Allahabad High Court
Abdul Majid Siddiqi vs State Of Up And 3 Others on 29 April, 2024
Author: Manoj Kumar Gupta
Bench: Manoj Kumar Gupta
HIGH COURT OF JUDICATURE AT ALLAHABAD Neutral Citation No. - 2024:AHC:75580-DB AFR Court No. - 21 Case :- WRIT - C No. - 6985 of 2024 Petitioner :- Abdul Majid Siddiqi Respondent :- State Of Up And 3 Others Counsel for Petitioner :- Anirudh Upadhyay,Antaryami Upadhyay,Ashok Kumar Upadhyay Counsel for Respondent :- C.S.C.,Ramesh Kumar Shukla,Shalendra Kumar Hon'ble Manoj Kumar Gupta,J.
Hon'ble Kshitij Shailendra,J.
1. Heard learned counsel for the petitioner, learned Standing Counsel for the State-respondents and Sri Shailendra Kumar for the respondent-bank.
2. The instant petition has been filed praying for quashing of a communication dated 27.10.2023 by the respondent-bank addressed to the petitioner turning down his request for refund of money deposited by him as sale consideration for the auctioned property on the ground that an order of status quo passed by the Debts Recovery Appellate Tribunal is in operation and, therefore, it was not possible for the bank to handover physical possession of the mortgaged property to the petitioner.
3. The facts, in brief, are that the petitioner had purchased a property mortgaged by respondent no.4 (borrower) in favour of respondent no.3 (secured creditor), in pursuance of an auction advertisement issued on 30 April, 2019. The petitioner deposited the sale amount of Rs.82.90 lac on 15.06.2019. He was issued a sale certificate on 09.07.2019. There was some typographical error in the sale certificate and, therefore, an amended sale certificate was issued on 03.01.2020. On 12.11.2020, an order was passed by the District Magistrate, Prayagraj under Section 14 of the Act for delivery of actual physical possession of the mortgaged property to the secured creditor. However, it seems that the said order could not be enforced and, therefore, physical possession of the mortgaged property was not delivered to the secured creditor. Thus, secured creditor was also not in position to deliver possession of the property to the petitioner.
4. The petitioner filed Writ-C No.30381 of 2021 with the grievance that possession of the property purchased by him in the auction sale had not been delivered to him. The said writ petition was disposed of by a Coordinate Bench of this Court by an order dated 07.12.2021 noting that in the past, the possession could not be made over to the petitioner in view of the Covid-19 pandemic and a restraint order in respect of eviction proceedings during the said period. The Court noted that the said hindrance was no more there at the time of passing of the order and, therefore, the writ petition was disposed of by observing that the proceedings for handing over possession of the property sold to the petitioner be completed on or before 31 March, 2022 provided that there was no legal impediment.
5. The possession of the mortgaged property was still not delivered to the petitioner. He, therefore, filed Contempt Application (Civil) No.5172 of 2022 before this Court and it was disposed of on 05.09.2022 granting two months further time to comply with the order of writ court. It seems that, thereafter, the petitioner filed a fresh representation before the respondent-bank and prayed for refund of the auction money along with interest and damages for mental harassment. The total sum demanded by the petitioner was Rs.1,96,93,367/-, out of which, Rs.82,90,000/- was the sale price deposited by him and the rest was towards interest and damages on account of mental harassment and legal expenses. The bank responded to his representation/ claim by the impugned communication. The bank, in its reply, stated that it had been making best efforts to handover physical possession of the mortgaged property to the petitioner but it was helpless without the help of administration and police force in handing over possession to the petitioner. It was also stated that the eviction notice dated 30.10.2022 issued by the bank and the notice dated 16.11.2022 issued by the City Magistrate were challenged by the borrower before the D.R.T. by filing S.A. No.841 of 2022 and in which the petitioner also appeared through his counsel. The D.R.T. passed an order on 21.11.2022 and rejected the prayer of the borrower for interim relief. Aggrieved thereby, the borrower had approached D.R.A.T. by filing Appeal Diary No.1015 of 2022 and wherein an order of status quo was passed and which was in operation. The bank, therefore, expressed its inability to handover possession of the mortgaged property to the petitioner.
6. An affidavit has been filed on behalf of the respondent-bank and in which it has been clarified that the appeal pending before the D.R.A.T. has been decided by order dated 12 March, 2024 whereby the mortgagor has been granted opportunity of hearing before the D.R.T. and it has also been made open to him to file stay application before D.R.T. for seeking interim relief and, till disposal of the application for interim relief, an order of status quo has been passed by D.R.A.T.
7. It is admitted to counsel for the parties that the application for interim relief has still not been disposed of by D.R.T. and, therefore, the order of status quo passed by D.R.A.T. is still in operation.
8. Learned counsel for the petitioner submits that in case the respondent-bank is not in a position to deliver physical possession of the mortgaged property to the petitioner, it should refund the entire sale money along with interest and also pay damages for mental harassment and legal expenses incurred by the petitioner during this period in contesting litigation at various stages.
9. On the other hand, learned counsel for the secured creditor submits that the hands of the bank are tied by the order of status quo and it shall handover possession of the mortgaged property as soon as the order of status quo is vacated. He further submits that there is no provision in law for refund of sale money unless sale is set aside. It is also submitted that the title in the mortgaged property stood transferred in favour of the petitioner as soon as the entire money was deposited by him and sale certificate was issued. The said sale cannot be undone by the bank at its option.
10. We inquired from the counsel for the petitioner if there is any provision under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 or Rules framed thereunder for refund of sale money during pendency of litigation after the sale certificate has been issued. However, he could not show to us any such provision.
11. The conduct of sale, issue of sale certificate and delivery of possession is regulated by the Security Interest (Enforcement) Rules, 2002 framed under the Act. Rule 9, which is relevant for controversy involved, is quoted below:-
"9. Time of sale, issue of sale certificate and delivery of possession, etc.- (1) No sale of immovable property under these rules, in first instance shall take place before the expiry of thirty days from the date on which the public notice of sale is published in newspapers as referred to in the proviso to sub-rule (6) of rule 8 or notice of sale has been served to the borrower:
Provided further that if sale of immovable property by any one of the methods specified by sub rule (5) of rule 8 fails and sale is required to be conducted again, the authorized officer shall serve, affix and publish notice of sale of not less than fifteen days to the borrower, for any subsequent sale.
(2) The sale shall be confirmed in favour of the purchaser who has offered the highest sale price in his bid or tender or quotation or offer to the authorized officer and shall be subject to confirmation by the secured creditor:
Provided that no sale under this rule shall be confirmed, if the amount offered by sale price is less than the reserve price, specified under sub-rule (5) of rule 8:
Provided further that if the authorized officer fails to obtain a price higher than the reserve price, he may, with the consent of the borrower and the secured creditor effect the sale at such price.
(3) On every sale of immovable property, the purchaser shall immediately, i.e. on the same day or not later than next working day, as the case may be, pay a deposit of twenty five per cent of the amount of the sale price, which is inclusive of earnest money deposited, if any, to the authorized officer conducting the sale and in default of such deposit, the property shall be sold again.
(4) The balance amount of purchase price payable shall be paid by the purchaser to the authorized officer on or before the fifteenth day of confirmation of sale of the immovable property or such extended period [as may be agreed upon in writing between the purchaser and the secured creditor, in any case not exceeding three months.
(5) In default of payment within the period mentioned in sub-rule (4), the deposit shall be forfeited [to the secured creditor] and the property shall be resold and the defaulting purchaser shall forfeit all claim to the property or to any part of the sum for which it may be subsequently sold.
(6) On confirmation of sale by the secured creditor and if the terms of payment have been complied with, the authorized officer exercising the power of sale shall issue a certificate of sale of the immovable property in favour of the purchaser in the Form given in Appendix V to these rules.
(7) Where the immovable property sold is subject to any encumbrances, the authorized officer may, if he thinks fit, allow the purchaser to deposit with him the money required to discharge the encumbrances and any interest due thereon together with such additional amount that may be sufficient to meet the contingencies or further cost, expenses and interest as may be determined by him.
Provided that if after meeting the cost of removing encumbrances and contingencies there is any surplus available out of the money deposited by the purchaser such surplus shall be paid to the purchaser within fifteen days from the date of finaliasation of the sale.
(8) On such deposit of money for discharge of the encumbrances, the authorized officer shall issue or cause the purchaser to issue notices to the persons interested in or entitled to the money deposited with him and take steps to make the payment accordingly.
(9) The authorized officer shall deliver the property to the purchaser free from encumbrances known to the secured creditor on deposit of money as specified in sub-rule (7) above.
(10) The certificate of sale issued under sub-rule (6) shall specifically mention that whether the purchaser has purchased the immovable secured asset free from any encumbrances known to the secured creditor or not."
(emphasis supplied)
12. Rule 9 lays down various steps to be followed by a secured creditor in case of an auction sale and except sub-rule (5) of Rule 9, there is no provision under which resale of a property already auctioned can be made. Sub-rule (5) contemplates a situation where the auction purchaser makes default in making payment of the balance amount of purchase price as mandated under sub-rule (4) and, in that case, not only the deposit already made by an auction purchaser shall stand forfeited to the secured creditor, the property shall also be resold and the defaulting purchaser shall forfeit all claim to the property or to any part of the sum for which it may be subsequently sold.
13. Rule 9(6) provides that on confirmation of sale by the secured creditor and if the terms of payment have been complied with, the authorized officer exercising the power of sale shall issue a certificate of sale of the immovable property in favour of the purchaser in the Form given in Appendix V to these rules.
14. In Inspector General of Registration and Another vs. G. Madhurambal & Another, in Special Leave to Appeal (C) No. 16949 of 2022, decided on 11.11.2022, the Supreme Court held that a sale certificate is not an instrument of the kind mentioned in Clause (b) of Section 17 of the Registration Act, 1908 and is not compulsorily registrable. The Authorised Officer has to handover duly validated certificate to the auction purchaser with a copy thereof to the Registering Authority to be filed in Book 1.
15. In Esjaypee Impex Pvt. Ltd. v. Asst. General Manager and Authorized Officer, Canara Bank1, the Supreme Court held that a sale certificate issued by the Authorized Officer under the provisions of the SARFAESI Act, 2002, does not require registration. Only its copy is to be forwarded to the registering authorities for filing it in Book 1 as per Section 89 of the Registration Act. The relevant observations are reproduced below: -
"Learned counsel for the Bank agreed that the sale certificate has to be further validated and assured that the needful will be done within two weeks. However, a submission was made that the sale certificate was then to be handed over to the registering authority for registration and payment of stamp duty.
We are of the view that the mandate of law in terms of Section 17(2) (xii) read with Section 89(4) of the Registration Act, 1908 only required the authorised officer of the bank under the SARFAESI Act to hand over the duly validated sale certificate to the auction purchaser with a copy forwarded to the registering authorities to be filed in Book I as per Section 89 of the Registration Act."
16. In B. Arvind Kumar vs. Government of India & Others2 it has been held by the Apex Court that once the sale is confirmed in favour of auction purchaser, the sale becomes absolute and the title vests in the purchaser. The sale certificate is only evidence of title. There is no further requirement of any registration, thus, no stamp duty is to be paid for the same.
17. There is U.P. Amendment in Section 89(4)3 of the Registration Act and whereby the Registering Authority, upon receipt of sale certificate has to deal with it in the manner stipulated in respect of a document admitted to registration under sub-section (1) of Section 614. Sub-section (1) of Section 61 provides for scanning of the documents and a printout thereof to be kept permanently in the Book appropriate for the documents admitted to registration. The aforesaid minor difference in procedure in respect of keeping of the sale certificate does not in any manner change the legal position that sale certificate is not required to be registered, but is to be kept in the Book appropriate for it.
18. The scheme of the Act reveals that after the sale is confirmed, the secured creditor is not left with any power to cancel the sale certificate obviously for the reason that the title had vested in the auction purchaser. It is only the Tribunal exercising power under Section 17 of the Act or a Court of law which can annul a sale certificate issued in favour of the auction purchaser.
19. In the instant case, apart from the fact that the respondent-bank had no power with it to cancel the sale certificate, it could not have done so in view of the order of status quo passed by DRAT and which is still in operation. Thus, we are of considered opinion that the bank committed no error in rejecting the prayer for refund of purchase money.
20. It is also contended by counsel for the petitioner that the petitioner on one hand is being deprived of possession of the property and on the other hand the purchase money is also not being returned and if this is permitted, it would be unfair to the petitioner.
22. We find no force in the submission. The petitioner had participated in the auction knowing that it was a case of distress sale and not voluntary sale and there was every likelihood of litigation. It is a matter of common knowledge. It is for the said reason that generally distress sales do not fetch the price prevailing in the market. A prudent bidder while making the bid is presumed to have accounted for these uncertainties. The petitioner cannot be permitted to complain that any wrong has been done to him so as to accept his claim for damages.
23. The petition is devoid of merit and is, accordingly, dismissed. However, this is without prejudice to the right of the petitioner to seek possession of the mortgaged property, as and when the legal impediment is lifted or to pray for refund of sale price in case sale is ultimately set aside by the tribunal/ court.
Order Date :- 29.4.2024 AKShukla/-
(Kshitij Shailendra, J.) (Manoj Kumar Gupta, J.)