Disposed

Smt. K. Sahaja Rao v. The Assistant General Manager State Bank of India Sarb And 2 Others

Telangana HC10 Jan 2023WP/21511/2020

Case brief

AI extract

What is this about?

A secured-asset auction was upheld despite payment by cheque. The auction purchaser's petition was allowed, with redeposit and interest directed. The borrower could not compel one-time settlement; her petition was disposed of with loan-adjustment directions and restrictions on additional interest.

What did the court decide?

Auction restored subject to redeposit with interest within four weeks; proceeds and interest to be credited to the loan account, with additional interest restricted.

Smt. K. Sahaja Rao Vs The Assistant General Manager… — Banking and Recovery | Telangana HC (2023)

¶1

[³³⁰⁶ ]

¶2

HIGH COURT FOR THE^{STATE OF TELANGANAAT HYDERABAD} (SPecial Original Jurisdiction)

¶3

TUESDAY, THE TENTH^{DAY OF JANUARY} TWO THOUSAND AND^{TWENTY THREE}

¶4

PRESENT

¶5

THE HONOURABLE SRI JUSTICE^{P. NAVEEN RAO} AND

¶6

THE HONOURABLE SRI JUSTICE^{J" SREENIVASRAO}

¶7

WRIT PETITION Nos.21511 of^{2020 & 13330 012021}

¶8

WRIT PETITI ON NO: 21511^{OF 2020}

¶9

Between:

¶10

Smt. K. Sahaja Rao, Wo Sri^{K. SathyanarayanaRao, Aged-58 years,} R/o. Plot 7 52-. Road No.38, Jubilee^{Hills,Hyderabad 500 033.}

¶11

...PETITIONER

¶12

AND

¶13

1 The Assistant General Manager,^{State Bankof India, SARB, Koti, Hyderabad} 2 State Bank of lndia, SARB,^{K;ti, Hyderabad, Representedby its Authorized} Offrcer.

¶14

1. Reserve Bank of lndia Saifabad,^{Hyderabad, 500 004.}

¶15

...RESPONDENTS

¶16

Petition under Article 226^{of the constitutaonof India prayingthat in the}

¶17

circumstances stated in^{the affidavitfiledtherewith, the High courtmay be} pleased to issue a writ of Mandamus^{declaring the action of the RespondentBank} in refusing to clear the outstanding^{liability in the Petitioner's sMEloanaccount} no. 30482911975 by accepting^{Rs.93,13,612 deposited by the Petitioner under the} non-d iscretiona ry and^{non-d iscrimin atory sBl oTS2020onthe ground that an} Application No. 68 of 2019^{(diary no. 164of 2019) filed by the auction purchaseris} spending before the Hon'ble^{DebtsRecoveryAppellate Tribunalas illegal,} arbitrary, highhanded,^{violative of Banking norms, violative of the provisionsand} intention of the sARFAESI^{Act and the security interest enforcementrules} thereunder, violative^{of section60 of the Transfer of PropertyAct, violativeof} guidelines issued by the Reserve^{Bank of lndia, violativeof the terms and} conditions under the sBl^{oTS 2020 and violative of rights guaranteedunder} Article 14 of the constitution^{of lndia,with a consequential prayerto set aside,the} Bank,s letter dl.11t11t2O2O^{and direct the Bank to accept and appropriatethe} money deposited by^{the Petitioner in Bank'sNo-Lienaccount under the OTS} Scheme 2020 and discharge^{the total outstanding liability in the SME loan account} baring No. 30482911975^{and issue a loan closure certificate'}

¶18

¶19

lA NO: 1 OF 2O2O

¶20

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 letter d1.11-11-2020 and direct the Respondent Bank to accept the money deposited by the Petitioner under SBI OTS scheme 2020. lA NO: 1 OF 2021

¶21

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 receive the additional counter affidavit in WP No.215'1 I of 2020.

¶22

lA NO: 2 AF 2021

¶23

Between:

¶24

The Assistant General tuianager, State Bank of india, SARB, Koti, Hydeiabad 2. State Bank oi lndia, SARB, Koti, Hyderabad, Represented by its Authorized Officer.

¶25

... Petitioners/Respondents No.1 and 2

¶26

AND

¶27

1 Smt K. Sahaja Rao, Wo Sri K. Sathyanarayana Rao, Aged 58 years, R/o. Plol752 Road No.38, Jubilee Hills, Hyderabad 500 033

¶28

2 Reserve Bank of lndia Saifabad, Hyderabad, 500 004

¶29

...Respondents/Petitioners/Respondent No.3

¶30

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 receive the said documents as per list Dt 23109/201 in WP No 215'1 1 of 2020.

¶31

Counsel for the Petitioner: SRI S. RAVI, SENIOR COUNSEL FOR SRI. V. MURALI MANOHAR

¶32

Counsel for the Respondent Nos.1 & 2: SRI M. NARENDER REDDY, SENTOR COUNSEL FOR SRI M. SRIKANTH REDDY, SC FOR SBI

¶33

Counsel for the Respondent No.3: --

¶34

E)^r..^^-.

¶35

WRIT PETITION NO:"13330 OF 2021

¶36

SlrilS Pharmaceuticals Ltd.. Having its Registered offrce at Plot No.72, No.8-2-33413&4, Road No. 5, Opp.. SBI Executive Enclave, Banjara Hills, Hyderabad - 500 034. TS, represented by its Authorized Signatory, ltlr. Nagarjuna Rao.

¶37

AND

¶38

1 State Bank of lndia, SIB Saifabad Branch, HACA^{Bhavan, Hyderabad,Rep.} bv its Authorized Officer.

¶39

2 Nirs. K.Sahaja Rao, Wo K. Satyanarayana, Aged about 52^{years, Occ:} Busrness, Rlo H.No.75, HUDA Layout, Apt.No.G'1,^{S. R.lrr'lansion,Journalist} Colony, Jubilee Hills, Hyderabad- 500 033.

¶40

...RES'ONDENTS

¶41

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 an appropriate Writ, Direction or Order, particularly one in the nature of Writ of Certiorari,

¶42

a. Calling for records and setting aside the lmpugned^Orderdated 0910412021 passed by the Hon'ble Debt Recovery Appellate Tribunal,^Kolkata ("DRAT") in Appeal No.68 of 2019 and quash the same.

¶43

b. Direct the Respondent No. 1 to take back the bid amount of^{Rs. 10.55} Crores which is refunded to the Petitioner.

¶44

c. Direct the Respondent No.1 to deliver the^{physical possession.}

¶45

IA NO: 1 OF 2021

¶46

Petition under Section 151 CPC^praying that in the circumstances statedⁱⁿ the affidavit filed in support of the^petition, the High Court may be^{pleasedto stay} operation of order dated 09/0412021^passed by the Hon'ble^{Debt Recovery} Appellate Tribunal, Kolkata ("DRAT") in Appeal No. 68 of 2019^{pending disposal of} the writ petition.

¶47

lA NO: 2 OF 2021

¶48

Petition under Section 151 CPC^praying that in the circumstances statedⁱⁿ the affidavit filed in support of the^petition, the High Court^{may be pleased to direct} the Respondent No. 1 bank to not to take any^{further steps} to^auctionthe scheduled property.

¶49

lA NO: 3 OF 2021

¶50

Between:

¶51

State Bank of India, Stressed Assets Recovery Branch -^{l, (SARB-|), ll Floor,} TSRTC Commuter Amenity Centre, Koti, Hyderabad.

¶52

... Petitio ner/Res^pon dent^No.1

¶53

A}JD

¶54

l. i)lvl) rll.llllldLEUtlud15 LtU,, lCplESC|lLCU Uy lL5 a-\L,rtlltJr|ZEU Ol9lldtuiy, Mr Nagar;una Rao

¶55

..RespondenUPetitioner

¶56

Mrs. K.Sahala Rao, W/o K. Satyanarayana, R/o H.No.75, HUDA Layout, Apt.No.G'1 , S.R.Mansion, Journalist Colony, Jubilee Hills, Hyderabad- 500 033

¶57

.. Res ponde nURes po ndent No.2

¶58

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 vacate the interinr stay order dated 16.06.2021 in l.A.No.2/2021 in W.P.No.13330/ 2421.

¶59

Counsel for the Petitioner: SRI VIVEK REDDY, SENIOR COUNSEL FOR SRI. MANOJ REDDY KESHI REDDY

¶60

Counsel for the Respondent No.1: SRI M. NARENDER REDDY, SENIOR COUNSEL FOR SRI M. SRIKANTH REDDY, SC FOR SBI

¶61

Counsel for the Respondent No.2: SRI S. RAVI, SENIOR COUNSEL FOR SRi. V. MURAL| MANOHAR

¶62

The Court rnade the following: COMMON ORDER

¶63

Pn'R.J ,t.tst.J 0'l' Nos )1511 at)0:0 & Lt il0 ol :h:l

¶64

HONOURABLE SRI JUSTICE P.NAVEEN RAO & HONOURABLE SRI JUSTICE J.SREENIVAS RAO

¶65

WRIT PETITION Nos.21511 of 2O2O and 1333O OF 2027

¶66

COMMON ORDER: (per Hon'ble Si Justice P.Naueen Rao)

¶67

Heard learned senior counset Sri S.Ravi appearing for Sri V.Murali Manohar for petitioner (the borrower), and learned senior counsel Sri M.Narender Reddy appearing for Sri M-Srikanth Reddy for respondent-SBl (the bank) in W.P.No.2151l of 2O2O; learned senior counsel Sri Vivek Recldy appearing for Sri Manoj Reddy Keshi Reddy for petitioner (the auction purchaser), learned senior counsel M.Narender Reddy appearing for Sri M.Srikanth Reddy for respondent No.1 (the bank) and learned senior counsel Sri S.Ravi appearing ior Sri V.Murali Manohar for respondent no.2 (the borrower) in W.P.No.13330 of 2021.

¶68

These two writ Petitions concerns various measures taken by the State Bank of [ndia to recover the loan amount from the borrower. As the Bank, the borrower and the auction^purchaser are same, both Writ Petitions are heard together and decided by common order. For convenience,^parties are referred to as borrower, the^Bank and the auction purchaser respectively. The borrower is^petitioner in W. P.No.2 15 I 1 of 2O2O and the aLrction purchascr is^petitioner in W.P.No. 1333O of 2021.

¶69

1'!l,r,! 5i,./ tt l' ',t. : ! : i l,r )tt)o,\ J^{: jjtt,,1} ]t): I

¶70

¶71

Borrower availed 3.40 crores from the Bank. Borrower defaulted in repayment of loan. On 29.03.2011 loan accourt^was declared as Non-Performing Asset (NPA). On 19.04.2011 the Bank issued demand notice under Section 13(2) for rccovery of 2,79,31,113/-. On 05.O7.2011 possession notice under Section 13(a) of the Act was issued and on 11.O2.2O12,^{physicalpossession} of the mortgaged property was taken. On^{'29.O'2.'2Ol'2, O'2.O5.2Oi2} and 26.O2.2017, respondent-Bank issued three e-auction notices fixing the auction datcs. The borrower challcngcd all the e auction notices before the Debts Recovery Tribunal. The Debts^Recovery Tribunal granted conditional interim order. The borrower failed to comply with the conditional orders passed by the Dcbts^Recovery Tribunal by failing to make the payment. Thc threc auction proceedings were unsucccssful.

¶72

On 04.06.2017, the Bank issued a fourth c auction notice fixing auction on 23.O6.2017 for the sale of secured asset. The notice requires bidders to pay: i) the EMD of 1O%o ofthc reserved^price on or before 21.06.2017; iil 25oh of the bid amount on the date of auction i.e.,23.06.2077 including 1O% EMD; and iii) 75% of the bid amount within 15 days from the date of auction i.e., O8.07.2017. On 2l .06.2019 auction purcl-raser deposited 87 .2O,OOO I - towards EMD i.e,, 1O% of fixed reserved price through cheque of the Bank and the Bank issued receipt of acknowledgement. The chcque was also

¶73

/),/l./ lt .1!/r./ rl7 \ ,\ '/i/l ,,,'r-'/,.: li; ) nt:tt:t

¶74

encashed and the amount was transferred to concerned account of the Bank. In the e-auction held on 23.06.2077, the auction purchaser was declared as the highest bidder for INR 10.55 Cr. His bid exceeded the reserve price of 8.72 crore- Immediately after the e-auction, auction purchaser deposited 15%. of the bid amount on the date of auction through an SBI cheque dated 23.06.2017. The cheque was not encashed immediately as the bank was waiting for orders o[ the Debts Recovery Appellate Tribunai (DRAT). Four days ahead of the deadline auction purchaser deposited the balance 75%o of the bid amount by way of an SBI cheque. On O5.07.2017, the Bank issued sale certificate in favour of auction purchaser after verifying that the account of the auction purchaser had sufficient balance.

¶75

Since borrower was filing several interlocutory applications to delay proceedings before the Debts Recovery Tribunal, the auction purchaser filed W.P.No.35953 of 2018. This Hon'ble Court in its order in the writ petition observed that borrower has carried out a tirade and directed Debts Recovery Tribunal not to entertain any further interlocutory applications, at the instance of borrower, in S.A.No.447 of 2Ol7 .

¶76

Holever, borrower filed I.A.No. 1866 of 2Ol9 seeking for setting aside the fourth e-auction sale dated 23.06.2017 that was concluded

¶77

in favotrr o[ auction purchaser. On 23.05.2019, Debts^Recovery Tribunal passed order setting aside fourth e-auction sale dated 23.06.2017. DRAT confirmed Debts Recovery Tribunal ordcr dated 23.O5.2019. On 18.06.2019, Bank refunded thc auction purchaser's bid amount credited directly to his account without^p:ryurent of interest. Challenging thc orcler of Debts Recovcry^'fribunal,as allirmed by D!{AT, the auction purchaser irled^W.P.i'io. i333O oi 2O2i.

¶78

7 - In the meanwhile, the Bank has published a scherne callecl SBI scheme for One Time Settlement of NPAS and AUCA (SBl OTS-202O) covering the loan accounts with outstanding of abovc 20.00 lakhs and upto 50.O0 crores as on 31.O3.2O20.^'l'he scheme was llondiscretionary and non-discriminatory and was applicablc to all^NPAs as on 31.O3.2020. As per the said scheme, the Bank waves interest from the date of NPA and the scheme macle applicablc to cven accounts which had cases pending before thc Courts/DRTs- The scherne also gave an incentive up to 15o% for early payment. The last date of receipt of application under the SBI OTS 2020 scheme was 23.11.2O2O and the last day of conveying sanction was 3O.11.2O2O. An application made under the scheme was to be considered within 7 days. The respondent no. I had to accord and convey the sanction within 7 days from the date of receipt of the application.

¶79

t\4../.!.1/i../ ,rl !r,rl/i// d/ '1,r/).! I t.r.rtt \1t :t)a,'

¶80

¶81

The borrower has made an application under the rules of the scheme vide representation dated 19.lO.2O2O along with a Demand Draft for an amount of 5,46,683/-. Vide letter dat.ed 2l.lO.2O2O the bank returned the DD and intimated that as the OTS^claimor-r borrower loan account was linked to legal matters, they^{were in the} process of referring the same to legal department for^guidance and she would be advised accordingly on reccipt of clarification from legal department. However, until 11.11.2020 the Bank^failed to^respond or act in accordance with the borrower's^request the^schemewas ending on 30.L1.2O2O. Aggrieved by the inaction of the respondentBank, the borrower had deposited the entire amount^payable under the scheme in the Bank's 'No-lien Account' and^{requestedthe Bank} to appropriate the same towards the liability under the SBI OTS-2020 scheme ald issue a loan closure certificate.

¶82

Further, in response to the borrower's OTS^requestdated 06.11.2O2O, Bank replied on I^1. I^I .202O^{rejecting theOTSproposal} informing her that 'Your account^{couLdnotbe consiclered} for^settlement under SBI OTS 2O2O scheme in^{uieut of the pendingappeaL} filed^{bg the} auction purchaser before the AppelLate^{Tribunal,u.theregou are also} implea-ded as partA'. It was also^pointed out^{thatremittingthe} amount was without their consent, the^{saidamount rvouldbe} remitted back on furnishing^{the Bank details. Challenging the said} decisions ofthe bank, borrower filed^{W.P. No.21511of 2O2O.}

¶83

¶84

, \ /r Li /!/,, / ri l' ,r. :'/ i I / ,/,'r,.'/,.'" i I t)^.,t :t): i

¶85

W.P.No.13330 of 20211

¶86

Tl're prayer in ttre writ petitiolr reads as untler

¶87

".,. lo issue an appropriate Writ Direction or Ordcr particularly one In the n.rture of Wdt ol Certiorari, (a) Calling for .ecol ds and sctlillg aside thc lmpugned order dated o9/o4/2o2r^passed by the llonourable Delil Recr)very Appellate T.ibu$al, Kolkata in APpeal No.6a of 20 19;^(b) dirc( t thc l?cspondent No.I to lake back the bid amount of 10.55 Crcrcs lvhiclr is rcfunded to the Petitioner; (c) dircct the Respondent No.1 to deliver thc physical possession to the petitioner and pass such olher order(sl as this Honblc Court decDs lit and proper in the extraordinalr' circLunstatrces of the .ase in the ioterests ofjustice."

¶88

Submissions:

¶89

Submissions of learned senior co unsel for auction^purchaser:

¶90

11.1. The present writ is maintainable. Refund of bid amount b,r'SBI pursuant to DRT order cannot affect petitioner's right to challenge setting aside of auction sale.

¶91

71.2. It is settled 1aw that borrower can only raise ob.jections on the recovery of price. Borrower cannot raise objections on the mode of payment. Mode of payment in auction sale is a matter betweeil the secured creditor and the auction purchaser and oniy the secured creditor can raise objections.

¶92

I I .3. Terms and conditions of auction are silent on the mode of payment of 15% and 7 5o/' of bid amount, only EMD is required to be paid through DD/NEff/RTGS. Auction purchaser is permitted under Rule 9(3) and (4) of the Security lnterest (Enforcement) Rules, 2002 (for short, 'Rules 2002') to make payment by cheque. Rule 9(3) and (4) only use the phrase pay/paid. Mode of payment is not specified.

¶93

¶94

P\ti../ .t./J/r../ irl, \r,\ -./j// ,r -,/,,1/, (( l;;nt t)l :t): I

¶95

The Supreme Court, Delhi High Court and Karnataka^High Court have consistently held that cheque is a^{valid form} of^payment. Cheque payment from same branch^{is like a payorder and is a valid} mode of payment.

¶96

11.4. He would submit that consequent to issuing^{sale certificate,a} valuable right is vested in the auction^purchaser and the same cannot be nullified on any minor irregularity even assuming^there was one.

¶97

11.5. In any case, an auction sale cannot^{be set aside unless there} are material irregularities that^{causesubstantial injuryto the bank/} borrower. Variation from the^{prescribed mode of paymentis not a} material irregularity when the bank is not aggrieved.

¶98

i 1.6. An auction may be set aside^{if a prejudice was caused to tsank} or the borrower. The Bank has not^{pleadedpre.iudice.On the} contrary, it has accepted the^{payments made by the auction} purchaser through cheque mode and credited the^{money tothe} auction sale account. Further,^{in the affidavit filedbefore the DRAT} the bank asserted that^{while acceptingpayment of lO"/. EMDby} cheque bank had knowledge^{of availability of suflicientfundsin the} account of auction^purchaser.It has^{furtherassertedthat though} sufficient funds were available and^{when auctionpurchaser} furnished cheque for payment of^{balance757o of sale considerationin}

¶99

,r,,, /,. l/t / irr, ,,. ,^j, ,,/ -.i)rr,.r. /,i^{i n/,/} .tr-./

¶100

¶101

anticipation of orders from the DRAT money was not transferred from au.tion purchaser account. He would therefore submit that for the delay in transferring the money by the bank, auction purchaser cannot be blamcd. The borrower has not even pleaded any pre.judice caused to her on account of payment by cheque. The DRT and DRAT grossiy errecl in not considering whether substantial prejudice was caused to nullify the saie.

¶102

I 1 .7.^'I'he DRT and DRAT grossly erred in holding mode of payment of I O%" trMD. l5% of initial sale price and balance 75oln of salc consideration by cheque as unapproved mode.

¶103

1l.tl. Borrorver has already frustrated three rounds of auctiorr o[ secured asset by the Bank. Borrower was once again raising trivial and hyper technical grounds in order to frustrate the fourth round of auction. Thc borrower has every incentive to delay the auction sale for as long as possible.

¶104

11.9. lmpugned DR\T order and the DRT order are contrary to this High Court's order dated 01.03.2019 in W.P.No.35953 of 2O 18.

¶105

11.10. Learnecl senior counsel relied on following clecisions

¶106

Shashikala Sharma Vs. Allahabad Bank and othersl:

¶107

rMANU/DA/0001/2016

¶108

/'\1../⁽ /J^../ fi /' \rr\ _'tj / / ,r -rl_r, (r Iitj0t)l :tt: !

¶109

¶110

M/s.Knovus Steels and Infrastructure Limited, Hyderabad rep.by its Managing director v. State Bank of India, Stressed Assets Management Branch, Khairatabad, Hyderabad and othersr; 3) Poddar Steel Corporation vs. Ganesh Engineering lVorks and others3;

¶111

L&T Housing Finance Limited vs. Trishul Developers and another{;

¶112

Saheb Khan vs. Mohd.Yousufuddin and otherssl

¶113

Submissions of learned senior counsel f9I_EE!

¶114

l,earned senior counsel has drawn the attention of the Court to the averments on the affidavit liled by the Bank before DRAT. He would submit that as verilied by the Bank, there was enough amounts available in the account of the auction purchaser to meet tOOTo payment of sale consideration and Bank was satisfied with the arrangement.

¶115

12.1. However, the auction purchaser filed I.A.No. 1226 of 2O),8 prying to refund the amount paid by him, but he later withdrew the I.A. Further, the Bank has returned the entire money on 15/18-06-2019 after the order of DRAT affirming the decision of DRT nullifying the sale conlirmed in favour of auction^purchaser.

¶116

2 2015 SCC Online Hyd 273

¶117

r (199r)3 scc 273

¶118

o 1zo2o; to scc ess

¶119

r lzooe; a scc az6

¶120

¶121

Submissions of learned senior counsel Sri S.Ravi for borrower:

¶122

13.1. Learncd senior counsel would submit that allowing the auction purchascr to participate in the auction was ex /acie illegai. The auc'tion conditions and Rules 8 & 9 of Rules 202O clearly stipulate that participant in the auction must deposit 1Oo^ of the minimum bid amount by RTGS/DD, but not by cheque. Whereas auction purchascr has paid the margin money by cheque and the amount was not realized as on the date of auction. It is thus deemed that auction prrrchaser has not paid the EMD. Therefore, his participation in the auction and confirmation of sale to auction purchaser was ex/acie^illegal.

¶123

13.2. In tl.re tridders list, name of auction purchaser was not found. Therefore, it is not known how he was permitted to participate in the auction, nrore so, when his EMD was not realized.

¶124

13.3. As can be seen from Rules 8 and 9, the nrles do not envisage paymcnt of EMD by cheque. To participate in the auction, amount was to be remittcd by 2l/612017 but that was not done. On the day of auction, auction purchaser has to deposit 25o/o of the sale consideration after excluding l Oolo EMD already paid, but auction purchaser has not deposited on the day of the auction. Hc would further sui:mit that it was not possible to issue sale certificate on O5.O7 -2O l'i when arnount was credited on 06.07.2017. [t would

¶125

r\R.J,r.tsR../ ,ll' !u!.?/j// ,/ -'0^r0 .! lJli', ol lt) l

¶126

¶127

obviously mean the sale certificate was antedated to overcome the orders passed by DRAT remanding the matter to DRT. There was no money in the account of auction purchaser on all three days, i.e, before the day of the auction, on auction day and on O5.O7.2O17 when sale certificate was issued.

¶128

13.4. By the time the borrower preferred appeal before DRAT 5O%, of the amount due was paid.

¶129

13.5. He would submit that after the DRAT order the entire money paid by the auction purchaser was returned to him by the Bank on 15/1A-06-2019 and same was accepted by the auction purchaser. It would thus mean that auction purchaser has given up the cause. In fact he Iiled I.A., before DRT praying to refund his money. Therefore, it is no more open to Bank to seek confirmation of sale at this stage.

¶130

13.6. After the entire money was received by the petitioner, he has no locus standi to challenge the order of DRAT.

¶131

13.7. Further, right of redemption stands extinguished only after the sale certificate is registered whereas in this case the entire sale process is declared illegal by DRT, confirmed by DRAT.

¶132

13.8. Learned senior counsel rclied on following decisions:

¶133

I.1

¶134

rll \ ,, -^ir ,,7.,,-,r.t t.jⁱ Jtl !tt :tJ: l

¶135

Rao Mahmood Ahmed Khan through their LR, vs. Shri Ranbir Singh and others6;

¶136

l)e<:isior-r of Supremc Court in Manilal Mohanlal Shah and others vs. Sardar Sayed Ahmed sayed Mahmad and^{anotherdzLted} 14.O4.19i4:

¶137

9J Progressive Industrial ... vs. Bank of Baroda and others;; 10) Lalit Mohan Aggarwal and others vs. Andhra Bank^and otherss.

¶138

It is not in dispute that in the fourth auction,^{the auction} purcl.laser became the successful bidder. His offer to buy secured asset was 10.55 crores. It is not in dispute that the auction purchascr paicl full sale consideration and sale certificate was issued to him. However, the auction process is held illegal by Debts Recoverv Trihrrnal.

¶139

Learned Debts Recovery Tribunal held that^payment of EMD^by the auction purciraser by way of cheque was not valid. In the terms and conditiorrs of c-auction sale notice, the mode of^{paj.rnent of EMD} was specifiecl as RTGS/Dema;rd Draft and not by cheque. It is furtlrer held that the cheque presented on 21.06.2017 was encashed on 23.06.2017. Unless EMD was paid on 21.06.2017, the auction purchascr was not entitled to participate in the auction. It is also held that pavrnent of 257o towards sale amount was not on the same

¶140

r' 1995 SCC Supp (4) 27s

¶141

'^{ltn rggg vp rzz}

¶142

'MANU/DE/o149/2021

¶143

/, /.'./.i /t/t./ ,t/ ,,.^,r r l. !,^.r.r/.t 1.:li,,t :itt !

¶144

¶145

day or next working day of the auction date as required. The Tribunal held that the payment of EMD and balance 257o sale price was in contraventions of terms and conditions of e-auction sale notice and provisions of Rule 9(3) and (4) of the 20O2 Rules. The DRAT concurred with the view expressed by DRT.

¶146

To appreciate respective submissions and to test the correctness of the decisions of DRT and DRAT, it is necessary to consider the terms and conditions of e-auction and Rule 9{3) and (4} of the Rules 2002. Clauses 3, 5 and 9 of e-auction notice and Rule 9(3) and (4) of the Rules, 2O02, read as under:

¶147

"Clause 3. The intending purchaser (s)/bidder(s) is/are required to deposit EMD amount either through NEr"I/RTGS in the AccouDt No.34349336975, Name of A/c. SARB e-AUCTION A/C, Name of the Beneficiary: Srate Bank of lndia (SARB, IFSC Code: SBINOO05894) or by rvly of Demand Draft drawn in favour of State Banl< of India, SARB, Hydcrabad drawn on any Nationalized or Schedulcd Bank.

¶148

Clause.s. l'he intending biddcr(s) should submit the evidence lor EMD deposit like UR number along with Request Lettcr for participatiolr in the e-Auction, self-attested copies of (1) proof of idcntification lKyC)^|ttz., Voter ID Card/Driving License / Passporl etc. (ii) Current address-proof for communication (iii) PAN card of the bidder (iv) valid e-mail ID (v) contact number (Mobile/ Landline) of the bidder etc, to the Authorized Officer, State Bank of India, SARB, 2"d Floor, above APSRTC Building, Computer's Amenity Center, Koti, Hyderab:rd -500095 by 5.0O p.m., on 21 June 17. Scanned copies of the original of thcse documents can also be submitted to e mail ID of Authorized Officer.

¶149

Clause.g. The Earnest Moncy Deposit [DMD) of the successful bidder shall be retained towards part sale consideration and the EMD{s) of unsuccessful bidder(s) shall bc returned. The Earnest Money Deposit shall not bear any interest. The successful bidder shall lrave to deposit 25o/o of the sale price, immediately on acceptance of bicl price by the Authorized Officer and thc balance of the sale pricc on or bcfore l5th clay of sale or within such extendcd period as agreed upon in writing and solely at the discretion of the authorized officer. Default in dcposit of amount by the succcssful bidcler rvould entail forfeiture of the whole money, already deposited

¶150

l'! t, I .'. .,.!!../ rrl' ,,; .^i/r n/.'r,,ilr !t tta t,t102t

¶151

¶152

aud propcrty shall bc put re-auction afld^{thedefaulting bidder shall} havr: [o clain/r ight in r-cspect oI Propcrty/arnount.

¶153

Rule.g. Time of sale, issues of sale certificate and delivery of possession, etc.-

¶154

(3) ()n rlvera sale of immovabie property, the Ptlrchaser shall imm( dialely pay a deposit of twcnty-five^{per cent- of the amountof} thc sale price, to lhe authoriscd^{officcr conductingthe salc and ill} defarrlt of such deposit. the^property shall^{forthwith be sold again.}

¶155

(4)^'llle l)alance amount o[ purcl]ase price payable shall be paid bv the r',rrrlreser to rh..!rtho!'rsed officer o! or t'efore the Ilft.enth dav oI coDfirmatio[ of salc of tl-tc immovable^{propertyor such exlcndcd} pcriod as may be agreed upoD ilr writitlg betweell the^parties

¶156

[.-ronr the text and texture of sub-rutes⁽³⁾ and⁽⁴⁾ of^{Rule 9, it is} noticed thrt Rule 9 is silent on mode of^payment of EMD and^{25oh of} sale pricc. It only prescribes timeline for^payment of^257o sale^price arld balance 757o of s"rle price.

¶157

Clause-3 of e-auction notice requires^payment of^{EMD through} NEFT/RTGS or by Demand Draft. As per clause-s, the bidder^should enclose prool' of EMD deposit along with request letter^for participation in the e-auction. Clause-9 only talks of deposit of 25% sale price imrnediately on acceptance of bicl of^participant in^the e-auction and balance 7 5o/o on or before 15 days of confirmation^of sale or within extended period as the case may be.

¶158

Fronr the facts on record, it is apparent that on 21.06.2017, auction purclraser deposited EMD rn the torm ol cheque cirawn on his account in the sarne Bank. This chcque was encashed on

¶159

P /i,J .t ./JH..,l ttP Not Ztill ol:0:0 & l-li-it) ol )tt:l

¶160

¶161

23.06.2017. The question for consideration is having regard to tender condition clause No.3 whether the bank was right in accepting the EMD payment through cheque.

¶162

At this stage, it is necessary to note how this aspect^is considered in va rious decisions:

¶163

(i) In Poddar Steel corporation, clause-6 of the tender notice required the prospective bidder to deposit 57o of tender^valueas earnest money either by cash or Demand Draft drawn on^theState Bank of India. Whereas the appellant furnished the said amount in the form of cheque of the Union Bank of India drawn on its own branch. Hon'ble Supreme Court held as under:

¶164

"6. lt is true that in submitting its tende! accompanied by a chcque o[ the Urrron Bank of India .rnd !]ot^of the^{StateBankclause 6 of the} tcndcr notice was not obcyed literally, but the^{questionis as to} whether the saitl non-compliartce tlcprived the Dicsel^Locomotive Works ol the alrthority to accept the bid.^As 4^{matter o:f general} proposition it ca^^ot be hetd. that an duthoratg inoiting^{te^de"s} is botnd to giue elJect to eoery terrn^{,ne^tioned aft the} 'roticeⁱⁿ meticulois det(ril, a^d is ^ot e^titled to^{udiue eoen dtech^ical} irregutaritg of tittle or fto^{significaftce.Therequirementsin a teid.er} notice c.rn be classifted i'1.to t@o^cdtegories -^{thoseurhichlag dotoft} the essential conditiotus of^{eligibilitgand the othersurhich are iterelg} dftclllarg or subsid.idry uith the^{/?1.ainobiect} to^{be achieved. bg the} co^ditioft. I^ the first co.se t'r.e^{.Tuthoritgassaingthe te^dermaybe} requlred to enlorce them rlgidlg.^{Ift the othercq.ses} lt^{mustbe oPento} the authoritg to deoidte from^{dnd not co l^sis,uPon the strlct literal} conpliance of the conditio^ in^{dpproPridtecases.Thisaspect was} exarnined by this Court in^{C.J. Fernandez !-State of Karnataka} [(199O)^{2 SCC 4881 a casedealingwith tenders.Althoughnot in an} cntirely identical situalion as^{the present one,the observationsin} the judgment support our^view. The^{High Court has, inthe} impugncd decision, relied upon Rafiana^{DagaramShettg '.} lftternational Airy)ort AuthoritA^{of India} lll979l 3^{SCC489i but has} failed to appreciate that the^{rcported case belongcd to the first} category where the strict^{complianceof the conditioncouldbe} rnsistcd upon. The autlrorityⁱⁿ lhat^{case, by not itlsistinguPonthe} requirement in the teilder notice^{whichwasan essentialcondition of} eligibility, bestoq,cd a^{iavour on oneof thc bidders, rvhich amounted}

¶165

1'1 'r,1 -,:^/\t..1 rif \r,<sup>.,'jl / (r.1,1, (i ii;1'./:DI

¶166

lil

¶167

to iilegal discrimination. Thc^{judgment indicatesthat the court} closcll' examincd thc naturc of thc co dition^{t'hichhtrd been} rr:laxcd and its impact before answering the^{questiolrwhethcrit} could havc validly condoned the^{shortcomitlgin the tendcr in} question.^'Ihis part of the^judgrnent demonstrales the^cliflerence bctq,ecn thc two categories of the conditions^{discussedabove-} llolvcver it renlains to be sccn as to^{which of thctrvo clatlses. the} prcsent case belongs.

¶168

3 In the present case the certified^{cheque of theUnio^ Bd'rk of l^dia} d.rawn on its otDn brd ch ,nust be treated^{as sufJicient} for^{the purpose} of achieoirlg the object of the co^d.ition a^d^{the TenderConmatlee} took the c'bundant canatiotu bg a. further verificatio^ from^{the bqnk. I^} chis situation it is not correct to hold th.rt the^{Diesel Locornoaiue} Works had fto duthoritg to Ddive the^tech'I.ical literal^{conPliance oJ} cla,lse 6, specidlly @hen it @ds a^ its interest ^ot^{to reiect the s.rid} bid tohich u).ts the highest. We. thereforc, set tlsilc the^iDlpugned judgn)cDt and disnriss thc writ l)etitioll of respondcnt I filed belore the Iliglr Court.^'l'he app('aj is a.co.(lillgly all()w.tl wiih^.osts tlrrorrglr(,ut.' (etnptrasis sttpplied)

¶169

(ii) In Central Coalfields Limited and others vs. SLL-SML^(Joint

¶170

venture Consortium) and othersq, Hor.r'ble Suprente Court held,

¶171

"48-^{'fl-rcrelorc,} whether a term ot Nt'I is essential or not is a decision taken bJ- the cmployer which should be respectcd. llvctl^{if thetermls} essential, the employer has the inherent authority^to deviate^lrom it provided the deviation is made applicabte to all bidders and potential bidd.rs as [rcld in Rnmono DaVardm ShettlJ lRdmdna^Dayaram Shetq v. Intemetiorlal Airport Al.thoritg of l\dia, 11979) 3^SCC489]. However, i[ the term is held by the employer to be ancillary^or subsidiary, even that decision should bc respccted- The^{lawflrlncss of} that decision can be questioucd on very limitcd^{grounds, as} mentroncd in the various decisiorls discussed above, but thc soundness of the decision cannot be^questioned, otherwise this^Court woulcl be takiDg over the function of the tcnder issuing authority, whiclr it catlnot.

¶172

Again. looked at from the point of view of the enployer if the courts tal(e over the decision-making function of the^cmployerand make a distinction between essential and non-essential terms corltr;rl-1 to thc intention of thc employer and thereby rewrite^the .lrrangernent, it could lead to all sorts of^problerns including the one that ^,e are grappling lvith. Iior cxamplc, thc GTC that wc arc conc.Tned^q,ith spccifically states in Clause 15.2 that^"Any bid not acconrpanieci by an acceptabie Bid Securit-v/EiviD siraii be rejecied^iry the errlploycr as norl-responsive"- Surely, CCL ex facic^{intended this} lern] to l)e manclatory. yet the High CoLlrt helcl that the^bank

¶173

" atR 2o1E sc 3814

¶174

PNR,.I & JSR.,I tll' Nos 1l5l I ol 2020 .( lJl30 of 2011

¶175

¶176

guarantee in a format not prescribed by it ought to be accepted since that requirement was a non-essential term of the OTC. From the point of view of CCL, the GTC has been impermissibly rewritten by the I{igh Court.

¶177

(iii) In National High Speed Rail Corp. Limited vs. Monecarlo

¶178

116to, Hon'ble Supreme Court reviewed the^propositions enunciated

¶179

in precedent decisions and held:

¶180

"29.'fhus, from the aforesaid decisions, il can be seen that^a court before intcrfering in a contract ntatter^{in exerciseof powers} ofjudicial review should pose to itself the following^questions:

¶181

(4 Whether the process adoptecl or decision made by the authority is mala fide or intendcd to favour someone; or whether the^process adopted or decision nrade is so arbitrary^{andirrational thatthecourt} can say: "the dccisioir is such that no^{responsible authorityacting} reasonably and in accordance^{rvith relevant} larv could^{have reached"?} And

¶182

(i.) Whcther thc public interest is ailectcd?

¶183

lf the answers to the above^questions are in^{thenegative,then there} should be no interference under^{Article 226."}

¶184

(iv) In Ms. Srinidhi Stone Crushers and another vs. The

¶185

Authorized Officer, the South^{Indian Bank} Ltd.,^Bangaloreand othersrl, Hon'ble Karnataka High Court considered^{somewhatsimilar} issue. We respectfully agree with^{the view expressedby Karnataka}

¶186

High Court. The Karnataka High^{Court held,}

¶187

"14, Even otherwise, we hold^{thatsince the purchaser has tendered} the cheque for balance^{sarleconsiderationon13-11.2O.12and} 14.lt.2Ol2 being a holiday, the^{realizationof cheque on 15.11.2012,} was a legal and valid tcnder^{in complianceof sub-Rule(4) of Rule 9 of} Rr-rles, 2002. We are^{also of the opinionthat even if the chequewas} encashed on a subsequent date,^{after thechequewas presentedon} 13.I1.2012, since sub-Rule^{(4) provides that such'period couldbe} extended as may bc agreed^{upon in wriling',the act of presentationof}

¶188

r" 1zozz1 o scc aor "^{ttR zotgKAR4os9}

¶189

f<sup>:: r .! ..r.(lt.^/ rJ P ,,r'/i/^r,/ :rllr1! l.r^I n,,l -1,-' :.0

¶190

the chcque for realization, tvell within the^{penodstipulatcd, canbe} treat{d its an agrccmcnt in writillg to extctld thc^{pcriod.We say so} because, it is possible that even when the^{purchascrtendersthe} cheqrrc rvcll within the period, the^secllred creditor nray^delay presc|rting the cheque. If the secured creditor causes thc delay, the bianr cannot be shifted on the^purchaser- Utrder^such circulnstanccs, the act of prescntation of chequc^{shoulcl be construed} as an agreernent in writing to extend the^period.''

¶191

2't. As consistcntly held by Constitutional Courts, the decision making pro(^(rss of the enployer accepting or^{rejectingthe bid of a} participant shoulcl not be interfered unless the decision making proccss is rnalafide or intended to favour someone or is arbitrary or irrational. tt is also settled that having authored the tender documents, employer is the best^person to understand^and appreciate its requirements and irttefpret .its 'Jocunlcl-rts. Further, whether a term of auction notice is essenti.ll or not is a decision taken by the employer which should be respectcd and soundness of that decision cannot be questioned. Courts cannot make a distinction between cssential and non-essential terms.

¶192

Having regard to the parameters of^judicial review, thc decision of the Bank to accept payment of EMD and 25o/" of sale consideration by mode of cheque payment cannot be said as irrational or arbitrary or malaficle.

¶193

It is the catcgorical assertion of the Bank that its decision to accept the cheque did not violate nor barrecl by thc 2OO2 Act. It asserts th:rt i1 has knowledge on availability sulficient^{funds in the}

¶194

P,?,J .T ,/J?,J Ir'l' :r'o; ) l i l l,tl 2r)10,k l.i)jaot 21

¶195

¶196

account of auction purchaser as on the date o[^{depositof cheques. In} fact it delayed acceptance of first instalment of sale money^withhope of some order from the DRT in the case filed by the borrower.

¶197

As held by Hon'ble Supreme Court in^{PoddarSteel corporation} that in case of subsidiary or ancillary tender^condition it^{is open to} the authority to deviate from^{and not} to^{insist literalcompliance.} What is required to be noted is whether^{EMD was paid.EMD was} paid by auction purchaser by way of cheque. The Bank never raised objection on payment of DMD through^{cheque.It is deemedthat the} bank waived mode of^payment through^{NEFT/RTGS/DDas} mentioned in the auction notice.^{lt is also relevant to notebackground} facts of the case to appreciate^{the decisionof the bank to accept} cheque payment. Earlier three^{attemptsto sell the securedasset} faced stiff resistance from the^{borrowerandthreeauction processes} were unsuccessful. The auction^process in^{issue was the fourth} attempt and the Bank appears^{to be keen to finalizethe sale.}

¶198

Even assuming that the^{Bank erredin acceptingthe payment} of EMD and towards^{25o/o saJe considerationby cheques,some} material irregularity is not^{a ground to interfereand the writ Court} need not nullify the auction^{processunless the borrower satisfiesthe} Court that prejudice/injury^{caused to him.}

¶199

¶200

FurLher, as rightly contended by the learned senior counsel for auction purchaser, the borrower has neither pleaded nor shown how prejudice rvas caused to him. In fact, as noticed by this Court in Writ Petition No. 35953 of 2018 borrower was stalling auction proccss on one llretcxt or the other. The debtor has no role in the tnanner of conducting auction. He can raise objection if property put to auction was not properly described and base price detcrmined was far iess comparecl to markct price and essential condition of eligibility was

¶201

ln Saheb Khan, Hon'ble Supreme Court held there must be a matcriai irreguiarity or fraud and that must be pieaded and proved to and it must bc established that such rnaterial irregularity or fraud resuited in substantial injury to the applicant. Paragraph- 13 reads as

¶202

undr:r:

¶203

"13.'lhcrefore befr)e the sa]e can be set aside mer-cly establishrrrg a uratcr ial ir-regularity or fraud witl not do. The applicant must go further arrd cstablish to the satisfaction of the court that thc naterial irreguLrr it,v or fraud has resulted in substantial iDjury to the applicaBt Conversely even if the applicant has suffered substantial irljlu-y Ly r eason of the sale, this would not be sufli.-ieni to sct thc salc asidc unlcss substantial injury has becn occasi<rned by a matcrial irrcgularit], or fraud in publishing or conductiDg the sale. (See DhirL:nrlro Nath Gorai v. Sudhir Chandra Ghosh [(1964) 6 SCR l00l : AIR 1964 SC 13001 ; Jasuantlal NatuarLal Thakkar v. Sushilaben Menilal Daig.Lrwala [1991 Supp {2) SCC 691] ar.d Kadigala Rama Rao v. GLLtala l{ahto Ro.o U2OOO) 3 SCC 871)."

¶204

2.q. ln Rama Kishun and others vs. State of Utter Pradestr and othersl2, thc Hon'ble Supreme Court relred on vlew expresscd in

¶205

' 1zort 1 rt scc srt

¶206

¶207

I,'R,.1 & JSR.J tt I' No! zl5ll ol )t)l0 ta ||a ot )0)1

¶208

Navalkha & Sons vs. Ramanya DasI3, wherein it is held that after confirmation of sale Court should not interfere even if it is found that some material irregularity in the conduct of sale was committed.

¶209

In L&T Hosing Finance Limited, the Section i3(2) and 13(a) of the SARFAESI Act notices were challenged before DRT by the borrower. The DRT sets aside the demand notice on the ground that though secured creclitor is 'L&T Housing Finance Limited', on the notices the name of secured creditor was shown as 'L&T Finance Limited.'. The DRAT reversed tl.re decision. In writ petition filed against DRAT order the High court of Karnataka reversed the decision of DRAT. Hence, appeal to Hon'ble Supreme Court. The appellant contended that the both companies use common letterheads and in a1l other notices 'L&T Housing Finance Limited' seal was used, but due to mistake, in Section 13(4) notice '1,&? Finance Limited' seal was affixed. It was also pleaded that by such mistake no prejudice was caused to borrower. Dealing with these submissions, Hon'ble Supreme Court held,

¶210

"19. In the facts and circumstances, when the action has been taken by thc competent authority as^per the^{procedure prescribed by law} and lhe person affccted has a knowlcdgc leaving no ambiguity or conlusion in itlitiating proceedings under the^provisions of the SARFAESI Act by the secured creditor, in our considered^view, such action takcn thereof cannot be held to be bad in law merely on raising a trivial objection which has no legs to stand unless the pcrson is able to show any substantial prejudice being caused on account of the procedur.tl lapse as^prescribed under the Act or the

¶211

"^{(196e) 3 sccs37}

¶212

l,<sup>r / r:/..? / rrf \r,\ ':j/^I rr -)r-'r, !t I i.: 1l:l:l

¶213

¶214

RuI s fr'amccl thcreunder still with a caveat that^{italways dcpends} uporl tllc facts o[ cach casc to decipher^{the nattlre ol the proccdural} lapse l;ciDg complained of and the resultant^prejudice if^any,beilt[ cruscd ancl thcrc cannot be a straitjacket^{fornlulzr whiclr c:rnbr:} unil)rnrly follorvecl in all the traDs.rctions.

¶215

,\dv( rtintl to the lacts of the^{instant case, we.Lrc of thc viewthat} tlre ,)bt|etiorl raised by the .espotrdents^was trivii^{and technicalirr} nalure .rnd lhc appcllant (sccured creditor)^{has compliedwith thc} proccdrrre Prcscribcd under the SARFAESI Act.^{At rhe samctilne, th('} ol)jc.tion r:rised by thc respondcnts in^the first^{instancc, at thc stag(:} of filrng of a securitisation application before^{DRTunder the SAIIFAESI} At:l rs a fccble atternpt which has^persuaded ll]c^{Tribunalanclthc} High Corrr t to ncgate the^{proceedings initiated by the appellant under} lhc SAitl,/\irsl A(1. is urrsuartainable more^{so, \i'heii the icspoltdents} are unal,le lo^justify the error in thc^{procedure being followed by the} appcllanr (sccurcd creditor) to be complied^{with ininitiating} prorrr:tlrrgs undcr thc SARFAESI Act."

¶216

lt u-as vchemently contendcd by^{learned senior counselfor} borrowcr that the sale proceeds were repaid^{to altction purchaser and,} thelefore, it is no more open to him to claim^{the property.}

¶217

3 1. Allainst any decision by secured creditor^{under tl're Act,2002,} an aggricve(l person including thc borrower can^availremedy provide(l b-y Scction 17 of the Act, 2OO2. Against bank^taking measur('s rtnder the SARFEASI /ict,²⁰²² the^{borrowerfiled} S.A.No-447 of 2017 before the Debts^{Recovery Tribunal-Il,} Hyderabad. Agreeing with the contention of^{the borrowerthat EMD} was not paicl by the auction purchaser as required^{by Rule 9(3) and} (4) of tht: Itules, 2OO2 and auction notification, the DRT set aside^the entire auction process. Against decision of DRT,^{Section 18 of the} AcI, 2OA2 proviclcs remedy in the form of appeal^{before the DRAT.} Auclion purchaser preferr-ed appeal to DRAT.^Tl-re DRAT^renderedthe

¶218

¶219

?NR.I & JSR,J u'P ltot )1511 nl)t)10.1 t] )^lh ol 2l)21

¶220

decision on 09.O4.2021. Challenging the validity of the decisions of DRT and DRAT, W.P.No. 1333O of 202 i is filed on 74.06.2021.

¶221

The power of judicial review under Article 226 of the Constitution of lndia is very wide and a person aggrieved by decision of a statutory Tribunal can challenge the legality of the decision of the Tribunal. Aggrieved by the decision of DRT, affirmed by DRAT, the auction purchaser filed W.P.No. 13330 of 2021. Merely because the sale consideration was returned by the Bank soon after DRT passed orders does not take away right of aggrieved person to avail remedy of appeal and to challenge the legality of an order of the Tribunal. Moreover, the amount was refunded when appeal was pending before DRAT. Therefore, returning of full sale consideration by the Bank cannot per se amount to declaring the auction purchaser as nonentity and cannot hold that he has no locus srandi to challenge the decision of the Tribunals. Therefore, this contention is stated to be re.jected.

¶222

In Writ Petition No.35953 of 2018 filed by the auction purchaser, the Division Bench of this court expressed serious concern on how borrower was abusing the legal process. It is useful to extract paragraphs 19 and 2O of the^judgment dated 01.O3.2019. They read as under:

¶223

'' 19. 'fhe above narration of facts goes to show that the 4th respondent hos actually put to shame, even thc procedure

¶224

¶225

tt t,^,.,. )llni:tt.'l& ]^{i: l/1./} ''l,']

¶226

prescril)ed by the Coclc ol Civil Proccdure. Th(' Dcbts^Ilccovcry Triblln:rl^(l'roccdurc) Rulcs, 1993, make it^{clcar-that the provisions} of ttre CIPC aDd the Irldian Evidence^{Act, 1872. maynotperse apply} to thc l)roceedings bcforc the Tribunal and that^{thc Tribunalshall} ensLlrc compliancc with the princil>les of natural^{jLtstice- But, thc4'r'} r(:spoircleut appcars to have ctrploited every looPhole in^{the lawand} h:rs stre,-.cssfully rvardecl off auction^{purchas(:rst,y protracting the} applLcation pe[ding before the DRT. It is sickelling to llote^that rcpearcd interlocutory al)plications were filcd by the 4'l'^respondent and every order passecl by the DRT b€came the sul)ject-matter^{of an} appcal before the DRAT. At this stage,^{we do not know whether any} auction purchaser u,ill have any hopc of the^appeal of^{the 4th} rcsp.r d( r)r^gelurA dlspr)sed of at any timc.

¶227

,.1 l'h-raf^rp r-L.tho n^tp ^f the manner in u,hich the 4Ll, resp{)r)dtnt has carried out a tirilde, this writ^{petition is disposed of} dire.l rrrq thc Dtt'l' to dispose of the appeal, S.A.^{No 447 of 20 17 (O1d} S.A. No I71 of 2012) rvithin a^pcriod of^{tlvo (02) tnonthsflom the} dirte o, receipl o[ a copy of this order. No further^{interlocutory} ai)pl;c^lior1s sh;rll be entertaincd at the inst.ncc of the^41h rcsp()ndent arl(l the Tribunal, irl vielv of the iimited^{scopeof the} inqu[] lo bc conducted undcr Sectiotl l7 of the^{Act, 2002, tlear the} argllnlcrlts on thc sidc of thc borrower, secured^{creditor andthe} auctron pLrrchascr, dispose ot the application within two 102) rnonll)s-

¶228

These ordcrs of the Division Bench were placed before the^Debts Recovery Tribunal II. In spite of restraint imposed^against ent€rtaining [nterlocutory Application, the I.A.Nos.¹ 866 of^{2O1 9 and} 1867 of 2O19 rvere entertained by the Debts Recovery Tribunal-ll. In I.A.No. 1866 of 2019 borrower prayed to set aside the auction held on 23.06.2017. In paragraph-15 of the order. the Tribunal records hling of copy o[ order in W-P.no.35953 of 2018, but seeks to^ignore on the grouncl that the I.As wcre filed earlier to filing of^{Memoby the} auction purclraser and that copy of the order was not communicated by the High Court.

¶229

¶230

/,/i./.r^/l/1./ Ill, ,,, _'r i/ ,^.r,..".t Iiiio,/-.r)1

¶231

To the extent relevant order o[ Debts Recovery Tribr-rnal-ll reads

¶232

as under:

¶233

"15. -.-. The 2nd respondent placed on record the copy of order passcd irr Writ l'etition No.35953 of 20lB on 01.03.2019 .rlong with mcmo dated 06.05.2019. Prior 10 filing memo applicant filcd the above referrcd IA Nos.t866/2019 dnd 1867/2019. flolvever, as on this dav no copv of order p.tssed in WP No.35953 of 2018 is cornmunicated 10 this l'ribunal- Therefore, these two interlocutory application Nos.l866/2019 ar,d Ia67 /2019 are taken up along rvith thc'SA."

¶234

Ir1 vicw of the amendment questioning the subsequent e- auction sale notice dated 04.06.2017, the relief sought for qlrestioning the lrrst e-auction sale notice dated 2a/29.O2.2O12 has become redundant. Keeping in view of the facts stated supra, let me cousider the rival contentions advanced by the learned counsel appearir rg for the partics.

¶235

[n the result, SA along with lA No.1866/2019 is allowed settirlg .rside the e-auction sale held on 23.06.2017 while dismissing the IA No.1867/2019. llowcver, this order does not^preclude the l"r respondent Bank to initiate measures afresh for e auction sale of SA schedule property strictly in accordance with the^{provisions of} SARIIAI1SI Acl,2OO2 and rules framed there under for realization of secured debt."

¶236

If the Tribunal entertained doubt on copy of High Court Order filed by auction purchaser, it ought to have waited till certilied^copy was furnished. Further, when this Court directed not to^entertain interlocutory applications from the borrower, the^{Tribunal could not} have entertained I.A.No.1866 of 2019. Holding that two applications were filed earlier to filing of memos by the^{auction purchasercannot} be a ground to entertain the I.As., and decide^{the validityof auction} held on 23.06.2017. Both reasons ate^ex facie^{not valid and amounts} deliberatc violation of the orders of the Court.

¶237

,^.. ,, .l .,-.:ll l rrf . il ,-'r'r.( l^; t) ,t :11:l

¶238

¶239

?'7. ln vieu of clear restraint imposed by the Division BcItch, the clccisior.r ,r1 [)cbts RccovcrrT^{'lribtrnal-[I} to entertai]1^{I.A. No.I} 86{-r of 2019 anrl seltrrig asirlc eurction hcld on 23.O6.2017 is cx.facie illegal a r.rC r.r rrs tr st:r inal; lc.

¶240

For all the afores:rid reasons the order of Debt Recovery Triburral-ll, I-lyderabad dated 23.05.2019 in S.A.No.447 of 2O77^as affirmed by the Dcbts Recovery Appeliate Tribunal by order dated 9.4.2021 ir-r Appeal No.68 of 2O19 is set aside and W.P.No. 13330 of 2021 rs allor'ved. Thc auctiou purchaser shall cleposit entire sale considerat ion within 4 (four) weeks from the date of receipt of copy of this order. Ile shall also pay interest at the rate of 9'7o per annum from the date of refund of money by the bank till date of deposit to be paid along u'ith the principal amount. On such payment of full sale consideration witl.r interest, if any, all consequential steps shall be take n by the Bank.

¶241

W.P.No.21511of 2O2O:

¶242

Pral,er in the \,rit petition reacls as under

¶243

'...- to rssue a writ of Mandamus declaring the action of lhe Respondellt Bank in refusing to clear the outstarrding liability in the Petilioner's SMD loarr ac.,)uDt ro.304a2911975 by accepting 93,13,612/- deposited by the Pctrtroner undcr the non-discretiorlary aDd no[-disc.imrnatory SBI OTS lol0 on thc ground that an Applicatioi No.68 of 2() l9^(diary no. 164 of 20191 filed by the auctioD purchaser is pending b(:fore the llonble Debts I{ccovcry nppelhte Tribunal as illcgal. arbitftrry, highhandcd, violatrlc of Earrking norrns. violativc of thc provisions and intcrltion of Iilc SARFAESI Act an.l the Sccurrty lnl.:rest Dnforcenrent R,rles lherc undel, vioLrtrle of Scctiorr 60 ot tl)c lransfcr of Propcrty Act. 'iol.tive of gu(lclin,rs issucd bl,the ReseNc Rank of Indi^, vi()lativc ol the telrns antl co,ldirioos un(ler the Stll O'fS 2020 and violative of rights^guararltec.l

¶244

¶245

?'R..t ,t.lsR..t tt t'\o.215t I ol )0:0 & 1.1.;.i(t al )tt: I

¶246

under Arlicle I4 of the Constitution of^{Indi,r, witha conseqrtentialprayer} to sct irside the Banks letter dated ll/1ll2O2O^{and dircct the Bank to} accept and appropriate the lioney dcposited by the Petitiooer in^Ilanks No-Lien account under the OTS Scheme 2020^{anddischargethetotal} oulstancling liability in the SME loan account baring^{No.3O482911975 and} issue a loan closure cerlificale and^pass such other ordcr^or ordcrs^asthis Horl'ble court may deem fit and^proper in^the circumstances^{of thecase."}

¶247

Submissions of learned senior counsel Sri S.Ravi for the borrower:

¶248

40.1. The OTS scheme launched on l2.lO.2O2O is a^non- discretionary and non-discriminatory scheme.^{Though petitioner} apptied under OTS and^paid the total^{money payable} if^{OTS is} extended to him, the said application is rejected^{on erroneousground} that the appeal filecl by the auction^{purchaserbefore DRAT was} pending when as per OTS pending legal issues is not a bar to extend OTS. It envisages settlement of^{accountseven when litigation is} pending. It is irrational and would amount to rejection in an arbitrary and discrim inal ory ma n ner.

¶249

40.2. Litigation is^pursued by^{a thirdparty. Therefore,that would} not have been a ground for rejection^{of the application. That the} auction conducted on 23.06.2077^{was declared as illegal by DRT and,} therefore, the secured asset continues^{to be with the bank.The fact} that DRAT affirmed the decision of^{DRTin nullifyingthe auction} shows that the sale was not^{properly conducted by the Bank. After} the decision of DRAT, the entire money^{paid by the auction purchaser} was returned to him. The auction^{purchaseraccepted the same.It}

¶250

l f \ ,,^1/.j/ / .i/ lr-1ll (t it:il ot )t)) I

¶251

¶252

clearly shon's that in iln arbitrary manner. tht: applicatiot-r for settlement n,as rejected

¶253

40.3. By placing reliancc on several^judgrnt:nts of Punjab and Halyana High Collrt, he would submit that rejection of OTS^request was erroncous and that in the lacts of this the^principle laid down^by the Hon'ble Supreme Court in Sardar^(supra) applies and^{in terms} thereof, this Court can test the legality of rejection for settlement and isstte mandamus.

¶254

40..1. Learned senior counsel relied on lollowing decisions

¶255

) R.S. Rice Mills and others vs. Debts Recovery Tribunal-I and otho rs 4

¶256

2)Anu Bhalla and others vs. District Magi6trate, Pathankot and othersl5;

¶257

Arvindra Electronics Pvt.Ltd., Vs. State Bank of Indiar";

¶258

Samarth Woollen Mills and others vs. Indian Bank (Erstwhile Allahabad Bank)r^, ;

¶259

The Bijnor Urban Cooperative Bank Limited, Bijnor and others vs. Meenal Agarwal and othersls;

¶260

Subrnissions of learned senior counsel for the Bank:

¶261

41.1. The secured asset was sold to auction purchascr. However,

¶262

the DRT decltrred the sale as illegal on the grouncl of violation of Rule

¶263

rr valuTexToaarTzozz r! MANuTctTtr,ssTzozo "^{ruanu/pu/oao:/zouz} t'ttanulealols12ozz r* var'ruTscTrzssTzozr

¶264

¶265

9 of tl-re Rutes. Aggrievecl^{thereby, the auction purchaser filed appeal} before DRAT and said^{appeal was pendingwhen the application of} borrower was rejected.

¶266

41.2. ln adclition to^{ground of rejection, the Bank also noticed that} the borrower submitted^{fabricated sanctionedplan fromGHMC} during subsequent^{inspection The borrowerfirst obtained building} plan to construct a residential^{building.Whereasshe has produced} building plan as if^{shc had obtained permission toconstruct} commercial building to^{securethe funds from the BankThe bank} sanctioned loan by^{refcrringto building plan to constructcommercial} complex. The^{controllers of the Bank declaredthe account of the} petitioner as fraud account^{on 13.1 1.2O2Oand informed vide Circle} Ofhce letter datecl^{19.11,2020.The said fact was also reported to RBI} and RBI recordecl the^{same infraud folder. He would therefore} submit that in view of^{fraudplayed by the trorrower, OTS application} was not accepted. He^{would further submitthat the RBI guidelines} clearly state that^{fraudcases are not eligiblefor OTS'}

¶267

41.3. The borrower^{claimedthat as the buildingpermissionapplied} to GHMC to construct^{commercial complexwas not rejected,itis} deemed as^{granted,but in view of the fraud played by the borrowerin} securing a building^{permission for a residential building and later}

¶268

rll ,, '^., ,,/.Yr.)/,!L Iⁱ lr)i,/.'r,-'l

¶269

¶270

claiming deemed to have sccured building perrnission for commercial building lraudulently, no deemed permission can be assumed.

¶271

41.4. Oncc zrn account is shown in fraud foldr:r of RBI. ur-ricss the same is dcleted, the Bank cannot sanction OTS.

¶272

41.5. When fraud is apparent the borrower cannot scek application of OTS and no illegality committed by the Bank in taking note of the issue of fraud to hold that borrower is not entitled to OTS.

¶273

Replv bv learned scnior counsel for borrower:

¶274

42.1. The dccision in Bijnor is not applicable to the facl s of this case and the decision rn Sardar alone applies.

¶275

42.2. The reason assigned in the impugned der;ision is only on the ground that appeal filed l)y the auction purchaser rvas pcnding. In the counter-affidavit, Bank has invented theory of fraud to scuttle the prospects of One Timc Settlement of borrorver account. No ncw plea or a new reason cait be urged/'stated i-i the forri': ol i:oui-rtcr-afirdavit. The reason assigned to reject the OTS in the order- impugned alone has to be considered. In support of said contention lcarncd senior counsel relied on the decision of Honble Supreme Court in Mohinder

¶276

t,?.J.t./Ja../ lt ? \1)s ) l.t I I ol )tt:tt.t l_1-rjn ol )t)21

¶277

¶278

Singh Gill and others vs. The Chief Election Commissioner,^NewDelhi and otherst!);

¶279

42.3. Section 17 of the Indian Contract Act defines^{fraud. The} parameters to hold a person guilty of playing fraud as enshrined in Section 17 are not attracted to the case^{on hand.}

¶280

42.4. Bot!;' building permissions rvere^placed before the Bank.^Both permissions are valid- No fraud was committed by borrower. There was no misrepresentation.

¶281

ONE TIME SETTLEMENT IOTS):

¶282

The bank reluses to extend thc SBI-OTS^{2O2O to the borrower} for two reasons. Firstiy, on the^{groundthat litigation was pending on} the secured asset and secondly,^{the loanaccount is classifiedas} fraud account. The second reason^{was not the groundto reject the} OTS application impugned in^{W.P.No.21511 of 2O2O but is projected} in the counter affidavit.

¶283

Three clauses of SBI-OTS-2020^{are relevant for consideration.} They are clauses (iii) and^{(iv) undcr the headingcovERAGEand clause} (i) in paragraph 2.1, with heading as 'cases not^eligible to^be covered under the scheme'.^{'lhey read as under:}

¶284

"'MANU/sc/o20911977

¶285

¶286

rr/,^. r'^r/.,)'rr-i'r (' i. ir n^)t)t

¶287

"qgvqcgg'

¶288

clau! s O ., {'1) ,ex

¶289

Clause iii. Cases pending before Courts/DRTs will^{be eligible.} However, consent tcrms with default clause will^{have to be filc<1} belore presiding officet of Cotlrt/DRT for ol)taining^consent dect ,:e.

¶290

Clause iv. Cases wherc Bank has issued notice u/S l3(2) or taken action u/S.I3(4) of the Securitization alld^{Reconstl-tlction} of Frnarrcial Assets and Enforcement of Security lnterest^Act (SAff FAESI-2O02) rvilt be eligible. However, brancl.tt s are advised to d( fcr conducting auctiorls under SARFAESI^{frorrithc date of} issuc ol notice about the schemc to the borrower litl the^last dal( for receipt ofapplicaiions. No auclions shollld^{l)e co!':du't^C} if any application is reccived and it is under l)ro(css-^I3ranch may also defer any auctiorls for the accounts^{tlnderOTS 2020} till the ducs arc reccivcd or the OTS is treated as^farled.

¶291

2.1- Cascs not elisible to be eove.ed undel the scheme:

¶292

(i).^('ases reported as frnud to RBI will not be eligible."

¶293

As per clause (iii) even when cases are^pending in a Court/ Debts Recovery Tribunal, the concerne<l loan^accorrnt can^be processed under the scheme. As per clause (iv) oncc a noticc is issued to the borrower about the scheme, bank should llot conduct auction of ser:ured asset.

¶294

According to learned senior counsel for borrower, mcrely because appeal preferred b5r the auction purchaser was^pcnding not a ground to reject the OTS as per SBI-OTS-2020 scheme to borrower and it is contrary to the scheme.

¶295

In Bijnor (supra), Hon'ble Supreme Court helcl that it is uiiinrateiy ior the Bank to take a conscious ciecisiorr irr iis uwri interest and to secure/recover the outstandil.rg debt. No Bank can be

¶296

¶297

/'\7i./ ,i:./.5[./ l,l) ./, -',/^j/l,r -r,/lr.r' lJ3.i| 11 )tt:l

¶298

compelled to accept a lesser amount under the OTS Scheme despite the fact that the Bank is able to able to recover the entire loan amount by auctioning the secured^property/ mortgaged^property. When the loan is disbursed by the bank and the outstanding amount is due and payable to the Bank, it will always take a conscious decision in the interest of the Bank and in its comrnercial wisdom. Hon'ble Supreme Court further held,

¶299

"10. If a prayer is cntertaincd on the part of the dcfaulting unit/person to compel or direct the tinancial corpo r.rt ion / bank to enter into a one-time settlcmcnt on thc terms^ploposed by it/him, then everl deferulting Llnit/pcrson rvhich/rvho is capablc of^paying its/his dues as per the terms of the agreement entered into by it/him would like to get one tie settlement in its/his f:rvollr^{who rvould} not Iike to get his liability reduced and pay iesser amount than the amount he/she is liable to^pay under the loan account? tn the present case, it is noted that the original ivrit petitiorler and her husband are making the^p.ryments regularly in two other loan accounts and those accounts are regularized. Nlcaning thereby, they have the capacity to make the^paymcnt even with rcspect to the present loan.rccount aud despite the said fact, Dot a single amount/ instalment has beetr paid in the^present loan^account for^which original petitioner is^praying for^{the benefitunder ttle OTS Scheme.}

¶300

1 l. 'l'l,e sum and substancc of the itforesaid cliscussion rvottld be that no writ of mzrndantus can be^issued by the^tligh Courtⁱⁿ exercise of powers uncler Article²²⁶ of th(i^{Constittrtionof lndia,} directing a financial institutiolr/bank^{to positivell' grant the benelltof} OTS to a borrower. Thc^grant ol bcnefit under tlle^{OTSis alu'ays} subject to the eligibility criteria^{mentionedttnder} the^{OTS scheme} and the guidelines issued frorn^time to time.^{If the bank/financial} institution is of the opinion that^theloaneehas tlle^{capacity to make} the payment and/or that the^{bank/liDancialinstitutionis ableto} recover the cntire loan a rount^cven by^{auctioningthemortgaged} property/secured property, either from the loanec and/or^guarantor, the bank would be iustified in refusing^{to grant thebenehtunderthe} OTS Scheme. Ultimately, such a^decisiorl should^{be left to the} commercial wisdom of the bank^whoseamount is^{involved and it is} always to be presumed that the^financial institution/barlk^shiilltake a prudcnt decision whether to^{grantthebeircfit or not undertheOTS} Scheme, having rcgard to the public^{interestinvoh'edand having} regard to the factors which^{arenarratedhereinabove."}

¶301

.16

¶302

4a. In State Bank of India vs. Arvindra Electronics Private Limited2o,

¶303

before the Pur.rjab and Haryana High Court, reiiance was placed on judgmer.tt rcndered in Sardar Associates vs. Punjab & Sind Bank and others2r. Though decision of Bijnor was brought to the notice of the Hon'ble High Court, High Court followed the clccision in sardar Associates. Dealing with this aspect, Hon'Lrle Supreme Court hcld as uncler:

¶304

"lll.'lhorrgh the decision of this Court in the case ol Biirxtr Ltrbatt Cooperoti.ue Bank ,inited (supra) was specificall-r' pressed in service on behalf of the Bank and was pointed out to the Iligh Court. th( High Court instead following the binding dccision of tllis Court irl the case of Bilnor Urban Cooperatiue Bo,nk Limited(supra) has not follorved the same by observing that the earlier decision o[ this Court in thc casc of Sardar Associates (supra) is morc elaborate- we do not approvc such an obscrvation by the High Court and r(Jt f{)llo(,illg tlrc subseqltent bindiDg decision of this Colrrt which^assu(:h was^{on 1l-re} point. Beirlg a subscquent decision on the Poinr/issuc, thc lligh Court,.its bound to follow the samc."

¶305

To test the legality of justilication to reject O'IS applicatioD due to pending litigation, a brief recapitulation of history of litigation is necessary.

¶306

To i:ecover the loan arnount, the bank dccidcd to conduct sale of secured asset. The bank was unsuccessful on three occasior)s as on one ground or the other the borrower was stalling auction process. On the fourth attempt in the auction conducted on 23.06.201 7 sale was finalized and confirmed in favour of auction purchaser and he

¶307

:1' 2022 scc ont nc sc 1522

¶308

'' lzoosl^{s scczs;}

¶309

¶310

I,,\n../ tt JJli..,/ tt-P -\ot )l5ll ol lo:t),( t_t)vto1)t)tI

¶311

was issued sale certificate. The fourth auction process culminating in confirming the sale in favour of auction purchaser was also interfered by the Tribunal in SA No.447 of 2Ol7 along with I.A.No.1866 of 2019 on the ground that mode of paymenl by cheque towards EMD was not as per tender condition and balance amount towards 25ok sale consideration was not paid on the day of auction or on the next day and said payment by cheque rvas also not valid. Aggricvecl thereby, the auction purchaser filed Appeal No.68 of 2019 before the Debts Recovery Appellate Tribunal.

¶312

By the time SBI-OTS-2020 was introduced, Appeal^{No.68 of} 2019 was pending in Debts Recovery Appellate Tribunal. Since secured asset was sold and appeal was^pending in Debts^Recovery Appellate Tribunal against decision of DRT setting^aside the sale,^it cannot be said that the decision of the bar-rk^not to^acceptOTS request as amounting to a^{perversedecision, wholly ur.rtenable and} arbitrary for this Court to commend^{the Bank to acceptthe OTS} request. Having regard to the litigation^{the Bank has exercised} sound discretion and do not call^{for interference. It is apt to note} that Bank is entitled to recover^{the entire amount standing in the} loan account. In order to close^{existing loan account, Bank may} extend some incentive to the borrower^{or takerecourse to settlement} of account by mutually agreecl terms^{so that accounl can be closed.} It is entirely for the secured creditor^{howto negotiate such closure or}

¶313

refuse to negotiate for any settlement and proceed to enforce pavment of entire loan amount. with reference to OTS, the scope of^jrtdiciai review and interference by this Court is very narrow. No right, much less vestcd right is avaiiable to a borrower to compcl the Ba.nk to agrec for OTS. In the facts of this case, the decision to reject the OTS application of borrower is neither whimsical nor perverse or wholly arbitrary. It was based on sound reasoning.

¶314

Even olherwise, on detailed consideration ofthe issuc, we have opincd that tl.re Debts Recovery Tribunal grossly errcd in setting aside the auction snle and allowed W.P.No. 13330 of 2021, .

¶315

INCLUDING I,OAN ACCOUNT IN FRAUD FOLDI'R MAINTAINED BY RBI:

¶316

As per clause (i) of paragraph 2.7, if a case is reported to RBI that in loan account fraud is committed the account is not eligiblc to apply under the scheme.

¶317

In the counter affidavit deposed on 23.2.2021, the Bank asserts that the borrower submitted fabricated sanctioned plan of Greater Hyderabad Municipal Corporation (GHMC) to procurc the loan, According to the bank the borrower actually secured buitding permission to construct residential house but produced a bogus building permission to construct commercial building. Having come to kr-row of tht: same, the account of petitioner was declared as ll-aud

¶318

/,!a./.(.lr/t../ ,, /' ,,, -.li/1 ,4.'','/r.! I^t t.it) nl :t)) I

¶319

¶320

account on 13.i1.2O2O. The said fact was reported to RBI and RBI has recorded the borrower account in Fraud Folder. It is therefore asserted that as per clause 2.1 of SBI OTS-2020, when an account is declared as fraud account, the scheme benefits cannot be extended.

¶321

Learned senior counsel for the borrower contended that the issue of fraud account was not the reason to reject the OTS proposal of the petitioner and, therefore, it is not open to the Bank to raise the plea to support the order impugned. Further, behind the back ol borrower allegation of fraud cannot be levelied. As allegatior-r of fraud has severe adverse consequences, due process has to be followed before holding so.

¶322

It is true that the initial rejection not to accept the request of borrower for OTS was not on the ground of fraud. [n the counterafiidavit, for the first time, plea of inclusion of the borrower account in fraud folder by RBI was taken to support decision to reject OTS.

¶323

57- From the material on record, it is apparent that no^prior notice or opportunity was afforded to borrower before declaring his account vitiated by fraud.

¶324

Allegation of fraud is a serious issue. Once a^person is alleged to have committed fraud in dealing with financial matters, it^willhave severe adverse civil and evil consequences- The borrower cannot raise

¶325

4t')

¶326

finances from any financial instittltion. It would impact his social status an(l affect his reputation. Therefore, before alleging that a person corl.imitted fraud elementary principle is that pcrson ntust be told of reasons to allege fraud, give opportunity of hearing and ort due consideration of the explanation offered, to^pass orders assigning reasons in support of the decision. In the case on hand, Bank holds that borrower committed fraud to secure loan by^producing bogus building pcrrnission to construct a commercial complex, whereas, actual pennission was granted to construct residential buiiding only. Before coming to such conclusion the Bank did not affcrrd opportunitv to put forth the borrower's version. It appears the borrower has sufficient explanation to offer on the allegation.

¶327

According to borrower, two building permissions were granted by GHMC and both 1;lans are valid. These aspects ought to have been looked into before holding that borrower has played fraud. Therefore, thc unilateral decision of the bank holding that the borrower has committed fraud and icporting to RBI is ex facie tllegal and not sustainable. Further, as initial rejection of OTS application, impugned in 1.1-re writ petition, was not on the ground of fraud that cannot bc a glound to support the decision to reject OTS proposal of borrower in the form of a counter-afhdavit.

¶328

I \ /t./ ri /t^./ jll' \ ,! '1j// ()/ -rrli/!t 1 I^t lt) t,l 'tt:1

¶329

¶330

RIGHT OF REDEMPTION:

¶331

One other issue requires consideration is whether the^borrower is entitled to exercise right of redemption as envisaged in Section 13(8) of the Act. Though Section 13(8) of the Act envisages exercise^of right of redemption before the date of^{publication of notice for public} auction or inviting quotations or tender from^public or^{private treaty} for transfer by way of lease, assignment or sale of^{the secured assets,} by relying on Section 6O of Transfer of Property^{act, 1882, the Hon'ble} Supreme Court in Mathew^{Varghesehas held} that^{the rightof} redemption is available till saie certificate^{is registered in favour ol} auction purchaser. Thus, a borrower^{can apply right of redemption} before sale certificate is registered.

¶332

This being the^{positionin law, the question for considerationis} in the peculiar facts of the case,^{whetherthe borrower is qualifiedto} exercise the right of redemption and^{whether this Courtin exerciseof} equity^jurisdiction should^permit the^borrower. To^considerthis aspect, it is necessary to dwell^{into historyof litigationand chronolory} of events and directions issued^{by this Court in W.P.No.35953of} 20t4.

¶333

As borrower defaulted in^{repayment of loan, the bank classified} the loan account as NPA and^{took measures to recoverthe debts.On} 29.02.2012, the bank issued 1't^{E-auction noticescheduledon}

¶334

¶335

Jrl ,,r^{- ;/} ,)/-'rlrl\j I t i 1t).,t )t): I

¶336

30.O3.2012. Borrower hlecl S-A.No.17l of 2012 [later renumbered^as S.A.No.447 of 2Ol7l. On 22.03.2O72, DRT^passed conditional^order of stay of auction. Borrower failed to comply the^{condition.However,} auction coulcl nol be held. The Bank issued 2"'l E-auction^{notice on} 02.05.2O12, proposing to conduct E-auction r:n 04.06.2012. Borrower filcd I.A.No.624 of 2012 in S.A.No.171 of 2012 on 31.05.201 2. DRT ordered to proceed with sale but not to confirm^sale for 30 days. Borrower was granted liberty to make^{payment. No} payment r,vas made but flled application to extend the time. This was refused bl the DRT. Aggrieved thereby, Appeal was filed before^DRAT. The DRAT has not granted relief, There on Writ Petition No.24733 of 20 12 was tlled belbre thc Madras High Court. It was dismissed^as infructuous as auction purchaser took back the rnoney.

¶337

On '26.()2.201,7. thc Bank issued the third E-auction notice to conduct E-auction on 3O.03.2017. Borrower filed Interlocutory Application No.786 of 2017 seeking stay of auction notice dated 26.02.2017. The DRT passed order on 28.03.2017 granting liberty to banl( to conduct salc but also ordered not to issue sale certificate if the llorrower pays 5O7o of the outstanding amount. The amount was not paid. Borrower sought extension of time, but the same was ciisrnissed. iiou,ever, the saie rii<i not materiaiize as aur:Liorr purchasr:r srlught r-efund. Challenging tlre dismissal of the

¶338

l'/i./.!./i/,'/ ,l /, ,\ tti/,',,,'1/'r.r l]ir/r.,.'/,.]

¶339

¶340

application flor extension of time^{and challengingthe action of the} Bank in refunding the amount^{to theauction purchaser,} 4s respondent filed^{W. P. No.} 12835^{of 20 17 and W. P.No. 12 836of 2017} but withdrew them on 24.07.2017.

¶341

On O4.O6.2017, bank issued^{4th E-auction notice to conduct} e-auction on 23.06.2OI7. On^{22.06.2O17, borrowerfiled Interlocutoly} Application No.1756 of 2017 before^{DRT seeking stay of auction. The} DRT passed interim order authorizing^{the bank to proceed with} e-auction but directed not to^{issue sale certificate ifpetitioner} deposits 5O^o/ of the total outstanding^{dues in two equal instalments.} In the Appeal No.356 of 2017,^{DRAT orderedBank not to issue sale} certificate.

¶342

The 4tl, respondent moved^{two MiscellaneousApplications,one} for advancing the hearing of^{the appeal and another for amendment.} The application for amendment^{was allowed, but the applicationfor} stay was disposed of^{permitting the bank to proceedwith the sale but} not to issue the sale certificate.

¶343

As against the^{said order, the 4th respondenthled Appeal before} the DRAT. The DRAT^{allowed the Appeal on 06.07.2017 with a} direction to the DRT to^{dispose of the application in S-A'No.447of} 2Ol7 within a^period of^{three (O3) months.The bank proceededwith}

¶344

,t/,^..,,, i1, ,,/..rrl, !! l:. J, / 1]r/

¶345

¶346

the conducl of :ruction ort 23.06.20\7 and issued salc cer-ti{icate to tlre successful bidder on 05.O7 .201,7 .

¶347

Thcreafter, the 4tt. respondent moved a fer.v interlocutory applications, praying to implead the auction purchaser, for carrying out amendment and for furnishing the list of documents. The DRT allowed the applications for impleadment and amcndment, but dismisscd thc application for furnrshing the list of documents.

¶348

As against the said order, the 4th respondent moved Appeal bcfore the DI{AT. The DRAT disposed of the same by order dated 09.71.2017 \r,ith certain directions. Pursuant to those directions, the 4 ' respondent again nrovecl certain applications, whicl-r were disrnisseC by the DRT. As against the dismissal of those applications, a fresh appeal wars filed beforc tl're DRAT and the DRA'| disposed of the same ^ith certain direclions.

¶349

Frustrated at the repeated filing of interlocutory applications and challengins the orders passed on those aDplications b5, DRT before the DRAT, the person, who secured the sale certihcate in the auction held on 23.06.2017, has filed W.P.No.35953 of 2018 seeking a mandamus to direct the DRT to dispose of S.A.No.447 of 2Ol7 within a time frarne.

¶350

¶351

fnR,./ &.lst.,t tt l'Nos )ltl l ol )tDtt,l 1l) ti nl 2u: I

¶352

The chronologr of events^{and facts noted above clearly disclose} that petitioner had enough^{opportunitiestoexercise right of} redemption, but faiied to^{avail the opportunity. On the contrary,} whenever auction notices were issued,^{she has ltled applicationsto} ensure that sale is aborted.^{ThoughDRT passedconditionalorders,} she has not complied with the directions^{of DRT.}

¶353

At this stage, it is apt to note the^{directions of this Courtin}

¶354

W.P.No.35953 of 2O r8.

¶355

"20. Therefore, ial(ing note of^{the mannerin which the 4th respondent has} carried orrt a lirade, this^{writ petition is disposedof directingtheDRT to} dispose of the appeal, S.A.No.447^{of 20 17 (old S.A.No.l71of 2012)within a} periocl ol trvo (O2l months from the date of receipt^{ofa copyofthis order No} furthc. interlocutory applications^{shallbe entertained at theinstance of the} 4th respondent and the Tribunal, in^view of^{thc limited scope of the inquiry} to be coiducted Llnder Scction l7^{oftheAct, 2oO2, hear the arguments on} the sidc of thc borrower,^{securedcreditorand theauctionpurchaser'} dispose of the application^{withintwo(O2) months."}

¶356

72- Contrary to these orders,^{interlocutory appiicationswere} allowed and DRT nullified the^{sale, which is the subject matter of} W.P.No. 13330 of 2021. Even^{now, borrower is not offering to pay the} entire amount due to the^{Bank, but has beeninsisting for one time} settlement. In W.P.No.215^{17 of 2O2O, the borrower is prayingto} declare the action of the^{respondentinrefusing to clear the} outstanding liability of the^{borrower'sloan account by accepting}

¶357

93,13,612/- deposited by the borrower^{underSBI-OTS-202O} scheme and not accepting the^{saidproposal merelyon the ground} that Appeal No.68 of 2019 is^{pending is contrary to mandate of} Section 6O of the^{Transferof PropertyAct, violative of guidelines}

¶358

irl'^,,,. )/i/,,/,'rl) nr 1i^r:,, / -1,),'

¶359

¶360

issr-red by the Reserve Bank of Inctia, and violative of the terms and conditions Lrnder tlre SBI-OTS-2020. Thus, even now borrower is not showing inr:lination to clear the entire loan amount.

¶361

It is settled principle of law that writ Court need not grant relief merely because petitioner has made out a case, but Court in exercise of equity^jurisdiction may deny the relief, if the conduct of petitioner disentitles him. If directions of this Court in W.P.No.35953 of 2018 were complied in true letter and spirit by the DR'I', this litigation could have been avoided, the loan account closed and property would have vested in the auction purchaser long ago. The borrower cal not take advantage of grave illegality committed by thc DRT and not appreciatecl bl,DRAT. It is trut proper to give quietus to the litigation. Having regard to the conduct of petitioner, she is disentitled to secure equitable relief.

¶362

74- Therc is onc more aspect needs consideration. After the decision of DRT nullifying the auction held on 23.06.2O17, the entire sale consideration was returned to the auction purchaser. The bank now holds the borrower as defaulter and the loan account is not closed. With addition of penal interest for this period, the loan account may have swelled further. We have allowed W.P.No.l3330 of 2021. In tcrms thercol, the Bank gets 10.55 crores. We have also granted 9'2, interest from the date of refund till date of repayment to

I I

\ \

PNR.,I & JSR.J lrP Not 2ltl I of2010 & I Jjlt') ol 2o2l

¶367

be paid by auction purchaser. Though, the loan account is^not closed, we are not informed about the^{totaloutstandingin the loan} account as of now.

¶368

The Bank should credit 10.55 crores and interest^paid by the auction purchaser as per the directions in this order^to the^loan account. After crediting the amount, if the Bank assumes that^some more amount is due from borrower,^{the Bank should notify to the} borrower the account statemcnt. It is to be^{notedthatthe borrower} is not solely responsible for this hasco^{and Bank has} also^contributed to a great extent. Having regard to the history of^{litigation,we are of} the opinion that the Bank cannot levy^{penalinterest from the dateof} refund of sale proceeds. The interest^{amount paidby the auction} purchaser should be adjusted towards interest component of^loanof borrower. That course is^just and equitable.^If after^{such adjustment} the Bank hotds that borrower has to^{still pay somemore amount,it is} open to Bank and the borrower^{to resort to OTS. The Writ Petition is} accordingly disposed of.

¶369

CONCLUSIONS:

¶370

76 Wc record our conclusions in the two Writ Petitions^as under:

¶371

(1) Order of Debts Recovery Tribunal in^{S.A.No447 of 2017} ' and the orclcr of thc Debts Recovery^{Appellate Tribunalin Appeal} No.68 of 20 19, afhrming the order of^{Debts RecoveryTribunal,areset}

¶372

¶373

¶374

Pt;R,.t &.tsR.J ttI'tos2tj 0[2020 & I 1JJ0 o/ 2021

¶375

:LSidC 'I lre salc confirrned in favour of auction purchaser is held !alicl.

¶376

(2) The auction purchaser sha[ deposit 10.55 <--rores along u,ith intercst Qtt,9Y" per annum from the date of remittance of said nrorley b-y the Bank till the date of deposit by the auction purchaser in terms ol- this order.

¶377

(3) 10.55 crores paid by the auction purchascr along with interest shall be adjustcd to the loan account of the borrower.

¶378

(4) The Bank shall not charge additional interest over and al)ovc intcrr.st arnount paid by the auction purchascr fronl tlle date of conformation of sale till date of adjustment to lo;rn account o[ 4th respondent.

¶379

(5) If the Bank holds that borrower has to still pay some more amoLlnt, it is open to Bank and the borrower to resort to OTS.

¶380

(6) W.P.No.t3330 of 2O2t is allowed. W.p.No.2t5ll of 2O2O is disposed of.

¶381

Pencling rniscellaneous applications if any shall stand closed

¶382

SD/-I.NAGALAKSHMI

¶383

DEPUTY REGISTRAR //TRUE COPY//

¶384

L-u r

¶385

sEcTtoN oFFtcER

¶386

To, sEcTtoN oFFtcER 1 The Assistant General Manager, State Bank of rndia sARB. Koti. Hvderabad 2 The Authorized Officer, State Bank of tndia SARB, Koti, Hvder-a-badl^{-- ---} 3 The Reserve Bank of lndia Saifabad, Hvderabad. 5OO 004' 4 The Authorized Officer, State Bank of t;dia, SIB Saifabad Branch, HACA Bhavan, Hyderabad.

¶387

: IP I:^{gi:t,sl'^?.91j:} S?:_"^":,q tqq,"!9lp^{rri bu na r, kor kara} I ' 'r.,iJiiiji-iii i iyoeiaiJau. 7^'l 1 L.R Copies

¶388

B The Under Secretary, Union of lndia, Ministry of Law Justice and Company Affairs. New Delhi

¶389

9 The Secretary, Telangana Advocates Association Library, High Court for the State of Telangana at Hyderabad.

¶390

10 One CC to Sri V. Murati lvtanohar, Advocate tOpUCl 11 One CC to Sri M Srikanrh Reddy, SC FOR SBt tOpUCl 12 One CC to Sri t/anoj Reddy Keshi Reddy. Advoiate IOhUC] 13 Two CD Copres cHR^ Ls /,-,'

HIGH COURT

DATED:1 010112023

COMMON ORDER

W.P.No.21511 of 2020 & 13330 of 2021

¶396

S i-A IE
I
)
-j
r_) 2 3 l[N 2[8
,/l
Df.irfa.

¶397