Oriental Bank of Commerce v. 1.The Debt Recovery Appellate Tribunal, Chennai-2.2.Mr.P.Shamil Ahmed3.The Recovery Officer-II, Debt Recovery Tribunal-I

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED :: 05 -07-2007CORAMTHE HONOURABLE MR.JUSTICE ELIPE DHARMA RAO ANDTHE HONOURABLE MR.JUSTICE S.PALANIVELUWRIT PETITION No.13434 OF 2006Oriental Bank of Commerce,rep.by its Chief ManagerMr.M.O.Mathai,Overseas Branch, Nandanam,Chennai-35....Petitioner-vs-1.The Debt Recovery Appellate Tribunal, Chennai-2.2.Mr.P.Shamil Ahmed3.The Recovery Officer-II, Debt Recovery Tribunal-I, Chennai-2....RespondentsFor appellant : M/s.Murthi & VasanFor respondent 2 : Mr.Hajee K.A.Md. MustafaPetition under Article 226 of the Constitution ofIndia, praying for issuance of a writ of certiorari.O R D E RS.PALANIVELU,J.This Writ Petition is filed for issuance of a writ ofcertiorari, to call for the records of the first respondent inM.A.No.9 of 2006, dated 26.04.2006, and quash the same. https://hcservices.ecourts.gov.in/hcservices/

2. The factual matrix of the case is as mentionedbelow :2.1. The petitioner bank filed O.A.No.516 of 1998 onthe file of Debt Recovery Tribunal-I, Chennai, against the thirdrespondent and others, for recovery of a sum of Rs.1,10,46,655/-and the said O.A.was allowed, as prayed for, on 26.06.2001.Subsequent to the said order, the bank preferred D.R.C.No.156 of2001 on the file of Recovery Officer-II of Debt RecoveryTribunal-I, for realisation of the decretal amount. TheRecovery Officer-II also initiated proceedings to sell theimmovable properties mentioned under item Nos.1 to 6 of theRecovery Certificate, which were equitably mortgaged by thedefendants with the petitioner bank, as security. Auctionnotification was published in newspapers on 25.12.2004. On11.01.2005, the properties were auctioned by the RecoveryOfficer-II. In the said auction, the second respondent emergedas the successful bidder. On 11.02.2005, the petitioner bankaddressed a letter to the Recovery Officer, stating that eventhough the upset price for item No.6 was mentioned as Rs.2.00lakhs, the value of the said property is Rs.10.00 lakhs; it wasa mistake by oversight and, hence, a request was made not toconfirm the sale and to initiate the corrective action.Thereafter, on 18.02.2005, the Recovery Officer-II passed anorder, stating as follows :"AND Whereas on perusal of the TitleDeeds and other Original Documents relatingto the auctioned properties it is found thatin respect of the Item No.5, the boundariesand dimensions as specified in the documentdoes not conform with the descriptionprovided in the schedule to the DRC based onwhich the sale proclamation was issued. Assuch, the description, extent and saleconsideration will have to be determinedafresh. Further, in respect of Item No.6,the original title deeds are not readilytraceable, hence, it is not found feasible toprovide necessary documents enable properconveyance of the title to the successfulbidders;NOW, Therefore it is hereby ordered thatthe auction sale conducted in respect of ItemNo.5 and Item No.6 stands cancelled and thesums paid by the successful bidders will be https://hcservices.ecourts.gov.in/hcservices/ adjusted towards sale consideration andpoundage fee in respect of Item Nos.1 & 2 andthe balance remaining if any may be claimedby them as refund from the undersigned." 2.2. As against the above said order of the RecoveryOfficer-II cancelling the sale, the auction purchaser/secondrespondent filed M.A.No.75 of 2005 on the file of Debt RecoveryTribunal-I, Chennai, and the said petition was dismissed on23.09.2005. 2.3. Further aggrieved over the order passed by DebtRecovery Tribunal-I, the second respondent preferred an appealbefore Debt Recovery Appellate Tribunal, Chennai, in M.A.No.9 of2006. 2.4. After hearing both the parties, the AppellateTribunal allowed the appeal, directing the Recovery Officer-IIof Debt Recovery Tribunal-I, Chennai, to execute a sale deed infavour of the appellant therein, who is the second respondentherein, after complying with all the requirements as requiredunder law, within one week from the date of receipt of a copy ofthe order.2.5. As against the said order of Debt RecoveryAppellate Tribunal, the petitioner bank is now before this Courtwith this Writ Petition.3. The point that arises for consideration before thisCourt is, whether the order of cancellation of auction sale,passed by the Recovery Officer-II, is legally valid ? 4. The entire issue revolves around the letter sent by thepetitioner bank, dated 11.02.2005, and the subsequent order ofcancellation, passed by the Recovery Officer-II. The auctionsale was held on 11.01.2005. In the paper publication, the upsetprice of Item No.6 was mentioned as Rs.2.00 lakhs. But, thebank mentioned that the actual value of the property is Rs.10.00lakhs as per the Valuation Report already submitted to theRecovery Officer and, by oversight, the upset price was wronglymentioned as Rs.2.00 lakhs instead of Rs.10.00 lakhs. A furtherrequest was made by the bank not to confirm the sale. https://hcservices.ecourts.gov.in/hcservices/

5. On 18.02.2005, the Recovery Officer-II passed anorder, cancelling the auction sale in respect of Item Nos.5 and6, and directing for payment of the sale price to the auctionpurchaser, by adjusting the amount in sale consideration andpoundage fee in respect of Item Nos.1 and 2. In the said order,the Recovery Officer had stated that with reference to ItemNo.5, the boundaries and dimensions as specified in the documentdid not conform to the description provided in the schedule tothe DRC and, in respect of Item No.6, the original title deedswere not readily traceable and, hence, it was not found feasibleto provide necessary documents, for proper conveyance of titleto the successful bidders.6. The order passed by Debt Recovery Tribunal-I wouldindicate that prior to the hearing of the matter, a report wascalled for from the Recovery Officer with regard to the factors,which led to the passing of his proceedings, dated 18.02.2005.The contents of the report filed by the Recovery Officer throwmuch light on the circumstances of this case. In the saidreport, the Recovery Officer mentioned that after conducting theauction, his office made sincere efforts to identify thedocuments for the purpose of providing proper conveyance oftitle deeds to the successful bidder with regard to Item No.5,but, it was found that the boundary descriptions mentioned forthe said item did not tally with the ones described in theauction notice, on the basis of which a Recovery Certificatecame to be issued. So, he expressed his inability to confirmthe auction, portraying it as an improper one, which might bringabout multiplication of proceedings. It was also stated thatthe Recovery Officer coordinated with the bank officials in thisregard and came to a conclusion that it might not be proper toproceed further with the auction proceedings. It also transpiredto him that the title deeds for Item No.6 were not readilytraceable, which would also pave way to complications in furthercourse of action in the auction proceedings. Though it ismentioned in the report that the auction purchaser had not paidthe entire sale consideration within the stipulated time, hiscontention here is that he has deposited the entire amount. https://hcservices.ecourts.gov.in/hcservices/

7. Whatever it may be, the fact remains that the saleis clouded with certain irregularities, which might have creptin the proceedings either by inadvertence of the RecoveryOfficer or the bank officials. Any way, complications are boundto occur in future and the Court has to take care of interest ofparties.8. Debt Recovery Tribunal-I has observed that eventhough the auction purchaser may be a successful bidder, hecannot not claim for confirmation of sale as of right, whenirregularities or complications are ascertained subsequently.9. It is noteworthy to mention here that thepetitioner bank addressed a letter to the Recovery Officer,stating, that in publication in various newspapers, for ItemNo.6, the upset price is mentioned as Rs.2.00 lakhs, however, asper the valuation report already submitted, the value of thesaid property is Rs.10.00 lakhs, but, by inadvertence, the upsetprice of the said property has been published as Rs.2.00 lakhsinstead of Rs.10.00 lakhs and, accordingly, requested not toconfirm the sale and, instead, to initiate corrective action.Even though the said letter was received by the RecoveryOfficer, he has not specifically mentioned the variation in theupset price with regard to Item No.6 in his proceedings, dated18.02.2005, but, he has clearly mentioned that since the titledeeds are not readily traceable, it is not found feasible toprovide necessary documents to the successful bidder.10. Debt Recovery Appellate Tribunal, in its order,has stated that the auction purchaser filed an affidavit on15.04.2005, stating that in respect of Item No.5, he will notmake any claim or objection on the ground that the boundariesand dimensions do not conform to the description provided in theSchedule to the DRC and, as far as Item No.6 is concerned, hehas sworn to the effect that he would be satisfied with thecertified copy of the registered sale deed, dated 12.08.1993,bearing document No.2365 of 1993, and he would not make anyclaim as against the respondent bank or against the RecoveryOfficer-II, DRT-I, Chennai, with a request to confirm theauction. It is also observed in the order of Debt RecoveryAppellate Tribunal that neither the Recovery Officer nor thePresiding Officer of Debt Recovery Tribunal has taken intoconsideration the above said affidavit of undertaking sworn toby the auction purchaser and that when the said properties are https://hcservices.ecourts.gov.in/hcservices/ sold on 'as is where is condition', the Tribunal would not beheld responsible and liable for any encumbrance of theproperties. 11. This Court is not in agreement with the observations made byDebt Recovery Appellate Tribunal, for the reason that it couldnot be foreseen that the judgment debtors would not agitateagainst the irregularities in the conduct of the auctionproceedings, on the basis of the mis-descriptions and variationsof sale price with regard to Item Nos.5 and 6. Defendants inthe O.A. themselves filed a memo before Debt Recovery Tribunal-I, not pressing I.A.Nos.1021 of 2001 and 810 of 2004. Eventhough they have not pressed the said applications, it will notremove the irregularity occurred in the auction sale. Moreover,this Court is at a loss to discern now as to who are the partiesinterested in the properties subjected to auction, other thanthe defendants. When that be so, there is every possibility forthem to focus a scathing attack on the sale. 12. When a Court sale is conducted, it should be free from anyillegality or irregularity. Whenever it is brought to thenotice of the Court that certain irregularity or illegality iscrept in the sale proceedings, particularly before theconfirmation of sale as found in these proceedings, it isincumbent upon the Court to rectify it by all means and toconvey a better title to the auction purchaser. Since Courtitself conducts the sale, its duty is to apply its mind to thematerial factors, bearing on the reasonableness of the priceoffered. As per the settled principles, failure to apply itsmind to this aspect of conduct of the sale may amount tomaterial irregularity. Since the act of the Court shall harm noone, mis-description of the property also would be a materialirregularity. The Court has to guard against 'substantialinjury' to the auction purchaser and other parties concerned.'Injury' means, loss, which is wrongful, and 'substantial'means, actual and not imaginary. 'Irregularity' means, not beingin conformity to the rules prescribed for regulating the auctionsale. The word 'material' means, real, not merely formal andacademic.13. As far as this case is concerned, the Recovery Officer,after due verification, has come out with his proceedings, dated18.02.2005, cancelling the auction in respect of Item Nos.5 and6. This Court finds nothing wrong in the tenor of the saidproceedings. https://hcservices.ecourts.gov.in/hcservices/

14. Under the circumstances, we hold that the orderpassed by Debt Recovery Tribunal-I, on the strength ofcommunication and report of the Recovery Officer, does notsuffer from any illegality or infirmity and that theobservations and findings contained in the order of DebtRecovery Appellate Tribunal could not bear the seal of approvalof this Court. In order to avoid multiplicity of proceedings,it is just and necessary to confirm the cancellation of auction,held for Item Nos.5 and 6. It is necessary to mention here,that, hereafter, due steps should be taken for auction of theproperties at the instance of the Recovery Officer and that thepresent auction purchaser may also participate and bid theauction, so that no prejudice or illegal injury would be causedto anyone.15. In view of what is stated above, this WritPetition is allowed, setting aside the order of Debt RecoveryAppellate Authority and restoring the order of Debt RecoveryTribunal-I. No costs. Consequently, the connectedW.P.M.P.No.15002 of 2006 and W.V.M.P.No.1685 of 2006 are closed.dixitSd/Asst.Registrar/true copy/Sub Asst.Registrar https://hcservices.ecourts.gov.in/hcservices/ To1.The Debt Recovery Appellate Tribunal, Chennai-2.2.The Recovery Officer-II, Debt Recovery Tribunal-I, Chennai-2.+2cc to Mr. Hajee K.A. Md. Mustafa, Advocat sr no. 40197+ one cc to M/s. Murthi & Vasan, Advocate sr no. 40280pv(co)nm(10.07.07) W.P.No.13434 OF 2006