TMI Blog2017 (5) TMI 1275X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The petitioner is entitled to interest which we fix at 12% per annum. We direct the bank to refund the sale consideration viz. ₹ 62,00,000/- (Rupees Sixty Two Lakhs only) to the petitioner with interest at the rate of 12 % per annum, calculated from 24.7.2008 within a period of four weeks from the date of receipt or production of a copy of this order. The bank is given liberty to cancel the sale certificate. - W.P.NO.39199 of 2016 - - - Dated:- 28-4-2017 - Mr. S. Manikumar, And Mr. M. Govindaraj, JJ. For The Petitioner : Ms. for M/s.Sarvabhauman Associates For The Respondent : Mr.F.B.Benjamine George ORDER (ORDER OF THE COURT WAS MADE BY M. GOVINDARAJ, J. The unreasonable attitude taken by the bank in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was bringing the property for sale, one T.Harikrishna informed the Bank that he had a claim over the property and he filed a suit in O.S.No.7998 of 2008, against his father, one Vasantha, and the Bank, for declaration of title to the property, which is the subject matter of the auction sale dated 21.06.2008. The suit was pending on the file of XV Assistant Judge, City Civil Court, Chennai. Since there was no likelihood of disposal of the Civil Suit and the writ petitioner had to clear the outstanding liabilities, request was made to the Bank to refund ₹ 62,00,000/-. Since the respondent refused to refund, the present writ petition has been filed. 5. The Bank has filed a counter affidavit controverting the averments. (a) According to the bank, the writ petition is not maintainable in law. The amount was received from the petitioner, for sale of the subject property and accordingly, a sale certificate was issued in July 2008 followed by a revised sale certificate issued on 12.08.2014. Therefore, the sale subsists and it cannot be cancelled and that there is no question of returning the sale consideration to the petitioner. (b) The property originally belonged to one T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt. (f) On coming to know that O.S.No.7998 of 2008 was dismissed, the writ petitioner approached the Bank, seeking physical possession of the property. When the bank expressed its difficulties in handing over physical possession, the petitioner requested the Bank to refund the sale consideration. The Bank called the petitioner and explained about the pendency of the Civil Revision Petition and assured to render all its assistance to deliver physical possession after the disposal of the Civil Revision Petition. (g) The petitioner agreed to wait and requested the bank to issue a fresh sale certificate to enable him to register the sale certificate. Accordingly, the respondent issued a fresh sale certificate on 12.08.2014. Thus, the petitioner has abandoned his request to cancel the sale and refund the sale consideration. But, the writ petitioner has now come up with the present writ petition seeking refund. (h) Even though the respondent is bound to hand over physical possession as per the provisions of the Act, which cast a legal obligation, the petitioner has waived his right and therefore, is estopped from pleading anything contra. (i) The writ petitioner has purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ritten by the Bank dated 03.06.2014 would also show no information about the pendency of the Civil Suit or Civil Revision Petition before the High Court. The Bank had time and again ensured the petitioner that there was no encumbrance on the subject property and the officer concerned had requested the writ petitioner to wait for some more time. Therefore, the writ petitioner had waited for long and when he came to know that delivery of possession is impossible, even after the dismissal of the Civil Suit in O.S.No.7998 of 2008, he insisted for refund of the amount. (c) The learned counsel would further submit that the reading of the plaint in O.S.No.4552 of 2006 would disclose that there was a criminal case registered on the complaint given on 10.09.2004, pursuant to a direction issued by this Court in Crl.M.P.No.5837 of 2005, to the Central Bureau of Investigation (CBI) and to investigate the same as there was allegation of cheating in the creation of mortgage dated 20.08.2003. Therefore, it is clear that the subject property is under a cloud as the Civil Revision Petition pending before this Court in C.R.P.(PD) No.2234 of 2007 is yet to be decided. (d) According to the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 627] wherein this Court had observed as follows: 5. We have considered the submissions. Of course, in the aforesaid judgment, the Supreme Court, while considering a sale by the Official Liquidator, has held that it is the duty of the intending purchaser to satisfy himself as to the encumbrance before participating in the bid. Having participated in the bid, the intending purchaser cannot later on turn around and question the Official Liquidator on the ground that the encumbrance was not notified. In that case, the provisions of the Rules as applicable in the present case are not applicable to the Official Liquidator. But in the case on hand, once possession is taken over under Section 13(4) or under Section 14 of the SARFAESI Act, whenever the secured creditor contemplates a sale of immovable property, they will have to follow Rule 8 of the Security Interest (Enforcement) Rules, 2002. Rule 8(6)(f) mandates the secured creditors to set out in the terms of sale notice 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. A reading of the said rule, in our opinion, would also include the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On 30.04.2013, the above suit was dismissed. But due to the pendency of another suit, the Bank could not hand over possession of the property. Therefore, the Bank has advised the petitioner to wait for some more time. However, without waiting further, the petitioner had come up with a representation dated 21.05.2014 to cancel the sale. (c) According to the learned counsel, the demand made by the writ petitioner is not sustainable in the eye of law. He would further contend that the writ petitioner had accepted their advise to wait for sometime and asked for revised sale certificate, which was promptly given to him on 12.08.2014. Thereby, the writ petitioner had waived his right to demand refund of the money. (d) The learned counsel would further submit that a reading of the auction notice would clearly reveal that the writ petitioner had purchased the property on as is what is condition , as per clause 9 of auction notice. (e) It was contended that if at all the writ petitioner wants to get sale cancelled, he has to take steps for setting aside the sale under rule 62 of Income Tax Rules. The writ petitioner, without exhausting the alternative remedy, had approached this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner is entitled for refund of the sale consideration deposited with the Bank with interest. 13. The bank initiated SARFAESI proceedings against the borrower to recover the outstanding. The bank issued a notification calling for bids to purchase the secured asset. The auction notification dated 20.05.2008 is silent with regard to the encumbrances and pending litigations. The notification proceeded as if the secured asset was free from litigation and the bank would be in a position to put the purchaser in vacant possession of the property. 14. There is a statutory obligation cast on the bank to notify the encumbrance and delivery of the property to the purchaser free from encumbrance. STATUTORY BOLIGATION 15. Rule 8(6)(a) of the Security Interest (Enforcement) Rules, 2002 reads as follows: (a) the description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor: 16. There is no dispute that rule 8(6)(a) and 8(6)(f) are mandatory in nature. The Purchaser should be put on specific notice about all the encumbrances and other materials so as to enable him to take a conscious decision with regard to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng litigations were furnished to him. 23. Even in the letter dated 31.6.2014, rejecting the request made by the petitioner to refund the amount, the bank was not sure as to how many suits were pending and the encumbrances. 24.The following statement in the counter affidavit would support the case of the petitioner. .. It is true that some proceedings were pending before the civil courts and we are defending the cases. However to the best of our knowledge, there is no encumbrance over the property . 25. The materials available on record are sufficient to arrive at a conclusion that the bank for reasons best known, withheld information with regard to litigation with a view to sell the secured asset some how or the other. In any case, there is nothing on record to show that the writ petitioner had prior knowledge about the litigation and in spite of such information, participated in the auction. Non exhaustion of alternative remedy :- 26. The learned counsel for the bank contended that the petitioner must avail the alternative remedy to redress his grievances. There is no substance in the said argument. The petitioner is a thirty party to the loan transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Bank to disclose the relevant information is not tenable. 29. The Supreme Court in Bharat Sanchar Nigam Ltd. vs. Telephone Cables Ltd. [2010(3) Scale 36], indicated the need for the Public Sector Undertakings to ensure fairness in all their transaction. A public undertaking is required to ensure fairness, non-discrimination and non-arbitrariness in their dealings and decision making process. Their action is open to judicial review and scrutiny under the Right to Information Act, 2005. 30. The Supreme Court in J.Rajiv Subramaniyan and Another Vs.Pandiyas and Ors. (2014(2) CTC 323), indicated the requirement to take bona fide measures to ensure maximum yield from secured assets. The Supreme court observed :- 17. It must be emphasised that generally proceedings under the SARFAESI Act, 2002 against the borrowers are initiated only when the borrower is in dire straits. The provisions of the SARFAESI Act, 2002 and the 2002 Rules have been enacted to ensure that the secured asset is not sold for a song. It is expected that all the banks and financial institutions which resort to the extreme measures under the SARFAESI Act, 2002 for sale of the secured assets to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bid submitted by the applicant was accepted by the Bank and the sale was confirmed in his name. The applicant paid a sum of ₹ 65,07,000/- to the Bank. The amount was deposited on 27 August 2010. The sale was subsequently set aside by this Court. The Bank refunded the amount deposited by the applicant. However, interest was not paid. The Bank cannot be heard to say that the purchaser of the property is not entitled to interest. The money was deposited with the Bank. The Bank was having the money throughout the proceedings. The Bank utilized the money. The Bank charges different rates for different transactions. The Bank is charging 14% for mortgage loans. There are other transactions wherein the Bank charges even 18% interest per annum. Such being the factual position, the Bank cannot be heard to say that the applicant has to be satisfied only with the principal amount. We are of the view that the Bank having kept the amount for years together, is bound to pay interest to the applicant. 35. The petitioner is entitled to interest which we fix at 12% per annum. 36. We direct the bank to refund the sale consideration viz. ₹ 62,00,000/- (Rupees Sixty Two Lakhs only ..... X X X X Extracts X X X X X X X X Extracts X X X X
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