If there is any discrepancy in the manner of classifying an account as NPA or in the manner in which

If there is any discrepancy in the manner of classifying the account of the appellants as NPA or in the manner in which the property was valued or was auctioned, the DRT is vested with the power to set aside such auction at the stage after the secured creditor invokes the power under Section 13 of SARFAESI Act. Therefore, the present case is a fit case wherein the extraordinary power is necessary to be invoked and exercised.

The brief facts of the case are as follows; the respondent No.2 had approached the Canara Bank at Hubballi pursuant to which credit facilities were sanctioned on 16.03.2009. The total credit facility was sanctioned for the amount of 2.68 crores. He assured some property measuring 3 acres and 2 guntas. The said property was referred as the ‘Secured Asset’. As per the case of Canara Bank, the Complainant had not repaid the loan amount and in that view having committed default, the account of the Complainant was classified as ‘Nonperforming Asset’ on 15.01.2013. The Canara Bank has invoked the power under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (‘SARFAESI”) had issued appropriate notices and ultimately the possession of the secured asset as contemplated under Section 14 of the SARFAESI Act was taken on 22.03.2013. The secured asset was thereafter evaluated and was put into auction through the public notice dated 13.10.2013 indicating the date of auction as 15.11.2013. The reserve price of the secured asset was fixed at Rs.2, 28, 51,000/­. Though publication was made, no bids were received and on the auction day the state of Karnataka has declared it as public holiday. Accordingly, the Canara Bank had revised the valuation, indicating the reserve price as Rs.1.10 Crores, since the earlier reserve price at a higher rate had not attracted purchasers and issued the fresh auction notice dated 30.12.2013. The Complainant claiming to be aggrieved by such action, assailed the auction notice in a Writ Petition filed before the High Court of Karnataka, Dharwad Bench in Writ Petition.

The learned single judge has considered matter apart from taking note of contentions made by the plaintiff. It has also taken into consideration the alternate remedy available to the Complainant under the SARFAESI ACT  and accordingly dismissed the writ petition with cost of Rs.10,000/­, on 22nd January 2014. Later the complainant has filed the complaint under section 200 of C.P.C. in the court of Principal Civil Judge, alleging that the officers of the bank with auction purchaser had caused him a wrongful loss to him. The said complaint being taken on record, the learned Magistrate has referred the same for investigation under Section 156 (3) of Cr.P.C. and to submit a report. The appellants, therefore, claiming to be aggrieved had preferred the Criminal Petition under Section 482 of Cr.P.C in Criminal Petition, which was dismissed by the High Court through the on 21st January 2019.

M.S. Kiran Suri, learned senior counsel for the Complainant, on the other hand rely on the identical criminal petitions which had been dismissed by the High Court in so far as Accused are concerned. It is contended that though the loan of Rs.2.68 Crores was sanctioned, only a sum of Rs.90 lakhs was disbursed and the remaining amount was adjusted as repayment. It is further contended that the secured asset which was worth more than Rs.4 Crores was undervalued and ultimately sold for Rs.1.10 Crores in connivance with the auction purchaser who is arrayed as Accused No.15.

The Respondent­ Bank has observed that the entire auction is to be set-aside for any reason whatsoever, petitioner can take recourse to the remedy available under SARFAESI and get the sale set aside. However, petitioner cannot be permitted to stall the auction itself under extraordinary jurisdiction of this Court.

The learned senior counsel for the Complainant, in this regard referred to the decision of this Court in the case of General officer Commanding, Rashtriya Rifles v. Central Bureau of Investigation & Anr, to contend that the defense relating to good faith and public good are questions of fact and they are required to be proved by adducing evidence. The appellants herein had also referred to the provision as contained in section 32 of the SARFAESI Act which provides for the immunity from prosecution since protection is provided thereunder for the action taken in good faith.

In a circumstance where we have already indicated that a criminal proceeding would not be sustainable in a matter of the present nature, exposing the appellants even on that count to the proceedings before the Investigating Officer or the criminal court would not be justified.

The Supreme Court, after viewing all the reasons, ordered that:

1. The complaint bearing P.C. No.389/2016 and the order dated 20.05.2016 passed therein as also the FIR No.0152/2016 insofar as the appellants herein concerned stand quashed.

2. Insofar as the grievance of the Complainant, he is at liberty to avail his remedies in accordance with law if he chooses to assail the order dated 12.06.2015 and the order dated 31.05.2017 passed in Appeal in accordance with law.

3. The appeal is accordingly allowed with no order as to costs.

4. Pending applications if any shall also stand disposed of.

View/Download Judgement: K. Virupaksha & Anr. V. The State of Karnataka & Anr.

– S.Vishal Varma

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