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2014 DIGILAW 473 (GAU)

Natwar Kumar Jalan v. State Bank of India

2014-04-30

A.K.GOSWAMI

body2014
JUDGMENT : A.K. Goswami, J. Heard Mr. A.Das, learned counsel for the petitioner. Also heard Mr. B. Kalita, learned senior counsel, appearing for the respondent-bank. 2. A public notice for sale, for short, sale notice, of secured assets & immovable property, through e-Auction was published in the issue dated 6.7.2013 of the Assam Tribune by the Authorized Officer inviting offers for recovery of the secured debts of State Bank of India, Stressed Assets Recovery Branch, (SARB) in respect of two properties mentioned therein. The sale notice was issued in exercise of powers under the Securitization of Financial Assets and Enforcement of Security Interest Act, 2002 read with Rule 8 & 9 of Security Interest (Enforcement) Rules, 2002 and pursuant to the taking of possession of security assets of the borrowers/guarantors. 3. At the very outset, it will be relevant to note that this case has arisen in respect of the property mentioned at serial no. ii of the said sale notice. The date and time of e-Auction was fixed on 14.8.2013 at 11.00 am and it was further provided in the said sale notice that property may be seen on 24th/25th July, 2013 between 11 am to 4 pm. The reserved price for the land in question was Rs. 30 lakhs and earnest money was fixed at Rs. 3 lakhs. It was stipulated that the successful bidder is to deposit 25% of the sale price, adjusting the earnest money deposit paid already within 48 hours of the acceptance of offer by the Authorised Officer in respect of the sale, failing which the earnest money deposited would be forfeited. The property was to be sold "As-Is-Where-Is & As-Is-What-Is-Basis". 4. The petitioner had to approach this court earlier by way of W.P(C)No.4443/2013 with the grievance that he repeatedly approached the bank and notwithstanding the clause that the property would be shown at a particular time, the land in question was not shown to the petitioner. 5. Having regard to the limited nature of grievance expressed by the petitioner, the writ petition was disposed of by order dated 13.8.2013 directing the respondent-bank to provide inspection of the land to the petitioner before the e-Auction which was slated to be held on 14.8.2013. 6. 5. Having regard to the limited nature of grievance expressed by the petitioner, the writ petition was disposed of by order dated 13.8.2013 directing the respondent-bank to provide inspection of the land to the petitioner before the e-Auction which was slated to be held on 14.8.2013. 6. Pursuant to the said order of the court dated 13.8.2013, on the date of e-Auction, the representative of the petitioner was shown the land from a distance of 300/400 metres, without however, showing the approach road despite request. The petitioner, before the commencement of e-Auction, had sent an e-mail to the respondent No.2 indicating that his participation was subject to actual physical possession and existence of an approach road. In absence of any indication by the bank either in the advertisement or during the time of inspection, on the legitimate belief that the property had no defect, the petitioner submitted bid and participated in the e-Auction and ultimately, he emerged as the highest bidder at Rs. 90 lakhs. In view of the above, petitioner was required to deposit 25% of the bid amount within a period of 48 hours on the date of acceptance of the bid on 14.8.2013. The petitioner was expecting that there will be some response from the bank in connection with the approach road and as such did not make the deposit of 25% of the bid amount. However, there was no response from the bank and by a letter dated 21.8.2013, petitioner's earnest money was forfeited, as per terms and conditions of the sale notice. The bank also issued a fresh e-Auction notice dated 23.8.2013, which was published in the Assam Tribune dated 24.8.2013. 7. In the aforesaid broad premises, the petitioner had filed this writ petition praying for appropriate reliefs by making a number of prayers, details of which may not be necessary for this court to dilate for the reason that during the course of hearing, Mr. Das had confined his prayer to only one prayer which will be discussed at an appropriate place. 8. The respondent-bank had filed an affidavit and in the affidavit it has been clearly mentioned in paragraph-8 that the plot of land in question is a "hillock" which is full of rocks and there is no such approach road to the plot. 9. In view of the said statement of the respondent-bank, Mr. 8. The respondent-bank had filed an affidavit and in the affidavit it has been clearly mentioned in paragraph-8 that the plot of land in question is a "hillock" which is full of rocks and there is no such approach road to the plot. 9. In view of the said statement of the respondent-bank, Mr. Das has limited his prayer only for setting aside the letter dated 21.8.2013 by which the amount of earnest money of Rs. 3 lakhs was forfeited, and for a direction to the respondent-bank to release the said amount forthwith. It is submitted by Mr. Das that it was incumbent on the part of the bank to have indicated, in the first place, in the sale notice that the plot of land is land-locked, which a very relevant issue amounting to a defect in the property. The petitioner was harbouring some doubt with regard to the approach road, as the same was not shown to his representative at the time of inspection on 14.8.2013 and his apprehension has proved to be correct as the respondents have in their affidavit admitted that there was no approach road to the plot in question, he submits. Having failed to disclose this material aspect in the sale notice, the respondents have failed to discharge the responsibility cast upon them and have violated the provision of Section 55 of the Transfer of Property Act, 1882, for short, the Act. He has also relied on the decision of the Apex Court in the case of Haryana Financial Corporation and another v. Rajesh Gupta, reported in (2010) 1 SCC 655 . It is his contention that in the aforesaid factual matrix and in view of the decision in Haryana Financial Corporation (supra), the forfeiture of the earnest money is wholly untenable in law. 10. Mr. B. Kalita, learned senior counsel for the respondents submits that as the plot of land was to be sold on "As-Is-Where-Is & As-Is-What-Is-Basis", it is not necessary for the bank to have indicated that there was defect in the property and therefore, petitioner not having deposited 25% of the bid amount within the stipulated period, decision of the bank to forfeit the amount of earnest money is wholly justified. 11. I have considered the submissions of the learned counsel for the parties and perused the materials on record. 12. 11. I have considered the submissions of the learned counsel for the parties and perused the materials on record. 12. Section 55 of the Act provides that the seller is bound to disclose to the buyer any material defect in the property or in the seller's title thereto of which the seller is, and the buyer is not, aware, and which the buyer could not with ordinary care discover. 13. It has already been noticed that the property was not shown to the petitioner in terms of the sale notice and the petitioner had to come before this court for a direction to the bank to show the property and the property was eventually shown to the petitioner from a distance of 300/400 meters at the eleventh hour, which is not disputed by the learned senior counsel for the respondent-bank. A property, which is land-locked, must be held to be a property, which has a material defect and the seller is enjoined to disclose such defect to the prospective buyer. More so, in the case a statutory authority like the State Bank of India and it has to make true disclosure of facts relating to the property. I am unable to accept the submission of Mr. Kalita that the bank was not obliged to make known the defects relating to the property. 14. In the case of Haryana Financial Corporation (supra) the Apex Court, on the basis of factual matrix placed before the court had held that even though plot was to be sold "as-is-where-is-basis", it was incumbent on the part of the financial corporation to disclose to the respondent about non-existence of appropriate passage to the unit and that the passage mentioned in the revenue record was not fit for movement of vehicles. 15. The petitioner was dealing with an instrumentality of State and it is legitimate for him to proceed on the assumption that the respondents will act fairly. This court is constrained to note that the bank had fallen remiss on that count. This is not a case where the petitioner has sought to wriggle out from a confirmed bid on one pretext or the other, which may justify forfeiture of earnest money. In the instant case, though the petitioner is successful bidder, this court cannot be oblivious of the fact that the bank had failed to disclose material defects of the property. This is not a case where the petitioner has sought to wriggle out from a confirmed bid on one pretext or the other, which may justify forfeiture of earnest money. In the instant case, though the petitioner is successful bidder, this court cannot be oblivious of the fact that the bank had failed to disclose material defects of the property. The respondent-bank, in the considered opinion of the court, has acted unfairly, and is trying to take advantage of its own wrong. In the aforesaid context, this court is of the considered opinion that it will not be equitable to allow the respondent-bank to make pecuniary gain out of forfeiture of the earnest money of the petitioner for which no fault can be attributed to the petitioner. 16. Accordingly, the letter dated 21.8.2013 is set aside and quashed. A writ of mandamus is issued to the respondents to return the amount of Rs. 3 lakhs within a period of 30 days from today to the petitioner. In the event of respondents not paying the amount within the aforesaid period, the amount will carry simple interest @ 9% p.a. from the expiry of 30 days from today till payment. 17. Writ Petition is allowed as indicated above. Interim order passed earlier stands vacated. No costs.