Tech Mahindra Ltd. vs State Bank Of India And Ors.

Ranjit Singh, J

The appellant auction purchaser somehow succeeded in getting an order from the R.O. awarding interest on the amount deposited by it for the auctioned property by pleading that there was delay in handing over possession of the auctioned property. How the appellant could manage this order from the R.O., who had no jurisdiction to pass such an order would give rise very many doubts which cannot be easily dispelled or explained. In the appeals filed by the Bank/FI against the order passed by the R.O., the Tribunal below has corrected this jurisdictional error by setting aside the order passed by the R.O. The appellant still have gathered guts to file the present appeals to challenge the order passed by the Tribunal below.

When these appeals came up for hearing on 22.4.2015, first question posed to the Counsel for the appellant was to show law under which the appellant could claim interest on the amount deposited by it for the property purchased in auction sale on the ground that there was delay in handing over the possession of the auctioned property. Today, the Counsel is rather forthright in submitting that he has not been able to find any law in support of his submission. He still has chosen to make submission to press for his claim.

The Counsel then was confronted with query to show how it could move such application before the R.O. Of course the Counsel could not show any source of power on the part of R.O. to entertain such an application.

Before taking note of the facts, let me first see if there is any source and authority under which such an application before the R.O. could be filed to claim interest on the ground as pleaded by the appellant. The Counsel for the appellant has not made any submission in this regard but has confined himself to refer to various dates like when O.A, was allowed, when stay was granted in the appeal, the date of auction, date of deposit of money and finally, the date when the possession was handed over.

I have perused the application filed by the appellant before the R.O., which is available on record. In this application no mention is made to any section or any provision under which this application was filed. No source or authority to file this application is found mentioned in the heading of the application. The heading of this application simply records that it is for seeking interest on the sale proceeds and poundage fee paid by the auction purchaser. One would be left wondering as to how such an application was considered maintainable and how the R.O. not only entertained such application but even allowed it. At least I have not been able to dispel the thoughts which generally would instantly come to the mind when the officer, who is not new to the job, has been reckless in passing such an order which is beyond his power and jurisdiction. Even if one was to give some allowance of some ignorance or lack of knowledge to the R.O., he still may not be able to justify his conduct when it is noticed that the Bank at first available opportunity came up with the objection that such application was frivolous one. Besides, the Bank had also pleaded that the auction purchaser had filed objection against confirmation of sale, and for claiming return/repayment of the amount deposited by it. The Bank had even pleaded that any leverage in this regard would be an instance of unjust enrichment. Disregarding these objections, the R.O. continued to deal with the application unmindful of the valid legal objections raised. What can one construe from this would be obvious that there may be some thing else to propel this application.

The case seems to have changed track when it was taken up by a particular R.O. who has allowed this prayer though earlier it was being dealt with by a different R.O. This R.O. has gone on to allow the interest @ 8.5% for a period of 32 months without even caring to consider if he had any power or jurisdiction to pass such an order. Apparently, there is something more than what meets the eye.

Let us have a peep into the powers* of the R.O. What all the R.O. can do is contained in Chapter V of the RDDBFI Act. As per Section 25 of the RDDBFI Act, the R.O. on receipt of a certificate can proceed to recover the amount of debt by adopting one or more of the three modes given in this section. Section 26 of the Act clearly provides that it shall not be open to the defendant to dispute before the R.O. the correctness of the amount specified in the certificate. This section lays down a further bar for the R.O. to entertain any objection to the recovery certificate on any ground. The power to withdraw or to even to correct any clerical or arithmetical mistake in the recovery certificate is with the Presiding Officer. This would leave no scope of any interference in the recovery certificate by the R.O. If any stay is to be granted or any certificate is to be withdrawn, then Presiding Officer is required to intimate the same to the R.O. who shall then is to stay the proceedings until expiry of the time so allowed by the Presiding Officer. The combined reading of the provisions of Sections 25 to 27 of the RDDBFI Act would clearly show that the R.O. is only meant to ensure recovery as an executing officer. He does not possess any power to interfere with the recovery certificate once it is issued by the Presiding Officer.

I have not been able to locate any provision whereby the R.O. can, or is empowered to, entertain any claim by any person. Yet the R.O., has gone ahead to decide this claim of the auction purchaser, which is beyond his jurisdiction and authority. The R.O. has done so in complete disregard to his jurisdiction which may appear to be an intentional act on his part. This order apparently does not appear to have been passed in bona fide exercise of his powers by the R.O. and it may tend to reveal a clear case of assuming jurisdiction by him which is not vested in the R.O.

Reliance on the judgments passed under the land acquisition and relying on those observations by the R.O. is another act on his part which is misplaced and misconceived. The R.O. can be expected to acquaint himself with the legal position of his power and to see and examine his jurisdiction before passing such an order. The Tribunal below though has rightly set aside this order, and has even expressed its shock on the nature of application filed, but has not considered the aspect of lack of jurisdiction on the part of the R.O. to entertain such an application. What was shocking for the Tribunal below is the application which was filed by the Senior Manager (Accounts) of the auction purchaser company which even was not supported by any Board resolution or authority in her favour.

Perusal of the impugned order would further show that the Tribunal below has taken note of the order passed by the R.O. on 23.9.2009 while deciding the objection filed by the Customs Department, the CDs and the auction purchaser. The appellant auction purchaser had prayed for setting aside the sale. The plea in this regard was that the appellant was not informed about the dues of the Customs and other Government agencies which, as per the auction purchaser, was not disclosed to him. The plea further was that the order passed by this Tribunal granting stay of confirmation of sale had not been disclosed. While deciding these objections, the R.O. had made reference to the report submitted by the Court auctioneer that before starting the bidding process all the terms and conditions of the public auction was announced to the public and the public was also informed about the order dated 9.10.2007 of this Tribunal and all queries of persons present at the site were also answered. Even banner was placed in the premises of the property that the plant and machinery had been confiscated under the Customs Act. The R.O. relying on these averments, rejected the objection of the auction purchaser. This order had attained finality. How, under these circumstances, the R.O. chose to entertain an application and awarded interest on the ground of delayed handing over of the possession, would raise some very uncomfortable questions and doubts about the conduct of the R.O.

These pleas as were rejected earlier virtually are the ground now pleaded in support of the appeal that appellant is entitled to the interest as allowed by the R.O. Once the appellant had purchased this property in a public auction, which was sold 'as is where is basis', being fully aware of the other charges/order he even otherwise could not have been heard to make any claim for award of interest with any justification whatsoever. It can be viewed that the value of assets like real estate generally increases with passage of time and even if it has not happened then it cannot entitle the appellant to make a claim for interest. Suppose, if the price of the property has increased, the Bank could not claim some additional amount from the appellant.

In any case, a very serious issue in regard to the jurisdiction of the R.O. to entertain an application of this nature arises in this case, A very serious question that would cross the mind is as to how such an application was entertained. It cannot be expected that the R.O. was ignorant about his power and jurisdiction. Such an application clearly is neither maintainable nor could have been entertained by the R.O. This will be an added reason for this Tribunal to dismiss this appeal though the Tribunal below has not gone into these aspects while deciding the appeal. Both the appeals are totally misconceived and misplaced and therefore are dismissed with costs of Rs. 25,000 each to be deposited in the account of respondent State Bank of India and IFCI Ltd.