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.
1 | P a g e
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
2 | P a g e
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
3 | P a g e
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
4 | P a g e
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
5 | P a g e
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
6 | P a g e
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
7 | P a g e
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
8 | P a g e
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
9 | P a g e
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.
10 | P a g e

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