Bank Proceeded with Auction of property under SARFAESI Act, 2002 and Failure to Follow Court's Direction is misusing Process : DRAT Dismisses Appeal

In a recent case, the Kolkata bench of the Debts Recovery Appellate Tribunal (DRAT) dismissed the appeal by holding that the bank proceeded with the auction of property under the SARFAESI Act, 2002, and failure to follow Court's direction is misusing the Process.

K. Suchetha Rani and K.Ashok Kumar, the appellants challenged the order and judgement passed by DRT-II, Hyderabad in SA.1261/2017 whereby the DRT dismissed the SA filed by the Appellants.

Securitization Application under Section 17(1) of the SARFAESI Act, 2002 was filed by the Appellants challenging the sale certificate dated 17.05.2017 with a consequential relief for direction to the Respondent bank to disclose statement of account pertaining to the loan account of Appellants. Limitation was sought from 22.08.2016, when the sale of the schedule property was conducted.

Admittedly, the Appellants are the borrowers of the Respondent bank who availed credit facilities but failed to maintain the accounts in accordance with the Rules. Accordingly the loan account was classified as NPA and notice under section 13(2) was issued on 22.06.2015. Thereafter notice under Section 13(4) was issued on 22.06.2016, sale notice was published on 17.07.2016 and the sale was conducted on 22.08.2016. 25% of the bid amount was deposited on the same day of the auction.

But 75% of the bid amount was deposited on 16.05.2017. The Appellants herein filed SA on the ground that the Appellants are trying to settle the account with the bank but they have not been heard by the bank. They are misusing their powers and property is being alienated against law.

A Writ Petition No.26737/2016 was filed by the Appellants challenging the Sale Notice dated 14.07.2016 wherein an interim order was passed by High Court of Judicature at Hyderabad on 09.08.2016 permitting the Appellants to deposit a sum of Rs.15 lakhs on or before the sale i.e., 22.08.2016. It was further directed that if the payment is made, Respondent No.2 i.e., Bank shall not confirm the sale pending further orders. But if the petitioners fail to pay the said amount, the bank can proceed ahead including confirmation of sale.

It is submitted by the Respondent Bank that the conditions imposed by the High Court were not complied and accordingly, auction was conducted on 22.08.2016. The auction purchaser deposited 25% of the bid amount on the same day. Thereafter, several opportunities were granted to the Appellants for depositing the amount. Consequently, when they failed to deposit the same, the auction sale was confirmed on 28.03.2017 and sale certificate was issued in favour of the auction purchaser on 17.05.2017.

DRT-II, Hyderabad arrived at a conclusion that Appellants are not challenging the possession notice or the sale notice or the auction sale, rather, they are challenging the sale certificate which is not within the period of limitation. However, sale certificate was issued and registered after confirmation of sale and bid amount was deposited within the stipulated period under Rule 9(3) of Security Interest (Enforcement) Rules, 2002. Accordingly, Ld DRT-II, Hyderabad dismissed the SA.

The Appellants are borrowers of the Respondent bank who availed credit facilities and could not comply the terms and conditions regarding repayments and accordingly, loan account was classified as NPA. Notices under Section 13(2) and 13(4) of the Act were issued on 22.06.2015 and 26.07.2016 respectively. The E-auction sale notice was published on 17.07.2016 and the auction was conducted on 22.08.2016. 25% of the bid amount was also deposited on the same day.

Admittedly this is the third round of litigation which shows that the Appellants are chronic litigants who are making all the efforts not to pay the dues of the bank. In SA, the only challenge made is regarding the issuance of sale certificate dated 17.05.2017 and limitation was claimed from the date of auction sale i.e. 22.8.2016. Section 17 of the SARFAESI Act provides that challenge to any of the measures undertaken by the secured creditor under section 13(4) has to be made within 45 days from the date of cause of action.

In the present case, there is no challenge to the sale; rather, the sale certificate is in challenge, which is only a ministerial act and the impugned sale certificate is issued in compliance of the E auction sale conducted by the secured creditor. When there is no challenge to the sale, mere challenge to the sale certificate dated 17.05.2017 based on the auction sale held on 22.08.2016 is conclusively barred by limitation.

A perusal of the above order will reveal that time was granted to the Appellants to deposit a sum of Rs.15 lakhs before the date of auction sale. But that was not done, rather the Appellants made a prayer for extension of time to the Bank by sending different letters and the bank was kind enough to grant extension but sale was conducted on 22.08.2016. As far as the orders of Hon’ble High Court dated 09.08.2016 for deposit of Rs.15.00 lakhs is concerned, the same was not complied by the Appellants. Accordingly there is no illegality in the impugned auction sale conducted by the secured creditor in respect of the schedule property.

Counsel for the Appellants vehemently argued about the violation of Rule 9(3) & 9(4) of Security Interest (Enforcement) Rules, 2002. Law is well settled that a litigant can raise a plea only on the basis of pleadings made by him.

When the bank proceeded with the auction of the property under the provisions of the SARFAESI Act, 2002 and Rules made thereunder, after granting opportunities to the Appellants for making payments, they did not avail the same within the stipulated period. Thereafter, auction sale was confirmed and the sale certificate was issued and registered on 17.05.2017 which shows the conduct on the part of the borrowers only to gain indulgence, unfulfilled assurances and promises were made and they are unwilling to pay. Accordingly, the Borrower waived his right and was stopped from making any challenge under the SA.

Justice Anil Kumar Srivastava Chairperson held that the Appellants are just trying to gain time and are misusing the process of law by entering into the litigation without complying the directions of the High Court of Judicature at Hyderabad even when time was granted to them but they did not avail the said remedy granted by the High Court. The tribunal dismissed the appeal.

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