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2022 Supreme(Bom) 2671
IN THE HIGH COURT OF BOMBAY
S.S. Shinde, Sarang V. Kotwal, JJ.
Navnath Dattatray - Appellant
Versus
Balasaheb Bhapkar - Respondent
Criminal Appeal No. 788 of 2021
Decided On : 08-04-2022
R.S. Bade, Advocate, Y.M. Nakhwa, Advocate, V.M. Rathod, Advocate, Sabina Ansari, Advocate, Lalita Savekar, Advocate
IMPORTANT POINT
The court established that under the MPID Act, properties attached for the benefit of depositors must be sold through a public auction process to ensure fair market value, and private sales at lower prices are not permissible.
Headnote:
MPID Act - Property Auction and Sale - Sections 4, 11 - The court discussed the provisions of the Maharashtra Protection of Interest of Depositors (In Financial Establishments) Act, 1999, particularly Section 4 regarding property attachment and Section 11 concerning the auction process. The court emphasized that the recovery officer is not authorized to conduct private sales and must adhere to the auction process to ensure fair market value is obtained for the benefit of the investors. This legal framework influenced the court's decision to reject the appellant's application for purchasing the property at a price lower than the reserved price set by SEBI.
Fact of the Case:
The appellant appealed against the rejection of his application to purchase a property attached under the MPID Act for Rs.1,21,00,000.00. The property had been unsuccessfully auctioned multiple times, and the appellant had previously deposited Rs.60,50,000.00 to demonstrate his interest. The SEBI opposed the application, arguing that the appellant's offer was below the reserved price of Rs.1,71,00,000.00.
Finding of the Court:
The court found that the appellant's offer was significantly lower than the reserved price set by SEBI. It upheld the Special Judge's decision, which stated that the auction process must be followed to ensure a fair sale price for the benefit of the investors, and that the recovery officer could not engage in private sales.
Issues: Whether the appellant could purchase the property at a price lower than the reserved price set by SEBI, and whether the court could bypass the auction process established under the MPID Act.
Ratio Decidendi: The court held that adherence to the auction process is essential to protect the interests of investors and that the recovery officer is not authorized to conduct private sales. The appellant's lower offer could not justify bypassing the established auction procedure.
Final Decision: The appeal was dismissed, and the court upheld the Special Judge's order rejecting the appellant's application to purchase the property.
JUDGMENT/ORDER
1. This is an Appeal U/s. 11 of The Maharashtra Protection of Interest of Depositors (In Financial Establishments) Act, 1999 (for short ' MPID Act'). The Appellant has challenged the order dtd. 20/08/2021 passed by the designated court under the MPID Act, City Civil & Sessions Court, Mumbai, in Miscellaneous Application No.51 of 2021 in MPID Special Case No.7 of 2016 in C.R.No.83 of 2015. The Respondent Nos.1, 2 and 3 are the original accused. The Appellant is interested in purchasing one of the properties of the accused which was attached under the provisions of MPID Act. By the impugned order the learned Special Judge rejected the appellant's application for permission to purchase the said property for Rs.1,21,00,000.00. The amount deposited by the applicant was directed to be returned to him by the Registry of the Sessions Court.
2. The brief background of this Appeal as mentioned in the police report filed before the MPID Court in the proceedings preferred by the present applicant are as follows:
The representative authorized by the Securities and Exchange Board of India (for short 'SEBI') had lodged an F.I.R. with the Economic Offences Wing, Mumbai against M/s. Sai Prasad Food Ltd. and other associate companies and their Directors for cheating about 39 lakhs investors to the tune of Rs.4700.00 crores. The accused were arrested. Three notifications were issued U/s.4 of the MPID Act on 23/03/2016, 28/06/2016 and 31/03/2017. In the first two notifications, properties of the accused were attached and the attachment was made absolute vide third notification.
The subject matter of this Appeal is the property at third floor, Trade Tower, Plot No.59, Gut No.215/1, 215/2, 218, 219, 277/1 and 277/2, Pune-Solapur road, opposite Akashwani and Tekawade petrol pump, Hadapsar, Pune. (for short 'said property'). The appellant had showed his willingness to purchase that property for Rs.1,21,00,000.00. By previous orders her was permitted to deposit Rs.60,50,000.00 with the Registry of the Sessions Court. However, by the impugned order the application for permission to purchase the property was rejected and his amount was directed to be refunded back to him as mentioned earlier.
3. Before the Appellant, one Ghanshyam Zanwar had showed his interest in purchasing the said property for Rs.1,20,00,000.00. However, he had not deposited the complete EMD amount. The Special Judge under MPID Act vide his order dtd. 09/07/2019 directed the SEBI to accept the bid of said Ghanshyam Zanwar. In the meantime, the accused also brought two prospective buyers to purchase the said property for Rs.1,40,00,000.00. But neither Ghanshyam Zanwar nor those buyers brought by the accused could purchase the said property. Therefore, the Special Judge passed an order on 07/08/2019 in M.A.No.1120 of 2019 in the said case and directed the SEBI to conduct fresh e-auction of the property within two weeks from the date of order by issuing e-auction notice.
4. The case of the appellant is that the SEBI had tried to auction the property for 5 times in the past i.e. on 04/09/2017, 20/04/2018, 14/06/2018, 17/01/2019 and 22/11/2019 for the reserved price ranging from Rs.1,17,00,392.00 to Rs.1,71,00,000.00, but the auction was not successful. The applicant preferred M.A.No.51 of 2021 in the said case showing his willingness to purchase the said property for Rs.1,21,00,000.00, as mentioned earlier. To show his bonafides, the appellant had deposited Rs.60,50,000.00 with the Registry of the Sessions Court. The Investigating Officer objected grant of that application by filing his say. It was contended by him that the reserved price was Rs.1,71,00,000.00 and the appellant's offer was much less. The SEBI also opposed the appellant's application and contended that the recovery officer was not empowered to enter into the private sale with the appellant. It was further contended by SEBI that, he can participate in the next auction where all the prospective bidders would get a
