Case: Haryana Financial Corporation  Vs. Rajesh Gupta

4. On 8.1.1998, the appellants/Corporation issued an advertisement for sale of various units, including the land of M/s. Unique Oxygen Private Limited(hereinafter referred to as the defaulting unit), Old Hansi Road, Jind. On 28.1.1998 respondent initially made an offer of Rs.25,00,000/-, which was subsequently during negotiations enhanced to Rs.50,00,000/-. On that very day the respondent deposited an amount of Rs.2.5 lakhs by way of earnest money. On 29.1.1998 the respondent wrote a letter to the Managing Director of the appellants/Corporation as follows:"RAJESH GUPTA 578, AUTO MOBILEPhone: 28221 - 3 LinesFax No.01662 - 31084January 29, 1998The Managing DirectorHaryana Financial Corporation17, 18, 19 Sector 17-AKind Attention: Sh.Raj Kumar Ji, M.DSub: Offer to purchase assets of Unique Oxygen Private Limited JindWith reference to your advertisement in `ECONOMIC TIMES dated 08.01.98, we are inclined to submit our bid for purchase of assets of the above mentioned company. With this purpose we visited the factory premises on 21.01.1998. On our visit, it was noticed that the premises do not have an independent appropriate passage from the road. On further inquiry from the concerned Branch office, the copy of site plan/ building plans were not available and we were told that the same are available at Head office only. Therefore you are requested to kindly apprise us in this matter so that we do not face any problems, if we acquire the unit as per your offerWe hope to hear soon in this regardNo response was given by the appellants/Corporation to the respondent. However by letter dated 19.2.1998 the appellants/Corporation called the respondent for negotiations. These negotiations resulted in enhancement of the bid from Rs.25 lakhs to Rs.50 lakhs. Again in the letter dated 7.3.1998, the respondent stated as follows:"FAX NO.1072-70266 578, AUTO MOBILEPhone: 28221 (3 Lines)The Managing DirectorSub: Offer to purchase unit of Unique Oxygen Private Limited JindWith reference to the negotiation held on 6.3.98 at your Head Office for the sale of assets of said concern. We are the highest bidder and understand that our bid will be accepted. However, the matter regarding approved/authorised passage for smooth functioning of the factory was discussed in the meeting and the unit holder, who was also present in the meeting confirmed that such passage exist, at the factoryIn this regard, it is submitted that we have come to know that there is no approved/authorised passage to factory sufficient to pass a truck through it. The gate/passage presently being used is unauthorizedIn the light of above you are requested to kindly apprise us in this matter and supply us the copy of approved building plan, site plan for the building mortgaged by H.F.C. so that we may not face any problem in future in running the unitKindly treat it as most urgentSd/- Rajesh Gupta"5. It would appear that by letter dated 3.4.1998, the Branch manager brought the objection of the respondent to the notice of the head office of the appellants/Corporation. In response to this communication the Branch Manager was informed by the head office of the appellants/Corporation, by letter dated 7.4.1998 that clear cut passage/rasta has been provided to the unit as per documents submitted by the defaulting unit at the time of availing loan. Reference in this letter was also made to the Sale Deed, dated 8.9.1994, Mutation No.5172, Mutation No.9896, Search Report and sale deed, Rasta, wherein it is mentioned that there is an approach road to the factory site. The Branch Manager was directed to satisfy the respondent with the aforesaid documents. On 13.4.1998, the Branch Manager addressed a letter to the head office of the appellants/Corporation clearly informing as follows:"However, the actual Rasta which is of 3 Karams and appeared in the papers particularly shown in the sale deed is not connected directly with the unit and to connect the Rasta with the Rasta of the revenue record party purchased some land where the movement of the vehicles is not possible at all."6. In fact the letter further pointed out as follows:"It is further stated that the area mentioned in the map approved by the M.C. is 1130 sq. yd. whereas the total area in the sale deed and is mortgaged to the Corporation is 1210 sq. yd. It is also not out of place to mention that the land on which the office building is constructed is also not mortgaged to the Corporation and if that area is excluded the main gate of the factory will go behind from the existing place and then the unit will be stripped of independent Rasta."7. In spite of the aforesaid factual position, the appellants/Corporation issued the letter dated 18.5.1998 to the respondent advising him to deposit balance amount of 25 per cent of the bid amount within 15 days from the date of issue of the letter failing which the amount of the earnest money deposited would be forfeited without further notice. The respondent, however, again raised the issue regarding the passage at the open house held by the appellants/Corporation at Hissar on 12.6.1998. According to the appellants/ Corporation, as per the revenue record and the demarcation report of the revenue officials dated 27.6.1998, therein 16.5 ft. rasta is provided in the west of the Unit. However, not satisfied, the respondent did not pay the balance amount. Therefore the appellants/Corporation invited fresh tenders for sale of land. On 30.9.1998 the appellants/Corporation forfeited the sum of Rs.2.5 lakhs which had been deposited by the respondent as earnest money8. It was this action of the appellants/Corporation that was challenged by the respondent by way of a Writ Petition in the Punjab and Haryana High Court9. The aforesaid writ petition has been allowed by the Division Bench. The order dated 30.9.1998 by which the earnest money had been forfeited has been quashed and set aside. A further direction has been issued to the appellants/Corporation to refund the amount along with interest at the rate of 12 per cent per annum w.e.f. 1.2.1998 to the date of payment. The High Court also imposed costs on the appellants/Corporation assessed as Rs.5,000/-. Further directions were issued to release the amount to the respondent within two months from the receipt of a copy of the order of the High Court. It is this order which is challenged in the present appeal.

Court's reasoning:
18. In our opinion, the appellants cannot be given the benefit of Clause 5 of the advertisement. The appellants /Corporation cannot be permitted to take advantage of their own wrong. Clause 5 undoubtedly permits the forfeiture of the earnest money deposited. But this can only be, if the auction purchaser fails to comply with the conditions of sale. In our opinion the respondent has not failed to comply with the conditions of sale. Rather, it is the appellants/Corporation which has acted unfairly, and is trying to take advantage of its own wrong19. In view of the aforesaid, we are of the considered opinion that the appellants/Corporation cannot be permitted to rely upon Section 55 of The Transfer of Property Act, 1882. The appellants/Corporation failed to disclose to the respondent the material defect about the non-existence of the independent 3 `Karam passage to the property. Therefore, the appellants/ Corporation clearly acted in breach of Section 55 (1) (a) and (b) of The Transfer of Property Act, 188221. In our opinion, the reliance on Section 29 of the State Financial Corporations Act, 1951 is wholly misplaced. The aforesaid Section pertains to action which the Corporation can take against the Unit which had defaulted in payment of loan. In such circumstances the Corporation has the power to sell the property that has been hypothecated or mortgaged with the Corporation. Respondent herein is an auction purchaser and therefore cannot be confused with the defaulting unit. We are also of the considered opinion that the reliance placed on the judgment of this Court by the counsel for the appellants in the case of Union Bank of India vs. Official Liquidator and Ors. (1994) 1 SCC 575  is wholly misconceived. The aforesaid judgment relates to sale of the property and assets of a company in liquidation by the official liquidator under the orders of the Court. Therefore it is observed that the official liquidator cannot and does not hold any guarantee or warranty in respect of the property sold. That is because the official liquidator proceeds on the basis of what the records of the company in liquidation show. Therefore it is for the intending purchaser to satisfy himself in all respects as to the title and encumbrances and so forth of the immovable property that he proposes to purchase. In those circumstances it is held that the purchaser cannot after having purchased the property on such terms then claim diminution in the price on the ground of defect in the title or description of the property22. The aforesaid observation would be clearly applicable to the Corporation as it is exercising the rights of an owner in selling the property. The appellants/Corporation is not selling the property as an official liquidator23. In any event, the facts of this case as narrated above would clearly indicate that the respondent had made all necessary inquiries. It was the appellants/Corporation that failed to perform its obligations in giving a fair description of the property offered for sale. Learned counsel had also relied on another judgment in the case of U.T. Chandigarh Administration and Anr. vs. Amarjeet Singh and Ors. (2009) 4 SCC 660. In our opinion, the aforesaid judgment is wholly inapplicable to the facts and circumstances of this case as it relates to the duties of a developer who carries on activities of development of land and invites application for allotment of sites in a developed layoutIn our opinion the aforesaid judgment is not applicable to the facts of this case.