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SCA/14629/2007 8/ 9 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL
CIVIL APPLICATION No. 14629 of 2007
=========================================
PANKAJBHAI
BABULAL DAVE - Petitioner(s)
Versus
THE
STATE BANK OF INDIA & 1 - Respondent(s)
=========================================
Appearance :
MR
PUSHPADATTA VYAS for the Petitioner.
MS NALINI S LODHA for
Respondent no.1.
MR MANISH J PATEL and MR HEMAL A DAVE for
Respondent no.2.
=========================================
CORAM
:
HONOURABLE
THE CHIEF JUSTICE MR. S.J. MUKHOPADHAYA
and
HONOURABLE
MR.JUSTICE AKIL KURESHI
Date
: 07/05/2010
ORAL
ORDER
(Per
: HONOURABLE MR.JUSTICE AKIL KURESHI)
The
petitioner has filed this petition challenging the order dated 8th
June, 2007 passed by Debt Recovery Appellate Tribunal, Ahmedabad in
Appeal No. 23 of 2007 filed by the petitioner herein. He has also
prayed for quashing and setting aside the notice dated 17th February,
2007 produced at Annexure “A” to the petition under which
residential property of the petitioner was put to auction sale by the
respondent no.1 Bank.
2. It
is not in dispute that the petitioner was a borrower of the
respondent bank, the secured creditor, having become a guarantor to a
loan obtained by the principal borrower from the bank. It is also not
in dispute that the principal amount alongwith accumulated interest
was not repaid. The respondent bank therefore, initiated proceedings
under The Securitisation and Reconstruction of Financial Assents and
Enforcement of Security Interest Act, 2002 (hereinafter referred to
as “The Securitisation Act” for short).
3. Notice
under Section 13(2) of the Act was issued. Under Section 13(4) of the
Act, the respondent Bank also took possession of the property in
question. Till then the petitioner took no steps. It is a case of the
respondent bank that thereafter, the property in question was put to
auction sale.
4. It
appears that the petitioner, at one stage, approached the respondent
bank seeking benefit of One Time Settlement. In this regard, from the
bank a communication was issued to the petitioner on 21st January,
2006 indicating that the petitioner should pay the minimum amount of
Rs. 7,50,000/- and further that his application for One Time
Settlement should be received before 31st March, 2006 and that
settlement should be reached latest by 30th June, 2006. It is a case
of the petitioner that though he had shown his willingness to abide
by the terms of the One Time Settlement, the respondent bank neither
accepted nor rejected his request. According to the bank, however,
the offer of the petitioner was not unconditional. He had never shown
his willingness to repay the entire debt as per One Time Settlement
terms and had shown his readiness to pay only part of the debt. To
this aspect, we shall revert at a later stage.
5. Since
the bank was of the opinion that One Time Settlement offer had not
been worked out, the bank proceeded further with auction of the
property, the possession of which was taken under Securitisation Act.
A public notice was issued on 17th February, 2007 fixing the upset
price at Rs. 7,50,000/-.
6. It
appears that pursuant to the said auction notice, the auction was
held, the property was sold for a sum of Rs.11,51,000/-. It is the
case of the bank that the sale has been confirmed and the sale
certificate has also been issued in favour of the highest bidder upon
payment of the full price.
7. The
petitioner moved an application before Debt Recovery Appellate
Tribunal being Appeal No. 23 of 2007. He challenged the sale notice
dated 17th February, 2007. This application was dismissed by the
impugned order dated 8th June, 2007. The contention of the petitioner
that no notice was issued to him before the auction was held, was
turned down on interpretation of Rule 9(1) as well as Rule 8(6) of
the Security Interest (Enforcement) Rules, 2002. (“Rules”
for short).
8. It
is this order of the Tribunal which the petitioner has challenged in
this petition alongwith the auction notice dated 17th February, 2007.
9. Before
us, the learned counsel for the petitioner vehemently submitted that
the respondent bank did not finally reply to the request of the
petitioner for the benefit of One Time Settlement. Reliance was
placed on the decision of Sardar Associates and Others vs. Punjab and
Sind Bank and Others reported in (2009) 8 SCC 257, to contend that
such one One Time Settlement scheme is not discretionary and the
Bank, if the borrower had shown willingness to abide was duty bound
to accept terms.
10. It
was further contended that no notice was issued to the borrower.
Reliance was placed on Rules 6,5,8 as well as 9(1) of the Rules to
contend that individual notice to the borrower was necessary. Relying
on proviso to sub-rule 6(1) of the Rules, it was contended that only
in case where the property is sought to be sold either through tender
or public auction, and by way of additional mode, a notice was
required to be published in the newspapers. In all cases, however, it
was incumbent upon the bank to serve individual notice to the
borrower.
11. Relying
on the decision of the Apex Court in case of Commissioner
of Commercial Taxes, Board of Revenue, Madras and another vs.
Ramkishan Shrikishan Jhaver etc. reported in AIR 1968 SC 59,
it was contended that a proviso if the context so provides can also
be viewed as an individual provision and it is not always necessary
that proviso is added to the statute by way of an exception to the
main provision.
12. Reliance
was also placed on the decision in the case of Kishorilal
vs. Sales Officer, District Land Development Bank and others
reported in 2006(7) SCC 496 to contend that when there is
no due notice to the borrower, the auction sale must fail.
13. On
the other hand, learned counsel appearing for the respondent bank
contended that the order passed by the Debt Recovery Tribunal was not
challenged in the Appeal before Debt Recovery Appellate Tribunal
though a statutory appeal was available.
It
was contended that the possession of the property was taken by the
bank after following due process. That the property was in
possession of the neighbour and the keys were handed over to the
bank. At that stage, the petitioner ought to have known about steps
taken by the bank.
It
was contended that public notice was issued, one in Gujarati
newspaper circulated in Mahesana, where the party is situated and
another in Business Standard being circulated from Ahmedabad. It is
not possible to believe that the petitioner was not aware about such
publication.
It
was contended that the previous auction attempts had failed since no
offers were available from prospective borrowers. At this stage, the
petitioner made no move to challenge the auction process.
It
was further contended that the petitioner approached Debt Recovery
Tribunal against the notice for auction, meaning thereby the
petitioner was aware about notice being issued in the newspapers.
It
was further contended that the petitioner never agreed to repay the
entire debt as per One Time Settlement, the bank therefore, could not
have accepted such an offer which was conditional in nature.
14. Previously,
by an order dated 8th March, 2010 though we had inquired from the
learned counsel for the petitioner whether the petitioner would be
willing to deposit interest at the rate of 12% in favour of the
auction-purchaser, the learned counsel orally conveyed that the
petitioner would be so willing. However, no affidavit has been filed
to this effect. In any case, neither the bank nor the
auction-purchaser agreed to accept such an offer. We have therefore,
no option but to decide the petition on merits.
15. Having
heard learned counsel at considerable length and having perused the
material on record, we find that the issue of non-acceptance of One
Time Settlement in favour of the petitioner needs summary conclusion.
What is pointed out by the learned counsel for the bank, the
petitioner had not shown willingness to pay the entire amount that
would have been payable under One Time Settlement. His willingness
was to pay only part of the burden. One Time Settlement does not
envisage acceptance of amount in part. The stand of the bank that
such an offer being a conditional one could not have been accepted,
warrants no interference. In that view of the matter, non-conveyance
of the bank to the petitioner about his letter would not be fatal to
the proceedings. Had the offer of the petitioner been unconditional,
perhaps, the bank was duty bound to consider the same in terms of the
scheme and convey its decision to the petitioner before taking
further steps.
16. With
respect to the requirement of the individual notice, we may notice
relevant statutory provisions at this stage. Rule 8 of the Rules
pertains to the sale of immovable secured assets. Rule 9 pertains to
time of sale, issue of sale certificate and delivery of possession
etc. The relevant portion of the provisions reads as follows:
“8. Sale
of immovable secured assets-
(1) xxx xxx
xxx
(2) xxx xxx
xxx
(3) xxx xxx
xxx
(4) xxx xxx
xxx
(5) Before
effecting sale of the immovable property referred to in sub-rule (1)
of rule 9, the authorised officer shall obtain valuation of the
property from an approved valuer and in consultation with the secured
creditor, fix the reserve price of the property and may sell the
whole or any part of such immovable secured asset by any of the
following methods:-
(a) by
obtaining quotations from the persons dealing with similar
secured assets or otherwise interested in buying the such assets; or
(b) by inviting
tenders from the public;
(c) by holding
public auction; or
(d) by private
treaty.
(6) The
authorised officer shall serve to the borrower a notice of thirty
days for sale of the immovable secured assets, under sub-rule (5):
Provided that
if the sale of such secured asset is being effected by either
inviting tenders from the public or by holding public auction, the
secured creditor shall cause a public notice in two leading
newspapers one in vernacular language having sufficient circulation
in the locality by setting out the terms of the sale, which shall
include-
(a) The
description of the immovable property to be sold, including the
details of the encumbrances known to the secured creditor;
(b) the
secured debt for recovery of which the property is to be sold;
(c) reserve
price, below which the property may not be sold;
(d) time and
place of public auction or the time after which sale by any other
mode shall be completed;
(e) depositing
earnest money as may be stipulated by the secured creditor;
(f) 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;
9. Time of
sale, issues of sale certificate and delivery of possession etc. –
(1) No sale of
immovable property under these rules shall take place before th
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.”
17. Upon
perusal of the above noted provisions, one would find that under
sub-rule (1) of Rule 9 of the Rules, it is provided that no sale of
immovable asset under this Rule shall take place before expiry of 30
days from the date on which public notice of sale is published as
referred to in sub-rule 6 or notice of sale has been served to the
borrower.
Therefore,
reverting to the provisions of sub-rule (6), one finds that it
requires an authorised officer to serve to the borrower a notice of
30 days for sale of immovable secured assets under Sub-rule (5).
Proviso however, provides that if sale of such secured assets is
being effected, either by inviting tenders from the public or by
holding a public auction, the secured creditor is required to cause a
public notice in two leading news papers, one in Vernacular and
another having sufficient circulation.
18. It
can thus be seen that though ordinary mode of serving a notice to
the borrower of auction of 30 days of individual notice, however,
where under four modes envisaged for disposal of the property, the
bank proposes to sell the property either by way of tender or by way
of a public auction, it is sufficient if the notice is published in
two newspapers as provided under the proviso to sub-rule 6 of Rule 8
of the Rules. To our mind, the proviso provides for exception to the
main requirement of the individual notice to a borrower in case of
where the bank proposes to sell the property either by auction or by
a tender. The purpose appears to be quite simple. If through tender
or through public auction, members of public are required to be
invited to bid for the property, additional individual notice to the
borrower in such a case would not be necessary since the secured
creditor in any case would be required to issue a public notice for
the same. Significantly, in the proviso, the words having used “shall
cause a public notice” and does not use the words “shall
also cause a public notice”. This, to our mind is one of the
communications that the proviso to be made an exception to the main
requirement contained in the main Rule 6.
19. In
the present case, admittedly, public notices were issued. It is not
possible to hold that the petitioner was not aware about said steps
being initiated by the bank. He took no steps to raise objection at
that stage. The allegation of fraud are neither pleaded on record nor
any individual is joined in the petition by name. Such allegations
are therefore, not taken into account in this petition.
20. Before
closing, we may notice that under an order dated 11th April, 2008,
the petitioner was required to deposit a sum of Rs. 11,51,000/-
before this Court. Learned counsel for the petitioner pointed out
that the said amount was deposited on 2nd May, 2008. If the
petitioner applies for refund of such amount to the Registry, the
same shall be paid to the petitioner through an account payee cheque
after due verification alongwith accrued interest, if any.
21. Subject
to above directions, the petition is dismissed. Rule is discharged.
No costs.
(S.J.Mukhopadhaya,C.J.)
(Akil
Kureshi,J)
***vcdarji
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