ALLAHABAD BANK & ORS  Vs SHIPRA PANDEY & ORS

LPA 573/2019 Page 1 of 14 $~17.
* IN THE HIGH COURT OF DELHI AT NEW DELHI

+ Date of Decision: 14.01.2021

% LPA 573/2019 and C.M. Nos. 39796/2019 & 39798/2019

ALLAHABAD BANK & ORS ….. Appellants
Through : Mr. Rajesh Kumar Gautam, Mr.Anant
Gautam & Mr. Nipun Sharma,
Advocates.

versus

SHIPRA PANDEY & ORS ….. Respondents
Through : Ms. Nandita Abrol, Advocate for
respondent No.1 .

CORAM:
HON’BLE MR. JUSTICE VIPIN SANGHI
HON’BLE MS. JUSTICE REKHA PALLI

VIPIN SANGHI, J. (ORAL)

1. This Letters Patent Appeal is d irected against the judgment dated
24.07.2019 passed by the learned Single Judge in W.P.(C.) No.3984/2018
preferred by the respondent No.1 . By the impugned judgment, the learned
Single Judge allowed the said writ petition and held that the respondent
No.1 / writ petitioner was entitled to refund of the sa le amount of
Rs.1,33,45,000/ -. The learned Single Judge also directed that the respondent
No.1 shall be entitled to refund of the expenditure incurred by her on e –
stamp duty to the tune of Rs.5,30,800/ – and a further amount of
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LPA 573/2019 Page 2 of 14 Rs.1,33,700/ – towards the registration charges in respect of the sale
certificate/deed. Respondent No.1 had raised a certain bill to contend that
she ha d incurred expenditure on renovation of the property in question and ,
in respect thereof , the appellant bank was directed to appoint a valuer from
its panel to assess the value of the work carried out by the respondent No.1
for renovation of the property in question within eight weeks. The learned
Single Judge directed that the amount valued shall be paid to the respondent
No.1 / writ petitioner within two weeks of such valuation . The aforesaid
amounts of Rs.1,33,45,000/ -, Rs.5,30,800/ – and Rs.1,33,700/ – directed to be
refunded to the respondent No.1 were to carry interest @ 7% per ann um
computed from the date when the amounts were paid by the respondent No.1
pursuant to the auction purchase , till the date of refund.
2. The background in which the aforesaid reliefs were sought by the
respondent No.1 / writ petitioner , and came to be grante d to her , may now be
noticed.
3. On 08.08.2017, a public notification for e -auction was published by
the appellant / Allahabad Bank in the newspaper containing a list of
properties to be made available for auction on 28.08.2017 under the
SARFAESI Act, 2002. The list of properties included property No. 40/53,
First Floor, Chittranjan Park, New Delhi admeasuring 160 sq. yards. The
respondent No.1 participated in the said bidding process in respect of the
said property and gave a bid for Rs.1,33,45,000/ – which was accepted by the
appellant and a Sale Certificate was issued in her favour on 04.09.2017. The
respondent No.1 claimed that she took a loan of Rs.1 Crore carrying interest
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LPA 573/2019 Page 3 of 14 @ 12% per annum from the ICICI Bank in order to pay the sale
consideration. Admi ttedly, the respondent No.1 was placed in actual vacant
physical possession of the said property by the appellant Allahabad Bank
after receipt of the entire consideration.
4. Respondent No.1 claimed that since the property was not in a good
condition, she s pent Rs. 13 Lakhs for renovation so as to make the said
property habitable. She also deposited Rs. 5,30,800/ – as e-stamp duty for
registration of the Sale Certificate with the office of the Sub -Registrar,
Mehrauli, New Delhi , apart from an amount of Rs.1,33, 700/- towards
registration charges for registration of the Sale Certificate and complet ion of
all the formalities in the office of the Sub -Registrar, Delhi.
5. Respondent No.1 claimed that she was shocked when, on 04 .01.2018,
the Sub-Registrar refused to rel ease the Sale Certificate / Deed to her on the
ground that the Economic Offences Wing ( EOW ), Crime Branch had issued
a restraint order to the Sub-Registrar, not to transfer the said property . On
inquir y, she learnt that one FIR bearing No. 0296/2014 dated 10.11.2014
had been registered against one Prashant Kapoor. She further claimed that
this encumbrance was not notified in the e -auction notice issued by the
appellant bank and the appellant bank had not informed the public at large,
including the respon dent No.1 , that the Sub-Registrar had been restrained
from registering the transfer of the property in question. She claimed that
she was a bona fide purchaser of the said property , for which she had paid a
huge amount and also spent substantial amount on its renovation.
Consequently, she sent a communication on 04.01.2018 to the appellant
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LPA 573/2019 Page 4 of 14 bank disclosing the difficulty being faced by her in getting the Sale
Certificate/ Sale Deed released from the office of the Sub -Registrar owing to
the pendency of the said FIR. She also got a legal notice issued to the
appellant bank on 19/ 22.02.2018. In response, w hile admitting that the said
property had been sold through e -auction, the appellant bank claimed that it
was not responsible for any defect in the title as property has been sold on
‘as is where is ‟ basis . Consequently, the respondent No.1 preferred the writ
petition in question seeking the following reliefs:
“a. Quash the sale certificate dated 04.09.2017, issued and
signed by the by the Authorized Offic er of the Respondent No. 3
and direct the appropriate authorities to take strict action
against the Respondent No. 3;
b. Direct the Respondent No. 3 to refund the amount of
Rs.1,52,59,500/ – paid by the Petitioner as inclusive of total sale
consideration a mount and the additional amount spent by the
petitioner on the property in question along with interest at the
rate of 12%;
c. Direct the Respondent No. 3 to pay the interest
paid@12% on the loan amount of Rs. 1 Crores taken by the
Petitioner from ICICI Ba nk to purchase the property in
question;
d. Direct the Respondent No. 3 to pay the compensation of
Rs.50,00,000/ -(rupees fifty lacs only) in respect of the loss of
reputation, time and money ;
e. Pass such other and further order(s) and grant such
other reliefs in favour of the Petitioner and against the
Respondents, as this Hon’ble Court deems just and proper in
the facts and circumstances of the case and in the interest of
justice and equity.”
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LPA 573/2019 Page 5 of 14 6. The Allahabad Bank filed its counter -affidavit. Several ob jections
were taken , but we need not be detained by them as they are not relevant and
learned counsel for the appellant has not pressed any argument in respect of
the finding returned by the learned Single Judge on those aspects.
7. The appellant averred that it was not aware about the involvement of
the property in question in case FIR No.296/2014 under Sections 406/420/34
IPC registered at PS -Defence Colony. It also stated that the officials of the
Allahabad Bank offered their cooperation in getting the S ale Certificate/
Deed of the property in question released from the office of Sub -Registrar
and that they are still ready to extend their support for the same. It was
claimed that the bank was not responsible for any defect in the title of the
property wh ich had been sold on ‘as is where is‟ basis. The appellant also
dispute d the claim of the respondent No.1 / writ petitioner having incurred
additional expenditure on renovation, etc.
8. The learned Single Judge after rejecting the appellant’s assertion
regard ing maintainability of the writ petition (which argument has not been
pressed by learned counsel for the appellant before us) proceeded to
determine whether the respondent No.1 / writ petitioner was entitled to
refund of the amount of Rs.1,52,59,500/ – paid by her, which included the
total sale consideration amount spent by her on e -stamp duty, registration
charges and on renovation.
9. The learned Single Judge observed that the only plea taken by the
appellant / Allahabad Bank is that it is not responsible for any defect in the
title, as the property ha d been sold on ‘as is where is‟ basis. The learned
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LPA 573/2019 Page 6 of 14 Single Judge took note of the auction notification issued by the Allahabad
Bank – which was filed alon g with the writ petition by the respondent No.1 /
writ peti tioner , and observed that the same does not specify any
encumbrance on the property. The l earned Single Judge held that the
appellant bank – being the secured creditor, was obliged to set out in the sale
notice , all things which the authorized officer con sider ed it material for a
purchaser to know , in order to judge the nature and value of the property.
For this , reliance was placed on Rule 8(6)(f) of the Security Interest
(Enforcement) Rules, 2002 . In paragraph 13, the learned Single Judge
observed:
“13. If a stipulation of encumbrance is put then the purchaser
cannot contend his / her ignorance with regard to the
encumbrance. In the absence of such a stipulation, the
purchaser being a bona fide purchaser without knowledge of
encumbrance, the plea of the respondent Bank that it was not
aware about the involvement of the property in question in
criminal case bearing FIR No. 296/2014 under Section
406/420/34 IPC would not absolve the respondent Bank of the
liability of selling the property, which cannot be owned by the
purchaser in the absence of a registration of the Sale
Certificate.”
10. The learned Single Judge relied upon two decisions – one of the High
Court at Hyderabad and the other of the Allahabad High Court, wherein it
has been held that even when an asset sold under the SARFAESI Act is sold
on ‘as is where is’ and ‘as is what is‟ basis, the seller is bound to disclose to
the buyer any material defect in the property , or in the sellers title thereto. It
was held that a duty is cast upon the authorized officer of the bank to
disclose to the auction purchaser any material defect in the title, failing
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LPA 573/2019 Page 7 of 14 which it could be construed that the purchaser was misled. The immunity
claimed by the bank – on the pretext of sale on ‘as is where is’ basis , did not
absolve the secured creditor / bank to make a due diligence/thorough search
in respect of the property before proposing its sale.
11. The learned Single Judge relied on a Coordinate Bench decision of
this Court in Royal Star Trading Company Vs. IFCI Limited ,
MANU/ DE/2267/2014, wherein the auction purchaser sought refund of the
sale consideration since the possession of the property sold was not
delivered. The Court rejected the defence of the financial institution which
sold the property under the SARFAESI Act , that the financial institution was
absolved of its obligation to deliver the possession of the property
purchased , merely because the purchaser was obliged to inspect the asset/
property before its purchase.
12. Yet another decision of the Madras High Court in Jai Logistic Vs.
The Authorised Officer, Syndicate Bank, MANU/TN/1161/2010, was
relied upon by the learned Single Judge to support his decision .
Consequently, the learned Single Judge allowed the writ petition in terms, as
aforesaid.
13. The submission of l earned counsel for the appellant / Allahabad Bank,
firstly, is that the appellant bank , just like Respondent No.1, was also not
aware of the communication sent by the EOW to the Sub -Registrar of
Assurances not to transfer the property in question on account of the case
FIR No.296/2014 under Sections 406/420/34 IPC registered at PS -Defence
Colony , New Delhi, being pending. He submits that, in fact, the EOW had
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LPA 573/2019 Page 8 of 14 no jurisdiction to issue any such communication to the Sub -Registrar of
Assurances and, secondly, the Sub -Registrar of Assurances was not bound
by any such instruction or direction of the EOW .
14. He points out that the Supreme Court in Crl. Appeal No.1481/2019
titled Nevada Properties Pvt. Ltd. Through Its Director Vs. The State of
Maharashtra , 2019 (12) SCALE 826 , had in similar circumstances, held
that such a communication issue d to the Sub -Registrar of Assurances is
without any authority. He submits that this de cision of the Supreme Court
was render ed after passing of the impugned judgment . Whereas the
impugned judgment was rendered on 24.07.2019, the judgment of the
Supreme Court came to be delivered on 24.09.2019.
15. He submits that soon after the said decision was rendered, the
appellant proceeded to file a writ petition before this Court – being W. P.(C.)
No. 11662/2019 titled Allahabad Bank Vs. Joint Commissioner of Police,
Economic Offences Wing & Others , as a consequence of which , the said
communication of the EOW dated 16.03.2015 addressed to the Sub –
Registrar -III, Mehrauli Delhi was withdrawn vi de letter No.6349/R –
ACP/ SEC-VI/EOW dated 05.12.2019 .
16. Learned counsel further submits that the respondent No.1 / writ
petitioner did not place before the learned Single Judge the complete e-
auction notice. Only the advertisement published in the newspaper w as filed
by her , but not the detailed terms & conditions , to access which the
advertisement itself provided the relevant web link. He submits that had the
terms & conditions been placed before the learned Single Judge, the learned
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LPA 573/2019 Page 9 of 14 Single Judge would not h ave held in favour of the respondent No.1 / writ
petitioner . In this regard, he has drawn our attention to the detailed terms &
conditions which not only provided that the sale of the property put to
auction was on „as is where is ‟ basis ; „as is what is ‟ basis, but; also provi ded
in clause 19 that :
“19. The Authorized Officer will not be held responsible for
any charge, lien, encumbrance, property tax, or any other dues
to the Government or anybody in respect of the property under
sale. ”
17. Learned counsel sub mits that Respondent No.1 is equally to blame –
if not more, because she did not do due diligence before participating in the
e-auction and giving her bid.
18. Learned counsel submits that the learned Single Judge proceeded on
the foundation that the stipula tion of encumbrance had not been put in the
advertisement, which is not correct . He further points out that even while
executing the Sale Certificate, the appellant bank had stated that “the sale of
the scheduled property was made free from all encumbranc es known to the
secured creditor ”.
19. Learned counsel further submits that, in fact, there was no
encumbrance on the property in question and this is evident from the fact
that, firstly, the EOW had sent its communication dated 1 6.03.2015 to the
Sub-Registrar of Assurances without any authority of law or jurisdiction
and, secondly, the same was withdrawn without any consideration being
paid. The communication dated 16.03.2015 could not be termed as an
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LPA 573/2019 Page 10 of 14 encumbrance on the property in question. It was merely an unauthorised
obstruction by a third party, i.e. the EOW, Crime Branch, which was
subsequently withdrawn. He submits that the appellant bank was not, in any
way, responsible for the respondent No.1 not being able to get the Sale
Certificate/ Deed released from the Sub-Registrar .
20. Learned counsel further submits that the grievance raised by the
respondent No.1 no longer survives , since she is free to secure the registered
Sale Certificate/ Deed from the Sub -Registrar , since the EOW has issued the
communi cation on 05.12.2019. He submits that the respondent No.1 has not
really been put to any real prejudice , since the respondent No.1 was put in
actual physical and vacant possession of the property in question and she
even claimed to have carried out repair and renovation works on the
property by incurring expenditure without any let or hindrance . Thus, it was
open to her to occupy and use the property without any let or hindrance.
The only inconvenience suffered by the respondent No.1 was that she could
not get the registered Sale Deed/ Title Deed for the property for some time –
for which the appellant bank is not responsible in any way. The appellant
bank filed the writ petition before this Court to get the communication of the
EOW withdrawn in the ligh t of the judgment of the Supreme Court in
Nevada Properties Pvt. Ltd. (supra) . Even the respondent No.1 could have
done the same , but she does not take any such step.
21. Learned counsel, therefore, submits that since the fundamental
premise on whi ch the impu gned judgment has been rendered does not
survive, namely, the inability of the respondent No.1 to obtain the registered
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LPA 573/2019 Page 11 of 14 Sale Certificate / Deed from the Sub -Registrar of Assurances, the impugned
judgment – in the changed circumstances , cannot be sustained a nd the writ
petition is liable to be dismissed.
22. On the other hand, the submission of learned counsel for the
respondent No.1 is that since the respondent No.1 could not secure clear title
to the property , she has not only suffered monetary loss , but she acquired
another property and that she is, therefore, not interested in retaining the
property in question. She , therefore, submits that the respondent No.1 is
entitled to refund of her amount , as awarded by the learned Single Judge.
23. Learned counsel furth er submits that the appellant failed to carry out
due diligence before putting the property in auction despite the letter of
EOW placing an embargo on the transfer of the property. She submits that it
was a failure on the part of the appellant in carrying out due diligence which
led to the respondent No.1 being misled into purchasing the property in
question bona fide in public auction. She submits that even while issuing
the Sale Certificate, the appellant had represented to the respondent No.1
that the property is free from all encumbrances , which was not the case.
24. We have considered the submissions of learned counsels and perused
the complete record. In our view, the change in the fundamental scenario
brought about by the withdrawal of the letter of EO W dated 1 6.03.2015 vide
letter dated 05.12.2019 , in the light of the decision of the Supreme Court in
Nevada Properties Pvt. Ltd. (supra) has completely changed the complexion
of the case. In pursuance of the auction sale, after receipt of the sale
consid eration, the respondent No.1 / writ petitioner was placed in actual
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LPA 573/2019 Page 12 of 14 vacant physical possession of the property and she even exercised her
ownership right by undertaking renovation works therein without any let or
hindrance . Her possession was never disturb ed or questioned/ obstructed ,
and she continues to remain in actual physical and beneficial possession.
Therefore, it was open to the respondent No.1 / writ petitioner to occupy and
use the said property from the date she was put in possession.
25. In the li ght of the decision of the Supreme Court in Nevada
Properties Pvt. Ltd. (supra), it is clear that the EOW never had any authority
or jurisdiction to issue the communication of the kind they issued on
16.03.2015 to the Sub -Registrar of Assurances. The appe llant was not
responsible for the same , and we have no reason to believe that the appellant
was aware of it , and yet , did not disclose the same to the public at large
while putting the property to auction. In fact, even the Sub -Registrar of
Assurances was not bound by the said communication dated 1 6.03.2015
which had been issued without jurisdiction or authority of law. Therefore,
the refusal of the Sub -Registrar of Assurances to deliver the registered Sale
Certificate/ Deed to the respondent No.1 / writ p etitioner was not due to any
fault of the appellant. We also find merit in the appellants submission that
the letter dated 16.03.2015 could not be considered as an encumbrance on
the property in question. The said property had not been mortgaged or
charg ed, and no lien was created over it. No Court of law had passed an
order of restraint against its transfer. With the transfer of the property to the
appellant, no pre -existing liability fastened to, or attached to the property
was transferred to Responde nt No.1.
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LPA 573/2019 Page 13 of 14 26. The appellant may have opposed the respondent No.1 ’s writ petition
as it was entitled to it in law. Had the situation not undergone the
fundamental change, as aforesaid, and the title of the respondent No.1/ writ
petitioner could not be perfected by release of the registered Sale Certificate/
Deed, most certainly, the respondent No.1 would have had a valid reason
and would have been entitled to the relief as granted to her by the learned
Single Judge. Pertinently, it was the appellant which moved this Court by
filing W.P.(C.) No.1 1662/2019 to assail the letter dated 16.03.2015 issued
by the EOW to the Sub -Registrar of Assurances and the respondent No.1 /
writ petitioner did not take steps in that regard. Even she could have done
so. Therefore, it cannot be said that the appellant bank did not take steps to
aid the release of the Title Deed of the respondent No.1 from the Sub –
Registrar of Assurances.
27. It is clear to us that the respondent No.1 has undergone a change of
mind with passage of time , since the property was auctioned in August 2017
and it could well be that the property prices today have fallen when
compared to the time when the property was bought by the respondent No.1 .
Since it is now open to the respondent No.1 to proceed to obtain the
registered Sale Certificate/ Deed, in our view, it is no longer open to the
respondent No.1 to insist that she should be refunded the amount , having
purchased the same in public auction under the SARFAESI Act . The Sale
Certificate/ Deed has already be en registered and the transaction is
complete. The same cannot be rever sed in the light of the changed scenario ,
and there is no justification for its cancellation. The Respondent No.1 was
equally responsible for some inconvenience that she may have suff ered in
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LPA 573/2019 Page 14 of 14 not being able to get her hands on the registered Sale Certificate/ Deed .
28. Consequently, we are inclined to allow this appeal and set aside the
impugned judgment , primarily on account of the fundamentally changed fact
scenario. At the same time, we uphold the reasoning of the learned Single
Judge , which is no longer attracted in the changed circumstances of the case.
The parties are left to bear their respective costs.

VIPIN SANGHI, J

REKHA PALLI, J
JANUARY 14, 2021
B.S. Rohella

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