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TMI Blog2016 (3) TMI 551X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner in W.P. No.33652 of 2015 seeking Mandamus to declare the auction, dated 13-03-2015, and consequential issuance of sale certificate, document No.7414/15, dated 24-09-2015, in respect of immovable property admeasuring Acs.15-00, situated in Survey No.100/P, 100/VU, 100/LU, Jiyapally Village, Bibinagar Mandal, Nalgonda District, in favour of respondent No.2, under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short SARFAESI Act) and in exercise of powers conferred under Section 13 of the Act read with Rule 12 of Security Interest (Enforcement) Rules, 2002 ( for short Rules 2002) by respondent No.1 - Bank of Baroda, ARM Branch, Himayath Nagar, Hyderabad, as unconstitutional, unjust, illegal and violative of principles of natural justice, and to set aside the same. 4. W.P. No.38600 of 2015 is filed by Smt. Patalapally Atchamma, who is mother of P. Sridhar (proprietor of the petitioner in the former two writ petitions), seeking the very same relief of Mandamus to declare the auction, dated 13-03-2015, and consequential issuance of sale certificate document No.7415/15, dated 24-09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 06-02-2015. iv) According to the petitioners, in the last week of September 2015, when some unknown persons entered into the factory premises (secured assets) proclaiming that they purchased the same from the Bank and attempted to dispossess them from it, which was resisted by them successfully, but, they went back threatening that they would come again with the aid of police and take possession forcibly. Even, Sridhar was summoned to the police station, where he was provided with copy of sale certificate, dated 24-09-2015, both in respect of movable and immovable secured assets, and with the help of police, respondent No.2 (hereinafter referred to as auction purchaser) took physical possession of the secured assets belonging to the petitioner in W.P. No.38600 of 2015 and her son - P. Sridhar. When they sought for information as to auction of the secured assets, Bank did not furnish the same. Then, they obtained information under the Right to Information Act, 2005 (for short RTI Act) and, thus, they came to know that the secured assets were put to e-auction by the Bank and bids were opened on 13-03-2015 and that there was only one bidder, who is respondent No.2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by them (petitioners), tries to justify its acts. It is according to them that except the interim order of this Court in W.P. No.7462 of 2015, filed by Sridhar Enterprises against auction of movable properties proposed on 23.03.2015, directing the Bank to go ahead with the auction of movable properties and not to confirm the sale, there is no other pending writ petition or order in force. According to them, the secured immovable assets were not subject matter in W.P. No.7462 of 2015 and they never challenged the auction notification, dated 06.02.2015, as such, deposit of balance of 75% bid amount on 02.09.2015 is illegal and, thus, the Bank has clearly violated the provisions of the SARFAESI Act. viii) The petitioners also agitated that valuation of the secured assets was not properly done, and the very valuation made by the Bank demonstrates its mala fides as the adjacent land belonging to the brother of P. Sridhar was agreed to sell for Rs. 12.00 lakhs per acre on 17-11-2015 as per the auction notification, dated 06-10-2015, itself published in the Hindu News Paper, dated 07-10-2015. Thus, the petitioners attributed mala fides to the Bank in valuing the secured immovable asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d since earnest money deposit was required to be paid on or before 12-03-2015 for two mortgaged properties, auction-purchaser paid Rs. 15.00 lakhs on 04-03-2015 and, thus, the auction purchaser has complied with the required amount of earnest money deposit and paid the balance amount of Rs. 63.50 lakhs on 02-09-2015. Bank has specifically denied the allegation levelled by the petitioners that the auction purchaser regularly parks funds with it. Bank further denied that there is manipulation of amounts in regard to e-auction stating that the amounts were paid through RTGS method and, therefore, question of taking any undue advantage with it cannot arise. ii) Bank also states that the sale notice issued by the IDBI Bank for sale of some lands which is pressed into service by the petitioners is irrelevant and valuation of the said properties at Rs. 12.00 lakhs per acre is relatable to the land in Survey No.67, while the subject lands are situated in Survey No.100 and, therefore, the petitioners cannot claim any prejudice in conducting the e-auction and completing the formalities. 9. Additional counter affidavit was filed by the Bank on 26-12-2015 giving further details, as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue relating to extension of time and, finally, sought to dismiss the writ petitions. 10. Heard Sri G.K. Deshpande, learned counsel for the petitioners, Sri K. Mallikarjuna Rao, learned Standing Counsel for respondent No.1 - Bank, and Sri Sharath Sanghi, learned counsel for respondent No.2 - auction purchaser. 11. Learned counsel for the petitioners would submit that the Bank has never informed as to what transpired subsequent to the date of auction so far as auction of immovable properties are concerned and, therefore, the petitioners secured the information by making an application under the RTI Act and came to know that only the auction purchaser had participated in the auction and became successful bidder and though, the auction purchaser was supposed to deposit only 10% of bid price of Rs. 8.5 lakhs of both the secured immovable assets, he has deposited Rs. 15.00 lakhs exceeding 10% on 04-03-2015 itself and the balance of Rs. 6.50 lakhs to make it 25% of bid amount though was required to be paid on 13-03-2015 itself, has not tendered the said amount and deposited the same only on 17-03-2015, thus, accounted for violation of mandatory provisions of Sub-Rule (3) of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . No.718 of 2015, and, only after dismissal of the writ appeal, 75% of the bid amount was paid by the auction purchaser as the movable properties being fixtures in the extents sold in the auction, and contending that the writ petitions are not maintainable since there is efficacious alternative remedy available to the petitioners, placed reliance on the decisions of the Honble Supreme Court in United Bank of India v. Satyawati Tondon and others , Ikbals Case (Supra 1), and also the decisions of this Court in Trinethra Infra Ventures Ltd. v. IFCI Ltd. and others and Knovus Steels and Infrastructure Limited v. State Bank of India . i) For the proposition that once sale is confirmed, the same cannot be reopened, learned standing counsel placed reliance on the decisions of the Honble Supreme Court in Valji Khimji and Company v. Official Liquidator of Hindustan Nitro Product (Gujarat) Limited and others ; and Sadashiv Prasad Singh v. Harendar Singh and others . ii) Learned standing counsel also placed reliance on the decision of the Honble Supreme Court in Rosali V. v. Taico Bank and others as to the meaning of word immediately conveying within reasonable time. 13. Learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Storage Bin (viii) Vibrating Screen and (ix) Diesel Generator} as unconstitutional, illegal, arbitrary, unjust and violative of principles of Natural Justice and set aside the same and pass such other order or orders as this Honourable Court deems fit and necessary in the justice and equity. ii) A learned single Judge of this Court dismissed the Writ Petition No.7462 of 2015, holding thus: Apart from the maintainability of writ petition in respect of a simple dispute under a loan/composite hypothecation agreements, the writ petition deserves to be dismissed, for the very premise of filing the writ is that the movables sought to be auctioned on 23.03.2015 are not included in the hypothecation agreement except hydraulic excavators-2, rock breaker, poclainers. The petitioner should have disclosed the correct details of schedule under the composite hypothecation agreement for vindication of right under Article 226 of Constitution of India. As already noticed, the machinery is covered under agreement of hypothecation and the petitioner having not filed any rejoinder to the reply and documents placed on record by 1st respondent cannot be heard to complain that the impugned auction i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... movable assets. We have gone through the relevant averments made by the petitioners, Bank and the auction purchaser. i) We would like to narrate the sequence of events in order to appreciate the contentions raised by the respective parties. e-auction notice for sale of secured immovable assets was issued by the Bank on 06-02-2015 proposing to conduct auction on 13-03-2015. Auction purchaser has deposited Rs. 15.00 lakhs on 04-03-2015. Auction was conducted on 13-03-2015. Balance amount towards 25% of bid amount of Rs. 6.50 lakhs was tendered by the auction purchaser on 17-03-2015. Remaining 75% of bid amount i.e. Rs. 63.50 lakhs was tendered by the auction purchaser on 02-09-2015. ii) Sub-Rule (3) of Rule 9 provides that the purchaser shall immediately pay a deposit of twenty-five per cent of the amount of the sale price to the authorised officer conducting the sale and in default of such deposit, the property shall forthwith be sold again. In the instant case, the auction purchaser, who was the sole bidder participated in the auction on 13-03-2015, has not tendered the balance amount having deposited Rs. 15.00 lakhs on 04-03-2015 towards earnest money deposit. In fact, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... immediately may mean within reasonable time. Where an act is to be done within reasonable time, it must be done immediately. {See Gangavishan Heeralal v. Gopal Digambar jain [AIR 1980 MP 119: 1980 MPLJ 246]. AIR at p.123, Keshava S. jamkhandi v. Ramachandra S. Jamkhandi [AIR 1981 Kant 97: (1980) 2 Kant I J 432 (FB) ], AIR at p.101, Ramnarayan Triyoginarayan Trivedi v. State of M.P.[ AIR 1962 MP 93 (FB)]. AIR at p.98, R. v. HM Inspector of Taxes, ex p Clarke [(1971) 2 QB 640: (1971) 3 WLR 425: (1971) 3 All ER 394]. All ER at p.398 and R. v. HM Inspector of Taxes, ex p Clarke [(1973) 3 WLR 673: (1972) 1 All ER 545 (CA), All ER at p.555.}. The fact-situation in the above decision would reveal that the sale was conducted by the executing Court at about 4.00 p.m. on 26-10-1988 and keeping in view, the fact that the banks at that time were closed, directed the auction purchaser to deposit the amount by the next day, and the auction purchaser obliged the direction of the executing Court and deposited the amount on 27-10-1988 and the balance amount on 11-11-1988. Certainly, the said fact-situation is not akin to the one occurring in the instant case. In the instant case, thou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely 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. 20. 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 Rs. 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 Rs. 63.50 lakhs on 02-09-2015. The Bank in its additional counter, conveniently mentioned that the auction purchaser has sought ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e can be set aside. Thus, the Honble Supreme Court emphasised that recovery of public dues should be made in accordance with the procedure prescribed by law and in the event of a fundamental procedural error occurring in a sale, the same can be set aside. The fact-situation herein squarely covers the principle laid down by the Honble Supreme Court and, therefore, the auction held on 13-03-2015 is liable to be set aside. 21. Turning to the submission that the instant writ petition cannot be maintained, learned standing counsel for the Bank has placed reliance on the decisions of the Honble Supreme Court in Satyawati Tondons Case (Supra 4), Ikbals Case (Supra 1), and also the decisions of this Court in Trinethra Infra Ventures Ltds Case (Supra 5) and Knovus Steels and Infrastructure Limiteds Case (Supra 6) to fortify his stand that the petitioners ought to have approached the Debts Recovery Tribunal as an efficacious alternative remedy is available to them under Section 17 of the SARFAESI Act, and, therefore, the instant writ petitions are not maintainable. 22. Learned counsel for the petitioners, on the other hand, relied on the decision in Ikbals Case (Supra 1) for the propositio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng satisfying the expression written agreement occurring in Rule 9(4) of Rules 2002. 23. To substantiate the stand that once sale is confirmed, it cannot be reopened, the learned standing counsel for the Bank relied on the decisions of the Honble Supreme Court in Valji Khimjis Case (Supra 7) and Sadashiv Prasad Singhs Case (Supra 8). But the fact-situation therein is different from the one occurring herein and would not render any assistance to justify violation of mandatory requirements of Rules 9(3) and 9 (4) of the Rules 2002. 24. We, therefore, hold that 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 Rs. 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. 25. In the result, W.P. No.36652 of 2015 is dismissed; and W.P. Nos.36625 and 38600 of 2015 are allowed, as indicated abov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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