Delhi High Court on interpretation of clause“AS IS WHERE IS” often employed in the Auction Notice and interplay of “Caveat Venditor” vis-a-vis “Caveat Emptor”, SARFAESI Act and directions to refund auction amount –
On 14.12.2018, the Respondents – Bank had issued sale / auction public notice in respect of residential property under the SARFAESI Act.
The petitioner was declared as the highest bidder for Rs.4,90,25,000/- and the confirmation letter was issued.
On 15.2.2019, sale certificate was issued on payment of complete auction amount stating that the sale was free from all encumbrances known to the secured creditors.
On 12.6.2019, the petitioner paid the stamp duty and the sale certificate was registered on 14.6.2019.
The petitioner had also paid property taxes. In all total payment of Rs.5,38,72,536/- was paid by the petitioner.
Even after obtaining sale certificate, the possession was not given. It was found that the property was subject to encumbrances and involved in several litigations. According to the petitioner, the Bank had intentionally concealed the litigations. The petitioner had therefore, asked for refund of auction amount with interest.
In the important ruling the Delhi High Court held that the term “as is where is” basis of the auction sale cannot absolve the Bank of its responsibility to act transparently and deliver property free from all encumbrances.
HELD that the principle of caveat venditor is more on the rise as compared to the outdated principle of caveat emptor. The Transfer of Property Act, 1882, requires the seller to own up certain duties and it is not open to a responsible bank to take an innocent auction purchaser for a ride by selling tainted property and thereafter, claim protection under the principles of “buyer beware”. Therefore, the said clause based on onus of buyer has no blanket application. The expectation of credibility is on the higher side and consequently, standards of justness, fairness and transparency ought to be higher. It was, therefore, directed to refund the auction amount with interest.
To my mind, it is, therefore, salutary that the Banks should disclose the “encumbrances” in the auction sale rather than taking shelter under the vague term of “as is where is” to deceive the auction purchasers.
Judgment in W.P.(C) No.2829/2023 & CM APPL NO.10919 of 2023 of M/s.Kalyani (India) Private Limited Vs. Punjab National Bank
