Much to the relief of Preetha Shaji, a homemaker who has been fighting to save her husband’s house and land at Pathadipalam near Edappally, a Division Bench of the Kerala High Court on Tuesday set aside the property’s auction sale conducted by the bank for recovering a loan taken by Mr. Shaji’s relative.
Guarantee
The Bench comprising Chief Justice Hrishikesh Roy and Justice A.K. Jayasankaran Nambiar passed the verdict while allowing a petition filed by Mr. Shaji, challenging the Debt Recovery Tribunal’s final order for recovering the loan amount from him.
Mr. Shaji had stood guarantee for the loan of ₹2 lakh taken by his relative Sajan by mortgaging his property comprising 18.2 cents of land at Pathadipalam in 1994. When Mr. Sajan defaulted on repaying the loan, the bank took steps to recover the amount from the guarantor. Ratheesh M.N. bought Mr. Shaji’s property in the auction conducted by the bank.
The petitioner challenged the auction sale of the property done on February 2, 2014 on the ground that it was done more than eight years after the final order of the DRT issued in 2005. It was vitiated, as it violated the Recovery of Debts Due to Banks and Financial Institutions Act (RDDBFI) Act, 1993 and the second schedule of Rule 68b of the Income Tax Act.
The court said in terms of Section 29 of the RDDBFI Act, the bank was obliged to follow the procedure for recovery of tax. In this case, since the mortgage was one created by deposit of title deeds, there was no necessity for the bank to resort to a procedure for attachment of property as a precondition for sale. The auction sale was held after a lapse of more than eight years from the date of issuing recovery certificate in June 2005 and it was in violation of Section 29 of the Act. The sale conducted by the bank was therefore clearly illegal and void.
The court directed Mr. Shaji to pay an amount of ₹43,51,362.85 to the bank to redeem the mortgaged property. They should also pay an amount of ₹1,89,000 to Mr. Ratheesh who bought the land in the auction. The payments shall be effected on or before March 15.
