Anil Kumar Sood vs Ifci Ltd And Anr

This order is being prepared while working from home for being signed and communicated to the parties because of the suspension of functioning of DRAT due to spread of Corona Virus (Covid-19) in the entire country. This procedure for the preparation of orders by quasi judicial tribunals and their communication to the concerned litigants in place of formal pronouncement in open Court has been recognised by the Hon'ble Supreme Court in one of its judgments reported as AIR 2008 SC 2594, "State Bank of India and Ors. Vs. S.N.Goyal"(para 19) wherein it was observed that:-

".............While some quasi judicial tribunals fix a day for pronouncement and pronounce their orders on the day fixed, many quasi judicial authorities do not pronounce their orders. Some publish or notify their orders. Some prepare and sign the orders and communicate the same to the party concerned "

I now proceed to pass my final order in this appeal.

This litigation centres around and parties involved in this litigation are fighting in respect of plot no. B-5, Focal Point, Rajpura, (Punjab) msg. 12415 sq.yds. and superstructures built thereon(hereinafter referred to as 'property-in-question'). The present appeal arises out of an Appeal filed by the appellant herein(auction purchaser of 'property in question') before the Debt Recovery Tribunal(DRT) under Section 30 of the Recovery of Debts Due to Banks and Financial Institutions Act,1993('RDDBFI Act' in short) against an order passed by the Recovery Officer attached with DRT-3, Delhi in Recovery Case(RC) No. 116/2010. The recovery proceedings are going on for recovery of public money running into over twenty crores of rupees from the defaulting borrower/guarantors/mortgagor of respondent no.1 IFCI Ltd. against whom the DRT had issued a recovery certificate in Original Application(O.A.) No.450/2000 filed by IFCI Ltd. against its defaulting borrower M/s Overseas Cables Ltd., respondent no.2 (hereinafter to be referred as the 'borrower Company') and the guarantors (who are not parties in the present appeal) for recovery of Rs.5,81,94,815/- with pendente lite and future interest thereon @ 17.05% p.a. plus liquidated damages @ 2% p.a. plus interest tax outstanding in one loan account and for recovery of Rs. 3,55,41,175/- with interest thereon @ 18.05% p.a. plus liquidated damages @ 2% p.a. plus interest tax and costs in another loan account.

The learned DRT allowed the claims of IFCI Ltd. in the two loan accounts vide its final order dated 26.11.2010, as far as principal amounts outstanding in the two loan accounts were concerned. Interest was, however, reduced to 15% p.a. with quarterly rests from the date of filing of the O.A. It was directed that the decretal amount could be recovered from the sale of the mortgaged land msg. 12415 sq.yds. with structures thereon. The order of DRT does not appear to have been challenged by any party. In due course the recovery certificate came to be forwarded to the recovery officer for execution and the same came to be registered as R.C.No. 116/2010. Before the recovery officer the Certificate Holder(CH) IFCI Ltd. initially sought sale of only 11705 sq. yds. out of 12415 sq. yds. of mortgaged land and buildings constructed thereon. Rest of the mortgaged land with eighteen shops built thereon was not sought to auctioned by the CH Bank. In the valuation report produced by IFCI value of 18 shops and land underneath was not included. It appears that in respect of those 18 shops some litigation is going on since the same were being claimed to have been constructed illegally by the mortgagor on the mortgaged land. First sale proclamation was issued with a reserve price of Rs.590 lacs. That auction failed for want of buyers. It appears that thereafter another attempt was made to auction the property and at the request of the CH Bank as well as the 'advocate auctioneer' reserve price was reduced to Rs. 5.50 crores . It also appears from the records of the fora below that the decision of the recovery officer taken at the instance of the IFCI and the 'advocate auctioneer' had led to some litigation at the instance of one of the certificate debtors(CD) Harjinder Singh who had filed a writ petition in the Hon'ble Punjab and Haryana High Court which at one stage permitted the auction to go on but with the original reserve price and not the reduced one. By another order High Court had asked the IFCI and recovery officer to make another attempt to sell the mortgaged property but after getting the property valued afresh.

At that stage IFCI got the property valued and according to the valuation so got prepared the value of land msg. 12415 sq.yds. and superstructures but excluding the 18 shops constructed on a part of the mortgaged land, was assessed by the valuer engaged by IFCI was Rs.6,90,38,000/-. The property could however, be not sold at that much reserve price. At the request of IFCI the reserve price was then reduced to Rs.5, 86, 83,000/- and in the fresh auction conducted in November, 2018 the appellant herein purchased the same for Rs.5,86,83,000/-. The sale in his favour was confirmed by the recovery officer on 28.01.2019 and thereafter sale certificate was also issued. That sale was conducted by the recovery officer without first taking physical possession of the property in question. After confirmation of the sale the appellant wanted to be delivered physical possession also of the property in question. He was delivered physical possession of a part of the property and possession of the remaining part of the land over which 18 shops were there could not be delivered to the appellant since the occupants of those eighteen shops resisted taking over of possession. The recovery officer Shri Jetly was apprised of that position. On 08.02.2019 the shop owners also appeared before the recovery officer through an advocate and the advocate made an oral submission that there was material irregularity in the conduct of auction of the property in question and that the 18 shops had been purchased by them and they were bona fide purchasers. Counsel sought time from the recovery officer to file formal objections and the recovery officer Shri Vikash Jaitly accepted that request and adjourned his proceedings and while adjourning the proceedings to 27.02.2019 he directed that status quo shall be maintained by the auction purchaser, IFCI and further that the auction purchaser(appellant herein) shall not create any third party interest in respect of the property in question. On 27.02.2019 the recovery officer further directed IFCI to get fresh valuations done of mortgaged property including18 shops done. These directions were given since the recovery officer had entertained a doubt that the auction purchaser as well as IFCI had got the auction sale confirmed from him by playing some kind of fraud and concealment of material facts regarding the existence of 18 shops on a part of the mortgaged land which had led to exclusion of value of those shops while issuing sale proclamations.

The appellant-auction purchaser felt that the recovery officer had illegally started fresh kind of due diligence proceedings which he had already done and certified also before putting the property to auction and confirmation of sale in favour of the appellant. Her accordingly approached the learned Presiding officer of the DRT by way of an appeal under Section 30 of the RDDBFI Act,1993 but the same was dismissed and the order of dismissal of the appeal is now under challenge in the present second appeal. The relevant portions from the order passed by the learned Presiding, which give the background of the litigation and the reasons for the dismissal if the appeal are re-produced below:-

"2. The brief facts of the case are that instant appeal is being filed against the impugned order dated 08.02.2019 passed by Ld. Recovery Officer- II, DRT-III, Delhi, in RC No. 116/2010 whereby the Ld. Recovery Officer without application of judicial mind, exceeding his jurisdiction and powers and also misconstruing the settled law has not only directed the parties (including appellant) to maintain Status Quo qua the property-in-question but also has granted liberty to the CDs and Objector to file their objections (beyond limitation) and that too on verbal request, which is something unheard of in law and in practice. Still, the sale was conducted under the orders of Hon'ble High Court vide order dated 02.042018 and after conducting the sale and getting bid after failure of more than 10 auctions in past 19-years, a single bid was received and Ld. Recovery Officer after confirming the sale, as none filed any objections pre- sale or post sale, on his own self has ordered status quo, as if he is assuming appellant jurisdiction of his own orders. Hence, this appeal has been filed against the impugned order dated 08.02.2019 passed by Ld. Recovery Officer.

It is stated in the appeal that appellant herein is a bonafide auction purchaser who has purchased the immovable mortgaged property being all that piece & parcels, buildings & structures at B-5, Focal Point, Rajpura, Punjab admeasuring 12415 (hereinafter referred to as 'property-in-question') in a public auction conducted by Ld. Recovery Officer on 30.11.2018. The respondent no. 1 is a financial institution and is alleged to have granted certain credit facility to the respondent no. 2.it is also stated that the respondent no. 2, who was principal borrower of the respondent no. 1, is presently under liquidation with the Hon'ble High Court of Punjab &Haryana. In view of defaults committed by respondent no. 2 in repayment of the credit facilities, the respondent no. 1 Ned an OA no. 450/2000 beforeHon'ble DRT-1, Delhi against the respondent no. 2 and its guarantor and mortgagors which was allowed vide Final Order dated 26.11.2010 and pursuant thereto, a Recovery Certificate being RC No. 116/2010 was issued, accordingly, recovery proceedings were initiated against the respondent no. 2.

Further, it is stated that in CWP No. 22219 of 2017 titled "Harjinder Singh Vs. Recovery Officer-II, DRT-III, New Delhi&Ors.", Hon'ble High Court of Punjab & Haryana vide order dated 02.04.2018 directed the Ld. Recovery Officer and respondent no.1 to make a fresh efforts to seal the mortgaged properties after getting their market value reevaluated. However, after taking e ight adjournments from 15.05.2018 till 11.07.2018, the respondent no. 1 filed the valuation report on 16.07.2018 and requested to put the property (12415 sq. yds.) on auction with reserve price of Rs. 6.90 crore. Further, in view of some typographical mistake in sale proclamation dated 16.07.2018, fresh sale proclamation (for all those pieces and parcels of land measuring 12415 sq. yds.) dated 03.08.2018 was issued where date of e-auction was fixed on 20.09,2018 with reserve price of Rs. 6,90,38,000/-. On 09.10.2018, it was informed to the Ld. Recovery Officer that auction dated 20.09.2018 has failed for want of bids. It is pertinent to note that in all the valuation reports, especially the recent valuation reports, on the basis of which Recovery Officer had been fixing the reserve price and conducting the sale, it was clearly mentioned in all that there are 18-shops constructed over the land- in-question. Thus, it is beyond any pale of doubt, thatRecovery Officer was fully aware of the exact description of land, its contents and its features including the extent of construction thereupon, which is evident from the record of the Recovery Officer.

It is further stated that at the request of CHFI, reserve price was reduced by 15% and fresh sale proclamation (for all those pieces and parcels of land measuring 12415 sq. yds.) dated 09.10.2018 was issued when the date of e-auction was fixed on 30.11.2018 with reserve price of Rs. 5,86,83,000/-......................... It is also stated that on 30.11.2018, the appellant herein was declared as successful bidder for an amount of Rs. 5,86,83,000/-........................................................

6........................... ................. It is further stated that on 17.01.2018 appellant herein filed an application vide diary no 760 for preponement and confirmation of sale and other consequential relief and the purpose of filing the same was that since no objections had come forth during pre-sale and post-sale period of 30- days, confirmation could have been done on an early date, as theappellant immediately wanted to start the construction work as it wanted to start work of expansion in a time bound manner. The said application was mentioned before the Recovery Officer on 18.01.2019 on which date the Recovery Officer issued notice on the said application to CHFI and CDs returnable on 28.01.2019. However, despite service, none appeared for CDs on 28.01,2019 and after hearing all the parties and after being satisfied, the Ld. Recovery Officer confirmed the sale in favour of appellant herein and directed the Registry to issue Sale Certificate and also directed the CHFI to return the origin& documents and physical possession to the appellant in assistance with OL.. Thereafter, RC was adjourned to 08.022019 i.e. the date already fixed. Accordingly, the Registry issued Sale Certificate in favour of the appellant herein. Thereafter, the appellant approached the office of CHFI for taking actual physical possession of the property and original chain of previous title documents.

It is stated that CHFI vide its email dated 31.012019 send to the OL attached to Hon able High Court of Punjab & Haryana at Chandigarh, requested for assistance in handing over the possession to the auction purchaser I appellant herein. Vide office order dated 05.022019, OL appointed its official Sh. M.S. Uniyal to visit the property and to hand over the possession to the appellant / auction purchaser on 06.02.2019.On 06.02.2019, officials of CHFI and OL visited the auctioned property and handed over the actual physical possession of the property- in-question to the appellant / auction purchaser and spot proceedings were prepared at site on 06.02.2019. It is also stated that while handing over the possession to the appellant herein, also demanded physical possession of even those 18-shops constructed upon the mortgaged property. i.e. well within the auctioned area of 12415 sq. yds. in the property-in-question, to which the occupants resisted. It was informed by the representative of OL that the Hon'ble High Court of Punjab & Haryana at Chandigarh has already passed a detailed order dated 11.02.2013 with respect to abovesaid illegal shops. Nonetheless, with the subsequent order of Division Bench of High Court dated 02.04.2018, this order was not left with any significance. Even otherwise, from the perusal of order dated 13.02.2013, it is evidence that the 18-shops are illegally constructed over the property-in-question and are occupied by unauthorized occupants who did not allow the auction purchaser to take the possession even in the presence of representative of DL and CHFI. Moreover, these occupants never filed any objections till date, inspite of the fact, that they were fully aware that their shops have been illegally constructed upon the mortgaged property, against which there is a decree which they have never challenged and they did not file any objections to the repeated sales being conducted of the mortgaged properly and hence they were left with no right whatsoever. It is submitted that apart from the area of illegal 18-shops, the remaining portion of 12415 sq. yds. have been received by the appellant. It is also pertinent to note that after taking physical possession of the property-in- question on 06.02.2019* the appellant here has already started renovation in the premises and have invested a substantial amount in renovation. Further, for getting the remaining portion of property-in- question, the appellant herein filed another application dated 08.02.2019 vide diary no. 1706 for appointment of Receiver for taking possession of remaining area. The said application was taken up on 08.02.2019, on which date also no objections had been filed by any person whatsoever even though limitation had expired long back. The Ld. Recovery Officer did not pass any order on the said application and rather, on the verbal submissions of Objector and CDs not only directed the parties to maintain status quo of the property but also restrained the appellant from creating any 3rd party interest qua the property.

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Ld. counsel for respondent F1 contended that Ld. Recovery Officer has confirmed the auction of the said property vide order dated 28.01.2019 in favour of highest bidder Sh. Anil Sood and sale certificate has also been issued to Sh. Anil Sood. Further, the Ld. Recovery Officer vide order dated 28.01.2019 has directed the respondent Fl to handover the physical possession of the auctioned property to the auction purchaser in consultation with the OL attached to the Hon'ble Punjab & Haryana High Court and in compliance of aforesaid direction, the OL has handed over the physical possession of the auctioned property to the auction purchaser. Thereafter, the auction purchaser moved an application on 08.02.2019 for handing over the possession of 18-shops on the mortgaged property. The Recovery Officer, on perusal of the aforesaid application, was of the opinion that respondent Fl has concealed the fact of 18 shops which are constructed on the mortgaged property and in response to the observations of the Ld. Recovery Officer, respondent Fl filed an affidavit vide diary no. 2595 dated 27.02.2019 before the Ld. Recovery Officer wherein IFCI deposed that the CHFI never concealed the fact regarding illegal construction of 18-shops on the mortgaged property. It is also submitted that 18-shops constructed on the mortgaged property are illegally constructed shops and hence the valuation of the said shops has been excluded while carrying out the valuation of the said mortgaged property. Further, it is stated that the respondent Fl is in support of the present sale for the following reasons:

I. The shops in issue are illegal construction which cannot be legalized by way of sale under the aegis of DRT;

II. The shops have been constructed over a small portion of total land area of 12415 sq. yds.;

III. There is minimal chance of getting any buyer to purchase the illegally constructed shops if sold either at Fair Market Value or Distressed Sale Value.

Hence, it has been prayed to pass appropriate orders on the present appeal filed by the auction purchaser.

Heard and the record has been thoroughly perused, In the present matter, the impugned order dated 08.02.2019 has been challenged on the ground that Ld. Recovery Officer stayed the further proceedings with respect to the property-in-question and sited that in the auction notice, 18-shops were not mentioned and this fact has been suppressed on behalf of CHFI and 3 party objectors have appeared, who had stated that there is material illegality in the auction conducted on 30.11.2018, however, no formal objections were filed on behalf of third party objectors. Though, the counsel Sh. Suresh Arora appeared in the present matter.

13 Apparently, no formal objections were filed as apparent from the order dated 08.02.2019. Further, Ld. Recovery Officer has already passed an order, whereby he appointed Sh. Chander Mohan, Assistant to get the sate deed registered in favour of the appellant herein, however, Ld. Recovery Officer has observed that 18-shops were constructed and this point has been suppressed by the respondent FT and the valuation of the same was not disclosed in the sale Proclamation. However, Ld. counsel for the appellant herein drawn attention of this Tribunal to the order dated 22.12.2011 of Ld. Recovery Officer in RC No. 116/2010, wherein it is mentioned that the CD had disposed off a part of mortgaged property by constructing 18-shops without the permission of CH F' and a corn paint was lodged with the EOW, Delhi. ...........................................

Further as apparent from dated 31.10.2011 of Ld. Recovery Officer passed in RC No.116/2010 wherein bid was to be confirmed with the prior permission of Hon'ble High Court Punjab & Haryana, Chandigarh, which is not apparently sought by Ld. Recovery officer. From the perusal of the impugned order dated 27.02.2019, it is apparent that Ld. Recovery Officer merely directed the CHFI, OL & auction purchaser to maintain status quo of the property and by passing the said impugned order, no apparent illegality or irregularity is committed.

Resultantly, finding no merits in the present appeal, the same stand dismissed without no orders to costs."(highlighting is by me)

The appellant-auction purchaser felt that the recovery officer was bent upon harassing the auction purchaser by trying to reopen the confirmed sale of the property in question and so the present appeal came to be filed.

On behalf of the appellant Mr. Sanjeev Bhandari, advocate argued. He was assisted by Mr. Ravi Data, advocate who at one time was appointed by the recovery officer as the auctioneer for conducting the auction and on whose report the recovery officer had reduced the reserve price for the second auction by forty lacs since no buyer had come forward to buy the property, which as noticed already was 11705 sq.yds. only and did not include 18 shops constructed on the remaining mortgaged land.

From the side of respondent IFCI Mr. R.P.Aggarwal, advocate assisted by Mr. Narinder Singh, advocate had argued before this Tribunal.

The arguments from the side of the appellant were same as were raised before the learned Presiding Officer of DRT. The appellant's principal argument was that the recovery officer has no authority in law to reopen confirmed auction sale particularly when the recovery officer himself had confirmed the sale after fully satisfying himself that sale was conducted after compliance of all the requirements of law. It was contended that the recovery officer ought to have confirmed the sale immediately on the expiry of period of thirty days from the date of auction since no body including the mortgagor/owner of the mortgagedproperty or by IFCI had filed any objection petition before the recovery officer challenging the auction sale on any ground but that was not done and when the appellant/ auction-purchaser approached the recovery officer for confirmation of sale and issuance of sale certificate only then the recovery officer realised his mistake and confirmed the sale on 28.01.2019 by preponing the proceedings pending before him. Thereafter the same recovery officer by misusing his authority and as a pressure tactic and to blackmail the appellant started suspecting his own orders and putting the blame of fraud which never was there on the part of IFCI or the appellant has directed IFCI to get fresh value done which course of action is unheard of in law. It was also contended that in case the recovery officer had sold the mortgaged property which included 18 shops without examining the latest valuation report submitted before him by IFCI which showed that value of 18 shops was not included in the value of land msg. 12415 sq.yds. and other superstructures existing there the appellant as a bona fide purchaser cannot be blamed and so the exercise commenced by the recovery officer aimed at cancellation of the confirmed sale deserves to be stalled otherwise the recovery officer will succeed in his oblique motives of helping unauthorized persons who have now entered into this legal battle.

Learned counsel for IFCI maintained, as was the stand before DRT, that there was neither any concealment of any material fact by IFCI nor any kind of fraud was played by any IFCI official on the recovery officer as he had expressed in the orders dated 08.02.2019 and 27.02.2019. It was submitted that right from day one when the recovery proceedings commenced it has been the stand of IFCI that 18 shops built on a part of the mortgaged land were not to be sold nor their value was given by any valuer in any of the valuations reports produced before the recovery officer. It was contended that if the recovery officer himself did not bother to look into his own files to find out out what was to be auctioned by him and what was not to be auctioned then it shows gross negligence of the recovery officer and no involvement of any official of IFCI.

As far as the legal position that even a confirmed sale can be set aside in case the same is found to have been a product of 'fraud'. In the present case the recovery officer claims to have been misled into auctioning the mortgaged property for a price which did not include the value of 18 huge size shops constructed on a part of the mortgaged land meaning the appellant-auction purchaser has got 18 big shops for free though as per the valuation of shops now got done appears to be around a crore of rupees. I am of the view that the recovery officer should not be stopped to investigate as to whether the auction sale in favour of the appellant is a product of 'fraud' as is the suspicion which has crept into the mind of the recovery officer. As far as the contentions raised on behalf of the appellant that at every stage all material facts were placed before the recovery officer by IFCI before obtaining an order for sale of the part of mortgaged land excluding 18 shops is concerned I am of the view that all the grievances of the auction purchaser and IFCI ought to be urged first before the recovery officer during the course of investigation and his final decision should be awaited. This legal battle initiated by the auction purchaser appears to be premature because the recovery offices so far raised only a suspicion about the genuineness of the auction sale and has not set it aside suo moto.

This appeal is accordingly disposed of with a direction to the recovery officer to come out with his verdict within a period of one month. Since these days the functioning of DRTs is suspended due to spread of Corona Virus(Covid 19) this period of one month will commence from the date when lockdown is lifted by the Central Government. It is clarified that this Tribunal has not gone into the merits of the claim of the recovery officer that some 'fraud' has been played in the auction of the property in dispute and the recovery officer will take his own independent decision uninfluenced by any observation made by the learned Presiding Officer of DRT in his impugned order. This order will also not come in the way of disposal of objections already filed in respect of 18 shops by some third party objectors against the very auction of 18 shops and their threatened dispossession from those shops. The recovery officer will dispose of those objections also in accordance with law within the period of one month from the date of lifting of lockdown in the city.