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IN THE HIGH COURT OF CALCUTTA
Tapabrata Chakraborty, Raja Basu Chowdhury, JJ.
West Bengal Financial Corporation - Appellant
Versus
Annapurna Engineering And Manufacturing Private Limited And Others - Respondent
F.M.A. 707 of 2013
Decided On : 29-06-2022
Forfeiture - Sale of Fixed Assets - State Financial Corporation Act, 1951 - Section 29 - The judgment discusses the appellant's authority to sell fixed assets of a unit, the Company's failure to make payment, and the subsequent forfeiture of the deposit. The court considered the appellant's claim of being a deemed owner under Section 29 of the Act, the Company's contention of lack of disclosure of material defects in the property, and the applicability of Section 55(1)(a) of the Transfer of Property Act, 1882.
Fact of the Case:
The appellant, West Bengal Financial Corporation, published a sale notice inviting offers for sale of fixed assets of a unit. The Company offered to purchase the assets, deposited earnest money, and revised its offer. The appellant agreed to sell the assets but later cancelled the offer and forfeited the deposit due to the Company's failure to make the balance payment. The Company sought a refund through a writ petition.
Finding of the Court:
The court found that the appellant failed to disclose encumbrances relating to the auctioned property, preventing the Company from making payment within the stipulated time. The court held the appellant's conduct as arbitrary and unjustified the forfeiture of the deposit. It concluded that the appellant was in breach of contractual terms and dismissed the appeal, directing the release of the deposit to the Company.
Issues: The issues involved the appellant's authority to sell the assets, the Company's failure to make payment, the lack of disclosure of material defects in the property, and the justification for the forfeiture of the deposit.
Ratio Decidendi: The court held that the appellant's failure to disclose material defects in the property and the lack of opportunity to remedy the breach disentitled the appellant to forfeit the deposit. It also emphasized that time was not the essence of the contract and the appellant was in breach of contractual terms.
Final Decision: The appeal was dismissed, and the deposit made by the appellant was directed to be released in favor of the Company.
JUDGMENT
Raja Basu Chowdhury, J. - The present appeal is directed against the judgment dated 19th October, 2012 passed in WP No. 19306(W) of 2006 by which the learned Single Judge was inter alia pleased to direct the appellant to refund the forfeited deposit to the tune of Rs. 14.20 lakhs to the writ petitioners along with interest @ 12 % per annum from the date of institution of the writ petition till the date of payment. The appellant was also directed to pay costs of Rs. 20,000/- to the writ petitioners.
2. Shorn of unnecessary details, the facts are that on 12th May, 2004, the appellant, being the West Bengal Financial Corporation, published a sale notice in exercise of power under Section 29 of the State Financial Corporation Act, 1951 (hereinafter referred to as the Act of 1951) inviting offers for sale of various fixed assets inter alia including those of Bandel Ceramics Private Limited (hereinafter referred to as the Unit). The fixed assets of the Unit which formed part of the said advertisement was 'Land :
About 2 acres with Shed & Building, Jaw-Crusher, Pan Mill, Pulveriser, Muller Mixture, 150 T Friction Scrow Press, Down Draft Kiln etc. with laboratory equipments'. The writ petitioner no.1, namely, M/s Annapurna Engineering and Manufacturing Private Limited (hereinafter referred to as the Company) being interested had offered to purchase the aforesaid fixed assets of the Unit which was offered to be sold and quoted a purchase price of Rs. 42,00,000/- (Rupees Forty Two Lakhs only). In terms of the sale notice the Company also deposited 10% of the offer price as earnest money. By a letter dated 2nd December 2004 the Company revised its offer to Rs. 43,00,000/- (Rupees Forty Three Lakhs only). In response to the aforesaid revised offer of the Company, the appellant issued a letter of sale dated 2nd December, 2004 thereby agreeing to sell and transfer the fixed assets of the Unit in favour of the Company for a consideration of Rs. 43,00,000/- (Rupees Forty Three Lakhs only). The Company was not in a position to pay the balance consideration within the time stipulated by the appellant. However, in order to show its bona fide, a demand draft of Rs. 10,00,000/- (Rupees Ten Lakhs only) was forwarded to the appellant by cover of a letter dated 23rd December, 2004 with a request to extend the period by 21 (Twenty-One) days from 27th December, 2004 for making payment of the balance consideration of Rs. 28.80 lakhs. The appellant, while acknowledging the aforesaid letter dated 23rd December 2004 and while accepting the request for extension of time, imposed a condition by a letter dated 24th December, 2004 that the Company would be required to pay interest @ 9.5% per annum on the balance consideration, for the extended period with effect from 28th December, 2004. Thereafter by a letter dated 17th January, 2005, the appellant cancelled and withdrew its offer for sale of assets of the Unit and also purported to forfeit the money deposited by the Company including the earnest money since the Company did not make payment of the balance consideration within the stipulated period i.e. within 14th January, 2005.
3. Records would further reveal that the Company's banker, Vijaya Bank, while processing the Company's loan application informed the Company by letter dated 24/25th January, 2005 that there was a charge over the fixed assets of the Unit, which was offered to be sold, in favour of State Bank of India, Chinsurah Branch (hereinafter referred to as SBI) and requested the Company for 'No Due Certificate/No Objection Certificate' from SBI. A copy of the said letter was also marked to the appellant. While acknowledging the letter issued by Vijaya Bank, the appellant by a letter dated 27th January, 2005 clarified that SBI had charge on the current assets for working capital loan of the Unit, while the appellant was having absolute charge on the fixed assets of the Unit and that on account of failure on the part of the Company to make pay
AI
The judgment establishes that failure to disclose material defects in the property and the lack of opportunity to remedy the breach disentitles the seller from forfeiting the deposit. It also emphasi....
The excess amount paid by the petitioner, beyond 25% of the bid amount, could not be considered as a deposit under Rule 9, and any retention of amount by the respondent without authority of law would....
The main legal point established in the judgment is that the Bank's actions must adhere to the statutory provisions and be fair and transparent, especially in the context of property auctions under t....
Where a sum is named in a contract as a liquidated amount payable by way of damages, only reasonable compensation can be awarded not exceeding amount so stated. Similarly, in cases where amount fixed....
A seller must prove ownership and clear title to enforce forfeiture of an earnest deposit, especially when multiple legal heirs dispute the transaction.
The court emphasized the duty to disclose material facts in sale notifications and the principle of doing justice by promoting honesty and good faith.
Forfeiture of 25% bid amount under SARFAESI Rules 9(5) is mandatory on default, unaffected by higher subsequent sale or absence of loss; equity cannot override statutory provision. (28 words)
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