2012 Supreme(Mad) 3523

High Court of Judicature at Madras
D. MURUGESAN & K.K. SASIDHARAN, JJ.
Hemalatha Ranganathan
Versus
Authorised Officer Indian Bank Circle Office
W.P.No.13091 of 2012 & M.P.Nos.1 & 2 of 2012
Decided On : 13-08-2012

Ratios
a. On the sale of the security interest under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the authorised Officer cannot issue the order of confirmation or Sale Certificate in favour of the nominee of the auction purchaser.
b. Under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the sale should be confirmed in the name of the highest bidder and not in the name of his nominee.
c. In an application filed under Sec.14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, before issuing an order to take possession, the Magistrate must be satisfied that the intervention of the Court is necessary to take possession of the property, meaning thereby, the Bank should ordinarily make an attempt to take physical possession, without the intervention of Court.
d. In an application filed under Sec.14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the question of giving direction to the police to give assistance to execute the warrant and to break open the lock etc., would arise only in case the Commissioner is not in a position to take possession.

Headnote:(A)Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002(54 of 2002)-Sec.13, 14-Debt recovery-Security interest-Sale-Possession-Sale price-Deposit-Extension of time-Magistrate-Duty-Death-Petitioner had stood as guarantor for a loan obtained from the bank and on default in repayment, the property was brought for auction-In the writ petition filed by the petitioner, High Court had stayed the confirmation of sale-Though the condition of sale stated that the balance amount had to be paid within 15 days from the date of auction, authorised officer received it after 17 months-Later, the bank had, in breach of the interim order of the High Court, confirmed the sale and issued sale certificate in favour of a third party-Though the owner of the property was already no more, the bank had filed a petition against the dead person, obtained order for possession and thereby the petitioner was dispossessed from the property-In the writ petition, petitioner pointed out all the above infirmities and sought to cancel the sale and also repossession of the property-Bank had opposed the plea and justified the conduct of its authorised officer-Held, extension of time to deposit the balance amount without necessary clause in the sale condition rendered the conduct of the authorised officer colourful and invalid-On sale of the property, the sale certificate could be issued only in favour of the auction purchaser and not to a third party-Order for recovery of possession issued by the Chief Metropolitan Magistrate in a proceeding initiated against a dead person was invalid-Irregularities pointed out showed that the authorised officer had acted with ulterior motive to benefit a third party and cause loss of revenue by way of stamp duty to the State Government-Sale certificate issued was set aside, Advocate Commissioner was directed to put the petitioner again in possession of the property and the bank management was directed to initiate action against the authorised officer and submit a report thereon to the High Court-Writ petition was allowed accordingly.

       (B)Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002(54 of 2002)-Sec.13-Debt recovery-Security interest-Sale-Sale certificate-Third party-On the sale of the security interest under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the authorised Officer cannot issue the order of confirmation or Sale Certificate in favour of the nominee of the auction purchaser-Under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the sale should be confirmed in the name of the highest bidder and not in the name of his nominee.

       The provisions quoted above clearly gives an indication that the Authorised Officer has no power to issue the order of confirmation or Sale Certificate in favour of the nominee of auction purchaser. Para 26

       We make the position clear that the Authorised Officer has no authority to accept the request from the highest bidder to issue the Sale Certificate in favour of a third party. The sale should be confirmed in the name of the highest bidder and not in the name of his nominee. The privity of contract would only be between the successful bidder and the Bank. The sale certificate should be issued only in the name of the successful bidder in whose favour the letter of confirmation was issued. The question of further sale of the property would arise only after registration of the sale certificate by the Bank in the name of the successful bidder. The purchaser from the successful bidder cum sale certificate holder must necessarily pay stamp duty for registration. In short, the Authorised Officer has no authority to recognise a person as the nominee of the successful bidder. Para 41

       (C)Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002(54 of 2002)-Sec.13, 14-Debt recovery-Security interest-Sale-Possession-Magistrate-Duty-In an application filed under Sec.14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, before issuing an order to take possession, the Magistrate must be satisfied that the intervention of the Court is necessary to take possession of the property, meaning thereby, the Bank should ordinarily make an attempt to take physical possession, without the intervention of Court-In an application filed under Sec.14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the question of giving direction to the police to give assistance to execute the warrant and to break open the lock etc., would arise only in case the Commissioner is not in a position to take possession.

       The Magistrate must be satisfied that the intervention of the Court is necessary to take possession of the property, meaning thereby, the Bank should ordinarily make an attempt to take physical possession, without the intervention of Court. The question of giving direction to the police to give assistance to execute the warrant and to break open the lock etc., would arise only in case the Commissioner is not in a position to take possession. There were instances where the Advocate Commissioner with the assistance of police locked the premises without even allowing the inmates to take the cooked food or uniforms and books of school going children. Therefore, in normal circumstances, it is not necessary to order police protection and permission to break open the lock and similar other drastic steps at the first instance. It is always open to the Magistrate to issue suitable directions to execute the order under Section 14 depending upon the report filed by the Advocate Commissioner after the initial inspection. Para 44