Pankaj Gulati vs Union Bank Of India And Ors.

J.M. Malik, J

Counsel for the parties present. None is present for respondent No. 1. Last time too, i.e. 09.03.2011, nobody appeared on behalf of respondent No. 1. Today despite second call, nobody appears for respondent No. 1. Consequently, respondent No. 1 be proceeded against ex-parte. Arguments from the banks appearing before me heard. Mr. Karam Singh is present before this Court. He submits that he is the subsequent buyer introduced by Union Bank of India as ordered by the Ld. DRT-III. He further submits that he had deposited Rs. 20 lacs with Punjab National Bank. Counsel for the Punjab National Bank submits that the money deposited by him has not yet been encashed. The drafts are lying with the bank. Mr. Karam Singh submits that he is a proper party in this case. Counsel for the appellant and counsel for the Punjab National Bank and Allahabad Bank have no objection if he joins as a party in this case. Consequently, he is impleaded as a party in this case. Amended memo be submitted.

At this stage, Mr. Karam Singh submits that he is not interested in buying the property in dispute. He prays that he has parted with the money as back as on 21.11.2009 but he has not yet got the possession of the property in dispute. He further submits that it will take long haul of time in getting the possession of the premises in dispute. He submits that he is no more interested in the abovesaid transaction. He prays that money already deposited with the Punjab National Bank should be returned to him immediately.

Arguments heard. It is hereby directed that the amount of Rs. 20 lacs be paid back to Mr. Karam Singh. It is apparent that the order passed by the Ld. Trial Court appears to be inherently incorrect. The counsel for the appellant has invited the attention of the Court towards the fact that as a matter of fact the appellant Mr. Pankaj Gulati was declared as a successful bidder and he had paid the entire amount in October 2009. The sale was confirmed in his favour on 14.10.2009. He has filed this appeal that the sale certificate be issued and possession be handed over to him. For all these reasons, the amount be paid to Mr. Karam Singh within ten days from today.

Arguments in the main case also heard.

Counsel for the Allahabad Bank submits that the property should be resold because she has filed the valuation report which goes to show that the value of the property is Rs. 38.10 lacs and forced sale value should be 20% less than the value amount of Rs. 38.10 lacs i.e. Rs. 30.48 lacs. The property in dispute was sold for Rs. 15.75 lacs in September 2009. The valuation report produced before the Court is dated 28.02.2011.

On the other hand, counsel for the appellant submits that this plea has been raised for the first time and the valuation report has been produced before the Court for the first time during the stage of final arguments. It is pointed out that this sale was conducted to the knowledge of Allahabad Bank but it has never raised objections earlier and it was the signatory to the minutes of the auction.

Since the sale was confirmed in favour of the appellant, therefore, he is entitled to have the property in dispute. This is well settled that inadequacy of the amount is no ground for setting aside the sale. The property can be given to the appellant as per law.

In M/s. Kayjay Industries (P.) Ltd. Vs. M/s. Asnew Drums (P.) Ltd. and Ors., (1974) 2 SCC 213 the Hon'ble Supreme Court constituted by three judges bench was pleased to hold:

Certain salient facts may be highlighted in this context. A court sale is a forced sale and, notwithstanding the competitive element of a public auction, the best price is not often forthcoming.

The judge must make a certain margin for this factor. A value's report, good as a basis, is not as good as an actual offer and variations within limits between such an estimate, however, careful, and real bids by seasoned businessmen before the auctioneer are quite on the cards....

It was further held:

Businessmen make uncanny calculations before striking a bargain and that circumstance must enter the judicial verdict before deciding whether a better price could be had by a postponement of the sale.

It was further held in para 9:

.... The expression 'material irregularity in the conduct of the sale' must be benignantly construed to cover the climax act of the Court accepting the highest bid. Indeed, under the Civil Procedure Code, it is the Court which conducts the sale and its duty to apply its mind to the material factors bearing on the reasonableness of the price offered is part of the process of obtaining a proper price in the course of the sale. Therefore, failure to apply its mind to this aspect of the conduct of the sale may amount to material irregularity. Here, substantial injury without material irregularity is not enough even as material irregularity not linked directly to inadequacy of the price is insufficient...

In a recent authority reported in M/s. Valji Khimji and Company Vs. Official Liquidator of Hindustan Nitro Product (Gujrat) Limited and others, (2008) 9 SCC 299 it was held:

On the other hand, learned counsel for the respondents relied upon a decision of this Court in Divya Mfg. Co. (P.) Ltd. v. Union Bank of India, (2000) 6 SCC 69. We have carefully perused the above decision and we find that it is clearly distinguishable. The facts of the case were that at the initial stage the appellant offered Rs. 37 lakhs for purchasing the property in question. At the intervention of the court the price was raised to Rs. 1.3 crores, and ultimately it was found that the property could be sold for Rs. 2 crores. It was on these facts that this Court held that even after confirmation of the sale the same could be set aside. Thus, the ratio in Divya Mfg. Co. (P.) Ltd. 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 Mfg. Co. (P.) Ltd. 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'ble Katju, J.), in his judgment in Rajbir Singh Dalal (Dr. v. Chaudhari Devi Lal University, (2008) 9 SCC 284, 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. It could have been a different matter if the auction had been held without adequate publicity in well-known newspaper 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 newspaper having wide circulation, all eligible persons can come and bid for the same, and they are 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. Of course, the situation may be different if an auction-sale is finalised, say for Rs. 1 crore, and subsequently somebody turns up offering Rs. 10 crores. In this situation it is possible to infer that there was some fraud because if somebody subsequently offers Rs. 10 crores, then an inference can be drawn that an attempt had been made to acquire that property/asset at a collusion. However, if the price offered after the auction is over which is only a little over the auction price, that cannot by itself suggest that any fraud has been done.

In Saheb Khan v. Mohd. Yousufuddin & Ors., (2006) 4 SCC 476 it was held:

We are unable to sustain the reasoning of the High Court. Order 21 Rule 90 of the Code of Civil Procedure allows, inter alia, any person whose interest are affected by the sale to apply to the court to set aside a sale of immovable property sold in execution of a decree on the ground of "a material irregularity or fraud in publishing or conducting" the sale. Sub-rule (2) of Order 21 Rule 90 however places a further condition on the setting aside of a court sale in the following language:

(2) No sale shall be set aside on the ground of irregularity or fraud in publishing or conducting it unless, upon the facts proved, the court is satisfied that the applicant has sustained substantial injury by reason of such irregularity or fraud.

Therefore, before the sale can be set aside merely establishing a material irregularity or fraud will not do. The applicant must go further and establish to the satisfaction of the court that the material irregularity or fraud has resulted in substantial injury to the applicant. Conversely even if the applicant has suffered substantial injury by reason of the sale, this would not be sufficient to set the sale aside unless substantial injury has been occasioned by a material irregularity or fraud in publishing or conducting the sale. (See Dhirendra Nath Gorai v. Sudhir Chandra Ghosh, (1964) 6 SCR 1001 : AIR 1964 SC 1300; Jaswantlal Natvarlal Thakkar v. Sushilaben Manilal Dangarwala, 1991 Supp (2) SCC 691 and Kaiyala Rama Rao v. Gutala Kahna Rao, (2000) 3 SCC 87).

This view was followed by the Delhi High Court in case State Bank of India v. Hon'ble Debts Recovery Tribunal & Ors., 2010 (115) DRJ 304 (DB).

Under these circumstances, I hereby accept the appeal. The appellant be put in possession of the premises in dispute within thirty days from today as per law. There shall be no order as to costs. Copies of this order be furnished to the parties as per law and one copy be sent to the Ld. DRT forthwith.