Back
2009 Supreme(Mad) 632
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE P.K. MISRA & THE HONOURABLE MR. JUSTICE K. CHANDRU
Dr. R. Chamundeeswari & Others
Versus
Indian Overseas Bank & Others
Writ Petition Nos.6131, 6149, 6662 of 2005, 23002 & 49641 of 2006 and C.R.P. (NPD)Nos.1807 & 1808 of 2006 and M.P.Nos.1, 1 of 2006 and 1 of 2008
Decided on: 25-02-2009
For the Petitioner:M/s. G. Devi, N.K. Sekar, N. Rajasenthoor Pandian, A.L. Somayaji Senior Counsel for Srinath Sridevan, K. Rajasekaran, M/s. T.K. Sampath Associates, Advocates.
For the Respondent:R4, M/s. P.R. Ramakrishnan, N. Mani, Advocates.
The main legal point established in the judgment is the entitlement of the auction purchaser to compensation at a rate of 10% per annum on the deposited amount and the guarantor's obligation to deposit a further sum as a condition for setting aside the auction and the order of confirmation.
Headnote:
DRT - Debt Recovery Tribunal - Recovery of Debts Due to Banks and Financial Institutions Act, 1993, Second Schedule to the Income Tax Act, 1961 - The court set aside the auction sale and order of confirmation due to violation of the order of stay passed by the High Court. The auction purchaser was entitled to compensation at a rate of 10% per annum on the deposited amount. The guarantor was required to deposit a further sum of Rs.15,00,000 as a condition precedent for setting aside the auction and the order of confirmation. The auction purchaser was also entitled to a refund of the amount paid towards bondage fee and registration fee.
Fact of the Case:
The case involved a dispute related to the auction sale of a property by the Debt Recovery Tribunal (DRT) and the violation of the order of stay passed by the High Court. The auction purchaser claimed compensation for the violation of the order of stay.
Finding of the Court:
The court set aside the auction sale and order of confirmation due to violation of the order of stay passed by the High Court. The auction purchaser was entitled to compensation at a rate of 10% per annum on the deposited amount. The guarantor was required to deposit a further sum of Rs.15,00,000 as a condition precedent for setting aside the auction and the order of confirmation. The auction purchaser was also entitled to a refund of the amount paid towards bondage fee and registration fee.
Issues: Violation of the order of stay passed by the High Court, entitlement of the auction purchaser to compensation, and the guarantor's obligation to deposit a further sum as a condition for setting aside the auction and the order of confirmation.
Ratio Decidendi: The court held that the auction sale and order of confirmation were set aside due to the violation of the order of stay passed by the High Court. The auction purchaser was entitled to compensation at a rate of 10% per annum on the deposited amount. The guarantor was required to deposit a further sum of Rs.15,00,000 as a condition precedent for setting aside the auction and the order of confirmation. The auction purchaser was also entitled to a refund of the amount paid towards bondage fee and registration fee.
Final Decision: The court set aside the auction sale and order of confirmation, directed the refund of the amount paid towards bondage fee and registration fee to the auction purchaser, and required the guarantor to deposit a further sum as a condition for setting aside the auction and the order of confirmation.
Common Judgment: (P.K. Misra, J.)
For convenience, the Debt Recovery Tribunal and the Debt Recovery Appellate Tribunal are hereinafter referred to as "DRT" and "DRAT" respectively.
Mrs.S. Pareealam, wife of Mr.A.K. Srikanth, is the petitioner in W.P.No.6149 of 2005. She is the Proprietrix of M/s. Verismo Impex. One Aishwaraya & Company has transferred a Letter of Credit No.10991 dated 11. 2001. The applicant of such Letter of Credit is Supreme Impex Agency, Singapore and the beneficiary was Aishwaraya & Company. The petitioner also received another Letter of Credit from Supreme Impex vide L.C.No.LCDP 1910 issued by UCO Bank, Singapore. On the basis of these two Letters of Credit, she had approached the Indian Overseas Bank (in short "IOB") for a packing credit to a tune of Rs.50 lakhs. IOB had given credit to a tune of Rs.25 lakhs. In connection with the aforesaid transaction, IOB filed O.A.No.304 of 2003 before the DRT against M/s. Verismo Impex, represented by its Proprietrix and Mrs. Pareemalam and her husband A.K. Srikanth as borrowers and Dr. Shantha Ramakrishna, who was the guarantor. An ex-parte final order was passed by DRT on 35. 2004 in such Original Application by allowing the claim of the bank.
1.1 The guarantor, who was Respondent No.4 in such Original Application, filed M.A.No.204 of 2004 for setting aside the ex-parte final order. She also filed M.A.No.203 of 2004 for condonation of delay in filing such application and M.A.No.207 of 2004 for stay of operation of the ex-parte final order. A common order was passed in such applications on 10. 2004 by the DRT to the following effect:-
". . . As it is a debatable issue and hence bank is directed to file a counter. As the auction sale is scheduled on 10. 04, hence a conditional opportunity is granted to petitioner to deposit 25% of the OA claim amount to the Recovery Officer or to the bank. On furnishing proof of payment, the Recovery Officer may defer the auction proceeding.
Apart from this the def. shall bear the cost of auction sale failing which IA for stay shall stand as rejected. The case be called on 211. 04."
1. 2 The guarantor had filed W.P.No.28756 of 2004 challenging the proceedings initiated both under DRT and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (in short "SARFAESI Act"), wherein an interim order of stay was passed on 10. 2004 in WPMP.No.34927 of 2004. On behalf of the Bank, WVMP.No.2002 of 2004 was filed in W.P.No.28756 of 2004. Taking note of the fact that an affidavit had been filed by the Bank that it was withdrawing the notice under the SARFAESI Act and the fact that a decree had been obtained in O.A.No.304 of 2003, the order of stay was vacated by order dated 1. 2005.
1. 3 On 21. 2005, a fresh notice was published by the Recovery Officer notifying that the auction of the property furnished as security by such guarantor shall be held on 3. 2005.
1. 4 The guarantor had filed M.A.No.52 of 2005 before the DRT for modifying the earlier order dated 10. 2004 relating to deposit of 25% of the claim amount. In the meantime, the principal debtors had filed M.A.Nos.356 and 357 of 2004 for setting aside the ex-parte final order. On 12. 2005, while dealing with such matters arising out of O.A.No.304 of 2003, the DRT had passed the following order:-
"Heard the counsel for both the parties in respect of M.A.Nos.203, 204 and 207/04. The petitioner in these M.As has not complied with the orders of this court by depositing 25% of the O.A. claim. Hence, the Recovery Officer is liberty to proceed further with the auction in accordance with order dt.10. 04, which is self-explanatory. The petitioner. D4 moved MA.52/05 for modification of the earlier order but after hearing the counsel, I am not convinced to modify the order as the court has already ordered to deposit 25% of the OA claim without prejudice to the rights and contentions of the merits of the OA and this MA is partly allowed in c
