The Debts Recovery Appellate Tribunal, Kolkata bench comprising Justice Anil Kumar Srivastava was hearing an appeal filed by the Secured Creditor/bank and held that once a sale certificate is issued for a property under the SARFAESI Act and there is no plea of fraud, the sale cannot be set aside, and attempts to frustrate the purpose of the Act through litigation can affect the right of redemption.
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In the present case, the appeal was filed against the order issued by the Debts Recovery Tribunal, Cuttack. The judgment allowed SARFAESI Application filed by the Guarantor/ Respondent No. 1, against the Indian Overseas Bank and others. The DRT set aside an auction sale and sale certificate issued in favour of the auction purchaser and directed the SARFAESI Applicant Bank to deposit a sum of Rs. 39,30,000.00 for refunding to the auction purchaser.
The background of the case involves the borrower, who availed a cash credit facility from the bank and mortgaged his property. The loan account became classified as a non-performing asset (NPA), and after issuing various notices and possession orders, the bank initiated the SARFAESI application for recovery. The borrower and the guarantor (Respondent No. 1), filed multiple writ petitions before the Orissa High Court, seeking relief and proposing one-time settlements, but they failed to comply with the conditions set by the High Court.
Despite the conditional orders by the High Court, the borrowers did not deposit the required amounts within the specified timelines, leading to the bank rejecting their settlement proposals. Consequently, the SARFAESI application was filed, and the Debts Recovery Tribunal allowed it, prompting the bank to file this appeal.
The appellant argues that the DRT's finding regarding the non-consideration of a representation under Section 13(3A) of the SARFAESI Act is not supported by the SARFAESI application, as no such plea was made by the SARFAESI applicant. The appellant highlighted that the borrowers had multiple opportunities to settle the loan through one-time settlements, but they failed to comply with the conditions imposed by the court.
The Appellate Tribunal observed that when the SARFAESI Applicant herself approached the Hon’ble High Court again and again and there was a delay on her part in complying with the conditional orders passed by the Hon’ble High Court now she cannot take advantage of the same, as has been held in S. Karthik v. N. Subhash Chand Jain and Others, REED 2021 SC 09216.
The DRAT noted that the sale certificate was issued on 12th April 2019 which was registered on 18th June 2019 hence in terms of the law laid down by the Hon’ble Apex Court and there is no plea of fraud in terms of the law laid down in terms of the Hon’ble Apex Court, now the Respondent No. 1, i.e. SARFAESI Applicant cannot take advantage nor the mortgage can be redeemed under Section 13(8) of the Act.
Learned Counsel for Respondent No. 1 vehemently argued that the property was sold at a much less price than the actual price of the property. Learned Counsel submits that a valuation has been assessed on the basis of the old valuation report 2013-2016. Learned Counsel has also placed reliance upon the valuation report filed along with the opposition in the appeal by one Gobinda Chandra Patra dated 18th February 2020. On the basis of this valuation report, Learned Counsel submits that the Learned Valuer has valued the property at Rs.1,17,87,000.00 while the property is sold at a meagre amount of Rs. 39.30 lac. Per contra, Learned Counsel for the Appellant has placed reliance upon a Valuation Report dated 13th June 2018 of M/s. Essen Den wherein the valuation was assessed at Rs. 39.00 lac.
The Appellate Tribunal was not impressed by the submission made by the Learned Counsel for Respondent No. 1. He has placed reliance upon the valuation report of one Mr. Gobinda Chandra Patra dated 18th February 2020. This report was not filed before the DRT while the impugned judgment was passed on 29th September 2020. No reason is shown as to why this report was not filed before the DRT. The DRAT observed that evidence or a piece of evidence which was not filed before the DRT, could not be entertained in the appeal although there are provisions under Order 341 Rule 47 of the C.P.C. for filing of additional evidence in the appeal but neither any such application is filed nor any ground is made out to consider the valuation report, which was not filed before the DRT, in appeal. The Appellate Tribunal did not find any ground to take into consideration the submission of the Learned Counsel for Respondent No. 1 for considering the valuation report in the appeal which was not filed before the DRT.
On the basis of the discussion made above, the Appellate Tribunal were of the view that DRT has erred in holding that the e-auction allowing sale was not done in accordance with the provisions of the SARFAESI Act 2002 and the relevant Rules. Learned Debts Recovery Tribunal has recorded an illegal finding whereby the SARFAESI Application was allowed.
Accordingly, an appeal was allowed and the judgment and order, dated 29th September 2020, passed by the DRT was set aside.
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