H Govindarajrao vs KARNATAKA BANK LIMITED on 30 July 2021

FINAL ORDER

The present appeal is filed under Section 30 of the Recovery of Debts Due to the Bank And Financial Institution Act, 1993 by the Appellants seeking to set aside and quash the sale certificate daled 04.L2.2017 and stay all further DCP proceedings. The Appellants have not filed any separate I'A' for stay.

The main contentions of the Appellants are that the schedule property is sold in auction for a meagre sale consideration much less than the market price and the alleged successful bidder has been unduly favoured by the 1-'t Respondent Bank in allowing and accepting a single bidder for an unrealistic sale price without competition in bidding. The grounds, interalia, urged by the no statutory notice served on the borrower; conducted in violation of statutory provisions and also with procedural lapses; e-auction sale suffers from non- compliance to its own sale proclamation warranting to set aside the invalid e-auction sale dated 06.10.2017; auction sale is in violation of Order XXI Rule 64 of the Code of Civil Procedure, 1908; in the e-auction sale, the entire huge chunk of schedule property was sold for a paltry sum of Rs.2,13,00,000/- when the amount recoverable from the Appellants is just Rs.16,84,L01/- which is below 10% of the amount realized from the e-auction sale and the e-auction sale is in violation of well-settled legal principle upholding Order XXI Rule 64 of CPC. The Appellants in support of their case have relied on the judgments passed by the Hon'ble Apex Court in the case of Sai Enterprises Vs Bhimareddy Laxmaiah; Ambati Narasayya Vs M. Subba Rao and another - 1-989 Suppl.(2) SCC 693; S. Mariyappa (Dead) by LRs and others Vs Siddappa and another - (2005 (10) SCC 235 and Balakrishnan Vs Malaiyandi Konar (2006 (3) SCC 49)' It is further contended that contrarily in the case hand

DCP:5003 proceedings in O.A.No.20912003, the entire agricultural property came to be auctioned when the same was not necessary to satisfy the loan outstanding, and overruling the Appellanflborrower's objection, sale certificate is alleged to have been issued in violation of provisions of Order XXI Rule 64 of CPC. It is further contended that without an arbitration agreement or written consent of the Appellants, the matter was referred for arbitration on 02.03.1994 and the arbitral award came to be passed on 16.11.1998 after an undue delay of four years under unexplainable situation in violation of Rule 3 of the then prevailing provision of Arbitration Act and the said arbitral award passed after four years is ab initio void and unenforceable. Appellants further contended that the undisputed finding of this Tribunal terming the arbitral award as invalid and discharging the Defendants 4 to 6 alone from their liabilities retaining the Defendants 1 to 3 answerable in O.A.No.209/2003 on 15.17.2007 challenged by the 1't Respondent Bank O"rtr" o4, l/

Chennai and got reverted the said order on the ground that what is applicable to Defendants L to 3 is applicable to Defendants 4 to 6 also. It is further contended that even before the DMT, Chennai, the finding of this Tribunal in respect of invalid nature of the arbitration proceedings, remained undisputed and hence has become final and thus, the fact is that the arbitral award is ab initio invalid and unenforceable and the recovery certificate which is a product of the said arbitral award is also invalid and unenforceable. Appel lants fu rther contended that W. P'No.40099 / 2Ol7 filed by them before the Hon'ble High Court of Karnataka challenging the enforcement of arbitral award under the DCP proceedings by the l't Respondent Bank/RO, DRT, Bangalore by bringing the schedule property for sale is pending before the Hon'ble High Court. It is further contended that the Appellants filed their statement of objections seeking not to issue sale certificate on 08.11.2017 and brought to the w.P of the Recovery officer the pendency of 4OOgg/2017. When the 1't Respondent Bank itse failed raise any objection, the Recovery Officer hastily overruled the Appellants' objection and passed an order for issuance of sale certificate without considering the objection and also without application of mind in a single-line order. The public auction sale and issuance of sale certificate are hit by the doctrine of lispendens which out to have been avoided by the Recovery Officer in the interest of preventing multiplicity of litigations. Further grounds urged are, e-auction sale is in violation of Sections-7gA(2xiD or 798 etc of Land Reforms Act since the 2nd Respondent/Auction Purchaser is not an agriculturist and he is a person who comes within the category of restricted group; agricultural schedule land is not mortgaged to the Respondent Bank against any loan borrowed and hence, the same does not fall within the ambit of Section 81(c) of the Land Reforms Act the schedule property to the L't being a joint family property was never mortgaged the sale Respondent Bank and 1-'t Appellant is only co-owners of the schedule property and the e-auction ) of the schedule property has no binding on undivided shares of other family members in the said property, who are not parties to the said loan transaction and hence the e-auction sale is not absolute; valuation of the property is improper; deliberate misdescription of schedule property in the sale proclamation to wade off competition; lacks transparency in the auction sale proceedings and documentation; sale certificate contains false statements as absolute sale as the possession of the immovable schedule properlry is with the 1't Appellant till date and how can there be an absolute sale without delivery of possession of the immovable property to the purchaser; in the case on hand, the sale has not become absolute as stated in the sale certificate dated 15.11.2017 and no valid sale or conveyance of title has taken place in the eye of law as the possession of the property still remains with the joint family of the 1't Appellanq order dated 22.11.20L7 is not a reasoned order and is in violation of Article 3004 of the Constitution It is contended that the matter was to be of 06.71..20L7 but the authority was on leave on

Appellants' statement of objections filed in the interim was not appreciated by the Recovery Officer on 22.L1.20t7 who rejected the same for the simple reason "cannot considered at this stage", "untenable" and this Tribunal in its order in O.A.No.209/2003 dated 15.11.2007 has held that "As per the Supreme Court decision referred above, the parties are at liberty to question the validity of the award even at the time of execution also." But the Recovery Officer rejected the Appellants' statement of objections by a single-line order on 22.77.20L7. When there has been gross irregularity in 1't Respondent's recovery process against the Appellants which was brought to the knowledge of the Recovery Officer, the Recovery Officer ought not to have rejected the Appellants' objection without considering the same, that too without giving ample reasons for rejecting the same. It is further contended that the Respondent Bank filed RA 13412008 before the Hon'ble Debts Recovery Appellate (DRAT), Chennai, challenging the impugned passed this Tribunal in O.A.No.209l2003, wherein the n'ble D

in OA No.20912003 vide its order dated 05.12.2013 directed this Tribunal to issue modified RC and made a mention that the Debts Recovery Tribunal has no civil court powers and hence, it cannot alter/modify the judgment/decree/award, if any, passed by the civil court. But the Respondent Bank without approaching the civil court got the RC modified by this Tribunal itself which is contrary to the order passed by the DMT, Chennai and hence the RC rectified without jurisdiction by this Tribunal has no validity to become enforceable. Appellants further contended that the schedule property is sold in auction for a meagre sale consideration of Rs.2,13,00,000/- which is just above the reserve price of Rs.2,12,50,000/- and nowhere near the present market price and the alleged successful bidder has been unduly favoured by the 1't Respondent Bank in allowing and accepting a single bidder for an unrealistic sale price without any competition in bidding and it is a classic example of collusi between the bank and bidder and hence the e liable to be set aside to avoid miscarriage of ju with the appeal, the Appellants have produced copies of proceedings of the Recovery Officer vide Annexure-Al; order daled 22.L1.2017 of the Recovery Officer vide Annexure-A2; auction proceedings vide Annexure-A3; letter to successful bidder vide Annexure-A4; e-auction bid sheet vide Annexure- A5; statement of objections vide Annexure-A5; sale proclamation vide Annexure-A7; order dated 05.12.2013 of DMT, Chennai vide Annexure-A8; RC dated 15.11.2007 vide Annexure-A9; demand notice dated 06.07.2015 vide Annexure-A10; two valuation reports vide Annexures-Al1 and AL2; RTC Form No.16 vide Annexure-A13 and W. P.No.40099 / 2017 vide Annexu re-A14.

In response to the notice, the Respondent No.1 appeared through its counsel and filed statement of objections to the appeal filed by the Appellants, contending that the appeal filed by Appellants is not maintai in law or on facts and is liable to be rejected in limine and the ry limitation. r'/'*"rpory'"n, prayer in OA No.209l2003 Bank denies that the schedule property was the ancestral property of the 1't Appellant and his family members and that the 1't Appellant has no legally enforceable right over the undivided share. The said property is the joint property of the guarantors to the loan and the Appellant is one of the guarantors to the loan and the said property is attached after issuance of recovery certificate by this Tribunal and recovery proceedings were initiated in terms of orders passed in O.A.No.209l2003 by this Tribunal and in RA 134/2008 by DRAT which are final and binding on the parties. In spite of passing order dated 09.06.2013, the Appellants have not made any attempt to make the payment, hence without any option, the property in question was sold as per law by this Tribunal and it is denied that this Tribunal fixed the reserye price arbitrarily. Further, there is no stay order passed in W.P.4OOgg/2017 by the Hon'ble High Court of Karnataka. It is further contended that the auction e-auction and property was sold to the highest other contentions of 1't Respondent Bank

in OA No.20912003 irregularity commltted in passing the order by the Recovery Officer and in issuing the sale certificate by this Tribunal; all the notices as required under law were duly served as per law; there is no procedural lapses in conducting the sale; auction sale conducted is not in violation of the proclamation terms; provisions of CPC are not applicable, if there is a specific provision under the Act and Income Tax Act; selling the agricultural property portionwise without legally bifurcating the same in terms of Land Survey Act is not possible, hence entire property was sold in auction; the Appellant and other borrowers to loan are also liable to pay more than six crore to the 1st Respondent Bank; hence the 1tt Respondent is initiating to recover the said amount due from M/s Amogha Institute of Computers in O.A.No.326/2003 and recovery certificate is also issued and recovery proceedings are pending before the Recovery Officer; Appellants' contention that arbitral award is invalid is false and any basis; the said award was confirmed by the Principal Civi

Judse, Mansalore and based upon *" o"("" /- therein, this Tribunal issued the RC, which was subsequently modified as per the order passed by the Hon'ble DRAT in R.A.No.134l2008; there is a reasoned award and the subsequent proceeding in the present matter has reached its finality and hence Appellants have no right to challenge the same in the present appeal; there is no hurdle in auctioning the property as there is no stay order passed in the above Writ Petition; there is no lis pendens in the present matter; provisions of Land Reforms Act are not applicable in auctioning the property; provisions of Section zl4 of Transfer of Property Act are not applicable to the case in hand; property is properly valued and reserve price was fixed as per law; Respondent Bank denied the allegation that sale certificate contains false statemenfi the property is already delivered to the Auction Purchaser as per law and the Auction Purchaser is in possession and enjoyment of the same as absolute owner thereof; the order 134/2OOB is not challenged and it has reached cannot be urged in the present appeal; question was sold for more than the reserve price and there is no irregularity in the matter. It is contended that the property in question is an identified property and attached in the recovery proceedings and is sold as per law and there is no violation in auctioning the property in question. In view of the above reasons, l't Respondent Bank has prayed for the dismissal of the present appeal, with cost, in the interest of justice and equity.

In response to the notice, the Respondent No.2/Auction Purchaser appeared through his counsel and filed statement of objections to the appeal filed by the Appellants, contending that the appeal filed by Appellants is not maintainable either in law or on facts and hence the same is liable to be dismissed. It is contended that the property bearing Survey No.67l6A1P1 of Hosabettu village, Surathkal Hobli, Mangalore Taluk, the subject matter of Arbitration measuring 58.50 c and an award came to be passed in Arbitration Case No.1/1999 by the ,rr\*

Civil Judge, Mangalore on 25.07.2002. It is the case of the Respondent No.2 that he purchased the above property in e-auction on 06.10.2017 for Rs.2,13,00,000/- and his bid was the highest and the Recovery Officer of this Tribunal declared the Respondent No.2 as the successful bidder and after compliance of terms of the e-auction by the Respondent No.2, order of confirmation of sale and certificate of sale of the property were issued to the Respondent No.2 on

04. L2.2017 vide Annexures-C1 and C2 respectively and sale certificate came to be registered in the office of the Sub- Registrar, Mangalore on 04.L2.20L7 vide Annexure-C3 and Respondent No.2 was put in physical possession and enjoyment of the schedule property in accordance with law vide Annexures-C4 to C6 and his name is entered in the RTC for the year 2017-!8 vide Annexure-C7. Respondent No'2 contended that the sale is proper and there are no irregularities. Denying the allegation of the llants the e-auction of a revenue land is in violation of Sectio and 798 of the Karnataka Land Reforms Act, Respondent No.2 contended that he is an agriculturist and owns agricultural lands. Denying all other allegations, Respondent No.2 contended that the process of taking possession is under the provisions known to law and no injustice can be complained by the Appellants and there are no irregularities committed in the auction of the property and in the issuance of sale certificate to Respondent No.2 and hence the appeal be dismissed with cost as the appeal is without any merits.

On the above background, I have gone through the records, heard the arguments advanced by Learned Counsels appearing for both sides and written argument filed by the Appellants; and the following points arise for my consideration:

(a) Whether the Appellants have made out the case to allow the appeal? and

(b) To what reliel the parties are

REASONS

The Appellants have filed the present appeal seeking to quash and set aside the sale certificate dated 04.I2.20L7 and stay of further proceedings in DCP No.5003 obtained by Respondent No.L against the Appellants and others. Appellants have raised various contentions and grounds viz. property auctioned is for a meagre sale consideration much less than the market price and the alleged successful bidder has been unduly favoured by Respondent No.l- in allowing and accepting the single bidder for an unrealistic bid without competition in bidding; no statutory notice has been served on the borrower; e-auction is conducted in violation of statutory provisions and also procedural lapses; e-auction suffers from non-compliance to its own sale proclamation; auction sale is in violation of Order XXI Rule 64 of the CPC; in the e-auction sale, the entire huge chunk of property was sold for a paltry sum of Rs.2,13,00,000/- when ! the amount recoverable from the Appellants is Rs.16,84,10/-

AOR No.7 /201"7

which is below LOo/o of the amount realized in e-auction sale, etc. Respondent No.L and Respondent No.2 have filed detailed objections rebutting the above contentions and after careful consideration of the contentions and grounds raised by the Appellants and objections of Respondents No.1 and 2 and also perusing the records and having heard the arguments addressed by Learned Counsels appearing for both sides, I find that the properly was brought to sale initially on 07.09.20L7 and subsequently by way of an addendum published on L7.09.20L7, the auction sale was adjourned to 06.10.20L7 in which Respondent No.2 was the successful purchaser for Rs.2,L3,00,000/-, against the reserve price of Rs.2,L2,50,000/-. It is also observed that valuations have been obtained prior to issuance of sale proclamation and publication of the notices. Hence, the contention raised that the property has been sold for a meagre sale consideration much less than the market price cannot be accepted and the same is liable to be admitted by the Appellants herein that

AOR No.7 12017 in DCP No.5003 in OA N0.20912003 liable to Respondent No.1 and the claim of the Appellants was originally referred to arbitration on 02.03.1994 and the arbitral award came to be passed on 16.11.1998, subsequent to which a decree was passed by the civil court. As the amount involved in the decree was coming within the pecuniary jurisdiction of this Tribunal, O.A.No.209 /2003 came to be filed and obtained Final Order and RC in D.C.P.No.5003. So, the Appellants have not bothered to settle the decretal dues which are covered by the RC and therefore the property was brought to auction in execution of RC in D.C.P. No.5003. Therefore, the contentions and grounds raised by Appellants that the properly should not have been sold in execution of RC as it was not a secured property, but identified property etc are not lawfully tenable as any property of the secured debtor can be attached, upon being identified and executed against for recovery of the dues. Appellants have admitted in the appeal that the 1't Appellant is absolute owner ln possession of the schedule property vide para-V(1) on page-2. Immediately thereafter, the Appellants

A0R No.7 /20L7

stated that the application schedule property is an ancestral joint family property. Thus, it is found that the Appellants themselves are contradicting their own claim that property is owned absolutely by Appellant No.l, by stating immediately thereafter that it is a joint family property' Hence, these contentions are found to have been raised for obstructing the execution of RC proceedings by sale of schedule property, and hence rejected. It is also proved that sale proclamation was also affixed and the Appellants cannot take the plea that they were not served with the notice' Therefore, all the contentions and grounds raised in the appeal regarding the ownership of the property and the property has been sold for a lower price etc are found to be without any merit and liable to be rejected' It is also obserued that the Appellants had filed Writ Petition No.40099/2017 before the Hon'ble High Court of Karnataka which came to be disposed on 14.01.2019 with a li the Appellants to file the appeal under Section Recovery of Debts And Bankruptcy Act, 1993 availi in OA No.20912003 alternative remedy as sought by the Appellants and subsequently the Appellants have approached Hon'ble Debts Recovery Appellate Tribunal, Chennai and filed the appeal in pursuance thereof.

It is further observed that no bid was received for the sale scheduled on 07.09.201-7 and hence on 07.09.2017, the sale has been postponed by directing the Certificate Holder Bank to file a memo with regard to further steps. It is further observed that on 13.09.2017, Advocate for Certificate Holder Bank filed a memo seeking postponement of sale as there was no bidder and sought one more opportunity to sell the property through auction, which was allowed. Accordingly, e-auction was fixed to 06.10.2017 and bid submission on 04.10.2017, by keeping the other terms and conditions same. It is further observed that paper publication of the sale scheduled on 06.10.20L7 was published in newspapers viz. Udayavani, Kannada daily and The Times of India, daily on L7.09.2077. The paper

)1

scheduled on 05.10.2017 state that the sale has been adjourned to 06.10.2017. It is evident that on the scheduled date of sale, there was no bidder, and the sale has been adjourned to a subsequent date, publication of which has been carried out on 77.09.20L7, which is not valid in law according to the Counsel for the Appellants' Rule 15 of Schedule II of Income Tax Act provides for adjournment or stoppage of sale, which is relevant in this regard, reads as under: "Rule 15. Adjournment or stoppage of sale -

(1) The Tax Recovery Officer may, in his discretion, adjourn any sale hereunder to a specified day and hour; and the officer conducting anY such sale maY, in his discretion, adjourn the sale, recording his reasons for such adjournments: Provided within the Recovery that, where the sale is made ir; or precincts ol the office of the Tax Officer, no such

shall be made without the leave Recovery Officer.

of the Tax Where a sale of immovable property is adjourned under sub-rule (1-) for a longer period than one calendar month, a fresh proclamation of sale under this Schedule shall be made unless the defaulter consents to waive it. Thus, as per Rule 15, sale can be adjourned by the Recovery Officer in execution of Recovery Certificate (RC) by following Rule 15(1) and (2) and such adjournments are envisaged or contemplated to be done prior to the auction date. If such adjournment is for more than one month, a fresh proclamation of sale is required under Rule 15(2). In the instant case, the sale has been adjourned from 07.09.2017 lo

06. L0.2017, which is not warranting a fresh sale proclamati However, as per the publication carried out and , the publication of adjournment has been effected o9'

much after the scheduled date of O7'09'20L7 when it is recorded that there was no bidder. Therefore, the first sale scheduled on 07.09.2017 has not taken place for want of bidders and the proper thing the Learned Recovery Officer ought to have done is to go for fresh sale proclamation and not adjournment. The Tribunal is constrained to accept this technical plea vehemently raised by the Appellants during the course of arguments, as the adjournment has been carried out by publication 10 days after the sale date and therefore there is non-compliance of Rule 15' Though the Tribunal is very concerned about the recovery of such old NPA accounts in execution of Recovery Certificate, it cannot at the same time condone or overlook the procedural requirements which are to be followed by the Learned Recovery Officer and therefore the sale which has been conducted in violation of Rule l-5 will have to be considered as not valid in the eye of law. I am, therefore, constrained to allow this appeal and quash and set aside the sale as well as sale certificate by directing the parties to restore the status quo ante with respect to sale. All other contentions and grounds urged like non-following of the provisions of the Code of Civil Procedure etc are found to be not applicable for this case as the Learned Recovery Officer has to follow the rules and procedures under Schedule-ll of the Income Tax Act in execution of RC and therefore the Tribunal comes to the conclusion that excepting the sale conducted in violation of Rule l-5, all other contentions and grounds are found to be false and without any basis and therefore rejected. The sale having been conducted in violation of Rule 15 as stated supra, is invalid and therefore is liable to be quashed and set aside.

The amount deposited by the Appellants under Section 30(A) of R.D.B. Act shall be appropriated loan dues and the Respondent Bank is at liberty afresh against the property for recovery of the balance dues' if any, in accordance with law. I, therefore, pass following:

ORDER

In the result, AOR No-7/2077 in DCP No.5003 in O.A.No.209/2003 stands allowed, by setting aside the sale conducted on 06'10.2017 and sale Certificate dated 04.12.20L7. The Respondent No.1 is directed to refund the sale consideration to Respondent No.2 herein, the Auction Purchaser with simple interest al 9o/o p.a. from the date of receipt of the same till the date of repayment within 30 daYs. Respondents No.1 and 2 are also directed to get the sale certificate cancelled before the jurisdictional Sub-Registry within 30 days from the date of this order. The amounts deposited by the Appellants herein are Permitted )1

in OA N0.209/2003 dues of the appropriated towards the loan Appellants with Respondent No.l-. There will be no order as to cost. (Oictated to the Stenographer, after its transcription and necessary corrections, and pronounced by me in the Open Court on this 30th day of Presiding Officer DRT-I, Bengaluru +ashlr