Msc.Appl.-123/07 //1// In the High Court of Judicature for Rajasthan Jaipur Bench ** Civil Misc. Appl.-123/2007 in Company Appl.-79/2005 in Company Petition No.28/2003 OL of M/s Kesari Vanaspati Products Ltd (in provisional liquidation) Versus IDBI & Ors Date of Order ::: 14/05/2010 Hon'ble Mr. Justice Ajay Rastogi Mr. Vinay Kr. Goyal for applicant (respondent-3) Mr. Shiv Garg for respondent-IDBI Mr. BK Sharma, for OL Instant Misc. Application-123/2007 has been filed by M/s Blooming Engineers (P) Ltd. (respondent-3 in Co.Appl.79/2005) claiming interest over the amount of Rs.2,30,65,000/- (Rupees Two Crores, Thirty lacs & Sixty five thousand) deposited being highest bidder in auction proceedings initiated by Recovery Officer, Debts Recovery Tribunal, Jaipur, which have finally been set aside by this Court vide order dt.23/01/2007 in Co.Appl.- 79/2005 and notice published in Rajasthan Patrika on November 13, 2005 for auction scheduled on November 22, 2005 and sale certificate dt. 07/06/2006 were quashed; and the IDBI was directed to refund a sum of Rs.2,30,65,000/- to M/s Blooming Engineers (P) Ltd (applicant herein) – pursuant to which the amount (supra) was refunded vide pay order dt.12/02/2007 duly received on 16/02/2007. Prayer made in this misc. application is basically for clarification sought for in Msc.Appl.-123/07 //2// judgment dt.23/01/2007 rendered by this Court to the effect that the applicant is entitled for interest having accrued on having deposited the amount (supra) with the financial institution (IDBI) from the date of its deposit till actual refund whereof. Facts relevant for adjudication of the interest being claimed by applicant herein are that M/s Kesri Vanaspati Products Limited was ordered to be wound up by Company Court vide order dt.23/01/2004 in Co. Petition No.28/2003 and accordingly, the Official Liquidator attached to the Court was appointed as provisional Liquidator with the direction to take charge over all the property & effects of the Company in liquidation. The charge of assets & the record of Company in liquidation was taken over by the Official Liquidator on 03/04/2004. The Industrial Development Bank of India Ltd Jaipur (IDBI), Vijaya Bank, Jaipur, State Bank of Bikaner & Jaipur (SBBJ) and Rajasthan State Industrial Development & Investment Corporation Ltd (RIICO) were the secured creditors of Company in liquidation, out of which except RIICO, other secured creditors had opted to remain out of winding up proceedings. The IDBI in response to a letter of Official Liquidator conveyed vide letter dt. 11/06/2004 about having filed application with Debts Recovery Tribunal, Jaipur (DRT) which Msc.Appl.-123/07 //3// had decreed in its favour vide judgment dt.20/08/2003. However, on 13/11/2005 a notice issued by Recovery Officer, DRT was published in news paper -Rajasthan Patrika for auction of assets of Company in liquidation on 22/11/2005 in Recovery Case No.120/2003 (IDBI Vs. M/s Kesri Vanaspati Products Ltd). In those auction proceedings, present applicant (respondent-3 in Co.Appl.79/2005) participated and being highest bidder, auction sale was approved for a sum of Rs.2,30,65,000/-, which was deposited by applicant during the period from 22/11/2005 to 06/12/2005 as is detailed out in Ann.R.3/1; and a sale certificate was issued on 07/06/2006. At this stage, the Official Liquidator being provisional Liquidator of Co. in liquidation filed CWP- 9715/2005 along with stay application arraying present applicant as respondent-4 assailing the auction notice dt.13/11/2005 and sale certificate dt.07/06/2006 before the High Court, which was finally dismissed vide order dt.02/06/2006 while observing that recovery proceedings as well as confirmation of sale shall be subject to the decision of Co.Appl. No.79/2005. After hearing the parties, Co.Appl. No.79/2005 was finally allowed vide order dt. 23/01/2007; and auction notice & proceedings held on 22/11/2005 alongwith certificate of sale dt.07/06/2006 were quashed and set aside Msc.Appl.-123/07 //4// and the IDBI was directed to refund the amount having been deposited by present applicant and in pursuance whereof, respondent-IDBI refunded Rs.2,30,65,000/- vide banker's cheque dt. 12/02/2007 received by applicant on 16/02/07. Since the refund (supra) did not carry interest, the applicant has approached this Court by way of instant application. What has been prayed for is for clarification of judgment dt.23/01/2007 claiming interest as accrued on the purchase price deposited by the applicant with respondent-IDBI. It is relevant to mention that order sheet drawn by Recovery Officer, DRT on 30/11/2005 & 07/12/05 in auction proceeding, having been placed for perusal shows that amount received from auction purchase by Recovery Officer was deposited in FDRs with IDBI, initially for 46 days but since it was never en-cashed, must have been renewed from time to time; and that apart, possession of auctioned property pursuant to auction sale was never handed over to auction purchaser (applicant); hence it remains undisputed that auction purchaser having deposited complete sale price as per terms & conditions of the auction notice had not utilised either the auctioned property or the interest having yielded on the amount deposited with IDBI under FDRs, which basically belonged to present applicant on account of auction sale Msc.Appl.-123/07 //5// made in its favour on being set aside by the Court vide judgment dt.23/01/2007. Application has been opposed by respondent-IDBI basically on the premise that instant application is not maintainable as what the applicant has sought for is not a clarification of judgment but denial of the relief having not been granted by the Court in Co.Appl.79/2005, which in fact has been denied or be deemed to have been denied, being barred U/O.2, R.2, CPC. Counsel for respondent IDBI submits that relief prayed for in instant application was not granted by this Court while passing order dt.23/01/2007 and in the facts of present case, when relief being not claimed in earlier application or not granted by the Court at the time of disposal of earlier application, cannot now be examined afresh by this Court. Counsel further submits that S.34, CPC also provides that if the order of Court is silent about grant of interest, it shall be deemed to have refused such interest; therefore, separate proceedings shall not lie. Apart from preliminary objection being raised, it has also been averred as regards merits of instant application that amount of Rs.2,30,60,500/- deposited by the applicant (auction purchaser) could not put the money to commercial use because of short duration and uncertain period of deposit but had Msc.Appl.-123/07 //6// indisputably remained with financial institution (IDBI) from November, 2005 to February, 2007; and in fact was refunded to the applicant by IDBI by pay order dt. 12/02/2007. Here a question arises as to whether the IDBI had earned interest and if yielded, at what rate? Albeit the averments have been made that respondent-IDBI could not put the amount in Fixed deposits for commercial use because of short duration and uncertain in period of the deposits. The averment made appears to be incorrect in view of order sheets of Recovery officer, DRT, Jaipur 30/11/2005 & 07/12/2005 respectively which read ad infra: “30-11-05 - अिधवकता उभय पक्ष उप0 । िनलामीकतार् अिधवक् ताओ की िरपोटर् का अवलोकन िकया । सम् पित् त संख् या-1 की िनलामी असफल रही तथा सम् पित् त संख् या-2 की िनलामी सफल रही । सम् पित् त संख् या-2 की िनलामीकत् तार् अिध. ौी राजकुमार अपनी िरपोटर् के साथ 25% के DD Rs.57.75 लाख के पेश िकया उक् त DD को 46 िदन की FDR बनाने हेतु IDBI बैंक को वाद रसीद दी जावे । िनलामीकत् तार् अिधवक् ता ौी राजकुमार के कायर् को देखते हए फीस ु Rs.7000/- व ौी राजीव भािटया के कायर् को देखते हये फीस ु Rs.3000/- तय की जाती है उक् त रािश का भुगतान DH बैंक िनलामीकत् तार् अिधवक् ताओ को अदा कर रसीद न् यायालय में पेश करे । पऽावली पूवर् िनयत ितिथ िदनांक 06-01-06 को पेश हो ।" "07-12-05 : िनलामीबेता द्वारा पेश ूाथर्नापऽ पर पऽावली आज पेशी में ली गई । िनलामीबेता ने Msc.Appl.-123/07 //7// अपने ूाथर्नापऽ के साथ 75% के DD Rs.1,72,90,000/ पेश िकये । िजन् हे 46 िदन की FDR बनाने हेतु IDBI Bank, Anand Bhawan, Jaipur को वाद रसीद दी जावे । पऽावली पूवर् िनयत ितिथ िदनांक 06-01-06 को पेश हो । " Counsel for applicant submits that indisputably the applicant was the highest bidder in auction proceedings initiated by Recovery Officer, DRT held on 22/11/2005; full & final amount being deposited by auction purchaser (applicant) was placed in fixed deposits with IDBI initially for 46 days and pursuant to deposit of auction sale price, which was confirmed and certificate of sale was issued but possession of plant & machinery auctioned was never handed over to the applicant (auction purchaser); however, auction sale, itself, was set aside by this Court vide judgment dt.23/01/2007 in Co.Appl. 79/2005 - pursuant to which principal sum of auction sale price has been refunded to the applicant but the interest despite having yielded over the principal sum which remained lying in fixed deposit with IDBI till its refund, has not been paid along with the sum of refund in question. Counsel submits that once the purchase price was directed to be refunded while setting aside the auction sale, itself, the applicant was also entitled for the interest accrued thereon; that being so, judgment of this Court requires clarification Msc.Appl.-123/07 //8// in regard to the interest; and since no review of judgment was necessary, the relief can be granted to the applicant on the instant application. Counsel for applicant further submits that auction purchaser (applicant herein) was party to proceedings in Co.Appl.79/2005 but at that stage, being a respondent was to substantiate its justification submitted by Recovery Officer and there was no occasion to claim, make or submit to this Court while Co.Appl.79/2005 was being disposed of. This Court has considered rival contentions of Counsel for the parties and with their assistance, examined the material on record. Objection raised by respondent-IDBI that instant application is not maintainable being barred by provisions contained in O.2, R.2(2), CPC, is of no substance for the reason that O.2, R.2(2), CPC provides that the suit includes whole of the claim which the plaintiff is entitled to make and if having not been claimed by plaintiff, it may be deemed to have relinquished portion of the claim. But, in the instant case, Co.-Appl. 79/2005 was filed by Official Liquidator for setting aside auction sale initiated by Recovery Officer, DRT and in which the present applicant was arrayed as respondent-3 being auction purchaser in auction sale proceedings; Msc.Appl.-123/07 //9// as such was supposed to defend and substantiate justification offered by Recovery Officer DRT qua auction proceedings and when the auction proceedings being set aside vide judgment dt.23/01/2007, upon cause of action having arisen, the applicant has approached this Court for claiming interest over the refund of principal sum of purchase price offered in course of auction proceedings. In the facts of instant case, in considered opinion of this Court, O.2, R.2(2), CPC has no application. Apex Court while examining scope of S.34, CPC, in Motors & Investment Ltd Vs. New Bank of India (1997(11) SCC 271) had occasion to consider almost similar like controversy as in instant case, where auction sale was approved by Single Judge of the High Court but was set aside in appeal and when the matter went to the Apex Court, while upholding the judgment of Division Bench regarding its conclusion for setting aside auction sale, finally observed that in case the official assignee has kept the amount in any interest earning security, the principal amount together with interest is directed to be refunded to the claimant (auction purchaser); and in case the amount was not kept in any deposit and was used to discharge outstanding debt, the applicant is entitled to get interest @18% p.a. on the amount deposited by Msc.Appl.-123/07 //10// him. Apex Court in Motors & Investments Ltd Vs. New Bank of India (supra) observed ad infra: “6. Shri Ganguli may be right in his contention that the appellant having deposited the money, should be suitably compensated and no direction has been given by the Division Bench in that behalf.In the event of any subsisting liability against the estate of the respondents-2 and 3, to discharge any debts, it may be open to the official assignee to bring such part of the properties which may be sufficient to discharge the liability, to sale by public auction either by inviting tenders or through appropriate procedure under Order XXI of the CPC and then to conduct the sale in accordance therewith. In case the official assignee has kept Rs.77,500/- in any interest earning security, the principal amount together with interest is directed to be refunded to the appellant. In case the amount was not kept in any deposit and was used to discharge outstanding debt due by respondent Nos.2 and 3, the appellant is entitled to get interest at 18% per annum on the amount deposited by the appellant and the sale should be so conducted keeping in view the interest liability. From the amount secured by sale, apart from discharging the liabilities fastened on the lands, the interest also should be repaid to the appellant Msc.Appl.-123/07 //11// from the date of the deposit till date of repayment to the appellant.” While examining scope of O.21, R.93, CPC, in regard to auction sale of property, in Hindi Pracharak Prakashan Vs. M/s GK Bros. (AIR 1990 SC 2221), Apex Court took note of the fact that auction amount was lying deposited in Court without being invested; however, the sale was set aside on satisfaction of the decree while depositing dues under the decree in the Registry of the Court; and obviously when the purchase price was deposited, it was to be refunded to the auction purchaser. The Apex Court observed that even if amount has not been invested, auction purchaser is entitled to the amount deposited in the Court with reasonable compensation which was considered to be @ 12% interest on the principal sum. Similar like issue as being raised in instant case came up for consideration before Apex Court in Allahabd Bank Vs. Bengal Paper Mils Co. Ltd (JT 2004(8) SC 340), where Apex Court finally declined to grant interest to auction purchaser primarily on the premise that after the amount was deposited by auction purchaser, possession of auctioned property was handed over to him and it was not a case where auction purchaser was deprived of his money and of the property purchased by him in Msc.Appl.-123/07 //12// the auction; and when the property as security was utilized by auction purchaser; in such circumstances, applicant (auction purchaser) was held to be not entitled for interest on the amount being refunded. However, Apex Court in Central Bank of India Vs. Ravindra (2002(1) SCC 367) considered concept of interest and observed that it was the payment fixed by agreement or allowed by law for use or detention of money and the interest is basically a compensation for the use of the money which the purchaser was deprived of. In the instant case, it is not disputed that the purchase price offered by auction purchaser was deposited by the applicant but possession of the auctioned property was never handed over to him; inasmuch as the amount deposited by auction purchaser was put in fixed deposits with the respondent-IDBI, which remained lying in deposits till its refund pursuant to the order of Court. Thus, indisputably the respondent Bank has earned interest on the sale price deposited by the applicant which makes him entitled for compensation in regard to the use of money which the auction purchaser was deprived of. Apex Court in Aklu Ram Mahto Vs. Rajendra Mahto (AIR 1999 SC 1258) has also examined scope of S.29 of Arbitration Act, Msc.Appl.-123/07 //13// 1940 relating to the interest on Award vis-a- vis S.34, CPC and in para 2 it was observed ad infra: “2. There are four stages of grant of interest. Firstly, from the stage of accrual of cause of action till filing of the arbitration proceedings; secondly, during pendency of the proceedings before arbitrator; thirdly, future interest arising between date of award and date of the decree; and fourthly, interest arising from date of decree till realisation of award.” Finally it was observed that as regards Award of interest U/s 34, CPC, it is a matter of procedure and ought to be granted in all cases when there is a decree for money unless there are strong reasons to decline the same. In the instant case, money deposited by applicant, as is evident from order sheets dt.30/11/05 & dt.07/12/2005 drawn by Recovery Officer, DRT, was deposited in fixed deposits with financial institution (IDBI) initially for 46 days; however, it is not the case of IDBI that amount deposited by auction purchaser in fixed deposits with the Bank was not renewed at a later stage. Indisputably, the IDBI has earned interest over the amount lying in fixed deposits with it on being deposited by auction purchaser and in the considered opinion of this Court the applicant is certainly entitled for a reasonable compensation in the form of interest over the Msc.Appl.-123/07 //14// amount of refund by IDBI on the auction sale being set aside vide order dt.23/01/207 in Co.Appl. 79/2005, till receipt of the refund to him. Question arises as to what should be the rate of interest or the compensation which the applicant is entitled for. Certain print outs taken from websites have been produced for perusal including news at http://www. thehindubusinessline.com flashed on 07/01/2007 which clearly shows that State Bank of India has increased rate on domestic term deposits of Rs.15 lakh & above but less than Rs. One Crore with a maturity of one year & above to 8.25%, effective from January 8, and the rates for mid-size deposits range from 7.75% to 8.25% across various maturities. At the same time, the IDBI floats tax saving fixed deposit on 02/08/2006, as per The Economic Times, rate of interest offered on 5-year deposit would be 8.5% while IDBI Ltd also launched 5-year IDBI Suvidha Tax -Saving Fixed Deposit scheme with effective yields around 12%, w.e.f. August 4, 2006. However, as published on Indian Bank's Association website, prime lending rates for public sector banks, as regards IDBI as on 01/07/2009, was 12.75%. Taking note of factors (supra), this Court considers it appropriate to hold that that present applicant is entitled for a Msc.Appl.-123/07 //15// reasonable compensation viz. to pay interest @ 8.25% per annum on the amount which indisputably was lying in fixed deposits with respondent-IDBI from the date of its deposit till its refund through banker's cheque dt. 12/02/2007. Consequently, misc. application is allowed. Respondent-IDBI is directed to pay interest @8.25% p.a. on the principal sum of auction purchase price to the tune of Rs.2,30,65,000/- (Rs.Two Crores, Thirty lacs, Sixty five thousand) from the date it was deposited with IDBI till its refund through pay order/cheque dt.12/02/2007. Compliance of this order be made within two months from today failing which the interest (supra) shall be realised @12% p.a. instead of 8.25%. No order as to costs. (Ajay Rastogi), J. K.Khatri/p15/ 123MscApl07-79CoApl05RsrMay14Int.doc