Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS.31523153 of 2023
(@ SLP (Civil) Nos.59735974 of 2018)
G. VIKRAM KUMAR ...Appellant(s)
Versus
STATE BANK OF HYDERABAD
& ORS. ...Respondent(s)
J U D G M E N T
M. R. Shah, J.
1. Feeling aggrieved and dissatisfied with the
impugned judgment and order dated
Signature Not Verified
Digitally signed by R
Natarajan
Date: 2023.05.02
16:43:16 IST
Reason:
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08.09.2017 passed by the High Court of
Judicature at Hyderabad for the State of
Telangana and Andhra Pradesh passed in Writ
Petition No.31098 of 2016 and the subsequent
order dated 08.12.2017 passed in Review
Petition No.45031 of 2017 in Writ Petition
No.31098 of 2016, the appellant and the
auction purchaser has preferred the present
appeals.
2. The facts leading to the present appeals in
nutshell are as under:
2.1 That the respondent no.3 herein – builder had
taken loan from respondent no.2 – Bank for the
development of the multistorey housing
project. That the respondent no.3 (hereinafter
referred to as the borrower) was not able to
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repay the security interest to the Bank, the
Bank initiated proceedings against the
borrower under Section 13 of the Securitization
and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002
(hereinafter referred to as ‘the SARFAESI Act,
2002). The Bank attached the properties of the
borrower under Section 13(4) of the SARFAESI
Act. Against the measures taken by the Bank
under Section 13(4) of the SARFAESI Act, the
borrower filed S.A. No.253 of 2012 before the
Debt Recovery Tribunal (DRT), Hyderabad.
S.A. No.253 of 2012 was listed before the DRT
on 19.02.2016, when the borrower was given
liberty to file a list of intending buyers of the
property and bring forth with the buyers so as
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to enable the Tribunal to consider the same for
the repayment of the dues of the Bank. On
25.02.2016, the DRT passed an order
permitting the Bank to go ahead with the sale
as proposed excluding flat to be identified and
communicated by the borrower to the Bank by
29.02.2016 with full details of all purchasers to
the bank officials on affidavit so as to enable
the bank officer to exclude those flats, provided
the remaining flats are sufficient for recovery of
the dues. The Tribunal directed that the bank
may proceed with the sale but shall not
confirm the sale till the next date of hearing.
At this stage it is required to be noted that the
aforesaid order was passed by the Tribunal in
view of the submissions made by the borrower
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that he had sold seven flats out of 37 flats
which were to be sold by the Bank to some
third persons. Flat No.6401 – flat in question
was not amongst the said seven flats.
2.2 A Memorandum of Understanding (MoU) was
entered into between the respondent no.1 and
the borrower with respect to the sale of Flat
No.6401 on 10.04.2016 for a lumpsum
consideration of Fortyfive lakhs. It is pertinent
to note that in the MoU itself there was a
reference to some proceedings going on before
the DRT and that the Bank and the borrower
will obtain clearance in order to process the
agreement to sale. That an agreement to sale
was executed between the bank and the
borrower for a sale of Flat No.6401 on
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16.06.2016. At this stage, it is required to be
noted that the said agreement to sale was
executed by the borrower without
informing/obtaining any consent from the DRT
as well as the Bank and the permission, if any,
given to the borrower earlier obtained only to
the seven flats which were already recognized
by the DRT on 25.02.2016.
2.3 That thereafter the Bank issued a public notice
on 28.07.2016 for auctioning the properties of
the borrower. The said notice was published in
the newspaper on 29.07.2016. The property in
question, i.e. Flat No.6401 was also subjected
to auction. It was placed in Lot No.1 for which
the eauction was proposed on 30.08.2016.
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2.4 The borrower filed an application before the
DRT praying for stay on all proceedings of the
Bank pursuant to the auction notice dated
28.07.2016. On 24.08.2016 the DRT was
pleased to reject the application for stay filed
by the borrower. While rejecting the stay
application and refusing to grant the stay as
prayed, the DRT observed as under:
“…Pending the decision, this Tribunal has
directed to sell the property and the
Applicant now has entered into an
agreement to be sold for some other flats.
This is utter violation of the SARFAESI
action as also the direction of the
Tribunal.”
“7. As stated hereinabove, it is also
question of great concern that the
Applicant has entered into an agreement
with third party in respect of few other
flats i.e. Flat No.3202, 6401, 7101, 7202
and 3201 without the permission of the
Respondent Bank or this Tribunal.
Hence, any such transaction is declared
as void.”
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2.5 That thereafter eauction was conducted by the
Bank on 31.08.2016 in which the appellant
also participated. The appellant was declared
as a successful bidder with respect to Flat
No.6401 in Lot No.1. Accordingly, he made a
payment of 25% of the bid amount i.e.
Rs.6,45,250/. The Bank also issued a
confirmation receipt to the appellant on
31.08.2016.
2.6 That thereafter the respondent no.1 filed a Writ
Petition No.31098 of 2016 before the High
Court on 14.09.2016 challenging the eauction
notice dated 28.07.2016 to the extent it
concerns Flat No.6401. The said writ petition
was filed much after the auction was complete
and the appellant was declared as a successful
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bidder. The respondent no.1 did not disclose
in the writ petition that the auction has already
taken place The appellant herein was also not
.
made party. By impugned judgment and order
dated 15.09.2016 the High Court stayed the
auction qua Flat No.6401 as notified under the
eauction sale notice subject to respondent
no.1 (original wit petitioner) paying to the bank
not less than 25.81 lakhs before the scheduled
date and time of the auction, failing which, the
Bank shall be free to proceed with the auction.
The Bank issued a letter to the appellant dated
20.09.2016 stating that the High Court has
stayed the auction proceedings with respect to
Flat No.6401 and that the respondent no.1
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herein has paid the amount to the Bank as
directed by the High Court.
2.7 On becoming aware of the pending proceedings
in Writ Petition No.31098 of 2016 the appellant
herein filed an application for getting
impleaded in the said writ petition and filed the
counter affidavit. In the counter affidavit it was
specifically stated that the DRT has declared
the agreement of sale executed between the
respondent no.1 and the borrower as void and
that the appellant is the successful auction
purchaser and that the respondent no.1 had
not disclosed the complete and correct facts of
the case. It was also stated that the right, if
any, available to the respondent no.1 (original
writ petitioner) would have been under Section
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17 of the SARFAESI Act and not the writ
petition filed by him. It was also stated that
the respondent no.1 had not informed the
Court that the auction proceedings were
already over at the time when the stay order
was passed. The Bank also filed the counter
affidavit in the writ petition seeking dismissal
of the writ petition primarily on the ground that
an alternative remedy under Section 17 of the
SARFAESI Act was available. The High Court
allowed the impleadment application. Despite
the above, by the impugned judgment and
order the High Court has allowed the writ
petition filed by respondent no.1 herein. That
thereafter the appellant herein the auction
purchaser filed the review petition which has
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been dismissed by the High Court. Hence,
against the final decision of the High Court in
the main writ petition allowing the same in
favour of the respondent no.1 herein and
rejecting the review application filed by the
appellant, the appellant – successful auction
purchaser has preferred the present appeals.
3. Shri A. Sirajudeen, learned Senior Advocate
has appeared on behalf of the appellant. Shri
Buddy A. Ranganadhan, learned counsel has
appeared on behalf of respondent no.1 –
original writ petitioner and Shri Ananga
Bhattacharyya, learned counsel has appeared
on behalf of respondent no.3.
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4. Shri A. Sirajudeen, learned Senior counsel
appearing on behalf of the appellant has made
the following submissions:
(i) That the High Court has materially erred
in entertaining the writ petition filed by
respondent no.1 which was against the
steps taken by the Bank under Section
13(4) of the SARFAESI Act namely against
eauction notice;
(ii) That the respondent no.1 being the
agreement to sale holder had no right title
in the flat in question and therefore could
not have filed the writ petition challenging
eauction notice on the basis of the
agreement to sale in his favour;
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(iii) Even if the respondent no.1 had any right,
if any, in that case also he had alternative
efficacious statutory remedy available
under Section 17 of the SARFAESI Act
challenging the eauction notice;
(iv) That there was suppression of material
facts on the part of respondent no.1 which
was specifically pointed out by the
appellant in the counter affidavit that at
the time when the writ petition was filed
and the interim relief was obtained the
auction had taken place in which the
appellant was declared the successful
bidder;
(v) That in fact the DRT in the earlier order
dated 24.08.2016 declared the sale
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agreement in favour of the respondent
no.1 by the borrower as void as the same
was entered into without prior permission
of the DRT or even the Bank; and
(vi) The High Court has materially erred in
relying upon Section 13(8) of the
SARFAESI Act.
4.1 It is further submitted by learned counsel
appearing on behalf of the appellant that the
High Court has not properly appreciated the
fact that a sale agreement holder cannot seek
redemption of a property under Section 91 of
the Transfer of Property Act, 1882 and cannot
be treated at par with an auctionsale
purchaser under Section 54 of the Transfer of
Property Act makes it clear that no interest
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/charge is created upon a property only by way
of saleagreement. It is stated that in fact the
impugned judgment passed by the High Court
that the respondent no.1 be able to seek
redemption of the subject property which was
attached by the Bank. It is submitted that the
bank attached the property as against the
borrower and the respondent No.1 was only the
saleagreement holder. It is submitted that as
such by virtue of the impugned judgment and
order, the High Court has granted the decree
for specific performance of the agreement to
sale which is not permissible while exercising
the powers under Article 226 of the
Constitution of India.
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4.2 It is further submitted by learned counsel
appearing on behalf of the appellant that the
High Court has materially erred in observing
that the equity would be in favour of
respondent no. 1 as he has deposited the entire
amount as directed. It is submitted that the
High Court has materially erred in observing
that if the sale is confirmed the respondent
no.1 will suffer greater hardship and if the sale
is not confirmed at the most, the appellant may
lose interest on Rs.6,45,250/.
4.3 It is further submitted that as such there is no
clarity in the impugned judgment and order
passed by the High Court on what exact relief
the High Court has granted except observing
that the writ petition is allowed.
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5. While opposing the present appeal learned
counsel appearing on behalf of the respondent
no.1 has vehemently submitted that in the
present case Section 13(8) of the SARFAESI Act
shall be applicable and therefore when the
respondent no.1 being the agreement to sale
holder of the flat in question agreed to
pay/deposit the entire sale consideration the
High Court has not committed any error in
entertaining the writ petition under Article 226
of the Constitution of India challenging the e
auction notice.
5.1 It is submitted that as soon as respondent no.1
came to know that the flat in question which
was agreed to be sold in favour of respondent
no.1 for which part consideration was paid is
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put to auction, immediately he filed the writ
petition showing his inclination to deposit the
entire amount of sale consideration which is
permissible under Section 13(8) of the
SARFAESI Act. It is submitted that the object
and purpose of Section 13(8) of the SARFAESI
Act is to save the property from auction in case
the borrower and/or the person interested in
the property agrees to clear the dues.
5.2 It is submitted that in the present case at the
relevant time there was no concluded sale in
favour of the appellant, as at the relevant time
the appellant deposited only 25% of the auction
sale consideration. It is submitted that as per
the catena of decisions unless the full sale
consideration is paid; the sale deed is executed
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and/or the sale certificate is issued in favour of
the auction purchaser there is no concluded
sale. It is submitted that if the sale is not
concluded, Section 13(8) of the SARFAESI Act
shall be applicable and/or can be invoked. In
support of his submissions, he has relied upon
the decisions of this Court in the case of
Mathew Varghese v. M. Amritha Kumar,
;
(2014) 5 SCC 610 (para 38) Narandas
Karsondas vs. S.A. Kamtam, (1977) 3 SCC
247; B. Arvind Kumar vs. Govt. of India &
Ors., (2007) 5 SCC 745 (para 12). He has
also relied upon the decision of the Punjab and
Haryana High Court in the case of
Pal Alloys
& Metal India Pvt. Ltd. & Ors. vs.
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Allahabad Bank & Ors., 2021 SCC OnLine
as well as the decision of the
P&H 2733
Andhra Pradesh High Court in the case of M/s
India Finlease Securities Ltd. vs. Prasad
Indian Overseas Bank, 2012 SCC OnLine AP
205 .
5.3 It is further submitted by learned counsel
appearing on behalf of the respondent no.1
that the respondent no.1 has subsequently
died and his heirs including the widow are
residing in the flat in question since long and
that they have paid/deposited the entire sale
consideration and therefore if now the appeal is
allowed in that case, they have to vacate the
premises which will not be equitable.
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Therefore, it is prayed to dismiss the present
appeal.
6. Learned counsel appearing on behalf of the
Bank has though opposed the writ petition
before the High Court, has stated that whatever
the decision, the Bank shall abide by the same.
7. Heard learned counsel appearing on behalf of
the respective parties at length.
8. At the outset, it is required to be noted that
what was challenged before the High Court by
respondent no.1 in a writ petition under Article
226 of the Constitution of India was the e
auction notice which was pursuant to the
action initiated by the Bank in exercise of
powers under Section 13(4) of the SARFAESI
Act. At this stage it is required to be noted that
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eauction was held/conducted on 31.08.2016
in which the appellant participated and was
declared as a successful bidder and he made a
payment of 25% of the bid amount on the very
day i.e., on 31.08.2016. However, thereafter
the respondent no.1 filed the writ petition
before the High Court challenging the eauction
notice dated 28.07.2016 on 14.09.2016 that is
after conducting of the auction. It is required
to be noted that against any steps taken by the
Bank under Section 13(4) of the SARFAESI Act
the aggrieved party has a remedy under the
SARFAESI Act by way of appeal under Section
17 of the SARFAESI Act to approach the DRT.
Therefore, in view of the availability of the
alternative statutory remedy available by way of
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proceedings/appeal under Section 17 of the
SARFAESI Act, the High Court ought not to
have entertained the writ petition under Article
226 of the Constitution of India in which the e
auction notice was under challenge. Therefore,
the High Court has committed a very serious
error in entertaining the writ petition under
Article 226 of the Constitution of India
challenging the eauction notice issued by the
Bank in exercise of power under Section 13(4)
of the SARFAESI Act.
8.1 Even otherwise it is required to be noted that
the respondent no.1 – original writ petitioner
filed the writ petition as agreement to sale
holder of the flat in question. At this stage it is
required to be noted that earlier against the
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measures taken by the Bank under Section
13(4) of the SARFAESI Act the borrower filed
S.A.No.253 of 2012 before the DRT, Hyderabad.
The DRT, Hyderabad by order dated
19.12.2016 gave the liberty to the borrower to
file the list of intending buyers of the property
and to bring forth with the buyers so as to
enable the Tribunal to consider the same for
repayment of the dues of the Bank. That
thereafter on 25.02.2016 the DRT passed the
following order:
"The Bank is directed to go ahead with the
sale as proposed excluding the Flat to be
identified and communicated by the
Applicant to the Respondent Bank by
29.02.2016 with full detailed of all the
Purchasers to the Bank Officers on
affidavit so as to enable the Bank Officer
to exclude those Flats, provided the
remaining Flats are sufficient for recovery
of the dues. The Bank may proceed with
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the sale but shall not confirm the same till
the next date of hearing."
8.2 At this stage it is required to be noted that the
flat in question namely Flat No.6401 was not
the seven flats identified by the borrower to be
kept out of the auction proceedings. At the
relevant time the flat in question was not sold
amongst the seven flats mentioned before the
Tribunal. That thereafter during the pendency
of the S.A. No.253 of 2012 and without
obtaining prior approval and/or intimation to
the DRT and even the bank, the borrower
entered into the sale agreement with the
respondent no.1 on 16.06.2016. At this stage,
it is required to be noted that in the MoU dated
10.04.2016 between the borrower and the
respondent no.1 in Clause No.4 it was
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specifically provided that first the party should
obtain clearance of sale from DRT/SBH so that
they can process with further agreement to
sale. Thus, as such respondent no.1 at the
relevant time was aware about the pending
DRT proceedings. Still the respondent no.1
entered into the agreement to sale with the
borrower on 16.06.2016. At this stage, it is
pertinent to note that thereafter when the Bank
issued a public notice on 28.07.2016 for
auctioning the properties of the borrower.
Before the date of auction, on 24.08.2016 the
borrower filed an application before the DRT
praying for stay of all proceedings of the Bank
pursuant to the auction notice dated
28.07.2016. The DRT was pleased to reject the
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said application for stay vide the order dated
24.08.2016 by observing that the sale of the
flat in question without the permission of the
Bank or the Tribunal is void. The order dated
24.08.2016 is reproduced hereinabove. Thus,
as such the transaction in favour of the
respondent no.1 with respect to Flat no.6401
was already held to be void by the DRT. That
thereafter, after the borrower having failed to
obtain any order, the respondent no.1 had
straightway filed the writ petition challenging
the eauction notice which the borrower failed
to get any relief before the DRT. If the
respondent no.1 would have approached the
DRT against the eauction notice he would
have been nonsuited in view of the earlier
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order passed by the DRT dated 24.08.2016.
Therefore, calculatively the respondent no.1
filed the writ petition before the High Court
challenging the eauction notice and that too
after conducting of the eauction on
31.08.2016 and the sale in favour of the
appellant was confirmed. The aforesaid facts
were pointed out before the High Court and
despite the same the High Court has allowed
the writ petition which is not sustainable at all.
By the impugned order the respondent no.1
has got the relief which as such the borrower
failed to get from the DRT. On the aforesaid
grounds the impugned judgment and order
passed by the High Court is unsustainable.
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8.3 Even otherwise it is very debatable whether
Section 13(8) of the SARFAESI Act shall be
applicable in favour of a person who is only an
agreement to sale holder or Section 13(8) of the
SARFAESI Act shall be applicable only in case
of the borrower who is ready and willing to pay
the entire debt. In the present case the
borrower failed to get any relief from the DRT.
The borrower did not apply and/or invoke
Section 13(8) and did not agree to clear the
entire dues. Therefore, also the High Court has
materially erred in allowing the writ petition.
8.4 Even otherwise it is required to be noted that
as such what exact relief is granted by the High
Court is not clear. The High Court has simply
stated that the writ petition is allowed.
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However, it is required to be noted that what
was challenged before the High Court was the
eauction notice dated 28.07.2016 which was
already conducted on 31.08.2016. Therefore,
the writ petition was filed much after
conducting the eauction on 31.08.2016. No
consequential relief has been granted by the
High Court. Therefore, also the impugned
judgment and order passed by the High Court
is unsustainable.
8.5 Now so far as the submission on behalf of the
respondent no.1 that the respondent no.1 has
paid/deposited the amount of sale
consideration and now the respondent no.1 has
died his heirs will have to vacate the flat in
question and on the other hand the appellant
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shall be entitled to return the amount of
Rs.6,45,250/ deposited at the relevant time
being 25% of the auction sale consideration
with interest is concerned, at the outset it is
required to be noted that as such the
transaction between the respondent no.1 and
the borrower pursuant to the agreement to sale
dated 16.06.2016 was absolutely illegal and
behind the back of the Tribunal as well as the
Bank and during the pendency of the
proceedings before the Tribunal. In order
dated 24.08.2016 the Tribunal had in fact
already held the sale transaction as void. As
observed hereinabove even at the time when
the respondent no.1 entered into the agreement
to sale/MoU he was aware about the
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proceedings pending before the DRT which is
apparent from Clause 4 of the MoU referred to
hereinabove. Therefore, respondent no.1
and/or his heirs cannot be permitted to get the
benefit of his own wrong and cannot be
permitted to get the benefit of a void
transaction.
9. In view of the above and for the reasons stated
above, the impugned judgment and order
passed by the High Court is hereby quashed
and set aside. It is directed that on the full
payment of the auction sale consideration by
the appellant (after deducting the 25% of the
amount already deposited earlier) with 9%
interest from the date of auction till the actual
amount is paid, to be paid within a period of
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four weeks from today, the sale certificate be
issued in favour of the appellant with respect to
Flat No.6401. Whatever the amount is already
deposited by the respondent no.1/his heirs
shall be returned to the respondent no.1 (now
his heirs) with the interest at 9% from the date
of such deposit till the actual date of return
which shall be returned within a period of four
weeks from today. The heirs of original
respondent no.1 are granted three months’
time to vacate the flat in question and are
directed to hand over the peaceful and vacant
possession of the Flat No.6401 to the appellant
within a period of three months from today as
ordered above.
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Present appeals are allowed. However, in the
facts and circumstances of the case there shall
be no order as to costs.
……………………………J.
(M. R. SHAH)
……………………………J.
(C.T. RAVIKUMAR)
New Delhi,
May 2, 2023
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