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2024 (10) TMI 1457
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....Act, 1956, is praying for quashing and setting aside the auction process in respect of sale of the subject property bearing No. 193/1, Village - Devali, Mehrauli, New Delhi (popularly known as 'Sainik Farm Area'). The Petitioner is also challenging the auction in which the Petitioner itself is declared as successful auction purchaser. The challenge is on the ground of alleged suppression of material facts in contravention of section 55 (1) (a) of the Transfer Of Property Act, 1882. The Petitioner is further seeking directions to the Respondent Nos. 2 and 3 / State to pay damages of Rs. 5,00,00,000/- to the Petitioner for making the Petitioner participate in the auction process. The Petitioner is further seeking refund of the entire amount of purchase price of Rs. 8,13,60,000/- paid by it alongwith interest @ 18% p.a. The Petitioner is also praying for restraining the Respondent No. 3-State from parting with or disposing of the amount paid by the Petitioner. 3. Apart from the prayers indicated above, there are certain other omnibus prayers made by the Petitioner, which are reproduced below: "a(ii) this Hon'ble Court may be pleased to direct the Respondent No.3 not to....
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....- Economic Offences Wing (EOW), the Petitioner deputed two Advocates from Delhi, who met the Competent Authority for obtaining necessary information. It is alleged that the Competent Authority assured the Advocates of the Petitioner that the attachment by ED and EOW would soon be lifted. As per the Petitioner's own case, after such assurance, the Petitioner made the payment of the last installment of Rs. 2,03,40,000/- on 15.12.2018. 6. It is further the case of the Petitioner that it was waiting for copies of certain documents in respect of the subject property, which were not supplied. It is contended that the Petitioner ultimately vide its email dated 14.01.2019 informed the Respondent No. 6 - auction agency that the Petitioner's legal adviser had advised it to withhold further process, because the attachment from the subject property was not lifted / revoked, despite repeated requests. It is further contended that this led to the Petitioner filing an Application being Misc. Application No. 1079 of 2019 in the Court of Special Judge for the MPID Act and the Prevention of Money-Laundering Act, 2002 (for short "the PMLA") at Mumbai. The Petitioner made various prayers in the sai....
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....ss caused to the Petitioner. 8. It is further contended by the Petitioner that the Petitioner thereafter sent an email requesting to provide original title deeds and formal order for removal restrain/attachment. It is contended that the Petitioner had requested the Competent Authority as well as ED and EOW to comply with the directions issued under order dated 02.11.2019, however there was no response. It is further contended that in respect of another property at Village Issapur, Tal. Najafgarh, New Delhi, this Court has directed refund of sum of Rs. 12,71,00,000/- to the Petitioner under order passed in Writ Petition No. 8791 of 2019. It is further submitted that the Petitioner is entitled to refund of purchase price amount in the present case also. 9. The Competent Authority / Deputy Collector (Respondent No. 3) has filed an Affidavit-in-Reply affirmed on 16.10.2020 opposing the Petition. It is inter alia contended that this petition is not maintainable because the Petitioner has efficacious remedy of filing an Appeal u/s. 11 of the MPID Act. It is contended that the Petitioner had already approached the designated MPID Court by filing Misc. Application No. 1079 of 2019 an....
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....ded that subsequently EOW, Mumbai filed another Application no. 61/2018 in the designated MPID Court for making attachment of the remaining properties absolute, which was also allowed vide order dated 04.07.2018. Based on this order, the Competent Authority has further requested ED for handing over the original documents. It is contended that after getting valuation done through the appointed agency, auction notice was published on 26.09.2018 for auction of 16 properties, including the subject property. 11. It is further contended that there is sufficient disclaimer in the auction notice, which had put the Petitioner to sufficient notice about the circumstances in which auction is conducted and precaution that the Petitioner was expected to exercise. It is contended that the Petitioner has voluntarily participated in the bidding process and has emerged successful bidder, having given the highest bid. It is specifically contended that the Petitioner has paid the installments even after coming to know about the attachment over the subject property and therefore now, the Petitioner is estopped from seeking refund of purchase price already paid. The contentions / allegations of the ....
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.... Sur-rejoinder affirmed on 05/11/2020 contending inter alia that unlike PMLA, where u/s. 9, vesting of property in the Central Government is free from all encumbrances, the attachment under MPID is not free from all encumbrances and that is the reason why the bid documents clearly mention that the property is being auctioned on "as is where is and whatever there is basis" and it is for the auction purchaser to carry out due diligence. It is further contended that since the attachment of subject property is already lifted by the Designated Court and if the Respondent No. 4-ED does not comply with the orders of the Designated Court, the Petitioner can approach the Designated Court for appropriate remedy. It is again contended that despite the Petitioner's Advocates visiting office of the Competent Authority and despite discussion in the matter, the Petitioner has chosen to voluntarily continue to participate in the Auction and pay the full amount. It is further contended that the circumstances of present case and the circumstances in other WP/8791/2019 were different. 15. The Respondent No. 3-Competent Authority filed further additional affidavit, affirmed on 06.01.2021 contending....
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.... (b) Haryana Financial Corporation vs. Rajesh Gupta (2010) 1 SCC 655. (c) Chemstar Chemicals vs. State Bank of Mysore 2010 (6) CTC 635. (d) Celir LLP vs Bafna Motors 2023 SCC OnLine SC 1209. (e) Medineutrina Pvt. Ltd. vs. District Industries Centre 2021 SCC OnLine Bom 222. 19. He further submitted that u/s. 55 (1) (a) of the Transfer of Properties Act, the seller (Respondent No. 3-Competent Authority) is bound to disclose any material defect in the property or in the seller's title of which the seller is aware but buyer is not. He further submitted that seller is bound to produce to the buyer, on his request for examination, all the documents of title related to the property in the seller's possession or power. He submitted that the auction conducted by the Respondent - Authority of the subject property is contrary to the said provisions of law, as the Petitioner is still not having title documents. 20. Per contra, Ms. Chavan, the learned Addl. GP appearing for the Respondent / State has submitted that in all these judgments relied upon by the Petitioner, the auction notice proceeds on 'as is where is and whatever there is' basis, however in t....
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....to verify with the sub- registrar's office as well as obtain and analyse the revenue records with respect to the Properties and to satisfy themselves regarding the existence, title, nature, description, condition, existing encumbrances, liens, charges, statutory dues, etc., over the Properties before - submitting their bids (c) The Bidders may inspect and verify the scanned copies of the title deeds relating to the property as are available with the Seller on the e- auction Portal upon completion of registration. (d) The Agency/ the Seller shall not be responsible for rendering any assistance to the Bidder in connection with its independent inspection of the Properties. (e) Bidders are bound by the principle of Caveat Emptor (buyer bewares). (f) Bidders are requested to submit their bids only after conducting their own independent due diligence exercise with respect to the title to the properties." 22. She submitted that from the above clauses it is clear that bidders were specifically and sufficiently cautioned about the circumstances and the situation of the property in which the auction was conducted and the disclaimer expects the parti....
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.... Area in New Delhi which is a well known locality and the Petitioner has participated in auction and purchased the subject property with open eyes and therefore the Petitioner does not deserve any indulgence under the extra-ordinary writ jurisdiction of this Court, in facts and circumstances of the case. She has finally submitted that since the ED has not challenged the order of designated MPID Court which lifted the attachment, nothing further is required and in view of the statutory vesting of the property in the competent authority and lifting of attachment of the ED, nothing further is required under law for the Petitioner to enjoy the subject property. She, therefore, prayed for dismissal of the Petition. She has relied upon following the judgment of Division Bench of this Court in the case of State of Maharashtra Vs Anil Kohli (2020 SCC OnLine Bom 2674), in support of her case. REASONS AND CONCLUSIONS. 26. At the outset, it is apposite to consider certain provisions of the MPID Act, which have material bearing on the case of at hand. They are reproduced below. 4. Attachment of properties on default of return of deposits (1) Notwithstanding anything con....
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...., appoint any of its officers not below the rank of the deputy Collector, as the Competent Authority, to exercise control over the monies and the properties attached by the Government under section 4 of a Financial Establishment. (2) The Competent Authority shall have such other powers as may be necessary for carrying out the purposes of this Act. (3) The Competent Authority shall, within thirty days from the date of the publication of the said order, apply to the Designated Court, accompanied by one or more affidavits stating the grounds on which the Government has issued the said order under section 4 and the amount of money or other property believed to have been acquired out of the deposits and the details, if any, of persons in whose name such property is believed to have been invested or acquired or any other property attached under section 4, for such further orders as found necessary. 6. Designated Court (1) For the purposes of this Act, the Government may, with the concurrence of the chief Justice of the Bombay High Court by notification in the Official Gazette, constitute one or more Designated Court in the cadre of a District and Sessi....
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....(5) If cause is shown or any objection is made as aforesaid, the Designated Court shall proceed to investigate the same and in so doing. as regards the examination of the parties and in all other respects, the Designated Court shall, subject to the provisions of this Act, follow the summary procedure as contemplated under Order 37 of the Civil Procedure Code, 1908 and exercise all the powers of a court in hearing a suit under the said code any person making an objection shall be required to adduce evidence to show that on the date of the attachment he had some interest in the property attached. (6) After investigation under sub-section (5), the Designated Court shall pass on an order either making the order of attachment passed under sub-section (1) of section 4 absolute or varying it by releasing a portion of the property from attachment or cancelling the order of attachment: Provided that the Designated Court shall not release from attachment any interest, which it is satisfied that the financial Establishment or the person referred to in sub-section (1) has in the property, unless it is also satisfied that there will remain under attachment an amount or propert....
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....order from the Designated Court. 29. Perusal of the Section 5 shows that the Government is competent to appoint any of its officers (not below the rank of the deputy Collector) as the Competent Authority to exercise control over the monies and the properties attached u/s. 4 and such competent authority shall have such powers as may be necessary for carrying out the purposes of this Act. 30. In the present case, Respondent No. 3 is duly constituted Competent Authority and it has exercised power u/s. 5(3) by applying to the designated Court and subject property was attached. The Designated Court u/s. 6 of the MPID Act has passed an order after investigation, to release the subject property from attachment u/s. 7(6) of the MPID Act. 31. It is therefore clear that the subject property was first vested in the Competent Authority by operation of law and thereafter sold through the auction under process of law and the attachment of ED has been lifted by the Designated Court u/s. 7(6) of the MPID Act. 32. Once the subject property vests in the Competent Authority by operation of law and the same was sold by following due process of law and once the attachment of the property is....
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....or due repayment of any financial assistance. (ze) "secured debt" means a debt which is secured by any security interest; (zf) "security interest" means right, title or interest of any kind, other than those specified in section 31, upon property created in favour of any secured creditor and includes- (i) any mortgage, charge, hypothecation, assignment or any right, title or interest of any kind, on tangible asset, retained by the secured creditor as an owner of the property, given on hire or financial lease or conditional sale or under any other contract which secures the obligation to pay any unpaid portion of the purchase price of the asset or an obligation incurred or credit provided to enable the borrower to acquire the tangible asset; or (ii) such right, title or interest in any intangible asset or assignment or licence of such intangible asset which secures the obligation to pay any unpaid portion of the purchase price of the intangible asset or the obligation incurred or any credit provided to enable the borrower to acquire the intangible asset or licence of intangible asset" [Emphasis supplied] 35. It is therefore clear that the en....
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....he Petitioner, because there is cardinal difference between the legal consideration. The judgments relied upon by the Petitioners, therefore, being those dealing with sale of the secured assets under the provisions of SARFAESI Act, RD & B Act (under Debt Recovery Laws), are clearly not comparable. 39. We say so for the simple reason that the present sale is by the Competent Authority appointed under the MPID Act who is not a 'secured creditor' as provided or contemplated under Debt Recovery Laws. The properties which are secured assets, being held by the secured creditor such as banks and financial institutions are held under contract of mortgage or documents of other contractual obligations (e.g. charge, hypothecation, assignment etc.) between the borrower and guarantors and financial institutions. These properties are not tainted properties such as the properties which are attached under statutes such as MPID Act and PMLA. The properties such as the subject property in the present case are attached because there is investigation about public money being embezzled, which in the present case, stems from the complaints from the depositors. 40. Since the Government is satisfied....
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....were clear to advise of caution to verify with the sub-registrar office as well as revenue records with respect of the property under auction to satisfy themselves regarding title, nature, description, condition, existing encumbrances, liens, charges, statutory dues, etc. over the subject property. Bidders could even inspect and verify scanned copies of the title deeds relating to the property, which were available on the e-auction Portal. 43. These specific terms and conditions couched in the clauses 2.2 and 2.3 about caution and inspection, are much more and beyond the simple principle, 'buyer beware' and formed a contrary contract between the Petitioner and the competent authority. 44. Perusal of Section 55 of the Transfer of Properties Act clearly shows that the rights and liabilities of the buyer and seller provided thereunder, which binds the seller to disclose the buyer any material defects in the property or in the seller's title, is in the absence of contract to the contrary. 45. Clauses 2.2 and 2.3 of the terms and conditions of the e-auction (already reproduced above), would clearly show that there was a contract to the contrary and the participants / proposed p....
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....ested. It is not necessary for us to enter into or comment upon the reasons why the Respondent - State, in that case, had shown readiness and willingness to refund the principal amount. Suffice it to say that in the present case, the Respondent - State is opposing the refund of purchase price alongwith interest and we find that reasons stated for such opposition are both justifiable and sustainable, for reasons narrated above and in the facts and circumstances of the this case. 51. Before parting, we note that interestingly, learned counsel for the Petitioner has tried to canvass before us the principle of 'caveat venditor i.e. the seller beware' relying on the judgment of Delhi High Court in Kalyani (India) Private Limited vs. Punjab National Bank & Ors. (supra). So far as this judgment is concerned, we must note that it was a case arising out of SARFAESI Act. Also, in paragraph nos. 40 & 41 thereof, the learned Single Judge of Delhi High Court held that 'as is where is' clause is not a clause of blanket application and the meaning to be placed on such clause must result in a just and equitable outcome. The learned Single Judge of Delhi High Court has observed that there is nee....