S SATHYAKUMAR Vs. INDIAN OVERSEAS BANK

JUDGEMENT

(1.) W. P. No. 1261/2006 has been filed for issue of a Writ of mandamus directing the respondent therein to refund the amount deposited by the petitioners by way of Earnest Money Deposit pursuant to the auction sale notice in respect of the property bearing plot No. 30-A (SP) Thiruvika Industrial estate, Guindy, Chennai 600 032 with interest as may be fixed by this Hon'ble court whereas W. P. No. 3957/2006 has been filed for issue of a Writ of Mandamus directing the 1st respondent therein to forfeit the sum of Rs. 24 lakhs deposited by the 2nd and 3rd respondents jointly with the 1st respondent towards the reserve price of the property belonging to the petitioner auctioned by the 1st respondent on 9. 12. 2005 and credit the same to the loan account of the petitioner therein. In this order, the parties will be referred as per their rank in W. P. No. 3957/2006.

(2.) THE facts leading to the case are: M/s. Muthuraman Exports is a proprietary concern belonging to the petitioner in W. P. No. 3957/2006. THE petitioner availed various credit limits and loans from the 1st respondent Bank. THE said credit limits and loans were secured by furnishing various movable and immovable properties. THE property covered under the above writ petitions namely, land and building bearing Plot No. 30-A (SP) Thiruvika Industrial Estate, Guindy, chennai 600 032 is one among the various securities furnished to the 1st respondent Bank. THE petitioner/borrower defaulted in repayment. Hence, the 1st respondent invoked the right conferred on the secured creditors and issued a demand notice on the mortgagor on 3. 12. 2002 calling upon them to settle the dues. Since, they did not pay the dues, the 1st respondent decided to take possession of the secured assets and obtained an order from the Chief metropolitan Magitrate , Egmore in Crl. M. P. no. 3483/2004 on 14. 12. 2004 and subsequently, by notification dated 21. 1. 2005, notified for the auction sale of the premises bearing Plot No. 30-A, Thiruvika Industrial Estate, Guindy, Chennai belonging to M/s. Muthuraman Exports under the provisions of Securitisation and reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act in short) read with the rules therein. As per clause 7 of the notification, the intending bidders can inspect the property. Accordingly, respondents 2 and 3 inspected the premises and during such inspection, respondents 2 and 3 found that a third party by name M/s. Perfect Stitch garments Private Limited was in possession of the premises. Even though the sale notification disclosed that the property belonging to M/s. Muthuraman exports was brought for auction, in pursuance of Section13 (4) of the SARFAESI act, it appears that possession of the property was not taken over from the original owner namely, M/s. Muthuraman Exports and respondents 2 and 3 have participated in the auction by depositing a sum of Rs. 24 lakhs towards Earnest money Deposit and submitted their bid on 9. 12. 2005 offering to purchase the property at Rs. 2. 50 crores. Along with the said offer, respondents 2 and 3 had enclosed a letter to the effect that their offer is only a conditional offer, ie. , their offer is valid only if the Bank takes over possession of the premises from the third party/trespasser and in the said letter, they have specifically mentioned that they would comply with the terms and conditions of the auction notice by paying 25% of the bid amount provided the possession of the property vests with the bank, apart from saying that the validity of the offer is only for a period of 2 weeks. On 9. 12. 2005, along with others, respondents 2 and 3 had also participated in the auction. Since, no one had quoted a higher amount than respondents 2 and 3, they were declared as successful bidders. But, with regard to the conditional offer made by them, nothing was informed to them by the respondent Bank. Subsequent to this, a letter dated 9. 12. 2005 was served to them stating that the property was auctioned, as per the condition of the sale i. e, "as IS WHERE IS AND AS IS what IS" and accordingly, respondents 2 and 3 were directed to pay the balance amount representing 25% of the bid amount failing which they were informed that their deposit shall be forfeited. For the same, respondents 2 and 3 sent a reply dated 14. 12. 2005 bringing to the notice of the 1st respondent that in their initial offer, they have specifically mentioned that it was only a conditional offer, as such, the Bank cannot proceed with the offer unless the said condition is complied with. But, no reply was given for the same. Hence, respondents 2 and 3 filed W. P. No. 1261/2006 for the relief, as already stated. As far as W. P. No. 3957/2006 is concerned, this has been filed by one of the partners of M/s. Muthuraman Exports, who availed loan from the 1st respondent and on default in payment, the property was brought to sale and as per the prayer in the said writ petition, the 1st respondent namely, Indian Overseas bank should forfeit a sum of Rs. 24lakhs deposited by respondents 2 and 3 jointly towards the reserve price of the property belonging to the petitioner auctioned by the 1st respondent and credit the same to the loan account of the petitioner.

(3.) LEARNED counsel for the petitioner has contended that though the property in question, actually, is worth of nearly 4 crores, because of the default committed, the same has been auctioned for 2. 5 crores. Apart from that, according to the learned counsel, the 1st respondent has credited the expenses incurred by them for conducting the auction to the loan account of the petitioner and in the event, 1st respondent refunds the amount of Rs. 24 lakhs to respondents 2 and 3, it will be in violation of the terms and conditions of the auction and the bid amount has to be credited to the loan account of the petitioner.