In CWP No.14960 of 2019 (O&M)-PUNJ HC- If auction notice clarified that purchasers must satisfy themselves about title or description of property and purchasers signed Sale Certificate, then such auction can’t be challenged on ground of any outstanding liability discovered later: P&H HC Justices M.S. Ramachandra Rao & Jasjit Singh Bedi [01-06-2022]

Read Order: Mr. Mehinder Sharma v. Municipal Corporation Gurugram, Sector-34, Gurugram (Haryana) Through Its Executive Officer and Another 

Monika Rahar

Chandigarh, June 17, 2022: While dealing with a Writ petition filed by a purchaser of a property who sought cancellation of the auction through which he bought the said property on the ground that the property was already mortgaged to a Bank which was seeking possession of the same, the Punjab and Haryana High Court has held that the auctioneer categorically made it clear in the auction notice that the purchasers had an obligation to satisfy themselves as to the title and description of the property and once the same is purchased, the buyer would be deemed to have waived all such objections relating to the property. 

The Bench of Justices R M Ramachandra Rao and Jasjit Singh Bedi held, “By signing the sale certificate, he [purchaser] accepted the said term and bound himself by the prior mortgage.”

The Municipal Corporation, Gurugram (first respondent) issued a Public Notice in the Hindustan Times (English Newspaper Daily) proposing a Public auction of certain properties in exercise of its power under Section 130 of the Haryana Municipal Act, 1994 which permitted it to sell the immovable properties of the Property Tax defaulters. The sale was to be on “where is and what is there is basis”.

In the said public notice, there was a property whose owner was M/s. PBJ Associates Pvt. Ltd and reserve price was fixed at Rs. 16,45,745/-. 

The petitioner participated in the said auction, and became the highest bidder of the above property for Rs. 1,01,00,000/-. He paid the full amount and the sale certificate was also executed in his favour. Thus, the petitioner became the absolute owner of the property.

However, in 2018, an official attached to the second respondent- Bank (Stressed Asset Management Branch) affixed a notice on the above property stating that the physical possession of the said property was taken by  it under the provisions of SARFAESI Act, 2002 (“the Act”). 

Thereafter, the second respondent approached the District Magistrate, Gurugram under Section 14 of the Act and obtained an order for physically taking possession of the subject property. 

The petitioner approached the DRT-II, Chandigarh contending that he had purchased the property in a public auction, and he had now come to know that respondent-Bank was 

going to take physical possession of the subject property as a secured creditor; since, he had no connection with the loan, and he was the absolute owner of the property, the Bank be restrained from taking physical  possession, and an interim injunction be granted in his favour.

The SA was adjourned by ordering notice to the respondent- Bank. Then the petitioner approached the DRAT, Delhi which resulted in an order of status quo.

In the instant Writ Petition, the petitioner sought quashing of the auction and also refund of the entire sale consideration amount of Rs. 1,01,00,000/- along with stamp duty and registration fees with interest. The petitioner did not claim any relief with respect to the second respondent.

The question which arose for the consideration of the Court was whether the petitioner is entitled for refund of the sale consideration deposited by him for purchase of the subject property along with registration fee and stamp duty with interest or not?” 

With respect to this question, the Court referred to the clause in the public auction which stated that all bidders should, prior to the auction, satisfy themselves about the correctness of the title and description, measurements, etc. of the properties; and that the the first respondent would not entertain any enquiries at the time of auction in this regard. 

The clause also stated that on the property  being knocked down in favour of the bidder in the auction, he shall be held to waive all objections to the title & description etc. of the property.

Thus, the Court held that that being the term of the auction, it would bind all bidders  including the petitioner.

Further, the Bench also added that even if there was any prior claim to the said property, such as the mortgage in favour of respondent- Bank, the first respondent was not liable.

Also, it was opined by the Bank that the sale certificate also contained a clause that in case any liability incurred against the second respondent  such as prior Bank loan, only the purchaser would be liable for the same.

“This clause also binds the petitioner, and he cannot now contend that suppression of the mortgage in favour of respondent No.2 by respondent No.1 in the auction proceedings amounts to misrepresentation, and he is entitled to refund of the sale consideration as well registration and stamp duty paid by him for obtaining the sale certificate”, held the Court. 

Moreover, the Court was of the opinion that by signing the sale certificate, he accepted the said term and bound himself by the prior mortgage. 

Therefore, the Court did not find any merit in this Writ Petition and the same was thus dismissed without any cost.