R.SUBBIAH, J., The writ petitioner is a guarantor in respect of the credit limit availed by one M/s.Octogen Iron and Steels Indian Private Limited from the respondent bank. This present writ petition has been filed by him to issue a writ of Certiorari, calling for the records of the respondent bank in sale notice dated 06.12.2008 bearing land in S.F.No.202/1 of T.S.No.11/1300 and 1301 and quash the same. According to the petitioner, since the loan account turned into Non-Performance Asset, the bank had issued a demand notice dated 03.12.2007 under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as "SARFAESI Act"), claiming a sum of Rs.52,18,560.80. On expiry of the 60 days from the demand notice, the respondent bank had proceeded to issue possession notice under section 13(4) of the SARFAESI Act on 19.02.2008. Though the petitioner made several payments to the bank including a sum of Rs.10 lakhs paid on the date of possession notice, the respondent bank has not given credit to any of the amounts paid by the petitioner. Even in the possession notice, the same amount of Rs.52,18,560/- was mentioned as an outstanding. Hence, an appeal under Section 17 of the SARFAESI Act was filed by the petitioner before the Debts Recovery Tribunal-II, Chennai and he had sought for a stay of further proceedings pursuant to the notice issued by the bank under section 13(4). While the Debts Recovery Tribunal granting stay in the said application, passed a conditional order on 10.03.2008, directing the petitioner to pay a sum of Rs.6 lakhs on or before 29.04.2008.
2. It is the further case of the petitioner that though the conditional order was passed directing the writ petitioner to pay a sum of Rs.6 lakhs, the petitioner was able to pay only a sum of Rs.2 lakhs by 29.04.2008. Hence, he filed an application for extension of time for a further period of three weeks to pay the balance amount, but the said application was rejected by the Debts Recovery Tribunal-II and the interim stay granted was vacated. After the stay was vacated, the petitioner had paid another sum of Rs.4 lakhs by two demand drafts dated 06.05.2008 and 17.06.2008. However, the respondent bank proceeded to issue a sale notice dated 27.05.2008 to bring the entire mortgaged property for sale. Even in the sale notice, the outstanding amount was mentioned only as Rs.52,18,560/- though the sum of Rs.16 lakhs had been paid by the petitioner from 19.02.2008 i.e.from the date of possession notice issued under
section 13(4) upto 17.06.2008. The bank had brought the entire 12 cents of property for sale with an upset price of Rs.82 lakhs on 01.07.2008. Thereafter, the petitioner had filed an application for stay before the Debts Recovery Tribunal-II Chennai, seeking not to conduct the auction on 01.07.2008 and by order dated 30.06.2008, the petitioner was directed to deposit a sum of Rs.18 lakhs within three weeks. On being aggrieved, he had preferred CRP 2183 of 2008 before this Court and this court granted an order of interim stay only upto 22.07.2008, by which time the condition was not complied with. Thereafter, once again, the property for brought for sale by the respondent bank on 27.08.2008. Since in the revision petition, the petitioner was directed to approach the Debts Recovery Tribunal, the petitioner filed I.A.No.556 of 2008 seeking stay of sale which was to be held on 27.08.2008. In the said application, the Debts Recovery Tribunal passed a conditional order that the petitioner should pay a sum of Rs.18 lakhs within a period of six weeks by two instalments in equal proportion of the amount (1.e., by Rs.9 lakhs + Rs.9 lakhs). Even though he has complied with the first part of the conditional order, he has not complied with the second part. Therefore, he filed an application in S.A.No.28 of 2008 for extension of eight weeks' time to comply with the second part of the conditional order dated 28.08.2008. When the said application came up before the Debts Recovery Tribunal, Chennai, on 13.10.2008, the Tribunal granted 10 days' time to deposit the balance amount. Since the Tribunal had not granted sufficient time as prayed for to pay the balance amount, the petitioner filed C.R.P.No.3537 of 2008 before this Court, but the same was dismissed, granting 15 days' time to make the payment of the balance amount. Due to extraneous circumstances, the petitioner was unable to make the payment and thereafter, the respondent bank has brought the property for sale again on 09.01.2009 with an upset price of Rs.75 lakhs by reducing Rs.10 lakhs less than the earlier upset price. In fact, the sale notice issued by the bank again reflects the dues at Rs.52,18,560/-. Though the respondent bank has recovered more than Rs.25 lakhs out of Rs.52,18,560/-, in the sale notice, the bank is maintaining the due amount to the extent of Rs.52 lakhs and odd, without deducting any of the subsequent payments. Further, without any rhyme or reason, the respondent bank has reduced the upset price to Rs.75 lakhs as stated supra from Rs.85.2 lakhs. Thus, by contending that the action of the bank is arbitrary, highhandedness, whimsical and unilateral, the present writ petition has been filed to quash the sale notice dated 06.12.2008.
3. The main contention of the learned counsel for the petitioner is that the action of the bank, which has unilaterally reduced the upset price without giving any notice to the petitioner and without obtaining any valuation report as well as failure to give credit to the earlier payments made by the petitioner, is illegal and as such, the sale notice dated 06.12.2008 has to be quashed. He has also submitted that under Rule 8 of SARFAESI Rules, in the valuation report the upset price of the property has to be fixed and the valuation report should be obtained from the authorised officer of the respondent bank. In the instant case, no such valuation report was obtained before reducing the upset price. Further as per Rule 9(6) of the SARFAESI Rules, the property has to be sold for the secured debt. Though several payments were made, no proper credit was given by the respondent bank, which could be evident from the outstanding amount as shown under the sale notice. Hence, the sale notice is liable to be quashed.
4. Per contra, the learned counsel for the respondent bank submitted that on previous occasions, i.e.two times, the property was brought for sale, but the auction could not take place as the writ petitioner had obtained stay from the Tribunal for holding the auction. Though in the earlier sale notice dated 01.07.2008, the reserve price was fixed at Rs.85.32 lakhs, on the basis of the valuation report by the approved valuer dated 21.02.2008, the auction price was fixed at Rs.60.02 lakhs. Though the respondent bank had reduced the price in subsequent sale conducted on 09.01.2009 to Rs.75 lakhs on account of the steep fall in property prices, the valuer has not fixed the value below the auction value estimated by the valuer. Further, even if any excess amount after the adjustment of the dues of the bank, the residue of the money shall be paid to the person entitled thereto according with his rights and interests. Therefore, no prejudice would be caused to the petitioner by the sale of the property. Thus, he prayed for the dismissal of the writ petition.
5. Heard the learned counsel for both sides and perused the materials.
6. From the submissions made by the learned counsel for both sides, we understand, the main grievance of the writ petitioner is with regard to the failure to give credit towards the payments made by him while mentioning the outstanding amount in the sale notice and also the reduction of the upset price from Rs.85 lakhs and odd to Rs.75 lakhs. The dispute raised by the writ petitioner can be agitated only before the Debts Recovery Tribunal under SARFAESI Act. Though a writ petition may not be appropriate remedy to solve the dispute of this nature, as alternative remedy is available in exceptional cases involving equitable principle, the Court can entertain the writ petition in the circumstances as appearing in this case.
7. The main contention of the learned counsel for the petitioner is without giving credits to the payments effected by the writ petitioner, sale notice was issued on 27.05.2008 mentioning the outstanding amount as Rs.52,18,560/. Further, the original upset price fixed for Rs.85,00,000/- in earlier sale notice was reduced to Rs.75,00000/- in the subsequent sale notice without obtaining valuation report. Therefore, the grievance of the writ petitioner is that the sale notice is defective. In our considered opinion,
Section 13(8) gives a right to the borrower, to tender the outstanding amount with costs, charges and expenses any time before the sale. Under such circumstances the borrower/Debtor must be in a position to know the actual outstanding amount. Though there are some justification in the submission made by the learned counsel for the respondent that the upset price mentioned in the sale notice was not reduced below the auction price fixed at Rs.60.02 lakhs, he was not in a position to give any acceptable explanation for not giving credit to the payments effected by the petitioner while mentioning the outstanding amount in the sale notice except saying, even if there is any excess amount, after the adjustment of the dues of the bank, the residue of the money shall be paid to the person entitled thereto. The purpose of giving sale notice is not only to sell the property in auction but also to give an opportunity to the borrower to know the actual outstanding amount to enable him to tender the amount before the sale. Therefore, the bank should specify the actual outstanding amount as on date of the issuance of the sale notice. Hence, we are not inclined to accept the submission made by the learned counsel for the respondent bank that if there is any excess amount after the adjustment of the dues of the bank the residue of the money shall be paid to the person entitled thereto. Hence, we are of the view that the sale notice is defective in nature and under such circumstances, the petitioner is entitled to agitate the same under
section 17 of the SARFAESI ACT before the Debts Recovery Tribunal. As far the case on hand is concerned, the property was already sold in the auction held on dated 09.01.2009. The auction purchaser has also deposited the auction amount by way of cheque and handed over the same to the counsel for the respondent bank. At this juncture, when the matter was posted in the list on 22.07.09 for 'being mentioned', a representation was made by the petitioner that she has brought a demand draft for Rs.25,00,000/- in favour of the respondent bank and therefore, sought for a direction to the bank to accept the demand draft. She further submitted that the petitioner would be in a position to pay the balance amount including the amount towards compensation to the auction purchaser within a reasonable period. It was further submitted by the learned counsel for the petitioner that the secured debt property, being the residential property, her request may be considered sympathetically. But an objection was raised by the learned counsel for the respondent bank to consider the request of writ petitioner since the auction amount was already paid by the auction purchaser
8. But, in our considered opinion, since substantial amount has already been paid and further, the property, being a residential one, the request of the learned counsel for the petitioner is just and reasonable and it could be accepted. Hence, we direct the bank to receive the Demand Draft brought by the learned counsel for the petitioner in favour of the bank to the value of Rs.25,00,000/- and the petitioner is also directed to pay the balance amount to the respondent bank by 10.08.2009. On such payment, the cheque handed over by the auction purchaser shall be returned by the bank to the auction purchaser. Since the auction purchaser had already deposited Rs.18 lakhs, being 25% of the auction amount, on the date of auction and the said amount is lying unutilised, the petitioner is directed to pay interest at the rate of 15% on the said deposited amount from the date of deposit of the auction amount till the date of making payment to the auction purchaser on or before 10.08.2009. On failure to make the payments as directed supra, the sale certificate may be issued in favour of the auction purchaser.
With the above observation the Writ Petition is disposed of. No costs. Consequently, connected M.P.is closed.
gl To The Authorised Officer, Indian Bank, Park Town Branch, No.53, Raja Muthiah Road, Chennai 600 003