The bank cannot negotiate a sale with the second highest bidder without conducting a fresh auction if the highest bidder fails to comply with auction conditions.

ORDER :

KRISHNA S. DIXIT, J.

Petitioners being the guarantors to the 2003 loan availed by the 4^th respondent herein are knocking at the doors of Writ Court for assailing the Debt Recovery Appellate Tribunal’s order dated 18.07.2024, whereby appeal in S.A.No.4/2016 filed by the Respondent Nos.1 & 2 herein came to be allowed by setting aside Debt Recovery Tribunal’s order dated 28.4.2023 entered in S.A.No.146/2020. The DRT-II having favoured petitioners’ said S.A., had set aside the Sale Certificate with a direction to refund the sale consideration with interest to the purchasers.

2. FOUNDATIONAL FACTS OF THE CASE:

2.1 4^th respondent vide loan transaction dated 16.06.2003 had borrowed a certain sum of Rs.3,22,00,000/- (Rupees Three Crore & Twenty Two Lakh) only, in the form of Packaging Credit and Guarantees (Inland and Foreign), from the Bank of India. Petitioners happen to be the guarantors and had provided their property by way of mortgage for securing the repayment of loan. Because of failure of debt servicing, Sale Notice qua petitioners’ property came to be issued on 5.12.2015. Petitioners filed S.A.No.4/2016 challenging the same and had obtained a conditional interim order to the effect that the auction sale as scheduled would go on short of confirmation. The e-auction was conducted on 12.1.2016 by the 3^rd respondent herein and the sale in favour of respondent Nos.1 & 2 came to be confirmed on 15.3.2016, since highest bidder failed to confirm with the conditions.

2.2 Petitioners’ S.A.No.4/2016 in which Sale Notice was challenged came to be dismissed on 18.5.2016. They challenged dismissal order in AIR(SA)105/2017 and the DRAT, Chennai, granted a conditional interim order. When this was the position, Banks’ O.A.No.242/2006, later renumbered as T.A.No.109/2017 inter alia against the petitioners came to be dismissed and their obligation as guarantors was held discharged vide order dated 31.7.2017. As a consequence, petitioners withdrew AIR(SA) 105/2017. However, in Banks R.A.No.162/2017, the DRAT vide order dated 30.8.2017 reversed DRT’s order and thereby, decreed Banks’ O.A.No.242/2006. Petitioners had filed W.P.No.20318/2018 challenging the DRAT order and the Coordinate Bench granted ad interim order dated 17.5.2018 restraining sale of the subject property. Subsequently, this petition came to be dismissed on 25.2.2020. The respondent Nos.1 & 2 had paid the balance of 75% of sale price on 19.6.2020, the 25% having been paid earlier itself on the date of auction. Despite more than four years delay in payment, the 3^rd respondent issued the Sale Certificate in their favour inter alia on account of auction dated 12.1.2016 in which they were not the highest bidders.

2.3 Petitioners filed S.A.No.146/2020 challenging the Sale Certificate dated 17.8.2020. DRAT allowed the same on 28.4.2023 and set aside the Sale Certificate with a direction to the 3^rd respondent to refund the sale consideration together with interest to the purchasers and to proceed further in accordance with law. Respondent Nos.1 & 2 filed RA(SA) No.37/2023 challenging the DRT order. During the pendency of appeal, the 3^rd respondent vide order dated 21.11.2023 cancelled the Sale Certificate that was issued to these respondents and further refunded to them Rs.14,47,19,570/- (Rupees Fourteen Crore Forty Seven Lakh Nineteen Thousand Five Hundred Seventy)only, which included interest.

2.4 The 3^rd respondent being the Principal Borrower offered One Time Settlement of Rs.21,00,00,000/- (Rupees Twenty One crore) only, vide letter dated 2.3.2024. The 3^rd respondent vide letter dated 3.7.2024 accepted the OTS subject to the condition that the petitioners should pay the remaining amount of Rs.16,00,00,000/- (Rupees Sixteen crore) only, within thirty days, Rs.5,00,00,000/- (Rupees Five crore) only, having already been paid along with their OTS proposal.

2.5 When this was th