Court declined to interfere in the auction procedure on grounds of proper compilation of mandatory requirements of SARFAESI Act by the bank: High Court of Delhi

CM(M) 684 2021 such credit facilities the petitioner company had mortgaged 12 properties directors availed various credit facilities from the respondent bank. To avail petitioner no.1 of which petitioners no. 2 to 4 are Brief facts leading up to the filing of the present petition are that the Act 2002VIA VIDEO CONFERENCING] HON BLE MR. JUSTICE AMIT BANSAL PUNJAB AND SIND BANK Through: Ms. Seema Gupta Advocate. Respondent Riya Gulati Advocates. Navneet Mr. Aditya Awasthi and Ms. with Mr. Sidharth Chopra Mr. Through: Mr. Kirti Uppal Senior Advocate Petitioners FRANCO LEONE LIMITED AND ORS No.38650 2021CM(M) 684 2021 & CM No.35081 2021 for Stay) CM Date of decision: 29th October 2021 IN THE HIGH COURT OF DELHI AT NEW DELHI Signed By:ARUNAKANWARSigning Date:31.10.202117:32:28Signature Not Verified CM(M) 684 2021 27th September 2021 the Presiding Officer was on leave and the matter was application was issued to the bank returnable for 27th September 2021. On Recovery Tribunal II on 24th September 2021. Notice on the said filing a Securitization Application being SA No.119 2021 before the Debts The present auction notice was challenged by the petitioner by way of properties of the petitioners. auction notice dated 1st September 2021 to sell 8 out of the 12 mortgaged improve their offer however the respondent bank issued the impugned respondent bank the petitioners requested a copy of the bank policy to Recovery Management Policy of the bank. In response to the letter by the requested the petitioners to improve their OTS proposal to match it with the Delhi 110005. Vide letter dated 23rd August 2021 the respondent bank of property bearing no. 11786 6 Ground Floor Sat Nagar Karol Bagh New petitioners vide letter dated 29th November 2018 handed over possession SARFAESI Act to take possession of the mortgaged properties the consequent to the respondent bank taking steps under Section 13(4) of the payment of Rs.30 00 00 000 in respect of their dues. In the meanwhile 24th February 2021 the petitioners proposed a One Time Settlementbank to sell a few of the properties to repay their dues. Finally on October 2018 to 31st February 2020 sought permission of the respondent to make payment of Rs.46 13 45 410.39 . The petitioners from 26th bank under Section 13(2) of the SARFAESI Act calling upon the petitioners notice dated 5th May 2018 was issued to the petitioners by the respondent company was declared to be Non Performing Asset and a demand with the respondent bank. On 31st March 2018 the account of the petitioner Signed By:ARUNAKANWARSigning Date:31.10.202117:32:28Signature Not Verified CM(M) 684 2021 certain newspapers as enclosures however the same has not been supplied auction. Even though there is a reference in the aforesaid auction notice to notice dated 01st September 2021 nowhere provides the time and place of present case has been sent to the petitioner. He further states that the auction upon the aforesaid judgment it is submitted that no individual notice in the be given to the borrower and the said provisions are mandatory. Relying 2014) 5 SCC 610 to contend that individual notice under Rule 8(6) has to the Supreme Court in Mathew Varghese v. M. Amritha Kumar and Ors. complied with. Reference in this regard has been made to the judgment of Enforcement) Rules 2002 which are mandatory in nature have not been the petitioner that Rule 8(6) and Rule 8(7) of the Security Interest It is contended by the learned senior counsel appearing on behalf of and 29th October 2021. been filed and both counsels for parties were heard on 28th October 2021 was not to be carried till the next date of hearing. Reply and rejoinder have are subject matter of the present petition however the sale conformation was directed that the respondent bank could auction the two properties that Notice was issued in the present petition on 06th October 2021 and it Presiding Officer at any of the Debt Recovery Tribunals in Delhi. aforesaid SA when both the parties confirmed that currently there is no parties to verify whether or not the DRT has a Presiding Officer to hear the Court on 5th October 2021 when it was adjourned for 6th October 2021 for the petitioner filed the present petition. The petition was listed before this Since there was no Presiding Officer available on 1st October 2021 30th September 2021. adjourned to 1st October 2021. The term of the Presiding Officer ended on Signed By:ARUNAKANWARSigning Date:31.10.202117:32:28Signature Not Verified CM(M) 684 2021 out of which 8 were put for auction and only in respect of two properties Rs.44 70 00 000 which was secured by way of mortgage of 12 properties iv) the total loan sanctioned to the petitioner was for a sum of cannot have any objection to the aforesaid properties being auctioned communication dated 29th November 2018. Accordingly the petitioners Karol Bagh property to the respondent bank as evidenced from the the petitioners themselves had handed over the possession of the petitioner or any other person could also participate any objection to the respondent bank holding a public auction in which the repay the outstanding amount and therefore the petitioner could not have 31st August 2021 and that they would be required to sell the properties to ii) the petitioners have admitted their account to be NPA vide letter dated as noted in the auction notice i) the total outstanding amount as on date is more than Rs.72 43 00 000 has drawn attention of this Court to various documents to show that: Per contra the counsel appearing on behalf of the respondent bank August 2021 was never provided to the petitioner. made a better offer. The said policy referred to in the letter dated 31st asked the respondent Bank to furnish its policy so that the petitioner could better offer. In response the petitioner vide letter dated 31st August 2021 Rs.30 00 00 000 was rejected and the petitioner was advised to make a Time Settlement proposal on behalf of the petitioner of letter dated 23rd August 2021 of the respondent bank whereby the One Next senior counsel for the petitioner has drawn my attention to the to the petitioner. Signed By:ARUNAKANWARSigning Date:31.10.202117:32:28Signature Not Verified CM(M) 684 2021 out by the respondent bank. record this Court is not inclined to interfere with the auction process carried 11. Having heard the counsels for the parties and having gone through the functioning of the DRT and the urgency of the relief sought. 10. The present petition is being entertained only on account of the non properties. reserved price fixed by the respondent bank in respect of the aforesaid in respect of the Noida property. Both the aforesaid bids are in excess of the have been received whereas the petitioner has offered only Rs.1 72 51 000 Karol Bagh property and Rs.2 83 65 000 in respect of the Noida property proceedings whereby the highest bids of Rs.42 48 000 in respect of the Attention of this Court has also been drawn to details of the e auction Bagh and Noida and at the residential premises of the petitioners in Meera vii) Sale banner was also affixed at the two properties in question at Karol notice was without enclosures and on 04th September 2021 and nowhere has it been stated that the aforesaid vi) it has been admitted in the petition that the auction notice was received publication was duly sent to the petitioner along with the sale notice respect of time place and date of the auction. The aforesaid newspaper publication have also been filed with the reply which gives full detail in relevant portions of the aforesaid newspapers with regard to the said Financial Express and Jansatta were enclosures to the aforesaid notice. The v) the auction notice specifically notes that the newspaper publications in at Karol Bagh and Noida bids have been received by the respondent bank namely properties located Signed By:ARUNAKANWARSigning Date:31.10.202117:32:28Signature Not Verified CM(M) 684 2021 object to the auction conducted by the respondent bank in respect of the question to repay the loan of the respondent bank the petitioners cannot financial resources to repay the bank and wanted to sell the properties in 14. The fact of the matter is that when the petitioners did not have the present case. Mathew Varghesewould not come to the aid of the petitioner in the the residential premises of the petitioners. Therefore the judgment in of auction were duly affixed not only at the properties in question but also at clearly demonstrate that the sale banners containing the time date and place 13. The photographs filed by the respondent bank along with its reply the enclosures. non receipt of the enclosures since the sale notice specifically mentioned if that were the case then the petitioner ought to have protested about the However counsel for the respondent bank is correct in her submission that was provided in the said newspaper and not in the aforesaid notice. accompanied by the newspapers as the date time and place of the auction date. Counsel for the petitioner has contended that the said notice was not September 2021 which was more than 30 days before the proposed auction dated 01st September 2021 was received by the petitioner on 04th page 17 of the electronic file has admitted that the impugned auction notice auction date. The petitioners themselves in paragraphof the petition at enclosed newspapers was duly sent to the petitioners 30 days before the disbelieve the respondent bank that the auction notice along with the fully complied with by the respondent bank. There is no reason to provisions of the SARFAESI Act and the rules framed thereunder have been 12. There is merit in the contention of the respondent that all mandatory Signed By:ARUNAKANWARSigning Date:31.10.202117:32:28Signature Not Verified CM(M) 684 2021 OCTOBER 29 2021 AMIT BANSAL J. Interim order passed on 6th October 2021 stands vacated. petition along with the accompanying applications are dismissed. In view of the above no grounds for interference are made out. The below the amount due. that the said proposal has been rejected by the bank as the same was well respondent bank. Counsel for the respondent bank on instructions states 2021 a fresh OTS proposal was made on behalf of the petitioners to the am also informed that after the conclusion of the hearing on 28th October the aforesaid two properties would recover only a sum of Rs.3 26 00 000 . I bank the amount due currently is more than Rs. 74 00 00 000 . The sale of recovered from the borrower. In the present case as per the respondent that the objective of the policy is to receive maximum amounts that can be the reply filed by the respondent bank before this Court wherein it is stated same. Yet the relevant portions of the said policy has been reproduced in policy is not a public document and the bank is not bound to disclose the policy the counsel for the respondent bank has contended that the said 15. As regards the ground taken with respect to non receipt of the OTS respect of the said properties was much less than the price fetched in the participate in the auction and the price which they were willing to offer in participated in the auction. However the fact remains that they did not aforesaid properties. If the petitioners so desired they could have Signed By:ARUNAKANWARSigning Date:31.10.202117:32:28Signature Not Verified 

Summary: When the petitioners did not have the financial resources to repay the bank and wanted to sell the properties in question to repay the loan of the respondent bank, the petitioners cannot object to the auction conducted by the respondent bank in respect of the mortgaged properties. The aforesaid has been upheld by the High Court of Delhi while adjudicating the case of Franco Leone Limited And Ors V. Punjab And Sind Bank [CM(M) 684/2021 &amp; CM No.35081/2021] which was decided upon by  single judge bench comprising Justice Amit Bansal on 29th October 2021. The facts of the case are as follows. The petitioners availed various credit facilities from the respondent bank. To avail such credit facilities, the petitioner company had mortgaged 12 properties with the respondent bank. The account of the petitioner company was declared to be Non Performing Asset (NPA) and a demand notice was issued to the petitioners by the respondent bank under Section 13(2) of the SARFAESI Act, calling upon the petitioners to make payment of Rs.46,13,45,410.39/-. The petitioners, sought permission of the respondent bank to sell a few of the properties to repay their dues. the petitioners proposed a One Time Settlement (OTS) payment of Rs.30,00,00,000/- in respect of their dues. respondent bank taking steps under Section 13(4) of the SARFAESI Act to take possession of the mortgaged properties, the petitioners, vide letter dated 29th November, 2018, handed over possession of the property. In response to the letter by the respondent bank, the petitioners requested a copy of the bank policy to improve their offer, however, the respondent bank issued the impugned auction notice to sell 8 out of the 12 mortgaged properties of the petitioners. The present auction notice was challenged by the petitioner by way of filing a Securitization Application before the Debts Recovery Tribunal-II (DRT). The court perused the facts and arguments presented. It was of the opinion that “ There is merit in the contention of the respondent that all mandatory provisions of the SARFAESI Act and the rules framed thereunder have been fully complied with by the respondent bank. There is no reason to disbelieve the respondent bank that the auction notice along with the enclosed newspapers was duly sent to the petitioners 30 days before the auction date. As regards the ground taken with respect to non-receipt of the OTS policy, the counsel for the respondent bank has contended that the said policy is not a public document and the bank is not bound to disclose the same. Yet, the relevant portions of the said policy have been reproduced in the reply filed by the respondent bank before this Court, wherein it is stated that the objective of the policy is to receive maximum amounts that can be recovered from the borrower. In view of the above, no grounds for interference are made out. The petition along with the accompanying applications are dismissed.”