2012 (8) TMI 1098 - HC - Indian Laws

Auction Cancelled Due to Irregularities: Property Restored to Petitioner

The court found serious irregularities in the auction process, including collusive sales, violation of stay orders, issuance of sale certificates to ... Action sale - Invalid Sale - provisions of the SARFAESI Act - Held that:- In the case on hand, the Authorised Officer conducted the auction proceedings and later issued an order of confirmation, in total violation of the order passed by this Court. As observed by the Supreme Court in All Bengal Excise Licensees' Association [2007 (3) TMI 799 - SUPREME COURT OF INDIA] it is the duty of the Court to set the wrong right and not allow the perpetration of the wrong doing. We, therefore, by following the Full Bench judgment of this Court in Century Flour Mills v. S. Suppiah [1975 (3) TMI 60 - HIGH COURT OF MADRAS]) cancel the auction held on 7 January 2011. Since the Authorised Officer of the Bank violated the mandatory provisions of the SARFAESI Act and the Rules made thereunder and suppressed material particulars and made false statements to take possession of property stating that it was sold to Mr.S.Manisekaran not withstanding the fact that he was not a bidder and obtained an order against a dead person, the impugned order passed by the learned Chief Metropolitan Magistrate on such factual background also must be set aside. Order on the file of the learned Chief Metropolitan Magistrate, Egmore, Chennai is set aside. The learned Chief Metropolitan Magistrate is directed to put the petitioner in vacant possession of the property by deputing the very same Commissioner or another Advocate Commissioner within two weeks from the date of receipt or production of a copy of this order. It is open to the learned Chief Metropolitan Magistrate to take police assistance. The Authorised Officer of the Bank is directed to assist the learned Chief Metropolitan Magistrate and/or the Advocate Commissioner to effect re-delivery to the petitioner or her authorised agent. Issues Involved:1. Collusive sale by the Authorized Officer.2. Violation of stay order by the Bank.3. Irregularities in auction proceedings.4. Issuance of sale certificate to a non-bidder.5. Suppression of material facts in court filings.6. Misuse of SARFAESI Act provisions.7. Unauthorized extension of time for payment.8. Conduct of the Authorized Officer akin to a real estate agent.9. Legal consequences of violating court orders.Detailed Analysis:1. Collusive Sale by the Authorized Officer:The petitioner challenged the sale conducted by the Authorized Officer of Indian Bank, alleging it was collusive and in favor of a person who was not a bidder. The sale was conducted despite a stay order from the court, and the property was eventually sold to a stranger, violating the SARFAESI Act and auction terms.2. Violation of Stay Order by the Bank:Despite a court order on 7 January 2011 restraining the Bank from confirming the auction sale, the Authorized Officer proceeded with the sale. This action was in direct violation of the court's directive, highlighting a disregard for judicial orders.3. Irregularities in Auction Proceedings:The court found serious irregularities in the auction process, including the acceptance of 75% of the sale consideration after 18 months and the sale confirmation in the name of a third party. These actions were in violation of the SARFAESI Act and the auction notification terms.4. Issuance of Sale Certificate to a Non-Bidder:The sale certificate was issued to Mrs. V.Padmavathy, who was not a bidder. The highest bidder, Mr. B. Subramani, nominated Mr. S. Manisekaran, who did not participate in the auction, to receive the sale confirmation. This nomination and subsequent issuance of the sale certificate were unauthorized and illegal.5. Suppression of Material Facts in Court Filings:The Authorized Officer filed an application before the Chief Metropolitan Magistrate without disclosing that the property was sold to a non-bidder and that the person in possession was deceased. This suppression of facts led to the wrongful issuance of orders by the Magistrate.6. Misuse of SARFAESI Act Provisions:The court noted that the Authorized Officer misused the provisions of the SARFAESI Act to assist real estate agents rather than protect the Bank's interests. The officer's actions were aimed at facilitating a profitable real estate transaction rather than ensuring a fair auction process.7. Unauthorized Extension of Time for Payment:The court found that the Authorized Officer extended the time for the highest bidder to pay the remaining 75% of the bid amount without any authority. The balance amount was paid after one year and five months, contrary to the mandatory 15-day period stipulated by the SARFAESI Act and auction terms.8. Conduct of the Authorized Officer Akin to a Real Estate Agent:The court criticized the Authorized Officer for acting like a real estate agent, showing undue interest in assisting the auction purchaser and nominee, which resulted in financial loss to the Bank and the state due to evasion of stamp duty.9. Legal Consequences of Violating Court Orders:The court emphasized that violating court orders and gaining unfair advantage should not be tolerated. The auction held on 7 January 2011 was canceled, and the order passed by the Chief Metropolitan Magistrate was set aside. The court directed the Magistrate to restore possession of the property to the petitioner and instructed the Bank to conduct an internal inquiry and report back on actions taken against the concerned officers.Conclusion:The writ petition was allowed, and the court directed the Chief Metropolitan Magistrate to restore possession of the property to the petitioner. The Bank was instructed to conduct an internal inquiry and report on actions taken against the officers involved. The court highlighted the misuse of SARFAESI Act provisions and the need for higher Bank officials to prevent such illegal acts in the future.