Monster Trade Links Pvt. Ltd. vs Punjab National Bank And Ors.

Ranjit Singh, J

Earlier, Mr. Praveen Kochhar (respondent No.3) and Mr. Sunil Girdhjar (respondent No.4), had approached this Tribunal by way two separate appeals viz., Miscellaneous Appeal No. 77/2013 and Miscellaneous Appeal No. 188/2013. Finding no merit in these appeals, these were dismissed by this Tribunal on 16.10.2014. The said respondents, thereafter, filed an applications (I.A. 1522/2014 and 1523/2014) before the Tribunal below requesting for permission to participate in the inter se bidding for the property which had earlier been put to auction and had been purchased by the said respondent auction purchasers. The prayer made in the application has been allowed by the Tribunal below. Aggrieved against the same, the appellant has filed the present appeal with the grievance that the Tribunal below could not have legally permitted the inter se bidding once the appeal filed by respondents 3 and 4 had been dismissed by this Tribunal where they were given this option but had declined to avail the same.

The facts were noticed in detail while disposing of the Miscellaneous Appeal Nos. 77/2013 and 188/2013. To recapitulate, it can be noticed that borrower had obtained certain credit facilities from the respondent Punjab National Bank. The account of the borrower declared NPA, when notice under Section 13(2) followed by notice under Section 13(4) of the SARFAESI Act was issued. The borrower challenged the same by filing S.A. The Tribunal below allowed the Bank to put the property to auction sale, when the borrower filed an application for bringing a better prospective buyer. The borrower also prayed for grant of interim relief but the prayer was rejected on 3.10.2012. Consequently, the Bank had proceeded to sell the two properties in question and thus issued sale notice on 27.11.2011. The sale was conducted on 27.12.2011 where respondents 3 and 4 gave the highest bid.

As already noticed, the borrower had filed an application before the Tribunal below seeking permission to bring some prospective buyer who could offer better price. The Tribunal below issued notice on the said application for 21.12.2011, though this application did not contain any name or details of the prospective buyer. On 23.12.2011, the borrower was granted liberty to bring better buyer before the Tribunal within 10 days.

In the meantime, the auction took place and the respondent borrower had filed two applications praying for stay of the sale confirmation. The borrower ultimately succeeded in bringing a buyer and the Tribunal directed him deposit a sum of Rs. 2 crore within 10 days, failing which the physical possession of the properties were to be handed over to the then auction purchasers (respondent Nos. 3 and 4), Aggrieved against the order passed by the Tribunal, the said auction purchasers had filed two appeals as noticed above.

These two appeals filed by respondents 3 and 4 were dismissed by this Tribunal by taking note of the stand of the borrower that the buyer brought by it had offered a higher price for the property, which was 30-40% more than the bid prices given by respondent Nos. 3 and 4. The bids given by respondents was for 1.78 crore for both the properties whereas the buyer introduced by the borrower, M/s. Monster Trade Links Pvt. Ltd. (appellant in the present appeal) had offered and ultimately purchased the property for Rs. 2.4 crore. While dismissing the appeal field by respondent Nos. 3 and 4, this Tribunal noticed as under:

"The main plank of the Counsel for the appellant to attack the order permitting borrower to bring buyer has been that the auction had taken place and if such like prayers are allowed, then the auction sale would have no sanctity. Obliquely, the Counsel has prayed that confirmation of sale be done in favour of the appellant. The Counsel, however, could not cross the legal hurdles in way of his submission that there is no inherent right in seeking confirmation of the auction proceedings. View also is that the highest bidder in public auction, which the appellants are, cannot have a right to get the property or any privilege, unless the authority confirm the auction sale. Aim also is to get the best price. That is what has been kept in mind by the Tribunal below. The Counsel for the appellants could not show any legal basis for the submission that the auction held in such cases would lose their sanctity if these are not honoured and are interfered with like this. The Counsel was also unable to satisfy that the appellants will have right before the confirmation of sale in their favour. It may require notice that the borrower has a vital interest to see that his property fetches the best price which would ultimately result in discharge of his liability. No one other than the borrower would suffer in case his property is not sold at a best price because the Bank still would be in a legal position to recover the remaining amount whereas the auction purchaser would get the property at a price less than the actual value of the property. In any case, the legal position seems to be clear in this case that there is no right in favour of the auction purchasers as the sale in their favour has not been confirmed. If the borrower has been able to bring a buyer who has offered 30 to 40% more price for the properties, then that has to be preferred. The Counsel for the borrower would also point out that the appellants were given opportunity to match the price offered by the purchaser and was given the option of inter se bidding but they refused to participate in the process of either inter se biding or to make an offer matching the price given by respondent No. 2. Even this Tribunal has given opportunity to the appellants to match the bid of the purchaser, but appellants showed no interest and out rightly declined to avail the said opportunity.

In view of above, I find no merit in both the appeals and, therefore, would have no hesitation in dismissing the same. Ordered accordingly."

From the foregoing, it is clear one of the factors which weighed with this Tribunal while dismissing the appeals filed by respondent Nos. 3 and 4 was the fact that the said respondents were given opportunity to match price offered by the new purchaser (appellant) and was also given option of the inter se bidding, but they failed to either participate in the inter se bidding or match the price given by the present appellant. This opportunity was also given to respondents 3 and 4 by this Tribunal, but they outrightly declined to avail the said opportunity.

It may also call for a notice here that the Tribunal below while allowing application of the borrower to bring a buyer was of the view that the property had not fetched proper price. The right of the borrower to redeem the property was recognized and after noticing that the sale had not been confirmed in favour of respondent Nos. 3 and 4 who were the highest bidders. The auction in their favour was held liable to be set aside and the offer of the prospective buyer who had already deposited Rs. 2.11 crore was accepted and sale was ordered to be confirmed for Rs. 2.40 crore. The prospective buyer was directed to deposit the balance amount with the Bank within a week.

The appeals having been dismissed against the order so passed by the Tribunal below, the sale ought to have acquired finality as the direction issued by the Tribunal below to confirm the sale in favour of the prospective buyer, who is present appellant; had already been passed. Still, respondent Nos. 3 and 4 chose to file application before the Tribunal below requesting the Tribunal to hold inter se bidding for the property. It was pleaded before the Tribunal below by the present appellant that the issue had attained finality and that the auction held in his favour has been confirmed. The appellant accordingly pleaded that the applications filed by respondent Nos. 3 and 4 be dismissed.

The Tribunal below, however, was impressed with the grounds advanced by respondent Nos. 3 and 4 in their applications that their Counsel had declined to give consent for inter se bidding without taking any instructions from the said respondents. The Tribunal, accordingly, felt that inter se bidding be conducted by the authorized officer of the Bank and this should be started from Rs. 2.60 crore and the respondent Nos. 3 and 4 should first deposit the same with the authorized officer of the respondent Bank, who was to keep this amount in a no-lien interest-bearing account. Aggrieved against this order passed by the Tribunal below, the appellant has field the present appeal.

Notice in this appeal was issued and reply has been field respondent Nos. 3 and 4 as well as by the Bank. The Counsel for the appellant submits that once the opportunity was afforded to respondent Nos. 3 and 4 for inter se bidding earlier by the Tribunal below and even by this Tribunal, which was declined and the appeals were dismissed by this Tribunal, the Tribunal below would not have any jurisdiction to entertain such applications and allow inter se bidding as has been done, in short, the prayer is that these applications field by respondent Nos. 3 and 4 before the Tribunal below was not maintainable and the impugned order would call for interference on this short ground alone.

This prayer is vehemently opposed by the Counsel appearing for respondent Nos. 3 and 4 who would urge that applications filed by the said respondents were clearly maintainable, especially so, when the ground pleaded therein was that their Counsel had earlier declined to participate in inter se bidding without taking any instructions from the said respondents. The Counsel would further contend that appeals having been dismissed by this Tribunal, the appellate Tribunal became functus officio and as such no application could have been filed or entertained by this Tribunal for permitting inter se bidding as was prayed for by the respondents. The Counsel would further contend that appellant M/s. Monster Trade Links Pvt. Ltd. is, in fact, espousing the cause of the borrower. The Counsel has made allegation of fraud against of the appellant to urge that their appeal, therefore, would deserve dismissal on this ground.

When the attention of the Counsel is invited to the fact that no such plea on the ground of fraud was raised before the Tribunal below, the Counsel would contend that these facts came to the notice of the respondents subsequent to the order passed by the Tribunal below. The Counsel has also pressed into service the law laid down in the case of SP. Chengalvaraya Naidu v. Jagannath, II (1994) BC 546 (SC)=AIR 1994 SC 853, where the respondent had played fraud on the Court in obtaining preliminary decree. That is neither the case here nor it is so pleaded and proved. Plea of fraud was an issue raised in the case before the Hon'ble Supreme Court.

To allege fraud on the part of the appellant, reference is made to the written statement filed by respondent Nos. 3 and 4. It is averred in the written statement that one Mr. Vijay Julka is the Director of the respondent borrower company as well as M/s. Vidhi Infratech Pvt. Ltd. who is the owner of the property in question. He has filed an affidavit stating that M/s. Vidhi Infratech Pvt. Ltd. are the owners of this properties which were put to auction and this is a company in which Mr. Kapil Chugh and Mr. Sanjay Aggarwal were Directors prior to the induction of deponent Mr. Vijay Julka. It is further stated that the properties belong to Mr. Manoj Garg and his wife Ms. Saroj Garg who were involved in various fraud cases inasmuch as they have been arrested subsequent to the Red Comer notice issued, by CBI. It is stated that Mr. Kapil Chugh and Mr. Manoj Kumar Garg were absconding for three years. It is also stated that Mr. Manoj Kumar Garg and his family are primarily responsible for fraud committed against various nationalized Banks including Punjab National and M/s. Monster Trade Links is owned by the relatives of Mr. Manoj Kumar Garg.

The respondent Nos. 3 and 4 would also urge that the appeal is not tenable as the appellant has approached the Tribunal with unclean hands. The Counsel would point out that paid up share capital of the company is mere Rs. 1 lac, but they have paid a sum of Rs. 2.40 crore for the purchase of the property in question. The plea in the written statement further is that the appellant company is nothing but a front company of M/s. Vidhi Infratech Pvt. Ltd. which is the original mortgagor of the Bank. It is urged that to save their property, appellant front company is being used and thus the appeal is not maintainable.

The Counsel for the Bank on the other hand would allege that appellant has no locus and file and maintain this appeal as he has already sold one of the properties and this fact can be noticed from the pleadings filed by the appellant.

The short and crisp issue which, in my view, arise for consideration in the present appeal is the jurisdiction of the Tribunal below to entertain the applications of respondent Nos. 3 and 4 to direct inter se bidding on the face of the earlier order passed by this Tribunal, where appeals of respondent Nos. 3 and 4 were dismissed when they declined to avail the opportunity to participate in the inter se bidding or to make any better offer. An issue which is dealt with by the appellate Tribunal and is adjudicated one way or the other cannot be raised or agitated before a lower Tribunal and if it is done and is entertained, the order passed by the higher forum would lose sanctity and will be rendered meaningless and without any purpose, If such a course is permitted, it would enable the parties to easily circumvent the orders passed by the higher forum by raising and reviving their plea before the lower forum though the same had been considered and rejected. Whatever may be the reason, respondent Nos. 3 and 4 had declined to go in for inter se bidding and their appeals against the order passed by the Tribunal were dismissed. That was done while upholding the order passed by the Tribunal below. The Tribunal blow, vide its order, which was upheld by this Tribunal, had directed confirmation of the auction sale in favour of the appellant. The action of the Tribunal in entertaining these applications and allowing inter se bidding in this background not only would go to negate its own order earlier passed by the Tribunal below, but would in spirit negate the order passed by this Tribunal also. The order passed by the Tribunal below was appealed before this Tribunal and when this Tribunal dismissed the appeals filed by respondent Nos. 3 and 4, the order passed by the Tribunal below would stand merged into the order passed by this Tribunal. Thus, the act of Tribunal below in allowing the application for inter se bidding would prima facie appear to be violating the order passed by this Tribunal as well as the earlier order passed by the said Tribunal below. This aspect, the Tribunal below ought to have considered before entertaining such application and passing the impugned order.

I am also not much impressed with the submission that this Tribunal had become functus officio so the only course for the respondents was to move these applications before the Tribunal below. If such applications were not maintainable before this Tribunal, then, obviously, it could not be said that the jurisdiction of the Tribunal below could be invoked. What could not be done before this Tribunal could not be permitted to be done before the Tribunal below as the order passed by the Tribunal below would stand merged in the order passed by this Tribunal. The appropriate course obviously would be to approach a higher forum with the grievance or to take any other measure like to seek review of the order if otherwise permissible. Thus, the fact that this Tribunal has become functus officio would not go to vest the jurisdiction in the Tribunal below to deal with the issue which has been considered and decided by this Tribunal.

Due to the limited issue of maintainability of an application and jurisdiction of the Tribunal to entertain such an application, I have not felt inclined to go into the allegation of fraud as made by respondent Nos. 3 and 4 against the appellant. Needless would it be to mention that allegations of fraud are required to be specifically pleaded and proved. No such issue was raised before the Tribunal below and the impugned order is not passed by considering the aspect of fraud, if any. It would not be appropriate for me to comment whether the allegation as made in the reply would reveal any fraud on the part of the appellant or not. Prima facie, the allegations of fraud are alleged against Mr. Manoj Kumar Garg and his family. To correlate the appellant with the fraud, it is urged that present appellant company is owned by person who are related to Mr. Manoj Kumar Garg. Whether that would be enough to substantiate allegations of fraud against the appellant would be open to debate. In addition fraud is not alleged in regard to the act of purchase of the property. Since this issue was not considered or dealt with or raised before the Tribunal below, it would not appropriate to consider the same while deciding the limited issue of maintainability of the applications before the Tribunal below. So far, respondent Nos. 3 and 4 have not taken any action in relation to fraud on the part of the appellant to challenge the sale in their favour. They have taken this stand in their reply filed in the appeal filed by the appellant. Whether this would be a proper mode to make any allegation of fraud is again open to debate. Since I am not considering this issue, it would not be appropriate for me to make any further comment on this issue.

Similarly, the plea of the Bank that the appellant has no locus to maintain this appeal on the ground that appellant has sold one of the properties is an issue which is raised for the first time and had not been raised in any manner before the Tribunal below, It would not be, therefore, appropriate to consider this issue at this stage in this appeal. In any case, the appellant apparently would not be lacking in locus to maintain the appeal as only part of the property has been statedly sold and this would be enough to confer locus on them to agitate about their legal rights.

In view of the detailed discussion above, it is held to that the Tribunal below should have first gone into the aspect of the maintainability of the applications in view of the earlier order passed by it directing confirmation of sale in favour of the appellant and further in view of the order passed by this Tribunal in dismissing the appeals filed against the said order. The Tribunal ought to have considered whether respondent Nos. 3 and 4 could file and maintain these applications for inter se bidding once by operation of law the order passed by the Tribunal below has merged into the order passed by this Tribunal and the impugned order now passed by the Tribunal below may appear to be one which in effect amounts to overreaching the order passed by this Tribunal.

The Tribunal below may also be called upon to consider if the impugned order would amount to review of the earlier order passed by the Tribunal by implication or otherwise and whether such an order could be so passed when there was no prayer made for review of the earlier order and also on the ground that the order of the Tribunal below had merged into the order passed by this Tribunal. The Tribunal may also have to consider if the review of the order which is upheld in the appeal can be maintained or not. All these issues would arise in this case which apparently have escaped notice of the Tribunal below. 1 would, therefore, set aside the impugned order passed by the Tribunal and would remand the case back to the Tribunal to reconsider the prayer made in the applications in the light of the legal position and the observations made above.

I am conscious of the fact that the Tribunal below has passed this order with an aim to fetch maximum possible recovery from the property, which is one of the relevant considerations. While doing so, the Court or the Tribunal cannot ignore the legal issue that may arise. All such orders have to pass the test of legal scrutiny and have to be in accordance with the law. The Tribunal below would be at liberty to pass any appropriate order in accordance with law.

Ordered accordingly.