IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM TUESDAY, THE 8TH MARCH 2011 / 17TH PHALGUNA 1932 WP(C).No. 35721 of 2009(I) -------------------------- PETITIONER: -------------------- STEPHEN, S/O.PANDIYAMMA, SANTHI BHAVAN, MARIYANAD, PUTHUKURICHI, KADINAMKULAM, THIRUVANANTHAPURAM. BY ADV. SRI.K.P.SUJESH KUMAR RESPONDENTS: ---------------------- 1. STATE BANK OF TRAVANCORE, PALLITHURA BRANCH, ST.ANDREWS JUNCTION,THIRUVANANTHAPURAM, REPRESENTED BY ITS BRANCH MANAGER. 2. AUTHORISED OFFICER AND CHIEF MANAGER, STATE BANK OF TRAVANCORE, REGION III, ZONAL OFFICE, THIRUVANANTHAPURAM. 3. JOSEPH JOFRY, S.O.EDWIN,BEENA COTTAGE, MARIYANADU, PUTHUKURICHI,KADINAMKULAM, THIRUVANANTHAPURAM. 4. MARY BEENA, BEENA COTTAGE, MARIYANADU, PUTHUKURICHI, KADINAMKULAM, THIRUVANANTHAPURAM. 5. DR.C.P.VENKETESWARAN, SHILAJITH HOSPITAL, PUTHUKURICHI.P.O, KADINAMKULAM, THIRUVANANTHAPURAM. ADDL.6TH RESPONDENT IMPLEADED ----------------------------------------------------- ADDL.R6. JASINDA ANDREWS, W/O. MR. ANDREWS RESIDING AT AJANTHA HOUSE MARIANADU, PUDUKKURICHI, THIRUVANANTHAPURAM DISTRICT, R6 IS IMPLEADED AS PER ORDER IN NO.14605 DT.8.3.2011 R1 & R2 BY ADVS.SRI.R.S.KALKURA, SC SRI.GEORGE ZACHARIAH ERUTHICKEL R3 & 4 BY ADVS. SRI.M.RAMASWAMY PILLAI SRI.P.M.JOSEPH R5 BY ADV. SRI.P.C.HARIDAS ADDL.R6 BY ADV. SRI.GOERGE ZACHARIAH ERUTHICKAL THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 16.11.2010, ALONG WITH WPC NO. 37303 OF 2009 , THE COURT ON 08.03.2011 DELIVERED THE FOLLOWING: VK WP(C).No. 35721 of 2009(I) ------------------------------------ APPENDIX --------------- PETITIONER'S EXHIBITS ------------------------------------ EXT.P1. COPY OF THE ORDER OF ATTACHMENT IN IA NO.594/2005 IN O.S. NO50/2005 DATED 14.03.2005 ON THE FILE OF THE SUB COURT, ATTINGAL. EXT.P2. COPY OF THE JUDGMENT OF THE SUB COURT, ATTINGAL IN O.S. NO.50/2005 DATED 30.08.2008. EXT.P3. COPY OF THE DECREE IN O.S. NO.50/2005 DATED 30.08.2008. EXT.P4. COPY OF THE EXECUTION APPLICATION NO.83/2009M IN O.S. NO.50/2005 ON THE FILE OF THE SUB COURT, ATTINGAL. EXT.P5. COPY OF E.A. NO.154/2005 IN E.P.NO.83/2009 IN O.S. NO.54/05 ON THE FILE OF THE SUB COURT, ATTINGAL. EXT.P6. COPY OF THE OBJECTION FILED BY THE FIRST RESPONDENT DATED 5.11.2009 IN E.A. NO.154/2005 IN E.P. NO.83/2009 IN O.S. NO.54/05 ON THE FILE OF THE SUB COURT, ATTINGAL. EXT.P7. COPY OF THE REPRESENTATION SUBMITTED BY THE PETITIONER BEFORE THE SECOND RESPONDENT DATED 5.11.2009. EXT.P8. COPY OF THE RECEIPT DATED 25.03.2010 ISSUED BY THE 1ST RESPONENT RESPONDENT'S EXHIBITS -------------------------------------- EXT.R1(A). COPY OF THE LETTER NO.AGM/III/T/112 DATED 20.08.2009 EXT.R1(B). COPY OF THE LETTER DATED 24.08.2009 ISSUED BY THE 5TH RESPONDENT TO THE 1ST RESPONDENT BANK. EXT.R1(C). COPY OF THE ENCUMBRANCE CERTIFICATE NO.4809/09 DATED 20.08.2009. EXT.R1(D). COPY OF THE VALUATION STATEMENT OF SRI.A.K.BOSE DATED 25.11.2008. EXT.R1(E). COPY OF THE SALE NOTICE PUBLISHED IN THE HINDU DAILY DATED 17.08.2009. WP(C).No. 35721 of 2009(I) ------------------------------------ EXT.(F). COPY OF THE SALE NOTICE PUBLISHED IN KERALA KAUMUDI DAILY 08.07.2009. EXT.(G)COPY OF THE CORRENSPONDENCE FOR THE TENDER OPENING. EXT.(H). COPY OF THE LETTER GRANTING EXTENSION OF TIME TO THE 5TH RESPONDENT AT HIS REQUEST BY THE FIRST RESPONDENT DATED 29.08.2009. COUNTER OF 5TH RESPONDENT ------------------------------------------------ EXT.R1(A). COPY OF THE HINDU DAILY DATED 08.07.2009 EXT.R1(B). COPY OF THE ENCUMBRANCE CERTIFICATE NO.4809/2009 DATED 20.01.2009 EXT.R6(A). COPY OF THE DECREE IN O.S. NO.48/2005 ON THE FILE OF THE SUBORDINATE JUDGE'S COURT, ATTINGAL DATED 31.10.2008. / TRUE COPY / P.A. TO JUDGE VK C.K.ABDUL REHIM,J. ------------------------------- WP(C).NOs.35721 & 37303 of 2009 --------------------------------- Dated this the 8th day of March, 2011 JUDGMENT The issue involved in both these writ petitions relates to sale of immovable property conducted by respondents 1 and 2, which is the secured asset of a loan transaction, under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) Act. Petitioners in WP(C).No.37303/2009 who are respondents 3 and 4 in the other writ petition, are the borrowers. They availed a housing loan from the respondent Bank during the year 2003 to the tune of Rs.5.40 lakhs. Consequent to the default committed in repayments, the respondent Bank initiated proceedings under the SARFAESI Act against the immovable property having an extent of 4 Acres and 5 sq. meters comprised in survey No.218/1 of Kadinamkulam Village of Kazhakoottam Sub District in Thiruvananthapuram Taluk. The property in question was bid in auction by the 3rd respondent in WP(C). No.37303/2009, who is the 5th respondent in the other writ petition. According to the petitioners in WP(C).No.37303/2009 ( WP(C).35721 & 37303 of 2009 2 the borrowers), they got information about the sale only when Ext.P2 notice was received intimating the sale and requiring them to remove the movables from the house. According to the borrowers they have approached the Kerala State Fisherman Debt Relief Commission and the said Commission had requested the Bank to submit statement of accounts. 2. Petitioner in WP(C).No.35721/2009, who is the 4th respondent in the other writ petition, claims that he had obtained a money decree against the borrowers in a suit filed before the Sub Court, Attingal, as OS.No.50/2005. There was an interim attachment against the property in question as per order of that court, in I.A.No.594/2005 dated 14.3.2005. The suit in question was decreed permitting realisation of a sum of Rs.5,18,750/- along with interest @ 4% from the borrowers. Exts.P2 and P3 in WP(C).No.35721/2009 are the judgment and decree in the said case. It is further stated that EP.No.83/2009 filed to execute the decree is pending, with a claim of decree debt to the tune of Rs.7,10,000/-. It is stated that when the sale conducted by the Bank was noticed, he filed EA.No.154/2009 seeking direction against the respondent Bank to deposit the balance amount of sale proceeds, after appropriating amounts due under the loan WP(C).35721 & 37303 of 2009 3 account. The Bank filed objection stating that the property was sold for a sum of Rs.10,60,000/- and the amount due to the Bank was Rs.9,78,634/-. In the objection it is stated that the auction bidder had deposited only 25% of the amount and since there were orders of attachment issued by the Civil Court against the property the Bank could not execute sale certificate in favour of the bidder after collecting the balance 75% of the sale amount. According to the petitioner in WP(C).No.35721/2009 the property will easily fetch a market value of atleast Rs.25 lakhs. It is contended that the sale finalised for a sum of Rs.10,60,000/- is by way of collusion and there is material irregularity in the publication of the sale notice. It is further contended that there was only one bidder present at the time of the sale and he had not remitted the balance sale consideration in compliance with the mandate of the provisions contained in the Security Interest (Enforcement) Rules, 2002. It is contended that the petitioner is ready to purchase the property for a sum of Rs.20 lakhs and if it is permitted, his rights under the decree will be protected and the entire amount due to the respondent Bank can be realised and surplus amount if any available can be paid to the borrowers. Therefore the petitioner submitted Ext.P7 representation to the WP(C).35721 & 37303 of 2009 4 respondent Bank making such request. Since the same was not considered the petitioner is approaching this court seeking to quash the sale. Petitioner inter alia seeks direction against the respondent Bank to consider and pass appropriate orders on Ext.P7 representation. 3. In WP(C).No.37303/2009 which is filed by the borrowers it is pointed out that apart from the decree obtained by the petitioner in WP(C).No.35721/2009 the 5th respondent in that case had also filed another suit, as O.S.No.48/2005, before the Sub Court, Attingal and obtained an order of attachment before judgment against the very same property. In the said writ petition it is contended that the property in question will fetch a sum of Rs.30 lakhs as per the prevailing market value and the petitioners have identified prospective purchasers for a higher value. It is contended that the auction bidder is not interested in completing the sale by depositing the balance amount and therefore it is necessary to direct the respondent Bank to permit private sale of the property to the borrowers. Petitioners inter alia seek direction against the respondent Bank to grant six months time to sell the property through private sale. 4. In the counter affidavit filed by respondents 1 and 2 WP(C).35721 & 37303 of 2009 5 ( the Bank) in WP(C).No.35721/2009, it is contended that the proceedings under the SARFAESI Act was initiated on the basis of notice issued under section 13(2) on 5.7.2007 and subsequently the Chief Judicial Magistrate Court, Thiruvananthapuram was approached invoking section 14(1) of the Act. The property in question was taken over possession on 21.1.2008 and valuation of the property was taken through an approved valuer and sale notice was published on 27.12.2008 in two daily news papers, the Hindu and the Kerala Kaumudi. Since there was no bidders, the sale was published again on 8.7.2009. The last date for receipt of tenders was on 17.8.2009. The Bank received two tenders within the prescribed time and the 5th respondent, being the highest bidder, the sale was fixed in his name. 25% of the bid amount was deposited on the same day itself and the sale was confirmed in favour of the 5th respondent through letter dated 20.8.2009, copy of which was produced as Ext.R1(a). Subsequently, the auction bidder addressed the Bank through Ext.R1(b) letter that, there were orders of attachment, against the property and the Bank should clear such encumbrances. It is admitted that Ext.P7 letter in WP(C).No.35721/2009 was received subsequently which contained an offer of the petitioner therein to purchase the WP(C).35721 & 37303 of 2009 6 property for a value of Rs.20 lakhs. According to the respondent Bank, the sale was conducted after due publication and in proper compliance of all the required procedural formalities. It is contended that the order of attachment will not confer any right on the decree holder since the mortgage in favour of the Bank was created as early as on 18.9.2003. It is contended that the sale could not be challenged on the basis of any irregularity as alleged and the petitioner has no right to question the sale conducted pursuant the SARFAESI proceedings. It is further stated that the Bank has permitted the auction bidder an extended period for deposit of the balance amount, since it was found that there exist encumbrances of the attachment, which need be cleared. Under such circumstances it is contended that the writ petition is filed without any bonafides and the same is liable to be dismissed. 5. The auction bidder had filed a counter affidavit in WP (C).No.35721/2009 raising more or less same contentions as that of the respondent Bank. It is stated that on 20.8.2009 the sale was confirmed in favour of him and the Bank had directed to deposit the balance amount on or before 29.8.2009. But since it was noticed that there exists encumbrances of attachment against WP(C).35721 & 37303 of 2009 7 the property, the Bank was informed that the balance amount payable would be remitted only on getting the attachments lifted. According to the auction bidder, he is ready with funds to the tune of the balance amount which is deposited in Bank Accounts and the amount will be remitted as and when the encumbrances are cleared. 6. The 5th respondent in WP(C).No.37303/2009 got herself impleaded as additional 6th respondent in WP(C). No.35721/2009. She had filed counter affidavit in both the cases contending that by virtue of OS.No.48/2005 of the Sub Court, Attingal she got a decree against the borrowers as per Ext.R6(a) dated 31.10.2008. It is stated that in the said suit there was an interim order of attachment against the property in question. According to her, there was a charge created on the property to the extent of the decree debt of Rs.6,89,000/-. If the petitioner in WP(C).No.35721/2009 is allowed to purchase the property on the basis of the offer made, that would cause severe prejudice to her rights and interest, is the contention. 7. When WP(C).No.35721/2009 came up for consideration on 11.12.2009 this court issued an interim order to the effect of directing to keep in abeyance confirmation of the WP(C).35721 & 37303 of 2009 8 sale, if it is not already confirmed. The said interim order was extended thereafter periodically. This court referred both cases to the Mediation Centre for exploring possibility of a settlement. But the matter could not be settled. Thereafter on 11.10.2010 when the writ petitions came up for consideration counsel appearing for the petitioners in both the cases submitted that further attempts for mediation settlement of the matter with the auction purchaser is being pursued and that there is a chance for settlement . Eventhough counsel for the petitioner in WP(C). No35721/2009 submitted that he had deposited certain amounts with the respondent Bank in order to show bonafides of his claim, learned counsel appearing for the respondent Bank denied of any such deposit. However an adjournment was granted in order to facilitate the parties to arrive at a settlement if any possible. Thereafter when the matter was posted on 19.10.2010 Mr.Ramaswamy Pillai, learned counsel appearing for the petitioners in WP(C).No.37303/2009 (borrowers), submitted that the petitioners are ready to make deposit the entire bid amount with interest and any reasonable compensation, payable to auction purchaser, on or before 25.10.2010, and on that basis a further adjournment was sought for. Eventhough learned WP(C).35721 & 37303 of 2009 9 Standing Counsel appearing for the respondent Bank vehemently opposed the submissions, as a gesture of equity this court granted a last chance to the petitioner to make deposit of sufficient amounts in order to prove their bonafides. Accordingly the petitioners were directed to make deposit of a sum of Rs.14 lakhs on a provisional basis, on or before 26.10.2010, and directed the Bank to keep the said amount in Suspense Account, subject to further orders from this court. The above said interim order was issued making it clear that such deposit will not create any rights on the parties for a claim to set aside the sale. But the petitioners in WP(C).37303/2009 (the borrowers) have failed to make any such deposit. 8. On the other hand, it was submitted that the petitioner in WP(C).No. 35721/2009 had remitted a sum of Rs.14 lakhs before the 1st respondent Bank, on behalf of the borrowers. Exts.P9 to P12 (respondents in WP(C).No.35721/2009) were produced evidencing such deposit of a sum of Rs.14 lakhs. Through I.A.No.14996/2010 filed in WP(C).No.35721/2009 a direction was sought for against the respondent Bank to execute sale deed in favour of the petitioner therein, appropriating the entire amount in deposit. The respondent Bank opposed such a WP(C).35721 & 37303 of 2009 10 prayer on the ground that any deposit made bey the petitioner in WP(C).No.35721/2009 could not be accepted and no sale deed in favour of the said petitioner can be executed. 9. Since it is evident that no amicable settlement could be arrived, I am constrained to consider the writ petitions on merits. The petitioner in WP(C).No.35721/2009, as well as the 5th respondent in WP(C).No.37303/2009 (6th respondent in WP(C).No.35721/2009) are persons claim to have obtained decree against the borrowers. They claim to have obtained interim orders of attachment issued by the civil courts, with respect to the property in question. But it is evident that the mortgage in favour of the respondent Bank was created as early as in the year 2003, much prior to the orders of attachment. The respondent Bank is a secured creditor of the immovable property and a secured interest had been created on the property much prior to filing of the civil suits and orders of attachment issued. As far as the proceedings initiated under the SARFAESI Act is concerned, those persons are total strangers and they could not raise any objections, legally tenable, against the proceedings in question. It is evident that borrowers in this case has not resorted to any statutory remedies available under the SARFAESI Act, nor the WP(C).35721 & 37303 of 2009 11 parties are in a position to establish any material illegality or irregularity as far as the sale is concerned. Therefore I find no merit to interfere in any manner with the proceedings of sale completed under the provisions of the SARFAESI Act. 10. There exist a dispute as to whether the sale was confirmed or not. According to the respondent Bank on deposit of 25% of the sale amount a letter of confirmation was issued to the auction bidder, subject to outcome of the writ petitions. According to the petitioners, the sale was not confirmed and the auction bidders had not deposited the balance amount of 75% of the sale value. However the disputed question as to whether the sale was confirmed or not is of no relevance since the defaulters (borrowers) are not in a position to pay off the liability due to the Bank nor to seek to set aside the sale in question on that basis. On the other hand the offer is coming only from the side of the petitioner in WP(C).No.35721/2009. According to him, he is prepared to purchase the property in question for a consideration of Rs.20 lakhs. At the same time the borrowers are not in a position to arrive at any settlement with the said person with intervention of the additional 6th respondent, in order to work out an amicable solution. Even the possibility of setting aside the WP(C).35721 & 37303 of 2009 12 sale and paying back the amount deposited by the auction purchaser along with a reasonable interest or compensation, could not be worked out since the borrowers as well as the person who had obtained the decrees, could not arrive at any settlement with respect to apportionment of the amount offered after clearing payment of the amount due under the loan account. Therefore I am of the opinion that no relief by way of equity can be granted in the case at hand. Needless to say that there is no merit as far as the challenges raised against the proceedings of sale. 11. Under the above circumstances these writ petitions deserve no merit and the same are hereby dismissed. 12. It is made clear that respondents 1 and 2 (the Bank) will be at liberty to take further steps to confirm the sale and to issue sale certificate, if necessary after taking steps to get the attachment vacated. The petitioner in WP(C).No.35721/2009 is at liberty to withdraw the amount if any deposited pursuant to the order of this court dated 11.10.2010. C.K.ABDUL REHIM,JUDGE pmn/ WP(C).35721 & 37303 of 2009 13