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Interim injunction denied in property auction case

Our Legal Correspondent

CHENNAI, Aug. 2

THE Madras High Court has declined to grant interim injunction of the auction sale of property of a debtor who, after giving an undertaking to repay the loan failing which his assets could be appropriated against the dues, defaulted in repaying the loan amount.

Rejecting the contention of a partner of Ramu & Co of Alwarpet, Chennai (plaintiff) that the auction sale by Respondent 2 (Egmore Benefit Fund Society, Chennai) of the property of the plaintiff was ``not a concluded contract of sale'' between Respondent 1 (NMR Investments, Gopalapuram, Chennai) and R 2, Mr. Justice M. Karpagavinayagam said that the plaintiff's undertakings to repay the loan had consistently been breached. ``Having not come with clean hands, the plaintiff cannot be granted the interim r elief sought for.''

The plaintiff (Ramu & Co) got Rs. 5 crores loan from R 2 in July, 1995 on condition that R 2 had a right to appropriate any monies paid by the plaintiff in order of priority. They deposited the title deeds for the mortgaged property to R 2 and had execut ed a power of attorney empowering the Egmore Benefit Fund Society to sell the mortgaged property for realisation of dues.

Ramu & Co defaulted in repaying the principal and interest. In July 1997, R 2 issued a legal demand notice to which the plaintiff sought some more time to clear the dues. In August 1997 R 2 issued an auction notice. Following a series of litigation, the auction was finally held on December 13, 1999. R 1 was the highest bidder and was declared the successful purchaser of the property.

Now, one of the partners of the plaintiff filed a suit for a declaration that there was no concluded contract of sale of the suit property based on the public auction. He sought an interim relief to restrain R 2 and R 3 (Srirajan Company, Chennai) from p roceeding with respect to the auction sale.

He pointed out that the auction was hurried through, inadequately publicised and the Egmore Benefit Fund Society's Chairman persuaded others not to bid.

The plaintiff set up a benami to bid in the auction. Though the guideline value of the plot was Rs. 19.50 crores, R 1 was ready to buy at Rs. 9 crores.

The judge rejected the contentions of the plaintiff after agreeing to the conditions of the respondent that due advertisements were given in leading newspapers and none had offered to pay the guideline value.

He also rejected the contention that there was no concluded contract of sale between R 1 and R 2. Pointing out to the various plaints and petitions filed by Ramu & Co, the judge said despite the undertakings to repay, as acknowledged by the society, they (undertakings) had been consistently breached.

The plaintiff had not only failed to make a prima facie case but also not be able to point out the balance of convenience in this case. On the other hand, after the auction sale was over, the firm issued notice to R 2.

But since the auction sale was not conducted by observing the required formalities and the amount was less, he could have filed a suit for damages as per the Transfer of Property Act. When such a remedy was available, the relief of interim injunction cou ld not be granted to the plaintiff.

The judge said that on the other hand, if the injunction was granted, not only would the right of the Benefit Society would be affected, but the right of R 1, which had purchased the property, would be affected as it had already paid 25 per cent of the p urchase value.

The applicant was not entitled to interim injunction, the judge concluded.