Lincoln Education Academy vs Union Bank Of India & Ors
2023 Latest Caselaw 4968 Cal

                     IN THE HIGH COURT AT CALCUTTA

                       Constitutional Writ Jurisdiction

                                 Appellate Side



Present :-
The Hon'ble Justice Moushumi Bhattacharya


                                 WPA 4302 of 2023
                                     With
                       CAN 01 of 2023 and CAN 02 of 2023

                            Lincoln Education Academy
                                     -Versus-
                            Union Bank of India & Ors.



For the petitioner                     :    Mr. Jishnu Saha
                                            Ms. Deblina Lahiri
                                            Mr. Debashis Sarkar
                                            Mr. Mrinmoy Chatterjee



For the respondents                   :     Mr. Ranajit Chowdhury



Last Heard on                          :    11.08.2023.

Delivered on                           :    11.08.2023.


Moushumi Bhattacharya, J.

1. The petitioner is the auction purchaser of a property which

featured in at least two sale notices published by the respondent Union Bank

of India. The first sale notice is not part of records but the second sale

notice of 4th March, 2023, which admittedly is almost identical in substance

to the first, is part of records. The only question which arises before the

Court is whether the petitioner can be permitted to make the balance

payment pursuant to being adjudged a highest bidder for the property

beyond the timelines contemplated under Rule 9(4) and (5) of the Security

Interest Enforcement (Rules), 2002.

2. Rule 9(3) requires a purchaser to deposit 25% of the amount of the

sale price which includes earnest money in terms of the sale of immovable

property on the same day or not later than the next working day. The

petitioner admittedly paid this amount on 18th November, 2022. The issue is

whether the petitioner can be permitted to pay the balance 75% after expiry

of the timelines under Rule 9(4) which mandates that the balance amount

shall be paid by the purchaser to the authorized officer on or before the

fifteenth day of confirmation of sale or such extended period as may be

agreed upon in writing between the purchaser and the secured creditor but

not exceeding three months. The petitioner has admittedly crossed the three

months window by a considerable period of time.

3. According to learned counsel appearing for the petitioner, the

petitioner was discouraged from paying the balance 75% in terms of Rule 9(4)

of the 2002 Rules by several subsequent events.

4. On perusal of the documents brought to the Court and considering

the submissions made on behalf of the parties, the first of such subsequent

event is an order passed by the Debts Recovery Tribunal-III, Kolkata on 29th

November, 2022 in an application filed by the alleged mortgagor challenging

the sale notices published by the respondents on the ground that the

property has been mortgaged. The orders directed the SARFAESI applicant

to implead the auction purchaser( the petitioner before the Court) in the

application and notice to be issued to the auction purchaser to enable it to

participate in the proceedings. The order proceeds to restrain the auction

purchaser/ petitioner herein not to create any third party interest in respect

of the secured property. The facts thereafter show that the petitioner came to

the Court for extension of time to pay the balance amount and be permitted

to pay the same upon the DRT proceedings reaching a finality.

5. The second subsequent fact of relevance is a Judgment passed by

a co-ordinate Bench on 22nd March, 2023 in a suit filed by the alleged

mortgagor challenging the same notice for the property in question and for

restraining respondents including the respondent Bank herein from giving

any further effect to the mortgaged property. The property in question is the

subject matter of the sale notice which is part of records.

6. Since the petitioner paid the 25% for the property on 18th

November, 2022, the petitioner now says that the petitioner is no longer

interested in paying the balance 75% and instead wants refund of 25%

which amounts to approximate Rs. 4.16 crores.

7. The objection taken on behalf of the respondent Bank is that the

petitioner should have gone before the DRT for this relief and that the

petitioner has not pleaded or urged any points in earlier proceedings taken

out by the petitioner. Counsel primarily relies on the strict timelines under

Rule 9(4) of the 2002 Rules to object to the prayer for any extension of time

to pay the balance amount and also for refund of the 25% already put in by

the petitioner.

8. Although, Rule 9(4) provides for strict timelines followed by a

provision in the nature of a default consequence under Rule 9(5) wherein

the deposit put in by the purchaser shall be forfeited by the secured

creditor and the property shall be resold along with the defaulting

purchaser forfeiting all claims to the property, the construction of the Rule

in this case would depend on the two significant and subsequent events

which took place after the petitioner paid 25% of the deposit.

9. The order of the DRT put a fetter on the petitioner (described as a

auction purchaser in the orders) in terms of the petitioner not being able to

create third party rights in the said property. Naturally, a purchaser who

has paid 25% of the purchase price in terms of Rule 9(3) would be

discouraged or at least be indecisive in the matter of putting in the balance

amount where the property has been put under some sort of restraint. The

second factor, which was not gone into detail in the above paragraphs, is the

judgment of the co-ordinate Bench in the suit filed by the alleged mortgagor.

The Judgment of 22nd March, 2023 holds in the final paragraphs that the

property was mortgaged without the knowledge of the petitioners before the

Court and with the connivance with the officials of the respondent No. 7.

Significantly, the respondent No. 7 is the Respondent Bank before the Court

in the present writ petition.

10. The Judgment further holds that the petitioners made out a prima

facie case and are entitled to an order of injunction in terms of prayers (a), (c)

and (d) of the master summons which includes an order restraining the

respondents from giving any effect to the equitable mortgage of the property.

Not only do the respondents in the suit include the present respondent

before this Court, the subject matter of the suit is also the same property for

which the petitioner paid 25% of the purchase price. Third, the sale notice

published by the respondent bank on 4th March, 2023 clearly mentioned that

the sale shall be subject to several pending litigation including CS 390 of

2014 in which the Judgment was passed by the co-ordinate Bench.

11. The three factors as stated above constitute sufficient reason for

the petitioner/auction purchaser to step back, hesitate and prolong the

period for making payment of the balance 75%. The Judgment passed by the

co-ordinate Bench was finally nailed in the proverbial coffin on the property

which may be taken as the credible reason for the petitioner not putting in

the 75% of the purchase price.

12. The Court appreciates the predicament of the petitioner in having

put in 25% in November, 2022 and seen the property mired in litigation and

orders passed by the DRT. The petitioner's reluctance in paying the balance

75% and instead wanting the 25% back is completely understandable.

13. WPA 4302 of 2023 along with all connected applications are hence

allowed and disposed of by directing the respondent Union Bank of India to

return the amount of Rs. 4,16,50,000/- to the petitioner within 10 weeks

from today.

14. Learned counsel appearing for the respondent prays for stay of the

operation of this order. Considering the relevant dates and the subsequent

intervening events, the prayer for stay is considered and refused.

Urgent certified photocopy of this order, if applied for, be supplied to

the parties expeditiously on compliance of usual legal formalities.

(Moushumi Bhattacharya, J.)