ABDUL RAHIMAN S/O. ABBAS, APSARA SUPER BAZAR Vs. ORIENTAL BANK OF COMMERCE, REP. BY ITS AUTHORISED OFFICER, MR. RAMAKRISHNA P. S/O. SRI P.N. MANILATHAYA AND MRS. RACHNA RAI W/O MR. RAJESH PAI

JUDGEMENT

(1.) THE undisputed facts that led to the filing of the present petitions are as under: The petitioner was the borrower of different kinds of loans consisting of house loan, term loan and cash credit loan. At the time of borrowing the loans, as a primary security, he hypothecated shop No. 2 along with 25 cents of land situated at Town Vittal, in Buntwal Taluk. The collateral security was stock -in -trade i.e., the garments pertaining to the business of the borrower. It is also not in dispute that in the month of November, 2005, all the accounts of the borrower became Non -Performing Assets. Accordingly, it was intimated to the borrower. In January 2006, first notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement Security Interest Act, 2002 ('the Act' for short) came to be issued. However, there was no positive response to the said notice by the petitioner. After 60 days, symbolic possession was taken on 18.12.2006 which was notified by publication in a newspaper on 5.4.2007. Even at that stage, the petitioner has not made any positive payments or positive steps to clear his loan either approaching the bank or approaching DRT questioning the action of the 1st respondent bank. Ultimately, physical possession of the property came to be made on 6.8.2008 in the presence of the representative and guarantor of the borrower. Ever, then, there was no proper action on behalf of the borrower. Therefore, there was a proposal to bring the properties for sale after adhering to due process of law by the bank, is the contention of the bank. But the petitioner contends that there are irregularities which resulted in illegality of confirmation of sale of the properties in favour of the auction purchasers, who are 2nd and 3rd respondents before us. Apparently, at the time of bringing the properties for auction, seeking some time, the borrower said to have given cheque for Rs. 20,00,000/ - in the month of August, 2008, but the same was dishonoured. There is Section 138 Negotiable Instrument Act proceedings against the borrower initiated by the 1st respondent. According to the borrower, though the properties are situate at Vittal Town, the auction was held at Mangalore District Head Quarters. It is further contended that only 2 bidders were present at the time of auction and therefore with the collusion of the officials of the bank, the properties were sold for a meager price when the properties actually valued more than Rs. 60,00,000/ - and above at that time. According to the learned Counsel for the petitioner decision reported in the case of Authorized Officer, Indian Overseas Bank and Another Vs. Ashok Saw Mill, AIR 2009 SC 2420 , especially, paras 36 and 37 of the judgment applies and so also Securitisation and Reconstruction of Financial Assets and Enforcement Security Interest Rules 6, 7 and 8 are applicable.

(2.) WE have gone through the judgment of the Apex Court, in particular, paras 36 and 37. Though the petitioner is entitled to seek for relief of the present nature, the facts on record do not persuade us to grant the said relief for the laches on the part of the petitioner which are discussed herein below. So far as his contention that hypothecated goods have to be sold first and then proceed against the immovable properties, we find from the provisions of Rules 6 and 8 that the arrangement of provisions is only for convenience sake, but none of the provisions of the said rules mandates that creditor should first proceed against hypothecated goods and after exhausting such remedy, he should proceed against the secured properties.

(3.) WHEN we go through the records, we note that after taking physical possession of properties in question, the bank made several attempts to see that stock -in -trade hypothecated to the bank was brought for sale. However there was no positive action on the part of the borrower. Therefore, even the stock -in -trade could not be sold though it was hypothecated to the bank. Ultimately, after wide publicity of auction, after notifying the reserve price based on valuation report secured by the bank, auction was held at District Head Quarters Mangalore. According to the bank, they did so because of several factors which would hamper the smooth auction. Thinking that there would be number of bidders if it is held at District Head Quarters, they conducted the auction at District Head Quarters Mangalore. However, there was no impediment in law to conduct the same at Mangalore. The fact remains, the borrower who mortgaged the properties was well aware of the proposed sale by auction at Mangalore and it was within his power or authority to see that more bidders could have approached him. The fact remains even in spite of attempts of the bank to sell the properties in District Head Quarters, only 2 bidders were present. The valuation report secured at that time or just prior to the auction indicates that the properties were valued at Rs. 3,60,000/, Rs. 4,40,000/ - and Rs. 11,35,000/ -. During the auction, the reserve price was fixed at 50% of the above estimated value. Therefore, the properties were sold in auction to the 2nd and 3rd respondents and the same was confirmed after disputes or complaints were disposed of by the consumer forum and also DRAT.