2024 (10) TMI 794 - SC - Indian Laws

Default in depositing amount - respondents had not deposited the balance sale consideration within the mandatory period of 90 days - whether there was any default on part of the respondents in depositing the balance amount within the time prescribed pursuant to the auction sale dated 10.04.2018 so as to attract Rule 9(4) of the Rules and allow the appellant-Bank to cancel the auction which had already been confirmed? - HELD THAT - In the case at hand, the correspondence between the parties reveals that the respondents only sought extension of time for the reason that the appellant-Bank itself was not in a position to accept the amount as there was a complaint to the CBI, an advisory of the ED and a stay from the High Court. The silence on part of the appellant-Bank in either immediately revoking the sale confirmation or refusing to extend the time, impliedly amounted to extension of time in writing with consent. Secondly, the non-deposit of the balance sale consideration within the time limit prescribed under Rule 9(4) was not attributable to the respondents so as to call them defaulters within the meaning of the provisions of Rule 9 (4) and (5) of the Rules. The reason for the nonissuance of the sale certificate is solely attributable to the appellant-Bank and that there were no latches, negligence or default on part of the respondents in offering to deposit the balance auction amount. Since there is no default on their part, non-deposit of the said amount within the stipulated period would not be fatal within the meaning of sub-Rules (4) and (5) of Rule 9 of the Rules. The High Court has not committed any error of law in the peculiar facts and circumstances of the case in holding that the appellant- Bank manifestly erred in cancelling the auction sale dated 10.04.2018 and in directing to issue sale certificate/register the sale deed in favour of the respondents after getting the balance auction amount deposited within a period of four weeks. Appeal dismissed.

Summary

Issues Involved:
1. Whether there was any default by the respondents in depositing the balance amount within the prescribed time pursuant to the auction sale.
2. Whether the appellant-Bank was justified in cancelling the auction and refusing to issue the sale certificate.
3. Whether the statutory period for depositing the balance sale consideration under Rule 9(4) of the Security Interest (Enforcement) Rules, 2002, is extendable.
4. Whether the appellant-Bank's actions violated principles of natural justice.

Issue-wise Detailed Analysis:

1. Default in Depositing Balance Amount:
The primary issue was whether the respondents defaulted in depositing the balance sale consideration within the time prescribed following the auction sale dated 10.04.2018. The court found that the respondents, who were the highest bidders, deposited 25% of the bid amount immediately but were unable to deposit the remaining balance due to the appellant-Bank's refusal to accept it. The respondents consistently showed readiness and willingness to pay the balance amount, but the bank's actions, including a complaint to the CBI and an advisory from the ED, obstructed the process. Thus, the court concluded that the respondents were not at fault for the delay in payment.

2. Justification for Cancelling Auction and Refusal to Issue Sale Certificate:
The appellant-Bank unilaterally cancelled the auction and refused to issue the sale certificate, citing various reasons, including a complaint to the CBI and a writ petition challenging the auction notice. However, the court noted that these reasons were not substantial enough to justify the bank's actions. The interim stay from the writ petition did not affect the issuance of the sale certificate as the auction was already confirmed. Moreover, the advisory from the ED did not explicitly prohibit the confirmation of the sale. The court held that the bank's refusal to issue the sale certificate was unjustified.

3. Extension of Statutory Period Under Rule 9(4):
The court examined whether the statutory period for depositing the balance sale consideration under Rule 9(4) of the Security Interest (Enforcement) Rules, 2002, could be extended. It was determined that the period is not sacrosanct and may be extended with mutual agreement in writing. The court cited previous judgments, including Varimadugu Obi Reddy v. Sreenivasulu, which supported the view that the time for deposit could be extended if agreed upon by the parties. In this case, the bank's silence and subsequent actions implied consent to extend the time for payment.

4. Violation of Principles of Natural Justice:
The court found that the cancellation of the auction sale by the appellant-Bank was unilateral and done without providing notice or an opportunity for the respondents to be heard, thereby violating the principles of natural justice. The bank's decision lacked transparency and fairness, as the respondents were not given a chance to address the alleged defaults.

Conclusion:
The court concluded that the appellant-Bank erred in cancelling the auction sale and refusing to issue the sale certificate. The High Court's decision to direct the issuance of the sale certificate and registration of the sale deed in favor of the respondents was upheld. The appeals were dismissed, affirming that there was no default on the respondents' part and that the statutory period for payment could be extended with mutual consent. The court emphasized that the appellant-Bank's actions were in violation of natural justice principles, and the respondents were entitled to the relief sought.