2018 (12) TMI 1987 - HC - Indian Laws

Maintainability of petition on behalf of the auction purchaser seeking relief of refund of the sale consideration deposited by the auction purchaser is maintainable before the High Court under Article 226 of the Constitution of India, or he has remedy of appeal under Section 17 of the SARFAESI Act - imposing a condition as is where is as is what is the bank is not under obligation to hand over vacant physical possession of the secured assets to the auction purchaser - requirement to hand over the physical possession of the secured asset to the auction purchaser, who has fulfilled all the conditions and paid the entire sale consideration as per the terms of the bid. HELD THAT - The entire gamut of remedies provided under Section 17 of the SARFAESI Act is to oversee that the statutory provisions of Section 13(4) read with Rule 8 and 9 of the Rules, 2002 are adhered to, and the Debt Recovery Tribunal would immediately step in, whenever it finds any infraction by the secured creditor. There is no dispute between the auction-purchaser and the Bank with regard to any of the measures under section 13 (4) of the SARFAESI Act read with rule 8 and 9 of the Rules, 2002. Here, the petitioner, who is a auctionpurchaser has deposited the entire amount of bid and the Bank has issued a sale certificate dated 15/07/2017, wherein it has been recorded that the undersigned acknowledges the receipt of the sale price of Rs. 60 lakhs in full and handed over the delivery in possession of the schedule property . The said sale certificate issued under rule 9(6) has been signed by Authorised Officer, Allahabad bank. The Bank has stated that though the sale certificate has not been received by the petitioner, but the Bank is ready to hand over the sale certificate to the petitioner. In view of the the judgment of the Hon ble apex court in the case of Agarwal Tracom Pvt Ltd vs Punjab National Bank and Others 2017 (11) TMI 1523 - SUPREME COURT is clearly distinguishable on facts, and in the peculiar set of facts and circumstances of this case, the petitioner does not have any efficacious alternative remedy under the SARFAESI Act. It may be clarified here that the District Magistrate has not passed any order in excise of powers conferred upon him under Section 14 of the SARFAESI Act, despite 59 dates having been fixed in this regard, and strong disapproval is recorded in the manner in which the District Magistrate has not taken any action on the application of the bank - the inaction on part of the District Magistrates will have a detrimental effect in securing the possession of the properties and therefore effective mechanism must be taken by respondent no.1 in this regard. Whether the clause contained in the advertisement for e-auction, which provides that the property was being sold on as is where is Basis, as it is where it is Basis and whatever there is , which according to the Bank, dis-entitles the petitioner from seeking any claim against the respondent bank? - HELD THAT - The third-party, who comes forward to purchase the secured asset must have the confidence that he would get the property at the earliest and in case, considerable long time is consumed in transferring the property not only it would defeat the purpose of the Act but would also cause colossal loss and injury to a auctionpurchaser, like the petitioner - by merely inserting a clause as is where is and as is what is the responsibility of the Bank does not get diluted nor it can in any manner assist the bank in denying physical possession to the auction purchaser. It was a duty of the respondent Bank to deliver vacant possession of the secured asset to the petitioner within a reasonable time. Having failed to deliver possession, the petitioner has rightly exercised his option to get refund of the bid amount deposited with the Bank along with interest and damages. As noticed above, in the Recovery Management Policy 2017 2018 there is a provision of refunding the amount of EMD/sale proceeds, if the Bank is not able to deliver physical possession of the property beyond six months from the date of auction - the reasonable period for giving physical possession of the auction property to the auction purchaser would be six months, keeping in view that under section 13(4) the District Magistrate is under a statutory obligation to decide the application of the Bank within a maximum period of 60 days, and even taking into account certain delay in moving the application and other administrative delays, the possession of the property ought to have been handed over to the auction purchaser at least within a period of six months from the date of the auction. This writ petition is allowed with the direction to the respondent bank to refund Rs. 60 lakhs, which was deposited by the petitioner being the auction-purchaser of the aforesaid property, to the petitioner within a period of one month, along with interest @ 9 percent.

Summary

Issues Involved:
1. Maintainability of the writ petition under Article 226 of the Constitution versus the remedy under Section 17 of the SARFAESI Act.
2. Obligation of the bank to hand over vacant physical possession of the secured assets despite the "as is where is" condition.
3. Entitlement of the auction purchaser to physical possession of the secured asset and the reliefs available.

Issue-wise Detailed Analysis:

1. Maintainability of the Writ Petition:
The court considered whether the writ petition filed by the auction purchaser seeking a refund of the sale consideration is maintainable under Article 226 of the Constitution or if the petitioner should have sought remedy under Section 17 of the SARFAESI Act. It was noted that Section 17 of the SARFAESI Act provides for an appeal to the Debt Recovery Tribunal (DRT) by any person aggrieved by measures taken under Section 13(4). However, the court found that the petitioner was not aggrieved by any measures taken by the bank but by the inaction in handing over possession. Therefore, the petitioner did not have an efficacious alternative remedy under the SARFAESI Act, making the writ petition maintainable.

2. Obligation of the Bank Despite "As Is Where Is" Condition:
The court examined whether the "as is where is" condition in the auction notice absolved the bank from the obligation to hand over vacant physical possession. It was emphasized that Rule 8(6) of the Security Interest (Enforcement) Rules, 2002, mandates the disclosure of material facts about the property, including any encumbrances. The court found that the bank failed to disclose that the property was in possession of third parties, which was material information for potential bidders. The court held that the "as is where is" condition does not relieve the bank of its responsibility to deliver vacant possession, especially when such material facts were not disclosed.

3. Entitlement to Physical Possession and Reliefs:
The court noted that the petitioner had complied with all terms and conditions of the auction, including full payment of the bid amount. Despite this, the bank failed to hand over possession due to pending proceedings under Section 14 of the SARFAESI Act before the District Magistrate. The court criticized the delay and inaction by the District Magistrate and held that the bank's failure to deliver possession within a reasonable time (six months) entitled the petitioner to a refund. The court directed the bank to refund Rs. 60 lakhs with 9% interest and imposed a cost of Rs. 2 lakhs for mental trauma and harassment suffered by the petitioner.

Conclusion:
The court allowed the writ petition, directing the bank to refund the auction amount with interest and costs due to the bank's failure to deliver possession within a reasonable time, despite the "as is where is" condition. The court also highlighted the duty of transparency and full disclosure by the bank in auction proceedings.