2010 (7) TMI 1118

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....uction of Financial Assets and Enforcement of Security Interest Act, 2002 and the Rules made thereunder, is entitled to bring the property for sale by way of auction without disclosing the encumbrance. 2. The petitioner is a firm engaged in the business of providing logistics services. They came across a publication in one of the issues of 'The Daily Thanthi' dated 7.10.2009 for the sale of an extent of 4.38 acres of land comprised in S.F.No.291/2, Ichipatti Village, Kothumuttupalayam Road, Palladam Taluk, Tirupur District. That property belonged to one M/s Sowmya Textiles, which had availed loan from the respondent-Syndicate Bank. As there were defaulted repayments, the bank proceeded under the provisions of the Securitisation a....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....e. 4. On the other hand, the learned counsel for the respondent-bank would submit that even when the sale notice was issued, the bank was not aware of the encumbrance and therefore only the publication did not carry the encumbrance. As far as the bank is concerned, it is entitled to forfeit the earnest money deposit in the event the balance sale consideration is not paid in time. The auction bidder cannot have any right to seek for either the amount deposited towards earnest money to be refunded or to purchase the land after the clearance of encumbrance by the bank or financial institution. The learned counsel would rely upon the judgment of the Supreme Court in United Bank of India v. Official Liquidator and others, (1994) 1 SCC 575 and....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... purchaser may not bid in the event he/she came to know of any encumbrance over the property. That is why the rule specifically contemplates a provision for the authorised officer, while notifying the sale, to specifically state as to the encumbrance. It will be a different issue in the event the auction notice indicated that it is the duty of the intending purchaser to verify not only the encumbrance by way of alienation of the property, but also the other statutory liabilities and in that case, the intending purchaser cannot later on turn around and seek for either the refund of the earnest money deposited or insist the bank to clear the encumbrance. In the absence of such indication in the sale notice, in our considered view, the respond....