STATE BANK OF INDIA vs RECOVERY OFFICER OF DEBTS RECOVERY TRIBUNAL II on 11 October 2023

**JUDGMENT**

1. 1. The Appellant-Bank has filed the present Appeal u/s 30 of the RDB Act seeking to quash and set aside the order dated 19/09/2022 passed by Ld. Recovery Officer ("**Ld. RO**" for short) in Recovery Proceedings No.71/2017 ("**the impugned order**") and to direct the Respondent No.3-Auction Purchaser to pay a sum of Rs.2,36,12,300/-, as compensation amount, towards hypothecated movables, which were taken away by the Respondent No.3-Auction Purchaser without participating in the Public Auction.

2. 2. It is emerged from the record that pursuant to Sale Notice dated 28/03/2022 e-Auction was held on 11/05/2022 for the immovable property (plant and machinery) mentioned in Lot No.4, wherein bid amount of Rs.10.67 Crores mentioned by Respondent No.3 was accepted against the reserve price of Rs.629 Lakhs and thereafter, the Appellant-Bank handed over the possession of the movable properties to Respondent No.3 on 14/07/2022.

3. 3. It is also emerged that at the time of taking physical possession on the said movable plants and machinery, the officer of the Appellant-Bank restrained from taking the Mandrill Die and therefore, the Respondent No.3 preferred an interim application being IA No.309 of 2022 before the Ld. RO praying appropriate directions and clarifications.

1. 4. It is noticed from the record that in response to the aforesaid interim application, the Appellant-Bank submitted that the Respondent No.3-Auction Purchaser has raised the issue after obtaining the peaceful possession of the plant and machinery on 14/07/2022. It was contended by the Appellant-Bank that the Solid M.S. Bar (Dies) and other stock materials lying in the factory premises have never been put to the Auction and the Appellant-Bank had clarified the said facts to all intending bidders at the time of inspection of plant and machinery.

2. 5. It was further submitted by the Appellant-Bank that the reserve price fixed was based on valuation reports dated 05/02/2022 of one Shri Vishal Shah and dated 08/02/2022 of one Shri R. K. Patel, wherein the Solid M.S. Bar (Dies) and other stock materials were not included and therefore, it was not part and parcel of the Auction held on 11/05/2022 and requested the Ld. RO to dismiss the interim application filed by the Respondent No.3.

3. 6. After hearing the rival submissions made by both the parties, the Ld. RO observed in the impugned order dated 19/09/2022 that the hypothecated properties are situated on Plot No.123, 124, 456/A, 456/B, 458, 460, 462/B, 462/C in GIDC Industrial Estate, At & Po. Por – Ramangamdi, Dist.-Vadodara and therefore, two separate valuation reports were obtained in respect of the plant and machinery situated at Plot No.123 &

124 and at 456/A, 456/B, 458, 460, 462/B, 462/C in GIDC Industrial Estate, At & Po. Por – Ramangamdi, Dist.-Vadodara.

7. The Ld. RO also observed that the sale notice dated 28/03/2022 was issued in respect of movable plant and machinery mentioned at Lot No.4 situated at 456/A, 456/B, 458, 460, 462/B, 462/C in GIDC Industrial Estate, At & Po. Por – Ramangamdi, Dist.-Vadodara and against the reserve price of Rs.629 Lakhs, the Respondent No.3 was declared as successful bidder @Rs.10.67 Crores and therefore, the Appellant-Bank handed over the movable plant and machinery mentioned at Lot No.4 on 14/07/2022 to authorized person of the Respondent No.3-Auction Purchaser, who has signed the possession receipt on "As is where is", "As is what is" and "As is whatever" basis.

8. It was observed by the Ld. RO that the Appellant-Bank has not prepared any inspection report at the time of inspection before e-Auction and the value report was also not shown to the intending bidders. It was also observed by the Ld. RO that after Confirmation of Sale, on 10/08/2022, the Appellant-Bank has filed two valuation reports dated 22/07/2022 of one Multi Engineers and dated 27/07/2022 of one Mr. R. K. Patel stating that the earlier reserve price was fixed on the basis of valuation report dated 05/02/2022 and dated 08/02/2022 made by one Vishal Shah and one Shri R.K. Patel, respectively wherein there is no mention in respect of M.S. Bar (Dies) and stock materials. Therefore, the Ld. RO raised a question as to why the Appellant-Bank did not carry out valuation report for the whole piece and parcel / inventory of Lot No.4 situated at 456/A, 456/B, 458, 460, 462/B, 462/C in GIDC Industrial Estate, At & Po. Por – Ramangamdi, District Vadodara.

1. 9. In view of the above, the Ld. RO observed that the attached hypothecated properties were put to Public Auction on "As is where is" basis and the reserve price was also fixed keeping in view of the valuation reports which were on record. Further, it is observed that the provisions relating to sale of movable as well as immovable properties as contained in the said Schedule are applicable for all the parties in the recovery proceedings and the same are also applicable to the Appellant-Bank.

2. 10. With the above observations, the Ld. RO allowed the Interim Application No.309 of 2022 and directed the Appellant-Bank not to restrain the Respondent No.3-Auction Purchaser from taking the movable assets situated at Lot No.4 situated at 456/A, 456/B, 458, 460, 462/B, 462/C in GIDC Industrial Estate, At & Po. Por – Ramangamdi, Dist.-Vadodara.

3. 11. During the course of hearing, Ld. Counsel for Respondent No.2 submitted that Respondent No.2 has preferred SCA No.13596 of 2022 before the Hon'ble High Court of Gujarat challenging the entire auction proceedings and the said proceeding are still pending for final hearing. He further submitted that Respondent No.3 herein has not chosen to appear in the said proceedings, but the Appellant Bank herein is contesting the said proceedings, which shows collusion between the Appellant Bank and Respondent No.3 herein.

1. 12. I have carefully perused the observations made by the Ld. RO in the impugned order dated 19/09/2022 from which it transpires that Ld. RO has initiated recovery proceedings, after following due process of law, pursuant to which, the Respondent No.3 was issued Sale Certificate and allowed to take possession of the property in question. The objection was taken by the Appellant-Bank only when the sale of the auction properties mentioned in Lot No.4 concluded, based on which the physical possession of the same was handed over to the Respondent No.3-Auction Purchaser and therefore, the Ld. RO concluded the Auction Sale of attached properties in Lot No.4 and same reached finality.

2. 13. On perusal of record, it appears that pursuant to the order dated 04/10/2022 passed by this Tribunal, Shri Karunesh Mishra, Deputy General Manager of State Bank of India, Ahmedabad, filed his affidavit vide Exh.A/14 and stated that he had initiated departmental inquiry against the concerned officer and called for his explanation. The concerned officer also submitted his explanation to the competent authority and the same has been produced on record.

3. 14. It is the case of the Appellant-Bank that various dies (Solid M.S. Bar) and other stock materials lying in the factory premises were never put to Auction and Respondent No.-3 has not paid the amount for various dies (Solid M.S. Bar) and stock materials. Such dies and other materials were not forming part and parcel of the plant and machineries (Lot No.4) in the Auction held on 11/05/2022. As such, Respondent No.3 is not entitle to take possession of the said dies (Solid M.S. Bar) and other materials lying in the factory premises. Ld. Counsel for the Appellant-Bank further submitted that there was not a single die which was a part of the plant and machineries, but there were various quantities of dies which were lying in the factory premises of Respondent No.2, which were not attached with the plant and machineries and the same were attached by the order dated 15/06/2022 i.e. subsequent to the order of Auction of Lot No.4 (plant and machineries). As such, the Appellant-Bank obtained two valuation reports on 10/08/2022 valued by Multi Engineers dated 22/07/2022 and valued by R.K. Patel dated 27/07/2022 for the inventory situated in the factory premises. The said valuation reports contain a list of as much as 152 items and the previous valuation reports contained a list of only 75 items. Therefore, the claim of Respondent No.3 over the other items as part and parcel of the auctioned properties cannot be entertained.

1. 15. Considering the aforesaid contentions raised on behalf of the Appellant-Bank and the terms of Auction, it becomes clear that the Appellant-Bank intended to sale movable plant and machineries on "As is where is" and "As is whatever" basis. There is no purpose to exclude the Solid M.S. Bar (dies) and stock materials from the Auction process. There is also no reason for the Appellant-Bank not to carry out valuation report of the whole piece and parcel/inventory situated in the factory premises.

16. Respondent No.3-Auction Purchaser has filed affidavit vide Exh.T/37 stating therein the list of goods/items, the possession of which has been taken by it. Respondent No.3 has further stated in the affidavit that the Mandrill Machine Unit cannot do its mechanical function beyond the Mandrill Die (JUST LIKE PEN WITHOUT NIB) which means that the Mandrill Die is an integral part of the Mandrill Machine. It has been further stated in the said affidavit that more than 60% quantity of the goods/items are still lying in the premises in completely dismantled condition.

17. In view of the aforesaid facts and evidences on record, the Appellant-Bank is not justified in raising dispute with regard to the auctioned plant and machineries subsequent to completion of the entire Auction process. The Appellant-Bank is also not justified in obtaining valuation of various goods and materials as if the same were not forming the part of the plant and machineries put for Auction. The terms of Auction Sale Notice clearly depicted the goods/items of all plant and machineries lying in the factory premises on "As is where is", "As is what is" and "As is whatever" basis. The Auction Purchaser-Respondent No.3 having paid the entire Sale Consideration, is entitled to receive the disputed piece and parcel of plant and machineries lying in the factory premises (may be still in a dismantled condition) and the Appellant-Bank is not entitled to restrain it from taking possession thereof.

18. In view of the aforesaid reasons, the present Appeal being Appeal No.13 of 2022 preferred by the Appellant-Bank has no merit and the reliefs prayed therein do not deserve to be granted. Hence, following order is passed:

**ORDER**

- ➤ The present appeal is hereby dismissed with no order as to cost.

- ➤ Interim relief granted vide order dated 04/10/2022 is hereby vacated.

- ➤ The record of RP No.71/2017 be sent back to Ld. RO.

File be consigned to record.

Pronounced in the open Court on 11^th day of October, 2023.

**(Laxman Madnani)** **Presiding Officer** **DRT-II, Ahmedabad**

\*sruthi\*