2023 Supreme(Cal) 1009

IN THE HIGH COURT AT CALCUTTA
SABYASACHI BHATTACHARYYA, J.
Avlokan Commosales Private Limited and another – Appellants
Versus
State Bank of India and another – Respondent
WPO No. 2166 of 2022
Decided on : 14-07-2023

A Sale Certificate issued by a third party assignee in contravention of a restraint order is void ab initio and cannot be given effect to.

Headnote:

SALE CERTIFICATE - SECURED ASSETS RECOVERY ENFORCEMENT OF SECURITY INTEREST ACT, 2002 - SECTION 13(4), 17 - INTERPRETATION - SALE CERTIFICATE ISSUED BY THIRD PARTY ASSIGNEE - VALIDITY - INTEREST ON REFUND - CALCULATION - HELD, the sale certificate issued by third party assignee is void ab initio and the bank is liable to pay interest on the refund amount from the date of deposit.

Fact of the Case:

The petitioner participated in an auction sale held by the respondent bank under the SARFAESI Act. The bank initially did not execute any Sale Certificate in favor of the petitioner. Upon repeated communications by the petitioners, the bank sought refund of the consideration money paid by them for such sale. The bank initially took a stand that the concerned Tribunal had directed the bank not to issue Sale Certificate and that no further steps shall be taken till hearing the disposal of the SA. The bank later wrote to the petitioners that since the petitioners had requested the refund of the bid amount along with interest and other charges with compensation, the matter was sub judice before the DRT and shall be put up before the said Forum to seek appropriate direction. Upon the petitioner writing a further letter, reiterating the petitioners claim for refund of the bid amount, the bank wrote back indicating that it was under process of assigning the loan account of the borrower to one Phoenix ARC Private Limited and would inform the petitioner to take up the matter with Phoenix once the deed of assignment was executed. Subsequently, the loan account was apparently assigned to Phoenix. A purported Sale Certificate was issued by Phoenix in favor of the writ petitioners, referring therein to the settlement between Phoenix and the corporate debtor Sancheti. The petitioners filed the present writ petition and an order was passed observing that the sale had become infructuous by virtue of a settlement dated March 1, 2022 and the writ petitioners were entitled to refund of money. The SBI conceded to the same and prayed for extension of time to deposit the amount, thereby complying with the order dated May 17, 2022. The SBI, in such compliance, had deposited the principal amount of Rs.87,11,644 with the Registrar of the High Court. The SBI heavily relies on the Sale Certificate, which tantamounts to finalization of the conveyance to the petitioner. As such, the sale has crystallized and no further payment can be made. It is further argued that the petitioners have not prayed for cancellation of the sale deed, which is a valid document of transfer. In the absence of the same, the refund claimed by the petitioners is bad in law.

Finding of the Court:

The court held that the purported Sale Certificate issued by Phoenix alone was palpably de hors the law and irregular as well as illegal. Such Sale Certificate, thus, was void ab initio, being in contravention of a restraint order, and, on the grounds as indicated above, cannot be given effect to at all. Thus, for all practical purposes, the Sale Certificate having not been issued in due process of law to the petitioners, the auction sale never went through or was finalized. Thus, there is no scope of further “setting aside” of such sale, which was never finalized in the true sense of the term. Taking the spirit of the order of the co-ordinate bench dated July 16, 2022, for all practical purposes, it is to be deemed that the sale never went through due to the conduct of the bank in accepting the OTS after the order of the co-ordinate Bench from the borrower and taking the amount in terms of such OTS. Hence, there cannot be any doubt that the bank is liable to pay interest on the sum of Rs.55,19,250/- as per the spirit of the direction dated July 16, 2021 passed in WPO No.199 of 2021.

Issues: 1. Whether the Sale Certificate issued by the third party assignee is valid? 2. Whether the bank is liable to pay interest on the refund amount? If so, from what date?

Ratio Decidendi: 1. The court held that the Sale Certificate issued by Phoenix alone was palpably de hors the law and irregular as well as illegal. Such Sale Certificate, thus, was void ab initio, being in contravention of a restraint order, and, on the grounds as indicated above, cannot be given effect to at all. 2. The court held that the bank is liable to pay interest on the sum of Rs.55,19,250/- as per the spirit of the direction dated July 16, 2021 passed in WPO No.199 of 2021.

Final Decision: The court allowed the writ petition and directed the Registrar, Original Side to release the entire amount as deposited by the respondent-Bank with the Registrar, Original Side pursuant to the direction dated May 17, 2022 passed in the present writ petition, along with interest accrued thereon, to the petitioners and/or their duly authorized representative, within one month from date upon withdrawal of the same from the account where the same has been deposited.