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IN THE HIGH COURT OF DELHI AT NEW DELHI
ANIL KSHETARPAL, AMIT MAHAJAN
Bank Of Maharashtra – Appellant
Versus
Jai Kumar Bansal – Respondent
JUDGMENT :
ANIL KSHETARPAL, J.
1. Through the present Appeal, the Appellant assails the correctness of the judgment and decree dated 31.01.2023 [hereinafter referred to as the Impugned Judgment] passed by the Commercial Court, whereby the suit filed by the Respondent [Plaintiff before the Commercial Court] was partly decreed in CS(COMM) No.2243/2019.
FACTUAL BACKGROUND:
2. The brief facts necessary for the adjudication of the present Appeal are that the Appellant Bank, acting as a secured creditor under the SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT , 2002 [hereinafter referred to as 'SARFAESI Act'], issued a Public Notice on 28.11.2018 inviting bids for the sale of properties situated at H-3, H-3A, and H-4, UPSIDA Industrial Area, Sikandrabad, Uttar Pradesh. The properties had been given on lease by the U.P. State Industrial Development Authority (UPSIDA) to the Bank's borrower, M/s Ashoka Machine Tools International Pvt. Ltd., and served as collateral security for the repayment of dues.
3. On 28.11.2018, the Appellant issued a Public Notice for e- auction of the said properties. The notice unequivocally stipulated that the sale would
The court clarified that the 'As is where is' auction terms do not absolve the seller from disclosing known encumbrances, but purchasers must conduct due diligence and accept contractual liabilities.
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....
The seller's duty to disclose material defects and encumbrances in property sales is paramount, and failure to do so can invalidate the sale.
Important Point : The court established that auction terms can create a contract contrary to the obligations under Section 55(1)(a) of the Transfer of Property Act, emphasizing buyer diligence.
The seller must disclose material defects affecting property usability, failure of which constitutes misrepresentation and gives rise to legal recourse.
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.
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.
Secured creditors must fully deliver the auctioned property and disclose material defects; failure to do so incurs liability for damages, including refunds with interest.
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