Thursday, 19 December 2024

Celir LLP Vs. Mr. Sumati Prasad Bafna and Ors. - Any sale by auction or other public procurement methods once already confirmed or concluded ought not to be set-aside or interfered with lightly except on grounds that go to the core of such sale process, such as either being collusive, fraudulent or vitiated by inadequate pricing or underbidding.

SCI (2024.12.13) in Celir LLP Vs. Mr. Sumati Prasad Bafna and Ors. [(2024) ibclaw.in 319 SC, 2024 INSC 978, Contempt Petition (C) Nos. 158-159 of 2024 in Civil Appeal Nos. 5542-5543 of 2023 with M.A. Nos. 600-601 of 2024 in Civil Appeal Nos. 5542-5543 of 2023] held that;

  • Any sale by auction or other public procurement methods once already confirmed or concluded ought not to be set-aside or interfered with lightly except on grounds that go to the core of such sale process, such as either being collusive, fraudulent or vitiated by inadequate pricing or underbidding. 


Excerpts of the Order;

Facts of the case

a. Background of the case

  • The present petitions have been filed under Section 2(B) of the Contempt of Court Act, 1971 (Act, 1971) read with Article(s) 129 and 142(2) of the Constitution respectively seeking to initiate contempt proceedings against the respondents / alleged contemnors for wilful disobedience of the final judgment and order dated 21.09.2023 passed by the Hon’ble Supreme Court in Celir LLP v. Bafna Motors (Mumbai) Pvt. Ltd. and Ors. (2023) ibclaw.in 105 SC (Civil Appeal Nos. 5542-5543 of 2023).

  • Parties of the case:

    • Petitioner: Successful Auction Purchaser

    • Respondent No. 1: Mr. Sumati Prasad Bafna is the Original Borrower (Original Borrower)

    • Respondent No. 3: Union Bank of India is the Secured Creditor / Bank (Bank)

    • Respondent No. 4: Greenscape IT Park LLP and its director, Mr. Jayesh A. Vavia i.e., the Respondent No. 2 are the subsequent transferee / third party purchaser (Subsequent Transferee)

  • On 31.03.2021 the Borrower’s LRD Term Loan Account was declared as a NPA.

  • The Bank on 07.06.2021 issued a demand notice under Section 13(2) of the SARFAESI Act, 2002 for repayment of an aggregate sum of Rs. 123.83 crore.

  • Thereafter, the Bank on 04.02.2022 issued a possession notice to the Borrower and took symbolic possession of the Secured Asset.

  • Aggrieved by the aforesaid, the Borrower preferred a Securitization Application being S.A. No. 46 of 2022, under Section 17 of the SARFAESI Act before the DRT, assailing the aforesaid notice dated 07.06.2021.

  • On 25.03.2022, the Bank issued a notice of sale of the Secured Asset by way of a public auction, however, the said sale / auction failed on account of no bids being received. On 14.06.2023, the Bank published the notice of sale in terms of Rule 8(6) of the SARFAESI Rules for the 9th time.

  • The petitioner participated in the same and submitted its bid of Rs. 105.05 crore and the petitioner was declared as the highest bidder. The Bank on 30.06.2023 vide its email sent a “Sale Confirmation Letter” to the petitioner.

  • On 01.07.2023, the petitioner as per the terms and conditions of the auction notice deposited an amount of Rs, 15,76,25,000/- as 25% of the total sale consideration to the Bank, excluding the EMD already paid.

  • The Borrower realizing that the 9th auction being successful and that the Secured Asset was likely to be sold off, it hurriedly filed an IA bearing No. 2339 of 2023 in the S.A. No. 46 of 2022 on 05.07.2023, seeking to redeem the mortgage created over the Secured Asset by paying of the total outstanding sum of Rs. 123.83 crore (approx..) in lieu of the LRD Term Loan.

  • On 27.07.23, the petitioner deposited the balance sum of the total bid amount which was duly received and accepted by the Bank.

  • While the parties were awaiting for the DRT to pass an appropriate order on the redemption application, the borrowers went to the High Court and filed the Writ Petition No. 9523 of 2023.

  • Vide judgment dated 17.08.2023, the Hon’ble High Court allowed the writ petition and permitted the borrowers to redeem the mortgage of the secured asset subject to payment of Rs. 25 crore on the same day and the balance amount of Rs. 104 crore on or before 31.08.2023, failing which the sale of the Secured Asset in favour of the petitioner would be confirmed.


b. Proceedings before Supreme Court in Celir LLP v. Bafna Motors (Mumbai) Pvt. Ltd. and Ors. 

  • Aggrieved by the order of the Hon’ble High Court, the petitioner preferred SLP before the Hon’ble Supreme Court.  The aforesaid SLPs were instituted on 21.08.2023 and there was a caveat at the end of the Borrower, and thus the Borrower was fully aware of the aforesaid SLP pending before this Court.

  • On 25.08.2023, the aforesaid SLPs were taken up for hearing by this Court for the first time and the Borrower was also present during the hearing through his counsel. The Hon’ble Court vide its order dated 25.08.2023 adjourned the matter to 01.09.2023 without any interim stay or status quo operating between the parties.

  • On 26.08.2023, the Borrower pursuant to the said order of the High Court transferred a sum of Rs. 104 crore to the Bank for redeeming its mortgage.

  • The Bank on 28.08.2023 issued a NOC to the Borrower, and a Release Deed was executed between the parties for discharge of the mortgage over the Secured Asset, upon which the original title deeds and related documents were returned to the Borrower.

  • There was a second charge created over the said Secured Asset in favour of one Tata Motors Financial Solutions Ltd. which came to be released pursuant to payment of Rs. 15 crore by the Borrower on the same date (i.e. 28.08.2023) vide a Dead of Release registered before the Joint Sub Registrar, Thane having Registration No. 19283 of 2023.

  • On the very same day i.e., 28.08.2023, the Borrower entered into an Agreement of Assignment of Leasehold Rights with a third-party viz. M/s Greenscape I.T. Park LLP i.e., the Subsequent Transferee for the transfer of leasehold rights in the Secured Asset. The said agreement was registered before the Joint Sub Registrar.

  • The Hon’ble Supreme Court vide its final judgment, reported in (2023) ibclaw.in 105 SC, inter-alia held that the High Court erred in permitting the Borrower to redeem the mortgage after publication of the notice of sale / auction under Rule 9 sub-rule (1) of the SARFAESI Rules.

  • Accordingly, the High Court’s order dated 17.08.2023 was set-aside. Furthermore, the Hon’ble Court directed the petitioner to pay an additional amount of Rs. 23.95 crore to the Bank within a period of one week from the date of pronouncement, upon which the Bank was to issue the sale certificate for the Secured Asset in accordance with Rule 9(6) of the SARFAESI Rules. The Bank was further directed to refund the entire amount paid by the Borrower towards redemption of the mortgage of the Secured Asset upon receipt of the balance amount from the petitioner.


c. Subsequent Development/ Contempt Issue

  • On 27.09.2023, the petitioner paid the remaining amount of Rs. 23.95 crore in terms of the judgment dated 21.09.2023 whereupon Sale Certificate for the Secure Asset came to be issued by the Bank.

  • The Bank on the very same day addressed one letter to the Borrower requesting for the cancellation of the Release Deed dated 28.08.2023 and for returning the original title deeds to the Secured Asset in order to refund the amount paid towards redemption of the mortgage.

  • Thereafter, the petitioner sent several reminders to the Bank inter-alia to handover the physical possession of the Secured Asset along with its original title deeds. The Bank in response reiterated from time to time that it was actively taking steps for the purchase of complying with the directions passed by this Court in its judgment.

  • The Bank filed an application under Section 14 of the SARFAESI being S.A. No. 787 of 2023 for obtaining physical possession of the Secured Asset, and that the said application was pending before the District Magistrate, Thane, Mumbai.

  • In the interregnum, the Borrower filed I.A. No. 3220 of 2023 in S.A. No. 46 of 2022 for amendment of pleadings in the securitization application inter-alia for the purpose of: –

    • i) Bringing on record the subsequent development that had taken place;

    • ii) For challenging the Notice of Sale dated 12.06.2023 on the ground of want of a 30-days period between the date of issuance of the notice of sale and the date of auction in terms of Rule 8(6) and 9(1) of the SARFAESI Rules respectively;

    • iii) Praying to set aside the auction dated 30.06.2023 of the Secured Asset conducted by the Bank upon examination of the validity and propriety of all measures taken by the Bank in terms of Section 13(4) of the SARFAESI Act and Rule 8 and 9 of the SARFAESI Rules respectively.

  • The petitioner issued a legal notice dated 29.12.2023 to all the respondents, calling upon them to (a) handover the physical possession of the Secured Asset along with its original title deeds and (b) to take steps towards cancelling the Release Deed dated 28.08.2023.

  • In response to the above, the Borrower vide its letter dated 16.01.2024 inter-alia stated that since the Secured Asset stood transferred to the Subsequent Transferee, it had no role to play in handing over of the possession or the original title deeds of the same.

  • On the other hand, the Subsequent Transferee upon receipt of the aforesaid legal notice, instituted a suit being the Special Civil Suit No. 5 of 2024 against the petitioner inter-alia seeking a declaration that (a) they are the owners and title-holder of the Secured Asset; (b) the Assignment Agreement dated 28.08.2023 is legal and valid and (c) they are entitled to the physical possession of the Secured Asset.

  • The District Magistrate vide its order dated 02.02.2024 in S.A. No. 787 of 2023 allowed the Banks’ application under Section 14 of the SARFAESI Act. The Borrower preferred a SA under Section 17 of the SARFAESI Act for seeking stay of the aforesaid notice of possession dated 02.02.2024. The DRT refused to grant stay of the notice of possession and dismissed the Borrower’s IA No. 456 of 2024 in S.A. No. 53 of 2024.

  • The Borrower preferred an appeal against the aforesaid order being Misc. Appeal (D) No. 429 of 2024 before the DRAT, Mumbai. The DRAT vide its order dated 29.02.2024 granted status quo and deferred the proceedings for physical possession, and further directed the Bank to deposit Rs. 129 crore paid by the Borrower before it, in contrast to the order of this Court in Civil Appeal Nos. 5542-5543 of 2023 wherein the said amount was ordered to be refunded in clear terms.

  • On 01.03.2024, the present contempt petition came to be filed before this Court seeking initiation of contempt proceedings against the respondents for wilful disobedience of this Court’s order in Civil Appeal Nos. 5542-5543 of 2023 and further praying for:

    • i) handing over of the physical possession and original title deeds to the Secured Asset

    • ii) annulment of the Release Deed, the No Dues Certificate and the Deed of Assignment in favour of the Subsequent Proceedings and 

    • iii) the quashing of all proceedings pending in respect of the Secured Asset before the DRT, DRAT and the suit proceedings of the Subsequent Transferee.

Questions

  • Whether any act of contempt could be said to have been committed by the Respondent Nos. 1 to 4 respectively of the judgment dated 21.09.2023 passed by the Hon’ble Supreme Court in Celir LLP v. Bafna Motors (Mumbai) Pvt. Ltd. and Ors. (2023) ibclaw.in 105 SC? In other words, whether the Respondents in light of the aforesaid decision were duty bound to cancel the Release Deed dated 28.08.2023 and hand over the physical possession along with the original title deeds of the Secured Asset to the petitioner?

  • Whether, the proceedings arising out of S.A. No. 46 of 2022 could have continued after this Court’s judgment dated 21.09.2023 directing the issuance of the Sale Certificate of the Secured Asset to the petitioner? In other words, whether the petitioner by virtue of the Sale Certificate dated 27.09.2023 is said to have acquired a clear title to the said property?

  • Whether the transfer of the Secured Asset in favour of the Subsequent Transferee by way of the Assignment Agreement dated 28.08.2023 is hit by lis pendens? In other words, whether the absence of any registration in accordance with Section 52 of the Transfer of Property Act, 1882 as amended by the State of Maharashtra renders the lis pendens inapplicable?


Decision of the Supreme Court

A. Concept of Abuse of Process of Court and Collateral challenge to judgments that have attained finality

It is the case of the Borrower that there is no contempt not to speak of any violation of the decision of this Court rendered in the Main Appeals as the issue of validity of the 9th auction was never touched upon by this Court whilst deciding the right of the Borrower to redeem the mortgage, rather this Court had preserved the right of the Borrower to continue with its challenge to the auction proceedings before the DRT. Thus, in essence it is the case of the Borrower that this Court had adjudicated the right of redemption independent of the validity or legality of the SARFAESI proceedings that involved these rights.


The Hon’ble Supreme Court observes that:

  • (i) It is true the Borrower had assailed the actions of the Bank under the SARFAESI Act before the DRT by way of S.A. No. 46 of 2022. When the 9th Auction notice came to be issued on 12.06.2023 which the Borrower alleges to have received on 14.06.2023, the same was also challenged in the aforesaid securitization application by way of I.A. No. 2253 of 2023.

  • (ii) Before the DRT could conclude the proceedings, the Borrower on its own volition moved the High Court by way of its Writ Petition No. 9523 of 2023.

  • (iii) Thereafter, in the proceedings before the High Court, the Borrower voluntarily abandoned its aforesaid prayers and waived the right to pursue the S.A. No. 46 of 2022 before the DRT, irrespective of whether it was able to redeem the mortgage or not. In view of the above, the High Court by its impugned order permitted the Borrower to redeem the mortgage and directed that within a period of 1-week the S.A. No. 46 of 2022 be withdrawn and further clarified that even if the Borrower failed to withdraw the same, the said application would stand dismissed in light of its order and the Borrower would no longer be permitted to litigate any further in respect of the Secured Asset.

  • (iv) When the judgment in Main Appeals was reserved by this Court on 01.07.2023, the aforesaid period of 1-week had already elapsed. The Borrower never withdrew the SA. The Borrower in its written submissions before this Court claimed that it had already complied with the terms of the impugned order, but conveniently it never withdrew the S.A. No. 46 of 2022 which it was required to.

  • (v) Pertinently, during the course of hearing of the Main Appeals before this Court the petitioner / the successful auction purchaser apart from contending that the Borrower’s right to redeem the mortgage had been extinguished under the law, it specifically prayed that not only the impugned order of the High Court be set-aside but that the Bank be directed to issue the sale certificate to the Secured Asset and by its extension confirm the sale in its favour as evinced from its written submissions.

  • (vi) The Borrower being fully aware of the aforesaid prayers and even after having gone through the written submissions of the petitioner never contended that irrespective of whether its right to redeem the mortgage is available under the law or not, the sale at any cost cannot be confirmed in favour of the petitioner due to alleged illegality in the auction process. Not once did the Borrower raise the issue of there being no 30 / 15-days time gap between the notice of sale and the auction nor the issue that as per the terms of the auction, the same was subject to the outcome of the S.A. No. 46 of 2023.

  • (vii) Remarkably, although the Borrower during the course of hearing of the Main Appeals urged that no indulgence of this Court was warranted as it had already complied with the terms of the High Court’s impugned order and that the entire matter had been rendered infructuous, yet at the same time, not once did the Borrower even remotely indicate that it was in the process of withdrawing the S.A. No. 46 of 2023 as evinced from its written submissions.

  • (viii) Moreover, the Borrower despite being fully aware of the prayer of the petitioner for seeking confirmation of the sale in its favour and issuance of the sale certificate to the Secured Asset both during the course of hearing and in its written submissions which would have rendered the S.A. No. 46 of 2022 infructuous, it never prayed that in the event sale certificate is issued, its right to pursue S.A. No. 46 of 2022 be preserved, or that the sale certificate be made subject to the outcome of the said application.


B. Scope of Section 17 of the SARFAESI Act, 2002

  • It is no longer res integra that Section 17 of the SARFAESI Act, is a complete code that confers upon the DRT the jurisdiction to examine all the steps or measures taken by the secured creditor under the Act and provide remedies to any person aggrieved by any of those measures. By virtue of the said provision the DRT is clothed with a wide range of powers, to determine any issue or aspect pertaining to the SARFAESI proceedings initiated by the secured creditor and further a power to interfere with the same where necessary.(p124)

  • Section 17 of the SARFAESI Act provides a broad mechanism for an efficacious remedy to “any person” who is aggrieved by any of the “measures” taken or proposed to be taken by the secured creditor under the Act. The omnibus provision of Section 17(3) is of a wide import and enables the DRT to grant any relief in respect of any action or proceeding under the Act.(p124)

  • In Phoenix ARC (P) Ltd. v. Vishwa Bharati Vidya Mandir reported in (2022) ibclaw.in 03 SC, the Hon’ble Supreme Court held that where the Borrower is aggrieved by any proceedings initiated under the SARFAESI Act or any action proposed to be taken by a secured creditor, it has to avail the remedy under the SARFAESI Act and no writ petition would lie or be maintainable.(p125)

  • Thus, the remedy for seeking redemption of mortgage was not only available to the Borrower under Section 17 of the SARFAESI Act but was also availed by him, by way of I.A. No. 2339 of 2023 in S.A. No. 46 of 2022. This application for seeking redemption of mortgage was also heard by the DRT for quite some time, and even orders were reserved. However, suddenly, the Borrower decided to move the High Court for seeking the very same relief that it had sought in the securitization application.(p126)


C. Once Borrower has elected to move the High Court for the very same cause of action and underlying prayers, the Borrower was precluded from pursuing its remedies before the DRT

  • As there was virtually no difference between either the scope of proceedings or the prayer sought before the DRT and that before the High Court, once the Borrower had chosen to espouse the same matter already sub-judice in one forum before another, in this case the High Court, it was the duty of the Borrower to bring within the fold of its case all issues and grounds in respect of the 9th auction proceedings in the proceedings arising from the writ petition, by virtue of the Doctrine of Election.(p127)

  • Once, the Borrower had elected to move the High Court for the very same cause of action and underlying prayers, the moment the same was entertained by the High Court, which it did, the Borrower was precluded from pursuing its remedies before the DRT by way of S.A. No. 46 of 2024, and was duty bound to now espouse it only in the writ proceedings, as otherwise it would tantamount to having a second bite at the cherry and relitigating what it has already litigated.(p128)


D. The Decision in Celir LLP v. Bafna Motors & Ors. and the Scope of challenge before it

  • When the impugned order of the High Court was challenged before this Court in the Main Appeals, the scope of proceedings before the Supreme Court also entailed the issue of validity of the Bank’s actions under the SARFAESI Act.(p129)

  • Since, no challenge had been raised to the measures taken by the Bank under the SARFAESI Act and the 9th auction notice by the Borrower, this Court, in Celir LLP v. Bafna Motors & Ors. (2023) ibclaw.in 105 SC, proceeded to determine only the issue of right of redemption under Section 13(8) of the SARFAESI Act.(p130)

  • Thus, this Court only went on to determine the Borrower’s right to redeem the mortgage and having done so, this Court inter-alia set-aside the impugned order of the High Court and in view of the fact that the Bank had already confirmed the sale in favour of the petitioner, and in the absence of any challenge to the auction process, further directed that the sale certificate of the Secured Asset be issued to the petitioner.(p132)


E. The ‘Henderson’ Principle as a corollary of Constructive Res-Judicata

  • The ‘Henderson Principle’ is a foundational doctrine in common law that addresses the issue of multiplicity in litigation. It embodies the broader concept of procedural fairness, abuse of process and judicial efficiency by mandating that all claims and issues that could and ought to have been raised in a previous litigation should not be relitigated in subsequent proceedings. The extended form of res-judicata more popularly known as ‘Constructive Res Judicata’ contained in Section 11, Explanation VII of the CPC originates from this principle.(p135)


E.1 Existing Rulings

  • In Henderson v. Henderson reported in [1843] 3 Hare 999, the English Court of Chancery speaking through Sir James Wigram, V.C. held that where a given matter becomes the subject of litigation and the adjudication of a court of competent jurisdiction, the parties so litigating are required to bring forward their whole case. Once the litigation has been adjudicated by a court of competent jurisdiction, the same parties will not be permitted to reopen the lis in respect of issues which might have been brought forward as part of the subject in contest but were not, irrespective of whether the same was due to any form of negligence, inadvertence, accident or omission. It was further held, that principle of res judicata applies not only to points upon which the Court was called upon by the parties to adjudicate and pronounce a judgement but to every possible or probable point or issue that properly belonged to the subject of litigation and the parties ought to have brought forward at the time.(p136)

  • The above proposition of law came to be known as the ‘Henderson Principle’ and underwent significant evolution, adapting to changing judicial landscapes and procedural requirements. The House of Lords in Johnson v. Gore Wood & Co. reported in [2002] 2 AC 1, upon examining the ‘Henderson Principle’ authoritatively approved it with the following observations: –

    • (i) Lord Bingham of Cornhill integrated the principle with the broader doctrine of abuse of process and held that the bringing of a claim or the raising of a defence in later proceedings which ought to have been raised earlier will not always be hit by this principle, but rather will apply where such point is sought to be raised as an additional or collateral attack on a previous decision and the bringing forth of such ground amounts to misusing or abusing the process of the court or as a means for unjust harassment of a party.

    • (ii) Lord Millett construing the Principle held that it does not belong to the doctrine of res-judicata in the strict sense but rather was analogous to the doctrine, as it goes a step further to encompass even those proceedings that either culminated into a settlement or issues which had never been adjudicated previously in order to protect the process of the court from abuse and the defendant from oppression.(p137)

  • InVirgin Atlantic Airways Ltd. v. Zodiac Seats UK Ltd. reported in [2014] AC 160 Lord Sumption JSC further expounded the ‘Henderson Principle’ as although separate and distinct from cause of action estoppel or res judicata yet having the same underlying public interest that there should be finality in litigation and that a party should not be twice vexed in the same matter.(p138)

  • Even in a common law action it was said by Blackburn, J.: “I incline to think that the doctrine of res judicata applies to all matters which existed at the time of giving of the judgment, and which the party had an opportunity of bringing before the Court.” [See: Newington v. Levy reported in (1870) 6 CP 180 (J)].(p139)

  • The fundamental policy of the law is that there must be finality to litigation. Multiplicity of litigation benefits not the litigants whose rights have been determined, but those who seek to delay the enforcement of those rights and prevent them from reaching the rightful beneficiaries of the adjudication. The Henderson Principle, in the same manner as the principles underlying res judicata, is intended to ensure that grounds of attack or defence in litigation must be taken in one of the same proceeding. A party which avoids doing so does it at its own peril. In deciding as to whether a matter might have been urged in the earlier proceedings, the court must ask itself as to whether it could have been urged. In deciding whether the matter ought to have been urged in the earlier proceedings, the court will have due regard to the ambit of the earlier proceedings and the nexus which the matter bears to the nature of the controversy. In holding that a matter ought to have been taken as a ground of attack or defence in the earlier proceedings, the court is indicating that the matter is of such a nature and character and bears such a connection with the controversy in the earlier case that the failure to raise it in that proceeding would debar the party from agitating it in the future. The doctrine itself is based on public policy flowing from the age-old legal maxim interest reipublicae ut sit finis litium which means that in the interest of the State there should be an end to litigation and no party ought to be vexed twice in a litigation for one and the same cause.(p140)

  • The Henderson Principle was approvingly referred to and applied by this Court in State of U.P. v. Nawab Hussain reported in 1977 AIR 1680 as the underlying principle for res-judicata and constructive res-judicata for assuring finality to litigation.(p141)

  • This Court in Devilal Modi v. Sales Tax Officer, Ratlam & Ors. reported in 1965 AIR 1150, held that if the underlying rule of constructive res judicata is not applied to writ proceedings, it would be open to the party to take one proceeding after another and urge new grounds every time, and would be inconsistent with considerations of public policy.(p142)

  • In Shankara Coop. Housing Society Ltd. v. M. Prabhakar, Civil Appeal 4099 of 2000, this Court held that the ground of non-compliance of statutory provision which was very much available to the parties to raise but did not raise it as one of the grounds, cannot be raised later on and would be hit by the principles analogous to constructive res judicata.(p143)

  • It is clear that the ‘Henderson Principle’ is a core component of the broader doctrine of abuse of process, aimed at enthusing in the parties a sense of sanctity towards judicial adjudications and determinations. It ensures that litigants are not subjected to repetitive and vexatious legal challenges. At its core, the principle stipulates that all claims and issues that could and should have been raised in an earlier proceeding are barred from being raised in subsequent litigation, except in exceptional circumstances. This rule not only supports the finality of judgments but also underscores the ideals of judicial propriety and fairness.(p144)


E.2 Four situations where in second proceedings between the same parties doctrine res judicata as a corollary of the principle of abuse of process may be invoked

There are, four situations where in second proceedings between the same parties doctrine res judicata as a corollary of the principle of abuse of process may be invoked:

  • (i) cause of action estoppel, where the entirety of a decided cause of action is sought to be relitigated;

  • (ii) issue estoppel or, “decided issue estoppel,” where an issue is sought to be relitigated which has been raised and decided as a fundamental step in arriving at the earlier judicial decision;

  • (iii) extended or constructive res judicata i.e., “unraised issue estoppel,” where an issue is sought to be litigated which could, and should, have been raised in a previous action but was not raised;

  • (iv) a further extension of the aforesaid to points not raised in relation to an issue in the earlier decision, as opposed to issues not raised in relation to the decision itself.(p145)


E.3 Henderson principle as explained by the Court in this judgment

  • As part of the broader rule against abuse of process, the Henderson principle is rooted in the idea of preventing the judicial process from being exploited in any manner that tends to undermine its integrity. This idea of preventing abuse of judicial process is not confined to specific procedure rules, but rather aligned to a broader purport of giving quietus to litigation and finality to judicial decisions. The essence of this rule is that litigation must be conducted in good faith, and parties should not engage in procedural tactics that fragment disputes, prolong litigation, or undermine the outcomes of such litigation. It is not a rigid rule but rather a flexible principle to prevent oppressive, unfair, or detrimental litigation.(p146)

  • The Hon’ble Court is conscious of the fact, that ordinarily this principle has been applied to instances where a particular plea or ground was not raised at any stage of the proceedings, but were later sought to be raised. However, it must be borne in mind that construing this rule in a hyper-technical manner or through any strait-jacket formula will amount to taking a reductive view of this broad and comprehensive principle.(p147)

  • Although in the present case, the Borrower had raised the issue of the validity of the measures taken by the Bank under the SARFAESI Act and the legality of the 9th auction conducted it in the earlier stages albeit in a different proceeding, yet its conduct of having conveniently abandoned the same in a different proceeding elected by it for the same cause of action and then later reagitating it in the pretence that the two proceedings were distinct, is nothing but a textbook case of abuse of process of law.(p148)

  • Piecemeal litigation where issues are deliberately fragmented across separate proceedings to gain an unfair advantage is in itself a facet of abuse of process of law and would also fall foul of this principle. Merely because one proceeding initiated by a party differs in some aspects from another proceeding or happens to be before a different forum, will not make the subsequent proceeding distinct in nature from the former, if the underlying subject matter or the seminal issues involved remains substantially similar to each other or connected to the earlier subject matter by a certain degree, then such proceeding would tantamount to ‘relitigating’ and the Henderson Principle would be applicable.(p149)

  • Parties cannot be allowed to exploit procedural loopholes and different foras to revisit the same matters they had deliberately chosen not to pursue earlier. Thus, where a party deliberately withholds certain claims or issues in one proceeding with the intention to raise them in a subsequent litigation disguised as a distinct or separate remedy or proceeding from the initial one, such subsequent litigation will also fall foul of this principle.(p150)

  • Similarly, where a plea or issue was raised in earlier proceedings but later abandoned it is deemed waived and cannot be relitigated in subsequent. Allowing such pleas to be resurrected in later cases would not only undermine the finality of judgments but also incentivize strategic behaviour, where parties could withdraw claims in one case with the intention of reintroducing them later. proceedings. Abandonment signifies acquiescence, barring its reconsideration in subsequent litigation. This ensures that judicial processes are not misused for tactical advantage and that litigants are held accountable for their procedural choices. Parties must litigate diligently and in good faith, presenting their entire case at the earliest opportunity.(p151)

  • The Henderson principle operates on the broader contours of judicial propriety and fairness, ensuring that the judicial system remains an instrument of justice rather than a platform for procedural manipulation. Judicial propriety demands that courts maintain the finality and integrity of their decisions, preventing repeated challenges to settled matters. Once a matter has been adjudicated, it should not be revisited unless exceptional circumstances warrant such reconsideration. Repeated litigation of the same issue not only wastes judicial resources but also subjects the opposing party to unnecessary expense and harassment. judicial processes are not merely technical mechanisms but are rooted in principles of equity and justice.(p152)

  • Both logic and principle support the approach that the judicial determination of an entire cause of action is in fact the determination of every issue which is fundamental to establishing the entire cause of action. Thus, the assertion that the determination is only on one of the issues is flawed as it is nothing but an indirect way of asserting that the whole judgment is flawed and thereby relitigating the entire cause of action once more. The effect of a judicial determination on an entire cause of action is as if the court had made declarations on each issue fundamental to the ultimate decision.(p153)


E.4 Present case

In the present case, the very issue of the validity of the measures taken by the Bank under the SARFAESI Act and by it the legality of the 9th auction proceedings was innately and inextricably linked to the proceedings before this Court in the Main Appeals. 

  • The very issue of validity of the 9th auction notice and the proceedings thereto properly belonged to the subject of litigation in the Main Appeals before this Court and ought to have been brought forward as part of the subject in contest.

  • Moreover, since there was virtually no difference between the prayer sought before the DRT and that before the High Court, once the Borrower had chosen to espouse the same matter already sub-judice in DRT before the High Court, it was the duty of the Borrower to bring within the fold of its case all issues and grounds in respect of the 9th auction proceedings in the proceedings arising from the writ petition, by virtue of the Doctrine of Merger and Election. Since the prayers that were sought before the DRT had been merged with the prayers before the High Court, the scope of proceedings of the Main Appeals encompassed the issue of validity of the Bank’s actions under the SARFAESI Act and by extension the 9th auction notice dated 12.06.2023 which the Borrower for reasons best known to it, and such now cannot be permitted to raise these issued when they ought to have been raised in the Main Appeals.

  • By virtue of the Doctrine of Election, the Borrower cannot be permitted to pursue two inconsistent remedies, once the Borrower had availed the remedy to redeem its mortgage and pay the dues sought to be recovered by way of the SARFAESI proceedings initiated by the Bank and having failed in doing so, it now cannot be permitted to challenge those very SARFAESI proceedings. 

  • The Borrower neither in the Main Appeals nor in the review thereto raised the issue of validity of the 9th auction notice or brought to the notice of this court the terms of the auction, more particularly that such auction was subject to the outcome of the S.A. No. 46 of 2022.

  • Once the sale of the Secured Asset under Section 13(4) of the SARFAESI Act ended in issuance of a Sale Certificate as per Rule 9 (7) of the SARFAESI Rules, such sale was complete and absolute.

  • this court in its decision in the Main Appeals by no means either preserved the right or permitted the Borrower to continue pursuing the proceedings in S.A. No. 46 of 2022 pending before the DRT. This is in view of the maxim Expressio Unius Est Exclusio Alterius i.e., the expression of one thing is the exclusion of another. Where a court consciously and specifically grants certain reliefs but does not advert to other reliefs or rights, the relief so expressly provided necessarily leads to the implied exclusion of the other reliefs and rights. Thus, when this Court directed the issuance of the Sale Certificate it necessarily excluded the right to pursue the DRT proceedings.

  • Mere reference to the pendency of the DRT Proceedings in the judgment by no means could lead to the inference that this Court had preserved the rights of the Borrower to pursue the same. One cannot assume or infer any right by referring to a stray sentence here and a stray sentence there in the judgment. It is trite that judgments of courts are not to be construed as statutes.(p154)


F. Applicability of Lis Pendens in the absence of any registration as required under the State Amendment to Section 52 of the Transfer of Property Act, 1882

  • As per the Doctrine of lis pendens, nothing new can be introduced during the pendency of a petition and if at all anything new is introduced, the same would also be subject to the final outcome of the petition, which would decide the rights and obligations of the parties.(p156)

  • The doctrine of lis pendens is duly recognized in Section 52 of the TPA which states that during the pendency in any court of any suit in which any right to immovable property is directly and specifically in question, the property cannot be transferred or otherwise dealt with by any party to the suit or proceedings. The explanation to the provision states that for the purposes of the Section, the pendency of a suit or proceedings shall be deemed to commence from the date of the presentation of the plaint or institution of the proceeding in a Court, and shall continue until the suit or proceeding is disposed by a “final decree or order” and complete satisfaction of the order is obtained, unless it has become unobtainable by reason of the expiry of any period of limitation.(p157)

  • The following conditions ought to be fulfilled for the doctrine of lis pendens to apply: –

    • i. There must be a pending suit or proceeding;

    • ii. The suit or proceeding must be pending in a competent court;

    • iii. The suit or proceeding must not be collusive;

    • iv. The right to immovable property must be directly and specifically in question in the suit or proceeding;

    • v. The property must be transferred by a party to the litigation; and

    • vi. The alienation must affect the rights of any other party to the dispute.(p158)

  • In short, the doctrine of lis pendens, which Section 52 of the TPA encapsulates, bars the transfer of a suit property during the pendency of litigation. The only exception to the principle is when it is transferred under the authority of the court and on terms imposed by it. Where one of the parties to the suit transfers the suit property (or a part of it) to a third-party, the latter is bound by the result of the proceedings even if he did not have notice of the suit or proceeding.(p159)

  • In the present case, it has been canvassed on behalf of the Subsequent Transferee that it is a bona-fide third party purchaser of the Secured Asset since it was neither arrayed as a party to proceedings in the Main Appeals nor issued a notice of the said proceedings either by the petitioner or by the Bank.(p162)

  • Since, in the present case the Special Leave Petitions were already instituted and pending before this Court as on 28.08.2023 i.e., the date of execution of the Assignment Agreement for the transfer of the Secured Asset in favour of the Subsequent Transferee, the said Assignment Agreement dated 28.08.2023 and the transfer thereto is beyond a shadow of doubt hit by lis pendens.(p168)

  • It has been contended by the Subsequent Transferee that Section 52 of the TPA has a modified application in Maharashtra i.e., the area in which the said property is situated by virtue of the State Amendment made to Section 52 of the TPA by the Bombay Amendment Act, 1939 (Act XIV of 1939).(p169)

  • In view of the aforesaid, the Hon’ble Court is of the considered view that the execution of the Assignment Agreement dated 28.08.2023 and the transfer of the Secured Asset in pursuance thereto in favour of the Subsequent Transferee is hit by lis pendens despite the fact that no notice of pendency was registered in terms of the amended Section 52 of the TPA.(p176)

  • Thus, although Section 52 of the Act 1882 does not render a transfer pendente lite void yet the court while exercising contempt jurisdiction may be justified to pass directions either for reversal of the transactions in question by declaring the said transactions to be void or proceed to pass appropriate directions to the concerned authorities to ensure that the contumacious conduct on the part of the contemnor does not continue to enure to the advantage of the contemnor or anyone claiming under him.(p180)

  • Since in the present case, the Assignment Agreement dated 28.08.2023 whereby the Secured Asset was transferred in favour of Greenscape / the Subsequent Transferee was effected by the Borrower on the strength of its right of redemption pursuant to the High Court’s impugned order which was ultimately set-aside by this Court in its judgment and order dated 21.09.2023 in the Main Appeals, the same rendered Borrower’s right to transfer the Secured Asset non-est and by extension the Assignment Agreement void.(p181)


G. Whether any contempt is said to have been committed by the respondents?

  • The expression or word “wilful” means act or omission which is done voluntarily or intentionally and with the specific intent to do something which the law forbids or with the specific intent to fail to do something the law requires to be done, that is to say with bad purpose either to disobey or to disregard the law. It signifies a deliberate action done with evil intent or with a bad motive or purpose.(p185)

  • Article 129 of the Constitution declares this Court as a “a court of record” and states that it shall have all the powers of such a court including the power to punish for contempt of itself. The provisions of the Act, 1971 and the Rules framed thereunder form a part of a special statutory jurisdiction that is vested in courts to punish an offending party for its contemptuous conduct. It needs no emphasis that the power of contempt ought to be exercised sparingly with great care and caution. The contemptuous act complained of must be such that would result in obstruction of justice, adversely affect the majesty of law and impact the dignity of the courts of law.(p186)

  • It must also be understood that contempt proceedings are sui generis inasmuch as the Law of Evidence and the Code of Criminal Procedure, 1973 are not to be strictly applied. At the same time, the procedure adopted during the contempt proceedings must be fair and just that is to say the principles governing the Rule of law must be extended to the party against whom contempt proceedings have been initiated. The party must have every opportunity to place its position before the Court. Such a party must not be left unheard under any circumstances.(p187)

  • Any act of disobedience, defiance, or any attempt to malign the authority of the court would amount to contempt because they undermine the respect and trust that the public reposes in judicial institutions. The judicial process relies on the confidence of society, and any act that disrupts or disrespects this process threatens to erode the foundation of justice and order.(p196)

  • Contempt jurisdiction exists to preserve the majesty and sanctity of the law. Courts are the guardians of justice, and their decisions must command respect and compliance to ensure the proper functioning of society. When individuals or entities challenge the authority of courts through wilful disobedience or obstructive behaviour, they undermine the rule of law and create the risk of anarchy. Contempt serves as a mechanism to protect the integrity of the courts, ensuring that they remain a symbol of fairness, impartiality, and accountability.(p197)

  • When judicial orders are openly flouted or court proceedings are disrespected, it sends a signal that the rule of law is ineffective, leading to a loss of trust in the system. Judicial decisions must remain unimpaired, free from external pressures, manipulation, or circumvention. Acts that attempt to mislead the court, obstruct its functioning or frustrate its decisions distort the process of justice and would amount to contempt.(p198)

  • The contempt jurisdiction of this court cannot be construed by any formulaic or rigid approach. Merely because there is no prohibitory order or no specific direction issued the same would not mean that the parties cannot be held guilty of contempt. The Contempt jurisdiction of the court extends beyond the mere direct disobedience of explicit orders or prohibitory directions issued by the court. Even in the absence of such specific mandates, the deliberate conduct of parties aimed at frustrating court proceedings or circumventing its eventual decision may amount to contempt. This is because such actions strike at the heart of the judicial process, undermining its authority and obstructing its ability to deliver justice effectively. The authority of courts must be respected not only in the letter of their orders but also in the broader spirit of the proceedings before them.(p199)

  • Any contumacious conduct of the parties to bypass or nullify the decision of the court or render it ineffective, or to frustrate the proceedings of the court, or to enure any undue advantage therefrom would amount to contempt. Attempts to sidestep the court’s jurisdiction or manipulate the course of litigation through dishonest or obstructive conduct or malign or distort the decision of the courts would inevitably tantamount to contempt sans any prohibitory order or direction to such effect.(p200)

  • Thus, the mere conduct of parties aimed at frustrating the court proceedings or circumventing its decisions, even without an explicit prohibitory order, constitutes contempt. Such actions interfere with the administration of justice, undermine the respect and authority of the judiciary, and threaten the rule of law.(p201)

  • However, at the same time, the power of contempt ought to be exercised sparingly and with caution and care. It operates with a string of caution and unless otherwise satisfied beyond doubt, it would neither be fair nor reasonable for the courts to resort to such powers. The standard of proof required before a person is held guilty of committing contempt of court must be beyond all reasonable doubt.(p202)


H. Interpretation of the Higher Court decisions

  • Where a decision is rendered and the impugned order is set-aside, it behoves any logic that an express direction to act must be given in respect of every aspect of the decision. The parties are duty bound to act in accordance with common sense. It is axiomatic that a party should obey both the letter and the spirit of a court order, and it is neither open for the parties to adopt a myopic and blinkered view of such decision nor any such interpretation or view that sub-serves their own interests. It is ultimately the purpose for which the order was granted that will be the lodestar in guiding the parties as to the true effect of the order and determination of the court.(p205)

  • If at all the parties are in doubts over the judgment and order of a court, the correct approach is to prefer a miscellaneous application for seeking clarification rather than proceeding to presume a self-serving interpretation of the decision. At this stage, we may also explain the correct approach to be adopted by the other courts and forums where a party seeks to espouse a cause based on its own understanding or interpretation of a decision of an higher authority. In such situations, the courts or forums should neither aid the parties in their attempt to reinterpret the decision of a higher court nor should they embark on an inquisitorial exercise of their own in order to derive the scope or intent of the order in question. The courts and tribunals should not conflate a decision of a higher court that declares a law with a decision that declares the inter-se rights of a parties, the former only operates as a precedent and thus, it is open for the lower courts to apply their minds to assess whether the same is applicable to the issues before it or what law has been laid down therein. However, the latter not only has precedential value but also carries with it the weight of determination of the issues directly involved between the very parties before it, the subject-matter itself and by extension the entire cause of action. Since such decisions have directly decided or given a finding on the inter-se rights and issues of the same parties that are before it and as such has to a certain extent a direct and palpable effect on the cause of action before it, in such circumstances, the courts and tribunals should refrain from interpreting or examining the scope or effect of such decisions on their own as the same would amount to relitigating the very same issues and rather should relegate the parties to seek clarification from the court that passed the order and adjourn further proceedings sine die.(p206)


I. Present case

  • In the facts of the case, we are convinced that both the Borrower and the Subsequent Transferee have committed contempt of this Court’s judgment and order dated 21.09.2023 in the Main Appeals. The aforementioned acts of the contemnors are nothing more than a gamble on their part to circumvent and undermine the findings and directions passed by this Court in the Main Appeals. Similarly, the lame excuses offered by them for explaining their conduct are also nothing more than a calculated attempt in the hope that they would get away with legitimizing the illegal Assignment Agreement even after the decision of this Court, and is equally contemptuous.(p208)

  • However, on an overall conspectus of the facts of the present case, while the initial acts of the Borrower and the Subsequent Transferee are in violation of this Court’s judgment and order dated 21.09.2023, yet the efforts on their part to take steps and make amends by withdrawing the Special Civil Suit No. 5 of 2024 along with their belated unconditional undertaking to comply with any further order that this Court may deem fit and proper to pass, demonstrates their effort and willingness to purge themselves of their contemptuous conducts. Thus, we are inclined to provide one last opportunity to the Borrower and the Subsequent Transferee to abide by the judgement and order dated 21.09.2023 passed by this Court and further comply with the directions issued in the present contempt petition, and thus, deem it fit not to hold them guilty of contempt for the present moment.(p209)


J. Circumstances when a sale of property by auction or other means under the SARFAESI Act may be set-aside after its confirmation \When the sale of secured asset either by auction or any other method under the SARFAESI Act may be challenged or set-aside after its confirmation

  • In B. Arvind Kumar v. Govt of India & Ors. reported in (2017) ibclaw.in 1127 SC this Court whilst dealing with a plea to set-aside the sale of the property therein by way of public auction by the official receiver, it was held that when the sale is confirmed by the court, the sale becomes absolute and therefrom the title vests in the auction purchaser.(p211)

  • InLICA (P) Ltd. v. Official Liquidator reported in (1996) 85 Comp Cas 788 (SC) this Court held that the purpose of an open auction is to get the most remunerative price with the highest possible public participation, and as such the courts shall exercise their discretion to interfere where the auction suffers from any fraud or inadequate pricing or underbidding that too with circumspection, keeping in view the facts of each case.(p212)

  • This Court in Valji Khimji & Company v. Official Liquidator of Hindustan Nitro Product (Gujarat) Ltd. and Ors. (2017) ibclaw.in 195 SC held that once an auction is confirmed the objections to the same should not ordinarily be allowed, except on very limited grounds like fraud as otherwise no auction would ever be complete.(p213)

  • In Ram Kishun & Ors. v. State of Uttar Pradesh & Ors. reported in (2017) ibclaw.in 783 SC this Court although held that where public money is to be recovered such recovery should be done expeditiously, yet the same must be done strictly in accordance with the procedure prescribed by law. However, this Court after examining a plethora of other decisions further held that once the sale has been confirmed it cannot be set aside unless a fundamental procedural error has occurred or sale certificate had been obtained by misrepresentation or fraud.(p214)

  • In PHR Invent Educational Society v. UCO Bank reported in (2024) ibclaw.in 109 SC it was again reiterated that an auction-sale which stands confirmed can only be interfered with when there was any fraud or collusion, and entertaining of issues regarding the validity of such auction would amount to reopening issues which have achieved finality.(p215)

  • InV.S. Palanivel v. P. Sriram reported in (2024) ibclaw.in 223 SC this Court again reiterated unless there are some serious flaws in the conduct of the auction as for example perpetration of a fraud/collusion, grave irregularities that go to the root of such an auction, courts must ordinarily refrain from setting them aside keeping in mind the domino effect such an order would have.(p216)

  • Any sale by auction or other public procurement methods once already confirmed or concluded ought not to be set-aside or interfered with lightly except on grounds that go to the core of such sale process, such as either being collusive, fraudulent or vitiated by inadequate pricing or underbidding. Mere irregularity or deviation from a rule which does not have any fundamental procedural error does not take away the foundation of authority for such proceeding. In such cases, courts in particular should be mindful to refrain entertaining any ground for challenging an auction which either could have been taken earlier before the sale was conducted and confirmed or where no substantial injury has been caused on account of such irregularity.(p218)

  • In the present lis, apart from the want of statutory notice period, no other challenge has been laid to the 9th auction proceedings on the ground of it being either collusive, fraudulent or vitiated by inadequate pricing or underbidding, thus, the auction cannot be said to suffer from any fundamental procedural error, and as such does not warrant the interference of this Court, particularly when the plea sought to be raised to challenge the same could have been raised earlier.(p219)

  • The aforesaid may be looked at from one another angle. Even if the 9th auction were to be held illegal and bad in law by virtue of the aforesaid S.A. No. 46 of 2022, it would not mean that the auction purchaser would by virtue of such finding lose all its rights to the secured asset, even after having the sale confirmed in its favour.(p220)


K. Directions

In view of the aforesaid, the Hon’ble Supreme Court passes the following orders and directions: –

  • (i) The legality and validity of the 9th auction proceedings conducted pursuant to the notice of sale dated 12.06.2022 is upheld. The sale of the Secured Asset to the petitioner is hereby confirmed and the title conferred through the Sale Certificate dated 27.09.2023 is declared to be absolute.

  • (ii) The Borrower and the Bank shall immediately take steps for the cancellation of the Release Deed dated 28.08.2023 within a period of one week from the date of pronouncement.

  • (iii) The Borrower shall also unconditionally withdraw the S.A. No. 46 of 2022 pending before the DRT within a period of one week from the date of pronouncement.

  • (iv) The Assignment Agreement dated 28.08.2023 is hit by lis pendens and hereby declared void. The Subsequent Transferee shall hand over the peaceful physical possession of the Secured Asset along with its original title deeds to the Bank within a period of one week from the date of pronouncement of this judgment. In the event of any further hinderance or any obstruction that may be caused by the Borrower or the Subsequent Transferee while taking over the possession of the property then in such circumstances the Bank shall take the assistance of police.

  • (v) The Subsequent Transferee shall also withdraw the police complaint dated 17.01.2024 lodged by it within a period of one week from the date of pronouncement of this judgment.

  • (vi) We clarify that the Subsequent Transferee is not entitled to recover the amount paid by it towards redeeming the second charge over the Secured Asset or any other dues or amount paid in respect of the same from the petitioner.

  • (vii) The Bank shall refund the amount of Rs. 129 crore paid by the Borrower towards the redemption of mortgage without any interest only after the aforesaid directions have been complied to the letter and spirit.

  • (viii) The Subsequent Transferee is at liberty to recover the amount paid by it towards the Assignment Agreement dated 28.08.2023 and any other amount from the Borrower by availing appropriate legal remedy as may be available under the law.(p223)


Let this matter be notified once again before this Bench after a period of two weeks to report compliance of the aforesaid directions. There shall be no order as to costs.(p223-225)

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