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M/s MIDAS ELECTRONICS PVT. LTD. Versus SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA AND ORS.

2016 (6) TMI 901 - DELHI HIGH COURT

Auction purchaser wants to cancel the bid and claim refund of money deposited - Sale of the property by the SIDBI after taking possession of the mortgaged assets - Mortgage of the lease-hold property was subject to the condition that the plot demise in perpetuity cannot be sold without the prior permission of the lessor - The petitioner wanted to wriggle out of the sale and filed an application in SA No.311/2011. It prayed that ₹ 2 crores deposited by it with SIDBI be returned because the .....

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well by the learned DRT with reference to the post tender submission and bid opening date, when the bidders were requested to increase the bid offer and they informed that they cannot do so because infrastructure in the industrial area was not conducive and additionally the highest bidder would have to pay to the government authorities, before the title would be transferred in their name, and they estimated the final costs to the highest bidder to be within the range of ₹ 2.25 to ₹ .....

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longing to the State of Himachal Pradesh were granted by the State of Himachal Pradesh in favour of M/s Pilot Technologies (India) Ltd. on September 19, 2007. As per the grant, the lessor had the right to recover upto 50% unearned increase if lease-hold rights were transferred for consideration; upon prior permission being granted by the lessor. 2. The lessee company sought for a permission to mortgage the subject property and on September 20, 2007 i.e. a day after the perpetual lease-deed was e .....

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later. 3. The property was mortgaged to SIDBI for a loan sanctioned which was utilized to construct an industrial shed and purchase machinery, and there was default in the return of loan. SIDBI proceeded under SARFAESI Act, 2002. It issued a notice contemplated by sub-Section (2) of Section 13 of SARFAESI Act, 2002. The outstanding amount claimed in the notice did not come under dispute. SIDBI took possession of the mortgaged asset, and issued a public notice for sale of the property which read .....

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ction from public as under:- Name of Borrower Amount to be recover as per notice u/s 13(2) Description of secured Reserve price Earnest money Pilot Technologies (India)Ltd. ₹ 4,35,10,638 Plus interest Plant & machinery /SMF batteries. Plot Nos. 4 & 5, Phase-4, Industrial Area, Gwalthai, Distt.Bilaspur, (Himachal Pradesh) having land admeasuring 7000 sq.mtrs.& factory shed 21384 sq.ft.(approx.) & double storyed admn.block etc. of 5400 sq.ft. ₹ 190 lakh ₹ 19 lakh .....

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ance ₹ 1.5 crores was paid by the petitioner on July 11, 2011. On July 13, 2011 the petitioner asked for a sale certificate to be issued and possession handed over to it. 6. The lessee company filed SA No.311/2011 raising a grievance to the valuation report, the notice inviting bids and questioning the sale. The said petition was listed before DRT-III on July 14, 2011 when, in the presence of counsel for SIDBI a consent order was passed noting that counsel for the lessor stated that the le .....

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IDBI be returned because the State of Himachal Pradesh raised a demand towards unearned increase and other outstanding dues payable by the lessee. It was pleaded that said fact of there being an encumbrance on the property was not disclosed in the notice. 8. Learned DRT dismissed the application noting that to the prospective bidders the terms of the auction sale, vide clauses 8, 9, 13 and 14 (and in respect of which we may note that though not in the public notice, but in the tender documents a .....

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9 Forfeiture of EMD For bidders not complying with the terms and conditions specified in the Tender-cum-auction documents, the EMD amount shall be forfeited. 13. Time and manner of payment The successful tenderer shall pay then and there 25% of the purchase price less the sum tendered by way of EMD. The balance of the purchaser price shall be payable to the authorised officer on or before the 15th day of confirmation of sale by the secured creditor or such extended period as may be mutually agre .....

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of the said property/assets. 9. Learned DRT further noted that the bidders were called upon to increase the bids in response whereto the bidders in one voice said that Gwalthi Industrial Area had very few working units and the industrial environment was bleak. They also said that about ₹ 12 lacs have to be paid to the competent authority for change of ownership and ultimately the final price which the bidders would have to pay would be in the range of ₹ 2.25 to ₹ 2.5 crores. H .....

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rt to substantive proceedings. No merit was found in the order passed by learned DRAT with the opinion that it was a well reasoned order. 11. The petitioner has accordingly filed the writ petition and the fulcrum is the proviso to sub-Rule (6) of Rule 8 of the Security Interest (Enforcement) Rules, 2002, which reads as under:- (6) 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 s .....

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s 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. 12. With reference to clause (a) and (f) of the proviso, learned Senior Counsel for the petitio .....

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ited with SIDBI to be returned with interest. 13. Observation in the impugned order that the application filed by the petitioner was not maintainable before learned DRT has not been seriously contested by learned counsel for SIDBI and rightly so. In the Securitization Application filed by the borrower wherein intending sale was challenged, it was permissible for the purchaser to file an application and there was no necessity to take resort to a substantive remedy. 14. We thus decide the merits o .....

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title as is a free-hold tenure. The only difference is that the latter gives the freedom to deal with the immovable property and the former gives a restricted right to deal with the immovable property. Thus, by not informing the bidders that the title to be transferred would be a lease-hold tenure, there is no violation of the proviso to sub-Rule (6) of Rule 8 of the Security Interest (Enforcement) Rules, 2002. It needs to be highlighted that it was not conveyed to the intending bidders that th .....

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ity concerning a sale which is on As is Where is Basis . It is reported as 1994 (1) SCC 575 United Bank of India vs. Official Liquidator & Ors., in para 14 whereof it was observed :- 15. .................. It is for the intending purchaser to satisfy himself in all respects as to the title, encumbrances and so forth of the immovable property that he proposes to purchase. He cannot after having purchased the property on such terms then claim diminution in the price on the ground of defect in .....

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nce must be disclosed if a property is proceeded against by a secured creditor under SARFAESI Act, 2002, the second is a decision by a Division Bench of the Allahabad High Court, taking the same view and the third is a decision by a learned Single Judge of Madras High Court taking the same view. 17. What were the terms of the tender documents has not been discussed in the three judgments and thus the ratio of law thereof cannot be applied blindly to other cases. In the instant case, as noted abo .....

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