WA.No. 485 of 2018 in WPC. 1030/2018

IN THE HIGH COURT OF KERALA AT ERNAKULAM THE HONOURABLE THE CHIEF JUSTICE MR.ANTONY DOMINIC & THE HONOURABLE MR. JUSTICE RAJA VIJAYARAGHAVAN V MONDAY, THE 26TH DAY OF FEBRUARY 2018 / 7TH PHALGUNA, 1939 **WA.No. 485 of 2018 IN WPC. 1030/2018** AGAINST THE JUDGMENT IN WP(C) 1030/2018 of HIGH COURT OF KERALA DATED 09-02-2018 ## **APPELLANTS/RESPONDENTS 7-11:** - 1 MR. SHAJI V. P.,S/O. MR. PEETHAMBARAN, RESIDING AT VATTAPPUZHETHU (SANTHAS), NADUVATHUNAGAR P.O., AROOKUTTY S.O., AROOKUTTY, ALAPPUZHA DISTRICT, KERALA-688535. - 2 MR. PUSHPAN V. P., S/O. MR. PEETHAMBARAN, RESIDING AT VATTAPPUZHETHU (SANTHAS), NADUVATHUNAGAR P.O., AROOKUTTY S.O., AROOKUTTY, ALAPPUZHA DISTRICT, KERALA-688535. - 3 MR. RAJESH V. P.,S/O. MR. PEETHAMBARAN, RESIDING AT VATTAPPUZHETHU (SANTHAS), NADUVATHUNAGAR P.O., AROOKUTTY S.O., AROOKUTTY, ALAPPUZHA DISTRICT, KERALA-688535. - 4 MR. SUMESH V. P.,S/O. MR. PEETHAMBARAN, RESIDING AT VATTAPPUZHETHU (SANTHAS), NADUVATHUNAGAR P.O., AROOKUTTY S.O., AROOKUTTY, ALAPPUZHA DISTRICT, KERALA-688535. - 5 MR. SATYASEELAN A. D., S/O. K. S. DIVAKARAN, RESIDING AT MEKKRANIKARTH, 5/286,PALLIYARAKKAVU, AROOR S.O., ALAPPUZHA DISTRICT, KERALA-688534. - BY ADVS.SRI.BECHU KURIAN THOMAS (SR.) - SRI.ENOCH DAVID SIMON JOEL ## **RESPONDENTS/PETITIONER & RESPONDENTS 1 TO 6:** 1. K.T.UNNIKRISHNAN,AGED 56 YEARS, S/O. THANKAPPAN, RESIDING AT KUNJANVELIYIL HOUSE, EZHUPUNNA VILLAGE, ERAMALLOOR MURI, CHERTHALA TALUK, ALAPPUZHA DISTRICT- 688 537. 2. THE AUTHORISED OFFICER, U. C. O BANK, M. G. ROAD, RAVIPURAM, ERNAKULAM-682016. 3. THE MANAGER, UCO BANK, WILLINGTON ISLAND BRANCH, KOCHI-682003. 4. MR. B. SOMASEKHARAN,PROPRIETOR, M/S. OMKAR MARKETING ASSOCIATES, KRISHNA VIHAR, KAITHARAM, P.O., PIN-683519, NORTH PARAVUR, RESIDING AT MRRA-58-59, POONITHURA P.O., THRIPUNITHURA-682038,ERNAKULAM DIST. 5. MR. S. SHIBU, S/O. B. SOMASEKHARAN,RESIDING AT MRRA-58-59, POONITHURA P.O., THRIPUNITHURA-682038, ERNAKULAM DISTRICT. 6. MR. K. S. JOSHI,S/O. B. SOMASEKHARAN, RESIDING AT MRRA-58-59, POONITHURA P.O., THRIPUNITHURA-682038, ERNAKULAM DISTRICT. 7. SMT. M. R. RAGANINI DEVI, W/O.B. SOMASEKHARAN,RESIDING AT MRRA-58-59, POONITHURA P.O., THRIPUNITHURA-682038, ERNAKULAM DISTRICT. - R BY SRI.AJEESH S.BRITE - R BY SRI.DEEPAK JOY.K. - R BY SREEKALA KRISHNADAS, SC THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 26-02-2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ## **ANTONY DOMINIC, C.J. & RAJA VIJAYARAGHAVAN.V, J. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - W.A.No.485 of 2018** **- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 26[th] day of February, 2018** ## **JUDGMENT** ## _**Antony Dominic, C.J.**_ Respondents 7 to 11 in W.P.(C)No.1030/18 are the appellants. The writ petition was filed by the first respondent herein seeking to quash Ext.P1, sale notice issued by the third respondent bank in a proceedings initiated under the SARFAESI Act for the sale of a secured asset. Consequential reliefs were also sought for. By the judgment under appeal, setting aside the sale that was held on 3.11.2017 in favour of the appellants the learned Single Judge disposed of the writ petition and ordered that the amounts deposited by the appellants be refunded to them with 12% interest. It is this judgment, which is challenged before us. 2. We heard the Senior Counsel for the appellants, learned counsel for the first respondent and the counsel appearing for the Bank. W.A.No.485 of 2018 : 2 : 3. The facts of the case are that the first respondent was the guarantor of a loan availed by respondents 4 to 7. Default was committed by the Principal debtors, which lead to initiation of proceedings under the SARFAESI Act. It would appear that the secured asset belonging to the first respondent was brought to sale on 14.10.2016 and on 11.8.2017 and again on 3.11.2017. On 3.11.2017, the sale was conducted with reserve price as Rs.85,50,000/- and the appellants offered Rs.85,60,000/- and were declared as the successful bidder. The sale was confirmed on 4.1.2018 and sale certificate was also issued to them. The judgment under appeal shows that in the writ petition the first respondent had produced Ext.P5, a sale deed of 3.11.2017, on the date of sale of the property, whereby the property in the immediate neighbourhood of the secured asset was sold for Rs.40 lakhs per cent. It is also seen that by Ext.P6, sale agreement, a stranger had agreed to purchase the secured asset which is W.A.No.485 of 2018 : 3 : having an extent of 12.96 cents for Rs.1,57,20,425/-. It is also seen that to prove the bonafides of the offer that was received by the first respondent, the first respondent had produced a demand draft for Rs.1,44,88,936/-, which was representing the entire amount of liability that was due from him to the respondent bank. Further, we also find that the said demand draft has been handed over to the bank and the liability itself has been cleared. It is in the above background, the learned Single Judge has come to the inference that 12.96 cents of land belonging to the first respondent sold for Rs.85,60,000/- in favour of the appellants herein was the outcome of an undervaluation. We also find that even in the counter affidavit filed by the appellants, the appellants had not placed any plea doubting the genuineness of Ext.P5 sale deed produced by the first respondent to indicate that the price of the property in the immediate neighbourhood is much more and if the secured asset W.A.No.485 of 2018 : 4 : is sold at the same price, the property would have fetched Rs.1,28,33,000/-. It was, therefore, that the learned Single Judge has set aside the sale in favour of the appellants and ordered that the amounts deposited by the appellants in the respondent bank be refunded to them, with 12% interest. 4. Learned counsel for the appellants relied on the judgment of the Apex Court in _**Sadashiv Prasad Singh v. Harendar Singh and others [(2015) 5 SCC 574]**_ wherein it has been held that the rights of a third party bona fide auction purchaser in the property purchased by him in a sale in compliance with a court order/recovery proceedings under the RDDB Act, 1993, cannot be extinguished except in cases where the said purchase can be assailed on grounds of fraud or collusion. The relevant portion of the judgment, paragraphs 17 to 19 reads as under: _“17. Learned counsel for the auction purchaser Sadashiv Prasad Singh, in the first instance vehemently contended, that in terms of the law declared by this Court, property purchased by a third party auction purchaser, in_ W.A.No.485 of 2018 : 5 : _compliance of a court order, cannot be interfered with on the basis of the success or failure of parties to a proceeding, if auction purchaser had bonafidely purchased the property. In order to substantiate his aforesaid contention, learned counsel representing Sadashiv Prasad Singh placed emphatic reliance, firstly, on a judgment rendered by this Court in Ashwin S. Mehta & Anr. vs. Custodian & Ors., (2006) 2 SCC 385). Our attention was drawn to the following observations recorded therein : (SCC p.407, para 70)_ _“In that view of the matter, evidently, creation of any third-party interest is no longer in dispute nor the same is subject to any order of this Court. In any event, ordinarily, a bona fide purchaser for value in an auctionsale is treated differently than a decree-holder purchasing such properties. In the former event, even if such a decree is set aside, the interest of the bona fide purchaser in an auction-sale is saved. (See Nawab Zain-ul-Abdin Khan v. Mohd. Asghar Ali Khan (1887) 15 IA 12) The said decision has been affirmed by this Court in Gurjoginder Singh v. Jaswant Kaur (1994) 2 SCC 368).” (emphasis supplied)_ _18. On the same subject, and to the same end, learned counsel placed reliance on another judgment rendered by this Court in Janatha Textiles & Ors. vs. Tax Recovery Officer & Anr., (2008) 12 SCC 582, wherein the conclusions drawn in Ashwin S. Mehta’s case (supra) came to be reiterated. In the above judgment, this Court relied upon the decisions of the Privy Council and of this Court in Nawab Zain-Ul-Abdin Khan v. Mohd. Asghar Ali Khan, (1887-88) 15 IA 12; Janak Raj vs. Gurdial Singh, AIR 1967 SC 608; Gurjoginder Singh vs. Jaswant Kaur, (1994) 2 SCC 368; Padanathil Ruqmini Amma vs. P.K. Abdulla, (1996) 7 SCC 668, as also, on Ashwin S. Mehta (supra) in order to conclude, that: (Janatha Textiles case, SCC p.586, para 18)_ W.A.No.485 of 2018 : 6 : _“18. It is an established principle of law, that a third party auction purchaser’s interest, in the auctioned property continues to be protected, notwithstanding that the underlying decree is subsequently set aside or otherwise._ _It is, therefore, that this Court in its ultimate analysis observed as under: (Janatha Textiles case, SCC pp.588-89, para 20)_ _“20. Law makes a clear distinction between a stranger who is a bona fide purchaser of the property at an auction-sale and a decree-holder purchaser at a court auction. The strangers to the decree are afforded protection by the court because they are not connected with the decree. Unless the protection is extended to them the court sales would not fetch market value or fair price of the property.”_ _(emphasis supplied)_ _On the issue as has been dealt with in the foregoing paragraph, this Court has carved out one exception. The aforesaid exception came to be recorded in Valji Khimji and Company vs. Official Liquidator of Hindustan Nitro Product (Gujarat) Limited & Ors., (2008) 9 SCC 299, wherein it was held as under : (SCC p.305, paras 30-31)_ _“30. In the first case mentioned above i.e. where the auction is not subject to confirmation by any authority, the auction is complete on the fall of the hammer, and certain rights accrue in favour of the auction-purchaser. However, where the auction is to some subject subsequent confirmation by authority (under a statute or terms of the auction) the auction is not complete and no rights accrue_ W.A.No.485 of 2018 : 7 : _until the sale is confirmed by the said authority. Once, however, the sale is confirmed by that authority, certain rights accrue in favour of the auction-purchaser, and these rights cannot be extinguished except in exceptional cases such as fraud._ _31. In the present case, the auction having been confirmed on 30.7.2003 by the Court it cannot be set aside unless some fraud or collusion has been proved. We are satisfied that no fraud or collusion has been established by anyone in this case.” (emphasis supplied)_ _19. It is, therefore, apparent that the rights of an auctionpurchaser in the property purchased by him cannot be extinguished except in cases where the said purchase can be assailed on grounds of fraud or collusion.”_ 5. It is true that if a property was sold in execution of a decree and has been purchased by a third party and not the decree holder, even if the decree is set aside, the sale will be protected. This principle has been reiterated by the Apex Court in various occasions, including the judgment under reference. But, however, a further reading of the aforesaid paragraphs would show that in a case where collusion or sale is for a price lesser than the prevailing market price, the said principle may W.A.No.485 of 2018 : 8 : not have any application. This is evident from the fact that when the liability due to the bank was more than Rs.1,43,00,000/-, the property was sold for Rs.85,60,000/whereas the property could be sold for Rs.1,57,20,425/-. In such a factual background, we do not think the principles laid down by the Apex Court in _**Sadashiv Prasad Singh v. Harendar Singh and others [(2015) 5 SCC 574] (supra)**_ can be of any assistance to the appellants. 6. Learned counsel then placed reliance on the judgment of the Apex Court in _**Civil Appeal 1281/18 (Authorised Officer, S.B.T. and another v. Mathew, K.C.)**_ wherein it is held that the High Court under Article 226 of the Constitution should not entertain proceedings under the SARFAESI Act where efficacious alternate remedies are available. Though we do agree with this principle, the facts that we have noticed, according to us, fully justified the W.A.No.485 of 2018 : 9 : invocation and power of this court, as otherwise the injustice done to the first respondent would have gone unredressed. We are not persuaded to interfere with the judgment under appeal. Appeal fails and it is dismissed. _Sd/-_ **ANTONY DOMINIC CHIEF JUSTICE** _Sd/-_ **RAJA VIJAYARAGHAVAN.V JUDGE** _jes_ _// True Copy //_ _P.S. to Judge_