TMI Blog2019 (9) TMI 1495X X X X Extracts X X X X X X X X Extracts X X X X ..... dge the nature and value of the property. Learned Senior Counsel for the appellant vehemently argues that the appellant- Bank or its officers cannot be fastened with the obligation for alleged nondisclosure of pre-sale municipal tax dues as encumbrance while issuing notice under section 8(6) of the said Rules as the sale was conducted as is where is and as is what is basis; secondly, property tax dues were not known to the authorized officer; thirdly, even if such encumbrance was disclosed, the purchaser would have been directed to deposit such amount for discharging such encumbrance; and, fourthly, Clause E of the terms of E-auction sale notice imposed equal obligation upon the purchaser to make independent enquiries regarding encumbrances and title of the secured asset. Therefore, after completion of sale process and delivery of possession of the secured asset in favour of the respondent, he cannot claim refund of pre-sale municipal tax dues from the Bank. In HARYANA FINANCIAL CORPORATION VERSUS RAJESH GUPTA [ 2009 (12) TMI 995 - SUPREME COURT] , the Hon'ble Supreme Court distinguished the powers of secured creditor and the official liquidator in selling the proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest Act, 2002 (hereafter SARFAESI Act). On receipt of consideration price fixed by auction, the appellant/bank issued sell certificate in favour of the respondent in respect of the said property in question. The said sale was free from all encumbrances. Subsequent to his purchase, the respondent was charged for payment of property tax and maintenance tax in respect of the said property for the period prior to his auction purchase payable to the Kolkata Municipal Corporation. Contending, inter alia, that he was not liable to any of such tax or charge levied for the period prior to his sale, the respondent moved this Court with a prayer for issuance of a writ of mandamus directing and/or commending the respondent authorities to set aside and/or rescind and/or cancel and/or recall the letter dated 26th October, 2017 wherein and whereunder the appellant/bank communicated to him that the bank was not liable to any outstanding dues towards the property tax or maintenance charges claimed by the corporation with further writ of mandamus directing the bank authorities to reimburse the amount of ₹ 2,72,745/- paid by the petitioner towards outstanding property to the Kolkata Municipa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011) 2 SCC 439. Paragraph 8 of the above report is relevant for our purpose:- 8. The observations in Suganmal, (AIR 1965 SC 1740), related to a claim for refund of tax and have to be understood with reference to the nature of claim made therein. The decision in Suganmal has been explained and distinguished in several subsequent cases, including in U.P. Pollution Control Board v. Kanoria Industrial Ltd. [(2001) 2 SCC 549] and ABL International Ltd. v. Export Credit Guarantee Corporation of India Ltd. [(2004) 3 SCC 553]. The legal position becomes clear when the decision in Suganmal read with the other decisions of this Court on the issue, referred to below: (i) Normally, a petition under Article 226 of the Constitution of India will not be entertained to enforce a civil liability arising out of a breach of a contract or a tort to pay an amount of money due to the claimants. The aggrieved party will have to agitate the question in a civil suit. But an order for payment of money may be made in a writ proceeding, in enforcement of statutory functions of the State or its officers. (Vide Burmah Construction Co. v. State of Orissa.) (ii) If a right has been infringed-whether a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounds depending on facts and circumstances of a given case. (Vide U.P Pollution Control Board v. Kanoria Industrial Ltd.) (vi) Where the lis has a public law character, or involves a question arising out of public law functions on the part of the State or its authorities, access to justice by way of a public law remedy under Article 226 of the Constitution will not be denied. (Sanjana M. Wig (Ms) v. Hindustan Petroleum Corpn. Ltd.) We are therefore of the view that reliance upon Suganmal was misplaced, to hold that the writ petition filed by the appellant was not maintainable. 7. Thus, Mr. Mukherjee he contends that a writ petition under Article 226 of the Constitution of India may generally be maintained where the petitioner can demonstrate that there is a breach of statutory duty on the part of the said respondents or its agencies or that any action or inaction of the respondents as a functionary of 'State' within the meaning of the Article 12 of the Constitution of India is amenable to infraction of any constitutional or fundamental right of the petitioner. 8. It is urged by Mr. Mukherjee that the genesis of a writ petition under Article 226 is the interplay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate the outstanding municipal dues which is termed as 'encumbrance' by the writ petitioner. The relevant Rule 8(6)(a) and Rules 9(7) to Rule 9(10) of the said rules 2002 are as under:- 8(6). The authorised officer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets, under sub-rule (5): Provided that if the sale of such secured asset is being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice in two leading newspapers one in vernacular language having sufficient circulation in the locality by setting out the terms of sale, 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, 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) depositing earnest money as may be stipulated by the secured creditor; (f) any other thing which the authorised officer cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to make deposit and payment for discharge of the encumbrances and accordingly even statute requires the purchaser to make payment for discharge of the encumbrances. 17. Thirdly, Clause 'E' of the terms conditions contained in public notice dated 24th February, 2017 requires the intending bidders to make their own independent enquiries regarding encumbrances and claims/dues affecting the property prior to submitting their bid which essentially presupposes a contractual obligation the intending bidders and/or the purchaser to be aware of the encumbrances, claims and dues affecting the property to be factorized in their bid submission. 18. Fourthly, the Section 232 of the Kolkata Municipal Corporation Act also do not imposes any statutory liability upon the seller being the secured creditor/appellant/bank herein to make payment of outstanding municipal rates and taxes. 19. Mr. Kallol Basu, learned Advocate for the writ petitioner/respondent, on the other hand, submits by referring to a judgment in the case of Jayan Kuttichakku vs. Common Man Chitties Loans (P) Ltd. reported in 2006 SCC online Kerala 615 that the municipal dues is an encumbrance by referring to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 228. Factual background of the said report is that the petitioner purchased a secured asset from the bank through auction but he was not delivered with vacant possession of the property even after a period of nine years. The writ petitioner invoked the constitutional writ jurisdiction for recovery of the sale price with interest. The Madras High Court on due consideration of various provisions of the SARFAESI Act and the said rules, 2002 allowed the writ petition directing the bank and its officers to refund the sell price with interest. 23. In Smt. Rekha Sahu vs. UCO Bank and others reported in similar question came up for consideration before the Division Bench, Allahabad High Court, ((Lucknow Bench). The Court duly considered various precedents and statutory provisions contained in the SARFAESI Act as well as the said rules and held as under:- For the reasons aforesaid, it is clear that the secured creditor does not enjoy the immunity in respect of his action if it is not bona fide. Chief Manager level officer is chosen because with rich experience and maturity of mind he will be able to take action with due care and caution in view of stringent nature of the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restoring the status quo ante. These are the broad guidelines under which the secured assets are enforced/realised and the Bank/Financial Institution are able to recover its money against the secured assets in shortest time frame. 26. Security Interest (Enforcement) Rules, 2002 suffer an amendment by the Security Interest (Enforcement) Amendment Rules, 2018. Under the amended provisions of Rule 8(7)(a) the notice of sale shall contain the description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor. (emphasis supplied by us). 27. According to the appellant/bank, the outstanding municipal dues were unknown to it and therefore, Rule 8(6)(a) is not attracted and the appellant/bank as a secured creditor, had no legal obligation to publish along with public notice inviting sale of immovable secured asset the details of encumbrances not known to the secured creditor. 28. The learned trial judge while arriving at his decision relied on the precedents in AI Champdani Industries Limited (Supra) which held that auction purchaser has no liability for payment of pre-sale municipal tax dues. It was held by the Hon'ble Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty. Thus, it constitutes a burden on the title which diminishes the value of the land. The word encumbrance in relation to land acquisition means an interest in respect of which compensation has been made or could have been claimed. It includes like a lease or a mortgage, securities, servitors and trust etc. 31. In Jayan Kuttichakku (supra), one of us (the Hon'ble Chief Justice), while adorned the Bench of Kerala High Court, had the occasion to deliver on the scope of the term 'encumbrance' for 'incumbrance'. Paragraph 4 of the judgment is relevant for our purpose:- 4. Encumbrance and incumbrance are the same. That term is not defined in the T.P Act. Encumbrance is a legal claim on an estate (see Chambers's Twentieth Century Dictionary). Where the statute under consideration did not define the term incumbrance , the Apex Court in National Textile Corporation v. State of Maharashtra, (1977) 3 SCC 4, referred to Wharton's Law lexicon to notice incumbrance as a claim, lien or liability, attached to property. This is the sense in which the term is ordinarily used. An incumbrance, in this sense, has to be a liability attached to property ; it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g details of the encumbrances known to the secured creditor, when the secured asset is decided to be sold by either inviting tenders or by holding public auction. Under clause (f) of sub-rule (6) of Rule 8, the authorized officer is also bound to disclose any other thing which he considers material for a purchaser to know in order to judge the nature and value of the property. 36. Learned Senior Counsel for the appellant vehemently argues that the appellant- Bank or its officers cannot be fastened with the obligation for alleged nondisclosure of pre-sale municipal tax dues as encumbrance while issuing notice under section 8(6) of the said Rules as the sale was conducted as is where is and as is what is basis; secondly, property tax dues were not known to the authorized officer; thirdly, even if such encumbrance was disclosed, the purchaser would have been directed to deposit such amount for discharging such encumbrance; and, fourthly, Clause E of the terms of E-auction sale notice imposed equal obligation upon the purchaser to make independent enquiries regarding encumbrances and title of the secured asset. Therefore, after completion of sale process and delivery of possessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the provisions contained in Rule 9(7) of the said Rules that even if pre-sale municipal tax dues was disclosed by the authorized officer as an encumbrance, the purchaser was under obligation to deposit with him the money required to discharge such encumbrance. Therefore, when sale certificate was issued and vacant possession of the secured immovable property was handed over to the respondent, the Bank has no statutory liability to refund pre-sale municipal tax dues which was actually paid by the respondent/purchaser before mutation. 40. We have minutely considered the provisions of the SARFAESI Act and the Rules thereunder. We have already held that Rules 8 and 9 deal with the stage anterior to the issuance of sale certificate and delivery of possession. Rule 9(8) casts a duty upon the authorized officer to deliver the property to the purchaser free from encumbrances requiring the purchaser to deposit money for discharging the encumbrances. The ignorance of the second creditor regarding the encumbrance on the property is no longer a good and acceptable defence in view of the statutory provisions and various precedents by the Hon'ble Supreme Court and different High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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