Allowed

M/S.Silk Park v. the Authorized Officer, State Bank of Travancore

Kerala HC5 Sept 2016WP(C)/5546/2016

Case brief

AI extract

What is this about?

The Court held that the petitioner need not compensate the auction purchaser for interest. Since the sale was not confirmed by the Bank, the auction purchaser voluntarily deposited the balance amount and had no statutory right to interest. The petition was dismissed, and title deeds directed to be returned.

What did the court decide?

Petitioner not directed to pay compensation; title deeds to be returned forthwith.

M/S.Silk Park Vs the Authorized Officer… — Contract and Commercial Disputes | Kerala HC (2016)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT:

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THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE

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MONDAY, THE 5TH DAY OF SEPTEMBER 2016/14TH BHADRA, 1938

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WP(C).No. 5546 of 2016 (P)

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PETITIONER:

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M/S.SILK PARK, DOOR NO.5/510, HOSPITAL ROAD, PERINTHALMANNA, MALAPPURAM-679322, REPRESENTED BY ITS PARTNER SRI.P.SHIHABUDEEN.

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BY ADVS.SRI.S.EASWARAN

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SRI.M.A.AUGUSTINE

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RESPONDENT:

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1. THE AUTHORIZED OFFICER, STATE BANK OF TRAVANCORE,PERINTHALMANNA, MALAPPURAM DISTRICT, PIN-679322.

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2. THE DEBT RECOVERY TRIBUNAL (KERALA & LAKSHADWEEP), REPRESENTED BY REGISTRAR, ERNAKULAM-682011.

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*ADDL. R3 IMPLEADED

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3. MUHAMMED ABDUL KAREEM FAISAL, S/O.MUHAMMADALI HAJI, PUTHENKOT VADAKKEVEETTIL HOUSE, KAPPU, VETTATHOOR, PATTIKAD PO., MALAPPURAM DISTRICT - 679 325.

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ADDL.R3 IS IMPLEADED AS PER ORDER DATED 19.02.2016 IN IA.2418/2016

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R1 BY SRI.T.SETHUMADHAVAN (SENIOR ADVOCATE) ADV.SRI.JAYESH MOHAN KUMAR, SC R2 BY SRI.N.NAGARESH, ASSISTANT SOLICITOR GENERAL BY ADV. SRI.K.R.RAJKUMAR, ADDL.CGSC ADDL R3 BY ADVS.SRI.K.MOHANAKANNAN

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SMT.A.R.PRAVITHA

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THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 15-07-2016, THE COURT ON 05-09-2016 DELIVERED THE FOLLOWING:

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mbr/

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WP(C).No. 5546 of 2016 (P)

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APPENDIX

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PETITIONER(S)' EXHIBITS:

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EXHIBIT	P1-	COPY OF THE JUDGMENT DATED 27-7-2015 IN WP NO. 19815 OF 2015.
EXHIBIT	P2-	TRUE COPY OF THE INTERIM ORDER PASSED BY THE DEBT RECOVERY TRIBUNAL.
EXHIBIT	P3-	TRUE COPY OF THE ORDER DATED 19-1-2016 OF THE DRT.
EXHIBIT	P4-	TRUE COPY OF THE LETTER DATED 21-1-2016 ISSUED BY THE 1ST RESPONDENT.
EXHIBIT	P5-	TRUE COPY OF THE ORDER DATED 1-2-2016 ISSUED BY THE DRT.
EXHIBIT	P6-	TRUE COPY OF THE I.A. 375/2016 IN SA 376 OF 2015.
EXHIBIT	P7-	TRUE COPY OF THE ORDER DATED 8-2-2016 ISSUED BY THE DRT.
EXHIBIT	P8-	COPY OF THE LETTER DATED 12.4.2016 ISSUED BY THE BANK TO THE PETITIONER.
EXHIBIT	P9-	COPY OF THE LETTER DATED 20.4.2016 ISSUED BY THE BANK TO THE PETITIONER.
EXHIBIT	P10-	COPY OF THE LETTER DATED 21.5.2016 ISSUED BY THE BANK TO THE PETITIONER.
RESPOND -------	ENT(S)' -------	EXHIBITS: NIL ---------

//TRUE COPY//

P.S. TO JUDGE

mbr/

A.M. SHAFFIQUE, J.

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=============== W.P. (C) No. 5546 of 2016

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==================

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Dated this, the 5^th day of September, 2016

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J U D G M E N T

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This writ petition has been filed seeking time for payment of the entire debt due to the respondent Bank. In fact, the secured asset was taken possession by the Bank on 29/8/2015 and sale was held on 20/1/2016. During the relevant time, the matter was pending before the Debts Recovery Tribunal in SA No.376/15. The Bank permitted the petitioner to discharge the liabilities on payment of `3,78,62,391/- as on 21/1/2016 with future interest and costs, failing which, it was informed that the sale will be confirmed in favour of the bidder. By an order dated 01/02/2016, the Debts Recovery Tribunal extended the time for payment to the petitioner by 6/2/2016. Petitioner sought for further extension of time and by order dated 8/2/2016, the Debts Recovery Tribunal granted one more opportunity to the petitioner to pay the entire secured debt

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W.P(C) No.5546/16

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payable to the Bank as on 12/2/2016. Tribunal further observed that if the amount is not deposited by the petitioner, they could receive the balance amount from the auction purchaser and proceed further in accordance with law. It is at this stage that this writ petition has been filed.

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During the pendency of the writ petition, the auction purchaser got impleaded as additional 3^rd respondent and an interim order dated 7/4/2016 came to be passed taking into account the fact that the petitioner had remitted certain amount as directed by the Court. Accordingly, direction was issued to release `4.78 crores deposited by the additional 3^rd respondent, the auction purchaser. Further it was observed that the liability of the petitioner to compensate additional 3^rd respondent for the interest component of the amount deposited by the additional 3^rd respondent pursuant to the auction confirmed in his favour will have to be decided in the writ petition. Since the entire payment was made, the Bank was directed

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W.P(C) No.5546/16

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to release the properties belonging to the petitioner along with title deeds. It is now submitted by the learned counsel appearing on either side that the entire liability of the Bank had been settled. The amount payable to the auction purchaser had been refunded and the secured asset had been repossessed by the petitioner. The petitioner however has a case that they had suffered certain damage on account of negligence on the part of the respondent Bank. In so far as no such claim is pending before this Court, the said right of the petitioner is left open to be decided in appropriate proceedings.

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The only question remaining to be considered is whether petitioner should compensate the auction purchaser. According to the petitioner, he had a right to redeem the mortgage until registration of the sale deed in favour of the auction purchaser. According to the auction purchaser, he had deposited 47,70,000/- as Earnest Money Deposit, a further amount of 71,80,000/- towards part

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W.P(C) No.5546/16

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payment aggregating 1,19,50,000/- being 25% of the bid amount and a further amount of 3,58,50,000/-. The main contention urged by the petitioner is that when he has got the right to redeem the mortgage before issuance of the sale certificate, as held by the Apex Court in Mathew Varghese v. M. Amritha Kumar [(2014) 5 SCC 610], he had only exercised the said right and when the entire amount due to the Bank with interest and cost had been remitted and the payment has been made as permitted by this Court, there cannot be a further liability cast on the petitioner. It is also argued that there was no necessity for the auction purchaser to have deposited the entire amount on account of the fact that the sale had not been confirmed by the Bank. The liability to pay 75% of the balance amount arises only within 15 days of confirmation of sale which eventuality did not happen and therefore it is contended that the petitioner should not be made liable to pay any further amount.

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W.P(C) No.5546/16

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A statement is filed by the additional 3^rd

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respondent wherein a claim for interest has been made. According to the 3^rd respondent, at a reasonable estimate, taking into account rate of interest at 6%, the amount may come to `4,85,591/-.

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It is not in dispute that the amounts paid by the auction purchaser were available with the respondent Bank during the relevant time. Perusal of the records would show that petitioner was granted time upto 12/2/2016 to redeem the mortgage as per directions issued by the Debts Recovery Tribunal. When the petitioner challenged the said order before this Court, this Court passed an interim order on 12/2/2016, which reads as under;

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“Taking note of the payment of ` 93.70 lakhs effected by the petitioner today, there will be an interim stay as prayed for till then.”

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The case was again posted on 19/2/2016. On that day, it was observed that the petitioner had remitted a further amount of `95 lakhs. On 26/2/2016, this Court noticed the fact that

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W.P(C) No.5546/16

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the petitioner had paid a further amount of 1 crore on 26/2/2016 and the petitioner offered to pay the balance amount of 92 lakhs before 18/3/2016. On 23/3/2016, this Court observed that `84 lakhs has been transferred to the respondent Bank on the said date. It is thereafter that having taken note of the fact that the entire amount had been paid, interim order dated 7/4/2016 has been passed. Therefore, the time that has been spent is only between 12/2/2016 and 7/4/2016.

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The question is whether during the interregnum period, the auction purchaser should be compensated any further. It is relevant to note that the sale was not confirmed by the respondent Bank. As per the Security Interest (Enforcement) Rules, 2002, especially Rule 9(4), the balance amount of purchase price payable shall be paid by the purchaser to the authorised officer on or before the fifteenth day of confirmation of sale of the immovable property or such extended period as may be agreed upon in

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W.P(C) No.5546/16

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writing between the parties. This is an instance where there was no confirmation of sale and therefore an eventuality as contemplated under Rule 9(4) did not arise. In other words, the additional 3^rd respondent had voluntarily deposited the balance 75% of the auction amount. The additional 3^rd respondent gets a right or interest in the property only after confirmation of sale. Before confirmation of sale, he is only getting a right to participate in the auction and being declared as the highest bidder. Apparently, since the money is deposited before the Bank, 3^rd respondent can only seek for interest from the Bank. However, no such provision is made under the statute to enable the auction purchaser, whose sale is not confirmed, to receive any amount as cost/interest.

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As far as the petitioner is concerned, he had deposited the full amount by intervention of this Court and all steps had been taken by the petitioner to repay the entire amount and it will not be appropriate to direct the petitioner

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to pay further amount as compensation to the auction purchaser. Every auction purchaser in a distress sale takes the risk of the sale being set aside at a later stage and by intervention of Court, no equity can be worked out in their favour unless a specific mention is made in that behalf. As far as the present lis is concerned, I do not think that taking into account all the factual circumstances involved in the matter, petitioner should be mulcted with the liability to pay compensation to the additional 3^rd respondent. The title deeds of the petitioner shall be returned forthwith.

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Writ petition is, therefore, closed.

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Sd/- A.M. SHAFFIQUE, JUDGE

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//True Copy//

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P.S to Judge

M/S.Silk Park v. the Authorized Officer, State Bank of Travancore

Case brief

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M/S.Silk Park v. the Authorized Officer, State Bank of Travancore

Case brief

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