IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 16TH DAY OF JANUARY 2019 BEFORE THE HON’BLE MR. JUSTICE H. T. NARENDRA PRASAD W.P.No. 51709 OF 2014 (GM -DRT) And W.P.Nos. 58176-178 OF 2014 BETWEEN:
1. Sri R Nanda Kumar S/o J P Ramalinga Setty Aged 57 years R/a No. 1164/C, HIG, 2nd Cross Aravindanagar, Mysore-570023.
2. Sri B S Ramesh S/o B V Subraya Shetty Aged 57 years R/a No.1031, Maruthi Krupa Geetha Road, Chamarajpuram Mysore-570005.
3. Sri B S Suresh S/o B V Subraya Shetty Aged 52 years R/a No. 1239, Malatesha, 1st Cross Krishnamurthypuram, Mysore-570005.
4. Sri Suresh Laxminarayana Melgiri S/o Laxminarayana Melgiri Aged 46 years R/a No.196, 1st Main Road APMC, Bydagi, Haveri District-581106. … Petitioners (By Sri Manmohan P N, Advocate) AND:
1. The Authorized Officer Bank of India Karnataka Zone, 11 Kempegowda Road Bangalore-560009.
2. Smt. G S Bhagya W/o Late N Prakash Aged about 39 years R/a No.1205, K N Extension Triveni Road, Yeshwanthpur Bangalore-560022.
3. Miss Poorvaja P Yadav D/o Late N Prakash Aged about 16 years R/a No.1205, K N Extension Triveni Road, Yeshwanthpur Bangalore-560022.
4. Miss Harpitha P Yadav D/o Late N Prakash Aged about 14 years R/a No.1205, K N Extension Triveni Road, Yeshwanthpur Bangalore-560022.
Respondents No.3 and 4 are Minors and are represented by Their Natural Guardian/Mother Respondent No.2 Smt. G S Bhagya 5. Indian Overseas Bank Represented by its Manager Asset Recovery Management Branch K G Road, Bangalore-560001. ... Respondents (By Sri M. Mohamed Ibrahim, Advocate for R1: Sri. Rajesh Rai K, Advocate for R2:
Sri. Y P Gokol, Advocate for Sri. Y.V. Parthasarathy, Advocate for R5) These writ petitions are filed under Articles 226 & 227 of the Constitution of India praying to quash the order dated 11.10.2013 passed on the application filed by the petitioners under Rule 18 passed in S.A.No.512/2012 passed by the Debts Recovery Tribunal Karnataka at Bangalore (produced as Annex- J) in so far as refusing to award interest and consequently allow the application in its entirety and to direct R1 to pay interest to the petitioners on Rs.1,47,50,000/- from the date of deposit till the date of refund @21% p.a.
These writ petitions, coming on for preliminary hearing in ‘B’ Group, this day, the Court, made the following:
ORDER These writ petitions are directed against the order dated 11.10.2013 passed by the Debt Recovery Tribunal in S.A.No.512/2012 (Annexure-J) passed on an application filed under Rule 18 of the Debt Recovery Tribunal (Procedure) Rules, 1993 (‘Rules’ for short), in so far as refusing to award the interest.
2. The brief facts of the case are that the property bearing Site No.11/2, Part C, C1 and C2 situated in Industrial Suburb Manandwadi Road, Khilla Mohalla, Mysore measuring East to West 200 feet and North to South 300 feet, totally measuring 60,000/- sq.ft., originally owned by N.Prakash. He has mortgaged this property in favour of the respondent Banks. The Bank has initiated the proceedings under Securitization & Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) in S.A.No.116/2012. During the pendency of S.A.No.116/2012 before the Debt Recovery Tribunal, the Debt Recovery Tribunal by order dated 19.07.2012 held as follows:
“With the consent of both sides’ learned counsels, present 1st respondent Bank is hereby directed to hold fresh sale in respect of SA schedule property by issuing fresh Sale Notice as required under law. However, the 1st respondent Bank shall issue fresh Sale Notice by giving 15 days’ notice by fixing reserve price of Rs.4.75 crore as required under law by issuing fresh notices. If the said sale takes place in pursuance to the present Sale Notice, the entire sale proceeds of the secured asset shall be kept in an interest-bearing account of the DRT with the 1st respondent Bank. The said amount shall be subjected to final result of the present SA.”
3. Pursuant to that, the Bank has issued Sale Notification as per Annexure-A dated 23.07.2012. The reserve price was fixed as Rs.4.75 crores.
4. Pursuant to the Sale Notification, the petitioners have deposited 10% of the reserve price as EMD amount. Pursuant to that action, petitioners were the successful bidders in terms of the notification. Further, they have deposited 15% amount and the total amount deposited with the Bank comes to 25% of the reserve price.
5. It is the further case of the petitioners that the legal representatives of the guarantor have filed S.A.No.512/2012 before the Debt Recovery Tribunal. The Tribunal by order dated 11.10.2013 has considered the application filed by the petitioners and passed a final order. The application was disposed of with a direction to refund 25% bid amount deposited by the petitioners together with interest, if any accrued with the respondent No.1 Bank on the said deposit. It was also made clear that if no interest is earned on the said bid amount, the respondent No.1 Bank need not pay any interest on the same. Since the Bank has refused to pay the interest, petitioners have approached this Court challenging the impugned order as at Annexure-J.
6. Sri.P.N.Manmohan, learned counsel for the petitioners submits that by order dated 23.07.2012 (Annexure-A) notification has been issued and auction has been conducted. Pursuant to the notification, the petitioners have deposited 25% of the bid amount. The Tribunal by order dated 19.7.2012 is very clear that the amount which is deposited by the petitioners shall be kept in an interest- bearing account with the Bank. But, while passing the impugned order, the Tribunal has refused to grant interest. Hence, he sought for quashing of the order dated 11.10.2013 vide Annexure-J. He further submits that in the application filed by the legal representatives of the guarantor, there is an interim order passed by the Tribunal on 24.8.2012 and it was not brought to the notice of the petitioners by the Bank. Since, the amount is utilized by the Bank, they are entitled for the interest. Without considering this aspect of the matter, the Tribunal is not justified in directing the Bank not to pay interest to the petitioners.
7. Per contra, the learned counsel appearing for the first respondent Bank submits that the order dated 19.7.2012 passed by the Tribunal is very clear that only if sale is concluded and entire sale consideration is paid, then only it carries interest. He further submits that the petitioners themselves have withdrawn from the very sale proceeding and requested for the return of amount. Therefore, they are not entitled for the interest.
8. Heard the learned counsel for the parties.
Perused the records.
9. It is not in dispute that the site bearing Sy.No.11/2, Part C (C1 and C2), Industrial suburb, Manandwadi Road, Khilla Mohalla, Mysore South, Mysore is the property which has been mortgaged by the guarantor to the bank. In respect of the said transaction, there is dispute pending before DRT in S.A.No.116/2012 and S.A.No.512/2012. During the pendency of the proceedings, the Tribunal by order dated 19.7.2012 in S.A.116/2012 has passed the interim order, which is extracted hereinabove.
10. Pursuant to order dated 19.7.2012 passed by the Tribunal, the respondent-Bank has issued the notification dated 23.7.2012 vide Annexure-A fixing the date as 27.8.2012 for conducting auction. The petitioners are one of the bidders who participated for the auction. Pursuant to the notification dated 23.7.2012, they have deposited 10% of the reserve price as EMD. Since the petitioners were the successful bidders, including EMD they have deposited 25% of the sale consideration. Since the matter is in dispute before the DRT, they filed an application under Rule 18 of the Rules for return of bid amount. The application was clubbed with the main matter and was disposed of on 11.10.2013. The relevant operative portion of the order reads as under:
“The bid amount (of 25%) deposited by the bidders i.e., by Respondent Nos.6 to 9 shall be refunded to them by the Respondent No.1 Bank forthwith together with interest, if any, accrued with Respondent No.1-Bank on the said deposit.
However, it is made clear that, if no interest is earned on the said amount (bid amount) deposited by Respondent Nos.6 to 9, the Respondent No.1-Bank need not pay any interest on the same.”
11. The Tribunal while deciding the application has considered the entire amount which is deposited as EMD. In fact, the amount which is deposited as EMD is 10% of the reserve price. Subsequent to the sale, since the petitioners were the successful bidders, in addition to 10%, they have deposited 15%. In total, the petitioners have deposited 25% of the sale consideration amount. The Tribunal has not considered the application filed by the petitioners under Rule 18 of the Rules as to whether 25% of the sale consideration amount carries interest or not in view of the order dated 19.07.2017 passed in SA.No.116/2012. Since there is no clear finding by the Tribunal while considering the application filed under Rule 18 of the Rules, in my opinion, the matter requires re-consideration.
12. Hence, the following order:
a) The writ petitions are allowed.
b) The order dated 11.10.2013 passed by the Tribunal on application filed by the petitioner under Rule 18 of Debt Recovery Tribunal (Procedure) Rules, 1993 in S.A.512/2012 vide Annexure-J in so far as refusing to award interest, is set aside.
c) The matter is remitted back to the Tribunal for consideration of the application filed under Rule 18 of the Debt Recovery Tribunal (Procedure) Rules, 1993 after giving opportunities to both the parties.
c) The parties are directed to appear before the Tribunal on 25.2.2019.
d) Office is directed to send the records to the concerned Tribunal.
Sd/- JUDGE Cm/DM