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2016 (3) TMI 551 - HC - Indian LawsValidity of auction orders - auction conducted by respondent No.1 - Bank of Baroda, ARM Branch, Himayath Nagar, Hyderabad, and consequential issuance of Certificate of sale of moveable properties in favour of respondent No.2 in respect of movable properties of the petitioner - non receipt of balance 75% of the bid price within fifteen (15) days after confirmation of sale - contravention of the mandatory requirement provided by the provisions of Sub-Rule (4) of Rule 9 of Rules 2002 Held that - The Bank is attempting to take shelter under the interim order passed which was dismissed on 01-06-2015, and also the factum of preferring appeal by the petitioners which was also dismissed on 20-08-2015, and stating that only on obtaining certified copy of the order of dismissal of the writ appeal on 04.08.2015, it has informed the auction purchaser to deposit the balance bid price; (b) further reason assigned by the Bank is that the movables sought to be auctioned were, in fact, fixtures attached to the lands, which are secured assets in the form of immovable properties sought to be sold in the auction held on 13-03-2015, and therefore, the Bank has waited till disposal of writ appeal on 04-08-2015 for demanding the auction purchaser to deposit the balance 75% of bid price which was deposited on 02-09-2015. The reasons assigned by the Bank are absolutely unconvincing, since, though, the movables were attached to the lands sought to be sold in the auction held on 13-03-2015 and the sale was effected, nothing prevented it to receive the balance 75% of the bid price within fifteen (15) days after confirmation of sale. Thus, we are of the strong view, that there has been contravention of the mandatory requirement provided by the provisions of Sub-Rule (4) of Rule 9 of Rules 2002. Further, even a perusal of the letter addressed by the Bank to the auction purchaser on 04-08-2015 shows that the Bank has congratulated the auction purchaser and requested him to pay the remaining balance amount of ₹ 63.50 lakhs immediately to avoid forfeiture of the amount paid and further mentioning that on receiving full amount, it will issue sale certificate. The auction purchaser given a reply to the Bank on 11-08-2015 stating that he was inclined to pay total balance amount before the end of that month i.e., 31-08-2015 and requested to cooperate and oblige. But, the auction purchaser has paid the balance amount of ₹ 63.50 lakhs on 02-09-2015. The Bank in its additional counter, conveniently mentioned that the auction purchaser has sought time till 31-08-2015 basing on the reply given by him, but the said correspondence would not satisfy the requirement of Sub-Rule (4) of Rule 9 and, therefore, absolutely, there is no reason leaving apart plausible reason in getting over the time limit prescribed by Sub-Rule (4) of Rule 9 of Rules 2002. The auction conducted on 13.03.2015 by the Bank in favour of the auction purchaser - respondent No.2 is liable to be set aside on account of contravention of mandatory provisions of Rules 9(3) and (4) of Rules 2002, and, therefore, the same is set aside. However, we direct the Bank - respondent No.1 to return the bid amount of ₹ 85,00,000/- (Rupees eighty five lakhs only), without any interest thereon, to the auction purchaser - respondent No.2; granting liberty to take measures in accordance with law.
Issues Involved:
1. Legality of the auction dated 10-03-2015 and issuance of sale certificate for movable properties. 2. Legality of the auction dated 13-03-2015 and issuance of sale certificate for immovable properties. 3. Alleged violations of the SARFAESI Act and Security Interest (Enforcement) Rules, 2002. 4. Alleged undervaluation of secured assets. 5. Maintainability of the writ petitions in light of alternative remedies. Detailed Analysis: 1. Legality of the Auction Dated 10-03-2015 and Issuance of Sale Certificate for Movable Properties: The petitioner challenged the auction conducted by the Bank on 10-03-2015 and the subsequent issuance of the sale certificate dated 24-09-2015 for movable properties. The petitioner had previously filed W.P. No.7462 of 2015 seeking to set aside the auction notice, which was dismissed. The Division Bench also dismissed the writ appeal (W.A. No.718 of 2015) against this decision. The court held that entertaining the current writ petition would amount to reviewing the judgment passed by the Division Bench in W.A. No.718 of 2015. Therefore, W.P. No.36652 of 2015 was dismissed. 2. Legality of the Auction Dated 13-03-2015 and Issuance of Sale Certificate for Immovable Properties: The petitioners challenged the auction conducted on 13-03-2015 and the issuance of the sale certificate for immovable properties. The court examined the sequence of events and found violations of the mandatory provisions of Sub-Rule (3) of Rule 9 of the Security Interest (Enforcement) Rules, 2002. The auction purchaser failed to deposit the required 25% of the bid amount on the auction date and instead deposited it on 17-03-2015. Additionally, the auction purchaser deposited the remaining 75% of the bid amount on 02-09-2015, well beyond the 15-day period mandated by Sub-Rule (4) of Rule 9. The court held that these violations warranted setting aside the auction. 3. Alleged Violations of the SARFAESI Act and Security Interest (Enforcement) Rules, 2002: The petitioners argued that the Bank violated the provisions of the SARFAESI Act and the Security Interest (Enforcement) Rules, 2002. Specifically, they contended that the auction purchaser did not comply with the requirement to deposit 25% of the bid amount on the auction date and the remaining 75% within 15 days. The court agreed with the petitioners, finding that the Bank and the auction purchaser had failed to adhere to the mandatory provisions of the rules, leading to the setting aside of the auction. 4. Alleged Undervaluation of Secured Assets: The petitioners claimed that the Bank undervalued the secured immovable assets, asserting that adjacent properties were valued significantly higher. The court noted that the Bank's valuation of the secured assets at Rs. 3.40 lakhs per acre was suspicious, especially when adjacent land was valued at Rs. 12.00 lakhs per acre. This discrepancy contributed to the court's decision to set aside the auction. 5. Maintainability of the Writ Petitions in Light of Alternative Remedies: The Bank argued that the writ petitions were not maintainable because the petitioners had an efficacious alternative remedy available under Section 17 of the SARFAESI Act. However, the court held that the availability of an alternative remedy does not bar the exercise of its extraordinary jurisdiction under Article 226 of the Constitution of India. The court found that the violations of the mandatory provisions of the rules justified the exercise of its jurisdiction. Conclusion: The court dismissed W.P. No.36652 of 2015, finding no merit in the petitioner's challenge to the auction and sale certificate for movable properties. However, the court allowed W.P. Nos.36625 and 38600 of 2015, setting aside the auction conducted on 13-03-2015 and the issuance of the sale certificate for immovable properties due to violations of the mandatory provisions of the Security Interest (Enforcement) Rules, 2002. The court directed the Bank to return the bid amount to the auction purchaser without interest and granted liberty to the Bank to take measures in accordance with the law.
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