Allahabad Bank vs Shivangi Gupta And Ors

P.K. Bhasin, J

The respondent No. 1 was an auction purchaser of a property sold in auction by the appellant Bank in exercise of its powers under Section 13(4) of the Securitisation and Financial Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) in order to recover its dues from one of its borrowers M/s. Recon Enterprises, a proprietorship concern of the father of respondent No. 1 Shri Anup Gupta, to whom loan facility of Rs. 90 lacs had been extended by it but was not repaid/cleared as per the terms and conditions of the loan. Since the loan was secured by equitable mortgage of three shops in Darya Ganj, Delhi created by respondent Nos. 2 and 3 herein, the appellant Bank after declaring the account of the borrower Firm as Non-Performing Asset. (NPA) and serving requisite demand notices under Section 13(2) of the SARFAESI Act and upon the borrower/guarantors/mortgagors failing to clear the outstanding dues put up the mortgaged shops for public auction on 14.8.2012. The respondent No. 1 being the only bidder who participated in the auction her bid in respect of all the three shops was accepted by the auctioneer who had conducted the auction. It appears that the borrower Firm and guarantors, out of whom one guarantor is the mother of respondent No. 1 herein and others are also members of her family, had decided to challenge the auction of their properties by filing separate S.As. under Section 17(1) of SARFAESI Act before the date of the auction which was to be held on 14.8.2012 and on 13.8.2012 the DRT had passed orders that the sale in favour of the successful bidder will not be confirmed without the permission of DRT. Accordingly auction was held on 14.8.2012 when respondent No. 1 herein had paid before the auction Earnest Money of 10% of the reserve price of all the three shops in order to make her eligible to participate in the auction and since she was the sole bidder for the shops of her own family members her bids were accepted. As per the conditions of auction, as a successful bidder she was to make payment of 25% immediately on the acceptance of her bid after adjusting the payment of earnest money of 10% already paid by her. She made the balance payment of 15% in respect of two shops (G-3 and 3A) on the date of auction itself but did not make the payment of balance 15% in respect of the third ship (G-1) in respect of which she had paid Rs. 8.87 as earnest money before the auction. However, on the date of auction itself she had requested to the Authorised Officer of the Bank that she may be given one working day's time to make the balance payment of 15% since on that day the her Bank had closed at 1 p.m. because of security reasons by Delhi Police on account of the fact that next day was 15th August. However, the Bank had not responded to that written request of respondent No. 1 nor did she on her own tendered the balance amount on 16th August, 2012 of even on any subsequent date. On 17.9.2012 she sought refund of the earnest money of Rs. 8,87,000/- from the appellant Bank which, however, informed her vide letter dated 12th October, 2012 that the earnest money had been forfeited.

Then on 29.10.2012 respondent No. 1 filed a Securitisation application (S.A.) under Section 17(1) of the SARFAESI Act before the Debts Recovery Tribunal (DRT) seeking stay of fresh auction of the one shop in question (G-l) and for the alternate relief of refund of earnest money with interest on the allegation that the action of the Bank in forfeiting her earnest money was illegal and unjustified. The reliefs claimed in the S.A., which is stated to be still pending, were as under:

"It is therefore most respectfully prayed that in the interest of justice, equity and fair play, this Hon'ble Tribunal may most graciously be pleased to:

(i) Declare the action taken by the respondent Bank under Section 13(4) of the SARFAESI Act, 2002 and the rules framed there under thereby issuing letter dated 12.10.2012 to the applicant thereby forfeiting the earnest money of Rs. 8,87,000/- deposited by the applicant with the respondent Bank for purchasing the property bearing No. 79, Shop No. G-l, Ground Floor, Block-P, Ward No. 11, Municipal No. 4916, Shyam Lal Road, Darya Ganj, Delhi-110002, as null and void, illegal, untenable ana/bad in law and against the principle of natural justice, equity and fair play and consequently set aside and quash the same.

(ii) Grant opportunity to the securitization applicant to deposit the balance amount of her offered bid of Rs. 1.5 crore with the respondent Bank to confirm the auction sale of the property bearing No. 79, Shop No. G-1, Ground Floor, Block-P, Ward No. 11, Municipal No. 4916, Shyam Lal Road, Darya Ganj, Delhi 110002 in favour of the applicant or in alternate.

(iii) Direct the respondent Bank to refund the earnest money of Rs. 8,87,000 to the securitization applicant alongwith interest @ PLR of the respondent Bank.

(iv) Award any other or further relief(s) which this Hon'ble Tribunal deems fit and proper in the facts and circumstances of the case in favour of the applicant and against the respondent Bank."

Before proceeding further it needs to be noticed here that during the pendency of the S.A. respondent No. 1/auction purchaser had moved one miscellaneous application (being I.A. No. 1528/2015) on 11.8.2015 in which she had sought the following reliefs/directions from the DRT in respect of shops No. G-3 & G-3 A, even though those two shops were not the subject matter of that S.A.:

"It is, therefore, most respectfully prayed that this Hon'ble Court may be pleased to:

(i) Issue directions to the respondent Bank to release the earnest money deposited by the applicant/petitioner in respect of the sale of the property bearing Shop No. G-3 & G3-A, Ground Floor, Block B, Ward No. 11, Municipal No. 4916, Shyam Lal Road, Darya Ganj, New Delhi-110002 aggregating to the sum of Rs. 26,25,000/- alongwith interest thereon during the pendency of the deposit of the same with the Bank and till the time the said payment is released to the petitioner; and

(ii) Pass such other and further order(s) as this Hon'ble Court may deem fit and proper in the interest of Justice."

However, when the said application was taken up for consideration by the learned Presiding Officer of DRT on 5.10.2015 the same was withdrawn by the Counsel for the Security Applicant/auction purchaser.

Thereafter, in December, 2015 the respondent No. 1 filed another application (being I.A. No. 2219/2015) once again claiming a direction from the DRT which was earlier also claimed in I.A. No. 1528/2015 but which was withdrawn on 5.10.2015. The prayer made in the said second application is also re-produced below:

(i) Issue directions to the respondent Bank to release the earnest money deposited by the applicant/petitioner in respect of the sale of the property bearing Shop No. G-3 & G3-A, Ground Floor, Block B, Ward No. 11, Municipal No. 1, 4916, Shyam Lal Road, Darya Ganj, New Delhi-110002 aggregating to the sum of Rs. 26,25,000/- alongwith interest thereon during the pendency of the deposit of the same with the Bank and till the time the said payment is released to the petitioner; and

(ii) Pass such other and further order(s) as this Hon'ble Court may deem fit and proper in the interest of Justice."

In para Nos. 8 and 9 of this application No. 2210, 2015, the following averments, which were made in I.A. No. 1528/2015 also, were made by the respondent No. 1 herein:

"8. That the applicant had deposited 25% of the earnest amount as called for by the respondent Bank in their tender notice and further waited inordinately for a period of over 3 years to see that the matter gets concluded in the satisfactory manner.

That it is stated that the litigation between the parties has continued unabated during the intervening period and the applicant is no longer desirous of continuing the proceedings and would like to withdraw herself from the said bid in respect of the property mentioned aforesaid. Even otherwise, the property in Delhi have shown downward trend to the extent of 30%. The aforesaid bid was made at the relevant time taking into consideration that it will be in the interest of the applicant to start her own business but with the lapse of time and the inordinate delay in the Court, has promoted the applicant to prefer this application before this Hon'ble Tribunal seeking indulgence by craving that this Hon'ble Court may be pleased to release the 25% of the bid amount in respect of the aforesaid properties bearing Shop No. G-3 & G-3A, Ground Floor, Block-B, Ward No. 11, Municipal No. 4916, Shyam Lal Road, Darya Ganj, New Delhi-110002."

The respondent No. 1/auction purchaser thus by way of a miscellaneous application moved in her S.A. No. 580/2012 had sought the reliefs for refund of full amount of 25% of EMD in respect of shops No. G-3 and G-3A which were not even the subject matter of her S.A. in which she had sought some reliefs, as noticed already, in respect of shop No. G-1 only for which she had not paid balance amount of 15% at the time of acceptance of her bid on the date of the auction due to which her EMD stood forfeited by the Bank.

IA No. 2219/2015 was however dismissed 14.1.2016 by the then Presiding Officer DRT-III by coming to a categorical conclusion that the Bank had rightly forfeited the EMD. That order is also re-produced below:

"The present application is filed by the applicant requests to give direction to the respondent Bank to release the earnest money deposited by the applicant in respect of the property bearing Shop No. G-3 & G-3A, Ground Floor, Block-B, Ward No. 11, Municipal No. 4916, Shyam Lal Road, Darya Ganj, New Delhi-110002.

The learned Counsel for applicant submits that the earnest money deposited by the applicant is stuck up with the Bank since last three years therefore the Bank may be directed to release the same to the applicant. One the other hand the learned Counsel for respondent Bank submits that the Bank has rightly forfeited the earnest money after waiting for one year therefore the present application is time barred and not maintainable.

The learned Counsel appears for applicant in 321 of 2014 submits that the applicant Ms. Shivangi Gupta is the daughter of main borrower in the present matter.

After hearing bother sides at length and perusing the record, this Tribunal is of the view that the present I.A. is time barred and Bank has rightly forfeited the earnest money of the applicant.

With the above direction, the present I.A. is dismissed.

Matter be listed on 29.2.2016 for further proceedings."

Thereafter, respondent No. 1 had moved another application, being I.A. No. 446/2016, for re-call of the said order dated 14.1.2016. Notice of that application was given to the Bank by DRT for 15.3.2016. However, thereafter the auction purchaser does not appear to have requested the DRT for disposal of I.A. No. 446/2016 for some dates and on 12.7.2016 appears to have decided not to pursue that application since on that date her Counsel had got the case fixed for final arguments/disposal of the S.A. and the matter was adjourned to 28.9.2016 for final arguments. However, before that date the then Presiding Officer appears to have demitted office upon completion of his statutory tenure of five years.

The matter then came to be up for final hearing on 28.9.2016 before the Presiding Officer of DRT-II who had been given the additional charge of DRT-III also by the Central Government. It appears that on that date the auction purchaser pointed out that I.A. No. 446/2016 had not been disposed of and accordingly the learned Presiding Officer had directed filing of reply to that application instead of hearing final arguments and adjourned the matter for 28th November, 2016 for 'further proceedings'. On that date the impugned orders came to be passed and after allowing I.A. No. 446/2016 the learned Presiding Officer on the same date proceeded to allow I.A. No. 2219 also and S.A. was again adjourned to 13.2.2017 for 'further proceedings'. The orders passed on that date are re-produced below:

"I.A. No. 446 of 2016

The present application is filed by the applicant request for recall the order dated 14.1.2016 passed by this Tribunal wherein it was held that the I.A. No. 2219 of 2015 was barred by limitation and claim of the Bank was within time therefore the Bank has rightly forfeited the earnest money of the applicant.

In this fact and circumstances the present I.A. is allowed.

I.A. No. 2219 of 2015

The present application is filed by the auction purchaser to release the earnest money deposited by the auction purchaser in respect of the sale of the property bearing Shop No. G-3 and G-3A, Ground Floor, Block-B, Ward No. 11, Municipal No. 4916, Shyam Lal Road, Darya Ganj, New Delhi-110002 aggregating to a sum of Rs. 26.25 lacs alongwith interest thereon and notice to the respondent Bank were given

So far the Counsel for the Bank is concerned he submits that it is for the Tribunal to exercise its discretion. The learned Counsel for respondent No. 2 submits that he has no objection. Since subsequent order for sale of G-1 except to G-3 and G-3A by the Tribunal the auction purchaser filed this application for refund 25% of the amount deposited by her.

In this facts and circumstances in my considered view that it is a fit case to direct the Bank to refund the earnest money of Rs. 26.25 lacs to the auction purchaser. The learned Counsel for respondent Bank submits that the earnest money of Rs. 26.25 lacs deposited by the auction purchaser was not kept in interest bearing no Lien Account therefore it is not fit case for granted interest.

In view of the above, the respondent Bank is hereby directed to refund Rs. 26.25 lacs to the present applicant within two weeks in accordance with law.

With the above direction the present I.A. is disposed of.

Matter be listed on 13.2.2017 for further proceedings."

The Bank challenged this order of the DRT since it had been asked to refund the 25% EMD amount which the auction purchaser/respondent No. 1 herein had deposited with the auctioneer immediately on the fall of hammer on the date of the auction in respect of two shops (G-3 & G-3A) which were not even the subject matter of S.A. No. 580/2012. The grievance of the appellant pleaded in the memorandum of appeal and also urged through its learned Counsel is that in fact the DRT had no jurisdiction to entertain such an S.A. even in respect of shop No. G-1 since any dispute between a Bank and an auction purchaser whose bid is accepted but still sale is not confirmed for any reason is not a dispute which can be resolved in a petition under Section 17(1) of SARFAESI Act. It was also submitted that in any case the learned Presiding Office was unjustified in recalling the earlier order dated 14.1.2016 passed by his predecessor rejecting same prayer of the auction purchaser and that too without giving even a single reason. Learned Counsel for the appellant had also submitted that the impugned direction for these and various other reasons highlighted in the memorandum of appeal cannot be sustained at all by this Tribunal and has to be set aside and further that in case laconic and cryptic orders like the ones passed in this case which could be said to be perverse also, are sustained a bad precedent will be set. So, this is a fit case, Counsel submitted, where this Tribunal must take a serious view of the manner in which the learned Presiding Officer has dealt with the matter so far and pass appropriate orders to ensure that such like orders are not passed in future since S.A. is still pending.

On the other hand, learned Counsel appearing in this appeal for the auction purchaser who is the beneficiary of the impugned direction given to the Bank at her instance and whose submissions were supported by the learned Counsel for the other two respondents/guarantors, had obviously supported the impugned orders and had submitted that no fault can be found with the exercise of discretion exercised by the learned Presiding Officer of DRT in directing the Bank to refund the EMD amount of two shops to the auction purchaser particularly when the Counsel for the Bank had not even made any submissions before the DRT in opposition to I.A. No. 2219/2015. It was sought to be conveyed to this Tribunal that the impugned order thus could be said to be a consent order and, therefore, this appeal itself is incompetent.

I have considered the rival submissions and also gone through the record of the DRT which was also sent for.

In my view, the impugned order dated 28.11.2016 passed by the present Presiding Officer of DRT-III cannot be sustained and has to go because same prayer of the auction purchaser/respondent No. 1 had already been declined vide order dated 14.1.2016 of the then Presiding Officer and that order had not been challenged by the auction purchaser. The present Presiding Officer has not given any reason whatsoever for abruptly recalling that order dated 14.1.2016. Certainly passing such like orders can be said to be arbitrary exercise of quasi-judicial powers by the learned Presiding Officer and if sustained by his Tribunal every time a new Presiding Officer takes over he will get a power to set aside his predecessor's orders just because the new Presiding Officer feels that some of the earlier orders were not correct in his opinion. Here the auction purchaser had approached the DRT earlier also for same relief when I.A. No. 1528/2015 was filed and then the same was not pressed before the then Presiding Officer. It is not that a litigant has got a right to move some application then withdraw if and again move a fresh application for the same relief and after it is rejected move another application for recalling of that order of rejection and then decided not to pursue the same, like in this case I.A. No. 446/2016 moved by the auction purchaser for recall of order dated 14.1.2016 was not insisted for being heard on couple of dates and finally her Counsel himself had got the S.A. fixed for final arguments in the main S.A. and once the Presiding Officer changed had once again got I.A. 446/2016 listed hearing instead of advancing final arguments.

The way matter has been dealt with by the learned Presiding Officer who passed the order dated 28.11.2016 has shaken the judicial conscience of this Tribunal. The present Presiding Officer shockingly recalled an order passed by his predecessor on 14.1.2016 by a one line cryptic order dated 28.11.2016 without giving any reason at all as to how that order could be recalled and what was the justification for recalling that order and, therefore, that can be said to be a perverse decision.

In my firm view the order dated 28.11.2016 passed by the learned Presiding Officer of DRT-III is liable to be set aside for the aforesaid reasons without going into the submission of the learned Counsel for the Bank that the S.A. itself even in respect of the prayer for refund of 10% of EMD in respect of G-1 is not maintainable. That objection can be pressed before the DRT itself at the time of final hearing which will take appropriate decision in accordance with law uninfluenced by any observation made in this order in respect of the order dated 28.11.2016.

I am not inclined to accept the argument raised from the side of the respondents that the impugned order is a consent order thereby making this appeal itself incompetent. No consent was given on behalf of the Bank before the DRT to recall the order dated 14.1.2016 and for following I.A. No. 2219/2015.

This appeal is accordingly allowed and order dated 28.11.2016 of DRT-III, Delhi is hereby set aside. In the facts and circumstances of this case and observations made above regarding the manner in which the present learned Presiding Officer has dealt with the matter and exercised his authority/powers arbitrarily in recalling the order of his predecessor I deem it appropriate to withdraw the S.A. from DRT-III and direct its disposal now by the Presiding Officer of DRT-I, Delhi. The S.A. will now be taken up by DRT-I on the date already fixed in the matter. The record of the S.A. which was sent for by this Tribunal be sent back to DRT-III with a copy of this order and the Presiding Officer of DRT-III will ensure that the record is transmitted to DRT-I for the date already fixed in the matter.