2020 (4) TMI 730 - SC - Indian Laws

Supreme Court directs return of documents to auction purchaser, emphasizes finality of prior judicial findings

M/s. Tripower Enterprises (Private) Limited Versus State Bank of India & Ors.

The Supreme Court partially allowed the appeal, directing the return of original documents to the auction purchaser, except for those related to specific ... Public Auction by Banks - recovery of outstanding dues - Right of e-auction purchaser - To get original documents - no existence of valid mortgage in respect of the secured assets - approbation and reprobation of commitment on the part of guarantor - thrust of the argument of the appellant is that it having purchased the property in a public auction conducted by the Bank and upon complying with necessary formalities and further, having received the sale certificate in that regard, in law, was entitled to get the original title documents in respect of the stated properties - HELD THAT:- The guarantor cannot be allowed to approbate and reprobate from the commitment made in successive proceedings before the DRT and the High Court. Suffice it to observe that the guarantor has successively raised the issue regarding the validity of subject mortgage in different proceedings unsuccessfully. The concerned forum/Court unambiguously rejected the same. More importantly, the guarantor through its Director(s) having offered to pay the entire outstanding dues and also admitting on affidavit the factum of existence of subject mortgage in favour of the Bank, the question of showing any indulgence to the guarantor (by the High Court) did not arise. The guarantor cannot be allowed to raise the same plea repeatedly on every occasion/in every proceeding. Notably, the auction sale stands concluded and followed by issuance of sale certificate in favour of the appellant. Resultantly, the Bank is under legal obligation to handover the title deeds or original documents being Exhibits A110 to A114 to the appellant for completion of the formalities of sale - the High Court should have been loath in entertaining the writ petition filed by the guarantor, raising the same plea ad nauseam. The reason weighed with the High Court, in our opinion, is flimsy and untenable. That cannot be countenanced at the instance of the guarantor. The inevitable effect of entertaining the stated plea of guarantor will entail encouraging vexatious plea and procrastination of the concluded auction sale by delaying handing over of title documents to the highest bidder, in whose favour sale certificate has already been issued. Whether despite the decree of a Court of competent jurisdiction in favour of respondent No. 11 (A.R. Sridharan) concerning land bearing Paimash No. 722/4 admeasuring 1.80 acres, can the documents pertaining to that land be still made over to the appellant/auction purchaser, merely because sale certificate has been issued by the Bank in that regard? - HELD THAT:- The sale certificate, as issued by the Bank, does make reference to land bearing survey No. 282, which inter alia, consists of old Paimash No. 722/4. Therefore, to the extent of land referred to in the decree dated 16.2.1990 passed by the Court of District Munsiff, Chengalpattu in O.S. No. 186/1976 in favour of the respondent No. 11 (A.R. Sridharan), despite the issuance of sale certificate, the title document in respect of old Paimash No. 722/4 ought not to be released until the final decision in O.A. No. 11/2008 - The fact that other proceedings, including about the title in respect of land admeasuring 1.80 acres bearing Paimash No. 722/4 are pending between the parties, cannot be the basis to overlook the claim of the respondent No. 11 (A.R. Sridharan) until a Court of competent jurisdiction declares that the respondent No. 11 (A.R. Sridharan) had no subsisting right, title or interest in that property. Admittedly, the appellant is party to the O.A., as well as, in the application filed by the Bank for return of documents. The Bank has supported the stand taken by the appellant. We find no infirmity in the appellant having approached this Court instead of the Bank, the applicant before the DRT. Even the appellant could have itself approached the DRT for this very relief. Taking any view of the matter, the objection under consideration is of no avail to the contesting respondents. Although we are inclined to reverse the impugned decision of the High Court, however, for the nature of controversy brought before us, it may be appropriate to modify the operative order of the DRAT to the effect that the application filed by the Bank being I.A. No. 995/2017 in O.A. No. 11/2008 is partly allowed by ordering return of the original documents, except in respect of the land bearing Paimash No. 722/4 admeasuring 1.80 acres being subject matter of decree in O.S. No. 186/1976. This arrangement will meet the ends of justice in the facts of the present case. Appeal allowed in part. Issues Involved:1. Validity of the mortgage created by the guarantor.2. Right of the auction purchaser to obtain original documents.3. Jurisdiction of the DRT and DRAT in deciding the validity of the mortgage.4. Applicability of res judicata.5. Impact of prior judicial findings and admissions by the guarantor.Issue-wise Detailed Analysis:1. Validity of the Mortgage Created by the Guarantor:The guarantor contended that the mortgage was created by unauthorized persons and was therefore invalid. However, the DRT, in its order dated 10.2.2011, found that a valid mortgage had been created by the guarantor in favor of the Bank. This finding was upheld by the DRAT when the guarantor's appeal was dismissed for non-compliance with the pre-deposit condition. The DRT noted that the guarantor had admitted the mortgage and even offered to pay the outstanding dues. The High Court, however, restored the DRT's order rejecting the Bank's application for return of original documents, emphasizing the need to resolve the mortgage validity issue in the main proceedings (O.A. No. 11/2008).2. Right of the Auction Purchaser to Obtain Original Documents:The appellant, being the highest bidder in the auction conducted by the Bank, argued that it was entitled to the original title documents upon receiving the sale certificate. The DRAT had allowed the Bank’s application for return of original documents to fulfill its obligation to the auction purchaser. The High Court, however, reversed this decision, directing the DRT to retain the documents until the disposal of the main application. The Supreme Court found that the appellant, as the auction purchaser, was entitled to receive the original documents, except those pertaining to land bearing Paimash No. 722/4, which was subject to a decree in favor of respondent No. 11.3. Jurisdiction of the DRT and DRAT in Deciding the Validity of the Mortgage:The guarantor argued that the DRT under the 2002 Act could not decide the substantial issues regarding the validity of the mortgage. The Supreme Court, however, noted that the DRT had already decided the validity of the mortgage in its order dated 10.2.2011, which had attained finality. The Supreme Court emphasized that the DRT has the competence to decide on the validity of the mortgage and procedural irregularities committed by the Bank.4. Applicability of Res Judicata:The guarantor contended that the principle of res judicata did not apply to the findings of the DRT and DRAT. However, the Supreme Court observed that the guarantor could not approbate and reprobate, having admitted the mortgage in earlier proceedings. The repeated unsuccessful challenges by the guarantor on the same issue were noted, and the Supreme Court held that the principle of res judicata would prevent the guarantor from raising the same issue repeatedly.5. Impact of Prior Judicial Findings and Admissions by the Guarantor:The Supreme Court highlighted the guarantor’s admission of the mortgage and offer to pay the outstanding dues in earlier proceedings. The DRT had recorded these admissions, and the guarantor’s subsequent challenges were found to be vexatious. The Supreme Court held that the High Court should not have entertained the writ petition filed by the guarantor, given the consistent findings against it in prior proceedings.Conclusion:The Supreme Court partly allowed the appeal, directing the return of original documents to the appellant, except for those related to land bearing Paimash No. 722/4. The DRT was instructed to decide the main application on its merits, and all parties were allowed to raise their contentions. The decision emphasized the finality of prior judicial findings and the inadmissibility of repetitive challenges by the guarantor.