Ms krishidhan Farms Pvt Ltd vs Recovery Officer on 24 July 2023

JUDGMENT

(Delivered on 24th July, 2023)

1. The appellants original Certificate Debtors have challenged

Order

passed below Application (Exhibit-75) in RP No.209/2002 passed by the Recovery Officer by which he has rejected application of the present appellants for dismissing the execution proceeding with cost and cancellation of bids accepted on 28th November, 2005 in auction of the suit properties. My predecessor by Order dated 26th July, 2006 dismissed this Appeal and also dismissed Review Application No.8/2006 by Order 5th April, 2007. Therefore, the appellants filed Appeal No.252/2007 with MA No.852/2008 and 984/2009 before the Hon’ble DRAT, Mumbai which by Order dated 1st July, 2014 set aside the Order passed in this Appeal and directed to reconsider following points and disposed of Appeal afresh on merits:

Whether the amount has been paid by appellants in time?

Whether auction conducted by Recovery Officer is

[KAUR]

correct or not? Therefore, I am disposing of this Appeal afresh by recording my findings on aforementioned points.

2. At the outset, the facts which arises for determination of this Appeal can be summarized as under:

The appellants are borrower who committed default and therefore, respondent bank filed OA No.454/2001. The appellants and respondent bank filed Consent Terms before DRT on 18th June, 2002. As per terms and conditions, the appellants were to make payment of Rs.24 lakhs by 27th October, 2002 but appellants failed to honor terms and conditions and also failed to deposit the amount. Therefore, the Recovery Certificate was issued.

3. In the Recovery Proceeding bearing No.209/2002 the appellants deposited Rs.5,16,000/- but failed to deposit OTS amount within stipulated period. Therefore, Recovery Officer sold the suit property in auction which was challenged before him by Application (Exhibit-75). The Order passed in Application (Exhibit-75) is challenged in this Appeal.

4. During pendency, the appellants made amendment and added auction purchaser and subsequent purchasers of the suit properties.

[KAUR]

5. The respondent No.2 bank filed Reply (Exhibit-12), respondent Nos.3 and 4, auction purchasers filed Reply (Exhibit-26) and respondent No.5(a) and 5(b), 6,7 and 8, purchasers of the suit properties filed Reply (Exhibit-28) and thereby resisted the Appeal. The appellants by filing Rejoinder (Exhibit-29 and 30) resisted the contentions Reply of respondents.

6. As per direction of Hon’ble DRAT, I record my findings only on following points:

Whether the amount has been paid by appellants in time?

Whether auction conducted by Recovery Officer is correct or not?

What order

Findings:

1. Point No.1 – In the negative

2. Point No.2 – In the affirmative i.e. auction conducted by Recovery Officer is correct.

3. Point No.3 – As per final order.

REASONS

7. I have heard arguments made on behalf of the parties and considered the written submissions of appellants (Exhibit-34),

[KAUR]

respondent No.2 bank (Exhibit-37) and respondent Nos.3 to 8 (Exhibit-35).

8. The appellants relied upon the following Cases produced along with List (Exhibit-32):

Arce Polymers Pvt. Ltd., Vs. Alphine Pharmaceuticals Private Limited and Others reported in 2021 DGLS(SC)

884. M/s. Sardar Associates and Ors. Vs. Punjab and Sindh Bank and Others reported in AIR 2010 Supreme Court

218. State Bank of India Vs. Vijay Kumar reported in AIR 2007 Supreme Court 1689.

P.Vijayakumari and Another Vs. Indian Bank reported in 2018 DGLS(SC) 189

Eastern Paper Mill Machinery Pvt. Ltd. Vs. State reported in AIR 2005 Calcutta 21

Neetu Autos Pvt. Ltd. Vs. UCO Bank (Judgment passed by DRAT, Chennai dated 16.10.2002.)

9. The respondent No.2 bank relied upon the following Cases produced along with List (Exhibit-33):

The Sathe Biscuits & Chocolates Vs. Bank of Maharashtra reported in 2004 (3) Bom. CRP 735.

[KAUR]

Kanwar Vilas Raj Nath & Another Vs. Syndicate Bank reported in 2005(2) D.R.T.C. 517 (Bom.)

Sheeba Engineering Industries, Coimbatore Vs. State Bank of India, Coimbatore reported in 2009(2) D.R.T.C. 186 (Mad.)

X-Calibre Knives (P) Ltd., and another Vs. State Bank of India reported in (2005) 10 Supreme Court Cases 265.

10. I refer documents produced by both the parties which are only relevant for disposing of this Appeal.

As to Point No.1:

11. According to appellants, during pendency of Recovery Proceeding No.209/2022 the respondent bank vide letter dated 14th February, 2003 (annexed to Appeal) gave offer to the appellants for settlement through OTS as per guidelines of Reserve Bank of India and the appellants by letter dated 30th April, 2003 submitted OTS proposal for an amount of Rs.24 Lakhs. Thereafter, the respondent bank by letter dated 7th June, 2003 acknowledged and confirmed the receipt of OTS proposal letter and called upon the appellants to pay 25% of offer amount. The appellants had already paid Rs.3,40,000/- (during pendency of OA No.454/2001) and on 18th August, 2003 paid Rs.50,000/- which was accepted by the

[KAUR]

respondent bank. No doubt, Reserve Bank of India vide Revised Guidelines dated 29th January, 2023 for compromise/ settlement of chronic Non-Performing Assets (NPAs) of public sector banks had directed banks to compromise or settle the dues relating to NPAs including cases pending before Courts/DRTs/BIFR, subject to consent decree being obtained from the Courts/DRTs/BIFR. The last date for receipt of applications from borrowers was fixed as 30th April, 2003 and date for completion of process was fixed as 31st October, 2003. According to appellants, the date for submission of OTS offer was extended upto 31st July, 2004 and date for completion of process was extended upto 31st October, 2004 by Revised Guidelines. The said Guidelines are no produced on record.

12. Anyhow, as per decision in the case of “Sathe Biscuits & Chocolates Vs. Bank of Maharashtra” 2004 (3) Bom. CRP 735 the One Time Settlement is not applicable to the cases where decree has already been passed. Same observations is made by Hon’ble Supreme Case in the case X-Calibre Knives (P) Ltd. and another Vs. State Bank of India (2005) 10 Supreme Court Cases 265 (produced by

[KAUR]

respondent bank).

13. In the present case, it is apparent that respondent bank’s offer for settlement through OTS to the appellants during recovery proceeding is by mistake.

14. In the present case, there is no shred of evidence that respondent bank has accepted the OTS proposal of the appellants in writing, though it has accepted some amounts. For a moment, if OTS is said to be accepted by respondent bank, then as per RBI Guidelines dated 29th January, 2003 the OTS proposal process should have to be completed by 31st October, 2003. Admittedly, the appellants have not paid alleged OTS amount to the respondent bank within time i.e. by 31st October, 2003.

15. Though in the Cases relied upon by the appellants, the Hon’ble Supreme Court has observed that if amount of OTS is not paid within time, the bank is entitled for interest for the delayed period and would not terminate the agreement, in my opinion, it is the discretion of respondent bank. Therefore, I hold that the appellants have not deposited the amount within the time.

As to Point No.2:

16. Admittedly, the Recovery Officer in Recovery Proceeding

[KAUR]

No.209/2002 conducted sale of the suit property by auction and completed the same as appellants failed to repay the outstanding amount.

17. According to appellants, though respondent bank has filed OA No.454/2001 for recovery of Rs.39,87,967.75Ps., the appellants were to pay Rs.24 Lakhs as per Consent Terms. Out of that Rs.3,40,000/- was already paid and appellants were supposed to pay balance amount of Consent Terms by 27th October, 2002. In default, the respondent bank was entitled to recover full amount of Rs.39,87,967/-. However, Recovery Officer issued Demand Notice only for Rs.20,60,000/- and not for suit claim amount of Rs.39,87,967.75Ps. Thus, according to appellants the respondent bank intentionally waived default clause of Consent Terms (annexed to Appeal). Even then, the Recovery Officer issued Sale Proclamation (Exhibit-48 in RP No.209/2002) for Rs.80,32,609.75Ps relying upon whole outstanding amount of Rs.39,87,967.75Ps plus interest, which is wrong. However, the record of Recovery Proceeding No.209/2002 shows that though initially Demand Notice was issued for Rs.20,60,000/, the respondent bank made

[KAUR]

application for issuing Demand Notice for full amount and accordingly, fresh Demand Notice dated 10th April, 2003 for full amount of Rs.39,87,967.75Ps was issued of which copy is produced by the respondent bank along with IA No.1330/2023 in this Appeal. The Order Sheet (Roznama) of Recovery Proceeding No.209/2002 dated 10th April, 2003 also shows the same fact. In the circumstances, it could not be held that the respondent bank waived amount of default clause of Consent Terms. Therefore, amount mentioned in the Sale Proclamation appears to be correct.

18. Further according to appellants, the mortgaged suit property is agricultural land. Therefore, Sale Proclamation should have to disclose the nature of the suit property as agricultural land and only agriculturist would have been called to participate in auction. However, there is no law or rule that in case of agricultural land only agriculturists can participate in auction. Further, according to appellants the Reserve Price for sale of the suit property was fixed at Rs.12 Lakhs and out of three bidders, one bidder M/s. Yashdeep Constructions Promoters and Builders had quoted the bid amount of Rs.7,51,000/- which was less than the Reserve Price, so it

[KAUR]

should not have been allowed to participate in bidding process. However, Recovery Officer by allowing it to participate in bidding process made bidding process illegal.

19. On perusal of documents of bidding process in Recovery Proceeding No.209/2002, it appears that M/s. Yashdeep Constructions Promoters and Builders have mentioned bid amount for Rs.7,51,000/- less than Reserve Price of Rs.12 Lakhs. Further, it participated in bidding process. Anyhow, its bid has not been accepted and respondent Nos.3 and 4 won the bid and were declared as successful bidder who purchased the suit property for Rs.21,35,000/-. Therefore, bidding process could not be branded as illegal. More so, according to appellants, the suit property was sold at low price. According to them, as per Valuation Report dated 23rd February, 2004 (Exhibit-36 in RP No.209/2002) the suit property was valued at Rs.15,18,000/- which was Fair Market Value but Recovery Officer fixed the Reserve Price at Rs.12,00,000/-. However, on perusal of Valuation Report (Exhibit-36 in RP No.209/2002) it clearly discloses that Distress Value would be 75% of Market Value i.e. Rs.15,80,000/-. If one calculate 75% of Market Value of Rs.15,80,000/-, Distress Value comes to Rs.11,38,500/- and

[KAUR]

therefore, Reserve Price fixed at Rs.12,00,000/- by Recovery Officer appears to be reasonable and correct. Further, the said suit property has fetched the value of Rs.21,35,000/- by auction. That apart, in the letter (Exhibit-63 in Recovery Proceeding No.209/2002) given by the appellants to respondent bank, the appellants themselves has contended at page No.4 that value of the suit property was deteriorating. Therefore, I hold that Reserve Price fixed at Rs.12,00,000/- for sale of the suit property is just and reasonable.

20. The Recovery Officer as per law, rules and procedure for sale of immovable property sold the suit property in auction. He issued Sale Proclamation and thereafter, obtained Valuation Report and fixed the Reserve Price. Thereafter, by calling bids, bidding process completed and sold the suit property to highest bidder. There is no illegality committed by Recovery Officer while selling the suit property. The sale process of the suit property was completed on 28th November, 2005 and appellants has filed application for cancellation of the same on 29th December, 2005. As per Section 60 of Income Tax Act, 1961 the aggrieved person shall move application for setting aside the sale within thirty days from the date of sale. Therefore, application (Exhibit-75) filed

[KAUR]

by appellants is barred by limitation.

21. In view of the above observations, I record my finding on both the points accordingly. Resultantly, the Appeal is liable for dismissal.

22. Before parting with Judgment, I, with great regard, mention that Authorities cited on behalf of the appellants are not helpful to them whereas the Judgments cited on behalf of the respondent bank are squarely applicable to the present case. Hence, I proceed to pass the following order:

ORDER

Appeal No.9/2006 is dismissed with costs.

Pronounced in open Court.

Place : Pune Date: 24.07.2023 Sd/- (Dilip G. Murumkar) Presiding Officer Debts Recovery Tribunal, Pune