SARFAESI auction notices must disclose encumbrances, and omission can make earnest money forfeiture unsustainable.

In a SARFAESI sale of immovable property, the sale notice must comply with Rule 8 of the Security Interest (Enforcement) Rules, 2002 by disclosing material particulars needed to assess the property, including existing encumbrances. Where such disclosure is omitted, the intending purchaser is not expected to proceed as though the property is free from undisclosed liabilities or litigation. On that footing, forfeiture of the bidder's earnest money deposit is not justified when the auction notice is defective for non-disclosure of encumbrances, and the bidder is entitled to relief.

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Issues: Whether, when a secured creditor sells immovable property under the SARFAESI Act, the sale notice must disclose existing encumbrances, and whether forfeiture of the bidder's earnest money deposit was justified when such encumbrance was not disclosed.

Analysis: Upon taking possession under Section 13(4) or Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, a secured creditor conducting sale of immovable property must comply with Rule 8 of the Security Interest (Enforcement) Rules, 2002. Rule 8(6)(f) requires the sale notice to contain material particulars necessary for a purchaser to judge the nature and value of the property, and this includes disclosure of encumbrances. The Court distinguished sales conducted by an official liquidator, and held that in the SARFAESI context the intending purchaser cannot be compelled to proceed on a notice that omits material encumbrances, since the bidder would otherwise be purchasing the property along with undisclosed litigation or liabilities.

Conclusion: The omission to disclose the encumbrance in the auction notice rendered the forfeiture unsustainable, and the petitioner was entitled to relief.

Final Conclusion: The auction notice was held defective for non-disclosure of encumbrance, and the forfeiture order was set aside with directions for refund of the earnest money deposit.

Ratio Decidendi: In a SARFAESI auction of immovable property, the secured creditor must disclose material encumbrances in the sale notice under Rule 8(6)(f), and forfeiture of earnest money is not justified when the notice omits such disclosure.

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