2018 (4) TMI 1247 - HC - Indian Laws

Payment of balance of sales consideration alongwith interest - auction - petitioner sought some more time to make the full and final payment and assured that all outstanding payment shall be settled on or before 10.2.2017 - whether Rule 9(4) of the Rules which stood amended w.e.f. 4.11.2016 will govern the auction process which stood initiated on 2.11.2016 or the said auction process is to be governed by the Rules which were in vogue as on the date when the said auction process was put into motion by way of issuance of an advertisement? Held that - Sub Rule (4) of un-amended Rule 9 thus, inter alia, provided that the balance amount of purchase shall be paid by the purchaser to the authorized officer on or before 15th day of confirmation of the sale of immovable property or such extended period as may be agreed upon in between the parties. The embargo of maximum of three months was not there in the un-amended Rules. This embargo has been created by the amended Rules which have come in force w.e.f. 4.11.2016. It is settled principle of law that a process put into motion has to be taken to its logical conclusion as per the Rules which were in vogue at the time when the process was initiated and even if there is subsequent change in the Rules, then also the process which already stood initiated has to be completed as per old Rules itself. Amendments are always prospective until and unless the language of the Rule itself envisages that the amendment is sought to be retrospective - In the present case, it is not in dispute that the amendment so incorporated in Sub Rule (4) of Rule 9 (supra) was introduced w.e.f. 4.11.2016. Thus the amendment itself makes it clear that the same is prospective and not retrospective. Whether the act of respondents No.2 and 4 of forfeiting the amount so deposited by the petitioner and thereafter subjecting the property to re-auction is arbitrary or not? - Held that - Respondent-Bank rather than permitting the petitioner to deposit the balance amount, of course along with interest for the delayed period, went ahead to re-auction the property. Now the reauction was slated for the month of May, 2017 i.e. subsequent to the month in which petitioner had assured respondents No.2 and 4 that he shall be paying the entire purchase amount to the bank - the act of the respondent-bank forfeiting the amount deposited by the petitioner and initiating fresh steps for reauctioning the property in issue is arbitrary. Petition allowed - Petitioner is directed to deposit the balance purchase amount with respondents No.2 and 4 along with interest as per communication dated 31.12.2016 as calculated upto 30.4.2017 on or before 15.12.2017 - decided in favor of petitioner.

Summary

Issues Involved:
1. Applicability of amended Rule 9(4) of The Security Interest (Enforcement) (Amendment) Rules, 2002.
2. Arbitrariness of the respondents' actions in forfeiting the petitioner's deposited amount and re-auctioning the property.

Issue-wise Detailed Analysis:

1. Applicability of amended Rule 9(4) of The Security Interest (Enforcement) (Amendment) Rules, 2002:

The core legal issue was whether the amended Rule 9(4), which came into effect on 4.11.2016, would govern the auction process initiated on 2.11.2016. The court noted that the amendment to Rule 9(4) limited the extension period for depositing the balance purchase price to three months. The unamended Rule 9(4) allowed for an extended period as agreed upon in writing between the parties without such a limitation.

The court emphasized that a legislative amendment is generally presumed to be prospective unless explicitly stated otherwise. It cited the Supreme Court's rulings in *Commissioner of Income Tax (Central)-I, New Delhi Vs. Vatika Township Private Limited* and *P. Mahendran and others Vs. State of Karnataka and others*, which established that amendments should not affect processes already in motion unless clearly intended to be retrospective.

The court concluded that since the auction process began before the amendment took effect, it should be governed by the unamended rules. Therefore, the respondent-bank's argument that it could not extend the payment period beyond three months was deemed ill-founded.

2. Arbitrariness of the respondents' actions in forfeiting the petitioner's deposited amount and re-auctioning the property:

The petitioner argued that the forfeiture of the deposited amount and the re-auctioning of the property were arbitrary actions by the respondent-bank. The petitioner had informed the bank that funds would be available by April 2017 and requested an extension to make the full payment.

The court found that the respondent-bank's refusal to allow the petitioner to deposit the balance amount, despite the petitioner’s assurance and readiness to pay with interest, was arbitrary. The bank’s decision to re-auction the property in May 2017, after the petitioner had indicated readiness to pay by April 2017, was particularly unreasonable. The court noted that the re-auction notice even maintained the same reserve price, further highlighting the arbitrariness of the bank's actions.

The court held that the respondent-bank's actions violated Article 14 of the Constitution of India, which guarantees equality before the law.

Conclusion:

The writ petition was allowed. The court quashed and set aside the impugned communication dated 18.3.2017 (Annexure P-10) and the auction notice (Annexure P-13). The petitioner was directed to deposit the balance purchase amount with interest calculated up to 30.4.2017 by 15.12.2017. Additionally, the petitioner was required to pay ?2,12,711/- for subsequent expenses incurred by the respondent-bank. The court instructed the parties to complete the sale process in accordance with the law, including issuing a sale certificate. If the petitioner failed to deposit the balance amount by the specified date, the respondent-bank was permitted to re-auction the property. No order as to costs was made, and any pending miscellaneous applications were also disposed of.