Uttarakhand High Court
Manish Tayal And Another vs Mohd Shariq And Others on 10 March, 2016
Author: V.K. Bist
Bench: K.M. Joseph, V.K. Bist
IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL
Special Appeal No. 387 of 2015
Manish Tayal & another. ............ Appellants
Versus
Mohd. Shariq & others. ............. Respondents
Mr. Arvind Vashistha, Senior Advocate, assisted by Ms. Monika Pant, Advocate for
the appellants.
Mr. Ramji Srivastava, Advocate for respondent No. 1.
Mr. V.K. Kohli, Senior Advocate, assisted by Mr. Kanti Ram Sharma, Advocate for
respondent Nos. 2 & 3.
JUDGMENT
Coram: Hon'ble K.M. Joseph, C.J.
Hon'ble V.K. Bist, J.
Dated: 10th March, 2016 K.M. JOSEPH, C.J. (Oral) Appellants are respondent Nos. 7 & 8 in the writ petition. M/s SGV Industries (respondent No. 3 in the writ petition) had borrowed money from the Punjab National Bank (hereinafter referred to as the "respondent Bank"). Proceedings were taken under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the "Act"). An auction notice was issued on 18.06.2013 for effecting sale of assets of the borrower. The bids were to be given on or before 22.07.2013. The auction was to take place on 26.07.2013. The reserve price was fixed at ` 1,19,00,000/-. Respondent No. 1 / writ petitioner furnished a bid of ` 2,01,00,000/- on 22.07.2013 along with Earnest Money Deposit (EMD) of `11,90,000/-. The date of the auction, as already noticed, was 26.07.2013. The bid of the writ petitioner was found to be the highest. In terms of the auction, the bidder was to deposit a sum representing 25 per cent of the bid amount on the next day, i.e. by 27.07.2013. Writ petitioner made the deposit representing 25 per cent of the amount on 27.07.2013 by way of a demand draft drawn in favour of the respondent Bank under a covering letter. It so transpired that, on 25.07.2013, i.e. on the day just prior to the date of the auction, the principal borrower had filed an Original Application before the Tribunal questioning the sale. An interim order was passed 2 therein to the effect that, while the auction can go on, there will be no confirmation of the sale. The said interim order came to be vacated on 14.10.2013. Thereafter, within four days thereof, namely, on 18.10.2013, respondent Bank wrote to the writ petitioner about this development and the writ petitioner was called upon to deposit the balance 75 per cent within a period of 15 days. Writ petitioner wrote letter dated 25.10.2013 (Annexure No. 6 to the writ petition), which we think it appropriate to quote as under:
"To, The Authorized Officer, Punjab National Bank, Dehradun, Uttarakhand.
Subject: In reply to the letter dated 18.10.2013 with respect to the bid in respect of the property situated at 3, Doon Vihar, Jakhan, Dehradun.
Sir, This has reference to the e-auction of the above referred property held on 26.07.2013. That I was the highest bidder and the bid was decided in my favour with the bid price of Rs. 2.01 crores and as per the terms of bid, I also deposited the 25% amount of the bid immediately.
That in reference to the said matter the applicant i.e. M/s SGV Industries filed a case before DRT, Lucknow as SA No. 315/2013. In this case due to the non appearance of the applicant the IR was rejected by the Hon'ble Court by the order dated 14.10.2013 and the same was fixed for hearing on 23.12.2013.
That through my relevant sources I got to know that the learned counsel for the applicant appeared before the Hon'ble Court and prayed that matter be heard on an early date. Therefore, by the order dated 15.10.2013 the Hon'ble Court preponed the hearing of the case to 18.10.2013. Further, by the order dated 18.10.2013 the Hon'ble Court fixed the case for final hearing on 28.11.2013.
That because the matter is pending before the Hon'ble Court and final order has not been given in SA, hence, the bank must permit the bidder/applicant for the payment of rest of 75% of the bid amount after the case is decided.
Encl: Copy of the bank statement account.
Mohammed Shariq 151/16A, Doon Enclave Doon Vihar Colony, Jakhan Dehradun."3
2. This was responded to by the respondent Bank by communication dated 28.10.2013. Therein, the respondent Bank called upon the writ petitioner to deposit the remaining amount as per the direction of the Tribunal, failing which, earnest money deposited will be liable for forfeiture. Thereafter, the writ petitioner sent letter dated 01.11.2013. He, inter alia, would point out that the respondent Bank failed to disclose the factum of pendency of the proceedings before the Tribunal and the application for interim relief, which was within its knowledge, to the public at large and to the writ petitioner in particular. We may also quote paragraph 5 of the said letter as under:
"5. That upon enquires made by client it is learnt that the Hon'ble DRT, Lucknow in SA no. 315/2013 vide its order dated 01.08.2013 has observed in its findings that in clause 12 of sale notice dated 18.06.2013, it is prescribed that "the successful bidder shall have to deposit 25% of sale price, adjusting the EMD already paid, within 48 hours of acceptance of bid price". The said condition of sale notice is against the Rule 9(3) of the Security Interest (Enforcement) Rules, 2002.
It has been further observed by the Hon'ble Tribunal in its order that the Act 2002, provides that 25% amount to be deposited immediately, the Bank/FI cannot change the spirit of the Act and change according to its suitability. The Hon'ble Tribunal has clearly expressed that 25% of the sale price shall be deposited immediately and variance thereof will defeat the end of justice.
These observation have been made by the tribunal in the order dated 01.08.2013."
3. It is, further, stated in the letter that the writ petitioner would not have entered into the bidding had the fact of defective sale notice and pending litigation challenging the auction become known to him before the commencement of the auction proceedings. It is also stated that the respondent Bank has suppressed material facts and the request made is as follows:
"Thus my client in view of all the above reasons, does not want to put any further amount in jeopardy and you are requested to refund the entire amount received by you is Rs. 50,40,000=00 4 (Fifty Lacs Forty Thousand) immediately. My client does not want to get entangled in long drawn litigation and keep such a large amount of money blocked with uncertainty and be on tenterhook on account of illegality and suppression of material fact made by you for recovery in haste. You are therefore required to immediately refund the amount of Rs. 50,40,000 (Fifty Lacs Forty Thousand) with interest to my client."
4. To the same, respondent Bank sent letter dated 06.11.2013. It reads as follows:
"Date: 06.11.2013 Mohammed Shariq 151/16A, Doon Enclave, Doon Vihar Colony, Jakhan, Dehradun Reg: Bid in respect of the property situated at 3, Doon Vihar, Jakhan, Dehradun-M/s SGV Industries NPA account.
This has reference to our letter dated 18.10.2013 on the captioned subject vide which you were requested to deposit the balance amount of 75% within 15 days of the letter. Please also refer to our letter dated 28.10.2013 in response to your letter dated 25.10.2013. Contents of both the letters are self explanatory.
We are sorry to mention that till date there is no response from your side. It is once again requested to deposit the balance amount within three days of receipt of this letter otherwise the bank will be compelled to proceed further as per the provisions of the law.
Thanking You Yours sincerely Chief Manager (Authorised Officer)"
5. By letter dated 12.11.2013, writ petitioner corresponded again with the respondent Bank and, after making reference to letter dated 06.11.2013, it was, inter alia, stated as follows:
"You have not sent any response to my request for refund of earnest money neither any amount has been refunded by you, despite request made to you for the same. You are hereby informed once again that in view of reasons disclosed in the notice dated 5 01.11.2013, I do not want to put any further amount in jeopardy and you are requested to refund the entire amount received by you is Rs. 50,40,000=00 (Fifty Lacs Forty Thousand) immediately. I do not want to get entangled in long drawn litigation and keep such a large amount of money blocked with uncertainity and be on tenterhook on account of illegality and suppression of material fact made by you for recovery in haste. You are therefore required to immediately refund the amount of Rs. 50,40,000=00 (Fifty Lacs Forty Thousand) with interest to me."
6. Respondent Bank sent letter dated 21.11.2013 in response to the same. Therein, it is, inter alia, stated as follows:
"In this regards sufficient opportunity has already been provided to you and through this final communication you are once again advised to deposit the balance amount on or before 26.11.2013 otherwise the bank will be compelled to forfeit the earnest money so deposited with us by you as per terms of e- auction as well as SARFAESI Act. No further communication pertaining to above shall be entertained thereafter."
7. In response to the said letter, writ petitioner sent letter dated 25.11.2013. Therein, it is stated as follows:
"Date: 25.11.2013 To, The Chief Manager Punjab National Bank Patel Nagar Branch Dehradun Sir Ref:- Your letter dated 21.11.2013 directing deposit of balance 75% of the bid price pertaining to auction held 26-07-2013.
Please take reference of your letter dt. 21-11-2013 directing deposit of balance 75% of the bid price pertaining to auction held 26-07-2013.
I have also given detail reply to your all letters and again requested to kindly give me further time for depositing the balance 75%, the matter has been fixed for 28-11-2013 before Hon'ble Debts Recovery Tribunal, Lucknow for hearing. Further it is requested that please grant time till disposal of the case Pending before Hon'ble Debts Recovery Tribunal, Lucknow or any 6 direction in this regard may be issued by Hon'ble Debts Recovery Tribunal, Lucknow.
Your's faithfully Mohd. Sharique"
8. The next document produced in the writ petition is the auction notice dated 05.03.2014 issued by the respondent Bank evincing its interest to go in for re-auction. The amount of reserve price mentioned therein is ` 1,70,00,000/-. The amount outstanding is shown as over ` 20 crores. It is challenging the aforesaid re-auction notice dated 05.03.2014 and also seeking the following second prayer that the writ petition came to be filed:
"(ii) to issue a writ, order or direction in the nature of mandamus commanding the respondent bank to execute deed of convince pursuant to the auction sale dated 26-7-2013 in pursuant to the public auction notice dated 18-6-2013 or in alternative the respondent bank be directed to refund the money deposited by the petitioner pursuant to the auction sale dated 26-7-2013 in pursuant to the public auction notice dated 18-6-2013."
9. On 01.04.2014, the learned Single Judge passed an interim order directing that the auction can go on, but it will be subject to the result of the writ petition. The appellants, who are respondent Nos. 7 & 8 in the writ petition, participated in the re-auction and they made an offer of ` 1,70,50,000/-. It turned out that the offer of the appellants was the highest in re-auction. Accordingly, the auction was confirmed in their name and a sale-deed was executed in their favour on 27.05.2014.
10. The learned Single Judge found that the writ petitioner had been writing to the respondent Bank calling upon it to either return the money deposited or to grant extension of time; but, there was no positive response from the respondent Bank. Under Article 14 of the Constitution of India, the action of the Bank was scrutinized and, apparently, it did not pass muster. The learned Single Judge also noted that the reserve price fixed at ` 1,70,00,000/- was, apparently, inadequate, inasmuch as, in the 7 previous auction, the highest amount, which was quoted by the writ petitioner, was ` 2,01,00,000/-. It is on this basis that the learned Single Judge proceeded to issue the following directions:
"Consequently, writ petition succeeds and is hereby allowed. Re-auction held pursuant to the re-auction notice dated 05.03.2013 in favour of respondents no. 7 and 8 is hereby held invalid. Consequently, sale certificate dated 01.05.2014 issued in favour of respondent nos. 7 and 8 and sale deed executed in favour of respondent no. 7 and 8 on 27-05-2014 is hereby declared void and non est. Mandamus is issued against the Bank to execute sale deed in favour of the petitioner at the earliest, in any case, within two weeks from today. Bank shall be at liberty to withdraw Rs. 1,77,00,000/- deposited by the petitioner with the Registrar General of this Court. Bank is further directed to refund the amount taken from respondents no. 7 and 8 along with 10% interest thereon within two weeks from today. It is, however, made clear that sale in favour of the petitioner shall be subject to the final decision in the case pending before the D.R.T. No cost."
11. Feeling aggrieved, appellants, who are respondent Nos. 7 & 8 in the writ petition, are before us.
12. We have heard Mr. Arvind Vashistha, learned Senior Counsel appearing for the appellants; Mr. Ramji Srivastava, learned counsel appearing for respondent No. 1 / writ petitioner; and Mr. V.K. Kohli, learned Senior Counsel appearing for the respondent Bank.
13. Mr. Arvind Vashistha, learned Senior Counsel appearing for the appellants, would submit that there is no illegality in the conducting of the re-auction. He drew our attention to the conduct of the writ petitioner in writing to the respondent Bank to return the amount deposited and his not being interested in the matter developing further in view of the litigation pending. Learned Senior Counsel poses a question as to how a writ of mandamus could be issued contrary to the said demand to approve of the first auction, when the writ petitioner himself wanted to wriggle out and only wanted the money, which he had deposited with the respondent Bank. Regarding fixation of the reserve price, learned Senior Counsel would point out absence of pleadings in the matter on the part of the writ 8 petitioner. He would also remind the Court that the reserve price fixed in respect of the first auction was ` 1,19,00,000/-; whereas, the reserve price fixed in the re-auction is a good ` 51,00,000/- more than the reserve price fixed on the first occasion. He also would submit that actually the respondent Bank has taken into account the amount of ` 50,00,000/- and odd representing the 25 per cent of the total bid amount made by the writ petitioner, which, he would point out, stood automatically forfeited in terms of the law [see Rule 9(3) of the Security Interest (Enforcement) Rules, 2002].
14. Mr. V.K. Kohli, learned Senior Counsel appearing for the respondent Bank would also submit that there was no unfair conduct on the part of the respondent Bank; the property was auctioned on the terms that it will be sold as per various conditions; and there was no assurance of title. He would plead ignorance of order dated 26.07.2013 passed by the Tribunal, which incidentally happened to be the very same date as when the auction was held for the first time. Learned Senior Counsel would emphasize the correspondence, which has already been referred to, to point out that the respondent Bank, immediately after the vacation of the interim order, wrote to the writ petitioner on 18.10.2013 and, again, on 28.10.2013; the respondent Bank was willing to give reasonable time; but the writ petitioner insisted on being given the right to make the balance payment after the final disposal of the case before the Tribunal. Learned Senior Counsel would point out that there is no such duty on the part of the respondent Bank to wait for the final disposal of the case. He would also submit that the reserve price has been fixed on the basis of the Bank's perception of what price would be fetched. In fact, he points out that the writ petitioner has not complied with the terms of the auction and has not deposited the balance amount even though his bid was ` 2,01,00,000/-. He also would point out to the lack of pleadings in the matter on the part of the writ petitioner.
15. Mr. Ramji Srivastava, learned counsel appearing for the writ petitioner, on the other hand, would reiterate that the Bank's conduct 9 smacks of unfairness, insofar as the respondent Bank being a public sector bank, having issued a public notice, was under a duty of fairness, when the principal borrower initiated proceedings before the Tribunal on 25.07.2013 and obtained an interim order, to tell the bidders and in particular the writ petitioner, who turned out to be the highest bidder, that there is such a litigation and, what is more, there is an interim order passed by the Tribunal. This would have persuaded the writ petitioner not to invest money in a property, which was subject matter of litigation before the Tribunal. He would also reiterate his submission that the writ petitioner had been writing letters and neither there was any positive response in regard to the request for grant of time till the disposal of the case, nor was there an answer to the request for return of the amount deposited. He would also remind the Court that, being a public sector bank, there is a duty to fetch the highest amount possible. He points out that, pursuant to the order of the Court, the writ petitioner has already deposited a sum of ` 1,77,00,000/-, besides the amount, which is already lying deposited with the respondent Bank representing 25 per cent of the total amount. He would, therefore, submit that no interference is called for by the appellate court with the judgment passed by the learned Single Judge in the facts and circumstances of the case.
16. We are dealing with a writ petition, in which, obviously, we would be concerned with the principles of judicial review. No doubt, when the authorities, whose action is questioned, is State under Article 12, their actions and omissions would be scrutinized on the anvil of the constitutional duty to act fairly by every authority under Article 12, which the respondent Bank is. The respondent Bank issued the auction notice on 18.06.2013 and the last date for submission of the bids was 22.07.2013. Admittedly, at that time, there was no litigation by the principal borrower. Therefore, there was absolutely nothing illegal or unfair in the respondent Bank proceeding to auction the property. Writ petitioner also participated in it. It so transpired that, as already noted, on 25.07.2013, the principal borrower, on the eve of the auction, moved the Tribunal and secured an order on 26.07.2013, which did not militate against the holding of the 10 auction, but the only rider was that the sale will not be confirmed. This order is passed by the Tribunal at Lucknow and the auction sale, it is to be noted, took place at Dehradun. It is not exactly clear as to at what time the order was passed and at what time the auction took place. We need not probe this matter further. The writ petitioner, on the next day, makes the deposit of the amount representing 25 per cent. Thereafter, the interim order was vacated on 14.10.2013 and nothing stood in the way of the writ petitioner depositing the balance amount or the respondent Bank accepting it and the sale being confirmed. It is, thereupon, that letter dated 18.10.2013 was issued by the respondent Bank giving 15 days' time to the writ petitioner and there was another communication dated 28.10.2013 also by the respondent Bank giving time. But the letters, which had been written by the writ petitioner thereafter, would show that the writ petitioner wanted the refund of the amount (see letter dated 01.11.2013). The respondent Bank's response comes in the form of letter dated 06.11.2013. Thereafter, we have referred to the correspondence. From the correspondence, what we would gather is that the writ petitioner was interested to wriggle out of the bid and he was not interested to take the matter further and he was more interested in getting the money, which he had already deposited, back. He also writes, of course, in response to the letter of the respondent Bank to give him time till the disposal of the case.
17. The learned Single Judge has proceeded on the basis that there is a duty of fairness to respond to these letters. Going by the letters, we would think that the respondent Bank had made its position clear that, after the vacation of the order, the respondent Bank gave time initially by 15 days and it was further extended. The writ petitioner, apparently, did not comply with the communication calling upon him to deposit the balance amount. It is, at this juncture, necessary to notice that, under the terms of the auction, the clause clearly provides that, in case of default of payment, the amount already deposited by the bidder shall be forfeited and the property shall be put to re-auction. It is also apposite to advert to Rule 9(4) of the Security Interest (Enforcement) Rules, 2002, which reads as follows:
11"(4) The balance amount of purchase price payable shall be paid by the purchaser to the authorised officer on or before the fifteenth day of confirmation of sale of the immovable property or such extended period as may be agreed upon in writing between the parties."
18. Therefore, the balance amount was to be paid under the statute on or before the fifteenth day of confirmation (which had taken place in this case in favour of the writ petitioner) or such extended period as may be agreed upon in writing between the parties. There is no agreement in writing as per which the respondent Bank has agreed to give more time. If the writ petitioner is seeking a mandamus, then it is for him to show the conditions present showing that a legal right had sprung into existence. He has not produced any agreement by which the respondent Bank has given further time. Absence of a communication on his request for more time till the disposal of the case, which has been relied upon by the learned Single Judge, would not, in our opinion, clothe the writ petitioner with the right to seek a mandamus to take matters further in terms of the earlier auction notice. In the circumstances of this case, we would think that, while we recognise the duty on the part of the respondent Bank under Article 14 to act fairly, we cannot also, in the facts of this case, hold that the omission on the part of the respondent Bank in informing the writ petitioner about the pendency of the case before the Tribunal or the order passed, the contents of which we have already taken note of, would afflict the re-auction notice with an illegality. In terms of the conditions, quite clearly, the writ petitioner had failed to act in the manner provided under the terms of the auction notice, which were binding on the writ petitioner. In such circumstances, when the respondent Bank decides to go in for re- auction, we would think that it may not be appropriate to place the blame at the doorstep of the respondent Bank in judicial review proceedings or to interfere with the re-auction.
19. There remains question relating to reserve price. The reserve price fixed in the re-auction is about ` 51,00,000/- more than what was fixed in 12 the first auction. The learned Senior Counsel for the respondent Bank would submit that the Bank officers had fixed the price on their perception of the price that would be fetched in the auction. It may be true that the writ petitioner had quoted higher price in the first auction, but that sale did not go through. More importantly, this is a matter, which was not really put in issue by way of appropriate pleadings for the learned Single Judge to have entered the finding as he has done. In such circumstances, on the said score also, it may not be appropriate to interfere with the re-auction. It is not that we are oblivious of the fact that, ordinarily, banks, particularly public sector banks, are expected to make all efforts to fetch the maximum price for the properties so that the auction is fair to the borrower and also to the Bank itself when large amounts are due to it; but, since we are concerned with the legality of the action of the respondent Bank, it may not be appropriate for us to consider the matter further even on the lines of conducting a re-auction, with which idea, we did toy with in our minds.
20. The upshot of the above discussion is that the appeal filed must be allowed; the directions issued by the learned Single Judge must be set aside; and the writ petition must be dismissed. However, we would think that, in regard to the question about the forfeiture of ` 50,00,000/-, which has been effected by the respondent Bank, we should leave it open to the writ petitioner to seek appropriate remedy before the competent forum, if advised. The amount, however, deposited by the writ petitioner in a sum of ` 1,77,00,000/-, which has been directed to be put in Fixed Deposit under orders of this Court, shall be returned to the writ petitioner along with the accrued interest.
21. The appeal is allowed as above and the judgment passed by the learned Single Judge will stand set aside.
(V.K. Bist, J.) (K.M. Joseph, C. J.)
10.03.2016 10.03.2016
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