Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7128 OF 2022
Mrs. Leelamma Mathew …Appellant
Versus
M/s Indian Overseas Bank & Ors. …Respondents
J U D G M E N T
M.R. SHAH, J.
1. Feeling aggrieved and dissatisfied with the impugned
judgment and order passed by the High Court of Kerala at
Ernakulam in RFA No.379 of 2014 by which the High Court
has allowed the said appeal preferred by respondent no.1
Signature Not Verified
Digitally signed by R
Natarajan
Date: 2022.11.17
17:01:12 IST
Reason:
herein – Bank and has quashed and set aside the judgment
and decree passed by the learned Trial Court dated 31.01.2014
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in OS No.630 of 2012 directing the Bank to pay to the plaintiff
a sum of Rs.58,10,000/ with interest at the rate of 12% per
annum from the date of suit till realization, the original plaintiff
has preferred the present appeal.
2. That the defendant Bank secured the property in Survey
No.48/1 in Tirur Taluk, Tanur Village in exercise of powers
under the provisions of the Securitization and Reconstruction
of Financial Assets and Enforcement of Security Interest Act
2002 (hereinafter referred to as ‘SARFAESI Act, 2002’)
2.1 That the Bank secured the possession and thereafter by
notice for auction dated 23.01.2007 the secured asset
admeasuring 54 cents was put to auction. The appellant –
original plaintiff after inspection of the property submitted the
quotation for sale of 54 cents of land and offered
Rs.32,05,000/. It appears that in the quotation the original
plaintiff specifically stated that the offer of Rs.32,05,000/ is
subject to the condition that absolute ownership and vacant
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possession of full extent of property without encumbrances is
handed over. However, by communication dated 05.03.2007,
the Bank replied that as in the invitation to the public for
tenders, it is stated that the property would be sold in “as is
where is” and “as is what is” condition, the original plaintiff
may confirm that he is ready and willing to offer the bid and
take the property in the present condition. It appears that vide
communication dated 08.03.2007, the original plaintiff
reiterated that she is ready to purchase the property only if,
absolute ownership, vacant possession and full enjoyment of 54
cents of land, free from all encumbrances is given, otherwise,
she is not ready to purchase the property, if the Bank is not
able to assign absolute ownership, vacant possession and full
enjoyment of the property admeasuring 54 cents.
2.2 It appears that thereafter the Bank took the possession of
the property pursuant to the order passed by the CJM, Manjeri
in an application under Section 14 of the SARFAESI Act. That
thereafter the plaintiff paid a total sale consideration in the
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month of October, 2007. That thereafter the Tehsildar
submitted the report dated 21.11.2007 submitting that the
actual measurement of the land is 39.60 cents and that the
debtor had already transferred 14.40 cents out of land
admeasuring 54 cents prior to the creation of the mortgage with
the Bank. Despite the above the Bank issued the sale
certificate for 54 cents dated 21.11.2007 and handed over the
possession of the secured property admeasuring 39.60 cents
only however, the sale consideration is issued for 54 cents.
That thereafter the sale deed on the basis of the sale certificate
was actually executed in favour of the plaintiff only on
01.10.2010 for 54 cents. That thereafter the plaintiff instituted
the suit for recovery of damages/compensation with respect to
14.40 cents. It was the case of the plaintiff that as the plaintiff
paid a total sale consideration for 54 cents of the land and even
the sale certificate and the sale deed was executed for 54 cents
the plaintiff has been handed over the possession of 39.60
cents of the land only and therefore the plaintiff is entitled to
the damages/compensation with respect to the 14.40 cents
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which was less than the area for which the plaintiff paid the
amount i.e. 54 cents. It was the case on behalf of the plaintiff
that it was the duty of the bank when accepted the total sale
consideration for 54 cents, to hand over the peaceful and
vacant possession of the land admeasuring 54 cents. It was
also the case on behalf of the plaintiff that as the bank was
aware of the true facts that the area of the property/land is less
despite that the bank did not disclose the true facts to the
plaintiff and suppressed the material fact and played a fraud.
2.3 The suit was resisted by the defendant – Bank by
submitting that the sale was on “as is where is” and “as is what
is” basis and that the plaintiff was aware that the area of the
property is less than 54 cents and still she purchased the
secured property. It was the case on behalf of the defendants
that there was no fraud committed by them. It was submitted
that the documents submitted to them by the borrowers were
relating to the total extent of 54 cents of land which was put to
auction. That it was the case on behalf of the defendants that
the plaintiff is not entitled to any compensation from the
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defendants. The learned Trial Court framed the following
issues:
“(i) Whether the suit is maintainable?
(ii) Whether the plaintiff is entitled to get a decree as
prayed for?
(iii) Reliefs and Costs?”
2.4 That the learned Trial Court decreed the suit and directed
the defendant – Bank to pay to the plaintiff a sum of
Rs.58,10,000/ with future interest @ 12% pa from the date of
suit till realization.
2.5 Feeling aggrieved and dissatisfied with the judgment and
decree passed by the learned Trial Court, the defendant – Bank
filed the present appeal before the High Court. By the
impugned judgment and order the High Court has allowed the
appeal preferred by the defendants and has quashed and set
aside the decree passed by the learned Trial Court inter alia on
the grounds (i) that as the fraud has not been established and
proved the suit was barred in view of Section 34 of the
SARFAESI Act; (ii) That the plaintiff was aware of the fact that
the actual area of the secured property put to auction is less
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than 54 cents and therefore it cannot be said that there was
any nondisclosure on the part of the Bank; (iii) that the
property was put to auction “as is where is” and “as is what is”
basis?
2.6 Feeling aggrieved and dissatisfied with the impugned
judgment and order passed by the High Court allowing the
appeal and quashing and setting aside the decree passed by the
learned Trial Court and consequently dismissing the suit, the
original plaintiff has preferred the present appeal.
3. Shri M.T. George, learned counsel appearing on behalf of
the appellant has vehemently submitted that in the facts and
circumstances of the case the Hon’ble High Court has seriously
erred in quashing and setting aside the decree passed by the
learned Trial Court. It is submitted that as the suit was for
damages/compensation the same cannot be barred under
Section 34 of the SARFAESI Act.
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3.1 It is submitted that therefore the Hon’ble High Court has
materially erred in observing and holding that the suit was
barred by Section 34 of the SARFAESI Act.
3.2 It is further submitted by learned counsel for the
appellant that the appellant purchased 54 cents of the secured
property auctioned by the defendant – Bank in exercise of the
powers vested with it under the provisions of the SARFAESI
Act. That the offer made by the bank through the auction
notice dated 23.01.2007 was for sale of 54 cents of land in
Survey No.48/1. That the appellant offered Rs.32,05,000/
specifically stating that the absolute ownership and possession
of 54 cents of lands would be transferred without any
encumbrances. It is submitted that as the offer was conditional
the bank by letter dated 05.03.2007 informed the appellant
that the bank had invited tenders on the basis of “as is where
is” and “as is what is” condition and if the appellant is willing to
buy the property on the said condition, she has to inform the
Bank. It is submitted that thereafter the appellant replied on
08.03.2007 the tender bid be considered only if the bank could
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transfer absolute ownership and possession over the entire 54
cents of land without any encumbrances and if not, she would
withdraw her offer and the earnest money would be returned.
It is submitted that the bank took the possession of the
auctioned property through the intervention of the Court under
Section 14 of the SARFAESI Act and asked the appellant to pay
the balance sale consideration which was done by the appellant
on 17.10.2007. Consequently, the bank issued certificate of
sale for 54 cents of land on 21.11.2007 and thereafter the sale
certificate was registered and the sale deed was executed on
01.02.2010 for 54 cents of land. It is submitted that therefore
when the bank transferred to the appellant only 39.60 cents of
land a fact which was known to the bank and the appellant
paid an amount of Rs.32,05,000/ for 54 cents of land the
appellant original plaintiff is entitled to the remaining area of
land i.e. 14.40 cents. It is submitted that therefore the Trial
Court had rightly decreed the suit.
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3.3 Learned Counsel appearing on behalf of the appellant has
further submitted that the respondent – bank while exercising
the powers provided under the SARFAESI Act failed to comply
with Rule 8(6)(a) and (f) of the Security Interest (Enforcement)
Rules, 2002 (hereinafter referred to as Rules 2002) and Section
55(1)(a) of the Transfer of Property Act (hereinafter referred to
as ‘TP Act’). It is submitted that the disclosures can be said to
be fraudulent in view of Section 55(1)(a) of the TP Act and the
relevant provisions of the Rules, 2002 a duty is cast upon the
Authorised Officer to disclose to the auction purchaser any
material defect in the title failing which it could be construed
that the purchaser was misled. Reliance is placed on the
decision of this Court in the case of Haryana Financial
Corporation and Anr. Vs. Rajesh Gupta, (2010) 1 SCC 655.
3.4 It is submitted that Rule 8(6)(a) and (f) of the Rules 2002
mandates additional duty on the Authorised Officer to make
known to the bidders before auction any other thing which the
Authorised Officer considers it material for a purchaser to know
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in order to judge the nature and value of the property. It is
submitted that therefore the immunity claimed by the bank on
the pretext “as is where is” and “as is what is” basis is no more
a defence.
3.5 It is submitted that out of the total road frontage of 70.1
meters which portion consisted of 14.40 cents has captured
46.3 meters and remaining 39.60 cents were only 23.8 as road
frontage which has a direct bearing on the market value of the
property.
Making above submissions, it is prayed to allow the
present appeal and confirm the judgment and decree passed by
the learned Trial Court.
4. Present appeal is vehemently opposed by Shri Kunal
Tandon, learned counsel appearing on behalf of the Respondent
– Bank. It is submitted that as the property in question was
put to auction on “as is where is” and “as is what is” basis and
the plaintiff – auction purchaser was from the very beginning
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aware that the area of the land is less than what was advertised
and despite that the offer was made which was accepted, the
High Court has rightly set aside the judgment and decree
passed by the learned Trial Court.
4.1 It is submitted that as rightly observed by the High Court
it was not the case that the Bank had no saleable interest at
all. It is submitted that the Tehsildar gave its report on
21.11.2007 about the exact extent of the auction property.
Thus, no fault was said to the found with the Bank.
4.2 It is submitted that the Hon’ble High Court after looking at
the evidence as concluded that the original plaintiff was fully
aware of the deficiency in extent.
4.3 It is further submitted that even otherwise as observed
and held by Hon’ble High Court the suit itself was barred under
Section 34 of the SARFAESI Act.
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4.4 It is submitted that in terms of Section 34 of the
SARFAESI Act, the jurisdiction of the Civil Court is absolute
barred except in case the plaintiff is able to show fraud or
misrepresentation. It is submitted that in the present case
from the communications on record and that the possession
was handed over to the bank pursuant to the order under
Section 14 of the SARFAESI Act on 08.10.2007 and thereafter
the plaintiff made the payments on various dates, leading to the
issuance of the sale certificate on 21.11.2007, which was
registered almost 3 years later on 01.02.2010, it is very much
clear that the plaintiff was aware of the extent of the property
and no case of fraud is made out.
4.5 Even the claim of the plaintiff was barred by limitation. It
is submitted that the suit was filed in the year 2012 while the
auction sale took place on 05.02.2007 and the sale certificate
was issued on 21.11.2007. The payments were made on
October, 2007. It is submitted that thus the cause of action
arose on 05.02.2007 and thereafter on 21.11.2007. It is
submitted therefore as per Article 113 of the Limitation Act, the
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suit was barred by limitation being beyond three years from the
first date of knowledge.
Making above submissions it is prayed to dismiss the
present appeal.
5. We have heard learned counsel appearing for the
respective parties at length.
5.1 At the outset, it is required to be noted that after the Bank
received the possession of the secured property in exercise of
powers under the SARFAESI Act, the property in question
admeasuring 54 cents was put to auction, by Auction Notice
dated 23.01.2007. The plaintiff on the basis of the
representation made and the auction notice in which the land
was put to auction was stated to be 54 cents submitted her
offer of Rs.32,05,000/ for sale of 54 cents. At this stage, it is
required to be noted that in the quotation itself the plaintiff
specifically stated that the offer of Rs.32,05,000/ is subject to
the condition that the absolute ownership and vacant
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possession of full extent of property without encumbrances is
handed over. However, the Bank replied that as in the
invitation to the public for tenders, it is stated that the property
would be sold on “as is where is” and “as is what is” condition,
the plaintiff may confirm that the plaintiff is ready to offer the
bid and take the property in the present condition. However,
immediately vide communication dated 08.03.2007 the plaintiff
reiterated that she is ready to purchase the property only if,
absolute ownership, vacant possession and full enjoyment of 54
cents of land, free from all encumbrances is given, otherwise,
she is not ready to purchase the property, if the Bank is not
able to assign absolute ownership, vacant possession and full
enjoyment of the property admeasuring 54 cents. At this stage
it is required to be noted that the Bank took the possession of
the property auctioned on paper. However, the actual
possession was handed over to the Bank in the month of
October, 2007 pursuant to the order passed by the CJM,
Manjeri in an application under Section 14 of the SARFAESI
Act. That thereafter the Tehsildar submitted the report dated
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21.11.2007 submitting that the actual measurement of the
land is 39.60 cents and that the debtor had already transferred
14.40 cents out of land admeasuring 54 cents prior to creation
of the mortgage with the Bank. Despite the above the Bank
issued the sale certificate dated 21.11.2007 for 54 cents of
land, however, handed over the possession of the secured
property admeasuring 39.60 cents only. The sale consideration
received by the Bank was for 54 cents. That thereafter the sale
certificate was registered in the month of October, 2010.
Thereafter the plaintiff filed the suit for recovery of damages
with respect to 14.40 cents. The final certificate was registered
on 01.10.2010 and thereafter when the suit was filed in the
year 2012 it cannot be said that the suit was barred by
limitation. At this stage, it is required to be noted that as such
no issue was framed by the learned Trial Court on whether the
suit is barred by limitation or not.
5.2 Now so far as the submission on behalf of the plaintiff and
the finding recorded by the High Court that the suit was barred
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by Section 34 of the SARFAESI Act is concerned, at the outset it
is required to be noted that the suit was for
damages/compensation, with respect to the balance land,
which could not have been decided by the DRT or Appellate
Tribunal, Section 34 of the SARFAESI Act shall be applicable
only in a case where the Debt Recovery Tribunal and/or
Appellate Tribunal is empowered to decide the matter under the
SARFAESI Act. The plaintiff was not challenging the sale/sale
certificate. The plaintiff claimed the damages/compensation
with respect to the less area. Therefore, the High Court has
seriously erred in holding that the suit was barred by Section
34 of the SARFAESI Act.
5.3 Now so far as the submission on behalf of the Bank that
as the property was put to auction on “as is where is” and “as is
what is” basis and the plaintiff was aware that the actual area
of the property auction is less and thereafter entered into the
transaction and therefore the plaintiff cannot claim/pray
compensation/damages with respect to the deficiency in the
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area is concerned, at the outset, it is required to be noted that
right from the very beginning the plaintiff insisted for handing
over the possession of the 54 cents. When the property was
put to auction even the Bank was not in actual possession.
The Bank got possession pursuant to the order passed by the
District Magistrate and thereafter the measurement was done
by Tehsildar in which it was found that the actual area of the
land auctioned was 34.60 cents and 14.40 cents was already
transferred by the debtor much earlier. Therefore, at the
relevant time when the property was put to auction even the
Bank was not aware of the actual measurement and had gone
by the document and 54 cents was put to auction.
Considering the fact that the auction notice was for 54 cents;
the plaintiff submitted the offer of Rs.32,05,000/ for 54 cents;
the plaintiff paid the actual amount of sale consideration i.e.
Rs.32,05,000/ for 54 cents; the sale certificate was issued for
54 cents and even the sale certificate which was registered in
the year 2012 was for 54 cents, thereafter it was not open for
the Bank to contend that though the Bank had handed over the
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possession of 34.60 cents still the sale consideration recovered
would be for 54 cents. It was not open for the financial
institution like the Bank to take such a plea. Even otherwise it
is required to be noted that at least in the month of November,
2007 when the Tehsildar submitted the report, the Bank was
aware that the actual area is 34.60 cents and not 54 cents.
Thereafter the Bank ought not to have issued the sale
certificate for 54 cents. The Bank ought to have been fair and
ought to have issued the sale certificate only for 34.60 cents.
This shows the conduct on the part of the bank.
5.4 Rule 8 of the 2002 Rules cast a duty on the authorized
officer to take all precautions before putting the secured asset
to sell. As per subrule 5 of Rule 8 before effecting sale of the
immovable property (secured assets) the authorised officer shall
obtain valuation of the property from an approved valuer and in
consultation with the secured creditor and fix the reserve price
of the property and may sell the whole or any part of such
immovable secured asset. Therefore, when the reserve price
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was fixed the same was for 54 cents. Therefore, it can be
presumed that the Bank was aware that the actual area of the
secured asset is less than 54 cents. As per Section 54 of the
Transfer of Property Act the seller was bound to disclose any
buyer any material defect in the property of which the buyer is
not aware and which the buyer could not ordinarily discover.
Under the circumstances also the submission on behalf of the
Bank that the property was put to auction on “as is where is”
and “as is what is” condition, thereafter the plaintiff shall not
be entitled to compensation of the less area cannot be accepted.
6. In view of the above and for the reasons stated above, the
High Court has committed an error in allowing the appeal and
quashing and setting aside the judgment and decree passed by
the learned Trial Court. Consequently, the impugned judgment
and order passed by the High Court is hereby quashed and set
aside. The judgment and decree passed by the learned Trial
Court decreeing the suit is hereby restored. The respondent –
Bank to pay the decretal amount to the appellant with interest
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as per the judgment and decree passed by the learned Trial
Court within a period of 8 weeks from today.
The present appeal is allowed with costs which is
quantified at Rs.25,000/ which also shall be paid by the Bank
to the original plaintiff within a period of eight weeks from
today.
…………………………..J.
(M. R. SHAH)
…………………………...J.
(KRISHNA MURARI)
New Delhi;
November 17, 2022.
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