2018 (12) TMI 557 - HC - Indian Laws

Liability of purchaser of property in e-auction to clear the dues of previous owner - sale of immovable property by e-auction - denial of registration of property on the ground of attachment of said property - some dues were payable to the Punjab Government, which were pending against the previous owner of the said property - Section 31B of SARFAESI Act - Held that - Section 31B leaves no manner of doubt that the rights of a secured creditor to realise secured debts due and payable to them by sale of assets over which security interest is created, shall have priority and shall have to be paid in priority over all other debts and government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or Local Authority - Hence it clearly emerges that the revenues, taxes, cesses and rates due to the Central Government, State Government or a Local Authority shall not have precedence or preference over the dues recoverable by a secured creditor by sale of secured asset. Moreover, it is an admitted fact herein that the respondent-bank had auctioned the property in question under the Act being a secured asset, duly mortgaged in their favour by the previous owner, to secure the credit facilities allowed by the respondent-bank. In M/s Rana Girders Limited vs. Union of India and others, 2013 (8) TMI 540 - SUPREME COURT , the Apex Court held that the subsequent purchaser could not be burdened with the liability relating to the dues of the Government until and unless there is a specific provision in the statute mandating first charge for the purchaser. In the case in hand, the petitioner had purchased the property in e-auction being the highest bidder, believing that the property was free from all encumbrances and charges. Thus, the petitioner was under no obligation to discharge the liability of the outstanding dues against the previous owner. Petition allowed - decided in favor of petitioner.

Summary

Issues:
1. Registration of Sale Certificate issued by respondent No.4 - State Bank of India
2. Refusal of registration by respondent No.2 - Tehsildar, Rampura Phul, Bathinda
3. Priority of secured creditors over government dues

Analysis:

Issue 1: Registration of Sale Certificate
The petitioner filed a writ petition seeking a mandamus to direct respondent No.2 to register the Sale Certificate issued by respondent No.4 - State Bank of India for a single storey commercial land & building purchased in an e-auction. The petitioner claimed that the property was free from encumbrances as assured by the bank during the auction process. The Sale Certificate was issued to the petitioner after he deposited the sale amount and emerged as the highest bidder.

Issue 2: Refusal of Registration
Respondent No.2 - Tehsildar, Rampura Phul, Bathinda, refused to register the Sale Certificate citing an attachment on the property due to dues payable to the Punjab Government by the previous owner. The petitioner argued that the refusal was unjustified as the dispute over the sale amount was between other parties and did not concern the registration process.

Issue 3: Priority of Secured Creditors
The Court referred to Section 31B of the Act, emphasizing the priority of secured creditors to realize debts over government dues. Citing legal precedents, the Court reiterated that a subsequent purchaser, like the petitioner, should not be burdened with the liabilities of the previous owner unless specific statutory provisions mandate so. The Court held that the petitioner, as a buyer in good faith, was not obligated to clear the outstanding dues against the previous owner.

In conclusion, the Court allowed the writ petition, directing respondent No.2 to register the Sale Deed in favor of the petitioner, emphasizing the petitioner's rights as a buyer in the e-auction and the priority of secured creditors over government dues.