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J. Rajiv Subramaniyan and Another v. M/s Pandiyas and Others

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 3865 of 2014)Decided 14 Mar 2014
Civil Appeal No. 3865 of 2014
Justice S.S. Nijjar · Justice A.K. Sikri

Background

A bank sold borrowers' mortgaged properties through a private treaty after an unsuccessful auction. The purchasers paid the price and took possession, but the borrowers challenged the sale because the statutory sale procedure had not been followed. The High Court set the sale aside, and the purchasers appealed seeking to retain the property or receive adequate repayment.

Decision Breakdown

The Court upheld the invalidation of the sale because the mandatory safeguards under the applicable security-enforcement rules were breached. In particular, there were no written terms settled between the parties for the private sale, and the borrowers were absent from the meeting that approved it. The Court arranged repayment of the purchasers' sale price with the agreed simple-interest component and reimbursement of stamp duty by 15 June 2014, directing the bank to release the deposited sale proceeds with accrued interest immediately. Possession was to return to the borrowers after full repayment. The bank could not reopen its settled dues after accepting the earlier order without appealing it.

Lesson Learnt

A bank enforcing a mortgage must follow the sale safeguards applicable to the transaction, including the required written terms for a private treaty. Paying the purchase price and obtaining possession do not cure an unlawful sale, although the purchaser's repayment must be addressed when the sale is undone.

Official source (sci.gov.in)View Judgment (PDF)

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