Asha Gautam And Ors. vs Ifci And Ors.

S.N.H. Zaidi, J

Both these appeals have been directed against the judgment and order dated 6.4.2011 passed by the Presiding Officer of DRT-I, Delhi in Appeal No. 15/2009, whereby the orders dated 3.6.2009 and 10.7.2009 of the Recovery Officer (R.O.) passed in RC No. 43/2006, have been set aside and the RO has been directed to resell the properties after obtaining fresh valuation report from the CH-FI and to return the monies deposited by the appellants herein. The facts giving rise to these appeals, in brief, are that in the proceedings in respect of RC No. 43/2006, issued in O.A. No. 148/2002, the RO had ordered for the sale of the movable and immovable properties, namely, the microwave tower and the land situated at Khair Bypass Road. Aligarh (UP) and sale notices were published in the newspapers inviting sealed tenders by 8.4.2009, which were to be opened on 9.4.2009. The appellants of both the appeals submitted their sealed tenders. Only three tenders were received, which were opened on 9.4.2009 by the Sale Committee, appointed by the RO. The bid offered by Smt. Asha Gautam, the appellant of Appeal No. 227/2011, was found to be the highest, but the Sale Committee deferred the confirmation of sale to 17.4.2009 and then to 23.4.2009. On 23.4.2009, the Sale Committee instead of finalizing the bid, directed for the open auction of the said properties. The auction was conducted by the Sale Committee on that very date at the office of the CH-FI wherein seven persons, including the appellants of both the appeals, participated. The bid of Smt. Asha Gautam for Rs. 56.50 lacs was again found to be the highest whereas the bid of Mr. Sachin Jain for Rs. 50.25 lacs was the fifth at the final round of the auction and as such the sale was confirmed in favour of the highest bidder.

Mr. Sachin Jain filed objections before the RO taking the plea, inter alia, that the terms and conditions of the auction were not properly told by the Sale Committee and he could not fully understand the terms of sale due to loud noise and chaos at the auction site and he was under the impression that the auction was being held for the land only and offered to purchase the properties in question in Rs. 57.50 lacs. The RO, vide order dated 3.6.2009, directed him to deposit the entire offered amount within 15 days which was deposited by him. The RO, thereafter, vide order dated 10.7.2009, directed both the objector and the highest bidder to participate in the inter se bidding before the Sale Committee at the office of the CH-FI on 17.7.2009.

The highest bidder challenged the aforesaid orders dated 3.6.2009 and 10.7.2009 before the DRT in Appeal No. 15/2009 filed under Section 30 of the RDDBFI Act. The learned lower appellate Tribunal, after hearing the parties, set aside those orders of the RO as well as the auction of the properties in question held on 23.4.2009, by the impugned order dated 6.4.2011 and directed the RO to re-sell the properties after obtaining fresh valuation report from the CH-FI and also directed him to return the monies deposited by the highest bidder and the objector. Feeling aggrieved with that order and directions, both the highest bidder and the objector have filed the present appeals.

I have heard Mr. Tarun Kashyap, the learned Counsel appearing for the appellants of Appeal No. 227/2011, Mr. Cyan Prakash, the learned Counsel for the appellant of Appeal No. 317/2011 and Mr. P.R. Singh for the respondent FCI, the CH-FI.

Mr. Kashyap has contended that the RO had passed the order of inter se bidding of the properties in question arbitrarily and without properly appreciating the circumstance that the objector had unsuccessfully participated in the open auction held on 23.4.2009 and as such his challenge to the auction by offering a higher amount was nothing but an effort to scuttle the auction process and the order impugned of the lower appellate Tribunal directing for the resale of the properties in question was not even prayed for by anybody. According to him, prior to the conduct of the auction it was made known to everyone through the proclamation of sale, by publication of sale notice in the newspaper as well as by pronouncement of the terms and conditions of sale by the Sale Committee that the properties to be sold consist of both the land and the microwave tower, which is also reflected from the bid-sheet (Page No. 73 of the paper book of Appeal No. 227/2011) and every bidder was informed about the nature of those properties and ample opportunity was given to every bidder to make the bid and thereafter the highest bidder was declared as successful and the sale was confirmed in her favour.

Mr. Kashyap further contended that after the confirmation of sale and due deposit of the sale consideration by the highest bidder with the RO, the sale could be set aside only in accordance with the provisions of the Second Schedule to the Income Tax Act, but since the objector did not comply with the mandatory requirement of Rules 60 and 61 of the said Schedule and did not deposit any amount in accordance thereof, the objection should have been dismissed by the RO, instead of directing the objector to deposit the offered amount or permitting him to participate in the inter se bidding with the highest bidder.

He also contended that Mr. Jain had filed the objections after about one-and-half months of the auction dated 23.4.2009 but the RO without issuing notice to the highest bidder and without affording her any opportunity of hearing had passed the impugned orders dated 3.6.2009 and 10.7.2009 in violation of the principles of natural justice. He also pointed out that though those objections were listed for hearing on the point of its maintainability on 3.6.2009, but the RO without giving any finding on that point, vide order dated. 3.6.2009, directed him to deposit the offered amount within 15 days and without disposing of those objections on merit, vide order dated 10.7.2009, directed for the inter se bidding between the objector and highest bidder, which were bad in law. He further pointed out that neither the RO nor the lower appellate Tribunal had set aside the auction held on 23.4.2009, as such the properties in question cannot be resold by fresh auction, as directed by the DRT.

Mr. Kashyap also pointed out that there is nothing on record to show that the reserve price of the properties in question shown in the sale notice was not proper as no one had disputed it, but the lower appellate Tribunal, without there being any material on record in this regard, has wrongly held that the valuation of the property in question was much more than the amount offered by the objector. He also pointed out that the objector had only prayed for the acceptance of his offer of Rs. 57.50 lacs and confirmation of sale in his favour and he never prayed for any inter se bidding with the highest bidder, but the RO without looking to the relief sought for by the objector and without considering that the objector had not complied with the mandatory requirement of Rules 60 or 61 of the Second Schedule to the Income Tax Act, ordered for the inter se bidding, vide order dated 10.7.2009. He also contended that objector's contention that he could not understand that the auction was being conducted for both the land and the microwave tower is not tenable, because he had himself given tender quoting prices separately for the land and microwave tower, as is evident from the Sale Committee's report.

Mr. Kashyap further contended that the appellant could not deposit the poundage fee in time in mistakenly, but the same was deposited along with the interest for the delayed period after the application for condonation of delay was allowed by the RO and as such the objection raised in this regard by the objector was also not sustainable.

Mr. Gyan Prakash, however, contended that due to loud noise and chaos at the auction site the objector/appellant could not properly understand the terms of the auction and being under the impression that the auction was for the land only, he did not raise his bid beyond the highest bid of Smt. Asha Gautam, though he was ready and willing to bid for Rs. 57.50 lacs for both the land and microwave tower and had also deposited the said amount with the RO as per his direction without any delay. He further contended that the RO had rightly passed the orders dated 3.6.2009 and 10.7.2009 and the appeal filed by the respondents (appellants of Appeal No. 227/2011) before the DRT was on false and frivolous grounds. He also contended that the highest bidder did not deposit the entire required amount within the stipulated period of 15 days and had moved the application before the RO on 29.7.2009 seeking condonation of delay in depositing the poundage fee, which was never condoned as the RO, by order dated 31.7.2009, had observed that the issue of condonation of delay would be decided after the matter is adjudicated in appeal by the Presiding Officer. Mr. Prakash also contended that the lower Appellate Tribunal was not justified in ordering the re-sale of the properties in question after obtaining fresh valuation report as it was neither pleaded nor prayed by either of the parties.

I have considered the submissions of the parties Counsel and perused the records.

There is no dispute in respect of the facts that the appellants of both the appeals had participated in the open auction conducted on 23.4.2009 by the Sale Committee wherein, as per the bid sheet (Page No. 73 of the paper book of Appeal No. 227/2011), the bid of Smt. Gautam, the appellant of Appeal No. 227/2011, for Rs. 56.50 lacs was the highest whereas the bid of Mr. Jain, the appellant of Appeal No. 317/2011, for Rs. 50.25 lacs was the fifth at the final round of the auction. The bid of the highest bidder was accordingly accepted by the Sale Committee and the sale was confirmed in her favour. Mr. Jain, however, challenged the sale by filing objections before the RO and also offered a price of Rs. 57.5 lacs for the properties in question. In my opinion the objections have rightly been rejected by the lower appellate Tribunal as devoid of any force, as the circumstances clearly show that the participants of the auction fully knew that both the land and microwave tower were put on sale and that is why they had offered their bids for both the properties. Even the details of the properties were made known to everyone by the sale proclamation as well as the sale notices published in the newspapers, which clearly show that both the land and microwave tower were to be sold. The submission of the tender by the objector/appellant by himself offering Rs. 38.19 lacs for the land and Rs. 5.30 lacs for the microwave tower belies his own contentions. This makes the position very clear that the objector/appellant knew that the auction was held for both the said properties.

It is a settled proposition of law that the Court auctions cannot be allowed to be set aside at the instance of an unsuccessful bidder with a higher offer made after the completion of auction proceedings/confirmation of sale in favour of the highest bidder, if there is no allegation or proof of fraud or collusion in conducting the auction. The Hon'ble Supreme Court in the case of Valji Khimji & Co. v. Official Liquidator of Hindustan Product (Gujarat) Ltd. & Ors., IV (2008) BC 536 (SC) : VII (2008) SLT 621 has held that:

If it is held that every confirmed sale can be set aside the result would be that no auction sale will ever be complete because always somebody can come after the auction or its confirmation offering a higher amount.

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Of course, the situation may be different if an auction sale is finalized say for Rs. 1 crore, and subsequently somebody turns up offering Rs. 10 crores. In this situation it is possible to infer that there was some fraud because if somebody subsequently offers 10 crores, then an inference can be drawn that an attempt had been made to acquire that property/asset at a grossly inadequate price. The situation itself may indicate fraud or some collusion. However, if the price offered after the auction is over, is only a little over the auction price, that cannot by itself suggest that any fraud has been done.

In view of the above observation, the subsequent offer made by the objector/appellant for Rs. 57.5 lacs, which was higher by Rs. 1 lac only than the bid of the highest bidder/appellant, without any allegation of fraud or collusion or indicative of such fraud or collusion, could not be a ground sufficient for the RO either for directing him to deposit the offered amount or for directing the inter se bidding between him and the highest bidder, which in effect means the setting aside of the auction. The contention of Mr. Kashyap, in my opinion, has force that since the objector/appellant had not asked for the inter se bidding in his objection and had only prayed for the confirmation of sale in his favour at the offered price and though an objection was raised by him about non-deposit of the poundage fee by the highest bidder within the stipulated time, but since the RO without considering/disposing of the objections on merit or giving any finding on the maintainability of the objections, for which it was listed on 3.6.2009, had made the impugned orders dated 3.6.2009 and 10.7.2009, therefore, the same are not sustainable. I am, therefore, of the considered view that the direction given by the RO to the objector to deposit the offered amount without upholding the maintainability of the objection filed by him and the further direction for the inter se bidding between him and the highest bidder without disposing of the objections on merit were not proper and bad in law. The learned lower appellate Tribunal has thus rightly set aside the aforesaid orders of the RO by the order impugned.

Mr. Kashyap has pointed out that the appellants of Appeal No. 227/2011 have no grievance qua the setting aside of the orders of the RO by the Tribunal below and they are aggrieved only with that portion of the order dated 6.4.2011 whereby the auction dated 23.4.2009, conducted by the Sale Committee, has been set aside and the RO has been directed to resell the properties after calling for the fresh valuation report of the properties from the CH-FI and to return the sale consideration deposited by the auction purchaser. Mr. Prakash has, however, disputed the said order in its entirety on behalf the appellant of Appeal No. 317/2011.

It has been contended on behalf of both the appellants that as none of the parties to the appeal before the lower appellate Tribunal had disputed the valuation of the properties in question or asked for its re-sale, the impugned order of the Tribunal below directing the RO to re-sell the properties after obtaining fresh valuation from the CH-FI, without there being any material on record to suggest that the reserve price fixed by the Sale Committee was not sufficient, is arbitrary and against the facts and circumstances of the case. The contention of the parties appears to have force as the Tribunal below, in exercise of the power under Section 30 of the RDDBFI Act as an appellate Forum, was only required to see the infirmity or illegality in the orders appealed against and the same could have been substituted by the Tribunal below by any other order only in accordance with the relief claimed in the appeal. The order impugned lacks any finding qua the illegality/infirmity of the orders of the RO and since there was no prayer on the part of the appellants for setting aside the auction dated 23.4.2009 and there was also no material on record to suggest that the reserve price was not proper or insufficient and there was also no challenge to it before the lower Tribunal, as such the order impugned appears to be suffering with infirmity and cannot be sustained.

The contention of Mr. Kashyap that the sale of a property, whether movable or immovable, by the RO in a recovery proceeding, can only be challenged/set aside in accordance with the provisions of the Second Schedule to the Income Tax Act but since the sale in question has not been challenged in accordance thereto, therefore, it could not have been set aside by the Tribunal below, has force as, according to Section 29 of the RDDBFI Act, the provisions of the Second and Third Schedules to the Income Tax Act are applicable to the recovery proceedings with necessary modifications. It is not in dispute that the objector/appellant had not acted in accordance with the relevant Rule 45, 60 or 61 of the said Second Schedule for setting aside the sale. In view of this, the objection filed by the objector/appellant to the sale conducted by the Sale Committee on 23.4.2009, being in violation of the provisions of the said Schedule should have been rejected by the RO instead of granting any opportunity to him to participate in the inter se bidding with the highest bidder. In my opinion, the deposit of the offered amount by the objector in pursuance of the order dated 3.6.2009 of the RO cannot be held to be in compliance of Rule 60 or 61 of the Second Schedule to the said Act.

The plea taken by the objector/appellant that the highest bidder had not deposited the poundage fee within the stipulated period was not open to him in view of non-compliance of the mandatory provisions of Rule 60 or 61 of the Second Schedule to the Income Tax Act, although it appears that the requisite poundage fee had been deposited by the highest bidder along with interest for the delayed period.

Though RO is to make endeavour to get the maximum price of the property put to sale, but once the property was put to sale by inviting tenders and the tenders were also received by the due date of 8.4.2009, the Sale Committee conducting the sale should have finalised the sale in accordance with the rules. The Sale Committee, however, did not finalize it and decided to sell it by open auction and though the tender amount of the appellant Smt. Gautam, was the highest but since she had agreed to and participated in the open auction held on 23.4.2009, she cannot be said to be aggrieved of non-acceptance of her offer made by the tender. Since she was also the highest bidder in the open auction and the sale was confirmed in her favour, therefore, she was only required to deposit the safe consideration as per law. In my opinion, since the sale consideration was deposited by her within the stipulated period, some delay in depositing the poundage lee, which had also been deposited with interest for the delayed period, cannot be held to be a ground sufficient for setting aside the said auction.

On the basis of foregoing discussion, the order impugned of the lower appellate Tribunal directing the RO to resell the properties in question after obtaining fresh valuation report from the CH-FI and to return the amounts deposited by the appellants cannot be allowed to sustain. Consequently the appeals filed against it succeed. Appeal No. 227/2011 is accordingly allowed in full whereas Appeal No. 317/2011 is partly allowed and the order dated 6.4.2011 is hereby set aside only to the above extent. The RO is directed to proceed in accordance with law in respect of the sale of the properties in question in pursuance of the auction held on 23.4.2009. Copy of this order be furnished to the parties as per law.