CENTRAL BANK OF INDIA v. HOWRAH LIGHT STEEL CASTING

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2. As per pleadings of the parties the Central Bank of India sanctioned house building loan of Rs.6.00 lakhs to respondent no.2, Sri Partha Mondal, against mortgage of immovable property situated at 56/3/3, Jay Narayan Babu Ananda Dutta Lane, PS. Bantra, Howrah - 711101 (hereinafter referred to as "secured asset"). As per terms and conditions of the loan sanctioned on 09.03.2009, Deed No. 8130 of 2006 of the secured asset was deposited by the respondent no.2 with the appellant bank for his all indebtedness and liabilities of the loan. Subsequently, vide letter of sanction dated 09.03.2009 respondent no.1 M/s Howrah Light Steel Casting, a partnership firm, represented by one of its partner Sri Partha Mondal availed the cash credit loan of Rs.8.00 lakh from the appellant bank. Loan amount was not regularly paid. It was declared as NPA by the secured creditor. Ultimately, demand notice u/s 13(2) of the SARFAESI Act, 2002 (hereinafter referred to as "Act of 2002") was issued by the appellant bank on 19.01.2012. No objection was submitted either by the borrower or guarantor. Notice u/s 13(4) of the Act of 2002 was issued on 12.07.2012 which was published in the newspapers and possession of the mortgaged property was also taken by the bank. Valuation report of the secured asset was obtained from the empanelled valuer. Sale notice was published on 30.03.2014 for auction sale in the newspapers, "The Times of India" and "The Aajkal". Copy of the newspaper was also served upon the borrower. Auction sale was confirmed in favour of Smt.

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Bhagabati Ojha for an amount of Rs.25.35 lakhs and sale certificate was issued on 30.05.2014.

3. Neither the borrower nor the guarantor have challenged the possession notice as well as auction sale notice dated 30.03.2014 within the limitation period. Accordingly loan account was closed.

4. Appellant bank applied before the District Magistrate for taking physical possession of the secured asset u/s 14 of the Act of 2002. District Magistrate passed an order on 23.07.2015 for taking physical possession of the secured asset and appellant is under process of taking over physical possession.

5. Writ Petition WP No.18626(W) of 2015 was filed by the respondent challenging the order of the District Magistrate dated 23.07.2015 before the Hon'ble High Court at Calcutta which was dismissed on 06.08.2015 with liberty to approach the DRT. Consequent thereto respondent no. 1 and 2 filed the S.A. No. 158 of 2015 before learned DRT. Interim order was passed by the learned DRT to the effect not to take physical possession till next date with further direction to impleade the auction purchaser. Learned DRT set aside the order passed by District Magistrate, Howrah dated 23.07.2018 and allowed the S.A. However, no order was passed regarding repayment of sale amount deposited by the auction purchaser.

6. Feeling aggrieved, appellant bank preferred this appeal No. 263 of 2018 while the auction purchaser preferred the appeal No.

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32 of 2016 challenging the impugned order passed by learned

DRT.

7. Heard learned counsel for the parties and perused records.

8. Learned DRT had set aside the order of the District Magistrate dated 26.07.2015 by allowing the S.A., but declined to pass any order regarding refund of sale amount of Rs.25.35 lakhs in favour of the auction purchaser being not the appropriate forum for adjudication on the issue.

9. Learned DRT recorded a finding that as far as notices u/s 13(2) and 13(4) are concerned they were not challenged by the borrower or guarantor during the period of limitation. Hence, statutory remedy u/s 17 of the Act of 2002 has left. It would be pertinent to mention that neither borrower nor guarantor has challenged the finding of the learned DRT.

10. Other limb of the order relates to illegality of the order dated 23.07.2015 passed by the District Magistrate Howrah wherein learned DRT opined that the order is not in compliance of the provision of Section 14 of the Act of 2002. Learned DRT has placed reliance upon the judgement of Hon'ble Calcutta High Court in the case of WP No. 379(W) of 2013 (M/s. Swastyayan Agro Industries & Anr. Vs. Union of India & Ors.) Dated 24.07.2014; WP No. 2545(W) of 2014 (Prataima Roy & Anr. Vs. Union of India & Ors.) dated 24.02.2014. Accordingly, learned DRT set aside the order passed by the District Magistrate.

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11. Learned counsel for the appellant auction purchaser submits that impugned order is bad in law. Learned DRT has placed reliance upon two judgements of the Hon'ble Calcutta High Court. It is submitted that Hon'ble High Court in WP 18626(W) of 2015 (M/s Howrah Light Steel Casting & Ors. Vs. Central Bank of India) held that the decision of the Hon'ble Calcutta High Court in the case of Pratima Roy (supra) is distinguishable. Further Hon'ble High Court has held that decision of the Hon'ble Calcutta High Court in M/s. Swastyayan Agro Industries (supra) is also distinguishable and not applicable in the present case.

12. Writ Petition M/s Howrah Light Steel Casting (supra) was filed challenging the order of the District Magistrate dated 23.07.2015 passed u/s 14 of the Act of 2002. This writ petition was disposed of with the liberty to the appellant to approach the DRT u/s 17 of the Act of 2002. On the application of the auction purchaser learned DRT passed an order on 05.06.2018 directing the bank to refund the total amount of Rs.25.35 lakhs deposited by the auction purchaser along with interest within 30 days. Feeling aggrieved with the order appeal number 168 of 2018 was filed by the bank and it was decided on 03.09.2018 wherein it was directed that the DRT to decide the matter expeditiously and the order dated 05.06.2018 was set aside. Subsequent thereto learned DRT passed the impugned order setting aside the order of the District Magistrate passed on 23.07.2015.

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13. At the very outset it appears that learned DRT was persuaded by the two judgements of Hon'ble Calcutta High Court, one, M/s. Swastyayan Agro Industries (supra) and another Pratima Roy (supra) for setting aside the order of the Disrtrict Magisrate Howrah dated 23.07.2015. It would be relevant to mention that Hon'ble High Court in its decision in M/s Howrah Light Steel Casting (supra) specifically held that "There is no direction that the possession of the secured asset shall be taken by the secured creditor, instead the direction appears to be on the Commissioner to take possession with police assistance. Therefore, the decision in Pratima Roy (supra) is distinguishable."

14. Further it was held that "Insofar as M/s. Swastyayan Agro Industries (supra) is concerned, the learned judge had interfered on the ground that the additional district magistrate without having the necessary authorisation to make an order u/s 14 of the Act of 2002 had authorised a resolution agent of the secured creditor to take over possession of the secured asset with the assistance of the police and an officer of the Land and Land Reforms Department. That is definitely not the case here."

15. Both the decisions were distinguished by the Hon'ble High Court, but learned DRT had placed reliance upon those judgements which is against the principle of judicial discipline. Judicial discipline requires that finding and order of the Hon'ble High Court has to be followed in letter and spirit by all authorities including judicial authorities subordinate to the High Court.

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When specifically both the case laws, as referred to above, were distinguished by the Hon'ble High Court in the judgement cited above and they were not relied upon, then learned DRT was in error to place reliance upon those judgements in the order. Accordingly, as far as this aspect is concerned order of the learned DRT requires consideration of this Tribunal. This Tribunal is of the confirmed view that learned DRT has wrongly placed reliance upon the judgements of M/s. Swastyayan Agro Industries (supra) and Pratima Roy (supra).

16. Now the question arises as to whether the finding regarding quashing of the order of the learned District Magistrate can be upheld or not?

17. Proviso to Section 14 sub-section (1) provides that :

"Where the possession of any secured assets is required to be taken by the secured creditor or if any of the secured assets is r quired to be sold or transferred by the secured creditor under the provisions of this Act, the secured creditor may, for the purpose of taking possession or control of any such secured assets, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or as the case may be, the District Magistrate shall, on such request being made to him- (a) take possession of such asset and documents relating thereto; and

(b) forward such asset and documents to the secured creditor.

(2) For the purpose of securing compliance with the provisions of sub- section (1), the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion, be necessary."

If we go to the order passed by the learned district magistrate dated 23.07.2015 we find that aggregate amount of financial assistance granted and total claim amount of the bank as on date

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of filing the application is no where mentioned in the order. There is also no "satisfaction" recorded by the learned district magistrate that the claim of the bank is within the limitation period as is required to be recorded under Clause 2 of the proviso. Clause 5 provides that there should be a declaration that consequent upon such default in repayment of the financial assistance the account of the borrower has been classified as a NPA. It is also not mentioned in the order by the learned district magistrate. Provisions of the Act of 2002 and Rules made thereunder were complied with or not also did not find place in the order. Further Rule 1A provides that District Magistrate may authorize any officer subordinate to him to take over possession of the asset. Impugned order shows that it was addressed to the Commissioner of Police, Howrah wherein it was stated that "In view of the above, the undersigned being the authority u/s 14 of the Act of 2022 authorizes to take over possession of the secured property mentioned above making necessary inventory. You are requested to render Police assistance as and when required for the purpose." No specific authorization was given to any officer subordinate to the district magistrate, Howrah for taking possession of the secured asset, rather the "Subject" of the letter shows that "Police assistance to the secured creditor for taking over possession of secured property u/s 14 of the Act of 2002".

It means that district magistrate wrote the letter to the Police

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Commissioner Howrah to provide police assistance, but no officer subordinate to him was authorized subordinate to him to take possession. It is in violation of Section 14 sub-section (1A) of the Act of 2002. Accordingly, the order passed by learned district magistrate, Howrah is in contravention of specific provision of Section 14 which could not be sustained in the eye of law. Accordingly, learned DRT has set aside the order of the district magistrate, but on different ground. But as far as finding of quashing of the order of the district magistrate is concerned I do hereby confirm the finding, but on a different grounds mentioned in the body of the judgement.

18. Secondly, I am considering the submission made by learned counsel for the auction purchaser that learned DRT has failed to exercise its jurisdiction for passing order for refund of the sale price amount deposited by the auction purchaser. Impugned order shows that learned DRT has not passed any order for refund of the amount being not appropriate forum for adjudication. I am not impressed with the finding recorded by learned DRT declining to pass any order for refund of the sale price deposited by the auction purchaser. No doubt SARFAESI proceeding was initiated by the bank wherein secured asset was put on sale by way of public auction wherein auction purchaser was the highest bidder and he deposited the amount to the bank. When the bank could not deliver possession of the secured asset to the auction purchaser then auction purchaser has every right

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to make a request for refund of the amount so deposited along with interest from the bank. Learned DRT is the appropriate authority under Act of 2002 to pass an appropriate order for refund. Decline to pass an order amounts to refusal to the relief of refund of the amount. When possession was not delivered to the auction purchaser, he is entitled to refund of the amount deposited by him along with interest.

19. It was held by the Hon'ble Apex Court in the case of ITC Limited Vs. Blue Coast Hotels Ltd. & Ors. [(2018) 15 SCC 99] in Para 50 the judgement as under :

"50. In this case, the creditor did not have actual possession of the secured asset but only a constructive or symbolic possession. The transfer of the secured asset by the creditor therefore cannot be construed to be a complete transfer as contemplated by Section 8 of the Transfer of Property Act. The creditor nevertheless had a right to take actual possession of the secured assets and must therefore be held to be a secured creditor even after the limited transfer to the auction purchaser under the agreement 50. Thus, the entire interest in the property not having been passed on to the creditor in the first place, the creditor in turn could not pass on the entire interest to the auction purchaser and thus remained a secured creditor in the Act."

Cited case law is squarely applies in the present case wherein refund of the amount deposited by the auction purchaser along with interest has not been passed in favour of the auction purchaser. Accordingly, auction purchaser is entitled for the refund of the amount deposited by him.  

20. On the basis of the discussion made above I am of the view that quashing of the order of the District Magistrate passed by learned DRT has to be confirmed although on different ground as

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set out in the body of the judgement. Accordingly appeal filed by the appellant bank is liable to be dismissed.

21. However, the auction purchaser would be entitled for refund of the amount deposited by him along with interest at the rate of fixed deposit interest prevalent in the bank. Accordingly, appeal filed by the appellant auction purchaser is liable to be allowed.

O R D E R

22. Appeal No. 263 of 2018 [Central Bank of India Vs. Howrah Light Steel Casting & Ors.] is dismissed.

23. Appeal No. 32 of 2020 [Smt. Bhagabati Ojha Vs. Central Bank of India] is allowed. Appellant auction purchaser is entitled for refund of the amount deposited along with interest at the rate of fixed deposit interest prevalent on the date of this judgement for the period from the date of actual deposit made by the appellant auction purchaser till the date of refund. Payment should be made within a period of two weeks from today. Cost easy.

24. Let a copy of this judgement be kept in file of Appeal No. 32 of 2020.

Both the file be consigned to record room.

Copy of the order be supplied to the appellant and the respondents and a copy be also forwarded to the concerned DRT. Copy of the judgement/Final Order be uploaded in the Tribunal's website.

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Order dictated, signed and pronounced by me on this the 2^nd day of February, 2023.

(Anil Kumar Srivastava, J)

Chairperson

Dated : 02.02.2023

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