Arun Kumar vs Syndicate Bank

Ranjit Singh, J

The appellant herein is neither the borrower nor the guarantor. He claims to be having interest in the property as he had agreed to buy the property, i.e., Ground floor portion of residential property consisting of one servant quarter, two car parking spaces in the drive way adjoining property No. 52 along with undivided ownership rights in the land underneath the said building bearing No. B-63, Paschimi Marg, Vasant Vihar, New Delhi and front portion of basement (half of entire basement). In fact, the respondent bank had initiated action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, the SARFAESI Act) against the property in question. Respondent Nos. 2 and 3 had filed S.A. No. 37/2011 before the Tribunal below. One of the grounds of challenge was that respondent bank had granted permission on 30.3.2011. When the S.A. came up for hearing on 16.5.2011 the bank was required to explain as to how subsequent to the grant of permission the action under the SARFAESI Act had been initiated in this case. The Tribunal below passed a status quo order and allowed opportunity to respondents 2 and 3 to bring a proposal for the sale of the property.

On 25.3.2012, the Tribunal below passed the following order:

"In the interest of justice, this Tribunal is of the view that one opportunity should be given to the applicant to bring a buyer for the Vasant Vihar property who should offer the price not less than the distress sale value of the property as per the valuation report submitted by the bank on 26.3.2012. The buyer with whom the applicant has already entered into an "Agreement to sell" can also participate. It is made clear that though this Tribunal has given a liberty to the Applicant to bring the buyer at a price not less than the distress sale value of the property yet it is expected that the Applicant while showing his fairness should persuade the buyer for the maximum value which is in interest of Applicant as well as Bank. "

Thereafter, a joint application (I.A. No. 231/2012) was filed by the bank and the applicant for recording the settlement for the sale of Vasant Vihar property. In the application, it was stated that a buyer for the Vasant Vihar property was arranged, who was ready to buy the said property for Rs. 1520 lac. 10% of the sale price, i.e., Rs. 152 lac was to be paid on 26.3.2012 and the balance of Rs. 1368 lac was agreed to be paid on or before 30.6.2012. While this application was under consideration, a third party, namely, M/s. Mankind Pharma Ltd. appeared and moved an application (I.A. No. 233/2012) for becoming a party and offering Rs. 1560 lac for the purchase of the property in question. It was also allowed to deposit a sum of Rs. 175 lac.

When this happened, the bank filed another application (I.A. No. 247/2012) seeking permission to withdraw from the settlement on the ground that the appellant/applicant had failed to deposit 10% of the amount on 26.3.2012 and also that offer for a higher amount has now been received from a third-party. The appellant, at this stage had submitted that he had handed over a cheque dated 26.3.2012, but the respondent Bank had refused to accept the same. This fact was, however, denied by the bank and it was urged that nobody had approached the bank and the Bank had only received a letter dated 3.4.2012, but by then the bank had already moved I.A. No. 247/22012 for withdrawing the consent.

The third-party who had moved the I.A. No. 233/2012, in the meantime, pressed that it be allowed to take this property as it had offered Rs. 40 lac more than what had been offered by the appellant.

The Tribunal below heard the counsel for the parties and considered whether the bank could be allowed to withdraw the consent which it had earlier given by moving the joint application Mr. Arun Kumar, respondent No. 2, in the meantime, filed an appeal in which this Tribunal on 8.5.2014 passed the following order:--

"The counsel for appellant and respondent No. 4 has made submissions at tangent but has not touched as to how they can be impleaded being necessary or proper party. Counsel for the bank rightly pointed out that they both are not necessary or property party. More appropriately, the property should be put to open auction to fetch maximum value and for that, hearing the borrowers may be required. Arguing counsel for the borrower is unwell and so on request made by on his behalf the case is adjourned to 17.07.2014. Interim order passed by this Tribunal shall stand vacated. The Tribunal below may proceed with speed with the SA which is pending."

The parties, thereafter, pressed their respective claim before the Tribunal below. The Tribunal considered the facts pleaded before it and observed that the applicant appellant did not deposit 10%, of the amount upfront by 26.3.2012. The money was received only on 3.4.2012, that too, by way of a cheque which was 10% upfront money, by which time the bank had already taken a decision to withdraw the offer and had moved an application in this regard before the Tribunal on 29.3.2012. The Tribunal below has viewed that the contract was not complete due to non-deposit of the money by the appellant. The Tribunal did not accept the submission made before it that the bank had refused to accept the money, by observing that this could simply have been done by sending the money by e-banking system. It is also noticed by the Tribunal that there was no balance in the account from where the cheque was drawn. Ultimately, the Tribunal has rejected the application by the third-party as well as by the appellant and has directed that the property be put to public auction sale after giving due notice to everyone as prescribed under law. The applicant appellant has filed the present appeal against this order of the Tribunal below.

This Tribunal, vide its order dated 8.5.2014 (reproduced above), has already held that it would be more appropriate if the property was put to auction to fetch maximum value. The case thereafter was adjourned for hearing the appeal as the counsel for the borrower was unwell. The appellant then withdrew the appeal or 17.7.2014 on the ground that the appeal was rendered infructuous. Both, the present appellant as well as the third-party, were prima facie considered not necessary or proper parties.

I am of the considered opinion that the present appellant though is seeking his right on the basis of an application field by the bank and the appellant jointly would not have any right to claim this property as there was no concluded contract. Even if there was some agreement, this has failed as the appellant did not deposit the 10% of the amount by the due date. In the meantime, a substantially increased offer has also come. It is to ensure that the property fetches maximum price that it was ordered to be put to public auction if need so arises.

Counsel for the appellant, however, contends that the payment by cheque is a valid tender unless it is dishonoured. Here the question is not whether or not the appellant had made a valid tender by way of cheque, but it is a fact that he did not deposit 10% of the amount by the due date. Thus, the issue of cheque being a valid tender does not arise in this case. As per the counsel, the time was not the essence of agreement to sell. It may not have been so, but, the payment was required to be made within the stipulated time, and the appellant cannot set up a case that he could make payment at his leisure according to his convenience.

The counsel has made some other submissions also that there are status quo order by the High Court and it could not have been violated while ordering the sale etc. Having granted permission, the bank could not have proceeded under the SARFAESI Act is the other ground raised by the counsel for the appellant. The proceedings under the SARFAESI Act can proceed once the appellant has failed to comply with the conditions on which the sale was being considered in its favour.

I do not find any reason to interfere in the impugned order and therefore, would dismiss the appeal in limine.