Somesh Bahuguna vs Punjab National Bank & Ors.

JUSTICE R. D. KHARE, CHAIRPERSON

The present appeal has been preferred by the appellant under section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short "The SARFAESI Act") against the order dated 28.09.2018, whereby the S.A. No. 63/2018 filed by the appellant-Auction Purchaser has been dismissed.

Brief facts of the matter are that one M/s Dinesh Associates was granted a credit facility by the respondent- Bank, to which the respondent no. 3 mortgaged his property by depositing original title deed with the Bank. Since the Borrower did not maintain the financial discipline, therefore, the account was classified as NPA and after issuance of demand notice and possession notice, the respondent-bank put the property in question on auction by issuing sale notice dated 21.07.2016 and the date of auction was fixed for 02.09.2016. The property was sold for a sum of Rs. 40.25 lacs. After receipt of entire sale consideration, the sale certificate was issued on 06.10.2016 and the same was got registered in favour of the appellant on 23.02.2017. Since the respondent-Bank had not handed over the physical possession of the property in question, therefore, the appellant-Auction Purchaser has filed the S.A. No. 63/2018 before the Tribunal below praying that the e-auction sale dated 02.09.2016 may be set aside and the respondent-Bank may also be directed to return the sale consideration of Rs. 40.25 lacs to the appellant along with all costs and expenses incurred over execution and registration of sale certificate dated 23.02.2017 as well as interest @ 18% per annum. The Tribunal below vide order impugned has dismissed the S.A. of the appellant holding that on payment of entire sale consideration amount on 06.10.2016, the respondent-bank handed over delivery of possession of the property in question and issue sale certificate to this effect in favour of the appellant-Auction Purchaser, which was duly acknowledged by him. Being aggrieved by the said order, the present appeal has been filed.

It appears that despite service of notice, no one has appeared on behalf of the respondent no. 3-Borrower/Mortgagor, therefore, the present case was heard ex-parte against him.

Learned counsel for the appellant submitted that the respondent-Bank had published the auction sale notice for auctioning the property in question and the appellant being a bona fide purchaser participated in the said auction, which was to be held on 02.09.2016 and after deposition of the entire sale consideration, the sale certificate was issued by the Bank in favour of the appellant on 06.10.2016, which was registered before the Sub-registrar on 23.02.2017. It was further contended that after registration of sale certificate, the appellant went to the property in question, then it came to the knowledge of the appellant that a third party was in possession claiming himself to be the owner of the property in question, on which the appellant made enquiry from the office of Sub-Registrar, where after on 06.11.2008, Sanjay Minocha had executed a sale deed in favor of Meenu, W/o Gulab Singh on 06.11.2008. It was further contended that Gulab Singh, H/o Smt. Meenu Singh, who is an employee of the respondent-Bank, had executed the auction proceedings. Thereafter, Smt. Meenu has further executed a sale deed in favour of Smt. Rajani Rani, W/o Dinesh Kumar Agarwal and Smt. Jyoti Agarwal, W/o Shri Sandeep Agarwal on 05.12.2014. It was also contended that Smt. Rajani Rani lodged an FIR against Smt. Meenu, Shri Gulab Singh, Shri Sanjay Minocha and officer of the respondent-Bank on 12.06.2017. Subsequent to it, the appellant wrote a letter dated 21.05.2018 through her counsel to the respondent-Bank for handing over the possession of the property in question to the appellant, which was replied by the Bank vide letter dated 04.06.2018 stating therein that the Bank has sold the property to the auction purchaser and the Bank has nothing more to do. It was further contended that as the auction purchaser was neither getting his money back nor the possession, therefore, she filed the S.A. No. 63 of 2018 before the Tribunal below on 18.09.2015 for setting aside the e-auction sale dated 02.09.2016 and return of sale consideration amount of Rs. 40.25 lacs with all costs and expenses incurred in execution and registration of sale certificate on 23.02.2017 with interest @ 18% per annum compounded monthly.

Learned counsel further submitted that the aforesaid S.A. came up before the Tribunal below on 28.09.2018, but without issuing the notice to the respondents, the Tribunal below called for a parallel lawyer of the respondent-Bank, one Shri Aniruddh Anand and on his statement, the S.A. of the appellant-auction purchaser was dismissed. It was further contended that the auction sale, which was conducted by the Bank, was absolutely fraud, which was played by the respondent-Bank, but the said act was not considered by the Tribunal below. It was also contended that the Tribunal below has not considered the documentary evidence on record and has dismissed the S.A. of the appellant illegally. In support of this contention, learned counsel has relied upon two judgments passed by the Hon'ble Supreme Court in Indian Bank Vs. Satyam Fibers (India) Pvt. Ltd., (1996) 5 SCC 550, Ram Chandra Singh Vs. Savitri Devi and Ors., (2003) 8 SCC 319 and has argued that the fraud vitiates everything. It was, therefore, prayed that the order impugned may be set aside and the appeal filed by the appellant may be allowed.

Learned counsel for the respondent-Bank submitted that the respondent no. 3- Sanjay Minocha had mortgaged the property in the year 2006 and thereafter Mr. Minocha sold the property to Smt. Meenu Singh, who also thereafter transferred the same to Rajani Rani and Jyoti Agarwal. It was further contended that Sanjay Minocha sold the mortgaged property to one Smt. Meenu, who thereafter transferred it further to third party by way of registered sale deed and even after such transaction, the Bank has still first charge over the property in question and only question is to be considered in the present case is, as to whether the auction purchaser was given the possession of property in question or not?

Learned counsel has drawn attention of this court to page no. 35 of the paper book to show that the property in question is an open land and at the time of handing over the possession, photography of the auction purchaser was got done. It was thus contended that after handing over the possession of the property in question to the appellant, the sale certificate was issued on the request of the appellant himself. It was further contended that the Bank had initially proceeded against the secured assets after handing over the possession of the same to the auction purchaser and if the possession is lost by him, the Bank has no further responsibility for restoring that possession in as much as there was no fraud on part of the Bank and the property in question was auctioned on the basis of 'as is where is'. Therefore, the judgment impugned passed by the Tribunal below does not suffer from any infirmity or illegality. It was thus prayed that the appeal filed by the appellant may be dismissed with heavy costs.

Heaving heard the learned counsels for the parties and considering the material available on record, undisputedly, the property was sold by the bank on 02.09.2016 pursuant to the auction sale notice dated 21.07.2016 to the appellant for a sum of Rs. 40.25 lacs and the sale certificate was issued on 06.10.2016 and the same was got registered on 23.02.2017 by the Bank in favour of the appellant-Auction Purchaser.

The admitted fact is that the mortgagor-respondent no. 3 had sold the property in question to one Meenu, W/o Gulab Singh, who was the then Manager of the respondent-Bank at Paltan Bazar, Dehradun, vide sale deed dated 06.11.2008, which was subsequently corrected vide corrected registered deed dated 07.11.2014. Further, Meenu had sold the same to Rajani Rani, W/o Dinesh Kumar Agarwal and Jyoti Agarwal, D/o Anil Kumar and W/o Sandeep Agarwal vide registered sale deed dated 27.11.2014 and 04.11.2014. Thus, it is clear that the mortgaged property was sold by the mortgagor prior to the auction dated 02.09.2016 conducted by the bank in favour of the appellant. It is true that the property in question is an open residential plot.

So far as the contention of the appellant that the physical possession of the property in question has never been handed over by the Bank is concerned, para 2 of the sale certificate at page no. 23 of the paper book itself says as under:

For the sake of the argument, if I believe that first part of the above is true, the second part of the same is not believable, because the property in question was already sold by the mortgagor to the aforesaid persons prior to the sale dated 02.09.2016, but in the sale certificate, the bank has clearly mentioned that the property in question was free from all encumbrances, meaning thereby, the same is mentioned formally in the said sale certificate and the same was not related to the actual fact. Thus, the contention of the respondent-Bank that the possession was handed over to the appellant is untenable.

The next contention of the appellant that the property was sold on the basis of "as is where is", therefore, the Bank has to do nothing with regard to the property in question is also not tenable, because in each and every sale deed, it is clearly mentioned that in case the purchaser loses the property, he would have every right to recover the money from the seller. In the present case, the property in question was sold by the Bank to the appellant, which had already been transferred to one person to another person. Thus, the contention of the respondent-bank that the property in question was free from all encumbrances is also not acceptable. The property in question is an open land, therefore, anybody could go there and got his photographed, therefore, the contention of the respondent-bank that the possession was handed over to the appellant before issuance of sale certificate is also rejected.

In the present case, in my opinion, the possession is not the main grievance of the appellant, but it appears that the grievance of the appellant is that the possession of the property in question was to be delivered by the Bank without any encumbrances. If the property in question was under dispute and there was any encumbrances over it, the Bank ought to have first clear the same and then sold the property, but it did not do so. However, it is to be noted that in the present case, all these incidences took place in presence of one of the Managers of the respondent-Bank, who was even posted at Dehradun itself. Thus it can be inferred that the authorized officer of the Bank was well aware about these encumbrances in the property in question prior to the aforesaid auction. Hence it can be said that the property in question has not been sold fairly by the Bank. Thus, the auction sale is liable to be quashed.

In view of the discussions as recorded above, the auction sale dated 02.09.2016 pursuant to the sale notice dated 21.07.2016 is set aside and the respondent-bank is directed to refund the auction amount to the appellant-Auction Purchaser along with interest @ 8% per annum simple as well as the expenses incurred over the execution of sale deed. Consequently, the impugned order is set aside and the appeal filed by the appellant is allowed with no order as to costs.

A copy of this judgment be forwarded to the parties as well as the DRT concerned and be also uploaded on the e-DRT portal.