Back
IN THE HIGH COURT OF KERALA AT ERNAKULAM
Gopinath P.
P.K.Jagdev – Petitioner
Versus
Indian Bank And Ors. – Respondents
WP(C) NO. 749 OF 2021
Decided On : 19-03-2024
Debts Recovery Tribunal - Challenge to Sale Proceedings - Recovery of Debts and Bankruptcy Act, 1993 - SARFAESI Act - [PARTNERSHIP FIRM, MORTGAGE, SALE PROCEEDINGS] - [Recovery of Debts and Bankruptcy Act, 1993 - Section 17, Indian Partnership Act, 1932 - Section 29, Security Interest (Enforcement) Rules, 2002 - Rule 9(4)] - The court considered the challenge to the sale proceedings initiated by the bank under the Recovery of Debts and Bankruptcy Act, 1993 and the SARFAESI Act. The petitioner, grandson of the late N. Sundareswaran, challenged the sale on various grounds including lack of proper valuation, delay in depositing the balance sale consideration, and absence of notice. The court held that the petitioner had no locus standi to challenge the proceedings initiated by the bank under the SARFAESI Act against the properties mortgaged to the bank and in respect of action initiated against the properties of the firm and/or partners of the firm. However, the petitioner was entitled to challenge the sale to the extent of the rights obtained by him under the Settlement Deed of 1979. The court rejected the contention that there was no proper mortgage created in respect of the properties obtained by the petitioner under the Settlement Deed of 1979. It also held that the petitioner was not entitled to notice before the property, which was the subject matter of the 1979 Settlement Deed, was brought to sale. The court further ruled that the valuation was not suspect and there was no unreasonable delay in confirming the sale, dismissing the writ petition.
Fact of the Case:
The petitioner, grandson of the late N. Sundareswaran, challenged the sale proceedings initiated by the bank under the Recovery of Debts and Bankruptcy Act, 1993 and the SARFAESI Act. The petitioner claimed that the properties settled in his favor were sold without proper valuation and without notice to him. The bank contended that the petitioner had no locus standi to challenge the proceedings and that the properties were subject to valid mortgages.
Finding of the Court:
The court held that the petitioner had no locus standi to challenge the proceedings initiated by the bank under the SARFAESI Act against the properties mortgaged to the bank and in respect of action initiated against the properties of the firm and/or partners of the firm. However, the petitioner was entitled to challenge the sale to the extent of the rights obtained by him under the Settlement Deed of 1979. The court rejected the contention that there was no proper mortgage created in respect of the properties obtained by the petitioner under the Settlement Deed of 1979. It also held that the petitioner was not entitled to notice before the property, which was the subject matter of the 1979 Settlement Deed, was brought to sale. The court further ruled that the valuation was not suspect and there was no unreasonable delay in confirming the sale, dismissing the writ petition.
Issues: Locus standi of the petitioner to challenge the sale proceedings, validity of the mortgage created in respect of the properties obtained by the petitioner under the Settlement Deed of 1979, entitlement to notice before the sale, proper valuation of the properties, and delay in confirming the sale.
Ratio Decidendi: The petitioner had no locus standi to challenge the proceedings initiated by the bank under the SARFAESI Act against the properties mortgaged to the bank and in respect of action initiated against the properties of the firm and/or partners of the firm. However, the petitioner was entitled to challenge the sale to the extent of the rights obtained by him under the Settlement Deed of 1979. The court rejected the contention that there was no proper mortgage created in respect of the properties obtained by the petitioner under the Settlement Deed of 1979. It also held that the petitioner was not entitled to notice before the property, which was the subject matter of the 1979 Settlement Deed, was brought to sale. The court further ruled that the valuation was not suspect and there was no unreasonable delay in confirming the sale.
Final Decision: The writ petition was dismissed.
JUDGMENT :
The petitioner has approached this court challenging Ext.P3 order of the Debts Recovery Tribunal, Ernakulam, on T.S.A No.47/2016 arising out of S.A No.271/2008 filed before the Debts Recovery Tribunal, Chennai and also Exhibit P5 is the order of the Debts Recovery Appellate Tribunal on R.A (SA) 182/2018 dismissing the appeal filed by the petitioner against Ext.P3 order.
The facts which are to be noticed for the adjudication of the issues arising for consideration may be briefly noticed:-
2. The petitioner is the grandson of the late N. Sundareswaran who was the Managing Partner of a registered partnership firm -namely M/s N.Sundareswaran (hereinafter referred to as ‘the firm’). The firm was engaged in the business of processing and exporting cashews and was enjoying credit facilities from the Indian Bank through its Kollam branch. Though the business of the partnership firm continued fairly successfully till the year 1980-81, it appears that the business of the firm ran into rough weather, leading to the mounting of liabilities with the Indian Bank. Considering the long banking relationship with the firm, the Indian Bank extended a 'revival and rehabilitation package' to the firm. Even thereafter, the firm's business did not pick up, and finally, the bank decided to initiate proceedings for recovery of the amounts due to it. The bank filed an original application under the provisions of the Recovery of Debts and Bankruptcy Act, 1993 (In short 'the 1993 Act) before the Debts Recovery Tribunal at Chennai, which is now transferred and pending before the Debts Recovery Tribunal-II, Ernakulam, as TA 1/2005. It may be noted here that the petitioner, the grandson of the late N. Sundareswaran and the son of one of the partners of the firm (Smt. Vijayalakshmi) is not a party in the proceedings under the 1993 Act. The bank also initiated proceedings under the SARFAESI Act, leading to the issuance of a sale notice published on 14-06-2008, which is on record as Annexure-II, along with Ext.P1 Securitisation Application filed before the Tribunal. In terms of that notice, a sum of Rs. 112,04,05,628.14 (Rupees One hundred and twelve crores, four lakhs five thousand six hundred and twenty eight and fourteen paise) was due as of 31.07.2007. The properties mentioned in that notice were sold on 24-07-2008. According to the petitioner, the entire extent of the property was purchased by the 2nd respondent for Rs.4,45,50,000/-.
3. A parcel of the property having an extent of 16 ares and 18.8 Sq. Mtr in Sy No.9658 of Kollam Village (forming part of the properties sold) was settled on the petitioner and his sister through a settlement deed dated 20-12-1979 executed by his mother -Smt. Vijayalakshmi. The petitioner also claims that under a Will executed by late N. Sundareswaran, the petitioner became entitled to some further extent of property belonging to late N. Sundareswaran. It is the case of the petitioner that there is no valid mortgage in respect of the property settled in favour of the petitioner and his sister by their mother -Vijayalakshmi as only an attested copy of the document executed on 12-12-1969 had been deposited to create the mortgage. It is the case of the petitioner that there was no notice of the sale to the petitioner. It is the case of the petitioner that when the bank extended the renewal and rehabilitation package in the year 1991, it ought to have been aware of the settlement deed executed in the year 1979 and, therefore, the petitioner was also entitled to put on notice regarding the sale. It is the case of the petitioner that there was no proper valuation of the properties brought to sale through Annexure-II notice in Ext.P.1 before the sale was conducted. Certain discrepancies in the extent mentioned in the valuation report, which is on record along with the written statement filed by the bank before the Tribunal, are referred to demonstrate that the sale was conducted without proper valuation. It is also the case o
The petitioner had no locus standi to challenge the proceedings initiated by the bank under the SARFAESI Act against the properties mortgaged to the bank and in respect of action initiated against th....
The petitioner had no standing to challenge the bank's actions under the SARFAESI Act, except in relation to the property obtained under the settlement deed.
Sales executed after taking possession under the SARFAESI Act are void, affirming the authority of civil courts in possession disputes involving third parties.
Delay defeats equity and can render a petition unentertainable, especially in cases where the petitioner was aware of the proceedings but failed to act in a timely manner.
Court held that transactions made during the subsistence of a mortgage are void under the SARFAESI Act; the auction purchaser's rights were upheld despite challenges to the validity of earlier transf....
Compliance with statutory notice requirements is imperative in mortgage auctions; failures may invalidate the sale, preserving the mortgagor's right of redemption until formal sale registration.
The main legal point established in the judgment is that when an alternative remedy is available to challenge an order under the SARFAESI Act, the instant writ petition is not maintainable.
The court affirmed the validity of a mortgage auction, emphasizing banks' rights over secured properties despite challenges from subsequent purchasers and procedural compliance in auction processes.
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
