The Gauhati High Court has directed a bank and the district administration to hand over possession of a property to auction purchasers more than 11 years after the SARFAESI auction, holding that a third-party injunction operating in a pending title suit would not bar them from taking possession.

Justice Devashis Baruaah observed, “The said injunction, under no circumstances, would create any impediment or bar upon the Respondent Nos. 1 and 2 or even the District Commissioner or any other authority delegated by the District Commissioner to take possession of the property so that the possession can be handed over to the Petitioners.”

The observation came in a writ petition filed by one Pradip Mazumdar and two others seeking refund of ₹55 lakh paid towards purchase of a property in an auction conducted by the Industrial Cooperative Bank Ltd., along with interest, or alternatively, appropriate directions for handing over possession.

The property had been mortgaged by one Naba Kumar Das to secure a loan. After default, proceedings were initiated under the SARFAESI Act, 2002 and physical possession was handed over to the bank in December 2013. The bank thereafter issued an auction notice and the petitioners, being successful bidders, deposited the entire consideration of ₹55 lakh in December, 2014. A Sale Certificate was issued in February, 2015, but possession of the property was not actually handed over.

In the meantime, one Dimbeswar Kalita, claiming an agreement for sale with Das, had instituted a Title Suit and obtained an injunction restraining Das from alienating or transferring the property. The bank maintained that attempts to take possession could not be completed because of the injunction.

The petitioners, on the other hand, submitted that if refund could not be granted since title had already been conferred upon them, possession of the property should be handed over.

Considering the matter, the High Court first examined the effect of the Sale Certificate issued under Rule 9(6) of the Security Interest (Enforcement) Rules, 2002.

“It is well settled that upon issuance of a Sale Certificate, the title over the immovable property stands transferred to the person to whom the Sale Certificate was issued. There is also no requirement for execution of any additional Sale Deed or registration of the said certificate.”

Applying the position to the facts, the Court held, “The above proposition of law upon applied to the facts of the present case makes it clear as a noon day that with the issuance of the Sale Certificate on 20.02.2015 by the Authorized Officer of the Respondent No. 1, the title in respect to the property stood vested in the Petitioners.”

The Court therefore held that refund of the sale consideration could not be directed unless the Sale Certificate was first cancelled by due process.

“It is the opinion of this Court that the question of refund to the sale consideration cannot arise unless and until the Sale Certificate is cancelled by due process.”

It further rejected the submission that the Sale Certificate could be cancelled on the ground that fraud had been committed because possession had not been handed over. “Apart from that, mere non-handing over the possession would not amount to a commission of fraud.”

The Court, however, found from the documents placed on record that despite the contents of the Sale Certificate stating otherwise, possession had not actually been handed over to the petitioners. “In other words, what was transferred to the Petitioners vide the certificate of sale was a limited transfer in respect to the title without possession.”

Referring to Rule 9(9) of the Rules of 2002, the High Court noted that the Authorized Officer is required to deliver the property to the purchaser free from encumbrances known to the secured creditor. “The said Rule therefore imposes an obligation upon the secured creditor, i.e., the Respondent No. 1 to hand over the possession.”

The Court then considered the bank's reliance on the injunction operating in the Title Suit. It noted that the suit was between Dimbeswar Kalita and Naba Kumar Das, that the bank was not a party to the suit, that the Sale Certificate issued in favour of the petitioners had not been challenged and that no injunction operated against the bank.

It further noted that the injunction was limited to Das and restrained him from alienating or transferring the property. Since the sale in favour of the petitioners had been carried out under the SARFAESI Act and the Rules of 2002, the Court held that the injunction would not impede the bank or the district administration from taking possession.

Accordingly, the High Court held that issuance of the Sale Certificate dated February, 2015 amounted to a valid sale and that the petitioners had right, title and interest over the property.

The Court directed the bank to forthwith forward a copy of the Sale Certificate to the Sub-Registrar, Kamrup (M), and to take up the matter with the District Commissioner, Kamrup (Metro), for taking over possession of the property under Section 14 of the SARFAESI Act.

It further directed the District Commissioner to take the necessary steps for taking over possession and hand it over to the bank so that it could eventually be handed over to the petitioners. The exercise was directed to be completed within 60 days from the date of the bank's request.

The Court also clarified that neither the pendency of the Title Suit nor the injunction passed therein would bar the District Commissioner, his authorised officer or the bank from taking steps for handing over possession of the property to the petitioners.

Case No.: WP(C)/634/2023

Case Title: Pradip Mazumdar & 2 Ors. v. The Industrial Cooperative Bank Ltd. & Ors.

LL Citation: 2026 LiveLaw (Gau) 157

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