2016 (11) TMI 1315 - HC - Indian Laws

Invalid Sale Deed Void; Bank's Consent Essential

Authorized Officer Versus Dilipbhai Jayantilal Sanghavi

Authorized Officer Versus Dilipbhai Jayantilal Sanghavi - TMI Issues Involved:1. Validity of the sale deed executed after the initiation of proceedings under the SARFAESI Act.2. Jurisdiction of the Debts Recovery Tribunal in entertaining the securitization application.3. Legality of the order passed by the District Magistrate under Section 14 of the SARFAESI Act.4. Right of the Bank to proceed with the e-auction of the mortgaged property.5. Availability of alternative remedy to the petitioner Bank.Detailed Analysis:1. Validity of the Sale Deed Executed After the Initiation of Proceedings under the SARFAESI Act:The core issue revolves around the sale deed dated 25.04.2014 executed in favor of the respondent, which was challenged by the petitioner Bank. The Court observed that the sale deed was executed after the Bank had initiated proceedings under Section 13(2) of the SARFAESI Act on 18.01.2014. As per Section 13(13) of the SARFAESI Act, any transaction by way of sale, lease, or otherwise concerning the secured assets after the notice under Section 13(2) is void unless prior written consent from the secured creditor is obtained. The Court held that the sale deed in favor of the respondent was nullity and void since it was executed without the Bank's consent, making it incapable of conferring any right, title, or interest in the mortgaged property to the respondent.2. Jurisdiction of the Debts Recovery Tribunal in Entertaining the Securitization Application:The petitioner Bank contended that the Debts Recovery Tribunal (DRT) erred in entertaining the securitization application filed by the respondent, whose transaction was a nullity. The Court agreed, stating that the DRT should not have entertained the application or granted an interim order restraining the Bank from proceeding with the e-auction. The Tribunal's decision to entertain the application and issue the interim order was deemed beyond its jurisdiction, as the respondent had no locus standi to challenge the securitization proceedings based on a void sale deed.3. Legality of the Order Passed by the District Magistrate under Section 14 of the SARFAESI Act:The respondent argued that the order passed by the District Magistrate under Section 14 of the SARFAESI Act, authorizing the Bank to take possession of the property, was illegal. However, the Court noted that the original mortgagor did not challenge the order of possession. The possession was taken from the wife of the mortgagor, not from the respondent. The Court found no merit in the respondent's argument, emphasizing that the possession taken by the Bank was lawful and followed due procedure under the SARFAESI Act.4. Right of the Bank to Proceed with the E-auction of the Mortgaged Property:The Court upheld the petitioner Bank's right to proceed with the e-auction of the mortgaged property. It was noted that the Bank had taken symbolic possession on 12.06.2014 and actual physical possession on 13.02.2016 following the necessary formalities. The interim order by the DRT restraining the Bank from conducting the e-auction was quashed, allowing the Bank to proceed with the auction to realize its dues.5. Availability of Alternative Remedy to the Petitioner Bank:The respondent argued that the petitioner Bank had a statutory remedy available by way of appeal before the Debts Recovery Appellate Tribunal (DRAT). However, the Court noted that the post of Member of the DRAT, Mumbai, was vacant, making the alternative remedy unavailable. Given the circumstances, the Court exercised its powers under Article 226 of the Constitution of India to entertain the petition, setting aside the impugned order passed by the DRT.Conclusion:The petition was allowed, and the impugned order dated 11.03.2016 passed by the DRT was quashed. The petitioner Bank was permitted to proceed with the e-auction of the mortgaged property. Special Civil Application No.17901/2015 was dismissed as withdrawn with liberty to the petitioners to avail any other remedy at an appropriate stage. The interim order granted by the Tribunal was directed to continue till 23.10.2016 to allow the respondent to approach a higher forum, with a direction to maintain the status quo regarding the property.