RAJASTHAN FINANCIAL CORPORATION JAIPUR VS M/S JAIN BANDHU SNEH RESORTS PRIVATE LIMITED AND ANOTHER

RAJASTHAN FINANCIAL CORPORATION JAIPUR VS M/S JAIN BANDHU SNEH RESORTS PRIVATE LIMITED AND ANOTHER

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

Non-Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

Civil Appeal No. 3460 of 2022

(Arising out of SLP (Civil) No.2950 of 2020 )

RAJASTHAN FINANCIAL CORPORATION JAIPUR

AND OTHERS

.... Appellant(s)

Versus

M/S JAIN BANDHU SNEH RESORTS PRIVATE LIMITED

AND ANOTHER.

…. Respondent (s)

With

Civil Appeal Nos. 3462-3463 of 2022

(Arising out of SLP (Civil) No.4224-4225 of 2020)

 Civil Appeal No. 3461 of 2022

 (Arising out of SLP (Civil) No. 5473 of 2020)

J U D G M E N T

L. NAGESWARA RAO, J.

Leave granted.

1. The judgment dated 19.08.2019 of the High Court of

Rajasthan in D.B. Special Appeal (Writ) No. 605 of 2018 and

the order dated 04.01.2020 passed in DB Review Petition

(Writ) No. 187 of 2019 has been challenged in these Appeals.

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For the sake of convenience, M/s. Rajasthan Financial

Corporation has been referred to as “The Corporation”, M/s.

Sun On Mount Hotels Pvt. Ltd. has been referred to as the

“Auction Purchaser” and M/s. Jain Bandhu Sneh Resort Pvt.

Ltd. as the “Borrower”.

2. The Borrower availed a term loan of Rs. 2.14 Crores

from the Corporation on 29.12.1999. Thereafter, another

term loan of Rs. 41.24 Lakhs was taken by the Borrower from

the Corporation on 20.04.2001. The Borrower defaulted in

repayment of the loan for which, the Corporation issued a

notice to the Borrower for repayment of the loan amount

along with outstanding interest. Aggrieved thereby, the

Borrower filed a Writ Petition which was disposed of by the

learned Single Judge on 15.09.2006. The High Court found

no merit in the Writ Petition. However, the Corporation was

directed to consider the representation of the Borrower for

settlement of outstanding amounts, if made. Not satisfied

with the judgment of the learned Single Judge, the Borrower

filed a Writ Appeal seeking extension of time for repayment

of the outstanding dues and for waiver of penal interest.

Accepting the request for extension of time for making

repayment of the outstanding loan amount, the Division

Bench of the High Court granted time till 31.03.2009 subject

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to the Borrower either depositing 10 lakhs per month or

clearing up the account, whichever is earlier. The Corporation

was directed to consider the request of the Borrower with

respect to wavier of penal interest and it was also clarified by

the High Court that in case of default, the Writ Petition and

the Writ Appeal would stand dismissed.

3. Though the Corporation waived 50% of the penal

interest, the Borrower failed to repay the loan by 31.03.2009.

The Borrower refused to accept the waiver of 50% of penal

interest as offered by the Corporation and insisted upon a full

waiver, which request was not agreeable to the Corporation.

4. The Corporation took possession of the resort of the

Borrower on 19.10.2012. Later, on the instructions of the

Industries Minister, Government of Rajasthan, the

Corporation agreed to give another opportunity to the

Borrower to deposit 20% of the outstanding balance into the

loan account and to provide a suitable schedule for

repayment of the outstanding loan. On compliance of the

said conditions, the Corporation was willing to handover the

possession of the resort to the Borrower. However, the

Borrower did not respond to such an offer made by the

Corporation. Having left with no other alternative, the

Corporation invited bids for the sale of the resort by a notice

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dated 16.03.2013 which was also published in two daily

newspapers having circulation in Rajasthan and Delhi. The

said notice was the subject matter of the challenge in a Writ

Petition filed by the Borrower wherein while praying for

quashing of the said notice, the Borrower insisted on the

waiver of penal interest and further sought for reduction in

the rate of interest. During the pendency of the Writ Petition,

the Corporation carried out the auction proceedings in which

the Auction Purchaser emerged as the sole bidder on

23.05.2013. On 28.05.2013 an interim order was passed by

the High Court staying finalization of the auction proceedings

pursuant to the notice dated 16.03.2013. However, liberty

was granted to the Corporation to negotiate the bid offered

by the Auction Purchaser. The Auction Purchaser whose bid

was accepted, was directed to be impleaded as Respondent

in the Writ Petition. The interim order of the High Court was

extended from time to time, and on the basis of the

statement made by the Borrower on 20.12.2017 that serious

attempts were being made to clear outstanding loan, the

High Court again granted time to the Borrower till

11.01.2018. As the Borrower could not utilize the opportunity

to clear the loan, the interim order passed earlier was

vacated by the High Court on 11.01.2018 with the

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observation that the Borrower is only buying time and is not

serious in settlement of the dispute. The Appeal filed by the

Borrower against the order dated 11.01.2018 was dismissed

by the Division Bench of the High Court on 19.01.2018 with a

liberty to move an application for early hearing of the Writ

Petition.

5. The Writ Petition by which the auction notice dated

16.03.2013 was challenged was dismissed by a learned

Single Judge of the High Court by a judgment dated

08.03.2018. While dismissing the Petition, the learned Single

Judge was of the opinion that the scope of judicial review on

contractual matters was very limited and as the Borrower did

not avail of the opportunities that were given to it for

clearing the outstanding loan amount even at the time of

challenge to the legal notice dated 29.06.2005, it was not

open to the Borrower to raise the same contention again.

6. Challenging the judgment of the learned Single Judge,

the Borrower filed a Writ Appeal which was disposed of by

the judgment dated 19.08.2019. The Division Bench of the

High Court did not find any irregularity in the judgement of

the learned Single Judge warranting interference insofar as

the inability of the Borrower in not utilizing the chances given

to him and in clearing the outstanding loan amount was

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concerned. Further, the Division Bench also recorded a

finding that the Borrower was not serious in settling the

dispute with the Corporation. However, the Division Bench

while taking note of the fact that five years had elapsed after

the bid of Auction Purchaser was accepted, concluded that

the Corporation had mechanically confirmed the sale in

favour of the Auction Purchaser without factoring in the

escalation during the period of 5 years. On the said ground,

the sale confirmed in favour of the Auction Purchaser was set

aside and a direction was given to the Corporation to conduct

the auction proceedings for the resort afresh. It is relevant to

note that the Division Bench commented upon the conduct of

the Corporation in not even seeking interest from the Auction

Purchaser for the period 14.06.2013 to 15.01.2018.

7. Each of the Corporation, the Auction Purchaser and the

Borrower has filed a Civil Appeal challenging the judgment of

the High Court dated 19.08.2019. Further, the Auction

Purchaser has also challenged the order dated 04.01.2020 by

which the High Court had dismissed the review petition

against the judgment dated 19.08.2019.

8. The contention of the Corporation is that the Auction

Purchaser was the sole bidder who offered a sum of Rs. 8.21

crores on 23.05.2013. Pursuant to the negotiations between

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the Corporation and the Auction Purchaser the bid was

increased to 11.11 crores on 14.06.2013 and the finalization

of the sale was kept pending in light of the interim order of

the High Court dated 28.05.2013. Having found that the

Borrower was a rank defaulter and enough opportunities had

been given to the Borrower to clear the loan, the High Court

committed an error in setting aside the sale certificate, and

directing fresh auction to be conducted. The High Court

ought to have accepted the sale of the resort in favour of the

Auction Purchaser with a direction to the Auction Purchaser

to pay interest at the rate 12% on the bid amount for the

period between 14.06.2013 to 15.01.2018.

9. It was argued on behalf of the Auction Purchaser that

the bid amount was enhanced pursuant to the negotiations

and it had to wait for nearly five years from the date of

conclusion of the negotiations to get the possession of the

resort. Ultimately, the resort was handed over to the Auction

Purchaser only on 27.02.2018. After making the entire

payment, the Auction Purchaser has also spent huge

amounts in renovating the resort. To start with, there was no

bidder who came forward in the auction proceedings which

took place March, 2013. Thereafter, the Auction Purchaser

was the sole bidder. The High Court did not give any reason

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for setting aside the auction except that there was no

consideration of escalation in the prices between 2013 to

2018. According to the Auction Purchaser, it was not liable to

pay any interest amount for price escalations as it could not

enjoy the property for the period between 14.06.2013 to

15.01.2018 as an interim order of the High Court was in

operation.

10. The Borrower has also filed an Appeal aggrieved by the

findings recorded by the High Court that he is a rank

defaulter and no relief can be granted. According to the

Borrower, the Corporation colluded with the Auction

Purchaser and finalized the sale of the resort for a paltry

amount. It was argued on behalf of the Borrower that there is

evidence on record to show that the value of the resort was

Rs. 17 crores in the year 2012. The learned counsel for the

Borrower has further referred to the order of the High Court

while dismissing the review petition filed by Auction

Purchaser to submit that the ground of the auction sale being

vitiated by fraud was taken by the Borrower before the High

Court. However, the Writ Petition filed by the Borrower was

dismissed on the ground that sufficient opportunities were

given to the Borrower to clear the outstanding loan and as

the Borrower could not avail the said opportunities to clear

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the loan, it was not entitled for any relief. The contention of

fraud was not taken into consideration by the High Court

while disposing of the Writ Petition.

11. The Division Bench upheld the said order and held that

the Borrower was not entitled for any further indulgence by

this Court. We are not inclined to accept the submission of

the Borrower against this finding as sufficient opportunities

have already been given to the Borrower and, therefore, he is

not entitled to any further opportunity to bring a prospective

buyer for the property. At the same time, we reject the

submission made on behalf of the Auction Purchaser that it is

not liable to pay anything more than the amount that was

offered for the property on 14.06.2013. We are in agreement

with the High Court that the Corporation failed in its duty in

not taking into account the lapse of five years from the date

of auction while handing over the possession of the property

to the Auction Purchaser. The value of the property has

undoubtedly increased during the said period.

12. The Division Bench of the High Court has set aside the

confirmation of sale only on the ground that the Corporation

has not taken into account the escalation of the prices in

property between 14.06.2013 to 15.01.2018. Except this

ground, there is no fault found with the auction proceedings

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and finalization of the sale in favour of the Auction Purchaser.

Therefore, we are of the considered view that the sale in

favour of the Auction Purchaser could not have been set

aside by the Division Bench of the High Court on this ground

alone. However, we are in agreement with the observation

that the Corporation ought to have considered imposing

interest on the bid amount from 2013 to 2018.

13. For the aforesaid facts and circumstances, we reverse

the judgement of the High Court insofar as it set aside the

confirmation of the sale and the auction proceedings in

favour of the Auction Purchaser. However, we direct the

Auction Purchaser to pay interest at the rate of 12% per

annum on Rs. 11.11 crores for the period from 14.06.2013 to

15.01.2018. The Appeals are disposed of accordingly.

 ............................................J.

 [L. NAGESWARA RAO]

 .............................................J.

 [B. R. GAVAI]

New Delhi,

April 27, 2022.

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