Dismissed

Panchratna Bar N Restaurant and Ors. v. Bank of Baroda

DRAT7 Jun 2024REGULAR APPEAL/124/2011

Case brief

AI extract

What is this about?

The Delhi-bangalore-bank appeal challenged the dismissal of an application to set aside an auction sale attachment. The Bench held that the sale was valid as the objections were previously rejected under res judicata and appellants failed to prove substantial injury or comply with deposit rules.

What did the court decide?

The appeal was dismissed as the sale was valid and objections were previously rejected or not substantially proven.

Panchratna Bar N Restaurant and Ors. versus Bank of Baroda — Execution and Attachment | DRAT (2024)

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

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Appeal No. 124/2011

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Between

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Panchratna Bar N Restaurant & Ors. … Appellant/s V/s.

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Bank of Baroda & Ors. …Respondent/s

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Mr Kushal Sawant, i/b Mr, Meghnath Navlani, Advocate for Appellants.

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Mr K. D. Shukla, Advocate for Respondent No.1 Bank.

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Mr Vasantkumar Takke, i/b Mr A. Ramkrishna, Advocate for Respondent No. 2.

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Mr Jamshed Ansari, Advocate for Respondent No. 3.

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-: Order dated: 07/06/2024: -

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The appellants are a firm and its partners. They assail the judgment dated 06.05.2011 dismissing Appeal No. 04 of 2008 on the files of the Debts Recovery Tribunal-III, Mumbai (D.R.T.). Aggrieved by which, the appellants are in appeal before this Tribunal under Sec. 20 of the Recovery of Debts and Bankruptcy Act, 1993 (“RDB Act”, for short). 2. Original Application (O.A.) No. 63 of 2002 filed by Dena Bank (the predecessor of the present respondent Bank of Baroda) was allowed on 01.08.2003 by the D.R.T. and a Recovery Certificate (R.C.) was issued. For the execution of the R.C., the certificate holder (CH) filed Recovery Proceedings (R.P.) No. 453 of 2003 before the Recovery Officer (R.O). Subject properties belonging to the debtors were attached and proclaimed for sale on 25.09.2007. The certified

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debtors (CDs) approached the Ld. R.O. and vide letter dated 13.06.2007 requested for postponement of the sale by 25 days to enable them to settle the debt and proposed a one-time settlement (OTS). The CDs claim that they had applied for a loan from other banks to settle the decree debt. They were eager to sustain their business as it was their only source of income. An appropriate application as Ext. 44 was filed by the appellants to defer the sale scheduled on 25.09.2007. Consequently, the sale was re-scheduled and conducted on 24.10.2007 and the property was sold in two lots to respondents Nos. 2 and 3. After confirmation of the sale, a sale certificate was issued to them on 26.12.2007 which was registered on 31.08.2008.

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On 26.10.2007, the CDs applied for cancellation of sale and forfeiture of the amount deposited by the auction purchasers. It was alleged that the sale was conducted between 5.30 pm and 6.20 pm after office hours in violation of the sale notice as well as the D.R.T. (Procedure) Rules, 1993. It was further contended that despite the offer of settlement made by the CDs, the sale proceeded to ignore the offer and an application was filed to set aside the sale.

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These two applications as Exts. 54 and 56 respectively were dismissed by the Ld. R.O. vide common order dated 26.12.2007. The observation of the Ld. R.O. was that on 11.09.2007 even before the proposed sale, the Ld. Counsel for the CDs had filed Ext. 44 application for postponement of the sale scheduled to be held on 25.09.2007 by 25 days to enable the settlement of the debt. The CH had no objection, and accordingly, the sale was adjourned to

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04.10.2007. On that day, again by consent of both parties, the auction sale was further adjourned to 22.10.2007 to enable the CDs to repay the entire debt. On 22.10.2007, the Ld. Counsel for the bank submitted that the CDs did not deposit the amount as per the terms agreed, and therefore, requested the Ld. R.O. to proceed with the sale. Accordingly, the auction sale was scheduled to be held on 24.10.2007 i.e. within 30 days from the original date of sale. Being an adjournment of sale within 30 days, it was observed that no fresh proclamation was required. The CDs were aware that the sale would take place on the adjourned date. Nevertheless, a notice regarding the sale to be held on 24.10.2007 was directed to be published on the notice board for information of the public in general.

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It is observed that on 24.10.2007 the auction sale took place. The Ld. Counsel for the CDs, vide Ext. 48 raised an objection to the sale stating that the notice was displayed on the notice board only on 23.10.2007 at 5.30 pm and that the sale proceedings started only at 5.20 pm on 24.10.2007after the office hours. After hearing the Ld. Counsel appearing for the CH and the CDs, the Ld. R.O. rejected Ext.48. Subsequently, the sale was conducted. The Ld. R.O. observed that given the dismissal of Ext.48, the present application for setting aside the sale on the very same ground is not maintainable because of the principle of res-judicata. The Ld. R.O. also observed that Exts. 54 and 56 are not entertainable given the embargo under Rule 61 of the Second Schedule of the Income Tax Act, 1961. Hence, the applications were dismissed.

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Aggrieved by the dismissal of Exts. 54 and 56 the CDs preferred

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an appeal under Sec. 30 of the RDB Act before the Presiding Officer (P.O.). After considering all the aspects, the Ld. P.O. vide the impugned order was an agreement with the Ld. R.O. and hence, dismissed the appeal. The CDs are aggrieved and hence in appeal before this Tribunal.

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Heard Mr Kushal Sawant Ld. Counsel appearing for the appellants, Mr. K. D. Shukla the Ld. Counsel appearing for respondent No.1 bank, Mr. Vashantkumar Takke the Ld. Counsel for respondent No. 2 and Mr Jamshed Ansari the Ld. Counsel for respondent No. 3. Records perused.

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The question that arises for consideration in this appeal is whether the appellants are entitled to get the sale in favour of respondents Nos. 2 and 3 set aside for reasons stated in their applications Exts. 54 and 56.

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There is no dispute regarding the existence of a debt, allowing of the O.A., issuance of the recovery certificate and the filing of R.P. No. 453 of 2003, attachment of the subject property, and scheduling of the property for sale on 20.09.2007. It is also not in dispute that the appellants had filed Ext. 44 for postponement of the sale in order to enable them to settle the dispute and pay off the amount. With the consent of both sides, the sale was adjourned first to 04.10.2007 and then again to 22.10.2007 so that the appellants had sufficient time to raise the money required to settle the debt. Despite these two adjournments of the auction sale at the behest of the appellants, they could not comply with the OTS proposal and hence the CH requested the Ld. R.O. to proceed with the sale. Accordingly, the auction sale

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was rescheduled finally on 24.10.2007 which was successful. Though the CDs were aware of the adjournment of the sale, the notice was ordered to be published on the notice board. Rule 55 of the Second Schedule to the Income Tax Act, 1961 states that no sale of immovable property under this schedule shall, without the consent in writing of the defaulter, take place until after the expiration of at least 30 days calculated from the date on which a copy of the proclamation of sale has been affixed on property in the office of the Tax Officer whichever is later. In the instant case, the defaulters themselves had made an application for extending the sale up to 25 days to enable them to settle the debt. The Ld. Counsel for the CDs had raised objections about some minor errors in the authority letter submitted by the bidder and also that the application was on the letterhead and not in the form prescribed as per the Rules. After hearing these objections, the Ld. R.O. rejected that. In Ext. 48 objection was raised because the sale notice was displayed on 23.10.2007 after 5.30 pm the purchaser had not applied in the required format and the sale took place only at 5.20 pm. Ext. 48 was rejected by the Ld. R.O. by hearing both sides. After the sale was confirmed on payment of the sale consideration, the CDs filed Exts. 54 and 56. There is no doubt that the objections raised by the CDs were already addressed by the Ld. R.O. on Ext.48 which was rejected on 24.10.2007. No appeal was preferred and hence, the finding of the Ld. R.O. upheld by the Ld. P.O. on the principle of res-judicata is only to be upheld.

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The next point that arises for consideration is whether the objections raised by the CDs to set aside the sale could have been

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entertained for want of compliance with Rule 60 to the Second Schedule of the Income Tax Act. The aforesaid Rule mandates a deposit by the defaulter, of the amount specified in the proclamation of sale as that for the recovery of which the sale was ordered, with interest thereon at the rate of 15% per annum calculated from the date of proclamation of sale to the date when the deposit is made and also the amount for payment to the purchaser, as a penalty, a sum equal to 5% of the purchase money. Admittedly, the appellants have not deposited any amount along with their applications to set aside the sale.

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Under what circumstances a confirmed sale can be set aside has been settled by the Hon’ble Supreme Court in the decision Valji Khimji & Company vs. Official Liquidator of Hindustan Nitro Product (Gujarat) Ltd. & Ors. (2008) 12 SCR 1 where it is held that once the sale is confirmed, certain rights accrued in favour of the auction purchaser, and these rights cannot be extinguished except in exceptional cases such as fraud.

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Even before that, a division bench of the Hon’ble Supreme Court in Saheb Khan vs. Mohd. Yousufuddin & Ors. 2006 (4) SCC 406 has held that no sale shall be set aside on the ground of irregularity or fraud in publishing or conducting it unless upon the facts proved, the court is satisfied that the applicant has sustained substantial injury by the reason of such irregularity or fraud as mentioned in sub-sec. (2) of Order XXI Rule 90 of the Code of Civil Procedure.

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Therefore, before the sale can be set aside, merely establishing a material irregularity or fraud will not do. The applicants must go

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further and establish to the satisfaction of the Tribunal that the material irregularity or fraud has resulted in substantial injury to them. In the instant case, the specific particulars of material irregularity were not found to be substantial enough to set aside the sale. Hence, the Ld. R.O. as also Ld. P.O. were justified in dismissing the applications and the appeal.

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I find no merit in the appeal and hence, it is dismissed.

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Sd/Chairperson

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mks-01.

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Panchratna Bar N Restaurant and Ors. v. Bank of Baroda

Case brief

What is this about?

What did the court decide?

Panchratna Bar N Restaurant and Ors. v. Bank of Baroda

Case brief

What is this about?

What did the court decide?

What the court decided

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