Jharkhand High Court
Kumar Rohit vs Allahabad Bank Through Its Chairman Cum ... on 26 July, 2016
Equivalent citations: AIR 2017 JHARKHAND 65, 2017 (1) AJR 468, (2018) 1 BANKCAS 158, (2016) 4 JCR 445 (JHA), 2017 (2) KLT SN 87 (JHA)
Author: Shree Chandrashekhar
Bench: Virender Singh, Shree Chandrashekhar
1.
IN THE HIGH COURT OF JHARKHAND AT RANCHI
L.P.A. No. 220 of 2016
....
Kumar Rohit, Son of Sri Lalmani Nath Shahdeo, Resident of Shahdeo
Enclave, West End Part, Kaju Bagan, Beside D.A.V. Hehal (Junior Wing),
P.O.-Hehal, P.S.-Sukdeo Nagar, Dist-Ranchi, Jharkhand
..... Appellant
Versus
1.Allahabad Bank, through its Chairman-cum-Managing Director, Kolkata,
P.O.-G.P.O., Kolkata, P.S.:Topsia, District:-Kolkata, West Bengal.
2.The Chief Manager, Allahabad Bank, Harmu Colony Branch, Ranchi-
Cum- Authorized Officer, Allahabad Bank, P.O.-Harmu Housing Colony, P.S.
:Argora, District-Ranchi, Jharkhand
3.Jharkhand State Housing Board, through its Managing Director, Harmu,
P.O.-Harmu, P.S.-Argora, District-Ranchi, Jharkhand
.... Respondents
----
CORAM: HON'BLE MR. JUSTICE VIRENDER SINGH, CHIEF JUSTICE
HON'BLE MR. JUSTICE SHREE CHANDRASHEKHAR
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For the Appellant : Mr. V.P. Singh, Senior Advocate
Mrs. Rashmi Kumari, Advocate
For the Respondent Nos.1&2 : Mr. P.A.S. Pati, Advocate
Mr. Rohan Kashyap, Advocate
For Jharkhand State Housing Board : Mr. Ashok Kumar Singh, Advocate
-----
th
07/ 26 July, 2016
Per Shree Chandrashekhar, J.:
1. After having failed in his attempt before the Writ Court,
seeking refund of Rs.31,25,000/- the appellant-writ petitioner has
approached this Court in the instant Letters Patent Appeal.
2. Heard.
3. Mr. V.P. Singh, the learned Senior counsel for the appellant
referring to E-auction notice dated 01.03.2016 for sale of the residential
property MIG-D-120 at Harmu Housing Colony, contends that the
respondent- Allahabad Bank made a representation to the public at large
which was patently false and thereby the appellant was misled. E-auction
held pursuant to notice dated 01.03.2016 was illegal and therefore, the bid
amount deposited by the appellant must be refunded by the
respondent-Bank. It is further contended that after the respondent-Bank
fully recovered the secured debt from the borrower, forfeiture of
Rs.31,25,000/- by the Bank on the ground that the appellant-successful
2.
bidder has failed to deposit the balance 75% bid amount by the stipulated
date, would nothing but, be unjust enrichment.
4. Per contra, Mr. P.A.S. Pati, the learned counsel for the
respondent-Allahabad Bank, referring to the terms and conditions of
E-auction notice dated 01.03.2016, submits that once the appellant
participated in E-auction and he was declared successful bidder, he is
bound under the terms and conditions of E-auction. It is contended that
E-auction dated 07.04.2016 ultimately failed on account of failure of the
appellant to deposit the balance 75% of the bid amount, and in
consequence thereof, in terms of the conditions of E-auction, 25% of the bid
amount deposited by the appellant has to be forfeited. Refuting the
allegation of misrepresentation and fraud by the Bank, the learned counsel
submits that the property under auction could have been inspected by the
intending bidders, who upon inspection of the property could have decided
to participate or not to participate in E-auction.
5. Dr. Ashok Kumar Singh, the learned counsel appearing for
the respondent -Housing Board, opposing E-auction of the lease-hold
property which belongs to Jharkhand Housing Board contends that without
seeking prior approval of the Housing Board and consenting to the terms
and conditions, if any, of the Housing Board, the property under E-auction
could not have been put on sale.
6. Briefly stated, E-auction notice dated 01.03.2016 was issued
for "sale of immovable property mortgaged to Bank under Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002", which comprised land and building constructed over MIG-D-120,
Harmu Housing Colony, Argora, Ranchi, acquired by one Bijay Kumar
Pandey. The property was put on auction-sale on "as is where is basis",
"as it is where it is basis" and "whatever there is basis", for realization
3.
of Bank's dues with interest. The secured debt amounted to Rs.53,50,374/-
which was to be realized along with interest, costs, charges and expenses.
The date of auction was fixed on 07.04.2016. The appellant deposited the
Earnest Money Deposit (EMD) of Rs.7,00,000/- through Demand Draft on
30.03.2016and he was declared successful bidder in the bid held on 07.04.2016. The respondent-Bank informed the appellant on 08.04.2016 that he has been declared highest bidder, and required him to deposit 25% of the bid amount. The appellant deposited Rs.24,25,000/- on 08.04.2016 which was 25% of the bid amount after deducting Rs.7,00,000/- which was deposited by him as EMD. Thereafter, vide letter dated 20.04.2016 the authorized officer-respondent no.2 directed the appellant to pay the balance bid amount. In the meantime, the appellant approached this Court in W.P.(C) No.2075 of 2016 for quashing of letter dated 20.04.2016. The writ petition was disposed of on 22.04.2016 granting liberty to the appellant to deposit the balance amount by 27.04.2016. The respondent-Bank was directed to issue the "Sale Certificate" after receiving the balance bid amount. It is pleaded by the appellant that he came to know that the secured asset is a lease-hold property and the borrower is not the absolute owner of the plot bearing No. MIG-D-120, Harmu Housing Colony, Ranchi. The appellant, thereafter, approached respondent no.2 on 24.04.2016 for providing a copy of NOC/Permission, if any, granted by Jharkhand Housing Board for sale of the aforesaid property, however, the authorized officer-respondent no.2 did not respond to his application. Pleading misrepresentation and contending that the E-auction notice was illegal, the appellant approached the Writ Court with the following prayers :
A. A writ of certiorari or in nature thereof for Quashing/Cancelling the Sale Notice/E-Auction Notice issued by the Allahabad Bank regarding Auction sale of the property 4. situated at MIG-D-120 Harmu Housing Colony, Ranchi vide Ref- AB/HCB/SARFAESI/SALENOTICE/2015-16/2910 dated 01-03-2016 and also the E-auction held on 07-04-2016 as this property is a leasehold property and the bank can't Auction/Sale/transfer the property without taking 'No Objection Certificate' from Jharkhand Housing Board, Harmu, Ranchi.
B. A writ of Mandamus or in nature thereof for
commanding upon the respondents to refund the
Rs.31,25,000=00 (Thirty one Lacs twenty five thousand only) 25% of the bid amount deposited by the petitioner with interest of 12% per annum.
C. A writ of Mandamus or in nature thereof for commanding upon the respondents to pay cost of litigation and also compensation for the harassment suffered by the petitioner, due to the misrepresentation of the respondents.
D. A writ of Mandamus or in nature thereof for commanding upon the respondents not to take any coercive action against the petitioner till final adjudication of the present writ application."
7. The writ petition was dismissed on the ground that after availing indulgence of the Court for depositing balance 75% of the bid amount, now he would not be allowed to question E-auction for sale of the aforesaid property.
8. In the present proceeding, the respondent-Bank has filed counter-affidavit denying the allegation of misrepresentation referring to Clause-14 of the terms and conditions appended to E-auction notice dated 01.03.2016. It is asserted that the Housing Board granted 5. "No Objection" to the borrower to avail loan for construction of the house over the land leased by the Housing Board and the respondent-Bank vide letter 03.03.2016 duly informed the Estate Officer of the Housing Board about E-auction of the secured assets.
9. The respondent Housing Board has pleaded that the lessee was never granted permission by the Housing Board to mortgage the land in question with the respondent-Allahabad Bank. Moreover, the lessee who had only lease-hold rights for the balance unutilized period out of 90 years and not the absolute right, title and interest over the land, could have, at best, mortgaged his lease-hold rights with prior permission of the Housing Board. The Housing Board has disputed the right of the Allahabad-Bank to alienate or to transfer the land in question to any person without permission of the Housing Board.
10. From the pleadings of the parties, it appears that there is no dispute that the plot bearing no. MIG-D-120 at Harmu Housing Colony is a lease-hold property. The said property was originally allotted to Manoj Bihari Sinha on lease-hold basis for a period of 90 years on 19.08.1982. Subsequently, a Deed of Tripartite Lease was executed for transferring the lease-hold rights in plot no. MIG-D-120 in favour of Bijay Kumar Pandey, of which Jharkhand State Housing Board is a party. Clause-11 of the Tripartite Lease Agreement provided that "the second party shall not transfer, assign or otherwise part with the possession of whole or any part of the premises with the previous permission of the first party in writing which the first party shall be entitled to refuse in its sole discretion or in the event of consent being given may impose such terms and conditions as it thinks fit". E- auction notice dated 01.03.2016 makes it abundantly clear that it was a "sale notice for sale of the secured assets". The relevant portions of the auction notice dated 01.03.2016 are extracted below: 6.
SALE NOTICE/EAUCTION Sale of immovable property/ies mortgaged to Bank under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002(No.54 of 2002) Ref.AB/HCB/SARFAESI/SALENOTICE/2015-16/2910 Dated 01.03.2016 Whereas, the Authorized Officer of Allahabad Bank, Harmu Colony Branch, Ranchi had taken symbolic possession of the following property/ies pursuant to the notice issued under Sec.13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 in the following loan account with right to sell the same on "As is where is basis", "as it is where it is basis" and "whatever there is" for realization of Bank's dues plus interest as detailed hereunder and whereas consequent upon failure to repay the dues., the undersigned in exercise of power conferred under Section 13(4) of the said Act proposes to realize the Bank's dues by sale of the said property/ies. The Sale will be done by the undersigned through e-auction platform provided at the website https:allahabadbank auctiontiger.net Name of the Borrower Details of Properties Date of Demand Reserve Price Account/Mortgagor/Gaurantors Notice EMD Date of Possession Bid Increment Price Name of Account: All that part an parcel Amount of M/S SAFARI RESIDENTIA MIGD of Land & Building Secured 120, HARMU HOUSING COLONY, Constructed over MIG Debt 21.02.2014 Rs.70,00,000.00 RANCHI D120, Harmu Housing Borrower/ Mortgagor/ Colony, P.S.Argora, 10.02.2015 Rs. 7,00,000.00 Guarantors: Area2250 sq.ft. Dist
2.Sri Bijay Kumar Pandey (ProM/S Ranchi, Jharkhand Safari Residentia) MIGD120, acquired Vide sale Deed Harmu Housing Colony, Ranchi. No.13242 dated
3.Sri Sanjay Kumar Singh S/O Sri 02.09.2005 in the name Jairam Singh of Bijay Kumar Pandey Present dues Rs.10,000.00 Q No.356A, Road No--05, Ashok Bounded: On the North Rs.53,50,374.00 Nagar, Ranchi by :MIG Plot plus interest till
4.Sri Rishi Prakash Mishra No.D121 the date of C/6, Central Ashok Nagar, Ranchi On the South by :MIG realization and
5.Sri Bachesh Kumar 189, Bari Co Plot No.D119 On the costs, charges and Operative C, Bokaro Steel City, East by : MIG Plot No. expenses Bokaro. D131,
6.Sri Sandeep Sharma R/O Taj ON the West by :
Mahal Club Road, Ranchi 40'wide Road
11. The contention of the respondent-Bank based on Clause-20 that the intending bidder could have inspected the property and once he has participated in E-auction with his eyes and ears open there was no misrepresentation in E-auction notice, is liable to be rejected. Clause-20 reads, as under :
"20. For inspection of the property/ies, the intending bidders may contact Allahabad Bank, Harmu Colony Branch, Harmu, Ranchi -834002 during office hours between 07.03.2016 to 30.03.2016 between 11.00 am to 3.00 pm (except Holidays)."7.
12. The aforesaid clause does not disclose that the "property papers" were open for inspection. Physical inspection of the property, obviously, cannot disclose the nature of the right of the occupier, who is the borrower in the instant case. The recitals of the E-auction notice dated 01.03.2016 gives an impression as if the secured asset intended for sale is the absolute property of the borrower inasmuch as, the sale notice dated 01.03.2016 mentions that the aforesaid property was acquired by Bijay Kumar Pandey vide, "Sale Deed No.13242 dated 02.09.2015". Besides the element of misrepresentation in the auction-notice, it suffers from suppression of material informations.
13. The learned counsel for the respondent-Bank contended that under the SARFAESI Act, 2002 the authorized officer is empowered to sell the secured asset, which is the property in question and therefore, even if it was a lease-hold property, the same can legally be put on sale for realizing Bank's dues. The learned counsel referring to letter dated 07.05.2016 written by respondent no.2 to the Estate Officer, Jharkhand State Housing Board, submits that an intimation of the second auction was given to the Housing Board, to which the Housing Board has not raised any objection.
14. This contention does not merit acceptance. A property which belongs to the Housing Board, in respect of which a lease has been executed in favour of the allottee, cannot be sold by the respondent-Bank to realize dues from the borrower who is the lessee in the instant case. Clause-14 of the Tripartite Lease Agreement provides that the Housing Board has right to cancel the allotment in favour of the lessee and to evict him from the property for breach of the terms and conditions of the agreement. Letters dated 03.03.2016 8. and 07.05.2016 written by the respondent-Bank to the Housing Board are mere communications by the Bank. The response of the Housing Board contained in letter dated 13.07.2016 in response to letter of the respondent-Bank dated 07.04.2016 discloses that the Board has asserted first charge over the property and transfer of lease is subject to deposit of 50% of the sale price. Admittedly, the letters dated 07.05.2016 and 13.07.2016 are post-auction communications. Moreover, the respondent-Bank has not pleaded that it has accepted the conditions disclosed in letter dated 13.07.2016 by the Housing Board.
15. Admittedly, the facts noticed hereinabove were not disclosed to the intending bidders in the E-auction notice dated 01.03.2016. A bidder would not intend to buy litigation with the property, which may ensue between the Bank and the Housing Board. The petitioner has specifically pleaded that on 24.04.2016 he filed an application for providing a copy of NOC/permission, if any, granted by the Housing Board for sale of the property in question. The averments in paragraph no. 18 of the writ petition has been reiterated in paragraph no. 5(o) of the memorandum of the instant appeal, however, this assertion has not been controverted by the respondent-Bank. The Bank has taken a position that there was no pleading in the writ petition to the effect that while preparing for deposit of the balance bid amount the petitioner came to know about the aforesaid illegality, however, in view of the pleadings in the writ petition, particularly in paragraph no. 18, the defects in the sale notice cannot be ignored. There is no warrant of the proposition that illegality which would go to the root of the auction sale must have been discovered by an auction purchaser during the auction sale and a fact which would vitiate the 9. auction sale, if discovered subsequently, cannot be taken note of. Knowledge to the petitioner about nature of the property put on auction sale, even after the concluded sale, can be looked into to examine the legality of the sale notice and the auction sale. The fact that the sale notice was issued on "as is where is basis", "as it is where it is basis" and "whatever there is basis", would not attach legality to the auction sale inasmuch as, knowledge of the defect in property cannot be imputed to an intending purchaser. Such covenants cannot overcome the fatal defect in auction notice and the auction conducted by suppressing vital informations must be held illegal.
16. The Bank was under a duty to disclose all relevant facts including, the fact that the property put on auction sale was a lease-hold property and it belongs to the Housing Board. This is a basic requirement of fair play in action and more so, in case of a Public Sector Bank. The auction sale which proceeded on a misrepresentation to the intending bidders is definitely illegal and is liable to be quashed. The terms and conditions of an illegal auction sale cannot be enforced by the respondent-Bank, and accordingly Clause-13 of E-auction notice which provides forfeiture of the amount deposited by successful bidder in the event of failure to deposit the bid amount within the stipulated time cannot be resorted to by the respondent-Bank to forfeit EMD and 25% of the bid amount deposited by the appellant. Dismissal of the writ petition on the ground that the appellant-writ petitioner himself invoked jurisdiction of this Court seeking a direction upon the Bank to confirm the sale and issue Sale Certificate, is not justified. The writ petition was decided without affording an opportunity to the Housing Board to file its response, as is apparent from the proceeding in W.P.(C) No.2181 of 2016, which was 10. disposed of on the very first day of hearing. In view of the objection raised by the Housing Board to the auction sale of its property, the direction issued by the Writ Court to the respondent Bank to take steps for execution of lease in the name of the appellant is also rendered erroneous. Considering the aforesaid facts, we are of the opinion that the impugned order dated 26.04.2016 passed in W.P.(C) No.2181 of 2016 suffers from serious error in law.
17. Another issue which was debated during the course of hearing of the instant Letters Patent Appeal, is whether forfeiture of the amount deposited by the appellant would amount to unjust enrichment of the respondent-Bank. The learned Senior counsel for the appellant contended that in the subsequent auction vide E-auction notice published in the Newspaper on 07.05.2016 the borrower himself has paid all dues to the Bank, which issued "No Dues Certificate" to the borrower vide letter dated 23.06.2016 and therefore, appropriation of Rs.31,25,000/- deposited by the appellant would be unjust retention of the said amount by the Bank amounting to unjust enrichment. Mr. P.A.S. Pati, the learned counsel for the respondent-Bank, however, contended that on account of failure of the appellant to deposit the balance bid amount, the auction failed and the Bank was constrained to re-auction the property. The amount deposited by the appellant has to be forfeited in terms of the conditions attached to E-auction notice dated 01.03.2016, and if, the Courts interfere with the matters like the present one, no auction would ever be concluded.
18. The Contract Act, 1872 recognizes the principle of unjust enrichment in Section 72. This principle is infact foundation for the law governing restitution. The retention of money or property of another against the principle of justice, equity and good conscience 11. has been held by the Courts "unjust enrichment". On admitted facts, forfeiture of the amount deposited by the successful bidder, for sale of a property which the respondent-Bank could not have sold in auction sale without prior approval of the Housing Board and after realizing its dues from the borrower, would certainly amount to unjust enrichment. The respondent-Bank cannot legally retain EMD and 25% of the bid amount deposited by the appellant.
19. In the result, in view of the aforesaid discussions, the impugned order dated 26.04.2016 is set-aside. The writ petition stands allowed and consequently, the respondent-Bank is directed to refund Rs.31,25,000/- to the appellant, within four weeks.
(Virender Singh, C.J.) (Shree Chandrashekhar,J.) Sudhir/SI, A.F.R.