TaxTMI 
TaxTMI 
2026 (6) TMI 1290
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....sited by the petitioner with 15% interest per annum. 2. In nut shell, the contention of the petitioner has been that he has been successful bidder qua the property mentioned in Lot No.1 and Lot No.2 auctioned by the respondent Bank in the auction held on 30.05.2022 in pursuance to the auction notice dated 19.04.2022 (Annexure P-1). Prior to the auction, the petitioner inspected the properties on 26.05.2022 and the Bank had shown the area intended to be sold through the said auction to the petitioner which depicted the land and building, plant and machinery of rice sheller and flour mill, and that the entire complex was having a single boundary wall. Based on the same, the petitioner had participated in the said auction, bidding for properties mentioned in serial No.5 and 6 of the auction notice dated 19.04.2022 (Annexure P-1). 2.1 Being the successful bidder, the respondent Bank issued letter of acceptance of the bid dated 30.05.2022 (Annexure P-2). Petitioner had deposited 25% of the bid amount. 2.2 The petitioner was informed by the borrower-defaulter that some of the property which was not mortgaged to the Bank by him had also been shown by the Bank during inspection an....
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....rd learned counsel for the parties and also perused the record. 5. It is inter alia contended by learned counsel for the petitioner that the petitioner had participated in the auction held on 30.05.2022 in pursuance to the auction notice dated 19.04.2022 (Annexure P-1) published by the respondent Bank qua the properties mentioned at serial No.5 and 6 therein. He contends that the properties intended to be auctioned included in Lot No.1 and Lot No.2 were the factory land and building measuring 10 Kanal 8 Marla 3 Sershai along with plant and machinery of Rice Sheller and Flour Mill. Pursuant to the auction notice, the Bank also got an inspection conducted showing the property to the petitioner on 26.05.2022 and accordingly, the petitioner participated in the auction and was declared successful bidder therein. The petitioner had deposited 25% of the bid amount but later on being informed by the borrower that the plant and machinery infact existed in Khasra No. 20/1 and 22/1/2 which were not part of the mortgaged property and there was no flour mill being part of the mortgaged property, the petitioner sought extension of time for depositing of the balance amount which was granted ti....
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.... non disclosure of Khasra numbers of the mortgaged property and also the factum of flour mill being not part of auction, for the first time only on 11.08.2022 while moving the application (Annexure P-6) thereby seeking refund of the earnest money deposited by him. 6.1 Learned counsel further submits that the petitioner was very well aware of the property to be auctioned as he had pre-inspected the property on 26.05.2022 and only then he participated in the auction after being fully aware about the same and now he had back tracked for the reasons best known to him for which no case is made out for refund of earnest money deposited by him. 7. Considering the rival contentions and perusing the record it is observed that there is no dispute qua the factual position to the fact that in pursuance to the auction notice Annexure P-1 dated 19.04.2022 the petitioner had participated and was a successful bidder qua the properties mentioned at serial No.5 and 6 of the auction notice. In the auction conducted on 30.05.2022, it would be relevant to mention here that the petitioner had been declared successful bidder qua the properties mentioned at serial No.5 and 6 comprising 'Lot No.1 and....
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....oned in the auction notice but the same were conveyed to the petitioner through whatsapp message on his mobile No. 9216992313 on 21.05.2022. 10. It would be relevant to mention here that the procedure for sale of immovable secured asset are specifically defined in Rule 8 (7) of the Security Interest (Enforcement rules) 2002,which reads as under:- " 8. Sale of immovable secured assets.- xxxx (7) every notice of sale shall be affixed on the conspicuous part of the immovable property and the authorised officer shall upload the detailed terms and conditions of the sale, on the web-site of the secured creditor, which shall include; (a) the description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor; (b) the secured debt for recovery of which the property is to be sold; (c) reserve price of the immovable secured assets below which the property may not be sold; (d) time and place of public auction or the time after which sale by any other mode shall be completed; (e) deposit of earnest money as may be stipulated by the secured creditor; (f) any ....
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....old, the respondent Bank had not fully described the property along with specific Khasra Number and also despite there being mention of 'Flour Mill' in the auction notice (Annexure P-1), admittedly no such 'Flour Mill' ever existed at the spot. The respondent Bank failed to discharge its duty and therefore, there had been violation of Rule 8(7) of the Rules of 2002 governing the sale of immovable Secured assets. 13. Hon'ble Apex Court has dealt with identical circumstances in case titled as Haryana Financial Corporation & Anr. vs. Rajesh Gupta, 2010 (1) SCC 655, wherein Haryana Financial Corporation had conducted auction sale of the property by mentioning in auction notice 'as is where is' basis and the respondent had purchased the unit in auction by depositing the earnest money but later finding no independent passage to the unit being there he did not deposit the remaining amount leading to forfeiture of the earnest money. The Hon'ble Supreme Court decided the order of forfeiture of earnest money by holding that the Corporation was bound to disclose any material defect in the property and the non disclosure of the material fact qua non existence of the independent passage to t....
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....g the property for auction, when there are encumbrances attached to the property. Merely, by including a clause "as is where is basis or as is what is' condition stated in the sale notice does not obviate the bank from disclosing the encumbrances attached to the property, brought for auction. 36. The bank cannot shrug off its responsibility in disclosing the encumbrances in the advertisement when it is known that transparency is the essence of good governance and fair play. Concept of transparency is becoming a core value in democratic and participative governance. The public demand for transparency is getting stronger in good governance. Transparency is built on the basis of free flow of information and the whole process of government, institutions and information needs to be accessible to the interested parties, as well as the information provided should be sufficient to be understood. 37. The undisputed fact in the case at hand is that when notice under section 13(4) of the SARFAESI Act was issued by the Bank, the physical possession of the mortgaged property was not taken. There is a duty cast upon the Bank under clause (9) of rule 9 of the Rules, 2002 to ....
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....ike the petitioner. 41. In light of the above, we are of the considered opinion that by merely inserting a clause "as is where is" and "as is what is" the responsibility of the Bank does not get diluted nor it can in any manner assist the bank in denying physical possession to the auction purchaser." 14.1. The aforesaid decision was affirmed by Hon'ble Supreme Court in SLP No. 3493 of 2019 decided on 11.02.2019. 15. Relying upon the aforesaid decision of Rakesh Kumar Kaushal's case (supra) a Coordinate Division Bench of this Court in CWP 22743-2019 titled Joginder Singh Vs. Punjab National Bank and Another decided on 19.07.2022, reiterated that the Bank cannot hide behind the condition 'as is where is basis' mentioned in the sale notice to harass the innocent auction purchaser by failing to disclose regarding encumbrances attached to the secured asset. It also relied on the Division Bench of Telengana and Andhra Pradesh High Court decision in Mandava Krishna Chaitanya Vs. UCO Bank, 2018(2) ALT 640; wherein it was held that the concept of 'as is where is' basis has lost its significance in the current commercial milieu and the principle caveat venditor is more on the ....