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Synopsis

The Supreme Court recently observed that the validity of an order must be assessed solely on the reasoning it contains. This reasoning cannot be expanded or modified, especially through counter-affidavits or supplementary affidavits, once litigation has commenced, it held. 

A bench of Justices Pankaj Mithal and R Mahadevan dismissed a plea by the IDBI Bank against the Telangana High Court's orders of September 19, 2022 and November 29, 2022, which held that the bank was not justified in withholding the sale certificate and refusing to execute the sale deed with regard to a property in Malkajgiri district to respondent Ramswaroop Daliya and others.

The Supreme Court held that the period to deposit the balance sale consideration, as provided under the Security Interest (Enforcement) Rules, 2002, is not sacrosanct and is extendable with the consent in writing of the parties and that Rule 9(4) will only come into play when there is default on part of the party i.e. the auction purchaser to deposit the amount.

Court also found the cancellation of the auction sale was purely unilateral in nature without any notice or opportunity of hearing to the respondents, which per se in violation of the principles of natural justice and was illegal.

In its arguments, the appellant-Bank contended that in view of the statutory provisions contained under the Rules, especially Rule 9(4) of the Rules, since the respondents had not deposited the balance sale consideration within the mandatory period of 90 days, the High Court had erred in directing it to issue the sale certificate and to execute the sale deed. 

Moreover, on the complaint of the appellant-Bank to the CBI made on March 08, 2018, the Enforcement Directorate had taken suo moto cognisance and issued an advisory to the appellant-Bank not to release the title deeds, it said.

As per facts of the case, the appellant-Bank had issued e-auction notice on March 17, 2018 and had conducted the auction on April 10, 2018. The respondents had participated in the said auction and were recognised as the highest bidder who deposited 25% of the auction money amounting to Rs 36,00,000 then and there. On the very same day, a sale confirmation letter was issued, requiring the respondents to pay the balance amount of Rs 1,06,50,000 within 15 days so that the sale certificate might be issued.

The court noted when the appellant-Bank issued an e-auction notice, it had already made the complaint to the CBI but this aspect of the matter was not disclosed in the advertisement. 

"Thus, a conscious decision was taken by the appellant-Bank to go ahead with the e-auction despite there being a complaint to the CBI... In such a situation it does not lie in the mouth of the appellant-Bank to take shelter on the basis of the complaint made to the CBI and to deny issuance of the sale certificate, particularly when there was no specific direction either of the CBI or the ED not to confirm the auction sale or to issue the sale certificate. The only rider was to keep the property documents in safe custody," the bench said.

The court found that the appellant-Bank apparently was not justified in refusing to issue a sale certificate to the respondents on the pretext that there was an advisory from the ED. 

"It is worth noticing that even the advisory of ED of June 08, 2018 is not material for not accepting the balance sale consideration within the period of 15 days stipulated in the sale confirmation letter dated 10.04.2018 which period expired on 25.04.2018, much before the issuance of the advisory," the bench said. 

The court also pointed out that the communication of December 24, 2019, by which the appellant-Bank took a decision to cancel the auction sale and to return the amount deposited by the respondents, was completely silent as regards the default, if any, committed by the respondents in depositing the balance auction amount.

"The said plea was taken by the appellant-Bank for the first time through the counter affidavit filed in the writ petition. It is well recognised that the validity of an order can only be adjudged on the basis of the reasoning contained in the order and the said reasoning cannot be supplemented in any manner much less by means of a counter affidavit or a supplementary affidavit when the parties have entered into a litigation," the bench said, citing Mohinder Singh Gill & Anr Vs Chief Election Commissioner and Others (1978).

The court said since it has been clearly laid down that the parties are not permitted to raise new pleas not contained in the order impugned while assailing the correctness or the validity of such an order and in view of the law so laid down, the appellant Bank was certainly not entitled to raise the plea of default under Rule 9(4) of the Rules through the counter affidavit.

Referring to the Rules, the bench said that first there has to be a default on part of the auction purchaser to invite cancellation of the auction and second, that the period of deposit stipulated therein is not absolute rather extendable with the agreement of the parties.

In the case at hand, the bench noted, the correspondence between the parties revealed that the respondents only sought extension of time for the reason that the appellant-Bank itself was not in a position to accept the amount as there was a complaint to the CBI, an advisory of the ED and a stay from the High Court.

"The silence on part of the appellant-Bank in either immediately revoking the sale confirmation or refusing to extend the time, impliedly amounted to extension of time in writing with consent," the bench said.

Secondly, the non-deposit of the balance sale consideration within the time limit prescribed under Rule 9(4) was not attributable to the respondents so as to call them defaulters within the meaning of the provisions of Rule 9 (4) and (5) of the Rules, the bench pointed out.

As the correspondence on record clearly reveals that the respondents were always ready and willing to deposit the balance auction amount of Rs1,06,50,000 and had rather submitted a bank draft on October 15, 2022 of the said amount, whatever pleas have been taken by the appellant-Bank to avoid acceptance are all subsequent and are not very material, the bench said.

"In these facts and circumstances, reason for the non issuance of the sale certificate is solely attributable to the appellant-Bank and that there were no latches, negligence or default on part of the respondents in offering to deposit the balance auction amount. Since there is no default on their part, non-deposit of the said amount within the stipulated period would not be fatal within the meaning of sub-Rules (4) and (5) of Rule 9 of the Rules," the bench said.

Relying upon Union Bank of India Vs Rajat Infrastructure Private Limited and Others (2023), the appellant Bank had submitted that the statutory period prescribed under Rule 9(4) was not liable to be extended by the top court even in exercise of powers under Article 142 of the Constitution of India. 

The bench, however, said the authority cited on behalf of the appellant-Bank was not of any help to it in this case, as it was not providing for any new period of limitation for depositing the balance sale consideration or extending the time period provided under the Rules. 

Rule 9(4) will only come into play when there is default on part of the party i.e. the auction purchaser to deposit the amount and will not apply where there is no default or that the default, if any, lies upon the auctioneer i.e. appellant-Bank in the case at hand, the court said.

The court held the High Court had not committed any error of law in the peculiar facts and circumstances and that the appellant Bank manifestly erred in cancelling the auction sale.

It directed the appellant Bank to issue sale certificate and register the sale deed in favour of the respondents after getting the balance auction amount deposited within a period of four weeks.

Case Title: IDBI Bank Ltd Vs Ramswaroop Daliya And Ors