Kailash Devi Girdhar vs Indian Overseas Bank And Ors.

S.N.H. Zaidi, J

This appeal impugns the order dated 1.2.2011 passed by the Presiding Officer of the Debts Recovery Tribunal-I, Delhi (for short, 'the DRT') on an application moved by respondent No. 2, Ms. Vandana Anand, in S.A. No. Nil of 2010, whereby the learned DRT had ordered for inter se bidding between the applicant and the highest bidder, the appellant herein. Relevant facts of the case, in brief, are that respondent No. 1 Bank had invited tenders for the sale of two properties, namely, residential Apartment No. 5 (4th Floor), Eden Towers, Plot No. 20, Sector-5, Dwaraka, New Delhi and residential Apartment No. F-226, Saraswati Kunj Apartments, Plot No. 25, I.P. Extension, Patparganj, Delhi, vide advertisement published in the newspapers. The appellant filed a sealed tender along with requisite payment for Dwaraka property on 24.11.2010. The tenders were opened on the same day and the appellant was declared the successful bidder by the authorized officer of the Bank, as her bid of Rs. 65,01,100/- was the highest. The appellant deposited Rs. 16,26,100 through various demand drafts towards the payment of 25% of the bid amount on the same day and the authorized officer of the Bank required the appellant to deposit the balance amount of Rs. 48.75.000/- within 15 days of the confirmation of sale by the Bank. The appellant was notified vide letter dated 30.11.2010 that sanctioning authority had confirmed the sale in her favour and required her to deposit the balance amount by 14.12.2010. In the meanwhile, an application under Section 17(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, 'the Act'), along with a demand draft of Rs. 7 lakh, was filed before the DRT by respondent No. 2, Ms. Vandana Anand, claiming herself to be an intending purchaser of Dwaraka property, against the Bank and the borrower/mortgagor and assailing the sale proceedings and offering Rs. 66 lakh for the said property, she prayed for the cancellation of the auction sale. On her application, the learned Presiding Officer of the DRT, vide order dated 9.12.2010, directed the Bank as well as the highest bidder (appellant herein) to maintain status quo with regard to the property in question till further orders and, after hearing the applicant, the Bank and the highest bidder, by the impugned order, directed for inter se bidding of the said property between the applicant of the S.A. and the highest bidder, provided the applicant (Ms. Vandana Anand) deposits the balance amount to make her deposit equivalent to the amount deposited by the highest bidder with the Bank, within three days from the date of the order. The borrowers were also given liberty to participate in that inter se bidding to be held before the authorized officer of the Bank on 7.2.2011. Feeling aggrieved with that order, the highest bidder has come up in this appeal against that order.

I have heard Mr. Lajwinder Singh for the appellant, Mr. Karan Khanna for the respondent Bank, Mr. Dincur Bajaj for respondent No. 2 and Mr. A.K.D. Sayare for respondent No. 3, the borrower, and perused the record.

It has been pointed out that the borrowers (respondents 3 and 4) had also filed an appeal (Miscellaneous Appeal No. 68/2011) against the impugned order, which was finally disposed of by this Tribunal by order dated 22.9.2011 with the observation that since the one-time settlement (OTS) proposal submitted by the appellants (borrowers) has been accepted by the Bank, vide its letter dated 14.7.2011, the appellants were directed to comply with the terms and conditions of the OTS by continuing to deposit the amount as per the acceptance letter and the entire amount was directed to be deposited by 15.10.2011. It was also observed that if the entire amount was not deposited by that date, then the question with regard to the auctioning of the property or inter se bidding would be relevant and the Bank was also directed that the until the entire amount was deposited, the original title deeds of the property would not be released. Admittedly, the borrowers could not deposit the amount within the given time as per their OTS proposal.

The submission of Mr. Lajwinder Singh is that it is an admitted case of respondent No. 2 that she fully knew about the auction sale but, despite that, she neither participated in the sale proceeding nor submitted any tender, as invited, and the appellant being the highest bidder, the auction sale was also confirmed by the Bank in her favour and if respondent No. 2 was interested in purchasing the said property she should have participated in the auction sale and now she cannot challenge the proceedings of the auction, which were conducted as per law. He further contends that the deposit of demand draft of Rs. 7 lakh as well as the offer of Rs. 65 lakh, i.e., an increase of about Rs. 1 lakh only over the highest bid of the appellant, is nothing but a mere eyewash and an attempt to frustrate the auction sale. It has also been contended that the respondent No. 2 had no locus standi to challenge the auction sale proceedings and the learned DRT had erred in directing for inter se bidding and allowing her to participate in it and thereby frustrating the auction proceedings held on 24.11.2010. He also contended that the law relating to auction sale has been settled that where the auction sale has been held with adequate publicity in well-known newspapers, the same cannot be set aside after having been confirmed unless some fraud or collusion is proved.

Mr. Lajwinder Sigh has drawn my attention to the observations of the Hon'ble Supreme Court in Valji Khimji & Company v. Official Liquidator of Hindustan Nitro Product (Gujarat) Ltd. & Ors., IV (2008) BC 536 (SC), Rajender Singh v. Ramdhar Singh and Others, : IV (2001) SLT 477 : AIR 2001 SC 2220, and also to the judgment of the Hon'ble High Court of Delhi in Tata Iron and Steel v. Jhalani Tools, (Delhi), : (156) 2009 DLT 311, as well as of this Tribunal in Ram Lal Phutella v. State Bank of India & Ors., I (2009) BC 55 (DRAT).

Mr. Karan Khanna, learned Counsel for the respondent Bank, submitted that the Bank is only interested in the recovery of its outstanding dues and if the inter se bidding can fetch maximum price for the property, the Bank has no objection to it.

Mr, Dincur Bajaj, learned Counsel for respondent No. 2, submitted that as against the reserve price of Rs. 65 lakh for Dwaraka property only one tender of the appellant was received in the alleged auction sale, that too with an increase of only Rs. 1,100/- over the reserve price, which shows that the highest bidder and the officers of the Bank were in collusion. He further submitted that appellant had also not made the payment of the remaining 75% amount within 15 days as per Rule 9 of the Security Interest (Enforcement) Rules, 2002. It has also been contended by him that the learned DRT, while making the impugned order, had relied upon the judgment of the Hon'ble Apex Court in the case of Divya Manaufacturing Company (P) Ltd. v. Union Bank of India and Others, : V (2000) SLT 397=1 (2006) BC 428 (SC)=AIR 2000 SC 2346, which has been followed by the Supreme Court and the High Court in the subsequent cases of FCS Software Solutions Ltd. v. LA Medical Devices Ltd. and Ors., : I (2009) BC 18 (SC) : VIII (2008) SLT 396 : AIR 2008 SC 3137, Shradha Aromatic Private Limiteds. O.L. of Global Arya Industries Limited and Ors., (2001) 6 SCC 207 and D.J. Enterprises Ltd. and Anr. v. IFCI Ltd. and Ors., IV (2009) BC 23=. Mr. Bajaj also drew my attention to the observations of the Calcutta High Court in Sisir Kumar Mukherjee and Others v. Kanyalal Jhewar and Others, : AIR 1971 Cal 87, that where the property worth Rs. 60,000/- has been valued by the decree-holder in its execution application at Rs. 6,000/-, which was further reduced to Rs. 1,500/- in the sale proclamation, it would be a case where the decree-holder would be guilty of deliberately putting a shockingly low valuation of the disputed property in the proclamation of sale which amount to fraud on Court and would vitiate the sale.

Considering the rival submissions of the learned Counsel for the parties, it is to be noted that in the case of Valji Khimji & Company v. Official Liquidator of Hindustan Nitro Product (Gujarat) Ltd. & Ors. (supra), the Hon'ble Supreme Court while considering the ratio of the case of Divya Manufacturing Co. 's case (supra) has observed in paras 29. 30 and 31 that:

Thus, the ratio in Divya Manufacturing Company (P) Ltd. (supra) was that if there is fraud then even after the confirmation the sale can be set aside because it is well settled that fraud vitiates everything. On the facts of that case, the Court was of the view that that confirmed sale deserved to be set aside.

In our opinion the decision of this Court in Divya Manufacturing Company (P) Ltd. (supra) cannot be treated as laying down any absolute rule that a confirmed sale can be set aside in all circumstances. As observed by one of us (Hon. Katju, J) in his judgment in Dr. Rajbir Singh Dalal. Chaudhary Devi Lal University, Sirsa & Anr., Civil Appeal No. 4908/2008 pronounced on 6.8.2008, a decision of a Court cannot be treated as Euclid's formula and read and understood mechanically. A decision must be considered on the facts of that particular case.

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.

Besides that, the Apex Court in the case Rajender Singh v. Ramdhar Singh and Others (supra), while interpreting Order 21 Rule 90, CPC, has held that if no fraud or material irregularity has been alleged in the conduct of sale, inadequacy of price is not a ground for setting aside the Court sale.

My learned predecessor of this Tribunal, in the case of Ram Lal Phutella v. State Bank of India & Ors. (supra), which has almost similar facts and circumstances, held that where the appellant had neither alleged ownership over the property before the Recovery Officer or the DRT and was also not a borrower/ guarantor/mortgagor nor had he participated in the auction sale, he could not be deemed to be a person whose interest were affected by the sale. It has also been held that auction in favour of the respondent at higher price than the reserve price and the confirmation of sale in consequences thereof was in proper exercise of discretion and there was due observance of relevant rules contained in II Schedule to the Income Tax Act about prior publication of auction sale which was not suffering from any fraud or irregularity or any defect.

A perusal of the S.A. filed by respondent No. 2 shows that she has stated that after getting the knowledge of the property (at Dwaraka) being put to auction, she approached the officials of the Bank to enable her to participate in the auction proceedings pursuant to the advertisements (Annexure A-1), but from day one she was discouraged and no proper information was given to her by the Bank officials. She has further averred that on every visit to the Bank she met certain prospective buyers who informed her about the encumbrances over that property and thereby discouraged her to bid and some of the said prospective buyers even misinformed her about a settlement and cancellation of auction because of certain proceedings before the DRT. Although she has alleged that fraud was played by the officials of the Bank in collusion with the property dealers by not selling that property at appropriate price, yet it appears that neither respondent No. 2 made any complaint in that regard to the higher officers of the Bank nor she had given any plausible explanation of not participating in the auction sale pursuant to the advertisement published in the newspaper. There is no allegation that due publication of the auction sale was not made by the authorized officer of the Bank or she was prevented by anybody from submitting her bid through tender. Her contention that the said property had been sold at throwaway price, as it is of a substantial market value, is falsified by her own offer of Rs. 66 lakhs which is only about one lakh more than the highest bid received from the appellant herein, In view of these circumstances, I am satisfied that the allegation of fraud is not established even prima facie.

The High Court of Delhi in the case of D.J. Enterprises Ltd. and Anr. v. IFCI Ltd. and Ors. has neither interpreted the ratio of M/s. Divya Manufacturing (supra) nor based its finding on it. The Court has only quoted certain paragraphs of the judgment of the DRAT which had the reference of the said M/s. Divya Manufacturing's case. Moreover, the facts and circumstances of the case of D.J. Enterprises Ltd. and Anr. v. IFCI Ltd. and Ors. are entirely different and as such the view taken in that case does not apply to the present case.

I am in agreement with the contention of the learned Counsel for the appellant that a Court sale or any other auction sale conducted in accordance with the provisions of any Act or statutory rules can be interfered with only if it suffers from any fraud or material irregularity. The Hon'ble Punjab and Haryana High Court in the case of M/s. Bajwa and Company v. M/s. Keshav Rai Naresh Pal Singh and Another, 1989 PLJ 406, has observed that if Court auction sales are permitted to be set aside on offers being made at higher price subsequent to the auction, there will be no certainty about the auction sale and it will prejudice the very system of Court auctions and will result in a rule of thumb, which cannot be permitted. Similarly, the Delhi High Court in the case of Tata Iron and Steel v. Jhalani Tools, (Delhi) (supra), where the applicants have failed to show any material irregularity or fraud in the conduct of sale except making wild allegations that successful and unsuccessful bidders had formed coterie and also failed to show any substantial injury caused to them, has held that once the bid is accepted and the sale is confirmed, the same is not to be set aside merely on account of higher offer received later on.

The contention of Mr. Bajaj that notice of sale were published in two daily newspapers, namely, 'The Statesman' in English and 'Veer Arjun' in Hindi which have no sufficient circulation in the locality (Delhi) and this Tribunal in Appeal No. 256/2010--Ram Murti Pyare Lal and Another v. Central Bank of India and Others (decided on 7.6.2011) has observed that 'Veer Arjun' newspaper is nethera leading newspaper nor it has sufficient circulation in Delhi and as such the requirement of the Proviso to Section 8(6) of the Security Interest (Enforcement) Rules, 2002 has not been sufficiently complied with, loses its efficacy as it is not the case of the applicant/respondent No. 2 that she did not know about the intended auction sale of the property in question and has admitted in para 5.2 of her application that she came to know about the auction of the property from advertisement, a copy whereof was also annexed as Annexure A-1 to that application. Moreover, the auction sale was not assailed by the respondent No. 2 on the aforesaid ground before the learned DRT.

Mr. Bajaj has further contended that the appellant had not deposited the remaining 75% of her bid amount within the given time as per the requirement of Rule 9 of the Security Interest (Enforcement) Rules, 2002 is also not acceptable, as it appears that the appellant had the time to deposit the amount up to 14.12.2010 as per Bank's letter dated 30.11.2010, but since prior to that date the learned DRT had directed the Bank as well as the highest bidder to maintain status quo of the property in question, the appellant had committed no wrong in not making the deposit after the said order, as the auction sale proceedings had already been assailed in the S.A. filed by the respondent No. 2. This finding finds support from the contention of the Bank in para 4 of its counter-affidavit filed before this Tribunal, wherein it has been averred that the amount was not paid due to the order of the Presiding Officer of DRT-I, Delhi.

In view of above discussion, I am of the view that the learned Tribunal below has committed error in properly applying the law and appreciating the facts and circumstances of the case by directing the inter se bidding and thereby impliedly setting aside the auction sale conducted by the authorized officer of the Bank. The impugned order is, therefore, not sustainable and liable to be set aside

Consequently, this appeal is entitled to be allowed and the impugned order directing the inter se bidding is liable to be set aside. The appeal is, accordingly, allowed and the impugned order dated 1.2.2011 is set aside. Copy of this order be furnished to the parties as per law and one copy be also sent to the learned DRT forthwith.