This Securitisation Application (for short-‘SA’) was filed on 19.01.2018 under S. 17(1) of SARFAESI Act seeking issuance of appropriate directions to the defendant bank for staying of the sale of the ‘secured asset’ to be held on 09.02.2018 pursuant to Annexure-A2 sale notice dated 22.12.2017.

2. The sale proceedings of the defendant bank came to be impugned contending that the sale of a lesser extent of property should suffice for warding off the entire debt as the ‘secured asset’ has road frontage and is easily partible. The sale was sought to be declared as bad and illegal for the reason of the defendant's negation of the legal requirement of R. 8(5) & R. 8(6) of the Security Interest (Enforcement) Rules.

3. The defendant bank had on 02.02.2018 filed Written Statement and documents in substantiation of its SARFAESIA measures and arguments came to be advanced by either side time and again since 09.02.2018 onwards. The applicant had produced two sketches on his side to show the partibility of the ‘secured asset’ and his plea of partibility was strongly opposed by the defendant bank contending that the ‘secured asset’ would be rendered ‘unmarketable’ and ‘unsaleable’ if the property is to be divided in the manner suggested by the applicant in the sketch. This Tribunal vide its proceedings dated 05.03.2018 wherefore directed the applicant to identify and proffer prospective purchasers for the SA subject property to prove the saleability/marketability of such property in either of the manner provided in the two sketches prepared and filed by him. The SA thereafter stood adjourned to 26.03.2018 and 19.04.2018 with no signs of there being any prospective purchasers for the ‘secured asset’ on the side of the applicant. Notwithstanding the above contention the learned counsel for the applicant also contended that the SA subject financial assistance being one made available to ‘cashew industry sector’ a moratorium is declared by the State Government uptil 31.05.2018 precluding the defendants from in any manner proceeding with their recovery process. The defendant bank had come out with their affidavit affirming and stating inter-alia that the contention put-forth by the applicant as to the moratorium accorded by State Government is not applicable for the present case as the auction of the ‘secured asset’ had since been held on 09.02.2018 prior to the passing of order dated 22.02.2018 by the Government in the above regard.

4. The learned counsel for the applicant had in the proceedings dated 19.04.2018 submitted about the applicant's filing of an affidavit seeking time till 30.04.2018 to settle the entire issue with the defendant bank consequent upon exercising of his rights in terms of S. 13(8) of the Act. The learned counsel did as well submit then that if such settlement does not transpire, the defendant bank would of course be entitled to proceed further with their SARFAESIA measures already initiated by it. The relevant portion of the affidavit dated 18.04.2018 is excerpted hereunder:—

“I am the applicant in the above case. I know the facts of the case. The above Securitisation application filed by the applicant is for challenging the Annexure-A2 sale notice dated 22.12.2017. On 9.2.2018 during the pendency of this case, the defendant bank conducted the sale and an auction purchaser has participated in the auction and deposited 25% of the bid amount. It is respectfully submitted that for the ‘secured asset’ having an extent of 39.240 cents is situated in corporation of Cochin limit and there are two perspective purchasers to purchase the property. The highest offer given for the property is a non resident Indian and he will execute the agreement before 25.4.2018.

This being the situation, the applicant is willing to settle the entire issue by entering in to a compromise with defendant bank. Therefore it is most humbly submitted that this Honourable Tribunal may be pleased to grant time till 30.4.2018 to settle the entire issue with the defendant bank.”

5. The proceedings dated 07.05.2018 of this SA would further reveal as to assertive submissions that came to be made on the side of the applicant undertaking to pay Rs. 100 Lakhs required to be paid by the defendant before Friday. Thereupon the SA stood adjourned to 14.05.2018, 18.05.2018 and to this day for reporting of settlement by the applicants which was of no avail. The learned counsel for the applicant would seek enlargement of time by another month to effect mutation of the property for rendering his property saleable or marketable and hastened to add that the defendant bank was definitely at fault at the first place for having accepted the applicant's property as security without insisting for mutation at the time of their disbursement of loan. It is the further contention of the applicant that even the defendant bank would not be able to proceed with the sale of ‘secured asset’ unless and until the mutation are permitted to be carried out in revenue record. The learned counsel for the applicant besides acknowledging the co-operation rendered by the defendant bank in giving a letter dated 14.05.2018 for carrying out of the mutation in revenue records would seek interdiction of its further SARFAESIA measures to enable the applicant himself to sell away the ‘secured asset’ consequent upon his due completion of mutation process.

6. Mr. V.B. Harinarayan Ld. counsel for the defendant bank did submit that the sale notice under challenge is the 5 sale notice in succession of the other unfructified ones. Though there had been a successful bidder for the sale held on 09.02.2018 pursuant to Annexure-A2 sale notice dated 22.12.2017 the applicant had by whiling away the time on the context of retrieving the property for more than three months had succeeded in his attempt of making the said purchaser resile from the said process. The learned counsel would submit that the said purchaser withdrew himself from the sale proceedings and had as well taken away the initial sale proceeds amount deposited by him. It was further submitted that the applicant in this case had only filed a false affidavit dated 18.04.2018 causing the defendant's as also this Tribunal to believe as if the entire issue is being settled by him by 30.04.2018 and it is only unfortunate that the applicant would now make uncharitable remarks as against the defendant bank for having disbursed the loan on the strength of the security concededly offered by him. The learned counsel would sum up his submission stating that the defendant bank would find out its means of recovering its dues by putting forth the ‘secured asset’ for sale in a manner permissible under law.

7.1 Going by the submissions of the learned counsels appearing on either side as also the pleadings and evidence of the parties hereto, the ‘secured debt’ that is presently recoverable is understandably to the tune of Rs. 1,19,00,000/- (approx.). It is an admitted fact that the attempts made by the defendant for sale of the ‘secured asset’ on the earlier four occasions did not see fruition for the reserve price at which it was then notified for sale. Concededly the applicant had not impugned any of earlier sale notices. Pursuant to Annexure-A2 sale notice, one Kalapurakal Joseph Liston is stated to have been declared as ‘successful bidder’ in respect of the ‘secured asset’ to the tune of Rs. 2,26,10,000/- and initial sale proceeds came to be received by the defendant in terms of the sale notice. The confirmation of such sale was directed to be deferred by this Tribunal vide its order dated 09.02.2018 and the defendant bank did not surge ahead with the further sale process as submissions came to be made on the side of the applicant as to the efforts genuinely made by him to retrieve the property by settling the entire dues.

7.2 The learned counsel for the applicant during the course of his arguments would emphatically contend that Annexure-A2 sale notice is only to be declared as illegal also for the reason of the defendant's non-disclosure of the factum of subsistence of a tenancy which according to him is a clear violation of one of the conditions enumerated under the proviso to R. 8(6). Advertence was also made by him to the WS filed by the defendant bank wherein as well there is a clear admission about there being a tenant by name of Joseph Prince in the ‘secured asset’. It is no doubt true that the sale notice is bereft of the particulars as regards tenancy if any. The Tribunal at the same time is of the definite view that it is not open to the applicant to contend the non-disclosure of tenancy as a matter that would in any manner prejudice his interest. It would have been open for the tenant or the purchaser to raise such a contention had they been truly aggrieved on that score. The Tribunal ineluctably holds so fortified by the judgment rendered by Hon'ble High Court of Kerala in the case of Varghese Ukken v. State Bank Of India, reported in wherein it is held as follows:—

“20. With regard to the non mentioning of the encumbrances covered by Ext. P3 ‘encumbrance certificate’ and such other heads, it is very much relevant to note that, the liability to the Income Tax as well as the Sales Tax Departments has already been cleared by the Bank as observed in paragraph 2 of Ext. Rule 1(e) judgment, since the Petitioners did not choose to satisfy the same, in spite of issuance of Ext. Rule 1(i) letter. The attachment by the Civil Court was lifted upholding the ‘priority right’ of the Bank as per Ext. Rule 1(l) order passed by the concerned Civil Court, which in turn was recorded and W.P.(C) 33036 of 2007 filed by the concerned Chitty Company (Plaintiff before the Civil Court) was disposed of, permitting the Bank to appropriate the sale proceeds as per Ext. Rule 1(m) judgment. Even otherwise, non-mentioning of the encumbrances, if any, in the sale notification is not fatal or significant as far as the defaulter is concerned and absolutely no prejudice has been caused to the Petitioners in this regard. If at all anybody is to be aggrieved, it can only be the prospective purchasers like the 3rd Respondent, who do not have any such grievance, to contend that the amount quoted by them was on the firm belief that there was no encumbrance, in turn seeking to avoid the liability under the contract. As it stands so, there is absolutely no legal or factual basis for the contentions raised by the Petitioners on this score.

27. It is true, applying the principles of the celebrated decision in Taylor v. Taylor (1875 (1) Ch. D. 426) which is being followed in Indian context as well and also by virtue of the mandate in Indian Bank's Assn. v. Devkala Consultancy Service ((2004) 11 SCC 1)-Para 28, when the law stipulates to pursue an act in a particular manner, it has to be done in that manner alone and in no other way. But, the rules formulated by the Government, have to be read and understood, giving a purposive interpretation, so as to give effect to the provisions of the Act. It is also settled that, the law has to be read and understood by its spirit and not by letters.”

(Emphasis is mine)

7.3 The Tribunal now proceeds to consider whether it would be still open for the applicant to impugn Annexure-A2 sale notice for the reason of the defendant's initiation of sale measures in respect of the entire property oblivious of the equities embedded in R. 8(5) of the Security Interest (Enforcement) Rules. Even as per the admitted version of the applicant four sale notices brought out by the defendant on earlier occasions in respect of the entire ‘secured asset’ was never challenged on that count. The applicant though in this proceeding had made available two sketches and purchased time for proffering purchasers for any of the two items of properties shown therein was only unsuccessful in identifying such purchasers. The assurance and the undertaking made by the applicant vide his affidavit dated 18.04.2018 as regards settlement of the entire issue with the defendant bank by 30.04.2018 also has not been complied with. The parting submission that came to be made by the learned counsel appearing for the applicant as to the lapses committed by the defendant bank at the first place in having extended the loan facilities to the borrowers on the strength of the security of the applicant even in the absence of any mutation at that time appears to be one made in utter bad taste besides being deplorable and uncharitable.

7.4 Be as it may, Annexure-A2 sale notice under challenge is already rendered ‘infructuous’ as the successful bidder had reportedly backed out from the sale process. The cause of action alleged in the SA has since disappeared and does not survive to be agitated anymore. It is not open for the applicant to seek interdiction of further SARFAESIA measures by the defendant in the backdrop of S. 13(1) which in unequivocal terms permit a secured creditor to enforce its security interest without the intervention of any court or Tribunal with the only fetters on them to proceed strictly in accordance with law. With the above observations, the SA eventually stands disposed of as rendered ‘infructuous’. Consequently IA 194/2018 stands closed. No order as to costs.