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IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR
KULDEEP MATHUR, J.
Anil Kumar Tiwari S/o Sh. Deen Dayal Tiwari – Appellant
Versus
State Of Rajasthan, Through PP – Respondent
S.B. Criminal Misc(Pet.) No. 735/2022
Decided on : 09-04-2024
SARFAESI ACT - Cognizance and Auction Proceedings - Sections 13(2), 13(4), 32 of SARFAESI Act, Sections 420, 406, 120-B IPC - The court discussed the provisions of the SARFAESI Act, particularly Sections 13(2) and 32, which provide for the enforcement of security interests and immunity for bank officials acting in good faith. The court interpreted these provisions to conclude that the bank officials conducted the auction in compliance with the law and were entitled to protection from prosecution. The court also highlighted that the allegations of cheating under IPC were not substantiated, as the necessary elements of the offences were not present.
Fact of the Case:
M/s Parashwanath Stone Impex availed loans from Bank of Baroda, which were declared non-performing due to non-payment. The bank conducted an auction of secured assets, which was later challenged by the borrower, leading to criminal proceedings against bank officials for alleged cheating.
Finding of the Court:
The court found that the auction was conducted in accordance with the SARFAESI Act and that the bank officials acted in good faith. The allegations of cheating were not supported by evidence, and the courts below failed to apply the law correctly.
Issues: Whether the bank officials were entitled to immunity under Section 32 of the SARFAESI Act and whether the allegations of cheating under IPC were substantiated.
Ratio Decidendi: The court held that the bank officials were protected under Section 32 of the SARFAESI Act for actions taken in good faith. It emphasized that the elements of cheating under IPC were not established, as there was no evidence of dishonest intention or misrepresentation.
Final Decision: The court allowed the petition, quashing the orders of cognizance and the revision petition, thereby dismissing the criminal proceedings against the bank officials.
ORDER :
KULDEEP MATHUR, J.
1. By way of filing the present criminal misc petition, the petitioners have prayed for the following reliefs:-
1. The cognizance taken against petitioner vide order dated 22.01.2018 passed by Judicial Magistrate, First Class, Bijoliya in criminal case no.27/2018 be kindly quashed and set aside.
2. The revision order dated 04.10.2021 passed by Additional Session Judge No.3, Bhilwara, Mandalagarh camp passed in Revision petition 38/2018 wherein the learned Court has upheld order 22.01.2018 be kindly quashed and set aside.”
2. Succinctly stated facts of the present case are that M/s Parashwanath Stone Impex (hereinafter referred to as “the firm”), through its partners i.e. the respondent No.2 Mr. Mahendra Kumar Jain, Smt. Nirmala Jain and Smt. Seema Sunil Shah, had availed a Cash Credit loan of Rs.20,00,000/- and a Term loan of Rs.50,00,000/- (in total Rs.70,00,000/-) from Bank of Baroda, Bijoliya Branch, District Bhilwara against the following securities:-
2) Hypothecation agreement of Plant & Machinery
3) Industrial land of Shri Mahendra Kumar Son of Shri Sundar Lal Jain, on part of Araji Nos.1417/1, 1418 & 1419 Khata No.229 admeasuring 2590.90 Sq. Mtrs.
4) Industrial land of Shri Sunil Roopchand Shah on part of Araji Nos.1417/1, 1418 & 1419 Khata No.229 admeasuring 2510 Sq. Mtrs.
5) Personal Guarantee made by Mr. Sunil Roop Chand Shah.
3. The borrowers failed to make payment of the principal as well as the interest charged on the loan and therefore, the aforesaid loans were declared non-performing assets and a demand notice dated 29.04.2016 under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as “SARFAESI Act”) for the total due amount of Rs.66,45,613/-along with interest w.e.f. 31.03.2016 was served upon the firm. In the notice it was clearly stated that in case the demand/payment is not made, the immovable property i.e. Industrial land admeasuring 2590.90 Sq. Mtrs. on part of Araji Nos.1417/1, 1418 & 1419, Khata No.229, situated at back side of Shri Parashwanath Jain Mandir, Near NH-76, Gram Bijoliya, Tehsil Bijoliya, District Bhilwara shall be subjected to proceedings under Section 13(4) of SARFAESI Act for the enforcement of security interest.
4. Indisputedly, the firm could not satisfy the demand raised vide the demand notice dated 29.04.2016. In these circumstances, on 04.10.2016, under the orders of the District Magistrate, the possession of the secured assets was taken by the Authorized Officer and a tender auction notice dated 16.07.2016 with the reserve price of Rs.90,00,000/- was published.
5. The petitioners being the Authorized Officers of Bank of Baroda, on 20.12.2016, conducted auction of the secured assets as per the provisions of SARFAESI Act. The auction proceedings were conducted in the presence of the respondent No.2. The bid made by co-accused-Mr. Sunil Shah (also the guarantor), of Rs.1,10,02,000/- (for Plant and Machinery Rs.45.01 lacs and for land Rs.65.02 lacs) being the highest was accepted.
6. The demand draft of unsuccessful bidders were returned to them on their request and the auction proceedings were concluded successfully.
7. Being aggrieved by the auction dated 20.12.2016 for the sale of plant and machinery as well as the property of the firm, the respondent No.2 on 28.12.2016 filed a Securitisation Application No.138/2016 (Mahendra Kumar Jain Vs. Bank of Baroda) before the DRT, Jaipur (DRT) seeking quashing of the auction sale dated 20.12.2016 and restraining the respondent bank from confirming the sale. The Presiding Officer of the DRT, Jaipur, after going through the entire auction proceedings vide order dated 31.05.2019, was pleased to dismiss the SA No.138/2016 being devoid of merit.
8. It is pertinent to note here tha
The SARFAESI Act mandates exhausting statutory remedies before seeking extraordinary relief under Article 226; procedural compliance is essential, and the auction process cannot be set aside absent s....
The main legal point established in the judgment is that the protection provided under Section 32 of the SARFAESI Act, 2002 can be invoked to quash criminal proceedings when the actions are taken in ....
Mandatory compliance with procedural requirements under the SARFAESI Act is essential; failure to adhere prejudices borrowers' rights and invalidates auction proceedings.
Auction sale under SARFAESI Act upheld; simultaneous civil proceedings do not invalidate the completed transaction, and allegations of undervaluation found unsubstantiated.
The court reinforced that compliance with statutory notice requirements and fair valuation is essential in property auctions under the SARFAESI Act to protect borrower rights.
The sale certificate under the SARFAESI Act is sufficient for title transfer, negating the need for further registration, and the High Court should not intervene in SARFAESI proceedings when alternat....
While expressing the aforesaid view, we are conscious that the powers conferred upon the High Court under Article 226 of the Constitution to issue to any person or authority, including in appropriate....
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