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2015 DIGILAW 360 (UTT)

MOHD. SHARIQ v. PUNJAB NATIONAL BANK

2015-07-21

ALOK SINGH

body2015
JUDGMENT : Hon’ble Alok Singh, J. (Oral) Undisputed facts of the present case, inter alia, are that respondent no. 3 has borrowed money from the Punjab National Bank, Patel Nagar, Dehradun, while respondent nos. 4, 5 and 6 stood guarantors of the loan amount; respondent nos. 3, 4, 5 and 6 were declared NPA and ultimately notice under Section 13 (2) of the Securitization and Re-construction of Financial Assets and Enforcement of Security Interest Act, 2002 was issued and thereafter, assets of the borrower was taken into possession under sub-section (4) of Section 13 of the Act; auction notice was issued by the Bank on 18.06.2013 inviting the bids on or before 22.07.2013 to sell the mortgaged property of the borrower fixing reserve price as Rs. 1,19,00,000/-; petitioner has furnished his bid of Rs. 2,01,00,000/- on 22.07.2013 along with Earnest Money Deposit (EMD) of Rs. 11,90,000/-; as per the condition of the bid/auction, successful bidder has to deposit 25% of the bid amount on acceptance of the bid; on 25.07.2013, borrower i.e. respondent no. 3 has preferred an appeal before the D.R.T Lucknow challenging the auction notice dated 18.06.2013; D.R.T. vide order dated 26.07.2013, after hearing the counsel for the borrower as well as the Bank, was pleased to direct that since auction has to be held today on 26.07.2013, therefore, Bank may go on with the auction, however, confirmation of sale shall be kept in abeyance till further orders; auction was held on 26.07.2013 itself, however, neither petitioner nor other bidders were made aware of the interim order passed by the D.R.T. on 26.07.2013 itself; petitioner went to the Bank on 27.07.2013 to deposit Rs. 38,35,000/- i.e. balance of 25% of the bid amount; without informing the petitioner that confirmation of the sale was directed to be kept in abeyance by the D.R.T. vide order dated 26.07.2013, Bank has accepted Rs. 38,35,000/- i.e. balance of 25% of the bid amount; without informing the petitioner that confirmation of the sale was directed to be kept in abeyance by the D.R.T. vide order dated 26.07.2013, Bank has accepted Rs. 38, 35,000/- from the petitioner on 27.07.2013; vide order dated 14.10.2013, interim order granted by the D.R.T. on 26.07.2013 was vacated; vide letter dated 18.10.2013, Bank has informed the petitioner that since interim order had already been vacated vide order dated 14.10.2013, therefore, petitioner being the highest bidder should deposit balance 75 % of the bid amount within 15 days; vide letter dated 25.10.2013, petitioner has made request to the Bank that since litigation is pending before the D.R.T., assailing the auction notice, in question, therefore, he may be permitted to deposit the balance 75 % of the bid amount after the disposal of the case pending before the D.R.T.; Bank did not reply to the letter dated 25.10.2013, whereby the petitioner has made request to permit him to deposit balance 75 % of the bid amount after disposal of the case pending before the D.R.T.; again vide letter dated 28.10.2013, Bank directed the petitioner to deposit balance 75% of the bid amount at the earliest, failing which, earnest money deposited by the petitioner shall be liable to be forfeited; petitioner through his counsel Shri Manoj Kumar Tripathi, sent legal notice to the Bank on 01.11.2013, informing the Bank that since litigation is pending before the D.R.T., assailing the auction notice, in question, therefore, he is not interested in purchasing the property, in question, therefore, total amount deposited by him Rs. 50,40,000/- may be refunded to the petitioner with interest; Bank did not reply to the legal notice dated 01.11.2013 as to why, petitioner is not entitled for the refund of Rs. 50,40,000/- may be refunded to the petitioner with interest; Bank did not reply to the legal notice dated 01.11.2013 as to why, petitioner is not entitled for the refund of Rs. 50,40,000/- in view of the pendency of the litigation; rather instead issued another letter dated 06.11.2013 asking the petitioner to deposit balance 75% of the bid amount within three days; petitioner once again by letter dated 12.11.2013 requested the Bank that the amount deposited by him i.e. 50,40,000/- may be refunded to him in view of the pendency of the litigation before D.R.T., since petitioner did not want to keep himself waiting for the outcome of the litigation; however, no reply to the letter dated 12.11.2013 was sent by the Bank as to why he is not entitled for refund of the amount; rather instead Bank has issued another letter dated 21.11.2013 to the petitioner asking him to deposit the balance 75% of the bid amount on or before 26.11.2013; since, case before the D.R.T. was listed for 28.11.2013, therefore, petitioner again requested the Bank vide letter dated 25.11.2013 to grant him time to deposit balance 75% of the bid amount after disposal of the case, pending before the D.R.T., which was listed for 28.11.2013; Bank did not reply to the letter dated 25.11.2013 too; however, Bank was pleased to issue re-auction notice dated 05.03.2014 inviting fresh bids. 2. Feeling aggrieved, petitioner has approached this Court under Article 226 of the Constitution of India, assailing the re-auction notice dated 05.03.2014 and further seeking writ of mandamus commanding the Bank to execute deed of conveyance pursuant to the auction sale dated 26.07.2013 in favour of the petitioner or alternatively to refund the money deposited by the petitioner. 3. On 01.04.2014, this Court was pleased to direct the Bank to file affidavit specifically stating therein that as to why decision is not taken on the request of the petitioner for extension of time to deposit balance 75 % of the bid amount after the decision in the pending case before the Tribunal. This Court was further pleased to direct that re-auction pursuant of Annexure No. 13 shall be subject to final decision in the writ petition. Undisputedly, re-auction was held on 01.05.2014 and respondent nos. 7 and 8 were found to be the highest bidder with the bid of Rs. This Court was further pleased to direct that re-auction pursuant of Annexure No. 13 shall be subject to final decision in the writ petition. Undisputedly, re-auction was held on 01.05.2014 and respondent nos. 7 and 8 were found to be the highest bidder with the bid of Rs. 1,70,50,000/- and ultimately, sale deed was executed in favour of the auction purchaser/respondent nos. 7 and 8 on 27.05.2014 during the pendency of this writ petition. 4. I have heard Mr. Ramji Srivastava, Advocate for the petitioner, Mr. V.K. Kohli, Sr. Advocate, assisted by Mr. Kanti Ram Sharma, Advocate for respondent Bank and Mr. Arvind Vashisht, Sr. Advocate assisted by Mr. Ashish Sinha, Advocate for respondents no. 7 & 8 and have carefully perused the record. 5. At the risk of repetition, it is important to mention herein that vide order dated 01.04.2014 passed by this Court re-auction pursuant to the re-auction notice dated 05.03.2014 was made subject to the final outcome of the writ petition, therefore, sale certificate dated 01.05.2014 issued in favour of the auction purchasers i.e. respondents no. 7 & 8 and sale deed dated 27.05.2014 executed in favour of the respondent nos. 7 & 8 are subject to the final decision in the writ petition. There is no dispute to the fact that petitioner was found to be the highest bidder of Rs. 2,01,00,000/- on 26.07.2013 while on 26.07.2013 itself DRT in the presence of counsel for the Bank was pleased to direct that auction shall go on, however, confirmation of the sale shall be kept in abeyance. 6. It is important to mention here that petitioner was neither party in the proceedings before the DRT nor was present on 26.07.2013 when interim order was passed against Bank. 7. It is also important to note that on 27.07.2013, petitioner went to the bank to deposit Rs. 38,35,000/- balance of 25% of the bid amount, however, petitioner was not informed by the Bank about the interim direction issued by the DRT, instead Bank has accepted the amount of Rs. 38,35,000/- from the petitioner. 8. It is also not in dispute that litigation is still pending before the DRT wherein legality of the auction notice dated 18.06.2013 is yet to be decided. 38,35,000/- from the petitioner. 8. It is also not in dispute that litigation is still pending before the DRT wherein legality of the auction notice dated 18.06.2013 is yet to be decided. As narrated in facts hereinbefore, having acquired the knowledge about the pendency of the litigation before DRT, petitioner has made requests twice before the Bank vide letters dated 01.11.2013 and 12.11.2013 to refund the amount of Rs. 50,40,000/- along with interest in view of the pendency of litigation before DRT. 9. It is also important to note that when Bank did not reply to both the letters of the petitioner dated 01.11.2013 and 12.11.2013 and instead petitioner was insisted to deposit balance 75% of the bid amount, therefore, petitioner made request to the Bank to give him time to deposit 75% of the bid amount, after disposal of the case vide letter dated 26.11.2013 in view of the fact that case was listed before the DRT on 28.11.2013; Bank did not think it proper to reply the letter dated 26.11.2013 and instead has issued re-auction notice dated 05.03.2014. 10. On being asked repeatedly, Mr. V.K. Kohli, Sr. Advocate appearing for the respondent Bank could not point out any material to demonstrate - As to whether either of the requests of the petitioner either to refund the amount deposited by the petitioner or to grant him time to deposit the balance 75% of the bid amount, after disposal of the case pending before the DRT, was ever replied or declined. 11. Mr. V.K. Kohli, learned Sr. Advocate, could not point out any material to demonstrate - As to whether any specific decision was taken by the Bank for forfeiting 25% of the bid amount deposited by the petitioner. 12. As per mandate of Article 14 of the Constitution of India, neither State Government nor its instrumentalities or their officers are permitted to act in arbitrary or in unjustified manner. In the present case, officials of the Bank did not opt to reply either of the requests of the petitioner either to refund money deposited by the petitioner or to grant him time till the disposal of the case pending before the DRT nor officials have passed any specific order forfeiting the amount deposited by the petitioner. In the present case, officials of the Bank did not opt to reply either of the requests of the petitioner either to refund money deposited by the petitioner or to grant him time till the disposal of the case pending before the DRT nor officials have passed any specific order forfeiting the amount deposited by the petitioner. Therefore, action on the part of the Bank falls within the four corners of arbitrary and unjustified action, which is hit by Article 14 of the Constitution of India. 13. There is yet another aspect of the matter. Petitioner has agreed to purchase the property for Rs. 2,01,00,000/- and has deposited 25% of the bid amount and has also deposited Rs. 1,77,00,000/-inclusive of 10% interest on the 75% of the bid amount with the Registrar General of this Court pursuant to the interim order dated 10.03.2015 passed by this Court to show his bona fide and yet Bank has decided to confirm the sale in favour of respondents no. 7 and 8, that too for lesser amount of Rs. 1,70,50,000/- only, which on the face of it, is much much lesser than Rs. 2,01,00,000/-, which speaks in volumes about the conduct of the bank officials. 14. It is important to point out that bid of the petitioner was of Rs. Two crore and one lac even than in the re-auction notice reserve minimum cost of the property was fixed as Rs. One crore seventy lacs only by the Bank. In my considered view, minimum reserve cost of the property should have not been fixed less than Rs. Two crore one lac in view of the earlier bid cost as offered by the petitioner. Bank is supposed and duty bound to sell the property mortgaged at the market cost and not on throw away price. This action of the Bank is also arbitrary and is hit by Article 14 of the Constitution of India. 15. In view of the above discussion, since petitioner has shown his bona fide by depositing Rs. 1,77,00,000/- with the Registrar General of this Court along with 10% interest, I direct that re-auction held on 07.04.2014 for Rs. 1,70,50,000/- in favour of respondents no. 7 and 8 is not legal, therefore, liable to be set aside. 16. Consequently, writ petition succeeds and is hereby allowed. Re-auction held pursuant to the re-auction notice dated 05.03.2014 in favour of respondents no. 1,70,50,000/- in favour of respondents no. 7 and 8 is not legal, therefore, liable to be set aside. 16. Consequently, writ petition succeeds and is hereby allowed. Re-auction held pursuant to the re-auction notice dated 05.03.2014 in favour of respondents no. 7 and 8 is hereby held invalid. Consequently, sale certificate dated 01.05.2014 issued in favour of respondent nos. 7 and 8 and sale deed executed in favour of respondent no. 7 and 8 on 27.05.2014 is hereby declared void and non est. Mandamus is issued against the Bank to execute sale deed in favour of the petitioner at the earliest, in any case, within two weeks from today. Bank shall be at liberty to withdraw Rs. 1,77,00,000/- deposited by the petitioner with the Registrar General of this Court. Bank is further directed to refund the amount taken from respondents no. 7 and 8 along with 10% interest thereon within two weeks from today. It is, however, made clear that sale in favour of the petitioner shall be subject to the final decision in the case pending before the D.R.T. 17. No cost.