Case BriefsSupreme Court

   

Supreme Court: In an appeal against the judgment passed by the Kerala High Court, wherein it has set aside the judgment passed by the Trial Court directing the Bank to pay the plaintiff a sum of Rs.58,10,000 with interest at the rate of 12% per annum from the date of suit till realisation, the division bench of M.R Shah* and Krishna Murari, JJ while setting aside impugned judgment passed by the High Court directed the Bank to pay the decretal amount to the appellant with interest as per the judgment and decree passed by the Trial Court within a period of 8 weeks from the date of this judgment.

The Court noted that after the Bank received the possession of the secured property in exercise of powers under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI Act'), the property in question was put to auction, by an auction notice. The plaintiff on the basis of the representation made and the auction notice in which the land was put to auction was stated to be 54 cents submitted her offer of Rs.32,05,000/­ for sale of 54 cents.

The Court noted that in the quotation itself the plaintiff specifically stated that the offer of Rs.32,05,000/­ is subject to the condition that the absolute ownership and vacant possession of full extent of property without encumbrances is handed over. However, the Bank replied that as in the invitation to the public for tenders, it is stated that the property would be sold on “as is where is” and “as is what is” condition, the plaintiff may confirm that the plaintiff is ready to offer the bid and take the property in the present condition. However, immediately the plaintiff communicated that she is ready to purchase the property only if, absolute ownership, vacant possession and full enjoyment of 54 cents of land, free from all encumbrances is given, otherwise, she is not ready to purchase the property.

The Court further noted that the suit was for damages with respect to the balance land, which could not have been decided by the Debt Recovery Tribunal (‘DRT') or Appellate Tribunal, and Section 34 of the SARFAESI Act shall be applicable only in a case where the DRT and/or Appellate Tribunal is empowered to decide the matter under the SARFAESI Act. Further, the plaintiff did not challenge the sale or the sale certificate and just claimed damages with respect to the less area. Therefore, the High Court has seriously erred in holding that the suit was barred by Section 34 of the SARFAESI Act.

The Court noted that from the beginning the plaintiff insisted on handing over the possession of the 54 cents. Further, when the property was put to auction even the Bank was not aware of the actual measurement and had gone by the document and 54 cents was put to auction; the sale certificate was issued for 54 cents and even the sale certificate which was registered in the year 2012 was for 54 cents. Thus, it was not open for the financial institute like Bank to contend that though the Bank had handed over the possession of 34.60 cents, still the sale consideration recovered would be for 54 cents.

It was also noted that when the Tehsildar submitted the report, the Bank was aware that the actual area is 34.60 cents and not 54 cents. Thereafter, the Bank should be fair and not have issued the sale certificate for 54 cents.

The Court, while referring to Rule 8 of the 2002 SARFAESI Rules, said that as per this Rule, before effecting sale of the immovable property the authorised officer shall obtain valuation of the property from an approved valuer and fix the reserve price of the property and may sell the whole or any part of such immovable secured asset. Further, as per Section 54 of the Transfer of Property Act the seller was bound to disclose to any buyer any material defect in the property of which the buyer is not aware and which the buyer could not ordinarily discover.

Thus, it was held that the High Court has committed an error in allowing the appeal and quashing and setting aside the judgment and decree passed by the Trial Court.

[Leelamma Mathew v. Indian Overseas Bank, 2022 SCC OnLine SC 1601, decided on 17-11-2022]

*Judgment by: Justice M.R Shah


*Apoorva Goel, Editorial Assistant has reported this brief.

Case BriefsSupreme Court

Supreme Court: The Division Bench comprising of Hemant Gupta* and V. Ramasubramanian, JJ., reversed concurrent findings of Trial Court and Punjab and Haryana High Court by setting aside mandatory injunction granted against the Municipal Committee. The Bench held that merely being the highest bidder in auction will not entitle one of any right over the property unless there is an official communication indicating the sale has attained finality.

The Municipal Committee, Barwala had impugned the mandatory injunction granted to the plaintiff-respondent by the Trial Court and upheld by the High Court to execute a sale deed in respect of land measuring 55 kanals 5 marlas sought by the plaintiff.

The respondent-plaintiff had claimed title and possession over the disputed property on the basis of an open auction conducted by the Sub-Divisional Officer in 1999 and consequently, had obtained mandatory injunction against the Municipal Committee over said property. The plaintiff claimed that being the highest bidder and having deposited the total sale consideration of Rs.15,76,150 with the Municipal Committee, he was a bonafide purchaser and was in possession as owner of the suit land.

However, the Municipal Committee disputed the possession of the plaintiff as illegal contending that the Committee could not execute the sale deed without proper sanction of the competent authority i.e., Government of Haryana. The committee argued that the auction was not approved by the State Government and till such time the auction is confirmed, mere fact that the plaintiff was the highest bidder would not confer any equitable and legal right to him. It is only after the confirmation of sale and the letter accepting the bid is issued, the plaintiff could claim any enforceable right.

The Committee further submitted that the approval of sale by public auction itself did not amount to confirmation of auction; therefore, in the absence of confirmation of sale by the State Government, the plaintiff would not get any right over the property.

Whether merely being the highest bidder would confer any equitable and legal right over the property?

The Bench observed that the Haryana Municipalities Management of Municipal Properties and State Properties Rules, 1976 contemplates two acts to be completed by the Deputy Commissioner for alienating immovable property owned by Municipal Committee, one of which is approval of conduct of sale which was granted on 25-10-1995. However, the other important requirement is that no sale by auction shall be valid until it has been confirmed by the Deputy Commissioner.

The Bench noted that the communication dated 10-1-2007 relied on by plaintiff to contend that the sale was approved by the Deputy Commissioner was not a communication by the Deputy Commissioner to the Municipality or to the plaintiff that the sale stood confirmed; rather it was an inter-departmental communication with no endorsement of the copy of the said communication to the plaintiff. Therefore, the Bench opined that no concluded contract ever came into force and in the absence of any approval granted, no right would accrue.

Relying on the decision in State of Punjab v. Mehar Din, 2022 SCC OnLine SC 250, the Bench observed that State or authority which can be held to be State within the meaning of Article 12 of the Constitution is not bound to accept the highest tender of bid. Similarly, reliance was also palced by the Bench on the decision of Constitution Bench in Bachhittar Singh v. State of Punjab, AIR 1963 SC 395, to hold that merely writing something on the file does not amount to an order.

Evidence Act, 1872 and Presumption of Correctness

Noticeably, in pursuance of the powers conferred on the State Government, a message was conveyed on behalf of the Director, Local Bodies, Haryana to all the Deputy Commissioners of the State of Haryana that no municipal property will be sold without the prior approval of the Government. However, the Trial Court had discarded such communication for the reason that the communication had not been proved as per the provisions of the Evidence Act, 1872.

Considering that the communication had been produced by the Municipal Committee when the Committee examined Mahavir Singh, Secretary as DW-1 and Sandeep Kumar, Building Inspector as DW-2, the Bench opined that such communication had come on record from the official source which would carry presumption of correctness under Section 114 of the Indian Evidence Act, 1872 that the official acts had been regularly performed. The Bench added,

“The original record was not necessarily required to be proved by summoning the Government officials as such document was produced by the officials of the Municipal Committee from the official record.”

Findings and Conclusion

After factually analyzing the instant case, the Bench reached to the following findings:

  1. The letter dated 10-01-2007, seeking approval of the State Government by the Deputy Commissioner was not the approval granted by him which could be enforced by the plaintiff in the Court of law.
  2. The suit was not maintainable as there was no vested right with the plaintiff to claim such a decree merely on the basis of a participation in the public auction.
  3. Even if the plaintiff had any right on the basis of an auction, he could at best sue for specific performance of the so-called agreement.
  4. Even the suit for specific performance was barred by limitation as such suit could be filed within three years from the date of auction in terms of Article 54 of the Schedule to the Limitation Act, 1963, however the plaintiff had reached the Court beyond the period of limitation.

In view of the above, the Bench concluded that the plaintiff had been granted decree for mandatory injunction not only beyond the period of limitation but in contravention of the statute and the rules framed thereunder. Consequently, the appeal was allowed, the impugned judgments were set aside and the plaintiff’s possession of the disputed property was found to be illegal.

The Municipality was granted liberty to take possession of land and the amount of Rs.15,76,150 deposited by the plaintiff was directed to be forfeited towards the damages for the illegal occupation of the land for more than 20 years since the date of auction in contravention of law.

[Municipal Committee, Hisar v. Jai Narayan & Co., 2022 SCC OnLine SC 376, decided on 29-03-2022]


*Judgment by: Justice Hemant Gupta


Kamini Sharma, Editorial Assistant has put this report together 

Case BriefsSupreme Court

Supreme Court: The Division Bench of M. R. Shah* and Sanjiv Khanna, JJ., held that  the entire liability outstanding against the borrower could not be discharged on making the payment i.e. Rs.65.65 lakhs against the total dues Rs.1,85,37,218.80 and that the Division Bench of the High Court had erred in directing to release the mortgaged property/secured property and to handover the possession along with the original title deeds to the borrower on payment of a total sum of Rs.65.65 lakhs only.

Factual Matrix

The appellant bank had granted term loan of Rs.100 lakhs and cash credit limit of Rs.95 lakhs to the respondent–borrower against the security of two mortgaged properties namely; an industrial plot measuring 500 Sq.Mtrs. and a residential/housing property measuring 198 Sq.Mtrs. That the borrower failed to repay the term loan and his account became NPA. A notice under Section 13(2) of the SARFAESI Act, 2002 was served upon the borrower demanding a sum of Rs.1,85,37,218.80. Later on, the bank took possession of the residential house and issued a sale notice by public auction for the same for the reserve price was fixed at Rs.48.65 lakhs.

Findings of DRT and DRAT

The borrower challenged the auction by filing Securitization Application under Section 17 of the SARFAESI Act, 2002 before the DRT. The DRT by an interim order held that if the borrower deposits Rs.48.65 lakhs with the bank on or before 27-01-2014, the bank shall deliver the possession of the secured asset along with the original title deeds of the property in question. The order of the DRT was challenged by the bank before the DRAT (Debt Recovery Appellate Tribunal). Observing that the reserve price was Rs.48.65 lakhs which the borrower deposited and the bank had received the bids ranging from Rs. 61.50 lakhs to Rs.71 lakhs and the alleged bidders failed to deposit the earnest money, the DRAT held that when the borrower was ready to purchase the said property for Rs.71 lakhs no fault can be found with the order passed by DRT.

Impugned Order of the High Court

In appeal the Single Judge of the Rajasthan High Court set aside both the orders of DRT and DRAT primarily for the reason that the said orders were in contravention of Section 13(8) of the SARFAESI Act, 2002. However, by the impugned judgment and order the Division Bench of the High Court had reversed the judgment and order of the Single Judge and had directed the bank to release the secured property (residential house) on the borrower depositing a further sum of Rs.17 lakhs to the bank and handover the possession along with the title deeds to the borrower.

Analysis and Observation

The Court observed that when the auction proceedings were initiated under Section 13 of the SARFAESI Act and after the bank took over the possession under Section 14 of the SARFAESI Act as per Subsection (8) of Section 13 of the SARFAESI Act the secured asset should not be sold and/or transferred by the secured creditor, where the amount dues of the secured creditor together with all costs, charges and expenses incurred by him is tendered by the borrower or debtor to the secured creditor at any time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease assignment or sale of the secured assets.

Though as on 07-01-2013 the dues were Rs. 15 Rs.1,85,37,218.80 and without the secured property was sold in a public auction the Division Bench of the High Court had directed to release the mortgaged property and handover the possession along with original title deeds to the borrower on the borrower depositing/paying a total sum of Rs.65.65 lakhs only.

Noting that Rs.65.65 lakhs was not the amount realized by selling the mortgaged property in a public auction; it was only a highest bid received and the DRT passed an interim order directing to handover the possession and handover the original title deeds on payment of Rs.48.65 lakhs which was the base price, the Bench observed,

“…the borrower did not deposit and was not ready to deposit the entire amount of dues with secured creditor with all costs, charges and expenses incurred by the secured creditor.”

Even as per the Division Bench of the High Court the borrower made an offer to deposit/pay Rs.71 lakhs as a purchaser and not by way of redeeming the mortgaged property. Therefore, the Bench held that the impugned judgment and order passed by the Division Bench of the High Court directing to release the mortgaged property/secured property and to handover the possession as well as the original title deeds to the borrower on payment of a total sum of Rs.65.65 lakhs only was contrary to Subsection (8) of Section 13 of the SARFAESI Act.

Even otherwise, the Bench opined that on making the payment i.e. Rs.65.65 lakhs against the total dues the entire liability outstanding against the borrower could not be said to have been discharged and the liability of the borrower to pay the balance amount would still continue.

Findings and Conclusion

In the light of above, the Bench reached to following findings:

  1. The DRT in its interim order was not justified in directing to release the mortgaged property and handover the possession along with the original title deeds to the borrower on payment of Rs.48.65 lakhs only which was the base price/ reserve price, which the Division Bench of the High Court had increased to Rs.65.65 lakhs on the ground that the highest bid received was Rs.71 lakhs.
  2. Unless and until the borrower was ready to deposit/pay the entire amount payable together with all costs and expenses with the secured creditor, the borrower could not be discharged from the entire liability outstanding.
  3. The Single Judge had rightly set aside the orders passed by the DRT as well as by the DRAT considering Section 13(8) of the SARFAESI Act. The Division Bench of the High Court had erred in interfering with the order passed by the Single Judge.

Consequently, the Bench concluded, since the DRT’s order was an interim order, even if it is set aside the appeal/application will have to be decided and disposed of on merits and on whatever grounds which may be available to the borrower. However, at the same time the bank cannot be restrained from selling the mortgaged property by holding the public auction and realize the amount and recover the outstanding dues, unless the borrower deposits/pays the entire amount due and payable along with the costs incurred by the secured creditor as per Section 13(f) of the SARFAESI Act.

The impugned judgment and order was quashed and set aside and the order passed by the Single Judge quashing and setting aside the order passed by the DRT and confirmed by the DRAT was hereby restored.

[Bank of Baroda v. Karwa Trading Co., 2022 SCC OnLine SC 169, decided on 10-02-2022]


*Judgment by: Justice M. R. Shah

Appearance by:

For the Appellant: Praveena Gautam, Advocate

For the Respondent: Christi Jain, Advocate


Kamini Sharma, Editorial Assistant has put this report together 


 

Case BriefsSupreme Court

Supreme Court of India: While deliberating on the instant appeals expressing grievance over the judgment of Andhra Pradesh HC (Amravati) wherein it had directed the authorities concerned to conduct a re-auction of the entire properties by fixing the upset price higher than what has been fixed earlier, the Division Bench of M.R. Shah* and B.V. Nagrathna, JJ., held that unless there is concrete material and it is established that there was any fraud and/or collusion or the land in question was sold at a throw away price, the sale pursuant to the public auction cannot be set aside at the instance of strangers to the auction proceeding.

Facts and Litigation Trajectory

As per the facts of the case, a proposal was published by the office of Commissioner, Endowments Department to auction the land in question belonging to Sri Markendaya and Omkareswara Swamy Devasthanam, Eluru, which was published in the newspaper on 10.03.1997. Notification to sell the subject land was published in the Andhra Pradesh Gazette on 22.05.1997. Nobody raised any objection against the said proposal. The probable expected price of the land was fixed at Rs. 4,00,000/- per acre and the total extent of land was about 1.81 acre. The Commissioner of Endowments Department granted permission to sell the land. The Executive Officer of the Temple Trust issued tender/public notice to sell the land in question by way of an open auction in the presence of the Deputy Commissioner, Endowments on 22.05.1998. Thereafter the auction took place on 24.06.1998 in which 45 people participated. The appellant herein was declared as the highest bidder.

One L. Kantha Rao, who did not participate in the auction held on 24.06.1998, filed a Writ Petition in 1999 before the High Court to direct the Executive Officer/ the Temple Committee not to execute the sale deed in respect of the auctioned land. The High Court granted interim stay of all further proceedings subject to the condition that he furnishes a bank guarantee of a sum of Rs.30 lakhs within two weeks from the date of the said interim order. During the pendency of the aforesaid writ petition the office of the Commissioner, Endowments Department unilaterally passed an order dated 10.02.1999 cancelling the auction held on 24.06.1998. The Executive Officer of the Temple was instructed to conduct a re-auction for the land in question keeping the upset price of Rs.30 lakhs. The matter reached the High Court and it observed that while Commissioner had revoked the order dated 10.02.1999, the revision filed against the same had become infructuous, however, liberty was granted to the said L. Kantha Rao to file a revision against the original order passed by the Commissioner.

Then on the basis of the liberty granted by the High Court, the said Shri L. Kantha Rao filed a revision before the Government challenging the order dated 22.12.1998 although he was not a participant in the auction in which appellant herein was declared the highest bidder. The said revision was allowed thereby quashing and setting aside the order dated 22.12.1998 and directing the Commissioner to refund the amount paid by the appellant and to conduct a re-auction of the land.

The appellant filed a writ in before the Single Judge bench of the HC who decided that Kantha Rao had not locus standi. He did not participate in the tender-cum-auction and when 45 persons participated in tender-cum-auction, nothing prevented him to participate in tender-cum- auction proceedings.

Mere depositing the money saying that the amount would fetch more is of no argument that can be looked into without establishing malafides or fraud played by the vendor or vendee”.

The Division Bench of the HC set aside the judgment and order passed by the learned Single Judge and directed the authorities concerned to conduct the re-auction of the entire land by fixing the upset price higher than what had been fixed earlier by observing that since more than twenty years had elapsed from the date of issuance of GO Rt. No. 1808 dated 26.11.1999 and price of the land in question had risen. The Division Bench also observed that the writ petitioner as well as the appellant shall also be allowed to participate in the re-auction, if they are otherwise eligible.

Contentions

Harin P. Raval, appearing on behalf of the appellant, contended that the Division Bench of the HC has committed a grave error in setting aside the 1998 auction and ordering a re-auction, as the decision was reached by an improper appreciation of the facts. he also contended that the auction sale was conducted after wide publicity in the well-known newspapers, so there was no illegality in conducting the auction, therefore, the Division Bench of the High Court ought not to have set aside such a sale after a period of approximately twenty years from the date of conducting the public auction and the sale that too at the instance of a person, who never participated in the auction. Since the respondent did not even participate in the 1998 auction, therefore he does not have any locus.

The Division Bench of the High Court did not properly appreciated the fact that the proceedings initiated by L. Kantha Rao were by way of  PIL and therefore after his death, his wife could not have continued the PIL proceedings by way of writ petition before the High Court as a private litigation.

The counsels for the respondents argued that the duty of the State is parens partriae in respect of the charitable endowments and to ensure its due protection, therefore the Government cannot act against the interest of the temple. Thus the re-auction was justified if in case of a trust, the consideration is inadequate. They argued that the court should always keep the larger interest of the public in mind while interfering with the decision of the authority. Further, the concept of locus standi has been widened by this Court while dealing with matters of public interest. It is the duty of the Court to see that the price fetched is adequate.

Observations

Upon perusing the facts and the rival contentions, the Court observed that the Division Bench of the HC failed to appreciate and consider the lack of bonafides of L. Kantha Rao. Noting that since Rao did not participate in the 1998 auction proceedings or made any offer, the Court stated that he should not have been permitted to to raise any objection subsequently on the valuation.

Once the appellant was found to be the highest bidder in a public auction in which 45 persons had participated and thereafter when the sale was confirmed in his favour and even the sale deed was executed, unless and until it was found that there was any material irregularity or illegality in holding the public auction and/or auction/sale was vitiated by any fraud or collusion, it is not open to set aside the auction or sale in favour of a highest bidder on the basis of some representations made by third parties, who did not even participate in the auction proceedings and did not make any offer”.

The Court further noted that Kantha Rao did not raise any objection at an appropriate stage or time, therefore is unlikely that he had any grievance vis-a-vis the auction. The Court also pointed out the failure of the Division Bench to not analyze the covert method applied by a fence sitter to nullify the auction proceedings via filing a PIL. The Court noted that the “subsequent lucrative offer” for the land was made simply to frustrate the auction proceedings with malafide intent-

if there was any error in the decision-making process adopted by the authority, the remedy available was to question the sale deed in an appropriate proceeding available under the law and not by filing a petition under Article 226 of the Constitution of India”.

Finally the Court observed that more than 23 years have passed since the auction and the sale, hence it is obvious that the value of the land won’t be the same as it was in 1998. Therefore the point of consideration is the “value of the property at the time when the sale was conducted”. The Court pointed out that the respondents could not point out with any material that price offered by the appellant in the year 1998 was not a fair value.

Conclusion

Based on the facts, the Court concluded that the auction was conducted and held in the year 1998 and was sold in favour of the appellant then on payment of the full sale consideration as per the highest bid offered by him. Therefore, the valuation as on the date of auction is the relevant consideration and not the value after so many years and over two decades after conducting the auction and confirming the sale.

The Court also set aside the impugned decision of the Division Bench and restored the decision rendered by the Single Judge Bench of the HC.

K. Kumara Gupta v. Sri Markandeya and Sri Omkareswara Swamy Temple and ors., 2022 SCC OnLine SC 196, decided on 18.02.2022


*Judgment by: Justice MR Shah


Sucheta Sarkar, Editorial Assistant has put this report together


Case BriefsSupreme Court

Supreme Court: The Division Bench comprising of M.R. Shah and B.V. Nagarathna, JJ., directed the Indian Bank to refund the 25% auction consideration forfeited by the bank after cancelling the proposed auction. The Bench stated that since no loss had been accrued by the bank in the subsequent auction, it cannot wrongly deny the release of disputed amount.

The Property in question had been auctioned by the respondent Bank under Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the Rules made thereunder. The petitioner being successful highest bidder had deposited 25% of auction sale consideration and was required to deposit the remaining 75% of the bid within the time stipulated in the auction notice. The petitioner despite the repeated reminders and relaxation of Covid-19 Pandemic failed to comply the terms and conditions accepted by her, which led the Bank to cancel the sale and forfeit the amount deposited.

Alleging high handedness of the respondent Bank in cancelling the sale and forfeiture of the amount deposited, the petitioner had approached the High Court of the judicature at M.P. seeking refund of the forfeited amount. However, noticing that the petitioner was given proper reminders and Covid 19 extension for the payment of remaining 75% amount of the bid, the High Court had dismissed the petition.

Considering the fact that though initially the appellant deposited 25% of the auction sale consideration, however, subsequently she could not deposit balance 75% due to COVID-19 pandemic, the Bench opined that the High Court ought to have allowed the refund of the amount deposited being 25% of the auction sale consideration.

Further, noticing that subsequently the fresh auction had taken place, the property had been sold and it was not the case of the respondent-bank that in the subsequent sale, lesser amount was received; the Bench opined that no loss was caused to the respondent-bank.

Accordingly, the appeal was allowed and the order of forfeiture of 25% of the amount of auction sale consideration was set aside. The Bench directed the respondent-bank to refund/return the amount earlier deposited by the appellant as the part auction sale consideration (minus 50,000/- towards the expenditure which were required to be incurred by the respondent Bank for conducting the fresh auction) within a period of four weeks.

[Alisha Khan v. Indian Bank (Allahabad Bank), C.A. No. 007680 – 007681 of 2021, decided on 13-12-2021]


Kamini Sharma, Editorial Assistant has put this report together


Appearance by:

For the Appellant: Mithan Lal Gupta, Advocate, Vipin Gupta, Advocate and Mohan Lal Sharma, AOR

For Respondent(s): Ashish Rana, AOR

Case BriefsHigh Courts

Allahabad High Court: Siddhartha Varma, J., while deciding a matter with regard to the auction of the property of a dead person held that the proceeding conducted against a dead person is bad in law.

Respondent 1 along with his father and mother took a housing loan from the petitioner-bank. On failing to pay the loan, a demand notice was issued under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest At, 2002.

Later, a notice for possession was issued under Section 13(1) of the SARFAESI Act and symbolic possession of the property was taken.

Mother along with the respondent and wife of the respondent filed for quashing of the recovery notice.

It was noted that the bank issued a sale notice and had scheduled the auction.

Borrower Kanti Devi who was also a person who had kept her personal property as collateral security had expired, respondent 1 informed the Bank to defer the auction. Further Bank requested respondent 1 to furnish the details of legal heirs but did not defer the auction and later the property of Kanti Devi was auctioned.

Respondent 1 filed a securitization application and alleged that before the auction took place and after the sale notice was issued, Kanti Devi died and without impleading the legal heirs and representatives of the deceased, the auction had taken place which was bad in law.

Further, it was alleged that the possession notice was also bad in law as Sri Bal Govind Singh had died.

The Debts Recovery Tribunal held that since the notice was issued in the lifetime of Kanti Devi and since the Bank was not having any details of her legal heirs and representatives prior to the issuing of the sale notice, there was no illegality in the auction proceedings.

Respondent 1 had filed an appeal with Appellate Tribunal, though the appellate tribunal maintained the DRT order with regard to the legality of the possession, it reversed the finding with regard to the auction dated 10-12-2018 was correct despite the fact that Kanti Devi died on 21-11-2018 and thereafter appeal was allowed; set aside the order of the DRT and also quashed the sale notice. Auction and sale certificates were also set aside.

Aggrieved with the above, the petitioner-bank filed the present petition.

Analysis, Law and Decision

High Court opined that since the portion of the order which was upheld by the Debts Recovery Appellate Tribunal of the Debts Recovery Tribunal by which it was held that the possession was correctly taken was not challenged by respondent 1.

However, Court added that after the sale notice was issued on 6-11-2018 and thereafter on 26-11-2018, respondent 1 had informed the Bank about the death of the deceased on 21-11-2018 and the Bank had also asked respondent 1 to provide the details of the legal heirs and representatives of the deceased, it was imperative for the Bank to have substituted the legal heirs and representatives for the Bank to have substituted the legal heirs and representatives of the deceased.

Hence, in view of the above discussion, it was clear that Bank had sold the property of a dead person.

Elaborating further, Court stated that the purpose of giving a 30 days’ sale notice was that the owner/borrower be given an opportunity to plead before the Bank to liquidate dues. A further purpose is that the persons to whom the notice had been issued may point out any discrepancy in the proceeding.

 Hence, Court declared the auction erroneous also the sale certificate was issued erroneously.

“…borrower/guarantor always had the right to get the dues paid off before the auction of the property was done as till the auction, no third party right had been created.”

 Therefore, petition was dismissed. [SBI v. Rakesh Singh, 2021 SCC OnLine All 796, decided on 9-11-2021]


Advocates before the Court:

 Counsel for Petitioner: Tarun Varma, Kaushalendra Nath Singh

Counsel for Respondent: Amit Kumar Asthana, Kushal Kant

Case BriefsHigh Courts

Madras High Court: Sanjib Banerjee, J., addressed whether this Court is the appropriate forum to decide the quantum that can be forfeited and elaborated more of right to forfeit.

Instant petition was filed for issuance of a Writ of Certiorarified Mandamus calling for the records of the impugned letter issued by the respondent under Rule 9 (5) of the Security Interest (Enforcement) Rules, 2002 and quash the same and reasonable time frame to be fixed by this Court for paying the balance amount towards 75% of the balance purchase price by the petitioner.

Petitioner’s grievance was that the respondent secured creditor did not inform the petitioner of certain encumbrance pertaining to the asset sold under the Securities and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

At the bid, the petitioner had deposited only 25% of the consideration and did not pay any further.

Further, the petitioner’s case was that she tried to obtain loans to finance the purchase but was impeded by the property standing encumbered in some third party’s favour.

Another grievance of the petitioner was that the bank had purported to forfeit the consideration tendered without affording the petitioner a chance to pay the balance amount, particularly since the second surge of the pandemic stood in the way of the petitioner arranging for money.

Secured Creditor submitted that, notices were issued to the petitioner, and they had no authority to extend the payment period beyond 90 days from the date of the auction.

Adding to the above, secured creditor submitted that it had duly forfeited the amount which has been tendered by the petitioner and no question arises of the sale going through or of the consideration being returned.

Bench stated that, writ court is not the appropriate forum to adjudicate as to whether the forfeiture or the quantum thereof is appropriate and as to whether the secured creditor in this case is obliged to extend the time for making the balance payment by the petitioning-auction purchaser.

Right to Forfeit

Right to Forfeit has to be balanced against the rule against unjust enrichment.

Merely because there is a forfeiture clause does not imply that the entire amount deposited has to be forfeited.

Further, the High Court elaborating more, added that,

Forfeiture clause, like an earnest money deposit clause or a liquidated damages clause, has to be regarded as a genuine pre-estimate of the loss that may have been incurred, but when a forfeiture clause does not indicate an amount but provides that the entire amount tendered would be forfeited, it may not be permissible to forfeit, say 99% of the payment made for the default in depositing the balance 1%.

Thus, the quantum that can be forfeited will depend on the extent of the loss or damage suffered by the party, not in breach and this is, essentially, a question of fact that has to be adjudicated by an appropriate forum. The High Court, in exercise of the jurisdiction under Article 226 of the Constitution, is not such forum.

In view of the above, petition was disposed of.[Rubina v. Axis Bank Ltd., 2021 SCC OnLine Mad 2349, decided on 2-07-2021]


Advocates before the Court:

For Petitioner: Mr. Adithya
For Respondent: Mr. R. Sreedhar

Case BriefsHigh Courts

Orissa High Court: A Division Bench of Mohammad Rafiq and Debabrata Dash JJ. disposed off the petition on merits.

The factual matrix of the case is that the petitioner is a registered cooperative society, involved in supply/sale of different products including fertilizers, who participated in the e-auction made by the Steel Authority of India Limited, Rourkela Steel Plant for the purpose of sale of Ammonium Sulphate by depositing the required EMD. The auction was conducted and the petitioner’s name appeared in the bid sheet under rank-1 being the sole bidder. Despite the petitioner being the successful bidder no supply of the stock was made instead another open sale dated 19-12-2019 was published by the opposite parties. Being apprehensive that in the subsequent open sale, the entire stock would be sold wholly to the detriment of the petitioner; bid was given by the petitioner for purchase of small quantity of Ammonium Sulphate.  Hence the instant writ of mandamus has been filed to command the opposite parties to deliver the stock and direct the opposite party to consider and dispose of the petitioner’s representation dated 21-12-2019 as the action of the opposite party in holding the second auction is arbitrary and illegal.

B. K. Mohanty and S S Rao, Counsel for the petitioner submitted that as there was no response towards representation dated 19.12.2019 given by the petitioner, it is clear that there was no prior intimation regarding cancellation of the first auction process been given and it is a fit case for judicial review in annulling the second auction and for restoration of the result of the first auction.

B. Dasmohapatra and B.N Bhol, Counsel for the opposite parties highlighted the scope of writ jurisdiction in contractual dealings of the State. He further highlighted that in the first auction; the petitioner was the only participant and had applied for the quantity quoting the fixed bid price making the first auction not competitive at all. Hence the present case is not fir for judicial review.

The Court after hearing both sides relied on the judgment titled Maa Binda Express Carrier v. North-East Frontier Railway (2014) 3 SCC 760 and observed that there is a certain public interest at stake in the decision of cancellation of the first auction as petitioner being the sole participant in an auction reduces competition and hinders public interest. It also stated that judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and malafides. Its purpose is to check whether choice or decision is made ‘lawfully’ and not to check whether choice or decision is ‘sound’.

In view of the above, petitioner is estopped from questioning the validity/legality of the cancellation of the first auction and the petition is disposed off. [Maa Sarala Multipurpose Co-operative Ltd. v. Steel Authority of India, 2020 SCC OnLine Ori 536, decided on 20-07-2020]

Kerala High Court
Case BriefsHigh Courts

Kerala High Court: N. Nagaresh, J. disposed of a writ petition seeking to recover the amount due to be received from the properties auctioned.

In the present case, the petitioners 1 and 2 were subscribers to a Chitty and in order to invest in their business, they participated in various auctions. Properties were purchased in installments, however, repayment of the installments defaulted. The 2nd Respondent initiated action against the petitioners under the Revenue Recovery Act.

The counsel representing the petitioners, Sakir K.H had submitted that the amount sought to be recovered from the properties would fetch more than the amount due to the 1st respondent and if auction of the entire properties are conducted in pursuance of revenue recovery proceedings, it would put the petitioners in a position of irrecoverable loss and injury. The counsel expressed the petitioner’s willingness to discharge their liabilities provided the installment facilities are given to them for remitting their dues.

The standing counsel for the respondents, Anil Kumar submitted the amount that would cover the arrears.

High Court upon perusal of the facts and circumstances disposed the writ petition and permitted to remit the arrears towards the chitties and the loan in twenty equal monthly installments. The Court also directed that upon two payment defaults the respondents will be at liberty to proceed against the petitioners.[Prakasan C.K v. Kerala State Financial Enterprises Ltd., 2019 SCC OnLine Ker 2931, decided on 17-09-2019]

Punjab and Haryana High Court
Case BriefsHigh Courts

Punjab and Haryana High Court: The petition was filed before Krishna Murari, CJ. and Arun Palli, J., praying that the State Government should be commanded to declare an area in question as a protected monument and to preserve it accordingly. An affidavit was filed by Deputy Secretary, Department of Archaeology, Museums, and Archives, Punjab stating that a notification under Section 4(3) of the Punjab Ancient and Historical Monuments and Archaeological Sites and Remains Act, 1964, had been issued and published.

As per the amicus curiae in this case, according to the affidavit, cause of this petition had already been served thus this petition should be quashed. Whereas the Punjab Urban Development Authority submitted that notification had been issued without considering the objections by the authorities.

The High Court was of the view that issue raised by Punjab Urban Development Authority and submission of respondent both were beyond the scope of this Public Interest Litigation. Amicus curiae brought to light the fact that consideration for auction was not fully paid and no allotment order in their favour has been issued. The Court stated that if any legal right was violated they can take recourse accordingly and for this Public Interest Litigation the proceedings were closed and the matter was disposed. [Subhash Kapoor v. State of Punjab, 2018 SCC OnLine P&H 1517, decided on 01-10-2018]

Case BriefsHigh Courts

Delhi High Court: A Single Judge Bench comprising of Navin Chawla, J. allowed a miscellaneous petition filed under Section 34 of Arbitration and Conciliation Act 1996, against the order of the Arbitrator wherein he did not consider the second part of the prayer made by the petitioner.

The petitioner was the successful bidder for certain commercial plot in an auction sale conducted by the respondent, for which he had paid Rs. 5.52 crores, being the entire bid amount. He also purchased stamp duty worth Rs. 33,12,040. However, the respondent failed to execute the lease deed. Consequently, the petitioner demanded from the respondent, 15% p.a. interest on earnest money deposit (EDM), bid amount and stamp duty. Learned Arbitrator in his impugned award, found the reference in favour of the petitioner and directed the respondent to pay back the entire amount of stamp duty purchased by the petitioner along with 9% p.a. interest thereon. The petitioner was aggrieved by non-consideration of his prayer regarding the bid amount and EDM. The issue was before the High Court in the instant petition filed by the petitioner.

The High Court considered the submission of the respondent that since the Arbitrator did not grant the said prayer made by the petitioner, it must be deemed to have been rejected. The Court rejected such submission of the respondent. There was no discussion in the award on the above-said prayer. The Court observed that in terms of Section 31(3) of the Act, the Arbitrator had to state the reasons upon which the order is passed. If the claim made by the petitioner was to be rejected, Arbitrator has to give reasons for the same. One cannot assume rejection of prayer and, further, the reasons therefor. The High Court held that clearly, the Arbitrator did not consider the prayer as far as bid amount and EDM was concerned. Thus, the High Court directed the petitioner to reagitate such claims under proper proceedings. The petition was disposed of in above terms. [Surajmal Yadav v. DSIIDC Ltd.,  2018 SCC OnLine Del 9555,dated 24-05-2018]

Case BriefsSupreme Court

Supreme Court: Appointing the Official Receiver of the Bombay High Court as the receiver for the auction of the Aamby Valley Property, the 3-Judge Bench of Dipak Misra, CJ and Ranjan Gogoi and Dr. AK Sikri, JJ ordered auction of the property after SEBI sought for the direction of the Court in the light of the possible encroachment of the area in question.

The Bench said that the High Court was at liberty to adopt the procedure which will facilitate the auction and the mode of auction as suggested by the Official Liquidator shall be considered by the Company Judge in consultation with Justice A.S. Oka. It was directed that the Official Receiver has to see that the property is properly maintained and no encroachment takes place so that valuation does not reduce and auction takes place in peaceful manner.

The Court also said that the Receiver was at liberty to take instructions from the Company Judge and Justice A.S. Oka.

Earlier, the Court had rebuked Sahara Chief Subrata Roy for employing dilatory tactics and had said:

“He, who thinks or for that matter harbours the notion that he can play with law, is under wrong impression.”

The Court will now take up the matter in the first week of February 2018. [SEBI v. Subrata Roy Sahara, 2017 SCC OnLine SC 1354, order dated 23.11.2017]

Case BriefsSupreme Court

Supreme Court: The 3-judge bench of Dipak Misra, CJ and Ranjan Gogoi and Dr. AK Sikri, JJ , refusing to grant of further time to Sahara Group and Subrata Roy and entertaining post-dated cheques which are dated 11th November, 2017, said that the same would tantamount to travesty of justice and extending unwarranted sympathy to a person who is indubitably (that which cannot be doubted: Cambridge Dictionary) an abuser of the process of law. The Court, hence, directed the Official Liquidator to carry out the auction of the Aamby Valley property.

The Court directed that the auction be held as per the direction given by this Court and that the Official Liquidator is permitted to carry out the auction as per procedure and during the auction the Registrar General of the High Court of Bombay, who is designated as the Supreme Court appointee, shall remain personally present to over-see the physical auction at the auction venue at Mumbai.

Kapil SIbal, appearing for Sahara, argued that it was the first case where a contemnor had paid the substantial amount which may go up to Rs. 16,000 crores, and though approximately Rs.8651 crores is due, that should not be held against him. He added that tremendous efforts have been made by the respondent-contemnor to comply with the order of this Court and if the prayer made by him is not accepted, the principle of reasonableness would be defeated.

Senior counsel Arvind P. Datar, appearing for SEBI, contended that the auction has to proceed and this kind of “drama of procrastination” must stop. Amicus Curiae Shekhar Naphade also urged that the conception “enough is enough” should be adopted by this Court and there is no reason why long rope should be given to the respondent-contemnor to play truancy and seek indulgence.

Agreeing with the contentions of SEBI and amicus curiae, the bench said:

“He, who thinks or for that matter harbours the notion that he can play with law, is under wrong impression.”

Coming down heavily upon Subrata Roy, the Court said:

“the respondent-contemnor in his own way has treated this Court as a laboratory and has made a maladroit (awkward in movement or unskilled in behaviour or action: Cambridge Dictionary) effort to play, possibly thinking that he can survive on the ventilator as long as he can. He would have been well advised that a person who goes on a ventilator may not survive for long and, in any case, a time would come when he has to be comatosed.”

[SEBI v. Sahara India Real Estate Corporation Ltd, 2017 SCC OnLine SC 1069, order dated 11.09.2017]

 

Case BriefsSupreme Court

Supreme Court: The bench of Dipak Misra, Ranjan Gogoi and Dr. A.K. Sikri, JJ ordered the auction of the Aamby Valley City near Lonavala, Maharashtra due to non-payment of amount as agreed by the Sahara Group of Companies and asked the contemnors to provide all the necessary details relating to the property to the Official Liquidator of the Bombay High Court within 48 hours. The Court also asked Subrata Roy Sahara to remain personally present before the Court on the next date of hearing i.e. 27.04.2017.

The Court also directed the Power of Attorney Holder Dr. Prakash Swamy, who had filed an interim application giving a proposal that MG Capital Holdings LLC, New York, USA, shall purchase the Hotel Plaza by giving 550 million US dollars and to show its bona fide, had agreed to deposit Rs.750 crores with SEBI Sahara Refund Account, to appear before the Court on the next hearing. Since no sum was deposited by him, the Court asked Rana Mukherjee, the senior counsel appearing for the Union of India to intimate the Ministry of External Affairs, Government of India, so that Dr. Prakash Swamy does not leave India and asked him hand over his address and the passport number. The Court also directed him to deposit a sum of Rs.10 Crores in the SEBI Sahara Refund Account within 10 days, which shall be forfeited towards costs,  failing which this Court may issue non-bailable warrants of arrest against him.

Stating that the contemnor shall be guided by the affidavit that has been sworn and filed before this Court and not play truancy with the contents of the affidavit, the Court said that “He who plays truancy with the Majesty of Law, invites the wrath and, may, ultimately, has to suffer the peril.” [SEBI v. Sahara India Real Estate Corpn.Ltd, 2017 SCC OnLine SC 407, order dated 17.04.2017]

High Courts

Allahabad High Court: In the instant case where the petitioner had alleged that submission of  original documents of solvency and character certificates along with the bid document causes serious hardship to bidders, where bidders have to submit bids to more than one tender, the Court while referring cases of this Court directed the respondents that rather than insisting on filing of original certificates along with the bid document, authorities must accept attested true copies of the aforementioned documents along with affidavits verifying that said documents are valid. The Court further held that at the time of opening of bids authorities may compare the attested copies with originals and can reject the bid in case of non-production of original documents. The Court also clarified that these directions shall govern only those cases where last date of submission of the bid has not expired. Maa & Company v. State of U.P., Writ No. 23641 of 2014, Decided on 24th of April, 2014

To read the judgment, click here