The High Court dismissed a petition filed by an auction purchaser challenging a sale of secured asset and the subsequent compromise between the borrower and the bank. The Court held that the sale was not confirmed and the petitioner had no accrued rights to object to the repayment agreement.
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Court No. - 36
Case :- WRIT - C No. - 20800 of 2018 Petitioner :- Vinod Kumar Bhalotia Respondent :- Uco Bank And Another Counsel for Petitioner :- Arvind Srivastava,Ashok Kumar Dubey
Counsel for Respondent :- Ajay Shankar,R.P. Pandey Hon'ble Mrs. Sunita Agarwal,J.
The present petition is directed against the order dated 04.05.2018 passed by the Debt Recovery Appellate Tribunal in Appeal Sr. No.146 of 2017 ( Vinod Kumar Bhalotia Vs. UCO Bank & another) as also the order dated 14.06.2017 passed by the Debt Recovery Tribunal whereby the interim application filed by the auction purchaser was rejected and the securitization application moved by the borrower was disposed of on the basis of compromise between the secured creditor and the borrower.
The petitioner herein is auction purchaser of the secured asset sold on 23.03.2017. He claims to be the highest bidder and deposited requisite 25% of the sale amount after the sale was conducted. It appears that after auction, the borrower filed a securitization application before the Debt Recovery Tribunal challenging the measures taken by the secured creditor. During the pendency of the said application, the petitioner-auction purchaser moved an application before the tribunal to be impleaded as an intervener. The said application was rejected vide order dated 14.06.2017 with the observation that the auction purchaser was required to deposit balance sale amount within 15 days as required under Rule 9(3) of Security Interest (Enforcement) Rules' 2002, to avoid forfeiture. As the auction purchaser had failed to deposit the 75% of the balance sale consideration and the period of 15 days expired on 08.04.2017, the bank had proceeded to put the property for fresh auction.
In the meantime, an agreement was arrived between the borrower and the bank and the borrower had
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expressed his intention before the Debt Recovery Tribunal to pay the entire dues of the bank within one year and to pay minimum rupees one lac per month in view of the compromise arrived between the bank and the borrower. On the said agreement, the securitization application No.251 of 2017 was disposed of on 14.06.2017. In so far as the auction sale held on 23.03.2017 is concerned, the Debt Recovery Tribunal had recorded a categorical finding that the said sale was not confirmed in as much as, the borrower did not deposit 75% of the balance sale consideration and further no notice or intimation was required from the bank asking the auction purchaser to deposit the said money.
The said finding returned by the Debt Recovery Tribunal as affirmed by the appellate tribunal are assailed by the learned counsel for the petitioner with the submission that at no point of time, after the auction sale was held on 23.03.2017, the bank had asked the borrower to deposit the balance sale consideration. Submission is that the auction sale was not confirmed by the bank as per Rule 9(2) and 9(4) of Rules' 2002 and as such, the auction purchaser was not required to deposit remaining amount. The bank could not have set aside the sale on the ground that the auction purchaser had failed to deposit the balance sale consideration.
The submission is that a fraud has been committed by the bank in connivance with the borrower in entering into a compromise for deposit of the outstanding dues in easy installments. The auction purchaser was a necessary party to the securitization application moved by the borrower and the rejection of the application for impleadment results in non-suiting him. The rights of the auction purchaser accrued on the date of deposit of 25% of the sale consideration.
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To deal with this submission of learned counsel for the petitioner, it would be relevant to note that after the auction sale was conducted on 23.03.2017, the auction purchaser had never approached the bank for deposit of the balance sale consideration. In the meantime, the borrower had approached this court in a writ petition with the assertion that he was ready and willing to deposit the entire outstanding dues of the bank. The said writ petition was disposed of on 17.04.2017 with the liberty granted to the borrower to deposit the entire amount within one month. It appears that soon thereafter, the bank wrote a letter dated 01.05.2017 to the auction purchaser to get back the amount deposited with the bank in anticipation of the deposit to be made by the borrower.
It appears that the borrower did not deposit the money and, therefore, the bank had proceeded to issue fresh sale/auction notice. At this stage, the borrower approached the Debt Recovery Tribunal by moving securitization application no. 251 of 2017 which was decided on the basis of compromise between the bank and the borrower which was duly recorded in the order dated 14.06.2017. The question as to whether the auction purchaser is entitled to object the agreement arrived between the bank and the borrower is subject matter of consideration in the present petition.
It is relevant to note that the auction sale held on 23.03.2017 has not been confirmed. The auction purchaser, therefore, being a prospective purchaser has no right to object the compromise arrived between the bank and the borrower for repayment of the outstanding amount as no right had been accrued to him by the mere fact that he had deposited 25% of the sale consideration.
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The question as to whether the bank had committed fraud in entering into a compromise with the borrower need not be examined in the present petition in view of the written instructions supplied by the learned counsel for the respondent-bank that the borrower had deposited the entire outstanding dues with upto date interest as per the direction issued by Debt Recovery Tribunal in securitization application and the original mortgage deed of the disputed property has been returned back to the borrower.
It goes without saying that it is open for the auction purchaser to get his money back as per the directions of the appellate authority.
For all the above noted reasons, the writ petition is found devoid of merits and hence dismissed .
Order Date :- 9.7.2018 Himanshu
3 issues framed by the court
Whether the auction purchaser acquired rights to object to the compromise between the borrower and the bank by merely depositing 25% of the sale consideration.
Whether the auction sale was confirmed under the Security Interest (Enforcement) Rules, 2002, requiring the auction purchaser to deposit the balance consideration.
Whether the petition challenging the sale and the compromise agreement has any merit.
Vinod Kumar Bhalotia
Uco Bank
Sunita Agarwal
As recorded by the court registry
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