V. Sambandan vs The Punjab National Bank

K. Chandru, J.—Heard both sides.

The petitioner has filed the present writ petition seeking for a direction to the second respondent Bank to refund a sum of Rs. 3,30,000/-

deposited by him on 17.07.2009.

Pursuant to the auction notice issued by the second respondent dated 07.06.2009, the petitioner wanted to purchase the property comprised in

Survey No. 375/3 bearing Plot No. 9, situated at Kalaimagal Nagar in Mangadu Village, Chennai - 101. The reserve amount was fixed as Rs.

13,00,000/- and EMD was fixed as Rs. 1,30,000/-. The petitioner intended to buy the said property and paid a sum of Rs. 3,30,000/- by way of

three demand drafts to the second respondent.

The petitioner, after making certain enquiries regarding the title of the property issued a legal notice through his counsel dated 28.07.2009 stating

that he had bonafidely participated in the auction sale to purchase the property without any hesitation and good faith. But since the respondent

bank did not furnish the original title deeds and copy of other documents including the judgment and decree from the competent Court, he

apprehended that the title may not be proper. Therefore, he decided not to proceed with the transaction. He was also doubtful whether the

Authorised Officer of the bank was competent to deliver possession of the auctioned property without encumbrance and free from any future

litigation.

According to the petitioner, the property was not kept under the custody of the Authorised Officer in terms of Rule 8 & 9 of the SARFAESI

Rules. Therefore, calling for applications for purchase of property itself was illegal. In the light of these facts, he wanted the return of the amount

deposited with the bank.

The second respondent bank gave a reply through their counsel dated 14.08.2009. In the reply, in Paragraph 7, it was denied that copies of the

documents were not furnished at the time of auction. It was stated that the original documents pertaining to the schedule mentioned property and

copies of other parent documents were made available for all the participants before the commencement of Auction. In the auction notice released

to the newspaper, all the intending purchasers were put on notice, that the sale of the properties in question was ''in as is where is and as is what is

condition''. It was only on the basis of such condition, the properties were brought under auction. Therefore, the claim made by the petitioner that

Rules 8 & 9 of SARFAESI Rules were not complied with was denied. It was further stated that demand for refund of the sum of Rs. 3,30,000/-

was not sustainable either in terms of law or on facts. Since the petitioner had defaulted in making further payments, he was liable for forfeiture of

the said amounts.

Subsequent to the reply notice, the petitioner was also issued with an order dated 14.09.2009 stating that in terms of Rule 9(5) of The Security

Interest (Enforcement) Rules read with the terms and conditions of the auction dated 17.07.2009, the amount of Rs. 3,30,000 shall stand forfeited

for contravening the provisions of the petitioner''s offer. Aggrieved by this, the petitioner has come forward with the present writ petition.

On notice from this Court, the respondents have entered appearance and filed a counter affidavit dated 03.10.2009. In the counter affidavit, in

paragraph 9 it was clearly stated that because of the default committed by the petitioner, the sum of Rs. 3,30,000/- was to be forfeited in terms of

Rule 9(5) of SARFAESI Rules. Documents in support of the counter affidavit were also filed in the form of a typed set.

Mr. P.T. Perumal, learned Counsel for the petitioner submitted that the bank being public authority and when they put properties on sale, they

must show clear title to the said properties. The properties must be available in the hands of the Authorised Officer before the sale is effected. That

was the sum and substance of Rule 8 & 9 of SARFAESI Rules. He further submitted that it was not expected of a Bank to sell properties either

which are not available with them or which have encumbrances on them. Since the petitioner on coming to know about the encumbrances in the

property had legitimately withdrawn his original offer.

In essence, the petitioner wanted to contend that it is not Caveat Emptor (buyer beware), but on the contrary, the seller (i.e. The Bank) should

have clear title before selling the property. This Court is unable to agree with the same. No one has compelled the petitioner to go in for purchase

of such properties. On the contrary, in Condition No. 1 of the notification, it was clearly stated that the aforesaid properties of the debtors were to

be sold in ''as is where is basis''. Therefore, it is for the petitioner to have verified whether he was purchasing a property or a problem.

It must be noted that the contentions raised by the petitioner is no longer res integra. In almost under identical circumstances the Supreme

Court while considering a sale by the Official Liquidator, the properties of a wound up company dealt with a similar claim and rejected it vide its

decision in United Bank of India Vs. Official Liquidator and Others, . The following passages found in paragraphs 13 and 14 will make the position

clear and they are usefully reproduced below:

In our view, the complete answer to Triputi''s allegation in regard to the failure of the Official Liquidator to hand over to it possession of certain

properties which were sold to it, which, according to it, the company in liquidation did not even own, is contained in clause 2 of the Terms and

Conditions of Sale upon the basis of which the property and assets of the company in liquidation were sold by the Official Liquidator to Triputi

under the orders of this Court. Clause 2 reads thus:

The sale will be as per inventory list on ''as is where is basis'' and subject to the confirmation of the Hon''ble Supreme Court of India. The

Official Liquidator shall not provide any guarantee and/or warranty in respect of the immovable properties and as to the quality, quantity or

specification of the movable assets. The intending purchaser must satisfy themselves in all respect as regards the movable and immovable assets, as

to their title, encumbrances, area, boundary, description, quality, quantity, and volume etc. and the purchaser will be deemed to offer with full

knowledge as to the description, area etc. of the properties and defects thereof, if any. The purchaser shall not be entitled to claim any

compensation or deduction in price on any account whatsoever and shall be deemed to have purchased the property subject to all encumbrances,

liens and claims including those under the existing legislation affecting labour, staff etc. The Official Liquidator shall not entertain any complaint in

this regard after the sale is over. Any mistake in the notice inviting tender shall not vitiate the sale.

When the Official Liquidator sells the property and assets of a company in liquidation under the orders of the Court he cannot and does not

hold out any guarantee or warranty in respect thereof. This is because he must proceed upon the basis of what the records of the company in

liquidation show. It is for the intending purchaser to satisfy himself in all respects as to the title, encumbrances and so forth of the immovable

property that he proposes to purchase. He cannot after having purchased the property on such terms then claim diminution in the price on the

ground of defect in title or description of the property. The case of the Official Liquidator selling the property of a company in liquidation under the

orders, of the Court is altogether different from the case of an individual selling immovable property belonging to himself. There is, therefore, no

merit in the application made on behalf of Triputi that there should be a diminution in price or that it should not be made liable to pay interest on the

sum of Rs. 1 crore 98 lakhs.

In the light of the above, this Court is not inclined to interfere with the Auction conducted by the respondents or grant a direction to refund the

amount deposited. The writ petition is clearly misconceived. Accordingly, the same stands dismissed. No costs. Consequently, connected

miscellaneous petition is also dismissed.