Admittedly, the facts noticed hereinabove were not
disclosed to the intending bidders in the E-auction notice
dated 01.03.2016. A bidder would not intend to buy litigation with the
property, which may ensue between the Bank and the Housing Board.
The petitioner has specifically pleaded that on 24.04.2016 he filed an
application for providing a copy of NOC/permission, if any, granted by
the Housing Board for sale of the property in question. The averments
in paragraph no. 18 of the writ petition has been reiterated in
paragraph no. 5(o) of the memorandum of the instant appeal, however,
this assertion has not been controverted by the respondent-Bank. The
Bank has taken a position that there was no pleading in the writ
petition to the effect that while preparing for deposit of the balance bid
amount the petitioner came to know about the aforesaid illegality,
however, in view of the pleadings in the writ petition, particularly in
paragraph no. 18, the defects in the sale notice cannot be ignored.
There is no warrant of the proposition that illegality which would go to
the root of the auction sale must have been discovered by an auction
purchaser during the auction sale and a fact which would vitiate the
auction sale, if discovered subsequently, cannot be taken note of.
Knowledge to the petitioner about nature of the property put on auction
sale, even after the concluded sale, can be looked into to examine the
legality of the sale notice and the auction sale. The fact that the sale
notice was issued on “as is where is basis”, “as it is where it is
basis” and “whatever there is basis”, would not attach legality to the
auction sale inasmuch as, knowledge of the defect in property cannot
be imputed to an intending purchaser. Such covenants cannot
overcome the fatal defect in auction notice and the auction conducted
by suppressing vital informations must be held illegal.
16. The Bank was under a duty to disclose all relevant
facts including, the fact that the property put on auction sale was a
lease-hold property and it belongs to the Housing Board. This is a
basic requirement of fair play in action and more so, in case of a Public
Sector Bank. The auction sale which proceeded on a
misrepresentation to the intending bidders is definitely illegal and is
liable to be quashed. The terms and conditions of an illegal auction
sale cannot be enforced by the respondent-Bank, and accordingly
Clause-13 of E-auction notice which provides forfeiture of the amount
deposited by successful bidder in the event of failure to deposit the bid
amount within the stipulated time cannot be resorted to by the
respondent-Bank to forfeit EMD and 25% of the bid amount deposited
by the appellant. Dismissal of the writ petition on the ground that the
appellant-writ petitioner himself invoked jurisdiction of this Court
seeking a direction upon the Bank to confirm the sale and issue Sale
Certificate, is not justified. The writ petition was decided without
affording an opportunity to the Housing Board to file its response, as is
apparent from the proceeding in W.P.(C) No.2181 of 2016, which was10.
disposed of on the very first day of hearing. In view of the objection
raised by the Housing Board to the auction sale of its property, the
direction issued by the Writ Court to the respondent Bank to take steps
for execution of lease in the name of the appellant is also rendered
erroneous. Considering the aforesaid facts, we are of the opinion that
the impugned order dated 26.04.2016 passed in W.P.(C) No.2181 of
2016 suffers from serious error in law.
IN THE HIGH COURT OF JHARKHAND AT RANCHI
L.P.A. No. 220 of 2016
Kumar Rohit,
V
Allahabad Bank,
CORAM: MR. JUSTICE VIRENDER SINGH, CHIEF JUSTICE
MR. JUSTICE SHREE CHANDRASHEKHAR
Dated:26th July, 2016.
Citation: AIR 2017 Jharkh 65
Per Shree Chandrashekhar, J.:
1. After having failed in his attempt before the Writ Court,
seeking refund of Rs.31,25,000/- the appellant-writ petitioner has
approached this Court in the instant Letters Patent Appeal.
2. Heard.
3. Mr. V.P. Singh, the learned Senior counsel for the appellant
referring to E-auction notice dated 01.03.2016 for sale of the residential
property MIG-D-120 at Harmu Housing Colony, contends that the
respondent- Allahabad Bank made a representation to the public at large
which was patently false and thereby the appellant was misled. E-auction
held pursuant to notice dated 01.03.2016 was illegal and therefore, the bid
amount deposited by the appellant must be refunded by the
respondent-Bank. It is further contended that after the respondent-Bank
fully recovered the secured debt from the borrower, forfeiture of
Rs.31,25,000/- by the Bank on the ground that the appellant-successful2.
bidder has failed to deposit the balance 75% bid amount by the stipulated
date, would nothing but, be unjust enrichment.
4. Per contra, Mr. P.A.S. Pati, the learned counsel for the
respondent-Allahabad Bank, referring to the terms and conditions of
E-auction notice dated 01.03.2016, submits that once the appellant
participated in E-auction and he was declared successful bidder, he is
bound under the terms and conditions of E-auction. It is contended that
E-auction dated 07.04.2016 ultimately failed on account of failure of the
appellant to deposit the balance 75% of the bid amount, and in
consequence thereof, in terms of the conditions of E-auction, 25% of the bid
amount deposited by the appellant has to be forfeited. Refuting the
allegation of misrepresentation and fraud by the Bank, the learned counsel
submits that the property under auction could have been inspected by the
intending bidders, who upon inspection of the property could have decided
to participate or not to participate in E-auction.
5. Dr. Ashok Kumar Singh, the learned counsel appearing for
the respondent -Housing Board, opposing E-auction of the lease-hold
property which belongs to Jharkhand Housing Board contends that without
seeking prior approval of the Housing Board and consenting to the terms
and conditions, if any, of the Housing Board, the property under E-auction
could not have been put on sale.
6. Briefly stated, E-auction notice dated 01.03.2016 was issued
for “sale of immovable property mortgaged to Bank under Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002”, which comprised land and building constructed over MIG-D-120,
Harmu Housing Colony, Argora, Ranchi, acquired by one Bijay Kumar
Pandey. The property was put on auction-sale on “as is where is basis”,
“as it is where it is basis” and “whatever there is basis”, for realization3.
of Bank's dues with interest. The secured debt amounted to Rs.53,50,374/-
which was to be realized along with interest, costs, charges and expenses.
The date of auction was fixed on 07.04.2016. The appellant deposited the
Earnest Money Deposit (EMD) of Rs.7,00,000/- through Demand Draft on
30.03.2016 and he was declared successful bidder in the bid held on
07.04.2016. The respondent-Bank informed the appellant on 08.04.2016
that he has been declared highest bidder, and required him to deposit 25%
of the bid amount. The appellant deposited Rs.24,25,000/- on 08.04.2016
which was 25% of the bid amount after deducting Rs.7,00,000/- which was
deposited by him as EMD. Thereafter, vide letter dated 20.04.2016 the
authorized officer-respondent no.2 directed the appellant to pay the balance
bid amount. In the meantime, the appellant approached this Court in
W.P.(C) No.2075 of 2016 for quashing of letter dated 20.04.2016. The writ
petition was disposed of on 22.04.2016 granting liberty to the appellant to
deposit the balance amount by 27.04.2016. The respondent-Bank was
directed to issue the “Sale Certificate” after receiving the balance bid
amount. It is pleaded by the appellant that he came to know that the
secured asset is a lease-hold property and the borrower is not the absolute
owner of the plot bearing No. MIG-D-120, Harmu Housing Colony, Ranchi.
The appellant, thereafter, approached respondent no.2 on 24.04.2016 for
providing a copy of NOC/Permission, if any, granted by Jharkhand Housing
Board for sale of the aforesaid property, however, the authorized
officer-respondent no.2 did not respond to his application. Pleading
misrepresentation and contending that the E-auction notice was illegal, the
appellant approached the Writ Court with the following prayers :
A. A writ of certiorari or in nature thereof for
Quashing/Cancelling the Sale Notice/E-Auction Notice issued
by the Allahabad Bank regarding Auction sale of the property4.
situated at MIG-D-120 Harmu Housing Colony, Ranchi vide
Ref- AB/HCB/SARFAESI/SALENOTICE/2015-16/2910 dated
01-03-2016 and also the E-auction held on 07-04-2016 as
this property is a leasehold property and the bank can't
Auction/Sale/transfer the property without taking 'No
Objection Certificate' from Jharkhand Housing Board, Harmu,
Ranchi.
B. A writ of Mandamus or in nature thereof for
commanding upon the respondents to refund the
Rs.31,25,000=00 (Thirty one Lacs twenty five thousand only)
25% of the bid amount deposited by the petitioner with
interest of 12% per annum.
C. A writ of Mandamus or in nature thereof for
commanding upon the respondents to pay cost of litigation
and also compensation for the harassment suffered by the
petitioner, due to the misrepresentation of the respondents.
D. A writ of Mandamus or in nature thereof for
commanding upon the respondents not to take any coercive
action against the petitioner till final adjudication of the
present writ application.”
7. The writ petition was dismissed on the ground that after
availing indulgence of the Court for depositing balance 75% of the bid
amount, now he would not be allowed to question E-auction for sale of the
aforesaid property.
8. In the present proceeding, the respondent-Bank has filed
counter-affidavit denying the allegation of misrepresentation referring to
Clause-14 of the terms and conditions appended to E-auction notice
dated 01.03.2016. It is asserted that the Housing Board granted5.
“No Objection” to the borrower to avail loan for construction of the house
over the land leased by the Housing Board and the respondent-Bank vide
letter 03.03.2016 duly informed the Estate Officer of the Housing Board
about E-auction of the secured assets.
9. The respondent Housing Board has pleaded that the lessee was
never granted permission by the Housing Board to mortgage the land in
question with the respondent-Allahabad Bank. Moreover, the lessee who
had only lease-hold rights for the balance unutilized period out of 90 years
and not the absolute right, title and interest over the land, could have, at
best, mortgaged his lease-hold rights with prior permission of the Housing
Board. The Housing Board has disputed the right of the Allahabad-Bank to
alienate or to transfer the land in question to any person without permission
of the Housing Board.
10. From the pleadings of the parties, it appears that there is no
dispute that the plot bearing no. MIG-D-120 at Harmu Housing Colony is a
lease-hold property. The said property was originally allotted to Manoj Bihari
Sinha on lease-hold basis for a period of 90 years on 19.08.1982.
Subsequently, a Deed of Tripartite Lease was executed for transferring the
lease-hold rights in plot no. MIG-D-120 in favour of Bijay Kumar Pandey, of
which Jharkhand State Housing Board is a party. Clause-11 of the Tripartite
Lease Agreement provided that “the second party shall not transfer, assign
or otherwise part with the possession of whole or any part of the premises
with the previous permission of the first party in writing which the first party
shall be entitled to refuse in its sole discretion or in the event of consent
being given may impose such terms and conditions as it thinks fit”. Eauction
notice dated 01.03.2016 makes it abundantly clear that it was a
“sale notice for sale of the secured assets”. The relevant portions of the
auction notice dated 01.03.2016 are extracted below: 6.
SALE NOTICE/EAUCTION
Sale of immovable property/ies mortgaged to Bank under
Securitization and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002(No.54 of 2002)
Ref.AB/HCB/SARFAESI/SALENOTICE/2015-16/2910 Dated 01.03.2016
Whereas, the Authorized Officer of Allahabad Bank, Harmu Colony Branch,
Ranchi had taken symbolic possession of the following property/ies pursuant to the
notice issued under Sec.13(2) of the Securitization and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002 in the following loan account
with right to sell the same on “As is where is basis”, “as it is where it is basis” and
“whatever there is” for realization of Bank's dues plus interest as detailed
hereunder and whereas consequent upon failure to repay the dues., the
undersigned in exercise of power conferred under Section 13(4) of the said Act
proposes to realize the Bank's dues by sale of the said property/ies. The Sale will
be done by the undersigned through e-auction platform provided at the website
https:allahabadbank auctiontiger.net
Name of the Borrower
Account/Mortgagor/Gaurantors
Details of Properties Date of Demand
Notice
Date of Possession
Reserve Price
EMD
Bid Increment
Price
Name of Account:
M/S SAFARI RESIDENTIA MIGD
120, HARMU HOUSING COLONY,
RANCHI
Borrower/ Mortgagor/
Guarantors:
2.Sri Bijay Kumar Pandey (ProM/S
Safari Residentia) MIGD120,
Harmu Housing Colony, Ranchi.
3.Sri Sanjay Kumar Singh S/O Sri
Jairam Singh
Q No.356A, Road No—05, Ashok
Nagar, Ranchi
4.Sri Rishi Prakash Mishra
C/6, Central Ashok Nagar, Ranchi
5.Sri Bachesh Kumar 189, Bari Co
Operative C, Bokaro Steel City,
Bokaro.
6.Sri Sandeep Sharma R/O Taj
Mahal Club Road, Ranchi
All that part an parcel
of Land & Building
Constructed over MIGD120,
Harmu Housing
Colony, P.S.Argora,
Area2250 sq.ft. DistRanchi,
Jharkhand
acquired Vide sale Deed
No.13242 dated
02.09.2005 in the name
of Bijay Kumar Pandey
Bounded: On the North
by :MIG Plot
No.D121
On the South by :MIG
Plot No.D119 On the
East by : MIG Plot No.
D131,
ON the West by :
40'wide Road
Amount of
Secured
Debt 21.02.2014
10.02.2015
Rs.70,00,000.00
Rs. 7,00,000.00
Present dues
Rs.53,50,374.00
plus interest till
the date of
realization and
costs, charges and
expenses
Rs.10,000.00
11. The contention of the respondent-Bank based on Clause-20
that the intending bidder could have inspected the property and once he has
participated in E-auction with his eyes and ears open there was no
misrepresentation in E-auction notice, is liable to be rejected. Clause-20
reads, as under :
“20. For inspection of the property/ies, the intending
bidders may contact Allahabad Bank, Harmu Colony Branch, Harmu,
Ranchi -834002 during office hours between 07.03.2016 to
30.03.2016 between 11.00 am to 3.00 pm (except Holidays).”7.
12. The aforesaid clause does not disclose that the
“property papers” were open for inspection. Physical inspection of the
property, obviously, cannot disclose the nature of the right of the
occupier, who is the borrower in the instant case. The recitals of the
E-auction notice dated 01.03.2016 gives an impression as if the
secured asset intended for sale is the absolute property of the
borrower inasmuch as, the sale notice dated 01.03.2016 mentions that
the aforesaid property was acquired by Bijay Kumar Pandey vide,
“Sale Deed No.13242 dated 02.09.2015”. Besides the element of
misrepresentation in the auction-notice, it suffers from suppression of
material informations.
13. The learned counsel for the respondent-Bank
contended that under the SARFAESI Act, 2002 the authorized officer is
empowered to sell the secured asset, which is the property in question
and therefore, even if it was a lease-hold property, the same can
legally be put on sale for realizing Bank's dues. The learned counsel
referring to letter dated 07.05.2016 written by respondent no.2 to the
Estate Officer, Jharkhand State Housing Board, submits that an
intimation of the second auction was given to the Housing Board, to
which the Housing Board has not raised any objection.
14. This contention does not merit acceptance. A property
which belongs to the Housing Board, in respect of which a lease has
been executed in favour of the allottee, cannot be sold by the
respondent-Bank to realize dues from the borrower who is the lessee
in the instant case. Clause-14 of the Tripartite Lease Agreement
provides that the Housing Board has right to cancel the allotment in
favour of the lessee and to evict him from the property for breach of
the terms and conditions of the agreement. Letters dated 03.03.20168.
and 07.05.2016 written by the respondent-Bank to the Housing Board
are mere communications by the Bank. The response of the Housing
Board contained in letter dated 13.07.2016 in response to letter of the
respondent-Bank dated 07.04.2016 discloses that the Board has
asserted first charge over the property and transfer of lease is subject
to deposit of 50% of the sale price. Admittedly, the letters dated
07.05.2016 and 13.07.2016 are post-auction communications.
Moreover, the respondent-Bank has not pleaded that it has accepted
the conditions disclosed in letter dated 13.07.2016 by the Housing
Board.
15. Admittedly, the facts noticed hereinabove were not
disclosed to the intending bidders in the E-auction notice
dated 01.03.2016. A bidder would not intend to buy litigation with the
property, which may ensue between the Bank and the Housing Board.
The petitioner has specifically pleaded that on 24.04.2016 he filed an
application for providing a copy of NOC/permission, if any, granted by
the Housing Board for sale of the property in question. The averments
in paragraph no. 18 of the writ petition has been reiterated in
paragraph no. 5(o) of the memorandum of the instant appeal, however,
this assertion has not been controverted by the respondent-Bank. The
Bank has taken a position that there was no pleading in the writ
petition to the effect that while preparing for deposit of the balance bid
amount the petitioner came to know about the aforesaid illegality,
however, in view of the pleadings in the writ petition, particularly in
paragraph no. 18, the defects in the sale notice cannot be ignored.
There is no warrant of the proposition that illegality which would go to
the root of the auction sale must have been discovered by an auction
purchaser during the auction sale and a fact which would vitiate the
auction sale, if discovered subsequently, cannot be taken note of.
Knowledge to the petitioner about nature of the property put on auction
sale, even after the concluded sale, can be looked into to examine the
legality of the sale notice and the auction sale. The fact that the sale
notice was issued on “as is where is basis”, “as it is where it is
basis” and “whatever there is basis”, would not attach legality to the
auction sale inasmuch as, knowledge of the defect in property cannot
be imputed to an intending purchaser. Such covenants cannot
overcome the fatal defect in auction notice and the auction conducted
by suppressing vital informations must be held illegal.
16. The Bank was under a duty to disclose all relevant
facts including, the fact that the property put on auction sale was a
lease-hold property and it belongs to the Housing Board. This is a
basic requirement of fair play in action and more so, in case of a Public
Sector Bank. The auction sale which proceeded on a
misrepresentation to the intending bidders is definitely illegal and is
liable to be quashed. The terms and conditions of an illegal auction
sale cannot be enforced by the respondent-Bank, and accordingly
Clause-13 of E-auction notice which provides forfeiture of the amount
deposited by successful bidder in the event of failure to deposit the bid
amount within the stipulated time cannot be resorted to by the
respondent-Bank to forfeit EMD and 25% of the bid amount deposited
by the appellant. Dismissal of the writ petition on the ground that the
appellant-writ petitioner himself invoked jurisdiction of this Court
seeking a direction upon the Bank to confirm the sale and issue Sale
Certificate, is not justified. The writ petition was decided without
affording an opportunity to the Housing Board to file its response, as is
apparent from the proceeding in W.P.(C) No.2181 of 2016, which was10.
disposed of on the very first day of hearing. In view of the objection
raised by the Housing Board to the auction sale of its property, the
direction issued by the Writ Court to the respondent Bank to take steps
for execution of lease in the name of the appellant is also rendered
erroneous. Considering the aforesaid facts, we are of the opinion that
the impugned order dated 26.04.2016 passed in W.P.(C) No.2181 of
2016 suffers from serious error in law.
17. Another issue which was debated during the course of
hearing of the instant Letters Patent Appeal, is whether forfeiture of the
amount deposited by the appellant would amount to unjust enrichment
of the respondent-Bank. The learned Senior counsel for the appellant
contended that in the subsequent auction vide E-auction notice
published in the Newspaper on 07.05.2016 the borrower himself has
paid all dues to the Bank, which issued “No Dues Certificate” to the
borrower vide letter dated 23.06.2016 and therefore, appropriation of
Rs.31,25,000/- deposited by the appellant would be unjust retention of
the said amount by the Bank amounting to unjust enrichment.
Mr. P.A.S. Pati, the learned counsel for the respondent-Bank, however,
contended that on account of failure of the appellant to deposit the
balance bid amount, the auction failed and the Bank was constrained
to re-auction the property. The amount deposited by the appellant has
to be forfeited in terms of the conditions attached to E-auction notice
dated 01.03.2016, and if, the Courts interfere with the matters like the
present one, no auction would ever be concluded.
18. The Contract Act, 1872 recognizes the principle of
unjust enrichment in Section 72. This principle is infact foundation
for the law governing restitution. The retention of money or property of
another against the principle of justice, equity and good conscience
has been held by the Courts “unjust enrichment”. On admitted facts,
forfeiture of the amount deposited by the successful bidder, for sale of
a property which the respondent-Bank could not have sold in auction
sale without prior approval of the Housing Board and after realizing its
dues from the borrower, would certainly amount to unjust enrichment.
The respondent-Bank cannot legally retain EMD and 25% of the bid
amount deposited by the appellant.
19. In the result, in view of the aforesaid discussions, the
impugned order dated 26.04.2016 is set-aside. The writ petition
stands allowed and consequently, the respondent-Bank is directed to
refund Rs.31,25,000/- to the appellant, within four weeks.
Print Page
disclosed to the intending bidders in the E-auction notice
dated 01.03.2016. A bidder would not intend to buy litigation with the
property, which may ensue between the Bank and the Housing Board.
The petitioner has specifically pleaded that on 24.04.2016 he filed an
application for providing a copy of NOC/permission, if any, granted by
the Housing Board for sale of the property in question. The averments
in paragraph no. 18 of the writ petition has been reiterated in
paragraph no. 5(o) of the memorandum of the instant appeal, however,
this assertion has not been controverted by the respondent-Bank. The
Bank has taken a position that there was no pleading in the writ
petition to the effect that while preparing for deposit of the balance bid
amount the petitioner came to know about the aforesaid illegality,
however, in view of the pleadings in the writ petition, particularly in
paragraph no. 18, the defects in the sale notice cannot be ignored.
There is no warrant of the proposition that illegality which would go to
the root of the auction sale must have been discovered by an auction
purchaser during the auction sale and a fact which would vitiate the
auction sale, if discovered subsequently, cannot be taken note of.
Knowledge to the petitioner about nature of the property put on auction
sale, even after the concluded sale, can be looked into to examine the
legality of the sale notice and the auction sale. The fact that the sale
notice was issued on “as is where is basis”, “as it is where it is
basis” and “whatever there is basis”, would not attach legality to the
auction sale inasmuch as, knowledge of the defect in property cannot
be imputed to an intending purchaser. Such covenants cannot
overcome the fatal defect in auction notice and the auction conducted
by suppressing vital informations must be held illegal.
16. The Bank was under a duty to disclose all relevant
facts including, the fact that the property put on auction sale was a
lease-hold property and it belongs to the Housing Board. This is a
basic requirement of fair play in action and more so, in case of a Public
Sector Bank. The auction sale which proceeded on a
misrepresentation to the intending bidders is definitely illegal and is
liable to be quashed. The terms and conditions of an illegal auction
sale cannot be enforced by the respondent-Bank, and accordingly
Clause-13 of E-auction notice which provides forfeiture of the amount
deposited by successful bidder in the event of failure to deposit the bid
amount within the stipulated time cannot be resorted to by the
respondent-Bank to forfeit EMD and 25% of the bid amount deposited
by the appellant. Dismissal of the writ petition on the ground that the
appellant-writ petitioner himself invoked jurisdiction of this Court
seeking a direction upon the Bank to confirm the sale and issue Sale
Certificate, is not justified. The writ petition was decided without
affording an opportunity to the Housing Board to file its response, as is
apparent from the proceeding in W.P.(C) No.2181 of 2016, which was10.
disposed of on the very first day of hearing. In view of the objection
raised by the Housing Board to the auction sale of its property, the
direction issued by the Writ Court to the respondent Bank to take steps
for execution of lease in the name of the appellant is also rendered
erroneous. Considering the aforesaid facts, we are of the opinion that
the impugned order dated 26.04.2016 passed in W.P.(C) No.2181 of
2016 suffers from serious error in law.
IN THE HIGH COURT OF JHARKHAND AT RANCHI
L.P.A. No. 220 of 2016
Kumar Rohit,
V
Allahabad Bank,
CORAM: MR. JUSTICE VIRENDER SINGH, CHIEF JUSTICE
MR. JUSTICE SHREE CHANDRASHEKHAR
Dated:26th July, 2016.
Citation: AIR 2017 Jharkh 65
Per Shree Chandrashekhar, J.:
1. After having failed in his attempt before the Writ Court,
seeking refund of Rs.31,25,000/- the appellant-writ petitioner has
approached this Court in the instant Letters Patent Appeal.
2. Heard.
3. Mr. V.P. Singh, the learned Senior counsel for the appellant
referring to E-auction notice dated 01.03.2016 for sale of the residential
property MIG-D-120 at Harmu Housing Colony, contends that the
respondent- Allahabad Bank made a representation to the public at large
which was patently false and thereby the appellant was misled. E-auction
held pursuant to notice dated 01.03.2016 was illegal and therefore, the bid
amount deposited by the appellant must be refunded by the
respondent-Bank. It is further contended that after the respondent-Bank
fully recovered the secured debt from the borrower, forfeiture of
Rs.31,25,000/- by the Bank on the ground that the appellant-successful2.
bidder has failed to deposit the balance 75% bid amount by the stipulated
date, would nothing but, be unjust enrichment.
4. Per contra, Mr. P.A.S. Pati, the learned counsel for the
respondent-Allahabad Bank, referring to the terms and conditions of
E-auction notice dated 01.03.2016, submits that once the appellant
participated in E-auction and he was declared successful bidder, he is
bound under the terms and conditions of E-auction. It is contended that
E-auction dated 07.04.2016 ultimately failed on account of failure of the
appellant to deposit the balance 75% of the bid amount, and in
consequence thereof, in terms of the conditions of E-auction, 25% of the bid
amount deposited by the appellant has to be forfeited. Refuting the
allegation of misrepresentation and fraud by the Bank, the learned counsel
submits that the property under auction could have been inspected by the
intending bidders, who upon inspection of the property could have decided
to participate or not to participate in E-auction.
5. Dr. Ashok Kumar Singh, the learned counsel appearing for
the respondent -Housing Board, opposing E-auction of the lease-hold
property which belongs to Jharkhand Housing Board contends that without
seeking prior approval of the Housing Board and consenting to the terms
and conditions, if any, of the Housing Board, the property under E-auction
could not have been put on sale.
6. Briefly stated, E-auction notice dated 01.03.2016 was issued
for “sale of immovable property mortgaged to Bank under Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002”, which comprised land and building constructed over MIG-D-120,
Harmu Housing Colony, Argora, Ranchi, acquired by one Bijay Kumar
Pandey. The property was put on auction-sale on “as is where is basis”,
“as it is where it is basis” and “whatever there is basis”, for realization3.
of Bank's dues with interest. The secured debt amounted to Rs.53,50,374/-
which was to be realized along with interest, costs, charges and expenses.
The date of auction was fixed on 07.04.2016. The appellant deposited the
Earnest Money Deposit (EMD) of Rs.7,00,000/- through Demand Draft on
30.03.2016 and he was declared successful bidder in the bid held on
07.04.2016. The respondent-Bank informed the appellant on 08.04.2016
that he has been declared highest bidder, and required him to deposit 25%
of the bid amount. The appellant deposited Rs.24,25,000/- on 08.04.2016
which was 25% of the bid amount after deducting Rs.7,00,000/- which was
deposited by him as EMD. Thereafter, vide letter dated 20.04.2016 the
authorized officer-respondent no.2 directed the appellant to pay the balance
bid amount. In the meantime, the appellant approached this Court in
W.P.(C) No.2075 of 2016 for quashing of letter dated 20.04.2016. The writ
petition was disposed of on 22.04.2016 granting liberty to the appellant to
deposit the balance amount by 27.04.2016. The respondent-Bank was
directed to issue the “Sale Certificate” after receiving the balance bid
amount. It is pleaded by the appellant that he came to know that the
secured asset is a lease-hold property and the borrower is not the absolute
owner of the plot bearing No. MIG-D-120, Harmu Housing Colony, Ranchi.
The appellant, thereafter, approached respondent no.2 on 24.04.2016 for
providing a copy of NOC/Permission, if any, granted by Jharkhand Housing
Board for sale of the aforesaid property, however, the authorized
officer-respondent no.2 did not respond to his application. Pleading
misrepresentation and contending that the E-auction notice was illegal, the
appellant approached the Writ Court with the following prayers :
A. A writ of certiorari or in nature thereof for
Quashing/Cancelling the Sale Notice/E-Auction Notice issued
by the Allahabad Bank regarding Auction sale of the property4.
situated at MIG-D-120 Harmu Housing Colony, Ranchi vide
Ref- AB/HCB/SARFAESI/SALENOTICE/2015-16/2910 dated
01-03-2016 and also the E-auction held on 07-04-2016 as
this property is a leasehold property and the bank can't
Auction/Sale/transfer the property without taking 'No
Objection Certificate' from Jharkhand Housing Board, Harmu,
Ranchi.
B. A writ of Mandamus or in nature thereof for
commanding upon the respondents to refund the
Rs.31,25,000=00 (Thirty one Lacs twenty five thousand only)
25% of the bid amount deposited by the petitioner with
interest of 12% per annum.
C. A writ of Mandamus or in nature thereof for
commanding upon the respondents to pay cost of litigation
and also compensation for the harassment suffered by the
petitioner, due to the misrepresentation of the respondents.
D. A writ of Mandamus or in nature thereof for
commanding upon the respondents not to take any coercive
action against the petitioner till final adjudication of the
present writ application.”
7. The writ petition was dismissed on the ground that after
availing indulgence of the Court for depositing balance 75% of the bid
amount, now he would not be allowed to question E-auction for sale of the
aforesaid property.
8. In the present proceeding, the respondent-Bank has filed
counter-affidavit denying the allegation of misrepresentation referring to
Clause-14 of the terms and conditions appended to E-auction notice
dated 01.03.2016. It is asserted that the Housing Board granted5.
“No Objection” to the borrower to avail loan for construction of the house
over the land leased by the Housing Board and the respondent-Bank vide
letter 03.03.2016 duly informed the Estate Officer of the Housing Board
about E-auction of the secured assets.
9. The respondent Housing Board has pleaded that the lessee was
never granted permission by the Housing Board to mortgage the land in
question with the respondent-Allahabad Bank. Moreover, the lessee who
had only lease-hold rights for the balance unutilized period out of 90 years
and not the absolute right, title and interest over the land, could have, at
best, mortgaged his lease-hold rights with prior permission of the Housing
Board. The Housing Board has disputed the right of the Allahabad-Bank to
alienate or to transfer the land in question to any person without permission
of the Housing Board.
10. From the pleadings of the parties, it appears that there is no
dispute that the plot bearing no. MIG-D-120 at Harmu Housing Colony is a
lease-hold property. The said property was originally allotted to Manoj Bihari
Sinha on lease-hold basis for a period of 90 years on 19.08.1982.
Subsequently, a Deed of Tripartite Lease was executed for transferring the
lease-hold rights in plot no. MIG-D-120 in favour of Bijay Kumar Pandey, of
which Jharkhand State Housing Board is a party. Clause-11 of the Tripartite
Lease Agreement provided that “the second party shall not transfer, assign
or otherwise part with the possession of whole or any part of the premises
with the previous permission of the first party in writing which the first party
shall be entitled to refuse in its sole discretion or in the event of consent
being given may impose such terms and conditions as it thinks fit”. Eauction
notice dated 01.03.2016 makes it abundantly clear that it was a
“sale notice for sale of the secured assets”. The relevant portions of the
auction notice dated 01.03.2016 are extracted below: 6.
SALE NOTICE/EAUCTION
Sale of immovable property/ies mortgaged to Bank under
Securitization and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002(No.54 of 2002)
Ref.AB/HCB/SARFAESI/SALENOTICE/2015-16/2910 Dated 01.03.2016
Whereas, the Authorized Officer of Allahabad Bank, Harmu Colony Branch,
Ranchi had taken symbolic possession of the following property/ies pursuant to the
notice issued under Sec.13(2) of the Securitization and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002 in the following loan account
with right to sell the same on “As is where is basis”, “as it is where it is basis” and
“whatever there is” for realization of Bank's dues plus interest as detailed
hereunder and whereas consequent upon failure to repay the dues., the
undersigned in exercise of power conferred under Section 13(4) of the said Act
proposes to realize the Bank's dues by sale of the said property/ies. The Sale will
be done by the undersigned through e-auction platform provided at the website
https:allahabadbank auctiontiger.net
Name of the Borrower
Account/Mortgagor/Gaurantors
Details of Properties Date of Demand
Notice
Date of Possession
Reserve Price
EMD
Bid Increment
Price
Name of Account:
M/S SAFARI RESIDENTIA MIGD
120, HARMU HOUSING COLONY,
RANCHI
Borrower/ Mortgagor/
Guarantors:
2.Sri Bijay Kumar Pandey (ProM/S
Safari Residentia) MIGD120,
Harmu Housing Colony, Ranchi.
3.Sri Sanjay Kumar Singh S/O Sri
Jairam Singh
Q No.356A, Road No—05, Ashok
Nagar, Ranchi
4.Sri Rishi Prakash Mishra
C/6, Central Ashok Nagar, Ranchi
5.Sri Bachesh Kumar 189, Bari Co
Operative C, Bokaro Steel City,
Bokaro.
6.Sri Sandeep Sharma R/O Taj
Mahal Club Road, Ranchi
All that part an parcel
of Land & Building
Constructed over MIGD120,
Harmu Housing
Colony, P.S.Argora,
Area2250 sq.ft. DistRanchi,
Jharkhand
acquired Vide sale Deed
No.13242 dated
02.09.2005 in the name
of Bijay Kumar Pandey
Bounded: On the North
by :MIG Plot
No.D121
On the South by :MIG
Plot No.D119 On the
East by : MIG Plot No.
D131,
ON the West by :
40'wide Road
Amount of
Secured
Debt 21.02.2014
10.02.2015
Rs.70,00,000.00
Rs. 7,00,000.00
Present dues
Rs.53,50,374.00
plus interest till
the date of
realization and
costs, charges and
expenses
Rs.10,000.00
11. The contention of the respondent-Bank based on Clause-20
that the intending bidder could have inspected the property and once he has
participated in E-auction with his eyes and ears open there was no
misrepresentation in E-auction notice, is liable to be rejected. Clause-20
reads, as under :
“20. For inspection of the property/ies, the intending
bidders may contact Allahabad Bank, Harmu Colony Branch, Harmu,
Ranchi -834002 during office hours between 07.03.2016 to
30.03.2016 between 11.00 am to 3.00 pm (except Holidays).”7.
12. The aforesaid clause does not disclose that the
“property papers” were open for inspection. Physical inspection of the
property, obviously, cannot disclose the nature of the right of the
occupier, who is the borrower in the instant case. The recitals of the
E-auction notice dated 01.03.2016 gives an impression as if the
secured asset intended for sale is the absolute property of the
borrower inasmuch as, the sale notice dated 01.03.2016 mentions that
the aforesaid property was acquired by Bijay Kumar Pandey vide,
“Sale Deed No.13242 dated 02.09.2015”. Besides the element of
misrepresentation in the auction-notice, it suffers from suppression of
material informations.
13. The learned counsel for the respondent-Bank
contended that under the SARFAESI Act, 2002 the authorized officer is
empowered to sell the secured asset, which is the property in question
and therefore, even if it was a lease-hold property, the same can
legally be put on sale for realizing Bank's dues. The learned counsel
referring to letter dated 07.05.2016 written by respondent no.2 to the
Estate Officer, Jharkhand State Housing Board, submits that an
intimation of the second auction was given to the Housing Board, to
which the Housing Board has not raised any objection.
14. This contention does not merit acceptance. A property
which belongs to the Housing Board, in respect of which a lease has
been executed in favour of the allottee, cannot be sold by the
respondent-Bank to realize dues from the borrower who is the lessee
in the instant case. Clause-14 of the Tripartite Lease Agreement
provides that the Housing Board has right to cancel the allotment in
favour of the lessee and to evict him from the property for breach of
the terms and conditions of the agreement. Letters dated 03.03.20168.
and 07.05.2016 written by the respondent-Bank to the Housing Board
are mere communications by the Bank. The response of the Housing
Board contained in letter dated 13.07.2016 in response to letter of the
respondent-Bank dated 07.04.2016 discloses that the Board has
asserted first charge over the property and transfer of lease is subject
to deposit of 50% of the sale price. Admittedly, the letters dated
07.05.2016 and 13.07.2016 are post-auction communications.
Moreover, the respondent-Bank has not pleaded that it has accepted
the conditions disclosed in letter dated 13.07.2016 by the Housing
Board.
15. Admittedly, the facts noticed hereinabove were not
disclosed to the intending bidders in the E-auction notice
dated 01.03.2016. A bidder would not intend to buy litigation with the
property, which may ensue between the Bank and the Housing Board.
The petitioner has specifically pleaded that on 24.04.2016 he filed an
application for providing a copy of NOC/permission, if any, granted by
the Housing Board for sale of the property in question. The averments
in paragraph no. 18 of the writ petition has been reiterated in
paragraph no. 5(o) of the memorandum of the instant appeal, however,
this assertion has not been controverted by the respondent-Bank. The
Bank has taken a position that there was no pleading in the writ
petition to the effect that while preparing for deposit of the balance bid
amount the petitioner came to know about the aforesaid illegality,
however, in view of the pleadings in the writ petition, particularly in
paragraph no. 18, the defects in the sale notice cannot be ignored.
There is no warrant of the proposition that illegality which would go to
the root of the auction sale must have been discovered by an auction
purchaser during the auction sale and a fact which would vitiate the
auction sale, if discovered subsequently, cannot be taken note of.
Knowledge to the petitioner about nature of the property put on auction
sale, even after the concluded sale, can be looked into to examine the
legality of the sale notice and the auction sale. The fact that the sale
notice was issued on “as is where is basis”, “as it is where it is
basis” and “whatever there is basis”, would not attach legality to the
auction sale inasmuch as, knowledge of the defect in property cannot
be imputed to an intending purchaser. Such covenants cannot
overcome the fatal defect in auction notice and the auction conducted
by suppressing vital informations must be held illegal.
16. The Bank was under a duty to disclose all relevant
facts including, the fact that the property put on auction sale was a
lease-hold property and it belongs to the Housing Board. This is a
basic requirement of fair play in action and more so, in case of a Public
Sector Bank. The auction sale which proceeded on a
misrepresentation to the intending bidders is definitely illegal and is
liable to be quashed. The terms and conditions of an illegal auction
sale cannot be enforced by the respondent-Bank, and accordingly
Clause-13 of E-auction notice which provides forfeiture of the amount
deposited by successful bidder in the event of failure to deposit the bid
amount within the stipulated time cannot be resorted to by the
respondent-Bank to forfeit EMD and 25% of the bid amount deposited
by the appellant. Dismissal of the writ petition on the ground that the
appellant-writ petitioner himself invoked jurisdiction of this Court
seeking a direction upon the Bank to confirm the sale and issue Sale
Certificate, is not justified. The writ petition was decided without
affording an opportunity to the Housing Board to file its response, as is
apparent from the proceeding in W.P.(C) No.2181 of 2016, which was10.
disposed of on the very first day of hearing. In view of the objection
raised by the Housing Board to the auction sale of its property, the
direction issued by the Writ Court to the respondent Bank to take steps
for execution of lease in the name of the appellant is also rendered
erroneous. Considering the aforesaid facts, we are of the opinion that
the impugned order dated 26.04.2016 passed in W.P.(C) No.2181 of
2016 suffers from serious error in law.
17. Another issue which was debated during the course of
hearing of the instant Letters Patent Appeal, is whether forfeiture of the
amount deposited by the appellant would amount to unjust enrichment
of the respondent-Bank. The learned Senior counsel for the appellant
contended that in the subsequent auction vide E-auction notice
published in the Newspaper on 07.05.2016 the borrower himself has
paid all dues to the Bank, which issued “No Dues Certificate” to the
borrower vide letter dated 23.06.2016 and therefore, appropriation of
Rs.31,25,000/- deposited by the appellant would be unjust retention of
the said amount by the Bank amounting to unjust enrichment.
Mr. P.A.S. Pati, the learned counsel for the respondent-Bank, however,
contended that on account of failure of the appellant to deposit the
balance bid amount, the auction failed and the Bank was constrained
to re-auction the property. The amount deposited by the appellant has
to be forfeited in terms of the conditions attached to E-auction notice
dated 01.03.2016, and if, the Courts interfere with the matters like the
present one, no auction would ever be concluded.
18. The Contract Act, 1872 recognizes the principle of
unjust enrichment in Section 72. This principle is infact foundation
for the law governing restitution. The retention of money or property of
another against the principle of justice, equity and good conscience
has been held by the Courts “unjust enrichment”. On admitted facts,
forfeiture of the amount deposited by the successful bidder, for sale of
a property which the respondent-Bank could not have sold in auction
sale without prior approval of the Housing Board and after realizing its
dues from the borrower, would certainly amount to unjust enrichment.
The respondent-Bank cannot legally retain EMD and 25% of the bid
amount deposited by the appellant.
19. In the result, in view of the aforesaid discussions, the
impugned order dated 26.04.2016 is set-aside. The writ petition
stands allowed and consequently, the respondent-Bank is directed to
refund Rs.31,25,000/- to the appellant, within four weeks.
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