Subhashree Mohanty vs BANK OF BARODA on 7 January 2021

O R D E R

1. This Appeal impugns the order of the Ld. Presiding Officer, DRT, Cuttack, dated 22.01.2020, passed in S.A.No.22 of 2020, wherein the Appellant as Applicant in the SA prayed for a quashing of the e-Auction Sale Notice and the sale, if any made pursuant to the Sale Notice, including the Sale Certificate issued in favour of Respondent No.5 by Respondent No.1, and for the release of the mortgaged property to her on payment of the sale consideration.

2. The facts of the case may be stated as follows: -

i) Respondent No.3 is the husband of the Appellant and he had approached the Respondent No.2 Bank for sanction of a Cash Credit limit of Rs.70,00,000/- and same was sanctioned by the Respondent No.2 Bank on the condition that the Appellant has to create an equitable mortgage by deposit of the title deeds in respect of her property situate in Gandarpur. Respondent No.3 had availed the loan and the mortgage over the immovable property was also created by the Appellant. Thereafter, Respondent No.3 faced losses in the rice business and the loan account came to be declared as a NPA. Respondent No.1 took up proceedings under the SARFAESI Act, 2002, and issued the Possession Notice in respect of the mortgaged property. Respondent No.3 filed a writ petition in W.P.(C) No.4089 of 2015 before the Hon’ble High Court of Orissa, questioning the action of the Respondent No.1 and for consideration of the OTS proposal by the Respondent No.2 Bank. Respondent No.3 did not abide by the orders of the Hon’ble High Court of Orissa and he did not deposit Rs.10,00,000/- as ordered by the Hon’ble High Court. While so Respondent No.1 issued the Sale Notice for the sale of the mortgaged property, challenging which the Appellant filed SA.No.49 of 2016 before the Tribunal below and the said SA was dismissed with some directions.

ii) At the same time Respondent No.4 Bank i.e., United Bank of India had also proceeded to sell the property on the ground that the Appellant had mortgaged the very same property that she had mortgaged with Respondent No.2 Bank. The Appellant challenged the Sale Notice issued by Respondent No.4 Bank in SA.No.16 of 2015 before the Tribunal below and the said SA also came to be dismissed with some directions.

iii) Both the SAs i.e., SA.No.16 of 2015 and SA.No.49 of 2016 filed by the Appellant were dismissed by the Tribunal below with directions to both the banks to sell the property and deposit the sale proceeds with the Registrar of the Tribunal below who was directed to invest the same in a no lien account and await further orders till a verification was done by the Learned Presiding Officer. However, none of the banks chose to abide by the order passed by the DRT, Cuttack.

iv) Thereafter, the Appellant was able to enter into an One Time Settlement (OTS) with Respondent No.4 i.e., United Bank of India, and had paid some money. Respondent No.2 i.e., Bank of Baroda, proceeded again under the provisions of the SARFAESI Act for the sale of the mortgaged property and an e-auction sale was held on 25.02.2019. Respondent No.5 became the successful bidder in the said auction for an amount of Rs. 61,28,000/- and he deposited 25% of the sale consideration on 26.02.2019, whereupon the Authorized Officer i.e., Respondent No.1 had directed Respondent No.5 to deposit remaining 75% sale consideration on or before 12.03.2019. It is seen that Respondent No.5 the Auction Purchaser had deposited Rs.7,96,000/- on 30.03.2019; Rs.7,00,000/- on 08.04.2019; Rs.10,00,000/- on 30.04.2019; Rs.18,15,650/- on 21.05.2019; and Rs.2,84,350/- on 22.05.2019 thus, totalling to Rs.45,96,000/- being the remaining 75% of the sale consideration.

3. Heard the Ld. Counsel appearing for the respective parties.

4. The points that arise for consideration in this case may be stated as follows: - i) Whether the Ld. Presiding Officer, DRT, Cuttack, while passing the Order dated 22.01.2020 in SA.No.22 of 2020, has gone beyond his powers as enshrined in the SARFAESI Act and the Rules, 2002, and if so whether the said Order is sustainable under law?

ii) Whether Respondent No.1 the Authorized Officer of Bank of Baroda has not abided by Rule 8(6)(a) and 8(6)(f) of the Security Interest (Enforcement) Rules, 2002, relating to the Sale Notice and thus occasioned a violation of the said Rules warranting the cancellation of the sale conducted on 25.02.2019? Point No.1:-

5. A reading of the Order dated 22.01.2020 passed by the Ld. Presiding Officer, Cuttack, reveals that he has chosen not to go into the provisions of the SARFAESI Act, 2002, the application or otherwise of the same by the Respondent No.1 the Authorized Officer of Bank of Baroda but, has proceeded to take a sympathetic view towards the Respondent No.3 the borrower and his wife who is the Appellant herein and granted them ample chances to settle the accounts with the Banks. It is also seen that legality or illegality of the sale proceedings taken up by Respondent No.1 the Authorized Officer of Bank of Baroda under the provisions of the SARFAESI Act and the Rules, 2002, have also been chosen not to be examined by the Ld. Presiding Officer and he has analysed the entire case by being kind towards the Appellant herein. Therefore, it can be said that the Order dated 22.01.2020 is erroneous and the terms set out therein are also equally erroneous.

Point No.2:-

6. Rule 8(6) of the Security Interest (Enforcement) Rules, 2002, reads as follows; “ (6) The authorised officer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets, under sub-rule (5): PROVIDED that if the sale of such secured asset is being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice in two leading newspapers; one in vernacular language having sufficient circulation in the locality by setting out the terms of sale, which shall include, -- (a) the description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor; (b) the secured debt for recovery of which the property is to be sold;

(c) reserve price, below which the property may not be sold; (d) time and place of public auction or the time after which sale by any other mode shall be completed; (e) depositing earnest money as may be stipulated by the secured creditor; (f) any other thing which the authorised officer considers it material for a purchaser to know in order to judge the nature and value of the property.”

Rule 8(6)(a) and 8(6)(f) of the Security Interest (Enforcement) Rules, 2002, read as follows: - “8(6)(a) ---- the description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor; . 8(6)(f) --- any other thing which the authorized officer considers it material for a purchaser to know in order to judge the nature and value of the property.”

It is seen that the Ld. Presiding Officer, DRT, Cuttack, has categorically passed orders in SA.16 of 2015 and SA.No.49 of 2016, directing the sale of the property by both the Banks and for deposit of sale proceeds with the Registrar of the Tribunal below. This point is very crucial and it can be seen that the order has placed an embargo on the money that would be received by the Bank conducting the auction and it is not known when the verification would be done by the Ld. Presiding Officer, DRT, Cuttack and therefore, the very order of the Ld. Presiding Officer, DRT, Cuttack has imposed conditions on the Bank selling the property and such being the case it can easily be inferred that the proceedings after the sale by the Bank would be directed by the Ld. Presiding Officer, DRT, Cuttack and would be subject to orders that he may pass. The Auction Purchaser Respondent No.5, now having got to realize that the property that he had purchased in the auction is encumbered due to the claim of two Banks, has now sought for the return of the sale consideration that he had paid on the ground that he had not been informed about the encumbrance and the Authorized Officer Respondent No.1 has also not informed that the value of the property has diminished due to the claim made by the two Banks. Therefore, it can be seen that this point is important and the Authorized Officer of both the Banks, more particularly the Authorized Officer of Bank of Baroda – Respondent No.1, who is fully aware of the Order passed by the Ld. Presiding Officer, DRT, Cuttack, ought to have stated the same in the Sale Notice and the failure on his part to do so clearly indicates that Rule 8(6)(a) has not been adhered to. It is common knowledge that the value of the property is bound to fluctuate wherever there is a lis, more particularly in this case where two Banks i.e., Bank of Baroda and United Bank of India, have claimed rights over the same secured asset, which was being sold and such being the case, the fact of one Bank claiming charge over the other Bank is definitely a matter, which has to be necessarily brought to the knowledge of the prospective purchasers and it is seen that the Authorized Officer- Respondent No.1, in this case, who had issued the Sale Notice failed to inform this piece of vital information to the prospective bidders. Therefore, it can easily be said that the Authorized Officer – Respondent No.1, has once again failed to abide by Rule 8(6)(f). From the above, it can be seen that the Authorized Officer- Respondent No.1, in this case has neither adhered to Rule 8(6)(a) nor Rule 8(6)(f) of the Security Interest (Enforcement) Rules, 2002, in the matter of the issuance of the Sale Notice which drives this Tribunal to come to the inescapable conclusion that the measures taken by the secured creditor i.e., Respondent No.1 are not in accordance with the provisions of the SARFEASI Act and the Rules, 2002.

7. Point No.1 has been answered to the effect that the Order of the Ld. Presiding Officer dated 22.01,.2020 is liable to be set aside and Point No.2 is answered against the Authorized Officer Respondent No.1, who had conducted the sale, resulting in both the Points being Point No.1 and 2 being answered in favour of the Appellant, this Tribunal is driven to pass the following order:

8. In the result the appeal is allowed and accordingly it is ordered as follows :

i) The Order of the Ld. Presiding Officer, DRT, Cuttack, dated 22.01.2020 in SA.No.22 of 2020 is hereby set-aside.

ii) The auction sale of the property conducted by the Authorized Officer Respondent No.1 on 25.02.2019, is hereby set-aside.

iii) The Respondents No.2 i.e., Bank of Baroda, Mahatab Branch, Cuttack is directed to return the sale consideration paid by the Respondent No.5 – Auction Purchaser along with applicable rates of interest as on fixed deposits within a period of 7 working days from the date of receipt of a copy of this order.

iv) Notwithstanding anything it is made clear that in future this order would not in any way come in the way of both the Banks taking steps for recovery of their money as per law.

v) Parties to bear their own costs.

9. Communicate this Order to the parties concerned. File be consigned to the Record Room.

(Dictated to the Stenographer, transcribed by him, corrected, signed and pronounced by me on this the 7th day of January, 2021).

Sd/-

(Dr. T. Ravi Shankar) Chairperson