2023 (4) TMI 501 - SC - Indian Laws

Re-auction proceedings initiated by the first respondent - initiation of independent proceedings before the competent forum for recovery of the amount which stood forfeited by the first respondent - HELD THAT - The auction notice, in the first instance, was published on 18th June, 2013 with the reserve price of Rs.1.19 crores and the appellant s bid of Rs.2.01 crores was the highest. The earnest money of Rs.11.19 lakhs was deposited on 22nd July, 2013 and the bid was finalized on 26th July, 2013 and 25% of the bid in terms of the auction notice of Rs.38.35 lakhs was deposited by the appellant on 27th July, 2013. This fact has not been disputed that DRT passed an interim order on 26th July, 2013 and the fact that the proceedings had been initiated and pending on the date when the auction was held and the date on which 25% of the bid amount was deposited by the appellant, i.e., 27th July, 2013, was never brought to the notice of the appellant which would give him an option to revisit as to whether he may proceed with the auction or withdraw at that stage. This fact can be further corroborated which has come on record that even when the correspondence was made by the first respondent, the only request made by the appellant throughout was that he had no difficulty to pay the balance amount provided the matter is finally decided by DRT. Obviously, as a man of ordinary prudence, one is always supposed to assess the value of the property on which the auction was held by the secured creditor (first respondent) - once there is no dispute on the facts came on record, there appears no reason for the appellant to be relegated to avail other remedial mechanisms for recovery of the indisputed amount and the Division Bench has committed a manifest error in the facts and circumstances in not exercising its power under Article 226 of the Constitution and instead of resolving the dispute, the Division Bench under the impugned judgment has kept the issue alive, permitting the parties to have a second innings in reference to the dispute which stands crystalized/settled. The first respondent is directed to return the money of Rs.50.25 lakhs to the appellant deposited in reference to the auction notice dated 18th June, 2013 within a period of two months failing which it shall carry interest @ 12% per annum until the date it is made over to the appellant - Appeal allowed.

Summary

Issues Involved:
1. Legality of the re-auction proceedings.
2. Entitlement of the appellant to the forfeited amount.

Summary:

Legality of the Re-auction Proceedings:
The Supreme Court reviewed the judgment of the Division Bench of the High Court of Uttarakhand, which upheld the re-auction proceedings initiated by Punjab National Bank (secured creditor) on 1st May 2014. The High Court had reversed the Single Judge's order that had set aside the re-auction and directed the Bank to execute the sale deed in favor of the appellant. The Division Bench found no error in the re-auction process and directed the Bank to return Rs. 1.77 crores deposited by the appellant with accrued interest, allowing the appellant to seek appropriate remedy for the forfeited amount.

Entitlement of the Appellant to the Forfeited Amount:
The Supreme Court noted that the appellant, unaware of the interim order by the Debt Recovery Tribunal (DRT) on 26th July 2013, had deposited the earnest money and 25% of the bid amount. The appellant was later informed on 18th October 2013 to pay the balance amount as the interim relief was rejected by DRT. The appellant expressed willingness to pay the balance amount provided the DRT matter was resolved. However, the Bank initiated re-auction proceedings without forfeiting the appellant's deposited amount.

The Supreme Court observed that the appellant's bona fide was evident as he deposited Rs. 1.77 crores as directed by the High Court. The Division Bench erred in relegating the appellant to seek other remedies for the forfeited amount when the facts were undisputed. The Court held that the appellant should not be required to adopt other remedial mechanisms for the recovery of the forfeited amount.

Conclusion:
The appeal was allowed. The Supreme Court directed the first respondent to return Rs. 50.25 lakhs to the appellant within two months, failing which it shall carry interest at 12% per annum until payment. No costs were awarded, and pending applications were disposed of.