Allowed

Mansaram Gupta v. M/s. Andhra Bank and Another

Telangana HC6 Dec 2021WP/26593/2019

Case brief

AI extract

What is this about?

This High Court allowed a writ petition against a public sector bank for failing to refund the 25% auction deposit. The court held that refunding the money is necessary as the auctioned property was an unauthorized structure, rendering the sale unfair and the bank liable.

What did the court decide?

Directed Respondent 1 to refund the deposit amount of Rs. 54,54,000 with interest within eight weeks.

Mansaram Gupta Vs M/s. Andhra Bank and… — Contract and Commercial Disputes | Telangana HC (2021)

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HIGH COURT FO

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i^Jf,::l3l[,35 ]:h3]i3,*i^{Ar HYD ERABAD}

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MoN?1Y,IIE stxrH DAY OF DECETVBER TWO THOUSAND AND TWENTY ONE

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PRESENT

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THE HONOURABLE SRI JUSTICE UJJAL BHUYAN THE HoNoURABLE SMi}SsTIcE P, MADHAVIDEVI

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Between:

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WRIT^pET|TION NO: 26593 OF 2019

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Kama Mansaram Gupta. ta pu ri Coiony, phase s/o. lare.lvlurarilal Gupta, aged about - l, Srrl; ga ;CSi6hv,,rjvoElr nuo69 years, R/o Plot No.762, ...PETITIONER

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AND

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N,4is. Andhra Ba n-k., rep. by its chief [,4anager and Authorized officer. soeciarized ASSet Kecovery Manaoement Branch, Andhra Bank Building, Sultan Bizar, Doti. Hyderabad.

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2 M/s. SEW lnfrastructure Limited, 6-3-871, Snehalatha, Greenlands Road, Begumpet, Hyderabad.

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.,.RESPONDENTS

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Petition under Article 226 of lhe Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue a Writ of Mandamus or any other appropriate writ declaring that the action of the 1't respondent bank in auctioning the Sth floor built up area of Naspur House, Himayathnagar, Hyderabad, which is not covered by a construction^permission and it is an unauthorized construction and without having a valid mortgage of^{the built up} area since the mortgage was in respect of^{the undivided portionof the landin} premises No.3-6-436 to 438, Naspur House, Himayathnagar,^{Hyderabad as per} auction notice dated 05/07/2019^{and not returning the 25% of the highest bid amount} (Rs.54.54 lakhs) to the petitioner, is arbitrary and illegal and^{direct the 1st respondent} bank to return/refund the said^{amount of Rs.54,54,0001 to the petitionerwithinterest} at 18%^per annum from^{2410712019till the date of payment}

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IA NO : 1 OF 20'19

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Petition under Section¹⁵¹ cPc^{prayingthat in the circumstances stated in the} affidavit filed in support of^{the petition,the High Court may be pleased to directthe} .1st respondent bank to return/refund the 25% bid amount of the petitioner aggregating to Rs.54,54,000/-^{to the petitionerwith interest at 1B% per annum from} 24107 t2}1g till the date of^{payment, pending disposal of the writ petition'} COUNSEI fOr thE^{PEtitiONET:SRIVEDULAVENKATARAMANA, SENIOR COUNSEL} M/S BHARADWAJ ASSOCIATES

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Counsel for the Respondent^{No.1: SRIA. KRISHNAM RAJU}

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Counsel for the Respondent^{No'2: NONEAPPEARED}

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The Court made the following:^ORDER

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I .IUSTICE^{I.]J.IAI'I]HU YA N} HONOU^{TABI-8, SR} A,N D . .ri srtcu^{p' 114P111V1 l)E\ I} HONOUI{,.BLIi^SMT

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W.P.N^o.265930 F 2019

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9 rpnt^{a on ':tlesri Jusice t')iial Bhtrvan)}

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Heard^{lear redcounsellor the panies'}

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By^{filing this writ petition under Articlc 226 of the} Constitution^{of India, petitionerseeks a direction to respondent} No.l/Andhra^{Brnk to reluncl an amount of Rs 54'54 lakhswith} applicable^{interr st fiom the date of deposit till payment'}

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Accordin 1^{to the petitioner,respondentNo 1 i e} '^{r\ndhra Bank} (since merged vith^{the tJnion Bank ol India) had issued a salenotice} dated 05.07.20^{9 tbr sale ol the schedule propcrtybY r^,ay of'public} atrction on 24.{^{7 .2019.l'he details of the schedule pr,rperty are as} under:

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"Building )roperty at 3-6-436^{to 438, westernside'5rnflcor'} 'Naspur t ouse', Himayatnagar,^{Hyderabad, Built up areaof} 3842.50 s l, ft.^{situatedat Himayatnagar,Ward No 3, Blo':k No 6'} Municipal Corporation,^{Hyderabad belonging tolVl/s SEW} lnfrastruct tre Limited,^{situated at 'Naspur House,Himayatnagar'} Hyderaba I and bounded^{by: East:Road;West: H'No'3-6-436&} 3-6-437,I orth:^{Road; South:I,4ain Road".}

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4 Petitiont r participatecl^{in the auction sale, whichwe's held on} 24.07.2019 anr his^{bid was the highest. 'J'herelore, he was ccclaredas} the successful biddcr^{at his bid amountof Iis 2,18,16'000'00rvhich} was above the^{'escrvc pnce o1'I{s.2,t 6,00,000 00'}

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petitioner had already deposited lO% byway ofearnest money with respondent No. l/Andhra Bank i.e., on 22.07.2019. Thereafter, on the day of auction i.e.,24.07.2019 petitioner paid l5%of the bid amount, totalling 25% of the bid amount which ,, with Rule 9(3) of the Security Interest ,Urr".".n-,*rrffi;; The 25% ol the bid amount deposited b1, the petitioner with respondent No. I is Rs.54,54,000.00. As per requirement ol the aforesaid Rulcs, petitioner was required to pay 7"5%o of theremaining balance amount within a forlnight. It was at that stage that petitioner rnade further enquiries about the schedule property. On such enquiry, it was found that the 5,r, floor of the building, which is the schedule property, is an irnauthorized construction, inasmuch as as per the sanction plan of (jreater Hyder.abad Municipal Corporation (GHMC), construction was permitted only up to the 4rh floor. Thus, it transpired that the 5th floor of the building which is the schedule property is an unauthorized struclure.

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Faced rvith the above situation, petilioner requested respondent No.l./Andhra Bank to return back the amount deposited by him, as the auctioned property being an unauthorized construction would have no utility; rather the propefty may 1'acc advcrsc action at the hands of civic authorities. He was not in a position to get a clear and zrnarketable title over the same. In this connection, petitioner had

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)

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submitted^{severi I representationsas well as pleader's notjce'but to no} avail.

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7 In the ab,,ve^{circumstances, present writ petition bas been filed} seeking the^{reli f as indicated above'}

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This cou t, by^{order dated02'12'2019,had issuednoticeand} further passed^{an interim order directing respondent No'l not to} forfeit the 25ol bid^{amount depositedby the petitioner on 22'01'2019} and 24.07 .201!,^{aggregatingRs. 54,54,000.00.}

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g. Responc :nt No.l has hled a counter^{affidavitthrough Estranluli} Srinivasa Red< y, who is working as Chief^{Manager in LJnionBank of} lndia at the S1^,ecialized Asset Recovery Management^Branch,Koti, Hyderabad anc who is also the Authorised Officer of respondent No.l under the Secr ritization and Reconstruction of Financial Assets and Enforcement c I Security Interest Act, 2002 (briel1y 'the SARFAESI Act' hereinafte :) in respect of the loan account of respondent No.2.

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It is st rted that respondent No.1 i.e., Andhr.a Ilank was amalgamated/rLerged with Union Bank of India w.e.f , 0t.04,2020. Insofar claim c I the petitioner is concemed, it is stated :hat petitioner has got an effi:acious remedy by way of filing an application under Section 17(l) of the SARFAESI Act befbre the jurisdictional Debts Recover y Tribunal. Without availing the afbresaid remedy, z petitioner has straight away filed this wr.it petition, which is not

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maintainable. ln this connection, reliance is placed on a decision of the Suprer.r.re Coun in AGARWAL TRACOM PVT. LTD. v PUNJAB NA-I'IONAL BANK AND OT}IERS1.

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I l. On merit, it is contended that the auction sale was conducted and the secured asset was auction sold on "as is where is",^"as is what is" and "whatever there is" basis. Petitioner's successful bid arnount was Rs.2,16,18,000.00, out of which he had^deposited Rs.54,54,000.00 within 24 hours of the auction. Respondent^No. I^has issued a letter of confirmation of sale on^25.07 .2019.^In terms^{of Rule} 9(a) of the Security Interest^{(Enforcement)} Rules,^{2002, petitioner} was under an obligation to pay the balance amount of^{the purchase} price within 15 days of confirmation of sale. However,^petitioner failed to do so. Therefore, in accordance^{with Rule 9(5), the deposit} made by the petitioner was required to be^forfeited.

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Petitioner, having^{participated in the auction sale voluntarily,is} estopped from raising any objection^{as to the title or rnarketabilityof} the secured asset sold in the^{public auction.}

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On the allegation of the^{petitionerthat the securedasset wasan} unauthorized construction,^{respondent No. I has replied to the same in} paragraph 8 of the counter affidavit^{in the tbllowingmanner:}

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1 (2018) 1 scc 626

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"Without prejudice to above contention the resl ondent bank submits that it had no knowledlle acout the llleged unauthorized construction of 5'" floorⁱⁿ the^said buil ling, and resultantly, it could not be disclose{l by the Aut rorised Officer. lt is not feasible for the bank to disclose son ething which is not within their knowledge and there is lo mandate on the bank under law lo lace the cor requences despite not having knowledge the f,ank ou( nt to have disclosed it".

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Finally, i is stated that 25o/o ofthe sale price deposited by the petitioner i.e.,54,54,000.00 was forfeited on 02.11.2019 prior to passing of the i rterim order on 02.12.2019

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ln the , ircumstances, respondent No.1/Andhra B:rnk seeks dismissal of thr writ petition.

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Respond:nt No.2 i.e., the borrower has not tiled any counter atlldavit.

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Learned counsel for the parties argued at length a,lvaltcing their respective cast s which are on pleaded lines.

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We hav, given our due consideration to all aspccts of the matter as well as to tl : rival contentions.

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Responr ent No.I had issued sale notice for sale ol immoveable property on⁽ 5.07.2019 under the SARAFESI Act read with the proviso to Ru te 8(6) of the Security Interest (Enforcement) Rules, 2002 schedul: ng auction of the schedule properly on 24.07.2009.

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From the schedule of property, which we have already extracted, it is seen that the sale pertained to 5'h floor of the building known as "Naspur House' at Himayatnagar, Hyderabad.

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It is the specific allegation of the petitioner that the 5'h floor of the schedule property is an unauthorized structure in view of the fact that as per the sanction plan of GHMC, construction was permitted only up to the 4'h floor. Respondent No.l in paragraph 8 of the counter affidavit, which we have already^'extracted, has made a statement that it had no knowledge about the alleged unauthorized construction of the 5tl' floor. Therefore, this fact could not be disclosed by the Authorised Officer. It is also stated that it was not feasible lbr respondent No.l/Andhra Bank to disclose which is not within their knowledge. We are afraid we cannot accept such contention advanced on behalf of respondent No.l which is not only a financial institution but is also a public sector banking undertaking. It goes without saying that before accepting any security for furnishing of loan, it is the duty of the bank authorities to properly verify all aspects relating to the property. The fact that respondent No.2 has not come forward to controveft the allegation made by^the petitioner has only made it clear that the secured asset is nothing^but an unauthorized construction. Being a^{publicsector bank, before} putting the said propefty to auction sale, it^{wasnecessaryon the part} of respondent No.l/Andhra Bank^{to have veritled the status of such}

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secured asset.^{A r auctionsale undera statute, that too conducted by} a public sector^{b mk, has a certaindegreeof sanctity attachedto it} which should^{be rnaintainedat all costs. Puttingup urlauthorized} property tbr at ction^{sale by a public sector bank' in such} circumstances,^{c: nnot be.lustified.}

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21 . During th^{hearing' rvc had put a queryto lcarncd counsel lor} respondent No.^{/Andhra Bankas to whetherresponderlt No' 1 has} filed any^{police;omplaintagainst respondentNo'2 lbr llrnishing such} security which is^{a fraudulent actToday, learned cotrnselfbr} respondent No.^{/Andhra Bank submits that the concemed oificeris} absent and, th:relorc'^{the reqr'riredinlonnationis not available'} However, he ;ubmirs^{that respondent No'2 is lac ing corporate} insolvency^{pro, eedings bclore the NationalCompany' L'aw -lribunalat} Hyderabad.

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Insolar the objection^{of respondentNo.l as to altemative} remedy and tl e reliance^{placedon AGARWALTRACOM PVT'} LTD. (supra) s concerned,^{we are of the view thatpresentis a case} where petitio ler was induced to^{participate in an auction sale} conducted by a public sector bank.^{Acting on good faith, petitioner} has parted wi h substantial amount of money.^{lt has r-rowtranspired} that the prop( rty auction sold^{is an unauthorized strucLure, Beingan} unauthorized structure, it cannot have any^{marketablet.itle and is} liable for ai verse action any moment at^{the hands ol the civic}

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authorities.^{'Ihereis an elementof fraud in fumishing of the secured} asset^{which is further compoundedby putting up the saidproperty to} auction sale.^{Thishas clearly vitiated the auctionsale' ln such} circumstances,^{notwithstandingthe remedyof the auction purchaserto} question the^{action of respondent No'l under Section17 of the} SAR[EslAct,wewouldentertainthewritpetition'Insofarthe decision of^{the SupremeCoutt in AGARWAL TRACOM PVT'} LTD.,^{(supra) is concerned,the issue involvedin that case was the} action ol^{the securedcreditorin forl-eiting the rnoney deposited by the} auction^{purchascr" 'l'he above casc is distinguishablcinasmuch as in} the^{present casc, the questioll of tbrfeiturewouldnot arise'as the} propefty^{put up lbr auction sale was an illegal and unauthorized} structure.^{Re spondentNo.1 cornmitte<J a mistake in accepting such} unauthorized^{structure as secured asset and' therefore' it cannotbe} permitted to^{takeadvantageolits own wrong'}

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That^{being the} Posttton,^{we arc ol the consideredopinion that it} would only^{meet the ends of justice if respondentNo'1 (nowUnion} Bank of^{India) is directed to relund the amountdepositedby the} petitioner^{pursuantto the auction sale held on 24 '07 '2019withina} period of^{eight wecks from the date ol reccipt of a copy of this order} with applicable^{interest thereonlrom the date ofdeposittill the date of} payment.

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Writ petition^{is allowcd to the cxtent indicated above'}

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Miscellar :ous applications, if any pending, shall st.tnd closed.

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No costs.

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SD/. T.JAYASREE

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//TRUE COPY//

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ASSISIANT REGISTRAR /.. ( Lrl

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SECTION OFFICER

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One fAiT COI Y^{tO THE HON'BLESRI JUSTICEUJJAL I]HUYAN} ' - (For His Lordship's Kind Perusal)

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AND

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One fair cop ' 'to^{THE HON'BLESMT JUSTICEP' MADI{AVIDEVI} (For Her LordshiP's Kind^Perusal)

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To,

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1' ' The Chief M; nliein6cJu jryirtanigerent^{nager and Authorized} Branch, Andhra Bank Building, Sultan Bazar'^{officer, M/s. Andhra Bank, Specialized} Doti. Hydera^rad.

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