The Hindu Business Line : Bidders should satisfy themselves about title deeds of property on auction: Court

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Bidders should satisfy themselves about title deeds of property on auction: Court

P.V. Sivakumar

A file photo shows a notice for a bank auction of real estate properties. —

Our Legal Correspondent

Chennai, Nov. 11 Intending bidders in auctions held by banks for sale of properties should satisfy themselves as to the title, encumbrances, etc. of such properties, the Madras High Court held. It could not interfere with such auctions and direct the auctioneer to refund to the bidders the money deposited for participating in the auction.

The writ petitioner, V. Sambandan, sought a direction to the second respondent (Chief Manager, Punjab National Bank, Chennai) to return Rs 3.30 lakh deposited by him with the bank, as he was not interested in participating in the auction of property at Kalaimagal Nagar in Mangadu Village, Chennai. “This court is unable to agree with the petitioner that the seller (bank) should have clear title before selling the property,” Mr Justice K. Chandru ruled.

The petitioner submitted that he wanted to respond to the auction notice dated June 7, 2009 issued by the bank, and paid a deposit of Rs 3.30 lakh. After making enquiries regarding the title of the property, he issued a legal notice on July 28, 2009 to the second respondent stating that he had bonafidely participated in the auction sale. But since the respondent did not furnish the original title deeds and other documents, he apprehended that the title might not be proper. Therefore, he decided not to proceed with the transaction.

According to him, the property was not kept under the custody of the Authorised Officer of the bank in terms of Rules 8 & 9 of the SARFAESI Rules. Therefore, calling for applications for the purchase of the property itself was illegal, the petitioner contended.

The second respondent submitted that the original documents pertaining to the property and copies of other parent documents were made available to all the participants in the auction. In the notice published in newspapers, intending purchasers were put on notice that the sale of property in question was in ‘as is where is’ condition. Also, the demand for refund of deposit was not sustainable either in terms of law or on facts, since the petitioner had defaulted in making further payments.

Subsequently, the petitioner was also issued with an order dated September 14, 2009 that in terms of Rule 9(5) of the Security Interest (Enforcement) Rules, the amount of Rs 3.30 lakh shall stand forfeited. Aggrieved by this, the petitioner preferred the present writ petition.

The Judge ruled that this court was unable to agree with the petitioner’s submission that it was not caveat emptor (buyer beware), but on the contrary, the seller (bank) should have clear title before selling the property. No one had compelled the petitioner to go in for purchase of such properties. Condition No. 1 of the auction notice clearly stated that the property of the debtors was to be sold in ‘as is where is’ basis. Therefore, it was for the petitioner to have verified whether he was purchasing a property or a problem.

The Supreme Court, the Judge said, had rejected a similar claim in respect of sale by the Official Liquidator reported in 1994 (1) SCC 575.

This court was not inclined to interfere with the auction held by the bank or grant a direction to refund the amount deposited. The writ petition was dismissed.

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