ASHOK KUMAR GHOSH vs PUNJAB NATIONAL BANK AND ANR.
- Court
- Calcutta High Court
WPA 4255 OF 2025 & WPA 15541 OF 2025
Judgment Dated: 12-11-2026
WBCHCA0084292025
IN THE HIGH COURT AT CALCUTTA
CONSTITUTIONAL WRIT JURISDICTION
APPELLATE SIDE
CORAM: THE HON’BLE JUSTICE OM NARAYAN RAI
WPA 4255 OF 2025
WITH
CAN 1 OF 2025
SRI ASHOK KUMAR GHOSH …..PETITIONER
-VERSUS-
PUNJAB NATIONAL BANK & OTHERS …..RESPONDENTS
WITH
WPA 15541 OF 2025
PUNJAB NATIONAL BANK & ANOTHER ..…PETITIONERS
-VERSUS-
THE STATE OF WEST BENGAL & OTHERS ..…RESPONDENTS
Appearance:
For the Auction Purchaser (i.e., the
Petitioner in WPA 4255 of 2025 and
Respondent No.6 in WPA 15541 of 2025)
:Mr. Bikash Ranjan Bhattacharyya,
Sr.Adv.
Mr. Uday Sankar Chattopadhyay, Adv.
Mr. Suman Sankar Chatterjee, Adv.
Mr. Pronay Basak, Adv.
For Punjab National Bank and its
Authorised Officer (i.e., the Respondent
Nos.1 and 2 in WPA 4255 of 2025 and
Petitioners in WPA 15541 of 2025)
: Mr. Saptanshu Basu, Sr. Adv.
Mr. Abhishek Banerjee, Adv.
Ms. Parna Roy Choudhury, Adv.
Ms. Trisa Chanda, Adv.
For the Borrower, Guarantors and
Mortgagors (i.e., the Respondent Nos.3,4
and 5 in WPA 4255 of 2025 and WPA
15541 of 2025)
For the State Respondents in WPA
15541 of 2025
: Mr. Siddhartha Banerjee, Adv.
Mr. Debashis Karmakar, Adv.
Mr. Satyam Ojha, Adv.
Mr. Parikshit Lakhotia, Adv.
: Mr. Tapas Kumar Chatterjee, Adv.
Mr. Sailen Naskar, Adv.
Page 1 of 28
WPA 4255 OF 2025 & WPA 15541 OF 2025
Hearing Concluded on : September 01, 2026
Judgment on : November 12, 2026
OM NARAYAN RAI, J.:-
1. Since both these writ petitions share the same foundational facts and involve the
same parties (excepting the State Respondents in WPA 15541 of 2025), therefore
the same are being dealt with by a common order.
2. WPA 4255 of 2025 has been filed by the auction purchaser of the immovable
property that had been mortgaged with the Bank to secure the credit facilities
availed of by Ambhi Impex Private Limited i.e. the respondent no.3 from the said
Bank. He seeks refund of the consideration amount to the tune of Rs.5,53,22,000/-
(Rupees Five Crore Fifty-Three Lakh Twenty-Two Thousand Only) paid by him to
the Bank, along with interest on the ground that the Bank has failed to handover
possession of the auctioned property to him despite a lapse of more than two years.
3. WPA 15541 of 2025 has been filed by the Bank seeking a direction on the District
Magistrate to dispose of the Bank’s application under Section 14 of the
Securitisation and Reconstruction of Financial Assets and Enforcement of Security
1
Interest Act, 2002 , that is pending with the said District Magistrate.
FACTUAL MATRIX:
4. Shorn of meticulous details, the facts relevant for adjudication of the present writ
petition, as may be gathered from the material on record, are as follows: -
a. The respondent no. 3 i.e. Ambhi Impex Private Limited had availed of certain
credit facilities from the erstwhile Union Bank of India (presently Punjab
2
National Bank ). An immovable property, being bastu land measuring about
10.42 decimals together with a six-storied building standing thereon having
covered area of about 14,531 sq.ft., owned by the respondent nos. 4 and 5 was
mortgaged with the Bank for securing the said credit facilities.
b. Upon the borrower allegedly defaulting in repaying the credit facilities, the loan
3
account of the borrower was classified as a Non-Performing Asset , whereafter
the Bank initiated proceedings under the 2002 Act. The respondent nos. 3 to 5
challenged the Bank’s action under the 2002 Act, before the Debt Recovery
Tribunal-II, Kolkata by filing S.A. 217 of 2021.
c. During pendency of the said application, the Bank put the said mortgaged
property up for sale through auction in terms of the provisions of Section 13(4)
1
Hereafter “the 2002 Act”
2
Hereafter “the Bank”
3
Hereafter “NPA”
Page 2 of 28
WPA 4255 OF 2025 & WPA 15541 OF 2025
of the 2002 Act read with Rules 8 and 9 of the Security Interest (Enforcement)
4
Rule, 2002 .
d. The auction purchaser participated in the auction that was conducted on
September 28, 2022 and was selected as the highest bidder. The property was
ultimately sold to the auction purchaser upon payment of Rs.5,53,22,000/-
(Rupees Five Crore Fifty-Three Lakh Twenty-Two Thousand Only) and a sale
certificate was issued to him by the Bank on February 28, 2023.
e. The respondent nos.3 to 5 challenged the sale as well by filing an interlocutory
application being I.A. 1605 of 2022 in the pending SARFAESI application being
S.A. 217 of 2021 before the said Tribunal.
f. The Learned Tribunal dismissed both the said applications filed by the
respondent nos.3 to 5 by an order dated January 10, 2023. Feeling aggrieved
by the said order, the respondent nos. 3 to 5 approached this Court by way of
revisional application under Article 227 of the Constitution of India, being C.O.
553 of 2023.
g. The said revisional application was initially entertained by a Co-ordinate Bench
of this Court on May 17, 2023 when by an interim order the operation of the
order dated January 10, 2023 passed by the Tribunal was stayed till the last
week of July 2023 or until further orders whichever was earlier. Subsequently,
on September 29, 2023 another Co-ordinate Bench of this Court passed an
order directing the parties to maintain status quo with regard the property in
question till disposal of the revisional application. It was observed that if the
borrower and the guarantors (who were the petitioners in the said revisional
application) were dispossessed during the pendency of the revisional
application the situation would become irreversible.
h. The said revisional application remained pending before this Court and as such
the auction purchaser made a representation to the Bank through an e-mail
dated January 16, 2025 and requested for refund of the sale consideration. The
Bank responded to the said representation by a letter dated January 27, 2025
expressing its difficulty in refunding any amount to the petitioner.
i. The auction purchaser thereafter, took out an application praying for vacating
the said interim order of status quo. The said application was disposed of by an
order dated February 14, 2025 by observing that even if the auction purchaser
had a genuine grievance with regard to the pendency of the revisional
application which had actually created a situation where the auction purchaser
4
Hereafter “the 2002 Rules”
Page 3 of 28
WPA 4255 OF 2025 & WPA 15541 OF 2025
was not being able to enjoy the property, such issue could not be gone into by
the Court in the said revisional application. The auction purchaser was left free
to approach the appropriate forum for remedy.
j. Under such circumstances, the petitioner filed the writ petition being WPA
4255 of 2025 praying for issuance of a writ of mandamus commanding the
Bank to refund the auction sale consideration of Rs.5,53,22,000/- (Rupees Five
Crore Fifty-Three Lakh Twenty-Two Thousand only) along with 12% interest
thereon.
k. The revisional application filed by the respondent nos.3, 4 and 5 was ultimately
dismissed by an order dated May 19, 2025 with liberty to the said respondents
to approach the Debts Recovery Appellate Tribunal.
l. After dismissal of the said revisional application the Bank made a
representation before the District Magistrate to dispose of the Bank’s
application dated April 19, 2022 made under Section 14 of the 2002 Act.
Although such representation was made on June 25, 2025, no step was taken
by the District Magistrate and as such the Bank filed WPA 15541 of 2025
seeking directions on the District Magistrate to dispose of the Bank’s said
application under Section 14 of the 2002 Act.
SUBMISSIONS ON BEHALF OF THE PETITIONER:
5. A brief summary of the submissions made by Mr. Bhattacharyya, learned Senior
Advocate appearing for the petitioner, is as follows:-
a. Since the Bank has failed to deliver possession of the auctioned property
despite payment of the entire consideration, the Bank is liable to refund the
said consideration to the auction purchaser together with interest.
b. The Bank sold the property to the auction purchaser without disclosing the fact
that a litigation was pending in respect thereof between the Bank and the
respondent nos. 3, 4 and 5 before the Tribunal.
c. The sale certificate issued by the Bank would show that the Bank has stated
that the property is not encumbered, however, the property was under litigation
5
from the very inception. Mohd. Shariq vs. Punjab National Bank & Others
was cited for the proposition that in a bidding process, the facts must be made
clear to the bidders for the reason that there is always a high variance between
the market realizable value and the distress value of the mortgaged property
when put to public auction under the provisions of the 2002 Act.
5
2023 SCC OnLine SC 392
Page 4 of 28
WPA 4255 OF 2025 & WPA 15541 OF 2025
d. The Bank has in effect committed fraud on the auction purchaser in selling a
litigated property without disclosing the pending litigation. A judgment of the
Hon’ble Supreme Court in the case of Viney Kumar Sharma vs. The
6
Improvement Trust & Another was relied on to contend that the Bank is
legally obliged to disclose all pending litigations in the sale notice and non-
disclosure thereof would amount to practising fraud upon the auction
purchaser.
e. Another judgment of the Hon’ble Supreme Court in the case of Delhi
7
Development Authority vs. Corporation Bank & Others was relied on to
contend that an innocent auction purchaser who has “neither breached the
covenant nor failed in diligence” should not be made a scapegoat to suffer the
consequences of an undisclosed litigation between the Bank on the one hand
and the borrowers, guarantors and mortgagors on the other.
f. The petitioner got knowledge of the litigation between the borrower, guarantor
8
and mortgagors (i.e. the respondent nos. 3 to 5) on the one hand and the Bank
on the other for the first time when the revisional application being C.O. 553 of
2023 was filed by the said respondents against the Bank challenging the order
dated January 10, 2023 passed by the Tribunal.
g. The auction purchaser has borrowed money for the purpose of purchasing the
property in auction and the auction purchaser is having to pay interest thereon
without he himself being able to use the property in any manner.
h. A Co-ordinate Bench of this Court had by an order dated June 17, 2025
directed the Bank to either deliver possession or to refund money with interest
but the Bank has done neither.
i. The auction purchaser cannot be asked to wait indeterminately for getting
possession of the property. The petitioner should now be refunded the entire
consideration money as the petitioner is not interested in taking the property
anymore.
SUBMISSIONS ON BEHALF OF THE BANK:
6. A brief summary of the submissions made by Mr. Basu, learned Senior Advocate
appearing for the respondent Bank, is as follows:-
a. The auction purchaser has sought refund of the sale consideration without
challenging the sale. Such relief cannot be granted without setting aside the
6
SLP(C) No. 24811 of 2025, decided on January 16, 2026
7
2025 SCC OnLine SC 2071
8
Hereafter “the borrowers”
Page 5 of 28
WPA 4255 OF 2025 & WPA 15541 OF 2025
sale. Even in a suit a Civil Court would not grant a relief of setting aside a sale
unless a specific prayer therefor is made by amending the plaint.
b. A concluded sale, where sale certificate has been issued, cannot be set aside in
a writ proceeding. The auction purchaser’s remedy lies either before the
Tribunal by way of an appropriate application under Section 17 of the 2002 Act
or before the competent Civil Court. Celir LLP vs. Bafna Motors (Mumbai)
9
Private Limited & Others was cited to assert that the High Court should not
entertain a petition under Article 226 of the Constitution of India if an effective
remedy is available to the aggrieved person under the 2002 Act and that High
Court should not apply equitable considerations to overreach the outcome
contemplated by the statutory auction process prescribed under the 2002 Act.
10
c. PHR Invent Educational Society vs. UCO Bank & Others was pressed in
support of the contention that a confirmed auction sale can be interfered with
only when there is fraud or collusion.
11
d. Sanjay Sharma vs. Kotak Mahindra Bank Limited & Others was relied
on to contend that a sale by way of public auction cannot be set aside until
there is any material irregularity and/or illegality committed in holding the
auction or if such auction was vitiated by fraud or collusion.
e. The auction purchaser cannot argue that the Bank has committed fraud or
misrepresentation or suppression as there is no pleading to such effect in the
writ petition. There is no allegation of either fraud or suppression or
misrepresentation in the writ petition. Afsar Sheikh & Another vs. Soleman
12
Bibi & Others was relied on in support of the contention that fraud and
misrepresentation must be pleaded with specificity, particularity and precision.
13
f. Bachhaj Nahar vs. Nilima Mandal & Another was pressed into service to
demonstrate that a Court cannot make out a case not pleaded and no amount
of evidence can be looked into, upon a plea which was never put forward in the
pleadings.
14
g. Ishwar Dutt vs. Land Acquisition Collector & Another and Anathula
15
Sudhakar vs P. Buchi Reddy were also cited for the same purpose.
16
h. Allahabad University & Others vs. Geetanjali Tiwari (Pandey) & Others
was relied on in support of the contention that that a Writ Court should not
9
(2024) 2 SCC 1
10
(2024) 6 SCC 579
11
2024 SCC OnLine SC 4589
12
(1976) 2 SCC 142
13
(2008) 17 SCC 491
14
(2005) 7 SCC 190
15
(2008) 4 SCC 594
Page 6 of 28
WPA 4255 OF 2025 & WPA 15541 OF 2025
make out a third case not pleaded by the parties based on arguments advanced
in course of hearing and that the Court’s enquiry must be restricted to the case
pleaded and the evidence placed before it by the parties.
17
i. ITC Limited vs. Blue Coast Hotels Limited & Others was cited to
demonstrate that since the Bank remained a secured creditor even after
issuance of sale certificate, it was entitled to take police assistance under
Section 14 of the 2002 Act in order to deliver possession of the auctioned
property.
SUBMISSIONS ON BEHALF OF THE BORROWERS:
7. Mr. Banerjee, learned Advocate appearing for the borrowers made the following
submissions: -
a. The Bank has committed fraud on law and as such this Court should take note
thereof if the same is apparent from the record, irrespective of the pleadings.
b. The Bank has suppressed the fact that a Receiver has been appointed over the
property by the Tribunal on the Bank’s application being O.A.133 of 2016 who
is collecting rent from the tenants. Since the property is custodia legis
therefore, such property could neither have been put up for sale nor taken
possession of under Section 14 of the 2002 Act.
c. A chart of the alleged misstatements made by the Bank was handed up to
Court and the Court was taken through the writ petition filed by the Bank to
demonstrate the alleged suppressions and misstatements. The content of the
chart is reproduced hereinbelow:-
SI. REFERENCE OF
REFERENCE OF
SUMMARY
INCORRECT
STATEMENT
CORRECT
STATEMENT
1. Page 44, SI.10
Page 47
Sl.viii of Writ
Page 21, Para 5 of
Writ
In the Section 14 application the
bank has falsely stated on oath that
an amount of loan taken by the
borrower of Rs.7,50,00,000/-.
However in reality only a sum of
Rs.4.50 Crore was disbursed in
favour of the borrower.
2. Page 43 of Writ
Page No.21, Para 5 of
Writ
In the Section 14 application the
bank has sought to take physical
possession of property under
SARFAESI Act, however the bank
has itself choose not to proceed
under the SARFAESI Act, 2002.
16
(2024) 20 SCC 23
17
(2018) 15 SCC 99
Page 7 of 28
WPA 4255 OF 2025 & WPA 15541 OF 2025
3. Page 48 & Page 45,
Point No.22 & Page
48 of Writ
Page 30 Para 46 of
Writ
In the Section 14 application the
bank has stated on oath that there
is no tenancy lying in the mortgaged
property. Whereas the true fact is
that in the Section 19 proceeding
even a Receiver is appointed who is
even collecting rent from the tenant.
Even 20% reduced the price of the
property by the Valuer in his
Valuation Report for tenancy.
4. Page 50, Sl.18 of
Writ
Page 34, para 71 of
Writ
It is falsely by the bank that after
issuance of 13(2) notice, no amount
is paid by the borrower, but in
reality the borrower has paid huge
amount. Even the DRT order it is
recorded that an amount of Rs.35
Lakh was paid by the borrower.
Page 47, Sl. viii of
Writ
5. Page 47, SI No.iii
Page 32, para 56 of
Writ
In the Section 14 application the
bank has sought to take possession
of G+5 storied building, whereas the
bank has itself stated that the entire
5th floor is illegal and 50% of 4th
Floor is also illegal. Such
encumbrances were also not stated
in the sale notice.
Page 50, SI.No.8 of
Writ
Page 75 of Writ
Further in the Section 14 application
the details of property are incorrect.
The Section 14 application records
3000 sq.ft. in each floor whereas
judgement of DRT records that 2390
sq.ft. in each floor.
6. Page 5, 6, 17, 19 of
Writ
Page No.21, para 5 of
Writ
In the entire Writ petition the
petitioner bank has sought reliefs on
the basis of Notice under section
13(2) dated 1st September 2014 and
possession notice dated 8th
January 2015. However such 13(2)
notice long withdrawn by the
petitioner bank.
7. Page No.45, Sl.21
of Writ
Short list of dates in
Writ.
Section 17 application was pending
before the Learned Debts Recovery
Tribunal at the time of filing of the
Section 14 application.
Section 14 application is filed on
19.04.2022 and Section 17
application was decided by DRT on
10.01.2023
Page 8 of 28
WPA 4255 OF 2025 & WPA 15541 OF 2025
8. Page No.50, Sl.11
of Writ
By leaving the said information
empty the petitioner bank has
suppressed facts before the said
Magistrate. That after issuance of
the said 13(2) and also the Section
14 application time and again the
borrowers have made payments to
the bank.
9. Page 10 to 12,
ground stated in
SI.I to SI.IX of Writ
Page 21, Para 8 and
Page No.22, Para 9 of
Writ
Petitioner not entitled to any reliefs
from the District Magistrate and the
said Section 14 application is liable
to be rejected as the petitioner has
suppressed several facts from
magistrate with regard to filing of
previous Section 14 applications:
Page 43 of Writ
petition i.e. prayers
of Section 14
application i) to iii)
Page No.27 of
Affidavit-in-
Opposition filed by
Respondent No.3, 4
and 5.
st
a) 1 Section 14 application, order
already passed by the District
Magistrate, but petitioner bank
undertaken not to execute the DM's
order.
b) Petitioner bank choose not to
proceed under SRAFAESI Act, 2002
and choose to appoint of Receiver
under RDDBFI Act, 2002 in OA
proceeding.
nd
c) 2 Section 14 application filed
before the Learned Chief Judicial
Magistrate, but bank choose not to
proceed with such application;
rd
d) 3 Section 14 application, being
the subject matter in the instant Writ
petition;
Hence, Section 14 application barred
by 'res judicata' as order already
st
passed by DM in 1 Section 14
proceeding.
Also, Res sub-judice is application
as Section matter of adjudication is
already pending before the Chief
Judicial Magistrate in the 2nd
Section 14 application.
10. Page No.47, Sl. ix.
Page No.28 of
Affidavit-in-
Opposition filed by
The petitioner has not complied with
the statute while taking steps under
the said Act, 2002. That the
of Writ
Page 9 of 28
WPA 4255 OF 2025 & WPA 15541 OF 2025
Respondent No.3, 4
and 5.
respondent borrowers challenging
the all the actions of bank have
preferred an Appeal before the
Hon'ble Chairperson, Debts
Recovery Appellate Tribunal,
Kolkata and the date of hearing is
th
fixed on 11 August 2026.
11. Page 51, Para
19(B) of Writ
Page 29, para 40 of
Writ
In the said Section 14 application
the petitioner bank has stated 'YES'
which means that the bank has
accepted the contents of
representation made by the
borrower U/s.13(3A). The same is a
false statement.
12. Page 5 para 5 of
Page 21, Para 5 of
Writ
Contrary statement is made in the
Writ Petition and the Section 14
application. The petitioner bank is
seeking relief in the Section 14
application on the strength of
possession notice dated 20.07.2021
and the Writ petition is filed on the
basis of possession notice dated 8th
January 2015.
Writ
Page 51, Para 23
13. Page 45, para 14 of
Page 19 of Writ No demand made to individuals in
13(2) notice i.e. Sri Manoj Kumar
Agarwal and Sri Binod Kumar
Agarwal. Only demand was made
upon the borrower company.
Property owned by the Sri Manoj
Kumar Agarwal and Sri Binod
Kumar Agarwal.
Writ
14. Page 43, last para
In the Section 14 application the
petitioner bank has sought for
assistance in taking over
possession. The petitioner bank
cannot seek "assist us to take
possession" of the property, which is
in violation of law. Section 14 of the
SARFAESI Act, 2002 does not permit
the bank to take physical
possession U/s.14 of the Act.
of Writ
d. Courts have increasingly applied the doctrine of caveat venditor , moving away
from the traditional rule of caveat emptor in matters concerning auction sales
conducted under the 2002 Act and the Rules framed thereunder.
e. The Bank has suppressed the fact that during pendency of the present Section
14 application, expeditious disposal whereof is being sought, the Bank has filed
Page 10 of 28
WPA 4255 OF 2025 & WPA 15541 OF 2025
another application under Section 14 of the 2002 Act before the Chief Judicial
Magistrate which amounts to withdrawal of the present application.
18
f. K.D. Sharma vs. Steel Authority of India Limited & Others was relied on
to demonstrate that a Writ Court would certainly bear in mind the conduct of a
party who invokes the jurisdiction of the Court and if such applicant makes a
false statement or suppresses material fact or attempts to mislead the Court,
the Court may dismiss the action on that ground alone.
19
g. Prestige Lights Limited vs. State Bank of India was also cited for the
same purpose and it was highlighted that if there is suppression of material
facts on the part of the applicant or twisted facts have been placed before the
Writ Court, the Court may refuse to entertain the petition and dismiss it
without entering into the merits of the matter.
20
h. Union of India & Others vs. Bali Ram No. 850808321 was pressed for the
proposition that if the opponent is seeking to use a procedural technicality as a
shield for its own statutory breach then the Court, in an appropriate case, may
in its discretion, grant such relief as the suitor is found entitled. The said
judgment was also relied on to assert that waiver, in law, is an intentional
relinquishment of a known right or advantage by a person which, but for the
waiver, he would have enjoyed.
i. There cannot be any waiver against law. If known encumbrances are not
disclosed but the records reveal the same, then the Court must take note
thereof and pass appropriate directions.
REJOINDER OF THE AUCTION PURCHASER:
8. Mr. Bhattacharyya, learned Senior Advocate appearing for the petitioner made the
following rejoinder submissions: -
a. Lack of pleadings should not prevent this Court from passing appropriate
orders for refund in the wake of the admitted documents like the sale notice
and the sale certificate which reveal that a litigated property was sold to the
petitioner without mentioning the same in either the sale notice or the
litigation.
b. Maria Margarida Sequeira Fernandes & Others vs. Erasmo Jack De
21
Sequeira (Dead) Through LRS was cited to assert that the truth should be
the guiding star in the entire judicial process and that Judges at all levels have
to seriously engage themselves in the journey of discovering the truth.
18
(2008) 12 SCC 481
19
(2007) 8 SCC 449
20
2026 SCC OnLine SC 1319
21
(2012) 5 SCC 370
Page 11 of 28
WPA 4255 OF 2025 & WPA 15541 OF 2025
22
c. Mohd. Abdullah Azam Khan vs. Nawab Kazim Ali Khan was relied upon
to demonstrate that the purpose of the Evidence Act is to prove and disprove
the existence of facts in issue and to find out the truth of the facts asserted by
the parties as the decision of the case lies upon the truthfulness of those facts.
REJOINDER OF THE BANK:
9. Mr. Basu, learned Senior Advocate representing the Bank re-joined while
submitting as follows:-
a. The borrowers’ assertion that non-disclosure of tenancy in the Section 14
check-list renders the Bank’s Section 14 application impeachable is baseless.
The authority under Section 14 of the 2002 Act is only required to get satisfied
with the nine points mandated to be mentioned in the affidavit which is to be
submitted before the said authority. None of the said nine points require the
Bank to mention anything as regards tenancy or encumbrance over the
mortgaged property.
23
b. S.J.S. Business Enterprises (P) Limited vs. State of Bihar & Others was
cited to demonstrate that in order to sustain the charge of suppression, it must
be shown that there was suppression of a material fact which, if disclosed,
would have affected the merits of the case.
c. An unreported decision of the Hon’ble Division bench of this Court in the case
of Mr. Binay Chaudhary & Others vs. AU Small Finance Bank Limited &
24
Others was relied on to contend that the Section 14 authority performs only
a ministerial function and not an adjudicatory one.
d. The allegation that there are discrepancies as regards the statutory demand
notice under Section 13(2) of the 2002 Act is equally unfounded. The Tribunal
has already dealt with the said point and has upheld the Bank’s action under
the 2002 Act. The said order has been challenged before the DRAT and any
observation made by this Court would be an impermissible pre-emptive
decision on a point involved in the pending appeal.
e. The second application under Section 14 of the 2002 Act had been filed before
the Chief Judicial Magistrate by mistake and the same has in any case been
withdrawn.
ANALYSIS & DECISION:
10. The material on record reveals that the following facts are undisputed.
22
(2022) 20 SCC 233
23
(2004) 7 SCC 166
24
MAT 6 of 2026, decided on March 17, 2026
Page 12 of 28
WPA 4255 OF 2025 & WPA 15541 OF 2025
a. An application being S.A. 217 of 2021 challenging the steps taken by the Bank
under Section 13(4) of the 2002 Act was pending before the Tribunal at the
time when the sale notice was issued and published by the Bank.
b. The auction sale notice mentioned that the Bank was in symbolic possession of
the mortgaged property but it did not indicate anything about the pending
litigation. The notice rather indicated that there was no encumbrance known to
the Bank.
c. The borrowers took out an interim application being IA 1605 of 2022 in the
pending SA before the Tribunal thereby challenging the sale notice.
d. The bidding took place on November 28, 2022 and the auction purchaser was
declared as the highest bidder.
e. Both the SA as well as the IA were dismissed by the Tribunal on January 10,
2023. The order passed by the Tribunal, in paragraph 51 thereof (at page 31 of
the Bank’s writ petition) records that “……. tenancy from before the equitable
mortgage of the secured asset is admitted as it reflects from the loan sanction
letter dated 16.03.2013 …”.
f. The auction purchaser deposited the entire consideration amount on February
28, 2023, however, the Bank has not been able to deliver physical possession of
the property to the auction purchaser as yet.
g. The Bank filed the application under Section 14 of the 2002 Act in the year
2022 but the same remains pending since then.
11. The undisputed facts, thus establish that the Bank has not disclosed known
encumbrances and litigation. It has been vociferously argued by the Bank that as
the writ petition is bereft of any prayer for setting aside the sale and any pleading
that the auction purchaser was, in any manner, misled by the Bank’s sale notice
into purchasing a litigated or otherwise encumbered property therefore he is not
entitled to any relief.
12. It would be evident from the narration of the facts of the case in the beginning that
this Court in exercise of its supervisory jurisdiction under Article 227 of the
Constitution of India had on September 29, 2023 passed an interim order in C.O.
553 of 2023 directing the parties to maintain status quo with regard to the property
in question till disposal of the revisional application. The auction purchaser had
then filed an application CAN 2 of 2024 seeking vacation of the said interim order
which was disposed of by the Court on February 15, 2025.
13. The stand taken by the auction purchaser before this Court during the hearing of
the said application has been recorded in the order dated February 14, 2025,
whereby this Court disposed of the said application. The same deserves notice:-
Page 13 of 28
WPA 4255 OF 2025 & WPA 15541 OF 2025
“Mr. Bhattacharya, learned senior advocate for the opposite party no. 3, submits that
unless the said interim order is vacated, the purchaser who has invested huge sum of
money upon obtaining loan from a bank, will suffer irreparable loss and injury. He is not in
a position to enjoy the property he has purchased. He further submits that the Court must
direct refund of the sale consideration along with interest as the property was sold at a
time when the dispute had not been resolved between the borrower and the creditor and
the creditor could not have sold the property which was encumbered. On the basis of a
misrepresentation, the purchaser invested money and is now not in a position to enjoy his
property in view of the pending litigation.”
(Emphasis supplied)
14. This clearly reveals that it was the auction purchaser’s stand in Court that he was
misrepresented by the Bank. However, the auction purchaser has not mentioned
the same in his present writ petition. Would that disentitle him from claiming
refund even when it is evident that the auction sale notice breaches mandatory
requirements? The answer, in the facts of this case, would be in the negative for at
least two reasons:-
a. Firstly, there is nothing on record to convince this Court, with any degree of
certainty, that the auction purchaser was aware of either the pending litigation
or the existing tenancy. It is noticed that in paragraph 11 of the affidavit-in-
opposition filed by the Bank, the Bank has asserted that the auction purchaser
“ was always aware of the pending litigation and the limited scope of his rights
under the SARFAESI framework”. However, there is no evidence in support of
such assertion. On the contrary, the silence of the auction sale notice screams
of a fatal non-disclosure. In the wake of such factual position knowledge of the
auction purchaser cannot be presumed.
b. Secondly, mentioning only “symbolic possession” in the sale notice without
indicating either the pending litigation or an existing tenancy amounts to
material irregularity and misrepresentation to the public at large. Such
principle is well established and has been strongly reiterated by the Hon’ble
Supreme Court in the case of Viney Kumar Sharma (supra) following words:-
“ 6. It was the legal duty on the part of the Trust to have made it clear in the auction
notice itself that the subject plot is a subject matter of litigation. Authorities (such as banks,
recovery officers, or state bodies) conducting public auctions are legally required to disclose
all known encumbrances and litigation relating to the property, as failure to do so
invalidates the sale. Suppressing such material facts renders the auction fraudulent or
vitiated by material irregularity.
9. Public auction is one of the modes of sale intending to get highest competitive price
for the property. Public auction also ensures fairness in actions of the public authorities
and their officers who should act fairly and objectively. Their actions should be legitimate.
Their dealing should be free from suspicion. Nothing should be suggestive of bias,
Page 14 of 28
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favouritism, nepotism or beset with suspicious features of underbidding detrimental to the
legitimate interest of the stakeholders.”
(Emphasis supplied)
15. The Bank had sought to distinguish the aforesaid judgment in the case of Viney
Kumar Sharma (supra) by contending that the same was rendered in a situation
where the sale was not yet complete and the auction purchaser had pleaded
ignorance of the litigation. The objection is well taken, but it fails to buttress the
Bank’s case here.
16. This Court is cognizant of the legal position that a judgment is an authority for
what is actually decides and not what logically follows therefrom and that a little
25
difference in facts may lead to a different conclusion . However, it is equally well
settled that in order to derive the ratio decidendi of a case one would have to
ascertain the principle on which the case was decided inasmuch as it is the
26
principle on which the case was decided that binds as a precedent .
17. A reading of the judgments rendered in Mohd. Shariq (supra), Delhi Development
Authority (supra) and Viney Kumar Sharma (supra) would reveal that all of them
have been decided on the principle that it is the duty of the auctioneer-bank (or
auctioneer-public authority) to ensure a fair, open and competitive bidding process
inter alia by disclosing all known encumbrances and litigation concerning the
property before the auction takes place and that failure to do so would invalidate
the sale entitling the auction purchaser to claim refund of the consideration paid.
18. T he facts of the present case invite the direct application of the aforesaid principle
on which the Hon’ble Supreme Court decided the aforesaid cases. In the case at
hand too, it is undisputed that the Bank’s sale notice did not mention the pending
litigation. The SA pending before the Tribunal was a material litigation where not
only the measures taken by the Bank under Section 13(4) of the 2002 Act were
challenged but a subsequent challenge, to the very sale notice (which formed the
basis of the relevant auction) was also introduced by way of an IA, after the
publication thereof. Thus, it cannot be the case that the litigation was either
immaterial or unknown to the Bank.
19. Furthermore, the notice explicitly represented that no encumbrance was known to
the Bank, when the factual position was precisely the opposite. The order dated
January 10, 2023 passed by the Tribunal while dismissing the borrowers’ SA,
reveals that the auctioned property was tenanted. Such fact, therefore, constituted
25
Union of India vs. Chajju Ram; (2003) 5 SCC 568
26
Punjab Land Development and Reclamation Corpn. Ltd. vs. Labour Court; 1990 (3) SCC 682
Page 15 of 28
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a known encumbrance and accordingly, the same ought to have been mentioned in
the sale notice.
20. There is nothing on record to establish that the auction purchaser was aware of the
litigation and the encumbrances. Absence of appropriate pleading on the part of the
auction purchaser would not cure such a fundamental defect in the sale notice that
has been termed as a “material irregularity” by the Hon’ble Supreme Court.
21. Auction sales under the 2002 Act read with the 2002 Rules must strictly comply
with the provisions contained therein. The proviso to Rule 8(6) read with Appendix
IV-A thereof and Rule 8(7) of the 2002 Rules, which are relevant for the present
purpose, read in absolute mandatory terms. The statutory requirement of
disclosure of encumbrances and other material in the public sale notice is aimed at
protecting the intending purchasers. Any violation thereof would thus operate to
the severe detriment of the intending purchasers and would be a valid ground to
entertain the aggrieved purchaser’s claim for a full refund of the sale consideration
paid by it.
22. There is another way to look at the matter. Rule 9(6) of the 2002 Rules mandates
that the Authorized Officer shall on confirmation of sale and compliance with the
payment terms issue a certificate of sale in the form provided in Appendix V of the
2002 Rules. The form of sale certificate provided in Appendix V indicates that such
certificate should mention that “The sale of the scheduled property was made free
from all encumbrances known to the secured creditor listed below on deposit of the
money demanded by the undersigned ” and that the secured creditor “ has handed
.” Thus, delivery of
over the delivery and possession of the scheduled property
possession is an inseparable part of the sale process. That being so, the Bank
remains obliged to take appropriate steps to ensure expeditious delivery of
possession of the auctioned property to the auction purchaser. This would include
steps for the Bank itself taking actual physical possession of the property
23. The Bank filed its application under Section 14 of the 2002 Act before the District
Magistrate as far back as on April 19, 2022. There is no document on record to
show that the Bank took any proactive step to get the same disposed of after filing.
24. The property was put up for auction in November 2022 and sale certificate was
issued in February 2023. The first interim order that was passed in C.O. 553 of
2023 on May 17, 2023 actually did not prevent the Bank from taking steps for
getting its Section 14 application disposed of inasmuch as the said order only
stayed the operation of the order dated January 10, 2023 passed by the Tribunal
whereby the borrowers’ SA and IA were dismissed. The said order dated May 17,
Page 16 of 28
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2023 does not, in any manner, inhibit the possession taking process. The order
that actually prevented the Bank from taking possession came to be passed only on
September 23, 2023 which is about seven months after the issuance of sale
certificate. Taking the most conservative view too, three months had already
elapsed by the time even the first order dated May 17, 2023 was passed in the
revisional application. Nothing appears to have been done by the Bank in the
meantime. The Bank having realized the sale consideration from the auction
purchaser could not have wasted even a single day without taking appropriate
steps to get its Section 14 application disposed of.
25. While it is true that disposal of the application under Section 14 of the 2002 Act is
not in the hands of a Bank but nothing stops the Bank from pursuing its
application in the manner known to law. That would show its bona fide . The
situation in the present case is to the contrary. Records before this Court reveal an
order dated February 08, 2024 passed in the Section 14 proceeding (page 40 of the
Bank’s writ petition) which records thus:-
“Today was fixed for 3rd hearing i.e. 08.02.2024.
………… The Ld. Advocate of Secured Creditor stated that the borrower is a willful
defaulter and he neither paid any amount nor submitted any proposal for One Time
Settlement against his loan amount.
The Borrower prayed for some time as another chance for repayment of the said loan
and the Ld. Advocate of the Secured Creditors allowed him his prayer as last chance.
Hence it is ordered.
It is hereby directed the respondent borrower for amicable settlement as early as
possible from the communication of this order and in the meantime, both the parties are
directed to submit the outcome of the amicable settlement happened if any.
Fixed on 15/04/24 at 2.00 p. m for further hearing.
Let the copy of the order be served free of cost to the both side accordingly.”
26. It is significant to note that the secured asset had been sold to the auction
purchaser and sale certificate had been issued in his favour one year prior to the
said date. Such being the situation, there could have been no reason for the Bank
to agree to a postponement and allow the borrowers a “last chance” . The Court is
alive to the fact that an interim order of status quo passed by a Co-ordinate Bench
of this Court in C.O. 553 of 2023 was in operation at the said time but then that
was not the ground on which the hearing was postponed. This borders on a clear
breach of confidence and trust reposed by an auction purchaser in a Bank which is
duty bound to deliver possession of the auctioned property to the former.
27. The Bank has thus consistently failed in its duty as a secured creditor to deliver
possession of the auctioned property to the auction purchaser and this fact alone
would, in the facts of the present case, entitle the auction purchaser to refund of
Page 17 of 28
WPA 4255 OF 2025 & WPA 15541 OF 2025
the sale consideration. An auction purchaser under the framework of the 2002 Act
cannot be expected to wait indefinitely when the 2002 Act itself aims at expeditious
recovery of the financial asset upon sale of the secured asset which in turn
includes appropriate delivery of possession by the secured creditor to the auction
purchaser. In paragraph 46 of ITC Limited (supra), the Hon’ble Supreme Court
considered the provisions of Section 13(6) of the 2002 Act, which provides that any
transfer of the secured asset after taking possession thereof by the secured creditor
shall vest in the transferee all rights in, or in relation to, the secured asset
transferred as if transfer had been made by the owner of the secured asset and
then in paragraph 48 thereof held as follows:-
“ 48. In this case, the creditor did not have actual possession of the secured asset but
only a constructive or symbolic possession. The transfer of the secured asset by the
creditor therefore cannot be construed to be a complete transfer as contemplated by
Section 8 of the Transfer of Property Act. The creditor nevertheless had a right to take
actual possession of the secured assets and must therefore be held to be a secured
creditor even after the limited transfer to the auction-purchaser under the agreement.
[Dated 25-2-2015] Thus, the entire interest in the property not having been passed on to
the creditor in the first place, the creditor in turn could not pass on the entire interest to the
auction-purchaser and thus remained a secured creditor in the Act.”
28. The said judgment was clarified by the Hon’ble Supreme Court later on in the case
27
of Hindon Forge (P) Ltd. vs. State of U.P. , by observing that a secured creditor
remains a secured creditor even after possession is taken over as the fiction
contained in Section 13(6) does not convert the secured creditor into the owner of the
asset, but merely vests complete title in the transferee of the asset once transfer
takes place in accordance with Rules 8 and 9 of the 2002 Rules. It, thus needs to be
noted that complete title vests in the transferee only if the transfer takes place in
accordance with Rules 8 and 9 of the 2002 Rules . Since the Bank has failed in its
duty to effect transfer of the auctioned property in accordance with law, refund of
the sale consideration remains the only option.
29. It was argued by the Bank that as no challenge has been thrown to the sale, refund
of the sale consideration cannot be granted. In the instant case, since there is an
evident breach of the mandatory requirements of Rule 8(7) it cannot be said that
transfer has taken place in accordance with the 2002 Rules. The sale certificate
issued by the Bank would therefore be of no consequence. A similar objection as
the one raised by the Bank in the present case had also been raised by another
28
Ku Chih Choi vs. Central Bank of India
Bank in the case of where a Co-
27
(2019) 2 SCC 198
28
2023 SCC OnLine Cal 136
Page 18 of 28
WPA 4255 OF 2025 & WPA 15541 OF 2025
ordinate Bank of this Court had brushed aside such objection in the wake of the
Bank’s unpardonable conduct in the following words:-
“ 15. The other point raised on behalf of the Bank through learned counsel is directed
against the concerned District Magistrate for failing to act under section 14 of the
SARFAESI Act, 2002 and the Rules thereunder. Counsel has attributed knowledge on the
part of the petitioner of the nature of the possession of the property on the date of sale.
Counsel also urges that the money cannot be refunded to the petitioner in the absence of a
challenge to the sale certificate issued by the Bank. None of these points offer a
satisfactory answer to the irresponsible and fraudulent conduct on the part of the Bank in
persuading the petitioner to part with Rs. 35 lacs in July and September, 2014, for
th
executing a Sale Certificate of the secured asset in favour of the petitioner on 29
September, 2014 but failing to deliver the property to the petitioner for eight years
thereafter. The Bank has also attempted to frustrate the recourse taken by the petitioner
by filing a subsequent writ petition with reliefs which are clearly an afterthought and
vexatious with reference to the conduct of the Bank in the interregnum.”
(Emphasis supplied)
30. In any case once the Court finds that the sale notice itself is invalid, the entire
action on the basis of such notice would fall and a further challenge to the sale
certificate would be unnecessary. Furthermore, in the present case the sale
certificate is also equally discrepant, in that it discloses “NIL” encumbrances.
31. The Bank’s assertion that the auction purchaser must approach either a Civil
Court or the Tribunal to seek annulment of the sale is legally sound and it could,
therefore, have persuaded this Court to direct the auction purchaser to take the
Tribunal route if there was any disputed question of fact that required decision on
evidence. However, when it is not in dispute that the sale notice lacks the
mandatory disclosures and is consequently violative of Rule 8(7) of the 2002 Rules
and where it has been established from the sequence of events and the material on
record that the Bank’s conduct, as a public authority, is not above board and it
does not meet the standards of fairness expected of an instrumentality of the State,
there is no reason to send the auction purchaser to the alternative forum and
prolong the litigation. In fact, in Mohd. Shariq (supra) the Hon’ble Supreme Court
considered the same objection and rejected the same in the following words:-
“ 25. We are of the considered view that once there is no dispute on the facts that
came on record, there appears no reason for the appellant to be relegated to avail other
remedial mechanisms for recovery of the undisputed amount and the Division Bench has
committed a manifest error in the facts and circumstances in not exercising its power
under Article 226 of the Constitution and instead of resolving the dispute, the Division
Bench under the impugned judgment has kept the issue alive, permitting the parties to
have a second innings in reference to the dispute which stands crystallised/settled.”
(Emphasis supplied)
Page 19 of 28
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32. Both PHR Invent Educational Society (supra) and Celir LLP. (supra) cited by the
Bank reiterate and instruct that High Courts should not entertain petitions under
Article 226 of the Constitution if effective remedy is available to the aggrieved
person under the provisions of the SARFAESI Act. The salutary legal principle
reiterated by the Hon’ble Supreme Court in the said cases cannot come to the aid
of the Bank in the facts of the present case where, as already indicated above, the
now incurable defect in the sale notice is undisputed and the Bank’s conduct has
been found to have fallen short of all the standards of fairness and transparency.
Furthermore, it must also be noticed that in none of the said cases refund was
sought by an auction purchaser, who is a third party stranger to the main loan-
transaction between the Bank and the borrower, which conversely was the case in
Mohd. Shariq (supra). In fact, in both PHR Invent Educational Society (supra)
as well as Celir LLP. (supra) writ petitions had been entertained by the respective
High Courts at the instance of the borrowers which adversely affected the interests
of the auction purchasers.
33. The Bank had vociferously argued that this Court should not entertain the
petitioner’s prayer for refund in the absence of pleadings as regards lack of
knowledge and fraud or misrepresentation. In Baliram (supra), the Hon’ble
Supreme Court has held that substantive justice cannot be allowed to be trumped
by technicalities if the record before the High Court clearly evinces entitlement of
the suitor to a wider relief, than what is claimed. Paragraphs 43 and 44 of the said
judgment are especially relevant in the facts of the present case:-
“ 43. One of the exceptions is when the court is convinced that the petitioner is legally
entitled to more than what has been claimed, but might have claimed less due to ignorance
or bona fide mistake or inelegant drafting of the writ petition by his lawyer. Since
substantive justice cannot be allowed to be trumped by technicalities, if the record before
the high court clearly evinces entitlement of the suitor to a wider relief than what is
claimed, the opponent is put on notice and he/it has no answer, much less adequate
answer, and thereby, no prejudice is caused to him/it, and it is found that the opponent is
seeking to use a procedural technicality as a shield for its own statutory breach, the court
in an appropriate case may, in its discretion, grant such relief as the suitor is found
entitled.
44. However, there is a need to sound a word of caution. While the high courts are
expected to stick to the pleadings and the prayers, and not wander beyond, by observing
the rule of discipline that exists to prevent judicial overreach and surprise, the exception to
the rule of doing justice despite deficient pleadings in a writ petition ought to be sparingly
invoked and judiciously applied where the law and the record disclose a clear entitlement
of the suitor and the court is convinced that upholding the plea raised by the opponent,
based on technicality, would defeat the right. A judge who ignores both the rule and the
exception, ends up either shackled by technicality or exposes himself to be accused of
judicial activism.”
Page 20 of 28
WPA 4255 OF 2025 & WPA 15541 OF 2025
(Emphasis supplied)
34. The present case is clearly one where the Bank which acted in clear breach not
only of the mandate of Rule 8(7) but also of the auction purchaser’s trust and
confidence, as already discussed hereinabove, is seeking to use a procedural
technicality as a shield for its own statutory breach. The auction purchaser has not
been able to get possession of the auctioned property till today, i.e., even after
elapse of almost three years despite having paid the entire sale consideration.
Although the auction purchaser had taken a specific stand before this Court,
during the hearing of CAN 2 of 2024 filed in connection with C.O. 553 of 2023, that
he was misrepresented by the Bank and had sought for refund of the sale
consideration, the said pleading is not there in the writ petition, which persuades
this Court to believe that the writ petition is a product of “ inelegant drafting” . The
very fact that the Bank has taken a specific stand (albeit without any supporting
evidence) in its affidavit in opposition that the auction purchaser was aware of the
pending litigation hints that the Bank knew the pith of the case run by the auction
purchaser. There is no answer forthcoming from the Bank as to why has the sale
notice been published in abject defiance of Rule 8(7) of the 2002 Rules.
35. It cannot be lost sight of that the sale notice published by the Bank, a public
authority, is a notice to the public at large. The very opening words of the notice in
Appendix IV-A of the 2002 Rules i.e. “Notice is hereby given to the public in general
and ….” make it evident that the notice is meant for the public in general. Public
authorities being custodians of public trust cannot be permitted to act unfairly or
play truant with the Rules. It is precisely for such reason that the Hon’ble Supreme
Court expressed its displeasure in paragraph 5 of Viney Kumar Sharma (supra) in
the following words:-
“ 5. We are very much disturbed to note that when the plot in question was put to
auction by The Improvement Trust, Ludhiana (for short “the Trust”), the fact about
pendency of litigation was not disclosed before the parties who offered their bids in the
public auction . ”
(Emphasis supplied)
36. In the considered view of this Court, the facts of this case fully satisfy the
conditions mentioned by the Hon’ble Supreme Court in paragraph 43 of Bali Ram
(supra). Consequently, the auction purchaser’s prayer for refund cannot be
declined on the ground of lack of appropriate pleadings.
37. The judgments in the case of Bachhaj Nahar (supra) and Anathula Sudhakar
(supra) instruct that no amount of evidence can be looked into to grant any relief
on a plea that is not put forward in the pleadings. The said principle is rooted in
Page 21 of 28
WPA 4255 OF 2025 & WPA 15541 OF 2025
fairness of the adversarial system. The same cannot help the Bank in the facts of
the present case where the Bank being a public authority is itself at fault and is
seeking to take advantage of its own wrong by hiding behind technicalities.
Furthermore, as already discussed hereinabove, the gravely irresponsible conduct
of the Bank alone entitles the auction purchaser to exit the sale transaction in the
instant case.
38. In Allahabad University & Ors. (supra), the Hon’ble Supreme Court while taking
note of several authorities including Bachhaj Nahar (supra) and Bharat Singh
29
vs. State of Haryana held that it is well-nigh impermissible for the Writ Court to
conjecture or surmise and make out a third case not pleaded by the parties based
on arguments advanced in the course of hearing. The principle reiterated by the
Hon’ble Supreme Court in the said judgment is salutary but the same does not
come to the aid of the petitioner in the factual matrix of the present case as already
discussed hereinabove, where the reprehensible conduct of the Bank itself, without
anything more, would justify the auction purchaser’s claim for refund of the sale
consideration. Moreover, the auction purchaser has been found to be entitled to
refund in terms of the dictum of the Hon’ble Supreme Court in the case of Bali
Ram (supra).
39. For the same reasons as indicated in the immediately preceding paragraphs, the
judgment in the case of Iswar Dutt (supra), which mandates that although the
High Court has wide power in terms of Section 107 of the Code of Civil Procedure,
1908, it cannot go outside the pleadings and make out a new case, also cannot
support the Bank’s case.
40. In Afsar Sheikh & Anr. (supra) it was reiterated that undue influence, fraud,
misrepresentation must be separately pleaded with specificity, particularity and
persistence. The legal position on such score is very clear and the principle of law
on this point is well settled but the same, again, would not assist the Bank in the
present case since the materials on record demonstrate fatal non-disclosures in the
auction sale notice which amounts to material irregularity as held by the Hon’ble
Supreme Court in the case of Viney Kumar Sharma (supra).
41. In Sanjay Sharma (supra) it was asserted that sale by way of public auction
cannot be set aside until there is a material irregularity or illegality committed in
holding the auction or such auction was vitiated by any fraud or collusion. The said
judgment thus recognizes that material irregularity or illegality are valid grounds to
29
(1988) 4 SCC 534
Page 22 of 28
WPA 4255 OF 2025 & WPA 15541 OF 2025
set aside an auction sale. Such illegality and material irregularity have been
established in the present case.
42. Both Celir LLP. (supra) and PHR Invent Educational Society (supra) stress on
the sanctity of the auction process and instruct that confirmed auction sale can be
interfered with on limited grounds. The same does not aid the Bank in the present
case since the Bank itself has been responsible for defiling the auction process in
the case at hand by issuing an invalid sale notice and a discrepant sale certificate.
The said judgments are aimed at protecting auctions conducted in accordance with
the Rules. Such is not the case here.
43. In this context, the following observations of the Hon’ble Supreme Court in the case
30
of Sterling Holiday Resorts Ltd. vs. P.M. Associates , deserve notice: -
“ 33. We are conscious that this Court has repeatedly emphasised the sanctity of auction
sales and has cautioned against lightly setting aside confirmed sales, lest public
confidence in such sales be eroded. However, the principle of finality presupposes an
auction conducted in accordance with law. The same line of authority recognises that a
sale vitiated by material irregularity, fraud, or non-compliance with the mandatory
statutory procedure does not attract that protection and may be set aside even after
confirmation. Sanctity is the reward of legality, not a substitute for it. The decisions relied
upon by the Purchaser concerned auctions, whose legality was not in doubt and are,
therefore, of no assistance to it.”
(Emphasis supplied)
44. Similarly in the case of E. Muthurathinasabathy v. Sri International the Hon’ble
Supreme Court held as follows:-
“ 40. While the rights of a bona fide auction purchaser and the sanctity of a confirmed
sale ordinarily merit protection, such protection is not absolute and must yield where the
sale process itself is shown to be legally infirm or incongruous with the extant statutory
framework. In the present factual milieu, where the completion of the sale was delayed
beyond stipulated timelines due to judicial interventions and procedural constraints, and
where such delay is not attributable to the borrowers, the mere factum of confirmation
cannot preclude judicial scrutiny. The raison d'être of proceedings under the SARFAESI
Act is not the mechanical completion of a sale, but the lawful realisation of the secured
asset in a manner that is fair, transparent, and conducive to securing the best possible
value while balancing the interests of all stakeholders involved. If the process suffers
from material irregularities or fails to conform to mandatory requirements, thereby
rendering the sale inchoate, the Court would be justified in intervening, particularly
where the borrower has, in the interregnum, discharged the outstanding liability, so as to
obviate disproportionate deprivation of property and uphold substantive justice.”
(Emphasis supplied)
45. The auction purchaser will thus be entitled to refund of the entire sale
consideration. The sale certificate dated February 28, 2023 shall lose all force and
be of no consequence at all. The Bank shall, therefore, be entitled to put up the
30
2026 SCC OnLine SC 2039
Page 23 of 28
WPA 4255 OF 2025 & WPA 15541 OF 2025
secured asset for sale in accordance with law. However, insofar as the interest
thereon is concerned, this Court is of the view that the auction purchaser’s
entitlement thereto is somewhat curtailed in equity, since the auction purchaser
delayed seeking a refund on his own accord. The auction purchaser got clear
knowledge of the litigation when the borrower’s civil revisional application was
served upon him. However, he filed the writ petition seeking refund only on
February 20, 2025. He shall accordingly be entitled to simple interest on the sale
consideration at the highest fixed deposit rate offered by the Bank from February
20, 2025 till the date of refund of the entire sale consideration to him by the Bank.
46. As regards, the writ petition filed by the Bank, this Court finds sufficient strength
in the submissions of the Bank that the borrowers have no ground to stand and
object to a writ petition seeking expeditious disposal of the Bank’s Section 14
application. Indeed, when “ the powers exercisable by CMM/DM under Section 14 of
the S ARFAESI Act are ministerial steps and Section 14 does not involve any
adjudicatory process qua points raised by the borrowers against the secured creditor
taking possession of the secured assets” as held by the Hon’ble Supreme Court in
31
the case of Balkrishna Rama Tarle vs. Phoenix ARC (P) Ltd . , there can be no
justification to allow the borrowers to object to the Bank’s present writ petition for
speedy disposal of its Section 14 application. However, since the borrowers have
been impleaded as parties in the Bank’s writ petition, this Court has heard them.
47. The objections taken by the borrowers are of little substance. The borrowers’
objections that the Bank’s pleadings in the writ petition are punctuated with
misleading particulars and suffer from suppression (especially those indicated in
serial nos.1, 4, 7, 8, 10, 11, 12 and 14) may appear to be substantial on surface
but are actually of no consequence. The Bank’s pleadings are defective in
particulars but not in foundation. To wit, it is not in dispute that the Bank has
classified the borrower’s account as an NPA; it is not in dispute that the statutory
notice of demand is in existence and it is not in dispute that the bank is in
symbolic possession of the mortgaged property. What is in dispute is the legality of
the statutory notice of demand, the quantum of loan repayable and the measures
undertaken under Section 13(4) of the 2002 Act. The defect or omissions of
particulars can be taken note of from the annexures and other material on record,
especially when no decision on merits of the Section 14 application is to be taken
by this Court. This is exactly where the instructive judgment of the Hon’ble
31
(2023) 1 SCC 662
Page 24 of 28
WPA 4255 OF 2025 & WPA 15541 OF 2025
Supreme Court in the case of Bali Ram (supra) becomes the guiding light. The
relevant paragraphs of the said judgment have already been extracted hereinabove.
48. As regards the borrowers’ assertion that the property is under custodia legis, since
a receiver has been appointed over the same by the Tribunal on the Bank’s prayer
in the OA filed by the Bank, in the considered view of this Court the same would
also not stand in the way of the District Magistrate disposing of the application
under Section 14 of the 2002 Act in accordance with law.
49. It is the borrowers’ own case as recorded in the order dated January 10, 2023
passed by the Tribunal in the borrowers’ SA that the receiver has been collecting
rent from the tenants at the mortgaged property. It is again the borrowers’ own
case in the affidavit in opposition to the Bank’s writ petition that the borrowers are
in occupation of the mortgaged property along with their family and other
occupants. It is thus evident from the material on record that the receiver is only in
symbolic possession of the property in question.
50. It is well settled that if the receiver is only in symbolic possession of a property and
any action qua the property is taken, such action would not be treated as void or in
breach of custodia legis unless the receiver himself takes an objection thereto after
getting notice of the act. It is not for the borrowers to challenge the same. In such
connection the following observations of the Hon’ble Division Bench of this Court in
the case of Bengal Peerless Housing Development Co. Ltd. vs. Gopeswar
32
Prasad Agarwal , which were made after relying on the observations of the
33
Hon’ble Supreme Court in the cases of Kanhaiyalal vs. Dr. D.R. Banaji and
34
Anthony C. Leo vs. Nandlal Bal Krishnan deserve notice:-
“ 32. This brings us to the next question as to whether the leave of the Court was
required to be taken by the State Government and its authorities before proceeding under
section 3(1) and section 4 of Act II of 1948. The learned Single Judge has held that the
proceedings taken for requisition and acquisition of the land without obtaining leave of the
Court was contemptuous, and, accordingly, quashed the same. In arriving at the aforesaid
conclusion the learned Single Judge relied on the two decisions of the Hon'ble Supreme
Court in Kanhaiyalal's case (supra) and in the case of Anthony C. Leo (supra) referred to on
behalf of the writ petitioner. In the first of the two cases a sale of a property in possession
of the Receiver was under consideration and it was held that although such a course of
action was illegal, in the absence of notice to the learned Receiver the sale would only be
voidable and not void ab initio. In the second case the Hon'ble Supreme Court was called
upon to decide the question as to whether a Receiver appointed by Court can interfere with
the rights of a third party. While considering the above question, the Hon'ble Supreme
Court went on to observe that where a Receiver appointed by the Court is in actual
physical possession of the property, his possession cannot be disturbed without the leave
32
2002 SCC OnLine Cal 227 : (2002) 2 CHN 522
33
AIR 1958 SC 725
34
(1996) 11 SCC 376
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WPA 4255 OF 2025 & WPA 15541 OF 2025
of the Court. But it was also observed that the said Rule would not be applicable if the
Receiver was not holding physical possession of the property.
33. In Kanhaiyalal's case the Hon'ble Supreme Court was of the view that since the
Receiver did not take any steps inspite of having notice of the outstanding Government
dues and allowed the auction sale to be held for non-payment of such dues, the auction
sale could not be said to be invalid.
34. In our view, the same principle would also apply in the instant case since the
learned Joint Receivers claim to have taken possession of the property in question prior to
the issuance and service of the order under section 3(1) of Act II of 1948. Having regard to
the provisions of Rule 3(d) of 1948 Rules, it must be deemed that the Receivers had notice
of the said order and did not raise any objection to the intended requisition and acquisition
inspite of having notice of the same.
35. Applying the principles of Kanhaiyalal's case, we are inclined to hold that in the
absence of any objection from the side of the Joint Receivers, the requisition and
subsequent acquisition, without the prior leave of the Court, was not invalid. If, on the
other hand, the learned Joint Receivers were not in actual physical possession of the land,
the principles explained by the Hon'ble Supreme Court in Anthony C. Leo's case become
applicable.”
(Emphasis supplied)
51. The other objections as regards an earlier Section 13(2) notice having been
withdrawn and the Bank having dropped an earlier action under the 2002 Act are
matters which have already been dealt with by the Tribunal in its order dated
January 10, 2023 and it is neither for the District Magistrate to consider the same
in a proceeding under Section 14 of the 2002 Act nor for this Court in the present
writ petitions.
52. In Prestige Lights Limited (supra), the Hon’ble Supreme Court held that a party
must place all facts before the Court without any reservation, and that if there is
suppression of materials fact or twisted facts have been placed, the Writ Court may
refuse to entertain the petition. The said judgment does not help the petitioner
inasmuch as there is nothing so material that has been suppressed before this
Court and which disclosed would have led to a contrary fate of the Bank’s writ
petition. The following observations in paragraph 13 of S.J.S Business
Enterprises (p) Limited (supra) are particularly relevant in such context. The
same are extracted hereinbelow:-
“ 13. As a general rule, suppression of a material fact by a litigant disqualifies such
litigant from obtaining any relief. This rule has been evolved out of the need of the courts to
deter a litigant from abusing the process of court by deceiving it. But the suppressed fact
must be a material one in the sense that had it not been suppressed it would have had an
effect on the merits of the case. It must be a matter which was material for the
consideration of the court, whatever view the court may have taken [R. v. General Commrs.
for the purposes of the Income Tax Act for the District of Kensington, (1917) 1 KB 486 : 86
LJKB 257 : 116 LT 136 (CA)] . Thus when the liability to income tax was questioned by an
applicant on the ground of her non-residence, the fact that she had purchased and was
maintaining a house in the country was held to be a material fact, the suppression of
which disentitled her to the relief claimed [Ibid.] . Again when in earlier proceedings before
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WPA 4255 OF 2025 & WPA 15541 OF 2025
this Court, the appellant had undertaken that it would not carry on the manufacture of
liquor at its distillery and the proceedings before this Court were concluded on that basis,
a subsequent writ petition for renewal of the licence to manufacture liquor at the same
distillery before the High Court was held to have been initiated for oblique and ulterior
purposes and the interim order passed by the High Court in such subsequent application
was set aside by this Court [State of Haryana v. Karnal Distillery Co. Ltd., (1977) 2 SCC
431 : AIR 1977 SC 781] . Similarly, a challenge to an order fixing the price was rejected
because the petitioners had suppressed the fact that an agreement had been entered into
between the petitioners and the Government relating to the fixation of price and that the
impugned order had been replaced by another order [Welcom Hotel v. State of A.P., (1983)
4 SCC 575 : 1983 SCC (Cri) 872 : AIR 1983 SC 1015].”
(Emphasis supplied)
53. In K.D. Sharma (supra), the Hon’ble Supreme Court emphasized that the
petitioner must approach the Writ Court with clean hands. The said judgment does
not help the borrowers inasmuch as when the Bank has produced all the relevant
records before this Court, discrepancies in pleadings especially with regards to the
particulars of amount, date etc. would not be sufficient to drive home a charge of
unclean hands.
54. As regards the borrowers’ assertion that the Bank has made a wrong disclosure as
regards the secured asset being tenanted, while this Court agrees with Bank that
the statutory affidavit required to be affirmed by a secured creditor in a proceeding
under Section 14 of the 2002 Act does not require the secured creditor to mention
anything about tenancy or encumbrance, yet, when a check-list is being submitted
by a public body like a nationalized Bank to a public authority or an executive
authority the Bank should be cautious enough to ensure that the details provided
are proper and accurate. The Bank shall therefore be at liberty to file an
appropriate supplementary check list and/or affidavit before the District Magistrate
detailing the correct factual position.
55. The District Magistrate, Purba Burdwan is directed to dispose of the Bank’s
application under Section 14 of the 2002 Act expeditiously but within a period not
more than a month from date, strictly in accordance with law. The authorities
under Section 14 of the 2002 Act should bear in mind that applications filed under
the said provisions must be attended to and disposed of with utmost expedition
and that the power exercisable by them under the said provision is ministerial and
not adjudicatory as held in Balkrishna Rama Tarle (supra) and reiterated in Mr.
Binay Chaudhary & Others (supra).
56. Maria Margarida Sequeira Fernandes & Others (supra) and Mohd. Abdullah
Azam Khan (supra) cited by the auction purchaser instruct that the Courts should
strive to find out the truth in order to dispense justice in accordance with law.
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WPA 4255 OF 2025 & WPA 15541 OF 2025
57. WPA 4255 of 2025 stands disposed of with a direction on the Bank to refund of the
entire sale consideration to the auction purchaser together with simple interest on
such sale consideration at the highest fixed deposit rate offered by the Bank from
February 20, 2025 till the date of refund of the said sale consideration to him by
the Bank. The sale certificate being of no consequence, the Bank shall be free to
proceed for sale of the secured asset again, in accordance with law. No costs.
58. WPA 15541 of 2025 is disposed of by directing the District Magistrate, Purba
Burdwan to dispose of the Bank’s application under Section 14 of the 2002 Act
expeditiously but within a period not more than a month from date, strictly in
accordance with law, keeping in mind the dictum of the Hon’ble Supreme Court in
the case of Balkrishna Rama Tarle (supra). No costs.
59. Urgent photostat certified copy of this judgment, if applied for, be supplied to the
parties on urgent basis after completion of necessary formalities.
(OM NARAYAN RAI, J.)
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