TaxTMI 
TaxTMI 
2021 (12) TMI 173
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..... Andhra Bank (the 'Bank', for short) for sale of the mortgaged asset, namely, plot No. 66/B-1, Phase-I, IDA Jeedimetla, Quthbullapur Mandal, Medchal Malkajgiri District, Hyderabad, Telangana (hereinafter referred to as the 'Subject Property') as being in violation of the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as the 'SARFAESI Act' and the 'Rules' respectively). 3. Aggrieved by the said judgment, the present appeals have been preferred by M/s. Arce Polymers Private Limited, (for convenience, we would refer M/s. Arce Polymers Private Limited as the 'Second Purchaser') who had purchased the property from the original auction purchaser, namely, Basa Chandramouli; and by the Bank. 4. The impugned judgment had formulated five points for consideration, which read: "(a) Whether the 1st respondent Bank had an obligation to comply with Section 13(3A) of the Act and give a response to the petitioners' representation dt.01.11.2016 and whether the Debts Recovery Tribunal was correct in holding that there was no such obligati....
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....by way of a reply within sixty days of the notice under Section 13(2) of the SARFAESI Act. (vi) On 1st November 2016 and 6th November 2016 the Borrower wrote letter(s) in which, while accepting defaults and nonpayment, it had enlisted reasons for not being able to adhere to the payment schedule, namely, delay in commencement of production of pharmaceuticals due to the requirement of renewal of licenses from different statutory bodies, and policy changes by M/s. Singareni Collieries Company Limited, their prime customer, disqualifying them from participating in the tenders. The bank was requested to grant further moratorium of twelve months. (vii) The letters dated 1st and 6th November 2016, do not profess being a reply or objection to the notice dated 1st August 2016 issued by the Bank under Section 13(2) of the SARFAESI Act. (viii) On 7th November 2016, the Bank informed the Zonal Manager of the Recovery Management Department, in re the proposal submitted by the Borrower for restructuring the term loan, extension of the moratorium period and induction of fresh capital, with the following stipulations: "Sub : NPA A/c M/s Alphine Pharmaceuticals P....
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....ILITY LIMIT SANCTIONED OUTSTANDING BALANCE RECOVERY AFTER NPA REAL SHADOW PROVISION Term Loan 021230100009479 1.52 1.39 1.50 Nil OCC 021213100000502 0.35 0.40 0.41 0.10 Total 1.87 1.79 1.91 0.10 Company informed that though they are running the unit with low capacity production i.e. Rs. 3 to 4 lakhs per month the fixed expenses and interest charges are amounting to nearly Rs. 5.00 lakhs per month by which they are incurring losses. Company vide their letter dated 06.11.16 informed that they will to remit Rs. 6.00 lakhs by 15th of this month in the OCC account to bring the liability in the OCC account within the limit and infuse Rs. 60.00 lakhs within three months by which the Working capital liquidity problem will be solved and can execute the orders on hand / to be procured. It is also informed that they have approached M/s Singareni Collieries Company Ltd authorities to reconsider the eligibility of the company in participation of tenders as the erst while firm M/s Alphine Pharmaceuticals was acquired by them and converted to limited company. Now the company is requesting us to r....
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....and took symbolic possession of the Subject Property vide possession notice dated 3rd March 2017. (xi) Thenceforth, the Bank filed Crl.M.P.No.343/2017 under Section 14 of the SARFAESI Act before the Chief Metropolitan Magistrate, Cyberabad, Ranga Reddy District and took physical possession of the secured asset on 3rd May 2017 through Advocate Commissioner appointed by the court. (xii) On 1st June 2017, the Bank issued notice under Rule 6(2) read with Rule 8(6) of the Rules informing the Borrower that the Subject Property was being put to auction with a reserve price of Rs. 2,78,10,000/- (Rupees two crores seventy eight lakhs ten thousand only). The Borrower was given an option to repay the amount due along with interest so that the auction could be halted. (xiii) The Borrower did not respond to this letter. It neither protested nor made any payment. (xiv) The auction held on 6th October 2017 did not fructify as no bidder came forward to purchase the Subject Property. (xv) On 20th October 2017, 8th November 2017 and 17th November 2017, the Borrower made representations for regularisation of the account. The last letter dated 17th November....
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....une 2018. Both the attempts failed as no bidder came forward to participate in the auction. (xix) Importantly, the attempts to sell the Subject Property remained unchallenged by the Borrower. (xx) On 20th August 2018, the Bank issued the fourth notice for auction, regarding which the Borrower was duly informed. Given the fact that in the earlier auctions no bidder had participated, the Bank reduced the reserve price from Rs. 2,78,10,000/- (Rupees two crores seventy eight lakhs ten thousand only) to Rs. 2,60,00,000/- (Rupees two crores sixty lakhs only). Yet again, the Borrower did not respond. It neither questioned the sale notice, the reduction in reserve price, nor made any payment. (xxi) In the auction held on 11th September 2018, two bidders had participated and the Subject Property was sold at a bid price of Rs. 2,91,20,000/- (Rupees two crores ninety one lakhs twenty thousand only) to Basa Chandramouli. On 14th September 2018, sale confirmation letter was issued to Basa Chandramouli. On 27th September 2018, after Basa Chandramouli had made the total payment, the sale certificate was issued. 6. In October 2018, the Borrower approached and filed a ....
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....er through representations had pleaded difficulties being faced by it in repaying the loan instalments and sought extension of moratorium/more time for repayment. The High Court held that it was not necessary for the Borrower to specifically mention that the representations were in response to the notice under Section 13(2) of the SARFAESI Act. Further, relying upon the decision of the Bombay High Court in Blue Coast Hotels Limited v. IFCI Limited and Another, 2016 SCC OnLine Bom 2663 which decision on challenge became the subject matter of the appeal and decision of this Court in ITC Ltd. (supra), the High Court held that there is no specific provision or mandate under Section 13(3A) of the SARFAESI Act that the representation of the Borrower to the demand notice under Section 13(2) should be filed within a period of sixty days from the date of notice. The impugned judgment also refers to the letter dated 7th November 2016 to observe that the Chief Manager of the Bank had recommended deferring of action under the SARFAESI Act with the intent that the unit running in the Subject Property should be granted benefit of deferment of action. The Bank had proceeded to issue possession no....
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....nces set out in sub-paragraphs of paragraph 30 on the ground that the debtor, post the notice under Section 13(4) of the SARFAESI Act, had given proposals with assurances, letter of undertaking for repayment of the mortgage debt, pursuant to which time was granted and consequently the sale notice was deferred. Only when payments were not made as promised that the creditor had proceeded to recover the dues. Paragraph 31 and 32 of the decision in ITC Ltd. (supra) record as under: "31. From the above, it is clear that the creditor was induced by the debtor not to take action against them through assurances and promises. The creditor appeared to have entered into negotiations for the settlement of the dues and even accepted cheques in repayment much after the notice [Dated 26-3-2013] under Section 13(2) and after the debtor's letter of representation [Dated 27-5-2013] . Many opportunities were granted by the creditor to the debtor to repay the debt which were all met by proposals for extension of time. Eventually, the debtor even executed "A Letter of Undertaking [On 25-11-2013] " acknowledging the right of IFCI to sell the assets in the case of default. 32. In th....
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....y and laches, which aspects are material. Action on the Subject Property was delayed by more than a year as at the behest of the Borrower, the Bank gave them a long rope to regularise the account. To ignore the conduct of the Borrower would not be reasonable to the Bank once third party rights have been created. In this background, the principle of equitable estoppel as a rule of evidence bars the Borrower from complaining of violation. 15. The question of waiver of mandatory requirement of a statute was considered by this Court in depth in Commissioner of Customs, Mumbai v. Virgo Steels, Bombay and Another, (2002) 4 SCC 316 by referring to a catena of judgments beginning from the judgment of the Privy Council in AL.AR. Vellayan Chettiar (Decd.) and Others v. Government of the Province of Madras, Through the Collector of Ramnad at Madura, and Another AIR 1947 PC 197 wherein it was held that though notice under Section 80 of the Code of Civil Procedure, 1908 is mandatory, the suit would not be bad if the non-issuance of notice is waived by the party for whose benefit the provision has been enacted. Similarly, in S. Raghbir Singh Gill v. S. Gurcharan Singh Tohra and Others, (1980)....
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....fulness of administrative action is entitled to grant of remedial order, the general proposition does not undermine the discretion which the courts or judicial authorities have in assessing "what is fair and just to do in the particular case - to withhold the remedy altogether or to mould the remedy by grant of a declaration rather than a more coercive quashing, prohibiting or mandatory order or injunction which may have been sought." De Smith's Judicial Review, Eigth Edition (2018), at page 1006 Relief may be granted in respect of one aspect and not others. The general approach, therefore, is that a complainant who succeeds in establishing unlawfulness of an action is entitled to a remedial order, but the court has discretion in the sense of determining what is fair and just to do in a particular case. This discretionary aspect of grant of relief even with reference to post litigation events has been highlighted in Beg Raj Singh v. State of U.P. and Others, (2003) 1 SCC 726 wherein it was held as under: " 7. Having heard the learned counsel for the petitioner, as also the learned counsel for the State and the private respondent, we are satisfied that the petit....
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....he Borrower highlights the dilatory and tricky approach of the Borrower as it had failed to submit details of the additional collateral security offered along with the legal opinion and the engineer's valuation report. Even visit to the proposed collateral security property was not arranged. The Borrower again tried its luck and submitted a restructuring proposal vide communication dated 18th December 2017, but this did not fructify into an acceptable settlement. The Bank having lost faith could not rely on the Borrower. Only thereafter, the Bank proceeded with the auctions under the SARFAESI Act on 28th March 2018 and 14th June 2018. The Borrower then kept silent. As the earlier auctions failed, the Bank issued notice dated 20th August 2018 informing the Borrower about the fourth auction to be held on 11th September 2018 at a reduced reserve price. The Borrower challenged the actions taken by the Bank after the Subject Property had changed hands and third party interests had been created. Taking into consideration the entire facts of the case, which perspicuously reflect disingenuous conduct on part of the Borrower to gain indulgence, unfulfilled assurances and promises, their unw....