Ramesh Kumar vs State Bank Of India

Raniit Singh, J

Through its order dated 16.3.2012, the Presiding Officer, DRT-I, Delhi has permitted the respondent No. 1 bank to participate in the court auction which was to be held on the same date, i.e., 16.3.2012. While granting this permission, the Tribunal imposed a condition that no bid for less than Rs. 14.75 crore would be accepted as this was the amount accepted by the appellant in sale way of private treaty. The order dated 16.3.2012 is impugned in the present appeal.

The facts in brief are that O.A. filed by respondent bank was earlier dismissed, which was challenged by the bank before this Tribunal and the said appeal was allowed on 12.7.2010. The order passed by the Tribunal below was set aside. When this appeal was filed a writ petition filed by the appellant challenging the order passed by this Tribunal allowing the appeal of the respondent Bank was statedly pending before Delhi High Court. During the pendency of these proceedings, the Tribunal had issued a recovery certificate on 5.8.2010 against the appellant and Certificate Debtors (COs.). The Recovery Officer (R.O.) thereafter issued sale proclamation on 14.3.2011 and the property was put to auction on 6.5.2011. Court Receiver took possession of the property, namely, property No. 6, Benarsi Dass Estate, Timarpur, Delhi on 18.4.2011. Plea is that this was done without any notice to the COs or the appellant who states to be residing at Chicago, USA.

The sale by way of auction fixed on 6.5.2011 was at a reserve price of Rs. 14.19 crores, which was fixed on the basis of a valuation report dated 17.2.2011. As per the appellant none came forward to purchase the said property.

Claiming that the appellant had already deposited a sum of Rs. 47.94 lacs along with a proposal for settlement, which was made in March 2010, the appellant requested the bank to get proper valuation of the property done. Beside the appellant sought permission to bring a better buyer. The RO., then directed the Cos and appellant to file affidavit of assets and other details without placing emphasis on the sale of the mortgaged property. He issued show-cause notice for arrest of the appellant/COs.

The appellant approached the respondent bank through his letter date 11.10.2011 with a One-Time Settlement (OTS) offer of Rs. 14.75 crores. The appellant had proposed to sell the property by way of private treaty. Appellant claims that an application under rule 66 read with rule 68A of the Second Schedule to the Income Tax Act, 1961, and section 29 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short, the RDDBFI Act) was filed before the RO. for passing appropriate directions. In response to notice, the bank filed reply raising no objection if RO. allowed COs to sell the mortgaged property by way of private treaty for Rs. 14.75 crores. The bank, however, pointed out that there was no settlement proposal given by the COs, which, according to the appellant, was a misrepresentation.

R.O. thereafter felt the need for fresh auction for exploring the possibility of fetching market price so as to satisfy the recovery certificate to a large extent. Bank had filed an affidavit stating that the property may be put to auction at the reserve price of Rs. 14.19 crores. R.O. accordingly issued sale proclamation fixing reserve price of Rs. 14.19 crores. The grievance is that the B.O. did not require the bank to file fresh valuation report before putting the property to fresh sale. Grievance further is that the R.O. completely ignored the fact that the appellant had offered a sum of Rs. 14.75 crores by way of compromise by arranging the sale of property by way of private treaty. The appellant claimed that the worth of the property was more than Rs. 25 crores.

Feeling aggrieved against the order passed by the R.O., the appellant preferred an appeal before the DRT and prayed that the property may not be put to public auction without disposing of the pending compromise proposal dated 11.10.2011. DRT, vide its order dated 1.3.2012, allowed the auction to go on with modification to the extent that the appellant may deposit 25% of the offered amount of Rs. 14.75 crores with the Tribunal by 15.3.2012. The Court Auctioneer then was to continue with the public auction on 16.3.212 with enhanced reserve price of Rs. 14.75 crores. It was further directed that the intending purchaser may participate in the public auction. It is at this stage that the bank sought permission to participate in the said public auction as bidder. Appellant terms this action as 'U-turn' on the part of the bank. As per the appellant, respondent bank acted illegally by hatching a conspiracy and by fixing reserve price at Rs. 14.19 crores on the basis of old valuation report. It is, however, seen that the application filed by the 'bank seeking permission to bid for the property was dismissed by the R.O. The bank preferred an appeal against this order. Through impugned order, the Tribunal has allowed the bank to participate in the auction, which was to be held on 16.3.2012. Against this order, the appellant has filed the present appeal.

On the day, this appeal came up for first hearing, it was disclosed that the highest bid' of Rs. 15 crores was received, which was accepted by the RO. and the sale had been confirmed in favour of the highest bidder. The counsel for the appellant also informed the Tribunal that the auction purchaser had deposited the entire sale consideration. He, however, was not clear whether or not the sale certificate had been issued or if the possession of the property was also delivered to the auction purchaser or not. This Tribunal was of the view that under such circumstances the auction purchaser was a necessary party. Time was given to the counsel to implead the auction purchaser. This application was allowed on 11.6.2012. Notice was then issued to the bank and newly added respondent. Subsequently, it was revealed before the Tribunal that the sale was also confirmed on 2.5.2012, which fact the appellant had allegedly suppressed as the appeal came up for first hearing on 7.5.2012.

Counsel have put in appearance on behalf of the respondent bank as well as the auction purchaser. I have heard the counsel for the parties.

At the time of argument, it was put to the counsel appearing for the appellant that the appellant has not raised any challenge to the subsequent sale and the sale confirmation order. The counsel was asked to see if in the absence of challenge to the subsequent sale and confirmation order, the appellant can get any effective relief. Counsel, however, still insisted and primarily stuck to one submission that the DRT had no power and jurisdiction to interfere with the auction process which did by raising the minimum bid amount as was fixed by the R.O. The submission seems to be that once the R.O. had passed the order, which was to an extent modified by the DRT, there was a need for fresh proclamation of sale. Grievance also is that reserve price was settled without any fresh valuation. The counsel would also challenge that part of the direction whereby he was required to deposit 25% of the enhanced price of Rs. 14.75 crores. As per the counsel no opportunity of hearing was afforded to him.

Counsel appearing for the bank and the auction purchaser would counter the submission made by the counsel for the appellant and would term these as misconceived.

I see substance in what the counsel for the respondent bank and the auction purchaser have urged before me. The present appellant was a respondent before the Tribunal below and his contention before the said Tribunal that the property was having more value than the reserve price was not found tenable as the COs had failed to bring a prospective buyer on the earlier occasion. Still on the plea raised on behalf of the respondents that they were having a buyer for Rs. 14.75 crores, their interest was safeguarded by the Tribunal below by directing that the minimum bid of Rs. 14.75 crores shall be given by the bank while allowing it to participate in the auction. Not only that, even the appellant was advised by the Tribunal below to remain present personally or through the authorized representative to watch the interest and was given liberty to bring any intending buyer who was ready to purchase the said property by way of private treaty for Rs. 14.75 crores. I have not been able to appreciate how, in this background, the appellant has felt aggrieved with the sale which was concluded in favour of the auction purchaser for Rs. 15 crores?

The counsel appearing for the bank invited my attention to that part of the pleading contained in the application filed by the appellant where it is averred that the offer of Rs. 14.75 crore was much above the realizable value and the market value of the mortgaged property and if the application in this regard was allowed, the recovery certificate would be satisfied completely. The relevant averments are as under:-

That it is also pertinent to mention here that the offer price of Rs. 14.75 Crores is much above the realizable value and market value of the mortgaged property and if the present application allowed this recovery certificate will be satisfied completely.

In an appeal filed by the appellant against the order fixing the reserve price it is specifically pleaded that the order dated 3.2.2012 be quashed and the appellant be allowed to sell the property by way of private sale for Rs. 14.75 crore. This prayer as made by the appellant is well noticed by the Tribunal below in it is interim order dated 1.3.2012. The counsel accordingly are justified in submitting that now the appellant is only flogging a dead horse and has otherwise no legs to stand.

The counsel for the bank would also urge that the appellant had approached the Hon'ble High Court at Delhi to challenge the order of 3.2.2012 but did not prosecute the said writ petition which was dismissed for non-prosecution on 12.9.2012. Appellant even had challenged the order whereby the auction of the scheduled property was fixed for 6.5.2011 while fixing minimum price to be Rs. 14.19 crores. The plea raised before the High Court was prima facie found to be an after-thought as it is observed that the money had been availed and utilized on the basis of documents executed by the Managing Director of the Company, having the ostensible authority. This challenge was raised by Mr. D.D. Aggarwal who was the Managing Director. In the order passed by the Hon'ble High Court of Delhi, it is also noticed that the petitioner had earlier filed a writ petition challenging the same impugned order, which was returned under objection and was never re-filed on the ground that settlement discussion inter se parties were in progress.

The property having been sold in an auction for an amount more than what was offered by the appellant where he had a liberty to participate would seems rather fair. The sole ground of challenge insisted upon by the counsel for the appellant that once the DRT had interfered with the order, fresh auction notice was needed would not impress me in any manner. Equally untenable is his plea that the DRT would have no jurisdiction to fix any different minimum price as was fixed in this auction notice. In my view, the DRT was well within its jurisdiction to pass the impugned order, specially so, when it was to the benefit of the appellant. I fail to. appreciate as to how the direction to fix the reserve price more than what was fixed by the R.O. would cause prejudice to the appellant, specially so, when that price was fixed on the asking of the appellant that he had a buyer for the said amount. Obviously, the appellant was playing games as no such intending buyer had appeared at the time of auction. The amount was also disclosed by the appellant, which the Tribunal very fairly fixed as the minimum amount as no auction was to be held for a lesser amount than what was fixed by the Tribunal.

I see no substance in the appeal or in the submissions made by the counsel for the appellant and, accordingly, would dismiss the appeal it being without any merit. Parties to bear their own costs.

Copy of this order be furnished to the parties as per law.