SARFAESI disclosure duties require banks to reveal known encumbrances or face refund and interest claims by auction purchasers.

A secured creditor selling property under the SARFAESI framework must disclose encumbrances known to it and comply with the delivery and sale-certificate requirements in Rules 9(9) and 9(10) of the Security Interest (Enforcement) Rules, 2002. Where the bank knew of a pending civil suit and decree affecting the secured asset but failed to disclose them in the sale notice or otherwise, the nondisclosure breached the mandatory sale scheme. On those facts, the auction purchaser was entitled to refund of the sale consideration and registration charges, together with interest, because the bank retained the purchaser's money after the sale.

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Issues: Whether the auction purchaser was entitled to refund of the amount paid, with interest, on account of the secured creditor's failure to disclose the pendency of the civil suit and the decree affecting the secured asset, and whether the bank's conduct violated the mandatory requirements governing sale of secured assets.

Analysis: The sale notice required bidders to undertake due diligence, but the bank was aware of the civil suit and the decree and did not disclose either in the sale notice or otherwise. The encumbrance was not reflected in the Sub-Registrar's records, and the bank also failed to take effective steps to complete registration despite collecting registration charges. Rule 9(9) of the Security Interest (Enforcement) Rules, 2002 obligates the authorized officer to deliver the property free from encumbrances known to the secured creditor, and Rule 9(10) requires the sale certificate to state whether the property has been sold free from such encumbrances. The nondisclosure amounted to breach of the statutory scheme and, in the circumstances, rendered the auction purchaser entitled to refund of the amount deposited. The award of reasonable interest was also justified because the bank retained the purchaser's money after the sale.

Conclusion: The petitioner was entitled to refund of the sale consideration and registration charges with interest, and the bank's failure to disclose the known encumbrance warranted relief in favour of the petitioner.

Final Conclusion: The writ petition succeeded, and the auction purchaser obtained restitutionary relief against the secured creditor for breach of the mandatory disclosure obligations governing sale of secured assets.

Ratio Decidendi: Where a secured creditor sells property under the SARFAESI framework, it must disclose encumbrances known to it and comply with the prescribed manner of sale certificate and delivery obligations; failure to do so entitles the auction purchaser to refund and appropriate interest.

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