M/S MAYA HOTELS PVT LTD vs. THE AUTHORIZED OFFICER

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 17TH DAY OF NOVEMBER 2021 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE ANANT RAMANATH HEGDE W.P. NO.14083 OF 2020 (GM-DRT) BETWEEN: 1. M/S MAYA HOTELS PVT LTD NO.52/1, CHURCH STREET BANGALORE-560001 REP. BY ITS DIRECTOR MRS. THIRTHA KUMARASWAMY W/O M C KUMARA SWAMY AGED ABOUT 65 YEARS. 2. M C KUMARA SWAMY S/O M P CHANDRAIAH AGED ABOUT 65 YEARS NO.52/1, CHURCH STREET BANGALORE-560001. 3. MRS. THIRTHA KUMARASWAMY W/O M C KUMARASWAMY AGED ABOUT 65 YEARS NO.52/1 CHURCH STREET BANGALORE-560001. ... PETITIONERS (BY MR. S. VENKATESHWARA, ADV.,)

2 AND: THE AUTHORIZED OFFICER CORPORATION BANK NO.26, K H ROAD P B NO.2738 SHANTHINAGAR BANGALORE-560027.

... RESPONDENT (BY MR. RAVI B. NAIK, SR. COUNSEL FOR MR. K.B. MONESH KUMAR, ADV.,) - - - THIS WRIT PETITION IS FILED UNDER ARTICLE 226 & 227 OF THE CONSITUTION OF INDIA, PRAYING TO QUASH THE ORDERS DATED 01.10.2020 IN M.A.(SA) 163/2011, M.A.185/2017 AND AIR 781/2015 PASSED BY D.R.A.T 9DEBT RECOVERY APPELLATE TRIBUNAL) CHENNAI WHICH IS AT ANNEXURE-A AND PROTECT THE LEGAL RIGHTS OF THE PETITIONERS. DIRECT THE RESPONDENT FILE A MEMO IN ACCORDANCE WITH THE SUBMISSION MADE AND PLACED ON RECORD BEFORE THIS HONBLE COURT IN W.P.38524/2017 VIDE ORDER DATED 26.06.2018. & ETC. THIS WRIT PETITION COMING ON FOR ORDERS, THIS DAY, ALOK ARADHE J., MADE THE FOLLOWING: ORDER In this writ petition, the petitioners who are the borrowers have prayed for the following reliefs: (i) To stay the orders of the DRAT (Debt Recovery Appellate Tribunal) Chennai dated 01.10.2020 which is at Annexure-A and also

3 restrain the respondent from interfering with the petitioner's peaceful possession of their premises of the petition schedule property in the interest of justice and (ii) Direct the respondent-Bank immediately to transfer pre deposit amount of no lien account of petitioners Rs.1,03,46,235/- along with the accrued Bank interest from the date of depositing the amount till date with Registry of this Hon'ble High Court in the interest of justice and equity till the disposal of this writ petition. 2. Facts leading to filing of this petition briefly stated are that the petitioners are borrowers, who on 09.08.2004 availed financial assistance from the Bank of India. The aforesaid Bank thereupon issued credit sanction intimation. The petitioners availed of term loan of Rs.2,38,00,000/- to take over the liability from Bank of India. The Corporation Bank (hereinafter referred to as 'the Bank' for short) on 27.09.2004 further sanctioned a loan of Rs.4,60,00,000/-. The account of the petitioners was classified as Non Performing Asset (NPA) on 15.04.2006. The bank thereafter, filed an application under Recovery of Debts

4 Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as 'the Act' for short) for recovery of a sum of Rs.4,52,16,682/- along with interest at the rate of 15.75%. 3. The aforesaid application was allowed by the Debt Recovery Tribunal on 16.06.2009 and a recovery certificate was issued with the liberty to recover the same from the petitioners. On 04.09.2009, the Bank initiated execution proceedings. Sometime in the year 2010, the petitioners filed an application for setting aside of the order dated 26.06.2009 which was dismissed with costs. The petitioners thereafter filed a writ petition viz., W.P.No.613/2011. A bench of this court refused to entertain the writ petition and relegated the petitioners to avail the alternative remedy. 4. From 04.09.2009 till 29.05.2014, 14 attempts were made by the Recovery Officer to put the property to sale. However, the attempts to sell the property did not fructify as no bidder came forward. A sale proclamation was issued on 20.04.2014 by which auction was scheduled to be

5 held on 30.05.2014. The Bank thereafter sought permission from the Recovery Officer to participate in the process of auction. Thereafter an e-auction was held on 30.05.2014 and the respondent was held to be a successful bidder. The petitioner No.1 filed a writ petition viz., W.P.No.19760/2014 in which a prayer was made for quashment of sale proclamation dated 20.04.2014. The aforesaid writ petition was partly allowed by an order dated 11.07.2014. The relevant extract of the order reads as under: 4. If regard is had to the fact that there are no third parties who offered bids pursuant to the sale proclamation and the date for e-auction has since gone by, coupled with the promise that the petitioner would make payment of Rs.6.8 Crores on 17.07.2014, there is a need to allow this petition. 5. In the result, petition is allowed in part. 6. The sale proclamation dated 20.04.2014 is quashed. If the petitioner fails to fulfill its promise to pay Rs.6.8 Crores by 17.07.2014, the respondent / Recovery Officer is

6 at liberty to proceed with the issue of a fresh sale proclamation and recover the monies due. 7. The relief for mandamus to direct the respondent - Bank to consider petitioner's application for one time settlement, does not arise for consideration. If such representation is made by the petitioner, it may persuade the Bank to consider it. 5. The respondent deposited a sum of Rs.1,23,00,000/- as 25% of the bid amount as well as an amount of Rs.7,52,010/- as impounding fee. The respondent was directed to deposit the balance amount of Rs.5,64,00,000/- on or before 16.06.2016. The Bank deposited the amount on 16.06.2016. 6. The undertaking furnished to this court was not honored by the petitioners. However, in view of directions issued in W.P.No.19760/2014 dated 11.07.2014, the sale proclamation was set aside and the amount deposited by the bank was returned to it on 27.08.2014. Thereafter, for a period from 12.11.2014 to 22.12.2014, Recovery Officer granted opportunities to the petitioners to make payment of

7 the amount and to settle the matter. However, the petitioners did not settle the matter. Thereafter, an e-auction was held on 22.12.2013. The Bank was declared the successful bidder. The auction amount was paid on 05.01.2015. The petitioners, thereafter, filed an appeal against the order of the Recovery Officer before the Debt Recovery Tribunal, the application for stay of proclamation for sale was rejected with costs of Rs.5,000/- on 16.01.2005. Thereafter, the sale was confirmed on 27.01.2015 and a sale certificate was issued on the same day in favour of the Bank. 7. The petitioners thereafter filed writ petition viz., W.P.No.11220/2015 before this court to quash the sale certificate dated 27.01.2015. The aforesaid writ petition was dismissed as withdrawn on 02.03.2016. The petitioners thereafter again filed W.P.No.536/2020. The aforesaid writ petition was dismissed by a division bench of this court vide judgment dated 13.01.2020 with a liberty to the petitioners to file an appeal before the Debt Recovery Appellate Tribunal. The petitioners, thereupon filed an appeal before the Debt Recovery Appellate Tribunal, Chennai. The aforesaid appeal

8 has been dismissed by an order dated 01.10.2020 by the appellate tribunal. In the aforesaid factual background, this petition has been filed. 8. Learned counsel for the petitioners submitted that Debt Recovery Appellate Tribunal while passing the impugned order has not adverted to the observations made by division bench of this court in the judgment dated 13.01.2020 passed W.P.No.536/2020 and W.P.No.539/2020. It is further submitted that the undertaking furnished to the court in W.P.No.38524/2017 dated 26.06.2018 operates and therefore, the proceeding before the Debt Recovery Appellate Tribunal deserve to be quashed. It is also submitted that the petitioners have paid the entire amount under the One Time Settlement and the sale has been held in violation of II Schedule to the Income Tax Act, 1961 and therefore, the same is liable to be set aside. 9. On the other hand, learned Senior counsel for the Bank submitted that the petitioners have filed a contempt petition for non compliance of the order dated 26.06.2018

9 which has been dismissed by a bench of this court vide order dated 16.12.2020 in CCC No.667/2020 (Civil). It is further submitted that the aforesaid undertaking has not been violated. It is also urged that petitioners had furnished an undertaking to pay an amount of Rs.6,08,00,000/- on or before 07.07.2014, however, the aforesaid Undertaking has not been complied with. It is also urged that in view of decision of the Supreme Court in 'ICICI BANK LIMITED VS. ABURUBAM AND COMPANY AND OTHERS', (2018) 15 SCC 267, the bank can participate in the public auction. It is also urged that the conduct of the petitioners does not entitle them to any relief and the petitioners have made various attempts to stall the process of recovery of public dues for a period from 2009 till 2014. It is also urged that there is no violation of provisions contained in II Schedule to the Income Tax Act and the writ petition amounts to abuse of process of law and deserves to be dismissed with costs. 10. We have considered the submissions made by learned counsel for the parties and have perused the record. It is not in dispute that the petitioners have availed of the

10 financial assistance from the bank and their loan was classified as Non Performing Asset (NPA) on 15.04.2006. It is also not in dispute that a recovery certificate has been issued in favour of the bank on 26.09.2009. The petitioners have given an undertaking before this court that they shall pay an amount of Rs.6,08,00,000/- on or before 17.07.2014. 11. However, the petitioners did not pay the amount and got the sale proclamation dated 20.04.2014 set aside. Thereafter, again an e-auction was held on 22.12.2014. The Bank participated in the aforesaid auction and was declared successful bidder. The writ petition preferred by the petitioners viz., W.P.No.536/2020 and W.P.No.539/2020 was dismissed by a division bench of this court. The relevant extract of the order reads as under: Hence, we do not express any opinion in these writ petitions on merits of M.A.No.185/2017 and all contentions and also grounds urged before the appellate tribunal as well as grounds urged in the present writ petitions including contentions of the secured

11 creditor are kept open. Accordingly, these writ petitions stands dismissed. 12. No directions were issued in the aforesaid writ petition and the writ petition preferred by the petitioners was dismissed. Therefore, the contention that the Debt Recovery Appellate Tribunal has not followed the observations / directions made by a division bench of this court in the aforesaid writ petitions cannot be accepted. The Bank had given an undertaking before this court in WP No.38524/2017 on 26.06.2018 which is extracted below for the facility of reference: Sri.V.B.Ravi Shankar, learned counsel appearing for respondent-Bank submits that respondent -Bank would not take any precipitative action including interfering with the possession of property described in the schedule to writ petition till next date of hearing. It is also submitted by Sri.V.B.Ravi Shankar, learned counsel that proceedings initiated under the SARFAESI Act is not being proceeded and a memo also being filed before the Debt Recovery Tribunal to the said effect.

12 Hence, submission of Sri.V.B.Ravi Shankar learned counsel appearing for respondent-Bank is placed on record and this would ally the apprehension expressed by the petitioner appearing in person. 13. Admittedly, the petitioners had filed a petition for non-compliance of order dated 26.06.2018 passed in W.P.No.38524/2017 which has been dismissed by a division bench of this court vide order dated 16.12.2020 passed in CCC No.667/2020. Apart from this, there is no material on record to show as to how the bank has violated the undertaking given to it in the order dated 26.06.2018 passed in W.P.No.38524/2017. therefore, the aforesaid contention cannot be accepted. 14. The petitioners have not been able to demonstrate that the sale has been held in violation of any provisions of law and that they had paid the entire amount under the OTS scheme. The conduct of the petitioners has been contumacious and the petitioners by resorting to successive litigations have stalled the proceeding for

13 recovery of the public dues successfully for a period from 2009 to 2014. For the aforementioned reasons, we do not find any merit, the same fails and is hereby dismissed. Sd/- JUDGE Sd/- JUDGE ss