2017 (3) TMI 1008 - HC - Companies Law

Court grants release of mortgaged property under SARFAESI Act, sets auction process with timelines and reserve price

The court granted the application for releasing the mortgaged property, allowing the applicant to proceed under the SARFAESI Act. Directions were given ... Right of assignee under SARFAESI Act to enforce security interest - Powers and duties of the Official Liquidator in winding up - Appointment of valuer and right of access for valuation - Co-operative auction of assets in liquidation - Fixation of reserve price and court supervision of auctionAppointment of valuer and right of access for valuation - Right of assignee under SARFAESI Act to enforce security interest - Applicant entitled to have its appointed valuer access the property in possession of the Official Liquidator for preparation of a valuation report - HELD THAT: - The Court recognised that the applicant, having received assignment of the bank's financial assets together with the underlying security interest, is entitled to pursue valuation under the SARFAESI framework even though the Official Liquidator has custody of the land and building. The Official Liquidator did not oppose cooperative steps and was directed to fix a date, in coordination with the applicant, for the applicant's valuer to visit and assess the property; the applicant may be present to ensure proper valuation. The direction preserves the Official Liquidator's possession while enabling the assignee to exercise its right to obtain an independent valuation for enforcement and sale purposes. [Paras 9, 11]Official Liquidator to permit access to the applicant's valuer on a fixed date; applicant may appoint a valuer and participate in the valuation processCo-operative auction of assets in liquidation - Fixation of reserve price and court supervision of auction - Powers and duties of the Official Liquidator in winding up - Procedure for sale/auction of the property to be carried out cooperatively by the Official Liquidator and the applicant, with valuation, fixation of reserve price, advertisement and court intimation - HELD THAT: - Having directed reciprocal valuation, the Court required both valuation reports to be used to fix a reserve price for sale. The Official Liquidator was ordered to issue an advertisement for auction within stipulated timeframes, with the auction date to be intimated to the applicant and the applicant to be present. Before finalising any sale, the bids received must be placed before the Court as required by the Act and Company Court Rules, ensuring judicial oversight. The Court imposed timelines for appointment of the applicant's valuer, completion of valuation, declaration of reserve price, issuance of advertisement, conduct of auction and submission of the auction report to the Court. [Paras 10, 12]Official Liquidator and applicant to fix reserve price after valuation; Official Liquidator to advertise and conduct auction with applicant's participation and to place bids before the Court prior to finalisation; timelines prescribed for each stepFinal Conclusion: Application disposed of by directing cooperative valuation and sale of the property: the Official Liquidator to allow the applicant's valuer access, both parties to fix a reserve price based on respective valuations, the Official Liquidator to advertise and conduct the auction with the applicant's participation, and the bids to be reported to the Court within the stipulated timelines. Issues:1. Application for direction to release mortgaged property2. Assignment of financial assets under SARFAESI Act3. Cooperation between applicant and Official Liquidator for auctioning property4. Appointment of Valuer for asset valuation5. Fixing reserve price and conducting auctionIssue 1: Application for direction to release mortgaged propertyThe judgment involves an application filed by M/s. J.M Financial Asset Reconstruction Company seeking direction to release a mortgaged property, an industrial plot, from the Official Liquidator. The property was mortgaged with the State Bank of India, and the applicant, as per an assignment agreement, claims rights under the SARFAESI Act.Issue 2: Assignment of financial assets under SARFAESI ActFollowing an assignment agreement, the applicant asserts stepping into the shoes of the State Bank of India regarding the financial assets of M/s. Shakambari Fashions Private Limited. The Official Liquidator, having taken over the assets of the Company in liquidation, is involved in the proceedings.Issue 3: Cooperation between applicant and Official Liquidator for auctioning propertyThe Official Liquidator expressed no objection to the applicant continuing proceedings under the SARFAESI Act and proposed mutual cooperation for auctioning the property to realize the money due. The applicant agreed to cooperate and sought directions for the valuation of assets by appointing a Valuer.Issue 4: Appointment of Valuer for asset valuationThe applicant requested access to the property for valuation purposes, which the Official Liquidator had already assessed. The court directed the Official Liquidator to allow the applicant's Valuer to visit the property for valuation and participate in fixing the reserve price for the property.Issue 5: Fixing reserve price and conducting auctionBoth parties were directed to fix a reserve price based on valuation reports and conduct an auction. The applicant was permitted to appoint a Valuer for valuation within a week, and the auction was to be held after thirty days from the date of advertisement, with bid details to be submitted to the court.In conclusion, the judgment addressed the application for releasing a mortgaged property, assignment of financial assets under the SARFAESI Act, cooperation for auctioning the property, appointment of a Valuer for asset valuation, and the process of fixing a reserve price and conducting an auction, providing detailed directions and timelines for the parties involved.