George Joseph v. Recovery Officer

The appeal was filed on 30.01.2012 seeking to set aside Annexure — A12 proclamation of sale dated 02.01.2012 issued by the Ld. Recovery Officer, notifying the property for sale on 15.02.2012.

2.1 The appellants are the certificate debtors in DRC 3253 as borne out by Annexure — A2 Recovery Certificate dated 30.06.2010 which has come to be issued by the Tribunal pursuant to Annexure-A1 final order of even date passed in OA 134/2009. It is the case and contention of the appellants that they came to understand about the pendency of DRC only on receipt of certified copy of the judgment, that on entering appearance before the Recovery Officer they had objected as regards non-service of the demand notice, that on receipt of the certified copy of the demand notice on 05.12.2011 when the matter was posted on 28.12.2011 before the Recovery Officer V.K. Pillai it was reposted to 02.01.2012 as per A' Diary without mentioning anything more, that due to the Recovery Officer's absence on account of his sick leave the appellant's counsel had in good faith that nothing adverse would occur had chosen not to visit the Recovery Officer on 02.01.2012 but unfortunately was shocked to find in the A' Diary a proceeding to the effect of putting the appeal subject property for sale on 15.02.2012 consequent to proclaiming, publishing and affixing of the sale notice.

2.2 That on the appellants' obtaining of the certified copy of the proceedings dated 02.01.2012 they noticed something different from what was written on the A' Diary, that the proceedings would reveal there occurred no valid settlement of proclamation of any property rather something non-transparent and illegal had occurred in proclaiming the sale of the residential property belonging to the appellants wherein the registered office of the certificate debtor No. 1 company was functioning on lease, that the physical possession of the stock, valuables/movables belonging to the said company was illegally taken by the Authorised Officer of the bank on 06.12.2008 in respect of which the appellants had filed SA 295/2009 and a stranger M/s. Rajesh Exports Pvt. Ltd. had filed SA 543/2009, that as per the encumbrance certificate produced by the certificate holder bank the said M/s. Rajesh Exports Ltd. appears to be the alleged title holder of the property proclaimed for sale, that the valuation report divulging the property's value to be Rs. 5,91,61,000/- as against Rs. 12,64,76,900/- which was the valuation arrived by the same valuer at appellants' request in the year 2008 goes to show that it is a dishonest and unreliable one, that had the appellants been given an opportunity to peruse the said report and take part in the said proceedings the Recovery Officer probably would not have fixed the upset price at a throw away price of Rs. 7 Crores as against its present liberal valuation of Rs. 20 Crores, that the said valuer claiming to be the ‘approved valuer’ is only to be blacklisted and that it was illegal for the Recovery Officer to settle the proclamation of sale by fixing its upset price at Rs. 7 Crores without calling for a fresh valuation report by affording an opportunity of hearing to the appellants.

2.3 It is further contended that the appellants were not afforded any opportunity to file objections either to the demand notice nor to the notice for settling proclamation which was not served on the appellants for the reason of the registered office and the residence of the appellants been under illegal possession of the Authorised Officer, that the Recovery Officer overlooked and ignored the encumbrance over the property and had fraudulently and dishonestly mentioned in the sale proclamation about his ignorance of any encumbrance on the property, that the certificate holder bank acting and performing as national treasury unit of the nation had acted irresponsibly by suppressing the material facts and misled the Recovery Officer to ignore the encumbrance which they are much aware from the encumbrance certificate produced by them as well as from SA 295/2009 and SA 543/2009, that the bank is responsible and accountable to the appellants for the loss or sale of non-entitled movables of the appellants worth more than Rs. 1 crore which had then been stored in the property, that the Recovery Officer has no authority to proclaim sale of the property along with the movable in the unauthorized custody of the Authorised Officer, that the Recovery Officer has illegally proclaimed the appellants' property for sale without making attachment as per the provisions of RDDBFI Act and the Second Schedule to the Income Tax Act rendering the entire proceedings vitiated, that the hastiness and suo motu withdrawal of DRC from the file of Recovery Officer V.K. Pillai without prior intimation to the appellants smack of malafides and non transparency which is not expected of a public officer who is bestowed with jurisdiction to recover the certificate debt only by following the procedures established by law and observance of the principles of natural justice and that in the light of the aforesaid facts and circumstances Annexure-A12 proclamation of sale which has come to be issued by the Recovery Officer illegally and in violation of the principles of natural justice is to be set aside.

2.4 Mr. C.S. Ullas, Ld. counsel for the appellants in the course of his submissions contended that Annexure-A12 proclamation of sale dated 02.01.2012 is to be quashed holding it to be illegal for the reason of it having been issued in the absence of the appellants and non-service of demand notice or ordering publication of demand notice by substituted service of the same. Ld. counsel emphatically contended that as the Authorised Officer of a certificate holder bank had assumed physical possession of the appeal subject property along with the movable properties of the appellants' worth more than Rs. 1 Crore, the act of Recovery Officer in bringing such properties for sale (both immovable and the movable properties) and allowing the public to inspect the said properties which are in illegal custody of the bank is per se illegal. On the side of the appellants it was vehemently argued that Annexure-A12 sale notice which has come to be issued in the absence of attachment as contemplated under the Second Schedule to the Income Tax Act, 1961 has to be set aside since the Recovery Officer deriving authority and powers under S. 25 of RDDBFI Act ought to have ordered for sale only consequent to attaching the subject property in terms of S. 29 of the said Act making Second Schedule to the Income Tax Act applicable for the recovery proceedings. Ld. counsel for the appellants submitted that as the Tribunal cannot pass a charged decree as per the judgment rendered by the Apex Court in the case titled “Nahar Industrial Enterprises Ltd. v. Hong Kong and Shanghai Banking Corporation” attachment of the property is a mandatory legal requirement and the property could be brought for sale only within three years from the date of said attachment in accordance with the relevant Rule in the Second Schedule to the Income Tax Act.

2.5 That apart, the Ld. counsel did submit that as the certificate holder bank had initiated SARFAESIA measures prior to filing of the OA, S. 13(10) of the SARFAESI Act alone ought to have been invoked and the possession taken by the Authorised Officer under SARFAESI Act cannot be made available/accessible to the Recovery Officer to inspect and value the property. Ld. counsel vehemently argued that the SARFAESI Act overrides RDDBFI Act and the Ld. Recovery Officer ought to have shown restraint in the matter of proceeding with the sale of the appeal subject property vide Annexure-A12 sale proclamation as the Hon'ble Apex Court in the Transcore case had indicated about the myriad circumstances in which the OA proceedings ought to have been withdrawn. Ld. counsel vociferously contended that Annexure-A12 sale proclamation has to be set aside for the reason of gross undervaluation of a property worth Rs. 20 Crores at Rs. 7 Crores, as also for non-disclosure of the encumbrances to the general public regarding the title alleged to be transferred to M/s. Rajesh Exports Ltd. which is nothing short of a fraudulent act perpetrated on the public by the certificate holder bank and the Recovery Officer. For the forgoing reasons the Ld. counsel for the appellants sought the appeal to be allowed with costs.

3.1 Mr. Easwaran, Ld. counsel for the 2 respondent bank submitted that the relief sought for in the appeal have been long back virtually rendered ‘infructuous’ in view of the deferment of said sale ordered by the Tribunal in its proceedings dated 10.02.2012 observing therein as to the then pendency of the petition filed by the appellants to set aside the exparte final order passed in the OA. It was submitted that as this Tribunal had in the proceedings dated 10.02.2012 then directed the Ld. Recovery Officer to defer the auction sale awaiting its further directives, the recovery process had come to a halt. In these circumstances the 2 respondent bank had on 23.07.2015 filed an IA No. 1901/2015 seeking to vacate the aforesaid interim order dated 10.02.2013 by allowing the bank to proceed with the recovery proceedings, as the IA Nos. 329 & 331/2012 in OA 134/2009 filed by the appellants seeking to set aside the exparte final order and to stay the operation of the said order were disallowed by this Tribunal vide its order dated 15.05.2015.

3.2. Ld. counsel for the certificate holder bank submitted that the proceedings and records available in DRC would show as to the effecting of due publication of demand notice issued under Rule 2 of the Second Schedule to the Income Tax Act and service of other mandatory notices on the appellants by the Ld. Recovery Officer in terms of Rules 52 & 53. Adverting to Nahar Industrial Enterprises Ltd. case of the Hon'ble Supreme Court relied by the Ld. counsel for appellants, Advocate Mr. Easwaran appearing for 2 respondent would submit that he could not see any specific finding therein to the effect that the Debts Recovery Tribunal cannot pass a charged decree as submitted on the side of the appellants. He submitted that there is no requirement for attaching a mortgaged property as contended in vain by the Ld. counsel for the appellants, as the Recovery Officer deriving powers by virtue of the Recovery Certificate issued by the Tribunal is competent to sell the mortgaged property without any requirement for attachment of the same. On the side of the bank it was forcefully contended that the stipulation contained in Rule 68-B of the Second Schedule to the Income Tax Act for putting forth the property for sale within a period of 3 years from the date of attachment, would not apply for a recovery proceedings initiated by the Recovery Officer under RDDBFI Act and adverted to the Apex Court judgment in C.N. Paramasivan v. Sunrise Plaza case wherein it is found and held that the expression ‘as far as possible’ contained in S. 29 of RDDBFI Act has to be construed and read ‘as far as may be practicable’.

3.3. Mr. Easwaran, Advocate appearing for 2 respondent bank urged the Tribunal to appreciate that it is only futile on the part of the appellants to contend that SARFAESI Act overrides RDDBFI Act, such a submission coming forth from them in total ignorance of S. 37 of the posterior Act which makes it clear that the remedies provided in SARFAESI Act is in addition to and not in derogation of the provisions contained in RDDBFI Act. On the side of the bank it was submitted that the contentions raised by the appellants as regard undervaluation would not enure to their benefit in so far as Annexure-A12 notice had been long back rendered ‘infructuous’ and the Recovery Officer would in any way be proceeding afresh from the stage of Rule 53 sale proclamation by calling for a fresh valuation. Ld. counsel concluded his argument stating that as the appellants had come out with a case as if M/s. Rajesh Exports is now the title holder and non-mentioning of the said encumbrance in the Annexure-A12 sale notice is illegal and fatal, it is for the alleged title holder M/s. Rajesh Exports to come out with any claim petition before the Ld. Recovery Officer by invoking Rule 11 of the Second Schedule to the Income Tax Act. Ld. counsel expressed his doubt as regards the competency and locus of the appellants to sustain the present appeal for the reason of they alleging to have no saleable interest in the appeal subject property.

4.1 Annexure-A12 proclamation of sale dated 02.01.2012 is impugned by the appellants stating it to be suffering from many illegalities which includes among other grounds-non service of demand notice and notice for settling of sale proclamation, improper valuation, putting the property for sale without attachment of the immovable property, non-executability of the recovery certificate beyond 3 years etc. The points thus emerging for consideration by the Tribunal are as follows:—

(i) Whether Annexure A12 proclamation of sale notice dated 02.01.2012 is vitiated for material irregularity in service of demand notice or the notice for settlement of sale proclamation or publication thereof?

(ii) Whether Annexure A12 proclamation of sale notice dated 02.01.2012 is vitiated for the reason of ‘improper valuation’ as alleged by the appellants?

(iii) Whether Annexure A12 proclamation of sale notice dated 02.01.2012 is vitiated for the reason of non attachment of appeal subject property as alleged by the appellants?

(iv) Whether the Recovery Officer has committed any illegality in issuance of Annexure A12 proclamation of sale notice dated 02.01.2012 in negation of the provisions of the SARFAESI Act as alleged by the appellant?

(v) Whether the action of the Recovery Officer resulting in issuance of Annexure-A12 sale proclamation notice suffers from any illegality and smacks of malafides as alleged by the appellants?

(vi) Whether the appellants are entitled to the relief sought for in the appeal?

4.2 For proper consideration and appreciation of the above points in issue, it would be fruitful to cull out and reproduce the relevant portions of RDDBFI Act 1993, Debts Recovery Tribunal, Ernakulam (Kerala and Lakshadweep) Regulations of Practice 2005, the Second Schedule to the Income tax Act 1961 and the relevant provisions of the SARFAESI Act 2002. Accordingly they are extracted out below:

RDDBFI Act

2(g) “debt” means any liability (inclusive of interest) which is claimed as due from any person by a bank of a financial institution or by a consortium of banks or financial institutions during the course of any business activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or assigned, or whether payable under a decree or order of any civil court or any arbitration award or otherwise or under a mortgage and subsisting on, and legally recoverable on, the date of the application;

19. Application to the Tribunal.—

(1) Where a bank or a financial institution has to recover any debt from any person, it may make an application to the Tribunal within the local limits of whose jurisdiction—

(a) the defendant, or each of the defendants where there are more than one, at the time of making the application, actually and voluntarily resides or carries on business or personally works for gain; or

(b) any of the defendants, where there are more than one, at the time of making the application, actually and voluntarily resides or carries on business or personally works for gain; or

(c) the cause of action, wholly or in party, arises.

[Provided that the bank or financial institution may, with the permission of the Debts Recovery Tribunal, on an application made by it, withdraw the application, whether made before or after the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004 for the purpose of taking action under the Securitisation and reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), if no such action had been taken earlier under that Act:

(12) The Tribunal may make an interim order (whether by way of injunction or stay or attachment) against the defendant to debar him from transferring, alienating or otherwise dealing with, or disposing of, any property and assets belonging to him without the prior permission of the Tribunal.

(22) The Presiding Officer shall issue a certificate under his signature on the basis of the order of the Tribunal to the Recovery Officer for recovery of the amount of debt specified in the certificate.

(23) Where the Tribunal, which has issued a certificate of recovery, is satisfied that the property is situated within the local limits of the jurisdiction of two or more Tribunals, it may send the copies of the certificate of recovery for execution to such other Tribunals where the property is situated:

Provided that in a case where the Tribunal to which the certificate of recovery is sent for execution finds that it has no jurisdiction to comply with the certificate of recovery, it shall return the same to the Tribunal which has issued it.

24. Limitation.—The provisions of the Limitation Act, 1963 (36 of 1963), shall, as far as may be, apply to an application made to a Tribunal.

25. Modes of recovery of debts.—The Recovery Officer shall, on receipt of the copy of the certificate under sub-section (7) of section 19, proceed to recover the amount of debt specified in the certificate by one or more of the following modes, namely:—

(a) attachment and sale of the movable or immovable property of the defendant;

29. Application of certain provisions of Income-tax Act.—The provisions of the Second and Third Schedules to the Income-tax Act, 1961 and the Income-tax (Certificate Proceedings) Rules, 1962, as in force from time to time shall, as far as possible, apply with necessary modifications as if the said provisions and the rules referred to the amount of debt due under this Act instead of to the Income-tax:

Provided that any reference under the said provisions and the rules to the “assessee” shall be construed as a reference to the defendant under this Act.

30. Appeal against the order of Recovery Officer.—

(1) Notwithstanding anything contained in section 29, any person aggrieved by an order of the Recovery Officer made under this Act may, within thirty days from the date on which a copy of the order is issued to him, prefer an appeal to the Tribunal.

(2) On receipt of an appeal under sub-section (1), the Tribunal may, after giving an opportunity to the appellant to be heard, and after making such inquiry as it deems fit, confirm, modify or set aside the order made by the Recovery Officer in exercise of his powers under sections 25 to 28 (both inclusive).

Debts Recovery Tribunal, Ernakulam (Kerala and Lakshadweep) Regulations of Practice, 2005 : Chapter IX : Proceedings before Recovery Officers

41. Proceeding sheet: The Recovery Officers shall maintain proceeding sheet in respect of each Recovery Certificate showing the proceedings, in brief.

42. ‘A’ diary: The Recovery Officers shall also maintain separate “A” Diary in Form No. 11 showing the proceedings mentioned in regulation 41 and the date of next posting.

Second Schedule to the Income Tax Act

2. Issue of notice.

When a certificate has been drawn up by the Tax Recovery Officer for the recovery of arrears under this Schedule, the Tax Recovery Officer shall cause to be served upon the defaulter a notice requiring the defaulter to pay the amount specified in the certificate within fifteen days from the date of service of the notice and intimating that in default steps would be taken to realise the amount under this Schedule.

4. Mode of recovery.

If the amount mentioned in the notice is not paid within the time specified therein or within such further time as the Tax Recovery Officer may grant in his discretion, the Tax Recovery Officer shall proceed to realise the amount by one or more of the following modes:

(a) ******

(b) by attachment and sale of the defaulters immovable property;

48. Attachment.

Attachment of the immovable property of the defaulter shall be made by an order prohibiting the defaulter from transferring or charging the property in any way and prohibiting all persons from taking any benefit under such transfer or charge.

52. Sale and proclamation of sale - (1) The Tax Recovery Officer may direct that any immovable property which has been attached, or such portion thereof as may seem necessary to satisfy the certificate, shall be sold.

(2) Where any immovable property is ordered to be sold, the Tax Recovery Officer shall cause a proclamation of the intended sale to be made in the language of the district.

53. Contents of proclamation - A proclamation of sale of immovable property shall be drawn up after notice to the defaulter, and shall state the time and place of sale, and shall specify, as fairly and accurately as possible,

(a) the property to be sold;

(b) the revenue, if any, assessed upon the property or any part thereof;

(c) the amount for the recovery of which the sale is ordered;

(cc) the reserve price, if any, below which the property may not be sold; and

(d) any other thing which the Tax Recovery Officer considers it material for a purchaser to know, in order to judge the nature and value of the property.

54. (1) Every proclamation for the sale of immovable property shall be made at some place on or near such property by beat of drum or other customary mode, and a copy of the proclamation shall be affixed on a conspicuous part of the property and also upon a conspicuous part of the office of the Tax Recovery Officer.

(2) Where the Tax Recovery Officer so directs, such proclamation shall also be published in the Official Gazette or in a local newspaper, or in both; and the cost of such publication shall be deemed to be costs of the sale.

(3) Where the property is divided into lots for the purpose of being sold separately, it shall not be necessary to make a separate proclamation for each lot, unless proper notice of the sale cannot, in the opinion of the Tax Recovery Officer, otherwise be given.

68B. (1) No sale of immovable property shall be made under this Part after the expiry of three years from the end of the financial year in which the order giving rise to a demand of any tax, interest, fine, penalty or any other sum, for the recovery of which the immovable property has been attached, has become conclusive under the provisions of section 245-I or, as the case may be, final in terms of the provisions of Chapter XX : Provided that where the immovable property is required to be re-sold due to the amount of highest bid being less than the reserve price or under the circumstances mentioned in rule 57 or rule 58 or where the sale is set aside under rule 61, the aforesaid period of limitation for the sale of the immovable property shall stand extended by one year.

(2) In computing the period of limitation under sub-rule (1), the period (i) during which the levy of the aforesaid tax, interest, fine, penalty or any other sum is stayed by an order or injunction of any court; or (ii) during which the proceedings of attachment or sale of the immovable property are stayed by an order or injunction of any court; or (iii) commencing from the date of the presentation of any appeal against the order passed by the Tax Recovery Officer under this Schedule and ending on the day the appeal is decided, shall be excluded:

Provided that where immediately after the exclusion of the aforesaid period, the period of limitation for the sale of the immovable property is less than 180 days, such remaining period shall be extended to 180 days and the aforesaid period of limitation shall be deemed to be extended accordingly.

(3) Where any immovable property has been attached under this Part before the 1st day of June, 1992, and the order giving rise to a demand of any tax, interest, fine, penalty or any other sum, for the recovery of which the immovable property has been attached, has also become conclusive or final before the said date, that date shall be deemed to be the date on which the said order has become conclusive or, as the case may be, final.

(4) Where the sale of immovable property is not made in accordance with the provisions of sub-rule (1), the attachment order in relation to the said property shall be deemed to have been vacated on the expiry of the time of limitation specified under this rule.]

SARFAESI Act, 2002

*S. 13(10) Where dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an application in the form and manner as may be prescribed to the Debts Recovery Tribunal having jurisdiction or a competent court, as the case may be, for recovery of the balance amount from the borrower.

*35. The provisions of this Act to override other laws

The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.

*36. Limitation

No secured creditor shall be entitled to take all or any of the measures under sub-section (4) of section 13, unless his claim in respect of financial asset is made within the period of limitation prescribed under the Limitation Act, 1963 (36 of 1963).

*37. Application of other laws not barred

The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Companies Act, 1956 (1 of 1956), the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Recovery of Debts Due to Banks and

Financial Institutions Act, 1993 (51 of 1993) or any other law for the time being in force.

Security Interest (Enforcement) Rules, 2002

R. 8(6). The authorized office 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 authorized officer considers it material for a purchaser to know in order to judge the nature and value of the property.

5. Point No. (i) for consideration:

(i) The appellants had raised a definite contention as regards the non-service of demand notice on them in the above recovery proceedings, as also the non-publication of such notice by way of substituted service despite the bank being fully aware about the dispossession of the appellants from the address shown in the Recovery Certificate. It is the appellants' further case that they had not been served with Notice for Settlement of Sale Proclamation in terms of Rule 53 of the Second Schedule to the Income Tax Act and therefore the issuance of Annexure-A12 proclamation of sale without serving the said notices and without giving any opportunity to the appellants for filing of their objections to the demand notice as also to the Notice for Settling the Sale Proclamation is sought to be held as illegal and unsustainable.

(ii) Mr. Eswaran, Ld. counsel for 2 respondent bank adverted to the copy of the Tribunal's order dated 15.05.2015 passed in IA Nos. 329/2012 and 331/2012 in OA No. 134/2009 and pointed out to the observations and findings recorded by the Tribunal in the said IAs as regards due and proper service of notices on the appellants herein, going by the fact that the notices came to be issued to the appellants' address as set out by them in IA Nos. 329/2012 and 331/2012 filed on 30.01.2012, Annexure-B1 Crl. M.P. filed by them on 10.03.2010 before Ld. CJM Court, Ernakulam and Annexure-B5 lawyer's notice dated 16.05.2011 issued by the appellants to M/s. Rajesh Exports Ltd. The relevant portion of the said order dated 15.05.2015 as read out by the Ld. counsel for 2 respondent, is extracted out below:

“10. The copy of final order was sent to the petitioners 1 to 3 by this Tribunal on 15.7.2010 under R. 16 of the Debts Recovery Tribunal (Procedure) Rules, which came to be returned unserved with the postal endorsement ‘left without instructions’. This Tribunal finds that Annexure-B1 which is a Crl. M.P. filed by petitioners 2 and 3 on 10.03.2010 before the Ld. CJM Court, Ernakulam and Annexure-B5 lawyers notice dated 16.05.2011 issued on behalf of petitioners 2 and 3 to M/s. Rajesh Exports Ltd. divulges the petitioners' address as follows……… “Thaliyath House, Pallimukku, Church Landing Road, Ernakulam” and the final order in OA has been sent by this Tribunal to petitioners 2 and 3 by giving the very same address of “Thaliyath House, Pallimukku, Church Landing Road, Ernakulam” and to petitioner No. 1 company to the following address ………… “39/5039-A, Church Landing Road, Pallimukku, Kochi” as provided by the applicant in their OA filed on 08.04.2009. In the above I.A. Nos. 329/2012 and 331/2012 filed on 30.01.2012, the petitioners had given their address as “39/5039, Thaliyath House, Church Landing Road, Kochi”. Therefore this Tribunal finds that between 2009 and 2012, admittedly the petitioners 1 to 3 themselves have a case as to the above address being their proper address made known to the applicant bank as well as this Tribunal and even if the petitioners 1 to 3 had left from the said address for reasons whatsoever, the petitioners who had contracted loan with the respondent bank were enjoined with a duty to intimate the bank with regard to any change of their address and had a duty to leave instruction with the postal authorities as well with regard to their change of address for enabling the letters addressed to them to be re-directed to their other addresses if any. In respect of the notices or registered articles which are returned unserved with the postal endorsement ‘addressee left without instruction’, the well settled legal proposition is that it is a ‘deemed service’ of such notices in the eye of law which is fortified by the dictum laid down by Hon'ble Apex Court in the case titled M/s. Madan and Company v. Wazir Jaivir Chand, reported in (1989) 1 SCC 264 : AIR 1989 SC 630 which reads as follows:—

“All that a landlord can do to comply with this provision is to post a prepaid registered letter (acknowledgment due or otherwise) containing the tenant's correct address. Once he does this and the letter is delivered to the Post Office, he has no control over it. It is then presumed to have been delivered to the addressee under S. 27 of General Clauses Act. ……. An addressee can easily avoid receiving the letter addressed to him without specifically refusing to receive it. He can so manipulate matters that it gets returned to the sender with vague endorsements such as ‘not found’, ‘not in station’, ‘addressee has left’, and so on. …………… if a registered letter addressed to a person at his residential address does not get served in the normal course and is returned, it can only be attributed to the addressee's own conduct. If he is staying in the premises, there is no reason why it should not be served on him. If he is compelled to be away for some time all that he has to do is to leave necessary instructions with the postal authorities either to detain the letters addressed to him for some time until he returns or to forward them to the address where he has gone or to deliver them to some other person authorised by him. In this situation, we have to choose the more reasonable, effective, equitable and practical interpretation and that would be to read the word ‘served’ as ‘send by post’ correctly and properly addressed to the tenant.”

(Emphasis is mine)”

(iii) The Tribunal gave an anxious consideration as to whether Annexure-A12 sale proclamation notice is illegal and suffers from any material irregularity for the reason of alleged non-service of demand notice or the notice for settling of sale proclamation on the appellants for the reason of their dispossession by the bank under SARFAESI Act from the addresses set out in the Recovery Certificate?

(iv) In the instant case, on a conspectus of the file pertaining to DRC 3253 that has been called for and obtained from the Recovery Section of the Tribunal, the following facts came to the fore. The demand notices dated 01.09.2010 issued by the Ld. Recovery Officer Vijay Kumar Pillai under Rule 2 of the Second Schedule to the Income Tax Act to the Certificate debtor No. 1, Door No. 39/5039-A, Church landing road, Pallimukku, Cochin-682 016, Ernakulam District and to the CDs 2 & 3/appellants' address-Thaliyath House, Church landing road, Pallimukku, Cochin-682 016, Ernakulam District were returned unserved on 29.09.2010 with the postal endorsement ‘left without instruction’. Thereupon the demand notice dated 24.02.2011 came to be published by the Ld. Recovery Officer in Mathrubhumi Malayalam daily dated 06.03.2011. The notice for settling of sale proclamation dated 13.09.2011 that came to be issued to the certificate debtors by the Ld. Recovery Officer P. Balasubramanian as contemplated under Rule 53, also returned unserved with the postal endorsement ‘house locked, intimation slip dropped in the letter box, gate locked, unclaimed’. Consequently, the notice dated 18.10.2011 for settling of sale proclamation is seen published in Mathrubhumi dated 05.11.2011 for the appearance of the certificate debtors before the Recovery Officer for drawing of sale proclamation on 09.11.2011.

(v) The Tribunal or its Recovery Officer is expected to send its order or the notices as the case may be only to the last known, available correct address of the parties concerned and on doing so, there is a deemed constructive service of notice as also presumption of such service in the eye of law. The following judgments fortify the said well settled legal proposition:

(a) The Hon'ble High Court of Kerala in the case titled South Indian Bank Ltd. v. Union of India, reported in held as follows:—

“6. It is settled law that, when a notice sent by registered post is returned ‘unclaimed’, it could very well be treated as ‘valid and proper’ service……”

(b) The Hon'ble Apex Court in the case titled P.T. Thomas v. Thomas Job reported in held as follows:—

“14……… Though the notice was correctly addressed and despite the intimation by the post office, the notice was not accepted by the Respondent and was returned unserved. In such circumstances, the presumption of law is that the notice has been served on the Respondent.

(Emphasis is mine)

(vi) The appellants who had notice and evident knowledge of the above recovery proceedings, entered appearance before the Ld. Recovery Officer by causing their Adv. Mrs. Divya to file Vakalath exactly on 09.11.2011 which was notified to be the date for drawing the sale proclamation. On 09.11.2011, the recovery proceedings stood reposted to 18.11.2011 and then to 25.11.2011. The appellants' advocate had on 25.11.2011 and 30.11.2011 appeared before the Ld. Recovery Officer P. Balasubramanian and got to know about the publication of notice for settling of sale proclamation and the demand notice as also the factum of the completion of service of such notices and the contents of the demand notice on it been read out to her by the Ld. Recovery Officer in the proceedings dated 25.11.2011.

(vii) The Tribunal could find two vakalaths dated 09.11.2011 given by the appellants as also the certificate debtor No. 1 company to Adv. Mrs. Divya vide ID Nos. 13083 & 13084 by setting out therein the very same addresses contained in the recovery certificate to be the address of the appellants. In the additional two vakalaths which came to be filed in the above DRC proceedings before the Ld. Recovery Officer by Adv. Mr. Ullas and Mrs. Divya on 10.03.2014, the address of the appellants as disclosed therein is found to be the very same address as mentioned in the recovery certificate.

(viii) The appellants had proceeded with the mentioning of the very same address as found in Recovery Certificate, to be their address in the cause title set out by them in the above appeal. The Tribunal did not fail to notice that the appellants had in the verification para of the above appeal dated 30.01.2012 and in a counter affidavit dated 24.03.2014 filed before the Ld. Recovery Officer in IA No. 408/2014 mentioned to be now residing at A-4, Shanti River Dale, OEN bus stop, Vytila, while in IA 695/2014 filed by them on 19.03.2014 they continue to assert the address found in the Recovery Certificate to be their present address. Even if the appellants have been dispossessed from the Recovery Certificate mentioned address by 2 respondent bank by virtue of the authority conferred on them under the provisions of SARFAESI Act, they having contracted the loan with the 2 respondent bank and been arraigned as the party defendants in the above OA proceedings that had culminated in issuance of Recovery Certificate are enjoined with a duty and legal obligation to keep the authority concerned duly informed about their new address for ensuring the receipt of all consequential notices thereof. The appellants have no case or contention of having intimated the Tribunal, its Recovery Officer or the 2 respondent bank as regards their change of address for reasons whatsoever nor had they left any instructions to the postal authority to redirect their letters/notices to their new addresses whatever it be.

(ix) From the proceeding sheet of the Recovery Officer dated 02.01.2012 and the DRC file it could be discerned that an order settling terms of proclamation of sale has come to be issued separately on the same day fixing auction to be held on 15.02.2012 at 2.30p.m. and the proceedings in respect of DRC 3253 found in the A' Diary admittedly revealed the factum of ordering of proclamation of sale for auction of 24 Cents (9.72 Ares) in Sy. No. 865/7 & 8 of Ernakulam Village along with 3 storied office-cum-residential building on 15.02.2012 at 2.30 p.m. by fixing the reserve price at Rs. 7 Crores. The Ld. Recovery Officer had thus ordered to proclaim, affix and publish the sale notice accordingly. The appellants would besides admitting their knowledge of the aforestated A' Diary proceedings, urge the Tribunal to see and hold the A' Diary proceedings dated 02.01.2012 to be containing something different from the certified copy of proceedings of the Recovery Officer obtained and filed by them as Annexure-A5. The Tribunal would proceed to arrive at a finding as regards the discrepancy pointed out by the appellants in relation to the A' Diary proceedings from that of the proceedings of Recovery Officer while answering point No. (v) under consideration.

(x) The DRC records also reveal as regards the filing of an affidavit dated 09.01.2012 by the manager of the 2 respondent bank enclosing the affixture report evidencing affixing of the sale proclamation notice dated 02.01.2012 accompanied by beat of drums, as also effecting publication of sale notice dated 02.01.2012 in Mathrubhumi Malayalam daily dated 09.01.2012 in terms of Rule 54. The appellants therefore cannot be heard to say that they were not aware of the contents of the demand notice and sale proclamation notice as the case may be nor could they be permitted to contend that the sale proclamation came to be drawn in their absence and without serving demand notice or notice for settling of sale proclamation.

(xi) Going by the aforestated factual position, the Tribunal is convinced as to there being due and proper service of mandatory notices whether it be a demand notice as contemplated under Rule 2, notice for settling of sale proclamation or publication/affixing of sale proclamation notices in terms of Rules 53 & 54 of Second Schedule to the Income Tax Act and the case put forth by the appellants to the contrary is only to be discarded and disbelieved.

6. Point No. (ii) for consideration:

(i) Mr. C.S. Ullas urged the Tribunal to hold Annexure-A12 sale proclamation notice to be illegal for the reason of it attempting to put the property for sale at a throw away reserve price of Rs. 7 crores as against the present liberal valuation of the said property being Rs. 20 crores. The Ld. Counsel had produced Annexure-A6 valuation report dated 07.10.2008 purported to be issued by the same valuer S. Rajendraprasad divulging therein the value of appeal subject property to be Rs. 12.64 crores, to contradict Annexure-A7 valuation report dated 18.03.2011 obtained and produced by the bank before the Ld. Recovery Officer for the said property at Rs. 5.91 crores, which according to the appellants is apparently a gross under valuation. Ld. counsel for the appellants also submitted that the sale proclamation has been drawn without affording an opportunity to the appellants to object to Annexure-A7 valuation report and added that the concerned valuer has to be black listed for having given a dishonest, unreliable valuation.

(ii) Mr. Eswaran Ld. counsel for 2 respondent bank would submit that the Ld. Recovery Officer had put the property for sale by fixing the reserve price at Rs. 7 crores which appeared to be proper valuation for the property at the relevant time and Annexure-A12 sale proclamation however did not culminate in sale for the reason of the deferment of sale ordered by the Tribunal on 10.02.2012. Ld. counsel submitted that as 4 years had elapsed by now, Ld. Recovery Officer would in any respects be proceeding with the sale afresh only pursuant to issuing a fresh notice for settling of sale proclamation and obtention of fresh valuation report. Ld. counsel sought the issue of valuation to be left open to be decided by the Ld. Recovery Officer at the time of drawing of sale proclamation and settling the terms thereof on issuance of NSSP afresh.

(iii) The Tribunal is convinced that Annexure-A12 sale proclamation notice dated 02.01.2012 fixing the reserve price at Rs. 7 crores has been rendered infructuous and is irrelevant now for the reason that the Ld. Recovery Officer would anyway proceed for sale afresh only pursuant to the issuance of NSSP upon calling for a fresh valuation report from the ‘approved valuer’ and ascertaining its present valuation. Further to that, unlike in court auction sale that is held in terms of O. 21 R. 66 of Code of Civil Procedure, the Ld. Recovery Officer who is to issue sale proclamation notice under S. 29 of RDDBFI Act r/w Rules 52 and 53 of the Second Schedule to the Income Tax Act, is not required to seek the valuation of the judgment debtors as contended and claimed by the appellants. The Tribunal is reminded of the judgment rendered by the Hon'ble Supreme Court of India in Samir. K. Shah v. Union of India, reported in which reads as follows:—

“9. The Rules do not require the grant of any opportunity to the debtor of being heard before the valuation is made and the reserve price fixed. The debtor is entitled to notice only for the drawing up of the proclamation sale. Presumably, the intention is to keep the debtor informed of the steps taken by the creditor to realize a fair value of the debtor's property. There is no requirement for the creditor to consider any alternative valuation filed at the instance of the debtor. The reference to the decision of this Court in Desh Bandhu Gupta v. N.L. Anand & Rajinder Singh reported in (1994) 1 SCC 131 : 1993 AIR SCW 3458, by the Appellant, is inapt. The decision relates to a sale in execution of a decree under Order 21, Rule 66 of the Code of Civil Procedure which expressly requires that the sale proclamation shall include the estimate of the value of the property if any given by either or both of the parties. It was in that context that this Court had said:

It is very salutary that a person's property cannot be sold without his being told that it is being so sold and given an opportunity to offer his estimate as he is the person who intimately knew the value of his property and prevailing in the locality though exaggeration may at time be possible.

10. There is no corresponding provision in Rule 52 or 53 of the Schedule to the Income-tax Act, 1961 or in any other provision which have been incorporated into the Act by Section 29.”

(Emphasis is mine)

(iv) With regard to the difference in valuation pointed out by the appellants in Annexure-A6 valuation report dated 07.10.2008 and Annexure-A7 valuation report dated 18.03.2011 purported to be issued by the same valuer, the person competent to explain regarding the variation in the said valuation is the concerned valuer himself which is unnecessary for the purpose of this appeal in so far as Annexure-A12 sale notice had been rendered ineffectual. However, in view of such disparities in valuation pointed out by the appellants, the learned Recovery Officer shall prior to issuance of NSSP afresh obtain a fresh valuation from some other ‘approved valuer’ to ascertain about the prevalent market value for the purpose of avoiding future controversies on the point of valuation.

(v) That apart, the Tribunal is unable to hold the reserve price fixed at Rs. 7 crores to be in anyway unreasonable going by the fact that the Ld. Recovery Officer had as against Rs. 5.91 crores, Rs. 4.73 crores and Rs. 3.74 crores shown to be the market value, realisable value and auction/distress sale value respectively by the valuer in his Annexure-A7 report dated 18.03.2011, fixed the reserve price at Rs. 7 crores pursuant to the inspection of appeal subject property made by the Recovery Inspector. Annexure-A6 valuation report dated 07.10.2008 is found to have been obtained by the appellants at their request, by stating to the valuer as to the requirement of such report for audit purpose.

(vi) The appellants had filed Annexure-A9 copy of SA 295/2009 filed by them impugning therein Annexure-A10 sale notice dated 30.04.2009 issued by Authorised Officer of 2 respondent bank, with no challenge made whatsoever in respect of the appeal subject property then valued at Rs. 2.50 crores. The appellants had produced along with Annexure-A10 copy of SA 543/2009 alleged to be filed by a stranger M/s. Rajesh Exports Ltd., copy of sale deed dated 01.10.2009 Doc. No. 2817/2009 in respect of appeal subject property purported to be executed by the appellants to M/s. Rajesh Exports Ltd. for Rs. 1.05 crores. The appellants who would rely on Annexures A9 and A10 with no quarrel or disputes as regards the valuation arrived at Rs. 2.50 crores by the Authorised Officer and at Rs. 1.05 crores inter se the appellants and M/s. Rajesh Exports Ltd., have no justification or explanation in the present appeal as to how the present liberal valuation of it would be Rs. 20 crores as contended by them in vain in the absence of any acceptable evidence. The Tribunal is therefore negating the appellants' plea of ‘under valuation’.

7. Point No. (iii) for consideration:

(i) Mr. C.S. Ullas, the Ld. counsel for appellants sought Annexure-A12 sale proclamation notice to be quashed on the context of it having come to be issued in the absence of attachment of the appeal subject property which is a mandatory pre-requisite for putting forth the property for sale by the Ld. Recovery Officer. He submitted that S. 25 of RDDBFI Act requires the Recovery Officer to recover the amount specified in the certificate only by attachment and sale of movable or immovable properties of the defendant and not by any other mode. He submitted further that going by the Apex Court judgment in Nahar Industrial Enterprises Ltd. case, the Tribunal is not entitled to pass a charged decree and for that reason as well, the Recovery Officer is only entitled to follow the Rules in the Second Schedule to the Income Tax Act in terms of S. 25 & S. 29 of RDDBFI Act which necessarily mandates attachment of the appellants' property before proceeding to sell the same vide Annexure-A12 sale proclamation notice. That apart, the Ld. counsel for appellants would contend that Rule 68B of the Second Schedule to the Income Tax Act requires the sale of immovable property to be effected within three years from attachment of the immovable properties and not beyond that.

(ii) Mr. Easwaran S, Ld. counsel for a 2 respondent bank did submit that the power and authority to sell the mortgaged property vests with the Recovery Officer by virtue of the Recovery Certificate issued by the Tribunal and it is only futile on the part of the appellants to contend that the mortgaged property which is ordered to be sold in the Recovery Certificate has to undergo the process of further attachment. Adverting to S. 29 of the RDDBFI Act, the Ld. counsel for the bank contended that the law requires adaptation of the provisions of Second Schedule and Third Schedule to the Income Tax Act ‘as far as possible’ and ‘with necessary modifications’ and therefore, the appellants cannot be heard to say that the mortgage property could be brought for sale only pursuant to attachment of it and that too within three years from such attachment. Ld. counsel urged to appreciate that Rule 68B could not be pressed into service in the proceedings under RDDBFI Act. On the side of the 2 respondent bank, strong reliance was placed on the following judgments of the Hon'ble High Court of Kerala to buttress their contention as regards the non-requirement of attachment for putting forth of the mortgaged property for sale and non-applicability of Rule 68B of the Second Schedule to the Income Tax Act, 1961:

(a) In the case titled Bhat v. Anugraha Charitable Trust, reported in 2008 (1) KLT 617 : 2008 KHC 4616 it is held as follows:—

“12. Now, the pivotal question that has been argued is as to whether there should be an attachment as a prelude to sale in the case of the debt in question, which is admittedly a secured debt. Going by undisputed facts, the petitioners had mortgaged an item of property to the creditor bank by depositing title deeds in a notified area and thereby created a simple mortgage by such deposit, in terms of the Transfer of Property Act, 1882, the “T.P. Act”, for short. The quality of mortgage that is created under S. 96 of the T.P. Act is that of a simple mortgage because by such deposit of title deeds, there is a transfer of an interest under S. 58(a) of the T.P. Act in specified immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability. S. 2(g) of the R. D/B/Act defines a debt to mean, among other things, any liability which is secured. S. 17(1) of that Act provides that the Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain and decide applications from the banks and financial institutions for recovery of debts due to such banks and financial institutions. S. 19 provides the procedure of Tribunals. Sub-s. 20 thereof provides that the Tribunal may, after giving the applicant and the defendant an opportunity of being heard, pass such interim or final order on the application as it thinks fit, to meet the ends of justice. S. 22 provides for issuance of an certificate to the recovery officer for the recovery of the amount of debt specified in the certificate. S. 25 provides modes of recovery of debts which include, among other thins, attachment and sale of the immovable property of the defendant. S. 29 provides that the provisions of the Second and Third Schedules to the Income Tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules, 1962, as in force from time to time shall, as far as possible, apply with necessary modifications as if the said provisions and Rules referred to the amount of debts due under the Act instead of to the Income tax. I may also notice that S. 34(1) of the Act provides that subject to prescriptions in Sub-s. 2 thereof, the provisions of the Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than the Act. Sub-s. 2 of S. 34 provides that the R.D.B. Act shall be in addition to and not in derogation of the Industrial Finance Corporation Act, 1948, the State Financial Corporations Act, 1951, the Unit Trust of India Act, 1963, the Industrial Reconstruction Bank of India Act, 1984, the Sick Industrial Companies (Special Provisions) Act, 1985 and the Small Industries Development Bank of India Act, 1989.

14. In terms of the RDB Act, any provision of the TP Act, if inconsistent with the provisions of the RDB Act, would not continue to run against the banks. The mortgage creates a right of immovable property. That saleable interest is what the bank or the financial institution has. In terms of the TP Act, that right can be enforced only through a Court. By the exclusion of the jurisdiction of the civil court and the exclusive empowerment of the Tribunal, the intention was to expedite the recovery and not to put a further spoke in the wheel. When the bank moves the Tribunal on the strength of a mortgage in its favour, the sweep of Sub-s. 1 of S. 17(1), which empowers the Tribunal to pass such orders as may be necessary in the ends of justice, confers sufficient authority on the Tribunal to pass an order for sale. That power is inherent and unbridled by any provisions of any of the law for the time being in force. This is the net effect of S. 34(1) of the R.D.B. Act. ON this short reason, the argument of the petitioners on this ground also fails. That apart, Ext. P1 recovery order, which has become final, as quoted above, contains clear terms by which the mode of recovery is regulated by the Tribunal, which procedure can also stand within the sweep of jurisdiction available under S. 17(1) to pass such orders as are necessary to secure the needs of justice. The purposive manner in which the construction of the legislation requires to be done advises me to hold unless there is any express inhibition which would result in showing a different course to be the ends of justice. The Tribunal has very wide powers in terms of S. 17(1), including the power to order sale and such an order would run without any requirement to make an order of attachment.”

(b) In the case titled Kutaguptan v. Canara Bank reported in 2010 (1) KLT 361 it is held as follows:—

6. Section 25 of the RDB Act provides attachment and sale of immovable property as one of the modes of recovery of debt, in the enforcement of the recovery certificate. The concept of attachment and sale of immovable property in Clause (a) of Section 25 of the RDB Act does not, necessarily, mean that only a property which is attached, could be sold. Nor does it mean that notwithstanding the quality of any encumbrance created by the debtor in favour of the creditor on an item of property, it has to be, necessarily, attached as a prelude to sale. When security is created by way of mortgage and other transactions which result in encumbrance, no attachment is required, to enforce the liability that is already fastened on such property. The sale of the mortgaged property by the enforcement of the certificate against the mortgaged property is nothing but enforcement of the mortgagee's right for recovery by sale. The question of attachment does not arise in such cases. Rights under mortgages and the like, as in case in hand; on the strength of which recovery proceedings could be had without any further “attachment”, cannot be rapped off in favour of debtors by making reference to Rule 68B of the Second Schedule to the I.T. Act. That will only frustrate the very purpose of the RDB Act.

8. Adverting to Rule 68B of the Second Schedule, it can be seen that the restriction is on sale and the restriction is made referable to the conclusiveness of the demand and the finality of the case. Such conclusiveness is made on the basis of Section 245-I and Chap. XX of the I.T. Act. The provisions in Chap. XX of the I.T. Act are not only not incorporated by reference into the RDB Act, but are not even referred to in Section 29 of the RDB Act as relatable to the proceedings under that Act. Therefore, Rule 68B of the Second Schedule to the I.T. Act which applies to proceedings covered by Section 245-I or Chap. XX of the I.T. Act, does not, in any view of the matter, apply to proceedings under the RDB Act.

(iii) Going by the definition of ‘debt’ contained in S. 2(g) of RDDBFI Act, it is discernible without any room for doubt that the definition ‘debt’ includes secured debt as well which is payable under a mortgage. S. 19(12) of the Act entitles the Tribunal to make an interim order whether by way of injunction or stay or attachment against the defendant from transferring, alienating or otherwise dealing with or disposing of any property and assets belonging to him. S. 19(22) empowers the Presiding Officer to issue a certificate to the Recovery Officer for recovery of the amount of debt specified in the certificate and if the Tribunal would be satisfied that the property is situated within the local limits of the jurisdiction of two or more Tribunals, it may as provided under S. 19(23) send copies of the Recovery Certificate for execution to such other Tribunals where the property is situated. S. 19(25) of the RDDBFI Act read with Rule 18 of the Debts Recovery Tribunal Procedure Rules empowers the Tribunal to make such orders and give such directions as may be necessary or expedient to give effect to its orders or to secure the ends of justice. S. 25 entitles the Recovery Officer to recover the amount of debts specified in the Recovery Certificate by different modes set out therein which includes attachment and sale of movable or immovable property of the defendant. S. 29 of RDDBFI Act has made certain provisions of Income Tax Act contained in its Second and Third schedules as also Income Tax (Certificate Proceedings) Rules applicable for recovery of debt due under the RDDBFI Act ‘as far as possible’ and ‘with necessary modifications’. S. 31 provides for transfer of all cases pending before any court immediately before the date of establishment of Tribunal the cause of action of which would have fallen within the jurisdiction of the Tribunal if it had arisen after such establishment.

(iv) The Tribunal is conscious that the powers conferred on the Tax Recovery Officer under Second Schedule to the Income Tax Act, 1961 and the procedures laid therein for recovery of public taxes had been made applicable as far as possible, with necessary modifications as may be required for recovering the dues under RDDBFI Act, 1993 since the monies recoverable under the RDDBFI Act is also public money payable to banks and public financial institutions who are custodians of public wealth. Therefore going by the Rules of purposive interpretation, only such liberal interpretation which would ensure recovery of public dues are to be appreciated to do justice to the avowed object and intendment of the RDDBFI Act, 1993 which has been legislated for ensuring expeditious recovery of public dues.

(v) S. 17 confers power on the Tribunal on and from the date of its establishment, the jurisdiction, powers and authority to entertain and decide applications for recovery of ‘debts’ due to Banks and Financial Institutions, which of course without any shadow of doubt encompass the power and authority to recover the secured debt by sale of mortgaged properties. It is no doubt true that the Tribunal constituted under RDDBFI Act can only issue Recovery Certificate and cannot pass a decree or grant declaratory relief as pointed out by the Ld. counsel for appellants by placing advertence to the judgment of Apex Court in Nahar Industrial Enterprises Ltd. v. Hong Kong and Shanghai Banking Corporation case. But that however does not preclude or impede the Tribunal constituted under the RDDBFI Act for the specific purpose of expediting recovery of dues exceeding Rs. 10 lakhs payable to Bank and Financial Institutions from recovering its secured debts by sale of the mortgaged properties. The aforesaid provisions of RDDBFI Act cumulatively vouch for the competence, power and authority of the Debts Recovery Tribunal to entertain application for recovery of a ‘secured debt’ arising from mortgage of immovable properties and to issue Recovery Certificate for ordering sale of such properties.

(vi) Pertinently, in so far as S. 2(g) of RDDBFI Act defining the term ‘debt’ means and includes a ‘secured debt’ payable under a mortgage and S. 24 of RDDBFI Act makes the provisions of Limitation Act, 1963 applicable as far as may be to an application made to a Tribunal under S. 19(1) of the Act, the period of three years contemplated under Rule 68B of the Second Schedule to Income Tax Act cannot in any respects be held to be applicable while bringing a mortgage property for sale which would be governed only by the period of limitation provided under S. 24 of the RDDBFI Act.

(vii) The Hon'ble High Court of Kerala in its judgments rendered in the cases titled Bhat v. Anugraha Charitable Trust and Kutaguptan v. Canara Bank extracted out supra, besides upholding the Tribunal's wide powers in terms of S. 17(1) to order sale of mortgaged properties authoritatively declared the law that there is no requirement on the part of the Recovery Officer to make an order of attachment to effectuate sale of mortgaged properties. The Hon'ble High Court of Kerala had in the Kutaguptan's case also held as to the inapplicability of Rule 68B of Second Schedule to the Income Tax Act to the proceedings under RDDBFI Act.

(viii) The Hon'ble High Court of Delhi in the case titled State Bank Of India v. Samneel Engineering Company & Ors. reported in had deliberated at length about the powers vested with the Debts Recovery Tribunal to recover a debt due and payable on mortgage. The relevant portion of the said judgment is reproduced herein below:

15.8 It is, therefore, clear that debt is an essential ingredient of a mortgage. There may be a debt without a mortgage but there can be no mortgage without a debt. Properties are offered as security only for securing recovery of debt. If debt is repaid the mortgage ceases to be a mortgage. Even if the term debt would not have been defined in Act No. 51 of 1993 the mortgage would have been included within the meaning of debt. This is the general law and settled trend of judicial opinion. However, Act 51 of 1993 incorporates the definition of debt in its interpretation clause by way of abundant caution and gives it out a very wide meaning. The quint essence of the definition is the existence of any liability founded on an allegation as due from any person; the creditor being a bank or a financial institute or a consortium of the two. The liability may be in cash or otherwise. It may be secured or unsecured. A decree or order of any civil court or otherwise may intervene or not; the only rider being that the liability must be legally recoverable. The definition would cover all the cases where the liability is secured by a mortgage, charge, hypothecation or in any other manner known to law. An effort at carving out a mortgage away and out of the definition of debt is futile.

15.9 Therefore a suit based on a mortgage is a suit for recovery of a debt without regard to the nature of the mortgage and the nature of the relief sought for by the plaintiff.

(16) It is widely known and even a judicially noticeable fact that banks and financial institutions usually secure a loan advanced by them or credit facilities extended by them by securing mortgage of property. The most commonly resorted to form of mortgage by the banks is an equitable mortgage by deposit of title deeds. The Statement of Objects and Reasons in the Act reveals the experience of the Parliament to considerable difficulties being faced by the banks and financial institutions in recovering loans and enforcement of securities. In spite of the banks and financial institutions trying to play as safe as possible the outstandings recoverable to them had mounted to more than Rs. 5622 crores in the field of public sector banks alone. This was virtually causing an economic crisis preventing economic development of the country by blocking the funds. The Act was enacted with the object of ameliorating banks and financial institutions from such crisis.

(18) Though I have held that the term ‘debt’ as defined by clause (g) of Section 2 of the Act includes mortgage of every type within its meaning; I have also held that even if the term debt would not have been defined in the Act, it would have included mortgage within it. Having regard to the historical background of enactment, the Statements of Objects and Reasons the preamble, spelling out the mischief which is sought to be cured and prevented by the Act, the object with which the Act has been enacted, the Act has to be so interpreted as “to give the laws its claws”. So has to be assigned the term debt its meaning. Having already noticed that most of the loans advanced by the banks are secured by mortgages, the Act would be reduced to a futility if mortgage was to be excluded from the definition of debt.

(19) ……………………. Be that as it may, so far as the question of jurisdictional competence of the Tribunal to try a claim for recovery of debt based on a mortgage is concerned, I am clearly of the opinion that a mortgage debt is included within the meaning of the debt as defined under section 2(g) of the Act. A claim for recovery of such a debt lies within the jurisdictional competence of the Tribunal. As a necessary corollary the same is excluded from the jurisdiction of civil court.

(ix) In view of the foregoing discussion and reasonings, the Tribunal returns its finding that there is no requirement for attachment of the mortgaged property and Rule 68B of the Second Schedule to the Income Tax Act as well would not apply to the proceedings before the Ld. Recovery Officer.

8. Point No. (iv) for consideration:

(i) The Ld. counsel for appellants vehemently argued that as the Authorised Officer had taken the physical possession of the appeal subject property on 06.12.2008 and proclaimed it for sale vide sale notice dated 30.04.2009 under the auspices of SARFAESI Act as evidenced by Annexure-A9 copy of SA No. 295/2009 and Annexure-A10 copy of SA 543/2009, it is not within the competence of the Recovery Officer to proceed with the sale of the property which is already in the custody of the Authorised Officer appointed by 2 respondent bank. Ld. counsel submitted that the 2 respondent bank is responsible and accountable to the appellants for the loss or sale of non-entitled movables of the appellants worth more than Rs. 1 Crore which had then been stored in the property and that being the state of affairs, the Recovery Officer had no authority to proclaim sale of appeal subject property along with the movables which is in the unauthorized custody of the Authorised Officer of the bank. Ld. counsel also submitted that Recovery Officer could not allow inspection of the property which is in the possession of Authorised Officer and cannot proceed with the sale under RDDBFI Act. He also contended that as SARFAESI Act overrides all other Acts, and the SARFAESIA measures in the present case were taken prior to institution of the OA, S. 13(10) alone ought to have been invoked and the Recovery Officer is definitely precluded from proceeding to sell the property seized of by the Authorised Officer of the 2 respondent bank.

(ii) The Tribunal sitting on an appeal under S. 30 of RDDBFI Act is required to delve at and give its findings only on the legality or otherwise of the ‘order’ of the Ld. Recovery Officer impugned in the appeal proceedings, which in the present case is Annexure-A12 sale proclamation notice dated 02.01.2012. The scope of enquiry in the present appeal cannot be stretched too far to consider and give any findings as regards the alleged illegal physical possession and custody of the secured assets assumed by the Authorised Officer of the 2 respondent bank under the SARFAESI Act. The Tribunal sitting on an appeal under RDDBFI Act cannot look into the allegations made against the exercise of the powers and rights by the Authorised Officer of the 2 respondent bank under the provisions of SARFAESI Act which would be an independent, distinct enquiry in the appellants' application or appeal under S. 17 of SARFAESI Act.

(iii) The appellants' contention as to whether the Ld. Recovery Officer has no authority to order inspection of the appeal subject property stated to be in the custody and physical possession of the 2 respondent bank and as to whether the Ld. Recovery Officer had proclaimed sale of appeal subject property along with the non-entitled movable assets alone requires to be considered by the Tribunal. The other contentions raised by the appellants stating to be legal contentions on the lines that the provisions of SARFAESI Act shall prevail over the RDDBFI Act, S. 13(10) of the SARFAESI Act alone ought to have been invoked by the 2 respondent bank after exhausting the remedies available under SARFAESI Act and the recovery proceedings ought not to have been proceeded with by the Recovery Officer in the backdrop of the Authorized Officer proclaiming the secured asset for sale on 30.04.2009 which is the subject matter of Anenxure-A9 copy of SA 295/2009, however received the incidental further consideration of this Tribunal.

(iv) Concededly, the 2 respondent bank had initially proceeded with their recovery measures under SARFAESI Act by issuance of S. 13(2) notice and S. 13(4) possession notice dated 06.12.2008, followed by sale notice dated 30.04.2009 notifying the property for sale on 12.06.2009 which did not culminate in sale as SA 295/2009 have come to be filed by the appellants on 09.06.2009 impugning the same. In the meantime, the respondent bank had filed OA 134/2009 on 08.04.2009 under S. 19(1) of RDDBFI Act for recovery of Rs. 5,96,12,048.02/- with subsequent interest and cost from the defendants jointly and severally and by sale of A to E Schedule properties, in which Annexure-A2 Recovery Certificate dated 30.06.2010 have come to be issued. The 2 respondent bank submits that it could not proceed with the sale of secured assets under SARFAESI Act due to the pendency of SA 295/2009 and another SA 543/2009 that came to be filed subsequently by one M/s. Rajesh Exports Ltd. claiming to be the alleged owner of subject secured assets which stood dismissed only on 14.03.2016.

(v) Pursuant to the law expounded by the Apex Court in Transcore v. Union of India case as regards the non-application of doctrine of election while seeking simultaneous remedies under RDDBFI Act and SARFAESI Act, the law is no more res integra that the secured creditor bank is entitled to proceed simultaneously under both the said Acts and/or any other similar enactments as long as the remedy sought for is complementary to each other and there is no repugnancy nor inconsistency between the remedies sought for by the Bank. The Tribunal is of the definite view that in so far as the measures initiated under SARFAESI Act stood forestalled due to the pendency of SA No. 295/2009 and SA 543/2009 on some pretext or the other, the appellants cannot be permitted to contend that the recovery proceedings pending before the Recovery Officer in DRC 3253 also should be restrained due to pendency of SARFAESIA proceedings.

(vi) Certainly, there is no legal embargo or impediment for the Ld. Recovery Officer to proceed with sale of the appeal subject property in terms of Annexure-A2 Recovery Certificate dated 30.06.2010 issued to him, notwithstanding the fact that the 2 respondent bank is now in legal possession of the secured asset under SARFAESI Act as the bank is entitled to invoke the said remedies simultaneously it being complementary, additional remedy recognized under law. It is within the competence of the Ld. Recovery Officer to permit for inspection of the appeal subject property and to proceed with the sale in the above stated circumstances. The appellants' allegation that the Ld. Recovery Officer has proceeded to sell the appeal subject property along with the movables stored/stocked therein only appears to be farce going by the fact Annexure-A12 sale notice is proclaimed only for putting forth the immovable property for sale.

(vii) Ld. counsel for the appellants submitted that as per S. 35 of SARFAESI Act, its provisions has overriding effect and recourse to RDDBFI Act could be resorted to only in terms of S. 13(10) after exhausting all remedies under SARFAESI Act. Going by S. 37 of SARFAESI Act it could be discerned without any room for doubt that the remedy contemplated therein is an additional remedy apart from the ones which the bank/FIs could pursue and avail of under any other enactments. Giving such an interpretation would only render S. 37 of SARFAESI Act otiose and nugatory. S. 35 of SARFAESI Act of course gives overriding effect to its provisions notwithstanding anything inconsistent therewith contained in any other law for the time being in force. The appellants however could not point out any inconsistency in provisions contained in RDDBFI Act with that of SARFAESI Act to canvass for a proposition that the SARFAESI Act would prevail over RDDBFI Act or would in any respects preclude the 2 respondent bank from invoking the provisions of RDDBFI Act unless the measures or actions initiated under SARFAESI Act is wholly or thoroughly exhausted.

(viii) The appellants' contention that Transcore case of the Apex Court is indicative about the need for withdrawal of OA under myriad circumstances received the further consideration of the Tribunal. In view of the preceding factual narrative and the attendant circumstances of the present case, the need for discussion on withdrawal of OA by the Bank does not arise at all, more so as the OA proceedings had culminated in issuance of Recovery Certificate which is now put to execution by the Ld. Recovery Officer in terms of the said certificate. However to lay the controversy to rest, it is found desirable to point out here that the judgment of Hon'ble Supreme Court rendered in the case titled Transcore v. Union of India reported in is not on the lines as submitted by the appellants. The relevant portion of the said judgment is extracted out below:

“40. For the above reasons, we hold that withdrawal of the O.A. pending before the DRT under the DRT Act is not a pre-condition for taking recourse to NPA Act. It is for the bank/FI to exercise its discretion as to cases in which it may apply for leave and in cases where they may not apply for leave to withdraw. We do not wish to spell out those circumstances because the said first proviso to Section 19(1) is an enabling provision, which provision may deal with myriad circumstances which we do not wish to spell out herein.”

(ix) It remains a fact that the 2 respondent bank has not realized its ‘secured debt’ by sale of the ‘secured assets’ till now. Obviously, the present case has not reached a stage warranting the appellants' advertence or reliance on S. 13(10) of the SARFAESI Act which would come into play only when the sale proceeds of the secured assets are inadequate for discharge of the dues of the secured creditor and a need arises consequently for filing of an application to the Debts Recovery Tribunal having jurisdiction over the matter for recovery of the balance amount from the borrower. In the present case, the SARFAESIA action had preceded the filing of an application under S. 19 of the RDDBFI Act by the respondent bank and therefore there arises no question of invoking the said proviso to S. 19 requiring the bank to withdraw an application which has evidently come to be filed only subsequently to save the limitation prescribed/made applicable under S. 24 of the RDDBFI Act. S. 24 of RDDBFI Act mandates the banks/FIs to make an application to the Tribunal under S. 19 in terms of the provisions contained in Limitation Act, 1963 as far as it may apply to it. The Ld. counsel for the appellants could not show any provision of law which would extend or enlarge the period of limitation for the bank to pursue its remedies under RDDBFI Act due to the reason of its prior initiation of action under SARFAESI Act.

(x) The recourses provided under SARFAESI Act being an independent, additional remedy and right conferred on the secured creditor bank, if we resort to giving a narrower interpretation to S. 13(10) as if it mandates filing of an application before DRT to recover the balance dues only after sale of the secured assets, the applications by banks under S. 19 of RDDBFI Act could be hopelessly time barred rendering the banks remediless under the said Act. Giving such an interpretation to S. 13(10) of the SARFAESI Act would only result in drastic, adverse legal consequences prejudicing the interest of the banks/FIs besides tending to operate in derogation of the provisions contained in RDDBFI Act resulting in deprivation of the rights of banks/financial institutions otherwise available to it under the said Act. The Division Bench of the Hon'ble High Court of Delhi in the case titled Mayur Coirs (P) Ltd. v. Development Credit Bank Ltd. reported in held as follows:

“6. The Tribunal further held that the remedy under the Securitisation Act was an additional remedy to the one provided by RDDFBI Act and that the doctrine of election had no application. The secured creditor could chose one or more of the remedies available to him under the law as the object underlying both the RDDFBI Act as well as the SARFAESI Act is to ensure quick recovery of debts due to the banks and financial institutions. The present writ petition assails the correctness of the above order as already noticed earlier.

9. Equally untenable is the second submission made by Mr. Choudhary that the pendency of proceedings under the Securitisation Act would debar the bank from instituting proceedings for recovery of the debt by obtaining a decree from the DRT under the RDDBFI Act. There is no gainsaying that both the enactments are intended to ensure speedy recovery of the outstanding debts due to banks and financial institutions. There is nothing in either the provisions of the Securitisation Act or in the RDDBFI Act to suggest that invocation of one would forbid the invocation of the provisions contained in the other. That position has been, in our opinion, sufficiently explained by the Supreme Court in Transcore's case (supra) where the issue was whether the bank could, without withdrawing the proceedings instituted before the DRT, take resort to the Securitisation Act. Answering the question in the negative, the Court held that withdrawal of the OA before the DRT was not a condition precedent for invoking the Securitisation Act. We see no reason why the converse also cannot be true. If securitisation proceedings are permissible during the pendency of the recovery proceedings under the RDDBFI Act, there is no reason why the recovery proceedings would become legally bad just because the bank had taken resort to Securitisation Act. What is important is that both the proceedings can be instituted and maintained simultaneously. If that be so, just because the proceedings under the Securitisation Act had been instituted earlier would not render the proceedings before the DRT bad. The Appellate Tribunal was, in our opinion, perfectly justified in holding that the scheme of the two enactments did not debar simultaneous resort to the provisions thereof. The fact that there is a period of limitation prescribed for filing of the suits before the DRT also makes it necessary for the banks and financial institutions to institute such suits within the period of limitation stipulated for the same. Any delay in doing so would jeopardize the maintainability of such suits which no banking institution can afford to risk especially where the amounts outstanding against the borrowers are huge. In that view, the application made by the petitioners was an effort to somehow delay the proceedings in the OA pending before the Tribunal.”

(Emphasis is mine)

(xi) The Hon'ble High Court of Kerala in the case titled Lakshmi Enterprises v. State of Kerala by citing reference to the Transcore case held that the secured creditor bank could notwithstanding the invocation of DRT Act or the Securitisation Act take recourse to the provisions of the Revenue Recovery Act as well and the relevant portion of the said judgment is culled out and given below:—

“12. The applicability of the doctrine of election to a simultaneous prosecution of remedies available to the creditor under more than one enactment has been considered by the Supreme Court in Transcore v. Union of India, 2007 S.C. 712. The argument on the question of doctrine of election was rejected by the Supreme Court in the following terms:

In any event, there is no repugnancy nor inconsistency between the two remedies, therefore, the doctrine of election has no application.

13. The question is whether the principle is different in a case where the provisions of the RR Act are also invoked, at a point of time when a creditor has already invoked the provisions of the two enactments mentioned therein.

14. As noted above, there is no express bar in the provisions of the RR Act referable to the prosecution of any proceedings under the DRT Act or the Securitisation Act. Does, any provision under the RR Act spell out a case of mutual exclusion of the remedy under the RR Act and the remedy available to the bank under the DRT Act and Securitisation Act? Are there any provisions in the three enactments which contemplate a collision between any one or more of the provisions at the stage of invocation of the same or at the stage of enforcement of the same? Whether any right available to a defaulter, vis-a-vis his personal assets or the mortgaged properties get detrimentally affected. If a creditor takes recourse to the provisions of the RR Act, notwithstanding the invocation of the provisions of the DRT Act or the Securitisation Act? Is a creditor obliged to abandon his remedy under the above-mentioned enactments seeking recourse to the provisions of the RR Act? In my view, if the answer to the above questions are in the affirmative, then, the contention of the Petitioners requires to be accepted. But, in my view, there is nothing in the three enactments aforementioned, which could spell out the case of mutual exclusion in the operation of the three enactments thereby necessitating the creditor to express his intention to abandon the remedy under any one of the enactments before proceeding under the other two enactments.

15. In the circumstances, the doctrine of election is not available to the Petitioners with a view to deter the 3rd Respondent from invoking the provisions of the RR Act merely for the reason that the 3rd Respondent has exercised his right as a mortgagee under the Securitisation Act and as a bank under the provisions of the DRT Act. I am unable to accept the contentions of the Petitioners in this regard.”

(xii) In the light of the above, the Tribunal returns its findings that there is no illegality in issuance of Annexure-A12 sale proclamation in negation of the provisions of SARFAESI Act as alleged by the appellants.

9. Point No. (v) for consideration:

(i) Mr. C.S. Ullas, Ld. counsel for appellants vociferously argued that the action of Ld. Recovery Officer in issuing Annexure-A12 sale proclamation notice is totally illegal and smacks of malafides for the reason of drawing such proclamation in the absence of the appellants by suo motu withdrawal of the DRC file from the Ld. Recovery Officer Vijaykumar Pillai and publishing a different proceedings in the A' Diary dated 02.01.2012 from that of the actual proceedings of the Recovery Officer as evidenced by Annexure-A5 copy of proceedings dated 02.01.2012 applied and obtained by the appellants. Ld. counsel submitted that the 2 respondent bank had indulged in bench hunting gimmicks by getting Annexure-A12 sale notice proclaimed by the Recovery Officer other than the concerned Recovery Officer namely Vijaykumar Pillai.

(ii) The Tribunal anxiously perused the DRC file, A' Diaries maintained by both the Recovery Officers at the relevant time as also the service file of Ld. Recovery Officer Vijaykumar Pillai called for and received from the recovery section and admin section to ascertain as to what had truly transpired in the present case in the wake of such allegations forthcoming from the side of the appellants. On a conspectus of the aforesaid records, it is discernible that after the demand notice stage, the recovery proceedings since 13.09.2011 onwards had been held only before the Ld. Recovery Officer P. Balasubramanian pursuant to a request which came forth from the Ld. counsel for certificate holder bank vide his memo dated 12.08.2011 wherein he had pleaded for posting the recovery proceedings before the available Recovery Officer for continuation and its logical conclusion on account of the serious prejudice caused to the certificate holder bank for want of sitting of the concerned Recovery Officer Mr. Vijaykumar Pillai and the resultant adjournment of the said case from time to time.

(iii) On perusal of the ‘A’ diaries maintained by the both the Recovery Officers at the relevant time as also the service file connected to Recovery Officer Mr. Vijay Kumar Pillai, it has come to light that the Ld. Recovery Officer Mr. Vijay Kumar Pillai had been on continuous ‘earned leave’ or ‘medical leave’ from 02.05.2011 to 01.07.2011 and from 21.07.2011 till his death on 30.05.2012. It is thus noticeable therefrom that except the issuance of demand notice and requiring the publication of the same in the proceedings dated 24.02.2011 lastly, Ld. Recovery Officer Vijaykumar Pillai had no occasion to sit over the proceedings pertaining to the DRC 3253 due to his continuous ‘earned leave’ as also ‘sick leave’ from 02.05.2011 to 01.07.2011 and from 21.07.2011 till his unfortunate death on 30.05.2012 on account of his prolonged illness. Therefore, the appellants' could not have rendered appearance in person or through their counsel any time before him going by the fact that their counsel had entered appearance in the above recovery proceedings only on 09.11.2011.

(iv) The appellants' allegation that the 2 respondent bank had indulged in bench hunting gimmicks is only found to be ill-conceived. Further to that, the fact remains that the Recovery Certificate issued by the Tribunal is proceeded to be executed by either of the Recovery Officers available at the relevant time going by the exigency of the case and the stage of recovery proceedings. It is pertinent to mention here that the Ld. Recovery Officers are not vested with any exclusive jurisdiction over the recovery certificate subject matter except the division of work effected among themselves mutually going by odd and even numbers of the Recovery Certificates for sake of practical convenience. In the above narrated circumstances of the prolonged illness and continuous absence of the Ld. Recovery Officer Vijaykumar Pillai, it is rather uncharitable on the part of the appellants to allege that the Ld. Recovery Officer indulged in suo motu withdrawal of DRC file concerning Vijaykumar Pillai and proceeded to proclaim the sale in the absence of the appellants.

(v) After the appellants' entering of appearance through their counsel Ms. Divya in the above DRC proceedings on 09.11.2011, the recovery proceedings stood reposted without any hearing to 18.11.2011 and then again to 25.11.2011. On 25.11.2011, when the appellants appeared through their counsel before the Ld. Recovery Officer P. Balasubramanian they had got to know about the contents of the demand notice that was published as also regards the publication of the NSSP and the adjournment of the above proceedings to 30.11.2011 for issuance of proclamation of sale notice. The appellants had appeared before the same Recovery Officer on 30.11.2011 and was thus aware of the subsequent date of hearing as also the fact that the sale proclamation notice is likely to be drawn and issued on the subsequent date or hearing. From 30.11.2011, the proceeding stood reposted to 02.01.2012 as could be discerned from the A' Diary proceedings of Ld. Recovery Officer Vijaykumar Pillai due to his absence on that day as well and on 02.01.2012 the recovery proceedings was conducted by the Ld. Recovery Officer P. Balasubramanian.

(vi) The proceeding sheet of the Ld. Recovery Officer P. Balasubramanian pertaining to the hearing dates 25.11.2011, 30.11.2011 and 02.01.2012 as also the order settling the terms of proclamation of sale that came to be issued separately on 02.01.2012 are extracted out and reproduced hereunder:

“25/11/11

Adv. Varghese for CHB. Adv. Divya Krishnan for CD1 & 2. NSSP published. The Counsel for CD submitted that they were not in receipt of demand notice. Demand notice published. The service complete. Contents of demand notice read out to the Counsel. She can apply for a certified copy of DN and NSSP. POS to be issued on 30/11/2011.

30/11/11

Adv. Sandeep for CHB. Adv. Divya Krishnan for CD1 & 2. The property located at Malayatoor where L.S. is not received. Notice to V.O. for submission of sketch immediately. Bank may follow up the matter. Call on 28/12/11.

2/1/2012

Adv. Varghese for CHB. None for CD. For receipt of L.S. Notice to be sent again. Except C Schedule P.O.S. to be issued for other properties. Settling sale proclamation to be drawn for auction to be held on 15/2/2012 at 2.30 p.m. Order settling terms of proclamation of sale is issued separately.

2/1/2012

V.O., Malayattur Village, Mr. Unnikrishnan appeared and presented a report regarding the C Schedule properties wherein he mentioned that the boundaries are not clear and he could not fix the boundaries of the property which is not tallying with title deeds. In this regard he preferred a request to Taluk surveyor and sought his assistance. Notice may be issued to Taluk surveyor to demarcate the boundaries.

Order settling the terms of proclamation of sale

Adv. Varghese for Certificate holder Bank. No representation for Certificate Debtors. Notice for settling the terms of a sale proclamation in respect of the schedule properties was served on the Certificate Debtors on 05.11.2011 by publication in the Mathrubhumi daily newspaper, as the NSSP sent by registered post was returned undelivered. By the said notice the Certificate Debtors were informed that 10.30 A.M. on 09.11.2011 has been fixed for drawing up the proclamation of sale and settling the terms thereof with regard to the schedule properties and they were further directed to bring to the notice of the undersigned any encumbrances, charges, claims or liabilities attaching to the said properties or any portion thereof and also the revenue, if any, assessed upon the properties or any part thereof. Even after the service of the said notice on the Certificate Debtors no statement whatsoever has been filed by the certificate debtors, nor anything material has been brought on record.

The certificate amount of debt as on 01.01.2012 is Rs. 7,96,03,009.21.

Following are the immovable properties available for sale:

‘B’ Schedule part: [36.70 Ares in Re-Sy. No. 111/1 in Block No. 24 of Malayattoor Village, Sreemoolanagaram Sub-District, Aluva Taluk, Ernakulam District]

‘B’ Schedule part: [40.47 Ares in Re-Sy. No. 33/1-3 in Block No. 24 of Malayattoor Village, Sreemoolanagaram Sub-District, Aluva Taluk, Ernakulam District]

‘C’ Schedule: [41.83 Ares in Re-Sy. No. 33/1 in Block No. 24 of Malayattoor Village, Sreemoolanagaram Sub-District, Aluva Taluk, Ernakulam District]

‘D’ Schedule: [20.25 Ares in Re-Sy. No. 33/1 in Block No. 24 of Malayattoor Village, Sreemoolanagaram Sub-District, Aluva Taluk, Ernakulam District]

‘E’ Sch., Item 1: [4.86 Ares in Sy. No. 865/7 of Ernakulam Village, Sub-District and District, Kanayannur Taluk]

‘E’ Sch., Item 2: [4.86 Ares in Sy. No. 865/7 & 8 of Ernakulam Village, Sub-District and District, Kanayannur Taluk]

The Village Officer, Malayattoor has reported that he could not properly demarcate some of the properties and sought for demarcation by the Taluk Surveyor. Hence it is decided to proceed with sale of the single lot of ‘E’ schedule properties, admeasuring 9.72 Ares (24 Cents), at Ernakulam, at the end of the private road leading from the eastern side of Rudra Vilasom School. The Recovery Inspector had inspected the properties on my instruction. As reported by him, there is a 3-storeyed office-cum-residential building, car shed and a toilet block in the property; that the property, though located in the heart of the City, can only be accessed by medium 4-wheel vehicles. The property has been valued by the expert at Rs. 5,91,61,000/-, i.e. at Rs. 4,80,00,000/- for the land and Rs. 1,11,61,000/- for the buildings. Guideline value fixed by the Government is Rs. 10,97,250/- per Are, i.e. approx. Rs. 4,44,000/- per Cent. The Recovery Inspector has suggested to fix a reserve price of Rs. 7,00,00,000/- for the entire ‘E’ schedule property. Hence I order sale of ‘E’ schedule properties as a single lot, fixing the reserve price at Rs. 7,00,00,000/-, fixing the date of sale as 15th February 2012. Proclaim, affix and publish accordingly.”

(vii) As rightly pointed out by the Ld. counsel for the appellants the proceedings dated 02.01.2012 as found in the A'Diary maintained by Ld. Recovery Officer P. Balasubramanian revealed the following:

“1. DRC 3253

Adv. Varghese Cheriyan for CHB. VR/EC filed. Property inspected. POS is ordered for auction of 24 cents (9.72 ares) in Sy. No. 865/7, 8 of Ernakulam Village, Sub-District and District, Kanayannur Taluk, along with 3-storeyed office-cum-residential bldg, car shed and a toilet block located at the end of the private road for an amount of Rs. 7/crores to be held on 15/2/2012 at 2.30 p.m. Proclaim, publish and affix accordingly.”

(viii) As pointed out by the Ld. counsel for appellants, Annexure-A5 certified copy of the proceedings of the Ld. Recovery Officer dated 02.01.2012 and the A'Diary proceedings extracted out supra are not appearing to be similar word by word. Be as it may, from A'Diary proceedings dated 02.01.2012 which is extracted out by the appellants themselves in the above appeal, they had come to know about the proclamation of sale ordered for auction of the appeal subject property for Rs. 7 crores to be held on 15.02.2012 at 2.30 p.m. and also regards the proclamation publication and affixture of it ordered by the Ld. Recovery Officer on that day. In Annexure-A5 proceedings dated 02.01.2012, the first part of it divulges the Recovery Officer's ordering of sale proclamation to be drawn for auction to be held on 15.02.2012 at 2.30 p.m. of the other properties except ‘C Schedule’ properties and in addition to that, it divulges about the order settling proclamation of sale issued separately. The order of settling of sale proclamation that came to be issued separately is extracted out and given supra beneath the proceedings of the Recovery Officer dated 02.01.2012 and therefrom it could be discerned as to the manner in which the sale proclamation notice came to be drawn. The appellants who had applied and obtained Annexure-A5 proceedings from the Recovery Officer could have applied and verified the order of settling of sale proclamation that is stated to be issued separately as well.

(ix) The Tribunal finds the A'Diary proceedings dated 02.01.2012 to be a condensed version of the proceedings of Recovery Officer dated 02.01.2012 and the order settling the sale proclamation issued separately and could find no variation or difference in the contents that came to be revealed in the A'Diary although it is not verbatim similar. As per Regulation No. 42 of the Debts Recovery Tribunal Regulations of Practice, 2005, the Recovery Officers shall maintain A'Diary in form No. 11 showing the proceedings mentioned in Regulation 41 and the date of next posting. Form No. 11 requires 4 particulars to be divulged namely the date, serial number, case number/DRC number, proceedings in brief and the date to which adjourned. The A'Diary proceeding dated 02.01.2012 appears to be the condensed contents of the proceedings dated 02.01.2012 and the order settling the sale proclamation and in as much it does not contain anything contrastly dissimilar and different from that of the proceedings dated 02.01.2012, the Tribunal could not appreciate the appellants' allegation that the action of the Ld. Recovery Officer in issuing Annexure-A12 sale proclamation in the absence of the appellants and publishing of A'Diary proceedings containing contents different from that of the Recovery Officer's proceedings dated 02.01.2012 in any respects smacks of malafides.

(x) Even if the Tribunal is to hold that A'Diary proceedings is incorrect and irregular, that by itself would not invalidate the order dated 02.01.2012 issued by Ld. Recovery Officer in settlement of the sale proclamation and the proceedings recorded by him in the proceeding sheets. In coming to such a conclusion, the Tribunal stands fortified by the judgment of the Hon'ble High Court of Kerala rendered in the case titled Vasudevan Nair & Anr. v. Muraleedharan reported in wherein it is held as follows:

“8……… There is no mention of any order in I.A. No. 2310 of 2009 in the A Diary. The counsel pointed out that in the Civil Register No. 22, namely, Diary Register (A), three columns are to be filled up. They are (1) date, (2) number of suit, appeal or petition, and (3) purport of proceedings. Going by the A Diary, on 10-9-2009, no order was passed on I.A. No. 2310 of 2009. According to the learned Counsel for the Petitioners, since the A Diary does not show the existence of the order of status quo, the order passed on the Interlocutory Application for injunction would not be of any avail.

9. ……… Even if the order is wrongly mentioned or not mentioned in the A Diary, the effect of the order of injunction would not be affected.

10. I am not inclined to accept the contention put forward by the Petitioners that the A Diary prevails over the order of the status quo passed by the court below in application for injunction. The operative and executable order is the order passed by the judge and not what is noted in the A Diary by the Clerk in the office. It is true that the A Diary should reflect the true state of affairs in respect of the proceedings in court. However, the absence of an entry in the A Diary does not lead to the conclusion that the order which was passed by the learned Munsiff vanishes.”

10. Point No. (vi) for consideration

(i) While considering whether the appellants are entitled for any relief as prayed for by them in this appeal, the Tribunal finds that the appeal is laid solely seeking to set aside Annexure-A12 proclamation of sale dated 02.01.2012 issued by the Recovery Officer notifying the property for sale on 15.02.2012. The said sale did not happen on 15.02.2012 for the reason of this Tribunal ordering deferment of it in its proceedings dated 10.02.2012 in the backdrop of the then pendency of interlocutory petitions seeking to set aside the final order dated 30.06.2010 and for staying of its operation. When this fact was assertively pointed out by the Ld. counsel for 2 respondent bank, Mr. C.S. Ullas appearing for appellants did urge this Tribunal to consider and appreciate the illegalities pointed out in the appeal leading to issuance of Annexure-A12 sale proclamation notice. The law remains trite that the defaulter though could file a petition within 30 days from the date of sale for seeking its cancellation on the ground of material irregularity in publishing or conduct of sale or due to non-service of demand notice in terms of Rule 61 of the Second Schedule to the Income Tax Act, he could sustain his plea only on his showing of the ‘substantial injury’ suffered by him on account of the alleged irregularity or illegality. By virtue of Rule 30 of RDDBFI Act, the appellants of course are entitled to challenge every order of the Ld. Recovery Officer which could include Annexure-A12 sale proclamation notice as well. In this case, Annexure-A12 sale notice did not see fruition for the reason of this Tribunal ordering deferment of it observing the then pendency of IA Nos. 329 & 331/2012 in OA 134/2009, which also had since been disallowed on merits.

(ii) The only question that still requires to be considered is whether Annexure-A12 sale notice is to be held as illegal for the reason of it not divulging about the Annexure-A10 sale deed dated 01.10.2009 purported to be executed by the appellants to M/s. Rajesh Exports Limited and whether such a contention coming forth from the appellants is permissible in law?

(iii) The appellants themselves had in the present appeal filed Annexure-A9 copy of SA 295/2009 which is a securitisation appeal filed by them on 08.06.2009 under S. 17(1) of SARFAESI Act impugning therein Annexure-A10 sale notice dated 30.04.2009 putting the appeal subject property for sale among two other properties. In the said SA, the appellants had conceded as to their availment of cash credit facility of Rs. 450 lakhs and another cash credit facility of Rs. 50 lakhs from 2 respondent bank by mortgaging the SA subject properties which is inclusive of the appeal subject properties. That apart the appellants had produced Annexure-A10 copy of SA 543/2009 alleged to be the SA filed by a stranger M/s. Rajesh Exports Limited claiming ownership over the appeal subject property by virtue of sale deed dated 01.10.2009 purportedly executed by the appellants. The appellants had in ground ‘H’ of their appeal contended that it was illegal on the part of Recovery Officer to have settled, proclaimed and published sale notice without reflecting the alleged encumbrance on the property found in Sl. Nos. 7 & 10 of Annexure-A8 encumbrance certificate which relates to sale agreement dated 13.09.2006 and sale deed dated 01.10.2009 for Rs. 1.05 Crores purportedly executed between the appellants and M/s. Rajesh Exports Limited.

(iv) Mr. C.S. Ullas, Ld. counsel for the appellants submitted further that the said contentions is being raised by them without prejudice to their challenge to the alleged transfer of title appearing in the encumbrance certificate, as it is a fraud perpetrated on the public by the respondents 1 & 2. Except raising such a contention, the appellants had not made it known to this Tribunal as to what challenge he had made to the alleged sale since 2009 onwards nor had come out with a definite, rather clear submission either by way of pleadings or in the course of their arguments as to whether the said transactions as reflected in Sl. Nos. 7 & 10 of the encumbrance certificate are genuine or not. If the said transactions were fraudulent ones, what is the legal action mooted by the appellants so far to get the said documents cancelled remains unknown and undisclosed. Had the appellants not executed Annexure-A10 sale deed dated 01.10.2009 in favour of M/s. Rajesh Exports Limited, it is beyond the comprehension of the Tribunal as to the need for appellants' insistence for disclosing the alleged encumbrance in Annexure-A12 sale proclamation dated 02.01.2012. It is understandable that the reasons otherwise for such insistence could possibly be one aimed at deterring and dissuading any purchasers from participating in the auction.

(v) The Tribunal which is inclined to think so, at the same time is of the view that the Ld. Recovery Officer issuing proclamation notice under Rule 53 of the Second Schedule to the Income Tax Act is required to make a fair disclosure of such things which he would consider it material for the purchaser to know in order to judge the nature and value of the property. While the defaulters (appellants in this case) are entitled to know the time and place of sale, the amount for recovery of which the sale is ordered and the reserve price at which the property is put for sale pursuant to they being served with the notice for settling of sale proclamation, Rule 53(d) of the Second Schedule to the Income Tax Act is only a beneficial provision intended for the purchasers to expect fair disclosure of such other thing which the Recovery Officer would consider it material for the purchaser to know for judging the nature and value of the property.

(vi) Rule 8(6)(f) of Security Interest (Enforcement) Rules is a pari materia provision akin to Rule 53(d) of Second Schedule to the Income Tax Act which requires the Authorised Officer of the bank to disclose such other thing which he considers material for a purchaser to know in order to judge the nature and value of the property and that apart, Rule 8(6)(a) of the Security Interest (Enforcement) Rules enjoins a duty on the Authorised Officer to include in the sale notice the details of the encumbrances known to the secured creditor. Taking a close look at Rule 53 of Second Schedule to the Income Tax Act, it could be found that the requirement for disclosure of encumbrance is conspicuously absent therein, although fairness would require disclosure of such encumbrances in the know of things of the Recovery Officer to avoid any claim or challenge by the purchaser in respect of such encumbrances.

(vii) In the present case, the Tribunal finds that Annexure-A12 sale proclamation notice has come to be issued stating that the properties will be sold on ‘AS IS WHERE IS’ condition along with liabilities if any. It is further found mentioned therein that there is no information about any liability or charge against the properties. The said sale proclamation notice has not culminated in sale prejudicing the interest of anybody more particularly the purchasers on the said property. The Tribunal therefore holds that it is not open for the appellants to contend that the non-disclosure of the alleged sale deed dated 01.10.2009 in Annexure-A12 is a fraud perpetrated on the public, more so when they are unable to demonstrate the prejudice suffered by them on that score. The Tribunal is reminded of the judgment of the Hon'ble High Court of Kerala rendered in the case titled Varghese Ukken v. State Bank Of India, reported in wherein the Hon'ble Court had negatived such a plea forthcoming from the borrower in respect of a sale notice issued under Rule 8(6) of the Security Interest (Enforcement) Rules in the following lines:—

“20. ………………… 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)

(viii) The appellants concededly being the mortgagors of the appeal subject property was themselves not possessed of any legal right to transfer the same after the bank had initiated SARFAESI proceedings and had filed OA No. 134/2009. The said sale is hit by S. 13(13) of SARFAESI Act as also by S. 52 of Transfer of Property Act, it being a lis pendens sale. In so far as the appellants are relying on the said sale deed dated 01.10.2009 to press for their contention that the said encumbrance ought to have been mentioned in Annexure-A12 sale proclamation, it only implies their admission of existence of such an encumbrance and further speaks for the illegality committed by the appellants in encumbering a mortgaged property without the junction of the 2 respondent bank. The Tribunal is incidentally reminded of the judgment of the Hon'ble High Court of Kerala rendered in the case titled Kerala State Financial Enterprises Ltd. v. Meenachil Co-operative Agricultural and Rural Development Bank Ltd. reported in AIR 2005 KER 76 : 2004 (3) KLT 369 which reads as follows:—

“16. It is beyond dispute that mortgages by deposit of title deeds is a valid procedure, accepted under the Transfer of Property Act, for creating an encumbrance. Under Section 58(a) of the Act, a mortgage is a transfer of interest in specific immovable property. This may be for the purpose of securing the payment of money advanced or to be advanced by way of a loan. It includes an existing or future debt over the performance of an engagement which may give right to pecuniary liability. It is undisputable that in respect of a Kuri transaction the petitioner had entered into such an arrangement. The law recognizes a mortgage by deposit of title deeds. When a person delivers to the creditor or the agent, document or title to immovable property with intend to create a security thereon, the transaction is a mortgage by deposit of title deeds (Section 58(f) of the Transfer of Property Act). The petitioner claims that a mortgage deed as envisaged under Section 2(17) of the Indian Stamps Act is in existence. A mortgager therefore is disabled from further encumbering the properties in any case without the junction of mortgagee. It can well be presumed that a liability is automatically attached to the property and it is a burden imposed upon the land and the interest in the land, by the owner of the land.

(emphasis is mine)

17. Advertence may also be made to the dictionary meaning of the term ‘mortgage’, see Black's Law Dictionary, 7th Edition, by Bryan A. Garner. It is described as a conveyance of title to property that is given as security for the payment of a debt or the performance of a duty and that will become void upon payment of performance according to the stipulated terms. It is also “a lien against property that is granted to secure an obligation (such as a debt) and that is extinguished upon payment or performance according to stipulated terms. Thus, the mortgage presupposes a (notional) conveyance of title as such, though on limited terms and the mortgager may continue the occupation of the property.

18. While dealing with creation of encumbrances, which did not amount to sale, as pointed out by Leonard A. Jones in “A treatise on the Law or Mortgages”, the chief distinction between a mortgage and a pledge is that by a mortgage the general title is transferred to the mortgagee, subject to be re-vested by performance of the condition; while by a pledge the pledgor retains the general title in himself, and parts with the possession for a special purpose. It can therefore be stated that by a mortgage, the title is presumed as transferred; by a pledge, the possession alone is parted with. Therefore, if this Court does not step in, that may result in an illegality being perpetuated.”

(ix) Mr. Easwaran S, Ld. counsel for 2 respondent bank would submit that as the appellants are pressing for considering Annexure-A10 sale deed dated 01.10.2009 alleged to be executed by them in favour of M/s. Rajesh Exports Limited to hold Annexure-A12 sale proclamation notice to be illegal for the reason of non-mentioning of such encumbrance, obviously they make out a case of possessing no saleable interest in the appeal subject property. Ld. counsel for the bank doubted the locus and competency of the appellants to sustain this appeal and added that if M/s. Rajesh Exports Limited had purchased the property under the alleged sale it would still be subject to the mortgage concededly created in favour of 2 respondent bank and the recovery measures proceeded with by the Ld. Recovery Officer cannot be found fault with on that score as well. As observed by this Tribunal in the foregoing discussion, the appellants had not come out with a definite case as regards Annexure-A10 sale deed dated 01.10.2009 except trying to pick holes on the strength of it by canvassing for a proposition that the alleged sale should have been disclosed in the said sale proclamation. If the appellants would say that they are not possessed of title, whether they could sustain the appeal itself in the light of they losing the right of redemption as well is another significant question that would require further consideration. The appellants having pointed out as regards the alleged title of M/s. Rajesh Exports Limited reflected in the encumbrance certificate, it is for the said company to challenge the same by invoking Rule 11 of the Second Schedule to the Income Tax Act or for the prospective purchasers if any on a future date pursuant to the proclamation of sale to be issued afresh to assail the same on the point of ‘saleable interest’ under Rule 62 of the said schedule as and when a cause of action for such challenge arises. The Tribunal leaves it to the wisdom of the appellants to decide for themselves as to what is their true case and stand as regards Annexure-A10 sale deed dated 01.10.2009 purportedly executed by them in favour of M/s. Rajesh Exports Limited as any further discussion on that issue in this appeal is not warranted.

(x) The Hon'ble High Court of Kerala in the case titled Kuruvila v. Michael reported in held as follows:

“1. The question involved in this Revision is whether the Judgment debtor is entitled to contend that he has no absolute title over the property sought to be sold by the court in execution of the money decree passed against him, and therefore, the property is not liable to be sold in execution of the decree.

9. Going by the scheme of provisions in the Code of Civil Procedure as mentioned above, there is no scope for adjudication of the title of the judgment debtor before sale. If the court is satisfied that the judgment debtor has some right or interest in the property, proprietary right or possessory right, nothing prevents the court from conducting the court auction sale of that property. The aggrieved party, whether it is the auction purchaser or a stranger, has got remedies under the Code of Civil Procedure for protecting his rights. If the auction purchaser shows that the judgment debtor had no title, appropriate orders can be passed by the court setting aside the sale under Rule 91 of Order XXI. It is also well settled that there is no guarantee for title in respect of a court sale.

10. In Bhagwandas Dwarkadas v. Heejulbai [A.I.R. (35) 1948 Sind 24] it was held that where the court has before it an application to execute a decree by attachment of property, the court is concerned with the property in the hands of the judgment debtors. The court is concerned with judgment debtors; it is not concerned with third parties; and if it should appear thereafter that the property attached was in the possession of a third party, then it is for the third party to raise his claim and ask for an adjudication. It was also held that it is not for the court to adjudicate upon the claim of a third party on the objection of the judgment debtor. In Jai Prakash Talkies v. Lakshmi Talkies [1964 (2) A.W.R. 298] it was held that Order 21 rule 58 contemplates that the claim should be made by a person putting forward a right or title to the property attached. An objection by the judgment debtor that he is not the owner of the property in question, does not bring it within the terms of rule 58 of Order 21. It was also held that it is not open to the judgment debtor to resist the attachment contending that the owner thereof is someone else and not the judgment debtor.

13……………The judgment debtor, as of right, cannot contend that he has only limited rights and the absolute right vests in a third party and therefore, no sale could be held. If the judgment debtor has saleable interest in the property, no matter whether it is negligible when compared to the absolute title that does not prevent the court from proceeding with the sale of the rights of the judgment debtor to the extent to which such rights could be sold.”

(xi) The Tribunal reiterates its finding that Annexure-A12 had been rendered ineffectual and infructuous in the present case as early on 15.02.2012 itself as it had not culminated in sale on the notified day. Further to that, the Tribunal had arrived at a finding in the foregoing paras and points under consideration as to Annexure-A12 notice been lawfully issued pursuant to service of demand notices under Rule 2 and notice of settling of sale proclamation under Rule 53 of Second Schedule to the Income Tax Act. The other contentions raised by the appellants as regards the need for attachment of a mortgaged property, the illegalities alleged to have been committed by Recovery Officer on account of improper valuation, proceeding with sale of a property possessed by Authorised Officer, etc. had been found to be farce and devoid of any merit or substance. In coming to such an inescapable conclusion, the Tribunal is fortified by the recent judgment dated 20.06.2016 rendered by the Hon'ble High Court of Kerala in N.P. John v. The Recovery Office in W.P.(C) No. 3700 of 2008(M) which apparently is a case akin to the present case. The relevant portion of the said judgment is reproduced hereunder:

“9. It is not in dispute that under Chapter V of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 the Recovery Officer is appointed for executing the award passed by the Tribunal. As per Section 29, the Second Schedule to the Income Tax Act mutatis mutandis is made applicable to the procedure to be adopted by the Recovery Officer. Second Schedule, Part III deals with attachment and sale of immovable property. In the case on hand, the question of attachment does not arise as the sale is with reference to the property which has been mortgaged in favour of the Bank by sale of the property.

10. The only question now to be considered is whether there was sufficient notice to the petitioner before effecting sale of the property. The records made available indicates that notice was sent by registered post to the petitioner's address. However, it is returned with the endorsement “addressee left station”. Therefore, it is evident that the Recovery Officer had taken steps for issuing notice to the petitioner. Records also indicate that a notice dated 27.06.2005 has been published by the Recovery Officer under S. 25 to 29 of the Act to the petitioner in the newspaper. The publication was made in the Madhyamam daily dated 02.07.2005. Issuance of notice is contemplated under Rule 2 of Second Schedule…….

When no objection is raised to the said notice, then the second notice is issued only for drawing of the proclamation as provided under Rule 53. Notice dated 04.10.2005 has been issued for settlement of proclamation and the same was sent by registered post to the petitioner. The same was returned with the endorsement “addressee residing at foreign country”. Hence, another notice was prepared on 16.03.2006 and published in Madhyamam Daily dated 18.04.2006 proposing to settle the proclamation on 04.05.2006. Thereafter reports were called for from the Village Officer and the proclamation of sale was issued on 03.09.2007 proposing to effect sale on 23.10.2007. The proposal for sale was also published in Mathrubhumi daily dated 23.09.2007 and it is in pursuance of the same that the sale was conducted. Sale was confirmed on 27.11.2007.

11. The above records clearly indicate that all necessary steps have been taken by the Recovery Officer while effecting sale. Notice issued in the address of the petitioner was returned with the endorsement that he is abroad and he is not in the said address. Therefore, publication was effected in local dailies. The sale of property was also published in the newspaper. When all such steps have been taken, petitioner cannot contend that the sale was without notice to the petitioner. It is evident that there is substantial compliance of the statutory provisions. Therefore, it has to be presumed that the petitioner was aware of the proceedings and the sale proclamation was drawn after notice to the petitioner by way of publication.

12. ………….When there is evidence to show that notices had been published in accordance with the statutory provisions, I do not think that any prejudice had been caused to the petitioner, and there is no material irregularity in the conduct of sale.”

(emphasis is mine)

11. The Tribunal wherefore holds that the appellants are not entitled to any relief in this appeal going by the indubitable fact that their challenge made to Annexure-A12 sale proclamation notice had been rendered ‘infructuous’ long back. The SA No. 295/2009 filed by the appellants impugning the SARFAESIA measures is also pending since last 7 years. As none of the contentions raised in the appeal sustains, it only deserves to be dismissed. This Tribunal is incidentally reminded of an observation that has come to be recorded by the Hon'ble Supreme Court in the case titled KSL and Industries Ltd v. Arihant Threads Ltd reported in CDJ 2008 SC 1468 which are as follows:—

“109. Apart from the above, even on merits, the conduct of the respondent No. 1- company leaves much to be desired. Without challenging the final order passed by the DRT, Chandigarh, allowing the Bank's claim of Rs. 25,26,60,836/- together with interest @ 7.8% per annum, the said respondent questioned the order of the Recovery Officer, fixing the reserve price of the Company's assets for the purposes of the auction sale, under Section 30 of the RDDB Act, having full knowledge of the fact that the final order of the DRT, Chandigarh, could not be challenged in such appeal. The steps taken by the respondent No. 1, Company were far from bona fide and were only aimed at stalling the auction sale. Even at the time of auction of the company's assets, no attempt was made by the Respondent No. 1-Company to secure a bid higher than that of the appellant.”

12. CONCLUSION:

In the result, the Tribunal holds the appeal to be unsustainable and is accordingly dismissed. Consequently, IA No. 333/2012 is also dismissed. IA 1901/2015 filed by 2 respondent bank stands closed. There is no order as to costs.

(N. SOMASUNDAAR) PRESIDING OFFICER