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2017 (5) TMI 1275
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....the public auction pursuant to the auction notice issued by the respondent (hereinafter referred to as "the Bank") on 20.05.2008, in Daily Thanthi newspaper. In the said auction, the writ petitioner was declared as the successful bidder, as per the letter issued by the bank on 21.06.2008. The writ petitioner deposited a sum of Rs. 15,50,000/-, being 25% of the bid amount on 21.06.2008 itself. The balance amount of Rs. 46,50,000/- was deposited by the writ petitioner on 24.07.2008 as per schedule. 3. It is the grievance of the petitioner that at the time of auction and in the public notice, the Bank took a position that the Bank is in possession of the property and assured that physical possession will be delivered to him. Since the physical possession was not given by the Bank, the petitioner requested the Bank to refund the money. Thereafter, a reminder was sent on 21.05.2014. On 03.06.2014, the Bank gave a reply that they would initiate necessary proceedings under SARFAESI Act and deliver vacant possession. The officer in-charge of the bank was in regular touch with the writ petitioner. The writ petitioner waited endlessly with a hope that the bank would put him in vacant poss....
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....ble mortgage created over the property, in favour of the bank as null and void, and also for permanent injunction. The Bank entered appearance in the suit and filed an application in I.A.No.15775 of 2006 to reject the plaint. But the Trial Court, by order dated 10.07.2007, dismissed the application for rejection of plaint, against which, the Bank has preferred a Civil Revision Petition in C.R.P.No.2234 of 2007 and an interim order was granted on 08.08.2007, staying all further proceedings in O.S.No.4552 of 2006 and that the same was made absolute on 03.09.2007. The Civil Revision Petition is still pending on the file of the High Court. (d) The Bank would further contend that the sale notice was issued on 19.05.2008, and the bid was submitted on 20.06.2008. The petitioner was informed of the pendency of the suit. Knowing fully well about the pendency of the suit, the petitioner paid the entire sale consideration and sale certificate was issued to him, with all original title deeds. (e) However, when the Bank filed a petition under Section 14 of the SARFAESI Act, for taking possession of the property, the bank received another notice from City Civil Court, in O.S.No.7998 of 200....
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....ticle 226 of the Constitution of India. 6(a). The learned counsel for the petitioner contended that the writ petitioner had deposited the entire sale consideration to the tune of Rs. 62,00,000/- and had waited for several years to get the subject property delivered to his possession. Since there was pressure from his creditors to settle the amount borrowed for the purpose of purchasing the subject property, he was constrained to approach the Bank time and again for delivery of possession. The Bank pacified him with a promise that the physical possession of the property will be delivered to him soon. Thereafter, on 21.05.2014, he had made a representation to the Bank to refund the entire amount, along with interest at the rate of 24% per annum, from the date of deposit, till the date of realisation, as he has mobilised this amount by securing loan from financiers. To his surprise, for the first time, the Bank by its letter dated 03.06.2014 had expressed its inability and also had come out with the fact that Civil Suits are pending before the Civil Courts and that Bank was defending the same. The Bank had promised to file petition for taking physical possession of the property, be....
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....est (Enforcement) Rules, 2002, the description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor, shall be provided. As per Rule 8(6)(f) of the Security Interest (Enforcement) Rules, 2002, any other thing which the authorised officer considers it material for a purchaser to know, in order to judge the nature and value of the property, should also be put on notice. The Bank had suppressed all these material facts in the auction notice. Had it been disclosed, the writ petitioner would not have invested a huge sum in the auction proceeding. (g) Further, as per Rule 9(9) of the Security Interest (Enforcement) Rules, 2002, the authorised officer shall deliver the property to the purchaser free from encumbrances known to the secured creditor on deposit of money. Rule 9(10) would further state that the certificate of sale issued under sub-rule (6) shall specifically mention that whether the purchaser had purchased the immovable secured asset free from any encumbrances known to the secured creditor or not. Despite the mandatory provisions, the Bank had by giving wrong information, acted in contravention to the statutory require....
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....nly 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 respondent-bank would not be justified in compelling a purchaser to go ahead with the sale by depositing the balance sale consideration together with the encumbrance." 8. (a) The learned counsel appearing for the respondent Bank would submit that the Bank had obtained the mortgage on 20.08.2003. Thereafter, the mortgagor had filed a suit in O.S.NO.4552 of 2006, on 17.05.2006, praying for a declaration that the mortgage executed on 20.08.2003 was null and void and for a permanent injunction. The Bank has taken earnest steps to get the suit rejected, by filing an application under Order VII Rule 11 of the Civil Procedure Code, for rejection of plaint. But the same was dismissed on 10.07.2007, against which, the Bank preferred a Civil Revision Petition, in which, interim order of stay came to be granted, which was also made absolu....
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.... wherein the word encumbrance was explained. Encumbrance is a mere charge on the property and it must run with the property. Para 14 of the judgment is extracted hereunder in this regard :- "14. "Encumbrance" actually means the burden caused by an act or omission of man and not that created by nature. It means a burden or charge upon property or a claim or lien on the land. It means a legal liability on property. Thus, it constitutes a burden on the title which diminishes the value of the land. It may be a mortgage or a deed of trust or a lien of an easement. An encumbrance, thus, must be a charge on the property. It must run with the property. (Vide Collector of Bombay Vs. Nusserwanji Rattanji Mistri & Ors., AIR 1955 SC 298; H.P. State Electricity Board & Ors. Vs. Shiv K. Sharma & Ors., AIR 2005 SC 954; and AI Champdany Industries Ltd. Vs. Official Liquidator & Anr., (2009) 4 SCC 486)." 11. The learned counsel would rely on the judgment of the Supreme Court in MATHEW VARGHESE VS. M.AMRITHA KUMAR AND OTHERS [2014 (5) SCC 610] wherein it has been held that Section 29 of the Recovery of Debts Due to the Banks and Financial Institutions Act, 1993, is an enabling provision, under....
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....s a statutory obligation on the part of the bank to disclose the encumbrances in the sale notice. The failure to adhere to such duty would come within the ambit of sub Section (2) of Section 18 of the Contract Act, enabling the other party to avoid the contract. 19. When the statute mandates that a particular thing shall be done in a particular manner, it shall be done only in that manner. 20. In Indian Banks' Association, Bombay and others vs. Devkala Consultancy Service and others, 2004 (11) SCC 1, the Supreme Court observed that "it is well settled that when a procedure has been laid down, the Statutory Authority must exercise its power in the manner prescribed or not at all". 21. The bank was well aware of the cloud on title to the secured asset, on account of the pending litigations. Even then, the bank suppressed the information with regard to litigation in the sale notice. Whether the writ petitioner had prior knowledge of encumbrance 22. The learned counsel for the Bank contended that the bank informed the petitioner about the litigation. This contention has no basis. The counter affidavit filed by the bank does not contain a statement that the petitioner....
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....sel for the Bank that the properties sold in auction were given at a meagre sale consideration and the reserve price was fixed considering the litigiousness of the property does not augur well. The further argument that having known that the auction purchaser gets wide margin between the market price and the reserve price, he has to wait till he gets delivery of possession, is clearly contrary to the object of the statute. 28. Viewing from every angle the Bank has given an impression that they are exploiting the innocent borrowers by selling their properties at throw away prices, not only below the market price, but also below the guideline rate. Such an argument cannot be countenanced and exploitation in any form, whether it be the borrower or auction purchaser is depreciable. So also, the statement that the auction purchaser should be beware of the title, even though it is sold by Bank does not also sound reasonable. The financial institutions, while issuing sale notification, discharge a statutory duty. So much of credibility is naturally fastened on the Bank. It is not expected from a Public Sector Bank, to state that purchaser shall be aware of encumbrances. Even though the....
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....titioner deposited the amount way back on 24.07.2008. The bank was expected to put the petitioner in vacant possession of the property within a reasonable time. Even after a period of nine years, the bank is not in a position to deliver vacant possession. The secured asset is now in the midst of civil litigations. There is also a criminal case in respect of the mortgage relating to the secured asset. The petitioner waited all these years. It was only when he was convinced that the chances of culmination of litigation is very remote, the petitioner made a request to the bank to refund the amount. The bank instead of admitting its mistake in not disclosing the encumbrances, and litigations, dragged the petitioner from pillar to post and finally prompted him to approach this court. In view of the background facts, the bank is liable to refund the sale consideration to the petitioner. Interest :- 32. The other question is as to whether the petitioner is entitled to interest. 33. The petitioner deposited the sale consideration on 24.07.2008. The bank retained the money all these years without delivering the property to the petitioner. The bank is therefore liable to pay interes....