Adi Impex Infra Services vs State Bank of India & Ors

Ashok Menon, Chairperson

The appeal is filed under Sec. 20(1) of the Recovery of Debts & Bankruptcy Act, 1993 (“RDB Act” for short) challenging the order dated 28.06.2023 in Appeal No. 09 of 2023 on the files of the Debts Recovery of Tribunal-II, Mumbai.

Movable and immovable properties as Lot No. 3 were put up for E-auction on 24.03.2023 for recovery of debts due to the financial institutions and banks arrayed here as Respondents Nos. 1 to 8 in the Recovery Certificate No.07 of 2019 issued in Original Application (O.A.) No. 1381 of 2016 against Respondents Nos. 9 to 14 who are the borrowers and guarantors.

The Recovery Officer declared the 15th Respondent as the successful bidder for Lot No.3 in the above-mentioned E-auction conducted by the E-procurement agency which is the 16th Respondent herein.

The Appellant, a firm was also interested in participating in the auction. However, due to a technical glitch in the website, the process of uploading the necessary documents failed and the Appellant was unable to comply with the terms and conditions of the sale proclamation. Although the Appellant sent an email attaching the scanned copy of the documents and submitted to the D.R.T., no response whatsoever was received. On 24.03.2023 the Appellant filed an interim application before the Recovery Officer under Rules 9 and 11 of the 2nd Schedule to the Income Tax Act, 1961, explaining the denial of opportunity to the Appellant to participate in the auction. The Appellant had the demand draft for the earnest money deposit and also the documents ready for submission. At 12:05 PM, on 24.03.2023, the Ld. Recovery Officer rejected the application filed by the Appellant causing great prejudice to the Appellant preventing the firm’s participation in the auction. Respondent No. 15 was declared as the successful bidder for Lot No. 3.

Challenging the order of the Ld. Recovery Officer rejecting the application of the Appellant, an appeal was filed before the Ld. Presiding Officer, D.R.T. as Appeal No. 9 of 2023 under Sec. 30 of the RDB Act. The appeal was dismissed by the D.R.T. vide order dated 28.06.2023. The Appellant is aggrieved and hence in appeal before this Tribunal.

The Appellant has filed I.A. No. 630 to 2023 for an interlocutory order pending appeal to prevent physical possession of the auction properties from being handed over to the 15th Respondent. Vide order dated 30.06.2023 this Tribunal passed an ad interim order not to hand over possession of the auctioned property to the auction purchaser. The said interim order has been extended from time to time.

The auction purchaser appeared and filed I.A. No. 606 of 2023. It is stated that the entire sale consideration has been deposited by the auction purchaser and despite that possession of the property has not been handed over. The appeal has not been taken on file as the Appellant has not cured the defects pointed out by the office. In the meanwhile, the appeal was also amended the amendment was carried out. It is stated that the defects are not being cured deliberately to protract the proceedings after having obtained an ad interim order in favour of the Appellant.

Respondent No. 15 states that the firm is willing to take physical possession of the auctioned property subject to the outcome of the appeal and shall not claim any relief in terms of equity in case the appeal is allowed and the sale is set aside. The property was purchased by the Applicant to generate revenue and create employment. Extending the ad interim order from time to time without hearing the appeal causes great prejudice to the Applicant. In case the factory situated in the property does not function, the machinery would get rusted and rendered useless. The Applicant is therefore willing to give an undertaking that the possession would be subject to the outcome of the appeal.

Respondents No. 10 to 14 who are the borrowers have filed a reply to the application filed by the auction purchaser stating that the Applicant is not entitled to the auction property as there are several allegations against the conducting of the auction which need to be addressed.

Apart from the Appellant, there is also an intervener namely L7 Hi-tech Pvt. Ltd., a company which had sought to intervene for the reason that the auction was not conducted properly and that the 15th Respondent, declared as the highest bidder had actually formed a cartel and that the property was sold a lesser amount than it is worth. The Appellant has also raised several contentions with regard to the propriety of the sale. The impugned order of the Ld. Presiding Officer is, therefore, to be considered at length. The Appeal itself can be disposed of as early as possible after consideration of the various contentions raised regarding the propriety of the sale. Handing over possession to the auction purchaser at this stage would complicate matters. It is, therefore, in the interest of justice to not hand over possession of the auctioned property to Respondent No. 15 till the disposal of the appeal.

I.A. No. 606 of 2023 is dismissed. The pleadings shall be completed and the parties shall get ready for hearing the appeal on merits.

List before the Registrar for registration of the appeal on 24.01.2024.