Document Fragment View

Matching Fragments

8. It is further stated in the counter affidavit that even though the sale was confirmed in favour of the petitioner and the entire sale proceeds was credited to the loan outstanding, a sum of Rs.2,06,51,084/- remained outstanding and the continuing guarantee given by the petitioner was in subsistence and therefore, the petitioner is not entitled for return of the original documents till the entire loan is settled by the third respondent Firm. The respondent Bank apart from relying upon their right to general lien under Section 171 of the Indian Contract Act, 1872, have also relied upon the confirmation letter for supplemental mortgage, dated 26.09.2011, and the continuing guarantee agreements, dated 30.04.2012 and 26.10.2012. Accordingly, the first and second respondents have prayed for the dismissal of this Writ Petition.

https://www.mhc.tn.gov.in/judis

9. When the matter came up for hearing on 27.11.2023, this Court passed the following order:-

''The only issue that is involved in the present Writ Petition is as to whether the property that was purchased by the petitioner as an auction purchaser, can be a subject matter of a general lien under Section 171 of the Indian Contract Act, 1872 only on the ground that the petitioner had stood as a guarantor for the loan taken by the Partnership firm.
2. It is an admitted case that the property in question was also one of the property that was mortgaged towards the loan amount and this property was brought for sale by the Bank for recovery of the loan amount and the petitioner had participated in the auction and had purchased this property. After such purchase by the petitioner, without the sale being rendered to be bad in law, can the very same property be roped in once again by employing Section 171 of the Indian Contract Act, 1872?. Immediately after the sale of a mortgaged property, can the very same property be continued to be a subject matter of general lien or it goes out of the net and becomes the exclusive property of the auction purchaser?
3. Post this Writ Petition under the caption “Part Heard Case” on 29.11.2023.'' https://www.mhc.tn.gov.in/judis

10. Heard the learned counsel appearing on behalf of the petitioner and the learned Standing Counsel appearing on behalf of the respondent Bank.

11. The learned counsel for the petitioner submitted that the officials of the respondent Bank convinced the petitioner to participate in the auction, since it involves the residential house of the petitioner in which the family was living. Accordingly, the petitioner also participated and paid the entire consideration. On such payment, the property that was given as a security, automatically gets released and it cannot be once again held as a security by retaining the original title documents given as security. The leaned counsel further submitted that Section 171 of the Indian Contract Act will not apply to this case, since the act of the Bank in bringing the property for sale should be construed as a contract to the contrary and hence, the general lien cannot be exercised by the Bank. It was further contended that the continuing guarantee that was given by the petitioner can at the best, be construed only as a personal guarantee and the property that was already sold in the public auction cannot continue to be held as a security based on the continuing guarantee given by the petitioner. The learned counsel in https://www.mhc.tn.gov.in/judis order to substantiate his arguments, relied upon the following judgments:-