And Another vs State Bank Of India And Another
2023 Latest Caselaw 1573 Cal/2

                       In the High Court at Calcutta
                      Constitutional Writ Jurisdiction
                               Original Side

The Hon'ble Justice Sabyasachi Bhattacharyya

                           WPO No. 2166 of 2022

                   Avlokan Commosales Private Limited
                              and another
                                    Vs.
                     State Bank of India and another


     For the petitioners      :     Mr. Siddhartha Mitra, Sr. Adv.
                                    Mr. Raibat Banerji, Adv.
                                    Ms. Natasha Roy, Adv.

     For the respondents      :     Mr. Joy Saha, Sr. Adv.

Mr. Sarvesh Chandra Shrivastava, Adv.

Mr. Somnath Chattopadhyay, Adv.

Mr. Samir Kumar Das, Adv.

     Hearing concluded on      :    04.07.2023

     Judgment on               :    14.07.2023



     The Court:-

1. The petitioner no.1 participated in an auction sale held by the

respondent no.1-State Bank of India (SBI). The SBI initially did not

execute any Sale Certificate in favour of the petitioner no.1. Upon

repeated communications by the petitioners in that regard, the

petitioners sought for refund of the consideration money paid by them

for such sale. The Bank initially took a stand in writing that the

concerned Tribunal, that is, the Debts Recovery Tribunal (DRT)-1,

Kolkata, in its order dated August 7, 2018 passed in SA No.168 of

2018, had directed the Bank not to issue Sale Certificate and that no

further steps shall be taken till hearing the disposal of the SA. By

such communication dated October 12, 2018, the Bank further wrote

to the petitioners that since the petitioners had requested the refund

of the bid amount along with interest and other charges with

compensation, the matter was sub judice before the DRT and shall be

put up before the said Forum to seek appropriate direction.

2. Upon the petitioner no.1 writing a further letter on December 31,

2019, reiterating the petitioners‟ claim for refund of the bid amount,

totalling Rs.55,19,250/- along with interest at the rate of 15 per cent

per annum from the date of payment by the petitioner till actual

payment, with cost of DD charges amounting to Rs.15,912.30p, the

Bank wrote back on January 14, 2020 indicating that it was under

process of assigning the loan account of the borrower Sancheti

Electronics Limited to one Phoenix ARC Private Limited and would

inform the petitioner to take up the matter with Phoenix once the deed

of assignment was executed. Subsequently, the loan account was

apparently assigned to Phoenix.

3. Learned senior counsel appearing for the petitioner argues that the e-

auction, in which the petitioners were successful as bidders, was held

under the SARFAESI Act, 2002 by the SBI, consequent upon the

default in payment of loan by the debtor Sancheti Electronics. On

March 1, 2022, the Tribunal recorded the settlement between

Sancheti with Phoenix, to whom the debt was assigned by the SBI on

January 20, 2020.

4. On March 28, 2022 a purported Sale Certificate was issued by

Phoenix in favour of the writ petitioners, referring therein to the

settlement between Phoenix and the corporate debtor Sancheti. In

May 2022, the petitioners filed the present writ petition and an order

was passed on May 17, 2022 observing that the sale had become

infructuous by virtue of a settlement dated March 1, 2022 and the

writ petitioners were entitled to refund of money. The petitioners

primarily rely on the said order and a subsequent order dated June

15, 2022 where, in an application by the SBI for review of the May 17,

2022 order, the said application was dismissed.

5. On August 26, 2022, an appeal was filed by the SBI against the orders

dated May 17, 2022 and June 15, 2022 (rejecting the review

application). The appeal was disposed by the Division Bench without

interfering with the said orders of the learned Single Judge. On the

prayer of SBI, time was extended to deposit the amount as directed by

the order dated May 17, 2022.

6. It is submitted that after the said order of the Division Bench, the

direction as to refund has attained finality.

7. In fact, the SBI conceded to the same and prayed for extension of time

to deposit the amount, thereby complying with the order dated May

17, 2022. The SBI, in such compliance, had deposited the principal

amount of Rs.87,11,644 with the Registrar of the High Court. The

application made by Phoenix to be added as a party to the writ

petition was dismissed by a co-ordinate Bench, against which an

appeal is pending and no interim order has been passed.

8. The allegation of Phoenix regarding suppression of purported Sale

Certificate dated March 28, 2022 issued by Phoenix, in the writ

petition, it is argued, was considered by the Division Bench and,

despite such consideration, the order of the learned Single Judge was

not interfered with. SBI, and not Phoenix, was directed to make the

deposit with the Registrar.

9. In view of the observation of the learned Single Judge that the sale has

become infructuous, the Sale Certificate issued in the present case

loses relevance. The case of B. Arvind Kumar Vs. Government of India

and others [(2007) 5 SCC 745], cited by the SBI is sought to be

distinguished on such score.

10. The SBI, even after declaring its inability to transfer the property, is

now resiling from the position that they are bound to refund the

amount.

11. Having taken advantage of the Division Bench order, the SBI has

already sought for extension of time to deposit the amount directed by

the Trial Judge on May 17, 2022. In fact, the application of Phoenix to

be added as a party was also turned down by a co-ordinate Bench.

12. It is argued that as per Section 65 of the Contract Act, when an

agreement is discovered to be void or when a contract becomes void,

any person who had received any advantage under such agreement or

contract is bound to restore it or to make compensation to the person

from whom he received it. By relying on such principle, it is argued

that the petitioner is entitled to refund of such amount along with

interest.

13. Learned senior counsel for the SBI, on the other hand, submits that

the Sale Certificate issued on March 28, 2022 was duly served upon

the petitioner on the same date via e-mail. However, the said fact was

suppressed in the writ petition. In the affidavit-in-reply, the

petitioners denied receiving the Sale Certificate without, however,

making any comment on the e-mail which ex facie proves that such

denial is false.

14. The suppression being material and deliberate, the petitioner should

be dismissed. On such score, learned senior counsel for the Bank

cites Amar Singh Vs. Union of India and others, reported at (2011) 7

SCC 69.

15. A Sale Certificate is a document of transfer of title, it is argued, and

does not require any further conveyance. In support of such

submission, B. Arvind Kumar (supra) is cited.

16. Learned senior counsel for the Bank next contends that a Sale

Certificate issued by a court or authorized by a court does not require

registration, as per the said judgment. For such contention, learned

senior counsel also relies on Shakeena and another Vs. Bank of India

and others, reported at (2021) 12 SCC 761.

17. The SBI heavily relies on the Sale Certificate, which tantamounts to

finalization of the conveyance to the petitioner. As such, the sale has

crystallized and no further payment can be made. It is further argued

that the petitioners have not prayed for cancellation of the sale deed,

which is a valid document of transfer. In the absence of the same, the

refund claimed by the petitioners is bad in law.

18. It is also argued by the SBI that the writ petitioner is not

maintainable, since, by the order dated July 16, 2021 passed in WPA

No.199 of 2021, the matter was sent to the DRT. As this Court sent

back the matter to the Tribunal, it amounts to the observation that

the issues arising out of the sale should be decided by the Tribunal.

Consequently, the second writ petition is not maintainable.

19. There is no doubt, it is argued, that the subject-matter of the present

writ petition could be decided by the Tribunal under Section 17 of the

SARFAESI Act. An alternative remedy being available, the writ

petition should not be entertained. For such proposition, learned

senior counsel for the petitioner cites United Bank of India Vs.

Satyawati Tondon and others, reported at (2010) 8 SCC 110.

20. The order dated July 16, 2021 is also relied on by the SBI, where the

court held that the Tribunal has jurisdiction and was to dispose of SA

No.168 of 2008. It was made clear that in the event the sale is set

aside, the petitioners shall be entitled to interest on the sum of

Rs.55,19,250/- from the date of deposit of the same. Thus, it is

apparent that the same, if not set aside, would stand confirmed and

there would be no question of refund of money. No appeal was

preferred from the said order dated July 16, 2021. The sale was never

set aside by the Tribunal. On the contrary, the sale certificate has

been issued and no refund can now be claimed by the petitioners.

21. Although the order dated July 16, 2021 provided that the petitioners‟

grievance could be addressed by the Tribunal, the petitioners

deliberately failed to raise the issues involved in the writ petition

before the said Tribunal and, as such, cannot agitate the same afresh

by filing a second writ petition.

22. It is lastly argued by the SBI that the letter of the Bank stating

inability to take steps due to the DRT Order was dated October 12,

2018. The letter by the petitioner demanding repayment with interest

was dated December 31, 2019. WPA No.199 of 2021, the previous

writ petition was filed only in July, 2021. Thus, between October 12,

2018 and July 2021, for a period of almost three years, no steps were

taken, or any proceeding instituted, by the petitioners. Thus, the

petitioners waited for the decision of the DRT, in respect of the

challenge to the same and were willing to accept the property if the

sale was not set aside.

23. Hence, it is argued that the present writ petition ought to be

dismissed.

24. It is clear from the chronology of events that the auction sale was held

on August 2, 2018.

25. The entire amount of consideration of Rs.55,19,250/-was paid by the

petitioners by three drafts. The first such draft was dated July 25,

2018, the second, August 3, 2018 and the third, August 14, 2018.

26. It is relevant to mention that upon the borrower Sancheti having

applied for setting aside the Sale Notice, which was registered as SA

No.168 of 2018, the Presiding Officer of the DRT-I, Kolkata, vide order

dated August 7, 2018, restrained the respondent-Bank that is, the SBI

from issuing Sale Certificate and taking further steps till hearing and

disposal of the SA.

27. Hence, the last tranche of the consideration amount was received by

the SBI seven days after the order of injunction.

28. The petitioners have consistently been asking for issuance of Sale

Certificate, possession and original title deeds/agreements up to

September 6, 2018. The bank, for the first time in its communication

dated September 14, 2018, intimated the petitioners about the

restraint order dated August 7, 2018.

29. Thereafter, on October 10, 2018, the petitioners sought for refund of

their bid amount, together with interest at the rate of 15 per cent per

annum and cost of DD charges amounting to Rs.15,912.30p.

30. The Bank, on October 12, 2018, communicated to the petitioners that

since the matter was sub judice before the DRT-I, Kolkata, the Bank

would put up the matter before the said Forum to seek proper

direction in the matter. Again, on December 31, 2019, the petitioners

wrote to the Bank, referring to a meeting held with the authorized

officer of the Bank on December 17, 2019 where it was virtually

confirmed that suitable action would be taken by Bank within a

month. The petitioners reiterated their request for refund of the bid

amount with interest and DD charges.

31. The SBI, on January 14, 2010, replied to the petitioners‟ letter dated

December 31, 2019 and took the plea that the Bank was under

process of assigning the loan account of Sancheti to Phoenix ARC

Private Limited.

32. However, the Bank did not commit anything regarding the refund.

33. An Advocate‟s letter was next given by the petitioner to the Bank on

August 4, 2020, reiterating their claim of refund, interest and other

charges.

34. On August 14, 2020, the communication dated August 4, 2020 was

reiterated.

35. Meanwhile, the petitioners preferred WPO No.199 of 2021, which was

decided on July 16, 2021 by directing the Tribunal to dispose of "SA

No.168 of 2008" and put up the petitions in connection therewith

within two months from the date of communication of a copy of the

said order. It is made clear, by a co-ordinate Bench order, that in the

event of the sale being set aside, the petitioners shall be entitled to

interest on the said sum of Rs.55,19,250/- from the date of deposit of

the said amount with the SBI till the actual date of refund at the

prime lending rate of the Bank or as may be determined by the DRT in

accordance with law.

36. Vide order dated July 27, 2021, a correction was duly recorded in the

order of the co-ordinate Bench, amending "SA 168 of 2008" as "SA

168 of 2018".

37. A conspicuous turn of events took place on March 1, 2022, when an

amicable settlement was reached between the borrower Sancheti and

the Bank in SA 168 of 2018. The said SA was disposed of in view of

amicable settlement between the parties, recording that the SARFAESI

applicant (borrower) duly accepted the OTS amount of

Rs.3,65,00,000/- and deposited the same with the respondent-Bank,

in consonance with the offer of the SBI and sanction by it of the OTS

to the borrower by the Bank‟s letter dated August 21, 2021.

38. Thus, the intention of the Bank to avoid its liability towards the

present petitioners is clear from the said developments. In the order

recording amicable settlement, the SBI had it recorded conveniently,

to suit its purpose, that SA No.168 of 2018 was disposed of under the

category of "amicable settlement". It was further added by the

Tribunal that it was not certified as to merit or demerit of the case.

39. Such finding itself is rather dubious, since the same would be

otherwise unnecessary, unless specifically recorded at the instance of

the parties thereto, that is, the borrower and the Bank, to avoid the

consequence of the sale being „set aside‟, which would attract the

mischief of the co-ordinate Bench order saddling the bank with the

liability of paying interest.

40. Such recording has to be taken in proper perspective.

41. On July 16, 2021, a co-ordinate Bench of this Court disposed of the

petitioners‟ writ petition being WPO No.199 of 2021, where the Bank

was a party, which recorded that "in the event of the sale being set

aside, petitioners shall be entitled to interest on the said sum of

Rs.55,19,250/- from the date of deposit of the said amount with the

State Bank India till the actual date of refund, at the Prime Lending

Rate of the Bank or as may be determined by the Debts Recovery

Tribunal in accordance with law".

42. It was recorded in the order dated March 1, 2022, whereby SA No.168

of 2018 was disposed of by amicable settlement, that during the

pendency of the SA, the respondent-Bank had offered and sanctioned

the OTS to the borrower by letter dated August 21, 2021, which led to

the amicable settlement.

43. Thus, the said letter dated August 21, 2021 was hurriedly issued by

the Bank, after about one month from the order of the co-ordinate

Bench dated July 16, 2021, under which the Bank was under duress

to refund the entire amount of consideration, along with interest, to

the petitioners in the event the sale was set aside.

44. Taken in conjunction, the aforesaid developments clearly show the

mala fides adopted by the Bank in its conduct, insofar as, upon the

cloud of payment of interest being cast on it if the sale was set aside,

it hurriedly issued a letter accepting the OTS proposal and

sanctioning it by the same letter dated August 21, 2021 and had the

Tribunal record the disposal of SA No.168 of 2021 by "setting aside

the sale", but on "amicable settlement", further going to the extent of

observing that it was "not certified as merit or demerit of the case", in

a bid to avoid any finding that the sale was set aside.

45. However, the chronology of events makes such attempt of the Bank

transparent and obvious.

46. In any event, the expression used by the co-ordinate Bench in its

order dated July 16, 2021 was, "in the event of the sale being set

aside" and not, "in the event SA No.168 of 2018 is allowed".

47. The moment the SBI accepted the proposal of OTS (One Time

Settlement) of the borrower and the borrower paid the amount, which

was received by the Bank, the automatic effect in law was that the

auction sale which was being geared up to be conducted in favour of

the petitioners got nullified.

48. Since the genesis of the sale was the non-payment of the loan taken

by the borrower Sancheti, the moment the loan was repaid in terms of

the OTS, the sale automatically fell through, thereby leaving no option

for the petitioners but to be satisfied with refund of the money paid for

the sale.

49. In any event, no Sale Certificate could have been issued during the

relevant period, since there was a specific restraint order passed by

the Tribunal on August 7, 2018. The said order clearly restrained the

respondent-Bank from issuing the Sale Certificate and from taking

further steps till the hearing and disposal of the SA. The hearing and

disposal of the SA, although by amicable settlement, took place only

on March 1, 2022 and, as such, any Sale Certificate which was

purportedly issued during such period was null and void ab initio.

Moreover, the purported Sale Certificate sought to be relied on by the

Bank was not issued by the Bank, which was the vendor in the

auction sale and the creditor, but one Phoenix ARC Private Limited, to

which the Bank had allegedly assigned the loan of the borrower.

50. Thus, the net effect of the entire transactions was that the Bank had

assigned the loan of the borrower to Phoenix, in a transaction in

which the present petitioners were not parties and, as such, were not

bound by the same.

51. Moreover, under the SARFAESI Act and Rules, it is the creditor, that

is, the Bank, which undertook the auction sale and confirmed the

sale, was to execute the Sale Certificate in favour of the purchaser,

that is, the petitioner no.1. Phoenix, being a third party assignee of

the Bank, did not acquire any right to unilaterally execute such Sale

Certificate with regard to the auction sale. In the least, the Bank was

also a necessary party to the sale certificate and Phoenix could, as an

assignee, be a confirming party thereto.

52. That being not so, the purported Sale Certificate issued on March 28,

2022, that too, in the teeth of the restraint order from issuing such

Sale Certificate, by Phoenix alone was palpably de hors the law and

irregular as well as illegal.

53. Such Sale Certificate, thus, was void ab initio, being in contravention

of a restraint order, and, on the grounds as indicated above, cannot

be given effect to at all.

54. Thus, for all practical purposes, the Sale Certificate having not been

issued in due process of law to the petitioners, the auction sale never

went through or was finalized. Thus, there is no scope of further

"setting aside" of such sale, which was never finalized in the true

sense of the term.

55. Taking the spirit of the order of the co-ordinate bench dated July 16,

2022, for all practical purposes, it is to be deemed that the sale never

went through due to the conduct of the Bank in accepting the OTS

after the order of the co-ordinate Bench from the borrower and taking

the amount in terms of such OTS.

56. Hence, there cannot be any doubt that the Bank is liable to pay

interest on the sum of Rs.55,19,250/- as per the spirit of the direction

dated July 16, 2021 passed in WPO No.199 of 2021.

57. Insofar as the interest thereon is concerned, the SBI has already

deposited the entire amount, to the tune of Rs.55,19,250/-, together

with interest at the rate of 14 per cent per annum from the date of

deposit on July 25, 2018 and in proportion to the amounts deposited

from time to time thereafter with the Registrar, Original Side of this

Court in terms of the order dated May 17, 2022 passed in the present

writ petition. In such view of the matter, the said amount ought to be

disbursed to the petitioner in its entirety, along with the interest

accrued thereon. Since the Registrar, Original Side maintained the

said amount in an interest bearing deposit account with automatic

renewal, the claim of interest of the petitioners till date of receipt of

the amount is satisfied.

58. Accordingly, WPO No.2166 of 2022 is allowed, thereby directing the

Registrar, Original Side to release the entire amount as deposited by

the respondent-Bank with the Registrar, Original Side pursuant to the

direction dated May 17, 2022 passed in the present writ petition,

along with interest accrued thereon, to the petitioners and/or their

duly authorized representative, within one month from date upon

withdrawal of the same from the account where the same has been

deposited. Such disbursal of the amount by the Registrar, Original

Side to the petitioners, however, shall be subject to deduction of all

statutory deductable amounts payable to the Registrar, Original Side

for having rendered the necessary services in depositing such amount

and ancillary expenses.

59. There will be no order as to costs.

60. Urgent certified server copies, if applied for, be issued to the parties

upon compliance of due formalities.

( Sabyasachi Bhattacharyya, J. )

Later:

Learned counsel for the respondents, after delivery of the

judgment, seeks a stay of operation of the above judgment and order

for eight weeks. In order to enable the respondents to prefer an

appeal, stay of operation of the above judgment and order is granted

for a period of thirty days from date.

( Sabyasachi Bhattacharyya, J. )