Case: TSR Financial Services Pvt. Ltd Vs. Central Bank of India and Ors

1. Leave granted in the Special Leave Petitions. The Appellant - TSR Financial Services Pvt. Ltd. in the appeals arising out of Special Leave Petition (Civil) Nos. 28335-28336 of 2015 is the auction purchaser whereas the Appellant - The Bihar State Credit and Investment Corporation Ltd. (hereinafter referred to as "Financial Institution") in the appeals arising out of Special Leave Petition (Civil) Nos. 28787-28790 of 2015 is an incorporated Financial Institution which had granted financial accommodation/credit to the borrower - M/s. Deepak Electro Casting (India) Pvt. Ltd., who is Respondent No. 5 in appeals arising out of Special Leave Petition (Civil) Nos. 28335-28336 of 2015 and Respondent No. 1 in appeals arising out of Special Leave Petition (Civil) Nos. 28787-28790 of 2015.2. The challenge in the present appeals is to an order of the High Court dated 20th May, 2015 by which the sale in favour of the Appellant - TSR Financial Services Pvt. Ltd. (i.e. the auction purchaser) has been interdicted in Letters Patent Appeal(s) in confirmation of the order passed in the writ petition(s) by the learned single judge of the High Court. The High Court in the order(s) under challenge had thought it proper to interdict the sale in favour of the auction purchaser primarily on the ground that the same was effected and the property in question was delivered to the auction purchaser even before the expiry of the last date of the One Time Settlement (hereinafter referred to as "OTS") Scheme of which the borrower was entitled to seek benefits. The fact that the first auction sale was set aside/disapproved by the Board of Directors of the Financial Institution which had resulted in a second sale, without, however, any return of the purchase price and possession of the property in question was also taken into account by the High Court to arrive at the impugned conclusion. The High Court, therefore, doubted the bona fides of the sale transaction including the amount at which the sale was effected.3. We have heard the learned Counsels for the parties and have considered the matter.4. The first sale notice is dated 11th December, 2004 pursuant to which the Appellant - TSR Financial Services Pvt. Ltd. (the auction purchaser) offered an amount of ` 60.21 lakhs on 20th December, 2004. The said offer having been accepted by the Financial Institution on 23rd December, 2004 the Appellant - TSR Financial Services Pvt. Ltd. paid ` 15 lakh i.e. 25% of the offered amount on 15th January, 2005. Thereupon on 10th February, 2005 the Financial Institution issued notice to the Respondent - borrower giving it an opportunity to pay the amount of ` 60.21 lakhs within ten (10) days which amount was offered by the auction purchaser. The Respondent - borrower did not act in terms of the aforesaid notice/letter/communication dated 10th February, 2005. Possession of the property in question was handed over to the auction purchaser on 22nd March, 2005. What happened thereafter is a series of letters/communications by the Respondent - borrower with regard to the payments due under the OTS and indicating its agreement/readiness to pay the OTS amount. No payment, however, was forthcoming. In these circumstances, the auction purchaser paid the balance amount i.e. ` 30 lakhs on 11th April, 2005. However, it appears that on 5th September, 2005 the Board of Directors of the Financial Institution refused to approve the sale made in favour of the auction purchaser on the ground of inadequacy of the value fixed which, according to the Board of Directors of the Financial Institution should not have been ` 60.21 lakhs but should have been at about ` 65.34 lakhs. The aforesaid decision of the Board of Directors led to cancellation of the bid of the auction purchaser of ` 60.21 lakhs. A fresh advertisement/sale notice came to be issued on 24th January, 2006, which, incidentally, was followed by another communication dated 4th February, 2006 by the Financial Institution to the Respondent - borrower giving it another opportunity to pay the amount of ` 74 lakhs which was the amount offered by the auction purchaser in the second round of sale. Once again the Respondent - borrower did not respond to the said letter/communication dated 4th February, 2006. It is in these circumstances that on 17th February, 2006 the bid offered by the Appellant - auction purchaser of ` 74 lakhs came to be finalized.5. There is no manner of doubt that under the OTS Scheme the borrower had an option of paying the dues as per the said Scheme on or before 31st March, 2005 to which date the OTS Scheme was subsequently extended. It may also be correct that before the expiry of the said date the first sale was made in favour of the auction purchaser. The part deposit made by the auction purchaser and the handing over of possession of the property in question to the auction purchaser before 31st March, 2005 may appear to be somewhat irregular. However, such irregularity will have to be viewed in the context of the totality of the facts of the case and the admitted position that not only had the borrower failed to match the first offer of the auction purchaser (i.e. ` 60.21 lakhs) but also till the last date of the OTS Scheme i.e. 31st March, 2005 no payment was forthcoming from the Respondent-borrower. The Respondent - borrower was given another opportunity by the Financial Institution by communication dated 4th February, 2006, referred to earlier, to match the second offer made by the auction purchaser. However, the borrower failed to respond positively to the said offer also. It is in these circumstances that the finding of the High Court that the Financial Institution ought to have waited till the last date of the OTS Scheme will have to be viewed.6. The materials on record including the facts recited above would go to show that from 10th February, 2005 upto 31st March, 2005 i.e. for a period of nearly 40 days the borrower had an ample opportunity to pay the amount of ` 60.21 lakhs which was offered by the auction purchaser in the first round of sale (subsequently set aside). It did not comply with the said option. In the second round of sale, despite the notice dated 4th February, 2006 the borrower did not tender any payment to match what was offered and tendered by the auction purchaser. Besides, the auction purchaser, though had been in possession of the property from 2005 and in spite of payment of a huge amount of ` 74 lakhs as far back as on 4th February, 2006, has not been able to enjoy the fruits of the property because of the interim orders of the Court which, inter alia, included restriction on development of the property by the auction purchaser.7. As against the aforesaid facts, the borrower appears to have deposited a sum of ` 17 lakhs, as per its own calculation, sometime in the year 2013 though under the OTS Scheme it had to tender payment of ` 1.70 crore i.e. principal amount of ` 85 lakhs and the amount equivalent to 100% of the principal amount.8. Notwithstanding the order of the High Court being untenable in the facts noted above we had explored the possibility of settling the matter on equitable terms and accordingly we gave an option to the Respondent - borrower that the Court would consider restoring the property to it in the event it pays the amount under the OTS Scheme i.e. ` 1.70 crore and also pays suitable interest at the rate of 12% per annum on the amount of ` 74 lakhs paid by the auction purchaser. The learned Counsel for the borrower, on instructions, has submitted that the borrower would not be able to make the payment as above.

Decision reasoning: 1[ds]6. The materials on record including the facts recited above would go to show that from 10th February, 2005 upto 31st March, 2005 i.e. for a period of nearly 40 days the borrower had an ample opportunity to pay the amount of ` 60.21 lakhs which was offered by the auction purchaser in the first round of sale (subsequently set aside). It did not comply with the said option. In the second round of sale, despite the notice dated 4th February, 2006 the borrower did not tender any payment to match what was offered and tendered by the auction purchaser. Besides, the auction purchaser, though had been in possession of the property from 2005 and in spite of payment of a huge amount of ` 74 lakhs as far back as on 4th February, 2006, has not been able to enjoy the fruits of the property because of the interim orders of the Court which, inter alia, included restriction on development of the property by the auction purchaser7. As against the aforesaid facts, the borrower appears to have deposited a sum of ` 17 lakhs, as per its own calculation, sometime in the year 2013 though under the OTS Scheme it had to tender payment of ` 1.70 crore i.e. principal amount of ` 85 lakhs and the amount equivalent to 100% of the principal amount8. Notwithstanding the order of the High Court being untenable in the facts noted above we had explored the possibility of settling the matter on equitable terms and accordingly we gave an option to the Respondent - borrower that the Court would consider restoring the property to it in the event it pays the amount under the OTS Scheme i.e. ` 1.70 crore and also pays suitable interest at the rate of 12% per annum on the amount of ` 74 lakhs paid by the auction purchaser. The learned Counsel for the borrower, on instructions, has submitted that the borrower would not be able to make the payment as above.