SARFAESI auction shortfall and civil compensation: Section 34 does not bar a claim for deficiency in delivered land extent.

A civil claim for compensation arising from a SARFAESI auction shortfall is not barred by Section 34 where it does not challenge the auction sale or sale certificate but seeks damages for receiving less land than the extent for which full consideration was paid. The Court also held that a bank cannot rely on an "as is where is" and "as is what is" clause to avoid liability after advertising, selling and certifying a larger extent, retaining the full sale price, and then delivering a materially smaller area. The purchaser was therefore entitled to compensation for the deficiency, and the decree in its favour was restored.

---

---

Issues: (i) whether a suit for damages arising out of a SARFAESI auction was barred by Section 34 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; (ii) whether the bank could rely on an "as is where is" and "as is what is" sale to avoid liability for handing over less extent of land than the extent for which sale consideration was received.

Issue (i): Whether a suit for damages arising out of a SARFAESI auction was barred by Section 34 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

Analysis: The claim was not a challenge to the auction sale or the sale certificate, but a civil claim for compensation for the shortfall in extent after the bank had received full consideration for the advertised extent. Such a claim was outside the matters which the Debts Recovery Tribunal or the Appellate Tribunal could decide under the SARFAESI Act. Section 34 therefore did not exclude the civil court's jurisdiction in the facts of the case.

Conclusion: The suit was not barred under Section 34 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and the finding to the contrary was set aside.

Issue (ii): Whether the bank could rely on an "as is where is" and "as is what is" sale to avoid liability for handing over less extent of land than the extent for which sale consideration was received.

Analysis: The auction notice, the bidder's offer, the sale consideration, and the sale certificate all proceeded on the footing of 54 cents. After the measurement revealed that only 39.60 cents was available, the bank still issued the sale certificate for the full extent and retained the full sale price. In such circumstances, the bank could not deny the purchaser compensation for the deficient area by invoking the sale condition. The bank was expected to act fairly and disclose the material deficiency, consistent with the duty of disclosure under the law of transfer of property and the precautions required in the auction process.

Conclusion: The bank remained liable for the deficiency in extent and the purchaser was entitled to damages/compensation for the shortfall.

Final Conclusion: The decree granted by the trial court was restored and the purchaser's claim for compensation based on the deficiency in the auctioned extent was upheld.

Ratio Decidendi: A secured creditor cannot retain full sale consideration for an advertised extent of property and, after delivering a lesser extent, avoid liability by relying on an "as is where is" clause; a civil claim for compensation for such shortfall is not barred by Section 34 of the SARFAESI Act when it does not seek adjudication of the secured debt or challenge the auction itself.

---