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2016 (6) TMI 2 - UTTARAKHAND HIGH COURT

2016 (6) TMI 2 - UTTARAKHAND HIGH COURT - TMI - Re Auction orders under SARFAESI ACT - Held that:- While we recognise the duty on the part of the respondent Bank under Article 14 to act fairly, we cannot also, in the facts of this case, hold that the omission on the part of the respondent Bank in informing the writ petitioner about the pendency of the case before the Tribunal or the order passed, the contents of which we have already taken note of, would afflict the re-auction notice with an ill .....

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e price. The reserve price fixed in the re-auction is about ₹ 51,00,000/- more than what was fixed in the first auction. The learned Senior Counsel for the respondent Bank would submit that the Bank officers had fixed the price on their perception of the price that would be fetched in the auction. It may be true that the writ petitioner had quoted higher price in the first auction, but that sale did not go through. More importantly, this is a matter, which was not really put in issue by wa .....

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since we are concerned with the legality of the action of the respondent Bank, it may not be appropriate for us to consider the matter further even on the lines of conducting a re-auction, with which idea, we did toy with in our minds.

The upshot of the above discussion is that the appeal filed must be allowed; the directions issued by the learned Single Judge must be set aside; and the writ petition must be dismissed. However, we would think that, in regard to the question about the .....

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Joseph (CJ) And V. K. Bist, JJ. For the Petitioner : Arvind Vashistha, Monika Pant, Ramji Srivastava For the Respondent : V. K. Kohli, Kanti Ram Sharma JUDGMENT K. M. Joseph, CJ. (Oral) Appellants are respondent Nos. 7 & 8 in the writ petition. M/s SGV Industries (respondent No. 3 in the writ petition) had borrowed money from the Punjab National Bank (hereinafter referred to as the respondent Bank ). Proceedings were taken under the Securitisation and Reconstruction of Financial Assets and E .....

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already noticed, was 26.07.2013. The bid of the writ petitioner was found to be the highest. In terms of the auction, the bidder was to deposit a sum representing 25 per cent of the bid amount on the next day, i.e. by 27.07.2013. Writ petitioner made the deposit representing 25 per cent of the amount on 27.07.2013 by way of a demand draft drawn in favour of the respondent Bank under a covering letter. It so transpired that, on 25.07.2013, i.e. on the day just prior to the date of the auction, t .....

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od of 15 days. Writ petitioner wrote letter dated 25.10.2013 (Annexure No. 6 to the writ petition), which we think it appropriate to quote as under: To, The Authorized Officer, Punjab National Bank, Dehradun, Uttarakhand. Subject: In reply to the letter dated 18.10.2013 with respect to the bid in respect of the property situated at 3, Doon Vihar, Jakhan, Dehradun. Sir, This has reference to the e-auction of the above referred property held on 26.07.2013. That I was the highest bidder and the bid .....

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know that the learned counsel for the applicant appeared before the Hon ble Court and prayed that matter be heard on an early date. Therefore, by the order dated 15.10.2013 the Hon ble Court preponed the hearing of the case to 18.10.2013. Further, by the order dated 18.10.2013 the Hon ble Court fixed the case for final hearing on 28.11.2013. That because the matter is pending before the Hon ble Court and final order has not been given in SA, hence, the bank must permit the bidder/applicant for t .....

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er sent letter dated 01.11.2013. He, inter alia, would point out that the respondent Bank failed to disclose the factum of pendency of the proceedings before the Tribunal and the application for interim relief, which was within its knowledge, to the public at large and to the writ petitioner in particular. We may also quote paragraph 5 of the said letter as under: 5. That upon enquires made by client it is learnt that the Hon ble DRT, Lucknow in SA no. 315/2013 vide its order dated 01.08.2013 ha .....

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I cannot change the spirit of the Act and change according to its suitability. The Hon ble Tribunal has clearly expressed that 25% of the sale price shall be deposited immediately and variance thereof will defeat the end of justice. These observation have been made by the tribunal in the order dated 01.08.2013. 3. It is, further, stated in the letter that the writ petitioner would not have entered into the bidding had the fact of defective sale notice and pending litigation challenging the aucti .....

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rge amount of money blocked with uncertainty and be on tenterhook on account of illegality and suppression of material fact made by you for recovery in haste. You are therefore required to immediately refund the amount of ₹ 50,40,000 (Fifty Lacs Forty Thousand) with interest to my client. 4. To the same, respondent Bank sent letter dated 06.11.2013. It reads as follows: Date: 06.11.2013 Mohammed Shariq 151/16A, Doon Enclave, Doon Vihar Colony, Jakhan, Dehradun Reg: Bid in respect of the pr .....

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ed to deposit the balance amount within three days of receipt of this letter otherwise the bank will be compelled to proceed further as per the provisions of the law. Thanking You Yours sincerely Chief Manager (Authorised Officer) 5. By letter dated 12.11.2013, writ petitioner corresponded again with the respondent Bank and, after making reference to letter dated 06.11.2013, it was, inter alia, stated as follows: You have not sent any response to my request for refund of earnest money neither an .....

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k on account of illegality and suppression of material fact made by you for recovery in haste. You are therefore required to immediately refund the amount of ₹ 50,40,000=00 (Fifty Lacs Forty Thousand) with interest to me. 6. Respondent Bank sent letter dated 21.11.2013 in response to the same. Therein, it is, inter alia, stated as follows: In this regards sufficient opportunity has already been provided to you and through this final communication you are once again advised to deposit the b .....

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13 directing deposit of balance 75% of the bid price pertaining to auction held 26-07-2013. Please take reference of your letter dt. 21-11-2013 directing deposit of balance 75% of the bid price pertaining to auction held 26-07-2013. I have also given detail reply to your all letters and again requested to kindly give me further time for depositing the balance 75%, the matter has been fixed for 28-11-2013 before Hon ble Debts Recovery Tribunal, Lucknow for hearing. Further it is requested that pl .....

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₹ 20 crores. It is challenging the aforesaid re-auction notice dated 05.03.2014 and also seeking the following second prayer that the writ petition came to be filed: (ii) to issue a writ, order or direction in the nature of mandamus commanding the respondent bank to execute deed of convince pursuant to the auction sale dated 26-7-2013 in pursuant to the public auction notice dated 18-6-2013 or in alternative the respondent bank be directed to refund the money deposited by the petitioner p .....

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rdingly, the auction was confirmed in their name and a sale-deed was executed in their favour on 27.05.2014. 10. The learned Single Judge found that the writ petitioner had been writing to the respondent Bank calling upon it to either return the money deposited or to grant extension of time; but, there was no positive response from the respondent Bank. Under Article 14 of the Constitution of India, the action of the Bank was scrutinized and, apparently, it did not pass muster. The learned Single .....

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invalid. Consequently, sale certificate dated 01.05.2014 issued in favour of respondent nos. 7 and 8 and sale deed executed in favour of respondent no. 7 and 8 on 27-05-2014 is hereby declared void and non est. Mandamus is issued against the Bank to execute sale deed in favour of the petitioner at the earliest, in any case, within two weeks from today. Bank shall be at liberty to withdraw ₹ 1,77,00,000/- deposited by the petitioner with the Registrar General of this Court. Bank is further .....

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earned counsel appearing for respondent No. 1 / writ petitioner; and Mr. V.K. Kohli, learned Senior Counsel appearing for the respondent Bank. 13. Mr. Arvind Vashistha, learned Senior Counsel appearing for the appellants, would submit that there is no illegality in the conducting of the re-auction. He drew our attention to the conduct of the writ petitioner in writing to the respondent Bank to return the amount deposited and his not being interested in the matter developing further in view of th .....

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ice fixed in respect of the first auction was ₹ 1,19,00,000/-; whereas, the reserve price fixed in the re-auction is a good ₹ 51,00,000/- more than the reserve price fixed on the first occasion. He also would submit that actually the respondent Bank has taken into account the amount of ₹ 50,00,000/- and odd representing the 25 per cent of the total bid amount made by the writ petitioner, which, he would point out, stood automatically forfeited in terms of the law [see Rule 9(3) .....

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for the first time. Learned Senior Counsel would emphasize the correspondence, which has already been referred to, to point out that the respondent Bank, immediately after the vacation of the interim order, wrote to the writ petitioner on 18.10.2013 and, again, on 28.10.2013; the respondent Bank was willing to give reasonable time; but the writ petitioner insisted on being given the right to make the balance payment after the final disposal of the case before the Tribunal. Learned Senior Counsel .....

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the part of the writ petitioner. 15. Mr. Ramji Srivastava, learned counsel appearing for the writ petitioner, on the other hand, would reiterate that the Bank s conduct smacks of unfairness, insofar as the respondent Bank being a public sector bank, having issued a public notice, was under a duty of fairness, when the principal borrower initiated proceedings before the Tribunal on 25.07.2013 and obtained an interim order, to tell the bidders and in particular the writ petitioner, who turned out .....

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to the request for return of the amount deposited. He would also remind the Court that, being a public sector bank, there is a duty to fetch the highest amount possible. He points out that, pursuant to the order of the Court, the writ petitioner has already deposited a sum of ₹ 1,77,00,000/-, besides the amount, which is already lying deposited with the respondent Bank representing 25 per cent of the total amount. He would, therefore, submit that no interference is called for by the appell .....

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nt Bank issued the auction notice on 18.06.2013 and the last date for submission of the bids was 22.07.2013. Admittedly, at that time, there was no litigation by the principal borrower. Therefore, there was absolutely nothing illegal or unfair in the respondent Bank proceeding to auction the property. Writ petitioner also participated in it. It so transpired that, as already noted, on 25.07.2013, the principal borrower, on the eve of the auction, moved the Tribunal and secured an order on 26.07. .....

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m order was vacated on 14.10.2013 and nothing stood in the way of the writ petitioner depositing the balance amount or the respondent Bank accepting it and the sale being confirmed. It is, thereupon, that letter dated 18.10.2013 was issued by the respondent Bank giving 15 days time to the writ petitioner and there was another communication dated 28.10.2013 also by the respondent Bank giving time. But the letters, which had been written by the writ petitioner thereafter, would show that the writ .....

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the letter of the respondent Bank to give him time till the disposal of the case. 17. The learned Single Judge has proceeded on the basis that there is a duty of fairness to respond to these letters. Going by the letters, we would think that the respondent Bank had made its position clear that, after the vacation of the order, the respondent Bank gave time initially by 15 days and it was further extended. The writ petitioner, apparently, did not comply with the communication calling upon him to .....

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officer on or before the fifteenth day of confirmation of sale of the immovable property or such extended period as may be agreed upon in writing between the parties. 18. Therefore, the balance amount was to be paid under the statute on or before the fifteenth day of confirmation (which had taken place in this case in favour of the writ petitioner) or such extended period as may be agreed upon in writing between the parties. There is no agreement in writing as per which the respondent Bank has a .....

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matters further in terms of the earlier auction notice. In the circumstances of this case, we would think that, while we recognise the duty on the part of the respondent Bank under Article 14 to act fairly, we cannot also, in the facts of this case, hold that the omission on the part of the respondent Bank in informing the writ petitioner about the pendency of the case before the Tribunal or the order passed, the contents of which we have already taken note of, would afflict the re-auction noti .....

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reserve price. The reserve price fixed in the re-auction is about ₹ 51,00,000/- more than what was fixed in the first auction. The learned Senior Counsel for the respondent Bank would submit that the Bank officers had fixed the price on their perception of the price that would be fetched in the auction. It may be true that the writ petitioner had quoted higher price in the first auction, but that sale did not go through. More importantly, this is a matter, which was not really put in issu .....

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