2017(1) Law Herald (SO) 356 : 2016 LawHerald.Org 2534
IN THE SUPREME COURT OF INDIA
Before
The Hon’ble Mr. Justice Anil R. Dave
 The Hon’ble Mr. Justice Uday Umesh Lalit
Civil Appeal Nos. 10676-10677 of 2016 (@ Sip (C) No. 32638-32639 of 2011)
M/S Oasis Dealcom Pvt. Ltd.
v.
Khazana Dealcomm Pvt. Ltd. & Ors.
Decided on 08/11/2016
For the Petitioner:             In-person (Not present)
For the Respondent:       Mr. Chirag M. Shroff, Mr. D. Bharat Kumar, Mr. Tadimalla Baskar Gowthem, For Mr. Merusagar Samantaray. Advocates.
Security Interest (Enforcement) Rules, 2002, R.8–Auction Sale-Symbolic
Possession-No advertisement was published in the newspaper in terms of Rule
8(2) of the Rules and no possession notice under Rule 8(1) was affixed on the said
property-Auction Sale though confirmed but set aside-Sale certificate quashed.
  • Securitization & Reconstruction of Financial Assets and Enforcement of Security
    .Interest Act, 2002, S.17-Appeal-Auction Sale-Second application-Alan earlier
    point of time, the issuance of notice as well as notice for sale of the flat had been
    challenged, whereas the subsequent application had been filed after the auction
    had been held-The cause of action in respect of both the applications was not
    same and therefore, the second application for a different cause of action was
    (Para 24)
JUDGMENT
Mr. Anil R. Dave, J.:- Leave granted.
  1. The present appeals are directed against the judgment dated 24.08.2011 rendered by the
    ; High Court of Calcutta, whereby the High Court has dismissed the revision petition filed by the
appellant under Article 227 of the Constitution of India and affirmed the order of the Debt Recovery Appellate Tribunal, Calcutta.
  1. The facts of the case, in a nutshell, are as under:
Respondent nos. 2 and 3 are the principal shareholders, directors and persons in charge of Respondent No.1 Company. Respondent No. 4 (ING Vysya Bank) had granted financial assistance to Respondent nos.1 to 3 byway of “Cash Credit facility”. In consideration of the aforesaid loan, Respondent nos.1 to 3 had furnished security in terms of (a) Hypothecation of Book Debts, (b) Equitable mortgage of residential flat bearing no. 1 -C at 7/1, Queens Park, Kolkata-700019 and (c) pledge of LIC Policy for an assured sum of Rs.8 lakh in name of Respondent No.3.
  1. Respondent nos, 1 to 3 defaulted in the repayment of the loan and thus, the account was
    classified as “Non-performing Asset” with effect from 1.12.2008 in accordance with the directions
    of Reserve Bank of India. As on 31 st December, 2008, a sum of Rs.37,01,758.49 (Rupees Thirty
    seven lakh one thousand seven hundred fifty eight and forty nine paise), along with applicable
    interest @ 15% per annum and penal interest was outstanding against the said Respondents.
  2. Accordingly, a notice dated 17th January, 2009 under Section 13 (2) of The Securitisation and
    Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter
    referred to as “the Act11) read with Rule 9 of the Security Interest (Enforcement) Rules, 2002
    (hereinafter referred to as “the Rules”) was served upon Respondent nos.1 to 3 calling upon
    them to pay the aforementioned sum along with future interest within 60 days from the date of the
    said notice and they were also instructed not to create any third party interest in the secured
    assets by way of sale, lease or otherwise. The aforesaid notice was duly replied to by
. Respondent No.1 Company vide letter dated 14th March, 2009 by disputing the amount and requesting Respondent no. 4 bank to give certain credits. Respondent no.4 gave a reply vide its letter dated 20th March, 2009 to letter dated 14th March, 2009 by asserting that notice dated 17th January, 2009 had been correctly issued as per the provisions of Section 13 (2) of the Act.
  1. It is apposite to state that Respondent No. 4 bank vide possession notice dated 10th August,
    2009 took “symbolic possession” of the property in question i.e. Residential Flat No. bearing
    1C (1 st Floor) situated at premises no. 7/1, Queens Park, Kolkata-700019 (hereinafter
    referred to as “the flat”) which was in the names of Respondent nos. 2 and 3.
  2. Being aggrieved by said notice dated 10th August, 2009, Respondent nos. 1 and 3 preferred
    application no.92/2009 under Section 17 of Act, 2002 on 15th September, 2009 against Respondent
    4 bank by stating that the act of taking symbolic possession of the flat in question was illegal,
    without jurisdiction and was in violation of the Act and Regulations made thereunder, primarily for the
    reason that no advertisement was published in the newspaper in terms of Rule 8 (2) of the Rules and
    no possession notice under Rule 8 (1) was affixed on the said property and hence, prayed for
    quashing of notice dated 17th January, 2009 and also for quashing all steps taken under the Act.
  3. Taking cognizance of the aforesaid application, the learned Presiding Officer, DRT, Kolkata
    vide order dated 17th December, 2009 directed Respondent nos,1 and 3 to pay a sum of
    15 lakh before 26th December, 2009 and directed the Respondent bank to maintain
    status-quo and in case the borrowers fail to deposit the said sum before the stipulated date,
    Respondent no. 4 bank would be at liberty to proceed in accordance with law.
  4. Being dissatisfied with the order dated 17th December, 2009 passed by the DRT, Kolkata,
    Respondent nos.1 and 3 filed a Petition under Article 227 of the’ Constitution of India before
    the High Court and the High Court vide order dated 24th December, 2009 modified the order
    passed by the DRT to the extent that instead of paying a sum of Rs.15 lakh to the bank before
    26th December, 2009, bank guarantee for Rs.10 lakh be furnished before 2nd January, 2010
    and the hearing was adjourned to 4th January, 2010.
  1. On 4th January, 2010, when the matter was taken up before the High Court, an adjournment
    was sought for by the borrowers and it was submitted on behalf of the Respondent bank that
    bank guarantee for Rs.10 lakh, as ordered, had not been furnished by the borrowers.
  2. In the light of the aforestated situation, Respondent no.4 bank issued a notice dated 4th
    January, 2010 for auctioning the flat by referring to an earlier auction notice dated 10th
    November, 2009, which had been published in newspapers “The Statesman” (English) and
    “Aajkal” (Bengali). The auction was to take place on 6th January, 2010 and the reserve price
    of the flat was Rs.1,48,00,OQO/-(Rupees one crore forty eight lakh only).
  3. In terms of the aforestated notice dated 4th January, 2010, the Appellant (M/s Oasis
    Dealcom Pvt. Ltd) submitted its bid to purchase the flat, who was the sole bidder. Respondent
    4 bank, vide its letter dated 6th January, 2010 accepted the bid for a sum of
    Rs.1,48,00,000/- and on the same day, confirmed the sale in terms of the provisions of the Act.
    Respondent no.4 bank vide letter dated 9th January, 2010 also issued a sale’certificate in
    favour of the Appellant as per Rule 9 (6) of the Rules.
  4. On 11 th January, 2010, when the Petition came up for hearing before the High Court, it was noticed
    that the bank guarantee had not been furnished by the borrowers in terms of its order dated 24th
    December, 2009 and the Respondent bank had sold the property in question to the Appellant company.
  5. When the matterwas placed before the Debt Recovery Tribunal on 7th January, 2010, the Tribunal
    recorded the fact that the flat had been sold and therefore, virtually the proceedings had become
    However, the matterwas adjourned to 5th March, 2010, to enable the parties to complete
    the pleadings. However, on 14th January, 2010, the Respondent borrowers filed an application for
    depositing the amount payable but on the same day, taking judicial notice of the subsequent
    developments, the Tribunal dismissed the said application as it had become infructuous.
  6. In the aforestated circumstances, the Respondent borrowers filed another application under
    Section 17(1) of the Act challenging the validity of the demand notice dated 17th January,
    2009 and sale of property which had taken place in January 2010 in pursuance of the
    aforestated notice. The Tribunal ordered to maintain status-quo as on 28th January, 2010.
  7. Being aggrieved by the order of the Tribunal, Writ Petition No.169 of 2010 was filed by the
    present Appellant i.e. the auction purchaser, but the High Court disposed of the Petition as the
    matter was pending before the Tribunal. Ultimately, the Tribunal passed an order dated 10th
    June, 2010 in O.A. No.4 of 2010 setting aside the sale certificate. However, it permitted the
    borrowers to make payment within three weeks and if the amount was paid within three weeks,
    the bank was directed to refund the purchase money to the Appellant with 8% interest thereon.
  8. Being aggrieved by the said order, the Appellant filed Writ Petition No.7087 of 2010 challenging
    the validity of the order dated 10th June, 2010 passed by the Tribunal and the said petition was
    disposed of with a liberty to the Appellant to approach the Debt Recovery Appellate Tribunal.
  9. By an order dated 18th February, 2011, the Debt Recovery Appellate Tribunal confirmed the
    order passed by the Tribunal observing that material irregularities had been committed in
    conducting the auction sale and in the circumstances, the auction purchaser as well as the
    respondent bank separately challenged the validity of the said order dated 18th February,
    2011 before the High Court and the High Court confirmed the order passed by the Debt
    Recovery Appellate Tribunal by an order dated 24th August, 2011.
  10. Being aggrieved by the said judgment and order dated 24th August, 2011, the present
    appeals have been filed by the auction purchaser.
  11. The Appellant was represented by one of its Directors, Shri Agarwal, who appeared in
    He submitted that the amount of purchase price had already been paid and as the
    entire proceedings had been conducted in accordance with the provisions of the Act as well as
    the Rules, the High Court committed an error by setting aside the auction sale. He further
    submitted that there was neither any fraud nor any illegality in conducting the auction of the
    flat. He also submitted that necessary notice under Section 13 had already been issued to the
    Respondent borrowers and as the borrowers had failed to make payment after publication of
    notice in newspapers as per the provisions of the Act as well as the Rules, the property in
    question had been sold by holding an auction. He further submitted that the price offered by
    the Appellant was just and fair, though nobody else had participated in the bid. According to
    him, wide publicity had also been given to the auction. In view of the fact that the entire amount
    had been paid, according to him, the sale ought not to have been set aside. He further
    submitted that sufficient opportunity had been given to the borrowers to make the payment at
    an earlier point of time, but they had failed to make payment of their dues to the creditor bank.
    Moreover, according to him, the borrowers had also failed to furnish bank guarantee, as
    directed earlier and the said fact had been duly considered by the Tribunal at an earlier point
    of time and as the borrowers had failed to furnish the bank guarantee, the creditor bank had
    rightly confirmed the sale in favour of the Appellant company.
  12. On the other hand, the learned counsel for the Respondent borrowers had submitted that
    several serious irregularities had been committed by the bank in conducting the auction.
    Requisite notice, as required as per the Rules, had not been given and he had supported the
    judgment delivered by the High Court. According’to him, if for any reason the auction sale is
    postponed, the entire process for holding the auction should be started afresh and as no fresh
    notice was given before conducting the auction, the sale effected by the bank was absolutely
    improper as held by the High Court. He had thus supported the reasons assigned by the High
    Court for setting aside the auction sale.
  13. On behalf of the Respondent bank, the learned counsel submitted that the bank was prepared
    to accept the amount due and payable by the respondent borrower and in that event it would return
    the amount received from the Appellant along with interest thereon, as directed by the High Court.
  14. Upon hearing the learned counsel and going through the concurrent findings of fact arrived
    at by the Debt Recovery Appellate Tribunal as well as the High Court, we have no doubt about
    the fact that undue haste was made by the creditor bank in holding the auction. The creditor bank
    could have waited for some time when the proceedings were pending before the Tribunal as well
    as the High Court before conducting the auction and confirming the sale. We do not find any
    reason to disturb the concurrent findings arrived at by the Debt Recovery Appellate Tribunal as
    well as the High Court about the irregularities committed in holding the auction.
  15. A submission had been made on behalf of the Appellant that the second application filed
    under Section 17 of the Act was not maintainable and therefore, it ought not to have been
    entertained by the Tribunal. We are not in agreement with the said submission for the
    reason that when another application was filed under Section 17(1) of the Act, the cause
    of action was different. At an earlier point of time, the issuance of notice as well as notice
    for sale of the flat had been challenged, whereas the subsequent application had been
    filed after the auction had been held The cause of action in respect of both the
    applications was not same and therefore, in our opinion, the second application for a
    different cause of action was maintainable.
  16. In the circumstances, we do not intend to disturb the judgment delivered by the High Court.
    However, looking at the nature of litigation faced by the auction purchaser, we modify the order
    and direct that the amount already paid by the auction purchaser shall be returned to the
    auction purchaser with simple interest at the rate of 10% till the said amount is paid.
  17. In exercise of our powers under Article 142 of the Constitution of India, we further direct that
    before 30th November, 2016, the creditor bank shall give intimation of the total amount payable by
    the borrowers (i.e. principal amount and interest, including penai interest, if any) as on 1st
    December, 2016 and if the said amount is not paid by the borrowers before 10th day of December,
    2016, it would be open to the creditor bank to sell the flat by holding an auction, without giving any
    further notice to the borrowers but after giving a 30 days’ public notice for the sale of the flat in one
    English leading newspaper and in one local newspaper, so as to recover its dues.
  18. The appeals are disposed of in terms of the aforestated modification with no order as to costs.