G VIKRAM KUMAR vs STATE BANK OF HYDERABAD & ORS.
Civil Appeal no 3152 of 2023
Facts:‘
1.Respondent no.3 had taken loan from respondent no.2 – Bank for the development of the multistorey housing project. That the respondent no.3 (hereinafter referred to as the borrower) was not able to repay the security interest to the Bank, the Bank initiated proceedings against the borrower under Section 13 of the SARFAESI.
2.The Bank attached the properties of the borrower under Section 13(4) of the SARFAESI Act. Against the measures taken by the Bank under Section 13(4) of the SARFAESI Act, the borrower filed S.A. No.253 of 2012 before the DRT Hyderabad.
3.On 25.02.2016, the DRT passed an order permitting the Bank to go ahead with the sale as proposed excluding flat to be identified and communicated by the borrower to the Bank by 29.02.2016 with full details of all purchasers to the bank officials on affidavit so as to enable the bank officer to exclude those flats, provided the remaining flats are sufficient for recovery of the dues. MoU was entered into between the respondent no.1 and the borrower with respect to the sale of Flat No.6401 on 10.04.2016 for a lumpsum consideration of Forty five lakhs. It is pertinent to note that in the MoU itself there was a reference to some proceedings going on before the DRT and that the Bank and the borrower will obtain clearance in order to process the agreement to sale.
4.Bank issued a public notice on 28.07.2016 for auctioning the properties of the borrower. The said notice was published in the newspaper on 29.07.2016. The property in question, i.e. Flat No.6401 was also subjected to auction. Borrower filed an application before the DRT praying for stay on all proceedings of the Bank pursuant to the auction notice dated 28.07.2016. On 24.08.2016 the DRT was pleased to reject the application for stay filed by the borrower.
5.E-auction was conducted by the Bank on 31.08.2016 in which the appellant also participated. The appellant was declared as a successful bidder with respect to Flat No.6401 in Lot No.1. Accordingly, he made a payment of 25% of the bid amount i.e. Rs.6,45,250/. The Bank also issued a confirmation receipt to the appellant on 31.08.2016. Respondent no.1 filed a Writ Petition No.31098 of 2016 before the High Court on 14.09.2016 challenging the eauction notice dated 28.07.2016 to the extent it concerns Flat No.6401 after e auction process.
6.By impugned judgment and order dated 15.09.2016 the High Court stayed the auction qua Flat No.6401 as notified under the eauction sale notice subject to respondent no.1 (original wit petitioner) paying to the bank not less than 25.81 lakhs before the scheduled date and time of the auction, failing which, the Bank shall be free to proceed with the auction. Appellant herein filed an application for getting impleaded in the said writ petition and filed the counter affidavit. In the counter affidavit it was specifically stated that the DRT has declared the agreement of sale executed between the respondent no.1 and the borrower as void and that the appellant is the successful auction purchaser and that the respondent no.1 had not disclosed the complete and correct facts of the case.
7.Bank also filed the counter affidavit in the writ petition seeking dismissal of the writ petition primarily on the ground that an alternative remedy under Section 17 of the SARFAESI Act was available. The High Court allowed the impleadment application. Despite the above, by the impugned judgment and order the High Court has allowed the writ petition filed by respondent no.1 herein.
8.Against the final decision of the High Court in the main writ petition allowing the same in favour of the respondent no.1 herein and rejecting the review application filed by the appellant, the appellant – successful auction purchaser has preferred the present appeals.
Issue: Whether the order passed by the HC was correct in law?
Arguments:
For Appellants:
1.It was submitted that High Court has materially erred in entertaining the writ petition filed by respondent no.1 which was against the steps taken by the Bank under Section 13(4) of the SARFAESI Act namely against eauction notice. Respondent no.1 being the agreement to sale holder had no right title in the flat in question and therefore could not have filed the writ petition challenging eauction notice on the basis of the agreement to sale in his favour.
2.It was submitted that there was suppression of material facts on the part of respondent no.1 which was specifically pointed out by the appellant in the counter affidavit that at the time when the writ petition was filed and the interim relief was obtained the auction had taken place in which the appellant was declared the successful bidder.
3.High Court has materially erred in relying upon Section 13(8) of the SARFAESI Act. It was also submitted that High Court has not properly appreciated the fact that a sale agreement holder cannot seek redemption of a property under Section 91 of the Transfer of Property Act, 1882 and cannot be treated at par with an auction sale purchaser under Section 54 of the Transfer of Property Act makes it clear that no interest/charge is created upon a property only by way
of sale agreement.
4.It was submitted that as such by virtue of the impugned judgment and order, the High Court has granted the decree for specific performance of the agreement to sale which is not permissible while exercising the powers under Article 226 of the Constitution of India.
For respondents:
1.Counsel submitted that in the present case Section 13(8) of the SARFAESI Act shall be applicable and therefore when the respondent no.1 being the agreement to sale holder of the flat in question agreed to pay/deposit the entire sale consideration the High Court has not committed any error in entertaining the writ petition under Article 226 of the Constitution of India challenging the eauction notice.
2.It was submitted that the object and purpose of Section 13(8) of the SARFAESI Act is to save the property from auction in case the borrower and/or the person interested in the property agrees to clear the dues. It was submitted that in the present case at the relevant time there was no concluded sale in favour of the appellant, as at the relevant time the appellant deposited only 25% of the auction sale consideration.
3.It is submitted that if the sale is not concluded, Section 13(8) of the SARFAESI Act shall be applicable and/or can be invoked. It was submitted that the respondent no.1 has subsequently died and his heirs including the widow are residing in the flat in question since long and that they have paid/deposited the entire sale consideration and therefore if now the appeal is allowed in that case, they have to vacate the premises which will not be equitable.
Decision: Supreme Court set aside the order of High Court.
Rationale:
1.Hon’ble Court noted that eauction was held/conducted on 31.08.2016 in which the appellant participated and was declared as a successful bidder and he made a payment of 25% of the bid amount on the very day i.e., on 31.08.2016. However, thereafter the respondent no.1 filed the writ petition before the High Court challenging the eauction notice dated 28.07.2016 on 14.09.2016 that is after conducting of the auction.
2.High Court has committed a very serious error in entertaining the writ petition under Article 226 of the Constitution of India challenging the eauction notice issued by the Bank in exercise of power under Section 13(4) of the SARFAESI Act.
3.It also noted that the flat in question namely Flat No.6401 was not the seven flats identified by the borrower to be kept out of the auction proceedings. At the relevant time the flat in question was not sold amongst the seven flats mentioned before the Tribunal. That thereafter during the pendency of the S.A. No.253 of 2012 and without obtaining prior approval and/or intimation to the DRT and even the bank, the borrower entered into the sale agreement with the
respondent no.1 on 16.06.2016.
Order Copy:
