Delay in filing appeal against auction

By | August 20, 2015

Q: When will  Delay in filing appeal against auction be condoned?

SARFAESI : Where respondent-bank had neither published an auction notice in newspaper in respect of auction of property of which petitioner was joint owner nor had bank served a personal notice on petitioner in respect of same, there was no occasion for petitioner to become aware about sale of property in auction and, therefore, application filed by petitioner for condonation of delay in filing appeal under section 17 was to be allowed

HIGH COURT OF BOMBAY

Naresh

v.

Authorised Officer, Washim Urban Co-op. Bank Ltd.

SMT. VASANTI A. NAIK AND PRASANNA B. VARALE, JJ.

WRIT PETITION NO. 25 OF 2014

JUNE  29, 2015

FACTS

■           The petitioner was the joint venture of the immovable property along with ‘J’ and ‘N’.

■           In the year 2000, ‘J’ had applied to the respondent-bank for loan and the joint property of the petitioner, ‘J’ and ‘N’ was mortgaged towards security.

■           ‘J’ expired in the year 2001. The respondent-bank filed a dispute in the Co-operative Court under section 91 of the Maharashtra Co-operative Societies Act, seeking declaration that the legal heirs of ‘J’ were liable to pay the dues mentioned in the dispute.

■           The petitioner was not made a party to the said proceedings. The said dispute was decided by the Co-operative Court and it was held that the respondent-bank was entitled to receive the outstanding loan amount from the legal heirs of ‘J’.

■           Before the dispute was decided, the respondent-bank issued notice to the legal heirs of ‘J’ under section 13(2). So also, the notices under section 13(3) & (4) were issued to the legal heirs of ‘J’.

■           After taking the steps under the provisions of section 13 the respondent-bank published an auction notice on 19-5-2005 in a local newspaper.

■           The auction was scheduled to be held on 28-5-2005 but the auction was not held on 28-5-2005 and without issuing any other auction notice, the property was auctioned in favour of the respondent nos. 2 and 3 on 19-7-2006 i.e. more than a year later.

■           According to the petitioner, he became aware about the sale of the property in the auction in May, 2007 and hence, the petitioner filed a writ petition challenging the auction of the property. In view of the existence of the alternate remedy, the writ petition was permitted to be withdrawn and the petitioner filed an appeal under section 17 along with an application for condonation of delay in filing the appeal.

■           The application for condonation of delay was rejected, resulting in the dismissal of the appeal filed by the petitioner. The petitioner challenged the judgment of the Debts Recovery Tribunal before the Debts Recovery Appellate Tribunal, but the appeal was dismissed.

■           On writ :

HELD

■           The property was valued at Rs. 36.16 lakhs at the time of mortgage of the same with the respondent-bank in the year 2000 and after a lapse of six years i.e. on 19-7-2006, the property is sold by the respondent no. 1-bank to the respondent nos. 2 and 3 in the auction for a sum of Rs. 14 lakhs only. Though, it is stated on behalf of the respondent- bank that there is a likelihood that the respondent-bank may have issued the personal notice under rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002 to the petitioner, one does not find that an affidavit to that effect, is filed either before the Tribunal or in the Court. It was not the case of the respondent-bank before the Tribunal and it is not the case of the respondent-bank in the Court that before selling the property to the respondent nos. 2 and 3 in the auction, dated 19-7-2006, the petitioner was served with a notice. There is no public notice issued by the respondent-bank before selling the valuable property to the respondent nos. 2 and 3 in the auction, dated 19-7-2006. It prima facie appears that there is a clear violation of the provisions of rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002 while conducting the auction. However, while considering “sufficient cause”, one is not concerned with the violation of the provisions of the Security Interest (Enforcement) Rules, 2002. The absence of service of notice on the petitioner under rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002 is, however, relevant and significant while considering whether the petitioner had knowledge about the auction sale, dated 19-7-2006. Since, the respondent-bank had neither published an auction notice in the newspaper in respect of the auction dated 19-7-2006 nor had the bank served a personal notice on the petitioner in respect of the same, there was no occasion for the petitioner to become aware about the sale of the property in the auction on 19-7-2006. The petitioner has satisfactory explained the delay. The auction was held on 19-7-2006. The appeal was filed in the Debts Recovery Tribunal under section 17 of the Act of 2002 on 29-9-2007 along with the application for condonation of delay. Before filing of the appeal in September, 2007, the petitioner had approached the High Court in the month of June, 2007, challenging the auction sale. The writ petition was, however, withdrawn by the petitioner in view of the existence of the alternate remedy. The reasons mentioned in the application for condonation of delay are worthy of acceptance. It is stated in the application that since the petitioner did not receive the rent for the year commencing from June-2006, he enquired with the office of the Assistant Labour Commissioner in May-2007 and was informed that the land and the building was sold in auction to the respondent nos. 2 and 3. There is reason to believe the statement of the petitioner that he became aware about the sale of the property only in May, 2007, especially when the petitioner was never served with the notice under rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002. When the property, that is claimed to be worth Rs. 45 lakhs at the time of auction sale was sold for a pitiful sum of Rs. 14 lakhs, the Tribunal ought not have rejected the application for condonation of delay for the reasons recorded in the judgment. Merely, because it is mentioned by the petitioner in one of the affidavits that there was monthly tenancy in respect of the property and in the application for condonation of delay the petitioner had stated that he had not received the rent for the year commencing from June-2006, the Tribunal could not have held that there were material contradictions in the statements made by the petitioner. The approach of the Debts Recovery Tribunal in deciding the application is not just and proper. The Tribunal did not consider the matter in the right perspective and took an extremely pedantic approach in deciding the application filed by the petitioner. The Debts Recovery Appellate Tribunal has mechanically confirmed the judgment of the Debts Recovery Tribunal. [Para 6]

■           In the result, the writ petition is allowed. The impugned judgments are quashed and set aside. The application filed by the petitioner for condonation of delay in filing the appeal under section 17 is allowed. [Para 7]

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