IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Letters Patent Appeal No.301 of 2008 Date of Decision: March 20, 2009 M/s National Rice & General Mills and others Appellants Versus Bank of India and others Respondents CORAM:- HON'BLE MR. JUSTICE T.S.THAKUR, CHIEFJUSTICE HON'BLE MR. JUSTICE JASBIR SINGH Present: Mr.Mukul Aggarwal, Advocate for the appellants Mr.Amar Vivek and Mr.G.S.Anand, Advocates for the Caveator-Bank-respondent No.1 ….. Jasbir Singh, J. This letters patent appeal has been filed against judgment passed by the learned Single Bench on 27.11.2008 by which, Civil Writ Petition No.19113 of 2005, filed by the appellants was dismissed. In that writ petition, the appellants had laid challenge to orders dated 30.9.2003 and 18.11.2005 passed by respondent nos.4 and 5 respectively. It was their prayer that the orders, referred to above, be quashed and order passed by the Recovery Officer, Debt Recovery Tribunal, Chandigarh on 24.3.2003, be restored. Record reveals that the Debt Recovery Tribunal, Jaipur on 13.11.1997 passed an ex-parte decree in favour of respondent No.1 - Bank of India for an amount of Rs.65,49,293.74, to be recovered from the appellants. Above said order had become final. Pursuant to the said decree, a recovery certificate was issued Letters Patent Appeal No.301 of 2008 2 against the appellants under Section 19 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (in short, 1993 Act). When the appellants failed to make payment of decretal amount, respondent no.1, the Bank, filed an application before Debt Recovery Tribunal, Chandigarh seeking sale of moveable and immovable properties lying mortgaged with it. Prayer was allowed vide order dated 20.9.2002. Shri K.C.Bhatia, Advocate was appointed as Court Auctioneer. Under his orders, mortgaged properties were put to auction on 20.11.2002. Reserve price for sale of the mortgaged properties (moveable and immovable) was fixed at Rs.75 lacs. Respondent No.2 was the successful bidder for an amount of Rs.86,40,000/-. Appellants filed an application to set aside above said auction, by alleging that the auction proceedings were manipulated and were not fair. Admittedly, that ‘objection application’ was not filed as per provisions of Rules 60 and 61 of the second schedule of the Income Tax Act, 1961 (in short 1961 Act). Taking note of the above said fact, the Recovery Officer, on 28.2.2003, passed the following order:- “Objections to the sale can be filed under Rule 60 or 61 - counsel for objector has not filed objections under these rules. The objector has alleged fraud which is not envisaged in these rules therefore, it will be proper to hear the objection to this limited extent. Counsel for C.H. Bank opposed this but I am not convinced. Counsel for objector requested for time at request adjourned to 5.3.2003.” (emphasis supplied) The appellants failed to prove any fraud in conduct of auction proceedings, however, the Recovery Officer, in a very surprising manner, took a somersault and decided objection application filed by the appellants on merits, by ignoring his earlier order, as referred to above. Vide order Letters Patent Appeal No.301 of 2008 3 dated 24.3.2003, sale conducted on 20.11.2002 was set aside, amount deposited by respondent No.2 was ordered to be refunded to it. Respondent No.1-Bank of India went in appeal, which was allowed vide order dated 30.9.2003, setting aside order passed by the Recovery Officer on 24.3.2003. The Recovery Officer was directed to proceed further for confirmation of the sale, as per law. Appellants went in appeal, which was dismissed by the Debt Recovery Appellate Tribunal, Delhi on 18.11.2005. Under above mentioned circumstances, the appellants had filed CWP No.19113 of 2005, which was dismissed by the learned Single Bench vide the impugned order. Before us, counsel for the appellants has vehemently contended that the sale was conducted in derogation to the provisions of Rules as contained in second schedule of 1961 Act. By making reference to report of auction, submitted by the Court Auctioneer Mr.K.C.Bhatia, Advocate, counsel for the appellants submitted that an amount equivalent to 25% of the bid money, was not deposited with the Court Auctioneer immediately after conclusion of the auction proceedings. The Court Auctioneer was not justified in granting 24 hours time to deposit the above said amount. Counsel further argued that the Recovery Officer was justified in deciding objection application filed by the appellants on merits because by fraudulent sale of mortgaged properties, substantial injustice was done to the appellants. The alleged bidders had joined hands and the property was sold in favour of respondent No.2 at a lesser price. Counsel further argued that at the time of auction, bid was given by one Bhushan Kumar on behalf of respondent No.2, who had no authorisation to participate in the auction proceedings. Counsel further argued that once the learned Single Bench and the Courts below have noticed that there were irregularities committed in conducting the sale proceedings, the sale should have been set aside even Letters Patent Appeal No.301 of 2008 4 without filing any objection by the appellants. By stating as above, he prayed that the impugned orders be set aside and order passed by the Recovery Officer dated 24.3.2003 be restored. Prayer made has been vehemently opposed by Mr.Amar Vivek, Advocate appearing for the Caveator- respondent No.1 who argued that the judgment passed by the learned Single Bench is perfectly justified. Before the learned Single Bench, the appellants have failed to show that in the conduct of sale, any fraud was committed, as was alleged by them in their objection application. Further the appellants have miserably failed to prove that in the conduct of sale, they had sustained any substantial injury on account of minor irregularities committed at that time. By stating that admittedly objection application filed by the appellants was not as per provisions of Rules 60 and 61 of second schedule of 1961 Act, the Recovery Officer, vide order dated 28.2.2003, restricted their objections only with regard to allegation of fraud in conducting the sale proceedings, subsequent thereto it was not open to the Recovery Officer to pass order on merits, counsel prayed that appeal having no substance, be dismissed. After hearing counsel for the parties, we are convinced that by filing this appeal one more attempt has been made by the appellants to stall execution of decree, passed against them on 13.11.1997. Vide decree referred to above, respondent no.2 was held entitled to recover an amount of Rs.65,49,293.74 from the appellants. Admittedly, the said decree has become final. When the appellants failed to pay the decretal amount, recovery proceedings through process of sale of the properties, which were lying mortgaged with the Bank- respondent No.2, were initiated. It is not in dispute that the appellants had notice of the recovery proceedings through sale of mortgaged properties. Admittedly, in the notice of proclamation, Letters Patent Appeal No.301 of 2008 5 discretion was given to the Court Auctioneer to extend time for deposit of 25% amount of the bid amount. Relevant portion of the proclamation notice reads thus:- “2. The highest bidder shall deposit 25% of auction amount with the auctioneer immediately after the auction 5% deposit made shall be adjusted. The auctioneer in his discretion can allow 24 hours time to deposit 25% of the auction amount. The remaining 75% of the auction amount shall be paid within 15 days of the auction with the Recovery Officer. Failure to deposit the remaining of amount would entail forfeiture of amount deposited.” In the present case, auction proceedings were conducted on 20.11.2002 and were concluded at about 4.05 PM. At that time, Banks were closed. Auction purchaser made a request to extend time to deposit the balance of 25% amount of the purchase money for the property sold, by 24 hours. That request was allowed by the Court Auctioneer as per terms and conditions of the proclamation notice. Both moveable and immovable mortgaged properties were sold for an amount of Rs.86,40,000/- against a reserve price of Rs.75 lacs. Before us, it has been admitted that terms and conditions of the proclamation notice, were known to the appellants. If that was so, they should have raised objection at the relevant time. Not only this, despite notice of date of sale, they failed to remain present at the site of auction, what to talk of offering any better buyer to purchase the property. Their objection application appears to be an after thought. It is also not in dispute that at the time of auction, taking note of nature of the properties i.e. moveable and immovable, the prospective bidders agreed that both the properties be put to auction in one lot. Above said suggestion was accepted Letters Patent Appeal No.301 of 2008 6 by the Court Auctioneer. Counsel for the appellants has failed to show that how any injustice was done to the appellants by adopting that procedure. Admittedly, reserve price for both the properties was Rs.75 lacs. The learned Single Bench has noticed some minor irregularities in the conduct of sale. We feel that those do not go to the root of the case and had not resulted in any loss to the appellants. Furthermore, as is admitted on record, objection application was not filed by the appellants as per the provisions of Rules 60 and 61 of the rules contained in second schedule of 1961 Act. They had not made the mandatory deposit, to lay challenge to the sale of the properties, as is envisaged in the above said rules. Taking note of that situation, the Recovery Officer, vide order dated 28.2.2003, confined their objections only with regard to fraud committed at the time of auction, in which, mortgaged properties were sold. Very surprisingly, the Recovery Officer, thereafter, contrary to his earlier order, decided the objection application on merits and set aside sale proceedings vide his order dated 24.3.2003. We feel that the said action on the part of the Recovery Officer was wholly unjustified. Once, the appellants had failed to raise objections as per provisions of 1961 Act, the Recovery Officer was not justified in deciding their application on merits. Otherwise also, we are convinced that the appellants had failed to lay any foundation to prove that any fraud was committed at the time of auction and further that they have failed to show that the auction proceedings were conducted in a manner that resulted in any loss to them. Even before the Debt Recovery Tribunal and before this Court also, the appellants failed to show their readiness to pay the entire decretal amount along with interest and also failed to suggest that they had any better buyer at the time when auction was conducted. The learned Single Bench has Letters Patent Appeal No.301 of 2008 7 considered the entire matter carefully and thoroughly and has rightly held that no irregularity was committed in the conduct of auction sale. The conduct of Court Auctioneer was very fair and he has exercised the power as per terms and conditions of the proclamation notice. The appellants have failed to make out any case for interference by this Court. Dismissed. (JASBIR SINGH) JUDGE March 20, 2009 (T.S.THAKUR) gk CHIEF JUSTICE