Anita Tosniwal vs The Reserve Bank Of India & Ors
2023 Latest Caselaw 3763 Cal

                     IN THE HIGH COURT AT CALCUTTA
                                  Civil Appellate Jurisdiction
                                     APPELLATE SIDE

Present:

The Hon'ble Justice Tapabrata Chakraborty
                 &
The Hon'ble Justice Partha Sarathi Chatterjee


                                    FMA 1017 of 2021
                                            with
                                   IA No. CAN 1 of 2022
                                      Anita Tosniwal
                                          -Versus-
                              The Reserve Bank of India & Ors.



For the Appellant             :       Mr. Abhrotosh Majumdar, Ld. Sr. Adv.,
                                      Mr. Nilotpal Chatterjee,
                                      Mr. Sourabh Sengupta,



For the SBI/Respondent No.2   :       Mr. Soumya Roy,
                                      Mr. Santosh Mahato,
                                      Ms. Benazir Kazi.


For the Central Bank of
India/ Respondent
Nos.3 to 6                    :       Mr. Gautam Chakraborty.



Hearing is concluded on       :       18th May, 2023.



Judgment On                   :       9th June, 2023.



Tapabrata Chakraborty, J.

1. The present appeal has been preferred challenging the order dated

17th June, 2019 passed in a writ petition being WP No.19604 (W) of 2016.

In connection with the appeal, the appellant/writ petitioner has also filed an

application for appropriate order being CAN 1 of 2022.

2. The appellant's case is that the respondent no.5 published a notice

in the newspapers on 29th September, 2012 for e-auction of different

immovable properties. The appellant participated in the auction held on 1st

November, 2012 conducted by the Central Bank of India (hereinafter

referred to as CB) in respect of a flat being Flat no. D & E on the first floor of

Sushila Niketan located at AF-337, Hanapara, Kolkata-70012 (hereinafter

referred to as the said flat), as detailed in serial no. 11(b) of the auction

notice. The appellant submitted a bid of Rs.35,00,000/- and emerged to be

the highest bidder. Upon acceptance of the bid amount, the sale certificate

was issued on 27th December, 2012. The sale deed pertaining to the said

flat was thereafter executed on 28th August, 2014 and the original title deed

being no. 8450 of 2007 was also handed over to the appellant. Suddenly, on

7th September, 2015 a possession notice was affixed in the said flat. Stating

such fact the appellant lodged a complaint on 29th September, 2015 before

the Banking Ombudsman but in vain. Again on 29th April, 2016, persons

claiming to be the recovery agents of SBI visited the flat and threatened to

dispossess the appellant. On 4th May, 2016, the appellant lodged a

complaint before the DGM, Stressed Assets Management Branch, SBI and in

reply, the appellant was communicated a memo dated 19th May, 2016 by the

Authorised Officer (in short, AO) of SBI intimating inter alia that the flat in

question was owned by one Gaurav Surana (Jain) vide original deed no.8450

of 2007 and the same had been mortgaged to SBI as security for sanctioning

credit facilities to M/s Bhagwati Lifestyle Private Limited. The said account

became NPA on 27th February, 2012 and accordingly a notice under Section

13(2) of the Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002 (in short, SARFAESI Act) was

issued on 22nd December, 2012 and possession was taken under Section

13(4) of the SARFAESI Act on 20th September, 2013. Thereafter, the

appellant through her learned advocate issued a demand notice dated 7th

June, 2016 protesting against the acts of the CB and claiming refund of the

consideration amount along with interest. As there was no response, the

appellant was constrained to prefer the writ petition. During pendency of the

writ petition, the Investigating Officer, Central Bureau of Investigation (in

short, CBI) by a notice dated 19th September, 2017 intimated the appellant

that CBI has started a case being CBI Case No.RCBSK2016E0004 dated

18th March, 2016 relating to bank fraud on SBI. In connection with the said

case, the mother deed pertaining to the flat in question being deed no.8450

of 2007 was also seized from the appellant. Such facts were brought on

record by filling a supplementary affidavit.

3. The writ petition was dismissed for default on 5th March, 2019. The

restoration application filed thereafter was allowed by the order impugned

and the writ petition was disposed of observing inter alia that 'apparently,

there are title disputes in respect of an immovable property. State Bank of

India is also claiming security interest in respect of the same immovable

property which was sold by Central Bank of India. A decision may be

required as to which of the Banks has a better or a simpler right title and

interest in respect of the immovable property concerned. It is for the parties to

have the disputes resolved before the appropriate forum, in accordance with

law. A writ Court need not enter into title disputes'. After filing of the appeal,

the Assistant Director, Prevention of Money Laundering Act, 2002 (in short,

PMLA) vide notice dated 26th November, 2021 had taken over possession of

the said flat and the said notice stands annexed to the application for

appropriate order. The notice also specifies that the order of provisional

attachment was passed on 31st March, 2020.

4. In the present appeal, CB has affirmed an affidavit stating inter alia

that one M/s Mahavir Textiles availed of credit facility upon mortgaging the

flat in question. As the borrower defaulted, the loan account was declared

NPA on 31st October, 2011 and subsequent thereto, notice under Section

13(4) was issued on 26th April, 2012. The said flat was put up for sale vide

notice dated 29th September, 2012 and was auctioned on 1st November,

2012. Thereafter, CB issued sale certificate on 27th December, 2012 stating

inter alia that the property had been sold on 'As is where is basis' and 'As is

what is basis'. The deed was thereafter executed on 28th August, 2014 and

the appellant was handed over possession along with the original title deed

to the appellant. Upon being served a copy of the writ petition on 8th

September, 2016, CB came to learn that in respect of the said flat, SBI also

issued notices under Section 13(2) and Section 13(4) of SARFAESI Act.

5. The respondent no.2 being the SBI also filed an affidavit-in-

opposition stating inter alia that the said flat was mortgaged to SBI and as

the borrower failed to repay, notices under Section 13(2) and Section 13(4) of

the SARFAESI Act were issued. The Section 13(4) notice was also published

in the newspaper on 25th September, 2013. The mother deed on the basis of

which loan was allegedly granted by CB was not genuine and the mortgage

of the demised flat to the respondent no.3 was fraudulent.

6. Mr. Majumdar, learned advocate appearing for the appellant

submits that the impugned order has been passed without appreciating the

admitted facts and the writ petition has been disposed of on the basis of an

erroneous observation that 'apparently, there are title disputes in respect of

an immovable property'. The writ Court without going into the merits of the

appellant's claim and without appreciating that the appellant had been a

victim of the fraud practised, refused her prayer towards refund of the

consideration money along with interest moreso when the writ Court has the

jurisdiction to set aside a statutory sale.

7. He contends that the appellant was caught in the cross fire between

CB and SBI. Gaurav Surana was the original owner of the said flat, who

purchased the same by a deed no. 8450 of 2007 and mortgaging the said

deed, loan was obtained from CB and SBI. In the said conspectus and as it

was explicit from the records that fraud had been practised, the observation

of the learned Judge that 'a decision may be required as to which of the

Banks has a better or a simpler right title and interest in respect of the

immovable property concerned' is otiose. The appellant who had invested her

money and had been a bona fide purchaser cannot be asked to wait till a

final decision is taken in the proceedings initiated by CBI, to get back

possession of the flat or the money expended.

8. Drawing our attention to the sale certificate issued in favour of the

appellant by CB on 27th December, 2012, Mr. Majumdar submits that a

conscious statement was incorporated in the said certificate to the effect

that 'the sale of the scheduled Property was made free from all encumbrances

known to the secured creditor listed below on deposit of the money demanded

by the undersigned'. It is, however, surprising as to how such a specific

statement could have been incorporated in the sale certificate when

admittedly a notice under Section 13(2) of the SARFAESI Act had already

been issued by SBI on 22nd December, 2012 pertaining to the self-same flat.

9. He argues that on the date of issuance of the sale certificate as well

as on the date execution of the sale deed, the CB authorities were very much

aware of the fact that the flat in question was not free from encumbrances

as the SBI authorities had also claimed right over the same. On one hand

the CB authorities had issued the sale certificate and executed a deed in

favour of the appellant upon receipt of the consideration money and on the

other hand they had taken a plea that as the flat was purchased on 'as is

where is basis' and 'as is what is basis', the appellant cannot claim refund.

It was incumbent upon the CB authorities to conduct proper enquiry and to

ascertain as regards existence of encumbrances over the property before

publishing the auction notice. For their laches the appellant cannot suffer.

10. He further argues that the CB authorities while conducting the

sale were under an obligation to strictly follow Rule 8 of the Security Interest

(Enforcement) Rules, 2002 (hereinafter referred to as the 2002 Rules) which

mandates that the secured creditor shall set out in the terms of the sale

notice any other thing which the AO considered it material for a purchaser

to know in order to judge the nature and value of the property. In support

of the arguments advanced reliance has been placed upon the judgments

delivered in the cases of Mr. Mandava Krishna Chaitanya -vs- UCO Bank,

Asset Management Branch, reported in 2018 SCC OnLine Hyd 196, Jai

Logistics, rep. by its Partner, G. Bhaskar, No.21/22, First Cross Street,

Chennai-600010 -vs- The Authorized Officer, Syndicate Bank, No.105-106,

Ponnurangam Road (West), R.S. Puram, Coimbatore, reported in 2010 (4) CTC

627, Janatha Textiles and Others -vs- Tax Recovery Officer and Another,

reported in (2008) 12 SCC 582 and S.L. Ispat Private Limited and Another -

vs- Punjab National Bank and Others, reported in 2023 SCC OnLine Cal 33.

Reliance has also been placed upon an unreported judgment delivered in the

case of State of West Bengal -vs- Union of India and Others in support of the

contention that the writ Court has the authority to set aside any Court sale

or a statutory sale.

11. Mr. Chakraborty, learned advocate appearing for the CB submits

that there had been no mistake on the part of the authorities of the said

bank and they have acted in strict consonance with the SARFAESI Act and

the Rules framed thereunder. A loan was advanced against mortgage of the

flat. As the loanee failed to pay the dues the account was declared NPA on

31st October, 2011. Thereafter, Section 13(2) notice was issued. On 26th

April, 2012, the AO of CB issued notice under Section 13(4). The said flat

was put up for sale by an auction notice dated 29th September, 2012. The

flat was sold to the highest bidder, sale certificate was issued and thereafter

the deed was executed. The allegation that the bank authorities had

suppressed the encumbrances prior to issuance of the sale certificate is

absolutely unfounded. The CB authorities had discharged their obligations

by executing the sale deed and by handing over possession of the said flat to

the appellant. Prior to participation in the tender process, the appellant was

under an obligation to ascertain as to whether there was any encumbrance

since the property was being sold on 'as is where is basis' and 'as is what is

basis'. Being conscious about the said clause in the auction notice and

having participated in the auction process and having paid the

consideration money, the appellant cannot claim refund.

12. Mr. Roy, learned advocate appearing for SBI submits that on the

basis of a forged deed, loan was granted by CB. The said deed did not create

any security interest over the flat in question. At the time of sale of such

property by CB, the said flat was mortgaged to SBI. The issue as regards

genuineness of the deed retained by CB, is to be adjudicated in the pending

criminal proceeding.

13. Heard the learned advocates appearing for the respective parties

and considered the materials on record.

14. For adjudication of the lis the following dates are essential :-

30th October, 2011 - The loan account of the borrower in CB became NPA;

27th February, 2012 - The loan account of the borrower in SBI became NPA;

26th April, 2012 - Notice under Section 13(4) of the SARFAESI Act issued by

the AO, CB;

29th September, 2012 - Auction sale notice issued by AO, CB;

1st November, 2012 - Auction conducted;

22nd December, 2012 - Notice under Section 13(2) of the SARFAESI Act

issued by the AO, SBI;

27th December, 2012 - Sale certificate issued by the AO, CB;

20th September, 2013 - Notice under Section 13(4) of SARFAESI Act issued

by the AO, SBI;

25th September, 2013 - Notice published in Business Standard and Akdin;

3rd October, 2013 - Complaint lodged on behalf of SBI to Inspector-in-

Charge, Baguihati police station;

4th May, 2014 - Sale notice published by SBI in Times of India and

Bartaman;

28th August, 2014 - Sale deed executed by CB in favour of the appellant;

31st March, 2020 - The order of provisional attachment was passed;

26th November, 2021 - The Assistant Director, PMLA took over possession of

the said flat.

15. It is the stand of SBI that the account of M/s Bhagwati Lifestyle

Private Limited became NPA on 27th February, 2012 and as such notice

under Section 13(2) of SARFAESI Act was issued on 22nd December, 2012.

Thereafter, notice under Section 13(4) was issued on 20th September, 2013

and physical possession of the flat was taken over. The possession notice

was also published in local newspaper on 25th September, 2013. At the time

of routine visit on 30th September, 2013, it was noted that some unknown

person had locked flat after breaking the bank's seal and padlock. To that

effect a general diary was lodged in Baguihati police station on 3rd October,

2013 and thereafter the AO of SBI repossessed the flat and posted security

guards. On 4th May, 2014 sale notice was published to dispose of the

property through e-auction. Again on routine inspection it was found that

the possession notice and display boards were destroyed and as such

possession notice was again pasted and display boards were reaffixed on 3rd

September, 2015.

16. It appears that sale certificate was issued on 27th December, 2012

by the AO of CB subsequent to issuance of Section 13(2) notice by AO of SBI

on 22nd December, 2012. The deed was executed by CB in favour of the

appellant on 28th August, 2014. It is the contention of SBI that possession of

the flat was taken over on 21st September, 2013 and since the bank's seal

and padlock was broken, a general diary was lodged in Baguihati police

station on 3rd October, 2013 and thereafter the AO of SBI repossessed the

flat and posted security guards. CB in its affidavit has averred that the bank

handed over possession of the flat on 28th August, 2014. In the said

conspectus, it thus cannot be totally ruled out that the CB authorities had

no knowledge that SBI was also claiming security interest over the self-same

property prior to execution of the sale deed on 28th August, 2014.

17. The provisions of the 2002 Rules cast an obligation upon the

secured creditors to be diligent and to take all necessary steps to ascertain

as to whether there are any encumbrances over the property before putting

up the property for sale moreso when the secured creditor is a nationalised

bank. Being an instrumentality of the State it cannot act in a casual and

negligent manner. In our opinion, though the property has been auctioned

on 'as is where is basis' and 'as is what is basis', the bank could not have

shirked its responsibility to disclose the encumbrances from taking clear

possession and the learned Judge in appreciation of such proposition ought

not to have refused to consider the appellant's claim. The possession of the

flat has been taken over by the competent authority in the proceedings

pertaining to bank fraud on SBI under the PMLA Act. In view of the fraud

practiced by the original borrower the appellant cannot bear the brunt.

There is no requirement under the said Rules towards execution of a deed of

conveyance to perfect the sale conducted and as such the execution of the

deed of conveyance does not detain us from issuing direction towards refund

of the consideration amount to the appellant. It is made clear that the sale

certificate and the subsequent deed of conveyance as executed in favour of

the appellant shall not confer any title over the flat in question in favour of

the appellant.

18. At the time of execution of the sale deed the appellant had paid an

amount of Rs. 2,65,722/- as stamp duty and Rs. 41,843/- as registration

fee. The said amount was not paid to the bank and it did utilise the same.

The sale price of Rs. 35,00,000/- paid by the appellant had been received

and retained by CB. The appellant also had not made a proper enquiry

about the property before participating in the auction and she ought to have

been more diligent. For such laches we are not inclined to allow the

appellant's prayer for interest and refund of the stamp duty and registration

fee. However, it would be iniquitous to deny the appellant's prayer for refund

of the consideration money of Rs. 35,00,000/-.

19. For the reasons discussed above, the order impugned in the

present appeal is set aside and the respondent nos. 3 to 6 are directed to

refund the consideration money of Rs. 35,00,000/- to the appellant within a

period of two weeks from the date of communication of this order.

20. The appeal and the connected application are, accordingly,

disposed of, however, without any order as to the costs.

21. Urgent Photostat copy of this judgment, if applied for, shall be

granted to the parties as expeditiously as possible, upon compliance of all

formalities.

(Partha Sarathi Chatterjee, J.) (Tapabrata Chakraborty, J.)