2017 (3) TMI 748 - HC - Indian Laws

Court directs Recovery Officer to decide on objections regarding Property No. 6 within 3 months. SARFAESI Act applications ruled on.

The court directed the Recovery Officer to decide on objections raised by SGS Constructions and others regarding Property No.6 within three months. The ... Proceedings pending before the Recovery Officer under the RDDBFI Act - attachment orders - proceedings initiated by HUDCO under the provisions of SARFAESI Act - Held that:- (i) The Recovery Officer attached to DRT-II, Delhi shall consider and decide the objections raised by SGS Constructions as well as other objectors, if any, with regard to Property No.6 specified in the Recovery Certificate dated 30.06.2008 and pass an appropriate order in accordance with law within 3 months from today. (ii) The consideration of the objections by the Recovery Officer shall be in accordance with the procedure prescribed under the Second and Third Schedules to the Income Tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules, 1962. (iii) The order of the Recovery Officer dated 01.07.2015 as confirmed by DRT by order dated 10.07.2015 and by DRAT by order dated 20.07.2015 is hereby set aside and the application of SGS Constructions for amendment of its objections shall stand allowed as prayed for. (iv) So far as the proceedings initiated by HUDCO under the provisions of SARFAESI Act are concerned, the DRT shall decide all the Applications under Section 17(1) pending on its file including the claim of SGS Constructions that Property No.6 being an agricultural land is beyond the purview of the SARFAESI Act and pass an appropriate order in accordance with law within three months from today. (v) Till appropriate orders are passed by the Recovery Officer and DRT in terms of the above directions, status quo obtaining as on today with regard to Property Nos. 1 to 6 shall be maintained in all respects. Issues Involved:1. Mortgage and Recovery Proceedings2. Validity of the Agreement of Sale3. Jurisdiction and Maintainability of Writ Petitions4. Status and Nature of Property No.65. Proceedings under SARFAESI Act vs. RDDBFI Act6. Interim Orders and AppealsDetailed Analysis:1. Mortgage and Recovery Proceedings:The Trust had taken a loan from HUDCO in 1995 by mortgaging six properties, including Property No.6, a vacant land. Upon default, HUDCO initiated proceedings before the Debt Recovery Tribunal (DRT) under the RDDBFI Act. The DRT issued a Recovery Certificate for Rs. 148.08 crores in 2008, which was upheld by the Debt Recovery Appellate Tribunal (DRAT). The Recovery Officer initiated steps to recover the debt by selling the mortgaged properties.2. Validity of the Agreement of Sale:SGS Constructions entered into an agreement of sale with the Trust for Property No.6 in 2010. The Trust contended that the agreement, being unregistered, did not confer any right or title to SGS Constructions as per Section 54 of the Transfer of Property Act and Section 49 of the Registration Act as amended by the State of U.P. SGS Constructions, however, argued that the agreement was later duly stamped and registered, thus conferring rights over the property.3. Jurisdiction and Maintainability of Writ Petitions:Several writ petitions were filed by different parties, including SGS Constructions, KM Realcon Pvt. Ltd., and the Trust, seeking various reliefs related to the sale and recovery proceedings. The Supreme Court held that the High Court of Allahabad had erred in adjudicating property rights under writ jurisdiction and directed that such disputes be resolved by the DRT and Recovery Officer.4. Status and Nature of Property No.6:A significant contention was whether Property No.6 was agricultural land, which would exclude it from the purview of the SARFAESI Act as per Section 31(i). SGS Constructions claimed it was agricultural land, while HUDCO and the Trust argued it was residential land, supported by various documents. The Supreme Court directed that the nature and character of the land be adjudicated by the Recovery Officer.5. Proceedings under SARFAESI Act vs. RDDBFI Act:HUDCO initiated proceedings under the SARFAESI Act for enforcing the security interest in the mortgaged properties. The Supreme Court in Transcore v. Union of India held that financial institutions could take recourse to the SARFAESI Act even when recovery proceedings under the RDDBFI Act were pending. The DRT was directed to consider whether the measures taken by HUDCO under the SARFAESI Act were in accordance with the law.6. Interim Orders and Appeals:Various interim orders were passed by the Single Judge, which were challenged through LPAs. The court observed that SGS Constructions was not given a fair opportunity to address its objections before the Recovery Officer. The orders of the Recovery Officer and subsequent confirmations by DRT and DRAT were set aside, and the Recovery Officer was directed to consider the objections afresh.Conclusion:The court directed the Recovery Officer to consider and decide the objections raised by SGS Constructions and other objectors regarding Property No.6 within three months. The DRT was also directed to decide all applications under Section 17(1) of the SARFAESI Act, including the claim that Property No.6 was agricultural land. All interim orders were vacated, and status quo regarding the properties was to be maintained until appropriate orders were passed. W.P.(C) No.3047/2016 was allowed, and the other writ petitions and LPAs were disposed of accordingly.