Raj Purohit Sogaram & Anr. vs The Indian Overseas Bank & Ors.

Instant appeal has arisen against the order and Judgment dated 9.6.2025 passed by Learned DRT-I, Hyderabad om S.A. 03 of 2023 (Raj Purohit Sogaram & Another -vs- Indian Overseas Bank & 0thers) whereby Learned DRT partly allowed the S.A. by setting aside the letter dated 1.9.2022 for forfeiture the 25% of the bid amount deposited by the Appellants with a further direction to the Bank to refund the Rs.23,27,500.00 deposited by the Appellants towards 25% of the bid amount.

Facts, in brief, are that a Securitisation Application under Section 17 of the SARFAESI Act, 2002 (hereinafter referred to as the ‘Act’) was filed by the Appellants, who are the Bidders in the auction conducted by Respondent No. 1, Indian Overseas Bank, by challenging notice dated 1.9.2022 issued by the Bank for a direction to the Bank to accept the remaining 75% of the balance bid amount and to register the deed in favour of the Defendant and in alternative to refund of the 25% of the bid amount paid by them pursuant to the auction conducted on 30^th September, 2019.

As per pleadings of the parties, Respondents No. 2 and 3, M/s. Hardens Steel Industries and Kusuma Satyanarayana, availed the loan facility from the Respondent No. 1, Indian Overseas Bank, and committed default in repayment. Subsequently, e-Auction Sale Proceedings were conducted. Appellants participated in the e-Auction conducted on 30^th September, 2019 in pursuance to the Sale Notice dated 12.9.2019. Appellants became successful bidders for a sum of Rs.93.00 lac. A sum of Rs.23.00 lac, being the 25% of the bid amount was deposited. Sale was confirmed in favour of the Appellants vide letter dated 30^th September, 2019. Remaining 75% of the bid amount was to be deposited within thirty days extendable upto 90 days.

It was informed by the Bank that S.A. 271 of 2019 is filed by the Borrowers, Respondents No. 2 and 3, challenging the Sale Notice dated 12.9.2019 and obtained the stay order from the DRT. Appellants waited for the outcome of the S.A. for payment of the remaining 75% of the bid amount. In January, 2022 they were informed that the S.A. was dismissed on 04.10.2021.

Letter dated 01.9.2022 was issued by the Bank communicating that a Writ Petition No. 28115 of 2021 was filed by the Respondents No. 3 and 4 herein against the order of dismissal of S.A. which was also dismissed on 02.8.2022. As Appellants have not paid the balance 75% of the bid amount on or before 29^th December, 2019, amount paid by the Appellants was forfeited by the Bank.

Appellants herein filed S.A. 03 of 2023 under Section 17 of the Act challenging the letter dated 1.9.2022 on the ground that they were never informed about the order passed by the Learned DRT, Hyderabad. Respondent Bank filed their opposition stating the facts as narrated in the Section 17 petition wherein it is admitted that the Appellants are successful bidders for sale consideration of Rs.93.00 lac. 25% of the bid amount, Rs.23,27,500.00 was paid by the Appellants and the sale was confirmed in their favour. Balance 75% of the bid amount was to be deposited within thirty days. S.A. 271 of 2019 was filed by the Borrowers challenging the Auction Sale Notice dated 12.9.2019 wherein an interim order was granted by the Learned DRT to proceed with the auction but not to confirm the sale. S.A. was dismissed on 4.10.2021. Thereafter, a writ petition was filed before the Hon’ble High Court by the Borrower which too was dismissed.

Appellants never made any attempt to deposit 75% of the bid amount on or before 29.10.2019, i.e., 30 days from the date of auction, Hence, letter dated 01.9.2022 forfeiting 25% of the bid amount was issued.

Learned DRT framed the following two issues: of the bid amount deposited by the Applicant in pursuance of the auction conducted on 30.09.2019 in respect of the schedule property?

Learned DRT recorded a finding that in the S.A. 271 of 2019 filed by the Borrower an interim order was granted by the DRT to proceed with the sale but not to confirm the sale; which order was well within the knowledge of the Bank as a caveat was also filed by the Bank at the time of hearing of the I.A. Despite stay granted by the DRT, Respondent Bank confirmed the sale on 30.9.2019 without informing the Appellants about the filing of S.A. The letter of confirmation should have been issued by the Bank after dismissal of the S.A. 271 of 2019 and thereafter they could have asked the Appellants to deposit the remaining 75% of the bid amount. Accordingly, Learned DRT recorded a finding that Bank is not entitled to forfeit the 25% of the bid amount. However, Learned DRT, without assigning any reason granted the alternative relief for refund of the 25% of the bid amount paid by the Appellants. But the main relief for direction to deposit 75% of the bid amount was impliedly refused.

Feeling aggrieved, the Appellants preferred the appeal.

I have heard the Learned Counsel for the parties and perused the record.

Learned Counsel for Appellant would submit that an S.A. was filed by the Appellants challenging the notice dated 1.9.2022 as illegal and non est with a further direction to the Secured Creditor to accept the balance 75% of the bid amount and execute the deed in their favour. In alternative, relief for refund of 25% of the bid amount was sought for.

Learned Counsel for Appellant would further submit that the Learned DRT categorically held that the Bank was not entitled to forfeit 25% of the bid amount. But, Learned DRT without assigning any reason, considered the issue raised by the Appellants and refused the relief of execution of the deed by accepting 75% of the bid amount by the Bank without assigning any reason and allowed the alternative relief of refund of 25% of the bid amount paid by the Appellants.

Learned Counsel would submit that in the impugned order itself a contradictory finding is recorded by the Learned DRT on the issue that the Bank could not forfeit the 25% bid amount which is not challenged by the Bank, but then it was incumbent upon the Learned DRT to allow the relief of execution of the deed by the Bank after receiving the balance 75% of the bid amount.

Per contra, Learned Counsel for Respondent would submit that admittedly, S.A. 271 of 2019 was dismissed by the DRT wherein there was challenge to the Sale Notice. In the S.A. 271 of 2019 there was a direction by the DRT to go ahead with the auction but not to confirm the sale. Till dismissal of S.A. 271 of 2019, the Auction Purchaser did not deposit the balance 75% of the bid amount despite letter dated 30^th September, 2019. Since 75% of the bid amount was not deposited, letter dated 1.9.2022 was issued by the Bank forfeiting 25% of the bid amount which is challenged by the Auction Purchaser.

Learned Counsel for the Bank would further submit that the Auction Purchaser has not complied with Rule 9 (4) of the Security Interest (Enforcement) Rules, 2002; hence the Bank was within its jurisdiction and right to forfeit the amount. It is further submitted that the relief sought for in alternative was granted by the Learned DRT to the Appellants.

Admittedly, S.A. 271 of 2019 challenging the e-Auction Sale Notice dated 12.9.2019 was filed by the Borrower wherein e-Auction was conducted and the Appellants herein are the successful Auction Purchasers who has deposited 25% of the bid amount. Subsequently, S.A. 271 of 2019 was dismissed by Learned DRT. Till disposal of S.A. 271 of 2019, 75% of the bid amount was not deposited by the Auction Purchaser. Consequently, Bank forfeited the 25% bid amount and issued a letter dated 01.9.2022 communicating forfeiture of the 25% of the bid amount. Initially, this letter was challenged before the Hon’ble High Court wherein an order was passed giving liberty to prefer an application under Section 17 of the SARFAESI Act, 2002 (hereinafter referred to as the ‘Act’). Thereafter, challenge was made by filling Application under Section 17 of the Act by the Appellants/Auction Purchasers wherein relief sought for was as under:

Learned DRT recorded a finding that the sale was confirmed on 30^th September, 2019 while an order was passed by the Learned DRT in I.A. 2814 of 2019 in S.A. 271 of 2019 whereby stay was granted to the effect that the Bank may proceed with the auction sale but not to confirm the same. It is also recorded by the Learned DRT that this order was well within the knowledge of the Bank but despite this order, sale was confirmed on 30^th September, 2019 without informing the Auction Purchaser about filing of S.A. 271 of 2019. A categorical finding is also recorded by the Learned DRT that:

Interestingly, this finding of the DRT is not challenged by the Bank either by filing cross-appeal or even in the opposition filed by the Bank. Accordingly, the finding, as regards forfeiture of 25% of the bid amount is concerned, attained finality. Accordingly, it is to be held that Bank illegally forfeited the amount of 25% of the bid amount deposited by the Auction Purchaser.

Now the question of relief sought for by the Appellants in the S.A. is to be looked into.

Learned DRT without assigning any reason straightway granted a relief of refund of 25% of the bid amount but why the main relief of receiving the 75% of the remaining bid amount by the Bank and executing the deed in favour of the Auction Purchaser is not granted is not dealt with by the DRT. Law is well settled that an order without reasoning is bad in law as has been held by the Hon’ble Apex Court in Brijmani Devi -vs- Pappu Kumar and Another, reported in (2022) 4 SCC 497.

It was expected from Learned DRT to assign reasons for not granting the main relief of direction to deposit 75% of the bid amount. Non mentioning of any reason makes the order unreasonable which could not sustain in the eye of law. In such circumstances, the only course left is to remand the matter to DRT to decide the matter afresh in the light of the observation made in the body of the judgment on the issue as to whether Appellants herein are entitled for the main relief or not? Needless to observe that Learned DRT should pass a reasoned order after affording opportunity of hearing to the parties.

Appeal is disposed of. Matter is remanded to the Learned DRT-1, Hyderabad to decide it afresh in the light of the observation made in the body of the judgment, in accordance with law, after giving an opportunity of hearing to the parties.

File be consigned to Record room.

Copy of the Judgment/Final Order be uploaded in the Tribunal’s Website.

Order signed, dated and pronounced in open Court.