IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI
A.V.Sesha Sai, Sumathi Jagadam, JJ.
Shaik Masthan Vali - Appellant
Versus
Union of India - Respondent
Writ Petition No. 20975 of 2022
Decided On : 09-11-2023
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act - Auction of Property - Rules 6(2) and 8(6) of the Security Interest(Enforcement) Rules, 2002 - Summary of Acts and Sections: The court discussed the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the Security Interest(Enforcement) Rules, 2002, particularly focusing on Rule 8(5) which stipulates the requirement to mention the actual extent of the property to be sold in the auction notice.
Fact of the Case:
The petitioner participated in an auction for a property conducted by the respondents-bank authorities. The petitioner emerged as the highest bidder, but later discovered that only a portion of the property was available for sale, while the rest was covered by a road. The petitioner filed a Writ Petition seeking a refund of the proportionate amount paid for the entire extent of the property.
Finding of the Court:
The court found that the auction notice did not mention the actual extent of the property, which was a violation of the Rules. The court also referred to a similar case and held that the bank's conduct was unjustified in declining the petitioner's request. The court allowed the Writ Petition and directed the respondents-bank authorities to refund the proportionate amount paid by the petitioner.
Issues: The issues before the court were whether the respondents-bank authorities' action in refusing to consider the petitioner's request was in accordance with the law and whether the petitioner was entitled to relief under Article 226 of the Constitution of India.
Ratio Decidendi: The court held that the auction notice should have mentioned the actual extent of the property to be sold, as required by Rule 8(5) of the Security Interest(Enforcement) Rules, 2002. The court also emphasized the duty of the authorized officer to take all precautions before putting the secured asset to sale, as per Rule 8(5).
Final Decision: The Writ Petition was allowed, and the respondents-bank authorities were directed to refund the proportionate amount paid by the petitioner towards the entire extent of the property, while retaining the amount paid towards the available portion. The court also allowed the respondents-bank authorities to proceed against the person in occupation of the rest of the extent of the property as per law.
JUDGMENT
A.V.SESHA SAI, J. - Heard Sri S.M.Subhani, learned Senior Counsel representing Sri G.Suryam and Sri Sreedhar Valiveti, learned Standing Counsel for Respondent No.2 to 4, apart from perusing the material available on record.
2. For realization of the debt amount from one M/s.V.R.Enterprises, the respondents-bank authorities initiated proceedings under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002(for short The Act") and conducted public auction for the subject land, pursuant to the Intended Sale Notice, dtd. 27/8/2010, issued under Rules 6(2) and 8(6) of the Security Interest(Enforcement) Rules, 2002 framed under the Act. The auction for the subject property was conducted on 8/10/2010, in which the petitioner herein emerged as highest bidder and a sale certificate was also issued by the respondents-bank authorities on 11/11/2010 after the payment of the entire bid amount of Rs.5, 41, 200.00 by the petitioner.
3. According to the learned counsel for the petitioner, only an extent of 75 square yards is available out of the total extent of 240 square yards on ground and the rest of the extent is covered by a road and the respondents-bank authorities did not disclose the said reality in their auction notice. In elaboration, it is further contended by the learned counsel for the petitioner that the respondents-bank authorities also obtained a valuation certificate from their approved valuer prior to auction of the subject property and, according to the said valuation certificate, the available site is only 75 square yards and the rest of the extent of 165.00 square yards is covered by a road. According to the learned Senior Counsel, the said information was not mentioned in the auction Sale Notice issued by the respondents-bank authorities.
4. The information available before this Court discloses that after correspondence with the respondentsbank authorities, eventually, a legal notice came to be issued by the Petitioner in the month of November, 2018 and, thereafter, Writ Petition No.8232 of 2019 was filed before this Court. In the said Writ Petition, initially, on 2/7/2019, an interim order was granted by a Coordinate Bench of this Court, directing Respondent Nos.2 to 4 therein to consider the petitioner"s representations, dtd. 21/7/2023 and 13/3/2018, and also the legal notice dtd. 31/10/2018, and take appropriate decision and communicate the same. Eventually, the said Writ Petition came to be disposed of vide order, dtd. 19/11/2019. Paragraphs Nos.3 and 4 of the said order read as follows:-
3. In order to put a quietus for the entire issue, this Court deems it appropriate to dispose of the Writ Petition, leaving it open for the petitioner herein to submit appropriate representation/application to the respondents' bank within a period of 10 days from the date of receipt of a copy of this order, enclosing all the relevant information and if any such representation/application is made within the time stipulated above, the same be considered and appropriate orders be passed within a period of three(3) weeks, thereafter as per law. Accordingly, the Writ Petition is disposed of.
4. In the result, the writ petition is disposed of. There shall be no order as to costs.
5. Pursuant to the aforesaid order, the respondents-bank authorities, by way of impugned intimation, dtd. 19/12/2019, declined to consider the request of the petitioner. In the above background, the present Writ Petition came to be filed by the petitioner.
6. A counter affidavit has been filed by the respondents-bank, denying the allegations in the affidavit, filed in support of the Writ Petition, and in the direction of justifying the impugned action.
7. According to the learned counsel for the petitioner, the impugned action is highly illegal, arbitrary, unreasonable and violative of Articles 14 and 300-A of the Constitution of India, besides being opposed to the very spirit and object o
AI
Seller is bound to disclose any buyer any material defect in property of which buyer is not aware and which buyer could not ordinarily discover.
A bank's misrepresentation of property details in an auction can invalidate the sale, and forfeiture of the deposit is unjustified if the sale is characterized by a lack of fair disclosure.
The auction sale of secured assets was invalid due to violations of statutory procedures, including failure to obtain separate valuations and selling below the reserve price.
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.
A secured creditor, acting as a trustee, must secure the best possible value for a mortgaged asset; mere intimation of a reduced reserve price to a borrower does not constitute the mandatory 'consent....
The specific and stringent conditions of an auction sale notice, the waiver of statutory rights by the purchaser, and the inapplicability of precedent in determining the legal position under the SARF....
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