# United Bank Of India & Anr v. State Of U.P. & Ors

- **Citation:** (2016) 8 ILRA 953
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2016-08-10
- **Bench:** Ashwani Kumar Mishra
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/united-bank-of-india-anr-v-state-of-u-p-ors-44289
- **Pages:** 8

## Text

8 All. United Bank Of India & Anr. Vs State Of U.P. & Ors.
953
(2016) 8 ILRA 953
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 10.08.2016

BEFORE

THE HON'BLE ASHWANI KUMAR MISHRA, J.

Writ C No.- 35868 Of 2016

United Bank Of India & Anr. ...Petitioners
 Versus
State Of U.P. & Ors. ...Respondents

Counsel for Petitioners:
Krishna Mohan Asthana

Counsel for Respondents:
C.S.C., Ashok Pandey

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act,
2002 - Sections 17 and 18 - Successive Appeals Against Successive Auction Notices -
Jurisdiction -- Borrower's securitisation appeal under Section 17(1) against first auction notice dismissed by
DRT -- Appeal under Section 18 against such dismissal remained pending before Appellate Tribunal without
compliance of mandatory pre-deposit or grant of interim relief -- Fresh e-auction notice issued during
pendency, challenged by borrower through fresh appeal under Section 17(1), in which Tribunal declined
interim relief by reasoned order that attained finality -- Borrower thereafter revived stay application in earlier
pending Section 18 appeal to challenge fresh auction notice -- Held: Having elected to challenge fresh auction
notice by separate appeal under Section 17(1) and having failed therein, borrower could not revert to earlier
pending Section 18 appeal, confined in scope to previous superseded auction notice, to assail the fresh notice.
(Para 1)

Jurisdiction of Appellate Tribunal - Fresh Cause of Action Cannot Be Agitated in Pending Appeal -
- Held: Appellate Tribunal had no jurisdiction to entertain, in pending Section 18 appeal, a challenge to fresh
auction notice which was never subject-matter of that appeal, more so when borrower's separate challenge
under Section 17 to the fresh notice was not pursued further. (Para 2)

Interim Protection - Requirement of Reasons - SARFAESI Proceedings -- Appellate Tribunal stayed
e-auction and allowed waiver of 75% of mandatory pre-deposit without recording any reasons -- Held:
Reasons must be assigned even while granting interim or interlocutory protection -- Order staying e-auction
without recording reasons is unsustainable. (Para 3)

Recovery Proceedings - Caution in Grant of Stay - Impact on Financial Institutions -- Held: Courts
and Tribunals must exercise circumspection while granting stay in matters concerning recovery of dues of
banks and financial institutions, since such stay orders have serious adverse impact on financial health of such
institutions and, ultimately, on the economy. (Para 4)

Section 18(1), Provisos - Mandatory Pre-Deposit - Waiver - Reduction Only With Reasons
Recorded in Writing -- Second proviso to Section 18(1) mandates pre-deposit of 50% of amount due; third
954 INDIAN LAW REPORTS ALLAHABAD SERIES

proviso permits Appellate Tribunal to reduce it to not less than 25%, for reasons recorded in writing -- Held:
Grant of interim protection before compliance with requirement of pre-deposit under Section 18(1) was
impermissible in facts of the case. (Para 5)

Writ Petition Allowed -- Order of Debt Recovery Appellate Tribunal dated 26.06.2016, staying e-auction of
secured asset and allowing waiver of pre-deposit, set aside -- Parties left to pursue remedies available to
them in law -- Costs made easy.

Case Law Discussed

1. Narayan Chandra Ghosh vs. UCO Bank & Ors. (referred)

2. Siemens Engineering & Manufacturing Co. of India Ltd. vs. Union of India, AIR 1976 SC 1785

3. G. Vallikumari vs. Andhra Education Society and others, (2010) 2 SCC 497

4. Kranti Associates (P) Ltd. vs. Masood Ahmed Khan, (2010) 9 SCC 496

5. United Bank of India vs. Satyawati Tondon, 2010 AIR SCW 5267

(Delivered by Hon'ble Ashwani Kumar Mishra, J.)

1. Petitioner United Bank of India has approached this Court challenging an order passed
by the Debt Recovery Appellate Tribunal, Allahabad (hereinafter referred to as the "Appellate
tribunal") dated 26.6.2016, staying e-auction of property in question, scheduled for 21.6.2016.
Application for waiver has been allowed simultaneously, permitting the defaulters to deposit 25%
amount till the date of auction, after adjusting the amount deposited after issuance of notice under
Section 13(2) of the SARFAESI Act, 2002.

2. Facts in brief are that commercial loan was availed under the Prime Minister's
Employment Generation Scheme by respondent firm on 19th February, 2010. Overall credit limit of
Rs.23,75,000/- for Ice and Ice-cream Unit was sanctioned. It consisted of a term loan of Rs.
16,15,000/-, repayable in 84 monthly installments of Rs. 19,226/- per month, beginning from
February, 2010 besides interest as given in schedule to the sanction letter. Working capital
amounting to Rs. 7,16,000/- was also sanctioned and had to be paid in 84 monthly installments of
Rs. 9,048/- along with interest. Terms of loan were duly accepted and a biding agreement came into
being. Respondent no. 3 is the proprietor of the respondent no. 2 firm and respondent no. 4 is the
guarantor. Respondent no. 4 admittedly executed a equitable mortgage of house no. 260/129/2,
Himmatganj, Allahabad, which is the subject matter of e-auction.

3. Default in payment of loan amount in terms of loan agreement is not disputed. A notice
under Section 13(2) of the SARFAESI Act was issued on 31st August, 2013, showing a liability of
Rs.27,53,563/- along with future interest. Recovery notices were also issued from time to time and
respondent firm requested for grant of further time to repay the amount, but to no avail. Possession
notice under Section 13(4) was issued on 10th April 2014. Ultimately bank proceeded with auction
of mortgaged property vide notice dated 28.8.2014, fixing 8th October 2014 as the date of auction.
8 All. United Bank Of India & Anr. Vs State Of U.P. & Ors.
955
Respondent nos. 2 and 3, at this stage filed a securitization appeal no. 364 of 2014 on 30th
September, 2014. This appeal came to be dismissed by the Debts Recovery Tribunal (hereinafter
referred to as "Tribunal") on 28th August 2015.

4. Aggrieved by the rejection of this appeal vide order dated 28.8.2015, respondent no. 2
and 3 then preferred an appeal before the Appellate Tribunal which was registered as securitization
appeal no. 256 of 2015. Along with appeal, an application for waiver from pre deposit was also
filed along with stay application. An objection was also came to be filed by the petitioner in the
matter.

5. It transpires that while securitization appeal of petitioner remained pending before the
appellate tribunal, a fresh date for auction was fixed on 21.6.2016 vide notice dated 10.5.2016.
Aggrieved by this notice respondent nos. 2 and 3 preferred a fresh appeal under Section 17(1) of
SARFAESI Act, 2002 on 21st May 2016. An objection to such appeal was filed by the petitioner on
6th June, 2016. The Tribunal disposed of stay application while refusing to interfere with e-auction
fixed for 21st June. The order of Tribunal dated 7th June 2016 is reproduced :-

" Ld. Counsel Sri Ashok Pandey is present on behalf of the applicant.

Ld. Counsel Sri. K.M. Asthana is present on behalf of the respondent bank.

Counsel for the bank filed written objection.

Copy reserved.

While arguing on stay application, counsel for the applicant submitted that he has
no objection if bank may auction the property under Securitization and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002 but bank is under obligation to disclose the
arbitration proceedings pending before the Hon'ble High Court to the intending purchasers. He
further submitted that he has no other grouse at this stage as far as disposal of stay application is
concerned.

Whereas counsel for the bank submitted that bank has every right to auction the
property and is not under obligation to disclose anything to the intending purchaser regarding
alleged arbitration proceedings. He further submitted that the said property is not subject matter of
arbitration proceedings.

In rebuttal counsel for the applicant submitted that as one arbitration dispute is
pending regarding partnership firm before Hon;ble High Court as such bank is under obligation to
disclose such fact to all the bidders to avoid multiplicity of litigation.

I have heard the counsel for the parties and gone through the record. In fact
applicants have referred partition deed dated 18.3.1977 annexed at page 126 of S.A. and partnership
956 INDIAN LAW REPORTS ALLAHABAD SERIES

deed dt. 25.3.1977 annexed at page 150 of the S.A. In which the mortgagor of the bank is not party,
so I am of the considered opinion that if at all some dispute is pending before Hon'ble High Court
regarding said documents, the bank is not under obligation to convey any litigation between third
persons to the purchasers under securitization process. The stay application is accordingly disposed
of.

The applicant is directed to file rejoinder within 15 days.

Post the matter on 12.7.2016 for final hearing."

6. The order of Tribunal dated 7th June 2016, has been allowed to become final. No appeal
under Section 18, has been filed against it. Respondent nos. 2 and 3, however, appear to have
moved an application on 14.6.2016 for stay in their appeal pending before the Appellate Tribunal
being S.A. 256 of 2015. An objection was filed by the petitioner raising various grounds. The
Appellate Tribunal by the order impugned has allowed the waiver application to the extent of 75%
and respondent nos. 2 and 3 have been permitted to deposit 25% pre deposit till the date of eauction. Paragraphs 12 to 15 of the appellate order reads as under:-

" 12. It is to be pointed out at this juncture that as per the second proviso of subsection (1) of Section 18 of the SARFAESI Act, 2002 no appeal shall be entertained unless the
borrower/guarantor has deposited with the Appellate Tribunal 50% of the amount due from him as
claimed by the secured creditor or determined by the Debts Recovery Tribunal. As per the third
proviso of Sub-section (1) of Section 18, the Appellate Tribunal may, for the reasons to be recorded
in writing, reduce the amount to not less than 25% of debt referred to in the second proviso.

13. The language used in Section 18(1) of the SARFAESI Act, 2002 is very plain
and clear that the Appellate Tribunal is not versted with any discretion, except to the pre-deposit
amount to the extent of 25% of the debt due from the appellant for reasons to be recorded in
writing.

14. In view of the law laid down by the Hon'ble Supreme Court in Narayan
Chandra Ghosh Vs. UCO Bank & Ors. (Supra) and in the facts of the present case, I deem it just
and proper to direct the appellants to deposit 25% of the demand amounting to Rs. 27,53,563/-
raised by the respondent-Bank as per notice under section 13(2) of the SARFAESI Act, 2002,
which is to be reduced by a sum of Rs. 2,47,541/- which has already been paid by the appellants
after the demand notice. This amount is to be paid before the auction sale of the property in
question scheduled to be held on 21.6.2016 in the form of Demand Draft in the name of the
Registrar of the Appellate Tribunal, Allahabad, who shall keep the sasme in FDR for a period of six
months n the Nationalized Bank in auto renewal scheme.

15. The waiver application is accordingly decided.
8 All. United Bank Of India & Anr. Vs State Of U.P. & Ors.
957
7. Tribunal at the same time has proceeded to stay the auction/sale of the property in
question fixed for 21st June, 2016. Aggrieved by the order of the Appellate Tribunal, petitioner
bank has filed the present writ petition. A counter affidavit has been filed in the matter on behalf of
respondent nos. 2 to 4 which is taken on record.

8. I have heard Sri K.M. Asthana for the petitioners, learned Standing Counsel appearing
for respondent nos. 1 and 5 and Sri Ashok Pandey, counsel for respondent nos. 2 to 4. With the
consent of the counsel for the parties, writ petition is disposed of finally at the admission stage
itself.

9. Learned counsel for the petitioner has challenged the appellate order on the following
grounds:-

(i) The grant of interim protection is unsustainable since no reasons have been
assigned in the order.

(ii) No relief could be granted in respect of the e-acution fixed for 21st June 2016,
in the appeal filed under Section 18 as it was against a previous notice, and had lost its efficacy,
especially as a subsequent appeal was filed under Section 17(1) against fresh notice.

(iii) The order dated 7.6.2016 rejecting stay application had attained finality and
without any challenge laid to it, no stay could be granted.

(iv) It is also contended that Appellate Tribunal could not entertain and grant relief
on the interim application as condition of pre deposit of 25% was not met by then.

10. Sri. Ashok Pandey, Advocate, on the other hand has submitted that the Appellate
Tribunal has validly passed interim order for the reasons recorded therein, which requires no
interference.

11. From the facts already noticed above, it is undisputed that a commercial loan was
availed of by respondent nos. 2 and 3 and the borrower failed to repay the loan amount in terms of
the agreement. Proceedings under Section 13(2) were initiated vide notice dated 31.8.2013 and
thereafter, possession notice under Section 13(4) dated 10th April, 2014 was also issued. Auction
notice of mortgaged property was issued on 28.8.2014 fixing 8th October, 2014 as the date of
auction. The proceedings were challenged by filing appeal under Section 17(1) of the Act, 2002
being securitization appeal no. 364 of 2014. This appeal of respondent nos. 2 and 3 has been
rejected on 28.8.2015. In appeal filed against it under Section 18 No. 256 of 2015 neither the
requirement of pre deposit in terms of Section 18 was met nor any interim protection was granted.

12. The date for auction fixed on 8.10.2014 had expired. A fresh auction notice was
published on 10.5.2016 fixing 21st June 2016 as the date for holding of e-auction. Respondents
opted to challenge the fresh e-auction notice by instituting a fresh appeal under Section 17(1) of the
958 INDIAN LAW REPORTS ALLAHABAD SERIES

SARFAESI Act of 21st May 2016. The filing of fresh appeal by respondent nos. 2 and 3, in law,
would mean that respondents opted not to pursue their grievance in pending appeal before under
Section 18 of the Act. This appears to have been done as a fresh cause had arisen and for pursuing
the appeal under Section 18, the respondents had to comply with the requirement of pre deposit in
terms of Section 18(1), where as, no such requirement existed if a fresh appeal under Section 17
was filed. It was however open in law for the respondents to have filed a fresh appeal under Section
17 which they opted.

13. However having opted to choose such course and having failed to get any interim relief
from the Tribunal, respondents gave up their challenge in the fresh appeal under Section 17 and
reverted back to the appeal pending under Section 18. The order of Tribunal dated 7.6.2016,
already extracted, is not even challenged. No appeal under Section 18 was filed against it. Instead a
fresh application for stay was preferred in their pending appeal before Appellate Tribunal being
S.A. No. 256 of 2015.

14. The Appeal before appellate Tribunal was pending on the date of issuance of fresh
auction notice dated 10th May 2016, and in case respondent nos. 2 and 3 intended to question the
fresh auction notice in their pending appeal under Section 18, there was no necessity of having filed
a fresh securitization appeal under Section 17. However, after having elected not to challenge the
fresh auction notice in pending appeal under Section 18, and filing a fresh appeal under Section 17
against it, the respondent nos. 2 to 4 could not thereafter give up their appeal against fresh auction
notice and straightaway challenge the auction notice in appeal arising out of the previous auction
notice. This Court finds substance in the argument of the petitioner that respondent nos. 2 and 3
having given up their challenge in the fresh auction notice in the appeal filed against it, could not
have pressed their pending appeal under Section 18 for challenging the fresh auction notice.
Admittedly, the scope of appeal under Section 18 was restricted to the order passed by the Tribunal
rejecting challenge to the previous auction notice. The fresh auction notice was not the subject
matter of challenge in previous appeal filed under Section 17 or the orders passed thereafter. A
fresh cause, therefore could not have been brought before the appellate forum in the pending
appeal. The Appellate forum, therefore, had no jurisdiction to entertain a challenge to the fresh
auction notice in the pending appeal arising out of previous e-auction notice. Particularly, as the
challenge made to the fresh auction notice by invoking Section 17 was not pursued.

15. Even otherwise, this Court finds that absolutely no reasons have been assigned for grant
of interim protection to respondent nos. 2 and 3. Apparently, the default in repayment of loan was
established and the only ground pressed was the pendency of some arbitration, which the
respondents wanted to be made known to the intending purchaser. It was not open for the Appellate
Tribunal to have stayed the e-auction without specifying reasons for grant of such interim
protection. Law is settled that reasons must be assigned even for grant of interim protection. (See:
Siemens Engineering & Manufacturing Co. of India Ltd. Vs. Union of India and other: AIR 1976
SC 1785, G.Vallikumari vs. Andhra Education Society and others: (2010) 2 SCC 497 and Kranti
Associates (P) Ltd. vs. Masood Ahmed Khan: (2010) 9 SCC 496).
8 All. United Bank Of India & Anr. Vs State Of U.P. & Ors.
959
16. This is particularly so as proceedings under SARFAESI Act have been undertaken.
Apex Court in United Bank of India Vs. Satyawati Tondon 2010 AIR SCW 5267 has been
pleased to observe that in cases relating to recovery of the dues of banks, financial institutions and
secured creditors, stay granted by High Court would have serious adverse impact on the financial
health of such bodies/institutions, which would ultimately be detrimental to the economy. The
observation of the apex court applies equally to the proceedings of Appellate Tribunal when it
proceeds to grant interim protection to a defaulter. Cogent reasons have to be assigned before the
Tribunal assumes jurisdiction in the matter to grant interim protection. In the absence of reasons
assigned for grant of relief by the Tribunal, the order itself is rendered bad. This Court also finds
that interim relief has been granted by the Tribunal, even before requirement of pre deposit was
met, which was impermissible.

17. In the facts and circumstances, as have been noticed above, this Court finds that the
order of the Tribunal impugned in this petition suffers from lack of jurisdiction and is, otherwise, in
teeth of settled principles of law, which cannot be sustained.

18. Writ petition, consequently, stands allowed. Order of the Tribunal dated 20th June 2016
is set aside. Parties are left to pursue their remedy as are available to them in law.

19. Costs made easy.
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960 INDIAN LAW REPORTS ALLAHABAD SERIES

(2016) 8 ILRA 960
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 10.08.2016

BEFORE

THE HON'BLE MRS. SUNITA AGARWAL, J.

Writ C No.- 40249 Of 2008

Ram Briksh ...Petitioner
 Versus
State Of U.P. & Ors. ...Respondents

Counsel for Petitioner:
Gyanendra Kumar Singh, S.P. Pandey, S. Shahi, Satyawan Shahi

Counsel for Respondents:
C.S.C., Anoop Trivedi, O.P. Shukla, P.N. Tripathi, V.K. Singh

Fair Price Shop Licence -- Cancellation -- Substitution of Legal Heir -- Locus Standi --
Petitioner, licence holder, died during pendency of writ petition -- Substitution application filed by his son on
ground that cancellation orders were illegal and he, being legal heir, has right to be heard -- Respondent
objected that petition became infructuous on death of licence holder and son has no right to defend father's
action or inaction -- Son of deceased licence holder has a right for consideration for allotment of fair price
shop if father was carrying good reputation in distribution of essential commodities -- If cancellation orders
are allowed to stand unconsidered on merits, they would come in the way of son's preferential right -- Writ
petition cannot be rendered infructuous -- Substitution application allowed. (Para 1)

Government Order dated 17.08.2002 -- Clause 10(jha) -- Preferential Right of Legal Heir --
Clause 10(jha) provides that on death of a shopkeeper of good reputation, the shop may be allotted to his
dependent, meaning wife, son, or unmarried daughter -- Reliance placed on Subash Vs. State of U.P., 2015
(1) ADJ 113 -- Division Bench therein held that allotment is to be made only after resolution in open meeting
of Gaon Sabha, and legal heir of a licensee who earned goodwill has a preferential right for consideration on
compassionate ground -- Son of licence holder has preferential right for consideration, subject to villagers'
opinion on father's reputation being obtained in open Gram Sabha meeting. (Para 2)

Cancellation of Licence -- Non-Distribution of Essential Commodities -- Absence of Concerned
Officer -- Distribution scheduled for 11.10.2007 could not take place as the concerned officer/observer did
not turn up -- Licence holder promptly informed District Supply Officer, who fixed 18.10.2007 for distribution
and nominated another officer to supervise -- Distribution duly carried out on 18.10.2007 -- Suspension
order passed on 30.10.2007, i.e., twelve days after distribution, acting on an earlier complaint . Distribution
was not withheld but only postponed for reasons beyond licence holder's control -- First charge in suspension
order not proved -- Licensing and Appellate Authorities failed to consider that distribution had in fact taken
place on rescheduled date. (Para 3)