Banks must ensure fair market valuations in auctions of mortgaged properties to protect borrowers' rights, and not depress values arbitrarily which would lead to undue prejudice.

JUDGMENT

1. This petition has been filed under Article 227 of the Constitution of India for quashing/setting aside of the order dated 13th January, 2020 passed by the learned Additional District Judge/Executing Court, Saket Courts, in Ex. No. 337/2017. The petitioner is the Judgement Debtor and the respondent, as the Decree-Holder has sought the execution of the Final Decree dated 20th August, 1996.

2. Some of the relevant facts may be noted at this juncture. The petitioner had on 4th November, 1987 secured a loan of Rs.20 lakhs from the respondent against the mortgage of Plot No M-5, G.K.II, New Delhi. A Mortgage Deed was executed on 15th January, 1988. The agreed rate of interest according to the petitioner was 18% simple interest per annum.

3. Since the petitioner defaulted in the repayment of the loan, a suit was filed in the High Court [CS (OS) No. 1174/1991] by the respondent for the recovery of Rs.20,19,158.65/- along with interest @ 18% p.a. from the date of filing of the suit till recovery, with a further prayer for the sale of the mortgaged property in case of non-payment.

4. A preliminary decree was passed on 21st February, 1992 upon an application filed under Order XXIII Rules 1 & 3 CPC. In terms of the said preliminary decree based on a compromise arrived at between the parties, the petitioner had agreed to pay by 30th June, 1995 a sum of Rs.23,37,177/- along with costs of proceedings amounting to Rs.22,688.75/- The petitioner claims that the interest upon the decretal amount was simple and subject to RBI Guidelines. In 1994, the petitioner went into liquidation and defaulted in making payments. This resulted in a final decree being passed on 20th August, 1996 directing the sale of the mortgaged property.

5. Execution was filed on 26th May, 1997 being Ex. P. No. 180/1997 for the recovery of Rs.57,04,365.90/- as on 31st March, 1997. The petitioner was directed, vide orders dated 28th July, 2010, to deposit the decretal amount along with simple interest. This order of the Single Bench of this court was upheld by the Division Bench vide order dated 2nd April, 2013. A Special Leave Petition was filed by the petitioner which was dismissed by the Supreme Court on 21st April 2014 when the petitioner failed to comply with the earlier order dated 30th September, 2013 whereby the petitioner was directed to deposit a sum of Rs.One crore as it could deposit only Rs.50 lakhs.

6. Due to the enhancement in the pecuniary jurisdiction of this court, the Execution Petition was transferred to the District Court. An order of attachment of the property was issued on 12th March, 2018 and the possession taken on 13th April, 2018. The valuers at the behest of the respondent submitted a valuation report dated 18th May, 2018 valuing the property at Rs.24,16,78,125/-.

7. Mr. Anant Aggarwal, the learned counsel for the petitioner has submitted that the grievance of the petitioner is two-fold. One is that the respondent has wrongly calculated the interest liability of the petitioner by taking a compound rate and thus exceeding 18% which is the upper limit fixed by the RBI under its Guidelines. Attention has also been drawn to the Circular of the RBI dated 26th August, 2002 (Annexure A-10) that provided that the effective rate of interest should not be exceeded whereas here it was 18%. Secondly, the learned counsel has argued that despite the respondent's valuer fixing the valuation of the property at more than Rs.24 crores, when the property was to be put for auction, it reduced the reserve price to Rs.16,00,00,000/- from Rs.18,13,00