Rajani Ranjan Sahu vs Canara Bank
- Court
- Patna High Court
IN THE HIGH COURT OF JUDICATURE AT PATNA
Civil Writ Jurisdiction Case No.2503 of 2020
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Rajani Ranjan Sahu Son of Late Mukut Prasad Sahu Ex-Member of
Parliament (R.S.), Flat No.504, Nav Sansad Vihar, Plot No.4, Sector-22,
Dwarka, New Delhi- 110077.
... ... Petitioner/s
Versus
1. Canara Bank Exhibition Road, Patna- 800001, through its Chief Manager.
2. The Chief Manager, Authorized Officer, Canara Bank, Exhibition Road,
Patna.
3. M/s Ashok Auto Enterprises Pvt. Ltd., through its Director Neelam Sahu,
Wife of Sri Prabhat Sahu, Resident of 197-B, S.K. Puri, Patna, Registered
Office at Exhibition Road, P.S. Gandhi Maidan, District- Patna.
4. Mrs. Suman Parva Wife of Sri Madhup Kumar Singh Resident of B-4-103,
P.R.D.A., S.K. Puri, Patna- 800001.
5. The District Magistrate & Collector, Patna.
... ... Respondent/s
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Appearance :
For the Petitioner/s : M/s Nikhil Kumar Agrawal
Aditi Hansaria, Advocates
For the Respondent/s : Mr. Rajan Ghoshrave, Advcoate
Sanjay Kumar, Advocate
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C ORAM: HONOURABLE JUSTICE SMT. G. ANUPAMA CHAKRAVARTHY
ORAL JUDGMENT
Date : 10-09-2026
I.A. No. 1 of 2020:
1. I.A. No. 1 of 2020 is filed to amend the
prayer portion at paragraph 1 of the Writ petition due to
the subsequent developments as paragraph (b), (c) (d)
and (e) .
2. Accordingly, I.A. No. 1 of 2020 is hereby
allowed, amending the prayer portion. The reliefs
mentioned in paragraph No. 8 thereof would form part
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of the Writ petition.
C.W.J.C. No. 2503 of 2020
3. The petitioner has filed the instant
application for the following reliefs:
“(a). for issuance of Writ in the nature of
Writ of certiorari or any other appropriate
directions, Writ/Writs, direction/
order/orders to quash the entire sale action
of respondent Canara Bank including notice
dated 16.02.2015 under Securitization &
Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002,
sale certificate dated 14.12.2015 and
prohibit the Bank from handing over or
interfering with the petitioner's flat and for
further relief/reliefs as may be admissible
and found find fit by this Hon' ble Court.
"(b) For that forceful possession and
eviction of inmates of the petitioner's flat by
the respondent Bank with the help of local
administration in a bid to get collusive sale
concluded to be illegal and not sustainable
in the eyes of law.
(c) For that the Bank has malafide
proceeded to get the sale concluded to over
reach judicial scrutiny and after filing of the
Writ petition.
(d) The following may be added as party
respondent:
(i) District Magistrate & Collector, Patna.
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(e) The following prayer may be added to
the Writ petition:
It is, therefore, prayed that your Lordships
may graciously be pleased to issue Rule
NISI calling upon the respondents to show
cause (a) as to why possession of
petitioner's flat is not restored immediately
and petitioner duly compensated for the
loss as well as mental agony suffered by
him at by this advance age and (b) as to
why the respondents or persons responsible
for such misdemeanor is not punished and
after hearing the parties and considering
the show cause, if any, be further pleased
to make the Rule absolute and grant the
relief sought for:
4. The brief facts culled out of the Writ petition
are that the petitioner had stood guarantor for the loan
granted by the respondent-Bank to M/s Ashok Auto
Enterprises Pvt. Ltd. and had offered his 2000 sq. ft. flat
situated at S.P. Verma Road, Patna, as security.
Subsequently, the loan was restructured and fresh
accommodation was sanctioned by the Bank on
10.11.2011/ and communicated vide order dated
11.02.2012, but the petitioner did not renew or extend
his guarantee. It is the petitioner's case that, thereafter,
there were substantial variations in the loan
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arrangement without his knowledge or consent,
whereby he stood discharged from his liability as
guarantor.
5. The petitioner further asserts that, despite
such discharge, the respondent-Bank proceeded under
the SARFAESI Act and sold his flat in the year 2015.
According to the petitioner, no statutory notice under
Section 13(2) or possession notice was duly served
upon him. It is also alleged that the property, valued at
Rs.71.30 lakh in 2011, was subsequently sold for only
Rs.28.60 lakh against a reserve price of Rs.27.60 lakh.
The petitioner also challenges the sale on the ground
that the successful bidder did not deposit the required
15% of the sale consideration within the prescribed
time and that the delay was illegally condoned by the
Bank.
6. The Learned counsel for the petitioner
submits that the petitioner stood discharged from his
liability as guarantor on account of material variation
and restructuring of the loan without his consent.
Therefore, the respondent-Bank had no authority to
proceed against the petitioner's property under the
SARFAESI Act. It is further submitted that the sale is
vitiated for non-service of mandatory statutory notices,
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violation of principles of natural justice, gross
undervaluation of the property and non-compliance
with the requirement regarding deposit of the sale
consideration. On these grounds, the Learned counsel
seeks appropriate relief against the impugned action of
the respondent-Bank.
7. A counter affidavit was filed on behalf of the
respondent CANARA Bank. The Learned counsel for the
respondent-Bank, on the other hand, submits that the
petitioner was never discharged from his liability under
the guarantee merely because the loan account was
subsequently rescheduled or fresh guarantees were
obtained from other persons. It is submitted that the
petitioner's liability continued in terms of the guarantee
agreement executed by him and there was neither any
request by the petitioner for discharge nor any
communication by the Bank releasing him from such
liability.
8. It is further submitted that the petitioner's
property was revalued on 06.07.2015 by a registered
valuer and, owing to the prevailing market conditions,
its value was lower than the valuation made in 2011.
The allegation of undervaluation is, therefore, denied.
9. The Learned counsel further submits that
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the Bank proceeded against the secured property in
accordance with the provisions of the SARFAESI Act and,
after following the prescribed procedure, sold the
property and issued the sale certificate dated
14.12.2015 in favour of the auction purchaser. It is
contended that there is no violation of the provisions of
the SARFAESI Act or the principles of natural justice.
10. Lastly, the Learned counsel submits that
the Writ is not maintainable in view of the efficacious
alternative remedy available to the petitioner under the
SARFAESI Act and, therefore, the Writ petition is liable
to be dismissed.
11. A counter affidavit was filed on behalf of
the respondent No. 4. The Learned counsel for
respondent No. 4 submits that the Writ petition is highly
belated and has been filed several years after issuance
of the sale certificate dated 14.12.2015 and after
possession of the property had already been handed
over to respondent No. 4. It is submitted that the
petitioner had knowledge of the auction and sale of the
property and has approached this Court only when the
Bank subsequently sought recovery of the outstanding
dues from him.
12. The Learned counsel further submits that
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the petitioner has suppressed material facts,
particularly the earlier proceedings initiated by the
borrower and another guarantor, which were dismissed
by this Court, and the subsequent proceedings before
the Debt Recovery Tribunal. According to the Learned
counsel, the present Writ is only an attempt to reopen
the issues relating to the auction sale and to obstruct
the recovery proceedings.
13. It is further submitted that respondent No.
4 is a bona fide auction purchaser and had purchased
the property in an open auction conducted by the Bank.
The allegation of collusion or fraud is wholly baseless.
The valuation of the property was based on the
prevailing market value/MVR at the relevant time, and
respondent No. 4 had no role in fixing the reserve price
or conducting the auction.
14. The Learned counsel also submits that the
alleged non-deposit of 15% of the sale consideration, if
any, is a matter between the Bank and the auction
purchaser and cannot, by itself, be used by the
petitioner to challenge the sale, particularly when the
Bank accepted the payment and issued the sale
certificate. It is further submitted that the petitioner
cannot take advantage of his age or visual impairment
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to challenge a transaction after an unexplained delay.
15. Lastly, the Learned counsel submits that
respondent No. 4 is already in possession of the
property and has inducted a tenant therein. Since the
sale has already been completed and possession
delivered, no effective relief as sought in the Writ
petition can now be granted. The Writ petition is,
therefore, liable to be dismissed with costs.
16. A rejoinder to the counter affidavit filed on
behalf of respondent Canara Bank was filed by the
petitioner. The Learned counsel for the petitioner, in
reply, submits that the Bank has not specifically
answered the petitioner's case regarding the fresh
sanctions granted to the principal debtor without
obtaining any fresh guarantee from the petitioner. It is
submitted that after the original guarantee,
fresh/additional financial facilities were sanctioned on
11.02.2012 and again on 10.04.2013 on revised terms,
and the latter sanction specifically contemplated
guarantees of persons other than the petitioner. The
petitioner, therefore, submits that his liability could not
have been extended to such subsequent facilities.
17. The Learned counsel for the petitioner
further submits that the Bank's explanation regarding
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the fall in the value of the petitioner's property is wholly
unconvincing. It is pointed out that, whereas the value
of the petitioner's property was substantially reduced
for fixing the reserve price, the valuation of another
secured property of the principal debtor's husband was
substantially increased during the same period.
According to the Learned counsel, this comparative
valuation casts serious doubt on the manner in which
the reserve price of the petitioner's property was fixed.
18. It is next submitted that the terms of the e-
auction notice required the successful bidder to deposit
25% of the bid amount, inclusive of the EMD,
immediately upon acceptance of the bid. Against the
bid of Rs.28.60 lakh, respondent No. 4 was thus
required to deposit Rs.7.15 lakh immediately, whereas
only Rs.3 lakh had been deposited. The balance amount
was admittedly paid later. The Learned counsel submits
that instead of taking action in accordance with the
auction terms, the Bank permitted the delayed
payment, which further supports the petitioner's
allegation regarding the manner in which the sale was
conducted.
19. The Learned counsel for the respondent-
Bank, by way of supplementary submissions, reiterates
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that the Writ petition is not maintainable in view of the
statutory and efficacious remedy available to the
petitioner under the SARFAESI Act against the measures
taken by the Bank.
20. It is further submitted by the Learned
counsel for the respondent Bank that the petitioner was
not discharged from his contractual liability as
guarantor merely because the loan was rescheduled or
fresh guarantees were obtained from other persons.
The Bank asserts that it never released the petitioner
from his guarantee liability.
21. As regards the valuation, the Learned
counsel for the respondent Bank submits that the
property was an old and weak structure and was
revalued on 06.07.2015 by a registered valuer. Its lower
valuation in 2015, as compared to the valuation made
in 2011, was attributable to the condition of the
property and the prevailing market conditions.
22. The Learned counsel for the respondent
Bank further submits that the Bank had duly complied
with the provisions of the SARFAESI Act and that the
petitioner was aware of the recovery proceedings. It is
pointed out that the auction took place in 2015,
whereas the present Writ was filed after about five
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years. In the meantime, the borrower and another
guarantor had already approached this Court and
thereafter the Debt Recovery Tribunal, Patna, where
their securitisation applications are pending.
23. It is, therefore, submitted by the Learned
counsel for the respondent Bank that entertaining the
present Writ may affect the pending proceedings before
the Debt Recovery Tribunal and that the petitioner
ought to be relegated to the statutory remedy available
under the SARFAESI Act. On these grounds, the Learned
counsel seeks dismissal of the Writ petition.
24. A rejoinder to the supplementary counter
affidavit of respondent Bank was filed on behalf of the
petitioner. The Learned counsel for the petitioner
submits that the supplementary counter affidavit does
not specifically answer the petitioner's principal
grievance regarding non-service of the statutory notices
and violation of the principles of natural justice.
25. It is further submitted that the Bank's
explanation regarding the valuation of the property is
not supported by any convincing material. The
petitioner relies upon the substantial difference
between the earlier valuation and the reserve price
fixed in 2015 and submits that the manner in which the
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valuation was reduced requires scrutiny.
26. The Learned counsel for the petitioner
further submits that the Bank's own communication to
the District Magistrate seeking possession proceeded
on the basis that the petitioner's property was security
for the loan of Rs.75 lakh sanctioned in 2011, although,
according to the petitioner, he had not guaranteed the
said subsequent loan. This, according to the petitioner,
raises a serious question regarding the authority of the
Bank to proceed against his property.
27. It is also submitted by the Learned counsel
for the petitioner that the Bank permitted the auction
purchaser to make the required deposit belatedly,
despite the terms of the auction and the statutory
requirement, and thereafter obtained possession of the
property through the District Magistrate. According to
the Learned counsel, these circumstances, coupled with
the alleged suppression and inconsistent stand of the
Bank, prima facie require investigation.
28. The Learned counsel for the petitioner,
therefore, submits that the case involves more than a
mere disputed valuation or recovery proceeding and
warrants exercise of the Writ jurisdiction of this Court,
including appropriate inquiry into the alleged
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irregularities in the sale.
29. A rejoinder to the supplementary counter
affidavit of respondent No. 4 was filed on behalf of the
petitioner. The Learned counsel for the petitioner
submits that the allegation of delay and suppression
made by respondent No. 4 is misconceived. According
to the petitioner, he approached this Court promptly
after acquiring knowledge of the sale, and possession of
the flat was taken through the State authorities only
thereafter, on 28.01.2020. The petitioner has
accordingly sought restoration of possession by way of
the pending interlocutory application.
30. The Learned counsel for the petitioner
further submits that respondent No. 4 cannot claim to
be a bona fide purchaser unaffected by the alleged
irregularities in the auction, particularly when she was
the sole bidder and the Bank accepted the balance sale
consideration after the time prescribed in the auction
notice had expired. It is submitted that against the bid
of Rs.28.60 lakh, 25% of the bid amount was required
to be deposited immediately, but only Rs.3 lakh had
been deposited initially and the balance was accepted
later by the Bank.
31. It is also submitted by the Learned counsel
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for the petitioner that the documents relied upon by the
petitioner disclose that the Bank sought possession
from the District Magistrate by stating that the
petitioner was guarantor for the loan of Rs.75 lakh,
which fact is specifically disputed by the petitioner.
According to the Learned counsel for the petitioner, this
circumstance further supports the petitioner's
contention that the sale and subsequent possession
were founded on an erroneous and unauthorized action
of the Bank.
32. The Learned counsel for the petitioner,
therefore, submits that the objections of respondent No.
4 regarding delay, possession and bona fide purchase
do not answer the material irregularities alleged by the
petitioner and that the relief sought in the Writ petition,
including restoration of possession, deserves
consideration.
33. A supplementary counter affidavit was
again filed on behalf of the respondent Bank. The
Learned counsel for the respondent-Bank, while
referring to the averments made in the counter affidavit
and supplementary counter affidavit, submitted that
the allegations levelled by the petitioner are bald,
misleading, misconceived and baseless. It was
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contended that the proceedings initiated by the Bank
under the provisions of the SARFAESI Act, 2002 were
lawful and in accordance with the prescribed procedure.
34. It was further submitted by the Learned
counsel for the respondent-Bank that the petitioner has
suppressed material facts and has incorrectly alleged
that he was neither a guarantor nor liable in respect of
the loan account of the principal debtor. According to
the Bank, the action taken against the secured asset,
including issuance of notice, taking over possession and
subsequent sale, was undertaken in exercise of the
powers available to the Bank under the SARFAESI Act
and the Security Interest (Enforcement) Rules, 2002.
35. The Learned counsel for the respondent-
Bank further submitted that the allegations of collusion,
fraud, mala fide exercise of power and undervaluation
of the property are wholly unfounded and have not
been substantiated by any cogent material. The
allegation that the property was deliberately sold at a
throwaway price or that the auction purchaser and the
Bank acted in collusion was also denied.
36. It was also submitted by the Learned
counsel for the respondent-Bank that the petitioner
cannot seek restoration of possession or challenge the
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measures taken under the SARFAESI Act by way of the
present Writ petition, particularly when the statute
provides an efficacious alternative remedy against such
measures.
37. With regard to the alleged non-payment of
25% of the bid amount by the auction purchaser, the
Bank disputed the petitioner’s interpretation of the
relevant provisions and maintained that the sale was
not rendered invalid on the grounds alleged by the
petitioner.
38. The Learned counsel accordingly submitted
that the Writ petition, as well as the interlocutory
application seeking restoration of possession, lack merit
and are liable to be dismissed.
39. Having considered the rival submissions
and perused the materials available on record, this
Court finds substance in the contention of the
petitioner.
40. The documents produced by the Bank itself
disclose that the loan was sanctioned on 10.11.2011,
whereas Annexure-5 records the date of sanction as
"11.02.2012". Significantly, the said document refers to
the continuation of the equitable mortgage of the flat in
question and, in the particulars of collateral securities,
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the property which is the subject matter of the present
proceeding has been shown as collateral security. The
document also refers to the earlier loan of 2009.
However, the Bank has not placed on record any fresh
guarantee executed by the petitioner in respect of the
subsequent financial accommodation sanctioned on
revised terms.
41. The stand of the Bank that the petitioner
continued to remain liable merely because he had not
sought his discharge does not, in the facts of the
present case, satisfactorily answer the specific
contention of the petitioner that the subsequent
financial facilities were sanctioned on materially altered
terms without his consent with regards to the liability of
a guarantor being founded upon the terms of the
guarantee, the Bank was required to demonstrate that
the petitioner's guarantee continued to cover the
subsequent accommodation against which the disputed
property was proceeded against. The mere mentioning
of the particulars of guarantor/co-obligant in Form NF-
589, Annexure-R/1, does not by itself establish that the
petitioner had consented to or guaranteed the
subsequent enhanced/restructured facilities.
42. It is further significant that the Bank has
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relied upon the disputed property as security for the
subsequent loan facility, while the petitioner specifically
disputes having stood guarantor for such subsequent
facility. In the absence of any cogent document
evidencing the petitioner's consent to the altered
financial arrangement or extending his guarantee to the
subsequent facility, the action of the Bank in enforcing
the security against the petitioner's property cannot be
sustained merely on the basis of the original guarantee.
43. The Court also finds that the manner in
which the sale proceedings were conducted gives rise
to serious infirmities. The petitioner has specifically
demonstrated that, against the auction bid of Rs.28.60
lakh, the amount required to be deposited towards 25%
of the sale consideration was Rs.7.15 lakh, whereas
only Rs.3 lakh was initially deposited and the balance
was accepted subsequently. The Bank has not
satisfactorily explained the acceptance of the delayed
payment in the face of the terms governing the auction.
This circumstance assumes significance when
considered along with the petitioner's allegation
regarding the substantially reduced valuation of the
property and the reserve price fixed in 2015.
44. The Court is also unable to overlook the
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petitioner's specific grievance regarding non-service of
the statutory notices and the consequential denial of an
effective opportunity, to object to the proposed
measures against his property. Where the very authority
of the secured creditor to proceed against the particular
secured asset is disputed and the material on record
does not satisfactorily establish the petitioner's
continuing consent to the subsequent financial facility,
strict compliance with the statutory procedure becomes
all the more necessary.
45. The plea of availability of an alternative
remedy cannot, in the facts of the present case, by
itself operate as an absolute bar to exercise of Writ
jurisdiction, particularly when the petitioner has raised
questions concerning the jurisdiction and foundational
authority of the Bank to proceed against his property,
coupled with allegations of violation of mandatory
statutory requirements and material irregularities in the
auction process.
46. The subsequent possession of the property
by respondent No.4 or issuance of the sale certificate
cannot, by itself, validate a sale if the foundational
action of the secured creditor is found to be
unsustainable or the mandatory procedure prescribed
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by law has not been followed. The rights claimed by the
auction purchaser are consequently subject to the
validity of the underlying SARFAESI proceedings.
Auction purchasers amounts have to be refunded back
to him by the respondent Bank.
47. In view of the aforesaid facts and
circumstances, this Court is of the considered opinion
that the respondent-Bank has failed to satisfactorily
establish the petitioner's continuing liability in respect
of the subsequent financial accommodation against
which the disputed property was proceeded against and
has also failed to dispel the material irregularities
pointed out by the petitioner in the sale proceedings.
The impugned measures taken against the petitioner's
property, including the sale certificate dated
14.12.2015, therefore, cannot be sustained.
48. Accordingly, the Writ petition is allowed.
The impugned sale proceedings in respect of the
petitioner's property and the consequential sale
certificate dated 14.12.2015 are hereby quashed. The
respondent-Bank shall take consequential steps in
accordance with law. The petitioner shall be entitled to
restoration of possession, subject to such consequential
directions as may be necessary for giving effect to this
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order.
49. Interlocutory Application(s), if any, shall
stand disposed of.
(G. Anupama Chakravarthy, J)
Spd/-
AFR/NAFR NAFR
CAV DATE NA
Uploading Date 11.09.2026
Transmission Date