2014 (8) TMI 1208 - HC - Indian Laws

Seeking discharge their obligation in terms of the provisions of SARFAESI Act of handing over possession of a secured asset to the petitioners which had been put up for sale by auction and has since been purchased by them - bid money received and sale certificate issued but possession not transferred - HELD THAT - There cannot be any doubt that in relation to a property which is a secured asset within the meaning of section 2(zc) of the SARFAESI Act and is put up for auction for recovery of the secured debt of the secured creditor in terms of the provisions thereof occupied by persons either in the capacity of an owner or as a tenant or as a lessee such occupation would amount to an intrusion on the property and if it is for the auction purchaser to get rid of those occupants after the sale is effected to have vacant physical possession thereof according to law the value that such property would fetch in auction is likely to be lesser compared to a situation where the selfsame property is put up for auction free of occupants. In the event a public auction of an immovable property is conducted on as-iswhere- is-basis a prospective purchaser would not in the normal run of events participate in the auction without utilising the opportunity of inspection of the property. He would bid in the auction bearing in mind the existing situation position and condition of the property. If the property is encumbrance free (includes the nonoccupancy factor) and amenities attached thereto are to his liking most certainly he would offer a higher amount. The offer would most certainly be on the lower side should the property be encumbered (occupied) or suffer from any disadvantages. In case the property is not to his liking he is free not to participate in the auction. Once with open eyes he participates in the auction he cannot expect a better deal that he was not assured of on the day he offered his bid - If an encumbrance exists say the secured creditor has only been in symbolic possession with the borrowers in actual possession of the secured asset and the prospective purchaser bids with full knowledge of such encumbrance it is not open to him after the sale certificate is issued to contend that it carries with it the duty of the secured creditor to put him in actual possession of the secured asset. There is no reason as to why the principle of caveat-emptor shall not apply in such a situation. The respondents do not owe a duty to hand over vacant and peaceful physical possession of the secured asset to the petitioners and making a direction in this behalf does not arise - Petition dismissed.

Summary

Issues Involved:
1. Duty of the respondents to hand over vacant and peaceful physical possession of the secured asset to the petitioners.
2. Whether the respondents should be directed to deliver vacant and peaceful physical possession of the secured asset to the petitioners.

Detailed Analysis:

Issue 1: Duty of the Respondents to Hand Over Vacant and Peaceful Physical Possession of the Secured Asset to the Petitioners
The petitioners sought orders compelling the Central Bank of India and its officers to discharge their obligations under the SARFAESI Act by handing over possession of a secured asset purchased by the petitioners through an auction. The respondents contested this, arguing that the asset was sold on an "as-is-where-is" basis, implying that the petitioners were responsible for removing any occupants.

The court examined various precedents and legal provisions to determine whether the respondents had a duty to hand over physical possession. The court referred to several cases, including M/s. Transcore v. Union of India, Business India Builders & Developers Ltd. v. Union Bank of India, and Kottakkal Co-operative Urban Bank v. T. Balakrishnan, to understand the legal context of possession under the SARFAESI Act.

The court concluded that the stipulation in the auction notice that the secured asset was sold on an "as-is-where-is" basis was decisive. This meant that the petitioners, having participated in the auction with full knowledge of the terms, could not later claim a right to vacant possession. The principle of "caveat emptor" (buyer beware) applied, and the respondents were not obligated to deliver physical possession.

Issue 2: Direction to Deliver Vacant and Peaceful Physical Possession of the Secured Asset to the Petitioners
The court considered whether it should direct the respondents to deliver vacant and peaceful physical possession of the secured asset. The petitioners argued that the sale certificate indicated the property was free from all known encumbrances, which they interpreted as including physical possession.

However, the court noted that the sale certificate and auction notice clearly stated that the sale was on an "as-is-where-is" basis. The court also referred to the Supreme Court's decision in Standard Chartered Bank v. V. Noble Kumar, which outlined the procedures for taking possession under the SARFAESI Act.

The court concluded that the respondents did not owe a duty to hand over vacant and peaceful possession and that making such a direction was not warranted. The petitioners were advised to take legal steps to obtain possession according to law.

Conclusion
The writ petition was dismissed, with the court holding that the respondents did not have a duty to deliver vacant and peaceful possession of the secured asset to the petitioners. The petitioners were free to pursue legal remedies to obtain possession. The court also directed the respondents to take steps to perfect the title of the petitioners.