THE HON’BLE SRI JUSTICE N.V. RAMANA AND THE HON’BLE SRI JUSTICE P. DURGA PRASAD W.P. No. 9785 of 2011 Judgment: (Per N.V. Ramana, J.) The petitioner, namely M/s. Mahishamardini Griha Nirman Pvt. Ltd., which is a company incorporated under the provisions of the Companies Act, 1956, represented by its Deputy General Manager, initially filed this writ petition, praying for the following relief: To issue a Writ, order or orders, more particularly one in the nature of Writ of Mandamus declaring the action of respondent No.1 in not registering the Securitization Appeal filed before it by the petitioner-company as arbitrary and illegal, against the principles of natural justice and Articles 14 and 21 of the Constitution of India and consequently direct respondent No.1 to register the Securitization Appeal, without insisting upon the production of the sale letter etc., and pass such other order or orders as the Hon’ble Court may deem fit and proper in the circumstances of the case. The petitioner states that respondent Nos. 4 and 5, namely two Directors of M/s. Bipasha Realtors Pvt. Ltd., which is also a company registered under the Companies Act, 1956, purchased the property in question i.e. land in an extent of Acs.14.20 gts., with structures thereon, situated in Sy. Nos. 13, 21 and 411 of Patancheru village and mandal, Medak District, belonging to M/s. A.P. Scooters Limited, which is represented by the Official Liquidator, in the auction conducted by the High Court on 15.11.2006 for Rs.31,25,00,000/-. Thereafter, respondent Nos. 4 and 5 on 21.12.2006 entered into an agreement of sale with the petitioner for sale of 25% of the said property for Rs.7,81,25,000/-, and as agreed, the petitioner states that they paid the said amount on 03.04.2007. Upon receipt of the entire sale consideration, the petitioner states that the Official Liquidator on 03.04.2007, executed registered sale deed in respect of the property in question in favour of respondent Nos. 4 and 5. The petitioner states that Clause (vi) of the agreement of sale dated 21.12.2006 entered into by the petitioner with respondent Nos. 4 and 5, enables respondent Nos. 4 and 5 to raise advance from financial institutions by mortgaging the property in question. And invoking this clause, respondent Nos. 4 and 5, mortgaged the property in question, and availed term loan of Rs.25,00,00,000/- from respondent No.3, namely Indian Overseas Bank, for establishment of an industrial estate on 21.12.2007. After registration of the property in question in their favour by the Official Liquidator, respondent Nos. 4 and 5 in spite of several requests, did not execute sale deed conveying 25% of the undivided share in the property in question, the petitioner states after exchange of notices, they invoked the arbitration clause contained in Clause (ix) of the agreement of sale, and initiated arbitration proceedings for resolution of the disputes between the petitioner and respondent Nos. 4 and 5, and this Court, by orders dated 30.04.2010 passed in A.A. No. 66 of 2009, appointed an Arbitrator, and the arbitration proceedings are pending before him. As the matters stood thus, the petitioner states that they came to know that as respondent Nos. 4 and 5 did not repay the term loan amount, respondent No.2 issued notice dated 11.01.2010 under Section 13(2) of the SARFAESI Act, calling upon respondent Nos. 4 and 5 to pay the amount demanded thereunder. Upon receipt of the said notice, respondent Nos. 4 and 5 represented to respondent Nos. 2 and 3 that the petitioner has 25% undivided share in the mortgaged property. However, as respondent Nos. 4 and 5 in spite of receipt of the notice, did not pay the amount demanded, respondent No.3 issued possession notice dated 28.07.2010 under Section 13(4) of the SARFAESI Act read with Rule 8(1) of the Rules framed thereunder. Thereafter, respondent No.3 issued sale notice dated 18.09.2010 for auctioning the property in question. Questioning the said notice, respondent Nos. 4 and 5 filed W.P. No. 23898 of 2010, and this Court by order dated 27.10.2010 stayed the auction subject to payment of Rs.5,00,00,000/- by respondent Nos. 4 and 5 to respondent No.3 in two instalments, failing which respondent No.3 was at liberty proceed with the sale and take such other steps for recover of due amounts as per law. Aggrieved by the said order, respondent No. 3 filed S.L.P. No.33800 of 2010, and the Hon’ble Supreme Court, by order dated 01.12.2010, passed orders modifying the order dated 27.10.2010 passed by this Court in the writ petition, and directed respondent Nos. 4 and 5 to pay the entire due amount by the end of February, 2011. As respondent Nos. 4 and 5 did not pay the entire due amount within the time prescribed by the Supreme Court, respondent No.3 put the property in question to sale by public auction on 27.10.2010. The petitioner states that they came to know of the afore-stated facts only from the counter filed by respondent Nos. 4 and 5 in the arbitration proceedings, which they served on 26.03.2011. Since they have 25% undivided share in the property in question, the petitioner states that they immediately filed Securitization Appeal before respondent No.1, namely the Debts Recovery Tribunal, praying to set aside the sale with respect to their 25% undivided share in the property in question. However, the petitioner states that respondent No.1 without going into the merits and factual aspects of the matter, on 08.04.2011 returned the Securitization Appeal S.A. (SR) No. 113 of 2011, raising certain objections and granted fifteen days time for compliance. The petitioner states that on 02.04.2011 they requested respondent No.3 to supply copies of the notices under Section 13(2) and 13(4) of the SARFAESI Act, and other copies of the documents, to enable them to file before the Debts Recovery Tribunal, and that respondent No.3 assured them to provide within 30 days. That they came to know that respondent No.3 is proceeding to execute the sale deed in respect of the property in question in favour of the auction purchaser on 13.04.2011, and contending that if the sale is confirmed and the sale deed is executed in favour of the auction purchaser, the petitioner will be deprived of its legitimate rights and interest in the property, filed the present writ petition seeking the relief as stated in the preliminary paragraph on 11.04.2011. During the pendency of the writ petition, the petitioner filed W.P.M.P. No. 38492 of 2011 on 14.09.2011, to permit him to substitute the following prayer in the writ petition: To declare the action of respondent Nos. 2 and 3 in selling the scheduled property to respondent No.6 by private treaty with the consent of respondent Nos. 4 and 5, who entered into an MOU dated 31.01.2010 with respondent No.6, contrary to the undertaking given to the Hon’ble Supreme Court dated 01.12.2010 and issuing the Sale Certificate dated 17.03.2011 as illegal and set aside the Sale Certificate dated 17.03.2011 issued by respondent Nos. 2 and 3-Bank in favour of M/s. MSN Laboratories Ltd., Sanathnagar, Hyderabad, by removing the existing main relief in the writ petition and pass such other order or orders as the Hon’ble Court may deem fit and proper in the circumstances of the case. The learned counsel for the petitioner submitted that the petitioner has 25% undivided share in the property in question, and this is evident from the agreement dated 21.12.2006 entered into by the petitioner and respondent Nos. 4 and 5. By mortgaging the property in question, respondent Nos. 4 and 5 have availed term loan from respondent Nos. 2 and 3. As respondent Nos. 4 and 5 did not repay the loan amount, respondent Nos. 2 and 3 issued notice under Section 13(2) and possession notice under Section 13(4) of the SARFAESI Act, and put the property in question, in which the petitioner has 25% undivided share, to sale. He denied the contention of respondent Nos. 2 and 3 that they do not have any knowledge about the agreement dated 21.12.2006 entered into by the petitioner and respondent Nos. 4 and 5, and to evidence that respondent Nos. 2 and 3 have knowledge about the petitioner having 25% undivided share in the property in question, produced letter dated 27.05.2010 addressed by respondent Nos. 4 and 5 to respondent No.2 and 3, wherein they informed them about the petitioner having 25% undivided share in the property in question. He submitted that even though respondent Nos. 2 and 3 have knowledge about the petitioner having 25% undivided share in the property in question, without issuing any notice to the petitioner, have sold the property in question to respondent No.6. He submitted that the market value of the property in question is worth Rs.50.00 crores, but respondent Nos. 4 and 5 in connivance with respondent Nos. 2 and 3, have given consent for sale of the property in question to respondent No.6 at Rs.30.00 crores, which is less than the price at which they originally purchased. He submitted that the petitioner is ready and willing to pay the price offered by respondent No.6. The learned counsel for the petitioner further submitted that respondent Nos. 4 and 5 have given an undertaking both before the Arbitrator on 22.01.2011 and the Supreme Court on 01.12.2010 that they will not alienate the property in question and create any third party rights in the property in question. However, contrary to the said undertakings, respondent Nos. 4 and 5, to defeat the interest of the petitioner, who has 25% undivided share in the property, have given consent to respondent Nos. 2 and 3 for the sale of the property in question by private treaty, which is violative of the provisions of Rule 8 of the Rules. He submitted that since respondent Nos. 4 and 5 contrary to the undertaking given before the Arbitrator and the Supreme Court and with a view to defraud the petitioner, have given consent for sale of the property in question by respondent Nos. 2 and 3, the Court has power to pass appropriate orders, including setting aside the sale of the property in question. In support of this argument, he placed reliance on the judgment of the apex Court in Delhi Development Authority v. Skipper Construction Co. ((P) Ltd.[1]. He submitted that the petitioner by letter dated 28.03.2011, followed by another letter dated 10.05.2011 requested respondent Nos. 2 and 3 to furnish copies of the notice under Section 13(2) and possession notice under Section 13(4) of the SARFAESI Act, and other documents, to enable them to comply with the objections raised by the Debts Recovery Tribunal for preferring the Securitization Appeal. As respondent Nos. 2 and 3 did not furnish the said documents, they are unable to comply the objections raised by the Debts Recovery Tribunal for preferring the appeal. As respondent Nos. 2 and 3 were proposing to confirm the sale in favour of respondent No.6, which is illegal, the petitioner was constrained to file the present writ petition, as if the sale is confirmed, the petitioner would suffer loss. As during the pendency of the writ petition, respondent Nos. 2 and 3 confirmed the sale and issued Sale Certificate dated 17.03.2011, the petitioner sought amendment of the prayer to the effect of questioning the sale and the issuance of Sale Certificate in favour of respondent No.6. Hence, he prayed that the sale effected in favour of respondent No.6 be declared as illegal and consequently the Sale Certificate dated 17.03.2011 issued by respondent Nos. 2 and 3 in favour of respondent No.6 be set aside. This Court by order dated 11.04.2011 granted interim directions to respondent Nos. 2 and 3 not to execute any sale deed in respect of the land in question in favour of the auction purchaser. Praying to vacate the said order, respondent Nos. 2 and 3 filed vacate stay petition supported by detailed counter. The learned counsel for respondent Nos. 2 and 3 reiterating the counter averments submitted that respondent Nos. 4 and 5 obtained term loan of Rs.25.00 crores from respondent Nos. 2 and 3 by mortgaging the property in question. As respondent Nos. 4 and 5 did not repay the loan amount in spite of issuing demand notice under Section 13(2) and possession notice under Section 13(4) of the SARFAESI Act, respondent Nos. 2 and 3 brought the property to sale by issuing sale notification dated 17.09.2010 fixing the reserve price at Rs.2812.98 lakhs. Questioning the said auction notification, respondent Nos. 4 and 5 filed W.P. No. 23898 of 2010, and the same by order dated 27.10.2010 was disposed of directing respondent Nos. 4 and 5 to pay Rs.5.00 crores by 31.12.2010 and the balance amount in two bi-monthly instalments i.e. by the end of April, 2011. Aggrieved thereby, respondent Nos. 2 and 3 filed S.L.P. No. 33800 of 2010, and the Supreme Court, by order dated 01.12.2010 disposed of the same, modifying the order in the writ petition directing respondent Nos. 4 and 5 to pay the amount on or before 28.02.2011. The learned counsel further submitted that in spite of the above order of the Supreme Court, respondent Nos. 4 and 5 did not repay the loan amount. However, respondent Nos. 4 and 5 approached respondent Nos. 2 and 3 and consented for sale of the mortgaged property by private treaty which is permissible under Rule 8(5)(d) of the Rules. He submitted that even though respondent Nos. 2 and 3 fixed the reserve price of the property in question at Rs.2812.98 lakhs, respondent Nos. 4 and 5 found a buyer, namely respondent No.6 for Rs.30.00 crores. And as respondent No.6 agreed to purchase the property in question for Rs.30.00 crores, and as the said price fully protected and safeguarded the interest of respondent Nos. 2 and 3, they have agreed for sale of the property in question, and accordingly, respondent No.6 paid an amount of Rs.19,11,11,000/- to respondent Nos. 2 and 3 and the balance amount to respondent Nos. 4 and 5, and as respondent Nos. 2 and 3 received their entire dues, and as respondent Nos. 4 and 5 expressed no objection to the confirmation of the sale, they confirmed the sale and issued Sale Certificate to respondent No.6 on 17.03.2011. At the time when respondent Nos. 2 and 3 conducted the sale, there was no order prohibiting the conduct of sale was in operation. The learned counsel further submitted that the respondent Nos. 2 and 3 are not aware of the agreement dated 21.12.2006, said to have been entered into by the petitioner with respondent Nos. 4 and 5 for taking 25% share in the property, and they not being party to the same, have nothing to do with it. At any rate, the petitioner is only an agreement holder with respondent Nos. 4 and 5 in respect of 25% undivided share in the property in question mortgaged by respondent Nos. 4 and 5 for the term loan taken by them, and merely because arbitration proceedings in respect of the said property are pending between the petitioner and respondent Nos. 4 and 5 before the Arbitrator, is no ground for the petitioner to stall the proceedings initiated by respondent Nos. 2 and 3 for recovery of the loan amount from respondent Nos. 4 and 5, by selling the property mortgaged by them, and more so when the petitioner does not dispute that respondent Nos. 2 and 3 have a right to recover the loan amount from respondent Nos. 4 and 5 by enforcing the security interest over the secured asset. This apart, the petitioner themselves in Clause (iv) of the agreement dated 21.12.2006, expressed no objection to respondent Nos. 4 and 5 mortgaging the property in question, for raising advances from financial institutions/banks towards their share of contribution for purchase of the property in question. If according the petitioner, respondent Nos. 4 and 5 have mis-represented and have acted contrary to the undertaking, their remedy is to proceed against respondent Nos. 4 and 5, and they cannot have any grievance against respondent Nos. 2 and 3, who sought to recovery their dues by selling the property in question, which is mortgaged by respondent Nos. 4 and 5 for the loan amount. The learned counsel further submitted that the petitioner has filed Securitization Appeal before the Debts Recovery Tribunal. As the same was returned with objections, it was for the petitioner to either comply with the same or get the same placed before the Presiding Officer of the Debts Recovery Tribunal, for hearing and orders thereon. The petitioner instead of complying with the objections raised by the Registry of the Debts Recovery Tribunal, has filed this writ petition questioning the confirmation of sale, which is not maintainable. Hence, he prayed that the writ petition be dismissed Respondent Nos. 4 and 5 did not file any counter. However, the counsel appearing on their behalf submitted that respondent Nos. 4 and 5 entered into agreement with the petitioner. As per Clause (vi) of the agreement, the petitioner expressed no objection to the taking of loan by respondent Nos. 4 and 5 by mortgaging the property in question, in which the petitioner has 25% undivided. Accordingly, by mortgaging the property in question, they have availed loan of Rs.25.00 crores from respondent Nos. 2 and 3. As they did not repay the loan amount, respondent Nos. 2 and 3 initiated recovery proceedings under the SARFAESI Act. As in spite of the time granted by the Supreme Court, they were unable to pay the dues to respondent Nos. 2 and 3, they had no option except to give consent for sale of the property in question. Accordingly, based on the consent given by them, respondent Nos. 2 and 3, sold the property in question to respondent No.6 by private treaty. He submitted that the petitioners have not violated any order. As on the day when they gave consent for sale of the property in question, there was no status quo order in force passed by the Arbitrator. At any rate, since petitioner has already initiated arbitration proceedings against respondent Nos. 4 and 5, he may pursue the said proceedings and seek appropriate reliefs against respondent Nos. 4 and 5, and he cannot maintain the present writ petition. Respondent No.6, namely M/s. MSN Laboratories Limited, who got impleaded as party-respondent states that respondent Nos. 4 and 5 entered into MoU with them with respect to the property in question on 31.12.2010 whereunder they have agreed to sell the property to them for sale consideration of Rs.30,00,00,000/-. That as per the agreement, they have paid an amount of Rs.5,00,00,000/- to respondent No.3 on 31.12.2010 and the balance amount of Rs.25,00,00,000/- on 28.02.2011. Respondent No.3 having received the entire amount, issued Sale Certificate on 17.03.2011 and handed over the property in question them. If the petitioner has any interest in the property in question, the remedy of the petitioner is to file appeal under Section 17 of the SARFAESI Act, before the Debts Recovery Tribunal, which he did not file. The petitioner neither being a party to the proceedings before the High Court nor the Supreme Court in the S.L.P., cannot complain violation of any of the conditions imposed in the orders. Hence, he prayed that the writ petition be dismissed. Heard the learned counsel for the petitioner, the learned counsel for respondent Nos. 2 and 3, the learned counsel for respondent Nos. 4 and 5 and the learned counsel for respondent No.6. The petitioner admittedly claims 25% undivided share in the property in question, based on the agreement of sale dated 21.12.2006, said to have been entered into by them with respondent Nos. 4 and 5. The said agreement of sale, vide Clause V.I enables respondent Nos. 4 and 5 to raise advance from financial institutions by mortgaging the property in question. The said clause reads as follows: Whereas Part of the First Part (respondent Nos. 4 and 5) has decided to raise an advance from financial institution/banks towards his share of contribution for purchase of the property and also create mortgage on the entire schedule property and Second Part has no objection on the stipulation that party of the Second Part will not be liable for the amount borrowed including interest and party of the First Part indemnify the party of the Second Part with regard to its share in the schedule property and: From a reading of the above clause, it is clear that respondent Nos. 4 and 5 have decided to raise advance from financial institutions by mortgaging the property in question to which the petitioner had no objection and that respondent Nos. 4 and 5 have agreed to indemnify the petitioner with respect to their share in the property in question. By invoking the above clause, admittedly, respondent Nos. 4 and 5 availed term loan of Rs.25.00 crores from respondent Nos. 2 and 3. The petitioner, admittedly, did not raise any objection to respondent Nos. 4 and 5 raising loan from respondent Nos. 2 and 3 by mortgaging the property in question. While so, on the ground that respondent Nos. 4 and 5 have violated the conditions of the agreement, in that they have not come forward to execute sale deed in respect of their 25% of the undivided share in the property in question, initiated arbitration proceedings by invoking the arbitration clause contained in Clause IX of the agreement. This Court by orders dated 30.04.2010 passed in A.A. No. 66 of 2009 appointed an Arbitrator, and the dispute between the petitioner and respondent Nos. 4 and 5, is pending adjudication before the Arbitrator. As respondent Nos. 4 and 5 did not repay the loan amount, respondent Nos. 2 and 3 issued notice under Section 13(2) followed by possession notice under Section 13(4) of the SARFAESI Act. When respondent Nos. 2 and 3 for realization of their dues, issued sale notification, for sale of the property in question, mortgaged by respondent Nos. 4 and 5 for the loan amount, respondent Nos. 2 and 3 questioned the same by filing W.P. No. 23898 of 2010. This Court, by order dated 27.10.2010 disposed of the said writ petition with the following directions: (i) The petitioner is permitted to deposit a sum of Rs.5.00 corre by 31.12.2010 and pay the entire balance due amount in two equal bi- monthly instalments by the end of February and April, 2011 respectively. (ii) It is made clear that in case of non-compliance of any of these conditions, the respondent bank is at liberty to proceed with the sale and take such other steps for recovery of the due amounts, as provided under the law. (iii) It is further made clear that as long as the above referred terms are complied with, the respondent bank shall not proceed with the auction of the subject property scheduled on 27.10.2010. Questioning the above order, respondents Nos. 2 and 3 filed S.L.P. No. 33800 of 2010, and the Supreme Court, vide order dated 01.12.2010, with the consent of the parties, disposed of the S.L.P. ordering as follows: (i) The respondents 4 and 5 herein shall pay to respondents 2 and 3/petitioner Bank, the first instalment of Rs.5.00 crores on or before 31.12.2010. (ii) The respondents 4 and 5 herein shall liquidate the entire debt towards the respondents 2 and 3/petitioner Bank on or before 28.02.2011; and (iii) The respondents 4 and 5 undertake not to create any third party rights in the subject property till the entire debt of the respondents 2 and 3/petitioner Bank is cleared by them. Respondent Nos. 4 and 5, admittedly, did not pay the due amount, as directed by the Supreme Court, on or before 28.02.2011. However, on the ground that they are unable to liquidate the debt, respondent Nos. 4 and 5 by letter dated 26.02.2011 issued consent to respondent Nos. 2 and 3 for sale of the property in question in favour of respondent No.6 by private treaty. It is the contention of the petitioner that the respondent Nos. 4 and 5 in connivance with respondent Nos.