appeal and the same was disposed of. 20. The bank was well aware that the valuation was not correct, and has been purposely reduced substantially. Instead of complying with the order of recovery officer, the bank quietly gets the second valuation done wherein the value was increased from Rs.5.35 to 5.44 crores, this second valuation report was also an eyewash. 21. The petitioners again filed a fresh objection to the valuation report on 10.01.2023, while this objection was still pending, the recovery officer by means of impugned order dated 03.04.2023 issued a sale proclamation fixing 23.05.2023 as the date of auction. This sale proclamation has been challenged in the instant writ petition. 22. The respondent no.2 has filed counter affidavit and the parties have filed further supplementary affidavit to bring the documents on record. 6 23. Counsel for the petitioners submitted that, the way valuation of the property done speaks volume about the conduct of the bank. In 2013 the valuation of the property was done by the bank wherein they valued the property at Rs.6.15 crores and the same bank in the year 2018 had made a valuation of Rs.7.41 crores, surprisingly, in September, 2022 the value of the property was drastically reduced to Rs.5.35 crores on the objection of the petitioner when the recovery officer raised an issue and asked the bank to give a clarification on this valuation, the bank again withdrew the valuation and gave a second valuation, which was done in December, 2022 valuing the property at Rs.5.44 crores. It is surprising to see how a property valued in 2013 for Rs.6.15 crores now after 9 years is being valued at Rs.5.44 crores, inspite of the fact that the property is situated in Kidwai Nagar, which is one of the prime areas of Kanpur. Under no stretch of imagination it can be made to believe that the value of property after 9 years had reduced. 24. Counsel for the petitioners further submits that while the valuation of the property has still not been decided and the objections are pending with the recovery officer, the recovery officer cannot proceed with the sale without fixing a proper reserved price. 25. Counsel for the petitioners argued that the interest of the bank was completely secured by the first policy itself, wherein, in the case of death the entire principal due was to be paid by the insurance company to the respondent no.2. The interest of the bank is further protected by securing the property. The DRT has decreed Rs.3.98 crores along with interest of 12%, which can very well be paid out by the insurance policy. 26. Though the interest of the respondent no.2, Bank was well protected, and they could have made a claim and availed the amount from the insurance company, but for the reasons best known, the respondent no.2, 7 Bank did not make any claim, on the contrary it had proceeded to recover the amount by initiating proceedings under the Recovery of Debts and Bankruptcy Act (RDB Act), 1993. 27. The claim arising out of the accidental death policy was pending before NCDRC and the Hon’ble Supreme Court has already directed the NCDRC to decide the matter expeditiously on 31.03.2023. The next date fixed in the matter before NCDRC was 10.05.2023 but since there was no sitting the matter was adjourned to sometimes in June, 2023. If the auction proceedings are kept in abeyance for a couple of months or till the decision of NCDRC then the bank would directly be paid by the Insurance Company and there will be no need to sell the property, and only if the claim of the petitioners is rejected the bank should proceed with the sale after fixing the proper valuation of the property. 28. Counsel for the respondent argued that since there is an alternative remedy available under the Recovery of Debts and Bankruptcy Act (RDB Act), 1993, the writ petition ought to be dismissed on this ground alone. 29. Counsel for the respondent further submitted that as per Section 29 of the 1993 Act, provisions of Second and Third Schedules to the Income Tax Act, 1961 will apply. 30. Counsel for the respondent submitted that no objection was filed against the second valuation report of the bank, so the recovery officer was justified to issue a sale proclamation taking the value suggested by the bank on the reserved price. 31. Heard Sri Atul Dayal, learned senior counsel assisted by Sri Ashok Kumar Srivastava and Ved Prakash, learned counsel for the petitioners and Sri Manish Trivedi, learned counsel for respondent no.2. 8 32. The primary duty of the recovery officer is to ensure that the property is sold at a price that will maximise the recovery of the debt. The recovery officer is expected to act in a fair and professional manner ensuring that the property is sold at a maximum price in order to protect the interest of the parties. 33. In fact, it is the duty of the recovery officer to examine the material on record relating to the valuation placed by either side and adjudicate the issue and ensure that the reserved prise fixed under the sale notice is reasonable and justified and the property is sold at a fair price. 34. The order passed by the recovery officer reveals that he himself was not satisfied with the valuation done by the bank and that is why he sought clarification. The bank instead of giving clarification filed second valuation report by marginally increasing the price just to over come the order passed by the recovery officer. The petitioner, in his second objection filed on 10.01.2023, specifically raised the above issue. 35. The recovery officer while passing the impugned order did not apply its mind and issued sale proclamation mechanically. The recovery officer ought to have satisfied itself with the valuation report before issuing the sale proclamation. Although, it was not necessary to pass any detailed order deciding the objection, but the record should reveal application of mind by the recovery officer to all relevant aspects, but which is completely lacking. Equity 36. If the impugned sale proclamation order is not setaside or kept in abeyance till the disposal of the claim pending before NCDRC the bank 9 will proceed to sell the property, which would fetch an amount which will definitely be less than the market rate. If the sale is allowed to proceed, the bank will recover the entire amount even if the property is sold at the half of the market value. 37. Apart from it, the bank will get the double benefit, they will keep the sale proceed and will also protect the claim amount while will be paid by the insurance company as the loan account is the beneficiary of that policy. The bank will get Rs.4.39 crores along with interest, which would be sufficient enough to satisfy the decree passed by the DRT. 38. On the other hand, if the impugned sale proclamation is not set aside, the petitioner will loose their property. While balancing the equity, it is in the interest of justice to hold back the sale till the judgment of NCDRC is pronounced as directed by Hon’ble Supreme Court. In any case, there will be no loss to the bank as they are earning interest on the decretal amount at the rate of 12% per annum and their financial interest is well protected as the value of the property (even going by the deflated valuation report) is much more than the decretal amount and the interest on it. 39. In this matter, the conduct of the bank has been very suspicious. Firstly, they made the petitioner buy an insurance policy where the premium was paid by the bank directly from the loan account. It was argued that taking the policy was optional. One wonders, why will any person pay a premium of Rs.9 lacs and buy a policy and make the bank a beneficiary. Further, the policy was made to be bought by the respondent no.2, which was ICICI Lombard. Assuming the policy was bought in a good faith, why the bank did not take any steps to make a claim after the death of the borrower. In fact, no effort was made by the bank to get the money from the insurance company. On the contrary, the entire endeavour 10 of the respondent no.2 (the bank) was to sell the property at a value, which seems to be far less than the market value. 40. Hence, the writ Petition is to be allowed on two counts. Firstly, no purpose will be served in going ahead with the sale proclamation, as the issue of payment of entire insured amount is pending before NCDRC, and the Hon’ble Supreme Court has already directed for the expeditious disposal of the matter. If the complaint case pending before NCDRC is allowed the bank will be paid of the entire outstanding and if not allowed, then the bank can proceed with the sale of the property. The interest of the bank is well protected, as the value of the property is more than the decretal amount and the interest. In any case the bank is getting 12% per annum simple interest on the decretal amount, which in any case is far more than the Prime rate of lending. Hence, it will be in the interest of justice to wait for a couple of week till the decision of NCDRC before the property is put to auction. 41. Secondly, the way bank has proceeded to value the property is highly doubtful. A prime property in the city of Kanpur, which was valued by the bank in 2013 for Rs.6.15 crores after 9 years in 2022 can not have a valuation of Rs.5.35 crores. The valuation was questioned by the recovery officer. Instead of getting correct valuation done by a approved valuer, the bank in a very clandestine manner get a second valuation done with a very marginal increase in the value. The way valuation is done by the bank is very suspicious. 42. It is apparent that the recovery officer while issuing the sale proclamation had not applied its mind. The petitioner had pointed out various anomalies in the valuation reports. It was the duty of the recovery officer to ensure that the property is sold to the maximum possible price. The record reveals that recovery officer has completely failed to advent to 11 the objections against the second valuation report, hence, the sale proclamation dated 03.04.2023 is set aside and the Recovery Officer is directed to carry out the fresh valuation, by Government approved valuer and once the current value is determined then only can proceed with the sale. 43. Accordingly, the writ petition is allowed. (Prashant Kumar, J.) (Manoj Kumar Gupta, J.) Order Date :- 22.05.2023 S.P. Digitally signed by :- SANJAY PURI High Court of Judicature at Allahabad 12