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Jothi (service)     04 July 2014

Sale of asset by drt when matter pending before drat

Dear Experts, please help advise action required by the Auction purchaser on this subject.

Facts :

Bank takes symbolic possession of the property on 7-10-2010.  Borrower approaches DRT  to appeal.

DRT issues Recovery certificate on 20.11.2012 to borrower & subsequently borrower files IA & MA and those has been dismissed by DRT.   Asset continues to be an NPA.

Borrower files A.IR before DRAT & seeks waiver by filing an IA.    DRAT orders on 24.2.2014 - for payment of portion of the debt by 5th May 2015 failing which IA stands dismissed.     Borrower files a WP in The High Court, and gets a manages to get a Interim Stay Order on 29th April.

Meanwhile, DRT has proceeded with auctioning of the property and completed the auction on 24.2.2014. Finds a buyer and DRT declares the sale becomes obsolute on 26-3-2014.     DRT also issues the "certificate of sale"  on 21-04-2014.  

Auction buyer registers the property with SRO on 22.4.2014

Questions :

a. Is the DRT right in auctioning the property on 24.2.2014 when there is an IA pending with DRAT & DRAT orders the borrower to pay a portion of the debt by 5.5.2014.   Is the DRT obliged to wait until 5.5.2014 before proceeding with the auction.

b. Now that the asset is sold & registered before the Writ filed in the HC, what will be the status of the Interim Stay granted by The High Court.

c. How can the DRT / Bank hand over possesion to the auction buyer by taking the help of the DM when there is a stay in The High Court.

d. What is the options before the auction buyer to push the DRT / Bank to handover possession of the property as soon as possible.

Thank you

 

 

 

 

 



 12 Replies

T. Kalaiselvan, Advocate (Advocate)     06 July 2014

The auction and handing over of possession by the bankers to the bidder has taken place when there was no stay , the reported orders by DRAT and orders on Writ by high court are after that, hence now you have to look for the other legal options only.  Contact yur lawyer about next course of action.

1 Like

RAJU O.F., (Advocate)     09 July 2014

DRAT Order would be in opertion when the amount under the condition was paid. Hence, there was no Stay passed by DRT,DRAT or High Court as on sale conducted by Recovery Officer of DRT and hence the sale is valid. You may submit the position before High Court and get the stay vacated.

1 Like

Jothi (service)     10 July 2014

How do we seek the DRT now to hand-over the physical possession to the buyer.....my doubt is that - if DRT file application under Section-14 to the DM / CMM to help execute handing over physical possession of the property, The DM / CMM may not oblige, citing the Stay in the HC.

Therefore is it necessary for DRT to approach HC to vacate the stay before filing the section-14 application with The DM/CMM ??

 

 

 

c.p.s. ramachary (1500)     12 July 2014

There is nothing like DRT filing any application under Sec.14 to DM/CMM. It is only the bank which can make such application. DRT does not approach High Court to vacate stay. Sale is over before you communicated the stay order obtained by you in H/C and the stay order became infructuous so far sal process is concerned. You have to move another petition in High Court to stop (transfer of the property) against registration of the 'Sale Certificate' so that further action of the bank can be stayed and creation of third party interest can be prevented untill finalisation of your Sec.17 application filed before DRT or finality of your challenges. Your advocate appearing in High Court should convince the Court that without stay of further action the purpose of your application filed before the DRT would be defeated.

1 Like

Jothi (service)     12 July 2014

Thank you Ramachary Sir,

Please help explain what is this section 17 application about.

I am seeking advice on who should I ask for handling-over possession of the property which i bought in auction-sale from DRT.  Should I apply to the bank or to DRT.    

Since I bought the property auctioned by DRT, will they not be responsible for physical handover of possesson ?

Thank you for your valuable time & advise

Regards...

Babu

 

 

Chandran Baloo (Proprietor)     12 July 2014

Dear Experts,

I am also an prey to such an act by the bank.  The only difference is I am a Partner of a firm and the other Parter has mortgaged the firms property by standing guarantor for his other new concern by taking a Term Loan and signing the legal documents as Proprietor.

The Bank with a Partner of a Firm sanctioned a Term Loan to his new concern by mortgaging the Firm's Property, while  he standing guarantor and signing as Proprietor of the same Firm ( name ) in 2006. This was done without the knowledge of the other Partner. The firm's account is with the same bank since 2001.  The new concern became a NPA in less than 2 yrs and DRT proceeding was initiated by the Bank and within 3 months an Order was passed based on the O.A and the order was ex-parte - a very rare case in any DRT court.. I,  the other Partner got to know about it and filed an objection to reopen the file and to stall the order from enforcement. Recovery Certificate is not issued yet. The proceedings are still pending.  But as per the order sheets, the bank has sent only two max... reminder by R.P.A.D to the address of the new concern that was stated " Returned Not Claimed " and the Bank has not given any public notice in any daily paper while gone ahead to get the O.A order - ex-parte. The Bank was well aware of the residential address of the Guarantor, but took no strain to contact him directly.
 
I have RTI docs from the Bank confirming the account and name of the partnership as per our Partnership Deed logged with the bank and the Guarantor being a Partner of the same, while the Bank has colluded in giving a Term Loan of just Rs. 92.00 lakhs for the firms property worth over 4 Cr.  This has also been done to keep the sanction within the Branch limit.
 
The Bank has also in their argument in the City Civil Court, expressed the Partnership Deed and the claimant's share in the Partnership Firm that is serving us in the particular branch, that has sanctioned the Term Loan by mortgaging the firm's Property that is time and again shown in our audited Balance Sheets and Income Tax return logged with the same branch of the Bank.  All documents carry our PAN card no. - which has the fourth alphabet as " F " - confirming it as a firm.
 
Other than dates ... I am not getting any justice.  The Bank has not even filed their objections for last 2 years.
 
Please comment and advice me going forward. 
Regards
Chandran Baloo
9980914335
Bangalore
aridraexports@gmail.com

Chandran Baloo (Proprietor)     12 July 2014

Dear Experts

How can I take my case to DRAT ?

Thanks and Regards

Chandran Baloo

K.K.Ganguly (Advocate)     12 July 2014

1. What has been mentione in the stay order passed by the High Court? It appears that the order of DRAT that the IA stands dismissed if the borrower fails to pay certain amount with in a specified period,

 

2. So, the IA is not dismissed as per the stay order of the High Court on the order of the DRAT,

 

3. There has been  no stay order restraining the sale of the property by DRT,

4.  However, if the borrower gets favourable order from the DRT setting aside the order of he DRT,then the sale may be reversed by the order of the RAT.

1 Like

T. Kalaiselvan, Advocate (Advocate)     12 July 2014

 
Section 17 of the act is given below:
17. Right to appeal
(1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) ofsection 13 taken by the secured creditor or his authorised officer under this Chapter, may make an application alongwith such fee, as may be prescribed to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measure had been taken:
PROVIDED that different fees may be prescribed formaking the application by the borrower and the person other than the borrower.
Explanation
: For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the
person (including borrower) to make an application to the Debts Recovery Tribunal under this sub-section.
(2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub-section
(4) of section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder.
(3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub-section
(4) of section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management of the business to the borrower or

restoration of possession of the secured assets to the borrower, it may by order, declare the recourse to anyone or more measures referred to in sub-section (4)of section 13 taken by the secured creditors as invalid and

restore the possession of the secured assets to the borrower or restore the management of the business to the borrower, as the case may be, and pass such order as it may consider appropriate and necessary in relation to
any of the recourse taken by the secured creditor under sub-section (4) of section 13.
(4) If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under sub-section (4) of section 13, is in accordance with the provisions of this Act and the rules made thereunder, then,notwithstanding anything contained in any other law for the time being in force, the secured creditor shall be entitled to take recourse to one or more of the measures specified under sub-section (4) of section 13 to
recover his secured debt.
(5) Any application made under sub-section (1) shall be dealt with by the Debts Recovery Tribunal as expeditiously as possible and disposed of within sixty days from the date of such application:
PROVIDED that the Debts Recovery Tribunal may, from time to time, extend the said period for reasons to be recorded in writing, so, however, that the total period of pendency of the application with the Debts Recovery Tribunal, shall not exceed four months from the date of making of such application made under sub-section (1).
(6) If the application is not disposed of by the Debts Recovery Tribunal within the period of four months  as specified in sub-section (5), any part to the application may make an application, in such form as may be
prescribed, to the Appellate Tribunal for directing the Debts Recovery Tribunal for expeditious disposal of the application pending before the Debts Recovery Tribunal and the Appellate Tribunal may, on such applica
tion, make an order for expeditious disposal of the pending application by the Debts Recovery Tribunal.
(7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the application in accordance with the p
rovisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the rules made thereunder

The borrowers can at any time before the sale is concluded, remit the dues and avoid loosing the security. In case any unhealthy/illegal act is done by the Authorised Officer, he will be liable for penal consequences. The borrowers will be entitled to get compensation for such acts. For redressing the grievances, the borrowers can approach firstly the DRT and thereafter the DRAT in appeal. The limitation period is 45 days and 30 days respectively

© 2009-2013 https://www.gktoday.in
The borrowers can at any time before the sale is concluded, remit the dues and avoid loosing the security. In case any unhealthy/illegal act is done by the Authorised Officer, he will be liable for penal consequences. The borrowers will be entitled to get compensation for such acts. For redressing the grievances, the borrowers can approach firstly the DRT and thereafter the DRAT in appeal. The limitation period is 45 days and 30 days respectively

© 2009-2013 https://www.gktoday.in
The borrowers can at any time before the sale is concluded, remit the dues and avoid loosing the security. In case any unhealthy/illegal act is done by the Authorised Officer, he will be liable for penal consequences. The borrowers will be entitled to get compensation for such acts. For redressing the grievances, the borrowers can approach firstly the DRT and thereafter the DRAT in appeal. The limitation period is 45 days and 30 days respectively

© 2009-2013 https://www.gktoday.in
The borrowers can at any time before the sale is concluded, remit the dues and avoid loosing the security. In case any unhealthy/illegal act is done by the Authorised Officer, he will be liable for penal consequences. The borrowers will be entitled to get compensation for such acts. For redressing the grievances, the borrowers can approach firstly the DRT and thereafter the DRAT in appeal. The limitation period is 45 days and 30 days respectively

© 2009-2013 https://www.gktoday.in
The borrowers can at any time before the sale is concluded, remit the dues and avoid loosing the security. In case any unhealthy/illegal act is done by the Authorised Officer, he will be liable for penal consequences. The borrowers will be entitled to get compensation for such acts. For redressing the grievances, the borrowers can approach firstly the DRT and thereafter the DRAT in appeal. The limitation period is 45 days and 30 days respectively

© 2009-2013 https://www.gktoday.in
The borrowers can at any time before the sale is concluded, remit the dues and avoid loosing the security. In case any unhealthy/illegal act is done by the Authorised Officer, he will be liable for penal consequences. The borrowers will be entitled to get compensation for such acts. For redressing the grievances, the borrowers can approach firstly the DRT and thereafter the DRAT in appeal. The limitation period is 45 days and 30 days respectively

© 2009-2013 https://www.gktoday.in

Jothi (service)     12 July 2014

Mr.Ganguly,

Thanks for your valuable inputs.   

a. Your interpretation that the IA is not dismissed as the stay order of the High Court is in force - may be right and therefore if the borrower gets a favourable order from DRAT setting aside the order of the DRT, then the sale may be reversed.   Appears your argument has fair.

In this circumstance what is the options before the auction purchaser ?

 

K.K.Ganguly (Advocate)     13 July 2014

1. Your statement is little confusing. If the Bank has taken symbolic possession u/s13(4) of SARFAESI Act,2002 and the borrower has filed application u/s 17 of the Act before the DRT, then how come DRT has isued recovery certificate? In such cases, the said application filed by the borrower praying for setting aside the possession notice or a stay order in taking possession is rejected and the Bank proceeds to take physical possession by filing application u/s14 of the Act to  DM for police help,

2.  Recovery certificate is isued by DRT if Bank files Original Application under Recovery of Dues due to Banks & Financial Institution Act, 1993,

 

3. If DRT has rejected the application filed by the borrower and the Bank has auctioned the property, then the Bank will file application before the DM as stated above for taking physical possession of the property to hand over to you,

 

4. Normally, the buyer arranges the Bank to file the said application to take physical possession of the property with police help to the DM and then the buyer himself follows up with the DMs office to get the DMs order,

 

5. Normally, such sale by the Bank is hardly reversed unless the Bank has made gross mistake in carrying out SARFAESI Proceeding,

 

6. Your step at this stage is to ensure that the Bank takes physical possession of the property and hands over to you.   

Rajesh   09 July 2017

Dear Friend 

Very clear telling you that who told you to purchase a property which is not in physical possession in Bank.

You have bought a property which is in symbolic possession by bank.

so fault is from your side. The bank is in win win situation. Bank has got all their profits. 

now it is time to see who is in grave, naturally buyer ie you are. you lost money, who lost mental peace and you have to fight a very long battle that is also very uncertain.

very best wishes for you.

 


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