/2022 INSC 0989/
REPORTABLE     
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7128 OF 2022
Mrs. Leelamma Mathew              …Appellant
Versus
M/s Indian Overseas Bank & Ors.           …Respondents
J U D G M E N T
M.R. SHAH, J.
1. Feeling   aggrieved   and   dissatisfied   with   the   impugned
judgment   and   order   passed   by   the   High   Court   of   Kerala   at
Ernakulam   in   RFA   No.379   of   2014   by   which   the   High   Court
has   allowed   the   said   appeal   preferred   by   respondent   no.1
herein   –   Bank   and   has   quashed   and   set   aside   the   judgment
and decree passed by the learned Trial Court dated 31.01.2014
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in OS No.630 of 2012 directing the Bank to pay to the plaintiff
a   sum   of   Rs.58,10,000/­   with   interest   at   the   rate   of   12%   per
annum from the date of suit till realization, the original plaintiff
has preferred the present appeal.
2. That the defendant ­ Bank secured the property in Survey
No.48/1   in   Tirur   Taluk,   Tanur   Village   in   exercise   of   powers
under   the   provisions   of   the   Securitization   and   Reconstruction
of   Financial   Assets   and   Enforcement   of   Security   Interest   Act
2002 (hereinafter referred to as ‘SARFAESI Act, 2002’)
2.1 That   the   Bank   secured   the   possession   and   thereafter   by
notice   for   auction   dated   23.01.2007   the   secured   asset
admeasuring   54   cents   was   put   to   auction.     The   appellant   –
original   plaintiff   after   inspection   of   the   property   submitted   the
quotation   for   sale   of   54   cents   of   land   and   offered
Rs.32,05,000/.     It   appears   that   in   the   quotation   the   original
plaintiff   specifically   stated   that   the   offer   of   Rs.32,05,000/­   is
subject   to   the   condition   that   absolute   ownership   and   vacant
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possession   of   full   extent   of   property   without   encumbrances   is
handed   over.     However,   by   communication   dated   05.03.2007,
the   Bank   replied   that   as   in   the   invitation   to   the   public   for
tenders,   it   is   stated   that   the   property   would   be   sold   in   “as   is
where   is”   and   “as   is   what   is”   condition,   the   original   plaintiff
may   confirm   that   he   is   ready   and   willing   to   offer   the   bid   and
take the property in the present condition.  It appears that vide
communication   dated   08.03.2007,   the   original   plaintiff
reiterated   that   she   is   ready   to   purchase   the   property   only   if,
absolute ownership, vacant possession and full enjoyment of 54
cents   of   land,   free   from   all   encumbrances   is   given,   otherwise,
she   is   not   ready   to   purchase   the   property,   if   the   Bank   is   not
able   to   assign   absolute   ownership,   vacant   possession   and   full
enjoyment of the property admeasuring 54 cents.  
2.2 It appears that thereafter the Bank took the possession of
the property pursuant to the order passed by the CJM, Manjeri
in an application under Section 14 of the SARFAESI Act.   That
thereafter   the   plaintiff   paid   a   total   sale   consideration   in   the
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month   of   October,   2007.     That   thereafter   the   Tehsildar
submitted   the   report   dated   21.11.2007   submitting   that   the
actual   measurement   of   the   land   is   39.60   cents   and   that   the
debtor   had   already   transferred   14.40   cents   out   of   land
admeasuring 54 cents prior to the creation of the mortgage with
the   Bank.     Despite   the   above   the   Bank   issued   the   sale
certificate   for   54   cents   dated   21.11.2007   and   handed   over   the
possession   of   the   secured   property   admeasuring   39.60   cents
only   however,   the   sale   consideration   is   issued   for   54   cents.
That thereafter the sale deed on the basis of the sale certificate
was   actually   executed   in   favour   of   the   plaintiff   only   on
01.10.2010 for 54 cents.  That thereafter the plaintiff instituted
the  suit for  recovery  of damages/compensation  with respect to
14.40 cents.  It was the case of the plaintiff that as the plaintiff
paid a total sale consideration for 54 cents of the land and even
the sale certificate and the sale deed was executed for 54 cents
the   plaintiff   has   been   handed   over   the   possession   of   39.60
cents   of   the   land   only   and   therefore   the   plaintiff   is   entitled   to
the   damages/compensation   with   respect   to   the   14.40   cents
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which   was   less   than   the   area   for   which   the   plaintiff   paid   the
amount i.e. 54 cents.   It was the case on behalf of the plaintiff
that   it   was   the   duty   of   the   bank   when   accepted   the   total   sale
consideration   for   54   cents,   to   hand   over   the   peaceful   and
vacant   possession   of   the   land   admeasuring   54   cents.     It   was
also   the   case   on   behalf   of   the   plaintiff   that   as   the   bank   was
aware of the true facts that the area of the property/land is less
despite   that   the   bank   did   not   disclose   the   true   facts   to   the
plaintiff and suppressed the material fact and played a fraud.
2.3 The   suit   was   resisted   by   the   defendant   –   Bank   by
submitting that the sale was on “as is where is” and “as is what
is”   basis   and   that   the   plaintiff   was   aware   that   the   area   of   the
property   is   less   than   54   cents   and   still   she   purchased   the
secured   property.     It  was  the  case  on  behalf   of  the   defendants
that there was no fraud committed by them.   It was submitted
that   the   documents   submitted   to   them   by   the   borrowers   were
relating to the total extent of 54 cents of land which was put to
auction.   That it was the case on behalf of the defendants that
the   plaintiff   is   not   entitled   to   any   compensation   from   the
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defendants.     The   learned   Trial   Court   framed   the   following
issues:
“(i)  Whether the suit is maintainable?
(ii)   Whether the plaintiff is entitled to get a decree as
prayed for?
(iii)  Reliefs and Costs?”
2.4 That the learned Trial Court decreed the suit and directed
the   defendant   –   Bank   to   pay   to   the   plaintiff   a   sum   of
Rs.58,10,000/­ with future interest @ 12% pa from the date of
suit till realization.
2.5 Feeling   aggrieved   and   dissatisfied   with   the   judgment   and
decree passed by the learned Trial Court, the defendant – Bank
filed   the   present   appeal   before   the   High   Court.     By   the
impugned judgment and order the High Court has allowed the
appeal   preferred   by   the   defendants   and   has   quashed   and   set
aside the decree passed by the learned Trial Court   inter alia   on
the grounds (i) that as the fraud has not been established and
proved   the   suit   was   barred   in   view   of   Section   34   of   the
SARFAESI  Act; (ii) That the plaintiff was aware of the fact that
the   actual   area   of   the   secured   property   put   to   auction   is   less
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than   54   cents   and   therefore   it   cannot   be   said   that   there   was
any   non­disclosure   on   the   part   of   the   Bank;   (iii)   that   the
property was put to auction “as is where is” and “as is what is”
basis?
2.6 Feeling   aggrieved   and   dissatisfied   with   the   impugned
judgment   and   order   passed   by   the   High   Court   allowing   the
appeal and quashing and setting aside the decree passed by the
learned   Trial   Court   and   consequently   dismissing   the   suit,   the
original plaintiff has preferred the present appeal.
3. Shri   M.T.   George,   learned   counsel  appearing   on  behalf   of
the   appellant   has   vehemently   submitted   that   in   the   facts   and
circumstances of the case the Hon’ble High Court has seriously
erred   in   quashing   and   setting   aside   the   decree   passed   by   the
learned   Trial   Court.     It   is   submitted   that   as   the   suit   was   for
damages/compensation   the   same   cannot   be   barred   under
Section 34 of the SARFAESI Act.
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3.1 It is  submitted that  therefore the  Hon’ble  High  Court has
materially   erred   in   observing   and   holding   that   the   suit   was
barred by Section 34 of the SARFAESI Act.
3.2 It   is   further   submitted   by   learned   counsel   for   the
appellant that the appellant purchased 54 cents of the secured
property   auctioned   by   the   defendant   –   Bank   in   exercise   of   the
powers   vested   with   it   under   the   provisions   of   the   SARFAESI
Act.     That   the   offer   made   by   the   bank   through   the   auction
notice   dated   23.01.2007   was   for   sale   of   54   cents   of   land   in
Survey   No.48/1.     That   the   appellant   offered   Rs.32,05,000/­
specifically stating that the absolute ownership and possession
of   54   cents   of   lands       would   be   transferred   without   any
encumbrances.  It is submitted that as the offer was conditional
the   bank   by   letter   dated   05.03.2007   informed   the   appellant
that the bank  had  invited tenders on  the basis of  “as is where
is” and “as is what is” condition and if the appellant is willing to
buy   the   property   on   the   said   condition,   she   has   to   inform   the
Bank.     It   is   submitted   that   thereafter   the   appellant   replied   on
08.03.2007 the tender bid be considered only if the bank could
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transfer   absolute   ownership   and  possession   over   the   entire  54
cents of land without any encumbrances and if not, she would
withdraw   her   offer   and   the   earnest   money   would   be   returned.
It   is   submitted   that   the   bank   took   the   possession   of   the
auctioned property through the intervention of the Court under
Section 14 of the SARFAESI Act and asked the appellant to pay
the balance sale consideration which was done by the appellant
on   17.10.2007.     Consequently,   the   bank   issued   certificate   of
sale for 54 cents of land on 21.11.2007 and thereafter the sale
certificate   was   registered   and   the   sale   deed   was   executed   on
01.02.2010 for 54 cents of land.   It is submitted that therefore
when the bank transferred to the appellant only 39.60 cents of
land   a   fact   which   was   known   to   the   bank   and   the   appellant
paid   an   amount   of   Rs.32,05,000/­   for   54   cents   of   land   the
appellant ­ original plaintiff is entitled to the remaining area of
land   i.e.   14.40   cents.     It   is   submitted   that   therefore   the   Trial
Court had rightly decreed the suit.
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3.3 Learned Counsel appearing on behalf of the appellant has
further   submitted   that   the   respondent   –   bank   while   exercising
the   powers   provided   under   the   SARFAESI   Act   failed   to   comply
with   Rule   8(6)(a)   and   (f)   of   the   Security   Interest   (Enforcement)
Rules, 2002  (hereinafter referred to as Rules 2002) and Section
55(1)(a)   of   the   Transfer   of   Property   Act   (hereinafter   referred   to
as ‘TP Act’).   It is submitted that the disclosures can be said to
be  fraudulent   in   view   of  Section   55(1)(a)   of  the   TP  Act   and  the
relevant  provisions   of   the  Rules,  2002   a  duty  is   cast   upon   the
Authorised   Officer   to   disclose   to   the   auction   purchaser   any
material   defect   in   the   title   failing   which   it   could   be   construed
that   the   purchaser   was   misled.     Reliance   is   placed   on   the
decision   of   this   Court   in   the   case   of   Haryana   Financial
Corporation and Anr. Vs. Rajesh Gupta,  (2010) 1 SCC 655.
3.4 It is submitted that  Rule 8(6)(a) and (f) of the Rules 2002
mandates   additional   duty   on   the   Authorised   Officer   to   make
known to the bidders before auction any other thing which the
Authorised Officer considers it material for a purchaser to know
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in   order   to   judge   the   nature   and   value   of   the   property.     It   is
submitted that therefore the immunity claimed by the bank on
the pretext “as is where is” and “as is what is” basis is no more
a defence.
3.5 It   is   submitted   that   out   of   the  total   road   frontage   of   70.1
meters   which   portion   consisted   of   14.40   cents   has   captured
46.3 meters and remaining 39.60 cents were only 23.8 as road
frontage which has a direct bearing on the market value of the
property.
Making   above   submissions,   it   is   prayed   to   allow   the
present appeal and confirm the judgment and decree passed by
the learned Trial Court.
4. Present   appeal   is   vehemently   opposed   by   Shri   Kunal
Tandon, learned counsel appearing on behalf of the Respondent
–   Bank.     It   is   submitted   that   as   the   property   in   question   was
put to auction on “as is where is” and “as is what is” basis and
the   plaintiff   –   auction   purchaser   was   from   the   very   beginning
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aware that the area of the land is less than what was advertised
and   despite   that   the   offer   was   made   which   was   accepted,   the
High   Court   has   rightly   set   aside   the   judgment   and   decree
passed by the learned Trial Court.
4.1 It is submitted that as rightly observed by the High Court
it   was   not   the   case   that   the   Bank   had   no   saleable   interest   at
all.     It   is   submitted   that   the   Tehsildar   gave   its   report   on
21.11.2007   about   the   exact   extent   of   the   auction   property.
Thus, no fault was said to the found with the Bank.
4.2 It is submitted that the Hon’ble High Court after looking at
the   evidence   as   concluded   that   the   original   plaintiff   was   fully
aware of the deficiency in extent.
4.3 It   is   further   submitted   that   even   otherwise   as   observed
and held by Hon’ble High Court the suit itself was barred under
Section 34 of the SARFAESI Act.
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4.4 It   is   submitted   that   in   terms   of   Section   34   of   the
SARFAESI   Act,   the   jurisdiction   of   the   Civil   Court   is   absolute
barred   except   in   case   the   plaintiff   is   able   to   show   fraud   or
misrepresentation.     It   is   submitted   that   in   the   present   case
from   the   communications   on   record   and   that   the   possession
was   handed   over   to   the   bank   pursuant   to   the   order   under
Section   14   of   the   SARFAESI   Act   on   08.10.2007   and   thereafter
the plaintiff made the payments on various dates, leading to the
issuance   of   the   sale   certificate   on   21.11.2007,   which   was
registered   almost   3   years   later   on   01.02.2010,   it   is   very   much
clear   that   the   plaintiff   was   aware   of   the   extent   of   the   property
and no case of fraud is made out.
4.5   Even the claim of the plaintiff was barred by limitation.  It
is submitted that the suit was filed in the year 2012 while the
auction   sale   took   place   on   05.02.2007   and   the   sale   certificate
was   issued   on   21.11.2007.     The   payments   were   made   on
October,   2007.     It   is   submitted   that   thus   the   cause   of   action
arose   on   05.02.2007   and   thereafter   on   21.11.2007.     It   is
submitted therefore as per Article 113 of the Limitation Act, the
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suit was barred by limitation being beyond three years from the
first date of knowledge.
Making   above   submissions   it   is   prayed   to   dismiss   the
present appeal.
5. We   have   heard   learned   counsel   appearing   for   the
respective parties at length.
5.1 At the outset, it is required to be noted that after the Bank
received   the   possession   of   the   secured   property   in   exercise   of
powers   under   the   SARFAESI   Act,   the   property   in   question
admeasuring   54   cents   was   put   to   auction,   by   Auction   Notice
dated   23.01.2007.     The   plaintiff   on   the   basis   of   the
representation   made   and   the   auction   notice   in   which   the   land
was   put   to   auction   was   stated   to   be   54   cents   submitted   her
offer of Rs.32,05,000/­ for sale of 54 cents.   At this stage, it is
required   to   be   noted   that   in   the   quotation   itself   the   plaintiff
specifically stated that the offer of Rs.32,05,000/­ is subject to
the   condition   that   the   absolute   ownership   and   vacant
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possession   of   full   extent   of   property   without   encumbrances   is
handed   over.     However,   the   Bank   replied   that   as   in   the
invitation to the public for tenders, it is stated that the property
would be sold on “as is where is” and “as is what is” condition,
the   plaintiff  may   confirm  that  the  plaintiff  is  ready  to  offer   the
bid   and   take   the   property   in   the   present   condition.     However,
immediately vide communication dated 08.03.2007 the plaintiff
reiterated   that   she   is   ready   to   purchase   the   property   only   if,
absolute ownership, vacant possession and full enjoyment of 54
cents   of   land,   free   from   all   encumbrances   is   given,   otherwise,
she   is   not   ready   to   purchase   the   property,   if   the   Bank   is   not
able   to   assign   absolute   ownership,   vacant   possession   and   full
enjoyment of the property admeasuring 54 cents.  At this stage
it is required to be noted that the Bank took the possession of
the   property   auctioned   on   paper.     However,   the   actual
possession   was   handed   over   to   the   Bank   in   the   month   of
October,   2007   pursuant   to   the   order   passed   by   the   CJM,
Manjeri   in   an   application   under   Section   14   of   the   SARFAESI
Act.     That   thereafter   the   Tehsildar   submitted   the   report   dated
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21.11.2007   submitting   that   the   actual   measurement   of   the
land is 39.60 cents and that the debtor had already transferred
14.40 cents out of land admeasuring 54 cents prior to creation
of   the   mortgage   with   the   Bank.     Despite   the   above   the   Bank
issued   the   sale   certificate   dated   21.11.2007   for   54   cents   of
land,   however,   handed   over   the   possession   of   the   secured
property admeasuring 39.60 cents only.  The sale consideration
received by the Bank was for 54 cents.  That thereafter the sale
certificate   was   registered   in   the   month   of   October,   2010.
Thereafter   the   plaintiff   filed   the   suit   for   recovery   of   damages
with respect to 14.40 cents.  The final certificate was registered
on   01.10.2010   and   thereafter   when   the   suit   was   filed   in   the
year   2012   it   cannot   be   said   that   the   suit   was   barred   by
limitation.  At this stage, it is required to be noted that as such
no issue was framed by the learned Trial Court on whether the
suit is barred by limitation or not.
5.2 Now so far as the submission on behalf of the plaintiff and
the finding recorded by the High Court that the suit was barred
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by Section 34 of the SARFAESI Act is concerned, at the outset it
is   required   to   be   noted   that   the   suit   was   for
damages/compensation,   with   respect   to   the   balance   land,
which   could   not   have   been   decided   by   the   DRT   or   Appellate
Tribunal,   Section   34   of   the   SARFAESI   Act   shall   be   applicable
only   in   a   case   where   the   Debt   Recovery   Tribunal   and/or
Appellate Tribunal is empowered to decide the matter under the
SARFAESI  Act.   The plaintiff was not challenging the sale/sale
certificate.     The   plaintiff   claimed   the   damages/compensation
with   respect   to   the   less   area.     Therefore,   the   High   Court   has
seriously   erred   in   holding   that   the   suit   was   barred   by   Section
34 of the SARFAESI Act. 
5.3 Now   so  far   as   the  submission   on   behalf  of   the   Bank   that
as the property was put to auction on “as is where is” and “as is
what is” basis and the plaintiff was aware that the actual area
of   the   property   auction   is   less   and   thereafter   entered   into   the
transaction   and   therefore   the   plaintiff   cannot   claim/pray
compensation/damages   with   respect   to   the   deficiency   in   the
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area is concerned, at the outset, it is required to be noted that
right   from   the  very   beginning   the   plaintiff   insisted   for   handing
over   the   possession   of   the   54   cents.     When   the   property   was
put   to   auction   even   the   Bank   was   not   in   actual   possession.
The   Bank   got   possession   pursuant   to   the   order   passed   by   the
District   Magistrate   and   thereafter   the   measurement   was   done
by   Tehsildar   in   which   it   was   found   that   the   actual   area   of   the
land   auctioned   was   34.60   cents   and   14.40   cents   was   already
transferred   by   the   debtor   much   earlier.     Therefore,   at   the
relevant   time   when   the   property   was   put   to   auction   even   the
Bank was not aware of the actual  measurement and  had gone
by   the   document   and   54   cents   was   put   to   auction.
Considering   the   fact   that   the   auction   notice   was   for   54   cents;
the plaintiff submitted the offer of Rs.32,05,000/­ for 54 cents;
the   plaintiff   paid   the   actual   amount   of   sale   consideration   i.e.
Rs.32,05,000/­ for 54 cents; the sale certificate was issued for
54   cents   and   even   the   sale   certificate   which   was   registered   in
the   year   2012   was   for   54   cents,   thereafter   it   was   not   open   for
the Bank to contend that though the Bank had handed over the
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possession of 34.60 cents still the sale consideration recovered
would   be   for   54   cents.     It   was   not   open   for   the   financial
institution like the Bank to take such a plea.  Even otherwise it
is required to be noted that at least in the month of November,
2007   when   the   Tehsildar   submitted   the   report,   the   Bank   was
aware   that   the   actual   area   is   34.60   cents   and   not   54   cents.
Thereafter   the   Bank   ought   not   to   have   issued   the   sale
certificate for 54 cents.   The Bank ought to have been fair and
ought   to   have   issued   the   sale   certificate   only   for   34.60   cents.
This shows the conduct on the part of the bank.
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 sub­rule 5 of Rule 8 before effecting sale of the
immovable property (secured assets) the  authorised officer shall
obtain valuation of the property from an approved valuer and in
consultation with the secured 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
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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   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.
6. In view of the above and for the reasons stated above, the
High Court has committed an error in allowing the appeal and
quashing and setting aside the judgment and decree passed by
the learned Trial Court.  Consequently, the impugned judgment
and order passed by the High Court is hereby quashed and set
aside.     The   judgment   and   decree   passed   by   the   learned   Trial
Court  decreeing   the suit  is hereby  restored.   The respondent  –
Bank to pay the decretal amount to the appellant with interest
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as   per   the   judgment   and   decree   passed   by   the   learned   Trial
Court within a period of 8 weeks from today.  
The   present   appeal   is   allowed   with   costs   which   is
quantified at Rs.25,000/­ which also shall be paid by the Bank
to   the   original   plaintiff   within   a   period   of   eight   weeks   from
today.
…………………………..J.
                   (M. R. SHAH)
…………………………...J.
         (KRISHNA MURARI)
New Delhi;
November 17, 2022.
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