ENCRORE ASSET RECONSTRUCTION CO PVT LTD vs VIVEKANANDA COFFEE CO AND ORS on 29 December 2023

ORDER

1. This Appeal is preferred against

Order

dated 17.12.2018 of DRT-II, Chennai, in SA 161/2018.

2. Brief facts leading to this Appeal are as follows:- First Respondent herein filed above referred Securitisation Application challenging Sale Notice dated 02.06.2018, on the ground that the upset price mentioned in the same is far below the market value and totally disproportionate, and auction is only to knock away the property at an inadequate price. It is contended that the real value of property put for Sale is Rs.15 Crores, but, the upset price fixed by Appellant herein is Rs.4.30 Crores, on that ground, prayed for setting aside the Sale Notice dated 02.06.2018.

Appellant herein resisted the Application contending that the Schedule property was brought to auction nine times prior to the present Sale Notice, but, all the proposed auction have failed, and reserve price of Rs.4.30 Crores is fixed as per the Valuation Report and Appellant Institution scrupulously followed the procedure in fixing the reserve price and conducting the Sale. It is contended that there is no violation, deviation or infirmity and the Application is liable to be dismissed. On these contentions, Tribunal below held that the upset price fixed by Appellant Institution is far low when compared to earlier upset prices and also upset price fixed by Recovery Officer in respect of the same property; on this ground, allowed the Securitisation Application. Aggrieved by which, present Appeal is preferred.

3. Both sides filed Written Arguments and reiterated the same at the time of oral submissions.

4. Main contention of Advocate for Appellant is that the reserve price fixed by Recovery Officer is based on Valuation Report dated 07.03.2016 by taking the rate of property at Rs.9,500/- per sq. ft. He submitted, even for the sake of arguments that the reserve price was correctly fixed, but as per the adverse impact given by Government of Tamilnadu while slashing the guideline values of all properties based on demonetization, comes to Rs.6,365/- per sq. ft., and in that rate, the value of subject property, comes to Rs.4,09,96,965/-, whereas, reserve price was fixed at Rs.4.30 Crores, therefore, Tribunal below is not right in holding that reserve price is far below the market value. He further argued that, Tribunal below, without any basis, recorded a finding that reserve price fixed by Appellant is far below the market value, and on these grounds, the Order of Tribunal below is liable to be set aside.

5. On the other hand, Advocate for first Respondent submitted, the reserve price fixed by Recovery Officer was at Rs.6,11,89,000/- based on Valuation Report dated 07.03.2016, whereas, reserve price fixed by Appellant Institution is based on Valuation Report dated 22.01.2018, and there is a long gap in between the date of demonetization and Valuation Report dated 22.01.2018. He further submitted even on earlier occasions, the reserve prices fixed are much above the price relied on by Appellant in Sale Notice dated 02.06.2018. Considering these aspects, Tribunal below rightly recorded a finding that reserve price of Rs.4.30 Crores is far below the market value, and on that ground, set aside the Sale Notice dated 02.06.2018, and there are no grounds to interfere with Order of Tribunal below.

6. I have perused the material papers and impugned Order dated 17.12.2018.

7. As rightly pointed out by Advocate for first Respondent, Tribunal below prepared a chart showing earlier reserve prices indicated in earlier Sale Notices. It is not in dispute that the Appellant relied on Valuation Report dated 22.01.2018 for fixing reserve price. As seen from the table mentioned in the impugned Order, even in the year 2013, the reserve price is shown at Rs.5.20 Crores, and in 2014, it is shown as Rs.4.82 Crores. According to Advocate for Appellant, due to demonetization of Currency Notes, there was fall back in the prices; but as seen from the chart referred in the impugned Order, Sale Notices dated 13.03.2017 and 14.03.2017, the reserve price is shown at Rs.4.40 Crores. These two Sale Notices were admittedly after demonetization. So, Rs.4.40 Crores, is definitely above the price indicated in Sale Notice dated 02.06.2018.

8. As per Rule 8(5) of Security Interest (Enforcement) Rules, 2002, (in short Enforcement Rules, 2002), Secured Creditor is expected to obtain Valuation Report from an

approved Valuer. As seen from the Valuation Report dated 22.01.2018 relied on by Appellant, there is no reference in the Report that Sreenidhi Management Consultancy Services Pvt. Ltd., is an approved Valuer; whereas, the earlier Valuation Report of Er.T.S. Srinivasan, reflects that it is a registered and paneled Valuer for Banks and TIIC. In the Valuation Report dated 22.01.2018, fair market value is shown as Rs.5.37 Crores and realizable value is shown Rs.4.30 Crores. There is no indication in the Valuation Report as to what was the basis of calculation of fair market value and realizable value. In the earlier Valuation Report issued by the approved Valuer for Indian Bank, from which Bank, Appellant got this debt assigned, indicated that 90% fair market value is realizable value, and 80% of realizable market value is taken as forced and distress value. Even that percentage is calculated, when fair market value is Rs.5.37 Crores, 90% of it, would come to Rs.4.83 Crores. But, as already referred, the reserve price is fixed at Rs.4.30 Crores based on the fair market value fixed by Sreenidhi

Management Consultancy Services Pvt. Ltd. Tribunal below compared the earlier Valuation Report including Valuation Report obtained by Recovery Officer, and came to the conclusion that Rs.4.30 Crores is not a correct value and it is far below.

9. In this case, OA is filed and Recovery Certificate is issued, and in execution of that, Recovery Officer put the very same property for Sale, and the Valuation Report obtained by Recovery Officer indicated that the market value of very same property as Rs.6,11,89,000/-. So, on comparison of these aspects, I have no hesitation in holding that Tribunal below is perfectly justified in setting aside Sale Notice dated 02.06.2018 and there are absolutely no grounds to interfere with the well reasoned Order dated 17.12.2018.

10. For the reasons stated above, it is held that Appeal is devoid of merits and liable to be dismissed.

11. In the result, Appeal in RA (SA) 15/2019 is dismissed. Both parties shall bear their own costs. All pending IAs, if any, sand closed. [Dictated to Athistamani, PS, transcribed by her, corrected, signed and pronounced by me in open court, this 29th of December, 2023] [Justice S. Ravi Kumar] CHAIRPERSON