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2018 Supreme(Del) 1351
IN THE HIGH COURT OF DELHI AT NEW DELHI
SIDDHARTH MRIDUL, DEEPA SHARMA, JJ.
Syndicate Bank - Petitioner
Versus
M/s SSP Tradex Private Ltd. & Ors. - Respondents
W.P. (C) 3754 of 2017, CM No. 16540 of 2017 & CM No. 44940 of 2017
Decided On : 04-05-2018
Advocate Appeared:
For the Petitioner: Mr. Adarsh B. Dial, Mr. Yudhishter Sharma
For the Respondents: Mr. B.S. Nagar, Mr. Yogesh Singh
The main legal point established in the judgment is that a party's failure to disclose material information and its repeated challenges to court orders can amount to an abuse of the legal process, leading to the imposition of costs.
Headnote:
Bank - Recovery of Loan - DRT Act, 1993 - Sec. 19, Sec. 20, Sec. 22, Sec. 24, Sec. 25, Sec. 30 - The court discussed the facts and issues related to the recovery of a loan by the petitioner Bank from the borrower and the subsequent auction of the subject property. The court analyzed the conduct of the petitioner Bank, its failure to disclose the pending litigation over the subject property, and its repeated challenges to the court's orders. The court found that the Bank's actions amounted to an abuse of the legal process and imposed costs on the Bank.
Fact of the Case:
The borrower failed to repay the loan, and the petitioner Bank filed a recovery application before Debt Recovery Tribunal-II (DRT-II) seeking permission to auction the subject property. The respondent No. 1 offered to purchase the property but later discovered a pre-existing claim by M/s Ansal Properties. The DRT-II extended the time for payment but later cancelled the sale in favor of respondent No. 1. The Bank succeeded in buying the property at a lower price in a subsequent auction. The Bank's repeated challenges to court orders led to the imposition of costs.
Finding of the Court:
The court found that the Bank's conduct was not bona fide, as it failed to disclose the pending litigation over the subject property and repeatedly challenged court orders. The court held that the Bank's actions amounted to an abuse of the legal process and imposed costs on the Bank.
Issues: The issues revolved around the Bank's failure to disclose the pending litigation over the subject property, its repeated challenges to court orders, and the imposition of costs on the Bank.
Ratio Decidendi: The court's decision was based on the finding that the Bank's conduct was not bona fide, and it had abused the legal process by failing to disclose the pending litigation and repeatedly challenging court orders.
Final Decision: The writ petition was dismissed, and costs of Rs. 2 lakhs were imposed on the Bank. The Bank was directed to release the deposited amount to the respondent No. 1 and pay interest on the said sum.
Deepa Sharma, J.
1. Vide this writ petition, the petitioner/ Bank has impugned the order dated 06.04.2017 passed by learned Debt Recovery Appellate Tribunal (hereinafter referred to as “DRAT”) in Misc. Application No. 274/2017 in Misc. Appeal No. 439/2016.
2. The facts necessary for the present writ petition are as under:-
M/s Nidhi Builders/borrower had taken loan from the petitioner Bank and also mortgaged the property bearing plot no. 9, Sector 20 at Dwarka, Delhi (hereinafter referred to as “subject property”). The borrower and the guarantors failed to repay the loan and an OA No. 07/10 was filed by the petitioner Bank against them for the recovery of Rs. 24.17 crores along with interest before Debt Recovery Tribunal-II, Delhi (hereinafter referred to as “DRT-II”). Permission to auction the subject property for the recovery of the defaulted amount was granted by the DRT-II. The reserve price was reduced from Rs. 28 crores to Rs. 17.85 crores. Thereupon, respondent No. 1 offered to purchase the subject property for a sum of Rs. 21.06 crores subject to Bank getting clearance from DRT and vide its letter dated 04.11.2013 offered to make the payment within 60 days and also offered to pay the earnest money of Rs. 2.10 crores upfront. After the permission granted by DRT-II to sell the subject property, respondent No. 1 deposited a sum of Rs. 2 crores as earnest money on 06.11.2013. Vide order dated 11.11.2013, DRT-II directed respondent No. 1 to make the entire balance payment within 60 days from the date of order. Before the expiry of 60 days, respondent No. 1/purchaser received a letter from M/s Ansal Properties & Infrastructure Ltd. (hereinafter referred to as “M/s Ansal”) wherein it was asserted that the latter had pre-existing rights in the subject property. Respondent No. 1 brought this fact to the notice of the petitioner Bank by writing a letter dated 14.12.2013. Respondent No. 1/purchaser also sought extension of time for making the balance payment by filing an application before DRT-II. Vide order dated 13.01.2014, DRT-II extended the time of payment till 28.02.2014 and on default, ordered the forfeiture of earnest money. Thereupon, respondent No. 1 vide letter dated 24.01.2014 asked for an assurance from the petitioner/Bank that the property was free from any encumbrances and the assurance that he would not have to pay any money to any third party. Respondent No. 1 also wrote to M/s Ansal vide letter dated 07.02.2014 demanding the copy of the orders, if any, of any Court restraining the sale of the subject property. Respondent No. 1 did not deposit the balance amount and filed an affidavit on 27.02.2014 before DRT-II, undertaking to make the balance payment amount only upon the Bank giving an undertaking that the subject property was free from all encumbrances, liens etc. While this affidavit was pending for disposal, the petitioner Bank and the borrower filed an application IA No. 239/14 on 19.03.2014 whereby they sought the cancellation of the permission granted by DRT-II to sell the subject property to respondent No. 1. DRT-II vide its order dated 21.03.2014, even though the affidavit dated 27.02.2014 of respondent No.1 was on file, withdrew the permission and cancelled the sale of the subject property in favour of respondent no. 1 and also granted liberty to the petitioner Bank to participate in the auction and to bid for the subject property. The petitioner Bank thereafter put the subject property to auction and succeeded in buying the subject property for a sum of Rs. 17.85 crores. Unaware of this development, respondent No. 1 filed an IA No. 268/14 on 01.04.2014 for extension of time by six months for making the balance payment of the amount. On this application of respondent No. 1, notice was issued to the petitioner Bank for 07.05.2014. Respondent No. 1 also filed an IA No. 348/2014 on 05.05.2014 seeking the stay of the order of DRT-II dated 21.03.2014 cancelling the sale of the subject property in it’
