Disclosure of encumbrances in SARFAESI auctions is mandatory; an as-is-where-is clause cannot defeat that duty.

Alternative remedy under SARFAESI does not bar a writ petition where the secured creditor has not acted in accordance with the statutory scheme, so the objection to maintainability was rejected. In the sale of secured assets under SARFAESI, read with the Security Interest (Enforcement) Rules, the secured creditor must disclose known encumbrances and other material facts relevant to the purchaser; an "as is where is" clause does not remove that duty. Because undisclosed litigation and related orders affected the properties, the auction process was held vitiated, and forfeiture of the bidder's deposit was unjustified. The deposited amount was ordered to be refunded with interest and costs.

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Issues: (i) Whether the writ petition under Article 226 of the Constitution of India was not maintainable for failure to avail the remedy under Section 17 of the SARFAESI Act, 2002; (ii) Whether the secured creditor was bound to disclose encumbrances and pending litigation in the tender notice and, on failure to do so, was entitled to forfeit the amount deposited by the bidder.

Issue (i): Whether the writ petition under Article 226 of the Constitution of India was not maintainable for failure to avail the remedy under Section 17 of the SARFAESI Act, 2002.

Analysis: The petition had remained pending for a considerable time after interim protection was granted. The Court noted that the rule of alternative remedy is not absolute and that a writ petition may be entertained where the authority has not acted in accordance with the enactment. In the circumstances, relegating the petitioner to the statutory remedy at that stage was held to be inappropriate.

Conclusion: The objection based on alternative remedy was rejected.

Issue (ii): Whether the secured creditor was bound to disclose encumbrances and pending litigation in the tender notice and, on failure to do so, was entitled to forfeit the amount deposited by the bidder.

Analysis: The sale of secured assets under Section 13(4) of the SARFAESI Act, 2002 read with Rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002 carries a statutory duty to disclose known encumbrances and all material particulars relevant to the purchaser. The Court held that a mere recital that the sale was on an "as is where is" basis does not dilute that obligation. Since the record showed undisclosed civil litigation and orders affecting the properties, the bank had failed to act transparently and in compliance with the statutory scheme. The forfeiture and the rejection of the petitioner's claim were therefore unjustified.

Conclusion: The bank was directed to refund the deposited amount with interest and costs, and the remaining reliefs were declined.

Final Conclusion: The petition succeeded in part: the auction process was found to be vitiated by nondisclosure of material encumbrances and litigation, resulting in refund of the deposited amount with interest and costs.

Ratio Decidendi: A secured creditor selling an asset under the SARFAESI framework must disclose known encumbrances and other material facts in the sale notice, and cannot rely on an "as is where is" clause to defeat that statutory duty.

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