HON’BLE SRI JUSTICE NAGESH BHEEMAPAKA WRIT PETITION No. 16108 OF 2025

O R D E R:

Petitioner’s case is that Respondent No.1 is functioning as a specialized branch to handle NPA accounts and undertake proceedings under the SARFAESI Act for realization of security interest. Respondent No.4 is the Head Office of the Union Bank of India, while Respondent Nos. 2 and 3 are formal parties to the case.

1.1. It is stated, Novus Green Energy Systems Ltd., a company under the Companies Act, 2013, had availed several credit facilities from the Union Bank of India through its Mid Corporate Branch, Jubilee Hills, Hyderabad. After classification of those loan accounts as Non-Performing Assets (NPA), the accounts were transferred to Respondent No.1 for recovery. The Bank, in order to recover dues, invoked provisions of the SARFAESI Act, 2002, and initiated steps to enforce the security interest created by guarantors. Among the securities was the subject property, which had been mortgaged by one Sri Yenigalla Vardhaman through his attorney holder, Sri Yenigalla Anshuman.

1.2. While so, Respondent No.1 issued a public auction notification dated 14.02.2025 for the sale of various properties, including the subject property, stating that property was free from encumbrances and litigation and that the Bank had taken possession. E-auction was conducted on 11.03.2025. Believing these representations, petitioner participated and offered a bid of Rs. 4,86,78,000/-, emerging as the highest bidder. He duly paid 25% of the bid amount, totalling Rs. 1,21,69,500/-, as per the auction terms, whereupon sale of the property was confirmed in his favour. Auction terms also stated that property was free from encumbrances and any court litigation, thereby inducing petitioner’s participation.

1.3. Petitioner asserted that after payment of 25% of the bid amount, he visited the subject property on 15.03.2025 and was shocked to discover a notice board stating that a civil suit, O.S. No. 211 of 2024, was pending before the XIX Additional Senior Civil Judge, City Civil Court, Secunderabad, concerning the same property. Petitioner immediately addressed the letter dated 24.03.2025 to the Bank, enclosing photographs of the notice board and sought extension of time to verify the third- party claims. Bank’s auction sale notice claimed that possession of the property was taken under Section 13(4) of the SARFAESI Act read with Rule 8 of the Security Interest (Enforcement) Rules, 2002. However, in reality, the Bank had neither taken physical possession nor disclosed the existence of pending litigation. The Bank’s concealment of litigation and possession details was deliberate and in violation of the statutory requirements under Rule 8(7)(a) and (f) of the Security Interest (Enforcement) Rules, 2002. Furthermore, the Bank later filed an Application seeking impleadment in the said civil suit, thereby confirming that litigation existed even before the auction notice was issued.

1.4. Petitioner relied on the settled position of law laid down by the Hon’ble Supreme Court in Indian Banks’ Association, Bombay v. Devkala Consultancy Services1 wherein it was held that statutory authorities must exercise powers strictly in the manner prescribed and that disclosure of encumbrances and pending litigation is a mandatory statutory duty and not a mere formality. He also cited other judgments, including K. Senthil Kumar v. The General Manager (Writ Petition No. 13269 of 2016) and S. Shanmuganathan v. The

1 (2004) 11 SCC 1

Authorized Officer, IOB Bank, (2017) ibclaw.in 104 HC, wherein it was reiterated that the bank’s duty to disclose encumbrances is a statutory obligation under Rule 9(9) of the Security Interest (Enforcement) Rules, 2002, and that failure to do so would attract Section 18(2) of the Indian Contract Act, 1872, enabling the purchaser to avoid the contract.

1.5. Being disturbed by these developments, petitioner addressed several communications to the Bank on 24.03.2025, 22.05.2025 and 23.