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Judgment
Anil Kumar Srivastava, Chairperson
THE APPELLATE TRIBUNAL :
Instant appeal has been preferred by the Appellants against judgment and order dated 16th February, 2022, passed by Learned DRT-3, Kolkata in S.A. 574 of 2021 (Shree Polytax Udyog LLP -vs- Authorised Officer, Aditya Birla Finance Limited & Others) disposing of the SARFAESI Application with a direction to the Respondents No. 1 and 2 to conduct inter se bidding between the Appellant and Respondent No. 3 (in appeal and Respondent No. 4 is S.A. (Shree Polytax Udyog LLP).
Facts of the case, in brief, are that the Appellant himself is neither a borrower nor mortgagor rather he is a prospective bidder for the auction which took place on 27th of October, 2021. The sale notice was published by Respondent No. 1 on 15th September, 2021 in the newspaper with sale date 27th October, 2021 for sale of a piece and parcel of ground floor flat, measuring about 1800 sq.ft. super built area together with proportionate share of interest in premises No. P-36, CIT H.S. 12, Scheme (M) VII, Manicktala Main Road, P.S. Manicktala, Kolkata on 27th October, 2021. Reserved price was fixed at Rs.3,01,00,000.00. Property was in the name of the Proforma Defendant, Devshar Fashions Private Limited. E-auction sale was fixed on 27th October, 2021. Appellant, through its Authorised Representative, met Respondent No. 1 and enquired about the formality for participating in the bid process which was to be held on 27th October, 2021. As per the terms and conditions of the e-auction, the last date of submission of sealed bid in the prescribed tender form along with Demand Draft of Rs.3,10,000.00 towards EMD to be submitted by 27th October, 2021 at 10.00 a.m. with the Respondent No. 1. Respondent No.3 sent his representative, C.A Pawan Goenka along with a demand draft for EMD being 780161 dated 26th October, 2021 drawn on KMB, Brabourne Road Branch but Respondent No. 1 did not accept the same. Then Respondent No. 3 sent an e-mail to Respondent No. 1 on 26th October, 2021 regarding the refusal and also requested him to permit him to participate in the bid to be held on 27th October, 2021 at 10 a.m. The Demand Draft, along with bid documents, were also sent through e-mail to Respondent No. 1 on 26th October, 2021. E-mail was answered with frivolous grounds.
On 27th October, 2021 again representative of Respondent No. 3 tendered the documents along with the original Demand Draft but he was asked to wait and was kept waiting. At 11.50 a.m. Respondent No. 1 received the copy of the bid form, along with a Demand Draft of Rs.3,10,000.00, with relevant documents. Thereafter, it was informed that login ID and password would be shared with the Respondent No. 3 by 1.00 p.m. but was not provided. Thereafter on 27th October, 2021, at about 2 p.m., Respondent No. 3 sent an e-mail stating all the facts to Respondent No. 1. On 29th October, 2021 Respondent No. 3 sent another e-mail to Respondent No. 1 complaining arbitrary and illegal action wherein reply was given. Paper publication and e-auction sale notice were self conflicting. However, Respondent No. 3 is ready and willing to buy the property on “as is where is” basis. Intentionally, Respondent No. 3 was not permitted to participate in the bid even EMD was not refunded. Accordingly, an application under Section 17 of the SARFAESI Application was preferred with relief to set aside the e-auction dated 27th October, 2021 and to conduct fresh e-auction sale. Further alternatively, inter se bidding between the highest bidder, if any, and the Respondent No. 3 be conducted.
Appellant submitted an application along with objection that he was the successful bidder in the auction held on 27th October, 2021. Letter was also issued by Aditya Birla Finance Limited, i.e. Respondents No. 1 and 2, to the Appellant accepting the bid and showing their intention to sell the secured asset in favour of the Appellant subject to the terms and conditions of the sale notice. A SARFAESI Application was also filed by the borrower, being Respondents No. 4, but there was no restraint order. Even a writ petition was preferred before the Hon’ble High Court at Calcutta but there was no restraint order. Bid of Rs.3.20 crore was accepted by the Secured Creditor. 25% of the bid amount, i.e. Rs.80.00 lac was deposited, remaining amount was also deposited within time. The Appellant has not participated in the e-auction process. An objection was also filed by the Respondents No. 1 and 2, i.e. Aditya Birla Finance Limited, and it is stated that in 2017, Respondent No. 4, i.e. Devshar Fashions Private Limited, applied to Respondents No. 1 and 2 for sanction of credit facilities against equitable mortgage of the disputed property. Loan facility of Rs.5.00 crore was sanctioned vide letter dated 16th and 22nd March, 2017. Formal loan documents were executed on 11th May, 2017 between Respondent No. 4 and Respondents No. 1 and 2. Subsequently loan account was classified as N.P.A. on 15th May, 2019 and provisions of SARFAESI Act, 2002 were invoked, sale notice was published and the e-auction was conducted on 27th October, 2021 as per terms and conditions of the sale notice. Last date of submission of sealed bid in prescribed form along with EMD was 27th October, 2021 at 10.00 a.m. Respondent No. 2 was situated at Room No. 401, Camac Square, 24, Camac Street, 4th Floor, P. S. Shakespeare Sarani, Kolkata -700 016. It was also specifically provided that bids received after the prescribed time would be rejected. E-auction bids were to be submitted in sealed cover.
On 26th October, 2021 one C.A Pawan Goenka came to the office of the Respondent No. 1 and 2 with a Demand Draft of Earnest Money, KYC of Respondent No. 4 herein and a PAN Card of one Manas Sarkar when the Respondent No. 1 shared the bid form and he was asked to submit the requisite documents as per auction notice and terms and conditions of the bidding process. Thereafter, he did not return and e-mail was sent on 26th October, 2021 at 7.20 p.m. to Defendant No. 1 leveling false and frivolous allegations which were replied to by Defendant No. 1. Respondent No. 3 failed to submit its sealed bid by 10 a.m. on 27th October, 2021 rather he came at 11.45 a.m. on 27th October, 2021 with loose bidding documents without sealed cover and submitted the same. Appellant’s bid was submitted in time but Respondents No. 3 was well aware of the result of the e-auction as well as rejection of their bid. The Respondent No. 4 failed to submit its sealed bid by 10.00 a.m. on 27th October, 2021 rather he came at 11.45 a.m. on 27th October, 2021 with loose bidding documents without sealed cover and submitted the same at 11.50 a.m. Applicant’s bid was submitted in time. Thereafter, Respondent No. 3, by an e-mail dated 29th October, 2021, raised false and frivolous allegations. EMD was returned by letter dated 2nd November, 2021. Auction process was conducted strictly in accordance with the sale notice. Application is liable to be dismissed.
Learned DRT has decided the SARFAESI Application by the impugned order wherein it is observed in para 9 of the judgment that on 6th December, 2021 Respondents No. 1 and 2, i.e. Bank, during the course of hearing, had submitted that inter se bidding, as prayed for by the Appellant, is agreeable if the Appellant deposits the amount matching to the amount already deposited by Respondent No. 4, i.e. Rs.2.05 crore.
SARFAESI Applicant agreed for the same vide order dated 14th December, 2021. SARFAESI Applicant deposited the amount. Thereafter, Learned DRT held that since balance amount has been deposited, the dispute between Appellant and Respondent No. 4 is deemed to have concluded if inter se bidding is conducted by the Respondent Bank, as admitted during the course of hearing. Accordingly, Learned DRT disposed of the SARFAESI Application with the direction to the Bank to conduct inter se bid between the Appellant and Respondent No. 1, i.e. Avanti Realtors Private Limited, Appellant herein.
Feeling aggrieved by the impugned order, Appellant has preferred the present appeal.
Learned Counsel for Appellants submits that the impugned order suffers from material illegalities and irregularities. It is submitted that the Respondent No. 3, i.e. Shree Polytax Udyog LLP (S.A.) failed to comply with the mandatory provisions of the auction notice wherein the tender/sealed bid/offer in the prescribed tender form along with EMD and KYC were to be deposited on 27th October, 2021 upto 10 a.m. at the Branch office mentioned herein. It is further mentioned that Tender papers not filled up or tenders received beyond last date will be considered as invalid tenders and shall accordingly be rejected. No interest shall be paid on EMD. Learned Counsel submits that the EMD was submitted on 27th October, 2021 after the stipulated time at 11.50 a.m. Learned Counsel further submits that Respondent No. 3 has no locus standi in the matter since he was a prospective bidder who could not comply the mandatory provisions of the sale notice.
It is further submitted that the Respondent No. 3 has waived his right, if any, as he himself has applied to the Respondent No. 1 on 28th October, 2021 for refund of Demand draft for Rs.30,10,000.00.
It is further submitted that Respondent No. 3 had received the EMD hence he has waived his right to object against the auction process. It is further submitted that the Respondent No. 3 has not come with clean hands before the Learned Tribunal in the SARFAESI Application hence he cannot seek any equity. It is further submitted that any concession, if it is there, was given by Respondents No. 1 and 2 who is a Financial Institution but no consent or concession was ever given to the Appellants to participate or to allow the Appellants to take part in the inter se bid. Concession or consent given by Respondent No. 1 and 2 cannot and/or would not bind the Appellants.
It is further submitted that the Respondent No. 3 has not challenged the impugned judgment. SARFAESI Application was filed by Respondent No. 3 which was disposed of. It means, that all the grounds, if any, taken by the Respondent No. 3, did not find favour with the Learned DRT. Since no appeal is preferred by the Respondent No. 3 against the impugned judgment and the judgment which is based on concession/statement given by the Respondents No. 1 and 2, Appellant is entitled for setting aside the impugned judgment.
It is further submitted that the Learned Tribunal has not recorded any irregularity or fraud in conducting the auction process which may give right to the Respondent No. 3 to claim re-auction or inter se bidding.
Respondent No. 3 is neither a successful bidder nor has admitted any EMD hence, he is not entitled for any relief.
Learned Counsel for Respondent No. 3 submitted that Respondent No. 3 has locus standi to file the SARFAESI Application under Section 17 of the SARFAESI Act, 2002. It is further submitted that Respondent No. 3 was a genuine bidder in the auction proceedings who had prepared Bank Draft to participate in the auction but he was prevented to participate in the bidding process. It is further submitted that in para 4 of the S.A. he has challenged the procedure followed in the process of bid. It is further submitted that the Appellant has not deposited 75% of the amount as per the terms and conditions of the sale notice. It is further submitted that the order dated 6th December, 2021 of the Learned DRT shows that the Appellant is now estopped from challenging the order dated 6th December, 2021 or the impugned judgment.
Admittedly, a SARFAESI Application No. 259 of 2019 is pending before the Learned DRT which is filed by the borrower. Learned Counsel for Respondent No. 3 further submits that the Appellant himself has not deposited the remaining 25% of the amount; however, no prejudice would be caused to him if inter se bid takes place as it would be in the interest of the borrower to fetch the highest amount from sale of secured assets.
Learned Counsel for Respondent No. 4 submits that an S.A. No. 259 of 2019 is pending which is filed under Section 17 of the SARFAESI Act, 2002 wherein the whole procedure undertaken by the Respondent No. 1 is under challenge.
The facts of the case in a nut shell are - as far as the issue of relationship between Respondents No. 1, 2 and 4 are concerned, Respondent No. 4 was granted credit facility by the Respondent No. 1 to the tune of Rs.2.5 crore wherein equitable mortgage was created by Respondent No. 3. There was a default in payment of the loan and the account was classified N.P.A. SARFAESI Proceedings were initiated by the Respondent No. 1 wherein the secured asset was put to auction sale. Now the present controversy arose.
Auction sale was scheduled to be held on 27th October, 2021 and the EMD was to be submitted by 10 a.m. on 27th October, 2021. As per the e-auction sale notice, the terms and conditions of the e-auction were to the effect that on the last date of submission of tender/sealed bid/offer in the prescribed tender forms along with EMD and KYC were to be submitted on 27th October, 2021 at 10.00 a.m. at the Branch Office address mentioned hereinabove. Tender papers not filled up or tenders received beyond last date will be considered as invalid tenders and shall accordingly be rejected. No interest shall be paid on the EMD. Date of e-auction for property is 27th October, 2021 at the web portal 80TP/SARFAESI Auction Tiger.net from 11 a.m. to 3.00 p.m. without unlimited extension of five minutes each. Reserve price of the property was fixed at Rs.3,01,00,000.00; Earnest Money Deposit (EMD) 10% of the reserve price Rs.30,10,000.00 and total loan outstanding was Rs.2,46,06,956.00. Respondent No. 3 deposited the tender documents along with EMD on 27th October, 2021 at 11.50 a.m. which was received by the Respondent No. 1 with an endorsement that “without sealed envelope received and content not verified”. Representative of Respondent No. 3 himself endorsed the time of submission of the bid documents as 11.50 a.m. on 27th October, 2021. It is also evident from the record that an application was moved by the Respondent No. 3 but Respondent No. 3 on 28th October, 2021 mentioned that “We have applied for bid purchase on 27th October, 2021 but unfortunately due to certain circumstances, our bid has been rejected so we request you to kindly refund our Demand Draft No. 730161 dated 26th October, 2021.” This application was moved by Mr. Manas Sarkar on behalf of Respondent No. 3 on 28th October, 2021 at 3.30 p.m.
Bid took place on 27th October, 2021. Appellants were the highest bidder for an amount of Rs.3.20 crore which was accepted by Respondent No. 1 and sale confirmation letter was issued on 27th October, 2021. 25% of the bid amount was deposited by the Appellants as per the terms and conditions of the tender notice. Remaining amount was deposited on 9th December, 2021 which was duly accepted by Respondent No. 1.
It would be very relevant to mention that the impugned judgment, dated 16th February, 2022, was delivered by the Learned Presiding Officer, DRT-3, Kolkata on the basis of concession given by and on behalf of Authorised Officer of Aditya Birla Finance Limited and Aditya Birla Finance Limited, Respondents No. 1 and 2. Before proceeding further, I find it appropriate to quote the relevant portion of the judgment of the Learned DRT-3, which is para 9 of the impugned judgment as under:
“Next two prayers relate to fresh auction sale and inter se budding between respondent no 4 and applicant. Applicant has alleged that they were prevented from participating in the auction sale in question. Whereas respondent no 4 averred that they are bona fide highest bidder and deposited 25% of the bid amount, as such, the right may not be curtailed. Whereas respondent bank submitted that applicant's request to participate in the bid process was rejected since they failed to submit EMD and KYC within time. Before going to resolve the controversy and adjudicate the rival contentions, I find that it was recorded in the order passed by this Tribunal on 06.12.2021 that respondent no. 1 and 2 bank during course of hearing had submitted that inter se bidding as prayed for by the applicant is agreeable if the applicant deposited, matching with the amount already deposited by respondent no. 4 i.e. 2.05 crore. Applicant agreed to the proposal and had submitted they would take steps to deposit the amount by 08.12.2021. It was further recorded in the order dated 14.12 2021 that applicant remitted entire amount with the respondent bank to comply with the order. Aforesaid admission of the respondent bank to conduct inter se bidding and subsequent deposition of the bid amount matching with the amount that had been deposited by respondent no.4 in compliance with the direction of this Tribunal, the dispute between applicant and respondent no.4. is deemed to have been concluded if inter se bidding is conducted by the respondent bank as admitted during course of hearing. The objective of the SARFAESI Act is to obtain money from the auction sale process as much as possible so that owner's interest may not be deprived as well as secured creditor can recover their dues and balance amount, if any, may be remitted to borrower’s account.”
Order dated 6th December, 2021 of Learned DRT-3 is also very relevant, which is quoted below:
“At the outset learned counsel appearing for the applicant submitted that Mr. Manas Sarkar and Ms. Sweta Maskara are not borrower and guarantor in the instant S.A.
It appears from record that applicant is one of the prospective bidder. According to applicant he has deposited EMD amount. Respondent has rejected his attempt to participate in the bid process since bid time is over.
However, respondent is agreed to consider his bid, without prejudice to the rights and contentions of successful bidder who deposited 25% of the bid amount, since applicant intends to get more money out of this auction sale. Applicant offered Rs. 30.00 lakhs more than that of the bid amount of successful bidder. Applicant has offered Rs.3.50 Crore whereas successful bidder's bid amount was Rs.3.20 crore.
After hearing sometime respondent no. 1 and 2 submitted that inter se bidding as prayed for by the applicant, without prejudice to his rights and contention in this S.A., is agreeable if the applicant shall deposit matching with the amount already deposited by the successful bidder i.e. Rs.2.5 crore. Applicant agreed to this during the course of hearing and submitted that he will take step to deposit Rs. 2.05 crore by 08.12.2021 to the authorised officer of respondent No. 1 and 2 who conducted the auction sate in question. After deposit of the aforesaid amount the matter will appear before this Tribunal on 14.12.2021 at 02.30 PM for further argument and order.
At this stage learned counsel appearing for respondent no.3 submitted that added respondent no.4 is the applicant in SA. No. 259 of 2019 which is pending before this Tribunal. As per Court Master aforesaid S.A. will come up for hearing on 24.01.2022. According to learned counsel if present S.A. is allowed the fate of S.A. 259 of 2019 would be vitiated. However, learned counsel for respondent no. 1 and 2 submitted that subject matter of this S.A. is completely different than that of S.A. 259 of 2019, as such, those two S.A. cannot be linked together. Considering the submission of the both the party prayer for analogous hearing of two S.A. is rejected.”
It is apparent from perusal of both the orders that in the order dated 6th December, 2021 statement of Respondent was recorded wherein he agreed to consider the bid of the Appellant subject to Appellant deposits matching amount already deposited by successful bidder i.e. Rs.2.50 crore. Appellant also agreed to deposit the amount. Thereafter, on 14th December, 2021 it is recorded by the Learned DRT that Respondent No. 3 in the appeal had deposited the entire bid amount.
Learned Counsel for Appellant submits that the entire impugned order is based on the concession or the settlement made by the Respondents No. 1 and 2 before the Learned DRT. As far as question of validity of concession given by the Respondents No. 1 and 2 is concerned, that would be discussed in the later part of the judgment. But at this stage, it is suffice to say that Appellant i.e. Avanti Realtors Private Company, was the affected party who had participated in the bid and was declared as the highest bidder. It had also deposited the amount as per the terms and conditions of the auction sale notice. Any concession or agreement arrived at between the Respondent No. 3 and the Respondents No. 1 and 2 would not bind the Appellant. If any agreement or terms has arrived at between the Respondent No. 3 and Respondents No. 1 and 2 that would be having binding effect over them only. No liability can be imposed upon Appellant on the basis of any settlement or concession made by Respondents No. 1 and 2 or any agreement arrived at between Respondent No. 3 and Respondents No. 1 and 2. Neither Appellant has given any consent nor a party to the settlement made by Respondents No. 1 and 2 before the Learned DRT for an inter se bidding. Hence such an observation and direction made by the DRT itself is illegal and against the settled principle of law. It was expected from the Learned DRT to pass the order in accordance with law.
Learned Counsel for Respondents No. 1 and 2 draws attention to para 3 (u) of their Affidavit-in-Opposition which is quoted below :
“u. During hearing of the S.A. 574 of 2021 before the Learned Tribunal below as to whether the answering respondents are agreeable to permit the respondent no. 3 to participate in inter-se bidding between the appellant and the respondent no 3. the Learned Senior Counsel appearing on behalf of the answering respondents submitted, without any instructions from the answering respondents, that the respondent no. 3 cannot pray for inter se bidding between the appellant and the respondent no. 3 without first depositing the bid amount being already paid by the appellant by that time. By an order dated 6 December, 2021, the Learned Tribunal below recorded that the Learned Senior Counsel for the answering respondents have submitted without prejudice to the rights and contentions of the answering respondents in pending S.A. 574 of 2021 that the respondent no. 3 may be permitted to participate in inter-se bidding between the appellant and the respondent no. 3 upon payment of Rs.2.3 Crores being the amount already been paid by the appellant at that point of time. It is stated that the said submission made by the Learned Senior Counsel appearing on behalf of the answering respondents were without any instructions from the answering respondents. Furthermore, the order dated December, 2021 had connected records that the said submission was made by the Learned Senior Counsel appearing for the answering respondent without prejudice to the rights and contentions of the answering respondents in the pending S.A. No. 574 of 2021.”
Learned Counsel for the Respondents No. 1 and 2 further placed reliance upon the judgment of Hon’ble Apex Court in Himalayan Cooperative Group Housing Society -vs- Balwan Singh & Others (2015) 7 SCC 373. Reliance is placed upon paragraphs 31 and 32 which are quoted below:
“31. Therefore, it is the solemn duty of an advocate not to transgress the authority conferred on him by the client. It is always better to seek appropriate instructions from the client or his authorised agent before making any concession which may, directly of remotely, affect the rightful legal right of the client. The advocate represents client before the court and conducts proceedings on behalf of the client. He is the only link between the court and the client. Therefore his responsibility is onerous. He is expected to follow the instructions of his client rather than substitute his judgment.
Generally, admissions of fact made by a counsel are binding upon their principals as long as they are unequivocal, where, however, doubt exists as to a purported admission, the court should be wary to accept such admissions until and unless the counsel or the advocate is authorised by his principal to make such admissions. Furthermore, a client is not bound by a statement or admission which he or his lawyer was not authorised to make. A lawyer generally has no implied or apparent authority to make an admission or statement which would directly surrender or conclude the substantial legal rights of the client unless such an admission or statement is clearly a proper step in accomplishing the purpose for which the lawyer was employed. We hasten to add neither the client nor the court is bound by the lawyer's statements or admissions as to matters of law or legal conclusions. Thus, according to generally accepted notions of professional responsibility, lawyers should follow the client's instructions rather than substitute their judgment for that of the client. We may add that in some cases, lawyers can make decisions without consulting the client. While in others, the decision is reserved for the client. It is often said that the lawyer can make decisions as to tactics without consulting the client, while the client has a right to make decisions that can affect his rights.”
The Hon’ble Apex Court in the said judgment noticed a famous statement of Lord Brougham “an advocate, in the discharge of his duty knows but one person in the world and that person is his client.”
Without making any comment on the statement of the Learned Counsel suffice to say that the law laid down by the Hon’ble Apex Court, as aforesaid, is binding.
Learned Counsel for the Appellant has placed reliance upon the judgment of Hon’ble Apex Court in K. Kumara Gupta -vs- Sri Markendaya and Sri Omkareswara Swamy Temple and Others (2022) 5 SCC 710. Reliance is placed upon paragraphs 14 and 15 of the judgment; while Learned Counsel for Respondent No. 3 has also placed reliance upon the same judgment and placed reliance upon paragraphs 12, 16, 17, 23 and 25.
In order to appreciate the submissions made by the Learned Counsel for the parties, it would be appropriate to briefly mention the factual aspect of the judgment of the Hon’ble Apex Court in Kumara Gupta (supra). It appears that a proposal was published for auction of a land in question. No objection was raised against the said proposal; probable accepted price of the land was fixed at Rs.4.00 lac per acre; total extent of land was about 1.8 acre. The term for sale of the land was granted by Commissioner of Endowment Department on 13th November, 1997. A notice for auction sale on 24th June, 1998 at 11.00 a.m. was published wherein Rs.20,000.00 was the EMD. Forty five persons participated, including the Appellant, K. Kumara Gupta. Sri L. Kantha Rao, the original writ petitioner, did not participate in the auction nor did he deposit Rs.20,000.00 as EMD.
Auction took place on 24th June, 1998. K. Kumara Gupta was declared as the highest bidder with an offer of Rs.13,01,000.00. An amount of Rs.7,85,000.00 being the one third of the bid amount was immediately deposited.
Thereafter, one Jagat Kumar, who did not participated in the auction made a representation on 28th July, 1998 that the subject land has a potential of fetching more money. Initially he had shown readiness and willingness to pay the higher price but did not deposit the money. He expressed his willingness to buy only 1200 sq. yard. Auction was cancelled by the order dated 24th July, 1998. Revision against that order was filed. However, by the order dated 22nd December, 1998 the sale was confirmed in favour of the Appellant. Thereafter, the Appellant deposited the remaining amount of Rs.15,69,810.00. Sale deed was executed in his favour by the Executive Officer on behalf of the Temple Trust on 31st December, 1998. Physical possession of the land was also delivered to Appellant.
Thereafter, one L. Kantha Rao filed a writ petition No. 41 of 1999 before the Hon’ble High Court to prevent the Executive Officer not to execute the sale deed. An interim order was issued by the Hon’ble High Court staying all further proceedings on 5th January, 1999 subject to payment of Rs.30,000.00 by way of Bank Guarantee within two weeks from the date of the interim order. Thereafter, on 10th February, 1999 Commissioner of Endowments Department Unilaterally cancelled the auction dated 24th June, 1998. The Executive Officer of the Temple Trust was instructed to conduct a re-auction keeping the upset price of Rs.30.00 lac.
Feeling aggrieved, Appellant preferred a revision before the Government under Section 93 of 1987 Act. Order of the Commissioner dated 10th February, 1999 was stayed by the Government vide order dated 8th March, 1999. L. Kantha Rao preferred a writ petition No. 11552 of 1999before the Hon’ble High Court challenging the said order granted by the Government on 8th March, 1999. However, the Commissioner, vide order dated 4th March, 1999 revoked his own order dated 10th February, 1999. Both the writ petitions were disposed of by the Hon’ble High Court but a liberty was granted to L. Kantha Rao to file revision against the original order passed by the Commissioner dated 22nd December, 1998. Although he was not a participant in the auction in which the Appellant was declared as the highest bidder. On 26th November, 1999, revision was allowed. Order dated 22nd December, 1999 was quashed and the Commissioner was directed to refund the amount paid by the Appellant and to conduct re-auction. Importantly, Appellant was not present at the time of passing of the order dated 26th November, 1999.
The Appellant feeling aggrieved, filed a writ petition No. 25407 of 1999 before the Hon’ble High Court challenging the order dated 26th November, 1000 which was allowed by the Learned Single Bench on 2nd February, 2018. In the meantime, L. Kantha Rao died on 1st March, 2018. Judgment dated 2nd February, 2018 was challenged by the Temple Trust by filing Writ Appeal No. 790 of 2018 before the Division Bench. Wife of L. Kantha Rao also filed Writ Petition No. 1069 of 2018. Division Bench allowed the appeals and directed the Authorities concerned to conduct re-auction of the entire land by fixing the upset price higher than that had been fixed earlier by observing that since more than twenty years had elapsed from the date of issuance of the Government Order dated 26th November, 1999 and the price of the land in question had arisen. Liberty was given to Appellant as well as to the Writ Petition to participate in the re-auction. The auction purchaser preferred an appeal before the Hon’ble Supreme Court. The Hon’ble Apex Court in para 12 has specifically held as under :
“12. Therefore, as such the sale, which was held and confirmed in the year 1998 and for which the sale deed was executed on 31-12-1998, the Division Bench of the High Court has ordered re-auction of the property in question after a period of more than 23 years solely on the basis of the offer made by one Shri Jagat Kumar in the year 1998 (after the public auction was concluded) and the offer made by one Shri L. Kantha Rao that they are ready to offer! pay a higher price than fetched in the public auction already concluded and therefore, the Division Bench of the High Court has presumed that the value of the property must have been much more than the sale consideration realised in the public auction. However, the Division Bench of the High Court has not at all appreciated and considered the lack of bona fides on the part of the said Shri Jagat Kumar and even Shri L. Kantha Rao. It is to be noted that though in the month of July 1998 i.e. after the public auction was held, the said Shri Jagat Kumar, who even did not participate in the auction proceedings initially came out with a case that he was ready and willing to pay a higher price for the auctioned land. But subsequently, he backed out and did not deposit any money. Neither did the said Shri Jagat Kumar nor Shri L. Kantha Rao had participated in the auction proceedings and made any offer. Therefore, as suck both of them ought not have been permitted to raise any objection subsequently Sn the valuation when they had not participated in the public auction and made any offer. The Division Bench of the High Court ought to have considered whether these subsequent objectors had acted in a bona fide manner.” (Emphasis supplied)
Further in para 13 it was specifically held that there is no allegation that the auction was in any way irregular or illegal. It was further held that unless and until it was found any material irregularity or illegality in holding the public auction and/or auction sale was vitiated by any fraud or collusion, it is not open to set aside the auction or sale in favour of the highest bidder on the basis of representation made by third party who did not even participate in the auction proceedings and did not make any offer. Para 13 and 14 are set out hereunder:
“13. At this stage, it is required to be noted that even Shri Jagat Kumar subsequently did not prosecute the matter further and subsequently it was only Shri L. Kantha Rao, who filed the revision before the Government by way of a "public interest litigation". It is also to be noted that neither the Government nor even the Division Bench & the High Court have given any finding that the action, which was conducted held on 24-6-1998 was in any way irregular and or illegal. Even the Division Bench of the High Court has as such not set aside the auction-sale in favour of the appellant, however, it has ordered re-auction by observing that as Shri L Kantha Rao deposited a sum of Rs 30 lakhs pursuant to the interim order passed by the High Court in Writ Petition No. 41 of 1999 and as even the learned Single Judge had also directed the appellant to pay a total sum of Rs 30 lakhs which the appellant had agreed, the Division Bench of the High Court has observed that the value of the property can be said to be much more than what was realised in the public auction.
Once the appellant was found to be the highest bidder in a public auction in which 45 persons had participated and thereafter when the sale was confirmed in his favour and even the sale deed was executed, unless and until it was found that there was any material irregularity and/or illegality in holding the public auction and/or auction-sale was vitiated by any fraud or collusion it is not open to set aside the auction or sale in favour of the highest bidder on the basis of some representations made by third parties, who did not even participate in the auction proceedings and did not make any offer.”
It was further held in para 16 as under:
“16. It is also required to be noted that the sale was confirmed in favour of the appellant by the Commissioner, Endowments Department after obtaining the report of the Assistant Commissioner. Therefore, we are of the opinion that in the aforesaid facts and circumstances of the case, the High Court ought not to have ordered re-auction of the land in question after a period of 23 years of confirmation of the sate and execution of the sale deed in favour of the auction-purchaser by observing that the Value of the property might have been much more, otherwise, the object and purpose of holding the public auction and the sanctity of the public auction will be frustrated. Unless there is concrete material and it is established that there was any fraud and/or collusion or the land in question was sold at a throwaway price, the sale pursuant to the public auction cannot be set aside at the instance of strangers to the auction proceeding.”
The Hon’ble Apex Court has specifically issued guidelines as to when a sale process to the public auction can be set aside in para 17 which is quoted below:
“17. The sale pursuant to the public auction can be set aside in an eventuality where it is found on the basis of material on record that the property had been sold away at a throwaway price and/or on a wholly inadequate consideration because of the fraud and/or collusion and/or after any material irregularity and/or illegality is found in conducting/holding the public auction. After the public auction is held and the highest bid is received and the property is sold in a public auction in favour of the highest bidder, such a sale cannot be set aside on the basis of some offer made by third parties subsequently and that too when they did not participate in the auction proceedings and made any offer and/or the offer is made only for the sake of making it and without any serious intent. In the present case, as observed hereinabove, though Shri Jagat Kumar immediately after finalising the auction stated that he is ready and willing to pay a higher price, however, subsequently, he backed out. If the auction sale, pursuant to the public auction, is set aside on the basis of such frivolous and irresponsible representations made by such persons then the sanctity of a public auction would be frustrated and the rights of a genuine bidder would be adversely affected.” (Emphasis supplied)
Further in para 23 it was held that under normal circumstance, unless there are allegations of fraud or collusion or cartel and/or any other material erroneous that the highest offer received in the public auction may be accepted as fare value; otherwise, there shall not be any sanctity of public auction. It was further held that what is required to be considered is at the relevant time when the sale was conducted what was the value of the land/property.
The Hon’ble Apex Court has further placed reliance upon a judgment of Jasbhai Motibhai Desai -vs- Roshan Kumar wherein in para 34 and 37 and 49 it was held that:
"34. This Court has laid down in a number of decisions that in order to have the locus standi to invoke the extraordinary jurisdiction under Article 226, an applicant should ordinarily be one who has a personal or individual right in the subject-matter of the application, though in the case of some of the writs like habeas corpus or quo warranto this rule is relaxed or modified. In other words, as a general rule, infringement of some legal right or prejudice to some legal interest inhering in the petitioner is necessary to give him a locus standi in the matter.
It will be seen that in the context of locus standi to apply for a writ of certiorari, an applicant may ordinarily fall in any of these categories: (i) "person aggrieved": (ii) "stranger: (iii) busybody or meddlesome interloper. Persons in the last category are easily distinguishable from those coming under the first two categories. Such persons interfere in things which do not concern them. They masquerade as crusaders for justice. They pretend to act in the name of pro bono publico, though they have no interest of the public or even of their own to protect. They indulge in the pastime of meddling with the judicial process either by force of habit or from improper motives. Often, they are actuated by a desire to win notoriety or cheap popularity: while the ulterior intent of some applicants in this category, may be no more than spoking the wheels of administration. The High Court should do well to reject the applications of such busybodies at the threshold.
It is true that in the ultimate analysis, the jurisdiction under Article 226 in general, and certiorari in particular, is discretionary. But in a country like India where writ petitions are instituted in the High Courts by the thousand, many of them frivolous, a strict ascertainment, at the outset, of the standing of the petitioner to invoke this extraordinary jurisdiction, must be insisted upon. The broad guidelines indicated by us, coupled with other well-established self-devised rules of practice, such as the availability of an alternative remedy, the conduct of the petitioner, etc., can go a long way to help the courts in weeding out a large number of writ petitions at the initial stage with consequent saving of public time and money."
Now, it is to be seen as to whether Appellant has any right to enter into a fresh bid or inter se bidding in between him and the Respondent No. 3, as ordered by the Learned DRT. Admittedly, Appellant did not participate in the bid. In this regard an explanation is given that the Appellant was prevented from participating in the bid. He went to the Respondents No. 1 and 2 with the bid documents and EMD Bank Draft but his documents were not accepted. However, he sent an e-mail mentioning all the facts on 27th October, 2021 as well as on 29th October, 2021 wherein he has mentioned that he was prevented from participating in the bid and he was informed that he would be provided login ID and password by 1.00 p.m. but was not provided; hence he could not participate in the bid. Again on 27th October, 2021, at about 2 p.m. he sent an e-mail stating all these facts to Respondent No. 1. On 29th October, 2021 these facts were again communicated.
Learned Counsel for Appellant submits that in response to the e-mail of representative of Respondents No. 1 and 2, wherein allegations were refuted and it was stated that the bid was submitted after 10 a.m. on 27th October, 2021, hence it could not be considered and the same was rejected.
As far as legal propositions are concerned, admittedly Appellant did not participate in the bid. Further he himself moved an application before Respondents No. 1 and 2 on 28th October, 2021 for refund of the EMD amount as he was fully aware that he could to participate in the auction.
As far as question of his being prevented from participating in the bid is concerned, it was a question of fact for which no evidence was led before the Learned DRT. Further, the SARFAESI Application has been disposed of by the Learned DRT against which no appeal is preferred by Respondent No. 3. It means that he had no grievance against the findings or the judgment recorded by the Learned DRT. Further, the Respondent No. 3 himself had waived his right to challenge the auction proceedings as he himself had requested Respondents No. 1 and 2 for refund of the EMD on 28th October, 2021. It is also relevant to mention that in the S.A. no ground is taken by the Respondent No. 3 regarding irregularity or illegality or fraud in the auction process. Hence, now the Respondent No. 3 cannot challenge the auction proceedings.
Admittedly, Respondent No. 3 is neither a borrower nor a mortgagor not did he participate in the auction proceedings as a bidder. Respondent No. 3 himself has no locus standi to file the writ petition, as has been held by the Hon’ble Apex Court in the case of Jasbhai Motibhai Desai (supra). Respondent No. 3 is neither borrower nor guarantor nor a bidder in the auction proceedings. Hence, he has no locus standi to challenge the auction.
It was held by the Hon’ble Apex Court in the case of K. Kumara Gupta (supra) that after the public auctionis held and the highest bid is received and the property is sold in auction in favour of the highest bidder, such sale cannot be set aside on the basis of some offer made by a third party subsequently and that too when they did not participate in the auction proceedings and made any offer and/or offer is made only for the sake of making it without any serious intent. In the present case, although, Respondent No. 3 had deposited an amount equal to the amount deposited by the Appellant and also gave an offer of Rs.3.80 crore for auction of the property in question. But in view of the law laid down, as referred to above, such type of offer neither can be considered nor accepted.
Respondent No. 3 did not participate in the auction proceedings and has not made any bid but can be said to be a fence sitter having no stake or hold and had simply come forward just to nullify the sale, which was in favour of the Appellant, by making a better offer by filing application under Section 17 of the SARFAESI Act 2002.
Reliance is also placed upon a Jagdish Singh -vs- Heeralal & Others (2014) 1 SCC 479. In the present case Respondent No. 3 was neither a borrower nor guarantor nor entered into the bid process. He is also not affected by any action taken under Section 13 (4) of the SARFAESI Act 2002. Hence, Respondent No. 3 cannot be covered under the expression “any person” under Section 17 of the SARFAESI Act 2002.
Learned Counsel for the Appellant submits that Respondent No. 3 has not come with clean hands as the fact of receiving the earnest money deposit is concealed in the application. I find force in the submission. It is settled legal position that when one wants to seek equity must do equity. Appellant has to furnish all the details in the application before seeking any relief. In the SARFAESI Application, Respondent No. 3 has not mentioned the fact that he applied for return of the EMD on 28th October, 2021. Such conduct of the SARFAESI Applicant disentitles him for any relief.
On the basis of the discussion, made above, I am of the view that the order of the Learned DRT is liable to be set aside as it relates to the direction to Bank for conducing inter se bidding between the Appellant and the Respondent No. 3. Accordingly, appeal is liable to be allowed.
ORDER
The appeal, being Appeal No. 11 of 2022, is allowed. The judgment and order dated 16th February, 2022, passed by Learned Debts Recovery Tribunal-3, Kolkata is set aside to the extent wherein direction is issued to the Bank to conduct inter se bidding between the Appellant and the Respondent No. 3.
Bank is directed to return the amount deposited by the Respondent No. 3 within one week.
No order as to costs.
File be consigned to Record room.
Copy of the order be supplied to Appellant and the Respondents and a copy be also forwarded to the concerned DRT.
Copy of the Judgment/Final Order be uploaded in the Tribunal’s Website.
Order pronounced by me in the open Court on this the 19th day of July, 2022.