M/S. AMARAVTHI BIO TECHNOLOGIES V. THE UNION OF INDIA

WP/6047/2022

AI Insights

The case involves a writ petition filed by a borrower against the Union Bank of India, challenging the conduct of an e-auction for her mortgaged property. The petitioner argued that the auction was conducted despite her request to settle the dues and that the property was undervalued to benefit a sole bidder. The bank countered that the auction followed due process under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and that the property was valued according to market standards. The court dismissed the petition, citing lack of evidence for the claims and noting that the petitioner had not consistently offered to pay the full amount due.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 723992 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 18-08-2022
• Assessment Year: misc
• Other Referred Cases: Satya Pal Anand vs. State of Madhya Pradesh, Rajasthan Housing Board vs. G.S. Investment, Palpap Inchinichi Software International Limited vs. M/s. Indian Bank, Farid Mohammed vs. Raj State Industrial and Investment Corporation Limited
• Laws Referred To: Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: HANUMANTHA RAO BACHINA; ANCHA PANDU RAO
• Assessee Lawyers: SANUTHA PATCHA
• Keywords: E-auction; Equitable Mortgage; Non-performing asset; One time settlement; Undervaluation
• Section: 13(2); 269(E)

Judgement Text

"THE HON’BLE SRI JUSTICE C.PRAVEEN KUMAR AND THE HON’BLE SRI JUSTICE TARLADA RAJASEKHAR RAO Writ Petition No.6047 of 2022 ORDER:- (per the Hon’ble Sri Justice C. Praveen Kumar) The present writ petition came to be filed, seeking the following relief:- “to declare the action of the third respondent in conducting e-auction dated 24.02.2022 in spite of request made by the petitioner for payment of entire dues to the respondent bank dated 21.02.2022 and also declaring the sole bidder, as auction purchaser, by under valuation of the property, as illegal, arbitrary and improper.” 2. The facts, which lead to filing of the present writ petition, are as under:- (a) The petitioner herein availed two loan loans from the Andhra Bank, Pamuru Road Branch, Kandukuru Mandal, Prakasam District in the year 2017. Thereafter, the Bank was merged with the Union Bank of India. The petitioner is said to have been obtained loan of Rs.5,00,000/- under Loan Account No.OCCSS-030413100057485 and another loan of Rs.22,50,000/- under Loan Account No.SGNEI- 030430100211126 for business purpose. As a security for the loan taken, the petitioner executed an equitable mortgage with the bank vide Mortgage Deed No.1243/2017 for an CPK, J & TRR,J W.P.No.6047 of 2022 2 amount of Rs.27,00,000/- on 16.03.2017, which was registered before SRO, Kandukuru. (b) It is stated that the petitioner was paying the installments regularly till the loan accounts was declared as Non Performing Asset [NPA] on 31.03.2021. It is said that the loan account was declared as NPA, as the petitioner failed to pay the installments. On 01.07.2021, a notice came to be issued by the bank, demanding payment of Rs.23,27,286.94 paisa along with interest. It is also to be noted here that prior to issuance of notice on 01.07.2021, the third respondent issued a demand notice under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [for short, “the Act”] dated 16.04.2021, but there was no response to the said notice. Hence, a demand notice dated 01.07.2021 came to be issued. (c) At that point of time, the petitioner approached the third respondent bank, seeking time for repayment and also renewal of the loan accounts. It is alleged that there was no positive response from the bank. While things stood thus, on 20.10.2021, the third respondent bank issued possession notice and thereafter on 18.01.2022 an e-auction notice. It is said that the petitioner requested the bank to give an opportunity for payment of entire outstanding amount on 21.02.2022. But, the same was refused and accordingly e- CPK, J & TRR,J W.P.No.6047 of 2022 3 auction was held on 24.02.2022. It is said that the reserve price of the property was shown as Rs.23,33,000/-, undervaluing the same only to benefit the sole auction purchaser, who participated in the auction. The bid was knock downed in his favour for an amount of Rs.23,50,000/-. At that point of time, the petitioner claims to have requested the third respondent bank not to confirm the sale, as the petitioner is ready to pay the due amount, but the bank authorities in collusion with the fourth respondent denied the request of the petitioner. Hence, the present writ petition came to be filed. 3. From the averments in the affidavit and the prayer made, it is made clear that the grievance of the petitioner is with regard to e-auction conducted on 24.02.2022 and in spite of the request made by the petitioner to pay the entire due amount, the authorities entertained the sole bidder. 4. A counter came to be filed by the third respondent, disputing the averments made in the affidavit filed in support of the writ petition, except to the extent admitted. It is categorically stated in the counter that after payment of full sale consideration by the fourth respondent, the Sale Certificate was issued on 07.03.2022 and that the property was registered in the name of the fourth respondent on 09.03.2022. The allegation that, the fourth respondent has not paid the total amount, is denied. Having regard to the CPK, J & TRR,J W.P.No.6047 of 2022 4 fact that the document is also registered in favour of the fourth respondent, it is stated that the writ petition itself cannot be entertained. While agreeing to the fact that the petitioner has availed two loans and is due a sum of Rs.23,27,286.94 paisa, the averment that the petitioner has offered to pay the entire amount on 21.02.2022 is denied. (a) On the other hand, it is stated that the husband of the deponent stood as co-borrower as well as guarantor to the aforesaid loans. It is further stated that though notice under Section 13(2) of the Act was received by the petitioner, there was no reply from the petitioner to the said demand notice. It is only after the notice dated 01.07.2021, the petitioner sought time for repayment or renew the loan account. The averments made in paragraph 5 of the affidavit that all of a sudden the respondent bank issued possession notice is denied. It is averred that following the procedure under SARFAESI Act, necessary steps were taken for possession and thereafter e-auction notice came to be issued. It is also stated that if the petitioner was ready to pay the outstanding amount, she should have mentioned the same in her representation dated 21.02.2022. On the contrary, in her representation, the petitioner requested the bank to provide an offer to pay an amount of Rs.20,00,000/-, as One Time Settlement [OTS] and to give remission for the remaining balance. Even in the legal notice dated CPK, J & TRR,J W.P.No.6047 of 2022 5 12.03.2022, the petitioner only requested for One Time Settlement, which was however not accepted by the bank. 5. In so far as the participation of one bidder is concerned, there appears to be some variation. While the averments in the counter state that number of bidders participated in the e-auction, but, during the course of arguments, learned counsel for the third respondent bank accepted that only one bidder participated in the e-auction, but, however, denied that there was any collusion between the auction purchaser and the bank. Having regard to the above, it is pleaded that the Bank followed the procedure as contemplated under the provisions of SARFAESI Act, after giving prior notice for payment of the amount to the petitioner which she did not avail. 6. A counter came to be filed by fourth respondent stating that he was informed by the bank on 25.02.2022 that he was the highest bidder in the e-auction and directed him to pay the bid amount of 75% on or before 26.02.2022 and that he paid 25% of the bid amount initially. After payment of entire amount, Sale Certificate dated 07.03.2022 was issued and the same was registered vide Document No.1312/2022. After registration of the property, the petitioner issued a notice dated 09.03.2022 informing about the present writ petition. He denied any collusion between himself and the third respondent bank. CPK, J & TRR,J W.P.No.6047 of 2022 6 7. Ms. Sanutha Patcha, learned counsel representing Sri V.Sai Kumar, learned counsel for the petitioner strenuously contend that Section 269 (E) of Income Tax Act, 1961, prescribe a procedure for fixing the reserve price and as such, the bank authorities ought to have followed the same. In so far as the fair market value of the property is concerned, she would contend that the value of property was intentionally fixed at a low price only to benefit the auction purchaser. She further submits that though the petitioner expressed her willingness to pay the amount on 21.02.2022, but the authorities proceeded with the auction on 24.02.2022. Her grievance appears to be that the reserve price has been undervalued, thereby putting the petitioner to loss. 8. Sri Hanumantha Rao Bachina, learned counsel for the third respondent bank reiterates the averments made in the counter filed on behalf of the third respondent and even Sri Ancha Pandu Ranga Rao, learned counsel for the fourth respondent denied any collusion between the fourth respondent and the third respondent bank in the auction process. 9. Learned counsel for the petitioner relies upon the judgments of different High Courts, to show that when there is a sole auction purchaser, the entire process has to be viewed with suspicion. CPK, J & TRR,J W.P.No.6047 of 2022 7 10. On the other hand, learned counsel for the respondents relies upon the judgment in Satya Pal Anand vs. State of Madhya Pradesh and others1 to show that when once Sale Certificate is issued, the petitioner has no other option except to approach the Debts Recovery Tribunal, ventilating her grievance. 11. The point that arises for consideration in the present writ petition is, whether the third respondent bank was right in proceeding with the auction in spite of request made by the petitioner for One Time Settlement and also whether the bank was right in accepting the bid of the sole auction purchaser? 12. The facts that the petitioner has availed two loan accounts is not in dispute. The fact that the petitioner has committed default in payment of installment and that her accounts were declared as ‘NPA’ on 31.03.2021, is also not in dispute. The grievance in the writ petition, as stated earlier, is only with regard to holding of e-auction on 24.02.2022, in spite of petitioner offering to pay the entire due amount on 21.02.2022, and participation of single bidder in the said auction. 13. The material on record discloses that a notice under Section 13(2) of the Act was issued to the petitioner, to 1 (2016) 10 SCC 767 CPK, J & TRR,J W.P.No.6047 of 2022 8 which, there was no reply. Long thereafter i.e. on 01.07.2021, another demand notice was issued, to which, the petitioner responded, requesting the bank, to give time for repayment of the amount and to renew the loan account. However, the record nowhere indicates payment of any amount or offering to pay the said amount. But, the petitioner now states that she offered to pay the entire amount on 21.02.2022 itself. If really, as stated by her is true, definitely the same would have reflected in her representation dated 21.02.2022. But, a perusal of the representation dated 21.02.2022, filed along with Memo, show that the petitioner offered to pay an amount of Rs.20,00,000/-, as One Time Settlement and requested the bank to give remission for the remaining balance, to which, the bank did not agree and proceeded with the auction on 24.02.2022. 14. Apart from above, even in the legal notice dated 02.03.2022, the petitioner requested for One Time Settlement and there was no plea to pay the entire amount. Therefore, the averments in the counter that the petitioner has offered to pay the entire amount appears to be incorrect. 15. The next ground raised is that the bank ought not to have proceeded with the auction when the petitioner has come forward for One Time Settlement. It is to be noted here, and as observed earlier, there was never any offer pursuant CPK, J & TRR,J W.P.No.6047 of 2022 9 to the notice under Section 13(2) of the Act and also after the demand notice dated 01.07.2021. Prima-facie it appears that the petitioner has been taking inconsistent pleas pursuant to the demand notice dated 01.07.2021. On the other hand, the petitioner pleaded for One Time Settlement, three days before the auction, which by itself, does not entitle the petitioner for postponing the e-auction process. 16. The next ground urged by the learned counsel for the petitioner is with regard to participation of sole bidder and alleged collusion between the officials of the bank and the auction purchaser. Though, participation of a single bidder is denied in the counter filed, but even accepting that there was only a one bidder, the same does not at all times, lead to an inference that there would be collusion between the bank and the auction purchaser. 17. The learned counsel for the petitioner relied upon a judgment of Rajasthan High Court at Jodhpur in Farid Mohammed vs. Raj State Industrial and Investment Corporation Limited (RIICO), dated 21.09.2021 in Civil Writ Petition No.1830 of 2020 in support of her plea. It is to be noted here that it was a case where, as per the terms and conditions of the e-auction policy, the RIICO reserves the right to cancel the highest bid offered by any person. In the said case, “the Auction Committee rejected the single bid offered by the petitioner on the ground that the multiple CPK, J & TRR,J W.P.No.6047 of 2022 10 higher bids received for other plots in the same auction, are higher than the single bid received for these plots.” Under those circumstances, the High Court rejected the offer of the single bid offered by the petitioner therein. 18. It is also to be noted here that the judgment of Hon’ble Supreme Court in Rajasthan Housing Board vs. G.S. Investment and another2 referred to, may not be applicable to the case on hand for the reason that in the said case, it was held that in the matter of sale of the plots by the Public body, which are Commercial transaction, even if some defects are found, the Court should exercise its discretionary power under Article 226 of Constitution of India, with great care and caution and should exercise only in furtherance of public interest. In the facts and circumstances of the case, the Court did not find any irregularity for indulgence as it will be against public interest. 19. The learned counsel for the petitioner also relied upon a judgment of Madras High Court in Palpap Inchinichi Software International Limited vs. M/s. Indian Bank dated 16.09.2011 in W.P.No.21987 of 2010 and M.P.No.1 of 2010. From a reading of the judgment, we find that there was no bidder and the bank purchased the property by reducing the market value in subsequent valuation report. The Court held that, in case, there was no 2 2007 (1) SCC 477 CPK, J & TRR,J W.P.No.6047 of 2022 11 bidder in the second auction, the Authorized Officer should have postponed the auction. But, instead, the Bank was allowed to bid and participate, which was found fault with, having regard to its location in Madras Town. Therefore, the judgments relied upon by the learned counsel for the petitioner, may not be any help to come to a conclusion that the entire auction process has to be viewed with suspicion because of single bidder. 20. It is further pleaded that the valuation of the property has been undervalued only to help the auction purchaser, but, prima-facie as seen from the record, the valuation report dated 01.12.2021, indicate the prevailing market value of the property as Rs.19,06,000/-; the comparable sale value of the property as Rs.17,15,000/- and the forced/distress sale value of the property at Rs.15,25,000/- and the guideline value of the property at Rs.4,69,700/-. This report though dated 01.12.2021 was not challenged by the petitioner except a bare averment in the affidavit that the property is undervalued. No material has been placed before the Court to show the valuation of the property in the neighborhood or in the close vicinity to the property that was put to auction. Therefore, it would be difficult for this Court to accept the said plea, without any documentary evidence in support of the same. CPK, J & TRR,J W.P.No.6047 of 2022 12 21. Though, learned counsel for the petitioner tried to contend that the procedure under Income Tax Act ought to have been followed for fixing the reserve price, but the SARFAESI Act, along with Rules being a self-contained Act, and as the provisions of the Act are scrupulously followed, it would be difficult to accept the plea of the petitioner in this writ petition at this stage, when Sale Certificate has been issued in favour of the auction purchaser and the property being registered in the name of the auction purchaser in the month of March, 2022 itself. 22. For the aforesaid reasons, we do not find any grounds to entertain the writ petition and accordingly the writ petition is dismissed, giving liberty to the petitioner to avail the remedy, if any, before the Debts Recovery Tribunal. It is made clear that observations made in the order are only for the purpose of deciding the case on hand and the same shall not influence the Tribunal in deciding the case, if any appeal is filed. There shall be no order as to costs. Miscellaneous petitions pending, if any, shall stand closed. _______________________________ JUSTICE C.PRAVEEN KUMAR _________________________________________ JUSTICE TARLADA RAJASEKHAR RAO Date: 18.08.2022 MS CPK, J & TRR,J W.P.No.6047 of 2022 13 THE HON’BLE SRI JUSTICE C.PRAVEEN KUMAR AND THE HON’BLE SRI JUSTICE TARLADA RAJASEKHAR RAO Writ Petition No.6047 of 2022 (per the Hon’ble Sri Justice C. Praveen Kumar) Date:18.08.2022 MS "