Dismissed

C.Satyanarayana Reddy v. Balaji Colour Laboratories

Telangana HC17 Aug 2021WP/30747/2018

Case brief

AI extract

What is this about?

Writ petition by auction purchasers seeking to set aside recovery tribunal orders reversing a land sale due to bank deviating from payment timeline mandated by Rule 9(4). Court held deviation fatal and dismissal appropriate.

What did the court decide?

Writ petition dismissed; auction order stands as set aside by Tribunal; borrowers get refund.

C.Satyanarayana Reddy Vs Balaji Colour Laboratories — Company and Corporate | Telangana HC (2021)

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HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD

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(Special Original Jurisdiction)

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TUESDAY ,THE SEVENTEENTH DAY OF AUGUST TWO THOUSAND AND TWENTY ONE

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PRESENT

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THE HONOURABLE SRI JUSTICE A.RAJASHEKER REDDY

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AND

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THE HONOURABLE DR, JUSTICE SHAMEEM AKTHER

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WRIT PETITION NO: 30747 OF 2018

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Between:

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C.Satyanarayana Reddy, S/o Raji Reddy aged about 45 years R:/o plot No. 2, Srinagar Colony, Ra machand rapuram, Hyderabad.

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C.Anji Reddy,, S/o Raji Reddy Aged about 40 years, Rio plot No. 2, Srinagar Colony, Ramachandrapuram Hyderabad.

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Durga Prasad PSRK, S/o P.Govinda Rao Aged 43 years, R/o 23-39/1, Jyothi Nagar Ramacha nd rapura m, Hyderabad.

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K.Satyanarayana Reddy,, S/o K.Ranga Reddy Aged about 50 years, R/o Ramachandra pura m Hyderabad.

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K.Sanjeeva Reddy, S/o Late K.lr/adhava Reddy Aged abut 42years, R/o H.No.

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2-11-lDA, Bollaram village Jannaram Mandal, Medak district.

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...PETITIONERS

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AND

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Balaji Colour Laboratories, A Padnership firm represented by its partner Mr.C.Kalyan A-33, Road No.12, Film Nagar, Jubilee Hills, Hyderabad

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Smt. M.Raja Ratna, W/o MVMG Appa Rao C1-10S, RCV Ctusters, Lottegoltahalli Bangaluru, Karnataka State, 560094.

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Andhra Bank,, Film Nagar Branch Film Nagar Society Complex, Film Nagar, Jubilee Hills, Hyderabad, Rep.by its Authorized Officer.

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...RESPONDENTS

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Petition under Article 226 of the Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High court may be pleased to issue a Writ order or direction more particularly one in the nature of WRIT OF CERTIORARIFIED Mandamus calling for the records thereby set aside the Judgment/order passed by the Hon'ble DRAT Kolkata in Appeal No. 61 of 2017 dated 1-5-2018 and also set aside the order passed in S.A.No. 376 of 2012 in DRT, Hyderabad dated 6-10-2016 as the same are illegal, arbitrary, unlawful, u nconstitutio na I and also against the Principles of Natural Justice and consequently uphold the sale certificate issued by the Respondents Bank in favour of the Petltioners herein dated 30-3-201 3.

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lA NO: 1 OF 2018

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Petition under section 151 cPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High court may be pleased to suspend the operation and execution of the Judgment/order passed by the Honble DRAT Kolkata in Appeal No. 61 of 2017 dated 1-5-2018 and also the order passed in S.A.No. 376 of 2012 in DRT, Hyderabad dated 6-10-2016 pending disposal of the Writ petition

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Counsel for the Petitioners:SRl. PARSA ANANTH NAGESWAR RAO Counsel for the Respondent No. 1: SRl. N M KRISHNAIAH Counsel for the Respondent No. 2: SRl. B. JAYA PRABHAKARA RAO Counsel for the Respondent No. 3: SRl. A. KRISHNAM RAJU

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The Court made the following:

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E ED E AND THE HON'BLE^{DR. JUSTICE SHAMEEM AKTHER}

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w.P.NO.30747^{0F 2018}

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ORDE

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The borrower and^{the guarantor, filed S'A'No'376 of 2012 on the}

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file of Debts^{Recov{lry Tribunalat Hyderabadunder Section 17 of the} securitisation^{and tleconstructionof Financial Assets and Enforcement} ofSecuritylnteres|Act,2oo2(forshort.theSARFAESIAct,)assailing thepossessionnot'icesdated23.07.2012and24,07,20t2issuedby the Bank under^{Ser:tion13(4) of the SARFAESI Act. Subsequently, the} Bank also conducted^{auctionof immovable property'}

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Vide order dated^{O6'10.2016set aside the auction conducted} bytheBankon?-S.t2.2Ol2pursuanttoauctionsalenoticedated 01.11.2012 and dir,ected^{the Bank to refundthe sale consideration} deposited by the eru:tion^{purchaserswith interest, and gave liberty to} the Bank to^{procer:dfor sale of the property afresh in accordance with} law.

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Assailing the order dated^{06.10.2016passed by the primary} Tribunal, the Bank filed Appeal^{No.62 of 2017, and the auction} purchasers filed Appeal No.61 of 2077 on the^{file of DebtsRecovery} Appellate Tribunal at Kolkata.^{Vide common order dated01.05.2018} the Appellate Tribunal dismissed the appeals.^{Assailingthe common}

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order passed by the Appellate Tribunat in Appeat N0.61 of 2017, auction purchasers filed the present writ petition.

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4 Against the common order passed by the Appellate Tribunal in Appeal No.62 of 2017 dated 01.05.2019, Bank has not preferred any writ petition.

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The schedule properties mortgaged for sanction of financial assistance to respondent No.1 is an open industrial plot admeasuring Acs.B.20 gts. consisting of Acs. 6.00 in Sy.Nos.842l1/I & 842/2/l (House No.14-227/22) situated at patancheru village and mandal, Medak District, belonging to one Shri S.Ramesh Babu and Acs.2.2O gts.(Comprising of Sy.Nos.842l1 admeasuring Ac.1.1B gts and Sy.Nos.842l2/1 admeasuring Ac.1.02 gts.) belonging to Shri C.Kalyan.

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For better appreciation, the facts in brief are that the 3'd respondent - Bank extended financial assistance to 1't respondent during the year 2007-2008 and the 2nd respondent stood as guarantor and the subject prdperty was mortgaged with the Bank as security. As the 1't respondent - borrower committed default in repayment of the loan amount, the 3'd respondent - Bank initiated proceedings under the provisions of SARFAESI Act, and the Security Interest (Enforcement) Rules, 2002 (for short'the 2002 Rules,), for recovery of the amount. It issued demand notice dated 16.05.2012 under Section 13(2) of the SARFAESI Act, and thereafter issued possession

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notices under Section 13(4) of the said^{Act on 23.07.2012 and} 24.07.2A12 for taking symbolic^possession of^{the schedule properties.} Subsequently Bank 'ssued another^{possessionnotice dated 28.08.2072} and the same^wars published in newspapers on 29.08.2072. Thereafter, Bank issued auction sale notice dated 01.11.2012,^{and the} same was^publishec iT the newspapers on 02.71.2012^{and the date of} auction was fixed on 03.12.2012.

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In the meanwhile, the respondents 1 and 2 - borrower and the guarantor, file,l S.A.No.376 of 2072 under Section 1.7 of the SARFAESI Act, on^1:he file of Debts Recovery Tribunal at Hyderabad, challenging the possession notices dated 23.07.2012 and 24.07.20L2. The Tribunal vide irrt:rim order dated 29.71.2072 granted s;tay of all further proceedings subject to respondents 1 and 2 depositing 20o/o of the auction amourt within a period of two weeks, with a default clause, and subsequently time for deposit was extended till 2L12.2012.

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B. As the conditional interim order of the Tribunal was not complied with, Ban< proceeded further and opened the single bid on 28.72.2012, which 'ryas submitted by the writ petitioners, wherein they have quoted an arnount of Rs.775.00 lakhs as against the reserve price of Rs.750.00 lakhs for the schedule property, and the same was accepted, and the urrit petitioners paid an amount of Rs.1,95,00,000/-

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towards 25o/o of the bid amount and the Bank issued letter^of confirmation of sale on 29.72.2012 in^favour of^{the writ petitioners} / auction purchasers, intimating them to^deposit the^{balance amount} not later than 15 days from the date of intimation^{oF completionoF the} survey of land. It is stated that^{in the survey, the extent of landwas} found to be Acs.7.21^gts. as against^Acs.8.22gts. ,Hence^{the Bank has} reduced the sale^{price quoted} by the^petitioners -^{auctionpurchasers} at Rs.775.OO lakhs for Ac.B.22^{gts, to Rs.7'08 crores for the extent of} Acs.7.21^gts., and accepted the^{balanceamountin proportionto the} extent of land, and issued the^{sale certlficatedated 30.03.2013in} favour of the auction Purchasers'

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Since the Bank^{has relaxedthe condition contrary to the sale} published in sale notice and also Rule 9(4) of the^{Rulesof 2002, and} further, as there is no basis^for the^{Bankto arrive at the reducedsale} price, the primary Tribunal vide order dated 06.10'2016^{in S.A.No.376} of 2012, set side the auction^{sale and directed the Bankto refund the} amount with interest,^{and gave libertyto the Bankto proceedwith the} sale afresh.

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Assaillng the said order^{dated 06.10.2016,Bank as well as} the auction^purchasers filed appeals^{and the appellate Tribunal, vide} the common order dated 01.05.2018,^{dismissed the appeals.Against}

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)

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the said common c'rder, the auction^purchasers are before this court in the present writ petifion.

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Learned counsel appearing for the writ^petitioners - auction purchasers while reiterating the above facts, further submits that the Bank published the:;ale notice and conducted the auction and the writ petitioners are the only bidders and their bid was accepted and after confirmation of sale when the land was surveyed, the extent of land was found to be lersr; than it was shown in the sale notice. He stated that the publication^,,vas given for sale of Acs.B.22 gts. but on survey'it was found to be c,n y Acs.7.21 gts. Therefore, in the confirmation letter dated 29.1,2.2012, Bank intimated the petitioners auction purchasers to depos t the balance amount within fifteen days from the date of completior of the survey of the land. On 20.03.2013 Bank informed the pe:itioners about the completion of survey, and immediately petitioners paid the balance sale price on 28.03.2013 i.e., within fifteen days; and hence the petitioners cannot be found fault with and they are the bona fide purchasers. He submits that aFter confirmation of saler, ordinarily objections shall not be entertained except on limited !lrounds of fraud and collusion. In the present case, there are no allegations of fraud and collusion, hence the auction conducted by the Bank cannot be interfered with. In support of his contention, learnecr r:ounsel reried on the judgment of the Apex court reported in VAL_|I KHIMJI AND COMpANy vs. OFFIIAL

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LIQUTDATOR OF HTNDUSTAN NrTRO qRODUCT (cutARAT) LrMrrED AND OTHERS,. With these submissions, he sought to set aside the orders passed by the primary as well as the appellate Tribunals.

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Counter affidavits are filed on behalf of respondents 1 and 2 - borrower and^guarantor supporting the impugned orders and seeking for dismissal of the writ petition.

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Learned counsel appearing for respondents 1 and 2 also made submissions supporting the impugned orders passed by the Tribunal and sought for dismissal of the writ petition.

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Counter affidavit is filed on behalf of the 3d respondent - Bank by its Assistant General Manager, Asset Recovery Management Branch, Hyderabad. In the counter affidavit it is stated that Bank did not file any writ petition against the common order dated 01.05,2018 passed by the Appellate Tribunal in Appeal No.62 of 2017 preferred by the Bank. The common order which is impugned in the writ petition is accepted by the Bank and it is ready and willing to refund the amount paid by the writ petitioners as successful auction purchasers. It is further stated infer alia that the writ petition may be dismissed with a direction to the writ petitioners to extend cooperation for cancellation of sale certiFicates and deliver possession of the property to the

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I lzoos;e scc 2es

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Authorized Officer of^{t:he respondent} -^{Bankand to receive the amount} paid to the Bank with interest at a specified^{rate,sincethe order of the} Tribunal does not specifically^{mention at what rate the interestshallbe} paid while refundingt the amount received^{from the writ petitioners.}

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Sri A.Krishnam Raju,^{learned StandingCounselreiterating} the above averments made in^{the counter affidavit, sought for} dismissal of the wri: Petition.

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In view ol' the above^{facts and circumstancesof the case,} the issue that ariser; for our^{considerationis whetherthe common} order passed by tlre Debts Recovery^{Appellate Tribunal at Kokatain} Appeal No.61 of :lC 17 dated 01.05.2018,^{in confirmingthe order} passed by the Debl.s Recovery Tribunal at Hyderabad in S.A.No,376 of 2012 dated 06.10,;1016 warrants any interference?

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As per the facts already noted above, there is no dispute till conducting of the aLrction on 03.12.2012 and after the interim order passed by the Tiibunal stood vacated, the bid was opened on 28.t2.2012 and tht: petitioners were the only participants and their bid was accepted anC the sale confirmation letter was issued on 29.12.20t2 and the writ petitioners paid 25o/o of the bid amount on the said date. ,After this stage, Rule 9(4) of the Rules of 2OO2 prescribes the proc;edure for deposit of the balance of 75o/o of the bid amount. The said provision was subsequently amended vide G.S.R.

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1046(E) dated 3.11.2016. As on the relevant date, the provision prior to amendment is required to be followed. However, For better appreciation, the said provision prior to, and aFter the amendment, is extracted as u nder:

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Rule9(4)of2OOZpriorto2076 am9&neot	Rule9(41afterthe amendmentvide 7 6
Thebalanceamountofpurchaseprice
payableshall be paid bythepurchaserto theauthorisedofFiceronorbeforethe fifteenth dayofconfirmationofsaleof theimmovablepropertyorsuch extended periodas maybe agreedupon inwritingbetweentheparties,	Thebalanceamointofpurchaseprice payableshall be paid bythepurchaser to theauthorizedofFiceronorbeforethe fifteenthdayofconfirmationofsaleof theimmovablepropertyorsuch extended periodlasmaybeagreedupon in writingbetweenthepurchaserand the securedcreditor,inanycasenot exceedinqthreemonthsl.

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From a reading of Rule 9(4) prior to 2016 amendment,

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which is applicable to the facts of the case, it is clear that the balance amount of purchase price shall be paid by the purchaser to the authorised officer of the Bank on or before the fifteenth day of confirmation of sale of the immovable property, or such extended period as may be agreed upon in writing between the parties. The Apex Court in the decision reported in SRI SIDDESHWARA COOPERATIVE BANK LIMITED AND ANOTHER ys. IKBAL AND OTHERS2 held that the word 'parties'occurring in Rule 9(4) includes creditor, borrower and auction-purchaser and that the agreement referred to in the said Rule between the parties, should be in writing, and the Apex Court further held that Rule 9(4) is mandatory. The relevant portion is as under:

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'lzor:y^{ro scc st}

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"18. A reading^{ol'sub-rule(1) of Rule 9 makes it manifest that the} provision is manditory. The^{plainlanguageof Rule 9(1) suggests this'} Similarly, Rule 9(3) which^{provides that the purchaser shallpay a deposit of} 25% of the amount ol'the^sale Price^{on the saleof immovable propertyalso} indicates that the saic^{provision is mandatoryin nature.As regards balance} amount of^{purchase p,rice,Sub-rule (4) provides that the said amountshall} be paid by the^{pur':haseron or beforethe fifteenth day of confirmation of} sale of immovable^{propertyor such extended period as may be agreed} upon in writing^{bet\veenthe parties.The period of fifteen days in Rule 9(4)} is not that sacrosa-'lct and^{it is extendableif there is a written agreement} between the^{parties for such extension.What is the meaninqof the} expression 'written agreement^{betweenthe parties'in Rule 9(4)? 2002} Rules do not^prescribe any^{particularform for suchagreement except that it} must be in writing, The^{use of term'written agreement'meansa mutual} understanding or En arrangement^{about relativerights,anddutiesby the} parties. For the^pLrposes of Rule 9(4), the^{expression "written agreement"} means nothing more than a^{manifestationof mutual assentin writing. The} word 'parties' for tl'e^{purposes of Rule 9(4) we thinkmustmean the} secured creditor, b{)rrower^{andauction purchaser."}

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In the^present case^{the facts on record would disclose that} the sale was confirm ed on 29.I2.2012.^{Therefore the auction} purchasers are required to deposit the^{purchaseprice within fifteen} days from the said^,late or^{withinsuchextended period as agreedupon} in writing between :he^parties. There^{is no material on record to show} that there is any a,3reement between the^{parties For extensionoF} period. Therefore, as per Rule 9(4), the auction^purchasers are required to pay the balance amount within fifteen days from 29.72.2012, on whrch date, the sale was confirmed. But the Bank vide the confirmation lr:t:er dated 29.12.2012 advised the^petitioners auction purchasers to pay the balance amount at the earliest not later than 15 days from :he date of intimation of completion of the survey of land. This advice o'the Bank is in deviation of the mandate under Rule 9(4) of 2002 Rules and also the terms and conditions of sale published in the sale notice. As already noted above, as per the

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judgment of the Apex court (2 supra), the procedure prescribed under Rule 9(4) of the Rules of 2002 is mandatory.

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For deviation from the procedure prescribed under Rule 9(4), the explanation of the Bank and the auction purchasers is that after the confirmation of sale, when the land was surveyed, it was Found that the extent available was only Acs.7.22 gts. though in the title deeds, the extent of the land was mentioned as Ac.B.22 gts., and as a result, Bank has chosen to confirm the sale of the land to an extent of Ac.7.2l gts., by reducing the highest bid / price of Rs.775.00 lakhs offered For Acs.B.22 gts., to Rs.7.0B crores, for the extent of land of Acs.7.21 guts.

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This procedure adopted by the Bank cannot be appreciated. If the Bank has noticed that the extent available was less, then as rightly noted by the Tribunals below, it ought to have cancelled the sale and directed for conducting of sale afresh. Further, the Bank has chosen to reduce the price to Rs.7.0B crores for the available extent of land of Acs.7.21 9ts. On what basis the Bank has arrived at this figure, is not forthcoming.

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There is no dispute with regard to the contention of the learned counsel for the petitioner that normally only in the case of collusion and fraud, as Iaid down by the Apex Court in Valji Khimji and Company vs. Official Liquidator of Hindustan Nitro Product (Gujarat)

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Limited and other!; i1 supra), the sale can be cancelled. But in the

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present case, the Bank has given go-bye to the mandate under Rule 9( ) of the Rules of 2002 and further, for arriving at the reduced sale price from Rs.775 00 lakhs to Rs.7.0B crores, there is also no basis. Therefore, the im:ugned auction sale cannot be sustained and the same is liable to bc.:;et aside.

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Apprecii:t ng the entire facts and circumstances of the case and the law laid down by Apex Court (2 supra), the primary as well as appellate Tribunals, have rightly set aside the auction sale and directed for refund of the anrount with interest. We do not Find any reason to interfere with the inrpugned orders, and the writ petition is devoid of any merits and the same is liable to be dismissed. The issue framed is

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answered in the n€rg ative.

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For the r'o'egoing reasons/ the writ petition is dismissed.

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Interlc)cutory applications pending, if any, shall stand

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closed. No order as to costs.

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SD/. N. CHANDRA SEKHA R RAO //TRUE COPYII ASSISTANT REGI ST R

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SECTION OFFICER

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To, 1. One CC to Sri. P 2. One CC to Sri. Nerr,ss|1antl Nageswar Rao, Advocate IOpUCt 4. 3. OneOne CC CC to to Sri. Sri.B.A ,tay vr Knshnajah, a,^p rabhakara Adv_ocate Rao, Advocate (OPUC)tOpUCl^{--- L-'} -", 5. Two Knshnam Raju. Advocate (OPUCi^-", CD Copies. PM t-\k

HIGH COURT

DA-lED:1710812021

ORDER

WP.No.30747 of 20't 8

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Dismissing the.WP Without costs.