Dismissed

M/S. Kotak Mahindra Bank v. D Balasubramanian

Madras HC10 Jan 2014A/233/2014

Case brief

AI extract

What is this about?

An applicant sought service charges for e-auction services. The court found the public auction was conducted by the Court, not the applicant. Service charges were denied, but Rs.2 Lakhs compensation for incidental expenses was granted.

What did the court decide?

Service charges denied; compensation of Rs.2,00,000 granted for incidental expenses.

M/S. Kotak Mahindra Bank Vs D Balasubramanian — Madras HC (2014) — LawSathi Research

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A.No.233 of 2014 in I.P.Nos.77 and 134 of 2002

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R.SUDHAKAR,J.

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This application is filed under Order XIV Rule 8 of the Original Side Rules and Section 90 of the presidency Towns and Insolvency Act III of 1909 to direct the respondent to pay the service charges amount along with applicable service tax of Rs.22,13,721/-.

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2.1. The brief facts of the case are as under: In response to the letter dated 13.9.2010 of the applicant, who offered to provide e- auctioning of the immovable properties stating that they are engaged in such activity for banks and other departments, the Official Assignee, by letter dated 13.9.2010, entrusted the work of e-publication for the auction sale of the property of the insolvent to the applicant herein.

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2.2. Pursuant to the same, e-publication of the auction sale

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notice was made stating that the properties will be sold by public auction on 8.11.2010. The upset price was fixed at Rs.20,00,00,000/-. Clause (14) of the said notice states that e-auction will be conducted by the applicant and the clause is set out hereunder:

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(2)

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“14. E-Auction will also be conducted by M.S.T.C. Ltd., for further details you may visit www.mstcecommerce.com Ph.No.25222842/25231584, Cell: 9445391081”

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2.3. Thereafter, tender-cum-auction sale was conducted on 15.11.2010. In that auction, S.C.Shah Investments and Nominees (CC Elevations Pvt. Ltd.) offered Rs.20.07 Crores. It is stated that the applicant collected the said amount and forwarded to the Official Assignee on 29.12.2010 and 28.1.2011 and, therefore, they are entitled to service charges. Hence, the applicant filed this application, for the relief stated supra.

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The said plea is resisted by the learned Official Assignee stating that the bid conducted by the applicant did not reach the reserve price and only in the sale conducted by the Court on 15.11.2010 the property was sold. In the report of the Official Assignee dated 27.7.2012, a specific plea was taken as under:

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“4. It is submitted that on 14.10.2008, 18.11.2008, 4.10.2010 and 8.11.2010, since the bid has not reached the reserve price, no steps taken to confirm the sale. Finally on 15.11.2010 directed the Hon'ble Court to conduct the e-auction through M/s.MSTC Limited based on the valuation report of the Official Assignee. Accordingly, by the letter dated 13.09.2010

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(3)

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MSTC Limited was directed to conduct e-auction. On the first auction sale no purchaser from M/s.MSTC Limited and 2^nd auction sale conducted on 9.11.2010, M/s.MSTC Limited brought the purchaser to the extent of Rs.11,00,00,000/- (Rupees eleven crores only).

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The affidavit stating that the entire auction sale was conducted before this Hon'ble Court by the applicant is false.”

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The objection by the learned counsel for the insolvent is also on the same line. She contended that at best the applicant will be entitled to compensation for web page advertisement and incidental expenses and they are not entitled to service charges in terms of Clause (14) of the auction sale notice as the sale was not effected by the applicant, but only by this Court. They are not entitled to claim charges as no sale was conducted.

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To test the veracity of the statement of the Official Assignee, this Court perused the order dated 15.11.2010 passed by this Court in A.No.406 of 2010. For better clarity, the said order dated 15.11.2010 is extracted hereunder:

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“In respect of the auction sale of the schedule of property "Bhuvaneswari Theatre" situated at Door No.81, New No.138, Perambur Barracks Road, Vepery, Madras, auction was held in the open Court, 1.Afsal,

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(4)

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2.Shiva Trading Corporation, 3.S.A.Shah Investments and 4.J.Aswin participated in the public auction. Auction was held starting with the reserve price of Rs.15 Crores. In the auction held in the court, the highest offer of Rs.20.07 Crores was offered by M/s.S.A.Shah Investments. Mr.Narendar Shah who represents M/s.S.A.Shah investments is present before this Court.

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Already the M/s.S.A.Shah Investments have remitted a sum of Rs.1.40 Crores and Rs.1 Crore has been paid by way of two cheques by the successful bidder Mr.Narendar Shah towards the balance EMD today to the Official Assignee, that is one cheque dated 15.11.2010 for a sum of Rs.50 Lakhs drawn on Axis Bank in favour of Official Assignee and another cheque dated 15.11.2010 for a sum of Rs.50 Lakhs. These payments have been recorded and the cheques are handed over to the Official Assignee. Thus the total amount of Rs.2.40 Crores has been paid towards EMD by the sucessful bidder. The balance sale consideration, to be paid by the successful bidder M/s.S.A.Shah Investments, is Rs.17.67 Crores (Rs.20.07 Crores – Rs.2.40 Crores).

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The successful bidder M/s.S.A.Shah Investments represented by Mr.Narendar Shah who is present here, is directed to pay the balance sale consideration within a period of 75 days from today in two equal instalments. 50% of the balance sale consideration to be paid with in 45 days from today. Thereafter the

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(5)

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balance 50% to be paid within the 75^th day from that day. This schedule has been agreed upon by Mr.Narendar Shah, the representative of M/s.S.A.Shah Investments. This submission is recorded.

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It is made clear that if the above payment schedule is not adhered to by the purchaser and commits default in any one payment, the entire deposit paid by him viz., Rs.2.40 Crores will be forfeited without further reference to this Court.

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In view of the confirmation of sale in favour of M/s.S.A.Shah Investments, the Official Assignee shall return the EMD to other unsuccessful bidders who have paid the EMD.

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The other co-sharers of the schedule property who are not the insolvents are represented this Court through counsel and they are agreeable for the sale and only with their consent the public sale was conducted before this Court today.

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The Official Assignee shall suitably consider, at the time of appropriation from this sale proceeds, the claim of the agreement holder who has filed a suit in C.S.No.602 of 2005.

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On payment of entire balance sale consideration, the Official Assignee shall execute the sale deed in favour of M/s.S.A.Shah Investments represented by

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(6)

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Mr.Narendar Shah or his nominees.

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The Official Assignee is directed to strictly follow the payment schedule and report to the court, if there is any delay by the purchaser.

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In respect of the other property situated behind the property sold today, the Official Assignee is directed to file a report as to whether that property needs to be sold or not.

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Call on 02.10.2010.”

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From a perusal of the order dated 15.11.2010, it is clear that nowhere it is stated that the sale of this property was conducted by the applicant. In the said order, it is recorded that four bidders, namely, (i) Afsal; (ii) Shiva Trading Corporation; (iii) S.A.Shah Investments, and (iv) J.Aswin, participated in the public auction held in the Court and Narendar Shah, representing M/s.S.A.Shah Investments, was declared the highest bidder in a sum of Rs.20.07 Crores and the sale was confirmed in his favour. It, therefore, follows that the objection raised by the Official Assignee that the applicant did not conduct the e-auction in terms of Clause (14) of the auction sale notice and is not entitled to service charges is sustained.

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I find that Clause (14) of the auction sale notice clearly

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(7)

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provides that e-auction will be conducted by the applicant. But, that has not happened and it was the Court which has conducted the public auction on 15.11.2010. Service charge, if any, is payable to the applicant only if e-auction is conducted by it. The order dated 15.11.2010 passed in A.No.406 of 2010 clearly shows that public auction was conducted in the Court. Therefore, the applicant will not be entitled to service charges.

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It is another matter that some amount has been routed through the applicant, but on that basis it cannot be said that sale was confirmed in the e-auction conducted by the applicant. At best it could be stated that the applicant received and transmitted the amount to the Official Assignee for which the Court is inclined to grant certain amount of compensation in the nature of incidental charges.

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For the purpose of determination of the amount of compensation to be granted to the applicant towards the charges incurred by the applicant pursuant to the auction sale advertisement, the Court considered the bid sheets dated 4.11.2010, bid history dated 4.11.2010, auction sale notice dated 8.11.2010 and the uploading of the details in the website. The expenses incurred by the applicant in this regard should be duly compensated. Keeping in mind all these expenses, the Court is inclined to order a sum of Rs.2,00,000/-

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(8)

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(Rupees Two Lakhs only). The said amount of Rs.2,00,000/- (Rupees Two Lakhs only) shall not be treated as payment of service charges, as this Court is of the considered view that the sale has not been conducted by the applicant and, therefore, the applicant will not be entitled to service charges as claimed.

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Henceforth, the Official Assignee is directed to take up the auctioning of properties by using the infrastructure facilities available with the office of the Office Assignee and expend the same out of the reserve funds. The Official Assignee sought permission of this Court to move a separate application in this regard, and is permitted.

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This application is disposed of accordingly.

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5.12.2014

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Index : Yes Internet : Yes

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Note to Registry:

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Issue order copy on 5.1.2015.

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sasi