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State Bank of India & Anr. v. Metta Chandra Sekhar Rao & Ors. and connected matters

Civil Appeal · 2017 INSC 1061Decided 30 Oct 2017
Civil Appeal No. 17372 of 2017, Civil Appeal No. 17374 of 2017
Justice Ranjan Gogoi · Justice Navin Sinha

Background

The State Bank of India had granted a loan secured by a mortgage created by deposit of title deeds, and the borrower had separately signed a letter waiving certain statutory rights under the Transfer of Property Act, 1882. When the loan went unpaid, the Bank sold the mortgaged house at auction and issued a sale certificate. The borrower later challenged the sale in the High Court, arguing that because the rights-waiver letter was itself an unregistered document, the entire mortgage was invalid. The High Court agreed and set aside both the auction sale and the sale certificate; the Bank and the auction purchaser (an unrelated third party who had since taken possession and renovated the property) appealed to the Supreme Court.

Decision Breakdown

The Supreme Court held that the High Court was wrong to set aside the sale. It found that the question of the mortgage's validity had never been raised at any earlier stage of the proceedings and was raised for the first time, belatedly, before the High Court, which should not have entertained it at that late stage. The Court also noted that the mortgage had in fact been acted upon by both sides to disburse and secure the loan, that part of the same mortgaged property had already been sold with finality, and that the auction purchaser was an innocent third party who had taken out a loan to pay the price and had already spent money renovating the property. On these grounds, the Supreme Court allowed the appeal and set aside the High Court's order, restoring the validity of the sale and the sale certificate.

Lesson Learnt

Courts are reluctant to unwind a completed property sale, especially one relied upon by an innocent purchaser, on a technical legal objection that a party could have raised years earlier but did not; such objections are generally not entertained for the first time at a late stage of litigation.

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

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