Writ Petition No. 6465 of 2010. Case: Asha Mehta and Anr. Vs Allahabad Bank and Ors.. High Court of Bombay (India)
| Case Number | Writ Petition No. 6465 of 2010 |
| Counsel | For Appellant: V.R. Dhond with Mr. Mayur Khandeparkar, T.N. Tripathi and Sapna Rachure i/b T.N. Tripathi and Co. and For Respondent: Naresh S. Fadia and Harihar Bhave i/b Bhave and Co., Sanjay Jain with Devanshu P. Desai, Nivit Dhruva, Prakash Shinde, Avinath S. Gautama and G.K. Tripathi i/b Anoopkumar Sharma and Purav Damania |
| Judges | D.Y. Chandrachud and Anoop V. Mohta, JJ. |
| Issue | Constitution Of India - Article 226; Recovery of Debts Due to Banks and Financial Institutions Act 1993 - Sections 28 and 29; Schedule to the Income Tax Act 1961 - Rules 52, 53, 60, 61, 62; Code of Civil Procedure - Section 73; Recovery of Debts Due to Banks and Financial Institutions Act 1993 - Section 22 |
| Citation | 2011 (1) MahLJ 1011 |
| Judgement Date | November 24, 2010 |
| Court | High Court of Bombay (India) |
Judgment:
D.Y. Chandrachud, J.
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Rule. The Learned Counsel for the Respondents waive service. On the request of the Learned Counsel and with their consent, the Petition is taken up for hearing and final disposal.
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The challenge in these proceedings under Article 226 of the Constitution is to an order dated 2 August 2010 of the Debt Recovery Appellate Tribunal. The Recovery Officer by an order dated 20 November 2009 dismissed an application filed by the Petitioners objecting to the confirmation of a sale. The order of the Recovery Officer was upheld by the Tribunal and in appeal by the Appellate Tribunal.
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The First Respondent, Allahabad Bank filed Original Application 183 of 2004 against the Petitioners for the recovery of its dues. The Application was allowed by the Debt Recovery Tribunal on 1 September 2005 in the amount of Rs.33.51 Crores together with future interest at 12% per annum. On 17 October 2005 a recovery certificate was issued in pursuance of the order of the Tribunal. On 17 December 2007 the Recovery Officer issued an order of attachment of three properties, among them being Flat 603 situated in a building known as Ruby Apartments at Walkeshwar, Mumbai. The attachment was levied in recovery proceedings 248 of 2005 which was in execution of the order of the Tribunal in O.A. 183 of 2004. On 9 April 2009 the First Respondent filed an affidavit before the Recovery Officer stating that another flat being Flat No.402 together with two appurtenant garages situated in a building known as Pleasant Park at Peddar Road, Mumbai had been mortgaged in its favour.
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The terms and conditions of sale were settled in pursuance of the provisions of Rules 52 and 53 of the Second Schedule to the Income Tax Act 1961 which is made applicable by virtue of the provisions of Sections 28 and 29 of the Recovery of Debts Due to Banks and Financial Institutions Act 1993. The terms of sale provided that the three properties were being sold on an 'as is where is an&d what is' basis. Two of those properties which form the subject matter of these proceedings are: (i) Flat No.402, Pleasant Park Cooperative Housing Society Limited, Peddar Road, Mumbai 400 006 with a carpet area of 1540 sq. ft. together with garage Nos. 17 and 18 each admeasuring 165.75 sq. ft; and (ii) Flat No.603 in Ruby Apartments at Walkeshwar Road, Mumbai 400 006 with a carpet area of 450 sq ft. Under the column entitled "Details of encumbrances to which the property is liable" the disclosure that was made was "not known". The First Respondent did not disclose details of encumbrances of which it had knowledge. The First Respondent was part of a consortium of banks led by the State Bank of India. The State Bank of India had in turn moved an application before the Debts Recovery Tribunal in which on 20 March 2007 a final order had been passed decreeing the claim and in pursuance of which a recovery certificate was issued on 20 April 2007. The recovery certificate in favour of the State Bank of India was in the total amount of Rs.35.68 Crores with interest @ 12% per annum. The recovery certificate stated that the outstandings were secured by a mortgage of several properties in which the First Respondent and Bank of Baroda had a pari pasu charge. Among the properties secured by the mortgage are the two properties which have been adverted to earlier. The statement that the details of encumbrances were not known was untrue to the knowledge of the First Respondent, for the First Respondent had knowledge of the charge in favour of State Bank, with whom it ranked pari pasu.
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Following the attachment of the property and the finalization of the terms and conditions of sale, the aforesaid properties were listed for public auction on 25 September 2009. The sale was advertised in the Times of India, the Economic Times and Navshakti. The reserved price of the property in Pleasant Park at Peddar Road was fixed at Rs.4.25 Crores. A challenge by the Petitioners to the valuation was rejected. Eight bids were received in respect of the property. of them three bidders agreed to revise their bids and the highest bid was that of the Tenth Respondent in the amount of Rs. 4.52 Crores. In respect of the residential flat in Ruby Apartments four bids were received. The reserved price was Rs.1.50 Crores. The highest bid was of the Eleventh Respondent in the amount of Rs. 1,50,11,111/.
These two bids of the highest bidders were accepted.
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On 17 November 2009 the Petitioners filed their objection to the confirmation of the sale on the ground that (i) the properties - in question had not been mortgaged in favour of the First Respondent; (ii) The sale consideration was under valued; (iii) The material particulars relating to the property had not been disclosed and (iv) A cartel had been formed by the bidders. The Recovery Officer declined to accept the objections by an order dated 20 November 2009. The order of the Recovery Officer was challenged in appeal but both the Debts Recovery Tribunal and in appeal the Appellate Tribunal declined to intervene. Aggrieved, the Petitioners have moved these proceedings under Article 226 of the Constitution.
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On behalf of the Petitioners it has been submitted that:
(i) Though the First Respondent was aware, when it finalized the terms and conditions of sale of the pre existing encumbrances on the property, including the charge held by the State Bank of India, these encumbrances were not disclosed. The terms of sale, as a matter of fact, did not even disclose that the First Respondent itself held a pari pasu charge together with the State Bank of India which was the lead bank in the consortium;
(ii) The properties were put up for sale on an as is where is basis which meant that every bidder was on notice of the fact that an investigation into the title of the two flats would have to be made by the bidder himself and that the First Respondent made no representation or warranty in that behalf. Any intending bidder would upon a scrutiny of the records of the Debts Recovery Tribunal have knowledge of the fact that the State Bank of India had a pre existing charge on the properties...
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