2018 (12) TMI 1982 - HC - Indian Laws

High Court upholds Tribunal decision on notice requirements, property classification, & valuation. Petition dismissed under Article 226.

Concern Readymix and Ors. Versus The Authorised Officer, Corporation Bank and Ors.

The High Court upheld the Tribunal's decision in a case involving non-compliance with notice requirements, classification of mortgaged property, and ... Default in repayment of Term Loan - account classified as NPA - Failure of auction three times - requirement to give 30 days time from the date of issue of notice under Rule 8(6) before the issue of the sale notice under Rule 9(1) of SARFAESI Rules - property brought to sale was admittedly an agricultural land and hence Section 31(i) of the Act was attracted or not - fixation of reserve price violating the law laid down by the Supreme Court in J. RAJIV SUBRAMANIYAN & ANR. VERSUS M/S. PANDIYAS & ORS [2014 (6) TMI 17 - SUPREME COURT]. Non-availability of a gap of 30 days between the date of issue of notice under Rule 8(6) and the sale notice under Rule 9(1) - HELD THAT:- In any case, the first argument of the learned counsel for the petitioner is about the failure of the Bank to issue a notice under Rule 9(1). If the petitioner was serious about this contention, he should have come up with a writ petition or gone before the Debts Recovery Tribunal by way of appeal challenging the first notice of sale dated 10-7-2017. The petitioner did not challenge the first notice of sale. He did not challenge even the subsequent 6 notices of sale. He came to Court only after the sale was effected on the 7th occasion. Therefore, a person who took advantage of the failure of 6 auctions, cannot come to Court after the completion of a successful auction on the 7th occasion, complaining that the first auction was defective. The impugned sale did not take place pursuant to the first auction notice, but took place pursuant to the 7th notice. Therefore, the defect, even if any, in the first notice, got wiped out. Hence, the first contention deserves to be rejected. Whether the mortgaged property is an agricultural land and that therefore Section 31(i) of the Securitisation Act, 2002, prohibits the invocation of the provisions of the Act, for the enforcement of security interest in an agricultural land? - HELD THAT:- A person who made a representation of a crucial fact in the form of a Sworn Affidavit and thereby induced a Bank to sanction a term loan, cannot go back on the representation made by him in his Affidavit. If the petitioners had refused to swear to an Affidavit in April, 2011, the Bank would not have sanctioned the facilities at all. After having held out a particular form of representation to the Bank and after having derived a benefit on account of such representation, the petitioner cannot now turn around and contend that what was made out by him/her was a misrepresentation. A vain attempt was made by the learned counsel for the petitioner to contend that the petitioner had to swear to such an Affidavit in April, 2011, because they were in need of money. But the learned counsel for the petitioner does not want to label the representation made by the petitioners as a misrepresentation, as the same would expose them to other consequences. If the petitioners had made a false representation in order to induce the Bank to sanction limits to them, they cannot go back on those representations, with a view to deprive the Bank of their dues. No amount of Case Law would go to the rescue of such a person. Therefore, the second contention is also liable to be rejected. Market Value - contention of the petitioner is that the valuation obtained way back on 22-02-2011 was Rs. 462.50 lakhs and that therefore the valuation obtained before the last auction sale was abysmally low - HELD THAT:- It is true that the securing of the best possible price by the secured creditor, would be beneficial to both parties. But ideal situations do not arise in auction sales. The Bank could not get a buyer for the property in 6 auction sales. It was only in the 7th auction that the Bank succeeded. Therefore, the petitioner cannot make an issue out of the valuation report. Therefore, the third contention is also liable to be rejected. All the three contentions raised by the learned counsel for the petitioner are liable to be rejected. The Debts Recovery Tribunal has applied its mind to all the three contentions and chose to reject them with its own reasons - Petition dismissed. Issues Involved:1. Non-compliance with the 30-day notice requirement between Rule 8(6) and Rule 9(1) under SARFAESI Act.2. Classification of the mortgaged property as agricultural land under Section 31(i) of the SARFAESI Act.3. Adequacy of the valuation and reserve price set for the auctioned property.Detailed Analysis:Issue 1: Non-compliance with the 30-day notice requirement between Rule 8(6) and Rule 9(1) under SARFAESI ActThe petitioners challenged the auction sale on the ground that the Authorized Officer did not provide a 30-day period between the notice under Rule 8(6) and the sale notice under Rule 9(1), violating the mandate of law. The Tribunal rejected this contention based on the Supreme Court judgment in Canara Bank v. M. Amarender Reddy, which clarified that the rules do not require separate notices for Rule 8(6) and Rule 9(1). The Tribunal noted that the Bank issued multiple notices due to failed auctions, and the subsequent notices were of sufficient duration as prescribed by the proviso to Rule 9(1). The Court emphasized that the jurisdiction under Article 226 is supervisory and not appellate, and found no perversity in the Tribunal's findings. Therefore, the first contention was rejected.Issue 2: Classification of the mortgaged property as agricultural land under Section 31(i) of the SARFAESI ActThe petitioners argued that the mortgaged property was agricultural land, thus invoking Section 31(i) of the SARFAESI Act, which prohibits the enforcement of security interest on agricultural land. The Tribunal rejected this argument, relying on an affidavit submitted by the second petitioner at the time of loan sanction, which stated that the land was not used for agricultural purposes and consented to proceed under the SARFAESI Act. The Court held that the representations made by the petitioners at the time of loan sanction were material and binding. The Court also noted that the petitioners could not now claim the property as agricultural land to avoid repayment. Therefore, the second contention was rejected.Issue 3: Adequacy of the valuation and reserve price set for the auctioned propertyThe petitioners contended that the reserve price set for the auction was significantly lower than the market value, violating the law laid down by the Supreme Court in J. Rajiv Subrahmaniyam v. Pandiyas, which mandates securing the best possible price for the secured asset. The Tribunal found that the Bank had obtained a fresh valuation before the last auction, which was considered adequate. The Court acknowledged that while the best possible price is ideal, practical challenges in auction sales often prevent achieving the highest valuation. The Bank's multiple failed auction attempts and eventual success in the seventh attempt were noted. Therefore, the third contention was also rejected.Conclusion:The High Court dismissed the writ petition, upholding the Tribunal's decision. The Court found that all three contentions raised by the petitioners were adequately addressed and rejected by the Tribunal. The Court emphasized the limited scope of its jurisdiction under Article 226 and found no error of law or perversity in the Tribunal's findings. The writ petition was dismissed, and no costs were awarded. Pending applications were also closed.