IN THE HIGH COURT OF JUDICATURE OF ANDHRA PRADESH AT HYDERABAD (SPECIAL ORIGINAL JURISDICTION) WEDNESDAY, THE TWENTY NINTH DAY OF DECEMBER TWO THOUSAND AND TEN THE HON'BLE SRI JUSTICE GHULAM MOHAMMED and THE HON’BLE SRI JUSTICE N. RAVI SHANKAR WRIT PETITION No.27920, 18314, 25758, 26652, 28134 and 28314 of 2010 W.P.No.27920 of 2010 BETWEEN: Kalluri Siddaiah … PETITIONER(S) And The Indian Overseas Bank, Bank Street, Koti, Hyderabad, rep. by its General Manager and others … RESPONDENT(S) THE HON'BLE SRI JUSTICE GHULAM MOHAMMED and THE HON’BLE SRI JUSTICE N. RAVI SHANKAR WRIT PETITION No.27920, 18314, 25758, 26652, 28134 and 28314 of 2010 COMMON ORDER: (Per HON’BLE SRI JUSTICE N. RAVI SHANKAR) The point that arises for determination in W.P.No.27920 of 2010 is about the validity of the sale of petitioner’s property held on 01.11.2010 pursuant to the sale notification dated 20.10.2010 issued by the Authorized Officer of the Indian Overseas Bank, Nandyal, in order to recover the loan amounts due to it from the petitioner in the said writ petition. 2. This writ petition has not been admitted and on notice being ordered before admission the concerned officer of the above Bank filed counter along with its material papers opposing the admission of this writ petition. 3. The said property is shown as item No.1 in the sale notification dated 20.10.2010 and the sale was proposed to be held under the provisions of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and The Security Interest (Enforcement) Rules, 2002 (hereafterwards referred to for short as ‘the Act’ and ‘the Rules’). The description of this property in the sale notification is given as Door Nos.2-428-232-A3, 2-428-232-A4 and 2-428-232-A5 and it is stated to be situate in a complex called Balaji Complex in Nandyal Town. The second item is shown with Door No.2-428-232-A5 i.e. part of the third item in Item No.1 in the same complex. The reserve prices of both the properties are given as Rs.5,30,00,000/- and Rs.1,25,00,000/- in the sale notification dated 20.10.2010. This aspect is mentioned as petitioner raised a dispute regarding the fixation of reserve prices also. As will be presently seen the 1st item was sold on 01.11.2010 but even according to the Bank the second item was not sold. 4. The other writ petitions are connected to the sale of the said first item of the property of the petitioner and one writ petition is concerned with the second item belonging to the petitioner in W.P.No.27920 of 2010 and their details relevant to the point will be mentioned infra. 5. The circumstances which led to the filing of all these writ petitions are these. The petitioner in W.P.No.27920 of 2010 is the borrower (hereafter referred to as borrower) from the Indian Overseas Bank, Nandyal (hereafterwards referred to for short as Bank) and he borrowed in 2005 a certain amount for the purposes of the development of his school run in the above premises/properties. The sale notification dated 20.10.2010 in question would show that a sum of Rs.1,96,61,386/- was due from the borrower to the Bank and for recovery of that amount it issued Section 13(2) notice under the Act to the borrower and took further steps and brought the two items of property belonging to him for sale and these are the two items mentioned in the sale notification dated 20.10.2010. 6. Before adjudicating W.P.No.27920 of 2010, mention should be made about the other writ petitions. The borrower himself earlier filed W.P.No.18314 of 2010 questioning an earlier sale notification dated 05.07.2010 which was issued by the Bank for the sale of the above two items and pursuant to that notification the sale was to be held on 12.08.2010. In W.P.M.P.No.23120 of 2010 in the said writ petition this Court on 09.08.2010 granted interim stay of the said sale on the condition that the borrower should deposit Rs.50 lakhs within two weeks from 09.08.2010 and a further sum of Rs.50 lakhs within two weeks thereafter. 7. Admittedly, the borrower did not comply with the above condition and so the said interim stay stood vacated, but the said sale notification lapsed. Thereafter, the Bank issued the present sale notification dated 20.10.2010 which is questioned in W.P.No.27920 of 2010. As W.P.No.18134 of 2010 was filed against the earlier sale notification dated 05.07.2010 which lapsed it follows that the said writ petition has become infructuous and it is accordingly dismissed as infructuous. 8. It must be now mentioned here that according to the counter filed by the Bank in W.P.No.27920 of 2010 the first item mentioned in the sale notification dated 20.10.2010 was sold by tender on 01.11.2010. The Bank say that one Gaddam Ankala Reddy submitted a tender to purchase it for Rs.5,30,50,000/- and it was accepted by the Bank and the sale was also confirmed in his favour. The learned counsel for the Bank across the Bar stated that that from out of the said sale proceeds the Bank has adjusted the loan amount due to it from the borrower and it is holding the surplus. The second item is admittedly not sold as the sale proceeds from the first item was sufficient to clear the loan of the borrower. 9. Now coming to the other writ petitions, 2nd petitioner in W.P.No.28314 of 2010, petitioner in W.P.No.28134 of 2010, petitioners in W.P.No.26652 of 2010 and petitioners in W.P.No.25758 of 2010 claim to be subsequent mortgagees/ creditors of the borrower and they are questioning the sale notification dated 20.10.2010 on various grounds and the main ground is that their interest in items 1 and 2 of the sale notification should be protected. The 1st petitioner in W.P.No.28314 of 2010 claim to be an intending bidder for item No.1 of the sale notification. The learned counsel appearing for the petitioners in all these writ petitions have not been able to show what is their right to question the sale notification issued by the Bank which is admittedly a prior mortgagee. Hence, all these writ petitions are dismissed as they do not involve any question of law which requires to be adjudicated by this Court. If they have any grievance they can work out their remedies before the concerned civil Court or in an appeal under Section 17 of the Act. 10. That takes us to W.P.No.27920 of 2010 which is filed by the borrower questioning the validity of the sale notification dated 20.10.2010. All the pleadings taken in the affidavit of the borrower filed in support of this writ petition relate to the disputes which he raised regarding the amounts due from him to the Bank and also the fixation of the upset prices for both the items in the said sale notification as too low. The Bank has in its counter denied each and every averment in the writ petition about the amounts due and it also pleaded that the upset prices fixed are quite proper. Thus, these are again questions relating to disputed facts which cannot be gone into by this Court under Article 226 of the Constitution and therefore they are not gone into. However, the question of fixation of upset prices will be dealt with infra. 11. The learned counsel for the borrower in this writ petition however raised a question of law which is not pleaded in the affidavit of the borrower and that is this. It may be noted that the sale notification is dated 20.10.2010 and it was published in the Sakshi daily newspaper issue of 21.10.2010 circulated in Kurnool District. The auction date is mentioned as 01.11.2010. The contention is that as per the proviso to sub-rule 6 of Rule 8 of the Rules a clear notice of 30 days is required to be served upon the borrower for the sale of immovable property and further Rule 9(1) of the Rules clearly stipulates that no sale of immovable property shall be held before the expiry of thirty days of the public notice of sale published in newspapers. It is pointed out that since sale notification is dated 20.10.2010 and as it was published in the Sakshi daily newspaper on 21.10.2010 and as the date of sale was fixed on 01.11.2010 which is within thirty days from 21.10.2010 the said sale must be held to be violative of Rule 9(1) and also the proviso to Rule 8(6) and consequently it must be held to be void as violative of the said Rules. 12. The above contention though not pleaded in the writ petition has been entertained as it is a question of law based on the statutory rules as it is well settled that it is not necessary to mention a question of law in the pleadings. It is clear that the date of sale is fixed as 01.11.2010 and it is within thirty days from the date of sale notification which is 20.10.2010/21.10.2010 and it is contrary to Rule 9 and Rule 8(6) of the Rules. The question now is whether the sale notification and the date of sale are valid and, if not, whether this Court should not interfere with the sale having regard to the conduct of the borrower and the other circumstances in this case as contended by the Bank’s counsel. 13. The learned counsel for the Bank firstly pointed out certain circumstances to show that the date of sale is valid and cannot be said to be contrary to the Rules. Secondly, he also pointed out certain circumstances relating to the conduct of the borrower and argued that the borrower’s conduct has been through out unfair and one of concealment of material facts before this Court and therefore even if there is violation of Rule 9 in conducting the sale this Court should not in the circumstances of this case interfere with the sale. On the other hand, the learned counsel for the borrower argued that whatever may be the conduct of the borrower this Court should interfere with the sale and set it aside as it is clearly contrary to Rule 9(1) of the Rules. 14. Supporting the validity of the date of the sale which is fixed as 01.11.2010, the learned counsel for the Bank has argued that the Bank has earlier issued a sale notification dated 05.07.2010 which was duly served on the borrower and the date of sale then fixed was 12.08.2010 which is beyond thirty days and if the period is reckoned from 05.07.2010 (i.e. date of earlier sale notification) the present date of sale fixed as 01.11.2010 can be said to be valid as the borrower was put on notice about the sale on 05.07.2010 itself and as the present date of sale i.e. 01.11.2010 is beyond thirty days from the earlier sale notice. In support of this contention, he placed reliance upon a Division Bench decision dated 27.01.2010 of this Court given in W.P.No.23886 of 2009. He also filed a copy of this decision. 15. The facts in the above mentioned W.P.No.23886 of 2009 are easily distinguishable from the facts in the present case. The said writ petition arose out of the proceedings in the appeal before the Debt Recovery Tribunal, Hyderabad. There the Bank gave a sale notice dated 15.07.2009 fixing the date of sale as 17.08.2009. The sale notice was published in the newspapers on 17.07.2009 but the sale proclamation was sent to the borrower on 22.07.2009. Thus, the date of sale 17.08.2009 was not beyond thirty days from the date 22.07.2009 on which the sale notice was served on the borrower. In those circumstances this Court held that the borrowers were entitled to the stay of auction given by the Tribunal and the auction could not be conducted. In the circumstances of that case this Court held that the sale notice served on the borrower on 22.07.2009 holds good and then directed the Bank to publish the auction notice and the sale date which should be beyond thirty days from 22.07.2009 and then proceed with the sale holding that there was no need to direct the bank to issue a fresh sale notice. It was in those circumstances it was held that the date of earlier sale notice could be relied upon by the bank. That is however not the case here. 16. It is true that the Bank in the present case issued an earlier sale notice dated 05.07.2010 fixing the date of sale as 12.08.2010. The said proceedings however fell through and could not be taken up in view of the interim stay granted on 09.08.2010 in W.P.M.P.No.23120 of 2010 in W.P.No.18314 of 2010 filed by the borrower and the sale could not take place. The Bank in its wisdom did not act upon the earlier sale notice dated 05.07.2010, but proceeded in its wisdom to issue a fresh sale notification dated 20.10.2010 and fixed the date of sale as 01.11.2010. The present date of sale 01.11.2010 is not beyond thirty days from 20.10.2010 which is the date of sale notification or 21.10.2010 which is the date on which the sale notice was published in the Sakshi daily newspaper. Thus, having issued a fresh sale notification dated 20.10.2010 the Bank cannot rely upon the earlier sale notification dated 05.07.2010 and contend that since the present date of sale i.e. 01.11.2010 is beyond thirty days from 05.07.2010, the sale should be held valid. The arrangement made in the decision in W.P.No.23886 of 2009 must be treated as an arrangement made in the circumstances of that case. As the present date of sale 01.11.2010 is not beyond thirty days from 20.10.2010/21/10.2010 which is the date of sale notification the above decision does not help the Bank. 17. Further the decision dated 12.03.2007 given in W.P.No.4914 of 2007, relied upon by the borrower’s counsel, supports his contention. In this case, decided by a learned Single Judge of this Court, the bank issued a sale notice dated 27.12.2006 but the sale date could not be fixed pursuant to that sale notice dated 27.12.2006 for various reasons. The bank again sent a notice on 02.03.2007 to the borrower drawing his attention to the earlier sale notice dated 27.12.2006 and informed him that pursuant to that notice it proposed to hold the sale on 13.03.2007 on the same terms and conditions as specified in the earlier sale notice/ proclamation dated 27.12.2006 and followed it up by a sale publication dated 03.03.2007 proposing to hold the sale on 13.03.2007. 18. It was held in the above decision that Rules 8(6) and Rule 9(1) of the Rules are intended to ensure wide publicity to get a good price for the property sought to be sold and in that view of the matter a fresh sale notice/proclamation are necessary and the sale should be held after thirty days of such sale notice/proclamation and this is mandatory. Thus, this decision supports the contention of the borrower’s counsel whereas the Division Bench decision relied upon by the Bank’s counsel is a case where the arrangement has been made by the Court itself in the particular facts of that case. It is thus clear that the contention of the Bank’s counsel that it can rely upon the earlier sale notice dated 05.07.2010 to argue that the date of present sale which is 01.11.2010 complies with Rule 9(1) of the Rules cannot be accepted. In other words, the date of present sale which is 01.11.2010 which is within thirty days from the sale notification/ proclamation dated 20.10.2010/21.10.2010 must be held to be contrary to Rules 8(6) and 9(1) of the Rules. 19. Thus, the above legal position shows that in the present case the date of sale being 01.11.2010 being within thirty days from the sale notification/ proclamation dated 20.10.2010 is no doubt contrary to Rule 9(1) and Rule 8(6) of the Rules as contended by the learned counsel for the borrower. The question however is whether this Court should exercise its discretion in favour of the borrower in this writ petition and set aside the sale having regard to the circumstances which according to the Bank show an unfair conduct on the part of the borrower. The Bank’s counsel relied upon the following circumstances alternatively to show that this Court should refuse to go to the rescue of the borrower despite the sale being contrary to Rules 8(6) and 9(1) of the Rules. We now proceed to consider the said circumstances to decide about the above contention of the Bank’s counsel. 20. The first circumstance pointed out on behalf of the Bank is that this borrower already illegally sold away the first item mentioned in the sale notification which was auctioned, by three agreements of sale cum GPAs dated 10.06.2009 in favour of third parties for a total sale consideration of Rs.3,03,31,000/- and therefore he has no right now to question the auction even assuming that there is any illegality in conducting it inasmuch as he has no subsisting interest now in the said item. Mention is made about these agreements in the counter of the Bank and it also filed Xerox copies of the said agreements. The learned counsel for the borrower did not deny this aspect. The borrower’s affidavit in his present W.P.No.27920 of 2010 or his affidavit in his previous W.P.No.18314 of 2010 do not disclose about the above agreements of sale. His counsel, however, repeatedly relied upon the violation of the Rule 8(6) and Rule 9(1) of the Rules for seeking to set aside the sale. The learned counsel for the Bank pointed out this suppression of fact in both the writ petitions of the borrower and urged that this Court should not show any indulgence to the borrower as he no longer has a subsisting interest in the property sold. The learned counsel for the borrower pointed out that despite the above agreements of sale cum GPAs the borrower still continues to be the title holder and therefore he has got a right to question the auction held on 01.11.2010. He also argued that since the said agreements of sale were subsequent to Section 13(2) notice they have to be treated as void in view Section 13(13) of the Act as it prohibits a borrower from alienating the secured asset in any manner and therefore the said agreements should be ignored. It may be noted that whether they are legal or illegal the borrower received Rs.3,03,31,000/- from the said agreements of sale on 10.06.2009 but he did not think of discharging the Bank’s loan from the said amount. This cannot be said to be a fair conduct on his part and he did not disclose about the said agreements. Hence, the above contention of the borrower’s counsel cannot be accepted. From this circumstance it is clear that the borrower did not act in a fair manner. 21. The second circumstance pointed out by the learned counsel for the Bank is that the borrower earlier filed W.P.No.18314 of 2010 questioning the previous auction notice and got stay of it in WPMP No.23120 of 2010 on 09.08.2010 and that this Court granted a conditional stay in it by directing him to deposit Rs.1 Crore in two instalments of Rs.50 lakhs each fixing the periods. His plea is that the borrower did not comply with the conditional stay order in depositing a sum of Rs.50 lakhs within two weeks from that date and a further sum of Rs.50 lakhs within two weeks thereafter but successfully got the sale proceedings stalled and again filed this writ petition questioning the present sale. He pointed out this conduct of the borrower is also not fair and therefore this Court now should not interfere in this writ petition though the sale is not in accordance with Rules 8(6) and 9(1) of the Rules. 22. In this writ petition, the borrower took a plea that the property i.e. item No.1 was worth Rs.15 Crores and that the upset price was fixed at Rs.5,30,00,000/- and this upset price was fixed by the Bank to help the intending auction purchaser to buy it at a throw away price. Dealing with this plea of the petitioner, the learned counsel for the Bank pointed out as pleaded in the Bank’s counter that the abovementioned three agreements of sale cum GPAs would themselves show that the borrower himself sold the said item in June 2009 for Rs.3,03,31,000/- and therefore the borrower cannot now complain about the upset price fixed at Rs.5,30,00,000/- which is far more than the price at which he sold away the said item. The Bank’s counsel pointed out this aspect and showed that the borrower’s conduct in this behalf cannot also be said to be fair. The learned counsel for the borrower pointed that even this circumstance does not come in his way to challenge the sale on the ground of violation of Rules 8(6) and 9(1) of the Rules. Certain other circumstances relating to the valuation of the property and the documents filed by the borrower himself were relied upon by the Bank to show that borrower’s plea regarding valuation cannot be accepted. It is however not necessary to go into the same. 23. Basing upon the above three circumstances, the learned counsel for the petitioner relied upon certain decisions of the Apex Court to show that this Court should not exercise its discretion under Article 226 of the Constitution in favour of the borrower in a case like this. The first decision relied upon by him is the one given in K.D.SHARMA vs. SAIL[1]. He relied upon this decision to show that where a person approaches a High Court under Article 226 of the Constitution by concealing facts the High Court should not exercise its discretion in his favour and it would also be justified to reject the writ petition at the threshold without going into the merits. This decision is relied upon in support of the Bank’s contention that the borrower having sold away the property in question under three agreements of sale cum GPAs dated 10.06.2009 and having concealed the same in his affidavits in both the writ petitions cannot be held entitled to any relief from this Court and this Court can even reject the writ petition without going into the merits of the matter. Laying down the proposition on this aspect, the Apex Court, in paras-34, 36, 37 and 38 of the said judgment observed as follows. “34. The jurisdiction of the Supreme Court under Article 32 and of the High Court under Article 226 of the Constitution is extraordinary, equitable and discretionary. Prerogative writs mentioned therein are issued for doing substantial justice. It is, therefore, of utmost necessity that the petitioner approaching the writ court must come with clean hands, put forward all the facts before the court without concealing or suppressing anything and seek an appropriate relief. If there is no candid disclosure of relevant and material facts or the petitioner is guilty of misleading the court, his petition may be dismissed at the threshold without considering the merits of the claim.” “36. A prerogative remedy is not a matter of course. While exercising extraordinary power a Writ Court would certainly bear in mind the conduct of the party who invokes the jurisdiction of the Court. If the applicant makes a false statement or suppresses material fact or attempts to mislead the Court, the Court may dismiss the action on that ground alone and may refuse to enter into the merits of the case by stating "We will not listen to your application because of what you have done". The rule has been evolved in larger public interest to deter unscrupulous litigants from abusing the process of Court by deceiving it.” “37. In Kensington Income Tax Commrs. [(1917) 1 KB 486 : 86 LJKB 257 : 116 LT 136 (CA)], Viscount Reading, C.J. observed: (KB pp. 495-96) "…Where an ex parte application has been made to this Court for a rule nisi or other process, if the Court comes to the conclusion that the affidavit in support of the applicant was