Case Note & Summary
The case arose from a writ petition filed under Articles 226 and 227 of the Constitution of India challenging two orders of the Debts Recovery Tribunal-II, Bengaluru dated 8 March 2023 and 15 March 2023 in Securitisation Application No.114 of 2023. The petitioners were a father (guarantor/mortgagor) and his son (borrower) who had availed a loan of ₹1,70,00,000 from UCO Bank in 2015 against the mortgage of the father’s property. The loan became irregular in 2018, leading the bank to initiate proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). Notices under Sections 13(2) and 13(4) were issued, and the property was put to auction. After an initial failed sale, a fresh auction was conducted on 14 September 2021, where the second respondent (auction purchaser) successfully bid ₹2,01,25,000 and deposited the full amount by 23 November 2021. Despite multiple litigations by the borrowers—including a writ petition that disposed of with a conditional order to pay the outstanding loan and solatium to the auction purchaser—the borrowers did not comply. A sale certificate was issued on 27 October 2022 and registered on 3 January 2023. When the bank sought possession, the first petitioner filed another writ petition which was dismissed on 13 February 2023 with liberty to challenge the sale certificate. Subsequently, the petitioners filed S.A. No.114 of 2023 before the Tribunal, but instead of serving copies of the appeal as directed, they rushed to the High Court seeking interim relief. The High Court noted that the auction sale was complete, the sale certificate had been issued, and the petitioners had repeatedly failed to honour court-directed payments. The court also observed that the petitioners had suppressed material facts and had not approached with clean hands. Applying the principles from CELIR LLP v. Bafna Motors (Mumbai) Pvt. Ltd., the court held that once a sale certificate is issued, the right to redemption is lost and no interim relief can be granted against the secured asset. The Tribunal’s orders merely directing service of copies did not cause any prejudice. The writ petition was accordingly dismissed, with the court declining to exercise its extraordinary jurisdiction under Article 226.
Headnote
A) Banking Law - Securitisation and Enforcement of Security Interest - Auction Sale and Issuance of Sale Certificate - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Sections 13(2), 13(4) - Once the auction sale is complete and a sale certificate is issued and registered, the property vests in the auction purchaser and the borrower’s right to redemption is extinguished; interim relief against the secured asset cannot be granted at that stage - Held that the Tribunal’s direction to serve notices was a procedural step and did not call for interference under Article 226; the writ petition was therefore not maintainable for grant of interim relief (Paras 6-12) B) Constitutional Law - Article 226 of the Constitution of India, 1950 - Discretionary Relief and Clean Hands - A person invoking the extraordinary writ jurisdiction must come with clean hands and comply with court directions; failure to comply with conditional orders and suppression of material facts disentitles the petitioner to equitable relief - Held that the petitioners, having repeatedly failed to deposit amounts as directed by the High Court and not even served copies of the appeal as directed by the Tribunal, and having concealed these facts, had forfeited their right to any relief under Article 226 (Paras 6-12)
Issue of Consideration
Whether the High Court under Article 226 should interfere with the orders of the Debts Recovery Tribunal refusing to consider interim relief when the sale of the secured asset is complete and the sale certificate has been issued, and the borrower has repeatedly failed to comply with conditional orders of the Court.
Final Decision
The writ petition was dismissed. The Court held that the petitioners, having failed to comply with the conditional order of the High Court and having not served copies of the appeal as directed by the Tribunal, and suppressing facts, are not entitled to any interim relief. The completion of auction sale and issuance of sale certificate extinguished the borrower’s rights and no interference under Article 226 was warranted.
Law Points
- Equitable relief under Article 226 cannot be granted to a party who has not complied with previous court orders
- after issuance of sale certificate under the SARFAESI Act the rights of the auction purchaser crystallize and interim relief against the secured asset cannot be granted
- the writ court will not entertain a petition where the petitioner has suppressed material facts.
