Bombay High Court
Hotel Avion Private Ltd vs The State Of Maharashtra And Ors on 14 July, 2023
Bench: R.P. Mohite-Dere, Gauri Godse
2023:BHC-AS:19475-DB
905.1127.18 apeal.docx
Iresh
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 1127 OF 2018
Hotel Avion Private Ltd
Through its Director
Mr. Trevor Misquitta
Having its office at Nehru Road,
Opp. Domestic Airport,
Vile Parle (E), Mumbai 400 057 ...Appellant
Versus
1. State of Maharashtra
Through its Inspector of Police,
Economic Offences Wing
Unit VII,
Having Office Opposite CST
Fort, Mumbai.
2. The Competent Authority
under the M.P.I.D. Act, 1999
and Sub-Divisional Officer,
Mumbai Suburban District,
having office at 9th Floor,
Administrative Building,
Bandra (East)
Mumbai - 400 051
3. M/s. Arya Lusters
Through its Agent
Mr. Ved Prakash Arya
Having office at 1st
Floor, 212/1 Panjrapol
Digitally
signed by Compound, G.P. Bldg.
IRESH
IRESH MASHAL
MASHAL Date: 1/39
2023.07.14
18:35:59
+0530
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905.1127.18 apeal.docx
C.P. Tank, Mumbai 400 004
4. Ms. Ulka Mahadev Sonawane
51 Yrs, Occu: Service R/at B.I.T.
Chawl No. 3, 1st Floor,
Room No. 7, Dr. Maheshwari
Road, Mumbai - 09. ...Respondents
WITH
CRIMINAL APPEAL NO. 1323 OF 2018
Hotel Avion Private Ltd
Through its Director
Mr. Trevor Misquitta
Having its office at Nehru Road,
Opp. Domestic Airport,
Vile Parle (E), Mumbai 400 057 ...Appellant
Versus
1. State of Maharashtra
Through its Inspector of Police,
Economic Offences Wing
Unit VII,
Having Office Opposite CST
Fort, Mumbai.
2. The Competent Authority
under the M.P.I.D. Act, 1999
and Sub-Divisional Officer,
Mumbai Suburban District,
having office at 9th Floor,
Administrative Building,
Bandra (East)
Mumbai - 400 051
3. M/s. Arya Lusters
2/39
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905.1127.18 apeal.docx
Through its Agent
Mr. Ved Prakash Arya
Having office at 1st
Floor, 212/1 Panjrapol
Compound, G.P. Bldg.
C.P. Tank, Mumbai 400 004 ....Respondents
Mr. Mihir Desai, Senior Advocate a/w Mr. Vijay Hiremath, Ms. Arati
Ranade and Ms. Sanskriti Yadav for Appellant in both Appeals
Mr. Subhash Jha a/w Mr. Ghanshyam Upadhyay, Mr. Siddharth Jha, Ms.
Monika Kale, Ms. Alka Pandey i/b D. Joshi for Respondent No. 3
Mrs. P. P. Shinde, APP for the State
Ms. Meghna Gowalani for Respondent No. 4
Mr. Bhagvat Gavande, Sub Divisional Officer and Competent Authority,
Mumbai Western.
Mr. Amrut Pawar, Police Inspector, EOW, 8 Mumbai.
CORAM: REVATI MOHITE DERE &
GAURI GODSE, JJ.
CLOSED FOR ORDERS : 8th JUNE 2023
PRONOUNCED ON : 14th JULY 2023
JUDGMENT (PER; GAURI GODSE, J.) :-
Brief Facts:
1. Both the Criminal Appeals are filed under Section 11 of the
Maharashtra Protection of Interest of Depositors (In Financial
905.1127.18 apeal.docx
Establishments) Act, 1999 ("MPID Act") for challenging the orders
passed by the Learned Special Judge of the MPID Court by which the
learned Judge accepted the respondent no.3, as a successful bidder on
14th August 2018 in the auction proceedings for sale of Hotel Jal
property.
2. Criminal Appeal No. 1127 of 2018 is filed under Section 11 of
the MPID Act for challenging the Order dated 28 th August 2018, by
which Miscellaneous Application No. 1100 of 2018 preferred by the
appellant was rejected; Order dated 30 th August 2018, by which
Miscellaneous Application No. 1099 of 2018 was partly allowed; and
Order dated 14th August 2018, by which the respondent no. 3's
Miscellaneous Application No. 186 of 2018 was allowed by the Special
Judge MPID Act, Mumbai ("the Special Judge"). By way of amendment,
the appellant also challenged the Orders dated 19 th October 2018 below
Exhibit 6 and 13th November 2018 below Exhibit 9 in Miscellaneous
Application No. 186 of 2018, passed by the Special Judge. The
appellant also prayed for directing the Competent Authority to forfeit
the amount paid by respondent no. 3 as per the auction notice dated
905.1127.18 apeal.docx
10th January 2018.
3. The appellant has also preferred Criminal Appeal No. 1323 of
2018 for challenging the Order dated 19 th October 2018, passed below
Exhibit 8 in Miscellaneous Application No. 186 of 2018, by the Special
Judge. Both the Appeals are heard together and disposed of by this
common Judgment and Order.
4. By the impugned Order dated 14th August 2018, respondent
no.3's bid was accepted as being the highest bid and respondent no. 3
was directed to deposit the entire amount of the sale price within 60
days.
5. By the impugned Order dated 28th August 2018, the learned
Special Judge rejected the Miscellaneous Application No. 1100 of 2018
filed by the appellant by holding that the appellant had not disputed the
financial status and locus of the bidders till the date of auction
proceedings were completed and now only the sale transaction was to
be executed. Miscellaneous Application No. 1100 of 2018 was filed by
the appellant, praying for directing respondent no. 2-the Competent
905.1127.18 apeal.docx
Authority to file a compliance report whether, while accepting the bid
for Hotel Jal property, the guidelines given by the Hon'ble Supreme
Court in Order dated 11th May 2010 ("said guidelines") were followed.
The appellant had also prayed that in the event of non-compliance with
the said guidelines, the auction proceedings with respect to the Hotel
Jal property be set aside.
6. By the impugned Order dated 30th August 2018, the learned
Special Judge partly allowed the application filed by respondent no. 3
and directed to correct the roznama dated 14 th August 2018 for
correcting the bid amount as Rs. 46.75 crores instead of Rs. 46.70
crores.
7. By the impugned Order dated 19th October 2018 passed below
Exhibit 6, respondent no.3 was granted an extension of time up to 26 th
October 2018 till 2:45 pm to deposit the remaining amount of the sale
price. It was recorded in the said Order that respondent no. 3 had
already deposited an amount of Rs. 25.50 crores and had prayed for an
extension of time to deposit the remaining amount of Rs. 21.25 crores.
905.1127.18 apeal.docx
By Order dated 13th November 2018 passed below Exhibit 9,
respondent no. 3 was granted an extension of time for three weeks to
deposit the balance consideration amount of Rs. 19.25 crores. The said
Order dated 19th October 2018, passed below Exhibit 8, is also
challenged by the Appellant by filing separate Criminal Appeal No.
1323 of 2018.
8. In the year 2000, MPID Special Case No. 36 of 2000 was filed
against the promoter/director of C.U. Marketing Company. By a
notification dated 17th May 2000, a total of 18 properties belonging to
the said company were proposed to be attached. Out of said 18
properties, the property at serial no. 18 - Hotel Jal, is the subject
matter of the present appeals. During the pendency of the proceedings,
Criminal Appeal No. 1597 of 2005 was filed before the Hon'ble
Supreme Court. In the said Appeal, by an Order dated 11 th May 2010,
Hon'ble Supreme Court allowed Miscellaneous Application No. 752 of
2010 for disposing of certain properties owned by the said company
and the Competent Authority was directed to auction the said 18
properties in accordance with the procedure stipulated in Annexure A-
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3, which was part of the said order. In the year 2015, Mr Ved Prakash
Arya submitted a proposal on behalf of Saffron Developers, offering to
buy all 18 properties, including Hotel Jal.
9. On 10th January 2018, the Competent Authority published a
notice for the purpose of the auction of seven properties described in
the said notice. The property of Hotel Jal was described as item no. 18
in the said notice. The said notice for auction sale prescribed certain
terms and conditions. On 7th February 2018, respondent no. 3-Arya
Lusters, through Mr Ved Prakash Arya, filed Miscellaneous Application
No. 186 of 2018 in the MPID, Special Case No. 36 of 2000, offering to
purchase the property - Hotel Jal.
10. On 1st June 2018, the appellant filed Miscellaneous Application
No. 732 of 2018 in the said MPID Special Case No. 36 of 2000,
seeking permission to participate in the auction sale with respect to
Hotel Jal as per the auction notice dated 10 th January 2018. By the
impugned Order dated 14th August 2018, the MPID court declared the
bid amount of Mr Ved Prakash Arya, as quoted in Miscellaneous
905.1127.18 apeal.docx
Application No. 186 of 2018, as the highest bid amount. The Court
further recorded that Mr Ved Prakash Arya shall deposit the entire
amount of the sale price within 60 days, failing which the earnest
amount deposited would be forfeited.
11. The appellant filed Miscellaneous Application No. 1099 of 2018,
praying for correcting the Rozanama dated 14 th August 2018, for
correcting the amount of the final auction price as Rs.46.75 Crores
instead of Rs. 46.70 Crores and for showing the successful bidder's
name as Arya Lusters Associates instead of Ved Prakash Arya. On 24 th
August 2018, the appellant filed Miscellaneous Application No. 1100 of
2018, praying for directing respondent no. 2 to file a compliance report
as to whether the said guidelines prescribed by the Hon'ble Supreme
Court by an order dated 11th May 2010 were complied. The appellant
further prayed that in the event of non-compliance with the said
guidelines issued by the Hon'ble Supreme Court, the proceedings
initiated by respondent no. 2 with respect to the auction of the Hotel
Jal property be declared as disqualified.
905.1127.18 apeal.docx
12. By the impugned Order dated 28th August 2018, the Special Judge
rejected the Miscellaneous Application No. 1100 of 2018 filed by the
appellant by holding that the appellant had not disputed the financial
status and locus of the bidders till the date auction proceedings were
completed and that only when the sale transaction remained to be
executed the said application was filed.
13. By the impugned Order dated 30th August 2018, the learned
Special Judge partly allowed the Miscellaneous Application No. 1099 of
2018 filed by the appellant. Thus, the learned Special Judge issued
directions to correct the final bid amount as Rs. 46.75 Crores; however,
refused to correct the name of the successful bidder.
14. The bid of respondent no. 3 was accepted on 14 th August 2018.
On 19th October 2018, respondent no. 3 was granted an extension up
to 26th October 2018 for depositing the balance amount of the sale
price. By an Order dated 13th November 2018, respondent no. 3 was
granted an extension of 3 weeks for making the payment of the balance
amount of Rs. 19.25 crores. Hence, by way of amendment, the
905.1127.18 apeal.docx
appellant has also challenged the said Orders dated 19 th October 2018
and 13th November 2018 in the aforesaid Criminal Appeal No. 1127 of
2018.
15. Thus, as per the extensions granted to respondent no. 3, the last
date to deposit the balance amount of the sale price was 3 rd December
2018. However, the entire balance amount of the sale price was
deposited by respondent no. 3 by 18th January 2019.
Submissions on behalf of the Appellant:
16. Mr Mihir Desai, learned senior counsel for the appellant,
submitted that the Competent Authority was under obligation to
comply with the guidelines as per Annexure 3 of the Order dated 11 th
May 2010 passed by the Hon'ble Supreme Court. He submitted that as
per the guidelines, the Competent Authority was under obligation to
verify the financial capacity of the bidder before finally accepting the
offer. He further submitted that MPID Court could not have granted
extension of time for depositing the amount of the sale price as prayed
by respondent no. 3.
905.1127.18 apeal.docx
17. He submitted that as per the auction notice, respondent no. 3 had
failed to deposit 10% of the total consideration amount as earnest
money within the stipulated time. Even as per the Orders of extension
granted by the learned Special Judge, respondent no. 3 failed to deposit
the entire amount of the sale price within the extended time. Learned
senior counsel submitted that 10% of the earnest amount was deposited
by respondent no. 3 by way of fixed deposits and the actual payment
was never made. Thus, mandatory conditions of the auction notice were
not complied with. As per the terms and conditions of the auction
notice, a specific time was stipulated for depositing the earnest money,
as well as the sale price after acceptance of the final bid; however, the
dates of various deposits made by respondent no. 3 would show that the
amounts were not deposited within time. It was submitted that the
action of the Competent Authority permitting respondent no. 3 to
deposit the amounts contrary to the terms and conditions of the auction
notice amounts to depriving the other participants from participating in
the auction proceedings.
18. According to Mr. Desai, the financial capacity and genuineness of
905.1127.18 apeal.docx
respondent no. 3 were never tested as directed by the Hon'ble Supreme
Court; that the amounts towards sale price were required to be
deposited in the savings account in the State Bank of India, however,
the said condition was also not complied with. Learned senior counsel
thus submitted that non-compliance with the terms and conditions of
the auction notice has vitiated the entire auction proceedings and has
rendered the auction sale a nullity.
19. By an order dated 27th August 2018, the learned Special Judge
passed an order in Miscellaneous Application No. 184 of 2018 filed by
respondent no. 3, thereby allowing the amount in the application to be
transferred to the account of respondent no. 3 for purchasing Roha
Paper Mill property. He, thus, submitted that the aforesaid facts would
show that the guidelines of the Hon'ble Supreme Court were not
followed and the terms and conditions of the auction notice were also
not complied, which has rendered the auction process a nullity.
20. In support of his submissions, learned senior counsel for the
Appellant relied upon the following decisions:-
905.1127.18 apeal.docx
1) Tirupati Rice Mills Pvt Ltd Vs. Central Bank of India and
another1
2) Manilal Mohanlal Shah and Ors Vs. Sardar Sayed Ahmed
Sayed Mahamad and Ors2.
3) Central Coalfields Limited and Ors Vs. SLL-SML (Joint
Venture Consortium) and Ors3.
21. Thus, learned senior counsel on behalf of the appellant submitted
that non-compliance with the terms and conditions of the auction
notice as well as the said guidelines issued by the Hon'ble Supreme
Court as stated hereinabove, has vitiated the entire auction proceedings.
He thus submitted that the Orders impugned in the appeal, thereby
accepting the bid amount of respondent no. 3 and granting extensions
for making payment of the sale price are required to be quashed and set
aside.
Submissions on behalf of Respondent No. 3:
2016 SCC Online Bom 11085
AIR 1954 SC 349
(2016) 4 SCR 890
905.1127.18 apeal.docx
22. Learned counsel appearing for respondent no. 3 supported the
Orders impugned in the aforesaid appeals. He submitted that the object
of the MPID Act is to protect the interest of the investors. He relied
upon the sections 7, 10 and 13 of the MPID Act, as well as Rules 5, 8
and 9 of the Maharashtra Protection of Interest of Depositors (In
Financial Establishments) Rules 1999. He submitted that the object of
the said MPID Act and the said Rules is to protect the interest of the
depositors, and thus the Competent Authority, as well as the learned
Special Judge, has in exercise of the powers conferred under the said
MPID Act and the said Rules, has rightly accepted the respondent no. 3
as the successful bidder and permitted to deposit the entire sale price.
23. Learned counsel submitted that respondent no. 3 was willing to
purchase all 18 properties as per the auction notice and had thus had
offered an amount of Rs. 150 crores and thereafter increased the said
offer to Rs. 198 crores, which was ultimately increased to Rs. 210
crores. He submitted that respondent no. 3 had initially already
deposited the amount of Rs.3.75 crores towards the offer for
905.1127.18 apeal.docx
purchasing the other properties. Hence, the financial capacity of
respondent no. 3 was sound, and hence no separate verification of the
financial capacity of respondent no. 3 was required. He relied upon the
letter dated 3rd March 2018, by which all the details with respect to the
deposit of the entire amount of Rs.4.5 Crores towards 10% of the total
amount as the earnest deposit was made on behalf of respondent no. 3.
He submitted that on 14th August 2018, the offer of respondent no. 3
was accepted and as per the extensions granted, respondent no. 3 has
deposited the entire amount towards the sale price. However, the last
amount was deposited on 18 th January 2019. He submitted that though
there was no formal Order extending the last deposit, the entire amount
deposited on behalf of respondent no. 3 is accepted by the Competent
Authority.
24. Learned counsel relied upon Rule 9 of the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest
Rules. He submitted that as per sub-Rule 4 of Rule 9, there was an
embargo of extension of time to deposit the amount as per the auction
sale proceedings. However, as per the settled law, inspite of the said
905.1127.18 apeal.docx
embargo, it is held that extension to make a deposit of the sale
consideration amount can be granted. He thus submitted that in the
present auction proceedings under MPID Act, respondent no. 3 stands
on a better footing as there is no such embargo in granting an extension
of time. In support of his submissions, he relied upon the decision of
the Hon'ble Supreme Court in the case of Tata Motors Limited Vs.
Brihan Mumbai Electric Supply Undertaking (BEST) and others 4.
Submissions on Behalf of Respondent No. 2:
25. Learned APP appearing for respondent no. 2-Competent
Authority relied upon the Affidavits dated 16 th October 2018 and 30th
October 2018 filed on behalf of respondent no. 2 to show that the
financial capacity of respondent no. 3 was verified. She submitted that
respondent no.3 had already deposited various amounts since the year
2015 towards the purchase of other properties. She further submitted
that the fixed deposits submitted by the respondent no. 3 were
encashed, and amounts were transferred to the concerned account in
the State Bank of India. She further submitted that the entire auction
2023 SCC OnLine SC 671
905.1127.18 apeal.docx
price is deposited; however, in view of the interim relief granted by this
Court on 6th October 2018 in the present Appeal, the sale was not
confirmed.
Submissions in Rejoinder on Behalf of Appellant:
26. Mr. Desai, the learned senior counsel, in response to the
submissions made on behalf of respondent nos. 2 and 3, submitted that
though this Court, by Order dated 22 nd November 2018, had directed
that no further extension should be granted by the Trial Court, the
respondent no. 3 was permitted to deposit the balance amount. He
further submitted that the appellant had submitted all the financial
documents to show the financial capacity of the appellant. He tendered
a copy of the letter dated 26 th February 2019 submitted by respondent
no. 3 requesting the Competent Authority to return the amount
deposited by them pursuant to MA No. 185. He, thus, submitted that
the conduct of the respondent no. 3 showed that respondent no. 3 had
no financial capacity to complete the sale transaction; however, the
Competent Authority had never taken steps to test the financial capacity
905.1127.18 apeal.docx
of respondent no. 3. Thus, in view of non-compliance with the
guidelines of the Hon'ble Supreme Court as well as the terms and
conditions of the auction notice, the entire auction process stood
vitiated. Hence, the impugned Orders accepting respondent no. 3 as the
successful bidder and subsequent orders granting extension of time to
deposit the sale price are illegal and, thus, be quashed and set aside by
allowing the present Appeals.
Interim Order Pending the Appeals:
27. By Order dated 6th October 2018, this Court had directed that if
the money is deposited by respondent no. 3 within the stipulated period
as per the Order dated 14th August 2018, the Competent Authority not
to confirm the sale. Both the Appeals are admitted by Order dated 15 th
February 2023, and by the same Order, interim relief granted by Order
dated 6th October 2018 was vacated by issuing certain directions to the
Trial Court for executing the sale deed in favour of respondent no. 3.
The operative part of the Order dated 15th February 2023 reads thus:
"7) In view thereof, ad-interim relief granted by Order
905.1127.18 apeal.docx
dated 6th October, 2018 is vacated.
7.1) The trial Court is directed to pass appropriate orders
directing the Competent Authority to disburse/distribute
amounts lying with it in favour of the investors as early as
possible.
7.2) The Competent Authority is directed to execute sale-
deed of the suit property in favour of Respondent No. 3.
7.3) It is made clear that, the sale of suit property in
favour of Respondent No.3 shall be subject to the final
outcome of the present Appeals. In case the Appeals are
decided against the Respondent No.3, it shall not claim
any equity in the matter.
7.4) During the pendency of the present Appeals,
Respondent No.3 is directed, not to create any third
party right, title or interest in the suit property including
mortgage or lien on the suit property."
28. Feeling aggrieved by the said Order dated 15 th February 2023, the
appellant approached the Hon'ble Supreme Court by filing Special
Leave Petition (Criminal) Diary Nos. 6924/2023. The Hon'ble Supreme
Court, by Order dated 17th March 2023, disposed of the said SLP by
passing the following Order:
905.1127.18 apeal.docx
"We have heard learned counsel for the parties,
great length.
Permission to file special leave petition is granted.
Considering the facts and circumstances, we are of
the opinion that two condition(s), 1.0. 7,2 and 7.3
imposed in the impugned order dated 15.02.2023 passed
by the High court in Crl. A. No. 1127 of 2018 with Crl.
Appln. (APPA) No. 825/2019 and Crl. Appln. (APPA)
No. 2053 of 2018 with Crl. A. No.1323 of 2018 are
required to be modified:
Condition No.7.2 reads as under :
"Competent Authority is directed to execute sale-
deed of the suit property in favour of Respondent
No.3."
The above condition is set aside and modified as
under:
Till the final adjudication of the disputed matter
before the High Court in appeal, no sale-deed shall be
executed in favour of either of the parties.
Condition No.7.3 reads as under :
"It is made clear that, the sale of suit property in favour
of Respondent No.3 shall be subject to the final outcome
of the present Appeals. In case the Appeals are decided
against the Respondent No.3, it shall not claim any
905.1127.18 apeal.docx
equity in the matter."
The above condition is set aside and modified as under:
The question of execution of sale deed in favour of
any of the parties would arise only after the final
adjudication of the disputed matter.
We are making it clear that we have not interfered
with the direction passed by the High court regarding
disbursement of the amount lying with it in favour of the
investors which shall be subject to the final outcome of
the dispute between the parties.
Rest of the conditions imposed by the High Court in
the impugned order shall continue to operate.
Considering the facts and circumstances, we also
request the High Court to decide the appeals pending
before it in this connection expeditiously but not later
than two months from today.
The special leave petitions stand disposed of.
Pending application(s), if any, shall also stand
disposed of."
29. Thus, in view of the directions issued by the Hon'ble Supreme
Court, both Appeals were heard by us and are disposed of by this
common Judgment and Order.
905.1127.18 apeal.docx
Consideration of Submissions and Conclusions:
30. We have considered the submissions made on behalf of all parties.
We have perused the record of the Appeals.
31. By notice dated 10th January 2018, the Competent Authority
issued public notice for the auction sale of the seized properties as
described in the notice. The present appeals are concerning the property
at serial no. 18- Hotel Jal. The said notice prescribed certain terms and
conditions for the auction sale. Relevant terms and conditions for
deciding the controversy are reproduced hereunder:
"3) The final purchaser/bidder shall pay the balance
amount within 60 days after the date of auction by
demand draft/pay order drawn in favour of Competent
Authority & Sub Divisional Officer, Mumbai Western
Suburban. After deposition of the said full amount by
purchaser/bidder then only purchase Certificate of
properties will be issued according to the order of Special
Hon'ble Court. Thereafter as per the order of Special
Hon'ble Court, D.D/Pay order of remaining balance
amount would be deposited in bank.
905.1127.18 apeal.docx
9) If the purchaser could not pay the full cost of bidding
amount within 60 days period, his partly paid amount
will be forfeited including earnest money & the property
will be again put for the fresh bidding offers.
12) For taking participation in auction sale, applicant has
to pay 10% amount as per the government valuation as a
earnest money. This advertisement is available on website
http:mumbaisuburban.gov.in and also on notice board of
this office as well as of the Hon'ble Collector, Mumbai
Suburban District, Hon'ble Collector, Palghar, and Court
Room No. 36. Hon'ble City Civil Court, Mumbai.
13) The all rights have been reserved by this office to
change or make addition in any given terms &
conditions."
32. It is submitted on behalf of the appellant that the entire sale price
is not deposited by respondent no. 3 within the prescribed period of
sixty days as per the terms and conditions of the auction notice. Hence,
as per condition no. 9 of the auction notice, the earnest money deposit
of respondent no. 3 is required to be forfeited, and the property is
905.1127.18 apeal.docx
required to be again put up for fresh bidding offers.
33. Another grievance of the appellant is regarding non-compliance
with the said guidelines issued by the Hon'ble Supreme Court vide
Order dated 11th May 2010 for following the procedure described in
Annexure A-3. Copy of the Order dated 11 th May 2010, along with
Annexures A-2 and A-3, is on page 30 of the Criminal Appeal No. 1127
of 2018.
34. It is the grievance of the appellant that the said guidelines were
not followed before accepting the bid offer of respondent no. 3 for the
sale of the Hotel Jal property. In short, the grievance of the appellant is
that the Competent Authority has not followed the following conditions
as per the said guidelines:
(i) The financial capacity of respondent no. 3, as per clause 4,
is not ascertained.
(ii) As per clause 5, the true market value of the property is not
ascertained by seeking necessary information for selling the
property to a genuine buyer offering the highest price.
905.1127.18 apeal.docx
(iii) Earnest amount of the decided price from the prospective
buyer is not deposited in the designated bank account.
35. Thus, the appellant had filed MA No. 1100 of 2018 for directing
the Competent Authority to file compliance report as to whether, while
accepting the bid of respondent no. 3, the said guidelines were
followed. A perusal of the Auction Notice would show that the auction
process was conducted as per the said guidelines. Affidavits filed on
behalf of respondent no. 2 indicate that the financial capacity of
respondent no. 3 is verified, and the earnest amount, as well as the
entire auction price, is also deposited. It further reveals that respondent
no.3 had already deposited various amounts since the year 2015
towards other properties and that the fixed deposits submitted by
respondent no. 3 were encashed, and the amounts were transferred to
the concerned account in the State Bank of India. Respondent No. 2 has
further stated in the Affidavits that the appellant had never raised any
objection against respondent no. 3 during the auction proceedings and
that the contentions raised now are vague and baseless. An affidavit
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dated 6th February 2019 filed on behalf of respondent no. 2 states that
the bid amount of respondent no. 3 was the highest, and hence the
same was accepted. The said affidavit further provides the details of the
entire sale price of Rs. 46.75 crores deposited by respondent no. 3, with
the last deposit made on 18th January 2019. The said affidavit also
indicates that the entire amount is invested in a term deposit scheme
which is renewed from time to time.
36. Though the appellant has filed an affidavit-in-rejoinder raising
objection to the contentions of respondent no. 2, there is nothing
shown to us that will controvert the case of respondent no. 2. Perusal of
the record and Affidavits filed on behalf of respondent no. 2-Competent
Authority shows that in compliance with the Order dated 6 th February
2019 passed by this Court, the Competent Authority had encashed the
fixed deposits as shown in paragraph no. 3 of the affidavit of Mr.
Suresh Thale, Nayab Tahsildar and have invested the same in short-term
deposits in the nationalised bank, which is renewed from time to time.
37. The record and proceedings show that the auction process is
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conducted as per the terms and conditions of the notice dated 10 th
January 2018. On perusal of the record, we do not find any substance
in the objection raised by the Appellant that the true market value of
the property is not ascertained for selling the property to a genuine
buyer offering the highest price. Though it is sought to be contended on
behalf of the appellant that the condition of deposit of 10% earnest
amount is not complied with by respondent no. 3, the affidavits filed on
behalf of the Competent Authority do not state that the terms and
conditions of auction notices are not complied with. We do not see any
reason to disbelieve the statements made by the Competent Authority.
38. Though an objection is raised on behalf of the appellant that the
entire sale price is not deposited by respondent no. 3 within 60 days
after the date of auction, the affidavits filed by the Competent Authority
show that the entire sale price is deposited by respondent no. 3, and the
last deposit is made on 18th January 2019.
39. The record shows that the last extension of time granted to
respondent no. 3 for depositing the balance amount of the sale price
905.1127.18 apeal.docx
was by Order dated 13th November 2018 for a period of three weeks
which expired on 3rd December 2018, and respondent no. 3 completed
payment of the full amount towards the sale price by 18 th January 2019.
As per the terms and conditions of the notice dated 10 th January 2018,
the successful bidder was required to pay the balance sale price within
60 days of the date of the auction. It is important to note here that as
per clause 13 of the said notice, all the rights have been reserved by the
Competent Authority to change or make additions to any given terms
and conditions. Even otherwise, the Special Court has also granted
extension of time to respondent no. 3 from time to time for making the
payment.
40. It is brought to our notice that by Order dated 22 nd November
2018, this Court had extended the ad-interim relief already granted in
the present appeal up to 6th December 2018 and further directed that
no further extension shall be granted by the Trial Court until further
Orders of this Court. The learned Special Judge had granted an
extension for making payment of the balance amount towards the sale
price, lastly by Order dated 13 th November 2018. Thus, it appears that
905.1127.18 apeal.docx
in view of the Order passed by this Court on 22 nd November 2018, no
further extension was granted to respondent no. 3. Be that as it may be,
respondent no. 3 has deposited the entire amount towards the sale price
by 18th January 2019.
41. It is also brought on record that the entire amount towards the
sale price is invested by the Competent Authority in a short-term
deposit scheme, and the same is renewed from time to time and that a
sufficient amount towards interest is generated on the said deposits. We
are informed that approximately an amount of Rs. 6.67 Crores is
generated towards interest on the sale price of Rs. 46.75 Crores
deposited by respondent no. 3. The aforesaid facts would show that as
per the extension of time granted by the learned Special Judge,
respondent no. 3 has deposited the amounts towards the sale price, and
the Competent Authority has accepted the entire amount and also
deposited the same in a short-term deposit scheme as directed by this
Court. It is necessary to note that a substantial amount is already
generated towards interest on the said deposits.
905.1127.18 apeal.docx
42. Mr. Jha, learned counsel appearing for respondent no. 3 on
instructions submitted that though the amounts were directed to be
deposited without prejudice to the rights and contentions of the parties,
respondent no. 3 shall not claim the amount towards the interest that is
generated on the sale price deposited by respondent no. 3.
43. As per the auction notice dated 10th January 2018, respondent no.
3 filed an application on 7 th February 2018, offering to purchase the
concerned property. So far as the appellant is concerned, the application
was filed by the appellant on 1st June 2018, i.e. after more than 4
months of the time prescribed by the auction notice. Respondent No. 3,
being the highest bidder, the offer of respondent no. 3 was accepted by
the MPID Court on 14th August 2018. By the present appeal, the
appellant has challenged the Order dated 14th August 2018. However,
the appellant admittedly has not offered any better amount over and
above the bid offered by respondent no. 3.
44. By the present appeal, the appellant has challenged the order
dated 30th August 2018 by which the application being M.A. No. 1099
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of 2018 filed by the appellant for making corrections in the Order
dated 14th August 2018 for correcting the name of the successful bidder
as Arya Lusters Associates and not Ved Prakash Arya is rejected and only
the prayer for correcting the final auction price as Rs. 46.75 Crores
instead of Rs. 46.70 Crores is allowed. It is not in dispute that Arya
Luster Associates is represented by Mr. Ved Prakash Arya and the entire
amount towards the sale price is deposited by Arya Luster Associates
through Ved Prakash Arya. Hence, we do not find any substance in the
submissions made by the appellant for correcting the name of successful
bidder.
45. So far as the impugned Order dated 28th August 2018, thereby
rejecting the appellant's M.A. No. 1100 of 2018 is concerned,
respondent no. 2-Competent Authority has already filed affidavits,
thereby stating that the said guidelines issued by the Hon'ble Supreme
Court are followed before accepting the bid of respondent no. 3. The
said application being MA No. 1100 of 2018, was filed by the appellant
for directing the Competent Authority to file compliance report
whether the said guidelines were followed before accepting the bid of
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respondent No. 3. The MPID Court by Order dated 28 th August 2018
have rejected the application by holding; that the appellant and their
advocate did not participate in the auction proceedings, that the
appellant neither disputed the locus standi of respondent no. 3 nor
raised any dispute about the financial status of respondent no. 3, that
Mr. Ved Prakash Arya is already declared as the highest bidder, and
time was granted to deposit the remaining sale price and that the
bidding process was completed. Thus, the learned Special Judge rejected
the application filed by the appellant.
46. Irrespective of the reasons given by the learned Special Judge of
the MPID Court for rejecting the application filed by the appellant, we,
on perusal of the record, find that the said guidelines issued by the
Hon'ble Supreme Court are followed by the Competent Authority. So
far as the financial status of respondent no. 3 is concerned the
Competent Authority has already placed on record that even before the
auction process, respondent no. 3 has deposited various amounts since
the year 2015 towards the purchase of the other properties. The
affidavits filed by the Competent Authority show that the financial
905.1127.18 apeal.docx
documents of respondent no. 3 were also verified. We have perused the
said guidelines, and in our view, the record shows that the said
guidelines are complied with by the Competent Authority. The
appellant has mainly raised objections on verification of the financial
status of respondent no. 3 and non-deposit of the sale price in the
designated account. The Competent Authority has placed on record that
respondent no. 3 had submitted all the documents for verification of it's
financial status and that the same are verified. It is also brought on
record that respondent no. 3 has deposited various amounts since the
year 2015 towards the purchase of other properties. As stated herein
above, the Competent Authority has placed on record that the entire
amount towards the sale price is deposited and is lying in the designated
account, and the same is invested in a short-term deposit, which has
generated a substantially large amount towards interest. Thus, we do
not find any merit in the submissions made by the appellant regarding
the financial status of respondent no. 3.
47. So far as the payment towards the entire sale price within 60 days
of the auction is concerned, respondent no. 3 was granted extension
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from time to time to deposit the balance amount towards the sale price.
Accordingly, the entire sale price is deposited by 18 th January 2019. We
have already held that though the last date to deposit the balance
amount was 3rd December 2018, it appears that the last extension
remained pending in view of the Order passed by this Court on 22 nd
November 2018, thereby directing the MPID Court not to grant the
further extension. Hence, it appears that after the Order of extension
granted on 13th November 2018, a further extension was not granted.
48. We have held that as per clause 13 of the terms and conditions of
the auction notice, the Competent Authority had reserved all the rights
to change or make addition to the terms and conditions. There is
nothing argued before us that would show that there is any bar under
the provisions of the said MPID Act or the said Rules of 1999, to grant
an extension of time to deposit the amount towards the sale price.
Thus, in our view, condition no. 9 for depositing the balance amount
towards the sale price within 60 days would stand modified in view of
acceptance of the entire amount by the Competent Authority by
exercising the right reserved as per clause 13. Even otherwise, the
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appellant has never offered any better price and admittedly, respondent
no. 3 is the highest bidder.
49. During the pendency of the Appeals, this Court, by way of interim
relief granted on 15th February 2023, had directed the Trial Court to
pass appropriate Orders directing the Competent Authority to
disburse/distribute amounts lying with it in favour of the investors as
early as possible. It is necessary to note that the Hon'ble Supreme
Court, by the aforesaid Order dated 17 th March 2023, has confirmed
the said direction. However, we are informed that, unfortunately, till
date, no Orders are passed to disburse the amounts in favour of the
investors.
50. We find it necessary to take into consideration the objects of the
said MPID Act. This Act is brought into force to protect the interest of
depositors in the financial establishment and matters relating thereto. As
pointed out by Mr. Jha, learned counsel for respondent no. 3, the
relevant provisions of the said MPID Act, as well as the Rules framed
thereunder, show that the object of the said Act is to protect the interest
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of the depositors for which the powers are vested in the Competent
Authority as per Section 10 and 13 of the said MPID Act.
51. In view of the provision of Section 10 of the said MPID Act read
with Rule 5 of the Rules of 1999, any property attached and vested in
the Competent Authority is to be administered as far as may be
practicable in the best interest of the depositors and the financial
establishment as deemed fit by the Competent Authority. In our view,
the Competent Authority and the MPID Court have rightly accepted
respondent no. 3 as the successful bidder on the basis of the highest
price offered by respondent no.3, and respondent no. 3 has also
deposited the entire amount towards the sale price. Hence, considering
the purpose behind legislating the MPID Act, we find that the
Competent Authority has, in its wisdom, acted in the best interest of the
depositors.
52. We find that the learned Special Judge of the MPID Court has
properly appreciated the facts and circumstances of the case and,
keeping in mind the objects of the MPID Act, has passed appropriate
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Orders which are in the interest of the depositors. It is also important to
take into consideration that the amount towards the sale price has also
generated a substantial amount towards interest, which can be utilised
in the best interest of the depositors. Thus, for the reasons stated above,
we do not find any substance in the objections raised by the appellant.
In our view, the Orders impugned in the present appeal do not warrant
any interference.
53. So far as the decisions of the Hon'ble Supreme Court, as well as
this Court, relied upon by the learned senior counsel for the appellant,
are concerned, we do not find that the principles laid down in the said
decisions are of any assistance in the facts of the present case. The
decision of this Court in the case of Tirupati Rice Mills is concerned the
same was arising out of the DRT proceedings, and the said decision is
not of any assistance in the facts of the present case. So far as the
decision of the Hon'ble Supreme Court in the case of Central Coalfields
Limited and others is concerned, the same is with respect to tender
proceedings, and hence, the principles laid down in the said decision are
not applicable to the presents case which deals with auction proceedings
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with respect to the property attached under the said MPID Act.
54. The decision of the Hon'ble Supreme Court in the case of Tata
Motors relied upon by Mr. Jha is concerned; the same also deals with
tender proceedings for awarding contracts, and hence, the same is also
not applicable in the facts of the present case.
55. Thus, in view of the reasons recorded above, we do not find any
merit in both the appeals. Hence, both the appeals are dismissed.
GAURI GODSE, J. REVATI MOHITE DERE, J.
56. After the judgment was pronounced, learned Senior Counsel for
the appellant sought continuation of the interim relief in operation till
today.
57. Accordingly, the said order which is in force till today to continue
for a period of three weeks.
GAURI GODSE, J. REVATI MOHITE DERE, J.
