SARFAESI Auction: Supreme Court 06.09.2019 Holds Bank Must Handover Original Documents To Auction Purchaser
The Supreme Court in Tripower Enterprises Pvt Ltd vs State Bank of India, Judgment delivered by A.M. Khanwilkar, J., dealt with return of original title documents Exhibits A110 to A114 after SARFAESI auction. The Court set aside Madras High Court order dated 06.09.2019 and restored DRAT order directing DRT to return documents to Bank for auction purchaser. Practically what we have seen is that DRT withholds documents saying mortgage validity is still under inquiry in OA. Supreme Court said once sale certificate is issued, Bank must handover documents. This blog explains Tripower Enterprises Case on SARFAESI, mortgage validity, and auction purchaser rights.
Facts: Bank Auctioned Property; DRT Refused To Return Title Deeds; High Court Upheld DRT
Borrower M/s Rukmini Mills Ltd availed loan from SBI. Guarantor Associated Trading Corporation Pvt Ltd mortgaged property on 12.04.1984. Loan became NPA. Bank issued demand notice 13.05.2008 and took possession 15.10.2008 under Section 13(4) SARFAESI Act 2002. Guarantor challenged in SA No.225/2008. DRT dismissed on 10.02.2011 holding valid mortgage exists. Appeal dismissed for non-deposit on 08.02.2013.Bank conducted e-auction on 28.02.2017. Appellant Tripower Enterprises was highest bidder. Sale certificate issued 29.04.2017. Bank filed IA No.995/2017 before DRT for return of original documents A110-A114 to handover to auction purchaser. DRT rejected on 09.11.2018 saying mortgage validity still to be decided in OA No.11/2008. DRAT allowed appeal on 29.03.2019 and directed return. High Court reversed DRAT on 06.09.2019 and told DRT to retain documents till OA disposal. Supreme Court reversed High Court.
A common mistake DRTs make is withholding title deeds during pendency of OA. Tripower Enterprises Case says sale certificate creates obligation to deliver documents.
SARFAESI Sale And Return Of Documents: Auction Purchaser Entitled To Title Deeds
The Supreme Court in Tripower Enterprises Case held: Once auction is concluded and sale certificate issued under SARFAESI, Bank is legally obliged to handover original title documents to auction purchaser. DRAT rightly directed return. High Court erred in directing retention till OA disposal.
Court noted: Guarantor had repeatedly raised "no valid mortgage" plea and lost. DRT 10.02.2011 already held valid mortgage. Appeal dismissed. Guarantor’s Director filed affidavit 27.01.2011 offering to pay Rs.350.12 lakhs. Cannot approbate and reprobate.
On mortgage dispute: Court said DRT will still decide validity in pending OA No.11/2008. But that does not justify withholding documents from bonafide auction purchaser who paid Rs.60.25 crores.
In Our Experience, Banks Must Release Documents Post Auction
The Supreme Court in Tripower Enterprises Case directed: Return all original documents except land bearing Paimash No.722/4 admeasuring 1.80 acres which is subject of civil decree dated 16.02.1990 in OS No.186/1976 in favor of Respondent 11. For that parcel, retain till final decision. A common mistake is thinking DRT cannot return documents before OA disposal. Court said SARFAESI recovery and OA recovery can run parallel. Auction purchaser rights cannot be stalled.
Conclusion
Tripower Enterprises Pvt Ltd vs State Bank of India establishes that sarfaesi auction sale certificate original documents supreme court 2019 law protects auction purchasers. Supreme Court held DRT must return title deeds after sale certificate. Validity of mortgage can be decided later in OA. Exception made for property covered by prior civil court decree. As the law stands, banks must handover documents post auction, subject to third party decrees. The Supreme Court’s ruling prevents delay and protects SARFAESI process.
