Smt. Vimala, herein after referred to as the ‘guarantor’ is the petitioner in W.P.3531/2007. M.A Krishna Murthy-the auction purchaser is the petitioner in W.P 17320/2007 hereinafter referred to as the ‘Auction purchaser’ Central Bank of India - the petitioner in W.P 17544/2007, hereinafter referred to as the ‘banker’ is the petitioner in these writ petitions.
2. Subject involved in all the three cases is almost similar. Therefore, all the cases are taken up for consideration by this common order.
3. Necessary facts for the consideration of the case are as under:
- Guarantor contends that she is aged about 85 years, a Senior Citizen. The property involved is mortgaged to the bank, it belonged to them, purchased by her husband C L Narasimhaiah Setty under a sale deed dated 10.6.1977 It is a residential house, she is in possession of the property along with other family members. During the life time of her husband, he has executed a will dated 31.5.1995 bequeathed his undivided share in favour of his sons equally, while settling the property has granted life interest in favour of the guarantor, while granting life interest to stay in the property, has not authorised her to sell or mortgage the property, while so the documents were mortgaged in favour of bank for raising a loan of Rs. 17,50,000/- for the family business. Business suffered loss. While so bank filed O.A.309/2002 on the file of the Debt Recovery Tribunal, Bangalore. Debt Recovery Tribunal referred the case for settlement before Lok Adalath, High Court Legal Services Committee has considered the reference, an award is passed, wherein the borrowers have agreed to pay Rs. 33,50,000/- as a final settlement of the claim of the bank. This settlement is not within the knowledge of the guarantor, she has not signed the joint memo. One of her son viz., N. Surya Bhagavan has signed it, not even her advocate has signed the joint memo. It is only on 05.04.2006 when she learnt that the property is ordered for sale, she has come to know about the action of N. Surya Bhagavan and also the bank So, she has filed Writ Petition No. 6625/2006. This Court has considered the case of the guarantor, by an order dated 01.06.2006 has dismissed the writ Petition on the ground of laches. Thereafter guarantor has filed Writ Appeal No. 899/2006. The Writ Appeal was withdrawn. This Court was pleased to grant liberty to the petitioner to withdraw the Writ Petition also. Thereafter guarantor approached Lok Adhalath. Filed an Application under Order 9 Rule 13 read with Sections 21 and 25 of the Legal Services Authority Act, 1987 on 03.10.2006
4. During the pendency of the said petition, Recovery Officer attached to Debt Recovery Tribunal has conducted the auction on 5.10.2006 On 11.10.2006 she applied for the certified copy of the bid sheet, filed an application on 17.10.2006 before Debt Recovery Tribunal seeking for setting aside of the same by filling I.A 1464/2006. On the said application, the office of the Debt Recovery Tribunal has raised an objection contending that the application is one of setting aside of the sale, it amounts to an appeal, the guarantor has to pay Court fee of Rs. 30,000. It is the further case of the guarantor that on 2.11.2006 she requested the Debt Recovery Tribunal not to confirm the sale since her case is pending before the Lok Adalath at High Court. The copy of the bid sheet do not contain the full particulars of the auction purchasers. So, she moved an application seeking for stay of the delivery of the property to the auction purchaser. On 28.11.2006 Debt Recovery Tribunal was pleased to direct the Recovery Officer not to deliver the property to the auction purchaser until further orders. In the mean while, the auction purchaser filed two applications in I.A Nos. 120/2007 and 121/2007, sought for vacating the Interim Order of not to deliver. In the absence of the petitioner, on 28.11.2006 the Interim Order was vacated by the Debt Recovery Tribunal. When the auction purchaser tried to take possession, guarantor moved an application for recalling the order. Debt Recovery Tribunal was pleaded to pass an order directing the Recovery Officer not to deliver possession, instructed Court commissioner to handover possession to the guarantor. So, guarantor continued in possession of the property till 31.01.2907 Again, the auction purchaser moved an application on 01.02.2007 seeking recalling the order dated 31.01.2007 On 05.02.2007 the High Court Lok Adalath permitted the petitioner to request the Debt Recovery Tribunal to defer the proceedings. An application was made in this regard before the Debt Recovery Tribunal. On 22.02.2007 an application filed by the petitioner including IA 1454/2006 was dismissed with exemplary costs of Rs. 10,000/- while vacating the Interim Order. On 05.02.2007 the High Court Lok Adalath has passed an order after hearing all the concerned. Held the guarantor being not a party to the joint memo, referring the matter to the Lok Adalath, the decree is not binding on her. While guarantor was agitating her right in the property, sale is conducted, sale is not valid in law. so, she seeks for setting aside the sale in view of the High Court Lok Adalath holding that the decree passed is bad in law.
5. In WP 17320/2007 the auction purchaser contends that he is the auction purchaser in an auction conducted by the Recovery Officer of DRT, in pursuance of an order passed by the DRT in OA 309/02 and in pursuance of a Certificate No. 3264 issued by the DRT on 5.10.2006 It is further pleaded that auction purchaser has purchased the property for a sum of Rs. 3 crores 27 lakhs. The auction purchaser has paid Rs. 81,75,000/- being 25% of the bid amount on 5.10.2007 and balance 75% payable in a sum of Rs. 2,45,25,000/- is deposited on 18.10.2007 In pursuance of the deposit, the same was confirmed on 15.11.2006 On the very same day, the sale certificate is issued in favour of the auction purchaser. The auction purchaser has got the sale certificate registered by paying the registration and stamp duty to the tune of Rs. 30,73,800/-. Though, the auction purchaser has spent Rs. 3,57,73,800 for purchase of the property, in addition to it auction purchaser is suffering for one year on account of various litigations initiated by guarantor, the partnership firm of M/s. Sathyasri Silks and N. Surya Bhagavan.
6. Guarantor is the mother of Surya Bhagavan. She is under the care and responsibility of Surya Bhagavan. Respondents 3 to 8 are the partners of the firm Sathyasri Silks. It is the guarantor and her sons, that have mortgaged the property in favour of the bank, availed the loan for business purposes. Guarantors have authorised N. Surya Bhagavan to mortgage the schedule property on 6.3.1997 itself. Loan borrowed is not paid. So the bank has filed an application for recovery in OA 309/2002. The loan being not paid, the action of the bank is proper. Guarantor and her sons have appeared before the DRT, filed a written statement. While so, N. Surya Bhagavan - the eldest son of guarantor has approached the bank for concession of the interest. So, the case was referred to Lok Adalath. The dispute was settled and a joint memo was filed by Surya Bhagavan. The bank officials have also signed the memo. Surya Bhagavan and the firm has gained a sum of Rs. 15.00 lakhs as concession but the said compromise was not kept up, as Surya Bhagavan has represented that he is authorised to represent it being acted upon by Lok Adalath headed by Justice P. Vishwanatha Shetty, award is passed. While so, IA 683/2005 was filed on 12.9.2005 before the DRT by Surya Bhagavan seeking for extension of time, bank has filed objections. On 18.10.2005 DRT passed an interim order of stay directing the said Surya Bhagavan and his brothers to deposit 25% of the agreed amount which was not paid as per the order of the tribunal. So, by an order dated 9.12.2005 the DRT vacated the order. The Recovery Officer of DRT issued attachment, sale proclamation on 6.2.2006 The said attachment was duly published including in Deccan Herald on 29.3.2006, property was fixed for auction on 28.5.2006, sale was fixed on 23.6.2006, auction could not take place on the said date as the guarantor filed W.P.6625/2006. The said writ petition is filed after 2 years and 2 months of recovery certificate. Two other sons of the guarantor have filed W.P.8186/2006. In the said writ petition the sons of guarantor have challenged the auction of the property by DRT. In WP 6625/2006, the High Court ordered for stay of the recovery with a condition to deposit 16 lakhs within two weeks. This interim order also has not been complied with by the borrowers, W.P.8186/2006 was dismissed on 10.7.2006 Guarantor filed W.A in 6625/2006. It also was dismissed as withdrawn on 30.8.2006 The property was auctioned on 5.10.2006 petitioner has purchased as highest bidder for a sum of Rs. 3crores 27 lakhs. The sale was confirmed on 15.11.2006 The auction purchaser could not raise any bank loan on account of the pendency of the litigation. Guarantor has filed a Misc. Petition under Order 9 Rule 13 before the DRT. The said application is not maintainable. Provisions of Section 21 of the Legal Services Authority Act, 1987 (Hereinafter referred to as ‘the Act, 1987’) is meant for giving the awards passed in Lok Adalath. The said award is equivalent to a decree passed in Civil Courts insofar as the enforcement. Section 21(2) declares that the award passed by the Lok Adalath is final binding on all the parties, no appeal shall lie to any Court against the award. So, the application filed by the guarantor is not maintainable. Section 25 of the Act, 1987 is not applicable to the questions involved in the application. Provisions of Order 9 Rule 13 CPC are meant to set-aside the exparte decree. In the present case, no decree is passed by the Civil Court, award by the Lok Adalath is a consent award. So, Order 9 Rule 13 CPC is not attracted. Proviso to Order 9 Rule 13 declare that the Court cannot set-aside a decree merely on the ground of irregularity in the service of summons, if the Court is definite that the defendant had notice of the date of hearing and had sufficient time to appear and answer the case of the plaintiff. N. Surya Bhagavan has stated before the Lok Adalath of his authority to represent other defendants. The ration card produced by the guarantor would support that the mother and son are living in the same house. So, the assertion of the guarantor that the son did not consult the mother cannot be believed. Guarantor had full knowledge of the problem regarding the loan of the bank and its development. Further, guarantor has authorised N. Surya Bhavavan for dealing with the bank. So, the award passed by the Lok Adalath is binding on the parties. The contents of the will having no relevance in regard to the decision of the case, as it is a consent award that is executed by the Recovery Officer. Inspite of getting an interim order by two sons of guarantor, they having failed to pay the money in a sum of Rs. 16.00 lakhs there is no merit in the case of the borrowers. All the applications filed by the guarantor being dismissed, the order of the Lok Adalath in recalling the award and the order passed on 8.10.2007 is liable to be quashed.
7. In W.P 175544/07, bank seeks for quashing of the order dated 8.10.2007 passed by Lok Adalath of High Court in OA 309/2002 and for such other reliefs.
8. While referring to the loan raised by M/s. Sathyasri Silks, it contends that the guarantor and the family members of the guarantor, for the business purpose have availed loan, secured loan by creating mortgage in regard to the property. Money is not paid on demand, OA was instituted for the recovery of the money. OA was referred for settlement before Lok Adalath, Surya Bhagavan appeared on behalf of all the other defendants and has entered into a compromise. Thereafter, Lok Adalath has passed a decree, their being no payment of the money in accordance with the terms of the compromise, the decree was executed by the issue of the recovery certificate. Even before the issue of the recovery certificate, Surya Bhagavan has failed to deposit 25% of the due payable to the bank. So, the auction has taken place. Objections raised by the guarantor are with a malafide and fraudulent intention to stall the recovery proceedings. Learned Single Judge has considered all the aspects, rejected the Writ petition On 1.6.2006 Thereafter, two sons of guarantor has filed W.P.8186/2006. It was finally dismissed on 10.7.2006 Writ Appeal preferred by guarantor in W. P. 6625/2006 was also dismissed. Application under Order 9 Rule 13 and the order passed by the Lok Adalath after the conduct of the sale by the Recovery Officer are bad in law.
9. Heard learned advocates for the petitioners and learned Senior counsel for the parties.
10. Learned advocate for the guarantor substantiates his client's case with the following submissions:
- Guarantor is not a party to the joint memo-Annexure “C”. So, the award passed is not binding on her. She being a senior citizen, had the desire to spend her life in the family house according to the intention expressed by her husband. So her right to reside in the property cannot be taken away without she being a consenting party to the joint memo. Even the award passed do not refer to of she being a consenting party, the description is the brothers of Surya Bhagan are the consenting parties. So, it is not binding on the guarantor.
- Secondly, application filed to recall the award was pending before the Lok Adalath. Then the DRT has dismissed all the applications filed by the guarantor. This is not a proper approach. When there is a lis regarding the right of the party, the action of the DRT is not apt. The action of the DRT in dismissing the applications 1454/2002, 1659/2006 and 436/2007 is bad in law.
- Any aggrieved party can maintain the application seeking for setting-aside of sale under Order 21 Rule 90. On such an application, the office of the DRT states/demands to pay Rs. 30,000/-. It is not called for. It is not an appeal as the one understood by the authority. The award under which the execution of the sale are set-aside by the High Court. Further proceedings conducted by the DRT are liable to be quashed. So auction sale relied by the auction purchaser is invalid under law.
11. The mandate under Order 21 Rule 64 is equally applicable to a sale by any officer authorised under law including an Officer under the DRT. It is in similar to 61 of the Income Tax Rules. So, in view of the following rulings:
(1) Ambali Narasayya v. M. Subba Rao, 1989 Supp (2) SCC 693
(2) Balakrishnan v. Malaigandi Kumar, (2006) 3 SC 49
(3) Parvathy Antherjanam v. Indian Bank (AIR 1996 KER 159)
(4) Canara Steel Ltd. v. State Bank of India (ILR 2004 KAR 8)
(5) M/S. Annapurna Industries v. Syndicate Bank* (ILR 1993 KAR 1081)
(6) Dr. Dr. Smt. Shashi Prateek v. Charan Singh Verma & Anr. (AIR 2009 ALL 109)
(7) Grindlays Bank Ltd. v. The Central Government Industrial Tribunal (1980 Supp SCC 420 : AIR 1981 SC 606)
(8) L. Chandra Kumar v. Union of India ((1997) 3 SCC 261 : AIR 1997 SC 1125)
The Recovery Officer ought not to have sold the entire property. The action of the Recovery Officer is contrary to the conditions in the proclamation itself. So, the same is not binding.
12. To challenge a sale, application under Order 21 Rule 90 is filed, it cannot be treated as an appeal. So, the action of the DRT in treating an application under Order 21 Rule 90 as an appeal is not in accordance with law. So, pray for setting-aside the auction held by the Recovery Officer of DRT and allow the writ.
13. Learned Senior counsel for the bank contends that borrowing of the money by mortgaging the property is not in dispute. Failure of the borrower to pay the money borrowed is not in disputed. OA is filed for recovery of the borrowed sum is not in dispute. Including the guarantor, the other family members, the partners of Sathyasri Silks have appeared in the OA, filed the written statement it is a joint written statement. During the pendency of the OA, it is referred to Lok Adalath. A representation is made by Surya Bhagavan that he is interested in compromise, he represented not only on his behalf but also on behalf of other family members. The said representation is accepted. On the said representation, an award is passed not only interest is reduced but also by the terms of the compromise, there was a benefit to the tune of Rs. 15.00 lakhs to the borrower. Further, an application was filed before DRT seeking extension of time. It was allowed with a condition to deposit 25% of the amount due, inspite of it the said money is not paid. So, DRT has vacated the order and then sale was conducted. In such a situation, when there was a failure of the borrower to pay money and recovery proceedings being initiated under DRT, without the authority of law, without any section under the Legal Services Authorities Act authorising the Lok Adalath to pass an order of recalling the award passed, the award passed by Lok Adalath is recalled. So, the order passed by the Lok Adalath of High Court Legal Services Authority is bad in law. So, pray for upholding the sale conducted by the Recovery Officer, set-aside the order of the High Court Lok Adalath. Learned Advocate places reliance on the following:
(1) United Bank of India v. Satyavati Tandon reported in III (2010) BC 495 (SC)
(2) SEC 6 OF INCOME TAC ACT
(3) State of Punjab v. Jalour Singh (APPEAL) CIVIL 522 OF 2008)
14. Learned advocate for the auction purchaser contend that property is purchased by the auction purchaser in the auction. It is a Court sale. Believing in the Court sale, auction purchaser has invested nearly 4 crores. If the auction purchaser is not put in possession of the property, Court sale will not have any relevance. Further, the money is in deposit. The other three brothers of Surya Bhagavan have filed applications for release of the balance money. This probabalises that other family members of Surya Bhagavan are interested in confirmation of the sale, support the auction of the DRT. If, for any reason the Court were to come to a conclusion that the auction sale is irregular, 20% of the bid money has to be awarded as solatium, as held by the Apex Court in
(1) Valji Khimji & Co. v. Official Liquidator Of Hindustan Nitro Projects, (2008) 9 SCC 299
(2) Janardhan Reddy v. Viajaya Bank, (2008) 7 SCC 738 as the money is locked up. This is an appropriate relief.
Also place reliance on Janatha Textiles v. Tax Recovery Officer, III (2008) BC 372 on the aspect of bonafide auction purchaser. So, pray for orders for setting aside the order passed by the Lok Adalath of the High Court.
15. In the light of the above submissions, subjects urged are taken up for consideration:
15.(1) Inherent power - Lok Adalath:
Advocate for the guarantor has submitted that guarantor is not a party to the joint memo, the compromise recorded by the Lok Adalath is not binding on her. It is rebutted contending a joint written statement is filed, Suryabhagavan has represented for the mother also obtained benefit of Rs. 15 lakhs while agreeing to pay in one time settlement, so it cannot be questioned. The Lok Adalath has referred to Section 20(4) of the Legal Services Authority Act, 1987 and has stated in para 21 of its order that the Lok Adalath shall be guided by principles of justice, fair play and other legal principles. Also relied on the decision of Grindlay's Bank Ltd. v. The Central Government Industrial Tribunal (1980 Supp SCC 420 : AIR 1981 SC 606) as under:
“Sub-section (1) of S.11 of the Act as substituted by S.9 of the Industrial Disputes (Amendment & Miscellaneous Provisions) Act, 1956, is in these terms:
“11.(1) Subject to any rues that may be made in this behalf, an arbitration, a Board, Court. Labour Court, Tribunal or National Tribunal shall follow such procedure as the arbitrator or other authority concerned may think fit”.
The word shall follow such procedure as the arbitrator or other authority may think fit are of the widest amplitude and confer ample power upon the Tribunal and other authorities to devise such procedure as the justice of the case demands. Under Clause (a) to (c) of sub-sec (3) of S.11 the Tribunal and other authorities have the same power as are vested in civil courts under the Code of Civil Procedure, 1908, of (a) enforcing the attendance of any person and examining him on oath, (b) compelling the production of documents and material objects, and (c) issuing commissions for the examining of witness. Under clause (d) thereof, the Tribunal and the other authorities have also the same powers as are vested in Civil Courts under the Code of Civil Procedure, 1908 in respect of such other matters as may be prescribed. Although the Tribunal or other authorities specified in S.11 are not Courts but they have the trappings of a Court, and they exercise quasi-judicial functions.
The object of giving such wide powers is to mitigate the rigour of the technicalities of the law, for achieving the object of effective investigation and settlement of industrial disputes, and thus assuring industrial peace and harmony. The discretion thus conformed on these authorities to determine the procedure as they may thin fit, however, is subject to the rules made by the ‘appropriate Government’ in this behalf. Part III of the Industrial Disputes (Central) Rules, 1957 makes rules in this behalf. Rules 9 to 30 are the relevant rules regulating procedure. State Government too have made their own corresponding rules. Expect to the extent specified in sub-sec.(3) of S.11 of the Act and the rules framed there under, the provisions of the Code of Civil Procedure, 1908 are not applicable to proceedings before the authorities mentioned in sub-sec(1). The provisions of the Evidence Act, in their strict sense, like wise do not apply to proceedings before the authorities. Never the less, all these authorities being quasi-judicial in nature objectively determining matters referred to them, have to exercise their discretion in a judicial manner, without caprice, and according to the general principles of law and rules of natural justice.”
15.(2) Also, further placed reliance on the decision of the Apex Court reported in the case of Nagaraj v. State of Karnataka reported in 1993 Supp (4) SCC 594 and has culled out the ratio, which reads as under:
“A procedural review which is either inherent or implied in a Court or Tribunal to set aside a palpable erroneous order passed under misapprehension.
A review on merits when the error sought to be corrected is one of law and is apparent on the face of the record. When review is sought due to procedural defect the advertent error committed by the Tribunal must be corrected ex debitio justici to prevent the abuse of its process and such power is inherent in every Court or Tribunal - “Justice is a virtue which transcends all barriers. Neither the rules of procedure nor technicalities of law can stand in its way; the Order of the Court should not be prejudicial to any one. If the Court finds that the Order was passed under a mistake and it would have exercised jurisdiction but for the erroneous assumption which in fact did not exist and its perpetration shall result in miscarriage of justice then it cannot on any principle be precluded from rectifying the error. Mistake is accepted as valid reason to recall an Order. Review literally and even judicially means re-examination or reconstruction. Basic philosophy inherent in it is the universal acceptance of human fallibility. Yet the realm of law courts and even the statutes lean strongly in favour of finality of decision legally or properly made. Exceptions both statutorily and judicially have been carved out to correct accidental mistakes or miscarriage of justice. Even when there was no statutory provisions and no rules were framed by the highest court indicating the circumstances in which it could rectify its order the courts culled out such power to avoid abuse of process or miscarriage of justice. “Rectification of an Order stems from the fundamental principles that justice is above all. It is exercised to remove the error and not for disturbing finality.”
15.(3) In A.R Antulay v. R.S Naik, the court has referred to the opinion expressed by his Lordship Justice Ranganath Mishra and observed as follows:
108… If a mistake is detected and the Apex Court is not able to correct it with a view to doing justice for fear of being misunderstood, the cause of justice is bound to suffer and for the Apex Court the apprehension would not be a valid consideration. Today it is Abdul Rehaman Antulay with a political background and perhaps some status and wealth but tomorrow it can be any ill-placed citizen. This court while administering justice does not take into consideration as to who is before it. Every litigant is entitled to the same consideration and if an order is warranted in the interest of justice, the contention of Mr. Jethmalani cannot stand in he way as a bar to the making of that order, (p. 1570)
15.(4) Further, their Lordships have expressed the principle of law that justice is not only to be done, but manifestly seen to be done and stated the law, which reads as under:
“It is again absolutely basic to our system that justice must only be done but must manifestly be seen to be done but must manifestly be seen to be done. If justice was so clearly not seen to be done, as on the afternoon in question here, it seems to me that, it is no answer to the applicant to say: Well, even if the case had been properly conducted, the result would have been the same. That is mixing up doing justice with seeing that justice is done (per Lord Widgery, C.J at p. 1375): Stringer v. Minister of Housing, (1970) 1 WLR 1281, 1297”.
15.(5) On the aspect of exercise of the inherent power, it is held as follows:
“When something is obvious (it may be said), why force everybody to go through the tiresome waste of time involved in framing charges and giving an opportunity to be heard? The result is obvious from the start. Those who take this view do not, I think, do themselves justice. As everybody who has anything to do with the law well knows, the path of the is strewn with examples of iopen and shut cases which, somehow, were not; of unanswerable charges which, in the event, were completely answered; of inexplicable conduct which was fully explained; of fixed and unalterable determinations that by discussion, suffered a change. Nor are those with any knowledge of human nature who pause to think for a moment likely to underestimate the feelings of resentment of those who find that a decision against them has been made without their being afforded any opportunity to influence the course of events” (John v. Rees, (1970) Ch. 345, 402.)
So presence of ail the parties before a joint memo is recorded by the Lok Adalath is mandatory. If there is any person absent, the decree passed becomes a decree without; jurisdiction as the one found in the ratio of the Apex Court in Kiran Singh v. Chamon Pavan, AIR 1954 SC 340.
15.(6) It has also to be noted, the ratio laid down by the Apex Court in M. Vishwanath v. SK Tiles and Potteries Pvt. Ltd., (Criminal Appeal No. 1869/2008) as under:
“All Courts, whether Civil or Criminal posses, in the absence of any express provision, as inherent in their constitution, all such powers as are necessary to do the right and undo a wrong in the course of administration of justice or the principle when law gives a person anything it gives him that without which it cannot exist.”
15.(7) Learned Senior Advocate for the Bank or the learned Advocate for the auction purchaser has not placed any case law disputing the prepositions referred by the Lok Adalath in its order or the principles which govern the authority under law is directed to decide the rights of the parties. So the Court has to find out in the facts of the case whether the approach of the Lok Adalath is proper or not. The positive contention of the Advocate for the guarantor that guarantor is not a signatory to the joint memo filed before the Lok Adalath is not at all disputed. Implied authority is sought as a ground to support the compromise recorded at the Lok Adalath. So, the case falls within the ambit of ignorance of the Lok Adalath when it recorded the compromise without ascertaining the authority of Suryabhagavan to represent his mother before the Lok Adalath is probabalised. So, when a party is not before the Court or authority under law, the finding is not binding on the party. The discussion of the Lok Adalath in the impugned order at para 28 and 29, would probabalise that no material is placed before the Lok Adalath to support the submission of the Advocate for the banker that Suryabhagavan represented tor the mother/guarantor also. So, the conclusion reached by the Lok Adalath that guarantor is not represented before the authority requires to be accepted. Further, contention of the learned Senior Advocate that the borrowers failed to pay money in spite of they getting benefit of Rs. 15 lakhs while entering into compromise becomes secondary subject, not on rights of the parties. It is the rights of the parties that decide a case. So the submission of the Senior Advocate for the bank, auction purchaser is rejected.
15.(8) Compliance of Order XXI Rule 64: Next contention urged is in regard to the following of principles in Rule 61 of the Income Tax Rules which are similar to Order XXI Rule 64 of CPC.
The sale proclamation issued by the Recovery Officer contains the clause regarding the manner in which the sale should be conducted. It reads as follows:
“The property will be put for sale in the lots specified in the schedule, if the amount to be realized by sale is satisfied by the sale of a portion of the property the sale shall be, immediately stopped with respect to the remainder. The sale will also be stopped if, before any lot is knocked down; the arrears mentioned in the said certificate, interest payable under Section 220(2) of the Income Tax, 1961 and costs (including the costs of sale) are tendered to the Officer conduction the sale or proof of sale given to his satisfaction that the amount of such arrears, interest and costs has been paid to the undersigned”.
15.(9) According to this clause, the sale of the property will be undertaken according to the need after bidding part by part. In the facts of the case, the total liability is nearly 1 crore 10 lakhs. Not even effort is made for sale atleast one portion of the property to get the balance payable by the borrowers to the bank. In Abmati Narasayya v. M Subba Rao, (1989 Supp (2) SCC 693) the Hon'ble Apex Court has held that there is a duty cast on the Executing Court under Order XXI Rule 84 to decide whether it is necessary to bring the entire attached property for sale or such portion thereof as may deem necessary to satisfy the decree. The Hon'ble Apex Court has also added if the property is large and the decree to be satisfied is small, the court must bring only such portion of the property, the proceeds of which would be sufficient to satisfy the claim of the decree holder. Their Lordships have further clarified, it is immaterial whether the property is one or several. Even if the property is one, if a separate portion could be sold without violating any provision of law only such portion of the property should be sold.
15(10) Similarly, in Balakrishnan v. Malaiyandi Konar reported in (2006) 3 SCC 49, the Hon'ble Apex Court held as under:
“Held, the said expression clearly indicates the legislative intent that no sale can be allowed beyond the decreetal amount mentioned in the sale proclamation”.
15.(11) Similar dicta is found in Sai Enterprises v. Bhimreddy Laxmaiah, (2007) 13 SCC 576, where in Hon'ble Apex Court emphasized wondering necessary to satisfy the decree in order 21 R64 C.P.C, have further clarified while stating this is not just discretion but an obligation imposed on Court.
15.(12) If, under the sale proclamation the property intended to be sold is for Rs. 1 crore 10 lakhs, then how the auction is held for Rs. 3 crores 27 lakhs remains unsubstantiated in the entire case pleaded by the bank or the auction purchaser. Auction sale condition is violated by the Recovery Officer, Auction Purchaser, Bank are parties to the auction sale. There is a duty cast under law on DRT, auction purchaser, Recovery Officer, Bank to conduct the auction according to the published terms. No material is placed by contesting parties as to why the authority has to violate the condition in proclamation.
15.(13) In Parvathy Antherjanam v. Indian Bank, Ernakulam, reported in AIR 1996 Kerala 159 following the Hon'ble Apex Court ruling in 1989 Supp (2) SCC 693 : AIR 1990 SC 119 held that the mandate of sale of the portion of the property that is required for satisfying the decree is emphasised by the Judgment of the High Court of Kerala.
15.(14) In the facts of the case on hand, neither the DRT nor the Recovery Officer inspite of a positive mention in the proclamation that portions of the property will be brought for sale, there is no indication as to why the sale of the entire property is done without complying with the mandate in the sale proclamation published by the Recovery Officer. So, the submission of the learned advocate for the auction purchaser, learned Sr. advocate for the bank that the auction is proper is rejected. The submission of the advocate for the guarantor that the auction is violative of mandate under Order 21 Rule 64 is accepted.
16. Action of DRT in deciding IA's filed by guarantor
It is the submission of the learned advocate for the guarantor that in view of the pendency of the application by the guarantor before the Lok Adalath to recall the award, until the finding is given by the Lok Adalatn Committee, DRT ought not to have ordered for sale. Also submit that after the sale is conducted for an application under order XXI Rule 58, it is not in accordance with law to call upon the guarantor to pay Rs. 30,000/- as Court fee, considering it as an appeal. Place reliance on United Bank of India v. Satyavati Tandon referred to supra. It is rebutted contending that the guarantor being a party, she is bound by the sale. So, only appeal lies and the action of the DRT is proper. Section 17 of the Recovery of Dues Due to Banks and Financial Institutions Act, 1993 is considered by the Hon'ble Apex Court in United Bank of India v. Satyawati Tondon reported in III (23010) BC 495 (SC) and their Lordships have held while interpreting Section 17(1) that the expression ‘any person’ used in Section 17(1) is of wide import. It takes within its fold, not only the borrower but also guarantor or any other person who may be affected by the action taken under Section 13(4) or Section 14. Further, the Hon'ble Apex Court has clarified both the tribunal and Appellate Tribunal are empowered to pass interim orders under Section 17 or 18 and are required to decide the matters within a fixed time schedule. Apex Court has held
The expression ‘any person’ used in Section 17(1) is of wide import. It takes within its fold, not only the borrower but also Section 1.3(4) or Section 14. Both, the Tribunal and the Appellate Tribunal are empowered to pass interim orders under Section 17 and 18 and are required to decide the matters within a fixed time schedule. It is thus evident that the remedies available to an aggrieved person under the SRFAESI Act are both expeditious and effective.
17. The Hon'ble Apex Court thereby has declared that the aggrieved person under SRFAESI Act that there is an expeditious and effective remedy. In the facts of the case that Surya Bhagavan failed to pay 25% of the amount as per the directions of the DRT, DRT has summarily rejected the applications filed by the guarantor, has not considered the importance of the claim pleaded by the guarantor that her claim for recalling of the order and award is pending before the High Court Lok Adalath. Thereby, the action of the DRT is incorrect. So, the submission of the advocate for the guarantor is accepted. Submission of the learned Sr. counsel for the bank and also the auction purchaser are rejected.
18. Possession of auction purchaser, solatium
It is positively contended by the learned advocate for the auction purchaser that his client has invested nearly Rs. 4.00 crores. Having invested nearly Rs. 4.00 crores, his client should be paid 20% solatium if the Court were to come to conclusion that the sale is liable to be set-aside for any reason. This submission is rebutted reliance is on the manner of conducting the auction.
19. If the sale is conducted in accordance with the proclamation or terms of the declaration in the proclamation, then the submission could have been accepted. In the sale proclamation i.e, the offer for the public to participate in the auction, there is a specific condition that property will be auctioned part by part. The Debt Recovery Officer having published that he will proceed for auction of one property after the other i.e, in stages, he having violated, this violation being openly not opposed by the auction purchaser, he is a party to the neglect of the Recovery Officer. So, the submission of the learned Senior Advocate for solatium at 20% is rejected.
20. During the pendency of the proceedings before the Court, the creditor has deposited a sum of Rs. 20.00 lakhs to be paid to the bank. Bank be paid the said sum. The order of the High Court Lok Adalath dated 20.3.2004 is upheld. The DRT is directed to decide OA in accordance with law. Writ Petition No. 3531/2007 is allowed. Sale held is set-aside. Writ Petition Nos. 17320/2007 and 17544/2007 are dismissed. No Costs.