APHC010358712022 IN THE HIGH COURT OF ANDHRA PRADESH (Special Original Jurisdiction) MONDAY, THE THIRTIETH DAY OF MARCH TWO THOUSAND AND TWENTY SIX WRIT PETITION N Between: 1. M/S.C-TEL INFOSYSTEMS PVT LTD, REGI DELHI, D.S.M.No. SHIVAJI MARG, NEW DELHI NEAR VANTHENA CENTRE, RAMAVARRAPADU, RADHA KRISHNA PLAZA, D.No. 3-38, VIJAYWADA , A.P. ITS AUTHORIZED SIGNATORY 1. KARUR VYSYA BANK LTD. NEAR SAVANI TRANSPORT, VIJAYAWADA, ANDHRA PRADESH 520001. 2. RESERVE BANK OF INDIA, 6 SAIFABAD, HYDERABAD 3. UNION OF INDIA, REPRESENTED BY ITS JOINT SECRETARY, MINISTRY OF FINANCE BUILDING, SANSAD MARG, NEW DELHI CORAM:- HON’BLE Mrs. JUSTICE LISA GILL HON’BLE Mr.JUSTICE NINALA JAYASURYA Present: Ms.V.Dyumani, counsel for Petitioner Mr.Sreedhar Valiveti, counsel for respondent No.1 Mr.S.Satyanarayana Moorthy 1 WP_21676_2022 IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI (Special Original Jurisdiction) THE THIRTIETH DAY OF MARCH TWO THOUSAND AND TWENTY SIX WRIT PETITION No: 21676 of 2022 TEL INFOSYSTEMS PVT LTD, REGISTERED OFFICE NEW DELHI, D.S.M.No.361-362, 3RD FLOOR, DLF TOWERS, SHIVAJI MARG, NEW DELHI- 110015 AND BRANCH OFFICE AT NEAR VANTHENA CENTRE, RAMAVARRAPADU, RADHA KRISHNA 38, VIJAYWADA , A.P. – 521108, REPRESENTED BY S AUTHORIZED SIGNATORY. ...PETITIONER AND KARUR VYSYA BANK LTD., 11-61-36, SINGARAJUVARI STREET, NEAR SAVANI TRANSPORT, VIJAYAWADA, ANDHRA PRADESH RESERVE BANK OF INDIA, 6-1-56, SECRETARIAT ROAD, SAIFABAD, HYDERABAD-500 004. UNION OF INDIA, REPRESENTED BY ITS JOINT SECRETARY, MINISTRY OF FINANCE & BANKING, 3RD FLOOR , JEEVAN DEEP SANSAD MARG, NEW DELHI – 110001. ...RESPONDENT(S): s. JUSTICE LISA GILL & Mr.JUSTICE NINALA JAYASURYA Ms.V.Dyumani, counsel for Petitioner Mr.Sreedhar Valiveti, counsel for respondent No.1 Mr.S.Satyanarayana Moorthy, counsel for respondent No.2 LG, J & NJS, J WP_21676_2022 IN THE HIGH COURT OF ANDHRA PRADESH [3575] STERED OFFICE NEW FLOOR, DLF TOWERS, 110015 AND BRANCH OFFICE AT NEAR VANTHENA CENTRE, RAMAVARRAPADU, RADHA KRISHNA REPRESENTED BY ...PETITIONER 36, SINGARAJUVARI STREET, NEAR SAVANI TRANSPORT, VIJAYAWADA, ANDHRA PRADESH- 56, SECRETARIAT ROAD, UNION OF INDIA, REPRESENTED BY ITS JOINT SECRETARY, FLOOR , JEEVAN DEEP ...RESPONDENT(S): , counsel for respondent No.2 2 LG, J & NJS, J WP_21676_2022 The Court made the following order: (Per Hon’ble Sri Justice Ninala Jayasurya) Karur Vysya Bank (herein after referred to as ‘the Bank’) issued E-Auction Sale Notice dated 24.11.2021 in respect of Commercial Factory Land and Building admeasuring Ac.1.10 cents in R.S.Nos.205/2A, 204/5 and 203 situated at Kodurupadu Village of Bapulapudu Mandal, Krishna District of M/s.Ramdev Industries Limited and Ac.1.95 cents in R.S.No.205/2A, 204/5 and 203 of Kodurupadu Village, Bapulapadu Mandal, Krishna District of M/s.Balakishan Bhararia. Out of the said total extent of Ac.3.05 cents, existing total site area for sale was notified as Ac.2.47 cents. The reserve price for Ac.2.47 cents was fixed at Rs.2,25,23,000/-. 2. The petitioner offered 56% higher price as against the reserve price Rs.2,25,23,000/- and was declared as a highest bidder. It deposited entire sale price amount of Rs.4,03,48,000/- and a Sale Certificate dated 25.01.2022 for an extent of Ac.2.47 cents was issued. However, on 28.03.2022 the Sale Certificate was registered for an extent of Ac.2.13 cents as against Ac.2.47 cents notified in the E-Auction Notice. 3. The petitioner vide Notice dated 16.04.2022 (Ex.P7) followed by a Legal Notice dated 30.05.2022 (Ex.P8), while pointing out the difference in the area which is actually proposed in the Auction Notice and the Registered Sale Certificate i.e., Ac.0.34 cents (Ac.2.47 cents – Ac.2.13 cents) requested the bank to refund the proportionate sale price of Rs.55,53,976/- together with interest @ 18% p.a., from the date of payment. The Bank refused to refund 3 LG, J & NJS, J WP_21676_2022 the said amount. Therefore, present writ petition was filed aggrieved by the said refusal and for a direction to deliver physical possession of an extent of Ac.0.34 cents or in the alternative, to refund the proportionate bid price of Rs.55,53,976/- for Ac.0.34 cents with interest. 4. Heard learned counsel for the petitioner. Also heard learned counsel for the respondent-Bank. 5. Perused the material on record. 6. The main contention of learned counsel for auction purchaser / petitioner is that though property admeasuring Ac.2.47 cents was notified by the Bank at Rs.4,03,48,000/-, however admittedly only an extent of Ac.2.13 cents was registered as Ac.0.34 cents was acquired for road widening by the National High Way Authority even prior to the mortgage of the properties in question in favour of the Bank. She submits that Bank was at fault, since no proper verification with due diligence of the availability of the property offered as security, was done. She submits that the petitioner cannot be made to suffer for lapses on the part of the Bank and rejection of the request of the petitioner for refund of the proportionate bid price of Rs.55,53,976/- on the premise that property in question was sold on “as is where is” and “as is what is” and “whatever there is” is not just and in fact it is the bounden duty of the Bank to notify and offer the property which is physically available, to enable the prospective auction purchasers to take a decision before offering their bids. 4 LG, J & NJS, J WP_21676_2022 7. Drawing the attention of this Court to Ex.P6 i.e., Certificate dated 14.03.2022 of the Tahsildar, Bapulapadu as also the latest Certificate dated 10.03.2026 issued by him and the relevant Land Acquisition Awards Dated 14.11.2013 and 31.12.2015, she submits that the said material / documents clearly establish that even prior to the Auction Notice dated 24.11.2021, an extent of about 1,332 sq.meters (Ac.0.33 cents), out of the subject matter property was acquired in two phases and in view of the undisputed position, claim of the petitioner for refund of proportionate sale price to the extent of Ac.0.33 cents deserves consideration. She submits that in all fairness, the Bank should have refunded the proportionate amount of sale price immediately on receipt of the claim made by the petitioner, instead of unjustly enriching itself by retaining the amount and therefore the petitioner is also entitled for the interest from the date of payment till the date of refund by the Bank. The learned counsel also placed reliance on the decision of a learned Division Bench in Mandava Krishna Chaitanya v. UCO Bank, Asset Management Branch1. 8. On the contrary, learned counsel for the Bank while stoutly opposing the contentions advanced on behalf of the petitioner, sought to support the action of the Bank. He contends that the petitioner inspected and verified the subject matter property before participating in the auction, was aware of the fact of the proposed road widening and the present claim is only an afterthought. He submits that the petitioner / auction purchaser having agreed for registration of 1 2018 (2) ALT 640 5 LG, J & NJS, J WP_21676_2022 the Sale Certificate for an extent of Ac.2.13 cents cannot turn around and make any claim for refund of proportionate sale price on the premise that less extent of Ac.2.13 cents was registered instead of Ac.2.47 cents. He submits that had the petitioner raised any objection at the time of the registration of Ac.2.13 cents as against Ac.2.47 cents, the bank would have cancelled the auction. He also submits that reliance on the Certificate of the Tahsildar dated 14.03.2022 (Ex.P6) is of no consequence as the vacant possession of the subject matter property was handed over to the petitioner on 22.02.2022, much prior to the registration of the Sale Certificate on 28.03.2022. He submits that since the petitioner proceeded with the registration of Ac.2.13 cents, the Bank had adjusted the sale proceeds to the Borrower’s account on 31.03.2022, that in those circumstances, the petitioner is not entitled for the reliefs as prayed for, more particularly as the sale had become absolute. Making the said submissions, the learned counsel seeks dismissal of the writ petition. 9. On an appreciation of the rival contentions, the point that arises for adjudication is : Whether the petitioner is entitled for refund of proportionate sale price on the ground that less extent of the area was registered instead of total extent offered / notified in the E-Auction Notice with interest, in the facts and circumstances of the case? 10. Before dealing with the point at issue, it may be appropriate to refer to relevant documents filed along with the counter-affidavit of the Bank. For 6 LG, J & NJS, J WP_21676_2022 securing loan from the Bank, the Borrower executed a Memorandum of Deposit of Title Deeds for Registration in respect of certain properties including those which are the subject matter of the present auction. Prior to the said Mortgage dated 18.05.2017, it would appear that a Valuation Report was obtained on 17.03.2017 and the Bank got the properties re-valued subsequently by another Registered Valuer (see Page No.24 of the counter- affidavit). The Second Valuer along with the Relationship Manager of the Bank inspected the property in question on 17.11.2021 and submitted Valuation Report dated 18.11.2021. S.No. I (16) of the said report refers to the boundaries of the property and details of extents are mentioned as follows: Ac.1.95 cents + Ac.1.10 cents (as per Doc) = Ac.3.05 cents. Ac.2.74 cents (as per Actual) (Deducted for road widening = Ac.0.24 cents) Total extent value considered = Ac.2.23 cents 11. Curiously at S.No.II (19) dealing with the Characteristics of the Site, it is mentioned as follows: 19 General remarks, if any like threat of Acquisition of Land for Public Service purposes, Road widening or applicability of CRZ provisions etc.(distance from the sea coast / total level must be incorporated ) Part-A (Valuation of Land) No 7 LG, J & NJS, J WP_21676_2022 12. In the said report, the value of the said extent of Ac.2.23 cents was detailed as follows: 05 Value of land a. Guideline value of Land Ac.2.23 cents X Rs.60,00,000/- per acre = Rs.1,33,80,000 b. Market value of land Ac.2.23 cents X Rs.1,01,00,000/- per acre = Rs.2,25,23,000/- c. Realizable sale value of property (90%) Rs.2,02,70,700/- d. Forced Sale Value of Property (80%) Rs.1,80,18,400/- 13. Thus, the Re-Valuation Report dated 18.11.2021 makes it crystal clear that valuation was done for only Ac.2.23 cents as against Ac.2.47 cents and an extent of Ac.0.24 cents was excluded on the premise that the same was part of road widening. The fact that the entire extent of Ac.2.47 cents is not available for auction / for sale is well within the knowledge of the Bank and in the said circumstances, it is nothing but a misadventure to issue E-Auction Notice dated 24.11.2021 mentioning the total site area for sale as Ac.2.47 cents. This itself is a fundamental flaw on the part of the Bank. It is not even the case of the Bank supported by any material to the effect that this crucial aspect of availability of less extent physically, than what was sought to be auctioned was intimated to the bidders, including the petitioner. In the absence of the same, the auction in respect of the property in question cannot 8 LG, J & NJS, J WP_21676_2022 be said to be in tune with the Security Interest (Enforcement) Rules, 2002, more particularly Rule 8(7) of the said Rules. 14. Further the plea that since No Objection was raised at the time of registration of less extent than what was notified / proposed in the auction notice, it is not open to raise any claim, that too after the sale proceeds are appropriated to the borrowers’ account sounds attractive, but the same merits no acceptance for more than two reasons. 1. Firstly, the Bank has not mentioned correct extent / details of the property sought to be auctioned. 2. Secondly, it is not the case of the Bank that the difference in the area was due to acquisition of land after handing over of possession of an extent of Ac.2.47 cents to the petitioner and thereby lesser extent of Ac.2.13 cents was registered. 3. Thirdly, stand taken in the counter-affidavit based on the conditions of sale viz., “as is where is” and “as is what is” and “whatever there is” was disapproved by Courts of Law in the judgments, referred to herein below. 15. It is axiomatic that Banks are obligated to ensure accuracy of the valuation report and description of the property. Though the prospective buyers / auction purchasers are expected to verify the property offered for sale, it is incumbent on the part of the Bank to offer the property which is 9 LG, J & NJS, J WP_21676_2022 actually / physically available for sale / auction, without suppressing any material aspects, which would affect the very validity of the sale. 16. In the case on hand, the fact that the Sale Certificate was registered for Ac.2.13 cents as against the notified extent of Ac.2.47 cents coupled with the averments made in the counter-affidavit (Para No.6) and the Valuation Report dated 18.11.2021 leads to an irresistible conclusion that the Bank had not acted in a prudent and fair manner. Having issued an Auction Notice without disclosing relevant material aspects pertaining to the actual extent of land physically available for sale, it is not right on the part of the Bank to contend that the sale proceeds were adjusted to the borrowers’ account. The respondent – Bank falls within the meaning of Article 12 of the Constitution of India, and is duty bound to act fairly, reasonably, but not arbitrarily. 17. In Mandava Krishna Chaitanya’s case, upheld by the Hon’ble Supreme Court in S.L.P.No.8022 of 2018 dated 09.04.2018, the petitioner / auction purchaser before a Learned Division Bench of the High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh, raised contentions inter alia to the effect that the respondent – Bank had misrepresented several facts, that the bank had failed to conduct due diligence and title search before accepting mortgage property as security for the loan advanced by it. The Bank referring to the Clauses of the E-Auction Notice that the property was sold on “as is where is” and “as is what is” basis, that the intending bidders had to make discreet enquiries as regards the 10 LG, J & NJS, J WP_21676_2022 property to satisfy themselves about the title, extent, quality and quantity of the property before submitting their bid, argued that the petitioner having participated in the auction sale, knowing fully well the conditions of sale could not raise an objection as to the title of the subject property not being clear or lawful. A contention referring to principle / Rule of Caveat Emptor was also raised. The learned Division Bench formulated the question as to whether the Bank can seek to protect itself with the shield of ‘Caveat Emptor’ Principle. Referring to the statutory scheme under the SARFAESI Act and the Rules framed there under, at Para No.9 held as follows: “The aforestated statutory scheme demonstrates that the secured creditor may also sell a secured asset which is not free from encumbrances. However, an endeavour must necessarily be made by the secured creditor to know as to whether any encumbrances attach to the secured asset, as the rules stipulate delivery of the property to the purchaser free from encumbrances ‘known to the secured creditor’. The secured creditor cannot therefore blindly accept any property as security and go on to sell the same without even enquiring as to what encumbrances attach to it. Be it noted that a secured creditor and more particularly, a bank, offers loan facilities on the strength of such secured assets and, in most cases, such loan facilities are sourced from public funds garnered from the exchequer/common man and therefore, a high level of responsibility attaches to the secured creditors, especially banks, to ensure that the secured assets, on the strength of which they offer tax payers’ monies or customer deposits to borrowers, are worthy of being mortgaged as security for such loans. It is not open to a bank, such as the UCO Bank, to baldly state that it obtained the subject property as security for the loan sanctioned by it to a borrower and that once it 11 LG, J & NJS, J WP_21676_2022 proposed to sell it on an ‘as is where is’ and ‘as is what is’ basis, it is freed from all responsibility.” 18. Division Bench in Para No.10.1 referred to the judgment of a Division Bench of Allahabad High Court in Rekha Sahu vs. UCO Bank (Manu/UP/1191/2013) wherein, it was held that “the banks must tread very carefully before holding public auctions and take all necessary steps to ascertain and furnish all information relating to encumbrances / attachments on the property to the intending purchaser.” 19. In Para No.20, Division Bench of the Common High Court further held as follows: “In terms of the statutory scheme of the SARFAESI Act and the Rules of 2002 and given the weighty preponderance of judicial wisdom, as set out supra, a secured creditor who is empowered under the SARFAESI Act to enforce any secured interest created in its favour, without the intervention of a Court or a Tribunal, but in accordance with the procedure prescribed therefor, cannot take the responsibility resting upon it lightly. Such a secured creditor not only owes a duty to protect the interest of the borrower by raising the best possible price while selling his mortgaged properties, but also owes a duty to the auction purchaser to verify the encumbrances that attach to the mortgaged property proposed to be sold, so as to inform all intending bidders of the same. Clauses (a) and (f) in the proviso to 20 Rule 8(6) of the Rules of 2002 bear out this responsibility explicitly, as the secured creditor is mandated thereunder to include the details of the encumbrances known to it and also any other thing which may be considered material for a purchaser to know in order to judge the nature and value of the property. These clauses therefore visit a duty upon the secured creditor to undertake due diligence at least at the stage of putting the secured asset 12 LG, J & NJS, J WP_21676_2022 to sale, if not at the time of taking the said property as security while granting loans, so that the bidders in the auction can rest assured that the bank has taken necessary measures in this regard and proceed to participate in the auction sale. Ignorance of the secured creditor as to the encumbrances on the property sold by it is no longer an acceptable argument in the light of the decisions of various Courts rejecting the plea that a sale on ‘as is where is’ basis constitutes a shield of protection.” 20. It was held by the Division Bench that the concept of “as is where is” and “as is what is” basis has lost its significance in the current commercial milieu and the principle of caveat venditor is more on the rise as compared to the outdated principle of caveat emptor, that the Transfer of Property Act requires the seller to own up to certain duties and it is not open to a responsible bank to take an innocent auction purchaser for a ride by selling to him a tainted property and thereafter claim protection under the principles of ‘buyer beware’. It further deprecated the practice of Banks in sanctioning loans without exercising due diligence, in the following terms while allowing the writ petition; “It is therefore manifest that the bank made the innocent petitioner a victim by failing to exercise due diligence, not only in terms of the statutory scheme of the SARFAESI Act and the Rules of 2002, but also in its own commercial interest, let alone public interest, when it accepted this property as security for the loan sanctioned by it. This utter carelessness on the part of the bank in sanctioning loans, by use of public monies, on the strength of secured assets which are not even worthy of being mortgaged, requires to be deprecated in the strongest terms. Banks necessarily have to exercise more care and caution while using public monies available with them, be it through deposits by 13 LG, J & NJS, J WP_21676_2022 customers or otherwise, when sanctioning loans without caution or worse and cannot be permitted to claim protection under outdated legal principles so as to victimize innocent auction purchasers, such as the petitioner.” 21. The said judgment though delivered in the context of non-disclosure of encumbrances over the auctioned property, principle laid down is equally applicable to facts of the present case. 22. In Mrs.Leelamma Mathew v. M/s.Indian Overseas Bank & Ors.,2 the case of the appellant / plaintiff was that total sale consideration for Ac.54 cents of land was paid, the Bank issued a Sale Certificate and executed a Sale Deed, but delivered possession of Ac.39.60 cents only and therefore she is entitled for damages / compensation in respect of Ac.14.40 cents. The Bank inter alia pleaded that the sale was on ‘as is where’ and ‘as is what is’ basis, that the plaintiff being aware that property is less than 54 cents, still purchased the same and as such is not entitled for compensation. The Hon’ble Supreme Court while setting aside the order under appeal held as follows: “5.4 Rule 8 of the 2002 Rules cast a duty on the authorized officer to take all precautions before putting the secured asset to sell. As per sub-rule 5 of Rule 8 before effecting sale of the immovable property (secured assets) the authorized officer shall obtain valuation of the property from an approved valuer and in consultation with the secure creditor and fix the reserve price of the property and may sell the whole or any part of such immovable secured asset. Therefore, when the reserve price was fixed the same was for 54 cents. Therefore, it can be presumed that the Bank was aware that the actual area of the secured 2 2022 INSC 1214 14 LG, J & NJS, J WP_21676_2022 asset is less than 54 cents. As per Section 54 of the Transfer of Property Act the seller was bound to disclose any buyer any material defect in the property of which the buyer is not aware and which the buyer could not ordinarily discover. Under the circumstances also the submission on behalf of the Bank that the property was put to auction on “as is where is” and “as is what is” condition, thereafter the plaintiff shall not be entitled to compensation of the less area cannot be accepted.” 23. A Division Bench of High Court of Punjab and Haryana at Chandigarh, in Harvinder Kaur v. Shriram Finance Ltd., and Others (CWP_14694_2023 (O & M) dt.31.05.2024), rejected the contention of the Financial Institution that the petitioner is not entitled to refund of consideration amount as the property was sold ‘as is where is’, ‘as is what is basis’ and ‘whatever there is basis’. 24. In Delhi Development Authority v. Corporation Bank Ltd. 3, the Hon’ble Supreme Court while examining the matter with reference to duty of the lessee to honour the covenants of the lease, the duty of a bank to exercise due diligence before advancing public money and the duty of an instrumentality of the state, as trustee of public property to guard against encroachment upon its’ title, set aside the auction and held that “the Bank having advanced the money of an illegal mortgage and having chosen to auction what it never lawfully possessed, bears the responsibility for the consequences.” 25. Coming to the facts of the case and the alternative relief for refund of proportionate bid price, the material on record as well as the legal position is 3 2025 INSC 1161 15 LG, J & NJS, J WP_21676_2022 in favour of the petitioner. The M.R.O. Certificates and the Awards referred to above in respect of the property in question which are not disputed, clearly establish that ‘the Bank’ is well aware of the factual situation, yet ventured to proceed with the auction and registered less extent of property, than what was actually notified by it. Though the petitioner / auction purchaser could not have accepted registration of less extent, it is the primary responsibility of the Bank to sell land which is physically available, and as the extent is less, collect the price to the extent of available area and refund the excess amount in a fair manner, which is lacking in the present case. Therefore, the alternative relief sought for by the petitioner merits acceptance. 26. So far as the claim for interest is concerned, it is not in dispute that petitioner requested the Bank to refund the proportionate bid price through its Notices dated 16.04.2022 and 30.05.2022. Had the Bank acted with prudence and considered the genuineness of the claim made by the petitioner with reference to the material available on record, it would have avoided not only the present litigation but also the claim for interest on the proportionate bid price. The petitioner parted with more than Rs.55,00,000/- in excess, in the whole transaction and the action of the Bank, in appropriating the same, in the considered opinion of this Court is not just or tenable. Therefore, it is deemed appropriate to grant interest @ 6% p.a. 27. Point is answered accordingly. 16 LG, J & NJS, J WP_21676_2022 28. In the result, writ petition is allowed with a direction to the 1st respondent-Bank to calculate and refund the proportionate bid price in respect of an extent of Ac.0.33 cents out of Ac.2.47 cents of auctioned scheduled property with interest @ 6% p.a., from the date of payment of amount of Rs.55,53,976/- made by the petitioner, within a period of four (4) weeks from the date of receipt of a copy of this order. No order as to costs. Consequently, pending Miscellaneous Applications, if any, are disposed of accordingly as well. (LISA GILL) JUDGE (NINALA JAYASURYA) JUDGE Date: 30.03.2026 BLV 17 LG, J & NJS, J WP_21676_2022 THE HONOURABLE Ms. JUSTICE LISA GILL THE HONOURABLE Mr.JUSTICE NINALA JAYASURYA WRIT PETITION No: 21676 OF 2022 Date:30.03.2026 BLV