Case: M/s. R.S. Infra-Transmission Ltd Vs. Saurinindubhai Patel and Ors

2. The facts leading to the present appeal in nutshell are as under:-2.1 A Bank namely, IndusInd Bank Ltd. (hereinafter referred to as the Bank) filed an O.A. bearing No. 424 of 1999 before the Debt Recovery Tribunal, Ahmedabad (hereinafter referred to as DRT) on 25.05.2006 for recovery of debt and enforcement of security against the original respondent Nos. 3 to 5 (original borrowers). Recovery Certificate bearing RP No.153/2006 was issued in favour of the Bank for recovery of an amount of Rs.71,88,819.87/- recoverable from the original borrowers - respondent Nos. 3 to 5 with further interest payable at the rate of 12% p.a. from 27.12.1999 till realization and the costs, charges and expenses of the proceedings for recovery thereof.2.2 The immovable properties, being Survey No.188/P admeasuring 36,735 square meters owned by respondent No.3 (borrower) and Survey No.187/P admeasuring 8280.51 square meters owned by respondent No.5 (borrower) situated at Mauje Karan Nagar, Tehsil Kadi, District Mehsana got attached in pursuance of the above Recovery Order/Certificate.2.3 A proclamation of sale of the properties came to be issued by the Recovery Officer, DRT on 28.11.2006 fixing the public auction on 08.01.2007. As per the proclamation of the sale, the amount due and payable was Rs.1,27,30,527/- including interests as on 30.06.2006. In the auction held on 08.01.2007, the bid of respondent Nos. 1 and 2 herein (original writ petitioners) being the highest offer being Rs.1.35 crores came to be accepted by the Recovery Officer. The successful bidders – respondent Nos. 1 and 2 herein deposited the bid amount on 22.01.2007.2.4 That the original borrowers thereafter filed an application under Rule 60 of the Second Schedule of the Income Tax Act, 1961 read with Sections 25 to 29 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 for setting aside the above auction vide application dated 25.01.2007 and submitted a Demand Draft for an amount of Rs.1,27,30,527/- as specified in the sale proclamation. Respondent No.3 herein (borrower) also submitted a Demand Draft for Rs.6,75,000/- for payment to the purchaser as penalty, a sum equal to 5% of the purchase money and a Demand Draft for Rs.3,01,290/- towards interest @ 15% from the date of the sale proclamation to the date of deposit, i.e., 25.01.2007. The Recovery Officer adjourned the matter to 06.02.2007 directing the respondents to serve a copy of the order and the application on the Bank and the auction purchaser. In the meantime, the appellant herein expressed its interest in purchasing the properties which were the subject matter of the auction sale and entered into a Memorandum of Understanding with respondent No.3 (borrower).2.5 The Bank filed its reply on 06.02.2007 before the Recovery Officer in response to the application of the respondent No.5 (on the 29th day from the date of auction). In its reply, the Bank claimed that there was some shortfall in the amount deposited by the borrower but no calculation sheet was attached to the reply. The matter was adjourned for filing of reply by the auction purchaser and the Bank was also directed to file compliance affidavit. The auction purchasers - respondent Nos. 1 and 2 herein filed its objection/reply to the application. The borrower also filed its rejoinder to the reply filed by the Bank. The matter got adjourned to 15.02.2007 with the following order passed by the Recovery Officer:-………..the bank had still not served the copy of the calculation sheet.Further, he submits a DD for an amount of Rs.2.80 lacs towards difference in calculations, if any. He farther submits that the CH Bank be directed to serve a copy of the calculation sheet on the CDs, so that, any further difference in interest, etc. in calculation may be paid. Request is allowed. CH Bank is again directed to serve a· copy of the calculation sheet on the CDs, so that, the CDs may be able to pay the difference in payment, if any.2.6 Thereafter, the Bank submitted a calculation sheet before the Recovery Officer on 12.02.2007. According to the calculation sheet, the borrower - respondent No.3 deposited a further sum of Rs.77,647/- with the Recovery Officer, which was over and above Rs. 2.80 lakhs deposited as per the order dated 15.02.2007. The Recovery Officer thereafter passed an order dated 15.02.2007 allowing the application submitted by the respondent No.3 – borrower by holding that the borrower had deposited the requisite amount for setting aside the sale under Rule 60 of the Second Schedule of the Income Tax Act. Accordingly, the sale of the properties in question came to be set aside. The Recovery Officer also directed the Bank to hand over all the original documents pertaining to the immovable properties in question to the borrower immediately. In compliance of the order passed by the Recovery Officer, the Bank handed back to the original borrowers the documents pertaining to the properties in question on 19.02.2007 and on release of the documents, the request of the Bank to release the amount deposited was allowed by the Recovery Officer. Immediately on 19.02.2007 itself, the borrowers – respondent Nos.3 to 5 herein executed two sale deeds in favour of the appellant herein for a sale consideration of Rs.1,40,89,855/-. That after the sale deeds were executed in favour of the appellant dated 19.02.2007, the auction purchasers – respondent Nos. 1 and 2 preferred an appeal bearing No.11 of 2007 before the DRT, Ahmedabad on 20.02.2007.2.7 The DRT Ahmedabad by order dated 18.05.2007 allowed the said Appeal No.11 of 2007 and set aside the order passed by the Recovery Officer passed in Recovery Proceedings No.153 of 2006. The borrowers then preferred the appeal bearing No.233 of 2007 before the DRAT, Mumbai against the order dated 18.05.2007 passed by the DRT in Appeal No.11 of 2007. The appellant herein moved an application bearing M.A. No.704 of 2007 seeking impleadment in Appeal No.223 of 2007.2.8 Prior to the borrower preferring Appeal No.223 of 2007, respondent Nos.1 and 2 herein moved an application before the Recovery Officer on 31.05.2007 for seeking a direction to the appellant to maintain status quo over the properties in question and to appoint the receiver to take possession of the same from the appellant. The said application came to be rejected by the Recovery Officer vide order dated 31.05.2007. Against the order passed by the Recovery Officer dated 31.05.2007, rejecting the application seeking status quo order in regard to the properties in question, respondent Nos. 1 and 2 herein preferred appeal before the DRT being Appeal No. 34 of 2007, which came to be dismissed by the order dated 08.02.2008. Thereafter respondent Nos. 1 and 2 herein filed an Appeal No.43 of 2008 before the DRAT, Mumbai against the order dated 08.02.2008.2.9 Further, respondent Nos. 1 and 2 moved cross objections in Appeal No.223 of 2007 aggrieved by certain observations in the order dated 18.05.2007 pertaining to the right of redemption of the mortgagers till the time conveyance is not executed in favour of the successful auction purchaser.2.10 By order dated 07.09.2015, the DRAT, Mumbai allowed Appeal No.223 of 2007 preferred by the borrowers and set aside the auction sale dated 08.01.2007, which was in favour of the respondent Nos. 1 and 2 herein.2.11 Feeling aggrieved and dissatisfied with the order passed by the DRAT, Mumbai dated 07.09.2015, allowing the Appeal No.223 of 2007 and setting aside the auction sale, respondent Nos. 1 and 2 herein (the auction purchasers) preferred the writ petition before the High Court being Special Civil Application No.17981 of 2015. By the impugned judgment and order, the High Court has allowed the said writ petition and has quashed and set aside order dated 07.09.2015 passed by the DRAT, Mumbai in Appeal No.223 of 2007 and consequently confirmed the sale in favour of respondent Nos. 1 and 2 herein (the auction purchasers).2.12 Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the High Court, the subsequent purchaser - respondent No.5 – M/s. R.S. Infra-Transmission Ltd. has preferred the present appeal.

Court's reasoning:
6.2 At the time of hearing of the application under Rule 60 on 09.02.2007, a grievance was made before the Recovery Officer as to why the Bank had not served a copy of the calculation sheet and in the meantime, the judgment debtor had himself deposited a further sum of Rs.2.80 lakhs towards the difference in calculation, if any. The Recovery Officer directed the Bank to supply the calculation sheet and the Bank submitted the calculation sheet before the Recovery Officer on 12.02.2007 and on that day, a sum of Rs.77,647/- was the shortfall, which the judgment debtor deposited on the very next day, i.e., on 13.02.2007. If the Bank would have submitted the calculation sheet earlier alongwith the reply on 06.02.2007, which was 29th day from the date of auction, the judgment debtor would have deposited the balance shortfall amount. Therefore, in the facts and circumstances of the case, it can be said that there was a substantial compliance/ compliance of Rule 60. If the Recovery Officer would have been accurate in submitting the exact amount in the sale proclamation due and payable on the date of sale proclamation then the eventuality which has arisen in the present case would not have arisen. There was an absurd misconduct on the part of the Recovery Officer for which the judgment debtor should not be made to suffer.6.3 At this stage, it is required to be noted that the right available to the judgment debtor under Rule 60 is a valuable right and the last resort/opportunity to the judgment debtor to save his property. It is a right available to the judgment debtor after his property is sold in a court auction. Therefore, such a valuable right available to the judgment debtor to save his property should not be affected on the technical ground and/or for the mistake and/or the bona fide mistake for which he was not at all responsible.6.4 The legislative intent of Rule 60 has been dealt with and considered in detail by the Bombay High Court in the case of Hotel Paras Garden, Balapur & Anr. (supra). In the aforesaid case, it is observed that the legislative intent of Rule 60 is to give the defaulter as much latitude as possible till the end and he can, under Rule 60, without assigning any cause but after depositing the sum therein mentioned as mentioned in the sale proclamation within the stipulated time, avoid the auction and protect his property. Thus, the right which is available to the judgment debtor under Rule 60 is a most valuable right available and the same shall not be permitted to be affected on the technical ground and/or bona fide mistake for which he cannot be said to be at fault.6.5 Now, so far as the submission on behalf of respondent Nos. 1 and 2 that according to the Bank, a sum of Rs.4.63 lakhs was the balance amount due and payable against which even subsequently the borrower has deposited Rs. 3,57,647/- and therefore, still there is a shortfall is concerned, the aforesaid has no substance. At this stage, it is required to be noted that on deposit of the aforesaid amount of Rs. 3,5,7647/-, (i.e., Rs.2,80,000/- + Rs.77,647/-) as on 13.02.2007, the Recovery Officer directed the Bank to hand over the original documents pertaining to the impugned properties and file compliance affidavit and thereafter the Bank was allowed to appropriate the decretal amount deposited by the judgment debtor and that on 19.02.2007 itself, the Bank complied with the order passed by the Recovery Officer dated 15.02.2007 and handed back to the judgment debtor the documents pertaining to the properties in question and requested to release the amount deposited, which came to be allowed by the Recovery Officer. At that time, no dispute was raised by the Bank that any further amount was due and payable. The Bank was satisfied with the deposit of the amount by the judgment debtor.7. In view of the above discussion and for the reasons stated above, the High Court has committed a grave/serious error in quashing and setting aside the order passed by the DRAT and the Recovery Officer by which the Recovery Officer and the DRAT set aside the sale in favour of the auction purchasers. The view taken by the High Court is too technical. The High Court has not at all considered the facts narrated hereinabove in its true perspective. The High Court has not at all appreciated and considered the fact that for the inaccuracy and/or mistake on the part of the Recovery Officer, the judgment debtor cannot be made to suffer for no fault of his. The High Court has also not properly appreciated and considered the valuable right available to the judgment debtor under Rule 60. As observed and held hereinabove, when the substantial amount was deposited, there was no reason for the judgment debtor not to deposit the shortfall, which as such can be said to be very meagre amount. As and when the judgment debtor was made aware about the shortfall, immediately, the shortfall amount has been deposited by the judgment debtor.Under the circumstances, the impugned judgment and order passed by the High court is unsustainable and the same deserves to be quashed and set aside.