Syndicate Bank Vs. Estate Officer & Manager (Recoveries) & Ors  Insc 190
(22 February 2007)
Tarun Chatterjee & Altamas Kabir
I.A.NOS. 27-31, 32-36 & 12-16 IN CIVIL APPEAL NOS. 7824-7828/2004 ALTAMAS KABIR, J.
All these appeals have been filed by the Syndicate Bank against the common
judgment passed by the Division Bench of the High Court of Andhra Pradesh on 6th August, 2003, dismissing the several writ petitions filed by the Bank.
Briefly stated the facts leading to the filing of the Special Leave
Petitions are that M/s. United Auto Tractors Private Limited, (for short 'the
Company') one of the common respondents in all these appeals, applied to the
Government of Andhra Pradesh for allotment of 100 acres of land in the
industrial area for setting up of an industry for manufacturing agricultural
tractors and implements. The Government of Andhra Pradesh by its letter dated 18th July, 1972 written by the Director of Industries allotted 51 acres of land in
Nacharam Industrial Development Area, Hyderabad, to the company for setting up
of the said industry. An Agreement was entered into on 3rd August, 1972 between the Government of Andhra Pradesh and the Company which required the company
to pay to the Government the cost of the land plus development charges as
determined by the Government. As a condition precedent to place the Company in
possession of the plot, an initial payment of not less than Rs.2,46,840/- being
50% of the costs, was required to be paid. The Company agreed to execute a
promissory note in favour of the Government for the balance unpaid cost of the
land plus development charges.
Under the Agreement, the Government agreed to the Company raising money on
the property agreed to be sold provided the financial agency agreed to pay on
behalf of the Company so much of the amount advanced as loan to the Company as
would remain due on the said promissory note.
Financing agencies were required to obtain prior consent of the Government
in case they advanced more than 60% of the value of the land.
Under the terms and conditions of the Agreement, the company was required to
complete the construction of the factory building and other structures within 9
months and if the land was no longer required for the purpose for which it was
allotted, the Company would relinquish and restore the land to the Government.
The Agreement also contained the usual clauses of re-entry on breach of any of
the covenants mentioned in the Agreement. It was also stipulated that till such
time as the ownership of the property was transferred to the company in the
manner mentioned in the Agreement, the property would continue to remain the
property of the Government.
On 3rd August, 1972, the Director of Industries, Andhra Pradesh, issued a
letter permitting the Company to mortgage the allotted land to any scheduled
bank and obtain financial assistance to set up the project.
In pursuance of a policy decision, the Government of Andhra Pradesh issued
orders, being GOMs No. 1162 dated 4th December, 1973, directing the transfer of
all the industrial estates and development areas, including the industrial area
in question, to the Andhra Pradesh Industrial Infrastructure Corporation Ltd.
(for short 'the APIICL') with effect from 1st January, 1974. Consequently, the
industrial area with which we are concerned, together with all the rights in
the land, stood vested in the APIICL. The APIICL immediately required the
Company to take note of the vesting of the land in the Corporation and demanded
payment of the balance 50% cost of the land. The Company however, failed to pay
the same within the stipulated time. On the other hand, the Syndicate Bank
appears to have advanced several loans to the Company subject to mortgage of
the allotted land by deposit of Title Deeds. The Syndicate Bank treated the
"No Objection Letter"
of the Director of Industries dated 18th July, 1972 as the Title Deeds.
Since the Company failed to discharge its obligations to the Syndicate Bank,
proceedings were taken by the Bank for recovery in the Debts Recovery Tribunal,
Bangalore, (for short 'the Tribunal') of the amount advanced to the Company for
purchase of machinery and movable s which were hypothecated in favour of the
Bank as security. The Tribunal allowed the Bank's application on 18th October,
1996 and held that the Bank was entitled to recover a sum of Rs.2,57,10,393/-
from the Company and its Directors, including the Managing Director, jointly
and severally, with costs, current and future interest on the principal amount
at the rate of 21.5% per annum with quarterly rests from the dated of the
application to the date of realization. The Tribunal accordingly issued a
Recovery Certificate dated 30th December, 1996, certifying that in default of
such payments as aforesaid, the amount due would be recoverable by sale of the
hypothecated movables or mortgaged immovable properties.
While the said proceedings were being taken by the Bank, the APIICL by its
proceedings dated 17th August, 1993, cancelled the allotment of land to the
Company to an extent of 25 acres on the ground that the Company had failed to
utilize the land allotted for setting up a unit for manufacturing tractors. The
said order was not challenged by the Company and has since attained finality.
The Recovery Officer appointed for recovering the amount due to Syndicate
Bank as decreed by the Tribunal, issued proclamation of sale deed dated 21st
January, 1998 and auction sale notice in newspapers dated 8th March, 1998
proposing to auction the entire land measuring 51 acres which had initially
been allotted to the Company for realization of the dues of the Syndicate Bank.
The APIICL also filed its claim before the Recovery Officer contending that
there was no valid and enforceable mortgage in respect of the lands in question
and that the allotment of land to an extent of 25 acres had already been
cancelled and proceedings for eviction of the Company from the land had already
been initiated under the Andhra Pradesh Public Premises (Eviction of
Unauthorized Occupants) Act, 1968. Although, the Bank ultimately confined
itself to the sale of the remaining 26 acres of land, the High Court, inter
alia, held that the Company was not entitled to mortgage the properties by way
of deposit of title deeds in order to secure financial assistance from the
Syndicate Bank since the land continued to remain with the Government in the
absence of any deed of sale. It was also held that since the Syndicate Bank had
advanced more than 60% of the value of the land without prior notice to the
Government as was required by the Agreement, the APIICL, being the
successor-in-interest of the Government, was not bound by the advances so made
by the Syndicate Bank and the Syndicate Bank could not, therefore, have first
charge over the property in question. The High Court also held that the order
passed by the Recovery Officer on 12th August, 1998 rejecting the petition of
the APIICL was erroneous, since the Recovery Officer could not have proceeded
with the sale of the land belonging to the APIICL in the absence of any
authorization and permission by the Presiding Officer of the Tribunal.
Consequent to its aforesaid findings, the writ petitions filed by the APIICL
were allowed whereas those filed by the Syndicate Bank, the Company and
Nacharam Industrial Association were dismissed.
When the Special Leave Petitions were taken up for consideration on 29th November, 2004, this Court passed the following order:- "Leave granted.
In view of the competing claims to the 26 acres of land which form part of
the land allotted initially by the Government to the M/s. United Auto Tractors
Ltd. (UATL) and keeping in mind that both the appellant- Bank and APIIC have
the right to sell the land (APIIC as the owner and Syndicate Bank as the
mortgagee) we direct the sale of the land by a Committee to be set up consisting
of representatives of both the bodies. The Committee shall settle the terms and
conditions of sale and shall also have the property valued by a reputed valuer.
The sale shall be held after public notice by open auction or by private
negotiation between the Committee and such parties. Any such sale shall be
subject to the confirmation of this Court. The sale proceeds shall be kept in
the appellant Bank in a fixed deposit account to be opened in the joints names
of the two bodies initially for a period of one year and shall be kept renewed
pending further orders of this Court. The rights of the parties to the sale
proceeds shall be determined at the hearing of these appeals. Before the sale
takes place an inventory shall be prepared of the items of the machinery and
other items to be sold. If there are any records of UATL in the property to be
sold, the same shall be made available to the UATL by the Committee."
Pursuant to the aforesaid order, a Committee was constituted and after
completion of formalities of having the property valued, an advertisement was
published on 12th September, 2005 for sale of 26 acres of land situated at
Industrial Park, Nacharam, Hyderabad. In the auction, which was conducted
through sealed tenders, M/s. Celebrity Infrastructure Private Ltd., was the
highest bidder, having made a bid of Rs.42.1 crores for the land. 25% of the
bid money was duly deposited by M/s. Celebrity Infrastructure Pvt. Ltd., but
the balance of the purchase price offer was not deposited either within a
period of 15 days from the date of opening of the sealed tenders or within the
time extended by APIICL and Syndicate Bank. Ultimately, the offer of M/s.
Celebrity Infrastructure Pvt. Ltd. was cancelled by APIICL and Syndicate
Bank on 13th December, 2005. The cancellation of the offer made to M/s.
Celebrity Infrastructure Pvt. Ltd. was challenged by M/s. Celebrity
Infrastructure Pvt. Ltd. by way of separate applications, including
I.A.Nos.17-21/2006, for an injunction to restrain APIICL and Syndicate Bank
from handing over possession of the land in question to M/s.
Paradigm Logistics and Distribution Pvt. Ltd. and also to restrain the Bank
and APIICL from seeking confirmation of sale in favour of M/s. Paradigm
Logistics and Distribution Pvt.
Ltd.. The said applications were taken up for consideration on 3rd April, 2006 and were dismissed. The applications, being I.A.Nos. 12-16 and 32-36/06,
made by APIICL and Syndicate Bank for confirmation of sale in favour of M/s.
Paradigm Logistics and Distribution Pvt. Ltd. were directed to be listed for
consideration after three weeks. It was specifically mentioned that the
directions given would not in any way affect the claim of M/s. Paradigm
Logistics and Distribution Pvt. Ltd. for confirmation of sale.
It is pursuant to the aforesaid directions that these applications, as also
I.A.Nos. 27-31, were listed for hearing before us.
Mr. R.F. Nariman, learned senior advocate, appearing in support of I.A.Nos.
27-31 filed by M/s. Paradigm Logistics and Distribution Pvt. Ltd. submitted
that the applicant had matched the offer made by M/s. Celebrity Infrastructure
Ltd. and pursuant to the allotment letter dated 20th December, 2005 and 27th
December, 2005, deposited the entire consideration amount of Rs.42.10 crores on
2nd January, 2006, by way of a Pay Order. After observing the terms and
conditions of the sale an allotment letter dated 2nd January, 2006, was issued to the applicant company by the Zonal Manager, APIICL. It was stated therein
that pursuant to the decision of the Committee at the meeting held on 2nd
Jaunary, 2006, M/s. Paradigm Logistics and Distribution Pvt.
Ltd. was provisionally allotted land to the extent of 26 acres situated at
Industrial Park, Nacharam, Hyderabad at a total price of Rs.42.10 crores for
setting up its I.T. projects and that necessary steps were being taken to
obtain conformation of sale from the Supreme Court in favour of the applicant.
M/s. Paradigm Logistics and Distribution Pvt. Ltd.
thereafter filed I.A.Nos. 22-26/06 for being impleaded as parties to the
proceedings and such applications were duly allowed on 3rd April, 2006. M/s. Paradigm Logistics and Distribution Pvt. Ltd. also filed I.A. Nos. 27-31, inter
alia, for confirmation of sale of the property in question in favour of the
Similar applications have been made by Syndicate Bank, being I.A.Nos. 12-16/-06,
and APIICL, being I.A.Nos. 32-36, for confirmation of sale of the land in
question in favour of M/s. Paradigm Logistics and Distribution Pvt. Lt d. for a
sum of Rs.42.10 crores.
It transpires that apart from M/s. Paradigm Logistics and Distribution Pvt.
Ltd., there were some other bidders who were interested in the property in
question. The said parties were also given an opportunity to make offers which
were higher than that made by M/s. Celebrity Infrastructure Pvt. Ltd.
Although, higher offers were, in fact, made by some of the interveners,
including M/s. Coromamdel Preftcrate Pvt.
Ltd., ultimately none of the interveners were in a position to deposit even
50% of the bid amount. In the process however, M/s. Paradigm Logistics and
Distribution Pvt. Ltd. raised its offer to Rs. 50 crores.
Since in our view M/s. Paradigm Logistics and Distribution Pvt. Ltd. had
deposited the entire amount of bid money as far back as on 2nd January, 2006,
and there being no other bidders who were in a position to match the offer with
positive results, we are of the view that the sale in favour of M/s. Paradigm
Logistics and Distribution Pvt. Ltd. as suggested both by Syndicate Bank and
APIICL should be confirmed. We, accordingly, confirm the sale in favour of M/s.
Paradigm Logistics and Distribution Pvt. Ltd. for a consideration of Rs.50
crores, subject to deposit of the balance sum of Rs. 7.90 crores within a
period of two months from date. The sale deed shall be executed and registered
by APIICL as the Vendor and by Syndicate Bank as the Confirming Party in favour
of M/s. Paradigm Logistics and Distribution Pvt. Ltd.
It is made clear that M/s. Paradigm Logistics and Distribution Pvt. Ltd.
shall not make any claim as regards interest on the sum of Rs.42.10 crores. which
had been deposited by them on 2nd January, 2006 and the same will be
appropriated towards the sale proceeds.
As directed in the order of 29th November, 2004, the sale proceeds shall be
kept by Syndicate Bank in a fixed deposit account to be opened in the joint
names of the Bank and APIICL initially for a period of one year. The same shall
be kept renewed until further orders of this Court. As also indicated in the
order of 29th November, 2004, before the sale is completed an inventory shall
be prepared of the items of the machinery and other items to be sold. If there
are any records of M/s. United Auto Tractors Ltd. in the property to be sold,
the same is to be made available to the said company by the Committee appointed
by the said order to conduct the auction and to complete the sale. This
disposes of I.A.Nos.
27-31, 32-36 and 12-16.
Let the main appeals be listed for hearing in due course.