IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 31ST DAY OF OCTOBER, 2017 BEFORE THE HON’BLE MR. JUSTICE A S BOPANNA WRIT PETITION No.51141/2016 (GM-RES) BETWEEN:
SRI M N MUTHAPPA S/O LATE N.S.MUTHANNA AGED ABOUT 55 YEARS, R/AT M & M BANGALORE, PRIVATE LIMITED, NO.3, 8TH CROSS, SECTOR-A BEHIND GREEN COUNTRY PUBLIC SCHOOL OPP. SAHAKARANAGARA GATE, BANGALORE-560092 [ ... PETITIONER (BY SRI SURESH BABU B N, ADV.) AND:
MANIPAL HOUSING FINANCE SYNDICATE LIMITED NO.116, NORTH BLOCK, MANIPAL CENTER, DICKENSON ROAD, BANGALORE-560042 REP. BY ITS BRANCH MANAGER, AUTHORISED OFFICER ... RESPONDENT (BY SRI B S MAHENDRA, ADV. FOR C/R) THIS PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA, WITH A PRAYER TO DIRECT RESPONDENT TO REFUND A SUM OF RS.45,00,000/- DEPOSITED BY THE PETITIONER BEING 25% OF THE BID AMOUNT.
THIS PETITION COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP, THIS DAY, THE COURT MADE THE FOLLOWING:
O R D E R The petitioner is before this Court seeking issue of mandamus to direct the respondent to refund a sum of Rs.45,00,000/- deposited by the petitioner as 25 % of the bid amount.
2. The respondent-company treating the financial assistance granted to the borrower as NPA had thereafter initiated the proceedings under the SARFAESI Act to bring the secured asset to sale. In the said process, the petitioner had participated and was the highest bidder offering a sum of Rs.1 crore 80 lakhs. 25% of the bid amount to the tune of 45 lakhs was deposited by the petitioner as required under the Rules. When the petitioner was required to pay the remaining 75% and complete the transaction, the petitioner had noticed certain defects in the title to the property and in that view did not complete the transaction, but instead had written to the respondent highlighting these aspects of the matter.
3. The respondent however invoking Rule 9(5) of the Security Interest Enforcement Rules, 2002 (‘Rules’ for short) forfeited the said amount and thereafter brought the property to sale once over again. The petitioner in that light claiming to be aggrieved is before this Court seeking that a mandamus be issued to the respondent to refund the amount deposited by him towards 25% of the bid amount.
4. The respondent has filed their objection statement disputing the claim as put forth by the petitioner. Insofar as the fact that the petitioner had participated in the auction and was the highest bidder is not in dispute. The fact that pursuant to the same, 25% of the amount had been deposited by him is also not in dispute. The contention however is that when the sale was on ‘as is where is’ basis and the petitioner had also intimated the respondent that he had verified the documents and was satisfied with the title, the petitioner at this juncture cannot contend to the contrary and seek for refund of the amount. It is further contended that in view of the provision contained in Rule 9(4) of the Rules such forfeiture is required to be done and the respondent has therefore proceeded in accordance with law. In that light, they seek that the prayer be rejected and the writ petition be dismissed.
5. In the light of the rival pleadings, I have heard the learned counsel for the petitioner as also the learned counsel for the respondents and perused the petition papers.
6. As noticed, the undisputed position is that the petitioner had participated in the auction process and deposited the 25% of the amount. The question therefore is as to whether in the present facts and circumstances the petitioner is entitled to the prayer as made in the instant petition ? No doubt, reference to Rule 9(5) of the Rules would indicate that if the auction purchaser fails to deposit the balance amount, the amount in deposit is to be forfeited and the property would be sold subsequently. Insofar as the provision as contained, there is absolutely no dispute. Learned counsel for the respondent has in that light relied on the decision of Madras High Court in the case of N.Suresh vs. Indian Bank, Chennai (W.P.No.5760/2013 disposed of on 26.03.2013) wherein the Rule as contemplated has been considered and it is held that such provision would enable the forfeiture of the deposited amount. Insofar as the legal position, there is absolutely no dispute. Yet what requires consideration is as to whether in the present facts and circumstances, the prayer could be accepted.
7. Firstly it is to be noticed that the documents as produced along with writ petition would disclose the entries as contained in the Record of Rights would show that there was some confusion with regard to the title to the property. That apart, it is also pointed out that the property which was brought to sale as the secured asset is a site which had been formed in the layout, yet the entire property was shown in a different name and therefore there was confusion with regard to the title and it is in that view, the petitioner had intimated the respondent-Bank and requested that the amount be returned.
8. While taking note of all these aspects, what is also to be kept in view is that even in the said circumstance if this Court arrives at a conclusion that any direction to refund the amount is to be made, whether the entire amount of Rs.45,00,000/- as deposited by the petitioner could be ordered to be refunded in this petition. To take note of this aspect, what is also necessary to be taken into consideration is that the respondent-company on having cancelled the transaction with the petitioner by forfeiting the amount had once again brought the property to sale in the said proceedings. The respondents have sold the property for a sum of Rs.1 crore 72 lakhs 52 thousand.
9. As already indicated above, the petitioner at the first instance had offered a sum of Rs.1 crore 80 lakhs for the said property. If that be the position, the loss by way of reduction in the value in any event is due to the act of the petitioner in subsequently not completing the transaction by depositing the balance amount.
10. If that be the position, the subsequent action as initiated by the respondents would have to be considered as an action at the ‘risk and cost’ of the petitioner and therefore to the extent of reduced price as received by the respondents as also the cost incurred by them in once over again bringing the property to sale is to be deducted from the amount which had been deposited by the petitioner. Therefore, in the present circumstance, when the respondent has once over again sold the property and realised the amount and in the circumstances where the petitioner has referred to the documents to point out that there was defective title which prevented him from proceeding with the transaction, it would be in the interest of justice that the refund would be to the extent after deducting the loss incurred by the respondent in view of the property once over again being brought to sale for a lesser value. Hence the prayer as made for refund of the entire amount of Rs.45,00,000/- cannot be accepted by this Court.
11. The respondent however is directed to deduct the difference of the amount received as the lesser price from the earlier offered sale price as also the costs incurred and refund the remaining amount to the petitioner. The said process shall be completed and refund shall be made within two months from the date of receipt of a copy of this order.
The petition is accordingly disposed of.
Sd/- JUDGE akc/bms