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IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
M.S. Ramachandra Rao, Harminder Singh Madaan, JJ.
Shri Santosh Saw Mill & Anr. – Appellants
Versus
Allahabad Bank & Ors. – Respondents
CWP No. 21059 of 2018 (O&M) & CWP No. 26146 of 2018 (O&M)
Decided On : 12-10-2022
SARFAESI ACT - SALE NOTICE - AUCTION - BID - POSSESSION - ADVERSE POSSESSION - LIMITATION - JURISDICTION - WRIT PETITION - INTERIM RELIEF - SALE CERTIFICATE - IMPLEADMENT - APPEAL - APPELLATE TRIBUNAL - REVIEW - JURISDICTION - SUBSTANTIAL JUSTICE - EQUITABLE RELIEF - SUPERVISORY JURISDICTION - DISCRETIONARY RELIEF - INTEREST OF JUSTICE:
Fact of the Case:
Petitioners challenged the order of the DRAT confirming the sale of a property in favor of respondent No.5 and directing the issuance of a sale certificate. The petitioners claimed to be in possession of the property since 1972 and contended that the sale notice was issued beyond the limitation period prescribed under Section 36 of the SARFAESI Act, 2002. They also argued that they had acquired title to the property through adverse possession.
Finding of the Court:
The Court held that the petitioners had no right, title, or interest in the property and that their plea of adverse possession was not maintainable. It further held that the sale notice was not issued beyond the limitation period and that the Bank was not required to take actual physical possession of the property before issuing the sale notice. The Court also held that the DRAT had jurisdiction to entertain the appeal filed by respondent No.5 and that the DRAT's order confirming the sale in favor of respondent No.5 was justified.
Issues: 1. Whether the petitioners had any right, title, or interest in the property? 2. Whether the sale notice was issued beyond the limitation period prescribed under Section 36 of the SARFAESI Act, 2002? 3. Whether the petitioners had acquired title to the property through adverse possession? 4. Whether the Bank was required to take actual physical possession of the property before issuing the sale notice? 5. Whether the DRAT had jurisdiction to entertain the appeal filed by respondent No.5? 6. Whether the DRAT's order confirming the sale in favor of respondent No.5 was justified?
Ratio Decidendi: 1. The petitioners had no right, title, or interest in the property because they had not executed a registered relinquishment deed in favor of petitioner No.2, as mandated by Section 17(1) (b) of the Registration Act,1908, and their plea of adverse possession was not maintainable as it was inconsistent with their plea of title. 2. The sale notice was not issued beyond the limitation period prescribed under Section 36 of the SARFAESI Act, 2002, as the Bank had issued notices under sec.13(2) and Sec.13(4) of the SARFAESI Act,2002 on 7.2.2011 and 9.11.2011 respectively and thereafter issued a sale notice on 22.12.2011 proposing to put the property in question to sale by way of tender to recover more than 35 Crores owed to it by respondent No.3. 3. The Bank was not required to take actual physical possession of the property before issuing the sale notice, as the SARFAESI Act,2002 does not contain any such provision. 4. The DRAT had jurisdiction to entertain the appeal filed by respondent No.5 as the petitioners were 'persons aggrieved' by the measures referred to in Sub-Section (4) of Section 13 of the SARFAESI Act, 2002. 5. The DRAT's order confirming the sale in favor of respondent No.5 was justified as the petitioners had no right, title, or interest in the property and the sale notice was not issued beyond the limitation period.
Final Decision: The Court dismissed both writ petitions. It also dismissed the SA pending before the DRT-II, Chandigarh.
JUDGMENT
M.S. Ramachandra Rao, J. - Since these two writ petitions are between the same parties and common questions of fact and law arise for consideration, they are being disposed of by this common order.
2. The background facts Petitioner No.1 is a proprietory concern and petitioner No.2 is its proprietor. The subject matter of these Writ Petitions is property bearing W-9, Industrial Area, Yamuna Nagar, Haryana. This property was purchased under a register sale deed dt.15.10.1971 in the name of Santosh Kumar Aggarwala (Respondent No.4) by his late father Sukhdeo Prosad Aggarwala. Initially, the petitioner No.1 was a partnership firm constituted under a partnership deed dt.03.01.1972 (P-1) with Sajjan Kumar Aggarwala (brother of respondent No.4), petitioner No.2, Smt. Shanti Devi Aggarwala and Smt. Kusum Devi Aggarwala. The firm started business on the above property with the consent of respondent No.4.
3. According to petitioner No.2, on 16.06.1987, the other partners of the firm executed a general power of attorney in his favour authorizing him to sell, mortgage, lease or otherwise dispose of the said plot. In 1989-90, a loan was taken by respondent No.3 firm and respondent No.4 from Allahabad Bank (respondent No.1) (for short 'the Bank'). The above mentioned property was given as security for the said loan.
4. Petitioner No.2 contends that respondent No.4 relinquished his right in the said property in favour of the petitioner No.2 after taking due consideration from him and since 13.10.1997, all partners retired with their own free will by settling their accounts, that the petitioner No.1 ceased to be a partnership firm and became a proprietory concern with the petitioner No.2 as the sole proprietor.
5. Since there was a default committed by respondent No.3, the Bank got issued a demand notice dt.07.02.2011 under Section 13(2) of the SARFAESI Act, 2002 demanding 35,03,12,775/- from the respondent No.3. Similar notice was also issued to respondent No.4, Sajjan Kumar Aggarwala (brother of respondent No.4), Suresh Kumar Aggarwala and Suresh Kumar Dorejka, who were guarantors to the said loan.
6. Thereafter notice dt.09.11.2011 under Section 13(4) of the Act and a sale notice dt.22.12.2011 was issued by the Bank putting the above property to sale on 31.01.2012.
7. SA 17 of 2012 On 24.01.2012, SA No. 17 of 2012 was filed by the petitioners before the DRT-I, Chandigarh to set aside the sale notice dt. 22.12.2011 and also to restrain the Bank from forcibly dispossessing them. Interim relief was sought to restrain the Bank from alienating the property.
8. On 30.01.2012, the DRT-I, Chandigarh directed that the sealed bids received pursuant to the sale notice dt. 22.12.2011 be not opened by the Bank till the next date of hearing.
9. On 31.01.2012, M/s Globe Panel Industries India Pvt. Ltd. (respondent No.5) quoted 2.40 Crores against the reserve price of 2.26 Crores and became the highest tenderer.
10. During the pendency of the SA No. 17 of 2012, an Advocate Commissioner was also appointed, who filed a report on 14.02.2012, that the petitioners are in possession of the above property.
11. Respondent No.5 filed an application IA No. 633 of 2012 to permit it to participate in SA No.17 of 2012 and seek inter-se bidding claiming to be a proper party since it had quoted 2.40 Crore for the said property.
12. By order dt. 13.07.2012, IA No. 633 of 2012 was dismissed.
13. The petitioners had offered to pay 2.40 Crore contending that they had been in physical possession of the property for the last 40 years and deposited the said amount on 12.07.2012.
14. Order dt.13.7.2012 of the DRT-I, Chandigarh in SA 17 of 2012 The DRT-I, Chandigarh passed order in SA No.17 of 2012 on 13.7.2012 holding that any sale of property can only take place after obtaining physical possession of the property; that the statement of the Bank in the sale notice that it had already taken possession of the property was misleading; on equity since the petitioners had deposited equi
AI
A person who has no right, title, or interest in a property cannot challenge the sale of that property under the SARFAESI Act, 2002.
Mandatory compliance with procedural requirements under the SARFAESI Act is essential; failure to adhere prejudices borrowers' rights and invalidates auction proceedings.
A secured creditor, acting as a trustee, must secure the best possible value for a mortgaged asset; mere intimation of a reduced reserve price to a borrower does not constitute the mandatory 'consent....
Possession notice and auction sale notice – Only in a case where secured property is actually put to use as agricultural land and solely on the basis of revenue records/Pattadar and once secured prop....
Unregistered documents do not confer ownership of immovable property; valid title requires registration under the Transfer of Property Act.
The DRT cannot validate an auction sale without hearing the objections of the parties and violating principles of natural justice.
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