Leasehold auction sale upheld where bidder bore title and dues risk under as is where is terms, despite disclosure objections.

A secured creditor's auction on an "as is where is" basis was upheld where the sale notice did not misdescribe the property as freehold and the tender terms placed title verification and statutory dues on the bidder. Leasehold title was treated as a mode of title, not an encumbrance requiring separate disclosure under the sale rules, so the non-disclosure objection failed. The sale was also not invalid for lack of prior lessor consent, because a mortgage of leasehold property remains enforceable by sale and any later consent or acquiescence by the lessor is legally effective. No ground was found to interfere with the sale process.

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Issues: (i) whether the auction sale of the secured asset was vitiated for not disclosing that the property was leasehold and for not setting out outstanding lease-related dues in the public notice; (ii) whether the sale was invalid for want of the lessor's prior consent where the lease deed contained a restriction against sale.

Issue (i): whether the auction sale of the secured asset was vitiated for not disclosing that the property was leasehold and for not setting out outstanding lease-related dues in the public notice

Analysis: Rule 8(6) of the Security Interest (Enforcement) Rules, 2002 requires disclosure of encumbrances known to the secured creditor and other material particulars in the sale notice. A leasehold title is not itself an encumbrance; it is a mode of title distinct from freehold title. The sale notice did not represent the property as freehold and was neutral on title, while the tender conditions expressly stated that the purchaser would bear statutory and governmental dues, if any, and that the sale was on an "as is where is" basis. In such a sale, the bidder is expected to satisfy itself about title, encumbrances, and attendant liabilities.

Conclusion: The auction sale was not vitiated on the ground of non-disclosure, and this objection fails.

Issue (ii): whether the sale was invalid for want of the lessor's prior consent where the lease deed contained a restriction against sale

Analysis: Permission to mortgage a leasehold property carries with it the practical incident that the mortgage may be enforced by sale if the debt is not repaid. A restriction in the permission letter against sale without prior approval could not defeat the mortgagee's enforcement rights. In any event, subsequent consent or ratification by the lessor is legally effective, and the lessor's conduct in agreeing to the sale and demanding unearned increase showed acquiescence.

Conclusion: The absence of prior consent did not invalidate the sale, and this objection also fails.

Final Conclusion: No ground was made out to interfere with the sale process or the orders below, and the writ petition was dismissed.

Ratio Decidendi: In a secured creditor's auction conducted on an "as is where is" basis, the purchaser cannot avoid the sale for non-disclosure of leasehold title or related dues where the tender conditions shift those risks to the bidder, and a mortgage of leasehold property remains enforceable by sale notwithstanding an inconsistent restriction in the permission to mortgage.

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