Dismissed

Twentyone Sugar Ltd. v. Osmanabad District Central Co-op Bank Ltd. and Ors.

DRAT22 Dec 2022REGULAR APPEAL/50/2022

Case brief

AI extract

What is this about?

The Tribunal dismissed the appellant's appeal regarding the rejection of its bid to lease a sugar factory. The bid was rejected because the Earnest Money Deposit (EMD) credited by RTGS arrived after the 4:00 PM deadline, despite being initiated earlier. The court held that strict compliance with tender timelines is mandatory.

What did the court decide?

The appeal was dismissed without costs, and the lease sale in favor of the third respondent was affirmed.

Twentyone Sugar Ltd. versus Osmanabad District Central Co-op… — Banking and Recovery | DRAT (2022)

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BEFORE THE DEBTS RECOVERY APPELLATE TRIBUNAL, AT: MUMBAI Present: Mr Justice Ashok Menon, Chairperson

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Appeal No. 50/2022

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Between

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M/s. Twentyone Sugar Ltd. … Appellant/s V/s. Osmanabad District Central Co-operative …Respondent/s Bank Ltd & Ors.

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Mr Rajesh Nagory along with Mr Aayush Kothari and Ms Rashi Shah, i/b M/s Kartikeya & Associates, Advocate for Appellant. Mr Vishwajeet Kapse along with Mr Prasad Thomre, Advocate for Respondent No.1.

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Mr Bhushan Walimbe, Advocate for Respondent No.2. Mr V.A. Thorat along with Mr Anant Devakate, Advocate for Respondent No. 3.

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-: Order dated: 22/12/2022:-

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The Applicant in Securitisation Application No. 204/2021 (S.A) on the files of Debts Recovery Tribunal, Aurangabad (D.R.T) is the Appellant herein and is aggrieved by the impugned Judgment and order dated 17/06/2022 in the aforesaid S.A.

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The Appellant is a company engaged in the business of sugar cane crushing and has various sugar factories across the State of Maharashtra. Respondent No. 2 is a sugar mill named Terna Shetkari Sahakari Sakhar Kharkhana Ltd. (‘Kharkhana’ for short), presently under liquidation, which had borrowed money from the 1^st Respondent, the Osmanabad District Central Cooperative Bank Ltd (‘the bank’ for short) and had created a mortgage with regard

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to the factory premises. The Kharkhana defaulted payment, and as a result of which, the account was classified as Non-Performing Assets (NPA). Thereafter, a demand notice was issued by the bank under section 13 (2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’ for short) demanding a sum of ₹1,755,626,271/as on 31/03/2011. The Kharkhana could not pay the amount demanded within the stipulated time and as a consequence, symbolic possession of the factory was taken by the bank on 04/06/2012. The bank invited public tenders from interested parties to lease out the factory by publishing it in various newspapers. The response was poor. One more tender notice was published on 12/11/2021 inviting bids from interested persons to run the sugar factory on lease for a period of 25 years starting from 2022-23. The last date for submitting tenders was 24/11/2021 and the tenders were to be opened at 1:00 PM on 25/11/2021. Among the requirements of the tender was the stipulation to deposit with the 1^st Respondent bank an Earnest Money Deposit (EMD) of ₹5.50 crores through RTGS/NEFT. Being interested in participating in the tender, the Appellant company obtained the tender form and submitted it on 24/11/2021 after having deposited the EMD amount of ₹5.50 crores with the 1^st Respondent bank through RTGS at about 3:31 PM. To the surprise of the Appellant, on 25/11/2021 it was learnt that the bid submitted by the Appellant company would not be considered by the 1^st Respondent and the auction proceeded without affording the Appellant an opportunity to participate in the bid. A legal notice was issued to the 1^st

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Respondent bank by the Appellant requesting them to consider the tender documents submitted by the Appellant. The bank declined to consider the said request and proceeded with the auction with the 3^rd Respondent as the sole bidder.

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Aggrieved by this act of the 1^st Respondent in rejecting the bid submitted by the Appellant, S.A No. 204 of 2021 was filed before the DRT. It is also pertinent to note that the rate quoted by the Appellant was ₹136,512,500/-more than the rate quoted by the 3^rd Respondent. The Ld. P.O. had in the first instance, vide order dated 15/01/2022 observed that 15 days delay of notice was not given by the 1^st Respondent bank to proceed with the auction and thus, set aside the tender notice issued by the bank. The order of the DRT dated 15/01/2022 was challenged before the Hon’ble High Court of Bombay, Bench at Aurangabad, in Writ Petition No. 2027 of 2022 filed by the third Respondent, Writ Petition No. 2562/2022 filed by the Bank, and Writ Petition No. 2543 filed by the Appellant herein. The Writs were disposed of with a direction to the DRT to dispose of the S.A. afresh within a time frame. The 1^st Respondent bank filed an affidavit before the DRT on 25/04/2022 stating that the board of directors of the bank passed the resolution on 22/04/2022 expressing its opinion that it is willing to abide by any directions passed by the DRT vide order dated 15/01/2022 and that the bank is willing to issue fresh tenders to lease out the sugar factory. Without considering the contentions raised by the Appellant and the affidavit filed by the bank, the DRT dismissed the S.A. vide order dated 17/06/2022. Aggrieved with

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that order, the Appellant is in appeal.

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The contention of the Appellant in this appeal is that all requirements in the tender notice were duly complied with by the Appellant. Despite that, the Appellant's bid was rejected. The bids received were to be opened by 1:00 PM on 25/11/2021, and by that time, the EMD submitted by the Appellant had already reached the 1^st Respondent bank. According to the Appellant, the amount was debited from their account by 3:30 PM and since the amount was sent by RTGS as stipulated in the tender notice, the Appellant cannot be found at fault for the amount not being credited to the account of the 1^st Respondent bank before 4:00 PM on 24/11/2021. It is the contention of the Appellant that the moment the amount is debited from the account of the Appellant by sending it by RTGS, which is Real Time Gross Settlement indicating that there is an immediate transfer of the amount to the account of the recipient. It is further submitted that the Appellant’s representative had reached the 1^st Respondent bank well before 4:00 PM on 24/11/2021 but he was asked to wait and the requisite documents were accepted by the bank only by 4:15 PM. The Appellant cannot be held responsible for the delay caused in receiving the documents. Hence, it is submitted that the bid of the Appellant was wrongly rejected.

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The contention of the 1^st Respondent bank as also the 3^rd Respondent, the successful bidder, is that the EMD amount allegedly deposited by the Appellant was credited to the 1^st Respondent bank account only by 16:26:56 hours on 24/11/2021

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as evident from the RTGS message at Exhibit C. It is also submitted that the tender form was not handed over by the Appellant’s representative by 4:15 PM on 24/11/2021 as contended. A printout of the tender form alone was submitted on that day. Hence it is submitted that the Appellant has no case in the appeal and it may be dismissed.

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Heard the learned counsel appearing for the Appellant as also the Respondents. Records perused.

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A perusal of the tender notice published by the 1^st Respondent bank indicates that the tenders are to be submitted before the creditor bank during office hours between 11:00 AM to 4:00 PM on or before 24/11/2021. Clause 8 of the said tender notice states that the tender is to be submitted in original tender form. Clause 15 of the notice makes it clear that tenders received after the expiry of the due date and time will not be considered. These stipulations in the tender notice indicate that the dates and time were mandatory and required strict compliance. It is also pertinent to note that the attempts made by the 1^st Respondent bank to auction the lease right for running the sugar factory had failed five times prior to the present tender. The loan amount due from the 2^nd Respondent was mounting every day. Moreover, there was also a huge arrear to be paid to the Provident Fund Department by the 2^nd Respondent. The payment got defaulted because the sugar factory was not functioning and there was no income derived from it.

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The only point that arises for consideration in this appeal is whether the action taken by the Appellant to initiate the

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proceedings of transferring the amount by RTGS at 3:30 PM on 24/11/2021 amounts to sufficient compliance with the tender notice.

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The RTGS system regulations, 2013 issued by the Reserve Bank of India in October 2013 as amended in December 2020 is produced for perusal, and paras 11.1 and 11.2 of the regulation read thus:

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“11.1. Eligible members can send/receive customer transactions on behalf of their customers. The transaction originating member shall carry out due diligence while sending the payment request to RTGS. The originating member should ensure to factor authentication by adopting a maker-checker principle while originating a payment transaction. Depending on the risk perception, participants may introduce/implement additional security features in the online delivery channels for initiating RTGS transactions by customers. The originating member should release the payment message from their system to the RTGS central system within 30 minutes of debiting a customer’s account. The originating member should have the facility of time stamping on their transactions at various stages for effecting the grievance redressal mechanism.

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11.2. Credit under customer transactions, received by RTGS member in its settlement account through RTGS, shall be ultimately credited to the account of the beneficiary on the basis of the account number in the payment message. The payment message receiving member may put in place a Straight Through Processing (STP) mechanism for crediting the beneficiary’s account. The beneficiary/receiving bank shall credit the account of beneficiary customer immediately on receipt of the payment message at their member interface. The beneficiary banks should credit the account of the beneficiary within 30 minutes of the receptor the message at the member interface.”

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Even according to the Appellant, the tender forms were submitted physically before the 1^st Respondent bank by only 4:15 PM on 24/11/2021. The fact that the EMD deposit was available with the 1^st Respondent bank at the time the tenders were opened by 1:00 PM on 25/11/2021 may not be sufficient. Court sales are too frequently adjourned to obtain a still higher price which may prove to be a self-defeating exercise and industrialists will lose faith in the actual sale taking place and may not travel up to the place of auction, being uncertain that the sale would at all go through. Tender notices carry the date and time of depositing EMDs as also the tender forms with the purpose. It is therefore essential that the participants abide by the time and date stipulated. In case the time is relaxed for the Appellant, others who had intended to bid but could not submit their tenders within the time may also come up with similar contention that their bids be accepted. The time and date stipulated in the tender process are undoubtedly essential terms which are to be strictly adhered to and no concession whatsoever could be granted to anyone interested in participating in the tender process. When the tender notice stipulates that the EMD amount has to be deposited through RTGS/NEFT, it means that the amount has to reach the 1^st Respondent bank by that time and date. The fact that the Appellant had commenced the process of sending the EMD amount by 3:30 PM on 24/11/2021 may not suffice because the records would show that the amount did not reach the 1^st Respondent’s account before 4:00 PM. Even as per the RTGS

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regulations issued by the RBI, there must be a 30 minutes window for the transactions to be made. The Appellant had sufficient time to inspect the promises of the factory sought to be leased out and also to make the EMD. Despite that, the Appellant waited till the 11^th hour to deposit the money and also defaulted in reaching the 1^st Respondent before the deadline of 4:00 PM on 24/11/2021. The allegation that the Appellant's representative was made to wait till 4:15 PM for the tender form to be accepted is also something to be proved by the Appellant. The allegations are self-serving and have not been proven sufficiently. It is also pertinent to note that the EMD amount was returned to the Appellant on 15/12/2021 by RTGS.

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The sale of the leasehold right has been confirmed in favour of the 3^rd Respondent it is settled law that no sale could be set aside unless the court is satisfied that the Applicant has sustained a substantial injury because of irregularity or fraud in completing or conducting the sale (see M/s Jagan Kishan & Co vs. Ludhiana Improvement Trust & Ors 2022 LiveLaw (SC) 733 ). The allegation that the bid proposed to be submitted by the Appellant was much higher than the bid submitted by the 3^rd Respondent is also no reason to set aside the sale which has been confirmed in favour of the 3^rd Respondent.

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For the reasons stated above, I find no reason whatsoever to interfere with the sale in favour of the 3^rd Respondent. The Appellant has not made out a case sufficient to set aside the sale and hence, the learned P.O. was justified in dismissing the S.A. I find no

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reason to upset the impugned finding.

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As a result, the appeal is dismissed, though without costs.

Sd/Chairperson

mks-1

ORDER

There was an order of the Tribunal directing the parties to maintain status quo till date. The Ld. Counsel appearing for the Appellant submits that in view of the dismissal of the Appeal, the Appellant would like to file a Writ Petition before the Hon’ble High Court. Hence, the status quo order made earlier may be extended. After hearing both sides, it is ordered that the parties shall maintain status quo for a further period of one week from today.

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Sd/Chairperson

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Twentyone Sugar Ltd. v. Osmanabad District Central Co-op Bank Ltd. and Ors.

Case brief

What is this about?

What did the court decide?

Twentyone Sugar Ltd. v. Osmanabad District Central Co-op Bank Ltd. and Ors.

Case brief

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What did the court decide?

What the court decided

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