United Bank of India V/S Sri.Balasingh Samuel and others

M.A(S.A):57/2012

1.         This appeal impugns the order dated 24.8.2011 passed by the Learned Presiding Officer, DRT Bangalore in SA No.888/2010.                                                                                   

2.         The case of the Appellant may be stated as follows:

The Appellant is the Proprietor of M/s P. Ramaiah Chetty Son dealing in old empty bottles, machinery parts etc.  The Appellant availed certain credit facilities from the 1^stRespondent Bank and defaulted in repayment of the same due to losses sustained in the business.  The 1^st Respondent Bank initiated proceedings under the provisions of the SARFAESI Act and issued the notice under Section 13(2) of the Act on 23.2.2008 demanding a sum of Rs.22,22,214/-.  While the Appellant was negotiating with the Bank for a settlement the 1^st Respondent Bank issued the Possession Notice under Section 13(4) of the Act on 9.7.2009 and took symbolic possession of the secured asset.  The 1^st Respondent Bank also issued the tender-cum-auction sale notice dated 20.8.2009.  The Appellant remitted a sum of Rs.5 lakhs on 5.10.2009 and by his letter dated 23.10.2009 sought time till 31.10.2009 for the payment of the remaining dues.  The 1^stRespondent Bank again issued the sale notice dated 12.6.2010 fixing the auction sale on 21.7.2010.  The Respondent Nos. 2 to 5 belonging to one family offered to settle the dues of the Appellant but the same could not be accepted for the reason that they wanted to take the secured asset for a meager sum of Rs.45 lakhs.  The Appellant again remitted a sum of Rs.40,000/- on 22.7.2010 and offered to settle the dues in installments which was not accepted by the 1^st Respondent Bank.  The 1^stRespondent brought the secured asset for sale again on 2.11.2010 fixing the auction sale on 6.12.2010 with the reserve price as Rs.75 lakhs for the recovery of its dues of Rs.28,71,026.90. In the auction the Respondent Nos. 2 to 5 jointly submitted a bid for Rs.75,01,000/- and it was the only bid received in the auction.  The Respondent Nos. 2 to 5 being the successful bidders in the auction had deposited Rs.18,75,250/- being 25% of the bid amount and did not remit any money thereafter and therefore the sale remained incomplete.  Thereafter the Appellant filed SA No.888/2010 before DRT Bangalore and the Tribunal below dismissed the appeal without considering the pleadings and authorities submitted by the Appellant.  Hence this appeal.

3.          Ld. Counsel appearing on behalf of the Appellant took this tribunal through the factual matrix of the case and stated the following:

a)      The valuation of the property has not been properly done because the valuation was not done through the approved valuer as per the Wealth Tax Act.

b)      The same valuer had enhanced the value of the property after a year.

c)      The secured creditor arrived at the valuation of the property which was obtained three years and 9 months before and that the same is  not proper.

d)      There was only one bidder and that the price at which the sale was knocked down was just Rs.1000/- more than the reserved price.

e)      The successful bidder in this case did not pay the 75% of the bid amount within a period of 15 days as stipulated in the Rules and that he has not paid the said sum even till today and therefore the Authorized officer has violated the provisions of the SARFAESI Act.

f)        The order of the Ld. Presiding officer, DRT, Bangalore is erroneous as it states that the SA has been filed after the issuance of the sale certificate as no sale certificate was issued in this case. The proceedings of the authorized officer are not in accordance with the provisions of the SARFAESI Act and the rules made thereunder and that the Ld. Presiding officer has not considered the facts of the case and that the appeal deserves to be allowed.

g)      The Authorized Officer contravened the rule 8(5) and proceeded to sell the whole of the property whereas a portion of the property would have been sufficient to discharge the dues.

Ld. Counsel relied upon judgments laid down in the case of ‘Punjab National Bank, New Delhi Vs Sunil Agarwal and others (2011) (1) D.R.T.C. 271 (DRAT, Delhi)’ and in the case of ‘Mithilesh Goel & others Vs. Punjab National Bank, New Delhi & others (2011 (1) D.R.T.C. 275 (DRAT Delhi)’ and prayed that the appeal be allowed with exemplary costs.

4.         Ld. Counsel  for the Respondent Bank drew the attention of this Tribunal to the facts of the case and stated that a reading of the securitization application filed by the Appellant would clearly reveal that the ground taken up by the Appellant before the tribunal below was that the valuation was not obtained before the sale of the property and that the point that has been urged with respect to the requirement of the valuer to be registered under the Wealth Tax Act has been developed subsequent to the SA and that such a development cannot be permitted.  Ld. Counsel further stated that the Appellant ought to have placed the above fact before the tribunal below to have enabled the Bank to reply to the same and that the Appellant is not entitled to take a new ground at this stage and the said ground has to be negatived.  Ld. Counsel prayed that orders may be passed.

5.         Ld. Counsel appearing on behalf of R2 to R5 stated that 25% of the bid amount was paid immediately after the knocking down of the bid and that the remaining 75% of the bid amount could not be paid because of the orders of stay passed by the Tribunal below and thereafter by the Hon’ble High Court of Karnataka.  Ld. Counsel added that the auction purchasers have offered to deposit the said amount before the Hon’ble High Court of Karnataka but the Hon’ble High Court of Karnataka had directed the auction purchasers to pay the money to the Bank at the appropriate time.

6.         Heard the Ld. Counsel for the Appellant, Ld. Counsel for the 1^st Respondent Bank and the Ld. Counsel for the auction purchasers i.e. R2 to R5.

7.         A perusal of SA No. 888/2010 on the file of DRT, Bangalore reveals that the Appellant has challenged only the sale conducted by the 1^st Respondent Bank on 6.12.2010.  It is also seen that the Appellant has not questioned the measure of taking of possession of the property.  It is seen that the Appellant has not pleaded that the valuer is not a registered valuer under the Wealth Tax Act in the SA before the Tribunal below and that the Appellant has submitted that the valuer is not a registered valuer under the Wealth Tax Act for the first time in this Appeal.  The perusal of the SA before the Tribunal below also reveals that the Appellant has stated that the Rule 8(5) and 9 of the Security Interest Enforcement Rules have not been adhered to by the Authorized Officer. 

8.         A perusal of the order of the Ld. Presiding Officer passed in SA 888/2010 reveals that the Appellant has not demonstrated any violation of any of the provisions of the SARFAESI Act or the rules made there under in the SA and that the Appellant has also not utilized the opportunity given to him to redeem the mortgage before the sale.  It is also seen that the Appellant has not put forward the plea that the valuer is not a registered valuer under the Wealth Tax Act before the Tribunal below and that when the Appellant has chosen to give up his right to submit a plea on the above question before the Tribunal below the Appellant cannot be permitted to raise the plea of non registration of the valuer under the Wealth Tax Act before this Tribunal in this Appeal and such being the case the Appellant’s contentions made for the first time with respect to the valuer cannot be taken into the consideration especially when the Respondent Bank had been denied the opportunity to counter a claim not made before the Tribunal below but presently made before this Tribunal with respect to the registration of the valuer under the Wealth Tax Act.   It is seen that two valuations have been made by valuer in this case.   A perusal of the valuation report dated 10.3.2008 i.e. the first report reveals that the “PURPOSE” of the valuation is “For City Union Bank Ltd., Sultanpet Branch, Bangalore” and a perusal of the valuation report dated 21.1.2009 i.e. the second report reveals that the “PURPOSE” of the valuation is “To Assess the fair Market Value to any Financial Institutions etc”.  A comparison of both the valuation reports reveals that the 1^st valuation report has been used by the secured creditor as shown for the purpose that it was obtained for and that the second valuation report has not been used as the purpose of the second valuation report was “to assess the fair market value to any financial institution etc” and that the act of the 1^stRespondent Bank in relying upon the first valuation report is proper.  The Appellant has also not shown that he was prejudiced by the sale stated to have been conducted based on the valuation report given by a valuer who has not been registered under the Wealth Tax Act and in the absence of any prejudice being demonstrated by the Appellant it cannot be said that the sale is bad in law. 

9.         Therefore from the fact that the Appellant has chosen not to aver the aspect of the valuer being not registered under the Wealth Tax Act before the Tribunal below, from the fact that it can be seen that the Appellant has chosen to give up his right to challenge the aspect of the registration of the valuer under the Wealth Tax Act in the securitization application filed in the Tribunal below, from the fact that the Appellant by not averring about the non registration of the valuer under the Wealth Tax Act had denied the opportunity to the 1^st Respondent Bank to counter the claim about the non registration before the Tribunal below, from the fact that the Appellant has made a new claim about the non registration of the valuer for the first time in this appeal before this Tribunal, from the fact that the Appellant has not shown that he was prejudiced by the non registration of the valuer under the Wealth Tax Act this Tribunal is driven to conclude that the finding of the Ld. Presiding Officer in paragraph IV(ii) that “it is also seen that  proper valuation has been obtained by the Respondent Bank from the approved valuer before issuing the sale notice as per the relevant rules made under the Act” is correct. 

10.       The Appellant’s contentions that the property has been undervalued and a property of a very high value has been sold for a very meager sum and the further contention that only the sale of a portion of the secured assets would have been sufficient to meet out the dues payable to the Bank have all to be watered down in view of the findings of the Ld. Presiding Officer in his order that the Authorized Officer has not contravened any of the provisions of the SARFAESI Act or the rules made thereunder.  It is also seen that the Ld. Presiding Officer has correctly come to the conclusion that the Appellant has not utilized the opportunity available to him to redeem the property. 

11.       A combined reading of the proceedings of the Authorized Officer dated 6.12.2010 and Ground No. iv of the Affidavit filed in support of IA 1156/2011 before this Tribunal reveals that the sale had not been confirmed.  Rule 9(4) of the SARFAESI Interest (Enforcement) Rules 2002 states that the balance 75% of the bid amount has to be paid on or before the fifteenth day of the confirmation of sale of the immovable property or such extended period as may be agreed upon in writing between the parties.  The confirmation of the sale was not done as on 21.12.2010 and an interim order of ‘status quo’ was passed by the Tribunal below on the said day and therefore the successful bidders could not pay the remaining 75% of the bid amount. Further it is also seen that the Hon’ble High Court of Karnataka was pleased to pass an interim order due to which also the 75% of the bid amount could not be paid by the successful bidders.  It is also seen in the “sealed application form for Tender cum Sale” dated 6.12.2010 submitted by the successful bidders that they have stated that they will pay the 75% of the bid amount on the same day of the delivery of possession of the property to them and that from this it can be seen that both the bidders and Authorized Officer have agreed to the condition that the successful bidders will pay 75% of the bid amount only on the delivery of possession.   Therefore it can be seen that the Authorized Officer has not contravened Rule 9(4) of the SARFAESI Interest (Enforcement) Rules 2002 and that the finding of the Ld. Presiding Officer that no Rule has been contravened is proper. 

12.       Therefore as it is seen that the Ld. Presiding Officer has properly considered all the material before him and arrived at a proper decision in his order no interference is warranted in this case.  Accordingly this Tribunal is driven to dismiss the appeal.

13.       In the result this appeal is dismissed.

IA 1155/2011 (Waiver):  RA(SA) is dismissed today.  The Registry is directed to send the deposit lying in this Tribunal alongwith the accrued interest to the Respondent Bank for being dealt with in accordance with law within a week.  This IA is closed.

This order was issed by the Honble Chair person of DRAT chennnai on 24th july 2012

Mr.Ravishankar Shetty V/S N.Masthan khan and others

A.IR:617/2010

IA-1091/2010 (Delay) – Ld. Counsel for the Petitioner drew the attention of this Tribunal to the order of the Hon’ble High Court of Karnataka and stated that the same may be perused and stated that a perusal of the said order would reveal that the writ petition was withdrawn by the petitioner to take recourse to the alternative remedy.  

The Ld. Counsel drew the attention of this Tribunal to the affidavit filed in support of this IA and stated that a perusal of the same would reveal that the petitioner had filed the writ petition before the Hon’ble High Court because the post of Chairperson was vacant at that time and that thereafter withdrew the said writ petition to seek the alternate remedy and thus filed the appeal here.  The Ld. Counsel stated that the petitioner has filed the appeal immediately after the withdrawal of the writ petition and stated that the delay has occurred due to the fact that the W.P. No.5698/2009 filed before the Hon’ble High Court of Karnataka was pending.

Ld. Counsel Shri Pandurangan appearing on behalf of the respondent bank stated that only the post of Chairperson was vacant and the office i.e., Registry of this Tribunal was working and now the petitioner cannot say that there was nobody to receive any filing.  The Ld. Counsel stated that inspite of the absence of the Chairperson, Office of the DRAT was functioning and any person was entitled to file any application during the working hours on any working day and therefore the reason stated by the petitioner that the post of the Chairperson was lying vacant cannot be accepted and that the petitioner is only trying the drag on the proceedings and is now trying to seek protection under Section 14 of the Limitation Act and that this Tribunal cannot come to the rescue of the petitioner and prayed that the application be dismissed as public money is involved and stated that a sum of more than Rs.67 lakhs is at stake in this case and this Tribunal cannot be a mute spectator to the delaying tactics adopted by the petitioner.  The Ld. Counsel also stated that the contention of the petitioner that the petitioner came to know of the case only after he met his relative cannot at all be believed.

Heard both sides.

It is seen that the reason stated by the Ld. Counsel for the Petitioner is that the post of Chairperson was lying vacant and therefore the petitioners could not file this appeal in time and therefore they had to proceed to approach the Hon’ble High Court of Karnataka.  It is common knowledge that the Registry of this Tribunal does not close when the post of Chairperson is vacant and therefore the contention of the Ld. Counsel for the petitioners that the delay was caused due to the post of the Chairperson lying vacant cannot be accepted. Therefore it can be seen that the delay in filing the appeal has not been properly explained by the petitioner and such being the case this Tribunal is driven to conclude that the petitioner has not shown that he was prevented by sufficient cause from filing the appeal within the period of limitation and further that he had also not properly explained the delay that had occurred thereafter. 

Therefore in the light of the above it can be seen that the delay has not been explained properly and this Tribunal is compelled to dismiss this IA.

Accordingly this IA is dismissed.

This order was issued by the Honble Chair person of DRAT Chennai on 27th july 2012

Jayarajan V/S SBI

A.IR:135/2008


IA-392/2008 (Waiver) –

 Ld. Counsel appearing on behalf of the petitioner stated that a written request for settlement has been made to the bank and that the bank is yet to pass orders on the same.

Ld. Counsel Shri Mohandas appearing on behalf of the respondent bank stated that there is no offer of settlement and stated that whatever representation was made to the bank the same has been duly considered by the bank and the same has also been rejected and prayed that this IA may be dismissed.

At this juncture the Ld. Counsel for the Petitioner stated that there has been no communication from the bank with respect to the rejection of the compromise proposal given by the petitioner to the bank.

Heard both sides.

It is seen that the bank has not accepted the proposal of the petitioner for settlement.  It is also seen that the petitioner has not complied with the conditional order dated 25.4.2012 and therefore this Tribunal is compelled to dismiss this IA. Accordingly this IA is dismissed.

This order was issed by the Honble Chair person of DRAT chennnai on 27th july 2012

OTS Drive of SBT

BL:27 July 2012

State Bank of Travancore (SBT) has launched a one-time settlement (OTS) campaign for repayment of non-performing accounts in the micro, small and medium enterprises (MSME) segment.

The scheme is applicable to all sub-standard assets (in default for more than 12 months) without collateral backing.

It is also applicable for doubtful or ‘loss assets’ (loss identified but not written off) as on March 31, 2012, as defined in the MSMED (MSME Development) Act 2006.

All MSME borrowers can avail this special opportunity and settle their outstanding with the bank, a bank spokesman said here.

There is also an additional incentive of 15 per cent and 10 per cent discount on the OTS amount arrived for borrowers who make full payment respectively within one month or three months from the date of approval of the OTS.

The last date of receipt of application by branches is August 31. More details can be had from the nearest branch or the MSME department at the SBT head office (phone no: 0471-2353658).

Insurer accountable to the insured for act of agent: Consumer forum

S Muralidharan;BL:26 JULY 2012

When an insurance company accepts without demur personal cheques of its agents, after the agent had collected premium from the insured favouring himself in the first instance, it cannot subsequently wriggle out of its commitment to the insured.

The National Consumer Disputes Redressal Commission in Bajaj Allianz Insurance Company Ltd v. Sali Thomas found the argument of the appellant—insurer, that it was not responsible for the actions of its agent in not paying the premium collected in his personal name and deposited in his personal bank account, untenable after having acquiesced in the act by accepting the first few instalments.

The wily agent did the vanishing trick after faithfully depositing with the insurer the first two instalments of Rs 1,50,000 each but swindled the last instalment for the same amount.

The insurer’s plea that the agent was no longer its employ when the third and the last instalment was collected by him once again in his personal capacity did not wash with the Commission. Had it put its foot down on the pernicious practice of the agent collecting premium in his personal name and then issuing his own cheque to the insurer, its stand would have been tenable. The commission pointed out that the insured obviously cannot be faulted because the insurer had fostered the notion that the agent had apparent authority to collect cheques in his personal name by condoning this act not once but twice.

(The author is a New Delhi-based chartered accountant.)

Indian Bank has made a provision of Rs 32 crore against its Rs 800-crore loan to Air India

BL ;Chennnai:26th july 2012

Indian Bank has made a provision of Rs 32 crore against its Rs 800-crore loan to Air India, the bank’s Chairman and Managing Director, Mr T. M. Bhasin, said at a press conference here today.

He said the bank was required to make Rs 8 crore of provision for each of the four quarters of the year, but it decided to take the entire provision in the first quarter itself.

Except for Air India, the bank has no other exposure to the aviation sector.

Indian Bank has restructured loans worth Rs 9,918 crore (loans for which payment terms have been reset to help the borrower.)

Two loan accounts are chunky, incidentally, both are public sector — Air India, and the one to the Rajasthan State Electricity Board (about Rs 1,200 crore).

Indeed, most banks have exposure to RSEB, but it is generally believed that the loans would be paid back as they are backed by a Government guarantee.

Mr.R.chidambaram and ors V/S IOB

M.A(S.A):81/2012

Proof of service not filed in this transfer petition.

Ld. Counsel Shri Aravind Ghosh appearing on behalf of the respondent bank stated that this Tribunal by its discretion transfer this case to any other DRT of competent jurisdiction and also issue directions for the disposal of the SA itself within two months.

Ld. Counsel Shri Desingu appears on behalf of the transfer petitioners and stated that a Presiding Officer cannot step into the shoes of the Authorised officer and also cannot conduct auctions and such being the case the SA should be transferred.

Heard both sides.

In view of the submissions made by the Ld. Counsel for the respondent bank the following order is passed.

‘A Presiding Officer of the DRT cannot conduct a sale under the provisions of the SARFAESI Act. Therefore the Registry, DRT-II, Chennai who has already collected the tenders is hereby directed to return the same to the Authorized Officer of the respondent bank. ‘SA No.67/2012’ is hereby transferred from the file of DRT-II, Chennai to the file of DRT-I, Chennai. The Ld. Presiding Officer, DRT-I, Chennai is hereby directed to take up the SA and dispose of the same as enshrined in Sec.17(5) of the RDDBFI Act.  However it will be open to the respondent bank to urge the Ld. Presiding Officer to dispose of the SA at the earliest.’

This MA(SA) is disposed of accordingly.

IA 749/2012 (stay); Orders passed in MA(SA).  Hence this IA is closed.

This order was issued by THE HON'BLE CHAIRPERSON  of DRAT ,Chennai ON 23/07/2012