IN THE HIGH COURT OF ANDHRA PRADESH :

AT AMARAVATI

***

Writ Petition No.1105 of 2019

Between:

M/s. Kirlampudi Sugar Mills Limited,

Represented by its Managing Director, Ch. Raghuram,

Reg. Office 6-3-663/16/1, Jaferali Bagh,

Somajiguda, Hyderabad – 500 082.

…. Petitioner

And

1) Recovery Officer-II, DRT, Department of Finance Services

and Two others.

….Respondents.

Writ Petition No.3007 of 2019

Between:

M/s. Sri Siddhartha Infratech and Services (1) Private

Limited, Near Bharatiya Vidhya Bhavan, Road No.84,

Jubilee Hills, Hyderabad – 500 033, rep. by its Managing

Partner Bandaru Narasimha Rao, S/o. Panduranga Rao,

Aged about 57 years.

…. Petitioner

And

1) Recovery Officer-II, Debts Recovery Tribunal,

Visakhapatnam and Two others.

….Respondents.

Writ Petition No.25880 of 2021

Between:

Central Bank of India, Kakinada Branch,

Rep. by its Senior Manager,

Kakinada, Andhra Pradesh.

…. Petitioner

And

1) Recovery Officer-II, Debts Recovery Tribunal,

Visakhapatnam and Three others.

….Respondents.

Date of Judgment pronounced on : 12.04.2022

2

THE HON’BLE SRI JUSTICE C. PRAVEEN KUMAR

AND

THE HON’BLE SMT. JUSTICE V. SUJATHA

1. Whether Reporters of Local newspapers : Yes/No

may be allowed to see the judgments?

2. Whether the copies of judgment may be marked : Yes/No

to Law Reporters/Journals:

3. Whether the Lordship wishes to see the fair copy: Yes/No

of the Judgment?

________________________________

JUSTICE C. PRAVEEN KUMAR

3

* THE HON’BLE SRI JUSTICE C. PRAVEEN KUMAR

AND

THE HON’BLE SMT. JUSTICE V. SUJATHA

+ Writ Petition No.1105 of 2019

% 12.04.2022

Between:

# M/s. Kirlampudi Sugar Mills Limited,

Represented by its Managing Director, Ch. Raghuram,

Reg. Office 6-3-663/16/1, Jaferali Bagh,

Somajiguda, Hyderabad – 500 082.

…. Petitioner

And

$ 1) Recovery Officer-II, DRT, Department of Finance

Services and Two others.

….Respondents.

Writ Petition No.3007 of 2019

Between:

# M/s. Sri Siddhartha Infratech and Services (1) Private

Limited, Near Bharatiya Vidhya Bhavan , Road No.84,

Jubilee Hills, Hyderabad – 500 033, rep. by its Managing

Partner Bandaru Narasimha Rao, S/o. Panduranga Rao,

Aged about 57 years.

…. Petitioner

And

$ 1) Recovery Officer-II, Debts Recovery Tribunal,

Visakhapatnam and Two others.

….Respondents.

Writ Petition No.25880 of 2021

Between:

# Central Bank of India, Kakinada Branch,

Rep. by its Senior Manager, Kakinada, Andhra Pradesh.

…. Petitioner

And

$ 1) Recovery Officer-II, Debts Recovery Tribunal,

Visakhapatnam and Three others. ….Respondents.

4

! Counsel for the Petitioner(s) :1)Sri Vedula Venkata Ramana,

Learned Senior Counsel.

2) Ms. V. Uma Devi.

3) Sri Ch. Siva Reddy.

Counsel for the Respondents : Sri N. Harinath,

Learned ASG, for Recovery

Officer.

<Gist :

>Head Note:

? Cases referred:

1) (2013) 9 SCC 460

2) (2013) 10 SCC 83

3) AIR 1954 SC 349

4) 1990 (4) SCC 90

5) 1996 (5) SCC 705

6) 2017 SCC Online Del. 10931

7) MANU/KA/1296/2021

8) 2011 (6) CTC 369

9) 2022 SCC Online 372

10) 2020 (8) SCC 129

11) 2003 (8) SCC 648

12) 2015 (4) SCC 334

13) 2020 (15) SCC 146

5

THE HONOURABLE SRI JUSTICE C.PRAVEEN KUMAR

AND

THE HONOURABLE SMT. JUSTICE V.SUJATHA

WRIT PETITION NO. 1105 OF 2019

AND

WRIT PETITION NO. 3007 OF 2019

AND

WRIT PETITION NO. 25880 OF 2021

COMMON ORDER : (Per Hon’ble Sri Justice C.Praveen Kumar)

1) As all these Writ Petitions are inter connected, they are

heard and disposed of by this Common Order taking Writ

Petition No. 3007 of 2019 as lead petition.

2) (i) The 3

rd Respondent herein [Borrower] availed credit

facilities from 2

nd Respondent Bank and when the 3

rd

Respondent committed default in payment of loan amount,

2

nd Respondent Bank approached the Debt Recovery

Tribunal, Visakhapatnam, and filed O.A. No. 9 of 2006. On

contest, the said O.A. was allowed and a decree came to be

passed covering the subject immovable property, which is

land admeasuring Acres 42.36 cents in Pitapuram Town,

Pitapuram Municipal Limits, East Godavari District.

(ii) The 2

nd Respondent Bank took steps for execution of

the said decree before the 1

st Respondent by filing R.P. No.

14 of 2009 under the provisions of Recovery of Debts Due To

The Banks and Financial Institutions Act, 1993, [„RDDB

Act‟]. The subject land was put to auction on 14.06.2018.

6

The Petitioner, namely, Sri Siddhartha Infratech and

Services (I) Private Limited, became the highest bidder and

on the same day he deposited 25% of the bid amount, which

was to the tune of Rs.7.00 crores. He made arrangement for

payment of balance bid amount within 15 days, in terms of

Rule 57(2) of schedule II of income tax Act. But On

14.06.2018 itself, the 3

rd Respondent filed W.P. No. 18502 of

2018, by way lunch motion, wherein, this Court on the same

day passed the following order:

“Ms. V. Uma Devi, learned Counsel for the Petitioner,

places reliance of the decision of this court in Pochiraju

Industries Ltd, Tamilnadu Vs. Punjab National bank

[2018(2) ALT 128(D.B)]

The issue raised in the Writ Petition in the context of the

afore stated decision requires examination.

There shall accordingly be interim stay of further

proceedings pursuant to the auction sale held on 14-06-

2018. Respondent No.2-Bank shall receive 25% of the

sale consideration from the auction purchaser, if any,

and shall not confirm the sale or receive the balance sale

consideration pending further orders.

Post on 20-06-2018.”

(iii) In view of the interim order, the Petitioner was

precluded from paying 75% of balance sale consideration.

Thereafter, W.P. No.18502 of 2018 was contested and the

same was dismissed on 26.10.2018. After receipt of copy of

the judgment on 08.11.2018, the 1

st Respondent herein

issued a letter to the Petitioner directing him to pay balance

amount on or before 23.11.2018. At that point of time, the

3

rd Respondent filed W.P. No. 41658 of 2018 questioning the

7

communication dated 08.11.2018 on the ground that the

same is contrary to Rule 57(2) of the Act. On 19.11.2018,

this Court passed an interim order, which is as under:

“”Mr. Ch.Siva Reddy, learned Counsel takes notice for

the respondents 1 and 2. Issue notice before admission

to the 3

rd

respondent returnable by 07.12.2018. It

appears that pursuant to the interim order passed by

this Court on 14.06.2018, the highest bidder deposited

25% of the bid amount within time. After the dismissal of

the writ petition on 26.10.2018, the Recovery Officer has

given (15) days time by the letter dated 08.11.2018 to the

3

rd

Respondent to make payment of the balance 75%. It

also appears that the balance amount has been

deposited by the 3

rd

respondent. But, the learned

counsel for the petitioner states that in terms of Rule

60(1)(a) of the Rules under Second Schedule of the

Income Tax Act, the petitioner is prepared to deposit the

amount indicated as due under the proclamation of sale

dated 09.05.2018. In the proclamation of sale dated

09.05.2018, the amount due as on 30.04.2018 is

indicated to be Rs.18,83,00,951.47 ps. The Petitioner,

under Rule 60(1)(a) of the Rules, has (30) days time from

the date of proclamation. In this case, the date of

proclamation is 14.06.2018. The interim stay granted by

this Court in the previous writ petition, was on the very

dame day, namely, 14.06.2018. But, the writ petition

was dismissed on 26.10.2018. On the ground that the

copy of the dismissal order was received on 08.11.2018,

the Recovery Officer gave to the highest bidder (15) days

time from 08.11.2018. If the time to obtain a certified

copy of the order, is made available to the 3

rd

respondent

for the propose of computing the period of (15) days, the

same can be made available to the borrower also under

Rule 60(1)(a) of the Rules. Therefore, if the Petitioner

makes payment of Rs.18,83,00,951.47 ps., on or before

07.12.2018, the sale held on 14.06.2018 may be

cancelled. To given an opportunity to the petitioner to

comply with this Rule, there will be an interim stay of

issue of sale certificate and further proceedings thereto.

If the money is not paid on or before 07.12.2018, the

Recovery Officer will be at liberty to issue a sale

8

certificate and proceed further. Call on 10.12.2018 for

reporting compliance”.

3. From a reading of the above order, it is clear that if the

Petitioner i.e. borrower commits default in payment of loan

amount on or before 07.12.2018, the Recovery Officer was

given liberty to issue Sale Certificate and proceed further. As

the Writ Petitioner committed default in payment of loan

amount, the 1

st Respondent issued a letter dated 25.01.2019

requesting the auction purchaser to pay balance amount

within 15 days. Questioning the said communication dated

25.01.2019, W.P.No.1105 of 2019 came to be filed by the

borrower contending that it is violative of Rule 57(2) of the

schedule II.

4. When the above Writ Petitions are pending consideration

before the High Court, the 1

st Respondent issued the present

impugned Order, dated 12.02.2019, forfeiting the amount

deposited by the auction purchaser and also canceling the

auction Sale, dated 14.06.2018. Assailing the same, W.P. No.

3007 of 2019 came to be filed. During pendency of these two

Writ Petitions, the Central Bank of India filed W.P. No.

25880 of 2021 questioning the action of the 1

st Respondent

in remitting the amount of Rs.7,39,68,473.55 to Government

treasury as illegal, arbitrary and against the provisions of

RDDB Act.

5. (i) Sri. Vedula Venkata Ramana, learned Senior Counsel

appearing for the Petitioner in W.P. No. 3007 of 2019 would

9

contend that, though Rule 57 of the Second Schedule of the

Income Tax Act, is applicable to the Recovery Officer, as per

the law laid down by the Hon‟ble Supreme Court and though

the requirement of Rule 57 was held to be mandatory,

according to him, there are number of court orders passed at

the instance of the borrower interfering right from the date of

auction, thereby disabling the Petitioner/auction purchaser

from depositing the balance bid amount. Since the borrower

failed to comply with the conditions imposed in the interim

orders obtained by him, the timeline contained in Rule 57

has elapsed due to Court orders. He would further submit

that the Court order should not cause prejudice to a party

[Actus Curiae Neminem Gravabit]. In view of the fact that

delay, if any, caused for payment of the amount was due to

the fault of the borrower, there is no default on the part of

the Petitioner in depositing balance bid amount.

(ii) Having regard to the order passed in W.P.No.41658 of

2018, dated 19.11.2018, he would submit that the same

clearly protects the Petitioner and requires the Recovery

Officer to accept the balance bid amount,and that the

Recovery Officer has no power to cancel the auction dated

14.06.2018 and forfeit 25% of the bid amount paid by the

auction purchaser.

(iii) The learned Senior Counsel further contends that the

3

rd Respondent – borrower, who committed default of the

10

orders passed, cannot claim any equity nor can point out the

mistakes if any committed by the Writ Petitioner. While

commenting on the bona fides of the borrower, learned

Senior Counsel would contend that there is absolutely no

justification for this Court to protect the borrower at this

length of time, more so, when he never availed the

opportunities given by the Court for payment of entire due

amount. According to him, it is settled law that the defaulter

has no equity and the equity of redemption is lost when once

the auction sale has taken place on 14.06.2018. He relies

upon a judgment of the Hon‟ble Supreme Court in support of

his plea.

6. Ms. V.Uma Devi, learned Counsel appearing for the

Petitioner in W.P. No. 1105 of 2019, which came to be filed

questioning the action of the 1

st Respondent in extending the

time for payment, would submit that the time frame

mandated under Rule 57 of the Income Tax Act, for payment

of balance consideration commences from the date of

dismissal of the writ petition i.e., 26.10.2018 and not from

the date of obtaining the order. The learned Counsel further

submits that, the obligation of the auction purchaser for

payment of remaining 75% of sale consideration starts from

the date of dismissal of the order i.e., 26.10.2018. The 15

days time for payment of balance consideration commenced

on 26.10.2018 and expired on 09.11.2018, but, the auction

11

purchaser never made any effort to pay the amount during

the said period. It is further stated that, on 19.11.2018, the

Hon‟ble High Court in W.P. No. 41658 of 2018 granted 15

days time to the auction purchaser for compliance of the

conditional order starting from 08.12.2018. Though, 15 days

time elapsed on 23.12.2018, the auction purchaser failed to

pay the balance amount. Left with no option, the Recovery

Officer issued proceedings forfeiting the initial payment.

(ii) The learned Counsel further contends that, without

depositing 75% amount as required under law, within the

time prescribed, the auction purchaser is shifting the blame

on to the borrower, to retrieve his amount. It is further

alleged by her that, from 26.10.2018 to 08.11.2018 and from

08.12.2018 to 22.12.2019 and then from 22.12.2018 to

12.02.2019, there were no orders restraining the auction

purchaser from paying 75% of the auction amount. But,

without paying the same, is now trying to find fault with the

borrower and the Recovery Officer. She relied upon an order

passed by this Court in W.P. No. 26383 of 2013 in support

of her plea.

7. Sri. Ch. Siva Reddy, learned Counsel appearing for the

Petitioner in W.P. No. 25880 of 2021 would contend that, if

the auction purchaser fails to pay 75% of the sale

consideration, the forfeited amount should be remitted to the

Bank,as recovery of the amount is for the debt due to the

12

bank or financial institutions and, forfeiting the amount to

the Government Treasury is bad in law. In other words, his

argument appears to be that it is the bank which has

incurred sale expenses including manpower and also issued

notices number of times, and as such, the bank is entitled to

the forfeited amount. He relies upon a judgment of the

Bombay High Court in W.P. No. 3742 of 2012 in support of

his plea.

8. In reply, Sri. Vedula Venkata Ramana, learned Senior

Counsel, relied upon the judgments reported in C.N.

Paramsivan And Another V. Sunrise Plaza through

Partner and Others

1 and General Manager, Sri

Siddeshwara Cooperative Bank Limited and Another

2.

According to him, even if certain provisions are mandatory in

nature, the same can be waived for the benefit of bank or for

the borrower. Since, the borrower failed to comply with the

interim orders in spite of giving number of opportunities, the

auction purchaser cannot be found fault with for the default

committed, if any, in payment of the amount, more so,

having regard to the orders passed by this Court.

9. Reiterating the arguments advanced, Ms. V. Uma Devi,

learned Counsel appearing for the Petitioner in W.P. No.

1

(2013) 9 SCC 460

2

(2013) 10 SCC 83

13

1105 of 2019, would submit that the Recovery Officer has no

power to extend time for payment of money.

10. At this stage, Sri. N. Harinath, Assistant Solicitor

General, appearing for Recovery Officer submit that, vide

proceedings dated 12.02.2019, the Recovery Officer has

already credited the amount to Government of India and that

the argument of the counsel that Recovery Officer has no

power to extend the time, has no legs to stand. He took us

through the judgment of Apex court in Pannirsivam in

support of his case.

11. Having regard to the peculiar facts of the case, the

following issues would arise for consideration:

(a)Whether Rule57(1) and 57(2) are mandatory?

(b)Whether Recovery Officer has power to extend time for

payment of auction amount?

(c)Whether Recovery Officer has power to cancel the auction

sale and forfeit the amount to the Government treasury

in the facts of the case?

(d)What are the effects of the orders passed by this Court

from time-to-time at the instance of the borrower?

(e)What is the effect of the interim order passed by this

court when the writ petition was finally dismissed?

I. Issue(a):

12. As against the mandatory conditions of paying the

amount within a stipulated period pursuant to the auction,

there are orders of the High Court staying the payment/the

payment process at the instance of the borrower. What is the

effect of the orders and whether the Recovery Officer was

14

right in giving time for payment and later canceling the

auction/sale notice and forfeiting the amount paid to the

Government?

13. Before proceeding further, it would be appropriate to

extract Section 29 of RDDB Act, 1993, which is as under.

“Section 29. Application of certain provisions of

Income-tax Act.

The provisions of the Second and Third Schedules to

the Income-tax Act, 1961 (43 of 1961) and the

Income-tax (Certificate Proceedings) Rules, 1962, as in

force from time to time shall, as far as possible, apply

with necessary modifications as if the said provisions

and the rules referred to the amount of debt due

under this Act instead of to the Income-tax:

Provided that any reference under the said provisions

and the rules to the assessee shall be construed as a

reference to the defendant under this Act.”

14. It would also be appropriate to refer to Rules 57 and 58

of Schedule – II to Income Tax Act, 1961, [„I.T. Act‟] which is

as under:

Deposit by purchaser and resale in default.

57. (1) On every sale of immovable property, the

person declared to be the purchaser shall pay,

immediately after such declaration, a deposit of

twenty-five per cent on the amount of his purchase

money, to the officer conducting the sale; and, in

default of such deposit, the property shall forthwith be

resold.

(2) The full amount of purchase money payable shall

be paid by the purchaser to the Tax Recovery Officer

on or before the fifteenth day from the date of the sale

of the property.

15

Procedure in default of payment.

58. In default of payment within the period mentioned

in the preceding rule, the deposit may, if the Tax

Recovery Officer thinks fit, after defraying the

expenses of the sale, be forfeited to the Government,

and the property shall be resold, and the defaulting

purchaser shall forfeit all claims to the property or to

any part of the sum for which it may subsequently be

sold.

15. A reading of Section 29 of the I.T. Act, would show that

Rules under I.T. Act are applicable only “as far as possible”

and with modifications as required, as if the said provisions

and the Rules referred to the amount of debt due under

RDDB Act in-stead of I.T. Act [C.N. Paramsivan, cited 1

st

above].

16. Dealing with Section 29 of RDDB Act, the Hon‟ble Apex

Court in C.N. Paramsivan [cited 1

st above] held as under:

“21. Applying the above principles to the case at hand

Section 29 of the RDDB Act incorporates the

provisions of the Rules found in the Second Schedule

to the Income Tax Act for purposes of realisation of

the dues by the Recovery Officer under the RDDB Act.

The expressions “as far as possible” and “with

necessary modifications” appearing in Section 29 have

been used to take care of situations where certain

provisions under the Income Tax Rules may have no

application on account of the scheme under the

RDDB Act being different from that of the Income Tax

Act or the Rules framed thereunder. The provisions of

the Rules, it is manifest, from a careful reading

of Section 29 are attracted only in so far as the same

deal with recovery of debts under the Act with the

modification that the „amount of debt‟ referred to in

the Rules is deemed to be one under the RDDB Act.

That modification was intended to make the position

16

explicit and to avoid any confusion in the application

of the Income Tax Rules to the recovery of debts under

the RDDB Act, which confusion could arise from a

literal application of the Rules to recoveries under the

said Act. Proviso to Section 29 further makes it clear

that any reference “to the assessee” under the

provisions of the Income Tax Act and the Rules shall

be construed as a reference to the defendant under

the RDDB Act. It is noteworthy that the Income Tax

Rules make provisions that do not strictly deal with

recovery of debts under the Act. Such of the rules

cannot possibly apply to recovery of debts under the

RDDB Act. For instance Rules 86 and 87 under

the Income Tax Act do not have any application to the

provisions of the RDDB Act, while Rules 57 and 58 of

the said Rules in the Second Schedule deal with the

process of recovery of the amount due and present no

difficulty in enforcing them for recoveries under the

RDDB Act. Suffice it to say that the use of the words

“as far as possible” in Section 29 of RDDB Act simply

indicate that the provisions of the Income Tax Rules

are applicable except such of them as do not have any

role to play in the matter of recovery of debts

recoverable under the RDDB Act. The argument that

the use of the words “as far as possible” in Section

29 is meant to give discretion to the Recovery Officer

to apply the said Rules or not to apply the same in

specific fact situations has not impressed us and is

accordingly rejected.

23. It follows that while the phrase “as far as

possible”, may be indicative of a certain inbuilt

flexibility, the scope of that flexibility extends only to

what is “not at all practicable”. In order to show that

Rules 57 and 58 of the Second Schedule of the Income

Tax Act may be departed from under the RDDB Act, it

would have to be proved that the application of these

Rules is “not at all practicable” in the context of RDDB

Act.”

17

17. Paragraph Nos. 23, 24, 26 and 27 of the said judgment

deal with the issue as to whether Rule 57(1), (2) and Section

58 are mandatory. The same are as under:

“23. …… In order to show that Rules 57 and 58 of the

Second Schedule of the Income Tax Act may be

departed from under the RDDB Act, it would have to

be proved that the application of these Rules is “not at

all practicable” in the context of RDDB Act.”

24. The interchangeable use of the words possible and

practicable was previously established by a three -

judge Bench of this Court in N.K. Chauhan and Ors.

v. State of Gujarat and Ors ., (1977) 1 SCC 308,

where this Court observed that in simple Anglo-Saxon

Practicable, feasible, possible, performable, are more

or less interchangeable. Webster defines the term

practicable thus:

(1). That can be put into practice; feasible.

(2). That can be used for an intended

purpose; usable.

26. It is, therefore, reasonable to hold that the phrase

as far as possible used in Section 29 of the RDDB Act

can at best mean that the Income Tax Rules may n ot

apply where it is not at all possible to apply them

having regard to the scheme and the context of the

legislation.

27. There is nothing in the provisions of Section 29 of

RDDB Act or the scheme of the rules under the

Income Tax Act to suggest that a discretion wider than

what is explained above was meant to be conferred

upon the Recovery Officer under Section 29 of the

RDDB Act or Rule 57 of the Income Tax Rules which

reads as under:

57. (1) On every sale of immovable

property, the person declared to be the

purchaser shall pay, immediately after

such declaration, a deposit of twenty-five

per cent on the amount of his purchase

money, to the officer conducting the sale;

and, in default of such deposit, the

property shall forthwith be resold.

18

(2) The full amount of purchase money

payable shall be paid by the purchaser to

the Tax Recovery Officer on or before the

fifteenth day from the date of the sale of

the property.”

18. After referring to Manilal Mohanlal Shah and Ors. V.

Sardar Sayed Ahmed Sayed Mahmed and Anr

3; Sardara

Singh (Dead) by Lrs. and Anr. V. Sardara Singh (Dead)

and Ors.

4 Balram, son of Bhasa Ram V. Ilam Singh and

Ors.

5, the Hon‟ble Apex Court reiterated the legal position in

the following words:

7...it was clearly held [in Manilal Mohanlal] that Rule

85 being mandatory, its non-compliance renders the

sale proceedings a complete nullity requiring the

executing court to proceed under Rule 86 and property

has to be resold unless the judgment-debtor satisfies

the decree by making the payment before the resale.

The argument that the executing court has inherent

power to extend time on the ground of its own mistake

was also expressly rejected...

From the above, it is clear that Rule 57 of Schedule II of

Income Tax Act, 1961 is mandatory in nature and breach of

the requirements under the Rule, will render the auction

non-est in the eye of law.

19. Accordingly, Issue (a) is answered holding that Rule 57

is mandatory.

II. Issue(b):

3

AIR 1954 SC 349

4

1990 (4) SCC 90

5

1996 (5) SCC 705

19

20. Once Rule 57 is held to be mandatory, whether it

follows automatically that Recovery Officer has no power to

extend time or whether there is any flexibility to Rule when it

is not at all possible to apply (paras 22 to 26 of Paramsivam)

The said issue was also discussed in Shri Sunil Gupta V.

Canara Bank and Anr

6; Asset Reconstruction Company

India Ltd. and Ors. Vs. Esteem Estate Projects Pvt. Ltd.

and Ors

7 and P.Kumaran V. The Debts Recovery

Appellate Tribunal & Ors

8.

21. A reading of the three judgments, referred to above,

would show that Madras High Court in P. Kumaran [cited

8

th above] held that, sub-rule (1) of Rule 57 is mandatory

while sub-rule (2) is not and could be applied with necessary

modifications, meaning thereby that the Recovery Officer

gets power to extend the time for payment with necessary

modifications, which should be in existence in the terms and

conditions of the Sale Notice itself. However, in Asset

Reconstruction Company India Ltd. [cited 7

th above], the

Karnataka High Court dealt with a situation where such a

condition was there in Sale Notice itself. After referring to the

judgment of Apex Court in C.N. Paramsivan [cited 1

st

above], where Section 29 and Rule 57 of Second Schedule

6

2017 SCC Online Del. 10931

7

MANU/KA/1296/2021

8

2011 (6) CTC 369

20

were held to be mandatory, distinguished the applicability of

the ratio laid down therein, in view of the specific condition

in the auction notice for extension of time. However, the

Delhi High Court in Shri Sunil Gupta [cited 7

th above],

while dealing with a situation where there was a delay of 2

days in payment of 75% of the due amount, held that Rules

57 (1) and (2) and 58 are mandatory in nature and leave no

scope of discretion in the hands of the Recovery Officer to

relax the terms, in the fact situation, though neither the

borrower nor the secured creditor opposed the same.

22. Having regard to the above, it is now to be seen

whether the Recovery Officer was right in issuing notices to

the auction purchaser for payment of balance 75%, after

expiry of 15 days time from the date of auction?

23. Admittedly, instant case is not one where there was any

condition in the Sale Notice giving power to the Recovery

Officer for extension of time. But, here is a case where the

amount could not be paid by the auction purchaser due to

an interim order passed by the High Court at the instance of

the borrower and the subsequent order passed by the High

Court at the instance of the borrower, who ultimately failed

to succeed in the Writ Petitions filed by him. To understand

the same, it would be appropriate to refer to factual situation

once again:

21

24. The fact make it clear that in the first instance, it was

the borrower who approached the High court vide W.P. No.

18502 of 2018 and an interim order came to be passed on

14.06.2018 i.e., on the date of auction itself permitting the

auction to go on and Respondent bank to receive 25% of the

sale consideration but further proceedings thereto were

stayed including confirmation of sale and payment of 75% of

balance sale consideration. Later the said Writ Petition was

dismissed on 26.10.2018. After obtaining a copy of the order

on 08.11.2018, the Recovery Officer issued notice to the

auction purchaser for payment of balance 75% on or before

23.11.2018.

25. (It is to be noted here that as the auction purchaser

failed to pay the balance sale consideration within 15 days,

which is made the ground to issue proceedings dated

12.02.2019] canceling the sale notice and forfeiting the

amount, violating Rule 57, the Recovery Officer ought to

have done it after the expiry of first 15 days from the date of

sale. Nothing of that sort was done. On the other hand, the

Recovery Officer waited till the completion of Court

proceedings and then gave notice calling upon the auction

purchaser to pay the balance 75% of sale amount within 15

days, for the reason that interim order came to be passed by

the High Court on the date of auction itself. It is also to be

22

noted here that on the date of auction itself, 25% of the sale

consideration was paid.)

26. The Hon‟ble Supreme Court in Mekha Ram and Others

Etc. V. State of Rajasthan and Others Etc

9 , after

referring to Indore Development Authority V. Manohar

Lal

10; South Eastern Coalfields Ltd. V. State of M.P.

11

and State of Punjab V. Rafiq Masih

12, where principle of

restitution was discussed by the Constitution Bench, it held

in paragraph 6.1, 6.2 and 6.3, as under:

“6.1 At this stage, the decision of this Court in the

case of Indore Development Authority (supra) on

principle of restitution is required to be referred to. In

the said decision, a Constitution Bench of this Court

after considering the earlier decision in the case of

South Eastern Coalfields (supra) and other decisions

on the principle of restitution, has observed and held

in paragraphs 335 to 336 as under:

In re : Principle of restitution

“335. The principle of restitution is founded on the

ideal of doing complete justice at the end of litigation,

and parties have to be placed in the same position but

for the litigation and interim order, if any, passed in

the matter. In South Eastern Coalfields Ltd. v. State of

M.P. [South Eastern Coalfields Ltd. v. State of M.P.,

(2003) 8 SCC 648], it was held that no party could

take advantage of litigation. It has to disgorge the

advantage gained due to delay in case lis is lost. The

interim order passed by the court merges into a final

9

2022 SCC Online SC 372

10

2020 (8) SCC 129

11

2003 (8) SCC 648

12

2015 (4) SCC 334

23

decision. The validity of an interim order, passed in

favour of a party, stands reversed in the event of a

final order going against the party successful at the

interim stage. Section 144 of the Code of Civil

Procedure is not the fountain source of restitution. It

is rather a statutory recognition of the rule of justice,

equity and fair play. The court has inherent

jurisdiction to order restitution so as to do complete

justice. This is also on the principle that a wrong order

should not be perpetuated by keeping it alive and

respecting it. In exercise of such power, the courts

have applied the principle of restitution to myriad

situations not falling within the terms of Section 144

CPC. What attracts applicability of restitution is not

the act of the court being wrongful or mistake or an

error committed by the court; the test is whether, on

account of an act of the party persuading the court to

pass an order held at the end as not sustainable,

resulting in one party gaining an advantage which it

would not have otherwise earned, or the other party

having suffered an impoverishment, restitution has to

be made. Litigation cannot be permitted to be a

productive industry. Litigation cannot be reduced to

gaming where there is an element of chance in every

case. If the concept of restitution is excluded from

application to interim orders, then the litigant would

stand to gain by swallowing the benefits yielding out of

the interim order. This Court observed in South

Eastern Coalfields [South Eastern Coalfields Ltd. v.

State of M.P., (2003) 8 SCC 648] thus: (SCC pp. 662-

64, paras 26-28)

“26. In our opinion, the principle of restitution takes

care of this submission. The word “restitution” in its

etymological sense means restoring to a party on the

modification, variation or reversal of a decree or order,

what has been lost to him in execution of decree or

order of the court or in direct consequence of a decree

or order (see Zafar Khan v. Board of Revenue, U.P.

[Zafar Khan v. Board of Revenue, U.P., 1984 Supp

SCC 505]). In law, the term “restitution” is used in

24

three senses: (i) return or restoration of some specific

thing to its rightful owner or status; (ii) compensation

for benefits derived from a wrong done to another; and

(iii) compensation or reparation for the loss caused to

another. (See Black's Law Dictionary, 7th Edn., p.

1315). The Law of Contracts by John D. Calamari &

Joseph M. Perillo has been quoted by Black to say that

“restitution” is an ambiguous term, sometimes

referring to the disgorging of something which has

been taken and at times referring to compensation for

the injury done:

„Often, the result under either meaning of the term

would be the same. … Unjust impoverishment, as well

as unjust enrichment, is a ground for restitution. If

the defendant is guilty of a non -tortious

misrepresentation, the measure of recovery is not rigid

but, as in other cases of restitution, such factors as

relative fault, the agreedupon risks, and the fairness of

alternative risk allocations not agreed upon and not

attributable to the fault of either party need to be

weighed.‟

The principle of restitution has been statutorily

recognised in Section 144 of the Code of Civil

Procedure, 1908. Section 144 CPC speaks not only of a

decree being varied, reversed, set aside or modified but

also includes an order on a par with a decree. The

scope of the provision is wide enough so as to include

therein almost all the kinds of variation, reversal,

setting aside or modification of a decree or order. The

interim order passed by the court merges into a final

decision. The validity of an interim order, passed in

favour of a party, stands reversed in the event of a

final decision going against the party successful at the

interim stage. …

27. … This is also on the principle that a wrong order

should not be perpetuated by keeping it alive and

respecting it (A. Arunagiri Nadar v. S.P. Rathinasami

[A. Arunagiri Nadar v. S.P. Rathinasami, 1970 SCC

OnLine Mad 63]). In the exercise of such inherent

25

power, the courts have applied the principles of

restitution to myriad situations not strictly falling

within the terms of Section 144.

28. That no one shall suffer by an act of the court is

not a rule confined to an erroneous act of the court;

the “act of the court” embraces within its sweep all

such acts as to which the court may form an opinion

in any legal proceedings that the court would not have

so acted had it been correctly apprised of the facts and

the law.

… the concept of restitution is excluded from

application to interim orders, then the litigant would

stand to gain by swallowing the benefits yielding out of

the interim order even though the battle has been lost

at the end. This cannot be countenanced. We are,

therefore, of the opinion that the successful party

finally held entitled to a relief assessable in terms of

money at the end of the litigation, is entitled to be

compensated by award of interest at a suitable

reasonable rate for the period for which the interim

order of the court withholding the release of money

had remained in operation.”

(emphasis supplied)

336. In State of Gujarat v. Essar Oil Ltd. [State of

Gujarat v. Essar Oil Ltd., (2012) 3 SCC 522 : (2012) 2

SCC (Civ) 182] , it was observed that the principle of

restitution is a remedy against unjust enrichment or

unjust benefit. The Court observed : (SCC p. 542,

paras 61-62) “61.

The concept of restitution is virtually a common law

principle, and it is a remedy against unjust

enrichment or unjust benefit. The core of the concept

lies in the conscience of the court, which prevents a

party from retaining money or some benefit derived

from another, which it has received by way of an

erroneous decree of the court. Such remedy in English

Law is generally different from a remedy in contract or

in tort and falls within the third category of common

26

law remedy, which is called quasi -contract or

restitution.

62. If we analyse the concept of restitution, one thing

emerges clearly that the obligation to restitute lies on

the person or the authority that has received unjust

enrichment or unjust benefit (see Halsbury's Laws of

England, 4th Edn., Vol. 9, p. 434).”

In the said decision, it is further observed and held

that the restitution principle recognizes and gives

shape to the idea that advantages secured by a

litigant, on account of orders of court, at his behest,

should not be perpetuated.

6.2 In the case of Ouseph Mathai v. M. Abdul

Khadir, reported in (2002) 1 SCC 319, it is observed

and held that after the dismissal of the lis, the party

concerned is relegated to the position which existed

prior to the filing of the petition in the court which had

granted the stay.

6.3 Even otherwise, no one can be permitted to take

the benefit of the wrong order passed by the court

which has been subsequently set aside by the higher

forum/court. As per the settled position of law, no

party should be prejudiced because of the order of the

court.”

27. From the Judgment of Hon‟ble Supreme Court, it is

clear that any advantage secured by a litigant, on account of

orders of Court, at his behest, should not be perpetuated

and after dismissal of the lis, the party will be relegated to

the position which existed prior to filing of the petition in the

Court, which granted the stay and that no party shall be

prejudiced because of the order of the court.

27

28. Applying the ration laid down therein, the position goes

back to date of auction i.e., 14.06.2018, which is the date of

filing Writ Petition and date of interim order as well. Hence

we feel that there is nothing wrong in issuing notice on

08.11.2018 calling upon the auction purchaser to pay the

balance 75% of the sale amount. (Whethe r the Recovery

Officer has such power will discuss a little later).

29. At this stage, one other principle, which is urged by the

learned Senior Counsel, should also be addressed to ,

namely, no party should suffer due to act of the court, [Actus

Curiae Neminem Gravabit]. [Odisha Forest Development

Corporation Ltd. V. Anupama Traders

13].

30. As stated earlier, in the instant case, everything got

stalled except depositing 25% of the sale consideration by

the auction purchaser, at the instance of the borrower, who

ultimately lost the case. Therefore the auction purchaser

cannot be put to loss due to an order passed by the court, at

the instance of the borrower which was later vacated on

dismissal of writ petition.

31. The journey of the auction purchaser did not stop here.

The call letter, dated 08.11.2018, issued to the auction

purchaser was again challenged by the borrower in W.P.

13

2020 (15) SCC 146

28

No.41658 of 2018 on 19.11.2018 i.e., before the expiry of 15

days given to pay 75% of balance sale consideration. The

High Court after referring to earlier history of the case, by

way of interim order, gave an opportunity to the borrower to

pay Rs.18,83,00,951.47 paise on or before 07.12.2018. It

was held that if the said amount is not paid on or before

07.12.2018, the Recovery Officer was given liberty to proceed

further by issuing sale certificate. The borrower failed to

comply with the orders, though the order came to be passed

at his instance, thereby putting the auction purchaser to

loss again.

32. As the borrower committed default again, the Recovery

Officer again issued another notice on 25.01.2019 calling

upon the auction purchaser to pay balance sale

consideration giving 15 days time in terms of the order of

this court. This is challenged in W.P. No. 1105 of 2019 by

the borrower, but no interim order was passed by the High

Court.

33. From the above, the following things would emerge:

a) the borrower has no intention to pay the amount

though order came to be passed at his instance;

b) in view of Mekha Ram and Others [cited 9

th above],

the issue goes back to the date of auction.

c) the interim order, dated 19.11.2018, passed in W.P. No.

41658 of 2018 does not anywhere prescribe any time

29

limit for the Recovery Officer to issue notice. On the

other hand, all powers were given to the Recovery

Officer to proceed further if the borrower commits

default [not paying Rs.18.00 crores on or before

09.12.2018].

d) in view of the default committed again by the borrower,

the Recovery Officer issued another notice on

25.01.02019 giving 15 days time to pay the amount to

auction purchase as sale certificate cannot be issued

without payment of balance amount.

34. Ms. V. Uma Devi, learned Counsel would con tend that

after the borrower failed to comply with the order by not

paying the amount by 07.12.2018, nothing prevented the

auction purchaser to pay the amount, more so when there is

no interim order.

35. As seen from the record, the auction purchaser could

not have imagined that the borrower would commit default

in payment of the amount. As urged by Sri. N. Harinath,

Assistant Solicitor General, the Recovery Officer needs time

to verify before calling upon the auction purchaser for

payment, more so, when the payment would be made to the

Bank and not to the Recovery Officer. We feel that some

leverage of time should be given to the Recovery Officer to

verify the fact situation and then proceed further, as directed

by the High Court, more so, when no time-limit was fixed by

30

the Court in its interim order. Further, the issuance of notice

to auction purchaser by the Recovery officer cannot be found

fault, for the reason, that the Hon‟ble Court in its interim

order, gave such power to him, namely, issuance of sale

certificate, which can be only after payment of balance 75%

of sale consideration, for which a notice is required to be

given.

36. At this stage, it is very much important to point out

that W.P. No. 41658 of 2018 was permitted to be dismissed

as infructuous, in view of the subsequent events, which

came to be challenged in W.P. No.1105 of 2019. Therefore,

the action of the Recovery Officer, which was challenged in

W.P. No. 41658 of 2018 cannot be found fault with now in

these proceedings.

37. Having regard to all the aforesaid circumstances, there

is nothing wrong in Recovery Officer giving time to the

auction purchaser for payment of the balance bid amount.

II. Issue (c), (d) and (e):

38. In view of pendency of W.P. No. 1105 of 2019 and having

regard to the earlier orders passed, Sri. Vedula Venkata

Ramana, learned Senior Counsel for the Petitioner would

submit that, the Recovery Officer did not allow the auction

purchaser to deposit the balance bid amount. Though, the

said Writ Petition is pending and it is now tagged on, the

31

Recovery Officer has cancelled the auction sale, dated

14.06.2018, and forfeited 25% of the amount paid on the

date of auction to the Treasury mainly on the ground that

the auction purchaser failed to pay 75% of the bid amount to

the appellant bank within a period of 15 days from

25.01.2019.

39. As stated earlier, the notice, dated 25.01.2019, calling

upon the auction purchaser to pay the bid amount is

challenged in W.P. No. 1105 of 2019, which is pending

consideration. Though, no interim orders are passed, but the

learned Counsel for the Petitioner would submit that the

Recovery Officer refused to accept the amount, more so,

having regard to the challenge made earlier with regard to

the power of the Recovery Officer extending time for payment

of the amount. Immediately, after completion of 15 days

time, impugned order, dated 12.09.2019, came to be passed,

which is under challenge in W.P. No. 3007 of 2019.

40. As seen from the entire gamut of the case, it was the

borrower who is responsible for filing case-after-case before

the High Court and on two occasions the auction purchaser

was prevented from paying the balance bid amount. When

the power of the Recovery Officer is in cloud, which is

challenged not only in the earlier Writ Petitions but also in

W.P.No.1105 of 2019, one cannot find fault with the auction

purchaser in not paying the amount, more so, having regard

32

to the plea taken that the Recovery Officer did not accept the

amount. No counter is filed by the Recovery Officer

rebutting the plea of the auction purchaser. Even otherwise,

the judgments of the High Courts referred to above, more

particularly, the judgment of the Division Bench of the

Karnataka High Court and the judgment of the Division

Bench of the Madras High Court, clearly held that even

mandatory statutory provisions can be waived, if the fact

situation warrants. Though Rule 57 was held to be

mandatory by the Hon‟ble Supreme Court in C.N.

Paramsivan [cited 1

st above], but the same distinguished by

the Division Bench of the Karnataka High Court on the

ground that the sale notice permits extension of time.

41. Further, the order impugned, dated 12.02.2019, refers

to Rule 13 and 14 of the online E-auction sale. Rule 14

states that, “in case of default in payment by the successful

bidder / auction purchaser within the stipulated time, the sale

will be cancelled and the amount already paid will be

forfeited and the property will be again put to sale ”.

Strangely, this Rule was never followed by the Recovery

Officer, nor was it brought to the notice of the Court at the

time of passing of the interim order in W.P. No.41658 of

2018. On the other hand, the interim order permits the

Recovery Officer to issue Sale Certificate, which remained

unchallenged.

33

42. At this stage, it would be appropriate to note that a

notice came to be issued by the Recovery Officer of the Debts

Recovery Tribunal, Visakhapatnam, permitting the auction

purchaser to deposit 75% within the stipulated time i.e., 15

days from the date of receipt of the order made by him on

25.01.2019. A copy of the same was marked to the auction

purchaser. There is no material on record to show as to

when the auction purchaser received the order. It would be

appropriate to extract the relevant portion of the order,

which is as under:

“As per the Hon‟ble High Court order I am herewith

permitting the auction purchaser to deposit balance

bid amount of 75% within the stipulated period i.e.,

15 days from the date of receipt of order by me i.e., on

25.01.2019.”

43. A reading of the above would show that 15 days time

for payment would be “from the date of receipt of the order”.

It does not say from the date of order, which is 25.01.2019.

These wordings assumes significant, for the reason that the

auction purchaser was not a party to the order passed by

the Debts Recovery Tribunal in R.P. No. 14 of 2009 in O.A.

No.09 of 2006, wherein, time was given for payment of the

amount. Definitely, things would have been different had the

auction purchaser been a party to the order passed in R.P.

No. 14 of 2009. Under those circumstanc es, it cannot be

said that the auction purchaser failed to comply with the

order of paying the amount within the period of 15 days,

34

more so, when the wording in Rule 57 is that “the amount to

be paid within 15 days from the date of sale”. Paying the

amount within 15 days of sale, as contemplated under Rule

57 would be relevant if the auction purchaser would be very

much available at the time of sale. But, as seen from the

record here, he was not a party before the Tribunal, when

the Order came to be passed and probably for that reason

the Recovery Officer used the word 15 days from the date of

receipt of the order. No counter is filed by the Recovery

Officer disputing the same. Having regard to the above, the

order of the Recovery Officer forfeiting the amount and

canceling the sale on the ground that the Petitioner has not

complied with payment of the amount within a period of 15

days from 25.01.2019 may not be correct.

44. Insofar as the powers of the Recovery Officer giving such

notice is concerned, the Hon‟ble Supreme Court has held

that payment of amount within 15 days is mandatory.

45. But, in the instant case, order passed by the Recovery

Officer in terms of Rule 57 was stayed by the High Court on

certain terms and later on the said Writ Petition was rejected

and when the Recovery Officer issued another notice, the

borrower again approached the High Court, wherein, he was

directed to deposit Rs.18.00 crores by 07.12.2018, which he

could not do. In view of the orders of the High Court,

Recovery Officer proceeded further by issuing another letter

35

for payment, which was again challenged. As held in Mekha

Ram and Others Etc. Etc [cited 9

th above], after the

dismissal of the lis, the party concerned is relegated to the

position which existed prior to the filing of the petition,

which has passed the interim order. After the dismissal of

W.P.No.18502 of 2018 on 26.10.2018, and the interim order,

dated 19.11.2018, being not been complied with by the

borrower, so, the position goes back to the date of auction.

Then the notice, dated 25.01.2019, has to be taken as one

issued in terms of auction held in the month of June 2018,

i.e., after payment of 25% of the amount. That being so, the

auction purchaser has to pay the amount within 15 days,

from the said date, but, he was not aware about the order

passed on 25.01.2019, as he was not a party before the

Debts Recovery Tribunal, when the order came to be passed,

For the said reason, as observed earlier, the Recovery Officer

categorically gave 15 days time from the date of receipt of

the order. Therefore, issuing of the notice calling upon the

auction purchaser to pay the amount, in the facts and

circumstances of the case, though mandatory, cannot be

said to be illegal. Consequently, the impugned notice

cancelling the sale and forfeiting the amount to Government

Treasury are set aside. Hence, it may not be necessary for

us to go into the issue raised by the Bank in W.P.No.25880

of 2021 already amount remitted to Government Treasury.

36

46. For all the above reasons, Writ Petition No.3007 of

2019 is allowed; consequently, the Recovery Officer will

issue a fresh notice forthwith giving 15 days time for

payment of the amount and in default of payment of

amount, with the time stipulated, he may take steps in

accordance with law.

47. Consequently, in the fact situation, Writ Petition No.

1105 of 2019 is dismissed. Further, no orders are required

in Writ Petition No. 25880 of 2021, since, the balance 75% of

the sale consideration has to be deposited with the

respondent/Bank. No order as to costs.

Consequently, miscellaneous petitions pending, if any,

shall stand closed.

_______________________________

JUSTICE C. PRAVEEN KUMAR

______________________

JUSTICE V.SUJATHA

Dated:12.04.2022

Note: LR copy to be marked.

SM / MS.

37

THE HONOURABLE SRI JUSTICE C.PRAVEEN KUMAR

AND

THE HONOURABLE SMT. JUSTICE V.SUJATHA

WRIT PETITION NO. 1105 OF 2019

AND

WRIT PETITION NO. 3007 OF 2019

AND

WRIT PETITION NO. 25880 OF 2021

Note: LR copy to be marked.

SM / MS.

Date:12.04.2022.

SM / MS.