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2023 Supreme(Cal) 1624

IN THE HIGH COURT AT CALCUTTA
PARTHA SARATHI CHATTERJEE, TAPABRATA CHAKRABORTY, JJ.
Anita Tosniwal - Appellant
Versus
The Reserve Bank of India & Ors. – Respondents
FMA 1017 of 2021 with IA No. CAN 1 of 2022
Decided On : 09-06-2023

Advocates Appeared:
For the Appellant : Mr. Abhrotosh Majumdar, Ld. Sr. Adv., Mr. Nilotpal Chatterjee, Mr. Sourabh Sengupta.
For the Respondents: Mr. Soumya Roy, Mr. Santosh Mahato, Ms. Benazir Kazi, Mr. Gautam Chakraborty.

Headnote:(A) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Sections 13(2) and 13(4) - Sale of immovable property under Secured Creditor's power of sale - The appellant participated in an auction for a property that was subject to encumbrances not disclosed by the bank; obtaining possession without addressing encumbrances constitutes negligence. (Paras 6, 17, 19)

(B) Banking laws - Duty of diligence - Secured creditors, being nationalized banks, must ascertain any encumbrances on the property before conducting an auction. The failure of the Central Bank of India to disclose existing claims compromised the title given to the appellant. (Paras 10, 17)

(C) Remedies - The court has the authority to set aside sales it considers unjust, even statutory ones, providing relief to the bona fide purchaser. (Paras 10, 19)

Facts of the case:
The appellant participated in an auction for a flat, but the property was also mortgaged to another bank, leading to disputes over ownership and possession. The appellant claimed refund after allegations of fraud against the seller surfaced.

Findings of Court:
The impugned order was set aside, highlighting the need for the bank to refund the consideration money as the appellant was misled and the bank failed in its duty.

Issues: The key issues revolved around ownership rights, the conduct of the banks, and whether the appellant can be compensated despite being a victim of fraud.

Ratio Decidendi: The court determined that the appellant, as a bona fide purchaser, is entitled to a refund of the purchase price due to the failure of the bank to disclose existing claims.

Result: The appeal is allowed; the bank is directed to refund Rs. 35,00,000/- to the appellant within two weeks.

Table of Content
1. background of the appellant's auction participation. (Para 1 , 2)
2. dispute over the mortgage of the flat. (Para 3 , 4 , 5)
3. arguments regarding cb's obligations during sale. (Para 6 , 7 , 8 , 9 , 10)
4. sbi's stance on loan and security interest. (Para 11 , 12)
5. timelines critical to understanding case. (Para 14 , 15 , 16)
6. duty of banks to disclose encumbrances. (Para 17)
7. ruling on the non-refund of additional charges. (Para 18)
8. conclusion and order for refund of purchase price. (Para 19 , 20 , 21)

JUDGMENT :

(Tapabrata Chakraborty, J.)

1. The present appeal has been preferred challenging the order dated 17th June, 2019 passed in a writ petition being WP No.19604 (W) of 2016. In connection with the appeal, the appellant/writ petitioner has also filed an application for appropriate order being CAN 1 of 2022.

2. The appellant’s case is that the respondent no.5 published a notice in the newspapers on 29th September, 2012 for e-auction of different immovable properties. The appellant participated in the auction held on 1st November, 2012 conducted by the Central Bank of India (hereinafter referred to as CB) in respect of a flat being Flat no. D & E on the first floor of Sushila Niketan located at AF-337, Hanapara, Kolkata-70012 (hereinafter referred to as the said flat), as detailed in serial no. 11(b) of the auction notice. The appellant submitted a bid of Rs.35,00,000/- and emerged to be the highest bidder. Upon acceptance of the bid amount, the sale certificate was issued on 27th December, 2012. The sale deed pertaining to the said flat was thereafter executed on 28th August, 2014 and the original title deed being no. 8450 of 2007 was also handed over to the appellant. Suddenly, on 7th September, 2015 a possession notice was affixed in the said flat. Stating such fact the appellant lodged a complaint on 29th September, 2015 before the Banking Ombudsman but in vain. Again on 29th April, 2016, persons claiming to be the recovery agents of SBI visited the flat and threatened to dispossess the appellant. On 4th May, 2016, the appellant lodged a complaint before the DGM, Stressed Assets Management Branch, SBI and in reply, the appellant was communicated a memo dated 19th May, 2016 by the Authorised Officer (in short, AO) of SBI intimating inter alia that the flat in question was owned by one Gaurav Surana (Jain) vide original deed no.8450 of 2007 and the same had been mortgaged to SBI as security for sanctioning credit facilities to M/s Bhagwati Lifestyle Private Limited. The said account became NPA on 27th February, 2012 and accordingly a notice under Section 13 (2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short, SARFAESI Act) was issued on 22nd December, 2012 and possession was taken under Section 13 (4) of the SARFAESI Act on 20th September, 2013. Thereafter, the appellant through her learned advocate issued a demand notice dated 7th June, 2016 protesting against the acts of the CB and claiming refund of the consideration amount along with interest. As there was no response, the appellant was constrained to prefer the writ petition. During pendency of the writ petition, the Investigating Officer, Central Bureau of Investigation (in short, CBI) by a notice dated 19th September, 2017 intimated the appellant that CBI has started a case being CBI Case No.RCBSK2016E0004 dated 18th March, 2016 relating to bank fraud on SBI. In connection with the said case, the mother deed pertaining to the flat in question being deed no.8450 of 2007 was also seized from the appellant. Such facts were brought on record by filling a supplementary affidavit.

3. The writ petition was dismissed for default on 5th March, 2019. The restoration application filed thereafter was allowed by the order impugned and the writ petition was disposed of observing inter alia that ‘apparently, there are title disputes in respect of an immovable property. State Bank of India is

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