TaxTMI 
TaxTMI 
2012 (8) TMI 1098
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....e of this writ petition. Background Facts: 2. M/s. Spark Chemicals and Pharmaceuticals Private Limited owned by Thiru S. Sundar, husband of the petitioner's sister availed financial assistance from Indian Bank, Hyderabad. The sister of the petitioner appears to have mortgaged her limited right in the property bearing Door No.7, M.G. Ramachandran Road, Kalashetra Colony, Besant Nagar, Chennai-90 in favour of the Bank. The Bank later initiated proceedings in O.A.No.1044 of 1999 before the Debts Recovery Tribunal (hereinafter referred to as "DRT") against the borrower and guarantor. The Original Application was allowed on 27 November 2008. Thereafter, the Bank initiated recovery proceedings by issuing notice under Section 13(2) followed by a notice under Section 13(4) of the SARFAESI Act. The subject property was owned by Mrs.Rajalakshmi, mother of the petitioner and she was also in possession. She challenged the proceedings initiated by the Bank before the DRT in S.A.No.345 of 2008. The appeal was dismissed on 18 October 2010. 3. The order dated 18 October 2010 was challenged before the Debts Recovery Appellate Tribunal (hereinafter referred to as "DRAT"), Chennai in AIR....
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....ef Metropolitan Magistraqte. Defense: 7. The Authorised Officer has filed a counter affidavit on 14 June 2012 in answer to the contentions raised by the petitioner. The Authorised Officer contended that the auction was conducted on 7 January 2011 and thereafter sale certificate was issued to the auction purchaser. The possession of the property was also given to the auction purchaser and as such, nothing survives in the writ petition. Production of file: 8. When the writ petition came up for hearing on 9 July 2012, the learned Counsel for the petitioner contended that the Authorised Officer has not given the details regarding the name and address of the successful bidder, the amount fetched in the auction and other relevant particulars. The learned counsel further contended that the Authorised Officer by suppressing the material particulars obtained an order from the learned Chief Metropolitan Magistrate and that too in the name of a dead person and as such the order is liable to be quashed. 9. When it was found that the Authorised Officer filed an evasive reply, we directed him to produce the Auction file on 16 July 2012. The Authorised Officer instead of producing ....
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....s on 7.1.2011 at 12.30 p.m. (ii) Total number of bidders along with names and addresses :- There were totally (5) five bidders :- The said bidders' details are as follows : 1.R. Ravi Kumar New No.25, Old No.13, Solai Aman Koil Street, Chennai 600 007. 2.R.Jayaraj 882/6, M.T.H. Road, Padi, Chennai 600 050. 3.Mrs.Varalakshmi, W/o B.Kumar No.24/69, Nehru Street, Kanagam, Chennai 600113. 4.S.Kanan Tender submitted without any details (disqualified). 5.B.Subramani 20/62, North Mada Street, Padi, Chennai 600 050. (iii) Name and addresses of successful bidder :- B.Subramani -20/62, North Mada Street, Padi, Chennai 600 050. (iv) Amount Quoted by the successful bidder :- Amount quoted in the tender document was Rs. 1,12,00,000/- Amount finally quoted in the inter se bidding / open auction is Rs. 1,15,00,000/- (One crore fifteen lakhs only) (v) Date of confirmation of sale :- On 07.01.2011 the said B.Subramani 20/62, North Mada Street, Padi, Chennai 600 050, had issued a letter dated 07.01.2011, to confirm/ convey the sale in the name of CA S.....
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....l possession of the subject premises was received from the Advocate Commissioner on 14.04.2012 and the same was handed over to the Auction purchaser viz., Mrs.V.Padmavathy, aged about 63 years W/o Thiru.R.Vadivelu, Old No.5, New No.7, Ganesh Nagar, Anna Nagar, Cuddalore 607 001 on 12.06.2012 under the Sale Certificate and the same was acknowledged." 15. The learned Chief Metropolitan Magistrate was made to believe that the subject property was sold in favour of Thiru. S. Manisekaran and he should be given vacant possession of the property. The learned Chief Metropolitan Magistrate having found from the petition in Crl.M.P.No.821 of 2012 that the property has already been sold in favour of Thiru Manisekaran issued an order appointing an Advocate Commissioner to take possession of the property. 16. Since the Authorised Officer obtained an order from the Magistrate suppressing the material facts, including the basic fact that Thiru Manisekaran never participated in the auction process, we consider it necessary to analyse the entire background facts of this case. 17. The Bank issued a notification on 7 January 2011 proposing to sell the subject property by way of public auctio....
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....so called auciton purchaser was not prepared to deposit the balance amount in spite of the ultimatum given by the Bank. The amount was deposited only on 11 June 2012 and it was readily accepted by the Authorised Officer not withstanding the mandatory condition that the amount should be deposited within fifteen days of confirmation. 20. The auction notification issued by the Bank does not contain any provision permitting the successful bidder to nominate a person to take the property after paying the balance amount. Similarly, there was no provision giving discretion to the Authorised Officer to extend the time for deposit of 75% of the bid amount. 21. There were only five bidders including Thiru B.Subramani. Thiru S. Manisekaran was not at all in the picture. The bid submitted by Thiru B.Subramani was found to be the highest and therefore Thiru B.Subramani was declared as the highest bidder. The Authorised Officer received 25% of the earnest money from him. It was only thereafter and that too during the currency of the order of stay, the Authorised Officer received a letter from Thiru B.Subramani and issued the letter of confirmation in the name of Thiru S.Manisekaran. 22.....
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.... 27. The sale in question was confirmed in favour of Thiru.S.Manisekaran not withstanding the fact that he was not a bidder. As per the terms of auction and the order of confirmation, Thiru S.Manisekaran was bound to pay 75% of the amount on or before 22 January 2011. The Authorised Officer very clearly stated in the letter of confirmation that in case the balance bid amount of 75% is not deposited on or before 22 January 2011, 25% of the bid amount already deposited will be forfeited without further notice. Therefore, it is clear that the Authorised Officer has not reserved any right to extend the time limit for deposit of balance 75% of the bid amount. Even though the order of confirmation was given in favour of Thiru S.Manisekaran on 7 January 2011 and he was directed to pay the balance amount by 22 January 2011, the fact remains that the amount was deposited only on 11 June 2012 and that too after identifying a person to purchase the property. 28. It is therefore, evident that 75% of the bid amount expected to be paid on or before 22 January 2011 was paid after a period of about one year and five months, in utter violation of the provisions of SARFAESI Act and the Security....
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....s the undue interest shown by the Authorised Officer. 32. The Authorised Officer assisted Thiru S.Manisekaran and Mrs. V.Padmavathy to conduct a profitable real estate business at the cost of Bank and the State Because of the illegal action of the Authorised Officer permitting transfer of sale confirmation and ultimately issuing the Sale Certificate in favour of a total stranger, who never participated in the auction process, the Registration Department of the State of Tamil Nadu was deprived of the stamp duty payable on the sale transaction. We are not in a position to believe that the Authorised Officer had acted in a bona fide manner to protect the interest of the Bank. 33. The Authorised Officer was restrained from confirming the bid and that was the text of the order passed on 7 January 2011 in the presence of the learned Counsel for the Bank. The Authorised Officer now says that he was informed of the restraint order only at 1.25 p.m. It is therefore clear that at least from 1.25 p.m. on 7January 2011 he had the knowledge of the direction given by this Court. Therefore, in all fairness, he should have maintained the status quo thereafter. However, very strangely in spit....
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....stranger to the auction proceedings. While considering the correctness of the order passed by the Chief Metropolitan Magistrate in the present case, these basic facts must necessarily be taken note of. 39. The application submitted by the Authorised Officer before the Chief Metropolitan Magistrate in Crl.M.P.No.821 of 2012 does not contain any details with regard to the earlier proceedings. Even though the earlier order passed by the Magistrate under Section 14 of the SARFAESI Act was set aside primarily on the ground that the deceased person was shown as a party in possession of the property, the fact remains that the subsequent application in Crl.M.P.No.821 of 2012 was also filed against a dead person. 40. The property was sold on 7 January 2011 presumably for the distress value prevailing as on that date. The major part of the consideration for sale was received by the Bank only on 11 June 2012. By that time, one year and five months have passed and naturally the property value would have been increased. Even after appropriating the sale consideration, still there is balance payable to the Bank. Therefore it is evident that the interest of the Bank was not safeguarded by t....
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....ks are projecting a case of artificial urgency and need to invoke Section 14 of the SARFAESI Act, without taking independent action to take possession. 44. The Magistrate must be satisfied that the intervention of the Court is necessary to take possession of the property, meaning thereby, the Bank should ordinarily make an attempt to take physical possession, without the intervention of Court. The question of giving direction to the police to give assistance to execute the warrant and to break open the lock etc., would arise only in case the Commissioner is not in a position to take possession. There were instances where the Advocate Commissioner with the assistance of police locked the premises without even allowing the inmates to take the cooked food or uniforms and books of school going children. Therefore, in normal circumstances, it is not necessary to order police protection and permission to break open the lock and similar other drastic steps at the first instance. It is always open to the Magistrate to issue suitable directions to execute the order under Section 14 depending upon the report filed by the Advocate Commissioner after the initial inspection. 45. The Autho....
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....y be available under Section 151 CPC, as available to us in such a case, but it is bound to be exercised in that manner in the interest of justice and public interest. 39. As rightly observed by the Full Bench of the Madras High Court in Century Flour Mills Ltd. that as a matter of judicial policy the court should guard against itself being stultified in circumstances like this by holding that it is powerless to undo a wrong done in disobedience of the Court's orders." Invalid Sale: 47. In the case on hand, the Authorised Officer conducted the auction proceedings and later issued an order of confirmation, in total violation of the order passed by this Court. As observed by the Supreme Court in All Bengal Excise Licensees' Association, it is the duty of the Court to set the wrong right and not allow the perpetration of the wrong doing. We, therefore, by following the Full Bench judgment of this Court in Century Flour Mills v. S. Suppiah (AIR 1975 Madras 217) and the judgment of the Supreme Court in All Bengal Excise Licensees' Association (2007(1) SCC 374), cancel the auction held on 7 January 2011. 48. Since the Authorised Officer of the Bank violated the ma....