M/s. Broadways Overseas Ltd. vs Central Excise and Another

Sanjay Kishan Kaul, C.J.—The Central Excise, Division No. 1 of the Jalandhar Division through its Assistant Commissioner issued a public

notice as proclamation of sale of plot measuring 175 Marlas situated in Village Raipur Rasulpur, which was the premises of M/s. Santosh Rubber

and Allied Industries on account of dues to it. It was categorically averred in the schedule of the public notice that there was no encumbrance on

the property whatsoever. In response to this public notice, the petitioner participated and sent his quotation on 3.1.2009 alongwith a pay order of

Rs. 6,60,0000/- towards 10% of reserve price. The sealed bids were opened on 9.1.2009 when the petitioner was found to be a successful

bidder having made a bid of Rs. 70 lacs. The petitioner immediately on the same day deposited an amount of Rs. 10,90,000/- so as to ensure that

25% of the bid amount totalling to Rs. 17,50,000/- as deposit with respondent No. 1.

The petitioner received a legal notice dated 14.1.2009 soon thereafter on behalf of respondent No. 2-Bank claiming that the property was

mortgaged with the said bank and that recovery proceedings were pending before the DRT, Chandigarh for a sum of Rs. 1,57,25,035/- due as on

30.4.2007 and the property was mortgaged as security for the loan. The petitioner replied to the said notice on 19.1.2009 through counsel

expressing ignorance about the first charge of the bank and having acted on the basis of the assurances held out by respondent No. 1 in their

auction notice. The petitioner naturally also served a notice upon respondent No. 1 on the same date calling upon the said respondent to either get

the property cleared from the bank within 15 days or in the alternative to refund the entire amount of Rs. 17,50,000/- alongwith 18% interest. The

reply of respondent No. 1 was, however, received only through a communication dated 19.3.2009 stating that as per the revenue records, title of

the property was clear and there was no stay at the time of auction with regard to sale of the property. It was further stated that since the matter

was sub-judice in terms of interim order dated 22.1.2009, no unilateral action can be taken by the department. The petitioner thus, found itself in a

predicament where neither the property was being transferred to him on payment of balance sale amount nor was the amount being refunded as

was deposited with respondent No. 1 despite repeated representations including dated 5.8.2009 and 18.6.2009. In these circumstances, the

petitioner has filed the present writ petition under Articles 226 and 227 of the Constitution of India seeking a direction against respondent No. 1 to

refund the amount of Rs. 17,50,000/- being 25% bid amount alongwith interest at the rate of 18% per annum.

There is practically no defence to the writ petition. The only justification for non-refund of the 25% amount is stated to be the order of DRT

dated 22.1.2009 whereby the interim stay was granted for all further proceedings of the Collector of Central Excise with respect to the sale held

on 9.1.2009. This order is alleged to have been continuing as averred in the counter affidavit. However, learned counsel for respondent No. 1

states that on 5.1.2012, a recovery certificate was issued by the DRT, Chandigarh, in favour of respondent No. 2-Bank negating the right of

respondent No. 1 and holding that the bank has the first charge, the property having been mortgaged to the bank. In these proceedings,

respondent No. 1 was impleaded as a party. This order has not been assailed further by respondent No. 1.

In view of the aforesaid, there is really no dispute that a sum of Rs. 17,50,000/- has to be refunded to the petitioner. However, the question is

whether the petitioner is entitled to interest on the amount and if so at what rate?

The inaction of respondent No. 1 in making the refund cannot be justified. Infact even after the orders were passed on 5.1.2012, the respondent

No. 1 has not cared to refund the amount. As far as the petitioner is concerned, its money was lying blocked and it had served a notice dated

19.1.2009 calling for refund of the amount deposited or get the property cleared of the incumbrances. The respondent No. 1 cannot take the

shelter of having acted bonafide to keep the money of the petitioner. The excuse being made of the interim order dated 22.1.2009 acting as an

impediment cannot be accepted for the reason that it restrained respondent No. 1 from taking further proceedings which would imply that it could

not have concluded the transaction, but nothing prevented it from cancelling the transaction and refunding the money to the petitioner having then

found out that the property was under a cloud on account of prior mortgage and having made an assertion in the sale proclamation to the contrary.

We are thus, of the view that the petitioner is entitled to interest on the amount of Rs. 17,50,000/- at least from the expiry 15 days of the notice by

the petitioner to respondent No. 1 dated 19.1.2009 calling upon respondent No. 1 to either get the property cleared or refund the entire amount.

The interest would thus, be payable from 4.4.2009. Taking into consideration the prevailing rate of interest at the relevant time, we grant 12% per

annum simple interest on the said amount. We thus, issue a direction to respondent No. 1 to refund a sum of Rs. 17,50,000/- alongwith interest at

the rate of 12% per annum simple interest from 4.4.2009 till date of payment within a period of 30 days from today. Any delay in payment would

entitle the petitioner to interest at 18% per annum for the delayed payment. The petitioner is also entitled to cost quantified at Rs. 10,000/-.