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CASE NO.: Appeal (civil)  7824-7828 of 2004

PETITIONER: Syndicate Bank

RESPONDENT: Estate Officer & Manager (Recoveries) & Ors

DATE OF JUDGMENT: 22/02/2007

BENCH: Tarun Chatterjee & Altamas Kabir

JUDGMENT: J U D G M E N T

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

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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

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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

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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 Pvt.  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 applicant. 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.

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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.