Dismissed

Aggarwal Enterprises v. Punjab National Bank

DRT7 Oct 2023SA/162/2023

Case brief

AI extract

What is this about?

The applicant filed a Securitization Application seeking refund of earnest money deposited for auction properties, alleging non-disclosure of electricity dues, incorrect possession status in advertisements, and existence of pending stays. The court dismissed the application, suspecting proxy litigation due to shared counsel, and finding no merit in the claims.

What did the court decide?

The Securitization Application was dismissed; the earnest money deposited by the applicants was not refunded.

Aggarwal Enterprises versus Punjab National Bank — Contract and Commercial Disputes | DRT (2023)

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SA No.162/2023

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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SA No.162/2023 M/s Aggarwal Enterprises and another Versus Punjab National Bank and another

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07.10.2023 Item No.13

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Present:

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Sh.Rahul Garg, Counsel for the Applicants.

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Sh.CS Pasricha, Counsel for respondent No.1/Bank alongwith Sh.Nand Kishore Barnwal, Chief Manager and Ms.Priyanka Gupta, Chief Manager (Law), PNB. Sh.Vivek Verma, Counsel for respondent No.2.

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M/s Aggarwal Enterprises and another (Applicants) have filed the present Securitization Application under Section 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, against Authorized Officer, Punjab National Bank and another (Respondents).

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Admittedly, PNB had granted credit facilities amounting to Rs.33 crores and odd sum to M/s Renny Steels (respondent No.2). Since, M/s Renny Steels failed to make the repayment of the loan, Bank initiated the SARFAESI proceedings.

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Admittedly, M/s Renny Steels has challenged the action of the Bank in the Hon’ble High Court. It has been brought to my notice that at least three writ petitions filed by M/s Renny Steels are pending against PNB. It is admitted on the record that Mr.Vivek Goyal, counsel in the present case, is also representing M/s Renny Steels in the Hon’ble High Court. Admittedly, on 02.05.2023, the Authorized Officer, PNB had issued auction notice, which was published in two newspapers i.e. in ‘Business Standard’ and ‘Dainik Jagran’, for the auction of eight properties. Out of the same, applicants participated in the auction of two properties. The reserve price of one property was Rs.7,45,56,000/- and the reserve price of the other property was Rs.5,21,54,000/-. Applicants gave bid of Rs.7,52,66,000/- against the reserve price of Rs.7,45,56,000 and Rs.5,26,64,000/against the reserve price of Rs.5,21,54,000/- and also deposited 10% of the bid

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SA No.162/2023

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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amount. Applicants were declared successful bidders. However, applicants did not deposit 15% of the bid amount within 24 hours and consequently the Authorized Officer, PNB forfeited the EMD deposited by the applicants.

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Aggrieved by the action of the Bank, in forfeiting the amount, applicants have filed the present SA.

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In the SA, applicants have alleged that Bank had not disclosed in the publication that a sum Rs.8 crores and odd sum was due by the borrower to the Himachal Pradesh Electricity Board towards electricity charges. On 09.06.2023, applicants wrote to the Bank stating that it has come to their notice that a sum of Rs.10 crores (approximately) is due by the borrowers to the Electricity Board and GST Department. It is alleged that three writ petitions are pending in the Hon’ble High Court and in one writ petition, the Hon’ble High Court has passed the stay order for not taking any coercive action against the borrowers and in these circumstances, the Bank was not justified in putting the property to auction. Applicants requested that the Bank be directed to refund the earnest money deposited by them.

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In the reply to the SA, the Authorized Officer of PNB has denied the facts mentioned in the SA. It is alleged that in fact the present SA has been filed at the behest of the borrower. Applicant is a man of the borrower. It is stated that the counsel who is representing the applicants in the present case, is also the counsel of the borrower in the Hon’ble High Court. The applicants and the borrower are in collusion with each other. In fact, they are hand-in-glove. It is also alleged that the Bank was not aware of the fact that any electricity and GST arrears were due from the borrower. It is stated that in the publication notice, published in English newspaper ‘Business Standard’ Bank had specifically mentioned that it was not in physical possession of the property. However, there was an error in the advertisement, published in Hindi Newspaper ‘Dainik Jagran’ where it was

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SA No.162/2023

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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mentioned that Bank was in physical possession of the property. This error had come to the notice and it had given corrigendum on 05.05.2023 in Dainik Jagran that Bank was not in physical possession of the property. Further, on the portal of the e-auction, it was categorically mentioned that Bank was not in physical possession of the secured assets. Accordingly, it is prayed that the SA be dismissed.

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I have heard Mr.Rahul Garg, counsel for the applicants; Mr.CS Pasricha, counsel for Authorized Officer, PNB and Mr.Vivek Verma, counsel for respondent No.2.

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Mr.Rahul Garg, counsel for the applicants has argued that the Bank was fully aware of the fact that a sum of Rs.8 crores and odd was due sum from the borrower to the electricity Board. Despite this, Bank did not disclose this fact in the publication. This amounts to misrepresentation on the part of the Bank and accordingly, on this ground the applicants are entitled to the refund of earnest money deposited by them. He further argued that the auction was fixed up for 08.06.2023 and on 09.06.2023, applicants had written a letter to the Bank stating that a sum of Rs.8 crores and odd sum was due from the borrower to the electricity Board. Mr.Garg further argued that in the Hindi publication it was mentioned that Bank was in physical possession of the two properties, in respect of which applicants had given the bid. In fact, the Bank was not in physical possession and was only in symbolic possession of the same. This amounts to misrepresentation on the part of the Bank. The Bank also did not disclose the fact in the publication that three writ petitions were pending in the Hon’ble High Court. Mr.Garg argued that on these grounds, the applicants are entitled to the refund of the earnest money.

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9. Per contra , Mr.CS Pasricha, counsel for respondent Bank has argued that there was no misrepresentation by the Bank. In the publication, which was given

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SA No.162/2023

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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in English newspaper ‘Business Standard’ it was categorically mentioned that Bank was not in physical possession of the two properties, of which the applicant had given the bid. However, Mr.Pasricha, candidly admitted that in the Hindi newspaper it was wrongly mentioned that Bank was in physical possession of the property. However, when the Bank came to know of this error, on the next day it had got published a corrigendum stating that Bank was not in physical possession of these properties.

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Regarding the electricity dues, counsel for the Bank submitted that the Bank was not aware of the fact that any arrears were due from the borrower to the electricity Board. Regarding the writs, Mr.Pasricha submitted that there was no stay order by the Hon’ble High Court for conducting the auction in the present case. Mr.Pasricha argued that the present litigation is proxy litigation. This SA has been filed by the applicants at the behest of the borrower. Drawing my attention to the copy of memo of parties of CWP, filed in the Hon’ble High Court, Mr.Pasricha submitted that Mr.Vivek Goyal, counsel for M/s Renny Steel in the Hon’ble High Court, is also representing the present applicants in the SA. This shows that the applicants were fully aware of the proceedings and they want to wriggle out of the bids on flimsy grounds.

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I have considered the rival contentions.

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It has already been mentioned that the case of the applicants is

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based on following three grounds:-

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i. The Bank had not disclosed in the publication that there are electricity dues from the borrower.

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ii. The Bank was not in physical possession of the property. However, it had wrongly mentioned in the publication that it was in physical possession of the property.

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iii. There was a stay order passed by the Hon’ble High Court against the auction. However, Bank did not disclose this fact in the publication.

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Mr.Garg, has not responded to the contention of Mr.Pasricha that Mr.Vivek Goyal, who is counsel for M/s Renny Steels in the Hon’ble High Court,

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SA No.162/2023

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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is also the counsel in the present case. That gives rise to the presumption that the applicants are hand-in-glove with the borrower and they were fully aware of the facts of the present case.

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Be that as it may, as far as the dues of electricity Board are concerned, the applicants had sent an email to the Bank on 09.06.2023. However, in that letter they did not mention the fact that any electricity arrears were due. However, in another letter of even date, which was given by hand, it was mentioned that it has come to their notice that a sum of Rs.8 crores and odd sum is due by the borrower to the electricity Board. Mr.Pasricha has produced on the record the reply of the said letter and it has been mentioned therein that the Bank is not aware of the fact that any electricity arrears are due from the borrower. Mr.Pasricha has also produced on the record a copy of the letter from electricity Board dated 12.06.2023 to the bank wherein it has mentioned that electricity arrears are due from the borrower. As per Bank, this letter was received on 15.06.2023. It is not understandable as to what made the electricity Board to communicate with the Bank when there was no communication by the Bank to the electricity Board.

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I smell rat in this. I am of the considered view that this letter was purportedly got written by the borrower from the electricity Board to the Bank. Regarding the writs, it has already been mentioned that Mr.Vivek Goyal is the counsel in the Hon’ble High Court as well as in the present SA. In these circumstances, it can be said that the applicants were fully aware of the facts of the case.

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Regarding the physical possession, it is admitted on the record that in the advertisement which was published in the Business Standard, it was mentioned that the Bank was not in physical possession. However, in the Dainik Jagran, it was mentioned that the Bank was in physical possession. However, Bank had got published a corrigendum in the paper.

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SA No.162/2023

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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Be that as it may, it is admitted on the record that on the portal of the e- auction, it was categorically mentioned that the Bank was in symbolic possession of the property. Moreover, Mr.Vivek Goyal, counsel for the borrower in the Hon’ble High Court, is also representing the applicants in the present SA. In these circumstances, the applicants had the knowledge of the facts.

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Having considered all the aspects of the case, I am of the considered view that applicants have made an abortive attempt to wriggle out of the auction as well as to seek refund of the earnest money deposited by them. There is no merit in the present SA and the same is hereby dismissed .

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All the pending IAs, if any, are also disposed of, accordingly. File be consigned to record room after due compliance.

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Pronounced in open court. MANOJ/07.10.2023

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(A S Narang) Presiding Officer DRT-I, Chandigarh

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Aggarwal Enterprises v. Punjab National Bank

Case brief

What is this about?

What did the court decide?

Aggarwal Enterprises v. Punjab National Bank

Case brief

What is this about?

What did the court decide?

What the court decided

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