Ms Eco Trade Reclaimed Rubber Pvt Ltd vs SHRI VITTHAL AGRO PRODUCTS P LTD on 25 May 2022

JUDGMENT

(Delivered on 25th May, 2022)

1. The Petitioner/Auction Purchaser has filed this application for recovery of Rs.6,91,63,707/- towards refund of auction amount and interest thereon @18% per annum and security charges and legal charges from respondent No.1 bank.

The factual matrix of this application can be summarised as under:

2. The respondent No.2 Vitthal Agro Products Pvt. Ltd., was borrower of the respondent No.1 bank who committed default in repayment of the loan. Therefore, the respondent No.1 bank invoked the provisions of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short “the SARFAESI Act”) and sold the mortgaged property by public auction on 8th November, 2011 to the Petitioner for Rs.1,46,25,000/- and charged interest to the tune of Rs.1,36,862/- for delay in payment of amount by ten (10) days. Thus, the Petitioner deposited total Rs.1,47,61,862/- with respondent No.1 bank. Thereafter, two Sale Certificates, one for immovable property and another for movable property therein were issued and in pursuance of that possession of the mortgaged property was handed over to the Petitioner on 23rd February, 2012. Thereafter, the respondent No.2 Vitthal Agro Products Pvt. Ltd had moved this Tribunal and challenged the measures taken by respondent No.1 bank by filing Securitisation Application No.26/2012 under the provisions of SARFAESI Act and the said application was allowed by this Tribunal by passing order on 2nd June, 2018 and thereby auction sale conducted by respondent No.1 bank was quashed and set aside and Sale Certificates were declared to be invalid. The respondent No.1 wilfully failed to refund the auction amount deposited by the Petitioner along with interest since 2012, after disposal of SA No.26/2012 filed by respondent No.2 Vitthal Agro Products Pvt. Ltd. In pursuance of these facts the Petitioner by issuing Notice demanded refund of the auction money paid by it in auction conducted by respondent No.1 bank with request to take back the possession of the auctioned property as Petitioner was no more title holder of the said property. The respondent No.1 filed Appeal along with delay condonation application No.709/2019 challenging the order of this Tribunal passed in SA No.26/2012 filed by respondent No.2 Vitthal Agro Products Pvt. Ltd., but the same was dismissed by Hon’ble Debts Recovery Appellate Tribunal (DRAT), Mumbai on 8th April, 2021. Therefore, on 12th April, 2021 the Petitioner issued letter to respondent No.1 bank for refund of auction amount along with interest @18% per annum and ancillary cost. However, the respondent No.1 failed to refund the same. Thus, the respondent No.1 is misusing the funds received from the Petitioner with malafide intention and thereby causing loss to the Petitioner. The details of amount claimed by the Petitioner are as under: Sr. No. Particulars Amount (INR)

1. Principal Amount along paid at the time of auction along with late fee and interest on late fee (14625000 + 136862) 14761862

2. Interest at 18% from the period 22.02.2012 till 08.04.2021 52203845

3. Security charges till 31.03.2021 1617000

4. Legal charges till 08.04.2021 850000

5. (Less) Scrap material moved from Site -13450 kg*Rs.20 269000

Total 69163707

Further, DRT, Pune decided SA No.26/2012 filed by respondent No.2 Vitthal Agro Products Pvt. Ltd., on 2nd June, 2018. However, DRT, Pune failed to direct respondent No.1 bank to refund amount to the Petitioner which was paid at the time of auction. Thereafter, Notices dated 10th September, 2018 was issued. The Petitioner again approached respondent No.1 bank on 12th April, 2021 for refund of auction amount but respondent No.1 bank failed to refund the same. Thus, there is continuous cause of action and therefore, the application is filed within the period of limitation of three (03) years. Therefore, the Petitioner has prayed to direct the respondent No.1 bank to refund the auction amount along with interest @18% per annum from 22nd February, 2012 till the date of actual realisation of the said amount along with ancillary cost of security expenses and legal charges.

3. The respondent No.1 bank by filing reply (Exhibit-7) resisted the application. It is contended that respondent bank is not liable to pay the amount towards interest, charges and cost as claimed by the Petitioner. Further, the present application is not maintainable as there is no provision to file such application seeking direction for refund of purchase amount under auction. Therefore, the application may be rejected.

4. The respondent No.2 appears to be formal party.

5. Heard arguments of both the parties.

6. The learned Advocate appearing for the Petitioner reiterates facts mentioned in the application and also filed Written Notes of Arguments (Exhibit-8) which I read. The learned Advocate appearing for respondent No.1 bank also reiterates facts mentioned in the reply.

7. Perused the annexures to the application. Admittedly, the property mortgaged by respondent No.2 Vitthal Agro Products Pvt. Ltd. with respondent No.1 bank have been purchased in auction by the Petitioner on 8th November, 2011 and they have paid/deposited Rs.1,47,61,862/- (14625000 + 136862). It is also admitted fact that the respondent No.1 bank issued two Sale Certificates to the Petitioner one for immovable property and another movable property and handed over the possession of auctioned property to the Petitioner on 23rd February, 2012. It is also not disputed that the respondent No.2 Vitthal Agro Products Pvt. Ltd. had filed SA No.26/2012 before this Tribunal challenging measures taken by the respondent

No.1 bank which was decided in its favour. The Operative Order passed by this Tribunal in that proceeding is reproduced as under:

“ ORDER

1. Securitization Application No.26/2012 is allowed with cost.

2. The auction sale conducted by defendant no.1 is hereby quashed and set aside and consequently, the two sale certificates both dated 22nd February, 2012 issued by defendant no.1 in favour of defendant no.2 are hereby set aside. “

8. On cursory perusal of the Operative Order of Judgment passed in SA No.26/2012, it appears that there is no direction to respondent No.1 bank to refund the auction amount to the Petitioner. However, it was bounden duty of respondent No.1 bank to refund the auction amount to the Petitioner immediately after judgment is delivered by this Tribunal in SA No.26/2012 or after rejection of delay condonation Application No.709/2019 filed before Hon’ble DRAT, Mumbai by respondent No.1 bank. However, respondent No.1 bank failed to do so.

9. Since auction sale of mortgaged property of respondent No.2 Vitthal Agro Products Pvt. Ltd. is set aside and quashed vide order dated 2nd June, 2018 passed in SA No.26/2012, the Petitioner was entitled for refund of auction money. However, respondent No.1 bank failed to refund the auction amount despite service of Demand Notices by the Petitioner. Therefore, the Petitioner is entitled for auction amount of Rs.1,47,61,862/- from the respondent No.1 bank.

10. The Petitioner has claimed interest @18% per annum on the auction amount for the period from 23rd February, 2012 till 8th April, 2021 which comes to Rs.5,22,03,845/-. However, in my opinion the Petitioner is not entitled for said amount as Petitioner was in physical possession of auctioned property from 22nd February, 2012 and litigation was pending before this Tribunal and Appellate Tribunal during this period. However, the Petitioner is entitled for interest on the amount recoverable from respondent No.1 bank from the date of filing of this application till full realisation of the said amount.

11. The Petitioner has claimed interest @18% per annum which in my opinion is exorbitant because the respondent bank was not at fault as SA No.26/2012 was decided by this Tribunal on 2nd June, 2018 which was filed by respondent No.2 Vitthal Agro Products Pvt. Ltd. and possession of auctioned property was with Petitioner from February, 2012. Having regard to the current policy of rate of interest, I am of the opinion that interest @9% per annum would be just and reasonable rate of interest which the Petitioner is entitled to receive on the amount due from respondent No.1 bank.

12. The Petitioner has claimed Rs.16,17,000/- towards security charges. The Petitioner suo motu has appointed security guards for protection of auctioned property which was in its possession. Therefore, the Petitioner is not entitled for the same.

13. Further, the Petitioner has claimed Rs.8,50,000/- towards legal charges but it has not produced the receipts and therefore, not deserve for the same, though entitled for the costs of this application.

14. In light of above observations I hold that application deserves to be partly allowed. Hence, I pass the following order:

ORDER

(A) The application is partly allowed. (B) The respondent No.1 bank shall pay/refund the auction amount of Rs.1,47,61,862/- (Rupees One Crore Forty-Seven Lakhs Sixty-One Thousand Eight Hundred and Sixty-Two only) together with interest @9% per annum from the date of filing of this application i.e. 17th June, 2021 till today within one month the date of this order. (C) If respondent No.1 fails to comply this order, it shall pay future interest @9% per annum on the amount due i.e. Rs.1,47,61,862/- from the date of filing of this application i.e. 17th June, 2021 till full realisation of the said amount. (D) The respondent No.1 shall pay costs of this application to the Petitioner and bear its own. (E) Pronounced in open Court. Sd/- (Dilip G Murumkar) Presiding Officer Debts Recovery Tribunal, Pune