Allowed

Gopal Roy v. Punjab National Bank

DRAT12 Aug 2024MISC APPEAL/34/2024

Case brief

AI extract

What is this about?

The热巴 Recovery Appellate Tribunal allowed an appeal against an order dismissing a plea to quash an auction sale. The Court held that a strict violation of the mandatory time limit for depositing 25% of the bid amount vitiates the auction, setting aside the sale and directing the refund of the deposit.

What did the court decide?

Impugned order set aside; auction sale set aside; bank directed to refund bid deposit within 30 days without interest; possession of secured asset to be retaken by the bank.

Gopal Roy versus Punjab National Bank — Banking and Recovery | DRAT (2024)

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Reportable / Non-reportable

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IN THE DEBT RECOVERY APPELLATE TRIBUNAL - KOLKATA HON'BLE Justice Anil Kumar Srivastava, Chairperson

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MISC. APPEAL/34/2024

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(Arising out of S.A. No. 490 of 2021 – DRT-III Kolkata)

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12.08.2024

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Gopal Roy residing At Banipur Vivekananda Road, Banipur, Habra PIN 743233.

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... Appellant

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--Vs--

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Punjab National Bank Having Office At Sastra, 48, Jessore Road, Barasat – 700124.

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2.Authorised Officer, Punjab National Bank, Residing At Circle Office , 24 Parganas (North) Sastra, 48, Jessore Road, Barasat, Pin- 700124

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3.Subhojit Kundu Residing At Kamarthuba, Vivekananda Road, Habra, North 24, Parganas – 743263.

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4.Sri Samir Kumar Kundu Residing At Kamarthuba, Vivekananda Road, Habra, North 24, Parganas

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... Respondents

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For Appellant : Mr. Samik Basu, ld. Adv. Mr. Kausik Das, ld. Adv.

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For Respondent: Mr. Debasish Chakraborty, ld. Adv. for bank Mr. Sandip Ghosh, ld. Adv. for resp. 3 and 4. Mr. Debayan Ghosh, ld. Adv.

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The Appellate Tribunal

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This M.A. No. 34 of 2024 is arising against the order dated 15.06.2023 passed by the learned DRT-III Kolkata in I.A. No. 975 of 2023 in S.A. 490 of 2021 whereby I.A. 975 of 2023 is dismissed. Feeling aggrieved appellant preferred the appeal.

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Heard learned counsel for the appellant as well as learned counsel for the bank, respondent no.1 & 2, and auction purchaser, respondent no. 3 & 4, and perused the records.

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Controversy is very short in this appeal. It appears that an auction was conducted on 13.07.2022 by the respondent no.1 and 2 bank for selling the secured asset of the appellant. Fact regarding creation of security interest by way of equitable mortgage in favour of bank is not in dispute at this juncture. When the auction sale was conducted on 13.07.2022, respondent no.3 and 4, auction purchasers, namely, Sri Subhojit Kundu and Sri Samir Kumar Kundu became the highest bidder, who had deposited Rs.1.70 lakh as earnest money and Rs.2.50 lakh on 14.07.2022. The total amount is Rs. 4.20 lakh. It is noteworthy that the highest bid was Rs.30.70 lakh. Thereafter, Rs.3,47,500/- was deposited by the successful bidders on 15.07.2022 and Rs.23,02,500/- was deposited on 12.10.2022. Thus, successful bidder deposited total amount of Rs.30.70 lakh on 12.10.2022.

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I.A. No. 957 of 2023 was filed by the borrower in pending S.A. No. 490 of 2021 for quashing auction sale held on 13.07.2022 before the learned DRT on the ground of violation of Rule 9(3) of Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as Rules). Objection was invited. After hearing learned counsel for the parties, learned DRT arrived at a conclusion that time for deposit of 75% of the bid amount was

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extended by the authorised officer of the bank and after payment of the bid amount sale certificate was issued, borrower has no role to play in the proceeding. Accordingly, learned DRT dismissed the I.A. 957 of 2023.

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Learned counsel for the appellant would submit that there is violation of Rule 9(3) of the Rules wherein 25% of the bid amount should have been deposited by the highest bidders by next working day i.e. 14.07.2022, but the same was not deposited.

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Per contra, learned counsel for the auction purchasers would submit that Rule 9(3) of the Rules is pari passu to Rule 9(2) of the Rules. Learned counsel submits that 25% of the bid amount was deposited on 15.07.2022. Learned counsel further submits that successful bidder has deposited the total bid amount and sale certificate was issued in their favour. Larned counsel for the bank has adopted the argument advanced by learned counsel for the auction purchasers.

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7. Rule 9(3) of the Rules reads as under :

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“On every sale of immovable property, the purchaser shall immediately, i.e. on the same day or not later than next working day, as the case may be, pay a deposit of twenty five per cent. of the amount of the sale price, which is inclusive of earnest money deposited, if any, to the authorized officer conducting the sale and in default of such deposit, the property shall be sold again;”

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The provisions of Rule 9(3) of the Rules are mandatory in nature. It has been held by the Hon’ble Apex Court in General

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Manager, Sri Siddeshwara Cooperative Bank Ltd. & Anr. Vs.

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Ikbal & Ors. [(2013) 10 SCC 83] at Para 18 as under :

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18. A reading of sub-rule (1) of Rule 9 makes it manifest that the provision is mandatory. The plain language of Rule 9(1)

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suggests this. Similarly, Rule 9(3) which provides that the purchaser shall pay a deposit of 25% of the amount of the sale price on the sale of immovable property also indicates that the said provision is mandatory in nature. As regards balance amount of purchase price, sub-rule (4) provides that the said amount shall be paid by the purchaser on or before the fifteenth day of confirmation of sale of immovable property or such extended period as may be agreed upon in writing between the parties. The period of fifteen days in Rule 9(4) is not that sacrosanct and it is extendable if there is a written agreement between the parties for such extension. What is the meaning of the expression ‘written agreement between the parties’ in Rule 9(4)? 2002 Rules do not prescribe any particular form for such agreement except that it must be in writing. The use of term ‘written agreement’ means a mutual understanding or an arrangement about relative rights and duties by the parties. For the purposes of Rule 9(4), the expression “written agreement” means nothing more than a manifestation of mutual assent in writing. The word ‘parties’ for the purposes of Rule 9(4) we think must mean the secured creditor, borrower and auction purchaser.

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It has further been held in Ikbal case (supra) at Para 19 and 20

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as under :

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There is no doubt that Rule 9(1) is mandatory but this provision is definitely for the benefit of the borrower. Similarly, Rule 9(3) and Rule 9(4) are for the benefit of the secured creditor (or in any case for the benefit of the borrower). It is settled position in law that even if a provision is mandatory, it can always be waived by a party (or parties) for whose benefit such provision has been made. The provision in Rule 9(1) being for the benefit of the borrower and the provisions contained in Rule 9(3) and Rule 9(4) being for the benefit of the secured creditor (or for that matter for the benefit of the borrower), the secured creditor and the borrower can lawfully waive their right. These provisions neither expressly nor contextually indicate otherwise. Obviously, the question whether there is waiver or not depends on facts of each case and no hard and fast rule can be laid down in this regard.

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The letter dated 13.11.2006 sent by the borrower to the Bank leaves no manner of doubt that the borrower had waived his right under Rule 9(1) or for that matter under Rule 9(3) and Rule 9(4) as well.

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Hon’ble Guwahati High Court in Union Bank of India &

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Anr. Vs. Pabitra Pran Saikia [2018 SCC OnLine Gau 2295] placing reliance on the decision of Ikbal case (supra) has held in Para 20, 22 and 23 as under :

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“20. A perusal of Rule 9(3) of the Rules reveals that 25% of the auction sale shall be deposited by the purchaser on the same day itself or not later than the next working day and the consequence of default of such deposit would be that the property shall be sold again. The veery expression “not later than the next working day” indicates a mandatory outer limit within which the 25% deposit can be made. Further, the consequence of such defalt having been provided in the rule itself that the property shall be sold again, also is an indication that the provisions of rule 9(3) are mandatory in nature.

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As held by the Hon’ble Supreme Court in para 19 of Ikbal (supra) Rule 9(3) of the Rules are mandatory in nature, but, they can be waived by the secured creditor and the borrower, but to that extent there definitely must be material to indicate that there was such a waiver. In the instant case, no such material has been produced by the petitioner bank or by the respondent thrt the mandatory period prescribed under rule 9(3) of the Rules had been waived by them.

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In view of the above, no infirmity can be found in the conclusion of the DRT, Guwahati in its order dated 30.01.2015 and DRAT, Kolkata in its order dated 4.7.2017 that the auction sale of 29.06.2013 and the slae certificate of 1.7.2013 are vitiated and unsustainable for there being a violation of the procedural requirements of Rule 9(3) of the Rules. In Ikbal case (supra) Hon’ble Apex Court has held that provisions

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of Rule 9(3) are mandatory in nature.

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In Swastik Agency and Others -vs- State Bank of

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India, Bhubaneswar & Others [AIR 2009 Orissa 147] reliance is placed on Nazir Ahmed -vs- King Emperor [AIR 1936 PC 253] wherein it has been held that when the statute provides for a particular procedure, the authority has to follow the same and cannot be permitted to act in contravention of the same.

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A bare reading of Rule 9(3) of the Rules would show that successful bidder is bound to deposit 25% of the sale price immediately, that is, on the same day or not later than next

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working day. It is a mandatory provision, which cannot be flouted and if so whole exercise of the auction sale would become invalid.

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In the present case, it is admitted by the auction purchasers that the slae price was 30.70 lakh, 25% of the amount would be Rs.7,67,500/-, but auction purchasers have deposited Rs.1.70 lakh on 13.07.2022, Rs.2.50 lakh on 14.07.2022, in total Rs.4.20 lakh was deposited, which is in violation of Rule 9(3) of the Rules. 13. Learned counsel for the auction purchaser would submit that Rule 9(3) of the Rules is pari passu to Rule 9(2) of the Rules. I cannot accept the same. Provisions of Rule 9(3) of the Rules have to be followed by the auction purchasesr. In the present case, 25% of the sale price was not deposited by the auction purchasers on the day of sale or at least on the next working day. Accordingly, whole exercise of auction process is vitiated. Accordingly, I am of the view that learned DRT has erred in passing the impugned order, which is liable to be quashed. Appeal deserves to be allowed.

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O R D E R

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Appeal is allowed. Impugned order dated 15.06.2023 is set aside. Auction sale conducted by the respondent no.1 and 2 bank on 13.07.2022 is set aside. Respondent no.1 and 2 bank are hereby directed to refund the bid amount deposited by the auction purchasers within 30 days. Since the auction purchasers failed to deposit 25% of the bid amount in accordance with rules,

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they are not entitled to any interest on the deposit amount. Authorised officer of the respondent bank should retake possession of the secured asset. Respondent bank would be at liberty to take steps for recovery of debt dues in accordance with law. Costs easy.

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File be consigned to record room.

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Copy of the order be supplied to the appellant and the respondents and a copy be also forwarded to the concerned DRT.

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Copy of the judgement/Final Order be uploaded in the Tribunal’s website.

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Order dictated, signed and pronounced by me in the open Court on this the 12^th day of August, 2024.

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(Anil Kumar Srivastava, J) Chairperson

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Dated : 12.08.2024 07/pkb

Gopal Roy v. Punjab National Bank

Case brief

What is this about?

What did the court decide?

Gopal Roy v. Punjab National Bank

Case brief

What is this about?

What did the court decide?

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