initiating appropriate proceedings before a competent forum. A
mere contention that they are bona fide purchasers for
valuable consideration, respondent Nos.1 to 5 and
Sri Hiren K. Dharamshi cannot seek setting aside of the sale in
question. The sale was made by Recovery Officer in the
recovery proceedings by following the recourse provided under
law for realization of the legitimate dues of the bank.
WP No 52283 of 2013
16. Sri. Bipin Hegde, learned counsel representing
Smt. Anuparna Bardoloi, learned counsel on behalf of the
petitioner Sri Naveen Bhandary, the auction purchaser,
contended that, the order passed by the Debt Recovery
Tribunal and the Appellate Tribunal are contrary to law and
material available on record. The DRT while passing the
impugned order dated 07.03.2008 committed an error by
holding that the Recovery Officer failed to investigate the
claims of the respondents, which is nothing but based on
assumptions and presumptions. In fact, the respondents have
no valid title to the sites purchased by them and they have no
locus standi to challenge the order of the Recovery Officer
passed in AOR 2 of 2003. It is an admitted fact that the
- 17 -
respondents/purchasers have purchased the alleged sites
subsequent to the date of the mortgage of property in
question. Under such circumstances, the purchasers have
purchased the mortgaged property and they stepped into the
shoes of the mortgager as defined under Section 58 of the
Transfer of Property Act, 1882. Further, the order dated
28.02.1997 passed by the DRT in OA No. 36/1996 has not
been challenged and the same has reached its finality and as
per the sale certificate, the property was auctioned in the
public and the petitioner, Naveen Bhandary being the highest
bidder has deposited the entire auction sale consideration, sale
was confirmed, registered sale deed was executed in his favour
and possession was also handed over to him. Accordingly, the
revenue records were also changed in the name of the auction
purchaser.
17. It is further contended that, the DRT failed to
consider that in view of Section 26(1) of the Recovery of Debts
due to Banks and Financial Institutions Act, 1993 (in short
'RDB Act'), the validity of the recovery certificate cannot be
challenged before the Recovery Officer. Therefore, the appeal
filed in AOR No.2 of 2003 is unsustainable in law. The finding
of the tribunal is that, bringing the property to auction by
- 18 -
Recovery Officer is in violation of the provisions of The
Karnataka Land Reforms Act. Since, the land was not
purchased for a specific prohibited purpose, the Debt Recovery
Tribunal, Bengaluru and the Debt Recovery Appellate Tribunal,
Chennai lost sight of the fact that, the Bengaluru Development
Authority had notified for acquisition of the property comprised
in Sy.No.122/1 measuring 1 acre 30 guntas and land bearing
Sy.No.122/2 measuring 3 acres and 18 guntas and later, 3
acres and 18 guntas were de-notified. In the said acquisition
proceedings also, the land in question was acquired for
formation of a residential layout. In view of the same, the
finding of the DRT, Bengaluru and DRAT, Chennai, that land in
question was agricultural land is highly erroneous. It is
contended that respondents by name Sri.G.S. Srinivas Gupta,
Aslam Basha, Ramachandra Hegde, Sashikala,
C.N. Vishwanath have purchased the property in question in
the year 1995 from the Power of Attorney Holder of
respondent Nos.11 and 12/respondent Nos.7 and 8
Sri. B.A. Ram and Sri. B.A. Laxman. The mortgage in favour of
the bank was of the year 1991 and therefore, respondents
G.S. Srinivas Gupta, Aslam Basha, Ramachandra Hedge,
Sashikala, C.N. Vishwanath are not bona fide purchasers, more
- 19 -
particularly, when original title deeds are in the custody of the
bank. Neither the respondents nor the subsequent purchasers
are the bona fide purchasers of the property in question, which
was fully mortgaged in favour of the bank, since they have not
scrutinized and verified the original title deeds, which were in
the custody of the bank before purchasing the property in
question. Respondent Nos.4 and 5/respondent Nos.1 and 2
being the agents of respondent Nos.11 and 12/respondent
Nos.7 and 8 cannot have independent right or a remote
standing to challenge the order of the Recovery Officer,
therefore, the impugned order dated 07.03.2008 made in AOR
2 of 2003 and also order passed by the DRT, Bengaluru and
DRAT, Chennai are unsustainable and liable to be set aside.
Hence, prayed to allow the petitions.
18. In support of their contentions, learned counsel for
the petitioner in W.P.No.36440/2014 relied upon the following
decisions:-
1. ITC Limited vs. Blue Coast Hotels Ltd., & Ors.,
reported in 2018 SCC Online SC 237;
2. Indian Bank v. K. Pappireddiyar reported in 2018
SCC Online SC 743;
- 20 -
3. Valley Iron & Steel Company Limited v. State of
Himachal Pradesh and Others reported in 2016 SCC
Online HP 2375;
4. A. Parvatham v. Bank of Baroda represented by its
Branch Manager, Tiruppur and 4 Others reported
2000 SCC Online Mad 276;
5. Bank of Baroda, Through its Branch Manager v.
Gopal Shriram Panda and Another reported in 2021
SCC Online Bom 466;
6. Smt. Madhukanta Patadia, W/o. Late
Harajeevandas v. The State of Karnataka,
W.P.No.147188 of 2020 DD 16.07.2020;
7. Tamil Chelvan v. State of Karnataka and Others in
WP No.38276/2013 and W.P.No.38702-
38703/2013 dated 25.05.2016;
8. Sri. B.M. Upendra Kumar v. State of Karnataka
reported in 2016 SCC Online Kar 855;
9. Sri. R. Raghu v. Sr. G.M. Krishna and Another in
Civil Appeal 8544 of 2024.
19. Sri. H.T. Nataraj, the learned counsel for respondent
Nos.1 to 5 and 7(a-c)(in W.P.No.36440/2014 and for
respondent Nos.4, 5, 6, 8, 9 and 11(A-C) in
W.P.No.52283/2013 vehemently contended that the
respondent/G.S. Srinivasa Gupta was a builder and developer.
In the year 1991, he entered into an Agreement for purchase
- 21 -
of land bearing Sy.Nos.122/1 and 122/2 of Gottigere village,
Uttarahalli Hobli, Bengaluru South Taluk measuring 1 acre
30 guntas and 3 acres 18 guntas respectively from
respondents Sri. B.A. Ram and Sri. B.A. Laxman and pursuant
to said Agreement, he was put in possession and enjoyment of
the property with all liberty to develop the land and to make
improvement thereon. The respondent G. S. Srinivasa Gupta
made complete payment as consideration to its owners,
formed private layout on the said property after obtaining
permission from the village administration on 15.11.1991. The
respondents Dr. C.N. Vishwanath, Dr. Ramachandra Hegde,
Hiren K. Dharamshi, Sri. Aslam Basha and Smt. Sashikala are
the owners of the residential plots formed in the layout in
those survey numbers, who are in possession of the property
since 1995, on which date, they were put in possession and
sale deeds were executed in their favour. According to the
respondent/G.S. Srinivasa Gupta, M/s. United Distilleries had
borrowed a sum of Rs.20.00 lakhs in the year 1991 from the
Bank. Accordingly, respondents B.A. Ram and B.A. Laxman
deposited the title deeds of the land in respect of above survey
numbers, as collateral security. Since M/s. United
Distilleries(respondent No.10/respondent No.6) committed
- 22 -
default, the Bank initiated recovery proceedings in OA
No.36/1996 before the Tribunal. The Tribunal passed the order
dated 28.02.1997 and accorded three months' time to
M/s. United Distilleries to pay the amounts due, failing which,
the Bank was permitted to sell the mortgage properties of
Sri B.A. Ram and Sri. B. A. Laxman. In pursuance of the order
passed in O.A. 36/1996, the Recovery Officer initiated recovery
proceedings in DCP No.206 in O.A.No.36/1996. Thus, the
Recovery Officer brought the aforesaid property for sale on
28.11.2002 and public auction was held. The petitioner/Naveen
Bhandary was the highest bidder, who was offered to purchase
the said property for Rs.38,00,000/-. Hence, respondent Nos.1
to 5 filed objections before the Recovery Officer with a request
not to confirm the sale and the property in question should not
be sold, as the objectors are absolute owners of the property
and none of the persons have the right over the said property.
It is further contended that the Recovery Officer failed to
appreciate the fact that the land, which was subject matter of
mortgage was an agricultural land. The land which is being
brought to sale is a converted land and fully developed layout.
Thus, it comprises of more than 100 residential plots and each
plot has been sold to individual persons and objectors, who are
- 23 -
the purchasers of said residential plots formed in the said
layout and they are in peaceful possession of the same.
It is further contended that the Recovery Officer ought to
have considered that the respondents M/s. United Distilleries,
Sri. B. A. Ram and Sri.B.A. Laxman are owning many movable
and immovable properties. Thus, without proceeding against
them, they proceeded against the property in question, which
is a converted land, purchased by respondent Nos.1 to 5
herein. The Recovery Officer ought to have proceeded in
accordance with the provisions of Code of Civil Procedure, by
arresting and detaining the defaulters in civil prison, so that
they will voluntarily pay the entire mortgage amount. Further,
the land owners Sri. B. A. Ram and Sri. B.A. Laxman played
fraud and cheated the prospective purchasers of residential
plots by selling the same knowingly that the property is the
subject matter of mortgage with the bank for discharge of
debt. Therefore, respondent Nos.1 to 5 and 7 prayed to
dismiss the petitions filed by the petitioners.
20. In support of their case, learned counsel for
respondent Nos.1 to 5 and LRs of respondent No.7 in
W.P.No.36440/2014 relied on the following decisions:-
- 24 -
1. Narayan Deorao Javle(deceased) through Legal
Representatives v. Krishna and Others reported in
(2021) 17 SCC 626;
2. Mathew Varghese v. Amritha Kumar and Others
reported in (2014) 5 SCC 610;
3. Vasu CoCo Resorts Pvt Ltd., and Others v. The
Authorised Officer, State Bank of India and Others;
4. ARCE Polymers Private Limited v. M/s. Alphine
Pharmaceuticals Private Limited & Others, Civil
Appeal No.7372/2021 disposed of 03.12.2021;
5. Ram Kishun and Others v. State of Uttar Pradesh
and Others, (2012) 11 SCC 511.
21. Sri. A. Madhusudhana Rao, learned counsel for
respondent No.8/respondent No.12 Sri. B.A. Laxman
vehemently contended that, respondent No.8, who is the
mortgager/guarantor had also sought for an opportunity for
one time settlement and had also deposited initial amount of
Rs.6,75,000/- at that time and the same was not considered
by the Bank. Further, respondent Nos.7 and 8 had executed a
Power of Attorney in favour of Sri. G.S. Srinivas Gupta and in-
turn, he sold sites to other respondents on the basis of said
Power of Attorney. As such, in the proceedings initiated by
Sri. G.S. Srinivas Gupta and other purchasers of sites,
Sri. B.A. Laxman alongwith his deceased brother
Sri. B.A. Ram(respondent No.7) had also filed objection to the
- 25 -
claim of the purchasers and had contested the matter. Hence,
Sri. B.A. Laxman has substantial interest in the controversy
involved in the case. Further, Rule 61 of the Income Tax Rules,
clearly enable the defaulter or any person whose interest are
affected by same, to seek for setting aside the sale. It is
further contended that the auction sale in favour of the auction
purchaser, is in violation of the provisions of Rule 9 (2) of the
SARFAESI Rules, which provides that, when the reserve price
of the property proposed to be sold, the notice regarding the
same should be given by the Recovery Officer to the
mortgager. The reserve price was reduced from Rs.42.00 lakhs
to Rs.34 lakhs and the property was sold to the auction
purchaser in the subsequent auction at Rs.38.00 lakhs.
Admittedly, no notice was given to respondent No.8-
B.A. Laxman, regarding reduction of reserve price by the
Recovery Officer. In this background, the very sale
proceedings are illegal and the same have been rightly set
aside. Further, the entire sale proceedings have been
conducted in a malafide manner, without fixing the reserve
price, taking into account the actual nature and location of the
land as on the date of the auction. The Recovery Officer,
without proper publication reduced the reserve price, only with
- 26 -
an intention to facilitate the auction purchaser, who is none
other than an ex-employee of the same bank, and also a
Director of the Bank Employees' House Building Co-operative
Society. The petitioner Naveen Bhandary, was the only bidder
in the impugned auction. The Debt Recovery Tribunal in the
order dated 07.03.2008 passed in AOR No.2/2003 has
extensively dealt with the aforesaid illegalities committed by
the Recovery Officer during the auction sale in paragraph No.6
of the said order and the same has been confirmed by the
Debt Recovery Appellate Tribunal, Chennai.
It is further contended that the orders passed by the
Debt Recovery Tribunal, Bengaluru and Debt Recovery
Appellate Tribunal, Chennai do not suffer from any error of
jurisdiction and the same do not call for interference under
Article 227 of the Constitution of India, 1950.
22. The learned counsel in support of this argument
relied upon the judgment of the Hon'ble Supreme Court in the
case of Delhi Development Authority v. Corporation Bank
and Ors, reported in 2025 INSC 1161(Civil Appeal
No.11269/2016) disposed of on 25.09.2025), wherein the
Hon'ble Supreme Court in paras 23 to 25 has reiterated the
- 27 -
principles relating to the procedure to be followed while
conducting the sale in terms of the provisions of Income Tax
Act, 1961 and the provisions of Recovery of Debts and
Bankruptcy Act, 1993. The Hon'ble Supreme Court has
categorically referred to the fact that at the time of the
proclamation of sale, a notice has to be issued to the defaulter,
and in the proclamation of sale, the time and place has to be
specified, the details of the property has to be stated and also
any other materials, which is required to assess the nature and
value of the property. Whereas, in the instant case, the sale
proclamation that has been issued by the Recovery Officer
does not satisfy these requirements and the sale in favour of
the auction purchaser is in violation of these provisions.
23. In view of the submissions made by both the parties,
in both the petitions, the following points which would arise for
our consideration is as under:-
"Whether the order passed by the Debt Recovery
Appellate Tribunal, Chennai is contrary to law and
thus calls for interference by this Court?"
24. In the instant case, the Bank challenged the
impugned order passed by DRT, Bengaluru and DRAT, Chennai
- 28 -
and to allow MA No.138/2008, whereas, the auction purchaser
also filed writ petition to set-aside the impugned order passed
by DRAT, Chennai in MA No.378/2010.
25. A reading of the final order passed in OA No.36/1996
reveals that the 9th respondent Sri. B.A. Laxman being the
owner of land bearing Sy.No.122/2 of Gottigere village, stood
as guarantor to the loan transaction of M/s. United Distilleries
and had created an equitable mortgage of his land by deposit
of title deeds in favour of the Bank. As the principal borrower
M/s. United Distilleries failed to clear the loan, the bank
proceeded for auction of the mortgaged properties belonging
to Sri. B.A. Laxman. Accordingly, the Recovery Officer brought
the said land for sale and the Bank had also got the land
valued by an approved valuer and the approved valuer has
described the property as a 'dry land suitable for forming
layout' and also stated that it is a 'vacant land' i.e., agricultural
land and it has been subsequently converted into a non-
agricultural land and made into several plots. Hence, it is just
and necessary to analyse the term 'land'.
The word 'Land' as defined in Section 2(A)(18) of the
Karnataka Land Reforms Act, 1961 reads as follows:
- 29 -
"Land" means agricultural land, that is to say,
land which is used or capable of being used for
agricultural purposes or purposes subservient thereto
and includes horticultural land, forest land, garden
land, pasture land, plantation and tope but does not
include house-site or land used exclusively for non
agricultural purposes;"
Therefore, from the above, it can be seen that the land in
this case is an agricultural land.
26. As per the objection statement of the Bank, the
Village Administrator, Gottigere Village had issued no objection
for formation of sites, however, he is not a competent
authority to approve the residential layout plan and that the
layout plan is null and void as the same is unauthorised one.
27. Therefore, from a combined reading of the
description of the property in the OA, the approved valuer's
report, the order of the learned Presiding Officer, DRT
Bangalore in AOR No.1/2003 and the objection statement to
the appeal in AOR No.2/2003 under Section 30 of RDDB & FI
Act filed by the Bank, it reveals that the land in question was
an agricultural land and converted into layout without sanction
or approval of competent authorities.
- 30 -
28. The bank as well as auction purchaser have taken
the contention that the Recovery Officer was directed to
proceed against the main borrowers personally as well as
against their individual properties forthwith. In fact, the charge
created in respect of mortgaged property in favour of the bank,
is in accordance with statutory provisions and therefore, the
bank has every right to auction and realise its dues by bringing
the mortgaged property to sale. Further, the mortgaged
property was agricultural land at the time it was mortgaged in
favour of the bank. But, when the said property was brought
for auction by the Recovery Officer, the same was converted
for non-agricultural and residential purposes by the Mortgager
or who are the owners of the mortgaged property. Thus, the
Appellate Tribunal ought to have given liberty to the bank to
approach the Recovery Officer for bringing the property
lawfully mortgaged to it, for auction to realise the amount due
to it. The Bank being the prior mortgage holder is entitled to
enforce the same in preference to the claim of respondent
Nos.1 to 5, 7 and Mr. Hiren K. Dharamshi, who are only
subsequent purchasers of the property pending the mortgage.
Respondent No.1/respondent No.4 Sri. G.S. Srinivas Gupta,
who was only Power of Attorney Holder of Sri. B.A. Ram and
- 31 -
Sri. B.A. Laxman and as such, Sri. G.S. Srinivas Gupta, is only
bound by the act of his principal i.e., they stepped into the
shoes of mortgager by virtue of Section 58 of the Transfer of
Property Act and thus, Sri. B.A. Ram and Sri. B.A. laxman
cannot contend that they have sold and converted the
mortgaged property as residential sites in favour of respondent
Nos.1 to 5, 7 and Sri. Hiren K. Dharamshi. Therefore, the
remedy of respondent Nos.1 to 5, 7 and Hiren K. Dharamshi
will lie only against those persons, who have defrauded them
by initiating appropriate proceedings before a competent
forum. Hence, it is just and necessary to analyse Sections 59A,
60 and 91 of the Transfer of Property Act, 1882 and Order 34,
Rule 1 of Code of Civil Procedure, 1908.
"59-A. References to mortgagors and
mortgagees to include persons deriving title
from them.--Unless otherwise expressly provided,
references in this Chapter to mortgagors and
mortgagees shall be deemed to include references to
persons deriving title from them respectively.
60. Right of mortgagor to redeem.--At any
time after the principal money has become due, the
mortgagor has a right, on payment or tender, at a
proper time and place, of the mortgage-money, to
require the mortgagee (a) to deliver to the
mortgagor the mortgage-deed and all documents
relating to the mortgaged property which are in the
possession or power of the mortgagee, (b) where the
mortgagee is in possession of the mortgaged
property, to deliver possession thereof to the
- 32 -
mortgagor, and (c) at the cost of the mortgagor
either to re-transfer the mortgaged property to him
or to such third person as he may direct, or to
execute and (where the mortgage has been effected
by a registered instrument) to have registered an
acknowledgment in writing that any right in
derogation of his interest transferred to the
mortgagee has been extinguished:
Provided that the right conferred by this section
has not been extinguished by act of the parties or by
decree of a court.
The right conferred by this section is called a right
to redeem and a suit to enforce it is called a suit for
redemption.
Nothing in this section shall be deemed to render
invalid any provision to the effect that, if the time
fixed for payment of the principal money has been
allowed to pass or no such time has been fixed, the
mortgagee shall be entitled to reasonable notice
before payment or tender of such money.
Redemption of portion of mortgaged
property.--Nothing in this section shall entitle a
person interested in a share only of the mortgaged
property to redeem his own share only, on payment
of a proportionate part of the amount remaining due
on the mortgage, except only where a mortgagee,
or, if there are more mortgagees than one, all such
mortgagees, has or have acquired, in whole or in
part, the share of a mortgagor.
91. Persons who may sue for redemption.--
Besides the mortgagor, any of the following persons
may redeem, or institute a suit for redemption of,
the mortgaged property, namely--
(a) any person (other than the mortgagee
of the interest sought to be redeemed) who
has any interest in, or charge upon, the
- 33 -
property mortgaged or in or upon the right
to redeem the same;
(b) any surety for the payment of the
mortgage-debt or any part thereof; or
(c) any creditor of the mortgagor who has
in a suit for the administration of his estate
obtained a decree for sale of the mortgaged
property."
Order 34 Rule 1 CPC, 1908:
"1. Parties to suits for foreclosure, sale and
redemption.--Subject to the provisions of this
Code, all persons having an interest either in the
mortgage-security or in the right of redemption shall
be joined as parties to any suit relating to the
mortgage.
Explanation.--A puisne mortgagee may sue for
foreclosure or for sale without making the prior
mortgagee a party to the suit; and a prior mortgage
need not be joined in a suit to redeem a subsequent
mortgage."
Thus, the equity of redemption is a right which is
subsidiary to the right of ownership. Such right is not over and
above the right of ownership purchased by respondents herein.
The expression "equity of redemption" is a convenient maxim,
but, an owner, who has stepped into the shoes of the
mortgager, after the purchase from the mortgager, but, before
filing a suit for foreclosure is entitled to redeem the property in
terms of Section 60 of Transfer of Property Act. Once
- 34 -
subsequent purchaser had purchased the mortgaged property,
the right of redemption is a part of the title and as an owner,
he could seek redemption of the suit land in view of Section 91
of Transfer of Property Act. Similar ratio is laid down by the
Hon'ble Supreme Court in the case of Narayan Deorao Javle
(Deceased) through LRs v. Krishna and Others, reported
in (2021) 17 SCC 626.
29. The guarantor, respondent No.8/respondent No.12
B.A. Laxman has taken the contention that, the auction sale in
favour of the auction purchaser is in violation of the provisions
of Rule 9(2) of SARFAESI Rules, which provides that, when the
reserve price of the property proposed to be sold, the notice
regarding the same should be given by the Recovery Officer to
the mortgager.
30. Admittedly, in these cases, the reserve price was
reduced from Rs.42.00 lakhs to Rs.34.00 lakhs and the
property was sold to the auction purchaser at Rs.38.00 lakhs.
Infact, no notice was given to respondent No.8/respondent
No.12 regarding reduction of reserve price by the Recovery
Officer. In this background, respondent No.8/respondent No.12
contended that the very sale proceedings are illegal. Hence, it
- 35 -
is just and necessary to analyse Section 9(2) of SARFAESI
Rules, 2002.
"Rule 9(2) of the SARFAESI Act states that the sale
of a secured asset is confirmed in favour of the
highest bidder, subject to the secured creditor's
approval. It also mandates that the sale price must
be at least equal to the reserve price to be
confirmed. The rule outlines the process for sale
confirmation, including the condition that the bid
must be higher than the reserve price."
31. The Hon'ble Apex Court in the case of Mathew
Varghese v. A. Amritha Kumar and Others reported in
(2014) 5 SCC 610, held that under SARFAESI Act, the
Recovery Officer shall comply mandatory procedures viz., 30
days' clear notice to borrower of date of sale and there is
mandatory requirement of adjournment/postponement of sale
for a period of more than one month and no sale or transfer of
secured asset to be made on any subsequent date without
notifying borrower afresh with 30 days' clear individual notice
of the fresh date of sale and thus, any sale or transfer of
secured asset under SARFAESI Act in violation of the above
mandatory requirements would be held invalid.
Therefore, it appears that, the entire sale proceedings
have been conducted in a malafide manner, without fixing the
- 36 -
reserve price taking into account the actual nature and location
of the land as on the date of auction, without there being
proper publication, by reducing the reserve price, with an
intention to facilitate the auction purchaser, who is none other
than an ex-employee of the same bank and also a Director of
the Bank Employees House Building Co-operative Society, who
was the only bidder in the impugned auction. The aforesaid
mandatory requirement was extensively dealt with by DRT,
Bengaluru and DRAT, Chennai.
32. Further, at the time of proclamation of sale, a notice
has to be issued to the defaulter and in the proclamation of
sale, the time and place has to be specified, the nature and
value of the property has to be stated. In this regard, the
Hon'ble Apex Court in the case of Delhi Development
Authority v. Corporation Bank and Ors. reported in 2025
INSC 1161 at paras 23 to 25 has held as under:-
"23. Section 29 of the 1993 Act deals with
application of certain provisions of Income-tax Act.
It provides that provisions of Second and Third
Schedules to the Income Tax Act, 1961 and the
Income Tax (Certificate Proceedings) Rules, 1962,
as in force from time to time, shall as far as
possible, apply with necessary modifications as if
the said provisions and the Rules referred to the
amount of debt due under this Act instead of to the
Income-tax. The Second Schedule provides for
- 37 -
procedure of recovery of tax, whereas the Third
Schedule deals with procedure for distraint by
Assessing Officer or Tax Recovery Officer. Rule 53
of Second Schedule to 1961 Act deals with contents
of proclamation. It provides that a proclamation of
sale of immovable property shall be drawn up after
notice to the defaulter, and shall state the time and
place of sale, and shall specify, as fairly and
accurately as possible:-
"(a) The property to be sold;
(b) The revenue, if any, assessed upon the
property or any part thereof;
(c) The amount for the recovery of which
the sale is ordered.
(d) Any other thing which the Tax Recovery
Officer considers it material for a
purchaser to know, in order to judge
the nature and value of the property."
24. Thus, Rule 53 mandates the Recovery Officer to
mention in the proclamation of sale any other thing
which he considers material for purchaser to know
in order to judge the nature and value of the
property.
25. In exercise of powers under Section 295(1) of
the 1961 Act and Rules 91 and 92 of the Second
Schedule of the 1961 Act, the Central Board of
Revenue has made the Rules namely, the Income
Tax (Certificate Proceedings), Rules 1962. Rule 16
of the Rules empowers the Recovery Officer to
summon any person whom he thinks necessary to
summon and may examine him in respect of any
matters relevant to the proclamation and require
him to produce any document in his possession or
power relating thereto."
- 38 -
33. Hence, in this case, the Recovery Officer has not
complied the mandatory strict compliance under SARFAESI
Rules and any infraction of the Rules would be detrimental to
the whole exercise of disposing of the secured Asset for
realising the outside secured creditor.
34. Admittedly, the Debt Recovery Tribunal (DRT) cannot
adjudicate civil rights such as those involving the declaration of
a sale deed's validity because these matters fall outside its
limited jurisdiction under the SARFAESI Act. The DRT's role is
primarily for expediting debt recovery and enforcing security
interests, not for resolving complex title disputes, which
remain the purview of civil courts, whereas, the Recovery
Officer of DRT, Bengaluru conducted auction sale which is
contrary to the provisions of law and which is against the
interest of respondents Sri. B.A. Ram and Sri. B.A. Laxman
and no notice was served upon them while reducing price of
the land in question.
35. It is contended that the schedule property comprises
of more than 100 residential plots and each plot has been sold
to individuals and objectors, thus they are in possession of the
property.
- 39 -
36. The auction purchaser has taken the contention that
the validity of certificate issued by Recovery Officer cannot be
challenged. Hence, it is just and necessary to analyse Section
26 of RDB Act, 1993, which reads as under:-
26. Validity of certificate and amendment
thereof.-- (1) It shall not be open to the defendant
to dispute before the Recovery Officer the
correctness of the amount specified in the
certificate, and no objection to the certificate on any
other ground shall also be entertained by the
Recovery Officer.
(2) Notwithstanding the issue of a certificate to a
Recovery Officer, the Presiding Officer shall have
power to withdraw the certificate or correct any
clerical or arithmetical mistake in the certificate by
sending an intimation to the Recovery Officer.
(3) The Presiding Officer shall intimate to the
Recovery Officer any order withdrawing or
cancelling a certificate or any correction made by
him under sub- section (2).
37. There is no dispute about the essential facts. The
property was sold in pursuance to the public auction. Mere fact
that the auction purchaser is not an agriculturist and he was a
former employee of the Bank and thus, there was bar against
him to purchase the land, itself leads to an irreversible
conclusion that the sale transaction is vitiated.
- 40 -
38. The petitioner bank has taken contention that the
Appellate Tribunal rejected the claim of the bank on the ground
that, the auction purchaser was barred in purchasing
agricultural land as there is bar under Section 79-A and 79-B
of The Karnataka Land Reforms Act, 1961.
39. We have perused the judgments relied upon by the
petitioner Bank in the case of Smt. Madhukanta Patadia,
Tamil Chelvan, B.M. Upendra Kumar and R. Raghu's
referred supra, wherein it is held that amendment provision to
Section 79A and B of the KLR Act are retrospective in nature
and hence the restrictions imposed in the earlier section has
been lifted by virtue of an amendment dated 13.08.2015.
There is no dispute as to the said proposition and lifting of
restrictions under the KLR Act. However, the fact remains that
the Recovery Officer conducted auction proceedings which are
contrary to the rules and not in the bonafide manner.
40. Admittedly, M/.s United Distilleries had availed
temporary overdraft facility from the Bank on 13.06.1991 and
a mortgage was created by the deposit of title deeds in favour
of the bank by Sri. B.A. Ram and Sri. B.A. Laxman. Later, they
executed a Power of Attorney in favour of Sri. G.S. Srinivas
- 41 -
Gupta, inturn, he developed the land in question, secured
permission from the Village Administrator, formed sites and
sold the sites to prospective purchasers on the basis of Power
of Attorney. Hence, the land in question do not remain as
agricultural land.
41. The bank has relied upon the decision in the case of
Indian Bank v K. Pappireddiyar reported in 2018 SCC
Online SC 743, wherein the Apex Court held that the question
as to whether the land is agricultural has to be determined on
the basis of totality of facts and circumstances including the
nature an character of the land, the use to which, it was put
and the purpose and intent of the parties on the date on which
the security interest was created.
42. Apart from the above, the only ground that is now
urged in the petitions is, as on the date of the auction
purchase, the auction purchaser was a retired employee of the
Bank. It appears that he has actively involved himself in the
process of auction purchase. In addition, the Court draws
support from the provisions of the Code of Civil Procedure,
1908, and finds that there is no clear proof of material
irregularity and are of substantial injury to either the
- 42 -
mortgager or the Bank Authority, as a result of the said sale
for what is termed as inadequate price. The land in question is
situated within the city limits of Bengaluru. The present cost of
the land would run to crores of rupees and thus, there is
allegation of reference of fraud and collusion. There is no merit
in the writ petitions and the petitions are liable to be
dismissed.
Accordingly, the writ petitions are dismissed and we
upheld the orders dated 23.08.2013 passed by Debt Recovery
Appellate Tribunal, Chennai in M.A.No.138/2008 and
M.A.No.378/2010.
In view of dismissal of the petitions, pending IAs, if any,
stands disposed of.
Sd/-
(D K SINGH)
JUDGE
Sd/-
(VENKATESH NAIK T)
JUDGE
MN/-
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