B MARUTHI Vs. INDIAN OVERSEAS BANK

JUDGEMENT

(1.) The petitioners were the highest bidders in the auction sale of a secured asset held by the Indian Overseas Bank on 27.08.2018. This sale was conducted under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for brevity, 'the SARFAESI Act'). While so, they filed S.A.No.399 of 2018 before the Debts Recovery Tribunal-II, Hyderabad (for brevity, 'the Tribunal'), to declare the said sale illegal and to award them damages and compensation of Rs.10,00,000/-. By order dated 09.04.2019, the Tribunal dismissed the S.A. Aggrieved thereby, they filed the present writ petition.

(2.) The admitted facts, to the extent relevant, are as follows: The Indian Overseas Bank (for brevity, 'the bank') conducted the e-auction sale of a secured asset, viz., Flat No.302, situated on the third floor of 'Sai Arcade' at Plot No.48 in Survey Nos.329/1, 330/1 and 331 of Chandanagar Village, Serilingampally Circle, Ranga Reddy District, under the provisions of the SARFAESI Act, on 27.08.2018. This secured asset belonged to one C.Naresh, who had created a security interest therein in favour of the bank. The petitioners became the highest bidders in this auction sale with a bid of Rs.25.60 lakhs. They immediately deposited 25% of the sale consideration. Confirmation of the sale was effected by the bank on 29.08.2018 calling upon the petitioners to deposit the balance sale consideration of Rs.19.20 lakhs within fifteen days. The petitioners claim to have approached another financial institution at that stage to avail financial assistance to pay the balance sale consideration and in that process, they obtained an encumbrance certificate in relation to the subject flat on 07.09.2018 from the Sub-Registrar's office at Serilingampally. They then came to know that C.Naresh, the owner, had executed registered Agreement of Sale-cum-General Power of Attorney dated 31.10.2014, bearing Document No.6403/2014, in favour of one Vallabhaneni Hymanjali. In view of this encumbrance, the petitioners assert that they could not secure a loan from the other financial institution. They addressed letter dated 10.09.2018 to the bank asking it to take necessary action for getting the encumbrance nullified.

(3.) However, by letter dated 19.09.2018, the bank disclaimed responsibility stating that the subsequent encumbrance created on 31.10.2014 was not binding on it. It further stated that it could pass valid title/legal right to the property and that it was not possible for it to cancel the subsequent encumbrance since it was not a party to that transaction. The bank accordingly called upon the petitioners to pay the balance sale consideration so that it could issue the sale certificate and register the same. The bank advised the petitioners that as the purchasers-owners of the property, they could take whatever measures they wished, to protect their interest in the property. The petitioners again addressed letter dated 25.09.2018 to the bank requesting it to clear the cloud on title. However, there was no response to their request but the bank pressurised them to pay the balance sale consideration. Under threat of forfeiture of the amount already deposited, the petitioners deposited the balance sale consideration and the bank issued them a sale certificate on 03.10.2018. Physical possession of the flat was however not delivered to them.