Ram Murti Pyara Lal & Ors. v. Central Bank Of India & Ors.

M.C Jain, Chairperson:— The appellant No. 1 is a partnership firm with appellant Nos. 2 and 3 as its partners. They are aggrieved of the order dated 7.12.2007 passed by the Tribunal below allowing the application of the auction purchasers for their impleadment in S.A No. 50/2005 filed by the appellants herein. The relevant facts may be stated briefly.

2. The appellants availed of certain loan and credit facilities from the 1st respondent-Bank herein. However, their account came to be categorized as NPA for failure of maintaining fiscal discipline of repayment. The Bank proceeded under the SRFAESI Act against them. Their property was sold to the auction purchasers on 11.6.2004 The appellants came up with an application under section 17 of the srfaesi act, complaining against the action taken by the Bank under the said Act. The holding of auction was, inter alia, disputed by them. According to them, no such auction was conducted by the Bank. The actions of the Bank were termed as actuated by mala fides. The auction purchasers moved an IA No. 14/2007 before the Tribunal below for their impleadment in the S.A contending that they were necessary parties in the S.A as they had purchased the property in public auction and had paid the entire amount about three years back. The sale was also confirmed in their favour with the issuance of sale certificate. As such, they were legal owners of the property in question, which, however, was still in the possession of the appellants herein. By the impugned order dated 7.12.2007, the Tribunal below allowed the said LA. It is this order which has been challenged by the appellants by means of this appeal.

3. I have heard Mr. Muneesh Malhotra, learned Counsel for the appellants, Mr. Jaswinder Singh, learned Counsel for the 1st respondent-Bank and Mr. C. Mohan Rao, learned Counsel for the auction purchasers.

4. The learned Counsel for the appellants has vehemently argued that the auction purchasers were neither necessary nor proper parties in the S.A pending before the Tribunal below and their impleadment ought to have been declined. It has been urged that the appellants through their S.A had challenged the pre-auction action of the Bank of proceeding under the SRFAESI Act and this central controversy could be decided and was desired to be adjudicated upon between them on the one hand and the Bank on the other, without the presence of the auction purchasers. It has also been reasoned by him that the appellants are the dominus litis, i.e, masters of the S.A and they could not be compelled to fight against whom they did not want to fight and against whom they, did not claim any relief. The learned Counsel has relied on the following three rulings in support of his appeal and to buttress his arguments against the necessity of the impleadment of the auction purchasers in the S.A pending before the Tribunal below:

(1) Ramesh Hirachand Kundanmal v. Municipal Corporation of Greater Bombay, (1992) 2 SCC 524.

(2) Kasturi v. Iyyamperumal, IV (2005) SLT 70 : II (2005) CLT 143 (SC) : AIR 2005 SC 2813.

(3) Oriental Bank of Commerce v. Anchor Constructions Pvt. Ltd., II (2007) BC 49 (DRAT/DRT).

5. He has also placed reliance on a decision of this Tribunal dated 9.5.2008 in Miscellaneous Appeal No. 59/2007 in Shri Surender Kumar v. State Bank of Mysore to stress the point that this Tribunal has held that when the challenge in the S.A related to pre-auction action of the Bank, the presence of the auction purchaser before the Tribunal below was not at all necessary.

6. The learned Counsel for the respondent-Bank, on the other hand, has argued that the impleadment of the auction purchasers in the S.A proceedings before the Tribunal below was essential in view of the fact that mortgaged property sold by the Bank under the SRFAESI Act had been purchased by them and sale had also been confirmed which was reflected in the issuance of sale certificate dated 28.6.2005 After the issuance of sale certificate, the learned Counsel reasoned, the auction purchasers were the successors in interest over the property in question and had acquired an absolute right over the same. They, according to him, had rightly been impleaded as parties to the S.A The contention has been controverted that only pre-auction action has been challenged by the appellants in the S.A In fact, they have alleged illegality and irregularities in the conduct of auction and allegations of collusion and misconduct on the part of Bank officials and the auction purchasers have also been made and this necessitated the presence of the auction purchasers before the Tribunal below.

7. Almost on the same lines, the learned Counsel for the auction purchasers has opposed the appeal, submitting that they were necessary parties in the S.A, the sale having been confirmed in their favour with the issuance of sale certificate and relief having been sought by the appellants through the S.A against them also by ignoring and setting aside the auction sale. The controversy raised in the S.A could not completely and effectively be decided by the Tribunal below without the presence and hearing of the auction purchaser, as submitted by the learned Counsel.

8. I have given my anxious consideration to the respective arguments of the learned Counsel for the parties in the light of the material on record and the applicable law. It has been held by the Hon'ble Supreme Court in the case of Razia Begum v. Sahebzadi Anwar Begum, AIR 1958 SC 886 (V 45 C 122), that the question of addition of parties under Rule 10 Order 1 of CPC is generally not one of initial jurisdiction of the Court, but of a judicial discretion which has to be exercised in view of all the facts and circumstances of a particular case. It is a ground reality that in the presence case, the auction sale in favour of the auction purchaser has been confirmed and sale certificate has-aiso been issued. The copy of the S.A filed by the appellants before the Tribunal below is there on record and it is noted therefrom that the appellants have questioned the auction and the conduct of auction. Ground (K) of the GROUNDS is to the following effect:

“Because no auction whatsoever was conducted by the respondent at any stage as no authorized officer was present on the site. Accordingly, the averment as stated in the said reply filed in SA No. 204/2005 with regard to the sale of the property, is false, wrong and shows mala fide of the respondent bank.”

9. Ground ‘O’ also contains allegations that the Bank accepted booty from the alleged prospective buyers. Ground ‘O’ is reproduced below in extenso:

“Because the applicants herein have approached the respondent Bank for amicable settlement of the dues and has accordingly sent a proposal for settlement dated 16.7.2005 which is annexed hereto as Annexure-7. However, the said proposal was not at all considered by the respondent as the respondent bank with the mala fide intentions, as it appears today, has accepted bootie with the alleged prospective buyer despite the fact that the applicants with bona fide as approached for settlement of their dues.”

10. Prayers (i) and (iv) in the S.A are directed against the auction purchasers as well, quashed in the following terms:

“(i) restrain the respondent bank or any other person claiming right, title or interest including the alleged buyer from taking any further action or creating any third party interest in pursuance to the notice under Section 13(2) and/or under Section 13(4) of the Securitisation Act in respect of property bearing Residential House No. BN-34, Shalimar Bagh (W), Delhi,

(iv) set aside the sale, if any, as alleged in reply filed in SA No. 204/2005 as the same is violation of provisions of Securitisation Act as well as various judgments of the Hon'ble Supreme Court.”

11. In the face of the allegations made against the conduct of auction and the auction purchasers it cannot be comprehended as to how the appellants insist for shutting out the hearing of the auction purchasers. There can be no justification whatsoever to grant relief to the appellants in the S.A against the auction and the auction purchasers without their presence and without an opportunity to them to contest the matter. It is simply not possible in adversary system of dispensation of justice. It may also significantly be pointed out that Sub-rule (2) of Rule 9 of the Security Interest (Enforcement) Rules, 2002 provides that the sale shall be confirmed in favour of the purchaser who has offered the highest sale price in his bid or tender or quotation or offer to the authorized officer and shall be subject to confirmation by the secured creditor. Sub-rule (6) of Rule 9 of the Security Interest (Enforcement) Rules, 2002 further says that on confirmation of sale by the secured creditor and if the terms of payment have been complied with, the authorized officer exercising the powers of sale shall issue a certificate of sale of the immovable property in favour of the purchaser in the form given in Appendix V to these Rules Section 13(6) of the SRFAESI Act provides that any transfer of secured asset after taking possession thereof, the secured creditor shall vest in the transferee all rights in, or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset.

12. It being the emphatic assertion of the respondent-Bank and the auction purchasers that sale in favour of the auction purchasers has been confirmed and sale certificate has been issued, they (auction purchasers) are necessary parties in the S.A pending before the Tribunal below keeping in view the provisions of the SRFAESI Act and the Security Interest (Enforcement) Rules, 2002. It may be stated at the risk of repetition that the appellants have questioned to the conduct of auction and have even alleged collusion between the Bank and the auction purchasers claiming relief against the auction purchasers too, assailing the auction sale. Indeed, the auction purchasers have a right to be heard and to meet the allegations made by the appellants against the auction and them (auction purchasers).

13. Having regard to the facts and circumstances of the present case, the rulings relied upon by the learned Counsel for the appellants would not come to the rescue of the appellant to shut out the auction purchasers from being impleaded and heard in the S.A pending before the Tribunal below. The decision of this Tribunal dated 9.5.2008 in Miscellaneous Appeal No. 59/2007 relied upon by the learned Counsel for the appellants is also clearly distinguishable. In that case, the challenge related only to the pre-auction action of the Bank. The vital question there was as to whether the Bank could proceed with the auction of the property under Section 13(4) of the SRFAESI Act. The presence of the auction purchaser before the Tribunal below was not at all found to be necessary for the determination of the said principal question on the facts of that case. Moreover, in that case, sale in favour of the auction purchaser had not been confirmed as there was a stay against the confirmation of sale. On the facts of that case, it was found that the auction purchaser could have locus only after the pre-auction action taken by the Bank was sustained. That is not the situation here. In the present case, allegations have been made by the appellants in the S.A against the conduct of auction and against the auction purchasers as well. Relief has also been sought in respect of the auction and against the auction purchasers. The sale has also been confirmed in favour of the auction purchasers and sale certificate has been issued. Thus, the facts of the cited case and the present case are poles apart with yawning gap. What has been held on the facts of the cited case cannot be extrapolated on to the present case.

14. Resultantly, I see no merit in this appeal. The impleadment of the auction purchasers in the S.A pending before the Tribunal below by the impugned order is perfectly justified.

15. The appeal is dismissed. No costs.

16. The parties are directed to appear before the Tribunal below on 15.1.2009 for further progress in the case according to law.

17. Copy of this order be supplied to the parties and another copy be sent to the Tribunal below.

18. Appeal dismissed.