A secured creditor retains rights over a property until actual possession is transferred, despite a sale certificate being issued to an auction buyer, as affirmed by the court.

ORDER :

1. This writ petition is filed challenging the order of the Chief Judicial Magistrate, Tiruvallur in Crl.M.P.No.10883 of 2024, dated 20.11.2024, filed under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [hereinafter referred to as “SARFAESI Act”].

2.1. Brief facts that are relevant for disposal of the writ petition are as follows.

2.2. The petitioner admitted that he had availed a loan of Rs.50.00 lakhs from the first respondent bank by mortgaging his property. Though it is stated by the petitioner that he had repaid substantial amount, the petitioner admitted that he committed default in payment of the monthly installments. It is not in dispute that the first respondent bank proceeded against the mortgaged property. After the property was brought for sale, a sale certificate was issued in favour of the auction-purchaser, the second respondent herein.

2.3. It is admitted by the petitioner that the sale certificate was also registered in favour of the second respondent on 31.10.2024. However, the first respondent, after the registration of the sale certificate, approached the Chief Judicial Magistrate, Tiruvallur by filing an application under Section 14 of the SARFAESI Act. The Chief Judicial Magistrate, Tiruvallur, has allowed the application on 20.11.2024 and appointed the advocate- commissioner with the warrant to take physical possession of the property and handover the same to the first respondent bank. It is against this order, the above writ petition is filed.

3. Learned counsel appearing for the petitioner submitted that the impugned order has been obtained by suppressing material facts and by playing fraud. Learned counsel for the petitioner also stated that the Chief Judicial Magistrate has no jurisdiction inasmuch as the property has been sold in favour of the auction-purchaser. He submitted that the first respondent bank cannot file application under Section 14 of the SARFAESI Act, after the transfer of title in favour of auction purchaser.

4. It is contended by learned counsel for the petitioner that once the property is sold, it cannot be termed as a secured asset so as to invoke Section 14 of the SARFAESI Act. Learned counsel further submitted that after a lapse of four years after auction sale, physical possession cannot be taken by resorting to Section 14 of the Act. Learned counsel reiterated his submission that after the registration of the sale certificate in favour of the auction-purchaser, the bank has no right, interest or control over the secured asset.

5. Learned counsel for the petitioner also relied upon the judgment of the Hon'ble Supreme Court in ITC Limited v. Blue Coast Hotels Limited and others , (2018) 15 SCC 99 by referring to paragraphs 43 to 46. Interestingly, learned counsel for the petitioner submitted that the Hon'ble Supreme Court has observed in a different case that the issue is left open.

6. The submission of learned counsel for the petitioner by relying upon the judgment in the case of ITC Limited, supra, has no merits. Learned counsel for the petitioner admitted that the said judgment of the Hon'ble Supreme Court is an authority on the interpretation of Section 14 of the SARFAESI Act.

7. He relied upon Paragraphs 43 to 46 of the judgment in the case of ITC Limited, supra, which read as follows:

“43. As noticed earlier, the creditor took over symbolic possession of the property on 20-6-2013. Thereupon, it transferred the property to the sole bidder ITC and issued a sale certificate for Rs. 515,44,01,000 on 25-2-2015. On the s