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Judgment
The appellants' two shops in Faridabad were auctioned and sold by the respondent on 30.06.2016 to recover its money which had earlier been lent to them and to secure the repayment of which loan money the auctioned property had been equitably mortgaged by them. The auction was conducted by the respondent(secured creditor) in exercise of its powers and authority under SARFAESI Act. The appellants had felt aggrieved by the auction sale of their property for various reasons and so they had filed a Securitisation Application(S.A.) under Section 17(1) of SARFAESI Act in DRT-I, Chandigarh(S.A.No. 197/2016) but with the change in jurisdictions of different DRTs in Chandigarh by the Central Government the S.A. came to be transferred to DRT-II, Chandigarh. During the pendency of the S.A. before DRT-I, Chandigarh the appellants had moved one miscellaneousapplication(being 1257/2016) bringing to the notice of the DRT that the auction purchaser had not paid the full auction money within the prescribed period and, therefore, the respondent should be directed to forfeit the EMD amount of 25% respondent made by the highest bidder and credit of that forfeited money should be given in the account of the appellants.The DRT had initially restrained the respondent from returning the EMD to the highest bidder. So long the S.A. was pending before DRT-I that applicationremained pending. However, when the S.A. was transferred to DRT-II where it was registered as S.A.No. 707/2017 that application was taken up by the learned Presiding Officer of DRT-II on 25.10.2017.
On 25.10.2017 the then learned Presiding Officerrejected not only the miscellaneous application for forfeiture of the EMD but the S.A. itself was also dismissed. That order was challenged by the appellants/security applicants by filing the present appeal under Section 18 of SARFAESI Act.
The impugned order date 25.10.2017 according to Mr. Ravi Data, learned counsel for the appellants, is a perverse order having been passed in undue haste totally ignoring the mandatory procedure which DRTs are expected to follow while deciding Securitisation Applications. Since such a serious charge of the learned Presiding Officer having passed a perverse order has been made by Mr. Data that order needs to be re-produced verbatim. It reads as under:-
"By way of this application, the counsel for the applicant challenges the sale auctioned dated 30.06.2016. That auction, though a Bid had come, was later on cancelled. As such the prayer made in the SA stood automatically allowed as the sale auction has become infructuous as the same has been cancelled by the Secured Creditor.
The next ground remains whether the amount paid to the Financial Institution (FI) by the highest bidder could and should have been forfeited or returned to him. This plea was taken vide IA No.1257 of 2016 and on 08.08.2017 when notice was issued it was stated that in case the highest bidder had not paid the balance amount till date, the amount deposited by the highest bidder shall not be refunded to him till next date of hearing. Thereafter the matter was adjourned to 18.09.2017 and since on that date interim order qua the refund of money, was passed and the matter was adjourned for today.
Reply has been filed by the FI stating that the amount has already been refunded to the highest bidder vide Cheque dated 28.01.2017, copy whereof has been annexed with their reply by FI as Annexure R-19. The same was received by the highest bidder on 01.02.2017. Since the amount has already been refunded to the highest bidder on 01.02.2017, before orders were passed and the question now remains regarding the academic interest.
The counsel for the applicant relies upon the reply filed by the FI, who along with their reply have filed various communications between them and the highest bidder extending time to make the balance payment and finally when time finally to make the payment was given on 17.11.2016, the highest bidder wrote to the Secured Creditor when they had come to know that criminal matter is pending in Hon'ble High Court of Punjab and Haryana against the borrower for committing offence against a third party regarding the shop mortgaged with the FI, without de-mortgaging the same. They were still ready to make the remaining payment though due to demonetization they could not do so. Pursuant to this, the Secured Credit wrote to the highest bidder that their bid dated 27.06.2016 towards purchase of property that was put to auction, is cancelled and money was being refunded which had already been done through Annexure R-19. Along with reply the FI has filed various orders of the Hon'ble High Court of Punjab and Haryana wherein applicant was directed to deposit the various amounts on various dates which the applicant did. Most specifically in the order dated 26.04.2016 wherein the petitioner therein had stated that he was ready to discharge his liability as per the terms and conditions settled with the respondent herein, by repaying the amount of Rs.52.00 lacs along with interest, without disturbing the title of the complainant therein. The counsel for the applicant states that in the order dated 05.09.2016 passed by the Hon'ble High Court of Punjab and Haryana only 52.00 lacs in terms of order dated 26.04.2016 is mentioned and there is no mention of interest part. The orders dated 26.047.2016 and 05.09.2016 both passed by the Hon'ble High Court are reproduced herein below:-
"101 CRM-M-13215-2016
Petitioner apprehends arrest in a case registered at the instance of Sudhir Nagar alleging that the petitioner had obtained loan from the complainant who had failed to return the same and discharge his liability. Subsequently, he had transferred two Booths to the complainant with an assurance that there was no encumbrance against the title but the Booths were found to be mortgaged with India Bulls for a sum of Rs.56 lacs.
Case came up for hearing before the Coordinate Bench of this Court, when counsel for the petitioner prayed for time to inform the court whether the petitioner was willing to pay off the loan to India Bulls subject to final; decision of the civil suit as a civil suit challenging the sale deed had been filed by the complainant against the petitioner and others.
When eth case was taken up today, counsel for the petitioner has submitted that petitioner is ready to discharge his liability as per the terms and conditions settled with India Bulls by repaying the amount of Rs.52 lacs along with interest without disturbing the tile of the complainant.
Petitioner is also involved in another criminal case registered at eth instance of complainant.
Counsel for the petitioner submits that said FIR is registered on the basis of similar allegations and that second fir IS POLITICALLY MOTIVATED. He has drawn attention of this Court to FIR EXP3/A wherein the complainant had filed a complaint under Section 156(3) C.P.C. leading to registration of FIR. Present FIR has also been registered on the basis of the orders passed by the Court under section 156(3) Cr.P.C.
Counsel for the petitioner submits that Booths were sold to the complainant for a meagre sum of Rs.65.00 lacs.
In view of offer given by the petitioner and a civil suit for recovery of Rs.2,71,13,000.00 having been filed by the complainant vide Annexure P7, is apparent that liability of the petitioner is a combination of both civil and criminal liability.
After hearing both the sides, it appears that there is a money dispute between the parties. I deem it appropriate to confirm the facts form the record.
Notice to the Advocate General, Haryana for 01.06.2016.
Meanwhile, an interim direction is issued that the petitioner will joint investigation on 14.05.2016 along with documents indicating that the petitioner has partly discharged the liability towards India Bulls. In case of petitioner doing so, he shall be released on interim bail to the satisfaction of the arresting officer.
Counsel for the complainant will be at liberty to raise arguments on next date of hearing challenging bone fide of the petitioner.
The Investigation Officer will apprise this Court regarding the steps taken by the petitioner to discharge his liability towards the financial institution aforesaid.
April 26, 2016 "
"206 CRM-M-13215-2016 (O & M)
The learned counsel for the petitioner on instructions undertakes to pay Rs.52. lacs in terms of order dated 26.04.2016, however, the amount in question is not readily available with him. He seeks some time to put up a proposal with regard to schedule of the payment to be made by him.
Post again on 22.09.2016.
Interim order to continue.
05.09.2016"
Which culminated in passing the final order dated 23.05.2017 by the Hon'ble High Court which is as under :-
"On 26.04.2016, interim directions were issued and the petitioner was allowed to joining the investigation. Thereafter some payments were made by the petitioner and vide order dated 02.03.2017, a consensus was arrived at between the parties whereby petitioner was required to pay Rs.35 lacs in two instalments each without prejudice to the rights of the parties at the relevant time.
Admittedly, an amount of Rs.35 lacs has been deposited by the petitioner with the bank.
In view of above, interim order dated 26.04.2016 is hereby made absolute without prejudice to the rival claims of the parties to be decided at the relevant stage in appropriate form.
Petition stands disposed of.
23.05.2017"
In view of the above since the property was under litigation and the money deposited by the highest bidder had been returned prior to the passing of interim order, I do not find it appropriate to get the amount from the highest bidder since it has been returned before passing of the interim order.
This is despite the fact that vide order dated 07.11.2016 the respondent FI had given time till 17.11.2016 to make payment and on 17.11.2016 the highest bidder had sent a letter and further time was sought but on 10.12.2016 the Secured Creditor wrote a letter to the highest bidder cancelling the bid and that they would refund the amount.
Further the FI has not suffered any loss or damage on account of non deposit of abalance amount by the highest bidder and the bid having been cancelled as the auction has failed and he applicant had undertaken to deposit the amount as per the directions of the Hon'ble High Court. I see no infirmity regarding the amount so refunded to the highest bidder. More so when the Secured Creditor is as liberty to put the pretty on auction again, if necessary and secure the outstanding amount. He applicant should not be allowed to take advantage of the default committed by him and once having approached the Hon'ble High Court in a criminal matter whereby the applicant submitted that he was ready to discharge his liability as per terms settled for repaying the amount with interest and it would be travesty of justice if the amount received from the third party is used by the applicant to his benefit after stating that he is ready to make the payment along with interest without disturbing the title of the complainant as mentioned in order dated 26.04.2016.
No other point has been urged.
In view of above I find no merit in the pleas raised by the applicant.
All pending IAs, if any, stands disposed of.
No further orders are called for.
SA is disposed of."
A bare reading of this order shows that while disposing of the miscellaneous application moved by the security applicants for direction to the financial institution to forfeit the EMD of 25% made by the highest bidder because of non payment of the balance 75% of auction money the S.A. itself was also rejected without examining various grounds of challenge taken by the security applicants in their S.A. which was running into fortysix pages. Without discussing the pleas raised in the S.A. the learned Presiding Officer was not justified in observing that the pleas had no merits. In fact the prayer of the appellants for forfeiture of the EMD was also rejected without going into the question whether the respondent was justified in not forfeiting the EMD and rejected that plead simply for the reason that the respondent had already returned the EMD money to the highest bidder.
This appeal, therefore, is allowed. Impugned order of DRT is set aside. The matter is remanded back to the DRT for a fresh reasoned order. The .S.A. shall now be taken up by the DRT on 29.06.2019 at 2 p.m. for further directions/proceedings.