Skip to main content

Creditors have the responsibility to get a fair and market value for the secured property

In PUSHPA BUILDERS LTD vs THE VAISH COOPERATIVE ADARSH BANK LTD., appeal was filed before the Delhi High Court by the  Judgement Debtor for quashing/setting aside of the order passed by the learned Additional District Judge/Executing Court. The Decree-Holder had sought the execution of the Final Decree.

The primary objection of the appellant was that the secured asset is being sold by the bank at a alarmingly reduced price whereas the Bank replied that due to COVID pandemic, the property prices had fallen drastically.

The court observed that when the respondent had come into the possession of the mortgaged property on 13th April, 2018, and as on 18th May, 2018, the property was worth more than Rs.24 crores, while it remained in the hands of the respondent, the value of the same property had plummeted by about half. It may be that in the Covid-19 pandemic period, the Real Estate sector has seen some diminished activities, but it cannot be overlooked, that it was in the year 2019 itself, that the respondent had sought to revise downwards the value of the mortgaged property from Rs.24,16,78,125/-, to Rs.18,13,00,000/- to Rs.16 crores and thereafter to Rs.13,75,00,000/-.

The court taking a strong view held that while the attempt of the banks and financial institutions such as the respondent to minimize their losses makes good business sense, there cannot be a free run for them at the cost of the borrowers who have mortgaged to them or furnished valuable property as security to assure repayment, which are worth multiple times the value of the loan.

To reiterate, when collaterals and securities are provided by borrowers, which would be available to the creditors for sale and transfer to recover outstanding dues, the creditors have the responsibility to get a fair and market value for the said collateral/security/immovable property. It is quite a common practice to claim that the value of the property has been depressed because the Bank’s attachment/lien exists over the property. However, this kind of argument does not appeal, as the consideration is to be paid by the purchaser as per market rates, to whosoever is entitled to receive it i.e., either the original owner or the creditor. It is also incumbent on all Receivers of immovable property/security to maintain them in good condition and not to allow the property to waste. The creditor cannot later on claim that the property under its custody had become dilapidated and therefore, cannot command the market value. The creditor would be responsible for the loss of such value and such practices that lead to distress sales below par have to be completed rooted out not just discouraged.

Comments

Post a Comment

Most viewed this month

The recovery of vehicles by the financier not an offence - SC

Special Leave Petition (Crl.) No. 8907  of 2009 Anup Sarmah (Petitioner) Vs Bhola Nath Sharma & Ors.(Respondents) The petitioner submitted that  respondents-financer had forcibly taken away the vehicle financed by them and  illegally deprived the petitioner from its lawful possession  and  thus,  committed  a crime. The complaint filed by the petitioner had been  entertained  by  the Judicial Magistrate (Ist Class), Gauhati (Assam) in Complaint Case  No.  608 of 2009, even directing the interim custody of the vehicle (Maruti  Zen)  be given to the petitioner vide order dated  17.3.2009.  The respondent on approaching the Guwahati High  Court against this order, the hon'ble court squashed the criminal  proceedings  pending   before  the  learned Magistrate. After hearing both sides, the Hon'ble Supreme Court decided on 30th...
7 comments
Read more

Valuation Report of Jewellery once made is effective for Four Assessment Years

The division Bench of the Delhi High Court in Pr.Commissioner of Wealth Tax vs. Raghu Hari Dalmia held that a valuation report made by a registered valuer once adopted shall be in effect for four assessment years unless an event has occurred whereby the value is increased or decreased. The High Court made it clear that the event of “search” under Section 132 of the Income Tax Act, 1961 cannot compel the assessee to undertake a fresh valuation.
2 comments
Read more

Mere Agreement To Sell The Leased Property To Tenant Would Not Terminate Landlord-Tenant Relationship

In CIVIL APPEAL Nos. 1237­1238 OF 2019, Dr. H.K. Sharma vs Shri Ram Lal, the tenant had objected against the eviction suit filed by the landlord, claiming that the landlord-tenant relationship between them had ceased to exist by virtue of an agreement for sale entered between them and that he has already paid some money in advance based on the agreement. The tenant contented as the landlord-tenant relationship did not exist, the landlord cannot evict him. The matter went through various forums and finally landed before the Supreme Court in appeal. The Supreme Court referring to the judgment in Shah Mathuradas Maganlal & Co. vs. Nagappa Shankarappa Malage & Ors., held that in the instant case the lease agreement included no clauses on the fate of the tenancy. A fortiori, the parties did not intend to surrender the tenancy rights despite entering into an agreement of sale of the tenanted property. In other words, if the parties really intended to surrender their tenancy ...
2 comments
Read more