ORDER
M.C. Jain, J. (Chairperson)
1. The order impugned in this appeal is one dated 5.1.2007 passed by the Presiding Officer, DRT-I, Chandigarh in Appeal 5/2005. The appeal before him had been filed by respondents 1 to 3 herein against the order dated 16.12.2004 passed by the Recovery Officer in R.C. 555/2001 issued pursuant to the order in O.A. 481/ 2001 (old DRT, Jaipur O.A. No. 21/99). The appeal was allowed by the Tribunal below whereby the sale of the property in question to the appellant herein was set aside.
2. The relevant facts may be stated briefly. The respondent No. 4 herein-Punjab National Bank (applicant in O.A.) had filed O.A. before DRT, Jaipur against M/s. Amrit Cellulose Ltd. (respondent No. 5 herein) and its directors/guarantors including respondents 1 to 3 for the recovery of Rs. 2 crores and odd. Managing Director of the company, namely, Mr. J.S. Sethi died after the O.A. was filed and the respondents 1 to 3 herein were his legal heirs, too, besides being guarantors/mortgagors. The O.A. was allowed by DRT, Jaipur on 21.1.1999. A Recovery Certificate was, accordingly, issued. After the establishment of DRT at Chandigarh, the matter came to be transferred there and the Recovery Certificate was numbered as 555/2001. The recovery proceedings were started against the company and its directors/guarantors. The respondents 1 to 3 herein filed an application to set aside the ex parte decree and recovery certificate dated 21.1.1999 passed in favour of the Bank. The ex parte decree and recovery certificate dated 21.1.1999 were set aside qua the respondents 1 to 3 on 22.12.2003. The case was re-heard qua respondents 1 to 3 and the DRT passed judgment on 28.5.2004 whereby the Bank was again held entitled to recover Rs. 2,24,14,973/- along with interest and a fresh recovery certificate was issued qua respondents 1 to 3. During the pendency of the application under Order 9 Rule 13, CPC filed by respondents 1 to 3 herein, their mortgaged property in question was put to sale by way of public auction by the Recovery Officer, in which the Reserve Price was fixed at Rs. 60 lakh on the basis of valuation report dated Rs. 23.3.2001. However, the auction did not materialize.
3. The property was again put to auction on 29.1.2005. This time the Reserve Price of the property was fixed at Rs. 30 lakh. Against the order of proclamation of sale, the respondents 1 to 3 herein filed an appeal before the DRT on 24.1.2005, challenging the same and the Tribunal passed interim order that the auction proceedings would continue but the Recovery Officer would not confirm the sale till the disposal of appeal. So, an embargo was placed on the confirmation of sale. On 29.1.2005, at the spot of auction the appellant offered the highest bid of Rs. 3-1,80 lakh and his bid being the highest was accepted. However, while finally deciding the appeal, the Tribunal below allowed it and set aside the sale. It has been ordered that the auction purchaser (present appellant) would be entitled to get back the amount deposited as sale consideration. Being aggrieved, the auction purchaser has preferred this appeal against the said order of the DRT.
4. A development took place when the matter was pending before the DRT that an OTS in between the CDs/respondents 1 to 3 herein and the CH/Bank was approved pursuant to which they made certain payments. Consequently, the appeal of the respondents 1 to 3 herein was not opposed from the side of the CH/Bank.
5. I have heard Mr. Pankaj Gupta, Counsel for the appellant, Mr. Anand Chhibber, Counsel for respondents 1 to 3 and Mr. M.U. Khan, Counsel for the 4th respondent-Bank.
6. The learned Counsel for the appellant has attacked the impugned order passed by the DRT on diverse grounds. I propose to set forth the same here in nutshell to be dealt with in detail a little later one by one. The appeal of the CDs/respondents 1 to 3 herein before the DRT was barred by time. He (appellant – auction purchaser) was never apprised at the time of the auction that there was stay of the appellate Court regarding confirmation of sale. No objection as to the valuation of the property was taken by the CDs/respondents 1 to 3 herein before the Recovery Officer. It was wrongly averred on their behalf that there was no second valuation report of the property. They themselves had contended that a Notification had been issued by the State of Punjab under Section 4 of the Land Acquisition Act, expressing the intention to acquire the properties described therein including the property in question, arid as such the market price of the property had dipped down. The CDs/respondents 1 to 3 did not make any application to set aside the sale under Rule 60 or 61 of the Second Schedule to the Income Tax Act, 1962. M/s. Satguru Colonizers – relatives of the CDs were operating from behind the scene to whom the CDs had sold the property privately to defeat the claim of the auction purchaser. An application dated 19.1.2007 was made by the CDs/respondents 1 to 3 to the Tribunal below (Annexure A-23 of the Paper Book) praying for passing sale confirmation order in favour of the said M/s. Satguru Colonizers on the ground that they had provided them funds of Rs. 2,41,50,000/- against the sale of the property in question on the understanding that the Bank would hand over conveyance/sale deed of the property directly to them (M/s. Satguru Colonizers). These are the grounds taken by the appellant and argued by his learned Counsel.
7. On the other hand, CDs/respondents 1 to 3 have supported the impugned order of the Tribunal below, setting aside the sale. Their contention is that the Recovery Certificate (555/2001) had become a nullity and infructuous as against them after setting aside of the ex parte decree dated 21.1.1999 against them on 22.12.2003. The Recovery Officer never fixed any Reserve Price afresh after passing order dated 16.12.2004 regarding issuance of proclamation of sale. Later on, it transpired that reliance was placed on the valuation report dated 16.4.2003 which had no meaning because the property was ordered to be put to sale on 16.12.2003. They had themselves placed before the Tribunal below a valuation report dated 22.1.2005, according to which the market value of the property was Rs. 1,56,00,000/- and the distress value was Rs. 1,50,00,000/-. Thus, the Recovery officer had fixed the Reserve Price (Rs. 30 lakh) much below the prevalent market rates, even ignoring the earlier valuation report dated 23.3.2001 whereby the Reserve Price was fixed at Rs. 60 lakh. The Recovery Officer, it has been argued, gave acomplete go-by to the stark reality that there has been continuous appreciation in the value of real estate over the years.
8. To take up the ground of the appeal before the Tribunal below being barred by time, it is to be pointed out that the objection to the appeal being barred by time had been raised by the Bank which gave it up and even did not oppose the appeal before the DRT owing to OTS. The auction purchaser-appellant herein came to the scene later on during the pendency of the appeal before the DRT after his highest bid of Rs. 31.80 lakh was accepted in the auction held on 29.1.2005. The learned Counsel urged that the appellant adopted the plea of the Bank, regarding the appeal being barred by time. It is not acceptable that he, who came on the scene later on and did not raise any plea regarding the appeal being barred by time, could start saying so, professedly adopting the objection of the Bank. On merits also, this objection regarding the appeal before the DRT being barred by time is factually incorrect. Section 30 of the RDDBFI Act provides that any person aggrieved by an order of the Recovery Officer may prefer an appeal before the DRT within 30 days from the date on which a copy of the order is issued to him. In the present case, the order regarding proclamation of sale was passed on 16.12.2004, but the copy was issued to the appellant on 3.1.2005 and the certified copy was delivered on 20.1.2005. The appeal itself came to be filed on 24.1.2005. Obviously, it had been filed well within time. So, this objection falls through.
9. It is of no consequence that the auction purchaser-appellant was not given to understand at the spot that there was stay order passed by the appellate forum (DRT) against the confirmation of sale. The record bears out that the proclamation of sale dated 21.12.2004 was issued on 23.12.2004 and pasted at the spot on 24.12.2004. The mere fact of the auction purchase having not gained knowledge of the stay order at the time of auction could not eclipse it (stay order). It was a fact that while admitting the appeal of the CDs on 25.1.2005 the DRT had passed an order that the auction proceedings would go on but the Recovery Officer would not confirm the sale. The efficacy and the operation of the stay order was not and could not be dependent upon the knowledge of the auction purchaser in this behalf. Resultantly, this argument, too, made on behalf of the appellant does not carry any weight.
10. The third argument that the CDs did not make any objection regarding the reserve price before the Recovery Officer does not score any point in favour of the appellant-auction purchaser in view of the fact that they had, even before the actual auction on 29.1.2005, lodged an appeal before the DRT on 24.1.2005, inter alia, on the point of reserve price.
11. As regards the availability of the second valuation report dated 16.4.2003, it has to be pointed out that the order regarding proclamation of sale was passed on 16.12.2004 by the Recovery officer. Of course, the reserve price is said to have been fixed at Rs. 30 lakh on the basis of valuation report dated 16.4.2003, but it is manifest that it was of nearly 21 months before. It is also a fact borne out on record that with their appeal the CDs had filed valuation report dated 22.1.2005 showing the market value of the property in question as Rs. 1,56,00,000/- and the distress value as Rs. 1,50,00,000/-. This fact can also not be ignored that earlier, the Reserve Price of the Property was fixed at Rs. 60 lakh as per the valuation report dated 23.3.2001, on the basis of which earlier this property was put to auction, but could not be auctioned. I have perused the valuation report dated 16.4.2003 on the basis of which the Reserve Price was fixed at Rs. 30 lakh and on which great emphasis has been placed by the learned Counsel for the appellant. I find that it gives no data, facts or material for fixing the value of the property in question at Rs. 30 lakh. The said valuation was seemingly fixed arbitrarily without the backing of any facts, data, material or grounds. There could hardly be any justification for significant drop in the value of the property from Rs. 60 lakh on 23.3.2001 to Rs. 30 lakh on 16.4.2003. It is also noticed that this report dated 16.4.2003 does not make any mention of Notification under Section 4 of the Land Acquisition Act having been issued in respect of certain area comprising the disputed property. Moreover, there is no document to show that any further Notification came to be issued by the Government after that of Section 4 of the Land Acquisition Act. Further, the date of Notification under Section 4 of the Land Acquisition Act is mentioned as 9.8.2004 in Annexures A-11 and A-12 of the Paper Book relied upon by the learned Counsel for the appellant. So, it could hardly have any nexus to the valuation report prepared 16 months before on 16.4.2003. Therefore, there is no sound basis to presume that there was a fear psychosis of acquisition prevailing all around as a result of which market value of the property in question surprisingly dipped to one-half from Rs. 60 lakh to Rs. 30 lakh.
12. The appeal having already been filed by the CDs/respondents 1 to 3 herein before the DRT on 24.1.2005, i.e., even before the actual auction which took place on 29.1.2005, on various grounds challenging the sale proclamation, there was hardly any necessity for them to have applied for setting aside the auction sale held on 29.1.2005 under Rules 60 and 61 of the Second Schedule to the Income Tax Act, more so when the appellate Court (DRT) had already ordered the Recovery officer not to confirm the sale, i.e., the auction sale was subject to the ultimate outcome of the appeal filed by the CDs/respondents 1 to 3.
13. As regards the contention of M/s. Satguru Colonizers being in operation from behind the scene, I do not think that auction purchaser gains anything by harping on this point. Nor does it make any difference that the persons owning, controlling or managing M/s. Satguru Colonizers were the relatives of CDs/respondents 1 to 3 herein. No restriction could be placed on the rights of the CDS and the Bank to go for an OTS according to RBI guidelines and settled norms. It was the candid case of the CDs/respondents 1 to 3 that they had arranged the whole settlement amount of Rs. 2,41,50,000/- from M/s. Satguru Colonizers Pvt. Ltd. against the sale of the property in question. Rs. 50 lakh were paid to the Bank on 20.10.2006 and Rs. 1,91,50,000/- on 19.1.2007 as per the application dated 19.1.2007 (Annexure A-23 of this appeal Paper Book). The learned Counsel for the appellant argued that by order dated 29.9.2003 the DRT had attached before judgment other properties too, of the CDs. He reasoned that to save all their properties, including the auctioned one, they might have paid the total sum of Rs. 2,41,50,000/- to the Bank as one-time settlement. In my opinion, this is besides the point. As per Annexure 23 referred to above, the case of the CDs was that they had arranged this amount from M/s. Satguru Colonizers against the sale of auctioned property only. The private sale by the CDs to M/s. Satguru Colonizers did not suffer from any infirmity or illegality and it was definitely a far better price of the property in question as compared to that offered by the auction purchaser on 29.1.2005, i.e. Rs. 31.80 lakh. It has been held by the Hon’ble Supreme Court in Seth Kashi Ram Chemical (India) v. State of Haryana and Ors. , that the claim of the highest bidder at auction for the acceptance of the bid is not maintainable and the auction sale cannot be effectuated when the payment of the loan has been made by the debtor to the creditor after auction of the property before confirmation of sale by the Court.
14. The learned Counsel for the appellant has made a reference to the following rulings. I have gone through them. They do not come to the rescue of the appellants under the facts and the circumstances of the present case.
1. Shankar and Anr. v. Jawaharlal AIR 1928 Nagpur 265.
2. Nanhelal and Anr. v. Umrao Singh AIR 1931 Privy Council 33.
3. Janak Raj v. Gurdial Singh and Anr. .
4. Kayjay Industries (P) Ltd. v. Asnew Drums (P) Ltd. and Ors. .
5. Padanathil Ruqmini Amnia v. P.K. Abdulla .
6. Bahusha International v. Canara Bank II (2007) BC 703.
15. In the case at hand, the heart of the matter is that the auction itself was basically incompetent in pursuance of R.C. 555/2001 which had been set aside by order dated 22.12.2003. It was vitiated not only for this reason but also for the sterling fact that the auction sale by order dated 16.12.2004 and the proclamation of sale dated 21.12.2004 to “sell the property were inherently defective as no Reserve Price was fixed at the time of passing the order dated 16.12.2004 and reliance was placed on a valuation report of an earlier date of 21 months back. In the proclamation of sale dated 21.12.2004 the R.C. number was mentioned as 555/ 2001 which had become a nullity after the passing of the order dated 22.12.2003 and setting aside of the ex parte decree dated 21.1.1999 qua respondents 1 to 3. The Reserve Price fixed herein as Rs. 30 lakh was on the basis of a valuation report dated 16.4.2003 which was bereft of any facts, data or material on the basis of which the said figure of Rs. 30 lakh had been arrived at. It was 50% of the Reserve Price (Rs.60 lakh) which had been fixed as per the valuation report of 23.3.2001 at the time of the first auction of the property. As pointed out earlier, the valuation report dated 22.1.2005 presented by the respondents 1 to 3 herein (appellants in Appeal 5/2005 before the Tribunal), the market value of the property was assessed as Rs. 1,56,00,000/- and the distress value as Rs. 1,50,00,000/-. The property was situated on National Highway No. 22 (Manali-Ambala). It was located in a fast developing area with colonisable land also nearby. The area was 14520 sq. yds. Or 12 bighas. It is crystal clear that in the proclamation of sale there were inherent defects going to the root of the matter. It was required of the Recovery Officer to have fixed the Reserve Price after getting the same evaluated subsequent to the passing of the decree dated 28.5.2004. It was arbitrary exercise of power to sell the property in 2005 on the basis of valuation report submitted 21 months earlier in 2003 and that, too, without any data, facts or material to support the reserve price of Rs. 30 lakh.
16. As held by the Hon’ble Supreme Court in the case of Desk Bandhu Gupta v. N.L. Anand & Rajinder Singh , auction-purchaser gets right only after confirmation of sale and till then his right is nebulous.
17. It has been ruled by the Hon’ble Supreme Court in the case of Divya Manufacturing Co. (P) Ltd. v. Union of India and Ors. , that it is the duty of the Court to see that the price fetched at auction is adequate price even though there is no suggestion of irregularity or fraud. Even the confirmation of sale by a Court at grossly inadequate price, whether or not it is a consequence of any irregularity or fraud in the conduct of sale could be set aside on the ground that it was not just and proper exercise of judicial discretion.
18. On a global consideration, I am of the view that the Presiding Officer of the DRT was perfectly justified in allowing the appeal and setting aside the sale.
19. A few words should be stated about the alternative argument of the learned Counsel for the appellant that the appellant should be awarded interest @ 15% per annum on the total amount deposited by him. I do not see any justification to accept the said argument. The situation here is part of the risk involved in a Court auction and the vicissitudes of the same. Only this would be proper to direct that the amount deposited by the appellant (auction purchaser) would be returned to him with interest, whatever has accrued thereon, in case of the same having been deposited in the Bank.
20. As an upshot of the discussion made hereinabove, I dismiss this appeal filed by the auction purchaser with the direction that he shall be entitled to get back the amount deposited as sale consideration with interest, whatever has accrued thereon in case of its having been deposited in the Bank.
No costs.
Supply copy of this order to the parties and send another one to the Tribunal below.