Smt. Uma Chopra V. The Union of India

WP/15868/2014

AI Insights

The case involves a writ petition filed by the petitioner challenging the e-auction of her property conducted by the Bank. The property, although registered in the name of the 5th respondent (the petitioner's estranged husband), was claimed by the petitioner to be her absolute property due to her substantial financial contributions and legal permissions obtained for construction. The Bank had initiated the e-auction following a default in loan repayment by the 5th respondent. The petitioner contested the e-auction on grounds that it was not in accordance with Rule 8 of the Security Interest (Enforcement) Rules, 2002, which she argued did not contemplate e-auctions. However, the court referenced a Madras High Court decision which supported the validity of e-auctions under the SARFAESI Act, leading to the dismissal of the petitioner's challenge.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 724150 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 23-06-2014
• Assessment Year: misc
• Other Referred Cases: Tamilnadu Organic Private Limited Chennai and others Vs. State Bank of India, M/s. Michigan Rubber (India) Limited Vs. The State of Karnataka and others, Khargram Panchayat Samity and another Vs. State of West Bengal and others, Narayan Chandra Ghosh Vs. UCO Bank and Others, Kanaiyalal Lalchand Sachdev and Others Vs. State of Maharashtra and Others, United Bank of India Vs. Satyawati Tandon and others, Commissioner of Income Tax and others Vs. Chhabil Dass Agarwal
• Laws Referred To: Article 226 of the Constitution of India, Security Interest (Enforcement) Rules, 2002, Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: E-auction; Property Dispute; Sale Notice; Security interest; Writ of Mandamus
• Section: 13(2); 8; 18; 17(1); 226; 13(4)

Judgement Text

"HON’BLE SRI JUSTICE ASHUTOSH MOHUNTA AND HON’BLE SRI JUSTICE M. SATYANARAYANA MURTHY WRIT PETITION No.15868 OF 2014 O R D E R: (Per Hon’ble Sri Justice M. Satyanarayana Murthy) This writ petition, under Article 226 of the Constitution of India, is filed by the petitioner to issue a writ, order or direction, more particularly one in the nature of writ of Mandamus, declaring the action of the respondents 2 and 3 – Bank, in issuing sale notice dated 07.02.2014 proposing to conduct sale of House property, bearing M. No.13-463/A/25 (H.No.13-6-463/A/25), measuring 178.5 Sq. yards, situated at Upper Basti, Hyderabad, belonging to the petitioner, by way of e-auction on 13.03.2014 as it is illegal, arbitrary and in contravention of Rule 8 of the Security Interest (Enforcement) Rules, 2002 (For short, ‘the Rules’). 2. It is alleged that the petitioner, who used to work as Pharmacist in Canada, is the legally wedded wife of 5th respondent and due to her strained relationship with 5th respondent, returned to India. However, the petitioner purchased the property in the name of 5th respondent, on 24.06.1998, vide document No.1083 of 1998, investing Rs.4,99,000/-, out of which Rs.2,00,000/- is of her mother. Thus, she is the ostensible owner of the property and later she along with her children came to Hyderabad and constructed a house, after obtaining permission from Greater Hyderabad Municipal Corporation (GHMC) on 07.01.2011, vide permission No.558/DC/CZ/Cir-7/2010 in File No.57335/29/12/2010. Thus, the petitioner by investing Rs.20,00,000/-, which is borrowed from her friends and also mortgaging her gold, completed construction, got assigned house number. Thus, she is the absolute owner of the property referred supra. While the matter stood thus, she came to know that a notice was got published in news paper proposing to sell the schedule property by the respondents – Bank, by way of e-auction. On enquiry, she came to know that 5th respondent developed illicit contact with the 6th respondent treating her as wife mortgaged the property with the respondents – Bank by depositing title deeds availed overdraft facility, and later committed default in discharging the debt. Thereupon, the respondents - Bank initiated proceedings by issuing notices under Sections 13(2) and 13(4) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (For short, ‘the SARFAESI Act’) proposing to sell the property by e-auction. 3. On receipt of information, the petitioner filed Securitization Application No.190 of 2014 before the Debts Recovery Tribunal, Hyderabad, in February, 2014 restricting her claim to the house property. The Tribunal while ordering notice in S.A. No.190 of 2014, disposed of the I.A. filed in S.A. No.190 of 2014, permitting the respondents – Bank to proceed with auction sale of the schedule property, but such sale shall be subject to the final result of S.A. No.190 of 2014 and also further directed the respondents – Bank not to dispossess the petitioner from the schedule property till disposal of S.A. No.190 of 2014, and without following due process of law for her eviction. 4. The e-auction held by the respondents – Bank is not in accordance with Rule 8 of Rules, 2002 and also the Rules framed under the SARFAESI Act as e-auction was not contemplated under any of the provisions of the SARFAESI Act and Rules framed therein. Therefore, the e-auction is totally against the provisions of SARFAESI Act and finally prayed to set-aside the e-auction held on 13.03.2014. 5. This Court ordered notice to the respondents at the stage of admission. 6. Heard the argument of learned counsel for the petitioner and respondents – Bank at length. 7. Learned counsel for the petitioner while reiterating the contentions raised in the petition mainly challenged the e-auction on the ground that it is not contemplated under the Rule 8 of Rules 2002 and also under the SARFAESI Act since the e-auction is against the rules, it is liable to be set-aside. 8. per contra, learned counsel for the respondents – Bank supported the sale on the ground that it is totally in accordance with law placing reliance on a Division Bench decision of Madras High Court in Tamilnadu Organic Private Limited Chennai and others Vs. State Bank of India[1]. 9. Considering rival contentions and perusing the material available on record, the sole point that arises for consideration is : Whether the respondents – Bank auctioned the house property bearing Municipal No.13-463/A/25 in accordance with the procedure prescribed under the SARFAESI Act and Rules framed there under? 10. POINT: Admittedly, the property was registered in the name of 5th respondent, but the contention of the petitioner is that she invested Rs.4,99,000/- and it is a disputed fact cannot be gone into at this stage, while exercising jurisdiction under Section 226 of the Constitution of India. It is an admitted fact that the petitioner aggrieved by the sale notice dated 07.02.2014, approached the Debts Recovery Tribunal by filing S.A. No.190 of 2014, under Section 17(1) of the SARFAESI Act, wherein the Tribunal disposed of the I.A. filed in S.A. No.190 of 2014 on 12.03.2014, passing the following order : “The respondent Bank is hereby permitted to proceed with the auction sale of the schedule property (Item No.3 property) along with other properties (Items Nos.1 and 2) as per schedule on 13.03.2014 in pursuance of the e-auction Sale Notice dated 07.02.2014. However, the said sale shall be subject to the result of the above SA. The Respondent Bank is further directed not to dispossess the Applicant from the schedule property (Item No.3 property of the Auction Notice) till the disposal of the above SA and without following the due procedure for her eviction. The present IA is accordingly disposed of.” 11. Thus, the impugned order passed by the Tribunal is only in Interlocutory Application in S.A. No.190 of 2014. The petitioner can challenge the same by way of Appeal under Section 18 of the SARFAESI Act, but the petitioner did not challenge the order passed by the Debts Recovery Tribunal and challenged the e-auction itself only on the ground that the e-auction was not recognized under Rule 8 of Rules 2002 and also under the SARFAESI Act. At this stage, we feel that it is useful to refer Rule 8, which is extracted hereunder for better appreciation : “8. Sale of immovable secured assets: (1) Where the secured asset is an immovable property, the authorized officer shall take or cause to be taken possession, by delivering a possession notice prepared as nearly as possible in Appendix IV to these rules, to the borrower and by affixing the possession notice on the outer door or at such conspicuous place of the property. (2) The possession notice as referred to in sub-rule (1) shall also be published in two leading newspapers, one in vernacular language having sufficient circulation in that locality, by the authorized officer. (3) In the event of possession of immovable property is actually taken by the authorized officer, such property shall be kept in his own custody or in the custody of any person authorized or appointed by him, who shall take as much care of the property in his custody as an owner of ordinary prudence would, under the similar circumstances, take of such property. (4) The authorized officer shall take steps for preservation and protection of secured assets and insure them, if necessary, till they are sold or otherwise disposed of. (5) Before effecting sale of the immovable property referred to in sub-rule (1) of Rule 9, the authorized officer shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor, fix the reserve price of the property and may sell the whole or any part of such immovable secured asset by any of the following methods : (a) by obtaining quotations from the persons dealing with similar secured assets or otherwise interested in buying the such assets ; or (b) by inviting tenders from the public ; (c) by holding public auction ; or (d) by private treaty. (6) The authorized officer 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. (7) Every notice of sale shall be affixed on a conspicuous part of the immovable property and may, if the authorized officer deems it fit, put on the website of the secured creditor on the Internet. (8) Sale by any method other than public auction or public tender, shall be on such terms as may be settled between the parties in writing.” 12. Undoubtedly, certain procedure is to be followed for auction of the property as contemplated under Rule 8, which does not include the e-auction. The mode of e-auction was not contemplated under Rule 8 of the Rules, 2000. However, inviting tenders from public contemplated in Rule 8(5)(a) may be in different recognized modes including e-auction. Similar question came up for consideration before Division Bench of Madras High Court in Tamilnadu Organic Private Limited (1 supra), wherein the Madras High Court after considering Section 13(4) of SARFAESI Act and Rule 8 (5)(c) and 9 of Rules framed thereunder, So also Schedule-I, Item 5 of Information Technology Act, 21 of 2000, held as follows : “The sale of secured assets by way of e-auction is not barred by provisions of Information Technology Act, 2000. Section 1(4) read with Item 5 of Schedule-I of Information Technology Act, 2000 would apply only to contracts for sale and to the conveyance of certain interests in the properties concerned. The e-auction sale procedures are followed only during the preliminary stages of the auction procedure. Contracts are concluded and the conveyance of properties in question takes place only by following the usual modes employed during public auctions. The service providers are not intermediaries, as they are only made use of for the purpose of providing a platform for intending purchasers to make their bids, for the purchase of properties in question. While all the procedures prescribed under provisions of Security Interest (Enforcement) Rules, 2002, are followed, it cannot be said that the procedures followed by the respondent banks, for bringing the secured assets for sale, by way of e-auction sale, are arbitrary and invalid. There is also no specific prohibition, either under the Securitization Act or under the Rules of 2002, restraining the respondent banks and authorities concerned from employing the e-auction sale process, for sale of the secured assets. The e-auction sale procedures are user friendly in nature. The intending purchasers could utilize the services of technically qualified persons or agencies, in making their bids. The e-auction sale procedures would reduce, substantially, the unethical influence of cartels and syndicates, which are posing a serious threat to the healthy competition that is expected to take place during public auctions. The respondent banks have adopted the e-auction sale process taking note of fact that cancerous growth of cartels and the syndicates has threatened the basic concept of public auction, making a mockery of process intended to get best possible price for properties brought for sale. Further, it cannot be said that use of service providers, in conducting e-auctions, is contrary to provisions contained in Securitization Act and the Security Interest (Enforcement) Rules, 2002. Sufficient safeguards are available to set right the irregularities, if any, that may occur during the process of e-auction sales.” 13. The Madras High Court while arriving at the above conclusion, referred various judgments of Apex Court and other High Courts including the judgment of Apex Court in M/s. Michigan Rubber (India) Limited Vs. The State of Karnataka and others[2] and also an unreported judgment of the Apex Court in Khargram Panchayat Samity and another Vs. State of West Bengal and others[3]. 14. The principle laid down in the above judgment can straight away be applied to the present facts of the case, since Rule 8 of Rules framed is silent with regard to specific mode of inviting tenders from public by e-auction. Therefore, sale of the property by e-auction cannot be said to be in contravention of the Rule 8 of Rules 2002 and also under the SARFAESI Act. Hence, the action of the respondents – Bank, in auctioning the property by way of e-auction cannot be said to be arbitrary and against Rule 8 of Rules 2002 and also under the SARFAESI Act and the same cannot be set-aside. 15. Even according to the docket order passed by the Debts Recovery Tribunal on 12.03.2014, sale is only subject to final result of the S.A. No.190 of 2014, filed under Section 17(1) of SARFAESI Act. If the sale of property by way of e-auction is invalid, the same can be decided by the Tribunal since the auction is not finalized but without exhausting such remedy before the Tribunal, the petitioner cannot resort to approach this Court and compel this Court to exercise extraordinary jurisdiction to set-aside the same. 16. In Narayan Chandra Ghosh Vs. UCO Bank and Others[4], the Apex Court in Para 8 held as follows : “It is well-settled that when a statute confers a right of appeal, while granting the right, the legislature can impose conditions for the exercise of such right, so long as the conditions are not so onerous as to amount to unreasonable restrictions, rendering the right almost illusory. Bearing in mind the object of the Act, the conditions hedged in the said proviso cannot be said to be onerous. Thus, we hold that the requirement of pre- deposit under sub-section (1) of Section 18 of the Act is mandatory and there is no reason whatsoever for not giving full effect to the provisions contained in Section 18 of the Act. In that view of the matter, no court, much less the Appellate Tribunal, a creature of the Act itself, can refuse to give full effect to the provisions of the statute. We have no hesitation in holding that deposit under the second proviso to Section 18 (1) of the Act being a condition precedent for preferring an appeal under the said section, the Appellate Tribunal had erred in law in entertaining the appeal without directing the appellant to comply with the said mandatory requirement.” 17. In Kanaiyalal Lalchand Sachdev and Others Vs. State of Maharashtra and Others[5], the Apex Court in Para 23 held as follows : “In our opinion therefore, the High Court rightly dismissed the petition on the ground that an efficacious remedy was available to the appellants under Section 17 of the Act. It is well settled that ordinarily relief under Articles 226/227 of the Constitution of India is not available if an efficacious alternative remedy is available to any aggrieved person”. 18. In another decision reported in United Bank of India Vs. Satyawati Tandon and others[6], the Apex Court in Para Nos.42 to 45 held as follows : “There is another reason why the impugned order should be set aside. If Respondent 1 had any tangible grievance against the notice issued under Section 13 (4) or action taken under Section 14, then she could have availed remedy by filing an application under Section 17 (1). The expression “any person” used in Section 17(1) is of wide import. It takes within its fold, not only the borrower but also the guarantor or any other person who may be affected by the action taken under Section 13(4) or Section 14. Both the Tribunal and the Appellate Tribunal are empowered to pass interim orders under Sections 17 and 18 and are required to decide the matters within a fixed time schedule. It is thus evident that the remedies available to an aggrieved person under the SARFAESI Act are both expeditious and effective. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution of India, if an effective, remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc. the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are a code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi-judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, the High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute. While expressing the aforesaid view, we are conscious that the powers conferred upon the High Court under Article 226 of the Constitution to issue to any person or authority, including in appropriate cases, any Government, directions, orders or writs including the five prerogative writs for the enforcement of any of the rights conferred by Part III or for any other purpose are very wide and there is no express limitation on exercise of that power but, at the same time, we cannot be oblivious of the rules of self-imposed restraint evolved by this Court, which every High Court is bound to keep in view while exercising power under Article 226 of the Constitution. It is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the Constitution and pass interim order ignoring the fact that the petitioner can avail effective alternative remedy by filing application, appeal, revision, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance.” 19. In view of the principles laid down in the above judgments, when an efficacious, effective, alternative and statutory remedy is available for redressal of the grievance of the petitioner, aggrieved by the order passed by the Debts Recovery Tribunal, this Court cannot entertain the petition filed under Article 226 of the Constitution of India since alternative, effective, statutory remedy is available under Section 18(1) of the SARFAESI Act. 20. In a recent decision of the Apex Court reported in Commissioner of Income Tax and others Vs. Chhabil Dass Agarwal[7], it was held as follows: \"Non-entertainment of petitions under writ jurisdiction by the High Court when an efficacious alternative remedy is available is a rule of self-imposed limitation. It is essentially a rule of policy, convenience and discretion rather than a rule of law. It is within the discretion of the High Court to grant relief under Article 226 despite the existence of an alternative remedy, however, the High Court must not interfere if there is an adequate efficacious alternative remedy available to the petitioner and he has approached the High Court without availing the same unless he has made out an exceptional case warranting such interference or there exist sufficient grounds to invoke the extraordinary jurisdiction under Article 226. However, when a statutory forum is created by law for redressal of grievances, a Writ Petition should not be entertained ignoring the statutory dispensation. In the instant case, the Act provides complete machinery for the assessment/re-assessment of tax, imposition of penalty and for obtaining relief in respect of any improper orders passed by the Revenue Authorities, and the assessee could not be permitted to invoke the writ jurisdiction when he had adequate remedy open to him by an appeal to the Commissioner of Income Tax (Appeals). Assessee in the instance case neither described the available alternative remedy under the Act as ineffectual and non-efficacious nor has the High Court ascribed cogent and satisfactory reasons to have exercised its jurisdiction in the facts of instant case. Wr it Court accordingly, as held, should not have entertained the Writ Petition.\" 21. Hence, the petitioner is at liberty to question the e-auction before the Debts Recovery Tribunal either in the pending S.A. No.190 of 2014 or by filing a separate Application under Section 17(1) of SARFAESI Act, if so advised. 22. In view of the peculiar facts and circumstances of the case, we find that it is appropriate to issue a direction to the Debts Recovery Tribunal at Hyderabad, to dispose of S.A. No.190 of 2014, as expeditiously as possible, preferably within a period of three (3) months, from the date of receipt of a copy of this Order. In view of the same, the writ petition is disposed of. No order as to costs. In consequence, miscellaneous petitions, if any, pending in this writ petition, shall stand closed. _____________________________ ASHUTOSH MOHUNTA, J _____________________________ M. SATYANARAYANA MURTHY, J Date. 23-06-2014 Dsh HON’BLE SRI JUSTICE ASHUTOSH MOHUNTA AND HON’BLE SRI JUSTICE M. SATYANARAYANA MURTHY 44 WRIT PETITION No.15868 OF 2014 (Order of the Division Bench delivered by Hon’ble Sri Justice Ashutosh Mohunta) Date. 23.06.2014 DSH [1] AIR 2014 Madras 103 [2] AIR 2012 SC 2915 [3] Civil Appeal No.5675 of 1985, Dt.23.04.1987 [4] (2011) 4 SCC 548 [5] (2011) 2 SCC 782 [6] (2010) 8 SCC 110 [7] MANU/SC/0802/2013 "