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Judgment
K.K. Sasidharan, J.—The collusive sale made by the Authorised Officer, Indian Bank in favour of a person, who was not even a bidder and
the conduct of auction proceedings, in spite of the stay granted by this Court, restraining the Bank from proceeding further with the sale and the
subsequent action taken by the Authorised Officer, to take possession of the property by approaching the learned Chief Metropolitan Magistrate,
Egmore, u/s 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred
to as ""SARFAESI Act"") without divulging the background facts followed by the issuance of a sale certificate in favour of a total stranger is the sum
and substance of this writ petition.
Background Facts:
M/s. Spark Chemicals and Pharmaceuticals Private Limited owned by Thiru S. Sundar, husband of the petitioner''s sister availed financial
assistance from Indian Bank, Hyderabad. The sister of the petitioner appears to have mortgaged her limited right in the property bearing Door No.
7, M.G. Ramachandran Road, Kalashetra Colony, Besant Nagar, Chennai-90 in favour of the Bank. The Bank later initiated proceedings in O.A.
No. 1044 of 1999 before the Debts Recovery Tribunal (hereinafter referred to as ""DRT"") against the borrower and guarantor. The Original
Application was allowed on 27 November 2008. Thereafter, the Bank initiated recovery proceedings by issuing notice u/s 13(2) followed by a
notice u/s 13(4) of the SARFAESI Act. The subject property was owned by Mrs.Rajalakshmi, mother of the petitioner and she was also in
possession. She challenged the proceedings initiated by the Bank before the DRT in S.A. No. 345 of 2008. The appeal was dismissed on 18
October 2010.
The order dated 18 October 2010 was challenged before the Debts Recovery Appellate Tribunal (hereinafter referred to as ""DRAT""), Chennai
in AIR. No. 637 of 2010. During the currency of the interim order of stay granted by DRAT, the Bank issued an auction notice proposing to sell
the property on 7 January 2011. This made the petitioner to file a writ petition in W.P. No. 354 of 2011 before this Court challenging the auction
proceedings.
The writ petition came up for consideration on 7 January 2011 and after hearing the counsel for the Bank, the Division Bench was pleased to
pass an order directing the DRAT to take up the application in I.A.Nos.1117 and 1118 of 2010 as expeditiously as possible and dispose of the
same on or before 18 February 2011. The Authorised Officer was permitted to proceed with the sale, but however, he was restrained from
confirming the auction sale.
Even though this Court restrained the Bank from confirming the auction on 7 January 2011, the Authorised Officer proceeded with the sale,
accepted the highest bid and thereafter issued a letter of confirmation to another person. The Authorised Officer along with Goondas, Police and
Advocate Commissioner came to the subject premises on 28 July 2011 and made an attempt to take possession of property. This made the
petitioner''s mother to file a writ petition before this Court in W.P. No. 18342 of 2011. This Court having found that possession was illegally taken
from Mrs. Rajalakshmi, passed an order on 10 August 2011 directing the Authorised Officer to hand over vacant possession to her. Since the said
order was not complied with, the petitioner filed a Contempt Petition bearing No. 1403 of 2011. Thereafter the Authorised Officer delivered
vacant possession to her.
Mrs. Rajalakshmi, the petitioner in W.P. No. 18442 of 2011 died on 10 December 2011 and the petitioner succeeded to the estate. While so,
on 14 April 2012, the Authorised Officer along with the Advocate Commissioner, Police Officials and Goondas once again descended on the
premises, locked a portion of the property and affixed a copy of the order dated 22 February 2012 passed by the Chief Metropolitan Magistrate,
Egmore, permitting the Bank to take possession of the property from late Rajalakhsmi. The petitioner having found that the Authorised Officer
without disclosing the true facts and suppressing material particulars and impleading a dead person obtained an order, filed this writ petition
challenging the order dated 22 February 2012 on the file of the Chief Metropolitan Magistraqte.
Defense:
The Authorised Officer has filed a counter affidavit on 14 June 2012 in answer to the contentions raised by the petitioner. The Authorised
Officer contended that the auction was conducted on 7 January 2011 and thereafter sale certificate was issued to the auction purchaser. The
possession of the property was also given to the auction purchaser and as such, nothing survives in the writ petition.
Production of file:
When the writ petition came up for hearing on 9 July 2012, the learned Counsel for the petitioner contended that the Authorised Officer has not
given the details regarding the name and address of the successful bidder, the amount fetched in the auction and other relevant particulars. The
learned counsel further contended that the Authorised Officer by suppressing the material particulars obtained an order from the learned Chief
Metropolitan Magistrate and that too in the name of a dead person and as such the order is liable to be quashed.
When it was found that the Authorised Officer filed an evasive reply, we directed him to produce the Auction file on 16 July 2012. The
Authorised Officer instead of producing the original file produced a photo copy of the documents terming it as a file.
We have heard the learned counsel for the petitioner and the learned Counsel for the Bank.
Startling Revelation:
We have perused the so called file produced by the Authorised Officer on 16 July 2012. On a perusal of the file, we found that the Authorised
Officer has committed serious irregularities in the conduct of sale. The sale was made in utter violation of the mandatory provisions of the
SARFAESI Act and the Rules made thereunder besides the terms and conditions of the auction notification issued by the Bank. The Authorised
Officer confirmed in the name of a third party, accepted 75% of the sale consideration after a period of eighteen months and ultimately sold the
property to yet another person.
Discussion:
The earlier order passed by the Magistrate was set aside by this Court primarily on the ground that the person in possession of the property,
was not shown as a party in the application filed by the Bank u/s 14 of the SARFAESI Act. Mrs.Chandrika Sundar, died in the year 1999 and yet
she was shown as the person in possession of the property. When it was found that Mrs.Rajalakshmi, mother of Mrs. Chandrika Sundar has been
in possession and enjoyment of the property, we set aside the order passed by the learned Chief Metropolitan Magistrate on 10 August 2011 and
directed the Authorised Officer to put the petitioner in vacant possession of the property. The said order was ultimately complied with after the
receipt of notice in the contempt proceedings.
Mrs. Rajalakshjmi died thereafter and the petitioner succeeded to the estate. The Authorised Officer, in the meantime, filed a fresh petition
before the learned Chief Metropolitan Magistrate in Crl.M.P. No. 821 of 2012 u/s 14 of the SARFAESI Act in the name of Mrs. Rajalakshmi, in
spite of the fact that she died as early as on 10 December 2011.
Since the file produced by the Bank revealed the fraudulent action taken by the Authorised Officer in connivance with the nominee of the
auction purchaser, we directed the Authorised Officer to file an affidavit clarifying certain points. Accordingly, the Authorised Officer filed an
affidavit, the material portion of which, reads thus:
(i)Date of sale of subject property :-
The date of sale of the subject property is on 7.1.2011 at 12.30 p.m.
(ii) Total number of bidders along with names and addresses :-
There were totally (5) five bidders :-
The said bidders'' details are as follows :
1.R. Ravi Kumar New No. 25, Old No. 13, Solai Aman Koil Street, Chennai 600 007.
2.R.Jayaraj 882/6, M.T.H. Road, Padi, Chennai 600 050.
3.Mrs.Varalakshmi, W/o B.Kumar No. 24/69, Nehru Street, Kanagam, Chennai 600113.
4.S.Kanan Tender submitted without any details (disqualified).
5.B.Subramani 20/62, North Mada Street, Padi, Chennai 600 050.
(iii) Name and addresses of successful bidder :-
B.Subramani -20/62, North Mada Street, Padi, Chennai 600 050.
(iv) Amount Quoted by the successful bidder :-
Amount quoted in the tender document was Rs.1,12,00,000/-
Amount finally quoted in the inter se bidding / open auction is Rs.1,15,00,000/- (One crore fifteen lakhs only)
(v) Date of confirmation of sale :-
On 07.01.2011 the said B.Subramani 20/62, North Mada Street, Padi, Chennai 600 050, had issued a letter dated 07.01.2011, to confirm/
convey the sale in the name of CA S.Manisekaran, No. 106/A, Kumarappa Mudali Street, Nungambakkam, Chennai 600 034 and accordingly,
the sale was confirmed in the name of C.A. S.Manisekaran and a confirmation of sale letter was received by the said C.A. S.Manisekaran and
accordingly, the same was acknowledged on 07.01.2011 at 1.25 p.m.
(vi) Date on which 25% bid amount was deposited :-
Total sum of Rs.28,75,000/- being the 25% of the bid amount was tendered as follows :-
Rs.11,12,000/- was tendered along with tender form as Demand Draft No. 096491, Axis Bank, dated 06.01.2011, the balance sum of
Rs.17,63,000/- was tendered vide cheque No. 627890 dated 07.01.2011 drawn on SBM, Abiramapuram.
(vii) Date on which the balance amount was deposited by successful bidder :
The said C.A. S.Manisekaran, No. 106/A, Kumarappa Mudali Street, Nungambakka, Chennai 600 034 did not pay the balance amount for want
of physical possession of the subject premises. Thus as the Bank had required the interest to be paid by C.A. S.Manisekaran, if he was required to
register the sale certificate. C.A. S.Manisekaran had accordingly paid the balance amount together with interest amount vide cheque dated
11.06.2012 paid a sum of Rs.1,20,00,000/- to and in favour of Indian Bank, ARMB Hyderabad. C.A. S.Manisekaran, had vide letter dated
11.06.2012 nominated one Mrs.V.Padmavathy, aged about 63 years W/o.Thiru.R.Vadivelu, Old No. 5, New No. 7, Ganesh Nagar, Anna
Nagar, Cuddalore 607 001 and requested to execute the sale certificate of the subject premises in the name of Mrs.V.Padmavathy.
(viii) Date on which the sale certificate was issued in the name of the Auction Purchaser, including the name and address of the person in whose
name it was registered :-
Sale Certificate was issued to and in favour of the nominee of C.A. S.Manisekaran Viz., Mrs.V.Padmavathy, aged about 63 years, W/o
Thiru.R.Vadivelu, Old No. 5, New No. 7, Ganesh Nagar, Anna Nagar, Cuddalore 607 001 on 12.06.2012.
ix In case the sale certificate was registered, the date and details of registration:
Sale Certificate was registered to and in favour of Mrs.V.Padmavathy, aged about 63 years W/o, Thiru.V.Vadivelu. Old No. 5, New No. 7,
Ganesh Nagar, Anna Nagar, Cuddalore 607 001 on 14.06.2012.
x.Whether the property was given possession and if so the person to whom the possession was given :
Physical possession of the subject premises was received from the Advocate Commissioner on 14.04.2012 and the same was handed over to the
Auction purchaser viz., Mrs.V.Padmavathy, aged about 63 years W/o Thiru.R.Vadivelu, Old No. 5, New No. 7, Ganesh Nagar, Anna Nagar,
Cuddalore 607 001 on 12.06.2012 under the Sale Certificate and the same was acknowledged.
The learned Chief Metropolitan Magistrate was made to believe that the subject property was sold in favour of Thiru. S. Manisekaran and he
should be given vacant possession of the property. The learned Chief Metropolitan Magistrate having found from the petition in Crl.M.P. No. 821
of 2012 that the property has already been sold in favour of Thiru Manisekaran issued an order appointing an Advocate Commissioner to take
possession of the property.
Since the Authorised Officer obtained an order from the Magistrate suppressing the material facts, including the basic fact that Thiru
Manisekaran never participated in the auction process, we consider it necessary to analyse the entire background facts of this case.
The Bank issued a notification on 7 January 2011 proposing to sell the subject property by way of public auction. The auction sale
proceedings shows that bids were received up to 12.00 noon on 7 January 2011. The bids were opened at 12.30 p.m. and the sale was
confirmed in the name of Thiru B. Subramani for a sum of Rs.1,15,00,000/-( Rupees one crore and fifteen lakhs). The said B. Subramani paid a
sum of Rs.17,63,000/- by way of demand draft dated 7 January 2011.
This Court granted stay of confirmation during the forenoon of 7 June 2011 in the immediate presence of the standing counsel for the Bank.
The auction was conducted at the office of the Bank at Egmore, Chennai hardly four kilometres from the seat of the High Court. In spite of the
order restraining the Bank from confirming the bid and the communication of the order by phone by the Standing Counsel for the Bank, the
Authorised Officer confirmed the bid in favour of Thiru B. Subramani on 7 January 2011. The learned counsel for the Bank on instructions
submitted that the interim order was made known to the Authorised Officer only at 1.25 p.m. and by that time he has already issued the order of
confirmation. However, on a perusal of the auction proceedings we found that the order of confirmation was not issued to the highest bidder. It
was issued to Thiru S. Manisekaran, who was not a bidder.
The Authorised Officer has produced a copy of the letter issued by Thiru B. Subramani appointing Thiru S. Manisekaran as his nominee to pay
the balance amount and he also made a request to the Bank to issue the sale certificate in favour of the nominee. The date of the letter was
corrected as 7 January 2011. There is no indication as to the actual time of receipt of the said letter by the Authorised Officer. The confirmation
letter proceeds as if Thiru S. Manisekaran himself took part in the auction and the sale was concluded in his favour for a sum of Rs.1,15,00,000/-.
The subsequent correspondence exchanged between Thiru S. Manisekarn and the Authorised Officer shows that 75% of the bid amount
viz.,Rs.86,25,000/- was not paid within the outer time limit of fifteen days stipulated by the Bank in the order of confirmation issued on 7 January
2011. Thiru S. Manisekaran has been taking time to deposit the balance 75% of the amount under the pretext that the Bank is yet to give him
vacant possession. The series of correspondence exchanged between Thiru S. Manisekaran and the Authorised Officer shows that the so called
auciton purchaser was not prepared to deposit the balance amount in spite of the ultimatum given by the Bank. The amount was deposited only on
11 June 2012 and it was readily accepted by the Authorised Officer not withstanding the mandatory condition that the amount should be deposited
within fifteen days of confirmation.
The auction notification issued by the Bank does not contain any provision permitting the successful bidder to nominate a person to take the
property after paying the balance amount. Similarly, there was no provision giving discretion to the Authorised Officer to extend the time for
deposit of 75% of the bid amount.
There were only five bidders including Thiru B.Subramani. Thiru S. Manisekaran was not at all in the picture. The bid submitted by Thiru
B.Subramani was found to be the highest and therefore Thiru B.Subramani was declared as the highest bidder. The Authorised Officer received
25% of the earnest money from him. It was only thereafter and that too during the currency of the order of stay, the Authorised Officer received a
letter from Thiru B.Subramani and issued the letter of confirmation in the name of Thiru S.Manisekaran.
The conditions of auction, more particularly, clause 23 provides that no time extension for making payment after the stipulated period will be
granted nor shall the successful bidder be allowed to make part payments.
Clause 40 of the auction notification provides that on confirmation of sale by the Bank and upon payment of the full amount of purchase price,
the Authorised Officer will execute the Sale Certificate in favour of the auction purchaser on payment of stamp duty, which shall be borne by him.
The sale notification does not contain any provision permitting the Authorised Officer to issue the order of confirmation in favour of a person
other than the successful bidder. The term ""purchaser"" would mean only a person in whose name the auction was confirmed originally and not a
person who appears subsequently, as the nominee of the successful bidder.
The sale is Governed by the provisions of the SARFAESI Act and the Rules made thereunder.
(a) Rule 9(2) of the Security Interest (Enforcement) Rules 2002 provides that the sale shall be confirmed in favour of the purchaser, who has
offered the highest sale price in his bid and shall be subject to confirmation by the secured creditor.
(b) Rule 9(3) provides that the purchaser shall immediately deposit 25% of the amount of the sale price with the Authorised Officer conducting the
sale and in default of such deposit, the property shall forthwith be sold again.
(c) Rule 9(4) provides that the balance amount of purchase price payable shall be paid by the purchaser on or before the fifteenth day of
confirmation of sale of the immovable property or such extended period as may be agreed upon in writing between the parties.
(d) Rule 9(5) gives authority to the Bank to forfeit 25% of the amount in case balance 75% is not deposited within the stipulated period.
(e) Rule 9(6) gives power to the Authorised Officer to issue sale certificate indicating the sale of the immovable property in favour of the purchaser
as per the form given in Appendix V to the Rules.
(f) Rule 9(9) provides that the Authorised Officer shall deliver the property to the purchaser free from encumbrances.
The provisions quoted above clearly gives an indication that the Authorised Officer has no power to issue the order of confirmation or Sale
Certificate in favour of the nominee of auction purchaser.
26 The sale in question was confirmed in favour of Thiru.S.Manisekaran not withstanding the fact that he was not a bidder. As per the terms of
auction and the order of confirmation, Thiru S.Manisekaran was bound to pay 75% of the amount on or before 22 January 2011. The Authorised
Officer very clearly stated in the letter of confirmation that in case the balance bid amount of 75% is not deposited on or before 22 January 2011,
25% of the bid amount already deposited will be forfeited without further notice. Therefore, it is clear that the Authorised Officer has not reserved
any right to extend the time limit for deposit of balance 75% of the bid amount. Even though the order of confirmation was given in favour of Thiru
S.Manisekaran on 7 January 2011 and he was directed to pay the balance amount by 22 January 2011, the fact remains that the amount was
deposited only on 11 June 2012 and that too after identifying a person to purchase the property.
It is therefore, evident that 75% of the bid amount expected to be paid on or before 22 January 2011 was paid after a period of about one
year and five months, in utter violation of the provisions of SARFAESI Act and the Security Interest (Enforcement) Rules, the mandatory
conditions of the auction notification and the letter of confirmation.
The issue regarding the power of the Recovery Officer to extend the time limit for payment of the balance amount came up for consideration
before us in P. Kumaran Vs. The Debts Recovery Appellate Tribunal and Others, , in the context of Rule 57(1) and (2) of II Schedule to the
Income Tax Act, 1961 which is made applicable to the sale under the Recovery of Debts Due to Banks and Financial Institutions Act. We made
the position clear in paragraph 26 of the said judgment that in case the auction notification does not contain a provision for extension of time for
depositing 75% of the amount, the recovery officer has no authority to give further time.
Paragraph 26:-
In fine and for the above discussions, we hold:
(i) sub-rule (1) of Rule 57 is mandatory;
(ii) sub-rule (2) of Rule 57, is not mandatory, as it could be applied as far as possible with necessary modifications;
(iii) such modifications can be made by incorporating the same in the terms and conditions in the sale notice itself and in the absence of such
modification in the sale notice, the Recovery Officer cannot extend the time for payment of the balance amount of 75 percent beyond the period of
15 days;
(iv) in the event the conditions of the sale notice provide for such extension and on the strength of the same if any extension is granted, the same
can be tested before the Competent Authority on the ground of arbitrary exercise of power, unjustifiable for extraneous consideration or on the
ground of malafide in the given facts and circumstances of the case.
The fact that the auction purchaser failed to deposit 75% of the bid amount on or before 22 January 2011 would result in forfeiture of 25% of
the bid amount paid by Thiru B.Subramani and it would give a cause of action to the Bank to issue a notification once again for sale.
The Authorised Officer has committed one more illegality by issuing the sale certificate in the name of Mrs. V.Padmavathy, who was not a
bidder at all. The fact that Thiru S.Manisekaran paid a sum of Rs.1,20,00,000/- on 11 June 2012 accompanied by a letter nominating Mrs.
V.Padmavathy to receive the Sale Certificate in her name, indicates that the payment was made by none other than Mrs. V.Padmavathy. This
clearly proves the undue interest shown by the Authorised Officer.
The Authorised Officer assisted Thiru S.Manisekaran and Mrs. V.Padmavathy to conduct a profitable real estate business at the cost of Bank
and the State Because of the illegal action of the Authorised Officer permitting transfer of sale confirmation and ultimately issuing the Sale
Certificate in favour of a total stranger, who never participated in the auction process, the Registration Department of the State of Tamil Nadu was
deprived of the stamp duty payable on the sale transaction. We are not in a position to believe that the Authorised Officer had acted in a bona fide
manner to protect the interest of the Bank.
The Authorised Officer was restrained from confirming the bid and that was the text of the order passed on 7 January 2011 in the presence of
the learned Counsel for the Bank. The Authorised Officer now says that he was informed of the restraint order only at 1.25 p.m. It is therefore
clear that at least from 1.25 p.m. on 7January 2011 he had the knowledge of the direction given by this Court. Therefore, in all fairness, he should
have maintained the status quo thereafter. However, very strangely in spite of the communication of the order of stay on 7 January 2011, the
Authorised Officer accepted the bids, conducted auction among the bidders, recognised the nominee of Thiru B. Subramani and issued the letter of
confirmation in favour of Thiru S. Manisekaran, received the balance amount of 75% on 11 June 2012, filed a petition before the learned Chief
Metropolitan Magistrate indicating that the property was purchased by Thiru S.Manisekaran and after obtaining orders u/s 14 of the SARFAESI
Act, issued the Sale Certificate in favour of Mrs. V.Padmavathy and handed over possession to her. This shows that the Authorised Officer was
determined to sell the property at any cost.
Most recently the Supreme Court in Ram Kishun and Others Vs. State of U.P. and Others, ) observed that the Authorised Officers of the
Banks should not behave like property dealers and dispose of the secured assets in any unreasonable or arbitrary manner in flagrant violation of the
statutory provisions.
The present case is a classic example as to how the Authorised Officers of the Banks are dealing with the secured assets, by misusing the
enormous power at their command.
The Supreme Court in Kanaiyalal Lalchand Sachdev and Others Vs. State of Maharashtra and Others, observed that an action u/s 14 of the
SARFAESI Act constitutes an action taken after the stage of section 13(4) and the same would fall within the ambit of Section 17(1) of the Act,
meaning thereby it is open to the DRT to consider as to whether any of the measures referred to in sub-section (4) of Section 13 taken by the
secured creditor for enforcement of security were in accordance with the provisions of the Act and Rules made thereunder.
The view taken by the Supreme Court in United Bank of India Vs. Satyawati Tondon and Others, that the action taken u/s 14 of the
SARFAESI Act is appealable u/s 17(1) of the Act was reiterated in Kanaiyalal Lalchand Sachdev and Others Vs. State of Maharashtra and
Others, .
The transfer of property to the third party purchaser was made u/s 13(6) of the SARFAESI Act. The Authorised Officer made a false
statement before the Chief Metropolitan Magistrate that the property was sold to Thiru S. Manisekaran, without divulging the fact that he was not
a bidder. The property, after taking possession, was given to a total stranger to the auction proceedings. While considering the correctness of the
order passed by the Chief Metropolitan Magistrate in the present case, these basic facts must necessarily be taken note of.
The application submitted by the Authorised Officer before the Chief Metropolitan Magistrate in Crl.M.P. No. 821 of 2012 does not contain
any details with regard to the earlier proceedings. Even though the earlier order passed by the Magistrate u/s 14 of the SARFAESI Act was set
aside primarily on the ground that the deceased person was shown as a party in possession of the property, the fact remains that the subsequent
application in Crl.M.P. No. 821 of 2012 was also filed against a dead person.
The property was sold on 7 January 2011 presumably for the distress value prevailing as on that date. The major part of the consideration for
sale was received by the Bank only on 11 June 2012. By that time, one year and five months have passed and naturally the property value would
have been increased. Even after appropriating the sale consideration, still there is balance payable to the Bank. Therefore it is evident that the
interest of the Bank was not safeguarded by the Authorised Officer.
We make the position clear that the Authorised Officer has no authority to accept the request from the highest bidder to issue the Sale
Certificate in favour of a third party. The sale should be confirmed in the name of the highest bidder and not in the name of his nominee. The privity
of contract would only be between the successful bidder and the Bank. The sale certificate should be issued only in the name of the successful
bidder in whose favour the letter of confirmation was issued. The question of further sale of the property would arise only after registration of the
sale certificate by the Bank in the name of the successful bidder. The purchaser from the successful bidder cum sale certificate holder must
necessarily pay stamp duty for registration. In short, the Authorised Officer has no authority to recognise a person as the nominee of the successful
bidder.
The order passed by the learned Chief Metropolitan Magistrate, Egmore, earlier on 29 June 2011 in Crl. M.P. No. 2522 of 2011 permitting
the Bank to take possession of the property was set aside by this Court. The said order was duly communicated to the learned Chief Metropolitan
Magistrate. The Bank thereafter approached the Magistrate with an application in Crl. M.P. No. 821 of 2012. The very same learned Magistrate
has considered the subsequent application and passed an order on 22 February 2012 appointing an Advocate Commissioner to take possession
of property. The learned Magistrate in the factual background of the case should have asked for better particulars from the Bank. The order
passed by the learned Metropolitan Magistrate does not contain any reference about the earlier order passed by him, which was ultimately set
aside by this Court. It is true that the respondent has no say in an application filed by the Bank u/s 14 of the SARFAESI Act. That does not mean
that the learned Chief Metropolitan Magistrate is bound to pass an order at the instance of the Bank even without furnishing the required
particulars.
We have noticed in several cases that the Magistrates were passing orders u/s 14 of he SARFAESI Act in the routine manner and as a matter
of course. The Advocate Commissioners appointed by the Court were given liberty to take the assistance of police, to break open the lock and to
take forcible possession of property. The Banks are projecting a case of artificial urgency and need to invoke Section 14 of the SARFAESI Act,
without taking independent action to take possession.
The Magistrate must be satisfied that the intervention of the Court is necessary to take possession of the property, meaning thereby, the Bank
should ordinarily make an attempt to take physical possession, without the intervention of Court. The question of giving direction to the police to
give assistance to execute the warrant and to break open the lock etc., would arise only in case the Commissioner is not in a position to take
possession. There were instances where the Advocate Commissioner with the assistance of police locked the premises without even allowing the
inmates to take the cooked food or uniforms and books of school going children. Therefore, in normal circumstances, it is not necessary to order
police protection and permission to break open the lock and similar other drastic steps at the first instance. It is always open to the Magistrate to
issue suitable directions to execute the order u/s 14 depending upon the report filed by the Advocate Commissioner after the initial inspection.
The Authorised Officer in utter disregard of the order passed by this Court on 7 January 2011 confirmed the auction and ultimately issued the
Sale Certificate on 12 June 2012. The question therefore is, whether it is open to a party to enjoy the unfair advantage gained by flouting the order
passed by the Court. The said issue is no longer res integra in view of the judgment of Supreme Court in All Bengal Excise Licensees'' Association
v.Raghabendra Singh, (2007) 11 SCC 374.
In All Bengal Excise Licensees'' Association, the High Court passed an interim order to the effect that the parties will be at liberty to process
the applications for grant of licences for excise shops but no final selection in respect of such shops shall be made without obtaining specific leave
of the Court. However, the excise department issued licences in violation of the interim order passed by the High Court. The matter was thereafter
taken up before the High Court by way of a Contempt Petition. The learned Single Judge of the High Court dismissed the contempt application
observing that the contemnors did not understand the implications and consequences of a prohibitory order passed in an independent proceeding.
The matter was thereafter taken up in appeal. The Supreme Court having found the violation and the grant of licence by flouting the direction,
observed that a party to the litigation cannot be allowed to take an unfair advantage by committing breach of an interim order and escape the
consequences thereof. The Supreme Court further said:
It is settled law that a party to the litigation cannot be allowed to take an unfair advantage by committing breach of an interim order and escape
the consequences thereof by pleading misunderstanding and thereafter retain the said advantage gained in breach of the order of the Court. Such
violations should be put an end to with an iron hand..........
In the instant case, the respondents have conducted the auction quite contrary to and in violation of an injunction order passed by the High
Court. Courts have held in a catena of decisions that where in violation of a restraint order or an injunction order against a party, something has
been done in disobedience, it will be the duty of the court as a policy to set the wrong right and not allow the perpetuation of the wrong doing. In
our opinion, the inherent power will not only be available u/s 151 CPC, as available to us in such a case, but it is bound to be exercised in that
manner in the interest of justice and public interest.
As rightly observed by the Full Bench of the Madras High Court in Century Flour Mills Ltd. that as a matter of judicial policy the court should
guard against itself being stultified in circumstances like this by holding that it is powerless to undo a wrong done in disobedience of the Court''s
orders.
Invalid Sale:
In the case on hand, the Authorised Officer conducted the auction proceedings and later issued an order of confirmation, in total violation of
the order passed by this Court. As observed by the Supreme Court in All Bengal Excise Licensees'' Association, it is the duty of the Court to set
the wrong right and not allow the perpetration of the wrong doing. We, therefore, by following the Full Bench judgment of this Court in Ramalinga
Choodambikai Mills Ltd. Vs. The Government of India and Others, and the judgment of the Supreme Court in All Bengal Excise Licensees''
Association ( 2007(1) SCC 374), cancel the auction held on 7 January 2011.
Since the Authorised Officer of the Bank violated the mandatory provisions of the SARFAESI Act and the Rules made thereunder and
suppressed material particulars and made false statements to take possession of property stating that it was sold to Mr. S.Manisekaran not
withstanding the fact that he was not a bidder and obtained an order against a dead person, the impugned order passed by the learned Chief
Metropolitan Magistrate on such factual background also must be set aside.
Conclusion:
In the result, the order dated 22 February 2012 in Crl. M.P. No. 821 if 2012 on the file of the learned Chief Metropolitan Magistrate,
Egmore, Chennai is set aside. The learned Chief Metropolitan Magistrate is directed to put the petitioner in vacant possession of the property by
deputing the very same Commissioner or another Advocate Commissioner within two weeks from the date of receipt or production of a copy of
this order. It is open to the learned Chief Metropolitan Magistrate to take police assistance. The Authorised Officer of the Bank is directed to
assist the learned Chief Metropolitan Magistrate and/or the Advocate Commissioner to effect re-delivery to the petitioner or her authorised agent.
Direction:
The factual matrix of this case clearly indicates the role played by the Authorised Officer as a real estate agent without making an attempt to get
best price and thereby to protect the interest of the Bank. The Authorised Officer appears to have acted on extraneous reasons and helped the real
estate lobby to make illegal gain. The provisions of the SARFAESI Act was not intended for such purpose. The Bank is entitled to take recovery
action by invoking the provisions of the Act. However, the action should not be for the purpose of assisting the real estate agents to enrich
themselves.
This case is really an eye opener. It is high time that the higher officers of the Bank rise to the occasion, so that such illegal acts would not recur
in future.
We, therefore, direct the Chairman-cum-Managing Director, Indian Bank, Chennai to conduct an enquiry in the matter through an officer of
the Bank not below the rank of a General Manager and take appropriate action against all concerned. The Chairman cum Managing Director is
further directed to submit an action taken report before the Registry of this Court on or before 31 October 2012. The writ petition is allowed with
the above direction. Consequently, the connected Mps are closed. No costs.