Karnataka High Court
Global Emerging Markets India Ltd vs Housing And Urban Development ... on 28 March, 2024
Author: S.G.Pandit
Bench: S.G.Pandit
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 28TH DAY OF MARCH, 2024
PRESENT
THE HON'BLE MR. JUSTICE S.G.PANDIT
AND
THE HON'BLE MR. JUSTICE C.M. POONACHA
WRIT PETITION No.27676 OF 2023 (GM-DRT)
BETWEEN
GLOBAL EMERGING MARKETS INDIA LTD
A COMPANY INCORPORATED UNDER
PROVISIONS OF THE COMPANIES ACT, 1956
HAVING ITS REGISTERED OFFICE AT B-28,
PUSHPANJALI FARMS
BIJWASAN, NEW DELHI-110061
REPRESENTED BY ITS AUTHORISED SIGNATORY
MR RAJESH KUMAR
...PETITIONER
(BY SRI ROHAN KOTHARI, ADVOCATE)
AND
HOUSING AND URBAN DEVELOPMENT
CORPORATION LTD
(A GOVERNMENT OF INDIA ENTERPRISE)
HAVING ITS BANGALORE REGIONAL
OFFICE AT MANIPAL CENTRE
7TH FLOOR, UNIT 703-704
NORTH BLOCK, NO.47
DICKENSON ROAD, BANGALORE-560042
THROUGH ITS MANAGER
....RESPONDENT
(BY SRI ANIKETH B C, ADVOCATE FOR
SRI RAYAPPA Y HADAGALI, ADVOCATE FOR C/R1)
THIS WRIT PETITION IS FILED UNDER 227 OF THE
CONSTITUTION OF INDIA PRAYING TO QUASH AND SET ASIDE
2
THE IMPUGNED ORDER DATED 07/09/2023 PASSED BY THE
HONBLE DRAT, CHENNAI IN RA (SA) NO.4/2021 (ANNEXURE-A)
AND ETC.
THIS PETITION HAVING BEEN HEARD AND RESERVED
FOR ORDER ON 22.3.2023, COMING ON FOR PRONOUNCEMENT
OF ORDERS, THIS DAY, POONACHA. J., DELIVERED THE
FOLLOWING:
ORDER
The present Writ Petition is filed seeking for the following reliefs:
"(a) Quash and set aside the impugned order dated 07.09.2023 passed by the Hon'ble DRAT, Chennai in RA (SA) No 4/2021 (ANNEXURE-A).
(b) Consequentially, direct the Respondent to forthwith refund to the Petitioner its earnest money deposit of Rs.
3,00,00,000/- along with 18% interest compounded quarterly, in the interests of justice and equity.
(c) Pass any such further orders as this Hon'ble Court deems fit in the interest of justice and equity."
2. The relevant facts necessary for consideration of the present Writ Petition are that the respondent issued e-auction sale notice dated 26.3.2014 notifying for sale of movable and immovable properties belonging to one M/s Vikat Hotels Pvt. Ltd1. The auction was notified to be held on 5.5.2014 and the reserve price was stipulated as `29.33 crores with an Earnest Money Deposit2 of 1 Hereinafter referred to as the 'Borrower' 2 Hereinafter referred to as the 'EMD' 3 `2.93 crores. The petitioner participated in the said auction by depositing a sum of `3.00 crores as EMD. The said e-auction notice contained various terms and conditions.
3. In the auction conducted on 5.5.2014 the petitioner was a successful bidder and was required to remit a sum of `4,52,50,000/- being 25% of the bid amount and the EMD paid would be deducted from the bid amount. It is the case of the petitioner that while he was arranging to comply with the stipulation of depositing 25% of the bid amount, he received a legal notice dated 7.5.2014 (Annexure-H to the Writ Petition) issued to the Authorized Officer of the respondent and to the petitioner, whereunder it was, inter alia stated that the sale was invalid; that a suit in OS No.3603/2010 was pending before the City Civil Court, Bengaluru with respect to the said property; that the property cannot be registered since the commencement certificate and sale certificate have not been issued.
4. The petitioner issued a letter dated 7.5.2014 (Annexure-J to the Writ Petition) to the respondent 4 seeking its response having regard to the legal notice dated 7.5.2014. The respondent vide its reply dated 7.5.2014 (Annexure-L to the Writ Petition) intimated that that since 25% of the auction sale price was not deposited by the petitioner as per the terms and conditions of the auction notice, the sum of `3.00 crores paid towards EMD stands forfeited. Being aggrieved, the petitioner preferred TSA No.4/2019 before the Debts Recovery Tribunal, Bengaluru3. The respondent entered appearance before the DRT and contested the said proceedings. The DRT by its order dated 29.1.2020 dismissed the application filed by the petitioner.
5. Being aggrieved, the petitioner preferred an appeal in RA (SA) No.4/2021 before the Debts Recovery Appellate Tribunal4, Chennai. The respondent entered appearance before the DRAT and contested the same. The DRAT by its order dated 7.9.2023 dismissed the appeal filed by the petitioner. Being aggrieved, the present Writ Petition is filed.
3 Hereinafter referred to as the 'DRT' 4 Hereinafter referred to as the 'DRAT' 5
6. Learned counsel for the petitioner assailing the order of the DRAT contends that the petitioner being the successful bidder had the requisite funds in his bank account to comply with the deposit of 25% of the sale price. However, since the respondent did not provide clarification pursuant to the legal notice dated 7.5.2014, 25% of the bid amount was not deposited. Further it is contended that having regard to the nature of the objections raised, the bank would have been aware of the pending litigation with respect to the auction property which was not disclosed by the respondent. That the respondent ought not to have forfeited the EMD amount. The respondent has subsequently entered into an one time settlement with the borrower, as a result of which, it is not entitled to forfeit the amount deposited by the petitioner as the same would tantamount to the respondent, which is a financial corporation making an unlawful gain. He further submits that both the DRT and DRAT have erred in dismissing the petition and appeal of the petitioner. Various findings of the DRT and DRAT have also been assailed by the learned counsel for the petitioner. Hence, 6 he seeks for allowing of the present petition and granting of the reliefs sought for.
7. Per contra, learned counsel for the respondent justifies the order passed by the DRT and DRAT and further referring to various clauses in the auction notice submits that the respondent is justified in forfeiting the EMD amount.
8. The submissions of both the learned counsel have been considered and the material on record has been perused. The question that arises for consideration is, whether the orders of the DRT and DRAT are erroneous and liable to be interfered with by this Court in the present Writ Petition?
9. The essential factual matrix are undisputed inasmuch as, the petitioner had participated in the e- auction sale conducted on 5.5.2014 by making an EMD of `3.00 crores. It is further undisputed that the petitioner was the highest bidder in a sum of `30,10,00,000/- and was required to deposit 25% of the said amount in a sum of `7,52,50,000/-. That the petitioner having deposited the EMD of `3.00 crores was required to deposit the 7 balance sum of `4,52,50,000/- immediately as per the terms and conditions of the e-auction sale. It is further undisputed that the petitioner did not deposit 25% of the amount as required, hence, the respondent has forfeited the EMD of `3.00 crores.
10. Before considering the contentions of the parties, it is relevant to notice the terms and conditions of the e-auction sale.
"TERMS AND CONDITIONS:
The e-Auction is being held on "AS IS WHERE IS"
AND "AS IS WHAT IS BASIS".
1. To the best of knowledge and information of the Authorised Officer, there is no encumbrance on the property. However, the intending bidders should make their own independent inquiries regarding the encumbrances, title of property(ies) put on auction and claims/rights/dues/affecting the property, prior to submitting their bid. The e-Auction advertisement does not constitute and will not be deemed to constitute and will not be deemed to constitute any commitment or any representation of the HUDCO. The property is being sold with all the existing and future encumbrances whether known or unknown to the HUDCO. The Authorised Officer/Secured Creditor shall not be responsible in any way for any third party claims/rights/dues.
2. It shall be the responsibility of the bidders to inspect and satisfy themselves about the asset and specification before submitting their -Bid. The inspection of property(ies) put on auction will be permitted to interested bidders at sites from 10.00 AM to 5:00PM from [the date of Newspaper Publication to Last date of Bid Documents (Hardcopy) submission].
8
9. The Earnest Money Deposit (EMD) of the successful bidder shall be retained towards part sale consideration and the EMD of unsuccessful bidders shall be refunded. The Earnest Money Deposit shall not bear any interest. The successful bidder shall have to deposit, 25% of the sale price, adjusting the EMD already paid, immediately after the acceptance of bid price by the Authorised Officer and the balance 75% of the sale price within 15 days of sale confirmation or within such extended period as agreed upon in writing by and solely at the discretion of the Authorised Officer. In case of default in payment by the successful bidder, the amount already deposited by such bidder shall be liable to be forfeited and property shall be put to re-auction and the defaulting borrower shall have no claim/right in respect of property/already deposited amount."
(emphasis supplied)
11. It is specifically stipulated that the e-auction is on "as is where is" and "as is what is" basis. That the respondent has stipulated that to the best of its knowledge and information, there is no encumbrance on the property. The bidders were permitted to inspect the property and satisfy themselves about the assets and specifications before submitting their bid from the date of newspaper publication till the last date of submission of the bid documents. It was further stipulated that the successful bidder was to deposit 25% of the sale price adjusting the EMD already paid immediately after acceptance of the bid 9 price by the Authorized Officer and balance 75% of the sale price was to be paid within 15 days of the sale confirmation or such extended period as mutually agreed between the parties. It is also specifically stipulated that in the case of default in payment by the successful bidder, the amount already deposited by such bidder was liable to be forfeited and the property was entitled to be put to re-auction.
12. Rule 8(7) of the Security Interest (Enforcement) Rules, 20025, states as follows:
"(7) Every notice of sale shall be affixed on a conspicuous part of the immovable property and the authorised officer shall upload the detailed terms and conditions of the sale, on the web- site of the secured creditor, which shall include;
(a) the description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor;
(b) the secured debt for recovery of which the property is to be sold;
(c) reserve price of the immovable secured assets below which the property may not be sold;
(d) time and place of public auction or the time after which sale by any other mode shall be completed;5
Hereinafter referred to as 'the Rules' 10
(e) deposit of earnest money as may be stipulated by the secured creditor;
(f) any other terms and conditions, which the authorized officer considers it necessary for a purchaser to know the nature and value of the property."
(emphasis supplied)
13. Rule 8(7)(a) of the Rules specifically stipulates that the details of encumbrances known to the secured creditor should be furnished.
14. It is the case of the petitioner that having regard to the legal notice dated 7.5.2014 he sought for a clarifications vide his letter dated 7.5.2014 which is not furnished. In this context, it is relevant to note that it is not the case of the petitioner that the respondent has intentionally withheld that information as to any encumbrance of the property. No material is placed on record to establish that pendency of suit was within the knowledge of the Bank and the Bank deliberately with held such information. Hence, it cannot be said that there is violation of Rule 8(7) of the Rules or the terms and conditions of the auction sale by the respondent.
15. Hence, it is clear that the petitioner having been required to deposit 25% of the bid amount i.e., 11 `4,52,50,000/- immediately consequent to the confirmation of the bid, has failed in doing so and as per clause 9 of the terms and conditions of the bid, the respondent was entitled to forfeit the money which it has done vide its notice dated 14.5.2014 (Annexure-L to the Writ Petition).
16. The DRT and the DRAT have adequately appreciated the case of the petitioner while passing the orders dated 29.1.2020 and 7.9.2023.
17. The reliance placed by the learned counsel for the petitioner on the judgment in the case of Haryana Financial Corporation v. Rajesh Gupta6 will not aid the case of the petitioner since in the said case the Hon'ble Supreme Court had specifically observed that the financial corporation had itself violated the terms and conditions of the sale and hence, held that the forfeiture by the financial corporation was erroneous. In the present case, as noticed above, it is the petitioner who has violated the terms and conditions of the e-auction. 6 (2010) 1 SCC 655 12
18. Learned counsel for the petitioner further vehemently contends that the respondent being a financial corporation ought not to be permitted to be profited and places reliance on the judgment in the case of Kailash Nath Associates v. Delhi Development Authority7. It is relevant to note that in the case of Kailash Nath Associates7 the Hon'ble Supreme Court was considering a case wherein the public auction was conducted by the Delhi Development Authority8, wherein the appellant therein was the highest bidder for a Plot. The appellant had deposited 25% of the bid amount and due to a recession in the industry, sought for time to deposit the remaining 75%. The High Power Committee of the DDA had also recommended that the appellant be granted time, which was not done. The said case would not aid the case of the petitioner as the Hon'ble Supreme Court had held that there was no breach of contract by the appellant therein and the DDA had made a profit. Further, the factual matrix in the said case and the present case is completely different and the petitioner herein has not even 7 (2015) 4 SCC 136 8 Hereinafter referred to as 'DDA' 13 deposited 25% of the bid amount within the stipulated time.
19. Having regard to the factual and legal position as noticed above, the petitioner has failed in demonstrating that the orders of the DRT and DRAT are erroneous and the relief sought for in the present petition is required to be granted. Hence, the question framed for consideration in answered in the negative.
20. In view of the aforementioned, the Writ Petition is dismissed as being devoid of merit.
No costs.
Sd/-
JUDGE Sd/-
JUDGE nd/-