MANIK MEHTA Vs. UCO BANK & OTHERS

JUDGEMENT

(1.) This petition under Article 227 of the Constitution of India has been preferred for quashment of the recovery and auction proceedings initiated against the petitioner by the respondent UCO Bank ('the Bank' henceforth); for quashing the appellate order dated 9-11-2011 passed by the Debts Recovery Appellate Tribunal, Allahabad ('the DRAT' henceforth) by which the appeals preferred by the Bank and the auction purchaser were allowed; and for a direction to the respondent Bank and the auction purchaser to hand over possession of the house.

(2.) The facts, in brief, as projected by the petitioner, are that the petitioner is a Graduate in Electrical Engineering and Information Technology. He is engaged in the business of Electronic/Computer Equipments from a rented premises at Bhilai. The petitioner obtained cash credit hypothecation facility/loan of Rs.3.50 lacs in the year 2000 which was subsequently enhanced to Rs.7.50 lacs in the year 2003. The hypothecated stocks lying in the petitioner's business premises were insured by the Bank with the Insurance Company of its own choice and the premium amount was deducted from the petitioner's account from time to time. During the intervening night of 28th February and 1st March, 2005 his landlord broke open and entered the petitioner's shop along with his accomplishes and took away the trading stock, miscellaneous equipment, furniture/fixtures, etc. Thus, committed loot of goods worth Rs.12.50 lacs out of which articles worth Rs.2.00 lacs were thrown in front of the petitioner's residence in a dilapidated condition, but the remaining articles worth Rs.10.50 lacs cannot be retrieved. The incident was reported to the police on which First Information Report ('FIR' henceforth) was registered for offence under Section 448/34 of the Indian Penal Code ('IPC' henceforth). The petitioner has also filed a criminal complaint for addition of offence under Section 379 of the I.P.C. The criminal case is still pending consideration before the jurisdictional Magistrate's Court. 3 days prior to this incident the entire stock was inspected by the Bank and inspection charges of Rs.3,000/- was debited from the petitioner's account, however, the insurance claim raised by the petitioner was not processed because of Bank's failure to inspect the shop after the incident for verification of the stock as also for the reason that the insurance policy obtained by the Bank was in the wrong name of M/s Furnitures Vision whereas the petitioner's business concern is named as M/s Future Vision.

(3.) Due to the set back in the business pursuant to the above stated event, the account was declared NPA on 6-7-2007 even though the outstanding dues were only to the tune of Rs.6.98 lacs as on 1-3-2005, but as per the norms of the Reserve Bank of India ('the RBI' henceforth), in case of CC limit of hypothecation cases, the account would be declared NPA if stock existing. The Bank, thereafter, invoked the provisions contained under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('the Act, 2002' henceforth) to enforce the security interest. The Bank eventually conducted auction of the secured asset on 24-6-2008 and confirmed the same on 20-3-2009. Petitioner's application challenging the auction proceeding was allowed by the Debts Recovery Tribunal ('the DRT' henceforth) on 9-11-2011, against which the auction purchaser as well as the Bank preferred appeals before the DRAT, which have been allowed by the impugned order, as a consequence the auction sale has been affirmed.