*THE HON'BLE SRI JUSTICE P.S.NARAYANA +W.P.No.10733 of 2007 % 27-11-2007 # Meher & Company, Represented by its Managing Partner B.Prabhakar Rao s/o.Mallaiah, Aged 44 years, R/o.84, HUDA complex, Tarnaka, Hyderabad-500006. .. Petitioner Vs. $ Union Bank of India, Dilsukhnagar Branch, Rajdhani Theatre Complex, Dilsukhnagar, Hyderabad Represented by its Authorised Officer. .. Respondent <GIST: >HEAD NOTE: ! Counsel for petitioner : Sri P.Venugopal ^ Counsel for respondent : Sri P.Suresh, Standing Counsel for respondent ? CASES REFERRED: 1.(1993) 1 SCC 445 2. (2005) 6 SCC 138 THE HON'BLE SRI JUSTICE P.S.NARAYANA W.P.No.10733 of 2007 Date : 27-11-2007 Between : Meher & Company, Represented by its Managing Partner B.Prabhakar Rao s/o.Mallaiah, Aged 44 years, R/o.84, HUDA complex, Tarnaka, Hyderabad-500006. .. Petitioner And Union Bank of India, Dilsukhnagar Branch, Rajdhani Theatre Complex, Dilsukhnagar, Hyderabad Represented by its Authorised Officer. .. Respondent THE HON'BLE SRI JUSTICE P.S.NARAYANA W.P.No.10733 of 2007 ORDER: 1. Heard Sri P.Venugopal, the learned Counsel representing the writ petitioner and Sri P.Suresh, the learned Standing Counsel representing the respondent. 2. This Court ordered notice before admission on 24-5-2007 and also made the following order in W.P.M.P.No.13487/2007: “The sale finalized in favour of the petitioner, in pursuance of the auction held to sell the properties namely 85 house plots in Sy.Nos.22, 23, 29, 33 and 36 of Toopranpet village (Sri Shiridi Sai Nagar), Choutuppal Mandal, Nalgonda District, appears to have been cancelled on the ground that there was some delay on the part of the petitioner in payment of the instalment amounts. The learned Counsel for the petitioner invited my attention to para (19) of the affidavit filed in support of the Writ Petition in which petitioner has undertaken to pay the entire balance amount. Having considered the submissions of the learned Counsel for the petitioner, I am of the view that if the properties are sold pending the hearing of this case, the petitioner would suffer irreparable loss. However the petitioner, in order to prove his bona fides, shall deposit the sale amount as a condition for stay of sale proposed to be made by the respondent. In the aforementioned facts and circumstances, I deem it appropriate to direct the respondent not to proceed with the sale, in pursuance of the notification dated 16.5.2007 published in newspapers on 17.5.2007 with respect to 85 house plots in Sy.Nos.22, 23, 29, 33 and 36 of Toopranpet village (Sri Shiridi Sai Nagar), Choutuppal Mandal, Nalgonda District, subject to the following conditions: (a) The petitioner shall pay Rs.2 crores within 24 hours from now; (b) The petitioner shall pay a further sum of Rs.2,76,57,506/- on or before 31.5.2007; (c) The petitioner shall pay the balance amount i.e., Rs.2,87,86,440/- on or before 30.6.2007. It is made clear that in default of any of the above conditions, the interim stay shall stand automatically vacated and it shall then be open to the respondent to proceed with the sale of the properties as proposed in the notification dated 16.3.2007.” Again, On Being Mentioned, in W.P.M.P.No.13994/2007, on 30-5-2007, the undernoted order was made by this Court : “By an order of this Court passed on 24.5.2007, interim directions were given subject to the conditions that the petitioner shall deposit certain amounts. It is brought to my notice that in condition (b), contained in the said order, a typographical mistake occurred to the effect that instead of a sum of Rs.76,57,506/-, a sum of Rs.2,76,57,506/- is directed to be paid by 31.5.2007. Therefore, this mistake is required to be corrected. Accordingly, the order dated 24.5.2007 is modified by substituting the figure of “Rs.2,76,57,506/-” with the figure of Rs.76,57,506/-” to be paid by 31.5.2007. The learned Counsel for the petitioner also submitted that in condition (a) of the order, the petitioner was directed to pay a sum of Rs.2 crores within 24 hours. He says that as the order copy could not be furnished by the Registry within 24 hours, the payment offered by the petitioner was not received by the respondents. In view of the above, condition mentioned in (a) of the order dated 24.5.2007 is modified and the time is extended till 31.5.2007 to pay the said sum of Rs.2 crores.” 3. The Writ Petition is filed for Writ of Mandamus declaring the action the respondent in canceling the sale confirmed in favour of the petitioner vide its letter No.ADV/CM/2007 dated 16-3-2007 with respect to 85 House properties in S.Nos.22, 23, 29, 33 & 36 of Toopran village (Sri Shiridi Sai Nagar), Choutuppal Mandal, Nalgonda District and the consequential action in issuing tender notification dated 16.5.22007 inviting the tenders for sale of the same as arbitrary, illegal and violative of principles of natural justice and to pass such other suitable orders. The said letter dated 16-3-2007 reads as hereunder : UNION BANK OF INDIA DILSUKHNAGAR BRANCH Rajadhani Theatre Complex, Dilsukhnagar, Hyderabad Ph: 23460147/148 Ref: DIL: 357 Date : 16-03-2007 M/s. Meher & Company Hyderabad Dear Sir, Sub: Declaration of successful bidder in the auction sale of 85 house properties – Toopranpet – Regarding. We wish to inform you that you have become the successful bidder in the auction (by sealed tenders) held today i.e., 16-03-2007 for sale of 85 house properties situated in Shirdi Sai Nagar, Tooparanpet village, Choutuppal Mandal, Nalgonda District for a total amount of Rs.5,64,44,000/- (Rupees Five Crores Sixty Four Lakhs Forty Four Thousand only). Further, you are required to pay 15% of the total amount viz., Rs.84,66,600/- (Rupees Eighty Four Lakhs Sixty Six Thousand and Six Hundred only) on or before 20-03-2007 failing which the next tenderer will be given the option and the sale will be confirmed in their favour and the EMD would be forfeited. Upon receipt of 15% of the amount the sale will be confirmed in your favour. Out of the balance sale consideration you are required to pay 34% viz., Rs.1,91,90,960/- (Rupees one Crore ninety one lakh ninety thousand nine hundred sixty only) on or before 31-03-2007 failing which the 15% of the amount which you pay on or before 21-03-2007 would be forfeited, and we would resale the properties. The total balance consideration is to be paid by 31- 05-2007. We undertake to confirm the sale of all the 85 plots on receipt of 15% of the total amount viz., Rs.84,66,600/- (Rupees Eighty four Lakhs Sixty Six Thousand and Six Hundred only) on or before 21- 03-2007 and would issue sale certificate/certificates in your name or in the names of your nominees separately. After receipt of the sale consideration, we will issue the sale certificates and also register/execute the sale deed/deeds in your favour or in favour of your nominees in respect of all the 85 plots either in lot or lots or separately. We request you to convey your acceptance of the above agreed terms. Thanking you, Yours faithfully, Sd/- (A.Ravindra Rao) Authorised Officer & Chief Manager 4. Sri P.Venugopal, the learned Counsel representing the petitioner had taken this Court through the respective pleadings of the parties, the affidavit filed in support of the Writ Petition, the counter affidavit and also the reply affidavit and several of the material papers and would submit that the tender notice itself is devoid of particulars and in the event of the respondent giving a clear title, the petitioner is ready and willing to pay the amount along with even interest in the event of this Court directing such payment to be made. The learned Counsel also further pointed out that the alleged default, if any, is because of the convincing reasons which had been explained and hence in the facts and circumstances of the case, the Writ Petition to be allowed. 5. Per contra, Sri Suresh, the learned Standing Counsel representing the respondent-Bank would contend that the parties are governed by the terms and conditions of the contract, the conditions specific in the tender notice and despite the fact that certain opportunites had been given, the petitioner was unable to make the payment. The learned Counsel also would explain that even the conditional order made by this Court had not been complied with and absolutely there are no bona fides. Having participated in pursuance of the tender notice with eyes wide open, now the petitioner cannot contend otherwise on the ground of either defective title or on any other similar ground whatsoever. In the light of the clear stand taken in the counter affidavit, the subsequent steps taken by the respondent-Bank being well justified, the same not to be disturbed by this Court. 6. Heard the Counsel. 7. The petitioner is a partnership firm doing business in land development and building. Accordingly, with difficulty the petitioner-firm had raised funds and commenced its business. Further, it stated that the respondent issued notification dated 5-3-2007 and published the same in Eenadu Telugu Daily News Paper dated 6-3-2007 and the same had been issued in purport of exercise of powers under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (Act 54 of 2002) (hereinafter in short referred to as “Act” for the purpose of convenience) r/w. Rules 6(1)(b) and 8(5)(b) of the Security (Enforcement) Rules, 2002 (hereinafter in short referred to as “Rules” for the purpose of convenience) and thereby invited sealed tenders for sale of 85 residential structures with open site admeasuring 200, 400 and 600 sq. yards with house properties in S.Nos.22, 23, 29, 33 and 36 of Toopran village of Sri Shiridi Sai Nagar, Choutuppal Mandal, Nalgonda District “as is where is basis”. The last date for submission of the tenders was notified as 16-3- 2007 till 12.00 P.M. The tenders were to be opened on the same day at 5.00 P.M. and the final bidder was to be announced on the same day. Further, it is stated the Earnest Money Deposit of 1% of the Reserve Price shall have to be paid Rs.5,75,000/- by way of Pay Order/Demand Drafts payable at Hyderabad in favour of the respondent. Here itself, it may be appropriate to have a glance at Section 13(2) of the Act and Rules 6(1)(b) and 8(5)(b) of the Rules. Section 13 of the Act deals with Enforcement of Security Interest and Section 13(2) reads as hereunder : “Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section (4)”. Rule 6 of the Rules deals with Sale of movable secured assets and Rule 6(1)(b) reads as hereunder : “The authorized officer may sell the movable secured assets taken possession under sub-rule (1) of Rule 4 in one or more lots by adopting any of the following methods to secure maximum sale price for the assets, to the so sold – (a)….. (b) inviting tenders from the public ” Rule 8 of the Rules deals with Sale of immovable secured assets and Rule 8(5)(b) reads as hereunder : “Before effecting sale of the immovable property referred to in sub-rule (1) of Rule 9, the authorized officer shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor, fix the reserve price of the property and may sell the whole or an part of such immovable secured asset by any of the following methods – (a)……. (b) by inviting tenders from the public” Further it is stated that in pursuance of the said notification, the petitioner had participated in the tenders by paying the Earnest Money Deposit of Rs.5,75,000/- representing 1% of the reserve price and became the highest bidder and consequently the respondent issued letter dated 16-3-2007 confirming the petitioner as the successful bidder in the auction for a sum of Rs.5,64,44,000/- and that 15% of the said amount i.e., Rs.84,66,600/- shall have to be paid on or before 20-3- 2007. It is further mentioned in the said letter that out of the balance sale consideration, an amount of Rs.1,91,90,960/- representing 34% of the sale consideration shall have to be paid on or before 31-5- 2007 and it is also mentioned that upon receipt of the said sale consideration they will issue a sale certificate and execute and register the sale deed in favour of the petitioner or its nominees with respect to the said 85 house properties along with the site either in lot or lots. It is also averred that in between 16-3-2007 and 20-3-2007, 17th and 18th March 2007 happened to be Saturday and Sunday, 20th being Ugadi and 19th was the only working day. Moreover even 27-3-2007 happened to be a public holiday and 31st March is the day for Annual Financial Year closing and it was also a Saturday. In spite of lack of sufficient working days, still the petitioner could raise Rs.6,26,000/- and also obtained the sanction from the Andhra Bank, Hanamkonda issued a letter for an amount of Rs.78,48,000/- and Demand Draft of Rs.6,26,600/-, which both put together comes to Rs.84,66,000/-, which represents the first instalment payable on or before 20-3-2007. With the said arrangement, the petitioner approached the respondent on 30-3-2007 and since the same was offered beyond 20- 3-2007, the respondent informed the petitioner that it is not within the power at its level to accept and t matter is being referred to the Central Office for their decision. It is also further stated that when the petitioner had not received any reply thereto, the petitioner made another representation dated 3-4-2007 reminding the respondent about the payment proposed to be made and also issue necessary instructions so as to facilitate the petitioner to pay the balance sale consideration. It is further stated that Andhra Bank, Hanamkonda vide letter dated 13-4-2007 had forwarded the Demand Drafts for an amount of Rs.29,40,000/- which in accordance with its sanction dated 30-3-2007. However, the respondent-Bank had not responded either to the previous representation dated 30- 3-2007 or to the representation dated 3-4-2007. In view thereof, the petitioner had again made a representation on 17-4-2007 requesting them to issue necessary orders to accept the amounts as the petitioner was ready to pay the entire amount with interest on the delayed period and also requested to furnish the title deeds and the link documents. When no action was taken pursuant to the aforesaid representations, the petitioner again submitted a representation dated 19-4-2007 to the Central Office of the respondent located at Mumbai and requested them to take appropriate action and do justice to the petitioner. It is also further stated that on 25-4-2007, the petitioner received the letter of the respondent dated 11-4-2007 inter alia cancelling the sale confirmed in favour of the petitioner and also alleged that the E.M.D. of Rs.5,75,000/- also stood forfeited and by the said letter the Demand Drafts submitted by the petitioner earlier were also returned. The said letter dated 11-4-2007 reads as hereunder : UNION BANK OF INDIA Dilsukhnagar Branch Rajadhani Theatre complex, Hyderabad Phones: 23420147/148 Ref. No. Date : 11-04-2007 M/s.Meher & Co. # 84, HUDA complex, Taranaka, Hyderabad. Sub: Auction sale of 85 houses at Toorpranpet (v), Chowtuppal (M), Rangareddy District. – Reg. This has reference to your letters No.43/2007 dated 30-03-2007 and 48.2007 dated 03- 04-2007 along with the pay order dated 30-03-2007 for Rs.6,26,600/- drawn in favour of Union Bank of India and the sanction letter dated 30-03-2007 of Andhra Bank, Personal Banking Center, Hanumkonda. We wish to inform you that since you have not complied with the terms of the confirmation of sale vide letter No.ADV/CM/2007 dated 16-03-2007 the sale in your favour stands cancelled and the E.M.D. of Rs.5.64 Lakhs forfeited forthwith. Therefore, we are returning herewith the pay order bearing No.946649 for Rs.6,26,000/- dated 30-03- 2007 issued by Andhra Bank, Himayathnagar, Hyderabad. Please note that we would entertain no further correspondence on the subject. Yours faithfully, Sd/- (A.Ravindra Rao) Authorised Officer Encl: As mentioned above C.C. DGM RO, Hyderabad. While the matters stood thus, the respondent-Bank published in the Eenadu Telugu Daily News Paper dated 17-5-2007, the notification dated 16-5-2007 thereby once again inviting the tenders with respect to the property in question fixing last date for receipt of the tenders as 1-6- 2007, upto 3.00 P.M. and opening and sale being the same day. The reserve price is fixed at Rs.5,63,59,000/-. Aggrieved by the said action of the respondent, the present Writ Petition is filed. The said action without affording any opportunity is challenged on the ground of principles of natural justice. Several representations made and the repeated requests also had been referred to in the affidavit filed in support of the Writ Petition. Further it is stated that the notification dated 16-5-2007 published in Eenadu Telugu Daily Newspaper dated 17-5- 2007 is contrary to Rule 9 of the Rules. The said Rule 9 of the Rules dealing with Time of sale, issue of sale certificate and delivery of possession reads as hereunder : (1) No sale of immovable property under these rules shall take place before the expiry of thirty days from the date on which the pubic notice of sale is published in newspapers as referred to in the proviso to sub-rule (6) or notice of sale has been served to the borrower. (2) The sale shall be confirmed in favour of the purchaser who has offered the highest sale price in his bid or tender or quotation or offer to the authorised officer and shall be subject to confirmation by the secured creditor; Provided that no sale under this rule shall be confirmed, if the amount offered by sale price is less than the reserve price, specified under sub- rule (5) of Rule 9: Provided further that if the authorised officer fails to obtain a price highest than the reserve price, he may, with the consent of the borrower and the secured creditor effect the sale at such price. (3) On every sale of immovable property, the purchaser shall immediately pay a deposit of twenty-five per cent of the amount of the sale price, to the authorised officer conducting the sale and in default of such deposit, the property shall forthwith be sold again. (4) The balance amount of purchase price payable 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. (5) In default of payment within the period mentioned in sub-rule (4), the deposit shall be forfeited and the property shall be resold and the defaulting purchaser shall forfeit all claim to the property or to any part of the sum for which it may be subsequently sold. (6) On confirmation of sale by the secured creditor and if the terms of payment have been complied with, the authorised officer exercising the powers of sale shall issue a certificate of sale of the immovable property in favour of the purchaser in the form given in Appendix V to these rules. (7) Where the immovable property sold is subject to any encumbrances, the authorised officer may, if he thinks fit, allow the purchaser to deposit with him the money required to discharge the encumbrances and any interest due thereon together with such additional amount that may be sufficient to meet the contingencies or further cost, expenses and interest as may be determined by him. (8) On such deposit of money for discharge of the encumbrances, the authorised officer may issue or cause the purchaser to issue notices to the persons interested in or entitled to the money deposited with him and take steps to make the payment accordingly. (9) The authorised officer shall deliver the property to the purchaser free from encumbrances known to the secured creditor on deposit of money as specified in sub-rule (7) above. (10) The certificate of sale issued under sub- rule (6) shall specifically mention that whether the purchaser has purchased the immovable secured asset free from any encumbrances known to the secured creditor or not. It is also stated that the respondent-Bank being an authority within the meaning of Article 12 of the Constitution of India, cannot resort to such arbitrary and illegal action. The respondent-Bank ought to have realized that the petitioner had undertaken to pay the amount with interest from the dates when the amounts fell due till the payment and in any event the respondent- Bank would be benefited by the offer of the petitioner as the reserve price notified is Rs.5,63,59,000/-, whereas by the offer of the petitioner, the respondent-Bank would fetch Rs.5,64,44,000/- and interest thereon which the petitioner is prepared to pay the lending rate of interest from 20-3-2007. Further specific stand had been taken that the respondent ought to have notified the final date for completing the entire transaction as 31-5-2007. It is further stated that the respondent ought to have noticed that the petitioner was required to pay Rs.2,76,57,506/- by 31-3-2007 and the balance of Rs.2,87,86,440/- by 31-5- 2007 and in the said regard the petitioner is undertaking as follows: i) Immediately to pay Rs.2,00,00,000/- ii) On or before 31-5-2007 an amount of Rs.76,57,506/- and the interest due from 20-3- 2007 at the lending rate on Rs.2,76,57,506/-; and iii) To pay on or before 23-9-2007 (that is four months from now) the balance amount of Rs.2,87,86,440/- along with interest thereon at the lending rate of the respondent-Bank from 31-5-2007. It is further reiterated that the offer of the petitioner is more beneficial to the respondent-Bank than going through the tender process again wherein the reserve price is fixed at lesser than the one notified in the previous notification. In such circumstances, the writ petitioner approached this Court. 8. The interim order and the modified order made by this Court already had been specified supra. 9. W.V.M.P.No.1398/2007 is filed by the respondent-Bank to vacate the interim order. It is averred in para-3 of the counter affidavit that the respondent-Bank opened two bids on 6-6-2007 received pursuant to the notification. When the petitioner committed default, one M/s. Lakshmi Constructions was declared as successful bidder who offered highest amount of Rs.5,70,00,000/- and as such the Writ Petition itself became infructuous. Further it is stated that the Writ Petition is not maintainable for the reason that the relationship with the Bank in respect of bid entered the realm of contract and on default of the conditions, the respondent-Bank is given liberty to proceed and take further steps pursuant to the notification dated 16-5-2007. In relation to the allegations in para- 3 of the affidavit that the respondent-Bank issued notification dated 5-3-2007 which was published in Eenadu Telugu Daily on 6-3-2007 inviting sealed tenders for the sale of 85 residential structures with open site admeasuring different extents with house properties in S.No.22, 23, 29, 33 and 36 of Toopran village, Choutuppal Mandal, Nalgonda District, as is where is basis, the same had been admitted. Further it is stated that the last date for submission of tenders was fixed as 16.3.2007 by 12 noon. The tenders were opened as per schedule and the respondent-Bank received three bids and they were opened according to the schedule on 16-3- 2007. According to the notification, the earnest money representing 1% of the reserve price will have to be paid by way of pay order or demand draft payable at Hyderabad in favour of the respondent-Bank on the very same day. The details of the persons and the bids submitted are as hereunder : a) Mehar & Company Rs.5,64,44,000/- (petitioner) b) S.R. Associates Rs.5,64,40,000.- c) M.K.Shah and others Rs.4,05,00,000/- It is further stated that as stated in the affidavit filed in support of the Writ Petition itself, the petitioner was