The unauthorized sale of mortgaged property is not binding on the mortgagee bank, allowing the registration of a sale certificate post-auction.

ORDER :

1. This writ petition has been filed for the issuance of a Writ of Mandamus directing the first respondent to register the sale certificate dated 26.9.2023 issued in favour of respondents 18 to 20, who are the auction purchasers.

2. Heard the learned counsel appearing for the petitioner bank, the learned Government Advocate appearing for the first respondent and the respective learned counsel appearing for the contesting respondents.

3. The case of the petitioner is as follows :

(i) The second respondent availed credit facilities to the tune of Rs.300 lakhs from the petitioner bank. In order to secure repayment of the credit facilities availed, the second respondent had offered to give, as a collateral security, the immovable properties at old S.No.102, R.S.No.102/1, O.S.No.102, R.S.No.102/2A ad-measuring 231 cents at Mathigiri Village, Hosur Taluk, Krishnagiri District. The second respondent also executed a memorandum of deposit of title deeds dated 08.9.2014, which was registered as doc.No.5572 of 2014 on the file of the first respondent. That apart, the second respondent deposited the entire original title deeds pertaining to the subject properties.

(ii) The second respondent committed default in repayment of the loan amount. Thereafter, proceedings were initiated under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, the SARFAESI Act) for recovering the total outstanding loan amount of nearly Rs.3.21 Crores. After fulfilling the procedure, a sale notice dated 11.10.2018 was issued to bring the mortgaged properties given a collateral security for sale. At that point of time, the second respondent approached the petitioner bank for one time settlement (OTS) to repay back the outstanding loan amount.

(iii) Accordingly, the petitioner bank sanctioned the OTS on 13.3.2019 for Rs.380 lakhs by imposing certain terms and conditions, which are as follows :

"a. To accept Rs.3,80,00,000/- in full and final settlement of the account payable on or before 30.3.2019.

b. Rs.51,32,680/- remitted as down payment for the OTS.

c. Release of the property of vacant land measuring 32.00 Ares at S.No.102/1J (27.0 Ares), 102/2A1 (5.0 Ares), near TITAN Township, Hosur to Denkanikotta Road, Mathigiri Village, Hosur Taluk, Krishnagiri District in the name of M/s.M.D.K. Developers P. Ltd./second respondent on payment of Rs.1,50,00,000/- (the amount has been paid by way of DDs and the same has been acknowledged by the petitioner bank).

d. Balance amount of Rs.1,78,67,320/- has to be remitted on or before 30.3.2019 for the release of S.No.102/2B2 measuring 46181.11 sq.ft. The original title deeds pertaining to the property shall be withheld by the bank pending release of 20000 sq.ft. and until receipt of NOC from Canara Bank, Devanahalli Branch as shown in the FMB annexed to this OTS sanction."

(iv) Thereafter, a sum of Rs.2,01,32,680/- was remitted by the second respondent out of the total amount of Rs.380 lakhs and accordingly, the petitioner bank released a portion of the lands comprised in S.Nos.102/2A1 and 102/1J ad-measuring a total extent of 79 cents through a partial discharge of mortgage deed dated 16.4.2019 registered as doc.No.3334 of 2019 on the file of the first respondent. However, the second respondent remitted only a sum of Rs.80 lakhs out of the balance amount and on 30.9.2019, it was credited to the loan account and the balance outstanding amount of Rs.98,67,3