Dismissed

Ms Star Brillian v. State Bank of India

DRAT15 Apr 2024REGULAR APPEAL/247/2017

Case brief

AI extract

What is this about?

The Tribunal dismissed an appeal where an auction purchaser sought interest on bid proceeds deposited in an interest-bearing account. The Tribunal held the appellant was estopped by a delivery certificate from claiming interest and found no unjust enrichment, as the bank was prevented from utilizing funds due to the mandatory payment of customs duty and subsequent litigation.

What did the court decide?

Appeal dismissed; Impugned judgment and order of the DRT confirmed.

Ms Star Brillian versus State Bank of India — Public Procurement and Tenders | DRAT (2024)

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA

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(Appeal No. 247 of 2017)

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(Arising out of OA. 181 of 2008 in DRT Visakhapatnam)

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THE HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA

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CHAIRPERSON

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M/s. Star Brillian, Building No. 1154, Behind old NCC, Durgah Road, Navsari -396445 represented by its partner Sri. Nikhil Navinchandra Shah.

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…Appellants

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-Versus-

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State Bank of India, Stressed Assets Management (SAM) Branch, Secundrabad, R.T. Road, District -Hyderabad, Andhra Pradesh 500023.

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Sri Srinivas Ajjarapu, Advocate, Advocate-Commissioner in O.A. No. 181 of 2008.

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… Respondents Counsel for the parties Mr. S. Raghavancharyalu with Ms. Srishti Burman Roy, Learned Counsel for the Appellant Mr. Subrata Kumar Sinha with Mr. Pankaj Kumar Mukherjee, Learned Counsel for the Respondent.

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JUDGMENT : On 15^th April, 2024

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THE APPELLATE TRIBUNAL :

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Instant Appeal has arisen against a judgment and order dated 10^th July, 2017 passed by DRT Visakhapatnam

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in I.A. No. 104 of 2015 arising out of O.A. No. 181 of 2008 M/s Star Brillian Vs State Bank of India and others whereby Learned DRT dismissed the petition. 2. As per the pleadings of the parties, an O.A. No. 181 of 2008 was filed by the State Bank of India, Respondent No. 1, against the Respondents No. 3 to 6 in O.A. for recovery of Rs. 57,11,09,454/- along with interest due from 01.12.2008. Advocate Commissioner was appointed by the Learned DRT vide order dated 01.12.2008 to take the possession of the assets and to sell them. Advocate Commissioner issued the auction notification on 13.11.2010 for the auction of diamonds stocks with a reserve price of Rs. 10,30,00,000/- for lot No’s 1 to 22. Appellant herein was declared as highest bidder who converted the EMD amount of Rs.1,10,00,000/- as Security Deposit as per the special terms and conditions. Auction was held in the month of December, 2010. As per the terms and conditions, the DRT has to confirm the acceptance of highest bid. Thereafter, highest bidder has to pay the remaining amount and take the delivery. But Learned Tribunal did not pass the orders for confirmation. A writ petition No. 17345 of 2011 was filed before the Hon’ble High Court of Andhra Pradesh which were decided on 23.06.2011 directing the DRT Visakhapatnam to pass appropriate orders regarding confirmation of sale. Learned DRT confirmed the sale in favour of the Appellant on 12.01.2012 and directed the Advocate Commissioner to deposit the sale proceeds in the name of “Mr. Advocate-Commissioner A/c. LID Jewellers” an

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interest bearing account with the Respondent Bank. Accordingly, an account No. 31110438868” was opened by the Advocate Commissioner. An amount of Rs.10,68,20,200/was deposited on 24.01.2012. Cumulative interest accrued on the above amount is about Rs. 5,68,13,763/-.

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3. Purchased goods were delivered to the Appellant on 09.09.2015 with a delay of three years eight months without any fault of the Appellant. I. A. No. 104 of 2015 was filed by the auction purchaser- Appellant herein praying that the Appellant is entitled for the payment of interest on the amounts paid by him with effect from the date of payment i.e. 24.01.2012 till the date of delivery of goods i.e. 09.09.2015. I.A. was dismissed by the Learned DRT by the impugned order.

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4. Feeling aggrieved, Auction Purchaser Appellant preferred the Appeal. 5. I have heard the Learned Counsel for the Appellant as well as the Respondent Bank and perused the Record. 6. Perusal of the impugned order will show that Learned DRT recorded a finding that the delay in delivery of possession was not on account of any delay being caused by the Bank or negligence of the Bank. Rather, it was due to the litigations filed by different parties as well as the delayed payment of customs duty by the Appellant. 7. It appears that the Visakhapatnam Special Economic Zone (VSFZ) vide letter dated 30^th January, 2012 informed the Advocate Commissioner that before removal of the

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goods the bidder is required to make payment of Rs.4,50,04,675/- towards outstanding lease amount and penal interest. Challenging the same, a Writ Petition No. 5753 of 2012 was filed by M/s Star Brillian, Appellant herein, which was decided by the Hon’ble High Court of Judicature of Andhra Pradesh at Hyderabad vide judgment and order dated 19^th March, 2012 wherein it was directed that the subjects lots/ goods may be delivered to the petitioner on the condition of the petitioner paying the necessary customs duty leviable on the subject goods value of Rs.10,68,20,200/- as may be determined by the authorities. This order was challenged by the VSEZ (Visakhapatnam Special Economic Zone) before a division Bench of the Hon’ble High Court of Judicature Andhra Pradesh by filing Writ Appeal No. 417 of 2012 which was dismissed on 12^th April, 2012. It was further held by the Hon’ble Division Bench that the diamonds, which are the subject matter of the auction, should be handed over to the first Respondent within a period of six weeks from today subject to payment of customs duty and other related charges other than the lease rent and penalties claimed by the Appellant VSEZ (Visakhapatnam Special Economic Zone). Against the judgment of Division Bench, SLP No. 18408 of 2012 was filed by VSEZ which was dismissed by the Hon’ble Apex Court on 17^th February, 2015. Thereafter, after payment of customs duty by the Appellant, the delivery of goods was made to the Appellant.

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8. Learned Counsel for the Appellant would submit that he has deposited the amount as per the directions of the Advocate Commissioner in an interest-bearing account. Interest accrued on the amount deposited by the Appellant. Delivery of goods was not made to him on depositing the amount. No delay was caused on his behalf. Bank cannot be ‘unduly enriched’ by payments of interest to the Bank.

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9. It is further submitted by the Learned Counsel for the Appellant that Appellant is neither a borrower nor a guarantor, rather he is an auction purchaser who had deposited the amount as per the tender documents, but the possession of the goods was not delivered to him due to the litigation. Appellant did not enter into the litigation. When the amount was deposited by the Appellant and was kept in an ‘interest bearing account’ it means that whatever interest was generated out of the amount deposited by the Appellant, only Appellant would be entitled for the accrued interest. In no case, Bank can claim the interest.

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10. Learned Counsel for the Appellant would further submit that a delivery certificate was given by the Appellant wherein he had confirmed that he will not raise any claim of any nature in future. It is submitted that the certificate relates to the goods only. It does not relate to the amount of interest accrued. Learned Counsel for the Appellant would further submit that any ambiguity in the tender document cannot enrich the Bank. Rather, it would be read in favour of the Appellant.

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11. Learned Counsel for the Respondent Bank would submit that no delay was caused due to any lapse on the part of the Bank. Delay was caused due to the litigation between VSEZ and the Appellant which ultimately was decided by the Hon’ble Apex Court. It is further submitted that Appellant is estopped from challenging the payment of interest. Appellant himself had issued a certificate that he will not raise any claim of any nature in future.

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12. Learned Counsel for the Respondent would further submit that it was the basic condition of the tender document that all the duties have to be paid before delivery of the goods. Learned Counsel has placed reliance at clause 10A of the terms and conditions of the auction wherein it was provided that “applicable duties/ as well as taxes and any other taxes or amounts payable to any statutory authority are to be paid by the buyer and obtain necessary clearance.”

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13. In Authorized officer State Bank of India Vs. C. Natarajan & Anr (2024) 2 SCC 637, Hon’ble Apex Court in Para 31 have laid down the law on the issue of unjust enrichment wherein it is held that-

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“31. The circumstances of the case make it imperative to consider the question; when does an enrichment or unjust enrichment occur?

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32 . Mahabir Kishore vs. State of Madhya Pradesh (1989) 4 SCC 1 is a decision of this Court which traced various English decisions and ultimately laid down the requirements of unjust enrichment as follows:

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“11. The principle of unjust enrichment requires: first, that the defendants has been ‘enriched’ by the receipt of a ‘benefit’; secondly, that this

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enrichment is ‘at the expense of the plaintiffs; and thirdly, that the retention of the enrichment be unjust. This justifies restitution. Enrichment may take the form of direct advantage to the recipient wealth such as by the receipt of money or indirect one for instance where inevitable expense has been saved.”

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33. In Sahakari Khand Udyog Mandal Ltd. vs CCE and Customs , reported in (2005) 3 SCC 738, this Court had the occasion to reiterate that unjust enrichment means retention of a benefit by a person that is unjust or inequitable. Unjust enrichment occurs when a person retains money or benefit which is justice, equity and good conscience, belongs to someone else. The doctrine of unjust enrichment, therefore, is that no person can be allowed to enrich inequitably at the expense of another. A right of recovery under the doctrine of unjust enrichment arises where retention of a benefit is considered contrary to justice or against equity.

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34. Yet again, in Indian Council for Enviro-Legal Action vs Union of India, (2011) 8 SCC 161, this Court held that a person is enriched if he has received a benefit, and he is unjustly enriched if retention of the benefit would be unjust.”

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14. Facts of the case are not very much in dispute. Appellant is the auction purchaser who was declared the highest bidder. 25% of the bid amount was deposited by him. Thereafter, in O.A. No. 181 of 2008 in I.A. No. 956 of 2008 and 79 of 2009 Learned DRT Visakhapatnam vide order dated 12^th January, 2012 directed the Advocate Commissioner to accept the bid of appellant herein M/s Star Brillian of Rs. 10,68,20,200/-. Sale proceeds should be kept in the name of Advocate Commissioner LID Jewellers’ interest bearing account.

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15. Subsequent thereto, Writ Petition No. 7285 of 2012 in W.P. No. 5753 of 2012 M/s Star Brillian vs. VSEZ was filed by the Appellant which was decided by the Hon’ble Apex Court of Judicature of Andhra Pradesh at Hyderabad on 19^th March, 2012 wherein Hon’ble High Court directed that the subject lots/ goods may be delivered to the petitioner on the condition of the petitioner paying the necessary customs duty leviable on the subject goods value of Rs.10,68,20,200/- as may be determined by the authorities. Writ appeal No. 417 of 2012 was filed by VSEZ against the judgment of Hon’ble Single Judge which was decided and dismissed on 20^th April, 2012 by the Division Bench of the Hon’ble High Court of Judicature at Andhra Pradesh. It was further directed that the diamonds which are the subject matter of the auction should be handed over to the 1^st Respondent within a period of six weeks from the date of judgment subject to payment of customs duty and other related charges other than the lease rent and penalties claimed by the Appellant, VSEZ. SLP No. 18408 of 2012 was filed against the judgment of the Hon’ble Division Bench before the Hon’ble Apex Court which was dismissed on 17.02.2015. Thereafter, possession of the goods was handed over to the Appellant herein after payment of customs duty.

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16. A contempt petition No. 942 of 2015 was filed by the Appellants which were decided by the Hon’ble Division Bench on 09.10.2015 wherein it was held that the delivery certificate dated 09.09.2015 demonstrates that the Advocate

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Commissioner having verified the payment of customs duty to the concerned authorities, delivered the diamondscovered by lots 1 to 22 to the petitioner. The delivery certificate also bears the endorsement of one Nikhil Shah, partner, confirming the delivery of the diamonds and undertaking that he would not be raising any claims in this regard in future. Hon’ble High Court further observed that the order passed by the Hon’ble High Court stands duly complied with, albeit with some amount of delay. However, Hon’ble High Court did not take a serious view of the delay as the petitioner paid the customs duty only recently. Sale certificate was issued.

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17. The only issue to be decided is as to whether the Appellant is entitled for the amount of interest accrued in the interest bearing account? whether any delay was caused on account of negligence or latches of the Bank or it was due to the delayed payments of customs duty by the Appellant.

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18. Hon’ble Division Bench of Hon’ble High Court of Andhra Pradesh in Writ appeal No. 417 of 2012 has quoted clause 10(a) of the terms and conditions of the auction which reads as under:

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“Mode of payment of sale value:

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Full sale value with taxes/ duties etc. will be paid by the tenderer as follows:

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(a) 100% of the material value is to be deposited within the stipulated time by way of Demand Draft drawn in favour of Commissioner A/c LID Jewellers, Visakhapatnam. Applicable Duties/ Sales tax and any other taxes or amounts payable to any statutory

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authority are to be paid by the Buyer and obtain necessary clearance.”

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19. It is also noted in the judgment that the 1^st Respondent i.e. M/s Star Brillian’s Counsel stated before the Hon’ble High Court that M/s Star Brillian is prepared to pay the customs duty and any other similar charges in this regard. Direction was also issued by the Hon’ble High Court to hand over the possession subject to payment of customs duty and other related charges. The customs duty was paid after the decision of the SLP before the Hon’ble Supreme Court on 17.02.2015. Contempt case 942 of 2015 also records that the possession was delivered after payment of the customs duty to the concerned authorities. A certificate was also issued by the Appellant herein to the effect that he will not raise any issue in the matter. It has been argued that this consent was given only in respect of the possession of the goods and not about the interest accrued in the account.

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20. I do not find any substance in the submissions. Specific certificate is signed by the Appellant mentioning that no objection shall be raised subsequently. Hence, now appellant is estopped from claiming the interest. Accordingly, I do not find any force in the arguments. 20. As far as delay is concerned, Writ Petition was filed by the Appellant himself which was contested by the VSEZ. Ultimately matter reached up to the Hon’ble Apex Court and attained finality. Delay was not caused on behalf of the Bank. Delay cannot be attributed to the Bank.

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21. As far as question of unjust enrichment is concerned, had the matter been not dragged in litigation, Bank would

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have been in a position to utilize the amount from the date of auction, but it could not be done. Further, Appellant deposited the amount but could not take the possession of the goods due to the non-payments of customs duty which was legally payable. It was a specific condition in the terms of the auction that all the duties leviable have to be paid by the auction purchaser. Accordingly, unless and until customs duty is not paid, delivery of goods could not be made to the auction purchaser. As soon as customs duty was paid, delivery was given to the auction purchaser. Accordingly, I could not accept the submission made by the Learned Counsel for the Appellant that there was an unjust enrichment of the Bank.

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22 . On the basis of discussion made above, I am of the considered view that the Learned DRT has recorded the finding in accordance with law. I do not find any irregularity and illegality in the impugned order. Appeal lacks merit and is liable to be dismissed.

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ORDER

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Appeal is dismissed. Impugned judgment and order dated 10^th July, 2017 passed by Learned DRT Visakhapatnam in I.A. No. 104 of 2015 in O.A. No. 181 of 2008 is confirmed.

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No Order as to costs.

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File be consigned to Record Room.

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Copy of the order be supplied to Appellant and the Respondents and a copy be also forwarded to the concerned DRT.

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Copy of the Judgment/ Final Order be uploaded in the Tribunal’s Website.

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Order signed and pronounced by me in the open Court today i.e. on 15^th April, 2024.

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