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High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE ELIPE DHARMARAO & THE HONOURABLE MR. JUSTICE M. VENUGOPAL
ICICI Bank Ltd.,
Versus
P. Veerendar Chordia
Civil Revision Petition No.1844 of 2009 & M.P.No.1 of 2009
Decided on: 18-03-2010
Forfeiture - Sale of Mortgaged Property - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) - Section 13(4) - Rule 8(5) of the Security Interest (Enforcement) Rules, 2002 - The court held that the sale of a secured asset by private treaty is a sale within the meaning of SARFAESI Act and upheld the Bank's right to forfeit the amount due to the purchaser's default. The court also found that the Memorandum of Understanding was a completed and concluded contract between the parties, and the Tribunal had no jurisdiction to declare it unsustainable in law.
Fact of the Case:
The borrower defaulted on a loan, leading to the Bank initiating proceedings under the SARFAESI Act and agreeing to sell the mortgaged property to the respondent under a private treaty. The respondent failed to make the full payment within the agreed time, leading to the Bank forfeiting the amount and the respondent filing an appeal before the Debts Recovery Tribunal.
Finding of the Court:
The court found that the Bank was within its rights to forfeit the amount due to the respondent's default and that the Memorandum of Understanding was a completed and concluded contract between the parties. The court held that the Tribunal had no jurisdiction to declare the Memorandum of Understanding unsustainable in law.
Issues: 1. Jurisdiction of the Debts Recovery Tribunal to entertain the appeal filed by the respondent under Section 17(1) of the SARFAESI Act. 2. Sustainability of the order passed by the Debts Recovery Tribunal. 3. Relief entitled to the parties.
Ratio Decidendi: The court held that the sale of a secured asset by private treaty is a sale within the meaning of SARFAESI Act, and the Bank had the right to forfeit the amount due to the respondent's default. The court also found that the Memorandum of Understanding was a completed and concluded contract between the parties, and the Tribunal had no jurisdiction to declare it unsustainable in law.
Final Decision: The Civil Revision Petition filed by the Bank was allowed, and the order of the Debts Recovery Tribunal was set aside. The Bank was directed to adjust the forfeited amount towards the loan account of the borrower and initiate fresh proceedings for recovery of the rest of the dues from the mortgaged property.
ELIPE DHARMARAO, J.
One M/s.Adhilakshmi Oils Private Limited has availed financial assistance from the petitioner Bank by way of a term loan facility to the tune of Rs.498.76 lakhs, by creating a mortgage over the property in R.S.Nos.322/A, 322/2B, 322/3 of Thirumangalam Usalia Road, Thummakundu Village, Usilampatti Taluk, Madurai District, measuring an extent of 11.90 acres together with superstructures, factory and building by depositing the title deeds in favour of the petitioner/Bank. Thereafter, the said borrower company defaulted in repayment of the loan, leading to initiation of the proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short SARFAESI Act) by the Bank as against the borrower company.
.2. Pursuant thereo, the petitioner Bank had brought the above said property for sale on as is where is and what is where is basis by and the respondent approached the petitioner Bank by his letter dated 29. 2008 to purchase the said property and the petitioner Bank by their letter dated 310. 2008 has accepted the said offer of the respondent and agreed to sell the property under private treaty. The sale consideration was fixed as Rs.275 lakhs and the respondent was directed to make a payment of Rs.50 lakhs immediately and the balance amount of Rs.225 lakhs to be paid on or before December, 31, 2008. Thereupon, a Memorandum of Understanding was signed by the petitioner Bank, the respondent purchaser and the borrower on 212. 2008, whereby the respondent has deposited the amount of Rs.50 lakhs and the same was kept in a No lien account.
.3. From the materials placed on record it is seen that the respondent, by their letter dated 312. 2008, has requested extension of time till 21. 2009, stating that the Chairman of their group has passed away. In the said letter, the respondent has stated as follows:
.".... As per MoU signed by all the parties the payments should be completed by 312. 2008. I have already remitted a sum of Rs.50.00 lacs out of the total sale consideration of Rs.275.00 lacs. In view of the above developments we request you to kindly give time till 24/01/2009 to make the balance amount of Rs.225.00 lacs. To ensure that we honour our commitments please find enclosed our cheque bearing no.184788 Dated 24/01/2009 for the balance amount of Rs.225.00 lacs payable by us. All the terms and conditions in the MoU are acceptable to me. I request you to kindly consider extension of time till 24/01/2009. I shall once again assure you that I shall honour the same by that date. In the event of failure bank is free to take steps which they deem fit." (emphasis supplied)
.4. Pursuant to the said letter, the petitioner Bank, by their letter dated 312. 2008 has extended the time till 21. 2009, as has been prayed for on the part of the purchaser/respondent. However, the respondent, did not honour his commitment by 21. 2009 and again, by their letter dated 21. 2009 has sought extension of time till 2. 2009. In the said letter, the respondent has stated that:
.".... As we have unexpected development which has adversely affected our plans we seek extension of time till 07.02.2009 as a last chance. We undertake that we will not seek any extension further. We undertake to honour the commitment of remittance of balance amount of Rs.225.00 lacs on or before 07.02.2009 failing which bank is free to take the steps they deem fit. (emphasis supplied)
.5. For the above request of the respondent, the petitioner Bank, by their letter dated 21. 2009 has replied in the following terms:
.".... As to your representation through your letter dated January 22, 2009 seeking extension of time till February 07, 2009, we hereby make it clear that your representation is considered on condition that no further extension of time will be permitted. We also make it clear that if the balance payment of Rs.225.00 lacs is not paid on or before February 07, 2009, the amount o
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