G. Vikram Kumar vs State Bank Of Hyderabad

CIVIL APPEAL NOS.3152­3153 of 2023 (@ SLP (Civil) Nos.5973­5974 of 2018)

G. VIKRAM KUMAR ...Appellant(s)

Versus

STATE BANK OF HYDERABAD & ORS. ...Respondent(s)

JUDGMENT

M. R. Shah, J.

1. Feeling aggrieved and dissatisfied with the

Signature Not Verified impugned judgment and order dated Digitally signed by R Natarajan Date: 2023.05.02 16:43:16 IST Reason:

Civil Appeal Nos. 3152­3153 of 2023

Page 1 of 35 08.09.2017 passed by the High Court of

Judicature at Hyderabad for the State of

Telangana and Andhra Pradesh passed in Writ

Petition No.31098 of 2016 and the subsequent

order dated 08.12.2017 passed in Review

Petition No.45031 of 2017 in Writ Petition

No.31098 of 2016, the appellant and the

auction purchaser has preferred the present

appeals.

2. The facts leading to the present appeals in

nutshell are as under:

2.1 That the respondent no.3 herein – builder had

taken loan from respondent no.2 – Bank for the

development of the multi­storey housing

project. That the respondent no.3 (hereinafter

referred to as the borrower) was not able to

Civil Appeal Nos. 3152­3153 of 2023

Page 2 of 35 repay the security interest to the Bank, the

Bank initiated proceedings against the

borrower under Section 13 of the Securitization

and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002

(hereinafter referred to as ‘the SARFAESI Act,

2002). The Bank attached the properties of the

borrower under Section 13(4) of the SARFAESI

Act. Against the measures taken by the Bank

under Section 13(4) of the SARFAESI Act, the

borrower filed S.A. No.253 of 2012 before the

Debt Recovery Tribunal (DRT), Hyderabad.

S.A. No.253 of 2012 was listed before the DRT

on 19.02.2016, when the borrower was given

liberty to file a list of intending buyers of the

property and bring forth with the buyers so as

Civil Appeal Nos. 3152­3153 of 2023

Page 3 of 35 to enable the Tribunal to consider the same for

the repayment of the dues of the Bank. On

25.02.2016, the DRT passed an order

permitting the Bank to go ahead with the sale

as proposed excluding flat to be identified and

communicated by the borrower to the Bank by

29.02.2016 with full details of all purchasers to

the bank officials on affidavit so as to enable

the bank officer to exclude those flats, provided

the remaining flats are sufficient for recovery of

the dues. The Tribunal directed that the bank

may proceed with the sale but shall not

confirm the sale till the next date of hearing.

At this stage it is required to be noted that the

aforesaid order was passed by the Tribunal in

view of the submissions made by the borrower

Civil Appeal Nos. 3152­3153 of 2023

Page 4 of 35 that he had sold seven flats out of 37 flats

which were to be sold by the Bank to some

third persons. Flat No.6401 – flat in question

was not amongst the said seven flats.

2.2 A Memorandum of Understanding (MoU) was

entered into between the respondent no.1 and

the borrower with respect to the sale of Flat

No.6401 on 10.04.2016 for a lumpsum

consideration of Forty­five lakhs. It is pertinent

to note that in the MoU itself there was a

reference to some proceedings going on before

the DRT and that the Bank and the borrower

will obtain clearance in order to process the

agreement to sale. That an agreement to sale

was executed between the bank and the

borrower for a sale of Flat No.6401 on

Civil Appeal Nos. 3152­3153 of 2023

Page 5 of 35 16.06.2016. At this stage, it is required to be

noted that the said agreement to sale was

executed by the borrower without

informing/obtaining any consent from the DRT

as well as the Bank and the permission, if any,

given to the borrower earlier obtained only to

the seven flats which were already recognized

by the DRT on 25.02.2016.

2.3 That thereafter the Bank issued a public notice

on 28.07.2016 for auctioning the properties of

the borrower. The said notice was published in

the newspaper on 29.07.2016. The property in

question, i.e. Flat No.6401 was also subjected

to auction. It was placed in Lot No.1 for which

the e­auction was proposed on 30.08.2016.

Civil Appeal Nos. 3152­3153 of 2023

Page 6 of 35 2.4 The borrower filed an application before the

DRT praying for stay on all proceedings of the

Bank pursuant to the auction notice dated

28.07.2016. On 24.08.2016 the DRT was

pleased to reject the application for stay filed

by the borrower. While rejecting the stay

application and refusing to grant the stay as

prayed, the DRT observed as under:

“…Pending the decision, this Tribunal has directed to sell the property and the Applicant now has entered into an agreement to be sold for some other flats. This is utter violation of the SARFAESI action as also the direction of the Tribunal.” “7. As stated hereinabove, it is also question of great concern that the Applicant has entered into an agreement with third party in respect of few other flats i.e. Flat No.3202, 6401, 7101, 7202 and 3201 without the permission of the Respondent Bank or this Tribunal. Hence, any such transaction is declared as void.”

Civil Appeal Nos. 3152­3153 of 2023

Page 7 of 35 2.5 That thereafter e­auction was conducted by the

Bank on 31.08.2016 in which the appellant

also participated. The appellant was declared

as a successful bidder with respect to Flat

No.6401 in Lot No.1. Accordingly, he made a

payment of 25% of the bid amount i.e.

Rs.6,45,250/­. The Bank also issued a

confirmation receipt to the appellant on

31.08.2016.

2.6 That thereafter the respondent no.1 filed a Writ

Petition No.31098 of 2016 before the High

Court on 14.09.2016 challenging the e­auction

notice dated 28.07.2016 to the extent it

concerns Flat No.6401. The said writ petition

was filed much after the auction was complete

and the appellant was declared as a successful

Civil Appeal Nos. 3152­3153 of 2023

Page 8 of 35 bidder. The respondent no.1 did not disclose

in the writ petition that the auction has already

taken place. The appellant herein was also not

made party. By impugned judgment and order

dated 15.09.2016 the High Court stayed the

auction qua Flat No.6401 as notified under the

e­auction sale notice subject to respondent

no.1 (original wit petitioner) paying to the bank

not less than 25.81 lakhs before the scheduled

date and time of the auction, failing which, the

Bank shall be free to proceed with the auction.

The Bank issued a letter to the appellant dated

20.09.2016 stating that the High Court has

stayed the auction proceedings with respect to

Flat No.6401 and that the respondent no.1

Civil Appeal Nos. 3152­3153 of 2023

Page 9 of 35 herein has paid the amount to the Bank as

directed by the High Court.

2.7 On becoming aware of the pending proceedings

in Writ Petition No.31098 of 2016 the appellant

herein filed an application for getting

impleaded in the said writ petition and filed the

counter affidavit. In the counter affidavit it was

specifically stated that the DRT has declared

the agreement of sale executed between the

respondent no.1 and the borrower as void and

that the appellant is the successful auction

purchaser and that the respondent no.1 had

not disclosed the complete and correct facts of

the case. It was also stated that the right, if

any, available to the respondent no.1 (original

writ petitioner) would have been under Section

Civil Appeal Nos. 3152­3153 of 2023

Page 10 of 35 17 of the SARFAESI Act and not the writ

petition filed by him. It was also stated that

the respondent no.1 had not informed the

Court that the auction proceedings were

already over at the time when the stay order

was passed. The Bank also filed the counter

affidavit in the writ petition seeking dismissal

of the writ petition primarily on the ground that

an alternative remedy under Section 17 of the

SARFAESI Act was available. The High Court

allowed the impleadment application. Despite

the above, by the impugned judgment and

order the High Court has allowed the writ

petition filed by respondent no.1 herein. That

thereafter the appellant herein the auction

purchaser filed the review petition which has

Civil Appeal Nos. 3152­3153 of 2023

Page 11 of 35 been dismissed by the High Court. Hence,

against the final decision of the High Court in

the main writ petition allowing the same in

favour of the respondent no.1 herein and

rejecting the review application filed by the

appellant, the appellant – successful auction

purchaser has preferred the present appeals.

3. Shri A. Sirajudeen, learned Senior Advocate

has appeared on behalf of the appellant. Shri

Buddy A. Ranganadhan, learned counsel has

appeared on behalf of respondent no.1 –

original writ petitioner and Shri Ananga

Bhattacharyya, learned counsel has appeared

on behalf of respondent no.3.

Civil Appeal Nos. 3152­3153 of 2023

Page 12 of 35

4. Shri A. Sirajudeen, learned Senior counsel

appearing on behalf of the appellant has made

the following submissions:

(i) That the High Court has materially erred

in entertaining the writ petition filed by

respondent no.1 which was against the

steps taken by the Bank under Section

13(4) of the SARFAESI Act namely against

e­auction notice;

(ii) That the respondent no.1 being the

agreement to sale holder had no right title

in the flat in question and therefore could

not have filed the writ petition challenging

e­auction notice on the basis of the

agreement to sale in his favour;

Civil Appeal Nos. 3152­3153 of 2023

Page 13 of 35

(iii) Even if the respondent no.1 had any right,

if any, in that case also he had alternative

efficacious statutory remedy available

under Section 17 of the SARFAESI Act

challenging the e­auction notice;

(iv) That there was suppression of material

facts on the part of respondent no.1 which

was specifically pointed out by the

appellant in the counter affidavit that at

the time when the writ petition was filed

and the interim relief was obtained the

auction had taken place in which the

appellant was declared the successful

bidder;

(v) That in fact the DRT in the earlier order

dated 24.08.2016 declared the sale

Civil Appeal Nos. 3152­3153 of 2023

Page 14 of 35 agreement in favour of the respondent

no.1 by the borrower as void as the same

was entered into without prior permission

of the DRT or even the Bank; and

(vi) The High Court has materially erred in

relying upon Section 13(8) of the

SARFAESI Act.

4.1 It is further submitted by learned counsel

appearing on behalf of the appellant that the

High Court has not properly appreciated the

fact that a sale agreement holder cannot seek

redemption of a property under Section 91 of

the Transfer of Property Act, 1882 and cannot

be treated at par with an auction­sale

purchaser under Section 54 of the Transfer of

Property Act makes it clear that no interest

Civil Appeal Nos. 3152­3153 of 2023

Page 15 of 35 /charge is created upon a property only by way

of sale­agreement. It is stated that in fact the

impugned judgment passed by the High Court

that the respondent no.1 be able to seek

redemption of the subject property which was

attached by the Bank. It is submitted that the

bank attached the property as against the

borrower and the respondent No.1 was only the

sale­agreement holder. It is submitted that as

such by virtue of the impugned judgment and

order, the High Court has granted the decree

for specific performance of the agreement to

sale which is not permissible while exercising

the powers under Article 226 of the

Constitution of India.

Civil Appeal Nos. 3152­3153 of 2023

Page 16 of 35 4.2 It is further submitted by learned counsel

appearing on behalf of the appellant that the

High Court has materially erred in observing

that the equity would be in favour of

respondent no. 1 as he has deposited the entire

amount as directed. It is submitted that the

High Court has materially erred in observing

that if the sale is confirmed the respondent

no.1 will suffer greater hardship and if the sale

is not confirmed at the most, the appellant may

lose interest on Rs.6,45,250/­.

4.3 It is further submitted that as such there is no

clarity in the impugned judgment and order

passed by the High Court on what exact relief

the High Court has granted except observing

that the writ petition is allowed.

Civil Appeal Nos. 3152­3153 of 2023

Page 17 of 35

5. While opposing the present appeal learned

counsel appearing on behalf of the respondent

no.1 has vehemently submitted that in the

present case Section 13(8) of the SARFAESI Act

shall be applicable and therefore when the

respondent no.1 being the agreement to sale

holder of the flat in question agreed to

pay/deposit the entire sale consideration the

High Court has not committed any error in

entertaining the writ petition under Article 226

of the Constitution of India challenging the e­

auction notice.

5.1 It is submitted that as soon as respondent no.1

came to know that the flat in question which

was agreed to be sold in favour of respondent

no.1 for which part consideration was paid is

Civil Appeal Nos. 3152­3153 of 2023

Page 18 of 35 put to auction, immediately he filed the writ

petition showing his inclination to deposit the

entire amount of sale consideration which is

permissible under Section 13(8) of the

SARFAESI Act. It is submitted that the object

and purpose of Section 13(8) of the SARFAESI

Act is to save the property from auction in case

the borrower and/or the person interested in

the property agrees to clear the dues.

5.2 It is submitted that in the present case at the

relevant time there was no concluded sale in

favour of the appellant, as at the relevant time

the appellant deposited only 25% of the auction

sale consideration. It is submitted that as per

the catena of decisions unless the full sale

consideration is paid; the sale deed is executed

Civil Appeal Nos. 3152­3153 of 2023

Page 19 of 35 and/or the sale certificate is issued in favour of

the auction purchaser there is no concluded

sale. It is submitted that if the sale is not

concluded, Section 13(8) of the SARFAESI Act

shall be applicable and/or can be invoked. In

support of his submissions, he has relied upon

the decisions of this Court in the case of

Mathew Varghese v. M. Amritha Kumar,

(2014) 5 SCC 610 (para 38); Narandas

Karsondas vs. S.A. Kamtam, (1977) 3 SCC

247; B. Arvind Kumar vs. Govt. of India &

Ors., (2007) 5 SCC 745 (para 12). He has

also relied upon the decision of the Punjab and

Haryana High Court in the case of Pal Alloys

& Metal India Pvt. Ltd. & Ors. vs.

Civil Appeal Nos. 3152­3153 of 2023

Page 20 of 35 Allahabad Bank & Ors., 2021 SCC OnLine

P&H 2733 as well as the decision of the

Andhra Pradesh High Court in the case of M/s

India Finlease Securities Ltd. vs. Prasad

Indian Overseas Bank, 2012 SCC OnLine AP

205.

5.3 It is further submitted by learned counsel

appearing on behalf of the respondent no.1

that the respondent no.1 has subsequently

died and his heirs including the widow are

residing in the flat in question since long and

that they have paid/deposited the entire sale

consideration and therefore if now the appeal is

allowed in that case, they have to vacate the

premises which will not be equitable.

Civil Appeal Nos. 3152­3153 of 2023

Page 21 of 35 Therefore, it is prayed to dismiss the present

appeal.

6. Learned counsel appearing on behalf of the

Bank has though opposed the writ petition

before the High Court, has stated that whatever

the decision, the Bank shall abide by the same.

7. Heard learned counsel appearing on behalf of

the respective parties at length.

8. At the outset, it is required to be noted that

what was challenged before the High Court by

respondent no.1 in a writ petition under Article

226 of the Constitution of India was the e­

auction notice which was pursuant to the

action initiated by the Bank in exercise of

powers under Section 13(4) of the SARFAESI

Act. At this stage it is required to be noted that

Civil Appeal Nos. 3152­3153 of 2023

Page 22 of 35 e­auction was held/conducted on 31.08.2016

in which the appellant participated and was

declared as a successful bidder and he made a

payment of 25% of the bid amount on the very

day i.e., on 31.08.2016. However, thereafter

the respondent no.1 filed the writ petition

before the High Court challenging the e­auction

notice dated 28.07.2016 on 14.09.2016 that is

after conducting of the auction. It is required

to be noted that against any steps taken by the

Bank under Section 13(4) of the SARFAESI Act

the aggrieved party has a remedy under the

SARFAESI Act by way of appeal under Section

17 of the SARFAESI Act to approach the DRT.

Therefore, in view of the availability of the

alternative statutory remedy available by way of

Civil Appeal Nos. 3152­3153 of 2023

Page 23 of 35 proceedings/appeal under Section 17 of the

SARFAESI Act, the High Court ought not to

have entertained the writ petition under Article

226 of the Constitution of India in which the e­

auction notice was under challenge. Therefore,

the High Court has committed a very serious

error in entertaining the writ petition under

Article 226 of the Constitution of India

challenging the e­auction notice issued by the

Bank in exercise of power under Section 13(4)

of the SARFAESI Act.

8.1 Even otherwise it is required to be noted that

the respondent no.1 – original writ petitioner

filed the writ petition as agreement to sale

holder of the flat in question. At this stage it is

required to be noted that earlier against the

Civil Appeal Nos. 3152­3153 of 2023

Page 24 of 35 measures taken by the Bank under Section

13(4) of the SARFAESI Act the borrower filed

S.A.No.253 of 2012 before the DRT, Hyderabad.

The DRT, Hyderabad by order dated

19.12.2016 gave the liberty to the borrower to

file the list of intending buyers of the property

and to bring forth with the buyers so as to

enable the Tribunal to consider the same for

repayment of the dues of the Bank. That

thereafter on 25.02.2016 the DRT passed the

following order:

"The Bank is directed to go ahead with the sale as proposed excluding the Flat to be identified and communicated by the Applicant to the Respondent Bank by 29.02.2016 with full detailed of all the Purchasers to the Bank Officers on affidavit so as to enable the Bank Officer to exclude those Flats, provided the remaining Flats are sufficient for recovery of the dues. The Bank may proceed with

Civil Appeal Nos. 3152­3153 of 2023

Page 25 of 35 the sale but shall not confirm the same till the next date of hearing."

8.2 At this stage it is required to be noted that the

flat in question namely Flat No.6401 was not

the seven flats identified by the borrower to be

kept out of the auction proceedings. At the

relevant time the flat in question was not sold

amongst the seven flats mentioned before the

Tribunal. That thereafter during the pendency

of the S.A. No.253 of 2012 and without

obtaining prior approval and/or intimation to

the DRT and even the bank, the borrower

entered into the sale agreement with the

respondent no.1 on 16.06.2016. At this stage,

it is required to be noted that in the MoU dated

10.04.2016 between the borrower and the

respondent no.1 in Clause No.4 it was

Civil Appeal Nos. 3152­3153 of 2023

Page 26 of 35 specifically provided that first the party should

obtain clearance of sale from DRT/SBH so that

they can process with further agreement to

sale. Thus, as such respondent no.1 at the

relevant time was aware about the pending

DRT proceedings. Still the respondent no.1

entered into the agreement to sale with the

borrower on 16.06.2016. At this stage, it is

pertinent to note that thereafter when the Bank

issued a public notice on 28.07.2016 for

auctioning the properties of the borrower.

Before the date of auction, on 24.08.2016 the

borrower filed an application before the DRT

praying for stay of all proceedings of the Bank

pursuant to the auction notice dated

28.07.2016. The DRT was pleased to reject the

Civil Appeal Nos. 3152­3153 of 2023

Page 27 of 35 said application for stay vide the order dated

24.08.2016 by observing that the sale of the

flat in question without the permission of the

Bank or the Tribunal is void. The order dated

24.08.2016 is reproduced hereinabove. Thus,

as such the transaction in favour of the

respondent no.1 with respect to Flat no.6401

was already held to be void by the DRT. That

thereafter, after the borrower having failed to

obtain any order, the respondent no.1 had

straightway filed the writ petition challenging

the e­auction notice which the borrower failed

to get any relief before the DRT. If the

respondent no.1 would have approached the

DRT against the e­auction notice he would

have been non­suited in view of the earlier

Civil Appeal Nos. 3152­3153 of 2023

Page 28 of 35 order passed by the DRT dated 24.08.2016.

Therefore, calculatively the respondent no.1

filed the writ petition before the High Court

challenging the e­auction notice and that too

after conducting of the e­auction on

31.08.2016 and the sale in favour of the

appellant was confirmed. The aforesaid facts

were pointed out before the High Court and

despite the same the High Court has allowed

the writ petition which is not sustainable at all.

By the impugned order the respondent no.1

has got the relief which as such the borrower

failed to get from the DRT. On the aforesaid

grounds the impugned judgment and order

passed by the High Court is unsustainable.

Civil Appeal Nos. 3152­3153 of 2023

Page 29 of 35 8.3 Even otherwise it is very debatable whether

Section 13(8) of the SARFAESI Act shall be

applicable in favour of a person who is only an

agreement to sale holder or Section 13(8) of the

SARFAESI Act shall be applicable only in case

of the borrower who is ready and willing to pay

the entire debt. In the present case the

borrower failed to get any relief from the DRT.

The borrower did not apply and/or invoke

Section 13(8) and did not agree to clear the

entire dues. Therefore, also the High Court has

materially erred in allowing the writ petition.

8.4 Even otherwise it is required to be noted that

as such what exact relief is granted by the High

Court is not clear. The High Court has simply

stated that the writ petition is allowed.

Civil Appeal Nos. 3152­3153 of 2023

Page 30 of 35 However, it is required to be noted that what

was challenged before the High Court was the

e­auction notice dated 28.07.2016 which was

already conducted on 31.08.2016. Therefore,

the writ petition was filed much after

conducting the e­auction on 31.08.2016. No

consequential relief has been granted by the

High Court. Therefore, also the impugned

judgment and order passed by the High Court

is unsustainable.

8.5 Now so far as the submission on behalf of the

respondent no.1 that the respondent no.1 has

paid/deposited the amount of sale

consideration and now the respondent no.1 has

died his heirs will have to vacate the flat in

question and on the other hand the appellant

Civil Appeal Nos. 3152­3153 of 2023

Page 31 of 35 shall be entitled to return the amount of

Rs.6,45,250/­ deposited at the relevant time

being 25% of the auction sale consideration

with interest is concerned, at the outset it is

required to be noted that as such the

transaction between the respondent no.1 and

the borrower pursuant to the agreement to sale

dated 16.06.2016 was absolutely illegal and

behind the back of the Tribunal as well as the

Bank and during the pendency of the

proceedings before the Tribunal. In order

dated 24.08.2016 the Tribunal had in fact

already held the sale transaction as void. As

observed hereinabove even at the time when

the respondent no.1 entered into the agreement

to sale/MoU he was aware about the

Civil Appeal Nos. 3152­3153 of 2023

Page 32 of 35 proceedings pending before the DRT which is

apparent from Clause 4 of the MoU referred to

hereinabove. Therefore, respondent no.1

and/or his heirs cannot be permitted to get the

benefit of his own wrong and cannot be

permitted to get the benefit of a void

transaction.

9. In view of the above and for the reasons stated

above, the impugned judgment and order

passed by the High Court is hereby quashed

and set aside. It is directed that on the full

payment of the auction sale consideration by

the appellant (after deducting the 25% of the

amount already deposited earlier) with 9%

interest from the date of auction till the actual

amount is paid, to be paid within a period of

Civil Appeal Nos. 3152­3153 of 2023

Page 33 of 35 four weeks from today, the sale certificate be

issued in favour of the appellant with respect to

Flat No.6401. Whatever the amount is already

deposited by the respondent no.1/his heirs

shall be returned to the respondent no.1 (now

his heirs) with the interest at 9% from the date

of such deposit till the actual date of return

which shall be returned within a period of four

weeks from today. The heirs of original

respondent no.1 are granted three months’

time to vacate the flat in question and are

directed to hand over the peaceful and vacant

possession of the Flat No.6401 to the appellant

within a period of three months from today as

ordered above.

Civil Appeal Nos. 3152­3153 of 2023

Page 34 of 35 Present appeals are allowed. However, in the

facts and circumstances of the case there shall

be no order as to costs.

……………………………J. (M. R. SHAH)

……………………………J. (C.T. RAVIKUMAR) New Delhi, May 2, 2023

Civil Appeal Nos. 3152­3153 of 2023

Page 35 of 35