Auction sale under SARFAESI Act upheld; simultaneous civil proceedings do not invalidate the completed transaction, and allegations of undervaluation found unsubstantiated.

JUDGMENT :

SIBO SANKAR MISHRA, J.

1. This writ petition has been filed by the petitioners assailing the order dated 15.11.2019 passed by the Debts Recovery Appellate Tribunal, Kolkata (hereinafter referred to as “DRAT”) in Appeal No.42 of 2019, whereby the learned Appellate Tribunal allowed the appeal filed by the State Bank of India (since merged with Union Bank of India) and reversed the order dated 02.04.2019 of the learned Debts Recovery Tribunal, Cuttack (hereinafter referred to as “DRT”). By the said order dated 02.04.2019, the DRT had allowed S.A. No. 1 of 2018 filed by the petitioners under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as “SARFAESI Act”), quashed the demand and possession notices as well as the auction sale and directed refund of the auction purchaser’s money with interest. The petitioners seek quashing of the DRAT order and a declaration that the measures taken by the bank under Sections 13 (2), 13(4) and 14 of the SARFAESI Act, including the auction sale and the consequential sale certificate and registered sale deed executed in favour of Opposite Party No.5, are illegal and void.

2. Mr. Ramakanta Mohanty, learned Senior Counsel appearing for the petitioners, Mr. S.P. Mishra, Senior Advocate, for opposite party no. 3 and Mr. D.C. Sabat, Advocate for opposite party no. 5, have been heard in extenso.

3. The facts giving rise to the present writ petition are that the petitioners, a proprietorship concern and its guarantor, had availed a cash credit limit of Rs.10,00,000/- (rupees ten lakh) in 2004, subsequently enhanced to Rs.20,00,000/- (rupees twenty lakh) in 2010, secured by mortgage of immovable properties of the proprietor and guarantor. Upon default, the loan account was classified as Non-Performing Asset (NPA). The bank issued notices under Section 13 (2) of the SARFAESI Act on 06.02.2015 and 24.02.2016, followed by possession notices under (4) on 03.07.2015 and 04.07.2016.

4. The secured asset was brought to auction on 18.04.2017 and sold on 19.05.2017 for Rs. 29,04,000/- to Opposite Party No.5. A sale certificate was issued on 12.06.2017 and pursuant to an order of the District Magistrate under Section 14 of the SARFAESI Act, physical possession was delivered to the auction purchaser on 20.12.2017. A registered sale deed was executed on 22.12.2017.

5. Meanwhile, a civil suit (C.S. No.244/2016) for specific performance had been instituted by one Samarendra Nanda based on an agreement with the guarantor. The Civil Court had passed an interim order of status quo which was later set aside in appeal. In CMP No.586 of 2017, this Court had also directed maintenance of status quo on 12.05.2017, which order was vacated on 01.11.2017.

6. The petitioners filed S.A. No.1 of 2018 before the learned DRT, Cuttack, challenging the measures under Section 13 (4) and the subsequent auction sale. By order dated 02.04.2019, the DRT allowed the S.A., quashed the demand and possession notices, the auction notice and the sale certificate and directed refund of the sale consideration to the auction purchaser with FD interest, while requiring the petitioners to deposit Rs.25,00,000/- (rupees twenty five lakhs) and the balance dues within one month.

7. The bank preferred appeal before the DRAT, Kolkata. By judgment dated 15.11.2019, the DRAT allowed the appeal, set aside the order of DRT and upheld the measures taken by the bank. The petitioners have now approached this Court challenging the order of the DRAT.

8. Mr. Ramakanta