IMPORTANT POINT
Borrower must be informed about date of auction of secured asset.

JUDGMENT

Ajay Rastogi, J.

1. Leave granted.

2. The present appeal is directed against the judgment and order dated 10th March, 2016 passed by the Division Bench of the High Court of Uttarakhand, Nainital whereby the High Court while reversing the finding returned by the learned Single Judge under its order dated 21st July, 2015 upheld the re-auction proceedings initiated by the first respondent (Punjab National Bank-secured creditor) held on 1st May, 2014 and granted liberty to the appellant to initiate independent proceedings before the competent forum for recovery of the amount which stood forfeited by the first respondent.

3. The seminal facts culled out from the record and relevant for the purpose are that the third respondent borrowed money from the first respondent. However, the third respondent later became defaulter and its bank accounts became NPA and ultimately notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter being referred to as the “Act 2002”) was issued and thereafter assets of the borrower were taken into possession under Section 13(4) of the Act, 2002. In furtherance thereof, auction notice was published by the Bank on 18th June, 2013 with reserve price of Rs.1.19 crores inviting the bids in reference to the mortgage property of the borrower.

4. The appellant who was the successful bidder furnished his bid of Rs.2,01,00,000/- on 22nd July, 2013 and deposited earnest money of Rs.11,19,000/- as per the condition of the bid/auction which successful bidder has to deposit (25% of the bid amount) on acceptance of the bid and that was deposited on 27th July, 2013.

5. On 25th July, 2013, the borrower (third respondent) preferred an appeal before the Debt Recovery Tribunal, Lucknow (hereinafter being referred to as “DRT”) assailing the auction notice dated 18th June, 2013. DRT vide order dated 26th July, 2013, after hearing the counsel for the borrower, passed an interim order directing that since auction is to be held on that day itself (i.e. 26th July, 2013), the Bank is at liberty to proceed with the auction but confirmation of the sale shall be kept in abeyance and await further orders of DRT.

6. The auction was held on 26th July, 2013. It is an admitted fact that the appellant was completely unaware of the interim order passed by DRT on 26th July, 2013. As the highest bidder, the appellant had to deposit 25% of the bid amount which he deposited on 27th July, 2013 amounting to Rs.38,35,000/- (balance of 25% of the bid) which the first respondent accepted.

7. In total, the appellant deposited an amount of Rs.50,25,000/- which included earnest money and 25% of the bid amount. The DRT later vacated the interim order due to non-prosecution on 14th October, 2013 but the substantive proceedings before the DRT remained pending and were posted for 18th October, 2013. Since the appellant was completely unaware of the pending proceedings before the DRT initiated at the instance of the third respondent(borrower) and it was nowhere indicated in the auction notice which ordinarily in the instant fact situation would not have been possible but the date when auction was held on 26th July, 2013 and the appellant was called upon to deposit the earnest money and 25% of the bid amount, no such information was extended to the appellant about the pending proceedings in reference to the auction notice published on 18th June, 2013 before the DRT.

8. The appellant was, for the first time, informed by a communication dated 18th October, 2013 wherein he was asked to pay the balance amount as interim relief has been rejected by DRT. The appellant responded to the communication made and submitted that he volunteers to pay the balance amount provided the matter pending with DRT is decided. Certain communications were made between the appellant and the first respondent. However, the first respondent later informed the appellant by communication dated 28th Oc