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TMI Blog2024 (10) TMI 1457X X X X Extracts X X X X X X X X Extracts X X X X ..... ured benefit, or to provide the service promised against such deposit, or where the Government has reason to believe that any Financial Establishment is acting in a calculated manner detrimental to the interest of the depositors with an intention to defraud them and if the Government is further satisfied that such financial Establishment is not likely to return the deposits or pay the interest or other benefits assured, the Government may in order to protect the interest of the depositors, issue an order in the Official Gazette attaching the money or other property believed to have been acquired by such Financial Establishment either in its own name or in the name of any other person from out of the deposits collected by such Financial Establishment. In the present case, Respondent No. 3 is duly constituted Competent Authority and it has exercised power u/s. 5(3) by applying to the designated Court and subject property was attached. The Designated Court u/s. 6 of the MPID Act has passed an order after investigation, to release the subject property from attachment u/s. 7(6) of the MPID Act - It is therefore clear that the subject property was first vested in the Competent Authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). The Petitioner is also challenging the auction in which the Petitioner itself is declared as successful auction purchaser. The challenge is on the ground of alleged suppression of material facts in contravention of section 55 (1) (a) of the Transfer Of Property Act, 1882. The Petitioner is further seeking directions to the Respondent Nos. 2 and 3 / State to pay damages of Rs. 5,00,00,000/- to the Petitioner for making the Petitioner participate in the auction process. The Petitioner is further seeking refund of the entire amount of purchase price of Rs. 8,13,60,000/- paid by it alongwith interest @ 18% p.a. The Petitioner is also praying for restraining the Respondent No. 3-State from parting with or disposing of the amount paid by the Petitioner. 3. Apart from the prayers indicated above, there are certain other omnibus prayers made by the Petitioner, which are reproduced below: a(ii) this Hon'ble Court may be pleased to direct the Respondent No.3 not to embark upon to auction any property in future having defects of inability to execute documents such as conveyance /sale deed, effecting transfer in revenue records of auction purchaser, giving full and complete disclosure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt by ED and EOW would soon be lifted. As per the Petitioner s own case, after such assurance, the Petitioner made the payment of the last installment of Rs. 2,03,40,000/- on 15.12.2018. 6. It is further the case of the Petitioner that it was waiting for copies of certain documents in respect of the subject property, which were not supplied. It is contended that the Petitioner ultimately vide its email dated 14.01.2019 informed the Respondent No. 6 auction agency that the Petitioner s legal adviser had advised it to withhold further process, because the attachment from the subject property was not lifted / revoked, despite repeated requests. It is further contended that this led to the Petitioner filing an Application being Misc. Application No. 1079 of 2019 in the Court of Special Judge for the MPID Act and the Prevention of Money-Laundering Act, 2002 (for short the PMLA ) at Mumbai. The Petitioner made various prayers in the said Application, which are reproduced below for the purpose of clarity: a. Direct the Respondent No. 3, i.e. the Enforcement Directorate to release the attachment on the property being 193/1, Village Devali, Mehrauli, New Delhi, admeasuring 2200 sq. yards; b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the directions issued under order dated 02.11.2019, however there was no response. It is further contended that in respect of another property at Village Issapur, Tal. Najafgarh, New Delhi, this Court has directed refund of sum of Rs. 12,71,00,000/- to the Petitioner under order passed in Writ Petition No. 8791 of 2019. It is further submitted that the Petitioner is entitled to refund of purchase price amount in the present case also. 9. The Competent Authority / Deputy Collector (Respondent No. 3) has filed an Affidavit-in-Reply affirmed on 16.10.2020 opposing the Petition. It is inter alia contended that this petition is not maintainable because the Petitioner has efficacious remedy of filing an Appeal u/s. 11 of the MPID Act. It is contended that the Petitioner had already approached the designated MPID Court by filing Misc. Application No. 1079 of 2019 and making various prayers, however, by the order dated 02.11.2019 all the prayers of the Petitioner except the prayer clause (a) have been rejected. Copy of the Misc. Application No. 1079 of 2019 is produced on record. It is further contended that the order dated 02.11.2019 (rejecting other prayers of the Petitioner) has a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that after getting valuation done through the appointed agency, auction notice was published on 26.09.2018 for auction of 16 properties, including the subject property. 11. It is further contended that there is sufficient disclaimer in the auction notice, which had put the Petitioner to sufficient notice about the circumstances in which auction is conducted and precaution that the Petitioner was expected to exercise. It is contended that the Petitioner has voluntarily participated in the bidding process and has emerged successful bidder, having given the highest bid. It is specifically contended that the Petitioner has paid the installments even after coming to know about the attachment over the subject property and therefore now, the Petitioner is estopped from seeking refund of purchase price already paid. The contentions / allegations of the Petitioner about alleged assurances given by the Competent Authority or its officers, are specifically denied as being outright absurd, blatantly false and misleading. It is contended that on receipt of full payment, sale certificate is also issued to the Petitioner on 07.01.2019. It is further specifically contended that the poss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and whatever there is basis and it is for the auction purchaser to carry out due diligence. It is further contended that since the attachment of subject property is already lifted by the Designated Court and if the Respondent No. 4-ED does not comply with the orders of the Designated Court, the Petitioner can approach the Designated Court for appropriate remedy. It is again contended that despite the Petitioner s Advocates visiting office of the Competent Authority and despite discussion in the matter, the Petitioner has chosen to voluntarily continue to participate in the Auction and pay the full amount. It is further contended that the circumstances of present case and the circumstances in other WP/8791/2019 were different. 15. The Respondent No. 3-Competent Authority filed further additional affidavit, affirmed on 06.01.2021 contending inter alia that after the total price was paid the sale certificate of the subject property as well as other properties was issued and the possession has been handed over to the Petitioner. It is contended that while taking sale certificate and accepting the possession, the Petitioner has not raised any protest. This additional affidavit labours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent No. 3-Competent Authority) is bound to disclose any material defect in the property or in the seller s title of which the seller is aware but buyer is not. He further submitted that seller is bound to produce to the buyer, on his request for examination, all the documents of title related to the property in the seller s possession or power. He submitted that the auction conducted by the Respondent - Authority of the subject property is contrary to the said provisions of law, as the Petitioner is still not having title documents. 20. Per contra, Ms. Chavan, the learned Addl. GP appearing for the Respondent / State has submitted that in all these judgments relied upon by the Petitioner, the auction notice proceeds on as is where is and whatever there is basis, however in the present case, there is much more stated under tender document over and above as is where is whatever there is basis in the form of clause 2.2 and 2.3. 21. For the purpose of clarity, we find it necessary to reproduce the said disclaimer clauses below: 2.2 Caution to the Bidders. (a) The Properties are being sold on an as is where is and whatever there is basis. (b) Bidders are advised to go through all the te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completion of registration. (d) The Agency/ the Seller shall not be responsible for rendering any assistance to the Bidder in connection with its independent inspection of the Properties. (e) Bidders are bound by the principle of Caveat Emptor (buyer bewares). (f) Bidders are requested to submit their bids only after conducting their own independent due diligence exercise with respect to the title to the properties. 22. She submitted that from the above clauses it is clear that bidders were specifically and sufficiently cautioned about the circumstances and the situation of the property in which the auction was conducted and the disclaimer expects the participants to have necessary inspection and they were sufficiently cautioned and advised to verify records. 23. She submitted that the judgments relied upon by the Petitioner are arising out the proceedings under either The Securitisation and Reconstruction Of Financial Assets And Enforcement Of Security Interest Act, 2002 (for short the SARFAESI Act ) or the Recovery Of Debts And Bankruptcy Act, 1993 (for short the RD B Act ) or Debt Recovery Laws in general. She submitted the present case and the present auction sale under the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r is required under law for the Petitioner to enjoy the subject property. She, therefore, prayed for dismissal of the Petition. She has relied upon following the judgment of Division Bench of this Court in the case of State of Maharashtra Vs Anil Kohli (2020 SCC OnLine Bom 2674), in support of her case. REASONS AND CONCLUSIONS. 26. At the outset, it is apposite to consider certain provisions of the MPID Act, which have material bearing on the case of at hand. They are reproduced below. 4. Attachment of properties on default of return of deposits (1) Notwithstanding anything contained in any other law for time being in force .- (i) where upon complaints received from the depositors or otherwise, the Government is satisfied that any Financial Establishment has failed,- (a) to return the deposit after maturity or on demand by the depositor; or (b) to pay interest or other assured benefit; or (c) to provide the service promised against such deposit; or (ii) where the Government has reason to believe that any Financial Establishment is acting in a calculated manner detrimental to the interest of the depositors with an intention to defraud them; and if the Government is satisfied that su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tails, if any, of persons in whose name such property is believed to have been invested or acquired or any other property attached under section 4, for such further orders as found necessary. 6. Designated Court (1) For the purposes of this Act, the Government may , with the concurrence of the chief Justice of the Bombay High Court by notification in the Official Gazette, constitute one or more Designated Court in the cadre of a District and Sessions Judge for such area or areas or for such case or class or group of cases, as may be specified in the notification (2) No court including the court constituted under the Presidency Towns Insolvency Act, 1909 and the Provincial Insolvency Act, 1920, other than the Designated Court shall have jurisdiction in respect of any matter to which shall provisions of this Act apply. (3) Any pending case in any other court to which the provisions of this Act apply shall, on the date of coming into force of this Act, stand transferred to the Designated Court. 7. Powers of Designated Court regarding attachment (1) Upon receipt of an application under section 5 , the Designated Court shall issue to the Financial Establishment or to any other person wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the property from attachment or cancelling the order of attachment: Provided that the Designated Court shall not release from attachment any interest, which it is satisfied that the financial Establishment or the person referred to in sub-section (1) has in the property, unless it is also satisfied that there will remain under attachment an amount or property of value not less than the value that is required for repayment to the depositors of such Financial Establishment. Rule 8 of The Maharashtra Protection of Interest of Depositors (In Financial Establishments) Rules, 1999 reads as under : 8. Power of Competent Authority to sell or Dispose of property 1. Where any property attached under sub-section (1) of section 4 of the Ordinance and vested in the Competent Authority under sub- section (2) of the section 4, is subject to speedy and natural decay or if it is otherwise expedient so to do, the Competent Authority may, after obtaining permission of the Designated Court, sell or otherwise dispose of the said property and include the proceeds in the account of the Financial Establishment. (2) The Competent Authority shall, after disposing of the said property under sub-rule (1) re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on under process of law and the attachment of ED has been lifted by the Designated Court u/s. 7(6) of the MPID Act. 32. Once the subject property vests in the Competent Authority by operation of law and the same was sold by following due process of law and once the attachment of the property is lifted / released by the Court of competent Jurisdiction, no further expectation of the Auction Purchaser can be entertained. 33. Now let us consider the scheme of SARFAESI Act and Security Interest (Enforcement) Rules, 2002. Rule 3 contemplates demand Notice, Rule 3(A) contemplates reply to representation of the borrower, Rule 4 governs procedure after issue of notice, Rule 5 provides for valuation of movable secured assets, Rule 6 provides for sale of movable secured assets, Rule 7 provides for issue of certificate of sale, Rule 8 provides for sale of immovable secured assets, Rule 9 provides for time of sale, issue of sale certificate and delivery of possession. The Authorized Officer is provided for exercise of rights of secured creditor under SARFAESI Act. 34. Under section 2 of the SARFAESI Act, following definitions assume importance: Section 2 * * * (z) securitisation means acquisiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intangible asset or licence of intangible asset [Emphasis supplied] 35. It is therefore clear that the enforcement of right of the secured creditor flows from an agreement / instrument / document and secured asset means property on which security interest is created. Security interest means right, title or interest of any kind upon the property created in favour of the secured creditor including mortgage, charge, hypothecation, assignment or any right, title or interest of any kind on tangible asset retained by the secured creditor etc. 36. These definitions would clearly indicate that while auctions are conducted for enforcement of rights under the SARFAESI Act, they are for enforcing rights of a secured creditor and the immovable property which is sold, is necessarily in the form of secured asset or any property in which security interest is created in favour of the secured creditor. The scheme revolves around creation of such security interest by the borrower / guarantor / assignor in favour of the bank or financial institute. 37. The scheme of MPID Act, on the other hand, has no reference to the secured assets or any security interest or secured creditor. There is no contractu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms from the complaints from the depositors. 40. Since the Government is satisfied, as contemplated u/s. 4 of the MPID Act, that the money of the depositors was not being returned, the subject property in the instant case was attached and necessary order was issued / published as provided u/s. 4(2) of the MPID Act and therefore it vested in the Competent Authority by operation of law. It does not require execution of the title deed owing to the very nature of facts and circumstances. 41. Another distinguishing factor between the present case and the facts in the judgments relied upon by the Petitioner, is that in the present case, since the auction is under MPID Act, there are sufficiently clear and explicit caution and inspection clauses (2.2 2.3) which were part of the auction notice / tender document and which obviously bind the Petitioner. The said clauses clearly advised / cautioned the Petitioner to verify with the sub-registrar's office as well as obtain and analyze the revenue records with respect to the subject property and satisfy itself regarding the existence, title, nature, description, condition, encumbrances, liens, charges, statutory dues over the subject propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract to the contrary and the participants / proposed purchasers where contractually required to make their own independent inquiries regarding a host of parameters of the subject property such as nature, encumbrances, litigations, attachments, liabilities, title, claims etc. 46. No submissions were made before us pointing out what efforts the Petitioner had taken to carry out due diligence. In fact what emerges from the record is that despite the Petitioners advocates and advisors being in touch with the officers of the Competent Authority, the Petitioner had volunteered to proceed with full payment. 47. Therefore, we have no hesitation to hold that in the teeth of clauses 2.2 and 2.3, much more than mere buyer beware or caveat emptor was specifically stated and therefore, the Petitioner cannot be entertained to say that he was not made aware sufficiently. 48. The very basis of the Petitioner s case seeking refund of the purchase price paid, is that the subject property cannot be utilized by the Petitioner. This argument is based on the alleged non-availability of the title deeds. Once the subject property vested in the Competent Authority and is sold to the Petitioner under due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that there is need for caution while giving effect to such a clause, because such clauses have the potential to become the tools of abuse at the hands of unscrupulous sellers. It is in this context that the learned Single Judge of Delhi High Court has held that it is pertinent to accentuate the rise in the principle of caveat venditor i.e., the seller beware as compared to caveat emptor i.e., the buyer beware , due to the changes in the orientation of market dynamics, which is becoming more consumer oriented. In this respect, we must note that in this case, seller is the Competent Authority, which is a statutory authority. Nothing is brought to our notice to hold that the Competent Authority has acted in an unscrupulous manner in this case. The Hon ble Supreme Court in case of K. C. Ninan vs. Kerala State Electricity Board and Ors. 2023 SCC OnLine SC 663 has held in paragraph no. 148 that while examining the effect of an as is where is clause, the facts and circumstances of each case individually, along with the terminology of the clauses governing the auction sales must be taken into consideration, to arrive at an equitable decision. In the facts and circumstances of this case, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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