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.
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