2022 (2) TMI 1471 - HC - Indian Laws

Seeking vacation of stay imposed on conducting public auction - seeking direction against respondent no.9 (Recovery Officer, Debts Recovery Tribunal-I) and respondent no.2 (Phoenix ARC Pvt. Ltd.) not to take any steps to alienate, encumber, transfer, value and/or auction the Flat No.37, 18th floor, Usha Kiran, Carmichael Road, Mumbai- 400026, belonging to petitioner no.2, until the Debt Recovery Appellate Tribunal, Mumbai is functional. HELD THAT - The Recovery Officer, DRT-I, Mumbai was oblivious of the sale notice whereby the claim as determined by him is a sum of Rs.270,28,51,260/- (Rs.270.29 crores). Incidentally, we may also note that the said sale proclamation, which is well within the knowledge of the petitioners, is not challenged before any forum till date. Apparently, on one hand Recovery Officer issued a sale notice whereby the claim as determined by him is a sum of Rs.270.29 crores while on the other he blindly accepted the submissions of the petitioners that the claim is only Rs.5 crores. This is a classic case of approbation and reprobation. As a matter of fact, the amount due and determined by the DRT is in excess of Rs.2,70,28,51,260/- and 25% of such sum was required to be deposited by the petitioners. The petitioners are knowingly and deliberately flying against all the material on record. It appears to be no more than a brazen exercise, once again to frustrate the auction process. Petition dismissed.

Issues Involved:
1. Validity of the impugned order dated 8th December 2021 by the Registrar, DRAT.
2. Stay on public auction of Flat No.37, Usha Kiran, Carmichael Road, Mumbai.
3. Jurisdiction of the Recovery Officer, DRT-I.
4. Compliance with the consent terms dated 1st October 2013.
5. Determination and payment of outstanding liabilities.
6. Allegations of vexatious litigation by respondents.

Issue-wise Detailed Analysis:

1. Validity of the Impugned Order Dated 8th December 2021 by the Registrar, DRAT:
The petitioners challenged the impugned order on the grounds that the Registrar, DRAT, accepted Rs.1.25 crores as 25% of Rs.5 crores without verifying the actual amount due. The court observed that the Registrar failed to ascertain the correct pre-deposit amount required under the order dated 2nd December 2021, which led to the stay of the auction. The court found the Registrar's actions unsatisfactory and set aside the impugned order.

2. Stay on Public Auction of Flat No.37, Usha Kiran, Carmichael Road, Mumbai:
The petitioners sought to vacate the stay on the auction of Flat No.37. The court noted that the Recovery Officer, DRT-I, stayed the auction based on the incorrect pre-deposit amount. The court highlighted that the outstanding amount was Rs.2,70,28,51,260/- and not Rs.5 crores. Consequently, the stay on the auction was vacated.

3. Jurisdiction of the Recovery Officer, DRT-I:
Respondents contended that the Recovery Officer lacked jurisdiction as there was no Recovery Certificate against them. The court dismissed this argument, noting that the Recovery Officer acted within his jurisdiction based on the order dated 24th July 2006 and the subsequent Recovery Certificate.

4. Compliance with the Consent Terms Dated 1st October 2013:
The court emphasized that respondents agreed to the consent terms, which included an undertaking to not obstruct recovery proceedings in case of default. Despite this, the respondents initiated multiple litigations to delay the auction. The court found that the respondents failed to comply with the consent terms, leading to the continuation of recovery proceedings.

5. Determination and Payment of Outstanding Liabilities:
The court noted that the respondents deposited Rs.1.25 crores as 25% of Rs.5 crores, misinterpreting the outstanding liability. The actual amount due was Rs.2,70,28,51,260/-, and 25% of this amount was required to be deposited. The court rejected the respondents' claim of having paid an excess amount and upheld the petitioners' calculation of outstanding dues.

6. Allegations of Vexatious Litigation by Respondents:
The court observed that the respondents engaged in a series of unsuccessful litigations up to the Supreme Court to delay the auction. The court found these actions to be vexatious and an abuse of the judicial process, resulting in undue harm and damage to the petitioners.

Decision:
The court dismissed Writ Petition No.2537 of 2021 with costs of Rs.1,00,000/- payable to the Maharashtra State Legal Services Authority. Writ Petition (L) No.46 of 2022 was allowed, quashing the impugned orders dated 8th December 2021 by the Registrar, DRAT, and 16th December 2021 by the Recovery Officer, DRT-I, thereby vacating the stay on the public auction. The court refused the prayer for a stay of the operation of the order.

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