HON’BLE THE CHIEF JUSTICE SRI ANIL R. DAVE AND HON’BLE SRI JUSTICE VILAS V. AFZULPURKAR WRIT PETITION Nos.27695 of 2007 AND 9158 of 2008 Writ Petition No.27695 of 2007 Between: Bhanu Constructions Company Limited. ...Petitioner And The Recovery Officer, Debts Recovery Tribunal, Hyderabad and others. … Respondents % 22.4.2009 ! Counsel for the petitioner : Sri S. Ravi ^ Counsel for respondent No.1 : Sri A. Rajasekhar Reddy, Assistant Solicitor General, assisted by Sri M. Ratna Reddy, Standing Counsel for Central Government. Counsel for respondent No.2 & 3 : Sri B. Adinarayana Rao Counsel for respondent Nos.4 to 7 : Sri D. Prakash Reddy, Senior Advocate, assisted by Sri B. Venkatadri & Smt.V.Dyumani. Counsel for respondent No.8 : Sri Ch. Srinivas Writ Petition No.9158 of 2008 Between: Mohd Saleem ...Petitioner And The Recovery Officer, Debts Recovery Tribunal, Hyderabad and others. …Respondents Counsel for the petitioner : Sri D. Prakash Reddy, Senior Advocate, assisted by Smt. V. Dyumani. Counsel for respondent No.1 : Sri A. Rajasekhar Reddy, Assistant Solicitor General, assisted by Sri M. Ratna Reddy, Standing Counsel for Central Government. Counsel for respondent No.2 : Sri S. Ravi Counsel for respondent Nos.3 and 4 : Sri B. Adinarayana Rao Ø Head Note: ? CITATIONS: 1. 2000 (2) ALT 73 2. AIR 1995 Bombay79 3. AIR 2005 SC 3353 4. (2007) 4 SCC 795 5. AIR 1958 AP 763 6. (2005) 6 SCC 705 7. (2008) 8 SCC 148 IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) WEDNESDAY, THE TWENTY SECOND DAY OF APRIL TWO THOUSAND AND NINE PRESENT HON'BLE THE CHIEF JUSTICE SRI ANIL R. DAVE AND HON'BLE SRI JUSTICE VILAS V. AFZULPURKAR WRIT PETITION Nos.27695 of 2007 AND 9158 of 2008 Writ Petition No.27695 of 2007 Between: Bhanu Constructions Company Limited, a company incorporated under the Companies Act, 1956 having its Registered Office at 6-3-354/8/2/B, Hindinagar, Banjara Hills, Hyderabad, Represented by its Chief Executive, Mr. B. Rajasekhar, S/o. B. Venkateswara Rao, aged 42 years; R/o. Hyderabad. ...Petitioner And 1. The Recovery Officer, Debts Recovery Tribunal, A.P. 5th Floor, Triveni Complex, Abids, Hyderabad. 2. Andhra Bank, SRM Branch, Koti, Hyderabad. 3. State Bank of India, SAM Branch, Secunderabad. 4. Carin Commercials Pvt. Ltd., a Company incorporated under the Companies Act, 1956, having its office at 84-A, Mittal Court, 8th Floor, 224, Nariman Point, Mumbai. 5. Rakshita Commercials Pvt. Ltd., a Company incorporated under the Companies Act, 1956, having its office at 84-A, Mittal Court, 8th Floor, 224, Nariman Point, Mumbai. 6. Netravati Commercials Pvt. Ltd., a Company incorporated under the Companies Act, 1956, having its office at 84-A, Mittal Court, 8th Floor, 224, Nariman Point, Mumbai. 7. Anmol Hotels Pvt. Ltd., Opp: Secretariat, Saifabad Grounds, Hyderabad. 8. Shabber Ahmed Khan and Associates, Represented by Shabber Ahmed Khan, Vijayawada. ...Respondents Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the affidavit filed herein the High Court will be pleased to issue a writ, direction or order especially in the nature of the writ of mandamus setting aside the auction conducted on 13-12-2007 and 14-12- 2007 by respondent No.1 for the sale of properties mortgaged by the petitioner to respondents No.2 and 3 and consequently directing that all proceedings in relation to R.P.No.420 of 2001 in O.A.No.460 of 1999 be transferred to the Debts Recovery Tribunal, Visakhaptnam. Counsel for the petitioner : Sri S. Ravi Counsel for respondent No.1 : Sri A. Rajasekhar Reddy, Assistant Solicitor General, assisted by Sri M. Ratna Reddy, Standing Counsel for Central Government. Counsel for respondent No.2 & 3 : Sri B. Adinarayana Rao Counsel for respondent Nos.4 to 7 : Sri D. Prakash Reddy, Senior Advocate, assisted by Sri B. Venkatadri & Smt.V.Dyumani. Counsel for respondent No.8 : Sri Ch. Srinivas Writ Petition No.9158 of 2008 Between: Mohd Saleem, S/o. Mohd. Ismail, M/s. Hotel Anmol Continental, Opp: Public Guardens, Nampally, Hyderabad. ...Petitioner And 1. The Recovery Officer, Debts Recovery Tribunal, Hyderabad. 2. Bhanu Constructions Company Limited, 6-3-354/8/2/B, Hindinagar, Banjarahills, Hyderabad, Represented by its Chief Executive Mr. B. Rajasekhar. 3. Andhra Bank, SARM Branch, Koti, Hyderabad, Represented by its Manager. 4. State Bank of India, SAM Branch, Secunderabad, Represented by its Manager. ...Respondents Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the affidavit filed herein the High Court will be pleased to issue a writ or order or direction more particularly in the nature of Writ of mandamus declaring the inaction on the part of the respondent No.1 in issuing the sale certificate and delivering the possession of the property to the petitioner as arbitrary, illegal, capricious and violative of principles of natural justice and consequently direct respondent No.1 to issue the Sale Certificate and deliver possession of the property bearing Municipal No.259/488 (Old) and No.855 (New) admeasuring 1123.5 Sq. meters situated at Panjagutta, Hyderabad consisting of ground + four upper floors. Counsel for the petitioner : Sri D. Prakash Reddy, Senior Advocate, assisted by Smt. V. Dyumani. Counsel for respondent No.1 : Sri A. Rajasekhar Reddy, Assistant Solicitor General, assisted by Sri M. Ratna Reddy, Standing Counsel for Central Government. Counsel for respondent No.2 : Sri S. Ravi Counsel for respondent Nos.3 and 4 : Sri B. Adinarayana Rao The Court made the following: ORDER: (Per Sri Anil R. Dave, C.J.) 1. As common questions of law and fact have fallen for consideration in these two writ petitions, at the request of the learned advocates, both the petitions were heard together and are decided by this common order. Facts of both the cases, in a nutshell, are as under: W.P.No.27695 of 2007 2. Writ Petition No.27695 of 2007 has been filed M/s. Bhanu Constructions Company Ltd. seeking a direction to set aside the auction conducted on 13.12.2007 and 14.12.2007 by the Recovery Officer, Debts Recovery Tribunal, Hyderabad (respondent No.1 herein) for sale of the properties mortgaged by it in favour of respondent Nos.2 and 3. The petitioner has also sought for a direction to transfer the proceedings of R.P.No.420 of 2001 in O.A.No.460 of 1999 pending on the file of the Debts Recovery Tribunal, Hyderabad to the Debts Recovery Tribunal, Visakhapatnam. 3. The petitioner is engaged in the business of construction. It availed certain loan facilities from Andhra Bank, Kothi, Hyderabad and State Bank of India, Secunderabad, respondent Nos.2 and 3 herein respectively. For the purpose of securing repayment of the loans, the petitioner and its guarantors had mortgaged certain immovable properties like agricultural lands situated in Krishna and Guntur Districts and open lands with a building in Hyderabad. When the petitioner failed to repay the loan amount, respondent Nos.2 and 3 had filed O.A.No.460 of 1999 before the Debts Recovery Tribunal, Hyderabad, and in pursuance of the said proceedings, a recovery certificate was issued on 31.10.2000. Subsequent to the constitution of a Bench of the Debts Recovery Tribunal at Visakhapatnam, the petitioner had filed M.P.No.28 of 2007 in R.P.No.420 of 2001 in O.A.No.460 of 1999 before the Debts Recovery Tribunal, Hyderabad, seeking transfer of the recovery certificate to the Debts Recovery Tribunal, Visakhapatnam, on the ground that the Tribunal at Visakhapatnam had got jurisdiction to try the proceedings as certain mortgaged properties are situated in Krishna and Guntur Districts. M.P.No.28 of 2007 was rejected by an order dated 10.12.2007 and the said order became final, as validity of the same was not challenged by the petitioner. While M.P.No.28 of 2007 was pending for its consideration, respondent No.1 herein issued an auction notice dated 10.10.2007 for sale of the mortgaged properties and the auction was held on 13.12.2007 and 14.12.2007. In the meanwhile, the Chairperson, Debts Recovery Appellate Tribunal, Chennai, by a letter dated 30.11.2007 conveyed his approval for transfer of recovery appeals in R.P.No.420 of 2001 in O.A.No.460 of 1999 to the file of the Debts Recovery Tribunal, Visakhapatnam. The grievance of the petitioner is that in spite of the specific direction from the Debts Recovery Appellate Tribunal, Chennai for transfer of the recovery appeals under letter dated 30.11.2007, respondent No.1 had passed an order dated 10.12.2007 in M.P.No.28 of 2007 holding that the recovery certificate need not be transferred to the Debts Recovery Tribunal, Visakhapatnam. In the said order dated 10.12.2007, it was also held that since the petitioner was carrying on business at Hyderabad and was having its registered office in Hyderabad, respondent No.1 was competent to execute the recovery certificate in respect of all the mortgaged properties irrespective of the fact that some of them fell under the jurisdiction of another Tribunal. Thereafter, on 14.12.2007, the petitioner had filed another petition being IAIR No.1205 of 2007 under Section 19(23) and (25) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short, “the RDB Act”) seeking stay of all further proceedings including stay of the auction proceedings scheduled to be held on 14.12.2007 at Vijayawada. However, the said petition was returned on the ground that the proceedings in O.A.No.460 of 1999 had been transferred to Debts Recovery Tribunal, Visakhapatnam. 4. Subsequent to the filing of the writ petition, the petitioner had filed WPMP.No.3851 of 2008 seeking to implead the auction purchasers of the property in the auction held on 13.12.2007 and 14.12.2007 as respondent Nos.4 to 7 in the writ petition, and the said application was granted by this Court on 11.3.2008. 5. It is the grievance of the petitioner that at the first instance, respondent No.1 had ignored the directions contained in the letter dated 30.11.2007 for transfer of the recovery proceedings to the file of the Debts Recovery Tribunal, Visakhapatnam, and thereafter, he could not have returned the petition seeking stay of the auction proceedings scheduled to be held on 14.12.2007 at Vijayawada. By doing so, the petitioner was put to irreparable damage. It is also the case of the petitioner that the proceedings pertaining to O.A.No.460 of 1999 could not have been transferred in a piecemeal manner and the entire proceedings should have been transferred to the Debts Recovery Tribunal, Visakhapatnam. Therefore, the action of respondent No.1 in passing order dated 10.12.2007 and in conducting auction on 13.12.2007 and 14.12.2007 is arbitrary, illegal and violative of the principles of natural justice. W.P.No.9158 of 2008 6. This petition has been filed by Sri Mohd. Saleem claiming to be the Proprietor of M/s. Hotel Anmol Continental, Nampally, Hyderabad, which was impleaded as respondent No.7 in Writ Petition No.27695 of 2007 on 11.3.2008. 7. It is the case of the petitioner in this petition that he had participated in the auction conducted on 13.12.2007 and he was the highest bidder having quoted Rs.7,16,00,000/- in respect of item No.1 of the property mentioned in the auction notice dated 10.10.2007. He had also deposited 25% of the bid amount on the date of auction and the remaining 75% within 15 days thereafter. Subsequently, the sale was also confirmed in favour of the petitioner by proceedings dated 21.2.2008 issued by respondent No.1. 8. In this petition, the petitioner has prayed for a direction to respondent No.1 to issue sale certificate and to deliver possession of the property bearing Municipal No.259/488 (old), No.855 (new) admeasuring 1123.5 Sq.mtrs. situated at Panjagutta, Hyderabad consisting of ground plus four upper floors. 9. According to the petitioner, M/s. Bhanu Constructions Company Ltd. (respondent No.2 in this petition), had filed M.P.Nos.4 and 5 of 2008, during the pendency of Writ Petition No.27695 of 2007, praying for a direction to set aside the sale held on 13.12.2007 and 14.12.2007, which were dismissed by respondent No.1 by an order dated 18.2.2008 on the ground that the mandatory requirement of Rule 61(b) of the Second Schedule to Income-Tax Act had not been complied with. It is, therefore, his grievance that even though the sale has become absolute, respondent No.1 is not executing sale certificate in his favour. 10. In Writ Petition No.27695 of 2007, affidavit in reply has been filed on behalf of respondent Nos.2 and 3 banks denying the allegations made by the petitioner. It has been stated that the appeal proceedings in R.P.No.420 of 2001 in O.A.No.460 of 1999 have already been transferred to the Debts Recovery Tribunal, Visakhapatnam, and now the said proceedings have nothing to do with the recovery proceedings in R.P.No.420 of 2001, as the recovery proceedings are pending before respondent No.1, who is concerned with execution of the recovery certificate. It has also been stated that respondent No.1 and the Tribunal are different and distinct authorities and according to Section 19(23) of the RDB Act, respondent No.1 had also jurisdiction to act as Recovery Officer in respect of the properties situated even outside the territorial jurisdiction of the Debts Recovery Tribunal, Hyderabad. It has been further stated that under Sections 19(22) and (25), the Recovery Officer is obliged to execute the recovery certificate sent to him. 11. Respondent Nos.4 to 6, who are the auction purchasers of the properties described at item 3 of the auction notice dated 10.10.2007, have filed a separate affidavit in reply. It has been stated that sale in respect of the afore-stated properties has been confirmed by the Recovery Officer on 21.2.2008 and possession of the properties has also been delivered to them, and that if the petitioner is aggrieved by the sale conducted by the Recovery Officer, the petitioner could have initiated appropriate proceedings under Rule 60 or 61 of the Second Schedule to the Income-Tax Act, but no such application was made by any person including the petitioner, and as the sale had been confirmed, the petitioner could have preferred an appeal under Section 30 of the RDB Act. It has also been stated that instead of pursuing the statutory remedies provided under the RDB Act, the petitioner had invoked the extraordinary jurisdiction of this Court under Article 226 of the Constitution and, therefore, the petition deserved rejection for not availing equally efficacious alternative remedy. It has been further stated that once a recovery certificate is issued, the Recovery Officer is vested with the jurisdiction to execute the same under Section 28 of the RDB Act unless the certificate is transferred to another Recovery Officer/Tribunal. 12. An affidavit in reply has also been filed on behalf of M/s. Hotel Anmol Continental (respondent No.7 in Writ Petition No.27695 of 2007) reiterating the averments made in Writ Petition No.9158 of 2008. 13. A rejoinder has been filed by the petitioner in Writ Petition No.27695 of 2007. It has been stated that respondent No.1 is a part of the Debts Recovery Tribunal and is, therefore, bound by the direction of the Debts Recovery Appellate Tribunal in its letter dated 30.11.2007. 14. Shabbir Ahmed Khan and Associates, Vijayawada had filed WPMP.No.31023 of 2008 for impleadment as party respondent in Writ Petition No.27695 of 2007 and the said application was granted by this Court on 20.2.2009. It is the case of Shabbir Ahmed Khan and Associates that in the auction held on 16.11.2007 at Vijayawada, it was the highest bidder in respect of the properties shown at Sl.Nos.1 and 2 of item No.4 of the auction notice and it had paid the amount payable by it and, therefore, it has prayed for a direction to respondent No.1 for issue of sale certificate in respect of these properties. 15. For the sake of convenience, the parties are referred to hereinafter as they are arrayed in Writ Petition No.27695 of 2007. 16. Sri S. Ravi, learned counsel appearing for the petitioner, has submitted that since the then Presiding Officer of the Tribunal had earlier appeared on behalf of the borrower before this Court in respect of certain transactions, the Tribunal had addressed a letter dated 22.11.2007 to the Appellate Tribunal, Chennai seeking instructions to transfer the recovery proceedings to any other Tribunal, and though the Appellate Tribunal accorded its approval vide its letter dated 30.11.2007 for transfer of the same to the Debts Recovery Tribunal, Visakhapatnam, the entire proceedings were not transferred. He has also submitted that respondent No.1 ought to have transferred the entire file to the Debts Recovery Tribunal, Visakhapatnam instead of transferring only appeal proceedings in a piecemeal manner. 17. Sri Ravi has further submitted that the value of the property shown at item No.1 in the auction notice dated 10.10.2007, which is a multistoreyed complex situated in Panjagutta, Hyderabad, was about Rs.14-15 Crores, whereas it was auctioned for Rs.7.16 Crores only. Moreover, the upset price of the said property was also not fixed in consultation with the petitioner. Similarly, the property shown at item No.3, comprising of agricultural lands situated in Paritala Village of Krishna District, was sold for Rs.17.88 Crores, whereas the market value of the same was Rs.25 Crores. He has also submitted that the bidders, who participated in the auction, had formed a cartel and, therefore, the properties sold at the auction did not fetch its proper market value. Thereafter, he has submitted that M.P.No.28 of 2007 was decided by respondent No.1 without intimating the date of hearing to the petitioner or its counsel on 10.12.2007 and the auction was conducted on 13.12.2007 and 14.12.2007 without affording reasonable opportunity to file an appeal and, therefore, the entire proceedings are contrary to the principles of natural justice. 18. Sri Ravi has thereafter submitted that on 14.12.2007, the petitioner had filed a petition being IAIR No.1205 of 2007 under Section 19(23) and (25) of the RDB Act seeking stay of all further proceedings including stay of the auction proceedings scheduled to be held on 14.12.2007 at Vijayawada. However, the said petition was returned on the ground that the entire proceedings in O.A.No.460 of 1999 had been transferred to Debts Recovery Tribunal, Visakhapatnam, and respondent No.1 had proceeded with the auction. 19. It has also been submitted by Sri S. Ravi that in January, 2007, the petitioner had approached the respondent Banks for one time settlement, but no action had been taken on the said proposal. He has also submitted that the petitioner was agreeable to deposit the amount required to be deposited under Rule 60 of the Second Schedule to the Income Tax Act. 20. Thereafter, Sri Ravi has submitted that respondent No.1 had no jurisdiction to execute the recovery certificate in respect of the properties situated outside the jurisdiction of the Debts Recovery Tribunal, Hyderabad. He has submitted that on one hand, respondent No.1 had ignored the directions contained in the letter dated 30.11.2007 of the Appellate Tribunal for transfer of the recovery proceedings to the file of the Debts Recovery Tribunal, Visakhapatnam, and on the other, returned the petition seeking stay of the auction, which was scheduled to be held on 14.12.2007 at Vijayawada, on the ground that the proceedings had been transferred to the Tribunal at Visakhapatnam. He has drawn attention of the Court to the provisions of Section 19(23) of the RDB Act and also to the judgment of a learned Single Judge of this Court in P.V. Subba Rao v. V. Peda Nageswara Rao[1]; a judgment of the Division Bench of the Bombay High Court in Shaba Yeshwant Naik v. Vinod Kumar[2]; and judgments of the Hon’ble Supreme Court in the cases of Salem Advocate Bar Association v. Union of India[3] and Mohit Bhargava v. Bharat Bhushan Bhargava[4]. 21. Sri Ravi has submitted that the language used in sub-section (23) of Section 19 of the RDB Act is that the Tribunal ‘may’ send the copies of the certificate of recovery for execution to such other Tribunals where the property is situated and, therefore, respondent No.1 had no jurisdiction to auction item No.3 of the properties, which are situated in Krishna District. The word ‘may’ should be read as ‘shall’ in the instant case and, therefore, the recovery certificate ought to have been transferred to the Tribunal having jurisdiction over Krishna and Guntur Districts, where the properties are situated. He has also submitted that even according to Section 39(1) of the Code of Civil Procedure (CPC), on the application made by the decree holder, the court, which passed the decree, may send it for execution to another court of competent jurisdiction. 22. Sri B. Adinarayana Rao, learned counsel appearing for respondent Nos.2 and 3 banks, has submitted that the petitioner is not concerned as to who sells the property mortgaged to the banks pursuant to the recovery certificate issued by the Tribunal. He has also submitted that the petitioner had not availed the statutory remedy of appeal provided under Section 30 of the RDB Act against the order passed by respondent No.1 (Recovery Officer) in M.P.No.28 of 2007, dated 10.12.2007, and has invoked jurisdiction of this Court to evade the payment of the loan amount. 23. Sri Adinarayana Rao has also drawn attention of the Court to the objects of the RDB Act and has submitted that to avoid delay in recovery of loans advanced by the banks, the RDB Act was enacted and Debts Recovery Tribunals were constituted. He has also submitted that the provisions of the Code of Civil Procedure do not apply to the proceedings initiated under the RDB Act. He has further added that in the instant case, the recovery certificate was issued on 31.10.2000, whereas the Tribunal at Visakhapatnam was constituted on 26.2.2002. According to him, only the Tribunal has power to transfer the recovery certificate and once the certificate is issued to the Recovery Officer under the provisions of the RDB Act, he is bound to execute the same. 24. Sri Adinarayana Rao has also submitted that the provisions of the Second Schedule to the Income Tax Act, 1961 apply to the proceedings under the RDB Act and as the petitioner had not deposited the amount specified in the recovery certificate as per the provisions of Rule 60 of the Second Schedule to the Income-Tax Act within 30 days from the date of sale and by way of penalty, a sum equal to 5% of the purchase money along with an application to respondent No.1, the auction sale cannot be set aside. Moreover, the petitioner did not file any appeal under Section 30 against the order of respondent No.1. He has finally submitted that no prejudice was caused to the petitioner by effecting sale of the mortgaged properties for recovery of the loan advanced to the borrower and, therefore, the petition deserves rejection. 25. Sri D. Prakash Reddy, learned Senior Advocate appearing for the respondent Nos.4 to 7 (auction purchasers) has submitted that his client had paid the amount and sale of the mortgaged properties had been confirmed by respondent No.1 on 21.2.2008. He has also submitted that the petitioner had not filed any appeal against the order dated 10.12.2007 passed by respondent No.1 in M.P.No.28 of 2007. He has also submitted that there is no provision in the RDB Act for transfer of the recovery certificate after it is transferred to the Recovery Officer for execution and, therefore, the action taken by the Recovery Officer cannot be said to be illegal or irregular. In support of his submission, Sri Reddy has relied on the judgment of a Division Bench of this Court in Lalithamba v. Mangamma[5]. 26. We have heard the learned Advocates at length and have also considered the facts of the case and the judgments referred to by the learned Advocates. 27. It is not in dispute that recovery certificate dated 30.10.2000 for Rs.44,06,30,954.79p. had been issued as the petitioner (borrower) did not repay the amount payable to the creditor banks. The said fact denotes that the petitioner is a defaulter who did not repay the amount of loans borrowed by it from both the banks. It is important to note the object with which the RDB Act has been enacted. The object with which the special statute has been enacted is to see that there is expeditious adjudication and recovery of debts due to banks and financial institutions. It is also pertinent to note that so as to see that the recovery is not delayed, the legislature has incorporated Section 22 in the RDB Act providing that the Tribunal as well as the Appellate Tribunal