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2024 DIGILAW 1493 (AP)

Inuganti Rangababu v. Deena Bank/Bank of Baroda

2024-10-19

DHIRAJ SINGH THAKUR, RAVI CHEEMALAPAT

body2024
ORDER : 1. The case of the petitioner in nutshell is that he became the as successful bidder in the auction conducted by the respondent bank and pursuantly he paid advance amount of Rs.50,00,000/- and later he went to the location of the property and having noticed that there is dispute with regard to identification of property, he addressed a letter dated 13.05.2019 to the bank with a request to conduct survey for identification and demarcation of the subject property. For no response, the petitioner got issued a legal notice dated 03.06.2021 requesting the Bank to clear the cloud and dispute over the property or else to refund the advance amount already paid by him. Thereafter, the respondent bank informed the petitioner through Whatsapp message that survey would be conducted on 02.12.2022. However, survey could not be conducted on that day as surveyor did not come to the spot. Thereafter, when the respondent bank is insisting for payment of balance sale consideration, the petitioner got issued a legal notice to the bank dated 05.12.2022 requiring them to get the survey completed and possession of the property be delivered after receiving balance amount, whereas, the bank issued notice dated 09.12.2022 without referring to the aspect of survey for identification of auctioned property demanded the petitioner to pay the balance sale consideration within 7 days or else the advance amount already collected by them would be forfeited. To the said notice, the petitioner got issued a reply notice dated 17.12.2022 mentioning all the facts and requiring the bank to conduct survey and localise the property and receive the balance amount, in the event of their failure to do so, refund the advance amount paid already along with interest. In reply, respondent Bank issued notice dated 27.12.2022 demanding and threatening the petitioner to pay the balance amount, or else, they would forfeit the advance amount paid. The said notice is impugned in this writ petition. 2. The respondent Bank filed counter stating that the Bank is in possession of the subject property and is always ready and willing to execute regular registered sale deed in favour of the petitioner, after verifying the Revenue Records available. Accordingly, prayed to dismiss the writ petition. 3. The said notice is impugned in this writ petition. 2. The respondent Bank filed counter stating that the Bank is in possession of the subject property and is always ready and willing to execute regular registered sale deed in favour of the petitioner, after verifying the Revenue Records available. Accordingly, prayed to dismiss the writ petition. 3. Initially this writ petition is filed to direct the respondent bank to conduct survey, identify and demarcate the property purchased by the petitioner in the auction conducted by the Bank and handover physical possession to the petitioner by receiving balance sale consideration, issue sale certificate and register the same. Subsequently, the relief sought is amended to the effect that in case the respondent bank failed to do so, direct the bank to refund the advance amount already collected along with interest at quarterly rests to the petitioner as per the Reserve Bank Guidelines applicable for commercial transactions. 4. Heard Sri M.Balanaga Srinivas, learned counsel for the petitioner and Sri Satyanarayana Dhara, learned Standing Counsel for respondent bank. 5. Learned counsel for the petitioner would contend that the respondent- Bank without ascertaining as to whether the subject property belongs to the borrower and whether he is in possession of the property, granted loan to be borrower. Further, as the borrower failed to repay the loan amount, the Bank invoked securitization proceedings and accordingly conducted auction, making the petitioner to believe that the subject property is very much available and it is free from all encumbrances, however, the same was proved false in view of the contents of the surveyor’s report that the borrower does not own any property in the schedule given by the Bank. He further contended that, the surveyor’s report clearly shows that the Bank did not take normal care before bringing the property to auction and hence failed to discharge the duties and obligation as required under Security Interest (Enforcement) Rules, 2002 , which led the petitioner to part with his amount with the Bank by way of payment of advance money. Therefore, the respondent Bank is liable for refund of the advance money paid by the petitioner together with compound interest. In support of his claim, learned counsel relied on decision of the Hon’ble Supreme Court in Govind Kumar Sharma & Anr v. Bank of Baroda & Ors. 2024 SCC OnLine SC 559. Therefore, the respondent Bank is liable for refund of the advance money paid by the petitioner together with compound interest. In support of his claim, learned counsel relied on decision of the Hon’ble Supreme Court in Govind Kumar Sharma & Anr v. Bank of Baroda & Ors. 2024 SCC OnLine SC 559. Accordingly, prayed to allow the writ petition setting aside the impugned legal notice and direct the respondent-bank to refund the advance amount along with compound interest. 6. On the other hand, learned Standing Counsel for the respondent Bank while reiterating the contents of the counter contended that the respondent Bank is in possession of the property and title deeds were also with it and the process of identification and localization of the property is under process by the revenue authorities. There are no merits in this writ petition and the same is liable to be dismissed. 7. In reply, learned counsel for the petitioner submitted that pursuant to the request of the Chief Manager, Bank of Baroda, Rajahmundry, the Village Surveyor, Penumarthi, has reported that the survey cannot be conducted as the claimant i.e., Sri Kanchustambam Venkata Satya Prasad (principal borrower) did not possess any land in Sy.No.14/1 of Penumarthi Village, Kakinada Rural Mandal, as per the mortgaged documents produced by the Bank authorities. Therefore, the Bank without ascertaining as to whether the principal borrower possess land as per the documents mortgaged with the Bank, granted loan and accordingly conducted auction and thereby the petitioner was put to great hardship, as such, prayed to allow the writ petition. 8. Perused the record and considered the submissions made by both the learned counsel. 9. Being the successful bidder in the auction conducted by the respondent Bank, the petitioner made part payment and balance amount is yet to be paid. Thereafter, the petitioner having found that there is dispute with regard to identification of property, made a request to the Bank to survey and demarcate the auctioned property. As the respondent failed to do so, he got issued a legal notice dated 17.12.2022 requesting the bank to refund the advance amount paid. In reply to the same, respondent bank issued the impugned legal notice dated 27.12.2022 threatening the petitioner that they would forfeit the advance amount if balance sale consideration is not paid. 10. As the respondent failed to do so, he got issued a legal notice dated 17.12.2022 requesting the bank to refund the advance amount paid. In reply to the same, respondent bank issued the impugned legal notice dated 27.12.2022 threatening the petitioner that they would forfeit the advance amount if balance sale consideration is not paid. 10. According to the respondent Bank, it is in possession of the property and identification of the subject property is under process before the Tahsildar, Kakinada, and the auctioned property would be handed over to the successful bidder by registering the same for which some time has been taken to survey. 11. The letter addressed by the Tahsildar, Kakinada Rural, vide Ref.A/282/2023, dt.28.06.2023 filed by the petitioner shows that the claimant i.e., Kanchustambam Venkata Satya Prasad (principal borrower) does not have any land in that particular survey number and as per web land records, pattadars are are in possession of the same. There is no material available on record to show that the principal borrower had any right over the subject property. This leads us only to one conclusion that there being dispute with regard to the property, the Bank conducted auction and preferred the petitioner to litigation on account of their negligence. 12. The petitioner in fact had participated in the bidding process and deposited advance amount of Rs.50,00,000/-, with the conviction and faith that the Bank would have done its due diligence that the property which he was buying was in terms of the statutory authority and powers which the Bank was exercising under the SARFAESI Act, 2002. In the present case, the Bank has clearly failed to discharge even a modicum of the responsibilities and obligations that were cast upon it. In view of the same, it is clear that the Bank had failed in its duty to undertake due diligence, at the stage of conducting auction without even having possession. The Bank could not play with the rights of the petitioner and threaten him with forfeiture of the advance amount paid by him when there is no fault from his side. 13. The Bank could not play with the rights of the petitioner and threaten him with forfeiture of the advance amount paid by him when there is no fault from his side. 13. The petitioner, therefore, was a bona fide participant who cannot be permitted to be made to suffer a loss, which certainly will not lead to any fruitful result inasmuch as he would be expected to pursue something which would be impossible to achieve, forced to resort to take any other remedy in law. 14. The decision in Govind Kumar case referred supra, the Hon’ble Supreme Court set aside the sale on the ground that Bank committed certain irregularities in conducting auction and directed the Bank to return the amount deposited by the auction purchasers together with compound interest at the rate 12% per annum. In the instant case, the property that was auctioned by the Bank does not even belong to the principal borrower, however, the Bank auctioned the same without ascertaining as to whether the principal borrower has title to property and made the petitioner participate in the auction and part with his money and the amount deposited by the petitioner is lying with the Bank. The decision relied by the learned counsel for the petitioner is applicable to the facts of the case. 15. For the reasons aforementioned, we allow this writ petition setting aside the impugned legal notice dated 27.12.2022 and hold that the sale in favour of the petitioner in regard to the auctioned property of Ac.2.00 cents in Sy.No.14/1 of Penumarthi Village and Panchayat limits, Kakinada Rural Mandal, Kakinada District, was nothing but a sham sale, which would require the refund of the entire amount paid by the petitioner to the respondent Bank along with compound interest at the rate of 12% per annum from the date when the amount was paid by the petitioner. There shall be no order as to costs. As a sequel, pending miscellaneous applications, if any, in this Appeal shall stand closed.