HONBLE SRI JUSTICE R. SUBHASH REDDY AND HONBLE SRI JUSTICE A. SHANKAR NARAYANA
WRIT PETITION Nos.36652 OF 2015 and batch
10-02-2016
M/s. Sridhar Enterprises.. Petitioner
Bank of Baroda, ARM Branch, Himayath Nagar, Hyderabad & 2 others .. Respondents
Counsel for the Petitioners:Sri G.K. Deshpande
Counsel for Respondent No.1:Sri K. Mallikarjuna Rao
Counsel for Respondent No.2: Sri Sharath Sanghi
<GIST:
>HEAD NOTE:
?CASES REFERRED:
1.(2013) 10 SCC 83
2.(2005) 4 SCC 120
3.[2014 (2) D.R.T.C. 27 (S.C.)]
4.(2010) 8 SCC 110
5.2015 (1) ALD 202
6.2015 SCC Online Hyd.273
7.(2008) 9 SCC 299
8.(2015) 5 SCC 574
9.(2009) 17 SCC 690
HONBLE SRI JUSTICE R. SUBHASH REDDY
AND
HONBLE SRI JUSTICE A. SHANKAR NARAYANA
WRIT PETITION Nos.36652, 36625 & 38600 OF 2015
COMMON ORDER: (Per Honble Sri Justice A. Shankar Narayana)
Since subject matter of all these writ petitions and the parties
are one and the same, they are being disposed of by this common
judgment.
2. W.P. No.36652 of 2015 is filed by M/s. Sridhar Enterprises,
represented by its proprietor Pathallapally Sridhar seeking Mandamus
to declare the auction, dated 10-03-2015, conducted by respondent
No.1 - Bank of Baroda, ARM Branch, Himayath Nagar, Hyderabad,
and consequential issuance of Certificate of sale of moveable
properties, dated 24-09-2015, in favour of respondent No.2 in respect
of movable properties of the petitioner as unconstitutional, unjust,
illegal and violative of principles of natural justice.
3. W.P. No.36625 of 2015 is also filed by the petitioner in
W.P. No.33652 of 2015 seeking Mandamus to declare the auction,
dated 13-03-2015, and consequential issuance of sale certificate,
document No.7414/15, dated 24-09-2015, in respect of immovable
property admeasuring Acs.15-00, situated in Survey No.100/P,
100/VU, 100/LU, Jiyapally Village, Bibinagar Mandal, Nalgonda
District, in favour of respondent No.2, under the provisions of the
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (for short SARFAESI
Act) and in exercise of powers conferred under Section 13 of the Act
read with Rule 12 of Security Interest (Enforcement) Rules, 2002 ( for
short Rules 2002) by respondent No.1 - Bank of Baroda, ARM
Branch, Himayath Nagar, Hyderabad, as unconstitutional, unjust,
illegal and violative of principles of natural justice, and to set aside
the same.
4. W.P. No.38600 of 2015 is filed by Smt. Patalapally
Atchamma, who is mother of P. Sridhar (proprietor of the petitioner in
the former two writ petitions), seeking the very same relief of
Mandamus to declare the auction, dated 13-03-2015, and
consequential issuance of sale certificate document No.7415/15,
dated 24-09-2015, in respect of immovable property admeasuring
Acs.10-00, situated in Survey No.100/P of Jiyapally Village,
Bibinagar Mandal, Nalgonda District, in favour of respondent No.2,
under the provisions of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002 (for
short SARFAESI Act) and in exercise of powers conferred under
Section 13 of the Act read with Rule 12 of Security Interest
(Enforcement) Rules, 2002 by respondent No.1 - Bank of Baroda,
ARM Branch, Himayath Nagar, Hyderabad, as unconstitutional,
unjust, illegal and violative of principles of natural justice, and to set
aside the same.
5. In the former two writ petitions, the petitioner is
M/s. Sridhar Enterprises represented by its proprietor, P. Sridhar and
in the latter writ petition, the petitioner is Smt. P. Atchamma.
However, in all the writ petitions, respondent No.1 is Bank of Baroda,
ARM Branch, Himayath Nagar, Hyderabad, and respondent No.2 is
auction purchaser - Manne Subramanyam.
6. The facts stated in these three writ petitions are almost
identical, as such, we would like to refer to the averments mentioned
in W.P. No.38600 of 2015 for disposal of these matters.
i) M/s. Sridhar Enterprises, represented by its proprietor
Sri P. Sridhar, which is petitioner in W.P. Nos.36652 and 36625 of
2015, availed certain financial facilities on 19-10-2010 from
respondent No.1 - Bank of Baroda, Himayathnagar Branch,
Hyderabad, (hereinafter referred to as Bank) for its business
purpose. Bank sanctioned a cash credit facility to M/s. Sridhar
Enterprises to the tune of Rs.190.00 lakhs and term loan of Rs.50.00
lakhs, on mortgaging immovable properties belonging to Sridhar, who
is proprietor of Sridhar Enterprises, which are admeasuring Acs.15-00
in Survey No.100 and Acs.10-00 in Survey No.100, situate in
Jiyapally village, Bibinagar Mandal, Nalgonda District (secured
asset).
ii) Bank has initiated measures under the provisions of the
SARFAESI Act for sale of the secured assets and put them to auction
on 13-03-2015. Even, Bank has filed comprehensive recovery suit in
O.A. No.397 of 2013 on the file of the Debts Recovery Tribunal,
Hyderabad.
iii) The petitioners plead that they were never informed by the
Bank as to result of the auction and no intimation was given to them
about sale of the secured assets under e-auction notification,
dated 06-02-2015.
iv) According to the petitioners, in the last week of September
2015, when some unknown persons entered into the factory premises
(secured assets) proclaiming that they purchased the same from the
Bank and attempted to dispossess them from it, which was resisted by
them successfully, but, they went back threatening that they would
come again with the aid of police and take possession forcibly.
Even, Sridhar was summoned to the police station, where he was
provided with copy of sale certificate, dated 24-09-2015, both in
respect of movable and immovable secured assets, and with the help
of police, respondent No.2 (hereinafter referred to as auction
purchaser) took physical possession of the secured assets belonging
to the petitioner in W.P. No.38600 of 2015 and her son - P. Sridhar.
When they sought for information as to auction of the secured assets,
Bank did not furnish the same. Then, they obtained information under
the Right to Information Act, 2005 (for short RTI Act) and, thus,
they came to know that the secured assets were put to e-auction by the
Bank and bids were opened on 13-03-2015 and that there was only
one bidder, who is respondent No.2.
v) It is also stated that the Bank has addressed a letter, dated
04-08-2015, to the auction purchaser stating that he was successful
bidder for the bid amount of Rs.85.00 lakhs and called upon him to
pay balance amount of Rs.63.50 lakhs as Rs.21.50 lakhs was already
paid. The statement of account furnished by the Bank would show
that the amount of Rs.85.00 lakhs was deposited on 05-09-2015.
Thereafter, they made another application under the RTI Act seeking
further information and on verifying the same, it was found that the
Bank has given a letter, dated 26-10-2015, stating that it received
Rs.15.00 lakhs on 04-03-2015 and Rs.6.50 lakhs on 17-03-2015
totalling to Rs.21.50 lakhs towards 25% of the auction amount and the
balance amount of Rs.63.50 lakhs was received on 02-09-2015 and
that due to pendency of W.P. No.7642 of 2015, filed by Sridhar
Enterprises, which was subsequently dismissed, the balance amount
was paid by the auction purchaser on 02-09-2015. The petitioners
narrated the details of dates and the amounts paid in a table in
paragraph No.7 of the affidavit in W.P. No.38600 of 2015.
vi) The petitioners also claimed that the Bank has never
explained the reasons why the auction purchaser had deposited huge
amount of Rs.15.00 lakhs on 04-03-2015, though, the earnest money
deposit required to be made for both the properties was Rs.8.50 lakhs
only and, thus, the unusual payment of Rs.15.00 lakhs made on
04.03.2015 gives rise to any amount of suspicion as to the way in
which the Bank has conducted business while discharging statutory
duties under the SARFAESI Act.
vii) According to the petitioners, no amount was paid on
13-03-2015, on which date auction has taken place. It is also stated
that even the amount of Rs.15.00 lakhs was received by the Bank as
legitimate payment for the purpose of auction, though auction
purchaser was required to deposit Rs.6.50 lakhs on 13-03-2015, which
did not occur thereby making the auction failure. Therefore,
petitioners expressed suspicion that the auction purchaser regularly
parks funds with the Bank making it convenient to use the same for
various contingent purposes. The second violation, according to the
petitioners, was payment of remaining 75% bid amount not being
done by the auction purchaser within fifteen (15) days and the Bank
taking shelter under certain alleged cases filed by them (petitioners),
tries to justify its acts. It is according to them that except the interim
order of this Court in W.P. No.7462 of 2015, filed by Sridhar
Enterprises against auction of movable properties proposed on
23.03.2015, directing the Bank to go ahead with the auction of
movable properties and not to confirm the sale, there is no other
pending writ petition or order in force. According to them, the
secured immovable assets were not subject matter in W.P. No.7462 of
2015 and they never challenged the auction notification, dated
06.02.2015, as such, deposit of balance of 75% bid amount on
02.09.2015 is illegal and, thus, the Bank has clearly violated the
provisions of the SARFAESI Act.
viii) The petitioners also agitated that valuation of the secured
assets was not properly done, and the very valuation made by the
Bank demonstrates its mala fides as the adjacent land belonging to the
brother of P. Sridhar was agreed to sell for Rs.12.00 lakhs per acre on
17-11-2015 as per the auction notification, dated 06-10-2015, itself
published in the Hindu News Paper, dated 07-10-2015. Thus, the
petitioners attributed mala fides to the Bank in valuing the secured
immovable assets at Rs.3.40 lakhs per acre. Hence, they sought to set
aside the auction of secured immovable assets admeasuring Acs.15.00
and Acs.10.00 constituting subject matter in W.P. Nos.36625 of 2015
and 38600 of 2015, respectively.
7. So far as secured movable assets constituting subject matter
in W.P. No.36652 of 2015 are concerned, while mentioning the very
same averments, narrated in the above, further stated that the
petitioner filed W.P. No.7462 of 2015 challenging the auction notice
published in Hans India English News Paper, dated 12-03-2015, and
the same was dismissed by this Court on 01-06-2015 holding that the
Bank has right to proceed under the composite hypothecation
agreement. In the said writ petition, this Court passed interim order
through W.P.M.P. No.9906 of 2015, permitting the Bank to proceed
further with auction, but, directed not to confirm the sale, and the said
interim order was in force till disposal of the writ petition i.e.,
W.P. No.7462 on 01.06.2015. Aggrieved by the same, Sridhar
Enterprises preferred W.A. No.718 of 2015 and the same was also
dismissed on 20.08.2015. Thus, the sale certificate of movable
property, dated 24-09-2015, is challenged in the instant writ petition
i.e., W.P. No.36652 of 2015.
8. Bank has filed its counter on 10-12-2015 stating that
pursuant to the auction conducted on 13-03-2015, successful bidder
made payments in accordance with the rules of auction and allege that
the petitioners are making attempts to invent some kind of alleged
irregularities to challenge the auction.
i) Bank states that e-auction bids have been received through
on-line only and all the relevant details have been furnished to the
petitioners, and, therefore, there were no parking of funds by the
auction purchaser or illegalities in conducting the e-auction. Bank has
referred to filing W.P. No.7462 of 2015 by M/s. Sridhar Enterprises,
which is petitioner in W.P. Nos.36652 and 36625 of 2015, and the
consequent writ appeal, and in the process, amounts were paid by the
auction purchaser including Rs.15.00 lakhs on 04-03-2015; since he
became successful bidder in the auction held on 13-03-2015, he was
asked to pay the balance amount of Rs.21.50 lakhs being 25% of the
bid amount of Rs.85.00 lakhs and the amount of Rs.6.50 lakhs was
paid on 17-03-2015, and subsequently balance bid amount of
Rs.63.50 lakhs was paid on 02-09-2015, and since earnest money
deposit was required to be paid on or before 12-03-2015 for two
mortgaged properties, auction-purchaser paid Rs.15.00 lakhs on
04-03-2015 and, thus, the auction purchaser has complied with the
required amount of earnest money deposit and paid the balance
amount of Rs.63.50 lakhs on 02-09-2015. Bank has specifically
denied the allegation levelled by the petitioners that the auction
purchaser regularly parks funds with it. Bank further denied that there
is manipulation of amounts in regard to e-auction stating that the
amounts were paid through RTGS method and, therefore, question of
taking any undue advantage with it cannot arise.
ii) Bank also states that the sale notice issued by the IDBI Bank
for sale of some lands which is pressed into service by the petitioners
is irrelevant and valuation of the said properties at Rs.12.00 lakhs per
acre is relatable to the land in Survey No.67, while the subject lands
are situated in Survey No.100 and, therefore, the petitioners cannot
claim any prejudice in conducting the e-auction and completing the
formalities.
9. Additional counter affidavit was filed by the Bank on
26-12-2015 giving further details, as the counter affidavit earlier filed
was bereft of certain details. In its additional counter affidavit, Bank
states that as per the conditions of auction, Rs.8.50 lakhs, which is
10% of reserve price of Rs.85.00 lakhs, in respect of both the pieces
of land was to be paid before 12-03-2015, and the auction purchaser
by way of RTGS sent the amount of Rs.15.00 lakhs. In the auction,
he became successful bidder and he was asked to pay 25% of the bid
amount being Rs.21.50 lakhs, and he paid the balance amount of
Rs.6.50 lakhs on 17-03-2015.
i) Bank states that in the meantime, this Court was pleased to
pass interim order staying confirmation of sale of movable properties,
which are situated as fixtures on the land which was put to auction
under the provisions of the SARFAESI Act, and on 01-06-2015, this
Court dismissed W.P. No.7462 of 2015 and subsequently the
petitioner preferred Writ Appeal No.718 of 2015 and the same was
also dismissed on 20-08-2015. Bank states that confirmation of sale
of land could not be made by the Bank in view of the fact that the
movables fixed to the land have to be removed and possession has to
be delivered to the successful bidder. The Bank and the auction
purchaser were obliged to wait for culmination of proceedings in writ
petition as well as the writ appeal, and on 04-08-2015, having
obtained certified copy of the order in the writ petition, it has asked
the auction purchaser to make payment of balance amount, and since
he has requested time till 31-08-2015 and in the meantime writ appeal
was preferred by the petitioners which was dismissed by this Court on
20-08-2015, auction purchaser made payment of balance amount in
respect of both the pieces of land by 02-09-2015.
ii) Bank, therefore, contends that extension of time for
payment of balance amount was necessitated because of the
proceedings initiated by the petitioners and also in view of the fact
that it was not in a position to confirm the sale and deliver the land
without removing the movable properties, which were fixed to the
land, and, therefore, claims that extension of time was allowed out of
legal necessity (Bank has mentioned as illegal necessity) and there
was no collusion between it (Bank) and the auction purchaser. Bank
has filed certain documents mentioned in paragraph No.6 stating that
they are required for proper adjudication of the issue relating to
extension of time and, finally, sought to dismiss the writ petitions.
10. Heard Sri G.K. Deshpande, learned counsel for the
petitioners, Sri K. Mallikarjuna Rao, learned Standing Counsel for
respondent No.1 - Bank, and Sri Sharath Sanghi, learned counsel for
respondent No.2 - auction purchaser.
11. Learned counsel for the petitioners would submit that the
Bank has never informed as to what transpired subsequent to the date
of auction so far as auction of immovable properties are concerned
and, therefore, the petitioners secured the information by making an
application under the RTI Act and came to know that only the auction
purchaser had participated in the auction and became successful
bidder and though, the auction purchaser was supposed to deposit
only 10% of bid price of Rs.8.5 lakhs of both the secured immovable
assets, he has deposited Rs.15.00 lakhs exceeding 10% on 04-03-2015
itself and the balance of Rs.6.50 lakhs to make it 25% of bid amount
though was required to be paid on 13-03-2015 itself, has not tendered
the said amount and deposited the same only on 17-03-2015, thus,
accounted for violation of mandatory provisions of Sub-Rule (3) of
Rule 9 of Rules 2002 and thereby submits that the auction purchaser
regularly parks funds with the bank making it convenient to use the
same for various contingent purposes.
i) He would further submit that there was inordinate delay in
making the balance payment of 75% of the bid amount though
Sub-Rule (4) of Rule 9 of Rules 2002 mandates that within fifteen
(15) days from the date of confirmation of sale the auction purchaser
has to deposit balance bid amount, still, as can be gathered from the
correspondence between Bank and the auction purchaser, dated
04.08.2015 addressed by Bank to the auction purchaser and the reply
given by him dated 11-08-2015 seeking time till 31-08-2015 and
making payment only on 02-09-2015 would unmistakably establish
that Bank as well as the auction purchaser flouted the mandatory
requirement of Sub Rule (4) of Rule 9 of the Rules 2002 and, thus,
collusion between Bank and the auction purchaser can be viewed as
any amount of suspicion would arise in regard to completion of sale
process and, therefore, sought to set aside the sale held on 13-03-2015
by declaring it as illegal.
ii) Learned counsel also would submit that Bank undervalued
the secured immovable assets though adjacent immovable secured
asset was valued at Rs.12.00 lakhs per acre when they were scheduled
to be sold in the auction on 17-11-2015 pursuant to the auction
notification dated 06-10-2015, but the Bank fixed the value in the
instant auction at Rs.3.40 lakhs, and, thus, attributed mala fides to
Bank and auction purchaser.
iii) Learned counsel for the petitioners, to substantiate the stand
taken by them, placed reliance on the decisions of the Honble
Supreme Court in General Manager, Sri Siddeshwara Cooperative
Bank Limited and another v. Ikbal and others , Commissioner of
Endowments and others v. Vittal Rao and others and Mathew
Varghese v. Amritha Kumari .
12. Learned Standing Counsel for the Bank while submitting
that the Bank has not committed any illegality or irregularity and that
payment of 25% of the bid amount and the remaining 75% of bid
amount were made in accordance with the provisions of the
SARFAESI Act and the rules made thereunder, and that the delay was
only due to the act of the petitioners in filing W.P. No.7462 of 2015
and obtaining interim order therein and after dismissal of the same,
preferring W.A. No.718 of 2015, and, only after dismissal of the writ
appeal, 75% of the bid amount was paid by the auction purchaser as
the movable properties being fixtures in the extents sold in the
auction, and contending that the writ petitions are not maintainable
since there is efficacious alternative remedy available to the
petitioners, placed reliance on the decisions of the Honble Supreme
Court in United Bank of India v. Satyawati Tondon and others ,
Ikbals Case (Supra 1), and also the decisions of this Court in
Trinethra Infra Ventures Ltd. v. IFCI Ltd. and others and
Knovus Steels and Infrastructure Limited v. State Bank of India .
i) For the proposition that once sale is confirmed, the same
cannot be reopened, learned standing counsel placed reliance on the
decisions of the Honble Supreme Court in Valji Khimji and
Company v. Official Liquidator of Hindustan Nitro Product
(Gujarat) Limited and others ; and Sadashiv Prasad Singh v.
Harendar Singh and others .
ii) Learned standing counsel also placed reliance on the
decision of the Honble Supreme Court in Rosali V. v. Taico Bank
and others as to the meaning of word immediately conveying
within reasonable time.
13. Learned counsel for the auction purchaser has not advanced
any specific submissions.
W.P. No.36652 of 2015:
14. We intend to take up W.P. No.36652 of 2015 separately for
the reason that the subject matter relates to movables and also as the
petitioner has previously filed W.P. No.7462 of 2015 seeking identical
relief and since he was unsuccessful in getting the action of the Bank
in issuing the e-auction notice, dated 10-03-2015, published in Hans
India News Paper, dated 12-03-2015, proposing to auction the
movables set aside, and even the petitioner being unsuccessful in
W.A. No.718 of 2015, as this Bench declined to grant relief and
dismissed the writ appeal by pronouncing the judgment therein on
20.08.2015. Further, we intend to refer to the relief prayed in
W.P. No.7462 of 2015, which reads thus:
Petition under Article 226 of the Constitution
of India praying that in the circumstances stated in
the affidavit filed therewith, the High Court may
be pleased to issue a Writ, order or direction more
particularly one a writ in the nature of Mandamus,
declaring the action of the respondent No.1 bank
in issuing Auction Notice Dt.10-03-2015
published in Hans India News Paper Dt.12-03-
2015 proposing to auction the Movable Properties
of the petitioner i.e., {(i) Wheel Loader (ii)
Intermediate Bin (iii) Secondary Crusher-1 (iv)
Secondary Crusher-2 (v) Conveyer-2 (vi) Return
Conveyor-2 (vii) Finished product Storage Bin
(viii) Vibrating Screen and (ix) Diesel Generator)
on 23-03-2015, as unconstitutional, illegal,
arbitrary, unjust, against the guidelines issued by
Respondent NO.2/RBI and violative of principles
of Natural Justice.
i) At the cost of repetition, we intend to extract the relief
sought for by the petitioner in the instant writ petition (W.P. No.36652
of 2015), which is thus:
For the reasons stated in the accompanying
affidavit the petitioner herein prays that this
Honble Court may be pleased to issue writ in the
nature of Mandamus, declaring the Auction
Dt.10-03-2015 conducted by the respondent No.1
bank and the consequential issuance of Certificate
of Sale of Moveables Property Dt.24-09-2015 in
favour of Respondent No.2 in respect of the
Movable Properties of the petitioner i.e.,
{(i) Wheel Loader (ii) Intermediate Bin (iii)
Secondary Crusher-1, Ten Tire Tipper (iv)
Secondary Crusher-2, Ten Tire Tipper (v)
Conveyer-2 (vi) Return Conveyor-2 (vii) Finished
Product Storage Bin (viii) Vibrating Screen and
(ix) Diesel Generator} as unconstitutional, illegal,
arbitrary, unjust and violative of principles of
Natural Justice and set aside the same and pass
such other order or orders as this Honourable
Court deems fit and necessary in the justice and
equity.
ii) A learned single Judge of this Court dismissed the Writ
Petition No.7462 of 2015, holding thus:
Apart from the maintainability of writ
petition in respect of a simple dispute under a
loan/composite hypothecation agreements, the writ
petition deserves to be dismissed, for the very
premise of filing the writ is that the movables
sought to be auctioned on 23.03.2015 are not
included in the hypothecation agreement except
hydraulic excavators-2, rock breaker, poclainers.
The petitioner should have disclosed the correct
details of schedule under the composite
hypothecation agreement for vindication of right
under Article 226 of Constitution of India. As
already noticed, the machinery is covered under
agreement of hypothecation and the petitioner
having not filed any rejoinder to the reply and
documents placed on record by 1st respondent
cannot be heard to complain that the impugned
auction is unauthorized and unconstitutional. In
my considered view, the decisions relied on by the
petitioner are distinguishable on the fact situation
of this case, and as tried to be persuaded by
petitioner, this Court is not prepared to exercise
the jurisdiction under Article 226 of Constitution
of India.
iii) This Division Bench dismissed W.A. No.718 of 2015 as
devoid of merit, holding thus:
.. We have also perused the judgments relied
on by the learned counsel for petitioner, but, as the
steps taken by the respondents are in terms of the
hypothecation agreement, the petitioner is not
entitled to claim bar under Order 2 Rule 2 of
C.P.C., and further, having regard to the facts of
the case on hand, the judgment of the Delhi High
Court in Syndicate Banks case (2 supra) also
would not render any assistance to the case of
petitioner. In view of the findings recorded by the
learned Single Judge, we are of the view that the
action taken by the respondents is in terms of the
hypothecation agreement. Further, it is brought to
our notice that auction was already conducted and
confirmation was stayed in view of the interim
order passed by the learned single Judge, but after
disposal of the writ petition, even the sale is
confirmed in favour of the 3rd party-purchaser and
the 1st respondent-bank has recovered the full sale
price.
iv) Though, learned counsel for the petitioners made an attempt
to impress upon us that the relief sought for in the instant writ petition
is for setting aside the sale certificate issued by the Bank to the
auction purchaser and, thus, the relief is distinguishable from the relief
prayed in W.P. No.7462 of 2015, we are not convinced with the same
for the reason that the sale certificate issued by the Bank in favour of
the auction purchaser relates to the very same auction, which was
challenged in W.P. No.7462 of 2015. Therefore, in our considered
view, if the instant writ petition is entertained and any order is passed,
it would amount to reviewing the judgment passed by this Division
Bench in W.A. No.718 of 2015. Therefore, we find no merit at all in
the instant writ petition (W.P. No.36652 of 2015) and, accordingly,
the instant writ petition is dismissed.
W.P. Nos.36625 & 38600 of 2015:
15. Turning to the reliefs claimed in W.P. Nos.36625 and
38600 of 2015, as already referred to in the above, they relate to
auction of secured immovable assets. We have gone through the
relevant averments made by the petitioners, Bank and the auction
purchaser.
i) We would like to narrate the sequence of events in order to
appreciate the contentions raised by the respective parties.
e-auction notice for sale of secured immovable assets was issued by
the Bank on 06-02-2015 proposing to conduct auction on 13-03-2015.
Auction purchaser has deposited Rs.15.00 lakhs on 04-03-2015.
Auction was conducted on 13-03-2015. Balance amount towards 25%
of bid amount of Rs.6.50 lakhs was tendered by the auction purchaser
on 17-03-2015. Remaining 75% of bid amount i.e. Rs.63.50 lakhs
was tendered by the auction purchaser on 02-09-2015.
ii) Sub-Rule (3) of Rule 9 provides that the purchaser shall
immediately pay a deposit of twenty-five per cent of the amount of the
sale price to the authorised officer conducting the sale and in default
of such deposit, the property shall forthwith be sold again. In the
instant case, the auction purchaser, who was the sole bidder
participated in the auction on 13-03-2015, has not tendered the
balance amount having deposited Rs.15.00 lakhs on 04-03-2015
towards earnest money deposit. In fact, earnest money deposit
required to be deposited for both the properties was Rs.8.50 lakhs, but
the auction purchaser deposited more than 10% required to be
deposited. The petitioners intended to attribute mala fides to the Bank
as well as auction purchaser. Even, over looking such allegation,
when looked at the delay in depositing balance amount of
Rs.6.50 lakhs, certainly, it amounts to infraction of mandatory
requirement of Sub-Rule (3) of Rule 9. When the auction was held on
13-03-2015, auction purchaser was required to deposit Rs.6.50 lakhs
to make it 25% on 13-03-2015 itself. As seen from the e-auction sale
notice, auction was scheduled to be held on 13-03-2015 between
11.00 a.m. and 3.00 p.m. As canvassed by the Bank, when the
deposits were made by the auction purchaser through on-line, the
question of failure to deposit Rs.6.50 lakhs on 13-03-2015, in all
probability, ought not have taken place. When formalities were
completed by 3.00 p.m. or 3.30 p.m., even giving half-an-hour time,
the auction purchaser ought to have deposited Rs.6.50 lakhs on the
same day, but he deposited the said amount only on 17-03-2015, for
which there is absolutely no explanation at all by the Bank in its
counter or in its additional counter.
iii) Learned standing counsel for the Bank argued that the word
immediately occurring in Sub-Rule (3) of Rule 9 has to be
construed as within reasonable time and when viewed in that
context making payment of Rs.6.50 lakhs on 17-03-2015 cannot be
construed as infraction of Sub-Rule (3) of Rule 9. In the said context,
he has placed reliance on the decision of the Honble Supreme Court
in Rosalis Case (Supra 9), wherein the Honble Supreme Court held
in paragraph Nos.31 and 32 explaining the meaning, thus:
31. The term immediately, therefore, must be
construed having regard to the aforementioned
principles. The term has two meanings. One,
indicating the relation of cause and effect and the
other, the absence of time between two events. In
the former sense, it means proximately, without
intervention of anything, as opposed to
mediately. In the latter sense, it means
instantaneously. The term immediately, is, thus,
required to be construed as meaning with all
reasonable speed, considering the circumstances of
the case. ( See Halsburys Laws of England, 4th
Edn., Vol.23, Para 1618, p.1178.)
32. In a given situation, the term immediately
may mean within reasonable time. Where an act
is to be done within reasonable time, it must be
done immediately. {See Gangavishan Heeralal v.
Gopal Digambar jain [AIR 1980 MP 119: 1980
MPLJ 246]. AIR at p.123, Keshava S. jamkhandi
v. Ramachandra S. Jamkhandi [AIR 1981 Kant
97: (1980) 2 Kant I J 432 (FB) ], AIR at p.101,
Ramnarayan Triyoginarayan Trivedi v. State of
M.P.[ AIR 1962 MP 93 (FB)]. AIR at p.98, R. v.
HM Inspector of Taxes, ex p Clarke [(1971) 2 QB
640: (1971) 3 WLR 425: (1971) 3 All ER 394].
All ER at p.398 and R. v. HM Inspector of Taxes,
ex p Clarke [(1973) 3 WLR 673: (1972) 1 All ER
545 (CA), All ER at p.555.}.
The fact-situation in the above decision would reveal that the sale was
conducted by the executing Court at about 4.00 p.m. on 26-10-1988
and keeping in view, the fact that the banks at that time were closed,
directed the auction purchaser to deposit the amount by the next day,
and the auction purchaser obliged the direction of the executing Court
and deposited the amount on 27-10-1988 and the balance amount on
11-11-1988. Certainly, the said fact-situation is not akin to the one
occurring in the instant case. In the instant case, though, auction had
taken place on 13-03-2015, auction purchaser has not deposited the
balance amount to make it 25% either on 13-03-2015, or at least, on
14-03-2015, but three (03) days after the date of auction, he has
deposited Rs.6.50 lakhs, and, therefore, it has to be held that there has
been complete contravention of the mandatory requirement of
Sub-Rule (3) of Rule 9. Certainly, the said violation cannot be
sidelined.
16. The next violation is failure to deposit balance payment of
75% of the bid amount within fifteen (15) days from the date of
auction by the auction purchaser. The balance bid amount was
deposited on 02-09-2015 by the auction purchaser. Sub-Rule (4) of
Rule 9 mandates that balance amount of purchase price payable shall
be paid by the purchaser to the authorised officer on or before
fifteenth day of confirmation of sale of the immovable property or
such extended period as may be agreed upon in writing between the
parties. Even, consequence of committing default is provided by the
provisions of Sub-Rule (5) of Rule 9.
17. It is, now, to be seen whether the reason assigned by the
Bank referred to in the above can be viewed as plausible reason or
whether the delay in payment of balance 75% of the bid amount
amounts to infraction of Sub-Rule (4) of Rule 9 of Rules 2002?
18. Though, we have referred to the reasons assigned by the
Bank while narrating the additional counter affidavit filed by the
Bank, we would like to once again state that (a) the Bank is
attempting to take shelter under the interim order passed in
W.P. No.7462 of 2015, which was dismissed on 01-06-2015, and also
the factum of preferring W.A. No.718 of 2015 by the petitioners
which was also dismissed on 20-08-2015, and stating that only on
obtaining certified copy of the order of dismissal of the writ appeal
on 04.08.2015, it has informed the auction purchaser to deposit the
balance bid price; (b) further reason assigned by the Bank is that the
movables sought to be auctioned were, in fact, fixtures attached to the
lands, which are secured assets in the form of immovable properties
sought to be sold in the auction held on 13-03-2015, and therefore, the
Bank has waited till disposal of writ appeal on 04-08-2015 for
demanding the auction purchaser to deposit the balance 75% of bid
price which was deposited on 02-09-2015.
19. The reasons assigned by the Bank are absolutely
unconvincing, since, though, the movables were attached to the lands
sought to be sold in the auction held on 13-03-2015 and the sale was
effected, nothing prevented it to receive the balance 75% of the bid
price within fifteen (15) days after confirmation of sale. Thus, we are
of the strong view, that there has been contravention of the mandatory
requirement provided by the provisions of Sub-Rule (4) of Rule 9 of
Rules 2002.
20. Further, even a perusal of the letter addressed by the Bank
to the auction purchaser on 04-08-2015 shows that the Bank has
congratulated the auction purchaser and requested him to pay the
remaining balance amount of Rs.63.50 lakhs immediately to avoid
forfeiture of the amount paid and further mentioning that on receiving
full amount, it will issue sale certificate. The auction purchaser given
a reply to the Bank on 11-08-2015 stating that he was inclined to pay
total balance amount before the end of that month i.e., 31-08-2015 and
requested to cooperate and oblige. But, the auction purchaser has paid
the balance amount of Rs.63.50 lakhs on 02-09-2015. The Bank in its
additional counter, conveniently mentioned that the auction purchaser
has sought time till 31-08-2015 basing on the reply given by him, but
the said correspondence would not satisfy the requirement of
Sub-Rule (4) of Rule 9 and, therefore, absolutely, there is no reason
leaving apart plausible reason in getting over the time limit prescribed
by Sub-Rule (4) of Rule 9 of Rules 2002. In the said context,
learned counsel for the petitioners placed reliance on the decision of
the Honble Supreme Court in Mathew Vargheses Case (Supra 3)
referring to paragraph Nos.39 and 40, thus:
39. In Ram kishun (supra), paras.13, 14 and 28 are
relevant forour purpose, which are as under:
13. Undoubtedly, public money should be recovered
and recovery should be made expeditiously. But it
does not mean that the Financial Institutions
which are concerned only with the recovery of
their loans, may be permitted to behave like
property dealers and be permitted further to
dispose off the secured assets in any unreasonable
or arbitrary manner in flagrant violation of the
statutory provisions.
14. A right to hold property is a constitutional right as
well as a human right. A person cannot be
deprived of his property except in accordance with
the provisions of a statute. (Vide Lachhman Dass
v. Jagat Ram and State of M.P. v. Narmada
bachao Andolan). Thus, the condition precedent
for taking away someones property or disposing
of the secured assets, is that the authority must
ensure compliance with the statutory provisions.
28. In view of the above, the law can be summarized
to the effect that the recovery of the public dues
must be made strictly in accordance with the
procedure prescribed by law. The liability of a
surety is co-extensive with that of the principal
debtor. In case there are more than one surety the
liability is to be divided equally among the sureties
for unpaid amount of loan. Once the sale has been
confirmed it cannot be set aside unless a
fundamental procedural error has occurred or sale
certificate had been obtained by misrepresentation
or fraud.
40. The above principles laid down by this Court also
makes it clear that though the recovery of public dues
should be made expeditiously, it shold be in accordance
with the procedure prescribed bylaw and that it should not
frustrate a Constitutional Right, as well as the Human
Right of a person to hold a property and that in the event of
a fundamental procedural error occurred in a sale, the same
can be set aside.
Thus, the Honble Supreme Court emphasised that recovery of public
dues should be made in accordance with the procedure prescribed by
law and in the event of a fundamental procedural error occurring in a
sale, the same can be set aside. The fact-situation herein squarely
covers the principle laid down by the Honble Supreme Court and,
therefore, the auction held on 13-03-2015 is liable to be set aside.
21. Turning to the submission that the instant writ petition
cannot be maintained, learned standing counsel for the Bank has
placed reliance on the decisions of the Honble Supreme Court in
Satyawati Tondons Case (Supra 4), Ikbals Case (Supra 1), and
also the decisions of this Court in Trinethra Infra Ventures Ltds
Case (Supra 5) and Knovus Steels and Infrastructure Limiteds
Case (Supra 6) to fortify his stand that the petitioners ought to have
approached the Debts Recovery Tribunal as an efficacious alternative
remedy is available to them under Section 17 of the SARFAESI Act,
and, therefore, the instant writ petitions are not maintainable.
22. Learned counsel for the petitioners, on the other hand,
relied on the decision in Ikbals Case (Supra 1) for the proposition
that availability of efficacious alternative remedy is not an absolute
bar to exercise extraordinary jurisdiction of this Court under Article
226 of the Constitution of India, and in the context of right of the
borrower in entering into written agreement as in Rule 9 (4) of Rules
2002 and explaining the meaning of expression written agreement
between the parties, learned counsel, while contending that the
Honble Supreme Court explained the word parties occurring in the
said expression, held that it includes secured debtor, borrower and
auction purchaser, placed reliance on the observations of the Honble
Supreme Court contained in paragraph No.14, thus:
14. A reading of sub-rule (1) of Rule 9 makes it
manifest that the provision is mandatory. The
plain language of Rule 9(1) suggests this.
Similarly, Rule 9(3) which provides that the
purchaser shall pay a deposit of 25% of the
amount of the sale price on the sale of immovable
property also indicates that the said provision is
mandatory in nature. As regards balance amount
of purchase price, sub-rule (4) provides that the
said amount shall be paid by the purchaser on or
before the fifteenth day of confirmation of sale of
immovable property or such extended period as
may be agreed upon in writing between the parties.
The period of fifteen days in Rule 9(4) is not that
sacrosanct and it is extendable if there is a written
agreement between the parties for such extension.
What is the meaning of the expression written
agreement between the parties in Rule 9(4)? The
2002 Rules do not prescribe any particular form
for such agreement except that it must be in
writing. The use of the term written agreement
means a mutual understanding or an arrangement
about relative rights and duties by the parties. For
the purpose of Rule 9(4), the expression written
agreement means nothing more than a
manifestation of mutual assent in writing. The
word parties for the purpose of Rule 9(4) we
think must mean the secured creditor, borrower
and auction-purchaser.
In fact, learned counsel for the petitioners placed reliance on the
decision in Ikbals Case (Supra 1) to answer the contention of the
learned standing counsel for the Bank that the correspondence
between the Bank and the auction purchaser, referred to in the above,
through the letters, dated 04-08-2015 and 11-08-2015, accounts for a
sort of mutual understanding satisfying the expression written
agreement occurring in Rule 9(4) of Rules 2002.
23. To substantiate the stand that once sale is confirmed, it
cannot be reopened, the learned standing counsel for the Bank relied
on the decisions of the Honble Supreme Court in Valji Khimjis
Case (Supra 7) and Sadashiv Prasad Singhs Case (Supra 8).
But the fact-situation therein is different from the one occurring herein
and would not render any assistance to justify violation of mandatory
requirements of Rules 9(3) and 9 (4) of the Rules 2002.
24. We, therefore, hold that the auction conducted on
13.03.2015 by the Bank in favour of the auction purchaser -
respondent No.2 is liable to be set aside on account of contravention
of mandatory provisions of Rules 9(3) and (4) of Rules 2002, and,
therefore, the same is set aside. However, we direct the Bank -
respondent No.1 to return the bid amount of Rs.85,00,000/- (Rupees
eighty five lakhs only), without any interest thereon, to the auction
purchaser - respondent No.2; granting liberty to take measures in
accordance with law.
25. In the result, W.P. No.36652 of 2015 is dismissed; and
W.P. Nos.36625 and 38600 of 2015 are allowed, as indicated above.
There shall be no order as to costs.
26. As a sequel thereto, miscellaneous petitions, if any pending
in these writ petitions, stand closed.
_____________________________
R.SUBHASH REDDY, J
_____________________________
A. SHANKAR NARAYANA, J
February 10, 2016.
WRIT PETITION Nos.36652 OF 2015 and batch
10-02-2016
M/s. Sridhar Enterprises.. Petitioner
Bank of Baroda, ARM Branch, Himayath Nagar, Hyderabad & 2 others .. Respondents
Counsel for the Petitioners:Sri G.K. Deshpande
Counsel for Respondent No.1:Sri K. Mallikarjuna Rao
Counsel for Respondent No.2: Sri Sharath Sanghi
<GIST:
>HEAD NOTE:
?CASES REFERRED:
1.(2013) 10 SCC 83
2.(2005) 4 SCC 120
3.[2014 (2) D.R.T.C. 27 (S.C.)]
4.(2010) 8 SCC 110
5.2015 (1) ALD 202
6.2015 SCC Online Hyd.273
7.(2008) 9 SCC 299
8.(2015) 5 SCC 574
9.(2009) 17 SCC 690
HONBLE SRI JUSTICE R. SUBHASH REDDY
AND
HONBLE SRI JUSTICE A. SHANKAR NARAYANA
WRIT PETITION Nos.36652, 36625 & 38600 OF 2015
COMMON ORDER: (Per Honble Sri Justice A. Shankar Narayana)
Since subject matter of all these writ petitions and the parties
are one and the same, they are being disposed of by this common
judgment.
2. W.P. No.36652 of 2015 is filed by M/s. Sridhar Enterprises,
represented by its proprietor Pathallapally Sridhar seeking Mandamus
to declare the auction, dated 10-03-2015, conducted by respondent
No.1 - Bank of Baroda, ARM Branch, Himayath Nagar, Hyderabad,
and consequential issuance of Certificate of sale of moveable
properties, dated 24-09-2015, in favour of respondent No.2 in respect
of movable properties of the petitioner as unconstitutional, unjust,
illegal and violative of principles of natural justice.
3. W.P. No.36625 of 2015 is also filed by the petitioner in
W.P. No.33652 of 2015 seeking Mandamus to declare the auction,
dated 13-03-2015, and consequential issuance of sale certificate,
document No.7414/15, dated 24-09-2015, in respect of immovable
property admeasuring Acs.15-00, situated in Survey No.100/P,
100/VU, 100/LU, Jiyapally Village, Bibinagar Mandal, Nalgonda
District, in favour of respondent No.2, under the provisions of the
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (for short SARFAESI
Act) and in exercise of powers conferred under Section 13 of the Act
read with Rule 12 of Security Interest (Enforcement) Rules, 2002 ( for
short Rules 2002) by respondent No.1 - Bank of Baroda, ARM
Branch, Himayath Nagar, Hyderabad, as unconstitutional, unjust,
illegal and violative of principles of natural justice, and to set aside
the same.
4. W.P. No.38600 of 2015 is filed by Smt. Patalapally
Atchamma, who is mother of P. Sridhar (proprietor of the petitioner in
the former two writ petitions), seeking the very same relief of
Mandamus to declare the auction, dated 13-03-2015, and
consequential issuance of sale certificate document No.7415/15,
dated 24-09-2015, in respect of immovable property admeasuring
Acs.10-00, situated in Survey No.100/P of Jiyapally Village,
Bibinagar Mandal, Nalgonda District, in favour of respondent No.2,
under the provisions of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002 (for
short SARFAESI Act) and in exercise of powers conferred under
Section 13 of the Act read with Rule 12 of Security Interest
(Enforcement) Rules, 2002 by respondent No.1 - Bank of Baroda,
ARM Branch, Himayath Nagar, Hyderabad, as unconstitutional,
unjust, illegal and violative of principles of natural justice, and to set
aside the same.
5. In the former two writ petitions, the petitioner is
M/s. Sridhar Enterprises represented by its proprietor, P. Sridhar and
in the latter writ petition, the petitioner is Smt. P. Atchamma.
However, in all the writ petitions, respondent No.1 is Bank of Baroda,
ARM Branch, Himayath Nagar, Hyderabad, and respondent No.2 is
auction purchaser - Manne Subramanyam.
6. The facts stated in these three writ petitions are almost
identical, as such, we would like to refer to the averments mentioned
in W.P. No.38600 of 2015 for disposal of these matters.
i) M/s. Sridhar Enterprises, represented by its proprietor
Sri P. Sridhar, which is petitioner in W.P. Nos.36652 and 36625 of
2015, availed certain financial facilities on 19-10-2010 from
respondent No.1 - Bank of Baroda, Himayathnagar Branch,
Hyderabad, (hereinafter referred to as Bank) for its business
purpose. Bank sanctioned a cash credit facility to M/s. Sridhar
Enterprises to the tune of Rs.190.00 lakhs and term loan of Rs.50.00
lakhs, on mortgaging immovable properties belonging to Sridhar, who
is proprietor of Sridhar Enterprises, which are admeasuring Acs.15-00
in Survey No.100 and Acs.10-00 in Survey No.100, situate in
Jiyapally village, Bibinagar Mandal, Nalgonda District (secured
asset).
ii) Bank has initiated measures under the provisions of the
SARFAESI Act for sale of the secured assets and put them to auction
on 13-03-2015. Even, Bank has filed comprehensive recovery suit in
O.A. No.397 of 2013 on the file of the Debts Recovery Tribunal,
Hyderabad.
iii) The petitioners plead that they were never informed by the
Bank as to result of the auction and no intimation was given to them
about sale of the secured assets under e-auction notification,
dated 06-02-2015.
iv) According to the petitioners, in the last week of September
2015, when some unknown persons entered into the factory premises
(secured assets) proclaiming that they purchased the same from the
Bank and attempted to dispossess them from it, which was resisted by
them successfully, but, they went back threatening that they would
come again with the aid of police and take possession forcibly.
Even, Sridhar was summoned to the police station, where he was
provided with copy of sale certificate, dated 24-09-2015, both in
respect of movable and immovable secured assets, and with the help
of police, respondent No.2 (hereinafter referred to as auction
purchaser) took physical possession of the secured assets belonging
to the petitioner in W.P. No.38600 of 2015 and her son - P. Sridhar.
When they sought for information as to auction of the secured assets,
Bank did not furnish the same. Then, they obtained information under
the Right to Information Act, 2005 (for short RTI Act) and, thus,
they came to know that the secured assets were put to e-auction by the
Bank and bids were opened on 13-03-2015 and that there was only
one bidder, who is respondent No.2.
v) It is also stated that the Bank has addressed a letter, dated
04-08-2015, to the auction purchaser stating that he was successful
bidder for the bid amount of Rs.85.00 lakhs and called upon him to
pay balance amount of Rs.63.50 lakhs as Rs.21.50 lakhs was already
paid. The statement of account furnished by the Bank would show
that the amount of Rs.85.00 lakhs was deposited on 05-09-2015.
Thereafter, they made another application under the RTI Act seeking
further information and on verifying the same, it was found that the
Bank has given a letter, dated 26-10-2015, stating that it received
Rs.15.00 lakhs on 04-03-2015 and Rs.6.50 lakhs on 17-03-2015
totalling to Rs.21.50 lakhs towards 25% of the auction amount and the
balance amount of Rs.63.50 lakhs was received on 02-09-2015 and
that due to pendency of W.P. No.7642 of 2015, filed by Sridhar
Enterprises, which was subsequently dismissed, the balance amount
was paid by the auction purchaser on 02-09-2015. The petitioners
narrated the details of dates and the amounts paid in a table in
paragraph No.7 of the affidavit in W.P. No.38600 of 2015.
vi) The petitioners also claimed that the Bank has never
explained the reasons why the auction purchaser had deposited huge
amount of Rs.15.00 lakhs on 04-03-2015, though, the earnest money
deposit required to be made for both the properties was Rs.8.50 lakhs
only and, thus, the unusual payment of Rs.15.00 lakhs made on
04.03.2015 gives rise to any amount of suspicion as to the way in
which the Bank has conducted business while discharging statutory
duties under the SARFAESI Act.
vii) According to the petitioners, no amount was paid on
13-03-2015, on which date auction has taken place. It is also stated
that even the amount of Rs.15.00 lakhs was received by the Bank as
legitimate payment for the purpose of auction, though auction
purchaser was required to deposit Rs.6.50 lakhs on 13-03-2015, which
did not occur thereby making the auction failure. Therefore,
petitioners expressed suspicion that the auction purchaser regularly
parks funds with the Bank making it convenient to use the same for
various contingent purposes. The second violation, according to the
petitioners, was payment of remaining 75% bid amount not being
done by the auction purchaser within fifteen (15) days and the Bank
taking shelter under certain alleged cases filed by them (petitioners),
tries to justify its acts. It is according to them that except the interim
order of this Court in W.P. No.7462 of 2015, filed by Sridhar
Enterprises against auction of movable properties proposed on
23.03.2015, directing the Bank to go ahead with the auction of
movable properties and not to confirm the sale, there is no other
pending writ petition or order in force. According to them, the
secured immovable assets were not subject matter in W.P. No.7462 of
2015 and they never challenged the auction notification, dated
06.02.2015, as such, deposit of balance of 75% bid amount on
02.09.2015 is illegal and, thus, the Bank has clearly violated the
provisions of the SARFAESI Act.
viii) The petitioners also agitated that valuation of the secured
assets was not properly done, and the very valuation made by the
Bank demonstrates its mala fides as the adjacent land belonging to the
brother of P. Sridhar was agreed to sell for Rs.12.00 lakhs per acre on
17-11-2015 as per the auction notification, dated 06-10-2015, itself
published in the Hindu News Paper, dated 07-10-2015. Thus, the
petitioners attributed mala fides to the Bank in valuing the secured
immovable assets at Rs.3.40 lakhs per acre. Hence, they sought to set
aside the auction of secured immovable assets admeasuring Acs.15.00
and Acs.10.00 constituting subject matter in W.P. Nos.36625 of 2015
and 38600 of 2015, respectively.
7. So far as secured movable assets constituting subject matter
in W.P. No.36652 of 2015 are concerned, while mentioning the very
same averments, narrated in the above, further stated that the
petitioner filed W.P. No.7462 of 2015 challenging the auction notice
published in Hans India English News Paper, dated 12-03-2015, and
the same was dismissed by this Court on 01-06-2015 holding that the
Bank has right to proceed under the composite hypothecation
agreement. In the said writ petition, this Court passed interim order
through W.P.M.P. No.9906 of 2015, permitting the Bank to proceed
further with auction, but, directed not to confirm the sale, and the said
interim order was in force till disposal of the writ petition i.e.,
W.P. No.7462 on 01.06.2015. Aggrieved by the same, Sridhar
Enterprises preferred W.A. No.718 of 2015 and the same was also
dismissed on 20.08.2015. Thus, the sale certificate of movable
property, dated 24-09-2015, is challenged in the instant writ petition
i.e., W.P. No.36652 of 2015.
8. Bank has filed its counter on 10-12-2015 stating that
pursuant to the auction conducted on 13-03-2015, successful bidder
made payments in accordance with the rules of auction and allege that
the petitioners are making attempts to invent some kind of alleged
irregularities to challenge the auction.
i) Bank states that e-auction bids have been received through
on-line only and all the relevant details have been furnished to the
petitioners, and, therefore, there were no parking of funds by the
auction purchaser or illegalities in conducting the e-auction. Bank has
referred to filing W.P. No.7462 of 2015 by M/s. Sridhar Enterprises,
which is petitioner in W.P. Nos.36652 and 36625 of 2015, and the
consequent writ appeal, and in the process, amounts were paid by the
auction purchaser including Rs.15.00 lakhs on 04-03-2015; since he
became successful bidder in the auction held on 13-03-2015, he was
asked to pay the balance amount of Rs.21.50 lakhs being 25% of the
bid amount of Rs.85.00 lakhs and the amount of Rs.6.50 lakhs was
paid on 17-03-2015, and subsequently balance bid amount of
Rs.63.50 lakhs was paid on 02-09-2015, and since earnest money
deposit was required to be paid on or before 12-03-2015 for two
mortgaged properties, auction-purchaser paid Rs.15.00 lakhs on
04-03-2015 and, thus, the auction purchaser has complied with the
required amount of earnest money deposit and paid the balance
amount of Rs.63.50 lakhs on 02-09-2015. Bank has specifically
denied the allegation levelled by the petitioners that the auction
purchaser regularly parks funds with it. Bank further denied that there
is manipulation of amounts in regard to e-auction stating that the
amounts were paid through RTGS method and, therefore, question of
taking any undue advantage with it cannot arise.
ii) Bank also states that the sale notice issued by the IDBI Bank
for sale of some lands which is pressed into service by the petitioners
is irrelevant and valuation of the said properties at Rs.12.00 lakhs per
acre is relatable to the land in Survey No.67, while the subject lands
are situated in Survey No.100 and, therefore, the petitioners cannot
claim any prejudice in conducting the e-auction and completing the
formalities.
9. Additional counter affidavit was filed by the Bank on
26-12-2015 giving further details, as the counter affidavit earlier filed
was bereft of certain details. In its additional counter affidavit, Bank
states that as per the conditions of auction, Rs.8.50 lakhs, which is
10% of reserve price of Rs.85.00 lakhs, in respect of both the pieces
of land was to be paid before 12-03-2015, and the auction purchaser
by way of RTGS sent the amount of Rs.15.00 lakhs. In the auction,
he became successful bidder and he was asked to pay 25% of the bid
amount being Rs.21.50 lakhs, and he paid the balance amount of
Rs.6.50 lakhs on 17-03-2015.
i) Bank states that in the meantime, this Court was pleased to
pass interim order staying confirmation of sale of movable properties,
which are situated as fixtures on the land which was put to auction
under the provisions of the SARFAESI Act, and on 01-06-2015, this
Court dismissed W.P. No.7462 of 2015 and subsequently the
petitioner preferred Writ Appeal No.718 of 2015 and the same was
also dismissed on 20-08-2015. Bank states that confirmation of sale
of land could not be made by the Bank in view of the fact that the
movables fixed to the land have to be removed and possession has to
be delivered to the successful bidder. The Bank and the auction
purchaser were obliged to wait for culmination of proceedings in writ
petition as well as the writ appeal, and on 04-08-2015, having
obtained certified copy of the order in the writ petition, it has asked
the auction purchaser to make payment of balance amount, and since
he has requested time till 31-08-2015 and in the meantime writ appeal
was preferred by the petitioners which was dismissed by this Court on
20-08-2015, auction purchaser made payment of balance amount in
respect of both the pieces of land by 02-09-2015.
ii) Bank, therefore, contends that extension of time for
payment of balance amount was necessitated because of the
proceedings initiated by the petitioners and also in view of the fact
that it was not in a position to confirm the sale and deliver the land
without removing the movable properties, which were fixed to the
land, and, therefore, claims that extension of time was allowed out of
legal necessity (Bank has mentioned as illegal necessity) and there
was no collusion between it (Bank) and the auction purchaser. Bank
has filed certain documents mentioned in paragraph No.6 stating that
they are required for proper adjudication of the issue relating to
extension of time and, finally, sought to dismiss the writ petitions.
10. Heard Sri G.K. Deshpande, learned counsel for the
petitioners, Sri K. Mallikarjuna Rao, learned Standing Counsel for
respondent No.1 - Bank, and Sri Sharath Sanghi, learned counsel for
respondent No.2 - auction purchaser.
11. Learned counsel for the petitioners would submit that the
Bank has never informed as to what transpired subsequent to the date
of auction so far as auction of immovable properties are concerned
and, therefore, the petitioners secured the information by making an
application under the RTI Act and came to know that only the auction
purchaser had participated in the auction and became successful
bidder and though, the auction purchaser was supposed to deposit
only 10% of bid price of Rs.8.5 lakhs of both the secured immovable
assets, he has deposited Rs.15.00 lakhs exceeding 10% on 04-03-2015
itself and the balance of Rs.6.50 lakhs to make it 25% of bid amount
though was required to be paid on 13-03-2015 itself, has not tendered
the said amount and deposited the same only on 17-03-2015, thus,
accounted for violation of mandatory provisions of Sub-Rule (3) of
Rule 9 of Rules 2002 and thereby submits that the auction purchaser
regularly parks funds with the bank making it convenient to use the
same for various contingent purposes.
i) He would further submit that there was inordinate delay in
making the balance payment of 75% of the bid amount though
Sub-Rule (4) of Rule 9 of Rules 2002 mandates that within fifteen
(15) days from the date of confirmation of sale the auction purchaser
has to deposit balance bid amount, still, as can be gathered from the
correspondence between Bank and the auction purchaser, dated
04.08.2015 addressed by Bank to the auction purchaser and the reply
given by him dated 11-08-2015 seeking time till 31-08-2015 and
making payment only on 02-09-2015 would unmistakably establish
that Bank as well as the auction purchaser flouted the mandatory
requirement of Sub Rule (4) of Rule 9 of the Rules 2002 and, thus,
collusion between Bank and the auction purchaser can be viewed as
any amount of suspicion would arise in regard to completion of sale
process and, therefore, sought to set aside the sale held on 13-03-2015
by declaring it as illegal.
ii) Learned counsel also would submit that Bank undervalued
the secured immovable assets though adjacent immovable secured
asset was valued at Rs.12.00 lakhs per acre when they were scheduled
to be sold in the auction on 17-11-2015 pursuant to the auction
notification dated 06-10-2015, but the Bank fixed the value in the
instant auction at Rs.3.40 lakhs, and, thus, attributed mala fides to
Bank and auction purchaser.
iii) Learned counsel for the petitioners, to substantiate the stand
taken by them, placed reliance on the decisions of the Honble
Supreme Court in General Manager, Sri Siddeshwara Cooperative
Bank Limited and another v. Ikbal and others , Commissioner of
Endowments and others v. Vittal Rao and others and Mathew
Varghese v. Amritha Kumari .
12. Learned Standing Counsel for the Bank while submitting
that the Bank has not committed any illegality or irregularity and that
payment of 25% of the bid amount and the remaining 75% of bid
amount were made in accordance with the provisions of the
SARFAESI Act and the rules made thereunder, and that the delay was
only due to the act of the petitioners in filing W.P. No.7462 of 2015
and obtaining interim order therein and after dismissal of the same,
preferring W.A. No.718 of 2015, and, only after dismissal of the writ
appeal, 75% of the bid amount was paid by the auction purchaser as
the movable properties being fixtures in the extents sold in the
auction, and contending that the writ petitions are not maintainable
since there is efficacious alternative remedy available to the
petitioners, placed reliance on the decisions of the Honble Supreme
Court in United Bank of India v. Satyawati Tondon and others ,
Ikbals Case (Supra 1), and also the decisions of this Court in
Trinethra Infra Ventures Ltd. v. IFCI Ltd. and others and
Knovus Steels and Infrastructure Limited v. State Bank of India .
i) For the proposition that once sale is confirmed, the same
cannot be reopened, learned standing counsel placed reliance on the
decisions of the Honble Supreme Court in Valji Khimji and
Company v. Official Liquidator of Hindustan Nitro Product
(Gujarat) Limited and others ; and Sadashiv Prasad Singh v.
Harendar Singh and others .
ii) Learned standing counsel also placed reliance on the
decision of the Honble Supreme Court in Rosali V. v. Taico Bank
and others as to the meaning of word immediately conveying
within reasonable time.
13. Learned counsel for the auction purchaser has not advanced
any specific submissions.
W.P. No.36652 of 2015:
14. We intend to take up W.P. No.36652 of 2015 separately for
the reason that the subject matter relates to movables and also as the
petitioner has previously filed W.P. No.7462 of 2015 seeking identical
relief and since he was unsuccessful in getting the action of the Bank
in issuing the e-auction notice, dated 10-03-2015, published in Hans
India News Paper, dated 12-03-2015, proposing to auction the
movables set aside, and even the petitioner being unsuccessful in
W.A. No.718 of 2015, as this Bench declined to grant relief and
dismissed the writ appeal by pronouncing the judgment therein on
20.08.2015. Further, we intend to refer to the relief prayed in
W.P. No.7462 of 2015, which reads thus:
Petition under Article 226 of the Constitution
of India praying that in the circumstances stated in
the affidavit filed therewith, the High Court may
be pleased to issue a Writ, order or direction more
particularly one a writ in the nature of Mandamus,
declaring the action of the respondent No.1 bank
in issuing Auction Notice Dt.10-03-2015
published in Hans India News Paper Dt.12-03-
2015 proposing to auction the Movable Properties
of the petitioner i.e., {(i) Wheel Loader (ii)
Intermediate Bin (iii) Secondary Crusher-1 (iv)
Secondary Crusher-2 (v) Conveyer-2 (vi) Return
Conveyor-2 (vii) Finished product Storage Bin
(viii) Vibrating Screen and (ix) Diesel Generator)
on 23-03-2015, as unconstitutional, illegal,
arbitrary, unjust, against the guidelines issued by
Respondent NO.2/RBI and violative of principles
of Natural Justice.
i) At the cost of repetition, we intend to extract the relief
sought for by the petitioner in the instant writ petition (W.P. No.36652
of 2015), which is thus:
For the reasons stated in the accompanying
affidavit the petitioner herein prays that this
Honble Court may be pleased to issue writ in the
nature of Mandamus, declaring the Auction
Dt.10-03-2015 conducted by the respondent No.1
bank and the consequential issuance of Certificate
of Sale of Moveables Property Dt.24-09-2015 in
favour of Respondent No.2 in respect of the
Movable Properties of the petitioner i.e.,
{(i) Wheel Loader (ii) Intermediate Bin (iii)
Secondary Crusher-1, Ten Tire Tipper (iv)
Secondary Crusher-2, Ten Tire Tipper (v)
Conveyer-2 (vi) Return Conveyor-2 (vii) Finished
Product Storage Bin (viii) Vibrating Screen and
(ix) Diesel Generator} as unconstitutional, illegal,
arbitrary, unjust and violative of principles of
Natural Justice and set aside the same and pass
such other order or orders as this Honourable
Court deems fit and necessary in the justice and
equity.
ii) A learned single Judge of this Court dismissed the Writ
Petition No.7462 of 2015, holding thus:
Apart from the maintainability of writ
petition in respect of a simple dispute under a
loan/composite hypothecation agreements, the writ
petition deserves to be dismissed, for the very
premise of filing the writ is that the movables
sought to be auctioned on 23.03.2015 are not
included in the hypothecation agreement except
hydraulic excavators-2, rock breaker, poclainers.
The petitioner should have disclosed the correct
details of schedule under the composite
hypothecation agreement for vindication of right
under Article 226 of Constitution of India. As
already noticed, the machinery is covered under
agreement of hypothecation and the petitioner
having not filed any rejoinder to the reply and
documents placed on record by 1st respondent
cannot be heard to complain that the impugned
auction is unauthorized and unconstitutional. In
my considered view, the decisions relied on by the
petitioner are distinguishable on the fact situation
of this case, and as tried to be persuaded by
petitioner, this Court is not prepared to exercise
the jurisdiction under Article 226 of Constitution
of India.
iii) This Division Bench dismissed W.A. No.718 of 2015 as
devoid of merit, holding thus:
.. We have also perused the judgments relied
on by the learned counsel for petitioner, but, as the
steps taken by the respondents are in terms of the
hypothecation agreement, the petitioner is not
entitled to claim bar under Order 2 Rule 2 of
C.P.C., and further, having regard to the facts of
the case on hand, the judgment of the Delhi High
Court in Syndicate Banks case (2 supra) also
would not render any assistance to the case of
petitioner. In view of the findings recorded by the
learned Single Judge, we are of the view that the
action taken by the respondents is in terms of the
hypothecation agreement. Further, it is brought to
our notice that auction was already conducted and
confirmation was stayed in view of the interim
order passed by the learned single Judge, but after
disposal of the writ petition, even the sale is
confirmed in favour of the 3rd party-purchaser and
the 1st respondent-bank has recovered the full sale
price.
iv) Though, learned counsel for the petitioners made an attempt
to impress upon us that the relief sought for in the instant writ petition
is for setting aside the sale certificate issued by the Bank to the
auction purchaser and, thus, the relief is distinguishable from the relief
prayed in W.P. No.7462 of 2015, we are not convinced with the same
for the reason that the sale certificate issued by the Bank in favour of
the auction purchaser relates to the very same auction, which was
challenged in W.P. No.7462 of 2015. Therefore, in our considered
view, if the instant writ petition is entertained and any order is passed,
it would amount to reviewing the judgment passed by this Division
Bench in W.A. No.718 of 2015. Therefore, we find no merit at all in
the instant writ petition (W.P. No.36652 of 2015) and, accordingly,
the instant writ petition is dismissed.
W.P. Nos.36625 & 38600 of 2015:
15. Turning to the reliefs claimed in W.P. Nos.36625 and
38600 of 2015, as already referred to in the above, they relate to
auction of secured immovable assets. We have gone through the
relevant averments made by the petitioners, Bank and the auction
purchaser.
i) We would like to narrate the sequence of events in order to
appreciate the contentions raised by the respective parties.
e-auction notice for sale of secured immovable assets was issued by
the Bank on 06-02-2015 proposing to conduct auction on 13-03-2015.
Auction purchaser has deposited Rs.15.00 lakhs on 04-03-2015.
Auction was conducted on 13-03-2015. Balance amount towards 25%
of bid amount of Rs.6.50 lakhs was tendered by the auction purchaser
on 17-03-2015. Remaining 75% of bid amount i.e. Rs.63.50 lakhs
was tendered by the auction purchaser on 02-09-2015.
ii) Sub-Rule (3) of Rule 9 provides that the purchaser shall
immediately pay a deposit of twenty-five per cent of the amount of the
sale price to the authorised officer conducting the sale and in default
of such deposit, the property shall forthwith be sold again. In the
instant case, the auction purchaser, who was the sole bidder
participated in the auction on 13-03-2015, has not tendered the
balance amount having deposited Rs.15.00 lakhs on 04-03-2015
towards earnest money deposit. In fact, earnest money deposit
required to be deposited for both the properties was Rs.8.50 lakhs, but
the auction purchaser deposited more than 10% required to be
deposited. The petitioners intended to attribute mala fides to the Bank
as well as auction purchaser. Even, over looking such allegation,
when looked at the delay in depositing balance amount of
Rs.6.50 lakhs, certainly, it amounts to infraction of mandatory
requirement of Sub-Rule (3) of Rule 9. When the auction was held on
13-03-2015, auction purchaser was required to deposit Rs.6.50 lakhs
to make it 25% on 13-03-2015 itself. As seen from the e-auction sale
notice, auction was scheduled to be held on 13-03-2015 between
11.00 a.m. and 3.00 p.m. As canvassed by the Bank, when the
deposits were made by the auction purchaser through on-line, the
question of failure to deposit Rs.6.50 lakhs on 13-03-2015, in all
probability, ought not have taken place. When formalities were
completed by 3.00 p.m. or 3.30 p.m., even giving half-an-hour time,
the auction purchaser ought to have deposited Rs.6.50 lakhs on the
same day, but he deposited the said amount only on 17-03-2015, for
which there is absolutely no explanation at all by the Bank in its
counter or in its additional counter.
iii) Learned standing counsel for the Bank argued that the word
immediately occurring in Sub-Rule (3) of Rule 9 has to be
construed as within reasonable time and when viewed in that
context making payment of Rs.6.50 lakhs on 17-03-2015 cannot be
construed as infraction of Sub-Rule (3) of Rule 9. In the said context,
he has placed reliance on the decision of the Honble Supreme Court
in Rosalis Case (Supra 9), wherein the Honble Supreme Court held
in paragraph Nos.31 and 32 explaining the meaning, thus:
31. The term immediately, therefore, must be
construed having regard to the aforementioned
principles. The term has two meanings. One,
indicating the relation of cause and effect and the
other, the absence of time between two events. In
the former sense, it means proximately, without
intervention of anything, as opposed to
mediately. In the latter sense, it means
instantaneously. The term immediately, is, thus,
required to be construed as meaning with all
reasonable speed, considering the circumstances of
the case. ( See Halsburys Laws of England, 4th
Edn., Vol.23, Para 1618, p.1178.)
32. In a given situation, the term immediately
may mean within reasonable time. Where an act
is to be done within reasonable time, it must be
done immediately. {See Gangavishan Heeralal v.
Gopal Digambar jain [AIR 1980 MP 119: 1980
MPLJ 246]. AIR at p.123, Keshava S. jamkhandi
v. Ramachandra S. Jamkhandi [AIR 1981 Kant
97: (1980) 2 Kant I J 432 (FB) ], AIR at p.101,
Ramnarayan Triyoginarayan Trivedi v. State of
M.P.[ AIR 1962 MP 93 (FB)]. AIR at p.98, R. v.
HM Inspector of Taxes, ex p Clarke [(1971) 2 QB
640: (1971) 3 WLR 425: (1971) 3 All ER 394].
All ER at p.398 and R. v. HM Inspector of Taxes,
ex p Clarke [(1973) 3 WLR 673: (1972) 1 All ER
545 (CA), All ER at p.555.}.
The fact-situation in the above decision would reveal that the sale was
conducted by the executing Court at about 4.00 p.m. on 26-10-1988
and keeping in view, the fact that the banks at that time were closed,
directed the auction purchaser to deposit the amount by the next day,
and the auction purchaser obliged the direction of the executing Court
and deposited the amount on 27-10-1988 and the balance amount on
11-11-1988. Certainly, the said fact-situation is not akin to the one
occurring in the instant case. In the instant case, though, auction had
taken place on 13-03-2015, auction purchaser has not deposited the
balance amount to make it 25% either on 13-03-2015, or at least, on
14-03-2015, but three (03) days after the date of auction, he has
deposited Rs.6.50 lakhs, and, therefore, it has to be held that there has
been complete contravention of the mandatory requirement of
Sub-Rule (3) of Rule 9. Certainly, the said violation cannot be
sidelined.
16. The next violation is failure to deposit balance payment of
75% of the bid amount within fifteen (15) days from the date of
auction by the auction purchaser. The balance bid amount was
deposited on 02-09-2015 by the auction purchaser. Sub-Rule (4) of
Rule 9 mandates that balance amount of purchase price payable shall
be paid by the purchaser to the authorised officer on or before
fifteenth day of confirmation of sale of the immovable property or
such extended period as may be agreed upon in writing between the
parties. Even, consequence of committing default is provided by the
provisions of Sub-Rule (5) of Rule 9.
17. It is, now, to be seen whether the reason assigned by the
Bank referred to in the above can be viewed as plausible reason or
whether the delay in payment of balance 75% of the bid amount
amounts to infraction of Sub-Rule (4) of Rule 9 of Rules 2002?
18. Though, we have referred to the reasons assigned by the
Bank while narrating the additional counter affidavit filed by the
Bank, we would like to once again state that (a) the Bank is
attempting to take shelter under the interim order passed in
W.P. No.7462 of 2015, which was dismissed on 01-06-2015, and also
the factum of preferring W.A. No.718 of 2015 by the petitioners
which was also dismissed on 20-08-2015, and stating that only on
obtaining certified copy of the order of dismissal of the writ appeal
on 04.08.2015, it has informed the auction purchaser to deposit the
balance bid price; (b) further reason assigned by the Bank is that the
movables sought to be auctioned were, in fact, fixtures attached to the
lands, which are secured assets in the form of immovable properties
sought to be sold in the auction held on 13-03-2015, and therefore, the
Bank has waited till disposal of writ appeal on 04-08-2015 for
demanding the auction purchaser to deposit the balance 75% of bid
price which was deposited on 02-09-2015.
19. The reasons assigned by the Bank are absolutely
unconvincing, since, though, the movables were attached to the lands
sought to be sold in the auction held on 13-03-2015 and the sale was
effected, nothing prevented it to receive the balance 75% of the bid
price within fifteen (15) days after confirmation of sale. Thus, we are
of the strong view, that there has been contravention of the mandatory
requirement provided by the provisions of Sub-Rule (4) of Rule 9 of
Rules 2002.
20. Further, even a perusal of the letter addressed by the Bank
to the auction purchaser on 04-08-2015 shows that the Bank has
congratulated the auction purchaser and requested him to pay the
remaining balance amount of Rs.63.50 lakhs immediately to avoid
forfeiture of the amount paid and further mentioning that on receiving
full amount, it will issue sale certificate. The auction purchaser given
a reply to the Bank on 11-08-2015 stating that he was inclined to pay
total balance amount before the end of that month i.e., 31-08-2015 and
requested to cooperate and oblige. But, the auction purchaser has paid
the balance amount of Rs.63.50 lakhs on 02-09-2015. The Bank in its
additional counter, conveniently mentioned that the auction purchaser
has sought time till 31-08-2015 basing on the reply given by him, but
the said correspondence would not satisfy the requirement of
Sub-Rule (4) of Rule 9 and, therefore, absolutely, there is no reason
leaving apart plausible reason in getting over the time limit prescribed
by Sub-Rule (4) of Rule 9 of Rules 2002. In the said context,
learned counsel for the petitioners placed reliance on the decision of
the Honble Supreme Court in Mathew Vargheses Case (Supra 3)
referring to paragraph Nos.39 and 40, thus:
39. In Ram kishun (supra), paras.13, 14 and 28 are
relevant forour purpose, which are as under:
13. Undoubtedly, public money should be recovered
and recovery should be made expeditiously. But it
does not mean that the Financial Institutions
which are concerned only with the recovery of
their loans, may be permitted to behave like
property dealers and be permitted further to
dispose off the secured assets in any unreasonable
or arbitrary manner in flagrant violation of the
statutory provisions.
14. A right to hold property is a constitutional right as
well as a human right. A person cannot be
deprived of his property except in accordance with
the provisions of a statute. (Vide Lachhman Dass
v. Jagat Ram and State of M.P. v. Narmada
bachao Andolan). Thus, the condition precedent
for taking away someones property or disposing
of the secured assets, is that the authority must
ensure compliance with the statutory provisions.
28. In view of the above, the law can be summarized
to the effect that the recovery of the public dues
must be made strictly in accordance with the
procedure prescribed by law. The liability of a
surety is co-extensive with that of the principal
debtor. In case there are more than one surety the
liability is to be divided equally among the sureties
for unpaid amount of loan. Once the sale has been
confirmed it cannot be set aside unless a
fundamental procedural error has occurred or sale
certificate had been obtained by misrepresentation
or fraud.
40. The above principles laid down by this Court also
makes it clear that though the recovery of public dues
should be made expeditiously, it shold be in accordance
with the procedure prescribed bylaw and that it should not
frustrate a Constitutional Right, as well as the Human
Right of a person to hold a property and that in the event of
a fundamental procedural error occurred in a sale, the same
can be set aside.
Thus, the Honble Supreme Court emphasised that recovery of public
dues should be made in accordance with the procedure prescribed by
law and in the event of a fundamental procedural error occurring in a
sale, the same can be set aside. The fact-situation herein squarely
covers the principle laid down by the Honble Supreme Court and,
therefore, the auction held on 13-03-2015 is liable to be set aside.
21. Turning to the submission that the instant writ petition
cannot be maintained, learned standing counsel for the Bank has
placed reliance on the decisions of the Honble Supreme Court in
Satyawati Tondons Case (Supra 4), Ikbals Case (Supra 1), and
also the decisions of this Court in Trinethra Infra Ventures Ltds
Case (Supra 5) and Knovus Steels and Infrastructure Limiteds
Case (Supra 6) to fortify his stand that the petitioners ought to have
approached the Debts Recovery Tribunal as an efficacious alternative
remedy is available to them under Section 17 of the SARFAESI Act,
and, therefore, the instant writ petitions are not maintainable.
22. Learned counsel for the petitioners, on the other hand,
relied on the decision in Ikbals Case (Supra 1) for the proposition
that availability of efficacious alternative remedy is not an absolute
bar to exercise extraordinary jurisdiction of this Court under Article
226 of the Constitution of India, and in the context of right of the
borrower in entering into written agreement as in Rule 9 (4) of Rules
2002 and explaining the meaning of expression written agreement
between the parties, learned counsel, while contending that the
Honble Supreme Court explained the word parties occurring in the
said expression, held that it includes secured debtor, borrower and
auction purchaser, placed reliance on the observations of the Honble
Supreme Court contained in paragraph No.14, thus:
14. A reading of sub-rule (1) of Rule 9 makes it
manifest that the provision is mandatory. The
plain language of Rule 9(1) suggests this.
Similarly, Rule 9(3) which provides that the
purchaser shall pay a deposit of 25% of the
amount of the sale price on the sale of immovable
property also indicates that the said provision is
mandatory in nature. As regards balance amount
of purchase price, sub-rule (4) provides that the
said amount shall be paid by the purchaser on or
before the fifteenth day of confirmation of sale of
immovable property or such extended period as
may be agreed upon in writing between the parties.
The period of fifteen days in Rule 9(4) is not that
sacrosanct and it is extendable if there is a written
agreement between the parties for such extension.
What is the meaning of the expression written
agreement between the parties in Rule 9(4)? The
2002 Rules do not prescribe any particular form
for such agreement except that it must be in
writing. The use of the term written agreement
means a mutual understanding or an arrangement
about relative rights and duties by the parties. For
the purpose of Rule 9(4), the expression written
agreement means nothing more than a
manifestation of mutual assent in writing. The
word parties for the purpose of Rule 9(4) we
think must mean the secured creditor, borrower
and auction-purchaser.
In fact, learned counsel for the petitioners placed reliance on the
decision in Ikbals Case (Supra 1) to answer the contention of the
learned standing counsel for the Bank that the correspondence
between the Bank and the auction purchaser, referred to in the above,
through the letters, dated 04-08-2015 and 11-08-2015, accounts for a
sort of mutual understanding satisfying the expression written
agreement occurring in Rule 9(4) of Rules 2002.
23. To substantiate the stand that once sale is confirmed, it
cannot be reopened, the learned standing counsel for the Bank relied
on the decisions of the Honble Supreme Court in Valji Khimjis
Case (Supra 7) and Sadashiv Prasad Singhs Case (Supra 8).
But the fact-situation therein is different from the one occurring herein
and would not render any assistance to justify violation of mandatory
requirements of Rules 9(3) and 9 (4) of the Rules 2002.
24. We, therefore, hold that the auction conducted on
13.03.2015 by the Bank in favour of the auction purchaser -
respondent No.2 is liable to be set aside on account of contravention
of mandatory provisions of Rules 9(3) and (4) of Rules 2002, and,
therefore, the same is set aside. However, we direct the Bank -
respondent No.1 to return the bid amount of Rs.85,00,000/- (Rupees
eighty five lakhs only), without any interest thereon, to the auction
purchaser - respondent No.2; granting liberty to take measures in
accordance with law.
25. In the result, W.P. No.36652 of 2015 is dismissed; and
W.P. Nos.36625 and 38600 of 2015 are allowed, as indicated above.
There shall be no order as to costs.
26. As a sequel thereto, miscellaneous petitions, if any pending
in these writ petitions, stand closed.
_____________________________
R.SUBHASH REDDY, J
_____________________________
A. SHANKAR NARAYANA, J
February 10, 2016.
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