A.K. Sinha vs Canara Bank And Ors

P.K. Bhasin, J

The appellant's house in Chandigarh was sold in public auction on 22.11.2010 to recover the dues of respondent No. 1 Bank which it had advanced as loan to one M/s. Eider PW1 Paging Ltd. and which this borrower had defaulted to re-pay. The appellant's house came to be auctioned and purchased by the respondents 2 and 3 for a sum of Rs. 4,34,50,000/-, since he had guaranteed the re-payment of the loan amount and had also created equitable mortgage of his house by way of deposit of its title deeds with the Bank and he too had failed to discharge his obligation under the guarantee agreement by not liquidating the dues of the respondent Bank as the guarantor. The auction of appellant's house was conducted in the recovery proceedings initiated by the Recovery Officer attached to Debt Recovery Tribunal-II, Chandigarh which had earlier issued a recovery certificate for a sum of Rs. 1,39,16,545/- with interest, etc. in a petition under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 ('RDDBFI Act') (being O.A. No. 137/2002) filed by the respondent No. 1 Bank against the borrower Company and the guarantors including the appellant herein and which amount had become almost five crores by the time appellant's property was put up for sale in November, 2010.

At the pre-auction stage in the recovery proceedings the appellant had challenged the proclamation of sale, etc. before the Recovery Officer but with no success and his appeal against Recovery Officer's order also came to be rejected by the DRT-II, Chandigarh. His second appeal too was dismissed by this Tribunal.

After the auction the appellant once again challenged the validity of the auction before the Recovery Officer but once again he lost in his attempt to save his house. He again approached the DRT in appeal and lost again there too as also before this Tribunal.

The appellant then had filed a writ petition before the Hon'ble Punjab & Haryana High Court (being CWP No. 21872/2011). Learned Counsel for the appellant had submitted before this Tribunal that since the appellant had come across some material which showed that the auction of his house, in which the husband-wife duo of respondents 2 and 3 herein were declared as highest bidders, was a fraud and deceit and amounted to 'cartel' sale and bid rigging, the writ petition was withdrawn with liberty to file appropriate application before the Recovery Officer.

Thereafter, the appellant approached the Recovery Officer once again with the material which showed that the impugned auction challenge to the validity thereof had earlier been repelled by him was not a genuine auction and was a cartel sale. The Recovery Officer, however, did not accept that material to be sufficient to set aside the auction and accordingly the appellant's application moved pursuant to the liberty granted by the High Court was rejected vide order dated 1.6.2012. The appeal filed against that order also came to be rejected by the DRT vide its order dated 18.1.2016. Hence this appeal.

The relevant portions only of the order dated 1.6.2012 of the Recovery Officer are re-produced hereunder:

"1.1 Recovery Certificate No. 362/2004 was issued on 25.8.2004 in OA No. 137/2002 for recovery of Rs. 1,39,16,545.00 along with pendent lite and future interest @ 15% p.a. with quarterly rests from the date of filing of the application till realization.

1.2 At the request of the CH Bank, in order to effect recovery of Bank's amounting of Rs. 4,91,54,827.00 as on 30.9.2010, a Proclamation of Sale was made on 30.9.2010 for the sale of property i.e. House No. 3096, Sector-21D, Chandigarh by auction on 22.11.2010. The Property was owned by Mr. A.K. Sinha, Certificate Debtor No. 5 (hereinafter referred to as CD No. 5.)

1.3 The Court Auctioneer, Ms. Shaweta Duggal, Advocate filed the auction report on 24.11.2010. Sh. Jitender Mohan Mittal and his wife Smt. Meenakshi Mittal were declared as the highest bidder with a bid amount of Rs. 4,34,50,000.00. Two demand drafts for Rs. 1,07,27,750.00 and Rs. 1,47,250.00 dated 22.11.2010 and 23.11.2010 respectively being 25% of the highest bid given by the aforesaid bidders were also deposited on 6.12.2010 i.e. well within the stipulated period.

1.4 CD No. 5 filed an Appeal No. 7/2010 in RC No. 362/2004 on 21.10.2010 on behalf of CD No. 1 and himself, before the Hon'ble Presiding Officer, DRT-I, Chandigarh against the order dated 30.9.2010 passed by the Recovery Officer for the Proclamation of Sale (POS). The appeal was dismissed on 3.10.2011. He went in Appeal (No. 385/2011) before the Hon'ble DRAT, Delhi against the said order dated 3.10.2011 passed by the Hon'ble Presiding Officer, DRT-I, Chandigarh. The appeal was dismissed in limine by the Hon'ble DRAT, Delhi on 14.11.2011.

2.1 CD No. 5 filed objection on 20.12.2010 to the sale of House No. 3096, Sector-21D, Chandigarh vide Diary No. 3516 dated 20.12.2010. Another set of objections was filed as objections to the recovery proceedings vide Diary No. 3517 dated 20.12.2010 by the CD No. 5 on behalf of CD Nos. 1 and 5.

6.1 After the appeal filed by the CD No. 5 before the Hon'ble DRAT, Delhi was dismissed on 14.11.2011, the CD No. 5 went to Hon'ble High Court in CWP No. 21872/2011. Vide order dated 6.12.2011 of the Hon'ble High Court the CD No. 5/petitioner withdrew the wit petition with liberty to move an appropriate application before the Recovery Officer. Therefore, CD No. 5 filed an application vide Dairy No. 59 dated 3.2.2012 in pursuance to order dated 6.12.2011 passed by the Hon'ble High Court in Civil Writ Petition No. 21872/2011 titled as A.K. Sinha v. Canara Bank and Ors..... The Counsel for CH Bank filed his reply on 18/1.2012. Thereafter, a replication on behalf of CD No. 5 was filed vide Diary, No. 1879 dated 2.3.2012 and new facts were stated in furtherance of the CD's earlier allegation that the auction of his house No. 3096, Sector 21-D, Chandigarh held on 22.11.2010 was fraudulent & manipulated ab initio. CD No. 5 alleged that irrebuttable documentary evidence of corrupt practices and fraudulent manipulated auction on 22.1.2010 conducted by the auctioneers in connivance with the Bank Official & the Auction Purchaser, has been discovered in the shape of an agreement signed on the same date viz., 22.11.2010 between Shri Surinder Mittal S/o. O.P. Mittal, resident of House No. 389, Sector 30-A, Chandigarh and Shri Parvesh Bhardwaj, resident of House No. 416. Village Gazipur, Delhi-96. Learned Counsel for CD No. 5 alleges that under the said agreement, Shri Surinder Mittal paid a sum of Rs. 10.00 lakh in cash to Shri was accepted in favour of Shri Jitender Mohan Mittal. A copy of the complaint filed by Shri Surinder Mittal s/o. Shri O.P. Mittal under Section 138 of N.I. Act is attached with the replication filed by the learned Counsel for CD No. 5.

6.3 I have carefully gone through the record and have given my mind to the respective submissions given by the Counsels for all parties.

6.5 Regarding the additional new facts brought on record vide replication filed on 2.3.2012 by the CD No. 5, I have perused the relevant documents and find that the address of Shri Pravesh Bhardwaj is given as House No. 416 Village Gazipur, Delhi-96 in agreement which is Annexure AA-I to the replication. The address of Shri Parvesh Bhardwaj is recorded as E-86, Gazipur Village, Delhi-110092 on the Annexures A-8, A-9 and A-10 attached with Court Auctioneer's report. More so, the signatures of the same person i.e. Shri Parvesh Bhardwaj as appearing on the alleged arrangement do not match with the signatures appearing on Annexures A-8 and A-10 attached with the Court Auctioneer's report. Further, the alleged agreements between Shri Jatinder Mohan Mittal brother of Shri Surinder Mittal is not a party to the same. The events, even if true, have caused no prejudice to the objector/CD No. 5. Further, it was open for the CD No. 5 to arrange for the prospective bidders at the auction proceedings to fetch the maximum price in the auction as the date, time and venue of the same was very much in the knowledge of the CD No. 5 as is evident from the fact that he had filed an appeal challenging the order of the Recovery Officer before the Hon'ble Presiding Officer, DRT-I, Chandigarh on 21.10.2010 i.e. about a month before the date of auction (held on 22.11.2010) and that he failed to get the desire relief for cancellation of the proclamation of the sale. CD No. 5 also chose not to remain present himself or through his representatives and, as such, failed to arrange for representatives/witness at the time and venue of the auction with a view a stall any attempts for mischief or manipulation to his disadvantage. Therefore, all allegations of manipulation of the auction proceedings are based apparently on hearsay are result of an afterthought. These were pressed through multiple applications/appeals apparently with the objective of delaying or jeopardizing the recovery proceedings initiated for the recovery of the public money."

The order dated 18.1.2016 passed by the DRT in the appellant's appeal against the said order of the Recovery Officer and which order is also under challenge in the present appeal is also re-produced below:

"The Counsel for the applicant states that the matter is listed before the Hon'ble High Court of Punjab and Haryana (which I was told at the time of hearing was in respect of the prayer of the appellant herein for registration of FIR in respect of the auction in question) for 15.2.2016.

The Counsel for the applicant on being asked as to when the payment was made, since on 30.4.2015, he had made a statement that property in question has been kept by the DRT despite borrower having repaid the full amount and there is no due towards the Bank.

Today the Counsel for the applicant states that he has not made this statement. It is really unfortunate that such statements are made to prejudice the Courts and getting them to pass orders in their favour (the learned Presiding Officer was referring to the order passed by him after confirmation of sale that physical possession of the auctioned house shall remain with the Court Commissioner and not to be handed over to the auction purchasers).

This appeal is listed against the orders of the Recovery Officer challenging his order dated 1.6.2012.

The Counsel for the applicant further states that this property was not mortgaged and when Recovery Certificate was issued, no notice was given and the property was sold below the valuation as was filed by the applicant.

Order of the Recovery Officer dated 1.6.2012 shown that pursuant to the recovery certificate issued bearing No. 62 of 2004 in OA No. 37 of 2012 auction was held through the Court auctioneer. After the Court auctioneer conducted the auction, property was sold. Pursuant to the sale of the property by the Court auctioneer an appeal bearing No. 385 of 2011 was filed before the DRAT which was dismissed on 14.11.2011.

Thereafter no appeal or writ challenging the said order was filed by the application before the proper Court. Instead he chose to file another appeal which is now numbered as Appeal No. 23 of 2013, challenging the same procedure which was adopted prior to the sale by the Court auctioneer Since all these objections have already been challenged, he cannot be allowed to reopen the same ground afresh.

Further the order dated 1.6.2012 passed by the Recovery Officer is a detailed order which gives details of the recovery certificates, finds mention of the appeal filed by the applicant and also dealing with the objections filed by different parties.

Pursuant to the order dated 1.6.2012, I find that the Recovery Officer has dealt all the contentions of the applicant in detail and there is nothing wrong with the order of the said date, as such appeal number now marked as Appeal No. 23 of 2013 since it was transferred from DRT-I, Chandigarh where it was numbered as Appeal No. 5 of 2012 is dismissed.

In view of the dismissal of the appeal, I.A. No. 1511 of 2015 filed by the auction purchaser has become infructuous. I.A. No. 1511 of 2015 is disposed off having become infructuous.

Copy of the order be supplied to the parties as per Rule and after due compliance the record be consigned to record room."

These orders clearly give the entire background of the litigation going on since the year 2002 as also the circumstances leading to the filing of the present appeal.

The only grievance urged before me by the learned Counsel for the appellant was that the auction of appellant's house is liable to be set aside for the reason that respondent No. 2 had through his brother Surinder Mohan Mittal paid Rs. 40 lacs to the other bidder Parvesh Bhardwaj so that he does not bid over and above the reserve price so that the bid of Jatinder Mittal, respondent No. 2 herein, who had participated in the auction for self as also on behalf of his wife, respondent No. 3 herein, was accepted and the huge house of the appellant comes to Mittal family for a song and at a paltry price of little over the reserve price of Rs. four crores and twenty-nine lacs even thought the actual price was more than ten crores considering the fact that it is a one kanal house in the prime Sector of Chandigarh.

On behalf of the auction purchasers (respondents 2 and 3) it has also been averred in their application (at page No. 225 of paper book) that in case this Tribunal feels that this matter cannot be decided till the High Court in a criminal writ petition filed by the appellant seeking registration of FIR decides whether any FIR is to be registered or not in respect of the auction in dispute, then the auction money may be ordered to be returned to them with interest and solatium. The learned Counsel for the auction purchasers had in any case strongly opposed this appeal as they have been deprived of the enjoyment of the house purchased by them for over four crores in the year 2010. The submission of the appellant in this regard is that in case fraud is established in the conduct of the auction then the amount of auction money paid by the auction purchasers will have to be forfeited and not returned to them as a reward for the successful DEAL to acquire the appellant's house.

After giving my serious consideration to the entire aspect of the matter and rival contentions I am of the prima facie view that the grievance of the appellant that the auction conducted in this case cannot be said to be free from doubts, has some substance. The fact that there was an agreement between Sh. Surinder Mittal, brother of the highest bidder Sh. Jatinder Mohan Mittal and another person Sh. Parvesh Bhardwaj who had also participated in the auction along with with Jatinder Mohan Mittal, respondent No. 2 herein, executed only on the day of the auction itself whereunder Surinder Mittal had entered into some DEAL with the said Parvesh Bhardwaj in respect of the property to be auctioned does not appear to have been denied by the auction purchasers and in fact the Recovery Officer also did not have any doubt and the existence of such an agreement relied upon before him by the appellant/objector. A sum of Rs. 40 lacs was also paid to Sh. Parvesh Bhardwaj on the day of the auction as per the understanding in respect of the DEAL of the property which he had come to purchase.

Now, what could be the DEAL between the brother of auction purchaser and the other person who also wanted to buy the appellant's house. This mystery could be solved if the brother of the auction purchaser had been called upon to throw some light regarding the agreement dated 22nd November, 2010. No one else can enter into their minds to find out what for Rs. 40 lacs was paid in cash to Parvesh Bhardwaj, if it was not given to him for stopping him from bidding, as is the case of the appellant. Prima facie, the money can be said to have been exchanged for that illegitimate purpose only so that the property in question comes to Mittal family. If on enquiry, which ought to have been ordered at least by the DRT's Presiding Officer, if not done by his Recovery Officer, it is found that that was such a 'DEAL' between Surinder Mittal and Parvesh Bhardwaj to ensure the sale of the appellant's house in favour of Mittals, then, of course, the auction will suffer from the vice of cartelisation which will have the effect of polluting the auction itself since that auction was not a private affair but a Court ordered auction which had to be free from any taint or illegality and not spurious.

I am also of the prima facie view that the appellant had done his part in bringing on record the facts regarding the DEAL in respect of his property and those facts were sufficient to have at least triggered the anxiety in the minds of the Recovery Officer as well as the Presiding Officer of DRT to find out as to what the DEAL was. They have conveniently given no importance to that suspicious circumstance primarily on the ground that after the first round of litigation nothing new including the fraud aspect could be examined despite the fact that the legal position is that fraud in judicial or even quasi judicial proceedings can be established at any time and even in any collateral proceedings.

At least, the Bank could have asked for an in-depth enquiry instead of resisting the appellant's attempt to establish the alleged fraud in the conduct of the auction.

I am not going into more details for the present in view of the interim directions which I propose to pass in the matter for the present instead of finally disposing of the main appeal though the matter after conclusion of arguments the matter had been reserved for final order only. The sole circumstance highlighted by the appellant and which remained unexplained cannot be ignored by this Tribunal as has been done by the Recovery Officer and also by the learned Presiding Officer of the DRT.

As a first step towards the exercise which for the present I intend to undertake myself, I direct the auction purchasers as well as Surinder Mittal to appear in person before this Tribunal on the next date of hearing. Auction purchasers will ensure that Surinder Mittal turns up on the next date. The Registry will in any case send him notice at his address which is of the auction purchasers also, with a direction to him to come along with his affidavit giving entire facts about the DEAL which he arrived at with Parvesh Bhardwaj in connection with the appellant's property in Chandigarh as also the facts centering around filing of a complaint by him under Section 138 of Negotiable Instruments Act against said Parvesh Bhardwaj. Thereafter, matter will be taken up for further consideration and directions after hearing all concerned.

However, I also find some justification in the grievances of the Bank and auction purchasers that the appellant is watching the match without buying the ticket and enjoying the benefit of a complimentary pass to enter the stadium. According to them, the appellant still remains a defaulter even after his house stands sold and recovery proceedings are going on to recover the balance amount recoverable under the recovery certificate and despite that he seeks to deprive the auction purchasers of the enjoyment of the property purchased by them for over four crores as the possession continues to be with the Court Commissioner as a result of ex parte stay granted in this appeal against delivery of possession to the auction purchasers.

The appellant definitely is liable to be put to some terms to balance the equities in the facts and circumstances of the case where he is taking a second chance to get back his property. The appellant is directed to deposit with the Registrar of this Tribunal the auction proceeds of Rs. 4,34,50,000/-, within two weeks from the date of receipt of this order. If that deposit is made, the physical possession of the property will continue to remain with the Registrar till further orders are passed by this Tribunal regarding possession as also whether as an interim measure this amount needs to be returned to the auction purchasers or will be retained in this Tribunal in the form of a Fixed Deposit with a nationalized Bank, as also the question if the auction purchasers are entitled to get any interest also on the said amount of auction money or not and if so, from whom. However, in case the appellant fails to make the deposit, as aforesaid within two weeks, the Court Commissioner shall be at liberty to hand over the physical possession of the property in question to the auction purchasers who, however, will retain the possession with themselves and will not create any kind of third-party interest, including by way of lease, etc., without the permission of this Tribunal since this Tribunal has decided to examine in depth the grievance of the appellant that the property purchased by the auction purchasers was as a result of fraud and even if possession gets delivered to them on the failure of the appellant to comply with the aforesaid condition imposed on him, that will not create any equity in their favour.

List this case now for further consideration on 5.5.2017 at Chandigarh Camp Court. A copy of this order be sent to parties/Counsel.