The Tribunal allowed the appeal, setting aside the DRT's dismissal of an application seeking refund of deposited auction earnest money. It held the bank forfeited the amount unlawfully as the appellant was bona fide, ready to pay, and entitled to disclosure of pending litigation.
Respondent Bank directed to refund the deposit amount within thirty days.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
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Appeal No. 98 of 2023-DRAT-Kolkata
IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA
Appeal No. 98 of 2023
(Arising out of S.A. 250 of 2019 in DRT, Visakhapatnam)
THE HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA
CHAIRPERSON
… Appellants
-Versus-
IDBI Bank Limited, represented by its Authorised Officer, Retail Asses Centre, Balahji Mangalagiri Chambers, 9/29/6-1, 5C, 4th Floor, Siripuram, Visakhapatnam – 500 003.
… Respondent
Counsel for the Appellants … Mr. Nemani Srinivas Counsel for Respondent … Ms. Rituparna Sanyal
JUDGMENT : 16th December, 2024
THE APPELLATE TRIBUNAL :
Instant appeal has arisen against judgment and order dated 19th April, 2023 passed by Learned DRT, Visakhapatnam dismissing S.A. 250 of 19 (Sri Pydi Ramesh Naidu & Another -vs- IDBI Bank). 2. As per the pleadings of the parties, Appellants are bidders in an auction for sale of the secured assets to be conducted by the Respondent, IDBI Bank Limited. They were asked to contact one M/s Sisir & Ravi Associates who informed them on 17.12.2012 that they are the agents of IDBI Bank. Respondent informed the Appellant that a publication was made in Eenadu Visakhapatnam Edition
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Appeal No. 98 of 2023-DRAT-Kolkata dated 16.12.2012 on the basis of that publication the Appellant participated in the auction and deposited Rs.7,02,000.00 as earnest money. Auction was to be held on 19.12.2012. Appellants were also informed by the Bank that the secured assets are mortgaged with the Bank which are free from all encumbrances and litigation and would be transferred in their favour without any encumbrance. Final inspection of the order was not made. Appellants participated in the auction proceedings and quoted a sum of Rs.70.30,000.00. Appellants were informed on 19.12.2012 that their offer has been accepted and sale has been confirmed in their favour. Appellants were asked to make deposit of an amount of Rs.52,28,000.00 on or before 3.01.2013. 3. On 27.12.2012 Respondent Bank addressed a letter to the Appellant intimating that the Borrower had filed an application, I.A. 925 of 2012, in pending S.A. 336 of 2012 wherein Learned DRT, Visakhapatnam directed the Bank not to finalise and confirm the sale without leave of the Tribunal. Respondent Bank did not inform the pendency of the litigation to the Appellant and auctioned the property in violation of the order of the DRT. Conditional order passed by Learned DRT was extended till 18.01.2013. 4. On 29.3.2013 Appellant sent a letter to the Respondent Bank stating that the auction was conducted suppressing the material fact and pendency of the litigation. However, Appellants were ready to deposit the remaining balance of 75% of the bid amount. 75% of the amount was available in
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Appeal No. 98 of 2023-DRAT-Kolkata another account of the Appellant with the Respondent Bank which could have been transferred at any point of time. On 13th February, 2013 Respondent Bank sent a letter to make a deposit of 75% on or before 21.2.2013. Another representation was made by the Appellants on 19.2.2013 to wait till 4.3.2013, i.e. the date when the period of appeal would expire.
5. On enquiry Appellants also found certain discrepancies in the title of the property and sent a letter on 26.2.2013 seeking clarification about the discrepancies. But prior to it Bank sent a letter on 25.2.2013 which was dispatched on 13.3.2013 communicating that the amount of 25% is forfeited by the Bank, which is against law.
6. Appellants filed O.S. 412 of 2013 before the District & Session Judge, Visakhapatnam for recovery of the amount which was decreed on 07.08.2017 by the VII Additional District Judge, Visakhapatnam. Appeal No. 1100 of 2017 was filed before the Hon’ble High Court of Judicature at Hyderabad for the State of Telangana at Hyderabad which was allowed by the Hon’ble High Court and the Appellants were directed to approach the DRT. Accordingly, Appellants filed an application under Section 17 of the SARFAESI Act, 2002 (hereinafter referred to as the “Act”) for a declaration that the letter dated 25.02.2013, forfeiting an amount of Rs.18,02,000.00, is invalid, against law and the amount be refunded to the Appellants.
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Appeal No. 98 of 2023-DRAT-Kolkata 7. Respondent denied the allegations and stated that the action was taken in accordance with law. There was no discrepancy in the title of the property.
8. Learned DRT, after scrutinizing the records, recorded a finding that the action taken by the Bank was in accordance with law and accordingly dismissed the SARFAESI Application.
9. Feeling aggrieved by the impugned judgment and order, Appellant Bank preferred the instant appeal. 10. I have heard the Learned Counsel for the parties and perused the record.
11. As far as facts are concerned, following advertisement was made in Eenadu Telgu newspaper :
"SITE FOR SALE 1170 square yards abutting NH-5, at Boyipalem, Opp Jayabheri Maruti @ 6000 per square yds. Ph.9849636969, 87909 11181"
This advertisement was issued by M/s Sisir & Ravi Associates. On the basis of this advertisement an amount of Rs.7.02 lac was deposited by the Appellants on 18.12.2012. It was represented that the title is clear and without any encumbrance. Auction was conducted on 19.12.2012. Letter of confirmation of sale was issued with a direction to the Appellant to deposit balance 75% of the bid amount, i.e. Rs.52.00 lac within fifteen days. On the same date, i.e. 19.12.2012, an interim order was passed by the Learned DRT, Visakhapatnam in pending S.A. 336 of 2012 in I.A. 925 of 2012 and stayed the confirmation of sale on the prayer
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Appeal No. 98 of 2023-DRAT-Kolkata made by the Borrower with a direction to pay 25% of the Demand Notice amount.
12. On 27th December, 2012 Bank informed the Appellants about the order dated 19.12.2012.
13. Respondent Bank did not inform the Appellant before auction about pendency of any SARFAESI Application. Auction was conducted despite pendency of the SARFAESI Application. Matter was posted on 18.1.2013 by the DRT. It is also apparent from the record that a letter dated 29.1.2013 was sent by the Appellant to the Bank stating that he is ready and willing to pay the remaining 75% of the bid amount. It is further stated that the amount is available in another account lying with the Bank. SARFAESI Application was dismissed on 30th January, 2013 which was communicated to the Bank on 4.02.2013. Again on 7.2.2013 Appellant sent a letter to the Bank conveying his willingness to deposit the remaining 75% of the amount with a rider that the Bank may wait till the period of appeal expires. Again a letter was sent on 19.2.2013 by the Appellant to the Bank to wait till 4.3.2013. However, certain discrepancies in the title were also noticed by the Appellant and a representation to that effect was made to the Bank on 26.2.2013 which was received on 27.2.2013. However, on 25.02.2013 a letter was sent by the Bank which was dispatched on 01.3.2013 and received by the Appellant on 04.3.2013 communicating that the amount deposited by the Appellant is forfeited as he failed to make payment by 21.02.2013.
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Appeal No. 98 of 2023-DRAT-Kolkata 14. It is also not in dispute that Civil Suit, O.S. 412 of 2013, was also filed by the Appellant before the District & Session Judge, Visakhapatnam for recovery of the amount which was decreed on 07.08.2017 by the VII Additional District Judge, Visakhapatnam. However, Appeal No. 1100 of 2017 was filed by the Bank before the Hon’ble High Court of Judicature at Hyderabad for the State of Telangana at Hyderabad. Suit was dismissed on the ground that Civil Court has no jurisdiction. Accordingly, Appellant preferred the application under Section 17 of the Act before the Learned DRT.
15. Learned Counsel for Appellant would submit that the Learned DRT has passed a sketchy order without assigning any reason. Learned DRT has not considered the fact that the Appellant was always ready and willing to deposit the 75% of the balance amount. Pendency of the SARFAESI Application was never disclosed in the advertisement. Advertisement itself, as quoted above, was very vague. However, Appellant participated in the auction proceedings; deposited 25% of the bid amount and was ready and willing to deposit the remaining 75% of the amount. But the Bank did not wait till the expiry of the period of appeal against the judgment by the Civil Court. Learned Counsel has placed reliance upon the judgment of Mohd. Shariq -vs- Punjab National Bank (2023 SCC OnLine SC 392) decided on 11th April, 2023 .
16. Per contra Learned Counsel for Respondent Bank submits that the Bank was within its jurisdiction to forfeit
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Appeal No. 98 of 2023-DRAT-Kolkata
the amount of 25% deposited by the Appellant as Appellant failed to deposit the remaining 75% of the amount within the stipulated period. Accordingly, Learned DRT has rightly dismissed the SARFAESI Application.
17. The case of Mohd. Shariq (supra) is squarely applicable to the facts of the present case. Hon’ble Apex Court has held that in that case also the correspondence was made by the 1st Respondent i.e. Appellant Respondent and the only request made by the Appellant was that he was ready and willing to pay the balance amount provided the matter is decided by Learned DRT.
18. In the present case also, if we go through the records, we find that the action of the Appellant was bona fide as he has already communicated to the Bank that he is ready and willing to deposit 75% of the amount but made a request to wait till the period of appeal against the judgment of the Civil Court expires. Appellant is an Auction Purchaser who invested the amount bona fidely without any collusion with the Borrower. He was having another account in the same Bank wherein the remaining 75% of the amount was available and Appellant undertook to pay the same as per the terms and conditions of the auction. Hence, it cannot be held that at any point of time any lapse was committed by the Appellant in making the deposit or to show his willingness to deposit the 75% amount.
19. Further even pendency of the S.A. was not disclosed by the Bank to the Appellant before auction. Bank is under an obligation to disclose all the pending litigation and
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Appeal No. 98 of 2023-DRAT-Kolkata encumbrances, if any, prior to the auction. Even certain discrepancies in the title were noticed by the Appellant. He sought clarification from the Bank but without addressing the Appellant’s grievances, Bank forfeited the amount which is against law.
20. Accordingly, I am of the considered view that the Respondent Bank was not entitled to forfeit the amount deposited by the Appellant. Learned DRT has committed manifest error in dismissing the SARFAESI Application. Appeal deserves to be allowed.
O R D E R
Appeal is allowed. Impugned judgment and order dated 19th April, 2023, passed by Learned DRT, Visakhapatnam dismissing S.A. 250 of 19 (Sri Pydi Ramesh Naidu & Another -vs- IDBI Bank), is set aside.
S.A. 250 of 19 (Sri Pydi Ramesh Naidu & Another -vsIDBI Bank) is allowed.
Respondent Bank is directed to refund the amount deposited by the Appellant within a period of thirty days. No order as to costs.
File be consigned to Record room.
Copy of the order be supplied to Appellant and the Respondents and a copy be also forwarded to the concerned DRT.
Order dictated, signed, dated and pronounced in open Court.
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Appeal No. 98 of 2023-DRAT-Kolkata (Anil Kumar Srivastava,J) Chairperson
Dated: 16th December, 2024
ac
2 issues framed by the court
Whether a bank is entitled to forfeit the earnest money deposited by an auction purchaser who was ready and willing to pay the balance amount but requested time due to pending litigation.
Whether the bank was obligated to disclose the pendency of a SARFAESI application prior to conducting an auction.
Colour shows how this judgement treated each authority
Mohd. Shariq -vs- Punjab National BankFollowed¶37
Mohd. Shariq -vs- Punjab National Bank (2023 SCC OnLine SC 392) · Who else cites this
1 provisions across 1 enactments
Pydi Ramesh Naidu
Pydi Annam Naidu
IDBI Bank Limited
Anil Kumar Srivastava
As recorded by the court registry
5 orders share this CNR
Judgements on the same questions, provisions and authorities, from every court
