2010 (9) TMI 1300

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....rder of the Recovery Officer dated 28.3.2007. (iii) The third is the impugned order of the DRAT whereby it accepted the appeal of the auction purchaser-respondent no.1 herein, and set aside the order dated 23.11.2007 of the DRT meaning thereby the sale of the auction property in favour of respondent no.1 was confirmed. It is this order which has been challenged by the borrower-petitioner company. 2. The facts of the case are that the respondent no.2 herein filed an Original Application (OA) No. 141/2000 for recovery of its dues inter alia against the present petitioner company. This OA was decreed and a recovery certificate No.116/2002 was issued. The subject property being plot no. G.P-38, Sector-18, Udyog Vihar, Phase-1 (E), Maruti Industrial Area, Gurgaon, Haryana. admeasuring 1923.03 sq.m was attached in execution of the recovery certificate. The property in question was put to auction on 25.1.2005 and the respondent no.1 purchased the same for Rs. 2.72 crores. Before the order of confirmation of sale could be passed, a joint compromise application was filed by the petitioner herein and the financial institution/respondent no.2 that a One Time Settlement (OTS) had b....

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....) SCC 554 and has argued that DRAT has committed a grave and manifest error in relying upon an earlier decision of 1994 of this court although reliance was placed by the petitioner herein to the decision of the Supreme Court which was a later decision of the year 1998 and in which it was held in para 23 as under:- "23. Relying on the use of the word "may" in Section 16(1) of the Act it has been contended in some High Courts that the word "may" in that section shows that the BIFR has power to reject a reference summarily without going into merits and that it is only when the BIFR takes up the reference for consideration on merits under Section 16(1) that it can be said that the "inquiry" as contemplated by the section has commenced. It is argued that if the reference before the BIFR is only at the stage of registration under Section 15, then Section 22 is not attracted. This contention, in our opinion, has no merit. In our view, when Section 16(1) says that the BIFR can conduct the inquiry "in such manner as it may deem fit", the said words are intended only to convey that a wide discretion is vested in the BIFR in regard to the procedure it may follow for conducting an inq....

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....fore it can be said that Section 22 comes into play. According to us, this logic will also apply when an appeal is pending under Section 25 before AAIFR. This is for the reason that suppose a sick company succeeds before AAIFR and it is held that the order of BIFR rejecting the reference is invalid and therefore it is directed that a sick company needs to be rehabilitated by formulating a scheme, then, in certain cases there would be futility of such remand orders because unless Section 22 applies after filing of an appeal under Section 25 it is possible that there would be scramble among the creditors to appropriate the assets, whether by getting the decrees or otherwise, of a sick company and that by the time AAIFR sends the matter back to BIFR for formulating and implementing a revival scheme, there may not be available any assets or sufficient assets for revival of the sick company on account of eventuality of Section 22 not applying during the pendency of an appeal against an order rejecting the registration of a reference by BIFR. In such scenario, if a sick company succeeds in AAIFR, the appeal would yet become infructuous because in the meanwhile all the assets of the sick ....

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....Section 22 of SICA. We may note that certain observations were made by DRAT against the financial institution that the compromise entered into by it with the borrower was not correct and was unfair and malafide. The financial institution had filed a writ petition No.9870/2009 and while reserving the judgment in this case on 27.9.2010 we had allowed the said petition of the bank by passing the following order:- "The petitioner, IFCI Limited, has filed this writ petition only aggrieved by some observations made in the impugned order adverse to the functioning of the petitioner Institution. This Court by a separate order passed in WP (C) No.8803/2009 had called upon the Chairman and Managing Director of IFCI to independently conduct an inquiry, to report as to whether the compromise accorded to the borrower was fair or not. The inquiry report has been filed in those proceedings which shows that a commercial decision was taken in the best interest of the petitioner Institution inter alia because the settlement compromised two accounts. We are of the considered view that commercial institution should be able to settle accounts with its borrower on commercial basis and ....

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....ame as under:- "We are unable to agree with the contentions of the senior counsel for the petitioner and we are of the opinion that the present petition is liable to be dismissed. The proceedings under Article 226 are discretionary and are intended to sub-serve the interest of justice. The petitioner is not admittedly the owner of the property as it is only an auction purchaser. Respondent No.2 borrower to whom the property belongs has paid the OTS amount to the respondent No.1. There is no inherent right in confirming of auction proceedings and this has been held by this court in its judgment in W.P.(C) No. 10219/2009 D. J. Enterprises Ltd. Vs. IFCI Ltd. decided on 4.5.2010. This court relied upon the two Supreme Court judgments reported as Mohan Wahi Vs. Commissioner of Income Tax, (2001) 4 SCC 362 and LICA (P) Ltd. Vs. The Official Liquidator, 1996 Company Case 788 (SC) and a Division Bench judgment of this court reported as A.K.Jain Vs. Canara Bank MANU/DE/8620/2007 that there is no inherent right to get the auction sale proceedings confirmed once there is an offer for a higher price. In the present case, there was an offer for higher price and the DRT vide th....