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Judgment
Ranjit Singh, J
Oriental Bank of Commerce (respondent No. 1) had initiated recovery proceedings against respondents 2 to 7 on the basis of a recovery certificate. A property comprising of Godown measuring 989.9 sq.yds. situated at Tarn Taran Road, Amritsar, Punjab was ordered to be sold for recovery of the dues of the Bank on the basis of the said recovery certificate issued in favour of the Bank. The proclamation of sale was issued and reserve price of the property was fixed at Rs. 74 lacs. Record reveals that while the process of recovery was in progress, respondent No. 6 - M/s. Raga International approached the appellant for sale of the property which was being put to auction sale. Case pleaded is that the appellant entered into an agreement to sell in respect of this property with respondent No. 6 on 14.10.2011. The appellant would claim that it had handed over two demand drafts for Rs. 9 lacs and Rs. 1 lac respectively payable at Canara Bank and drawn in favour of Oriental Bank of Commerce (respondent No. 1). These demand drafts were statedly deposited by respondent No. 6 with the Bank to seek approval for sale of the property in favour of the appellant. The appellant would state that it had deposited a sum of Rs. 9.25 lacs by way of demand draft on the assurance of respondent No. 6 that permission for the sale of the property would be received from the Bank. Appellant would plead that respondent No. 6 kept on assuring the appellant till 6.1.2012 that the permission would be received from the Bank for sale of the property in favour of the appellant and thereafter the appellant would be required to pay the balance agreed amount to the Bank within 30 days. It is averred that the appellant learnt to its shock on 6.1.2012 that the property was being put for public auction. The demand draft of Rs. 9.25 lacs was returned to the appellant whereas earlier demand drafts deposited by the Bank had been kept by the Bank.
The case set up by the appellant further was that respondent No. 6 at that stage informed the appellant about the recovery proceedings pending and the fact that the CDs (respondents 2 to 7) had moved an application before the R.O. praying, inter alia, that the CDs would deposit the reserve price with the Bank to seek release of the property and for not putting the said property to auction sale. The R.O., however, had allowed the recovery proceedings to go on but made the sale of the property subject to the final disposal of the said application filed by the CDs.
Relying upon the agreement which the appellant had entered with respondent No. 6, for which the appellant had made payment of Rs. 10 lacs to respondent No. 6, which, in turn, had been deposited with the Bank, the appellant states to have approached the Court auctioneer when it came to learn about the public auction, which was to take place on 7.1.2012, and filed one application revealing all these facts and circumstances while expressing its willingness to purchase the property at the price of Rs. 75 lacs though the reserve price fixed was Rs. 74 lacs. The appellant also tendered a demand draft for Rs. 9.25 lacs in favour of the respondent Bank towards on the spot payment of 25% of the offered amount. The appellant also expressed his willingness to make deposit of the balance amount of Rs. 55.25 lacs within 30 days. The appellant had even pleaded that in the event of its failure to honour its commitment the amount of Rs. 9.25 lacs, which stood deposited, could be forfeited.
The grievance of the appellant on this basis is that despite this offer the Court auctioneer went ahead to sell the property in favour of respondent Nos. 8 and 9 at the reserve price of Rs. 74 lacs while holding that there was no other offer made by any one. The appellant would plead that offer of the appellant for Rs. 75 lac was completely ignored.
The case came up for consideration before R.O. for confirmation of auction sale conducted on 7.1.2012 Considering the report of the Court auctioneer, the R.O. instead of passing order for confirming the sale in favour of the auction purchaser, allowed the application of the borrower, which was pending before it, subject to following conditions:
"(i) the payment of Rs. 55.75 lacs (Rs. 19.25 already deposited) shall be made within a period of 7 days from the date of this order in the form of Demand-Drafts, addressed to the Recovery Officer-I, who shall then order for release of the payment to the Certificate Holder Bank;
(ii) in addition, a sum of Rs. 1.00 lac shall also be paid to the auction purchaser (respondent Nos. 8 and 9 herein), as compensation and the said compensation would be paid within a period of seven days from the date of the said order;
(iii) the liability of CD-borrower to pay the balance outstanding debt shall continue to exist and admission of the application shall not confer on him any legal right for exoneration from the said liability;
(iv) CH Bank shall be at liberty to release the title deed of the property after the entire payment as ordered has been made; and
(v) CD shall, in case of default in making payment as per the said order, forfeit his right and the sale shall be confirmed forthwith in favour of the auction purchaser."
The appellant would state that it has deposited the amount of Rs. 55.75 lacs through the CDs within the stipulated time and had also deposited a sum of Rs. 1 lac as compensation to be paid to the auction purchaser whereafter the sale of the property was confirmed in favour of the appellant and possession thereof was also given to the appellant.
Aggrieved against this order, the auction purchaser (respondent Nos. 8 and 9) preferred an appeal against the order passed by the R.O. before the Tribunal below. In this appeal, respondent Nos. 8 and 9 did not implead the appellant as party. The appellant on learning about this appeal, moved an I.A. 391/2012 for being impleaded as party in the said appeal. This application filed by the appellant was dismissed by the Tribunal below, which has also set aside the order passed by the R.O. and had allowed the appeal field by respondents 8 and 9. The case of confirmation of sale has been remanded back to the R.O. for further proceedings with it in accordance with law. The appellant accordingly has filed the present appeal.
While dismissing the application filed by the appellant for being impleaded as party respondent, the Tribunal below has taken note of the fact from the report of the auctioneer that the appellant had not participated in the auction. The Tribunal has referred to this report where it is mentioned that only one person, namely, Mr. Sukhvinder Singh along with his partner Mr. Jarnail Singh had come forward to participate in the proceedings and that even after repeated announcement by the auctioneer and the Bank officials, no one else came forward to participate in the auction. It is also noticed that the Court auctioneer along with Bank officials waited for more than four hours and tried their level best to persuade the persons present to participate in the auction. In this background of these facts, the Tribunal below has observed that if the appellant was interested in purchasing the property, nothing stopped it from participating in the auction, by making a bid. Mere presence of the appellant at site through a representative was not considered sufficient to allow the prayer made in the application. The Tribunal below has observed that if such applications are allowed in this manner, it would shake the very foundation of the system as anyone could make a plea for being impleaded as party on the ground that they were present at the time of auction. The prayer of the appellant for being impleaded as party has accordingly been dismissed.
When the Counsel for the appellant was confronted with this factual position and was asked to explain as to how appellant's mere presence at the time of auction would make him a proper or necessary party for being impleaded in the appeal, he would refer to that part of the report given by the Court auctioneer which indicates the presence of the representative of the appellant which can be taken as participation. In this regard, the Counsel has made reference to Para 4 of the report where it is recorded that one Mr. Madan Lal Sharma had appeared as representative of the borrower Mr. Ravinder Singh proprietor of the Judgment debtor i.e., M/s. Raaga International along with one Mr. Kinchet Sodhi. The said Mr. Madan Lal Sharma had objected to the auction proceeding on the ground that the borrower had submitted a proposal before the Bank to sell the property to Mr. Kinchet Sodhi and in this regard had also submitted a draft of Rs. 10 lac along with the proposal letter. This was statedly pending with the Bank. Said Mr. Madan Lal Sharma reportedly had stated before the Court auctioneer that the proposed purchaser was agreeable to purchase the property for Rs. 75 lacs and was ready to deposit a draft of Rs. 9.25 lacs in the name of the CH Bank. It is also recorded that the Mr. Madan Lal Sharma had also expressed readiness to pay the remaining amount of Rs. 55.75 lacs within 30 days.
On the plea as noticed above, the Court auctioneer accepted the objection of the borrower as made through Mr. Madan Lal Sharma along with the draft of Rs. 9.25 lacs. The proposal and the affidavit along with the draft were attached with the report. Thereafter, it is noted that the auctioneer along with Bank officials waited there for more than four hours and tried their level best to persuade the persons present at the site to participate in the auction but even then no other person except Mr. Sukhvinder Singh came forward to participate in the auction proceedings. The Court auctioneer thereafter submitted the report along with original documents which included a draft of Rs. 18.50 lac of earnest money which was deposited by highest bidder Mr. Sukhvidner Singh.
The facts as stated above would clearly show that one Mr. Kinchet Sodhi was present at the site but all the pleas were made by Mr. Madan Lal Sharma who was present as representative of the borrower. The question that would arise here is whether the borrower had any right to raise an objection to the auction at the time of auction in the manner it was permitted to be done on the ground that the borrower had submitted some proposal to the Bank for sale of the property to some third party. The Counsel for the appellant was also confronted with this query to answer, but he has not been able to draw my attention to any legal provision which may justify this action. Once the R.O. had detailed the Court auctioneer for conduct of the auction of the property, the Court auctioneer would apparently have jurisdiction only to conduct an auction and would not be in any competent position to entertain any such plea as was made by the borrower. Even repeated queries by this Tribunal could not get any satisfactory response from the Counsel for the appellant in this regard
Strangely, however, the action of the Court auctioneer instead of being ignored was taken cognizance by the R.O. to accept the proposal of the borrower. The R.O. was expected to confirm or decline the confirmation of auction so conducted. Here again, the Counsel for the appellant is found wanting in giving any satisfactory answer in response to query about the power of the R.O. Would the R.O. have power to accept this arrangement on the plea made by the borrower once the directions were issued to hold auction of the property? The R.O. ought to have realized that the borrower had approached the Bank for sale of this property and it was for the Bank to consider this plea. The borrower could have come forward to redeem the property only if he was in a position to satisfy the entire recovery. The condition imposed by the R.O. in its order, as reproduced above, would clearly show that the borrower had not come forward to redeem the property but had made attempt to stall the auction. Appellant, who is a third party, could easily participate in the auction and compete with the person giving bids.
The Counsel for the appellant was unable to show any legal ground on which the appellant could be considered to be a proper or necessary party. In the case of Udit Narayan Singh Malpharia v. Board of Revenue, 1962 (SLT Soft) 36 : AIR 1963 SC 786, the Hon'ble Supreme Court has dealt with the question as to who are proper parties and who are necessary parties. It is held that necessary parties are parties who ought to have joined, i.e., parties necessary to the constitution of the suit without whom no decree can be passed at all. In order that party may be considered as a necessary party defendant, two conditions must be satisfied. First, there must be a right to some relief against him in respect of matter involved in the suit. Necessary party is one without whom no decree can be made effectively. A proper party is one in whose absence an effective order can be made but his presence is necessary for complete and final decision on the question involved in the proceedings.
Applying this principle, it can be said that the appellant certainly is not a necessary party. The appellant cannot also be said to be a proper party having regard to the plea that its arrangement was with the borrower and not with the auction purchaser. Borrower who had come forward with this plea is a party in this case. The Tribunal below has rightly observed that the appellant if interested in purchasing the property ought to have participated in the auction by making a bid. The right of the auction-purchaser cannot be allowed to be defeated simply because the borrower wanted to sell this property to some private person. It certainly cannot be made out as to what would be the exact arrangement that may be there between the borrower and the appellant. If the appellant had participated in the auction, respondents 8 and 9 would have been in a position to compete with it and might have made a better offer than Rs. 75 lacs. Since the appellant chose not to participate in the auction, it cannot be allowed to take advantage of the situation to make an offer after knowing the bid made by the auction purchaser and then coming up with a better bid without any further opportunity to the auction purchaser in this regard. The order passed by the R.O., therefore, cannot be held justified. The Tribunal below has rightly dismissed the prayer of the appellant for being impleaded as party as the appellant cannot be considered necessary or proper party. One may also have to keep in mind that respondents 8 and 9 were dominus litis in the proceeding before the RO and in the appeal and they cannot be forced to implead a party against whom they were not claiming any relief. The order passed the R.O allowing the borrower to sell the property in favour of the appellant in the manner as allowed would not sound fair, just and reasonable and, therefore, has rightly been set aside by the Tribunal below. I do not find any infirmity in the impugned order. The Tribunal below has remanded the case back to the R.O. for proceedings in the R.C. in accordance with law and to consider the submission made by the sole highest bidder. I find no merit in the appeal and, therefore, would dismiss the same in limine.