Abdulazeez Shanavaskhan v Union Bank of India and Authorized Officer, Union Bank of India

## **`IN THE HIGH COURT OF KERALA AT ERNAKULAM`** ## **`PRESENT`** ## **`THE HONOURABLE MRS. JUSTICE ANU SIVARAMAN`** ``` THURSDAY, THE 6[TH] DAY OF JULY 2023 / 15TH ASHADHA, 1945 ``` ## **`WP(C) NO. 1594 OF 2023`** ## **`PETITIONER:`** ``` ABDULAZEEZ SHANAVASKHAN AGED 48 YEARS S/O ABDULAZIZ, RESIDING AT "VENGAVILA KIZHAKKETHIL", ALUVILA, PATHANAPURAM, KOLLAM, PIN - 689695 BY ADVS. M.K.SUMOD ABDUL RAOOF PALLIPATH K.R.AVINASH (KUNNATH) VIDYA M.K. ``` ## **`RESPONDENTS:`** - **`1 THE UNION BANK OF INDIA ERNAKULAM MAIN BRANCH, UNION BANK BHAVAN, MG ROAD, ERNAKULAM, PIN - 682035 REPRESENTED BY ITS ASSISTANT GENERAL MANAGER.`** - **`2 THE AUTHORIZED OFFICER UNION BANK OF INDIA, UNION BANK BHAVA, IST FLOOR, NO. 3683, ERNAKULAM, PIN - 682035 SRI.A.S.P.KURUP, SC, UBI SRI.A.KEVIN THOMAS ADV.NIDHI SAM JOHNS(K/211/2005) ADV.LIJO JOSEPH (THOPPIL)(K/000537/2013) ADV.A.V.THOMAS (SR.)(T-49)`** ``` THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON ``` ``` 06.07.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ``` ``` WP(C) NO. 1594 OF 2023 ``` ``` 2 ``` ## **`JUDGMENT`** ## **Dated this the 6[th] day of July, 2023** This writ petition is filed seeking the following reliefs: _“(i) Issue writ of certiorari of quashing Exhibit P3 and Exhibit P5 of the respondents by calling for the records pertaining to the same from the respondents._ _(ii) Issue writ of mandamus or any other writ or order directing the respondents to return the remitted amount of Rs.1.50 crores to the petitioner._ _(iii) Issue a writ of mandamus or any other writ or order directing the respondents to reconsider Exhibit P4 request made by the petitioner in a time bound manner and by taking into account of the higher bid amount received under the fresh auction and the apex court’s judgment in “_ _**Alisha Khan vs Indian Bank (Allahabad Bank) and others reported in 2021 SCC Online SC 3340.** ”_ 2. Heard the learned counsel for the petitioner and the learned senior counsel appearing for the respondents. 3. It is submitted by the learned counsel for the petitioner that the petitioner was a successful bidder in an e-auction conducted under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred as 'the Act’) on 10.03.2022. He had deposited 25% of the bid amount ``` WP(C) NO. 1594 OF 2023 ``` ``` 3 ``` amounting to Rs.1.5 Crores with the respondents. The petitioner could not pay the balance amount within the time provided. The petitioner had therefore submitted requests before the bank for extension of time to pay the balance amount. But even within the extended time, he was unable to make the payments. He, therefore, approached this Court and by Ext.P1 judgment in W.P.(C). No.19120/2022 dated 15.09.2022, the petitioner was permitted to make a request before the bank for the return of 25% of the amount deposited by him which was forfeited by the bank in terms of Rule 9(5) of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred as ‘the Rules’). The learned counsel for the petitioner submits that thereafter, without considering the relevant aspects of the matter which had been raised by the petitioner including the fact that a resale had been conducted and that the property was bid in the resale for a much higher demand, the respondents have rejected the request made by the petitioner by Exts.P3 and P5. 4. The learned counsel for the petitioner submits that the specific case of the petitioner that the resale had yielded much higher amounts ``` WP(C) NO. 1594 OF 2023 ``` ``` 4 ``` and that the forfeiture of 25% of the amount paid by the petitioner pursuant to the auction conducted on 10.03.2022 therefore amounts to unjust enrichment has not been considered while rejecting the request of the petitioner. It is submitted by the learned counsel for the petitioner that since the orders under challenge are rendered by the respondent-bank pursuant to the requests made by the petitioner as permitted in Ext.P1, the petitioner has no alternate remedy and cannot approach the Debt Recovery Tribunal. 5. A counter affidavit has been placed on record by the respondents stating that the forfeiture of 25% of the amount deposited by the petitioner was strictly in terms of the Rule 9(5) of the Rules and that the petitioner has an alternative remedy to approach the Debt Recovery Tribunal under Section 17 of the Act as held by the Apex Court in **Agarwal Tracom Pvt. Ltd. v. Punjab National Bank and Others** [2018 (1) SCC 626]. It is further contended that, pursuant to the auction conducted on 10.03.2022, the petitioner had deposited only 25% of the amount and that he failed to deposit the balance amount within the statutory limit of three months. It is submitted that even ``` WP(C) NO. 1594 OF 2023 ``` ``` 5 ``` thereafter repeated communications were issued by the bank on 24.05.2022 and 08.06.2022 requiring the petitioner to remit the balance amount. It is stated that the petitioner had approached this Court filing W.P.(C) No.19120/2022 seeking directions to the respondents not to forfeit the amount of Rs.1.5 Crores deposited by the petitioner as also seeking directions to the respondents to grant time to the petitioner to make the balance payment of Rs.4.5 Crores. It is submitted that this Court, by interim order dated 13.06.2022, directed the respondents not to cancel the sale or forfeit the deposited amount. The said interim order was extended from time to time and on 27.07.2022, this Court had directed the petitioner to deposit the balance amount on or before 02.08.2022 to show his bonafides. It is stated that the petitioner failed to comply with the order. However, further time was sought for to raise the money and the interim order was extended by four weeks on 04.08.2022. In spite of that, no payment was made. It was thereafter that Ext.P1 judgment had been rendered permitting the bank to go on with the resale of the property and requiring a consideration of the petitioner's request for refund of ``` WP(C) NO. 1594 OF 2023 ``` ``` 6 ``` 25% of the amount deposited by him pursuant to the auction conducted on 10.03.2022. It is submitted that all the relevant aspects of the matter had been specifically considered by the respondents. It is further submitted by the learned senior counsel appearing for the respondents that S.A. No.77/2023 is pending before the Debt Recovery Tribunal against the resale conducted by the bank. 6. A reply affidavit has been placed on record by the petitioner stating that fresh sale was confirmed on 28.10.2022 for an amount of Rs.8.74 Crores and that therefore, the forfeiture of the amount paid by the petitioner is in the nature of unjust enrichment to the secured creditor. It is therefore contended that the impugned orders may be set aside and a reconsideration ordered. 7. The learned counsel for the petitioner also places reliance on an order passed by the Apex Court in S.L.P. Nos.15959 and 15960 of 2021 setting aside the order of forfeiture of 25% of the amount of auction sale consideration and directing the respondent-bank to refund/return the amount earlier deposited by the appellant as part of auction sale less an amount of Rs.50,000/- towards the expenditure ``` WP(C) NO. 1594 OF 2023 ``` ``` 7 ``` which was required to be incurred by the respondent-bank for conducting the fresh auction. Reliance is also placed on a judgment of this Court dated 03.08.2015 in W.P.(C).No.6083 of 2015 where this Court had held as follows: _8.The appropriation by the State and appropriation by the bank has to be differentiated. The State holding the money as a public trustee, and it expends the money for public. However, the banking activity is purely a commercial activity, nowhere it provides that the bank can appropriate the money. Though as per the provisions the amount can be forfeited, however the manner in which money can be appropriated is totally absent in the provision. The provision is vague. Though the petitioner has not challenged the validity of the Rule, nevertheless, it is incumbent for the bank to that state the manner in which it has to be appropriated._ _**The Rose valley Real Estate and Construction Ltd v. United Commercial Bank and Another** [2008 KHC 7648] the Gouhati High Court held that provision is punitive in nature and not compensatory. Therefore, forfeiture would arise only when procedure is observed before forfeiture and stating reasons for forfeiture. Mere default would not entail the forfeiture of the amount. It must be established that the auction purchaser has defaulted in making deposit of the amount. Mere non-payment of the amount within time cannot be treated as default unless it is attributable to him. Thus forfeiture without show cause to default purchaser is illegal._ _9. In view of the fact that the property has been subsequently sold and the bank has recovered the entire amount, the retention of the amount would amount to unjust enrichment. Therefore, taking of over all facts and circumstances, this Court is of the view that forfeiture in such circumstances is illegal and unsustainable and the writ petition is allowed. The respondent bank is hereby_ ``` WP(C) NO. 1594 OF 2023 ``` ``` 8 ``` _directed to release the Rs.22,50,500/- within two weeks on the production of the copy of the judgment along with interest if any accrued._ 8. The learned senior counsel appearing for the respondent, on the other hand, placed reliance on a judgment of the Apex Court in **Agarwal Tracom Pvt. Ltd. v. Punjab National Bank and Others** (cited supra) as also the judgment of the High Court of Telengana in **Rayalapuram Raja Reddy v. State Bank of India** [2021 (2) ALT 161] to contend that, in view of the provisions of Sections 13, 14 of the Act and Rule 9 of the Rules, the action of the bank in forfeiting amounts under Section 9(5) of the Act cannot be found fault with. Reliance is also placed on a decision of the Calcutta High Court in **Chief Manager, UCO Bank v. Sri.Amitava Ghosh** [2022 (4) Cal. H.C.N.1] to contend that, in view of the clear provisions of Rules 9(4) and 9(5) of the Rules, the direction to refund amounts which had been forfeited under Section 9(5) would be erroneous. 9. Having considered the contentions advanced on either side, I notice that the issue with regard to the realization of the entire amount by the bank by a further sale conducted on 28.10.2022 as also the ``` WP(C) NO. 1594 OF 2023 ``` ``` 9 ``` question of unjust enrichment to the bank have not been considered in the proceedings. However, in view of the fact that what is under challenge before this court is essentially an order refusing to refund the amount forfeited under Rule 9(5) of the Rules, I am of the opinion that the issue has to be raised appropriately before the Debt Recovery Tribunal where an S.A. challenging the resale is already pending as S.A. No.77/2023. 10. In the above view of the matter, I am of the opinion that the claim of the petitioner for refund of the amount is also liable to be considered by the Debt Recovery Tribunal while considering S.A. No.77/2023. In the result, this writ petition is ordered directing that in case the petitioner prefers an S.A. before the Debt Recovery Tribunal as against the forfeiture of 25% of the auction amount deposited by him pursuant to the auction conducted on 10.03.2022, the same shall be considered by the Debt Recovery Tribunal without raising the objection with regard to delay in preferring the same. In case the petitioner approaches the Debt Recovery Tribunal within a period of one month from the date of receipt of a copy of this judgment, the S.A. ``` WP(C) NO. 1594 OF 2023 ``` ``` 10 ``` shall be considered, in accordance with law, taking note of the contentions of the petitioner. All contentions of the parties are left open to be decided in the said proceedings. This writ petition is ordered accordingly. ``` Sd/- ``` ## **`ANU SIVARAMAN`** ``` JUDGE ``` ``` NP ``` ``` WP(C) NO. 1594 OF 2023 ``` ``` 11 ``` ## **`APPENDIX OF WP(C) 1594/2023`** ``` PETITIONER’S EXHIBITS Exhibit P1TRUE COPY OF THE JUDGMENT IN WP© NO: 19120/2022 DATED: 15/09/2022 Exhibit P2TRUE COPY OF THE APPLICATION DATED: 22/09/2022 SUBMITTED BY THE PETITIONER TO THE 2ND RESPONDENT Exhibit P3TRUE COPY OF THE ABOVE COMMUNICATION NO. EKM/DEWA/217/2021-2022 DATED:25/10/2022 OF THE 1ST RESPONDENT Exhibit P4TRUE COPY OF THE REPRESENTATION DATED: 22/11/2022 BEFORE THE 1ST RESPONDENT Exhibit P5TRUE COPY OF THE COMMUNICATION NO. EKM/DEWA/292/2021-2022 DATED: 14/12/2022I ISSUED BY THE 1ST RESPONDENT RESPONDENTS’ EXHIBITS Exhibit R1(a)TRUE COPY OF THE EMAIL COMMUNICATION BETWEEN THE PETITIONER AND THE 2ND RESPONDENT BETWEEN 25.03.2022 AND 27.04.2022 Exhibit R1(b)TRUE COPY OF THE E-MAIL CORRESPONDENCE BETWEEN THE PETITIONER AND THE 2ND RESPONDENT ON 08.06.2022 ```