K. KRISHNAMMA Vs. ZONAL MANAGER

JUDGEMENT

(1.) This writ petition, under Article 226 of the Constitution of India, is filed seeking verbatim the following relief:

(2.) We have heard the submissions of Sri K.Ananda Rao, learned counsel appearing for the writ petitioner; and, of Sri G.L.V.Ramana Murthy, learned Standing Counsel appearing for respondents 1, 3 & 4. Though the 5th respondent is served with notice, she did not enter appearance. The 2nd respondent is the Authorised Officer of the Bank. We have perused the material record.

(3.) The case of the writ petitioner is this: 'The petitioner is the owner of vacant house plot admeasuring an extent of 356 square yards in Karvetinagaram village & Mandal, Chittoor District. She addressed a letter to the 2nd respondent-Authorised Officer of the Indian Bank ('Bank', for brevity) offering the said premises on lease to the Bank. The said offer was accepted by the 1st respondent-Zonal Manager of the Bank. The 1st respondent addressed a letter, dated 22.07.2013, to the nd respondent with a request to surrender the existing premises of the Bank in view of sanction with regard to alternative premises offered by the petitioner. In the said letter, it is stated that the minimum required space area is around 1800 square feet (carpet area) and the rate of rent offered is @ Rs.7/- per square foot; that three months' rent shall be paid in advance; and, that the lease period is five years from the date of occupation. Certain other details with regard to lease are also mentioned in the said letter. The petitioner made a request to the Bank to grant a loan in a sum of Rs.15,00,000/- for construction of the building to the satisfaction of the respondent Bank for locating its Branch office. A loan of Rs.7,00,000/- was sanctioned, on 24.03.2014, as premises loan to the landlord. The said loan is divided into 114 EMIs @ Rs.11,744/- each month after excluding the holiday period of six months out of the loan term of 120 months. The petitioner's son stood as a guarantor. Having availed the loan, the petitioner started construction and made construction including the strong room as per the standards to be maintained by the Bank. The construction was raised upto the slab level. Since the amount of Rs.7,00,000/-, which was sanctioned as a loan, is a meagre amount and is not sufficient to meet the requirement of construction, the petitioner made a representation, dated 04.12.2014, to the 2nd respondent stating that the lease fixed at the rate of Rs.7/- per square foot is insufficient; and, for completion of the entire structure of the premises, at least, Rs.30,00,000/- is required to be spent; and requested the 3rd respondent-Bank Manager to grant ten more lakhs towards loan for completion of construction of the building. The Bank authorities refused to grant the said request. Hence, the petitioner could not complete the construction in full. The construction remained incomplete. The petitioner was also unable to pay the EMIs. The 3rd respondent -Branch Manager issued a notice, dated 17.01.2015, stating that an amount of Rs.87,925/- is overdue in the loan account. It is also stated that though an amount of Rs.6,50,000/- out of the loan amount of Rs.7,00,000/- was availed, the construction is incomplete. And, the petitioner was asked to complete the construction within one month and handover the constructed premises to the Bank for its occupation. The petitioner was also asked to remit Rs.87,925/- on or before 10.02.2015, and that otherwise the loan account will slipover in to the status of a Non Performing Asset (NPA). Later, the Authorized Officer/2nd respondent issued a notice, dated 31.08.2015, under Section 13(2) of the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 ('SARFAESI Act', for brevity) stating that the loan account is classified as NPA since 23.05.2015 as per the guidelines issued by the Reserve Bank of India and that the outstanding amount due and payable, as on 30.08.2015, is Rs.8,22,602/- and that the said amount carries interest at the agreed rate from 31.08.2015 till the date of repayment. The petitioner was asked to pay the said amount due as on 30.08.2015. The petitioner was unable to pay the said amount within the stipulated period. Possession notice, dated 13.01.2016, under Rule 8(1) of the Security Interest Enforcement Rules, 2002, ('Rules', for short), was issued and the petitioner was intimated that the liability is not discharged as per the demand in the notice under Section 13(2) of the SARFAESI Act, and that, therefore, possession of the property was taken over by exercising the power under Section 13(4) of the said Act read with Rules 8 & 9 of the Rules. The petitioner was cautioned not to deal with the property, which is the subject matter of the charge for an amount of Rs.8,71,607/-. Symbolic possession of the property was only taken. The petitioner was continuing in physical possession of the property. The Authorised Officer/2nd respondent issued auction notice, dated 14.11.2017, and the same was published in Eenadu Telugu daily District Edition, dated 22.11.2017. In the said publication, it was mentioned that the amount due is Rs.11,46,642/-, as on 30.09.2017, and the property is in an extent of 356 square yards (equivalent to 3200 square feet) and that the reserve price is fixed at Rs.32,50,000/- and that the sale will be held, on 29.12.2017, in between 11 AM and 1 PM in the office of the Indian Bank, Zonal Office, Tirupati. However, auction was not held on that day for reasons not known to the petitioner. The petitioner paid Rs.5,40,000/- through her second son and the same was adjusted towards the loan account in the month of January, 2018. The balance amount that remained to be paid is Rs.6,00,000/- and odd and the interest accrued thereon. The Bank again issued paper publication in Sakshi Telugu daily newspaper, dated 19.02.2019, stating that the property would be auctioned, on 21.03.2019 at 11 AM. The 2nd respondent-Authorised Officer also issued sale notice under Rules 6(2) & 8(6) of the Rules, dated 18.02.2019, with the same terms & conditions and stating that the amount payable as on 17.02.2019 is Rs.10,09,035/- and the reserve price is fixed at Rs.25,00,000/-. After receipt of the said auction notice, the petitioner remitted an amount of Rs.1,50,000/- to her loan account, on 20.03.2019, with a request to settle the claim under OTS and offering to pay the amount within a month and further requesting to stall the auction till such time. The said amount paid was adjusted towards the loan account. However, the 3rd respondent-Branch Manager proceeded to conduct auction without postponing the same. The 5th respondent alone submitted her bid and the same was accepted in toto and she was declared as a successful bidder. The bid amount offered by her is not intimated to the petitioner. The petitioner got issued a legal notice, dated 01.04.2019, stating that the property was auctioned in an irregular manner and without following the procedure contemplated under the SARFAESI Act, and that, therefore, the sale is null and void. The Branch Manager, who is impleaded as an eo-nominee party/4th respondent, acted contrary to her interest to do favour to the 5 th respondent, who is owner of the property adjacent to the said auctioned plot. The Branch Manager in collusion with the 5th respondent and her husband, who is a contractor and who is supplying mikes and decoration lights etcetera to the temples at Tirupati, persuaded them by misusing his official position and knocked the bid in favour of the 5th respondent. He acted contrary to the code of conduct prescribed for the Bank Officials. He bypassed the procedure contemplated under the Act. Despite the request made by the petitioner, the respondents failed to give the particulars of the amount due after making adjustment of Rs.6,90,000/-, which was already paid towards the loan account. Even as on the date of filing of the writ petition and till today, the petitioner is prepared to pay the entire balance loan amount and retain her property. A clear 30 days' time gap is to be maintained under Rule 8(6) of the Rules to enable the borrower to exercise the right of redemption. Notice under Rule 9(1) of the Rules cannot be published prior to the expiry of 30 days' period. The right of redemption stands terminated immediately upon publication of sale notice under Rule 9(1) of the Rules. In the case on hand, 30 days' time gap is not maintained between Rule 8(6) notice issued on 18.02.2019, and the publication of auction sale notice in newspapers on 19.02.2019. Thus, there is clear violation of the mandate of law. In the month of November, 2017, a sale notice under Rule 6(2) & 8(6) of the Rules was published on 22.11.2017, in Eenadu Telugu daily newspaper stating that the subject property, which is an unfinished commercial structure, will be auctioned on 29.12.2017. At that time, the reserve price was fixed at Rs.32,50,000/-. But the sale was not conducted. Therefore, sale notice was published on 18.02.2019, in a daily newspaper, on 19.02.2019, by fixing the reserve price at Rs.25,00,000/- without securing a fresh valuation report from the approved valuer as per Rule 8(5) of the Rules. Though it is mandatory on the part of the Bank to secure a valuation report from the approved valuer, such valuation report was not obtained before issuance of fresh sale notice, dated 18.02.2019, and the paper publication of the sale notice, dated 19.02.2019. Hence, the said notices are liable to be set aside. Fixing of a reserve price at Rs.25,00,000/- contrary to the earlier reserve price fixed at Rs.32,50,000/- would adversely affect the petitioner's right to property under Article 300-A of the Constitution of India. There are no valid reasons and in fact, no reasons are communicated to the petitioner for reducing the reserve price from Rs.32,50,000/- to Rs.25,00,000/-.'