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Synopsis

The Supreme Court recently observed that legal formulations cannot be enforced divorced from the realities of the fact situation of the case, as it set aside an order of Karanataka High Court quashing 2007 auction of a property in 2019 finding no prior 15 days notice by the bank.

A bench of Justices J B Pardiwala and R Mahadevan said, while administering law, it is to be tempered with equity and if the equitable situation demands after setting right the legal formulations not to take it to the logical end, the high court would be failing in its duty if it does not notice equitable consideration and mould the final order in exercise of its extraordinary jurisdiction. 

“Any other approach would render the high court a normal Court of Appeal, which it is not,” the court said.

The court also pointed out that the remedy under Article 226 of the Constitution is discretionary in nature and in a given case, even if some action or order challenged in the petition is found to be illegal and invalid, the high court while exercising its extraordinary jurisdiction thereunder can refuse to upset it with a view to doing substantial justice between the parties.

Court allowed the appeal by M S Sanjay and set aside the Karnataka High Court’s order of June 15, 2019.

The high court had allowed the writ petition filed by the respondent No.4 (guarantor) and thereby set aside the order passed by the Debt Recovery Appellate Tribunal (DRAT) of April 11, 2017.

The appellant, Sanjay was the auction purchaser. The respondent no 4 was the guarantor. The respondent no 2 was M/s. Arihant Sarees, which had availed of loan facility from the respondent no 1, Indian Bank.

As the borrower defaulted in repaying the loan amount, the bank decided to proceed under the provisions of the SARFAESI Act.

The property in question was mortgaged by the original borrower, with the respondent No 1 – Bank. Thus, a security interest was granted in favour of the bank. The bank proceeded to put the property in question to auction after due compliance with the provisions of the SARFAESI Act. The auction was conducted on July 31 2007. The appellant was declared as the successful bidder in the said auction proceedings. He deposited a total sum of Rs 24,00,000 with the bank.

On November 30, 2007, a sale certificate also came to be issued in favour of the appellant. The appellant thereafter started developing the property purchased by him in the auction. The borrower did not deem fit to question the legality and validity of the auction proceedings. 

However, it was the respondent no 4 who in its capacity as the guarantor went before the Debt Recovery Tribunal and questioned the legality and validity of the auction proceeding.

The DRT, Karnataka by the order of January 23, 2009 allowed the plea instituted by the guarantor and set at naught the auction proceedings.

The bank being dissatisfied with the order passed by the DRT went in appeal before the Debt Recovery Appellate Tribunal. The DRAT by its order of April 11, 2017 allowed the appeal filed by the bank and thereby set aside the order passed by the Debt Recovery Tribunal. 

On a plea by the guarantor, the high court allowed his writ petition and thereby set aside the order of the DRAT.

The apex court noted it appeared on plain reading of the impugned order passed that the high court proceeded on the footing that 15 clear days notice was not issued by the bank for putting the property in question to auction and accordingly declared the auction to be illegal.

After hearing the parties and going through the material on record, the bench said, “We hold the Respondent No 4 (Guarantor) wholly responsible for dragging the appellant – herein to a very frivolous litigation and that too on a very technical point. It all started in 2007. The appellant paid the entire sale consideration towards the sale of property which was put To auction, i.e., an amount of Rs 24,00,000 on November 30, 2007 and a sale certificate also came to be issued. Till that point of time, neither the borrower nor the guarantor said anything in this regard. It is sometime in March, 2008 that the guarantor conceived the idea of challenging the auction proceedings before the DRAT.”

Going by the materials on record the bench noted after the possession was handed over to the appellant, he developed the property by putting up further construction. For this purpose, building plans etc were sanctioned by the competent authority and he was said to have spent about Rs 1.5 Crore in developing the property further.

“When the High Court took up the writ petition for hearing in 2019 it went strictly by the number of days necessary for the issuance of auction notice. The High Court should have taken a practical view of the matter considering that the auction had attained finality way back in the year 2007,” the bench said.

The court also pointed out it is well settled that interference by the writ court for mere infraction of any statutory provision or norms, if such infraction has not resulted in injustice is not a matter of course.

“Without saying anything further in the matter, we allow this appeal and set aside the impugned judgment and order passed by the High Court. At one point of time, we weren inclined to allow this appeal With costs to be paid by the Respondent No.4 for instituting a frivolous litigation, however, we have refrained ourselves from Passing any order of costs,” the bench said.

Case Title: M S Sanjay Vs India Bank & Ors