BANK OF INDIA Vs. PUNJAB MILKCHEM LTD.

JUDGEMENT

(1.) THESE appeals have been directed against the order dated 16.9.2011 of DRT -I, Chandigarh whereby S.A. No. 6/2008 filed by M/s. Punjab Milkchem Ltd. and its Directors Mr. H.S. Thapar and Ms. Anita Thapar has been allowed and the sale certificate issued in favour of M/s. Spinoff Technopark Pvt. Ltd. has been set aside and Bank of India has been directed to refund the sale price with interest @ 8% p.a. to the said auction purchaser, which has also been directed to restore the possession of the property in question to the S.A. applicants. Both these appeals are being disposed of by a common judgment. The factual matrix of the case, in brief, is that Bank of India had granted various credit facilities in 1998 to the tune of Rs. 3,06,00,000/ - to M/s. Punjab Milkchem Ltd. on execution of loan documents, personal guarantee of its Directors H.S. Thapar and Ms. Anita Thapar and creation of equitable mortgage of the properties of the borrower company as well as of the guarantors in its favour. On continuous default in repayment of the loan, the Bank recalled the facilities and filed O.A. No. 668/2002 fur the recovery of Rs. 4,97,84,325/ -. During its pendency, the Bank issued a demand notice dated 3.12.2003 under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, the SARFAESI Act) claiming an amount of Rs. 5,76,79,192/ -. The guarantor H.S. Thapar sent letter/representation dated 25.5.2004 to the Bank qua the demand notice which was rejected by the Bank, vide intimation dated 2.12.2004.

(2.) THE Bank took physical possession of the mortgaged property on 25.9.2007 and issued possession notice to the borrower/mortgagors besides publishing in the newspapers and affixing on the property. It also proceeded to sell that property and issued notice for its sale and published it in the newspapers. The borrower company and its Directors challenged the actions of the Bank taken qua the property in question by filing the S.A. before the DRT mainly on the ground that the said property is an agricultural land to which the provisions of the SARFAESI Act do not apply. The DRT declined to grant any interim relief qua which an appeal was preferred and this Tribunal restrained the Bank from issuing the sale certificate on deposit of Rs. 20 lacs. However, since the auction could not succeed as no bid was received, the amount was not deposited and the appeal was ultimately dismissed.

(3.) AN application for impleadment of the auction purchaser and for amendment to bring the post -sale facts on record was moved by the S.A. applicants. The DRT allowed the impleadment but declined the amendment, which was assailed in appeal and this Tribunal, vide order dated 4.2.2011 passed in Inward No. 45/2011, allowed the amendment subject to deposit of cost with the Bank. A Local Commissioner was appointed by the DRT to ascertain the factual nature of the property in question as to whether or not it was an agricultural land. The Commissioner, vide report dated 6.4.2011, said that the property was not used for the purposes of agriculture. The Tribunal below has, however, allowed the S.A. by the order impugned, on the grounds that (i) the Bank had failed to discharge its statutory obligation under Section 13(3 -A) of the SARFAESI Act in communicating the reasons for not accepting the representation/objection of the borrower within the given period of seven days; (ii) the Bank had failed to comply with the requirement of Rule 8(1) of the Security Interest Enforcement Rules, 2002 (for short, the Enforcement Rules); and (iii) the mortgaged property of S.A. applicant No. 3 (Ms. Anita Thapar) was an agricultural land to which the provisions of the SARFAESI Act do not apply as per Section 31(i) of the SARFAESI Act and set aside the sale certificate issued in favour of the auction purchaser with certain directions as have been stated above. Feeling aggrieved with the above findings and the directions, both the secured creditor Bank as well as the auction purchaser have filed the instant appeals against it.