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SUPREME COURT OF INDIA
M.R. SHAH, C.T. RAVIKUMAR, JJ.
G. Vikram Kumar – Appellant
Versus
State Bank of Hyderabad & Ors. – Respondents
Civil Appeal Nos.31523153 of 2023 (@ SLP (Civil) Nos.59735974 of 2018)
Decided On : 02-05-2023
Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Section 13(8) and 17 – Transfer of Property Act, 1882 – Sections 54 and 91 – Constitution of India – Article 226 – Auction sale of hypothecated property – Flat in question was not the seven flats identified by borrower to be kept out of auction proceedings – Borrower did not apply and/or invoke Section 13(8) and did not agree to clear entire dues – High Court has materially erred in allowing writ petition – Respondent No. 1 and/or his heirs cannot be permitted to get benefit of his own wrong and cannot be permitted to get benefit of a void transaction – In view of availability of alternative statutory remedy under Section 17 of SARFAESI Act, High Court ought not to have entertained writ petition under Article 226 – Judgment and order passed by High Court quashed and set aside – On full payment of auction sale consideration, sale certificate to be issued in favour of appellant with respect to Flat. (Paras 8, 8.2, 8.3, 8.5 and 9)
Facts of the case:
Feeling aggrieved and dissatisfied with impugned judgment and order dated 08.09.2017 passed by the High Court of Judicature at Hyderabad for the State of Telangana and Andhra Pradesh passed in Writ Petition No.31098 of 2016 and the subsequent order dated 08.12.2017 passed in Review Petition No.45031 of 2017 in Writ Petition No.31098 of 2016, appellant and auction purchaser has preferred present appeals. What was challenged before the High Court by respondent no.1 in a writ petition under Article 226 of the Constitution of India was the e-auction
notice which was pursuant to action initiated by the Bank in exercise of powers under Section 13(4) of the SARFAESI Act.
Findings of Court:
Whatever the amount is already deposited by respondent no.1/his heirs shall be returned to respondent no.1 (now his heirs) with the interest at 9% from the date of such deposit till the actual date of return which shall be returned within a period of four weeks from today. The heirs of original respondent no.1 are granted three months’ time to vacate the flat in question.
Result : Appeals allowed.
JUDGMENT :
M. R. Shah, J.
1. Feeling aggrieved and dissatisfied with the impugned judgment and order dated 08.09.2017 passed by the High Court of Judicature at Hyderabad for the State of Telangana and Andhra Pradesh passed in Writ Petition No.31098 of 2016 and the subsequent order dated 08.12.2017 passed in Review Petition No.45031 of 2017 in Writ Petition No.31098 of 2016, the appellant and the auction purchaser has preferred the present appeals.
2. The facts leading to the present appeals in nutshell are as under:
2.1 That the respondent no.3 herein – builder had taken loan from respondent no.2 – Bank for the development of the multi-storey housing project. That the respondent no.3 (hereinafter referred to as the borrower) was not able to repay the security interest to the Bank, the Bank initiated proceedings against the borrower under Section 13 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ‘the SARFAESI Act, 2002). The Bank attached the properties of the borrower under Section 13(4) of the SARFAESI Act. Against the measures taken by the Bank under Section 13(4) of the SARFAESI Act, the borrower filed S.A. No.253 of 2012 before the Debt Recovery Tribunal (DRT), Hyderabad. S.A. No.253 of 2012 was listed before the DRT on 19.02.2016, when the borrower was given liberty to file a list of intending buyers of the property and bring forth with the buyers so as to enable the Tribunal to consider the same for the repayment of the dues of the Bank. On 25.02.2016, the DRT passed an order permitting the Bank to go ahead with the sale as proposed excluding flat to be identified and communicated by the borrower to the Bank by 29.02.2016 with full details of all purchasers to the bank officials on affidavit so as to enable the bank officer to exclude those flats, provided the remaining flats are sufficient for recovery of the dues. The Tribunal directed that the bank may proceed with the sale but shall not confirm the sale till the next date of hearing. At this stage it is required to be noted that the aforesaid order was passed by the Tribunal in view of the submissions made by the borrower that he had sold seven flats out of 37 flats which were to be sold by the Bank to some third persons. Flat No.6401 – flat in question was not amongst the said seven flats.
2.2 A Memorandum of Understanding (MoU) was entered into between the respondent no.1 and the borrower with respect to the sale of Flat No.6401 on 10.04.2016 for a lumpsum consideration of Forty-five lakhs. It is pertinent to note that in the MoU itself there was a reference to some proceedings going on before the DRT and that the Bank and the borrower will obtain clearance in order to process the agreement to sale. That an agreement to sale was executed between the bank and the borrower for a sale of Flat No.6401 on 16.06.2016. At this stage, it is required to be noted that the said agreement to sale was executed by the borrower without informing/obtaining any consent from the DRT as well as the Bank and the permission, if any, given to the borrower earlier obtained only to the seven flats which were already recognized by the DRT on 25.02.2016.
2.3 That thereafter the Bank issued a public notice on 28.07.2016 for auctioning the properties of the borrower. The said notice was published in the newspaper on 29.07.2016. The property in question, i.e. Flat No.6401 was also subjected to auction. It was placed in Lot No.1 for which the e-auction was proposed on 30.08.2016.
2.4 The borrower filed an application before the DRT praying for stay on all proceedings of the Bank pursuant to the auction notice dated 28.07.2016. On 24.08.2016 the DRT was pleased to reject the application for stay filed by the borrower. While rejecting the stay application and refusing to grant the stay as prayed, the DRT observed as under :
“…Pending the decision, this Tribunal has directed to sell the property and the Applicant now
No one can be permitted to get benefit of his own wrong and cannot be permitted to get benefit of a void transaction.
SARFAESI--Auction Sale--Confirmation of sale of secured assets by bank-- Writ Petition against such an action of Bank is not maintainable
The court held that when a statute provides specific remedies, writ jurisdiction under Article 226 should not be exercised, affirming the precedence of statutory procedures over equitable remedies.
Possession notice and auction sale notice – Only in a case where secured property is actually put to use as agricultural land and solely on the basis of revenue records/Pattadar and once secured prop....
(1) Writ Petition – High Court will ordinarily not entertain a petition under Article 226 of Constitution if an effective remedy is available to aggrieved person.(2) Auction sale of secured asset – S....
The sale certificate under the SARFAESI Act is sufficient for title transfer, negating the need for further registration, and the High Court should not intervene in SARFAESI proceedings when alternat....
Mandatory compliance with procedural requirements under the SARFAESI Act is essential; failure to adhere prejudices borrowers' rights and invalidates auction proceedings.
The court reinforced that compliance with statutory notice requirements and fair valuation is essential in property auctions under the SARFAESI Act to protect borrower rights.
The court held that the petitioners, as successful bidders in the e-auction, were entitled to have the sale deed executed in their favor as individuals, despite participating in the auction as a grou....
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