11 years after SARFAESI auction, Gauhati HC directs bank and district administration to hand over possession, says third-party injunction is no bar

The petitioners purchased, through an auction conducted under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”), a two-katha plot with an Assam-type house for ₹55 lakhs.

The entire consideration was paid on 20 December 2014, and the authorised officer issued a Sale Certificate dated 20 February 2015.

Although the certificate recorded delivery of possession, the petitioners alleged that actual physical possession was never handed over.

The petitioners initially filed Money Suit No. 89/2017 seeking refund of ₹55 lakhs with interest, but withdrew it with liberty to pursue an appropriate remedy.

They thereafter filed the present writ petition seeking refund with interest, or alternatively, delivery of possession.

The Bank contended that possession had been delivered or that any subsequent encroachment was not its responsibility, and later stated that possession could not be taken because Title Suit No. 553/2013, involving a third party’s claim over the property, was pending with an injunction order.

Whether the petitioners were entitled to a refund of the auction consideration of ₹55 lakhs with interest without cancellation of the Sale Certificate.

Whether issuance of the Sale Certificate transferred title in the property to the petitioners without requiring execution or registration of a separate sale deed.

Whether the Bank and the District Commissioner could be directed to take steps under Section 14 of the SARFAESI Act to obtain and deliver physical possession to the petitioners despite the pending civil suit and injunction.

The Court applied Rule 9(6) of the Security Interest (Enforcement) Rules, 2002, under which a Sale Certificate is issued upon completion and confirmation of an auction sale, and Rule 9(9), which obligates the authorised officer to deliver the property to the purchaser free from encumbrances known to the secured creditor.

Section 17(2)(xii) read with Section 89(4) of the Registration Act, 1908 provides that a certificate of sale issued in a public auction does not require compulsory registration; a copy is to be forwarded to the registering authority for filing in Book No. 1 (M/s Esjaypee Impex Pvt. Ltd. v. Assistant General Manager, Canara Bank, (2021) 11 SCC 537).

The Court relied on B. Arvind Kumar v. Government of India, (2007) 5 SCC 745, and State of Punjab v. M.S. Ferrous Alloys Forgings Pvt. Ltd., 2024 SCC OnLine SC 3372, for the rule that title passes upon successful completion and confirmation of the auction sale, while the Sale Certificate is evidence of title and does not require a further deed of transfer.

Under ITC Ltd. v. Blue Coast Hotels Ltd., (2018) 15 SCC 99, where only symbolic or constructive possession was available, the secured creditor remains entitled to invoke Section 14 of the SARFAESI Act to obtain actual possession and complete the transfer.

The Court also applied the doctrines of per incuriam and sub silentio, relying on State of U.P. v. Synthetics & Chemicals Ltd., (1991) 4 SCC 139, and Dr. Shah Faesal v. Union of India, (2020) 4 SCC 1, to decline reliance on the contrary coordinate-Bench decision in Ajay Sharma v. Punjab National Bank.

The Court held that the Sale Certificate dated 20 February 2015 represented a valid completed auction sale and that title had vested in the petitioners; therefore, refund of the consideration could not be ordered while the Sale Certificate remained operative, as that would permit unjust enrichment through retention of title along with recovery of the purchase price.

The Court distinguished the transfer of title from delivery of physical possession: the petitioners had obtained title, but the Bank had failed to fulfil its statutory obligation under Rule 9(9) to deliver possession.

Applying ITC Ltd., the Court found that the Bank could still approach the District Commissioner under Section 14 of the SARFAESI Act because the transfer remained incomplete in the practical sense until actual possession was secured.

The injunction in the pending suit operated only against the original mortgagor, Sri Naba Kumar Das, and neither the Bank nor the petitioners was a party against whom the injunction operated.

It therefore did not prevent the Bank or the District Commissioner from taking possession under the SARFAESI Act.

The Court declared the Sale Certificate dated 20 February 2015 to be a valid sale conferring right, title and interest upon the petitioners.

The Bank was directed to forward a copy of the Sale Certificate to the Sub-Registrar, Kamrup (M), for recording in Book No. 1 under Section 89 of the Registration Act.

The Bank was further directed to approach the District Commissioner, Kamrup (M), within 30 days for obtaining possession under Section 14 of the SARFAESI Act; the District Commissioner or authorised officer was directed to secure possession and hand it over to the Bank for ultimate delivery to the petitioners within 60 days of the request.

The pending civil suit and its injunction were expressly held not to bar these steps, and no costs were awarded.