Delhi High Court
Azad Singh Solanki vs Punjab National Bank on 7 July, 2016
Author: Rajiv Sahai Endlaw
Bench: Rajiv Sahai Endlaw
*IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 7th July, 2016
+ W.P.(C) No.4648/2014
AZAD SINGH SOLANKI ..... Petitioner
Through: Mr. Kirti Uppal, Sr. Adv. with Mr.
Sidharth Chopra and Mr. Mohd.
Manan, Advs.
Versus
PUNJAB NATIONAL BANK ..... Respondent
Through: Mr. Pallav Saxena, Adv.
CORAM:-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1. The petition (i) impugns the communication dated 26 th May, 2014 of the respondent Punjab National Bank (Bank) to the petitioner to the effect that upon the failure of the petitioner to pay balance 75% of the bid amount within the prescribed time, the amount deposited by the petitioner till then with the respondent Bank shall stand forfeited; and, (ii) seeks mandamus to the respondent Bank to refund the earnest amount of Rs.40,20,000/- to the petitioner along with interest.
2. The petition came up before this Court first on 28 th July, 2014 when the counsel for the respondent Bank appearing on advance notice was asked to obtain instructions whether the respondent Bank was agreeable to refund the W.P.(C) No.4648/2014 Page 1 of 15 amount forfeited. The counsel for the respondent Bank on 19th November, 2014 informed that the respondent Bank was not so agreeable. Notice of the petition was issued and pleadings have been completed. On 18th January, 2016 when the petition came up for hearing, attention of the senior counsel for the petitioner was invited to the order dated 18th March, 2015 of the Supreme Court in Civil Appeal No.3053/2015 titled National Highways Authority of India Vs. MEIL-
EDB LLC (JV) quoted by me in CCPL Developers Pvt. Ltd. Vs. GAIL (India) Ltd. MANU/DE/4361/2015 and on request of the counsels the matter was adjourned to 11th February, 2016 when after hearing arguments judgment was reserved.
3. It is the case of the petitioner (i) that in pursuance to the notice got published by the respondent Bank in the newspapers on 27th March, 2014 of e- auction of property no.E-131 ad measuring 100 sq. yards in Khasra No.174 min situated in the abadi deh of Village Mohammadpur, New Delhi, the petitioner submitted its bid in the sum of Rs.1,20,00,000/- and which during e-auction was enhanced to Rs.1,60,80,000/- and being the highest was accepted by the respondent Bank on 2nd May, 2014; (ii) that in accordance with the terms and conditions of e-auction the petitioner deposited Rs.12,00,000/- with the respondent Bank on 28th April, 2014 and Rs.28,20,000/- on 30th April, 2014, W.P.(C) No.4648/2014 Page 2 of 15 being 25% of the bid amount; (iii) the petitioner was required to deposit remaining 75% of the bid amount within the stipulated period of 15 days; (iv) that the petitioner though had made all arrangements for payment of the balance 75% of the bid amount but learnt that the aforesaid property was subject matter of multiple litigations and a disputed property and that the Debt Recovery Tribunal (DRT)-I, Chandigarh in SA No.71/2012 had restrained the respondent Bank from putting the subject property to e-auction; (v) the petitioner addressed a communication dated 17th May, 2014 to the respondent Bank seeking clarification and to which a confusing and evasive reply dated 17th May, 2014 was given by the respondent Bank but denying that it had been restrained from auctioning the property and pleading that the property was auctioned on "as is where is basis" in terms of the order dated 23 rd April, 2014 of the Chief Metropolitan Magistrate; (vi) the petitioner addressed yet another communication dated 20th May, 2014 to the respondent Bank and to which a response dated 22nd May, 2014 was sent by the respondent Bank; (vii) yet another letter dated 23rd May, 2014 also from the petitioner elicited the impugned communication dated 26th May, 2014; (viii) that the auction aforesaid by the respondent Bank is in violation of the order of the DRT-I, Chandigarh in SA No.71/2012 copy whereof is purported to be Annexure P-17 W.P.(C) No.4648/2014 Page 3 of 15 to the petition (but neither is there any P-17 to the petition nor is it shown in the index to the petition); (ix) that owing to the order dated 13th July, 2012 of this Court in W.P.(C) No.3600/2014 also, the respondent Bank was not entitled to auction the property; (x) that the mortgage itself of the subject property with the respondent Bank was under challenge; (xi) that sale of the property on "as is where is basis" does not entitle the respondent Bank to sell a property without even having a marketable and clean title thereto; (xii) that the property, in the sale notice was wrongly described as commercial; and, (xiii) that the auction aforesaid is in violation of the provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
4. The respondent Bank in its counter affidavit has defended the petition pleading (i) that the issues at which the parties are at variance constitute disputed questions of fact which cannot be gone into writ proceedings; (ii) that if the petitioner had any grievance, he ought to have invoked Section 17 of the SARFAESI Act and the writ petition is not maintainable for the reason of availability of alternative remedy; (iii) that the petitioner is espousing proxy litigation on behalf of the guarantor/mortgagor Mr. Udai Bir Singh Tokas who has since instituted SA No.71/2012 titled Udai Bir Singh Tokas Vs. Punjab W.P.(C) No.4648/2014 Page 4 of 15 National Bank before DRT-I, Chandigarh and which is pending adjudication;
(iv) that the aforesaid property was mortgaged in favour of the respondent Bank in the loan account of M/s. Virgo Trading House, of which Mr. Ankit Singla is the sole proprietor, credit facilities to whom were classified as Non-Performing Asset (NPA) and the provisions of SARFAESI Act were invoked for non- payment of dues of Rs.1,71,80,184/-; (v) that the subject property comprises of three floors of which ground floor is being used as a shop and the upper floors are being used for residential purposes; the property is even otherwise situated in a predominantly commercial area having numerous shops and offices in an urbanised village; (vi) that the property in the Sale Notice dated 27 th March, 2014 of e-auction was correctly described as "commercial"; the forfeiture has been effected in terms of clauses 11, 16 (ii), (iii) and (xxi) of the Sale Notice and Rules 9(4) and 9(5) of the Security Interest (Enforcement) Rules, 2002;
(vii) that the petitioner vide his letter dated 17th May, 2014 referred to the proceedings initiated by Mr. Udai Bir Singh Tokas before Debt Recovery Appellate Tribunal, Delhi (DRAT); (viii) that the respondent vide its reply dated 17th May, 2014 clarified that the DRAT, Delhi did not grant any interim relief to Mr. Udai Bir Singh Tokas and once again requested the petitioner to deposit the balance bid amount; (ix) that there was no dispute with respect to W.P.(C) No.4648/2014 Page 5 of 15 auction sale dated 30th April, 2014 including as to the nature of the property;
(x) that the petitioner appeared to have deposited Rs.40,20,000/- only with an ulterior motive to frustrate the statutory proceedings under SARFAESI Act, in collusion and connivance with Mr. Udai Bir Singh Tokas; (xi) that the petitioner inspected the property prior to auction sale dated 30th April, 2014 and made inquiries and only on being satisfied about all the matters relating to the auction sale participated therein; (xii) denying that the subject property is disputed property or that the petitioner was ready and willing with the balance sale consideration; (xiii) that W.P.(C) No.3600/2014 instituted by Mr. Udai Bir Singh Tokas before this Court was disposed of vide order dated 29th May, 2014 directing that till the final decision of SA No.71/2012 or 31 st July, 2014, whichever is earlier, the respondent Bank shall not issue fresh auction notice or take any other precipitative action; thereafter vide orders dated 22 nd July, 2014 and 9th September, 2014 the time to decide SA No.71/2012 was extended up to 5th September, 2014 and 31st October, 2014 respectively; the said time was not extended thereafter; SA No.71/2012 is still pending adjudication and there is no interim order therein; and, (xiv) that accordingly fresh Sale Notice dated 24th February, 2015 had been got issued by the respondent Bank. W.P.(C) No.4648/2014 Page 6 of 15
5. The petitioner has filed a rejoinder but since no reference was made thereto during the hearing, need to refer thereto is not felt.
6. The senior counsel for the petitioner during the hearing relied on (i) para 68 of Guruvayur Devaswom Managing Committee Vs.C.K. Rajan AIR 2004 SC 561 holding that existence of an alternative remedy albeit is no bar to exercise jurisdiction under Article 226 of the Constitution of India if discretion is exercised wholly without jurisdiction or contradictory to the constitutional or statutory provisions; (ii) paras 11 & 19 of Haryana Financial Corporation Vs. Rajesh Gupta AIR 2010 SC 338 laying down Haryana Financial Corporation could not rely on the clause of sale being of "as is where is basis" because it could not take advantage of its own wrong; (iii) paras 5 & 6 of Jai Logistics Vs. The Authorised Officer, Syndicate Bank MANU/TN/1161/2010 where a Division Bench of the High Court of Madras held that the obligation of the authorised officer of the Bank to in a Public Notice issued under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002 include in the Public Notice the details of encumbrances known to the secured creditors; (iv) Rekha Sahu Vs. UCO Bank I (2014) BC 221 (DB) where the High Court of Allahabad also held that a secured creditor does not enjoy the immunity in respect of his action if it is not bona fide and that if the authorised officer of the bank, prior to W.P.(C) No.4648/2014 Page 7 of 15 publishing auction notice, does not take care of encumbrances in the property and does not mention it in the public notice, the bank is liable for payment of interest on the sale consideration till the title is perfected; and, (v) R. Shanmugachandran Vs. The Chief Manager, Indian Bank Asset Recovery Management MANU/TN/1243/2012.
7. I have in Speed Track Cargo Vs. State Bank of Patiala MANU/DE/0359/2016, dealing with a similar petition, held a writ remedy to be not available for the relief as claimed in the present petition also, giving the following reasons:-
"9. The Division Bench of this Court in similar situation in judgment dated 10th March, 2011 in W.P.(C) No.8418/2010 titled Madhucon Projects Ltd. Vs. National Highway Authority of India had directed refund of 5% of the bid security given for the tender floated and which 5% was forfeited. However, the Supreme Court in order dated 18th March, 2015 in SLP (C) No.15689/2011 titled National Highways Authority of India Vs. MEIL-EDB LLC (JV) has dealt with the matter as under:-
"We are confronted with a situation when there is a contract between the parties, duly signed by the Respondent which restricts forfeiture of 5% of the value of the Bid Security ostensibly not by way of a penalty. Of course, as is to be expected, the Respondent disagrees and on the contrary submits that the deduction / forfeiture is in terrorem and is punitive in nature. A Writ Court may at least as a temporary or preliminary view decide whether the damages imposed by an Authority amenable to writ jurisdiction such as NHAI indubitably are punitive or not, but it should abjure from going into the minute calculation. That controversy should be left to the Civil Court to decide, i.e. whether the deduction / forfeiture, in the present instance of 5% of the value of the Bid Security is punitive or otherwise. We think that the course that W.P.(C) No.4648/2014 Page 8 of 15 commends itself to us is to relegate the parties to the Civil Courts to determine whether any damages had been suffered by the National Highways Authority of India and if so whether the deduction of 5% was a fair pre-estimate or was punitive in nature. Since the parties have been bona fide prosecuting writ proceedings in the event of the plaintiff seeks enlargement / extension of time for filing of a Suit, the Courts in seisin will keep all the circumstances in view before passing an order."
10. In the light of the said dicta of the Supreme Court, the remedy if any of the petitioner is not under Article 226 of the Constitution of India.
11. Reliance by the counsel for the petitioner on E. Muthuraj supra is totally misconceived. The counsel for the petitioner during the hearing has drawn my attention to para 5 under para 11 of the said judgment and on the basis whereof has contended that the Court therein held that Rule 8(6)(f) of the Security Interest (Enforcement) Rules, 2002 under the SARFAESI Act mandates the secured creditors to set out in the terms of sale notice any other thing which the authorised officer considers it material for a purchaser to know in order to judge the nature and value of the property and that the said Rule would include the encumbrance(s) relating to the property. However the paragraph cited by the counsel for the petitioner is not the paragraph of E. Muthuraj but the paragraph of Jai Logistics Vs. The Authorised Officer, Syndicate Bank reported in 2010 (4) CTC 627 referred to in para 11 of the judgment in E. Muthuraj. Thereafter in para 12 of E. Muthuraj itself it is noted that the judgment in Jai Logistics was considered by a Division Bench of the Madras High Court in R. Shanmugachandran Vs. The Chief Manager, Indian Bank, Asset Recovery Management Branch, Coimbatore MANU/TN/1243/2012 in which it was held that the purport of Rule 8(6) cannot be extended to such an extent that it obliterates the liability of the purchaser to undertake due diligence and to scrutinise the title to the property and that the obligation of the authorised officer is only to disclose the encumbrance that have come to the notice of the secured creditor and that it is for the auction purchaser to apply for encumbrance certificates in the time of 30 days W.P.(C) No.4648/2014 Page 9 of 15 made available to the intending buyers to see if there are any encumbrances. In the light of the judgment of the Division Bench in R. Shanmugachandran the writ petition in E. Muthuraj was dismissed. E. Muthuraj is thus against the petitioner rather than being in favour of the petitioner and reliance thereon appears to have been made making a Google like search and not after reading the judgment fully.
12. I am otherwise also entirely in agreement with the view taken in E. Muthuraj.
13. The Security Interest (Enforcement) Rules have been framed in exercise of the rule making power contained in Section 38(1) and 38(2)(b) read with Section 13(4), (10) and (12) of the SARFAESI Act. SARFAESI Act has been enacted to regulate the securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto. The SARFAESI Act is not concerned with the relationship between the banks/financial institutions holding the financial assets and security interest and the purchasers from the Banks / financial institution thereof. Section 13 lays down the procedure for enforcement of security interest and in sub Section (4) thereof empowers the secured creditor to take possession, in sub Section (10) thereof empowers the secured creditor to, if the dues are not fully satisfied from the sale proceeds of the secured asset, initiate proceedings before the Debt Recovery Tribunal (DRT) and in sub-Section (12) thereof provides for the rights of the secured creditor to be exercised by one or more its (authorized) officers. Section 38 empowers the Central Government to make rules inter alia for the manner in which the rights of secured creditor may be exercised. There is nothing in the provisions of SARFAESI Act to indicate the intent to encompass the relationship between the secured creditor as seller of the secured asset and the purchaser thereof. The Security Interest (Enforcement) Rules have to be read and interpreted in the said light. Rule 8 thereof provides for sale of immovable secured assets and sub Rule (6) thereof is as under:-
W.P.(C) No.4648/2014 Page 10 of 15
" The authorised officer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets, under sub- rule (5) PROVIDED that if the sale of such secured asset is being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice in two leading newspapers; one in vernacular language having sufficient circulation in the locality by setting out the terms of sale, 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, 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;
(e) depositing earnest money as may be stipulated by the secured creditor;
(f) any other thing which the authorised officer considers it material for a purchaser to know in order to judge the nature and value of the property."
14. Sub Rule (6) aforesaid is also dealing with the rights inter se between the secured creditor and its borrower. The same limits the liability of the secured creditor to, in the public notice of sale by auction, give details only of the encumbrances known to the secured creditor and inter alia of any other thing which the authorised officer considers it material for a purchaser to know in order to judge the nature and value of the property. The same does not impose an absolute obligation on the secured creditor to disclose all the encumbrances or all the things which a purchaser should know but only such of the encumbrances which are known to the secured creditor and only such other things which the authorised considers it material.
15. A perusal of the public notice in pursuance to which the petitioner submitted its bid along with EMD shows the terms and conditions thereof to be inter alia as under:-
"(2) Bidders are advised to go through the website https://sarfaesi.abeprocure.com for detailed terms and conditions of auction sale before submitting their bids and taking part in e- auction sale proceedings.
(8) The successful bidder shall have to pay 25% of the purchase amount (including earnest money) already paid, W.P.(C) No.4648/2014 Page 11 of 15 immediately on closure of the e-auction sale proceedings on the same day of the sale in the same mode stipulated in clause 7 above.
The balance 75% of the purchase price shall have to be paid within 15 days of acceptance/confirmation of sale conveyed to them. (11) The property is sold on "as is where is" and "as is what is" condition and the intending bidder should make discreet inquiries as regards on the property of any authority besides the banks charges and should satisfied themselves about the title, extent, quality and quality of the property/security before submitting their bid. No claim of whatsoever nature regarding the property/security put for sale charges encumbrances over the property/security on any other matter etc. will be entertained after submission of the online bid.
(19) The Court of Haryana only shall have the jurisdiction to adjudicate any type of dispute/case(s) relating to the above said sale/auction.
(20) All the terms used in the present sale notice are in the terms of the rules and meaning as enumerated under the provisions of SARFAESI Act, 2002. The sale is subject to conditions prescribed in the SARFAESI Act/Rules, 2002 and the condition mentioned above."
16. It is thus obvious that the sale was on "as is where is"
and "as is what is" condition and no claims of whatsoever nature were to be entertained. By stating so, in my view the proposed purchasers had been sufficiently warned/cautioned to satisfy themselves as to the nature and title of the property.
17. I may also state that a writ petition even otherwise is not maintainable. The claim in the writ petition is based on contract and has no public law character in it. I have recently in CCPL Developers Pvt. Ltd. Vs. Gail (India) Ltd.
MANU/DE/4361/2015, relying inter alia upon Joshi Technologies International Inc. Vs. Union of India (2015) 7 SCC 728 held such writ petitions to be not maintainable.
18. I am also of the opinion that the present controversy shall entail disputed questions of fact and which can be at best adjudicated in a suit and cannot be addressed in a writ petition under Article 226 of the Constitution of India.
19. The petition is thus dismissed as not maintainable with liberty however to the petitioner to take appropriate remedies."
W.P.(C) No.4648/2014 Page 12 of 15
8. I do not see any reason to take a different view in the present case. Mention may also be made of State of Kerala Vs. M.K. Jose MANU/SC/0869/2015 where also Supreme Court has held writ petition to be not maintainable in contractual disputes. In the light of subsequent judgments, reliance on Guruvayur Devaswom Managing Committee supra is not apposite. Rather in the present case there is an additional plea of the respondent Bank of the collusion of the petitioner with the mortgagor and which plea cannot, if I may say so, be said to be totally meritless. The timing of the proceedings initiated by the mortgagor Mr. Udai Bir Singh Tokas does indicate the petitioner and him being hand in glove. If that be so, certainly the petition is liable to be ousted from the discretionary jurisdiction under Article 226 of the Constitution of India on this ground alone.
9. As far as the judgments cited by the senior counsel for the petitioner are concerned, Haryana Financial Corporation supra is not with respect to proceedings under the SARFAESI Act. SARFAESI Act was brought into force to get over the difficulties faced by the banks in encashing their securities. Section 35 thereof gives provisions thereof overriding effect notwithstanding anything inconsistent therewith contained in any other law or any instrument having effect by virtue of any such law. The counsel for W.P.(C) No.4648/2014 Page 13 of 15 the respondent Bank in this regard has referred to T.P. Vishnu Kumar Vs. Canara Bank, P.N. Road, Tirupur (2013) 10 SCC 652 where the Supreme Court commented upon the misuse of Article 226 to thwart the proceedings under the SARFAESI Act. As far as R. Shanmugachandran and Jai Logistics supra are concerned, they have already been dealt with by me in Speed Track Cargo supra. Rekha Sahu supra turned on its own facts i.e. of a finding of fact of the action of the authorised officer of the Bank being not bona fide. I may respectfully state that no finding of fact - whether action is bona fide or not, also can be given without examination and cross- examination of witnesses. I am otherwise also, with respect, not inclined to accept the view taken by the Division Bench of the Allahabad High Court. I otherwise also find that the Division Bench of this Court in judgment dated 9th May, 2016 in W.P.(C) No.2089/2015 titled M/s Midas Electronics Pvt. Ltd. Vs. Small Industries Development Bank of India held that the judgment of the Division Bench of Allahabad High Court in Rekha Sahu does not discuss the terms of the tender documents and hence the ratio thereof cannot be blindly followed. Else, the Division Bench of this Court reasoned that the bank, in the auction notice, having given a clear indication to the prospective bidders that encumbrances if any in the form of W.P.(C) No.4648/2014 Page 14 of 15 government dues had to be paid, the bidders very well knew that if there were encumbrances on the property the same had to be borne by them. It was further held that when a property is put up for sale on „As Is Where Is‟ basis the bidder cannot be heard to contend that encumbrance was not disclosed.
10. The petition is therefore misconceived and is dismissed with liberty however to the petitioner to avail of civil remedies. The petitioner however having pursued this petition inspite of his attention having been drawn to the dicta of the Supreme Court in MEIL-EDB LLC (JV) supra, it is clarified that if the petitioner still does not invoke civil remedies, the same also may become barred by time.
No costs.
RAJIV SAHAI ENDLAW, J JULY 07, 2016 „pp‟..
W.P.(C) No.4648/2014 Page 15 of 15