2016 (11) TMI 608 - SC - Indian Laws

Auction notice - Held that - Upon hearing the learned counsel and going through the concurrent findings of fact arrived at by the Debt Recovery Appellate Tribunal as well as the High Court, we have no doubt about the fact that undue haste was made by the creditor bank in holding the auction. The creditor bank could have waited for some time when the proceedings were pending before the Tribunal as well as the High Court before conducting the auction and confirming the sale. We do not find any reason to disturb the concurrent findings arrived at by the Debt Recovery Appellate Tribunal as well as the High Court about the irregularities committed in holding the auction. A submission had been made on behalf of the Appellant that the second application filed under Section 17 of the Act was not maintainable and therefore, it ought not to have been entertained by the Tribunal. We are not in agreement with the said submission for the reason that when another application was filed under Section 17(1) of the Act, the cause of action was different. At an earlier point of time, the issuance of notice as well as notice for sale of the flat had been challenged, whereas the subsequent application had been filed after the auction had been held. The cause of action in respect of both the applications was not same and therefore, in our opinion, the second application for a different cause of action was maintainable. Thus we do not intend to disturb the judgment delivered by the High Court. However, looking at the nature of litigation faced by the auction purchaser, we modify the order and direct that the amount already paid by the auction purchaser shall be returned to the auction purchaser with simple interest at the rate of 10% till the said amount is paid.

Summary

Issues involved:
1. Validity of auction sale of property.
2. Compliance with rules and regulations in conducting the auction.
3. Maintainability of the second application filed under Section 17 of the Act.
4. Decision on returning the amount to the auction purchaser.
5. Direction regarding future actions by the creditor bank.

Issue 1: Validity of auction sale of property

The case involved Respondent nos. 1 to 3 defaulting on a loan, leading to the property being classified as a non-performing asset. The creditor bank issued a notice under Section 13(2) of the Act for repayment. Subsequently, symbolic possession of the property was taken, leading to legal challenges by the borrowers. The property was auctioned, and the auction purchaser filed appeals against the validity of the sale.

Issue 2: Compliance with rules and regulations in conducting the auction

The High Court and Debt Recovery Appellate Tribunal reviewed the auction sale process and found material irregularities. The auction purchaser argued that the sale was conducted in accordance with the Act and Rules, emphasizing fair pricing and wide publicity. However, the courts noted undue haste by the creditor bank in conducting the auction without waiting for pending legal proceedings, leading to the sale being set aside.

Issue 3: Maintainability of the second application filed under Section 17 of the Act

The Appellant contended that the second application under Section 17 was not maintainable as it raised a different cause of action. However, the Supreme Court disagreed, stating that the second application, challenging the auction after it had taken place, was distinct from the earlier challenges to the notice and sale, making it a valid application.

Issue 4: Decision on returning the amount to the auction purchaser

The Supreme Court modified the order, directing the return of the amount paid by the auction purchaser with simple interest. This decision was based on the findings of irregularities in the auction process and the need to protect the auction purchaser's interests.

Issue 5: Direction regarding future actions by the creditor bank

The Supreme Court, utilizing its powers under Article 142 of the Constitution, directed the creditor bank to provide details of the total amount due from the borrowers by a specified date. If the borrowers failed to pay, the bank was authorized to sell the property through auction after giving public notice. This direction aimed to ensure the recovery of dues while maintaining procedural fairness.

In conclusion, the Supreme Court upheld the findings of irregularities in the auction process, directed the return of the amount to the auction purchaser, and provided clear instructions for future actions by the creditor bank to recover outstanding dues.