Sale Arising From Collusive Suit Where Bank Isn't Party Does Not Bind Either Bank Or Auction Purchaser: DRAT Chennai

The Debts Recovery Appellate Tribunal Chennai bench of Justice G. Chandrasekharan (Chairperson) has held that a sale arising from a collusive suit, where the bank was not a party to the proceedings, does not bind the bank or the auction purchaser of the property under SARFAESI proceedings. Facts In 1991, the 2nd Respondent Bank sanctioned loans to one Mr. Raju. Ms. D. Ratchaka, as guarantor, mortgaged her property. On 08.09.1991, Ms. Ratchaka entered into a Sale Agreement with Ms. B. Usha Rani. In the said sale agreement, a clause stipulated that the mortgage would be cleared before the sale. The Bank filed a suit for recovery, which was decreed on 10.07.2001. Ms. Usha Rani, suppressing the decree, filed a suit for specific performance of the Sale Agreement and obtained an ex parte decree. A Sale Deed was executed in her favour in 2009. The Bank auctioned the mortgaged property on 21.01.2010. The Appellant was declared as the highest bidder for Rs. 3.22 crores. Ms. Usha Rani filed securitization applications to challenge the Bank's possession and sale notices. DRT-III found that the 1st Respondent is neither a Borrower nor a Guarantor. DRT-III dismissed the application to set aside the sale. Observations The Tribunal held that the suit filed by the appellant was a collusive suit between the 1st Respondent and the Guarantor, who conveniently remained ex parte. It observed that “any sale, on the basis of collusion, when the Bank is not a party to the Suit, will bind neither the Bank nor the purchaser who purchased the property through auction sale”. The Tribunal allowed the appeals. Case title: Mirra & Mirra Industries vs. Mrs. B. Usha Rani & Anr. Case Number: RA (SA): 165/2018 and RA (SA):178/2018 Counsel for Appellant: M/s. G. Vijay Anand Associates Counel for R1: S. Pugaleanthi Counsel for R2: T. Sundar Rajan Date of Judgment: 20.12.2024Click Here To Read/Download The Order

Sale Arising From Collusive Suit Where Bank Isn't Party Does Not Bind Either Bank Or Auction Purchaser: DRAT Chennai

Tazeen Ahmed

Tags