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Judgment
Ashok Menon, Chairperson
These two appeals are filed by two different Appellants challenging the judgments and orders dated 31.03.2010 and 26.10.2010 in Securitisation Applications (S.A.) No. 17 of 2010 and No. 31 of 2010 respectively on the files of the Debts Recovery Tribunal-II, Mumbai (D.R.T.) from orders respectively. The appeals pertain to separate challenges raised by the Appellants therein but since the property involved is common and the creditor and borrowers are also common, the appeals are disposed of by a common order.
The secured asset namely, the plot of land bearing C.S. No. 540 with a building thereon bearing No. 50 Dudhwala Building at Sadashiv Cross Lane, Girgaon, Mumbai-400004 belonging to the mortgagors was put up for auction conducted on 08.03.2010 by the first Respondent Bank of Baroda (formerly Dena Bank) the creditor for recovery of debt under the provisions of the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (“SARFAESI Act”, for short).
Krishnakant Lotia (Appellant in Appeal No. 92 of 2010), a third party raised a claim over the subject property by filing a Securitisation Application (S.A.) No. 17 of 2010 before the D.R.T. which was dismissed by Judgment and order dated 31.03.2010. Aggrieved by the dismissal of his S.A., Krishnakant Lotia preferred Appeal No. 92 of 2010 before this Tribunal. The dismissal of S.A. No. 17 of 2010 was also challenged before the Bombay High Court in Writ Petition No. 3330 of 2010. The said writ was dismissed by the Division Bench on 03.05.2010 holding that the Sarfaesi measures taken by the bank would be subject to the outcome of Appeal No. 92 of 2010 pending before this Tribunal.
The secured asset was sold in the auction conducted on 08.03.2010 to M/s Meeti Developers Pvt. Ltd, the highest bidder (Appellant in Appeal No. 01 of 2011) for a sale consideration of ₹82 lakhs. The sale was yet to be confirmed in favour of the highest bidder because of the restraining order issued in Writ Petition No. 3330 of 2010 on 20.04.2010 filed by the aforementioned Krishnakant Lotia.
In the meantime, Kalyani Services, a proprietorship (the Applicant in S.A. No. 31 of 2010 and the seventh Respondent in Appeal No.01 of 2011) offered to purchase the secured asset for ₹90.20 lakhs, but that offer was not accepted by the bank. Hence, Kalyani Services filed S.A. No. 31 of 2010 before the Debts Recovery Tribunal-II, Mumbai (D.R.T.) challenging the sale, but the highest bidder was not made a party to that S.A.
The bank chose not to file any reply in the S.A. No. 31 of 2010. The Ld. Presiding Officer, vide order dated 26.04.2010 observed that the offer made by the Applicant in the S.A. was 10% more than the bid offered by the Appellant as the highest bidder, and therefore, an inter-se bidding between the Applicant and the successful bidder should be conducted. It was also observed that in case an interested third party came with a much higher offer, that should also be considered. The said order was made subject to the ultimate decision of the Writ Petition No. 3330 of 2010.
Being the highest bidder, M/s Meeti Developers was aggrieved by the impugned order in S.A. 31 of 2010 and hence, approached the Hon’ble High Court of Bombay with a Writ Petition (L) No. 2112 of 2010. The Writ Petition was disposed of granting liberty to the Appellant to approach this Tribunal with an appeal. And hence, he filed Appeal No.01 of 2011.
Hence, two appeals are pending before this Tribunal concerning the subject property.
Concerning Appeal No. 01 of 2011 filed by the successful bidder, it has to be observed at the outset that the impugned order of Ld. Presiding Officer granting liberty for inter-se bidding and also permitting a third party to come with an offer to purchase the property already bid in the auction is apparently erroneous.
The Hon’ble Supreme Court has in the decision Valji Khimji & Co. vs. Official Liquidator of Hindustan Nitro Product (Gujarat) Ltd. & Ors 2008(9) SCC 299 relying on an earlier decision of the Hon’ble Supreme Court in M/s Kayjay Industries (P) Ltd. vs. M/s Asnew Drums (P) Ltd. & Ors. (1974) SCC 213 held that if 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. It could have been a different matter if the auction had been held without adequate publicity in well-known newspapers having wide circulation, but where the auction sale was done after wide publicity, then setting aside the sale after its confirmation will create huge problems. When an auction sale is advertised in well-known newspapers having wide circulation, all eligible persons can come and bid for the same. They will be themselves to be blamed if they do not come forward to bid at the time of the auction. They cannot ordinarily later on be allowed after the bidding (or confirmation) is over to offer a higher price.
In the decision of M/s Kayjay Industries (supra), it was held thus:
“If court sales are too frequently adjourned with a view to obtaining a still higher price it may prove a self defeating exercise, for industrialists will lose faith in the actual sale taking place and may not care to travel up to the place of the auction being uncertain that the sale would at all go through.”
The Hon’ble Supreme Court has again in Celir LLP vs. Bafna Motors (Mumbai) Pvt. Ltd. & Ors. 2023 DGLS (SC) 1119 relying upon the decision in Valji Khimji (supra), held that once an auction is confirmed the same can be interfered only on very limited grounds as otherwise no auction would be complete. The Hon’ble Supreme Court has in State of Punjab & Ors. vs. Mehar Din 2022 LiveLaw (SC) 235 held that judicial review in contractual/commercial/ tenders/public auction matters by superior courts is not proper and the courts should not interfere unless substantial public justice was involved or the transaction was malafide. As discussed, in the instant case, there does not appear to be any malafides in the auction sale of the subject property to M/s Meeti Developers.
Unless a clear case of fraud is made out in the auction, it cannot be set aside. In the instant case, it cannot be said that there is any fraud in conducting the sale either alleged or proved. The proprietor of Kalyani Services should have been aware of the publicity regarding the sale and ought to have participated in it, in case he was interested. It was not proper on his part to have approached the bank with an offer after the sale had concluded. The auction is complete on the fall of the hammer, and certain rights accrue in favour of the auction purchaser. The sale in favour of the M/s Meeti Developers would have been confirmed but for the injunction granted in Writ Petition No.3330 of 2010. That Writ was subsequently dismissed granting liberty to this Tribunal to decide the claim of Krishnakant Lotia in Appeal No. 92 of 2010.
Hence the question that remains for consideration now is whether Krishnakant Lotia, the Applicant in S.A. No. 17 of 2010 has any claim over the subject property as claimed in S.A. 17 of 2010 and whether the dismissal of his S.A. by the D.R.T. vide order dated 31. 03.2010 was proper and could be justified.
S.A. No. 17 of 2010 filed by the claimant Krishnakant Lotia was disposed of by the Tribunal by holding that the Recovery Officer could proceed to sell the property subject to the decision of the Hon’ble High Court of Bombay in the Suit No. 2660 of 2004 for specific performance.
Krishnakant Lotia has averred that he has purchased the property from the mortgagor who are Respondents Nos. 2 to 6 on 14. 12.1999 for sale consideration of ₹3.5 lakhs. When the Recovery Officer proceeded to attach the subject property in Recovery Proceeding (R.P.) No. 490 of 2002, he filed a writ petition No. 936 of 2004 before the High Court of Bombay. That writ petition was withdrawn and instead, he filed a suit No. 2660/2004 before the High Court seeking specific performance of contract against Respondents Nos. 2 to 6. The bank was also made a party to that suit. A claim petition was also made before the Recovery Officer who declined to lift the attachment. Lotia filed Appeal No. 20 of 2006 before the D.R.T. under Sec. 30 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (‘RDDB & FI Act’, for short) challenging the order of the Recovery Officer. That Appeal No. 20 of 2006 was disposed of by the D.R.T. on 27.09.2006 holding that the attachment shall be subject to the final decision in the suit for specific performance No. 2660 of 2004 before the Hon’ble High Court of Bombay.
Pending the proceedings before the Recovery Officer, the bank proceeded under the provisions of the SARFAESI Act against the subject property, and the property was sold to M/s Meeti Developers. Challenging the Sarfaesi action, the claimant Krishnakant Lotia filed S.A. No. 17 of 2010 and aggrieved by the action of the authorised officer in not permitting to bid for the property, Kalyani Services filed S.A. No. 31 of 2010. Orders were passed in the S.A. for inter-se bidding as mentioned above and those orders are challenged in these appeals.
In the meanwhile, Suit No. 2660 of 2004 filed by Krishnakant Lotia was transferred to the City Civil Court, Bombay, and refiled as S.C. Suit No. 7307 of 2004. After considering the claim of the Plaintiff therein it was observed that the agreement for sale between the plaintiff and mortgagors was not registered as required and it was curious that the property was mortgaged for ₹57 lakhs but agreed to be sold to the plaintiff for ₹3.5 lakhs which creates doubt regarding the genuineness of the agreement for sale and Suit No. 7307 of 2004 was dismissed vide judgment dated 25.09.2014. Even otherwise, given the decision of the Hon’ble Supreme Court in Suraj Lamp & Industries Pvt. Ltd. vs State of Haryana & Ors. AIR 2012 SC 206, the challenge by Lotia may not lie as it was held that immovable properties could be legally and lawfully transferred/conveyed only by a registered deed of conveyance, and transactions of the nature of GPA sales or agreement to sell did not convey title and did not amount to transfer of immovable property. An agreement to sell could be used to enforce specific performance or to defend possession under Sec. 53A of the Transfer of Property Act. The agreement in favour of Krishnakant Lotia was found to be unenforceable by a civil court of competent jurisdiction. Hence, he is not entitled to any protection.
Since Suit No. 7307 of 2004 was dismissed, the attachment of the property ordered by the Recover Officer has now become final. The auction sale in the Sarfaesi proceedings was made subject to the final order in Writ Petition No.3330 of 2010. That writ has also been disposed of with a direction to consider the dispute in the appeals pending before this Tribunal.
In the result, Appeal No. 01 of 2011 is allowed and the impugned order in S.A. No. 31 of 2010 dated 26.04.2010 is set aside and the S.A. is dismissed. The order dated 31.03.2010 of the D.R.T. in dismissing S.A. No. 17/2010 is upheld and Appeal No. 92 of 2010 is dismissed.