Excerpts of the Order;
# 1. Punjab National Bank (respondent no.3 bank) has granted certain credit facilities to M/s Shamli Papers Mill Ltd. (respondent no.5/borrower company), however, it defaulted in payment.
# 2. The Bank accordingly initiated proceedings under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short “SARFAESI”) and mortgaged property was put for auction. At this stage, the borrower company filed a Securitization Application (S.A.) No. 160 of 2010 before Debt Recovery Tribunal at Lucknow (for short “DRT”).
# 3. The DRT passed an interim order dated 19.07.2011, whereby the bank was allowed to proceed further for auction but restrained the bank not to confirm the sale till further order.
# 4. First sale notice was not materialized, therefore, bank issued fresh sale notice and ultimately auction was materialized on 17.02.2014. Petitioner (auction purchaser) deposited complete sale price and sale certificate was also issued on 03.03.2014 to auction purchaser.
# 5. Petitioner (auction purchaser) filed an application before DRT for impleadment and clarification of interim order dated 19.07.2011 passed by DRT.
# 6. On above referred application, the DRT passed an order dated 08.05.2014 whereby application was allowed and held that the auction dated 17.02.2014 to be illegal and quashed it and the bank was directed to refund the amount received from petitioner (auction purchaser) along with interest. Relevant part of order is mentioned hereinafter :-
“I have heard rival submissions and perused the record.
It reveals from the record that restrain order dated 19.07.11 was passed by my predecessor was with specific direction that the “the bank to proceed as per law but do not confirm the sale till further orders” and the said order was not vacated till date by this Tribunal. The Contention raised by the Ld. Counsel for the applicant that since no bid was received, therefore, auction was not materialized, thus the order dated 19.07.11 has no effect is not acceptable. A formal declaration of this Tribunal was necessary before proceeding further. The second limb of argument of the respondent-bank is that the order dated 19.07.2011 was for the sale notice dated 16.6.11 which pertains to auction sale of the factory, land and building only and the plant and machinery were not part of the said auction. Therefore, in any case the said restrain order is not applicable for the plant and machinery. The said contention of the respondent Bank is not sustainable as during the fourth impugned auction, the factory land and building were also put for auction along with plant and machinery, therefore, I do not find merit in the contention of the Ld. Counsel for the respondent- Bank and I am of the view that since without vacation of the restrain order the respondent-Bank proceeded further and sold the plant and machinery in the auction, the said act amounts disobedience of the interim order of this Tribunal, therefore, the Judgment of the Hon’ble High Court of judicature at Allahabad in case of Savitri Devi (supra) is rightly applicable in the present matter. Their Lordship in the said judgment has categorically held that :-
“9. Admittedly,… it is settled regal proposition that sale deeds so executed are a nullity as having been executed in disobedience of the interim order of the Court. In Mulraj V. Murti Raghunathji Maharaj, AIR 1967 SC 1386 the Hon’ble Supreme Court considered the effect of action taken subsequent to passing of an interim order in its disobedience and held that any action taken in disobedience of the order passed by the Court would be legal subsequent action would be nullity.
10. Similar view has been reiterated in Surjit Singh and others v Harbans Singh and others, 1995 (6) SSC 50 1995 SCFBRC $30, Govt. of A.P. Gudepu Salic and others, 200 (4) SSC 625, Hansraj Tirathram v. The Administrator, Municipality Jammu, AIR 1963 Kerala 18.
11. Therefore, there is no doubt that the alleged sale deeds are nullity meaning thereby no nest, unenforceable and in executable and deserve to be ignored.”
Therefore, in the light of above-mentioned facts and legal proposition the clarification application is hereby allowed and since the auction dated 17.02.2014 is illegal and all subsequent action of the respondent-Bank is nullity, hence, the auction is hereby quashed and the respondent-bank is hereby directed to refund the amount received from the auction purchaser along with interest @11% from the date of deposit of full amount of the auction.
Applicant to take steps before the Registrar for Incorporation of auction purchaser in the array of parties before the Registrar by 15.5.14.
List on 8.7.14 for final hearing.”
(emphasis supplied)
# 7. The above referred order dated 08.05.2014 was challenged by the bank before Debts Recovery Appellate Tribunal, Allahabad (for short “DRAT”) by filing an Appeal No. R65/2014.
# 8. Meanwhile, Securitization application filed by borrower was allowed to be withdrawn by order dated 25.06.2014. The order dated 25.06.2014 is mentioned hereinafter :-
“Ld. Counsel for the applicant submits that he has moved an application dated 7.6.14 for withdrawal of the SA.
At this stage Ld Counsel for the auction purchaser vehementally opposed the withdrawal of the SA stating that respondent Bank has not refunded back his money till date.
In reply, Ld Counsel for the respondent-Bank submits that possession of the factory premises was given to the auction purchaser for a period of one month to remove the movable assets which has already been removed by him. Therefore, he submits that auction purchaser has no ground to object in the matter. He further submits that he has no objection on withdrawal of the S.A.
In the light of submission made by the parties as well as application for withdrawal of the case available on record, the SA is dismissed as withdrawn.
However, the respondent-Bank is hereby directed to ensure the compliance of order dated 8.5.14 of this Tribunal.” (emphasis supplied)
# 9. Subsequently, the appeal filed by the bank (against order of DRT quashing auction) was allowed by DRAT by an order dated 23.12.2014 and impugned order dated 08.05.2014 and 25.06.2014 therein was set aside and liberty was granted to auction purchaser to challenge auction proceedings. Impleadment application filed by auction purchaser/petitioner was also rejected vide order dated 21.01.2015.
# 10. Auction purchaser/petitioner filed a Writ Petition No. 807 of 2015 before this Court and the same was disposed of by order dated 30.11.2018. Relevant part of order is quoted hereinbelow -:
“The Court further found that the only controversy which remained to be considered is to the effect that the moveable property, which was purchased by the petitioner in the auction is delivered or not and if not delivered, the money has been refunded back or not.
After going through all the facts and circumstances of the case, this Court is of the definite opinion that the appropriate forum for the respective parties including the auction purchaser, would be the Debt Recovery Tribunal for adjudication of some factual disputed question of law which has now crept in during pendency of the S.A proceedings before the Tribunal or before the Appellate Tribunal. The question of fact which has originated during litigation before the two Tribunals, can well be settled before them after hearing the rival claims of all the parties. This Court is also not in agreement with the views drawn by the Appellate Tribunal that in the given facts of the case the auction purchaser is now stranger and can seek his remedy elsewhere. In these view of the matter, this Court finds that the all the parties may be relegated before the Tribunal for final adjudication of their rights in the matter.
In view of the above, the petition succeeds and is allowed. The orders impugned dated 21.1.2015 and 23.12.2014 passed by the Debts Recovery Appellate Tribunal as well as order dated 25.06.2014 passed by Debts Recovery Tribunal to the extent of permitting the withdrawal of Securitisation Application No. 160 of 2010, are quashed. The matter is remanded back to the Tribunal for adjudication after hearing the parties including the auction purchaser afresh.” (emphasis supplied)
# 11. In compliance of above order, the DRT, Lucknow heard the parties and passed following order dated 29.07.2019 on an M.A. filed by auction purchaser and allowed securitization application and directed to refund the money to auction purchaser.
# 12. The DRT, Lucknow held that :-
“The Respondent bank has failed to explain that when the sale conducted in favour of auction purchaser was set aside vide Tribunal’s order drd.08-05-2014 then there was no reason to hand over the movable assets to the auction purchaser on a subsequent date.
The Respondent bank has failed to produce before the Tribunal any inventory with the signature of auction purchaser in support of handing over the movable items to the auction purchaser.
The Respondent bank has filed affidavit of Shri Rajkumar Saxena as evidence in support of handing over the movable assets. The said affidavit was filed before the Hon’ble High Court. Even with the said affidavit, no inventory duly signed by the Auction purchaser is enclosed in support of handing over the movable goods to him. Hence, merely on the basis of averments of affidavit, it cannot be inferred that the movable assets were ever handed over to the auction purchaser. Since the movable assets were never handed to applicant/auction purchaser, hence over applicant/auction purchaser is entitled to get back the sale consideration deposited by him with the bank.” (emphasis supplied)
# 13. The bank challenged the above order before DRAT which was allowed by impugned order dated 19.10.2020 that DRT shall adjudicate it first in the light of direction by this Court in Writ Petition No. 807 of 2015 which are referred below -:
“21. It is obvious that the appellant-bank orally prayed on 19.06.2019 for grant of permission to file additional documents but the Tribunal below declined to accept the said prayer stating that the matter was to be decided on the basis of earlier evidences. The Tribunal below has misconstrued the direction dated 30.11.2018 of the Hon’ble High Court. Since the order dated 19.06.2019 was challenged by the appellant-bank in Appeal No. R-55/2019 though, the same became infractuous after passing of the final order on 29.07.2019 but the bank was free to raise that issue in the instant appeal as the interim order dated 19.06.2019 merged with the final order. The order dated 19.06.2019 is not sustainable hence, is liable to be quashed in the present appeal.
22. It is worthwhile to mention that on 05.07.2019, the appellant-bank filed an application before the Tribunal below with some documents and the respondent No. 2 auction purchaser filed its preliminary objection on 10.07.2019 against the same. The Tribunal below ought to have decided the application dated 05.07.2019 before passing the final order. But without doing so, the Tribunal below has made certain observations with regard to some documents whereas, no finding was recorded with regard to the photographs and other electronics evidences including the videography stated to have been prepared on 05.08.2014 and 23.08.2014 by the appellant-bank. Further, the consideration of such documents without affording an opportunity of hearing to the auction purchaser for rebuttal of the same was another fallacy in the order and was also contrary to the earlier order passed on 19.06.2019 declining to permit the additional evidence.
23. Moreover, it is the specific averment of the appellant- bank that the representative of auction purchaser was present at the time of taking over the possession on 12.06.2014 and also that the videography was conducted on 05.08.2014 and 23.08.2014 in which the presence of authorized representative of auction purchaser is claimed. The electronic evidence including videography and photographs are relevant to decide the real controversy between the parties. However, the same was not considered and have not been allowed to be taken on record. Since the matter was pending before the Hon’ble High Court since 2014, therefore, the Bank had no opportunity to file evidence/document earlier before the DRT, Lucknow to substantiate their claim of delivery of possession Thus, the Bank is entitled to be provided an opportunity of furnishing evidences/documents available with them. Simultaneously, the auction purchaser is also entitled for adducing evidence/documents in support of its contention or for rebuttal of the documents filed by the Bank. Since, the finding is to be recorded for the first time by the trail court i.e. Tribunal below therefore, I deem it appropriate to remand the matter back to the DRT, Lucknow to adjudicate afresh after affording. opportunity to the parties to adduce the documents/evidences as they may wish to file.
24. In view of the above, the appeal is allowed. The order dated 19.06.2019 and 29.07.2019 passed by the Tribunal below are set aside and the matter is remanded back to the DRT, Lucknow to adjudicate it afresh in the light of the directions given by the Hon’ble High Court in Writ Petition No. 807/2015 after affording opportunity of filing additional evidences/documents and providing right to rebuttal to the same to the parties and then to decide the issue in accordance with law.”
# 14. The above order is impugned in present writ petition at the instance of auction purchaser.
Submissions of Petitioner/Auction purchaser :-
# 15. Sri Shashi Nandan, Senior Advocate assisted by Sri G.P. Srivastava, learned counsel for petitioner/auction purchaser has submitted that :-
(i) This Court by order dated 30.11.2018 has quashed the orders dated 21.01.2015, 23.12.2014 passed by DRT and order dated 25.06.2014 to the extent of permitting withdrawal of Securitization Application No. 160 of 2010 and matter was remanded back to DRT for adjudication after hearing the parties including the petitioner/auction purchaser afresh.
(ii) On remand, DRT heard the parties on a limited issue about handing over of movable assets and held that since sale conducted in favour of auction purchaser was set aside on 08.05.2014, then there was no reason for bank to handover the movable assets to auction purchaser and that no inventory was filed in support of handing over the movable property.
(iii) This Court has not directed to adduce any new evidence. It has directed only that parties be heard afresh.
(iv) Possession of auction property was never handed over to the petitioner.
(v) Sufficient opportunity was granted to the bank, but no evidence was submitted during proceedings before DRT.
(vi) That the respondent bank on one hand has taken a stand that they have delivered possession to the petitioner company, however, on other hand they made an averment that the possession of the unit was delivered to one Sri Aash Ahmad. The respondent bank has further issued a letter on 19.07.2014 to one of the Director of the applicant company that since the plant and machinery installed at factory premises are huge so Sri Aash Mohd., who has no concerned with the petitioner company had requested for further time of 1 to 1/2 month to remove the same.
(vii) The pendrive submitted by bank before this Court cannot be relied upon.
Submissions of Bank :-
# 16. Sri Sanjai Singh, learned counsel appearing for bank has submitted that :-
(i) There are sufficient evidence with the bank that possession of land along with machinery was handed over to auction purchaser, which essential to be looked into for proper adjudication of dispute, therefore, there was no illegality in impugned order whereby matter was remanded back for consideration with libertconsidered to be a ‘possession memo’y to submit evidence.
(ii) High Court has directed the DRT to decide afresh after hearing the parties, therefore, it ought to have allowed the bank to submit evidence. In support of their submission that possession was duly handed over.
(iii) Opportunity to place evidence cannot prejudice the auction purchaser as he has been granted liberty is granted to rebut the evidence.
# 17. Heard learned counsel for parties and perused record.
# 18. Handing over possession of a auction property requires a procedure to be allowed. A possession memo duly signed by representative of bank, auction purchaser and witnesses has to be prepared. To handover possession cannot be an empty formality.
# 19. In present case, learned counsel for bank alleged that possession of plant and machinery was handed over to auction purchaser/petitioner in presence of authorized representative of auction purchaser on 12.06.2014 and it was videographed also.
# 20. A photocopy of above referred possession memo dated 12.06.2014 is annexed as Annexure SA-1 of supplementary affidavit filed by respondents No. 3 and 4. The said document is dated 12.06.2014. It is purportedly signed by authorized signatory without any name/designation as well as same has signed below word ‘received’, but it is dated 18.06.2014, though by an order dated 08.05.2014, the DRT has held that auction dated 17.02.2014 was illegal, therefore, there was no occasion for bank to handover possession.
# 21. For reference, alleged possession memo is pasted hereinafter :-
# 22. The above referred document by any legal acumen could not be considered to be a ‘possession memo’ as required by due procedure, therefore, any videography of such act would have no consequence. The bank has brought on best evidence in support of their claim that property was handed over to auction purchaser, however, as referred above, it cannot be construed to be a legal document for possession.
# 23. The above referred document is not signed by any officer of bank, bank seal is also absent. Name of authorized officer is also not disclosed. The alleged authorized representative of auction purchaser has also not disclosed his name. There is no document on record how he was appointed as authorized representative of auction purchaser as well as there are no witnesses to the process of handing over of auction property; as well as inventory has also not placed on record though it was mentioned in above referred letter that inventory was also enclosed, therefore, there is no need to remand the matter to DRT for fresh consideration after giving opportunity to parties to give evidence as the best evidence is before the Court but it could not be considered to be a legal document for handing over possession of property to auction purchaser.
# 24. Accordingly, writ petition is allowed and impugned order dated 19.10.2020 is hereby quashed.
Order Date :- March 31, 2023
---------------------------------------------
