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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 19TH DAY OF MARCH, 2021
PRESENT
THE HON'BLE MR. JUSTICE SATISH CHANDRA SHARMA
AND
THE HON'BLE MR. JUSTICE SURAJ GOVINDARAJ
WRIT APPEAL NO.745/2020 C/W WRIT APPEAL NO.486/2020
IN WRIT APPEAL NO.745/2020
BETWEEN:
ASSET RECONSTRUCTION COMPANY INDIA LTD., HAVING ITS REGISTERED OFFICE AT THE RUBY, 10TH FLOOR NO.29, SENAPATI BAPAT MARG DADAR WEST MUMBAI-400 028 REPRESENTED BY ITS AUTHORIZED REPRESENTED BY ITS MANAGING DIRECTOR NOW REPRESENTED BY MR. NISHITH DOSHI. …APPELLANT
(BY SRI.DHYAN CHINNAPPA, SR. COUNSEL FOR SRI.ARJUN RAO AND KAJOL GOGI, ADVOCATES)
AND:
ESTEEM ESTATE PROJECTS PVT LTD., NO.73, THE SHELTON GRAND HOTEL M G ROAD, BENGALURU-560 001 REPRESENTED BY ITS MANAGING DIRECTOR MR HABIB KALWANI
SURAKSHA PROPERTIES NO.67 SRI RENUKA NILAYA NEAR LAKSHMI TEMPLE KORAMANGALA BENGALURU -560 095 REPRESENTED BY ITS PARTNER MR DINESH R.
THE RECOVERY OFFICER-2 DEBT RECOVERY TRIBUNAL NO.4 JEEVAN MANGAL LIC BUILDING RESIDENCY ROAD BENGALURU-560 025 … RESPONDENTS
(BY SRI.ANIL KUMAR SHETTY A., ADV., FOR R1 SRI.SHASHIKIRAN SHETTY, SR. COUNSEL FOR SRI.VIGNESH SHETTY, ADV. FOR R2)
THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE KARNATAKA HIGH COURT ACT, PRAYING TO ALLOW THE ABOVE WRIT APPEAL AND SET ASIDE THE ORDER DATED 03.08.2020 PASSED BY THE LEARNED SINGLE JUDGE IN WP.NO.98/2020 AND ETC.
IN WRIT APPEAL NO.486/2020
BETWEEN:
SURAKSHA PROPERTIES NO. 6, SRI. RENUKA NILAYA, NEAR LAKSHMI TEMPLE, KORMANGALA, BENGALURU- 560 095, REPRESENTED BY ITS PARTNER MR. DINESH.R …APPELLANT
(BY SRI.SHASHIKIRAN SHETTY, SR. COUNSEL FOR SRI.VIGNESH SHETTY, ADVOCATE)
AND:
ESTEEM ESTATE PROJECTS PVT LTD., NO.73, THE SHELTON GRAND HOTEL M G ROAD, BENGALURU-560 001 REPRESENTED BY
ITS MANAGING DIRECTOR MR HABIB KALWANI
ASSET RECONSTRUCTION COMPANY INDIA LTD., HAVING ITS REGISTERED OFFICE AT THE RUBYM 10TH FLOOR NO.29, SENAPATI, BAPAT MARG DADAR WEST MUMBAI- 400 028
RECOVERY OFFICER-2 DEBT RECOVERY TRIBUNAL NO.2 JEEVAN MANGAL LIC BUILDING RESIDENCY ROAD BENGALURU-560 025 … RESPONDENTS
(BY SRI.ANIL KUMAR SHETTY A., ADV., FOR R1 SRI.DHYAN CHINNAPPA, SR. COUNSEL FOR SRI.ARJUN RAO AND SRI.KAJOL GOGI, ADVOCATES FOR R2)
THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE KARNATAKA HIGH COURT ACT, PRAYING TO ALLOW THE ABOVE WRIT APPEAL AND SET ASIDE THE ORDER DATED 03.08.2020 PASSED BY THE LEARNED SINGLE JUDGE IN WP.NO.98/2020 AND ETC.
THESE WRIT APPEALS HAVING BEEN HEARD AND RESERVED ON 12.03.2021 COMING ON FOR ‘PRONOUNCEMENT’ OF JUDGMENT THIS DAY, SATISH CHANDRA SHARMA J., DELIVERED THE FOLLOWING:
JUDGMENT
The present writ appeals are arising out of the order dated 3.8.2020 passed by the learned Single Jude in WP.No.98/2020 between Esteem Estate Projects Private Ltd., vs. Suraksha Properties and Others, by which the writ petition preferred by Esteem Estate Projects Pvt. Ltd., has been allowed
setting aside the sale of the property, which was done on account of the orders passed by the Debts Recovery Tribunal.
For the sake of convenience, the parties to these appeals are referred to by their ranking in WA.No.745/2020.
The facts of the case reveal that the appellant is a company registered under the Companies Act, 1956. It is a Security and Reconstruction Company within the meaning of Section 2(h)(ia) of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as Act of 1993). It is also registered with the Reserve Bank of India. Respondent No.1 has availed financial assistance in the year 2005 from Karnataka Bank Limited for construction of a Hotel and to secure the payment of loan, the property in question was mortgaged with the Bank. The secured assets included his 70 rooms Hotel at M.G.Road, Bengaluru in the name and style of Hotel Shelton Grand (schedule property). The appellant company has acquired 100% of the debt of respondent No.1 from Karnataka Bank Limited.
The loan account of respondent No.1 became non performing asset on 30.6.2007 and therefore, Karnataka Bank Limited issued a notice under Section 13(2) of the SARFAESI
Act in March 2009. Thereafter, the Bank filed an original application before the Debts Recovery Tribunal (hereinafter referred to as DRT) under Section 19 of the Act of 1993. Respondent No.1 though contested the matter before DRT, in the year 2011 requested the Karnataka Bank Limited for settlement of its dues and a consensus was arrived at between the parties, meaning thereby, the Bank agreed to accept Rs.20 Crores as full and final settlement. However, respondent No.1 – borrower failed to pay the upfront monies.
The DRT finally passed an order in favour of the present appellant on 25.6.2015 and a Court Receiver was appointed. The Court Receiver took possession of the schedule property and it was placed in possession of the Court Receiver in July 2014 itself.
A Recovery Certificate was issued on account of the order passed by the DRT for a sum of Rs.33,58,99,112.50 in March 2016 and proceedings were also initiated before the Recovery Officer in DRC No.107/2017. Respondent No.1 – borrower failed to pay the aforesaid amount. Hence, a proclamation of sale was issued on 25.2.2017 and the reserve price was fixed at Rs.47,09,57,290.00. However, the property
could not be auctioned for want of bidders and the reserve price was reduced from time to time. Finally, an auction was scheduled in April 2017. The auction notice was published in various newspapers like New Indian Express, Samyuktha Karnataka, with a reserve price of Rs.44.74 crores. Again, the property could not be auctioned. Hence, a fresh proclamation of sale was issued on 7.2.2019 and the reserve price was reduced to Rs.30,64,00,000.00.
The record reveals that several sale proclamations were issued on various dates i.e., 5.2.2019, 25.2.2019 and 15.3.2019 and the reserve price was fixed at Rs.30 crores and no sale could took place for want of bidders. Hence, one more sale proclamation was issued on 21.5.2019 and the reserve price was brought down to Rs.27,57,70,000.00. Again a wide publicity was given to the auction, but sale could not be finalized again for want of bidders. Finally, on 2.7.2019, again a sale proclamation was issued and it was published in the New Indian Express on 4.7.2019 for sale of the properties keeping in view Section 38 and Section 52(2) of the Second Schedule to the Income Tax Act, 1961 r/w Act of 1993. The reserve price was fixed at Rs.27,57,70,000.00 and the auction was scheduled on 23.7.2019.
Respondent No.2 – Suraksha Properties participated in the auction process and was declared as a successful bidder. The bid of Respondent No.2 at Rs.27,59,70,000.00 was accepted and respondent No.2 deposited a sum of Rs.6,89,92,500.00 i.e., 25% of the bid amount with 1% of poundage on 24.7.2019.
As per the terms and conditions of the auction notice, the amount was required to be deposited on or before 6.8.2019. However, it was not deposited in time and an application was submitted for extension of time on 8.8.2019 for grant of three months’ time w.e.f., 7.8.2009 and the Recovery Officer has not extended the time to deposit the remaining amount stating that under Rule 57(2) of the Schedule II of Income Tax 1957 (Rules), he has no powers to grant extension of time.
Thus, on 8.8.2019 the Recovery Officer rejected the request of respondent No.2 for extension of time relying upon Rule 57(2) of Schedule II of the Income Tax Act, 1961. Being aggrieved by the order dated 8.8.2019, respondent No.2 preferred a writ petition i.e., WP.No.35574/2019 before this Court and the writ petition was disposed of with a direction to
respondent No.2 to approach the Debts Recovery Appellate Tribunal (hereinafter referred to as DRAT). Respondent No.2 thereafter, preferred an appeal before the DRAT on 20.9.2019 i.e., D No.2537/2019 and the DRAT, vide order dated 11.12.2019, has directed respondent No.2 to approach the DRT against the order of the Recovery Officer. Accordingly, respondent No.2 preferred an appeal before the DRT on 17.12.2019.
While the matter was pending before the DRT, respondent No.1 – borrower made an application before the DRT on 23.12.2019 stating that he is having a borrower who is willing to purchase the property for a sum of Rs.30 crores and the DRT directed respondent No.1 – borrower to keep the buyer present with a demand draft for Rs.30 crores on 30.12.2019. However, no buyer was produced before the DRT on 30.12.2019. Therefore, the DRT allowed the appeal vide order dated 30.12.2019, set aside the order passed by the Recovery Officer dated 8.8.2019 and directed the Recovery Officer to issue the Sale Certificate in favour of respondent No.2 after accepting the remaining sale consideration. Immediately, respondent No.2 deposited the remaining sale proceeds and on 2.1.2020 the Sale Certificate was issued. As the amount was
deposited by the successful bidder – respondent No.2 and the Sale Certificate was issued, the appellant company requested the Recovery Officer for transferring the amount i.e., Rs.27,59,70,000.00 deposited by respondent No.2 to the appellant – company. It is stated by the appellant that the possession of the schedule property was also handed over to respondent No.2 and respondent No.2 has informed this Court that it has renovated the property and is in possession of the same.
The facts on record reveal that immediately after passing of the order by DRT ie., on 30.12.2019, respondent No.1 – borrower has preferred the writ petition i.e., WP.No.98/2020 on 3.1.2020 praying for quashment of the order dated 30.12.2019 passed by the DRT in D.No.2537/2019 in DRC No.107/2017 arising out of OA.No.810/2011 and prayed for the following reliefs; “PRAYER
A) issue a writ of certiorari or any other like writ or order, thereby quash the order dated 30.12.2019 passed by the Debts Recovery Tribunal-II, Karnataka at Bengaluru in D.No.2537/2019 in DRC No.107/2017 in OA No.810/2011 as per Annexure-E, according to law.
INTERIM PRAYER
B) The petitioner prays that this Hon’ble Court may be pleased to pass an interim order staying the operation of
the order dated 30.12.2019 passed by the Debts Recovery Tribunal-II, Karnataka at Bengaluru in D.No.2537/2019 in DRC No.107/2017 in OA.No.810/2011 as per Annexure-E, pending final disposal of the above writ petition.
C) The petitioner prays that this Hon’ble Court may be pleased to pass an order as to the costs of the writ petition with such other relief or reliefs as this Hon’ble Court deems fit in the circumstance of the case.”
This Court, vide order dated 6.1.2020, granted an interim order staying the operation of the order dated 30.12.2019 and the matter was finally heard by the learned Single Judge. The learned Single Judge has allowed the writ petition and the sale in question has been set aside on the ground that the Recovery Officer was not having any power to extend the time limit to deposit the balance amount keeping in view Section 29 of the Act of 1993 r/w Schedule II of the Income Tax Act, 1961. It has been observed by the learned Single Judge that by no stretch of imagination extension of time could have been granted keeping in view the statutory provisions governing the field.
Paragraphs 34, 35, 36 and 37 of the order passed by the learned Single Judge read as under:
“34. In fact, the very General terms and conditions of the online auction sale stipulate that the sale would be governed by the Rules in Schedule-II to the Income Tax Act read with Section 29 of the RDB Act as
per Clause 1(b) of the General Terms and Conditions of Online Auction Sale. Further, Clause 12 which deals with default of payment categorically states that in default of payment of 25% of the bid amount on the same day and 75% of the balance bid amount within the stipulated time, shall render an automatic cancellation of the sale without any notice. It is, therefore, clear that even these General terms and conditions which are produced as Document No.3 to the statement of objections also mandate that the sale would stand automatically cancelled if there is a default in payment of either 25% or 75% of the bid amount. It is, thus, clear that the Recovery Officer would not have the jurisdiction to extend the time by placing reliance on Clause 11(c) of the General Terms and Conditions of Online Auction Sale, which, as stated above, is not traceable to any statutory power. To put it differently, the conduct of sale can only be in accordance with the statutory rules as contemplated under Section 29 of the RDB Act. This, would, in turn, mean that the sale will have to be conducted strictly in accordance with the Rules provided in Schedule-II of the Income Tax Act.
It is to be stated here that there can be no escape from the liability to pay 75% of the bid amount within 15 days by the auction purchaser on any ground whatsoever. It is also to be noticed here that an auction purchaser participates in an auction with the clear knowledge that he has to deposit the entire bid amount within 15 days and if he fails to do so, he suffers a serious consequence of forfeiture. If an auction purchaser is permitted to participate in an auction and thereafter contend that he has difficulty in paying the balance bid amount and that some leniency should be given to him to deposit the balance bid amount, the very purpose of an auction sale would be completely defeated. I am, therefore, of the view that the DRT had no jurisdiction to direct acceptance of the sale consideration after a period of 15 days and direct issuance of Sale Certificate. I, therefore, set aside the order passed by the DRT and hold that the Recovery Officer is required to resell the property as provided under Schedule-II of the Income Tax Act.
As a consequence of the order of the DRT being set aside, it necessary follows that 75% of the bid amount paid by the 1st respondent pursuant to the order of the DRT would have to be refunded to the 1st respondent, subject to the condition that the 1st respondent
surrenders the Sale certificate and also surrenders physical possession of the auctioned property if he has been put in possession.
Since the impugned order is set aside and the auction being declared non est, as a further consequence, the Sale Certificate issued pursuant to the impugned order shall be deemed to have been cancelled. The Recovery Officer is directed to ensure that necessary entries are made in the office of the Sub-Registrar to the effect that the Sale Certificate has been cancelled.
As far as the 25% of the bid amount that was deposited by the 1st respondent, as on the date of the auction sale, is concerned, the Recovery officer would have to first mandatorily defray the expenses of the sale from this 25% of the deposited amount. The Recovery officer shall thereafter decide whether the balance amount is required to be forfeited to the Government, as contemplated under Rule 58 of Schedule-II of the Income Tax Act. Writ petition is accordingly allowed.”
This Court has heard the learned counsel for the parties at length and perused the record.
The undisputed facts of the case reveal that respondent No.1 has assigned the subject property as security while availing financial assistance from the Karnataka Bank Limited and the present appellant has acquired 100% of the Debt of respondent No.1 from Karnataka Bank limited. The facts also make it very clear that the account of respondent No.1 became non performing asset on 30.6.2007 and a notice was issued under Section 13(2) of the SARFAESI Act in March
2009. The outstanding dues were not cleared by respondent No.1 and therefore, an Original Application was preferred before the DRT under Section 19 i.e., OA.No.810/2011. During the pendency of the Original Application also the Bank accepted one time settlement proposal and agreed to accept Rs.20 crores as full and final settlement in the year 2011. However, respondent No.1 – borrower failed to adhere to the commitment and finally the Original Application was decided by order/judgment dated 25.6.2015.
The undisputed facts also make it very clear that inspite of repeated attempts on the part of the Recovery Officer to dispose off the property in question by way of auction, the auction could not be finalized for want of bidders and finally again notice was issued on 2.7.2019, in which respondent No.2 was declared as the successful bidder and his bid of Rs.27,59,70,000.00 was accepted. The auction was held on 23.7.2019 and 25% of the bid amount along with 1% poundage was deposited on 24.7.2019 i.e., Rs.6,89,92,500.00 and the remaining amount was to be deposited within 15 days. However, on 8.8.2019 respondent No.2 sought an extension to deposit the amount within a period of three months keeping in view Clause 11(c) and also keeping in view Clause 17 of the
General Terms and Conditions of Online Auction Sale. The Recovery Officer has rejected the said request on 8.8.2019. Hence, the writ petition was preferred. Thereafter, as directed by this Court, vide order dated 20.8.2019 passed in WP.No.35574/2019, respondent No.2 has approached the DRAT and the DRAT vide order dated 11.12.2019 has directed respondent No.2 to approach the DRT and finally, the appeal was preferred on 17.12.2019 in DRT against the order of the Recovery Officer.
The undisputed facts also make it very clear that before the DRT, respondent No.1 submitted an application on 23.12.2019 that he is having a buyer who is ready to purchase the schedule property for a sum of Rs.30 crores and the DRT has granted time to respondent No.1 to keep the buyer present on 30.12.2019 with a demand draft of Rs.30 crores. Respondent No.1 again did not honour his commitment, no buyer was brought before the DRT on 30.12.2019 and finally, the DRT has passed the order dated 30.12.2019 granting time to respondent No.2 to deposit the remaining sale consideration. Respondent No.2 immediately complied with the order of the DRT and a Sale Certificate was issued on 2.1.2020 and the possession was also given to respondent No.2.
The facts and circumstances of the present case reveal that the account of respondent No.1 became non performing asset on 30.6.2007 and the appellant – company was able to realize the dues only in the year 2020. All attempts were made by respondent No.1 to ensure that the outstanding dues are not satisfied. The proposal of respondent No.1 was only in the year 2011 for one time settlement and respondent No.1 did not honour the said proposal. Thereafter, an order was passed by the DRT on 25.6.2015. Subsequently, with great difficulty the schedule property was sold and time was extended by the DRT to deposit the amount by the successful bidder. Before the DRT also, respondent No.1 – borrower took time on 23.12.2019 to produce a buyer. However, it did not produce any buyer and in those circumstances, the time was extended to deposit the amount. Thus, the present case is a case where the only question which has to be answered is in respect of the extension of time to deposit the remaining amount by the successful bidder.
The learned single Judge has arrived at a conclusion that keeping in view Section 29 of the Act of 1993 r/w Schedule II of the Income Tax Act, 1961, no further time could have
been granted to the successful bidder by the DRT to deposit the sale consideration.
In the present case, undisputedly, as per General Terms and Conditions of Online Auction Sale, there was a condition in existence for extension of time to deposit the balance amount. Section 29 of the Act of 1993 provides that the provisions of Schedule II and III of the Income Tax Act, 1961 (43 of 1961) and the Income-tax (Certificate Proceedings) Rules, 1962, as in force from time to time shall, as far as possible, apply with necessary modifications.
The relevant clauses of General Terms and Conditions of Online Auction Sale are reproduced as under;
“Clause 11. Deposit of purchase price:
(a) The bidder declared successful, shall pay, immediately after such declaration, a deposit of 25% (less EMD already paid) on the amount of his purchase money.
(b) In case of the auction-sale proceeding and concluding beyond the banking transaction hours, the deposit of 25% purchase price (less EMD already paid) shall be remitted before 12 noon of the next working day.
(c) The balance amount of purchase money shall be paid on or before the fifteenth day from the date of the sale or within such period as may be extended, for the reason to be recorded, by the Recovery Officer.
(d) The successful-bidder shall also pay towards Poundage Fee of one percent (1%) plus Rs.10/- on the purchase price.
Clause 17. Stay/cancellation of Sale:
a) In case of stay of further proceedings by higher judicial for the auction may either be deferred or cancelled and persons participating in the sale shall have no right to claim damages, compensation or cost for such postponement or cancellation:
b) Default in payment of 25% of the purchase price or the balance purchase price with poundage fee within the stipulated/extended time will result in cancellation of sale.
c) The purchaser may within 30 days of the sale, apply for setting aside the sale on the ground that the certificate debtor had no saleable interest in the property sold.“
Rules 57 and 58 of Schedule II of the Income Tax Act, 1961, deals with deposit of amount by the highest bidder and it provides for deposit of 25% of the bid amount immediately after declaration and the remaining amount has to be paid within 15 days from the date of the sale of the property. Section 29 of the Act of 1993 makes it very clear that Rules 57 and 58 shall apply as far as possible with necessary modifications, meaning thereby Section 29 does not state that Rules 57 and 58 shall be made applicable in toto and they shall be applicable with modifications as far as possible.
The present case is having peculiar a facts and circumstances. After a large number of successive auctions the property was not sold. The borrower failed to honour one time commitment. The borrower has also failed to honour the commitment before the DRT by producing another borrower, who was ready to pay Rs.30 crores as informed before the DRT and thereafter, with great difficulty the property was sold. Hence, the DRT was certainly justified in extending the time to respondent No.2 to pay the balance amount.
The learned Single Judge has placed reliance upon a judgment delivered by the Madras High Court in the case of P.Kumaran vs. DRAT, reported in (2011) 6 CTC 369 : 2011 SCC Online Mad 871.
In the aforesaid judgment, there were no terms and conditions in respect of extension of time in the auction notice itself and therefore, it was held that the auction purchaser has to pay the remaining 75% of the amount within 15 days keeping in view Rule 57(2) of the II Schedule to the Income Tax Act, 1961.
Paragraphs 24 and 26 of the aforesaid judgment delivered by the Madras High Court read as under: “24. However, Rule 57(2) of the Second Schedule to the Income Tax Act shall be considered with reference to Section 29 of the Recovery of Debts Due to Banks and Financial Institutions Act , which gives the power to the Recovery Officer to modify the sale conditions. Sub-rule
(2) of Rule 57, though provides that the purchaser shall pay the full amount of purchase money on or before the fifteenth day from the sale of the property, in the event the Recovery Officer is of the view that the said time could be also extended, he may do so in the sale notice for payment of the balance of 75 percent of the purchase money. It must be noticed that keeping in mind the necessity for speedy recovery of money due to the bank from borrowers, when rules were framed under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, such power for the Recovery Officer to grant extension is also provided. In this context, we may refer to sub-rules (3) and (4) of Rule 9 of the Security Interest (Enforcement) Rules, 2002. Sub-rule (3) of Rule 9 states that the purchaser shall immediately pay the deposit of 25 percent of the amount of sale price to the Authorised Officer conducting the sale and in default of such deposit, the property shall forthwith be sold again. This rule is similar to sub-rule (1) of Rule 57 of the Second Schedule to the Income Tax Act and is mandatory. Sub-rule (4) of Rule 9 states that the balance amount of purchase price shall be paid by the purchaser to the Authorised Officer on or before the fifteenth day of confirmation of sale of the immovable property or such extended period as may be agreed upon in writing between the parties. This provision for extension was intended only keeping in mind the speedy recovery of debt. In our opinion, while considering the provisions of sub-rule (2) of Rule 57 read with Section 29 of the Recovery of Debts Due to Banks and Financial Institutions Act, sub-rule (4) of Rule 9 must also be taken into consideration. That apart, under sub-rule (2) of Rule 57, no stipulation is prescribed for resale immediately after the expiry of the fifteenth day from the date of sale in the event of failure of the purchaser to deposit 75 percent of the purchase money as per the said rule. Here again, the judgments of the Apex Court relied upon by Mr.AR.L.Sundaresan, learned senior counsel in Rao
Mahmood Ahmed Khan's case and in Lakshmanasami Gounder's case holding mandatory the provisions of Order XXI Rule 85 while considering Rule 285-D of the U.P.Zamindari Abolition and Land Reforms Act and Section 36 of the Tamil Nadu Revenue Revenue Act relating to the deposit of balance purchase money within 15 days of sale are distinguishable, as those judgments were rendered with regard to those provisions where no discretion was available to the Sale Officer to modify the conditions provided in the relevant provisions. Hence, we hold that sub-rule (2) of Rule 57 cannot be said to be mandatory as the rules can be applied with necessary modification. 25. xx xx 26. In fine and for the above discussions, we hold: (i) sub-rule (1) of Rule 57 is mandatory; (ii) sub-rule (2) of Rule 57 is not mandatory, as it could be applied as far as possible with necessary modifications; (iii) such modifications can be made by incorporating the same in the terms and conditions in the sale notice itself and in the absence of such modification in the sale notice, the Recovery Officer cannot extend the time for payment of the balance amount of 75 percent beyond the period of 15 days; (iv) in the event the conditions of the sale notice provide for such extension and on the strength of the same if any extension is granted, the same can be tested before the competent authority on the ground of arbitrary exercise of power, unjustifiable for extraneous consideration or on the ground of mala fide in the given facts and circumstances of the case.”
It has been held by the Division Bench that sub-rule
(2) of Rule 57 is not mandatory and it can be applied with necessary modifications, however, such modifications should be in existence in the terms and conditions of the sale notice itself.
In the considered opinion of this Court, there was a condition mentioned in the sale notice itself for extension of time and therefore, in the light of the judgment delivered by the Division Bench, the DRT was justified in extending the time period.
The learned Single Judge also placed reliance upon a judgment delivered by the Hon’ble Supreme Court in the case of C.N.Paramsivam and another vs. Sunrise Plaza, reported in (2013) 9 SCC 460, wherein it has been held that the provisions under Rules 57 and 58 of Schedule II of the Income Tax Act, 1961, are mandatory in nature and non compliance with the provisions of Section 29 of the Act of 1993 and requirements under Rule 57 of Schedule II to the Income Tax Act, 1961, will render auction non est.
This Court has carefully gone through the aforesaid judgment delivered by the Hon’ble Apex Court, wherein the Hon’ble Apex Court has held that compliance of the provisions of Section 29 and requirement under Rule 57 of Schedule II to the Income Tax Act, 1961 is mandatory. However, the present case is having a distinguishable feature. In the present case, keeping in view Section 29 of the Act of 1993, a condition was incorporated in the auction notice itself in respect of extension
of time to pay the balance amount and the balance amount was paid by the successful bidder as directed by the DRT. No such contingency was involved in the case of C.N.Paramsiva (supra) and therefore, as there was a specific condition in the auction notice for extension of time, the aforesaid judgment delivered by the Hon’ble Supreme Court is distinguishable on facts.
It is true that against the order passed by the DRT there was an alternative remedy available to the borrower and at the first instance, keeping in view the judgment delivered in the case of United Bank of India vs. Satyawati Tondon and Ors., reported in 2010 (8) SCC 110, the petition should have been dismissed on the ground of availability of alternative remedy. However, the learned Single Judge has decided the petition on merits and therefore, as the petition has already been decided on merits, this Court is also deciding the appeal on merits.
The present case reflects that the property in question was subjected to sale right from 2015 onwards with an initial reserve price of Rs.47 crores. Inspite of repeated attempts on the part of the Recovery Officer, the property could
not be sold and the reserve price came to be reduced and finally it was fixed at Rs.27 crores. The sale was held on 23.7.2019 and respondent No.2 was the only successful bidder who has paid the entire sale consideration within the extended time period as extended by the DRT. It has been placed in possession of the property in question and General Terms and Conditions of Online Auction Sale notice do provide for extension of time by the Recovery Officer as per Clause 11(c) and therefore, this Court is of the opinion that the DRT was justified in extending the time period keeping in view the facts and circumstances of the case.
This Court is witnessing a disturbing trend in respect of recovery of dues outstanding against the borrowers. All kinds of hurdles are created by borrowers in the matter of recovery of dues by taking shelter on all kinds of technicalities. The borrower does not want to pay. Time is sought from time to time on some pretext or the other and when the property is sold for realization of the dues, the entire procedure is subjected to challenge on frivolous grounds. Therefore, the order dated 3.8.2020 passed by the learned Single Judge in WP.No.98/2020 deserves to be set aside and is accordingly, set aside.
Accordingly, WA.No.745/2020 stands allowed.
In the light of the order passed in WA.No.745/2020, the connected writ appeal filed by the successful bidder i.e., WA.No.486/2020 is also allowed.
No orders as to costs.
Sd/- JUDGE
Sd/- JUDGE