HON’BLE SRI JUSTICE P.S. NARAYANA WRIT PETITION No.19558 of 2007 Date: February , 2008 Between: 1. Mr. B. Sadanand and another …Petitioners And 1. Allahabad Bank, Marutinagar Branch, Hyderabad, represented by its Manager and another. …Respondents * * * ORDER: This Court issued rule nisi on 14.9.2007 and in W.P.M.P.No.25193 of 2007 interim stay as prayed for had been granted until further orders. 2. Heard Sri Prakash Reddy, learned Senior Counsel representing the writ petitioners and Sri B. Damodar Reddy, representing respondent No.1. 3. The writ petition is filed for a writ of Mandamus declaring auction of the petitioners’ property situated in a plot of land bearing H.No.8-2- 293/82/J/A/103 situated in Plot No.A/103 in survey No.403/1, Journalists Co-operative House Building Society, Jubilee Hills, Hyderabad, pending the appeal in R.A.No.3 of 2005 on the file of the Debts Recovery Tribunal, Hyderabad, as arbitrary, illegal and against the principles of natural justice and equity and consequently declare the sale notice dated 16.8.2007 issued by the second respondent as null and void and further restrain the respondent bank from proceeding further except in accordance with law and pass such other suitable orders. 4. Sri Prakash Reddy, learned Senior Counsel representing the writ petitioners, had taken this court through the contents of the affidavit filed in support of the writ petition and also counter-affidavit and would maintain that this is a case where the records had been manipulated and the learned Senior Counsel also demonstrated how an additional ‘zero’ had been added for the purpose of altering the quantum of amount. The counsel also would maintain that even otherwise seen an appeal is pending, till the disposal of the appeal the interest of the petitioners to be safeguarded and the writ petition can be disposed of directing disposal of the appeal as well, till then the interim order granted by this Court to be kept operative. 5. On the contrary, Sri B. Damodar Reddy, had taken this Court through the contents of the counter-affidavit and would maintain that the writ petition itself is not maintainable even otherwise the petitioners are at liberty to move appropriate application in the pending proceedings and to file a writ petition praying for such a relief even in the facts and circumstances cannot be sustained. The learned counsel also would submit that even otherwise the factual controversy which is being putforth cannot be gone into effectively by the writ court. 6. The first petitioner had sworn to the affidavit filed in support of the writ petition. The first petitioner along with his wife had purchased an open plot of land admeasuring 405 square yards bearing No.A/103 in survey No.403/1, Journalists Co-operative House Building Society, Jubilee Hills, Hyderabad, from one S.Y. Narayana Murthy represented by his registered GPA holder C.N. Murthy in the year 1998 for valuable sale consideration under registered sale deed dated 13.05.1998 bearing document No.836 of 1998 without any encumbrances. The petitioners reclaimed the said land by spending huge sums of money, constructed a two-storeyed residential house in the year 1999 and since then they had been in continuous and peaceful possession of the said property. While that being so, the officials of the first respondent bank visited the said house property on 25.8.2002 and informed the petitioners that the first respondent bank had instituted proceedings in O.A.No.26 of 1999 on the file of the Debts Recovery Tribunal, Hyderabad against one Splendour Ceramics Private Limited and others including the vendor of the petitioners for recovery of monies due from the said company, since S.Y. Narayana Murthy, the vendor of the petitioners, had offered the property as a collateral security for the loan facilities obtained by the company, and obtained a decree against the company and the guarantors including the petitioners’ vendor and that the bank initiated recovery proceedings in R.P.No.16 of 2002 for recovery of the decretal amount. The bank officials further informed the petitioners that if the petitioners pay a sum of Rs.5.00 lakhs, they would drop proceedings against the property. Thereafter, the first respondent bank refused to accept the compromise that was originally proposed by itself and demanded a total amount of Rs.5,35,13,365/- being the decretal amount mentioned in the recovery certificate. When the petitioners approached the Debts Recovery Tribunal in the year 2003 for the purpose of inspecting the record, the said application was refused with an endorsement that the entire record in O.A.No.26 of 1999 was transferred to this Court in a writ petition filed by one of the guarantors to the first respondent bank. A copy of the application filed before the Debts Recovery Tribunal and the endorsement thereof had been placed before this Court. The petitioners, on verification of the record and documents available with other respondents’ counsel in the O.A. proceedings came to know about the fraud played by the first respondent bank on the petitioner’s vendor S.Y. Narayana Murthy. A perusal of the letter dated 20.9.1989 issued by the first respondent bank addressed to the principal borrower/company would clearly show that the first respondent bank had sanctioned a term loan of Rs.23.00 lakhs against hypothecation of entire plant & machinery, equipment, electrical installation etc., of the company; co-acceptance of bills to an extent of Rs.18.81 lakhs under IDBI bills re-discounting scheme for purchase of machinery with counter indemnity from the company and hypothecation of plant and machinery and a cash credit of Rs.5.00 lakhs with hypothecation charge created over entire movable assets of the company. Thus, in all, the first respondent bank extended loan facilities of the value of Rs.46.81 lakhs to the company. The sanction letter further provided that as collateral security, it had obtained personal guarantees of directors of the company and security by way of equitable mortgage of residential property situated at Banjara Hills belonging to one of the directors of the company one C. Ramakrishna and that the said property was valued at Rs.5.00 lakhs. A copy of the sanction letter dated 20.9.1989 had been placed before this Court. Moreover, the first respondent bank had filed a photostat copy of deed of guarantee signed by the vendor of the petitioners in the proceedings before the Debts Recovery Tribunal. A perusal of the printed guarantee form with blanks filled in clearly shows that the guarantee was originally given for a sum of Rs.5,00,000/- and the first respondent bank officials in a fraudulent manner interpolated another ‘zero’ after the digit ‘5’ to make it a sum of Rs.50.00 lakhs. In words also the amount was re-written and the overwriting is clearly discernable. The total value of the loan sanctioned by the bank to the company was only Rs.46.81 lakhs and it had obtained personal guarantees from the directors of the company for the said sum only. In the guarantee form submitted by the petitioners’ vendor, the amount guaranteed was shown as Rs.50.00 lakhs. In fact, the first respondent bank did not give any explanation as to why the petitioners’ vendor alone was called upon to furnish a guarantee for Rs.50.00 lakhs while the bank had sanctioned only Rs.46.81 lakhs. A copy of the guarantee form submitted by the company’s directors and also the petitioners’ vendor had been placed before this Court. It is also averred that the first respondent bank was quite aware of the fact that the petitioners had purchased the property in the year 1998 itself when one of the defendants in the O.A. proceedings had categorically stated that the property was sold and that construction work was going on. However, the first respondent bank did not initiate any action then. On the contrary, the first respondent bank in the year 2002 sought to proceed against the petitioners’ property on the plea that equitable mortgage was created in its favour in respect of the property, though its own sanction letter clearly proves that some other property belonging to the company’s director was offered as collateral security. Aggrieved by the attitude of the first respondent bank, the petitioners approached the Recovery Officer-second respondent and filed a claim petition C.P.No.54 of 2003 in R.P.No.16 of 2002 bringing all the facts to the notice of the Recovery Officer. However, the Recovery Officer, without properly examining the issues involved, dismissed the claim petition on 11.02.2005. A copy of the order dated 11.02.2005 had been placed before this Court. Against the orders of the second respondent/Recovery Officer, the petitioners preferred an appeal R.A.No.3 of 2005 before the Debts Recovery Tribunal, Hyderabad and the said appeal is pending as the entire record pertaining to O.A. and the recovery proceedings was forwarded to this Court pursuant to an order passed in W.P.No.11170 of 2003. A copy of the appeal filed before the Debts Recovery Tribunal, Hyderabad, had been placed before this Court. While things stood thus, the first respondent bank had initiated auction proceedings through the second respondent to sell the house property of the petitioners on the ground that there was no stay granted by the Debts Recovery Tribunal, Hyderabad in the appeal proceedings filed by the petitioners. In this connection, the Recovery Officer had issued a sale notice in ‘Andhra Jyothi’ newspaper dated 24.6.2007 seeking for auction of the house property on 25.7.2007. A copy of the notice issued by the second respondent-Recovery Officer along with its translation had been placed before this Court. Immediately thereafter the petitioners got a memo filed before the Recovery Officer bringing to his notice about the pending appeal and also the fact that this Court had passed order in W.P.M.P.No.13741 of 2002 in W.P.No.11170 of 2002 dated 18.11.2002 calling for entire records in O.A.No.26 of 1999 and as such the appeal could not be disposed of. A copy of the memo dated 25.6.2007 along with the orders dated 18.11.2002 and 07.7.2003 passed in W.P.M.P.No.13741 of 2002 in W.P.No.11170 of 2002 had been placed before this Court. The first respondent bank filed its counter to the memo. In the meanwhile, the petitioners filed a writ petition challenging the action of the first respondent bank in proceeding with the auction sale of the petitioners’ property. Thereafter, the petitioners withdrew the writ petition as the second respondent postponed the auction proceedings in the absence of any bidders. Subsequently, the first respondent bank had obtained a fresh valuation report dated 11.8.2007 wherein the value of the property had been arrived at Rs.1.71 crores as against the earlier valuation of Rs.2.66 crores stated in the valuation report dated 15.11.2006. Both the valuation reports had been placed before this Court. The first respondent bank had not assigned any reasons for such a decline in the value of the property within a span of nine months. On the basis of fresh valuation report, the respondents had once again issued an auction notice in the Telugu daily ‘Andhra Jyothi’ dated 19.8.2007 fixing the date of auction as 26.9.2007 by showing the reserve price of the property as Rs.1.55 crores as against the earlier reserve price of Rs.2.25 crores. A copy of the said auction notice had been placed before this Court. It is also stated that the action of the respondents in proceeding with the auction of the house property belonging to the petitioners while the appeal filed by them against the orders dated 11.02.2005 passed by the second respondent was pending and when the entire record in O.A.No.26 of 1999 was sent to this court, is arbitrary, illegal and not maintainable for the following among other grounds. The first respondent bank had failed to produce any positive evidence before the Debt Recovery Tribunal in support of its case that the petitioners’ vendor had offered the property as collateral security. On the contrary, its own sanction letter dated 20.9.1989 clearly shows that property belonging to one of the directors of the company situated at Banjara Hills was offered and accepted as collateral security and not the property purchased by the petitioners. Moreover, the Debt Recovery Tribunal initially dismissed the O.A. filed by the first respondent bank for default and imposed costs and thereafter restored the O.A. without issuing any notices to the defendants therein and the same is under challenge before this Court in a writ petition filed by one of the directors/guarantors. The respondents ought to have appreciated that the R.A.No.3 of 2005 preferred by the petitioners against the order dated 11.02.2005 was pending before the Debts Recovery Tribunal and pending the appeal there can be no auction as the same would lead to unnecessary complications. The respondents had failed to appreciate that the appeal could not be heard only because the entire record was sent to this court in a writ proceeding and as such the Debts Recovery Tribunal could not have heard the appeal. The second respondent failed to appreciate that the Debts Recovery Tribunal, Hyderabad was not sitting regularly due to vacancy in the post of the Presiding Officer and the petitioners would be put to irreparable loss and injury if the auction was not stayed pending the appeal. The second respondent failed to appreciate that the first respondent bank had indulged in large scale fraud by manipulating the figures in the guarantee form furnished by the vendor of the petitioners and that in the absence of the record which had been sent to this court, the appeal preferred by the petitioners in R.A.No.3 of 2005 against the order dated 11.02.2005 cannot be heard. It is said in such circumstances the writ petitioners being left with no option approached this Court praying for the reliefs as specified supra. 7. In the counter-affidavit filed by respondent No.1 it is stated that the writ petition is not maintainable in view of Recovery Appeal No.3 of 2005 preferred by the writ petitioner before the D.R.T. Hyderabad against the orders of the Recovery Officer, DRT in C.P.No.54 of 2003 in R.P.No.16 of 2002 in O.A.No.26 of 1999 and is liable to be dismissed on this ground alone. Several allegations had been specifically denied. It is also averred that since the company M/s Splendour Ceramics Pvt. Ltd., availed credit facilities and failed to comply with the terms and conditions of sanction and failed to liquidate the loan amount, the respondent bank was constrained to file O.A.No.208 of 1995 on the file of the Debts Recovery Tribunal, Bangalore for recovery of Rs.1, 40, 21,792.08 paise against the company and 4 guarantors viz., C. Rama Krishna, T.J. Singh and R. Srinivasa Rao, the Directors of the company and also one N.Y. Narayana Murthy and the said O.A. was transferred to D.R.T. Hyderabad and was renumbered as O.A.No.26 of 1999. The company, C. Ramakrishna and R. Srinivasa Rao filed written statement admitting the availment of loan amount but disputed the quantum of amount claimed. Mr. T.J. Singh was set ex parte as he failed to appear before the Tribunal. Mr. Narayana Murthy, the other guarantor also filed written statement admitting guarantee deed executed in favour of the respondent bank and creation of equitable mortgage by deposit of original title deeds in respect of the property bearing Plot No.A 103 in survey No.403/1, admeasuring 405 square yards, situated at Journalists Co-operative House Building Society, Shaikpet village, Jubilee Hills, Hyderabad, but stated that he offered the said property as security for the loans availed by the company up to a limit of Rs.5.00 lakhs only but not Rs.50.00 lakhs and that the deed of guarantee executed by him was altered by the bank and he is not liable for the claim amount. The D.R.T., Hyderabad after considering the entire evidence on record, both oral and documentary, allowed the application on merits on 11.02.2002 as prayed for against all the defendants jointly and severally with costs. No appeal was filed and the said decree had become final. Accordingly recovery certificate was issued on 08.3.2002 for a sum of Rs.5,18,07,598.08 paise. One of the guarantors Mr. T.J. Singh filed M.A.No.27 of 2002 in O.A.No.26 of 1999 stating that he was not served any notice in the O.A. proceedings. The Presiding Officer, D.R.T., Hyderabad dismissed the said M.A. on 18.6.2002 holding that service of summons in O.A. was effected on him as per law. Aggrieved by the order, Mr. T.J. Singh filed W.P.No.11170 of 2002 before this Court and this Court in W.P.M.P.No.13741 of 2002 granted stay of operation of the order in M.A.No.27 of 2002 in O.A.No.26 of 1999 only, so far as it relates to T.J. Singh and no stay of execution proceedings in respect of other defendants against whom the decree had already been obtained by the bank on 27.6.2002 and this court further ordered on 07.7.2003 that the interim order earlier granted by this court shall continue until further orders. The respondent bank initiated recovery proceedings in R.P.No.16 of 2002 in O.A.No.26 of 1999 against the other defendants and had taken steps to sell the mortgaged property of N.Y. Narayana Murthy through public auction on 09.7.2003. The writ petitioners filed Claim Petition No.54 of 2003 before the Recovery Officer alleging that they had purchased the mortgaged property from N.Y. Narayana Murthy through his GPA holder, they are the bona fide purchasers for valid consideration and the property cannot be sold in public auction. The respondent bank filed counter stating that they are not bona fide purchasers for valuable consideration, that they had purchased the property subsequent to mortgage in favour of the bank and that too during the pendency of the O.A. proceedings before the D.R.T and the rights of the, if any, are subject to the mortgage in favour of the respondent bank. The Recovery Officer, DRT, Hyderabad dismissed the claim petition holding that the doctrine of lis pendens is squarely applicable to the case and the claim petitioners purchased the property without insisting for the original title deeds. The writ petitioners filed R.A.No.3 of 2005 against the order in C.P.No.54 of 2003 before the DRT, Hyderabad and had not obtained stay of proceedings in O.A.No.26 of 1999. Further it is stated that the property mentioned was mortgaged to the respondent bank by N.Y. Narayana Murthy for credit facilities sanctioned to M/s. Splendour Ceramics Pvt. Ltd., in the year 1989 and the petitioners were not bona fide purchasers for valuable consideration of the property and the same was put into service in collusion with the mortgagor, N.Y. Narayana Murthy to defeat the rights of the respondent bank and the same was not binding on the respondent bank. Even assuming without admitting that the sale transaction is bona fide, since the property was purchased by the petitioners on 13.5.1998 which was subsequent to the mortgage in favour of the respondent and that too during the pendency of the O.A. proceedings before the D.R.T., it will not affect the rights of the respondent bank. Further it is stated that the officials of the first respondent bank visited the house property on 25.8.2002 and informed the petitioners that the respondent bank filed O.A.No.26 of 1999 on the file of D.R.T., Hyderabad against one Splendour Ceramics Private Limited and others; that N.Y. Narayana Murthy had offered the property as a collateral security for the loan facilities obtained from the bank; that the bank had obtained a decree against the company and the guarantors including the petitioners’ vendor and the bank initiated proceedings in R.P.No.16 of 2002 for recovery of the decretal amount and that the bank officials would drop proceedings against the property if they pay Rs.5.00 lakhs and the petitioners were forced to give an undertaking to the bank are all incorrect. The petitioners voluntarily offered to pay a sum of Rs.5.00 lakhs for releasing the mortgaged property, but the same was declined since the offer was too low having regard to the total decretal overdue. It is also averred that the petitioners, who purchased the mortgaged property during pendency of the O.A. proceedings, cannot now challenge the decree/recovery certificate issued by the DRT, Hyderabad, which became final. Further it is stated that the respondent bank filed all the original documents including the deed of guarantee executed by N.Y. Narayana Murthy at the time of evidence and all the documents had been marked as exhibits and subsequently they were misplaced by the D.R.T., Hyderabad. The allegations in para 8 of the affidavit had been denied. The allegations in paragraphs 9 and 10 also had been substantially denied. It is stated that the petitioners filed C.P.No.54 of 2003 in R.P.No.16 of 2002 before the Recovery Officer, and the Recovery Officer, after examining all the issues, dismissed the claim petition on 11.02.2005. The petitioners preferred an appeal R.A.No.3 of 2005 before the Debts Recovery Tribunal, Hyderabad and the appeal is pending since the petitioners are not ready to proceed with the case, but not as alleged by the petitioners. Further it is averred that the respondent bank initiated auction proceedings to sell the mortgaged property on 25.7.2007. The petitioners filed memo before the recovery officer to defer sale. The respondent bank filed counter to the memo that there was no stay granted by the Debts Recovery Tribunal for proceeding against the property and the appeal could not be disposed of not on account of records were called for in W.P.No.11170 of 2002, but on account of the petitioners not ready with the case. The auction was postponed due to absence of bidders. The respondent bank had obtained a fresh valuation report dated 11.8.2007 from the approved appraiser. The respondent bank issued an auction notice on 19.8.2007 fixing the date of auction as 26.9.2007 and the respondent bank is legally entitled to recover the decretal amount and its action to auction the mortgaged property is perfectly valid. It is also stated that the vendor of the petitioners N.Y. Narayana Murthy mortgaged the property and the same was admitted in his written statement. The respondent bank filed all the documents before the Debts Recovery Tribunal to prove that the said guarantor N.Y. Narayana Murthy mortgaged the said property in favour of the respondent bank as security for the loan sanctioned to M/s.Splendour Ceramics Pvt. Ltd., and the DRT allowed the O.A. which became final. Further it is stated that petitioners had not obtained stay of auction proceedings and mere filing of appeal R.A.No.3 of 2005 is not a bar for further proceeding against the mortgaged property. The appeal was filed in 2005 when the Presiding Officer was sitting regularly and after vacancy arose in 2006, the Presiding Officer, D.R.T., Visakhapatnam was made in-charge and he was sitting every fortnight for a week. The auction notice was published in Andhra Jyoti on 16.8.2007. The in- charge Presiding Officer, D.R.T., Chennai had taken up the matters from 27.8.2007 to 31.8.2007, but the petitioners had not taken any steps for disposal of the appeal. Further it is stated that the petitioners purchased the mortgaged property during pendency of O.A. proceedings and are bound by the decree and they cannot challenge the decree/recovery certificate issued by the DRT, Hyderabad, in this case which attained finality. Huge public money is involved and the respondent bank could not recover the decretal amount on account of interim stay of action proceedings. 8. It is no doubt true that certain submissions were made by the learned Senior Counsel representing the writ petitioners and certain alleged tampering had been pointed out and further certain submissions were made. Unless the original records are produced this cannot be effectively and properly decided. Certain further submissions were made that inasmuch as an appeal of writ petitioners is pending disposal, till the appeal is disposed of, the rights of the writ petitioners to be safeguarded. 9. In the light of the respective stands taken by the parties, this Court is of the considered opinion that the factual controversies raised in this regard cannot be effectively gone into by this writ court. Even otherwise since it is stated that already Recovery Appeal No.3 of 2005 had been preferred by the writ petitioners before the Debt Recovery Tribunal, Hyderabad against the orders of the Recovery Officer, the writ petitioners are at liberty to move appropriate applications in the said proceeding and the writ petitioners also are at liberty