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2012 DIGILAW 239 (CAL)

UCO Bank v. West Bengal Financial Corporation

2012-03-22

TAPEN SEN

body2012
Judgment :- Tapen Sen, J. In this Writ Petition filed by the UCO Bank, prayer, inter alia, is not to give effect to the sale of the property to the second highest bidder in terms of the impugned letters dated 4.8.2010 (Annexure P-13) and 19.8.2010 (Annexure P-15). The Petitioner has further prayed for quashing of the said letters dated 4.8.2010 and 19.8.2010. They have also made a prayer that a writ of mandamus be issued directing the joint sale of the entire property comprising of 6.07 acres of land (i.e. 3.46 Acres of the mortgaged property PLUS 2.59 Acres held by the Petitioners by way of equitable mortgage). 2. The facts of this case, as would appear from the pleadings, is that in the year 1986, the West Bengal State Financial Corporation (Respondent no. 1) had provided financial assistance to the Respondent No. 2 (Biswamata Cold Storage (P) Ltd.) by granting a loan of Rs. 60 lacs. In order to take the loan, the Managing Director of the said Respondent no. 2 deposited the Title Deeds in respect of the land measuring 3.46 acres (more or less) situated in Mouza Raghunathgarh, J.L. No. 87, R.S. No. 3729, Touzi No. 19, P.S. & S.R.O. Chandrakona, Dist. Paschim Medinipore. The said property consisted of building, cold storage with Chambers standing thereon belonging to the Respondent no. 2. These Title Deeds were deposited on 8.10.1986 by the Respondent no. 2 with the intention of creating security on the said property by way of first charge. 3. Thereafter, on or about 29.3.2008, the Petitioner Bank sanctioned credit facilities to the Respondent no. 2 to the extent of Rs. 727.55 lacs for financing its cold storage unit. Credit facilities were secured by hypothecation of the Plant, Machinery, Equipment, Stocks of potatoes as also Book Debts of the Respondent no. 2 by way of first charge in favour of the Petitioner Bank. 4. Having availed the credit facilities to the tune of Rs. 727.55 lacs from the Petitioner, the Respondent no. 2 neglected and failed to make repayment and consequently, in May 2002, the Petitioner was compelled to demand repayment of the loan. Thereafter, on 30.5.2009, the Petitioner issued a Notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002. 727.55 lacs from the Petitioner, the Respondent no. 2 neglected and failed to make repayment and consequently, in May 2002, the Petitioner was compelled to demand repayment of the loan. Thereafter, on 30.5.2009, the Petitioner issued a Notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002. In spite of the said Demand, the Respondent No. 2, as well as its three Guarantors namely, Shyamal Dandapat, Panchugopal Dandapat and Babita Dandapat (who had guaranteed repayment of the dues) also neglected and failed to pay the same to the Petitioner Bank. 5. Consequently, on 14.8.2009, the Petitioner filed an application against the Respondent no. 2 and the said three guarantors under Section 19 of the Recovery of Debts due to Banks and Financial Institutions Act 1993. In the said application, the Petitioner Bank also impleaded the said Financial Corporation. The relief prayed for in the said application was inter alia for realization of the sum of Rs. 7,94,85,316.00/-. The said application was registered as O.A. No. 562 of 2009. 6. In November 2009, the Petitioner filed a miscellaneous application in the said proceeding being Misc. (I.A.) No. 216 of 2009 wherein they prayed that their application for appointment of Receiver and other reliefs along with the Misc. Application be heard together and in the mean time, the West Bengal Financial Corporation be directed not to part with the original Title Deeds without leave of the Court/Tribunal and/or alternatively, the original Title Deeds be deposited with the Registrar of the said Tribunal and be kept in safe custody until further orders were passed. 7. In Paragraph 13, the Petitioner has stated that they filed this Misc. Application because they were under an apprehension that the Financial Corporation was acting in collusion with the Directors of the loanee and that they were trying to dispose of and/or alienate the assets and properties including the aforesaid immovable properties in such manner that it would be prejudicial to the interests of the Petitioner Bank. On 6.11.2009, the learned Tribunal took up the aforesaid Misc. Application for hearing and ordered the appointment of one Sri P. N. Singh, Advocate and one Sri Suvankar Jana, Manager of UCO Bank as Joint Special Officers. On 6.11.2009, the learned Tribunal took up the aforesaid Misc. Application for hearing and ordered the appointment of one Sri P. N. Singh, Advocate and one Sri Suvankar Jana, Manager of UCO Bank as Joint Special Officers. The learned Tribunal directed them to find out the present position of the movable and immovable properties hypothecated/mortgaged in favour of the Petitioner Bank and to make an inventory of the said movable properties. 8. On 11.1.2010, both the Misc. Application as well as the original Application being O.A. No. 562 of 2009 were taken up for hearing by the learned Presiding Officer, Debt Recovery Tribunal-2, Calcutta. The Financial Corporation filed its opposition on the same day and the Tribunal after giving necessary directions for filing written statement fixed the case for hearing on 8.4.2010. 9. During the pendency of the original application as well as the during the pendency of the Misc. Application, the Petitioners were surprised to come across a Sale Notice which was published in “Bartaman” on 12.3.2010 inviting offers for sale of assets and properties of the Respondent no. 2 including the aforesaid immovable properties which were mortgaged to the Petitioner Bank. 10. Immediately thereafter on 15.3.2010, the Petitioner filed a supplementary application in the said O.A. No. 562 of 2009 wherein they prayed that an order of status quo be passed in respect of the sale of the assets of Respondent no. 2 by the Respondent no. 1. On 1.4.2010, the learned Tribunal held, inter alia, that if the Petitioner was aggrieved by any auction taken by the Officers of the Respondent no. 1, they should take recourse to the provisions of Section 9 of the State Financial Corporation Act, 1951. The Tribunal also held that it did not find any ground to interfere as it could not work as an Appellate Authority in relation to actions taken by the West Bengal Financial Corporation under Section 29 of the said 1951 Act. The Tribunal consequently dismissed the application by its order dated 1.4.2010. 11. Being aggrieved the Petitioner filed W.P. No. 459 of 2010. By Order dated 13.4.2010, the submissions of the Financial Corporation were recorded to the effect that the Bank shall be kept informed at every stage of the process of sale and such sale shall not be confirmed without giving 15 days’ Notice in advance. 11. Being aggrieved the Petitioner filed W.P. No. 459 of 2010. By Order dated 13.4.2010, the submissions of the Financial Corporation were recorded to the effect that the Bank shall be kept informed at every stage of the process of sale and such sale shall not be confirmed without giving 15 days’ Notice in advance. It was further directed that as and when valuation report was made public, the Bank shall be put on Notice. The Order dated 13.4.2010 passed by this Court in W.P. No. 459 of 2010 is Annexure P-10. Thereafter, it appears that on 22nd June, 2010, the Writ Petition was disposed of with the observations as follows: “WP No. 459 of 2010 IN THE HIGH COURT AT CALCUTTA Constitutional Writ Jurisdiction ORIGINAL SIDE UCO Bank Petitioner Versus West Bengal Financial Corporation & Anr. Respondents Before: The Hon’ble Justice JAYANTA KUMAR BISWAS Date: 22nd June, 2010 The court : Counsel for the Petitioner submits that in view of the order dated April 13, 2010 of this Court made in this case virtually nothing remains to be decided in the petition. He says that the order sufficiently protects the interest of the petitioner. Counsel for the financial corporation submits that everything concerning the auction has now been disclosed to the petitioner; and that the petitioner will be permitted to participate at every stage of the auction part of which has already been concluded. In view of the above-noted situation and the order dated April 13, 2010, I dispose of the petition directing the financial corporation to involve the petitioner at every stage of the ongoing auction. No costs. Certified Xerox. (JAYANTA KUMAR BISWAS, J.)” 12. It further appears that thereafter, auction of the property was held on 26.5.2010 and the highest bidder gave a bid of Rs. 6.50 crores. The Bank was informed about the valuation of the property by the Corporation on 26.5.2010 itself. In paragraph 22, the Petitioner Bank has stated that they were told about the highest bid of Rs. 6.50 crores and about the valuation of the property on 26.5.2010 itself when it was fixed for auction. As for the valuation report furnished by the Corporation, the same was Rs. 6.02 crores and the bid being higher, the Petitioner did not raise any objection. 13. 6.50 crores and about the valuation of the property on 26.5.2010 itself when it was fixed for auction. As for the valuation report furnished by the Corporation, the same was Rs. 6.02 crores and the bid being higher, the Petitioner did not raise any objection. 13. The Petitioner has stated that from the facts as stated above, it was under a bona fide belief that the sale was concluded and that it would be confirmed in favour of the highest bidder but on 4.8.2010, (first impugned letter) the Respondent no. 1 (Corporation) wrote a letter to Respondent no. 2 with a copy to the Petitioner and from this letter, the Petitioner came to learn that the highest bidder had withdrawn its offer alleging that all six Chambers of the Cold Storage were not on the 3.46 acres of the property and therefore, the Respondent no. 1 had negotiated with the second highest bidder about which, the Petitioner Bank had been informed and that the Corporation would confirm the sale at Rs. 539 lacs if the Petitioner Bank failed to procure a better or equal offer. 14. According to the Petitioner and as has been stated in Paragraph 23, the second highest bidder was the son of the highest bidder and is one of the Directors of Respondent no. 2. The Petitioner has further alleged in Paragraph 23 that the Corporation had unilaterally sought to revalue the property at Rs. 492 lacs. They have stated that to procure better offer than Rs. 539 lacs, the Petitioner should have been given an opportunity to publish a Notice to the public at large because the valuation made by Respondent no. 1 was much less than the amount of dues which were outstanding and payable to the Bank. 15. Consequently, on 11.8.2010, the Petitioner sent a letter through its Advocates objecting to such an act and pointed out that the entire Cold Storage was not situated on the property and that the Respondent no. 1 (the Corporation) did not have the right to alienate the Cold Storage in its entirety. The Petitioner also objected to the revaluation reducing the value from Rs. 6.02 crores which was done, according to the Petitioner, only to suit the interests of Respondent no. 1 to confirm the sale in favour of the second highest bidder in undue haste. 1 (the Corporation) did not have the right to alienate the Cold Storage in its entirety. The Petitioner also objected to the revaluation reducing the value from Rs. 6.02 crores which was done, according to the Petitioner, only to suit the interests of Respondent no. 1 to confirm the sale in favour of the second highest bidder in undue haste. The Petitioner also informed that they had not only the second charge over the property of 3.46 acres of land but they also had first charge over a contiguous 2.59 acres of land by way of equitable mortgage by deposit of Title Deeds. The Petitioner has stated that the Respondent no. 1, in reply to the said letter, admitted through its Advocates by their letter dated 19.8.2010, that only 5 Chambers of the Cold Storage was situated on the property in question. They also admitted that the valuation was done subsequently. They also stated that the highest bidder had withdrawn because the Respondent no. 1 Corporation was unable to transfer absolute right in respect of the entire Cold Storage. Notwithstanding the same, the Corporation sought to give effect to the sale to the 2nd highest bidder at Rs. 539 lacs. 16. Being aggrieved, the Petitioner filed this Writ Petition challenging the action of the Respondent no. 1 Corporation which, according to the Petitioner, prejudicially affects their rights as secured creditors to recover their dues from the Respondent no. 2 and diminishes the value not only of the common security but also the value of 2.59 acres of land which is not a part of the property in question and in respect whereof the Bank has exclusive rights as a mortgagee. This part of the grievance cannot form subject matter of this Writ Petition because the sale is confined only to 3.46 Acres and not 2.59 Acres. Therefore, such a grievance is not considered by this Court here itself. 17. An Affidavit-in-Opposition has been filed on behalf of Respondent no. 1 Corporation. They have stated that the Corporation has first charge over 3.46 acres of land together with building, Cold Storage with Chambers constructed and standing thereon. They have further stated that as per the Petitioner Bank’s letter of sanction dated 29.3.2008, financial assistance of the Bank was already secured by hypothecation of stocks, fuel, lubricants, assignment of cold storage receipts pledged with Respondent no. 2. They have further stated that as per the Petitioner Bank’s letter of sanction dated 29.3.2008, financial assistance of the Bank was already secured by hypothecation of stocks, fuel, lubricants, assignment of cold storage receipts pledged with Respondent no. 2. They also had second charge over the entire fixed assets. They have stated that the Petitioner Bank does not have first charge over the Plant and Machinery as wrongly mentioned in Paragraph 6 of the Writ Petition. They have also denied the assertion of the Petitioner Bank that they hold first charge over 2.59 acres of land. In sum and substance, the Corporation has stated that interest in favour of West Bengal Financial Corporation has accrued after the date of the notice issued under Section 30 of the State Financial Corporations Act, 1951 and is also accruing day to day. As on 30th June, 2010 the total outstanding balance in the loan account of the Respondent No. 2 with the West Bengal Financial Corporation was as follows: a) Principal : Rs. 1,66,61,933.30 b) Interest : Rs. 30,50,244.24 c) Others : Rs. 1,49,265.28 ------------------ Rs. 1,98,61,442.82 ------------------ 18. The Corporation has denied that the Petitioner was never informed about the developments at every stage of the sale. They have stated that the assets have not been sold to the second highest bidder as alleged by the Petitioner Bank but to another Company which was brought by the borrower Company against the opportunity given by the Corporation to them (i.e. the borrower Company). They have also stated that in the auction held on 26.5.2010, the same was held in the presence of the Petitioner Bank which never raised any objection to the said auction. 19. From the Affidavit-in-Opposition it is further evident that the Order dated 13.4.2010 passed by the Hon’ble Mr. Justice Dipankar Datta in WP No. 459 of 2010 had clearly recorded that the Bank shall be kept informed at every stage of the process of sale of the concerned Cold Storage and that the sale shall not be confirmed without giving the Bank 15 days’ Notice in advance. It was also further recorded in the said Order that the Financial Corporation shall be at liberty to receive further Orders over and above those which had been received till date and as and when such offers were opened, the Bank should be put on Notice. It was also further recorded in the said Order that the Financial Corporation shall be at liberty to receive further Orders over and above those which had been received till date and as and when such offers were opened, the Bank should be put on Notice. It was also recorded that at the same time, as and when the valuation report was made public, the Bank should again be put on Notice. This order was subsequently taken up by another Hon’ble Single Judge (Hon’ble Mr. Justice Jayanta Kumar Biswas) on 22.6.2010.His Lordship recorded that in view of the aforesaid Order dated 13.4.2010, everything pertaining to the auction, had been disclosed to the Bank (the Petitioner of WP No. 459 of 2010) and that the said Bank would be permitted to participate at every stage of the auction, part of which had already been concluded. 20. Upon a perusal of the two Orders referred to above, it is clear that both the Hon’ble Judges had ordered that the Bank shall be kept informed at every stage and that the process of sale shall not be confirmed without giving 15 days’ Notice to the Bank and that the Corporation shall be at liberty to receive further offers over and above those which had already been received till that date. It is also evident from the Order dated 26.2.2010 that part of the auction had already been concluded. 21. From a perusal of the communication which has been sought to be impugned, being the letter dated 4.8.2010, it is evident that the same is a letter of the Corporation sent to the Private Respondent No. 2. It is evident from the said letter that the Corporation had received offers from two intending purchasers against a sale Notice which was published in the “Bartaman” on 12.3.2010. The valuation of the fixed assets of the Cold Storage Unit was conducted by a valuer and since there was more than one offer for purchasing the fixed assets of the said Cold Storage Unit, an auction/bid was held at the Head Office of the Corporation on 26.5.2010 in the presence of the Senior Officers of the Corporation and the Representatives of UCO Bank. 22. 22. It is further evident that subsequently, however, when the area of the land of the Cold Storage which had been mortgaged to the Corporation was being measured, it was found that the 6th Cold Storage Chamber and its drying shed as also a portion of the drying shed adjacent to the 5th Chamber, were not constructed within the land measuring 3.46 acres which had been mortgaged to the Corporation. Consequently, the Corporation put the said Private Respondent No. 2 on Notice saying that they were supposed to be well aware of the plots of land upon which the Chambers had been built and therefore, non-creation of mortgage of those Plots on which the Chambers were constructed with the financial assistance of the Corporation was a wrongful part and a breach of trust on the part of the said Private Respondent. 23. As a consequence, the highest bidder, on having come to learn about such anomaly, withdrew its offer and therefore, the Corporation had to negotiate with the second highest bidder who agreed to purchase the fixed assets on “as-is-where-is” basis and “whatsoever there is” basis at a much lesser price of Rs. 539 lacs (Rupees Five crore Thirty Nine lacs only). However, according to the Corporation, the net value of the fixed assets of the Cold Storage Unit lying within 3.46 acres of the mortgaged land was revalued and it was reassessed at Rs. 492.00 lacs. 24. In the mean time, the aforementioned Writ Petition being WP No. 459 of 2010 was disposed of on 22.6.2010. It will show that the auction/process of sale was not prevented. In that background, the Financial Corporation notified that in exercise of powers conferred under Section 29(1) of the State Financial Corporations Act, 1951, the fixed assets of the Cold Storage Unit of the Respondent No. 2 comprised in 3.46 acres of land with Cold Storage building along with the Plant and Machinery lying mortgaged and hypothecated to the Corporation was being put on sale by the Corporation on the aforesaid “as-is-where-is” basis towards the realisation of its dues and the Corporation had received the offer of Rs. 539 lacs with full down payment, being the highest offer. 25. 539 lacs with full down payment, being the highest offer. 25. Consequently, the Respondent No. 2 was given Notice that if they had any equal or better offer from any buyer of their choice, then they could submit such higher or equal offer in writing together with payment of the entire consideration money by Demand Draft by 4 P.M. on 19.8.2010 but if no such offer was received, then the Corporation would invoke their powers under Section 29(1) of the 1951 Act and shall take steps to sell/dispose of the property without further reference to them at a consideration of Rs. 539 lacs. They also stated that in the event they were able to bring a better offer and simultaneously, if UCO Bank (the Petitioner) also brought any offer from a buyer of their choice which was better, then the offer brought by the UCO Bank shall be valid but upon making down payment within the said stipulated period. A copy of the letter was given to the Senior Manager, UCO Bank in terms of the Order dated 13.4.2010 passed in WP No. 459 of 2010 being in the nature of 15 days’ Notice in advance for bringing better offer. 26. This Court also heard the Private Respondents. They have also filed an affidavit on behalf of the added Respondents. They have stated that they came to learn from one Panchugopal Dandapat, the Director of the Respondent No. 2 that the fixed assets of the Respondent No. 2 Company were put to sale. After considering the letter dated 4.8.2010 referred to above, they had offered to purchase the same for a price of Rs. 546.00 lacs. They have stated in their Affidavit-in-Opposition that they also handed over a Pay Order for the said amount drawn in favour of the Respondent No. 1 on 19.8.2010 along with a letter which was accepted by the Respondent No. 1. They have also stated that after accepting the money, the Corporation waited for 7 days and ultimately, confirmed the sale in favour of the added Respondent on 27.8.2010 whereafter, they took possession of the property in question along with the land, plant, machinery and other fixed assets. They have stated that they are bona fide purchasers and they have acted in terms of sale Notice. They have stated that they are bona fide purchasers and they have acted in terms of sale Notice. They have also challenged the manner in which the Writ Petition has been filed submitting that for the self-same cause of action, the earlier Writ Petition being WP No. 459 of 2010 had been filed and it had been disposed of without any interim orders and the only Order that was passed was that the Bank shall be kept informed at every stage of the process of sale and that the sale shall not be confirmed without giving the Bank 15 days’ Notice. 27. Upon a perusal of the aforementioned facts and circumstances, it is thus evident that the UCO Bank is unnecessarily now trying to rake up and reopen the issues. They were all along present on the date of auction and they never raised any objection either to the sale or to the terms thereof. Moreover, the Corporation, in strict compliance of the Orders passed by this court, gave them sufficient time by their letter dated 4.8.2010 for bringing any better offer. In the said letter they also disclosed that the bidding had been held in the Head Office in the presence of the Senior Officers of the Corporation and representatives of the Bank. Under such circumstances, it is evident that the sale cannot now be allowed to be questioned by the Petitioner Bank merely because they want it to be reopened. What is more disgusting is that in spite of having been spectators to the sale and having received the Notice in strict compliance of the Orders passed by the earlier Writ Court and having not challenged them, they have chosen to once again file this Writ Petition which, for such reasons, is held to be misconceived and completely frivolous in nature. Consequently, this Court does not find any reason to interfere in this Writ Petition. 28. The Writ Petition is accordingly dismissed. However, in the facts and circumstances of this case, there shall be no Order as to Costs. Upon appropriate Application(s) being made, urgent Photostat Certified copy of this Judgment, be given/issued expeditiously subject to usual terms and conditions. Later : Prayer for stay made after pronouncement of the Judgment in Court, was considered and Refused.