TaxTMI 
TaxTMI 
2016 (1) TMI 86
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....le conducted on 13.08.2004 and the Sale Certificates dated 09.04.2009 are erroneous one, since it was passed without appreciation of the facts and circumstances of the case. 3. It is the contention of the Learned counsel for the Petitioners that the Fourth Respondent/Appellate Tribunal by virtue of the impugned order dated 22.08.2014 had caused serious prejudice insofar as the sale in favour of the Petitioners which had become absolute, had been set aside without properly considering the evidence on record, documents and pleadings projected by the parties. 4. According to the Learned counsel for the Petitioners, the Petitioners being the successful auction purchasers, do have right to the property and the said right had become absolute on execution of the sale certificates and delivery of possession of the property under the provisions of the SARFAESI Act. Also that, the First Respondent/Borrower had lost its 'Right of Redemption' of the property which was the secured assets in the hands of the Second Respondent/Indian Bank. 5. The Learned counsel for the Petitioners urges before this Court that the First Respondent/Borrower had transferred its interest in the property to ....
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.... in the Writ Petition and hence, status quo continues. 10. Yet another stand of the Petitioners is that the Fourth Respondent/Appellate Tribunal ought to have considered the fact that a 'Status Quo Order' was obtained by the First Respondent/Borrower on 29.07.2004 which was set aside by the Appellate Tribunal through an order dated 12.08.2004 and therefore, the auction was proceeded with on 13.08.2004 as there was no status quo order in operation on that date. Apart from that, this Court while entertaining the Writ Petition against the order of the Debts Recovery Appellate Tribunal had in fact remanded back the matter to the Debts Recovery Tribunal for consideration after setting aside the order dated 12.08.2004 without granting any relief to set aside the sale. 11. The Learned counsel for the Petitioners project an argument that the Appellate Tribunal should have considered the relief sought for in the Writ Petition in W.P. No.24814 of 2004 was only to set aside the auction sale and the said relief was not granted by this Court. Further, M. A.(SA) No.120 of 2004 was remanded for fresh consideration by the Debts Recovery Appellate Tribunal. As such, the order would not amount....
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....el for the Petitioners submits that the Petitioners are the successful bidders with the highest bid offer of sale of the properties in regard to item Nos.2, 4 and 1 respectively of the sale notices. All the Petitioners were issued with the necessary sale certificate dated 13.05.2008 by the Second Respondent/Bank and the same were duly registered as document Nos.5379, 5378 and 5380 of 2008 on the file of the District Registrar, Vellore. 16. The Learned counsel for the Petitioners in support of the contentions that the interim order merges with the final order and for all purposes, only the final order would operate referred to the following Hon'ble Supreme Court decisions: a) Commissioner of Excise of Delhi V. World Trunks Ltd., [2010 (11) SCC 153] b) Om Prakash Verma & Others V. State of Andhra Pradesh & Others [2010 (13) SCC 158] c) Dharam Dutt & Others V. Union of India & Others [2004 (1) SCC 712] d) Gojer Bros. Pvt. Ltd., V. Ratan Lal Singh [1974 (2) SCC 453] e)Kunhayammed V. State of Kerala & Others [2000 (6) SCC 359] 17.He also seeks in aid to the decisions of the Hon'ble Supreme Court in Janak Raj V. Gurdial Singh and another reported in AIR 1967 SC 608 a....
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....d sum within 90 days from the date of communication of the sanction ticket. Even for this sanction also, the First Respondent/Borrower had failed to comply with the same and therefore, this one time settlement also failed. 22. The Learned counsel for the Petitioners/Bank draws the attention of this Court that after disposal of W.P. No.8929 of 2003, the Bank invoked Section 13(4) of the SARFAESI Act by taking symbolic possession of the properties by issuance of Possession Notice dated 01.07.2004 and after taking possession, the Bank through its Authorised Officer issued Sale Notice by inviting bids from the public for sale of the mortgaged properties. 23. Continuing further, the Learned counsel for the Petitioners' Bank states that the First Respondent/borrower challenged the sale notice by filing S.A. No.20 of 2004 before the Debts Recovery Tribunal-I, Chennai and the Debts Recovery Tribunal had granted an interim order of status quo dated 29.07.2004. As against this order, the Bank filed an Appeal in M. A.(SA) No.120 of 2004 before the Debts Recovery Appellate Tribunal and the Learned Chairperson, Mumbai, in-charge of Debts Recovery Appellate Tribunal, Chennai by an order dated....
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....nnai in RA(SA) No.60 0f 2008 and the same was dismissed on merits on 08.04.2009. 28. It is contended on behalf of the Petitioners/Bank that bank initiated SARFAESI proceedings by issuing Demand Notice in respect of second set of properties on 16.12.2006 against which W.P. No.2431 of 2007 was filed and it was decided in favour of the Bank on 05.12.2007. Thereafter, Bank issued Sale Notice dated 26.09.2008, fixing sale on 05.11.2008 and thereafter, IA No.1995 of 2008 was filed by the First Respondent/Borrower in RA(SA) No.60 of 2008 instead of filing separate SA. In fact, the Second Respondent/Debts Recovery Appellate Tribunal, Chennai through an order dated 23.10.2008, stayed the auction stating that status quo is ordered to be maintained and tenders, if any received are directed to be kept in abeyance till 07.11.2008. Therefore, the bids were not opened. Subsequently, bids were opened and auction was conducted on 09.04.2009 after dismissal of the R. A.(SA) No.60 of 2008 on 08.04.2009. 29. The Learned counsel for the Petitioners/Bank urges before this Court that the First Respondent/Borrower filed W.P. No.8004 of 2009 as against the order dated 08.04.2009 passed by the Debts R....
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....smissal of the appeal, the same was confirmed after calling all the bidders. There are no irregularities in conducting and confirming the sale. In fact, the bids were received on or before 05.11.2008 with the Bank as per order dated 23.10.2008 of the Debts Recovery Appellate Tribunal in I. A.1995 of 2008 in RA(SA) No.60 of 2008 and after dismissal of R. A.(SA) No.60 of 2008 on 08.04.2009, the sale process was completed. Thereafter, tenders were opened and auction was taken on 09.04.2009. As such, the observations made of the Debts Recovery Appellate Tribunal in the order in R. A.(SA) 132 of 2012 on 22.08.2014, that sale had not taken place on the notified date and thereafter, issuance of sale certificate to be processed on 09.04.2009 was improper and were unsustainable since sale was not cancelled/set aside but only deferred owing to judicial intervention. Contentions of the Petitioners/Auction Purchasers in W.P.17203 of 2015: 33. According to the Learned counsel for the Petitioners, the impugned order dated 22.08.2014 in R. A.(SA)No.132 of 2012 passed by the Debts Recovery Appellate Tribunal, Chennai defeats the Petitioners' right as bona fide auction purchasers of the prope....
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....Learned counsel for the Petitioners/Auction purchasers contends that after issuance of Possession notice and/or after taking possession i.e., on 27.05.2008, the First Respondent/borrower had not exercised its right of redemption under Section 13(8) of the Act and that the sale notice mentioned that the property would be sold by tender cum auction and that sale shall be confirmed on the person making highest offer. In fact, the date of auction was 05.11.2008 and the last date of accepting of tender was 04.11.2008 by 5.00 p.m. 39. At this juncture, it is the stand of the Petitioners that in respect of the Properties purchased by them, the borrower had not questioned the same under the provisions of Section 13(4) of the Act or publication notice under the SARFAESI Act. 40. The Learned counsel for the Petitioners submits that the First Respondent/Borrower filed I. A. No.1995 of 2008 in S.A.446 of 2008 before the Debts Recovery Appellate Tribunal instead of projecting an application or appeal under Section 17 of the Act before the Debts Recovery Tribunal but only had chosen to file an interim application and that too before the Debts Recovery Appellate Tribunal which was incorrect....
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....les made thereunder and further, they acquired the sale of secured assets on 13.08.2004 and 09.04.2009, pursuant to the sale notices dated 09.07.2004 on 26.09.2008 was valid and conducted in accordance with the provisions of the Act and Rules made there under. 45. The Learned counsel for the Petitioners states that the First Respondent/borrower filed an appeal before the Debts Recovery Appellate Tribunal in R. A.(SA).132 of 2012 and on 22.08.2014, the Appellate Tribunal allowed the Appeal without assailing reasons as to how the order of DRT-III, Chennai in S.A. No.120 of 2009 was wrong. 46. The Learned counsel for the Petitioners contends that the sale certificate was issued only when the sale became absolute and that the sale certificate was not compulsorily registerable one. Furthermore, the Authorised Officer had sold the four items of mortgaged properties on 13.08.2004 when the order of status quo dated 29.04.2004 was not in force. 47. The Learned counsel for the Petitioners submits that the impugned order dated 22.08.2014 passed by the Debts Recovery Appellate Tribunal in RA.(SA) 132 of 2012 had failed to consider the points putforth by the auction purchasers and the ....
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....rs] wherein it was inter-alia held that "the third respondent being a stranger and auction purchaser, having purchased the property in the recovery proceedings by paying a sum of Rs. 23.05 crores, is entitled to the confirmation of sale in his favour". 52. Apart from the above, the Learned counsel for the Petitioners cites the judgment of the Division Bench of this Court in W. A. Nos.1222 & 1223 of 2005 in CDJ 2005 MHC 1328 [K.Kandasamy & another V. The Authorised Officer, State Bank of India and another] wherein in para 9 among other things it was held that "the provisions of Tamil Nadu Transparency in Tenders Act are not applicable to the sale of secured assets of both movable and immovable under the provisions of the Securisation Act". 53. The Learned counsel for the Petitioners relies on the order of the Division Bench of this Court dated 03.02.2015 in W.P. No.31904 of 2014 between Mohd. Ismail Harron and The Debts Recovery Appellate Tribunal rep. by its Registrar & another in CDJ 2015 MHC 923 wherein in para 26 it was among other things observed that "after the sale, the right of the person questioning the sale thereby claiming title is only by way of projecting an appli....
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....en apart from Section 151, we should observe that as a matter of judicial policy, the court should guard against itself being stultified in circumstances like this by holding that it is powerless to undo a wrong done in disobedience of the court's orders. Bit in this case it is not necessary to go to that extent as we hold that the power is available under Section 151, C.P. C...." 2) In the decision of Keshrimal Jivji Shah and another V. Bank of Maharashtra and others reported in 2004(3) Mh.L.J at Page 893 and at Special Page 902 wherein in paragraphs 24 and 25, it is observed and held as follows:- "...24. We cannot be unmindful and ignorant of the importance of this aspect, which has been repeatedly emphasised by the Supreme Court. We would be failing in our duty if, we do not abide by the ratio laid down in the aforesaid decisions. That part, in the case of Ramchandra Ganpat Shinde v. State of Maharashtra and others reported in AIR 1994 SC 1673 the Supreme Court in paras 12 and 13 has observed as under:- "12. Mr.Justice Arthur, J.Venderbilt in his "The Change of Law Reforms 1955"at pages 4 and 5 stated that:- "..... It is the Courts and not in the legislature that our....
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....ly, the contention that even a trespasser cannot be evicted without recourse to law is without merit, because the state of affairs in relation to property as on 15-9-1988 is what the Court is concerned with. Such an order cannot be circumvented by parties with impunity and expect the Court to confer its blessings. It does not matter that to the contempt proceedings Somani Builders was not a party. It cannot gain an advantage in derogation of the rights of the parties, who were litigating originally. If the right of subtenancy is recognised, how is status quo as of 15-9-1988 maintained? Hence, the grant of sub-lease contrary to the order of status quo is clearly illegal. All actions including the grant of sub-lease are clearly illegal." 25. In our view, therefore, if the facts in the present case are appreciated in the light of the decisions of the Supreme Court (supra), it is clear that during the pendency of the order of injunction issued by this Court on 6th March 1998, respondent no.2 has created sub-lease in favour of petitioners herein. It is of considerable significance that respondent no.2 to 4 did not appear either to oppose the O. A. or during the proceedings, initiated....
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....oes not instantly disable the court from passing any interim orders. It can yet pass appropriate orders. At the same time, it should also decide the question of jurisdiction at the earliest possible time. The interim orders so passed are orders within jurisdiction when passed and effective till the court decides that it has no jurisdiction to entertain the suit. These interim orders undoubtedly come to an end with the decision that this Court had no jurisdiction. It is open to the court to modify these orders while holding that it has no jurisdiction to try the suit. Indeed, in certain situations, it would be its duty to modify such orders or make appropriate directions. For example, take a case, where a party has been dispossessed from the suit property by appointing a receiver or otherwise; in such a case, the Court should, while holding that it has no jurisdiction to entertain the suit, put back the party in the position he was on the date of suit. But this power or obligation has nothing to do with the proposition that while in force, these orders have to be obeyed and their violation can be punished even after the question of jurisdiction is decided against the plaintiff provi....
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.... in Mathew Varghese V. M. Amritha Kumar and Others reported in 2014 (5) SCC 610 wherein it was held that "no sale or transfer of secured asset to be made on any subsequent date without notifying borrower afresh with 30 days clear individual notice of the fresh date of sale or any sale or transfer of secured assets under SARFAESI Act in violation to any of the above mandatory requirements would be invalid". In short, the Hon'ble Supreme Court had observed that the provisions of Rule (8) of 2002 Rules and Rule 15, Schedule II Pt. I of Income Tax Act, 1961 by virtue of Section 29 of RDDB Act, 1993 and Section 37 of SARFAESI Act, 2002 are to be strictly followed in sale of secured assets under SARFAESI Act, 2002. 60. The Learned counsel for the First Respondent contends that in the present case, 13(2) notice under SARFAESI Act was not served on all the guarantors/mortgagors and in fact, Section 2(f) of the SARFAESI Act clearly includes the guarantors also within the definition of 'Term' borrower and as per Rule 3 of the Security Interest (Enforcement) Rules, mere sending of notice is not enough. Further, if the notice was not received, it was to be served by affixture, admittedly in....
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....esh Reddy, New No.18, Bishop Wallers Avenue East, Mylapore, Chennai-4 & others V. Jignesh and others reported in 2008 (1) CTC 721 wherein it was inter-alia observed that the Recovery Officer should give enough publicity to get better offers and for attracting more purchasers etc. Discussions and Findings: 66. At the outset, it is to be pointed out that the First Respondent/Borrower is a registered partnership firm, engaged in the manufacture and distribution of tobacco and allied products had took a loan of Rs. 7.5 lakhs during the year 1990 and cash credit and guaranty facility of Rs. 30 lakhs from the year 1990-92, aggregating to Rs. 37.5 lakhs. In fact, the First Respondent was unable to repay the loan and resultantly, its account was classified as 'Non Performing Asset' from 1995. The Third Respondent/Bank caused a notice under Section 13(2) of the SARFAESI Act, 2002 on 21.10.2002 claiming a sum of Rs. 1,24,27,587/-. 67. It is well settled that for issuance of notice under Section 13(2) of the SARFAESI Act, two conditions are to be satisfied: 1)A borrower under a liability to a secured creditor under a security agreement should be in default in repayment of secured ....
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....d about the same, the Third Respondent/Bank filed M. A.(SA)No.120 of 2004 on the file of the Fourth Respondent/DRAT assailing the Ex-parte Interim Order passed by the DRT-I, Chennai in S.A. No.20 of 2004. The DRAT (in-charge) Mumbai allowed the S.A. No.20 of 2004 on 12.08.2004 by setting aside the order of status quo passed by the DRT, Chennai. Moreover, the DRAT (in-charge) Mumbai also permitted the Third Respondent/Bank to proceed with the sale but stayed the confirmation of sale. 72. Added further, the Third Respondent/Bank proceeded further in regard to the sale of items of properties on 13.08.2004, the First Respondent/Borrower as an aggrieved person against the order dated 12.08.2004 in M. A. No.120 of 2004 passed by the DRAT, filed W.P. No.24814 of 2004 before this Court and this Court while setting aside the order of DRAT, remitted the matter back for afresh disposal after hearing both the parties. The Fourth Respondent/DRAT by virtue of the order dated 14.10.2004, disposed of the appeal by directing the Bank to approach the DRT. 73. Apart from that, the DRT-I, Chennai on 03.12.2004 heard the subject matter and continued the interim order on condition by directing the....
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....14 of 2004 as regards the sale of the said properties on 13.08.2004. Likewise, the DRAT also had not dislodged the sale conducted by the Third Respondent/Bank on 13.08.2004 at the time of passing final orders in M. A.(SA) No.120 of 2004 dated 14.10.2004. Viewed in that perspective, this Court comes to an inescapable conclusion that the sale of four mortgaged properties on 13.08.2004 when the order of status quo is not in existence is a valid one in the eye of law. 77. In the case on hand, the First Respondent/Borrower had not repudiated the possession notice dated 27.05.2008. As a matter of fact, the First Respondent/Borrower projected the I. A. No.1995 of 2008 in S.A. No.446 of 2008 before the Fourth Respondent/DRAT, Chennai soon after receipt of sale notice dated 26.09.2008, seeking the order of stay proceedings pursuant to the sale notice dated 09.07.2004 published in newspaper English daily dated 02.10.2007 and therefore, it is latently and patently evident that the First Respondent/Borrower had knowledge of the sale notice dated 26.09.2008 issued by the Third Respondent bank and then, it had not focused in any petition in terms of Section 17(1) of the SARFAESI Act within 45....
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....ing mortgage, disposed of the properties to one Ramesh and not bringing this fact to the fore, has projected the S.A. 120 of 2009. When the First Respondent/Borrower had sold some of the properties to the aforesaid individual, it had lost its right of redemption in the considered opinion of this Court. In this regard, the Third Respondent/Bank rightly brought the mortgaged properties to sale by issuing the sale notice thereby, enforcing security in accordance with law. When the First Respondent/Borrower (Firm) had approached the Tribunal/DRAT/this Court with unclean hands, then, it is not entitled to seek equity and to invoke the jurisdiction of this Court under Article 226 of the Constitution of India. Also that, it was issued with the demand notice under Section 13 (8) of the SARFAESI Act on 21.10.2002 and again on 16.12.2006. Indeed, the First Respondent/Firm was provided with adequate opportunities to settle the dues and redeem the mortgaged properties, which was not availed off by it diligently (including the opportunity of exercising the right of redemption as envisaged under Section 13(8) of the Act). 81. At this stage, this Court aptly points out the decision of the Hon'....
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....hudas Parekh and Company [2000 (5) SCC page 694]. 85. It is to be noted that in case whether all partners of the firm are capable of being sued and of being adjudged as judgment debtors, a suit may be filed and a decree may be obtained against a firm under Order 30 of the Civil Procedure Code. Further, such a decree may be executed against the property of partnership and against all the partners by following the procedure of Order 21 Rule 50 of the Civil Procedure Code. 86. In the instant case, the auction sale notice was published on 09.07.2004 and in Tamil Daily 'Dina Thanthi' it was published on 10.07.2004. On 26.09.2008, the fresh auction sale notice was published in Indian Express. As such, there were no irregularities in conducting the sale by the Third Respondent/Bank. Also, it is to be noted that sale notice was sent to all the partners of the First Respondent Firm by the Third Respondent Bank through registered post and that apart, notice was affixed in the premises of the First Respondent and published in newspapers. 87. Dealing with the plea that the properties were sold by the Third Respondent/Bank without obtaining the valuation of the property from the 'Appro....