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0  02 May, 2023
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G. Vikram Kumar Vs. State Bank of Hyderabad & Ors.

  Supreme Court Of India Civil Appeal /3152- 3153/2023
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Case Background

As per case facts, a borrower defaulted on a loan, leading the bank to initiate SARFAESI proceedings and attach property. During DRT proceedings, the borrower entered into a sale agreement ...

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IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

                                                                         

CIVIL APPEAL NOS.3152­3153 of 2023

(@ SLP (Civil) Nos.5973­5974 of 2018)

G. VIKRAM KUMAR   ...Appellant(s)

Versus

STATE BANK OF HYDERABAD 

& ORS.                                      ...Respondent(s)

J U D G M E N T

M. R. Shah, J.

1.Feeling   aggrieved   and   dissatisfied   with   the

impugned   judgment   and   order   dated

Civil Appeal Nos. 3152­3153 of 2023

                                                                            Page 1 of 35 2023 INSC 475

08.09.2017   passed   by   the   High   Court   of

Judicature   at   Hyderabad   for   the   State   of

Telangana and Andhra Pradesh passed in Writ

Petition No.31098 of 2016 and the subsequent

order   dated   08.12.2017   passed   in   Review

Petition   No.45031   of   2017   in   Writ   Petition

No.31098   of   2016,   the   appellant   and   the

auction purchaser has  preferred the  present

appeals. 

2.The   facts   leading   to   the   present   appeals   in

nutshell are as under:

2.1That the respondent no.3 herein – builder had

taken loan from respondent no.2 – Bank for the

development   of   the   multi­storey   housing

project.  That the respondent no.3 (hereinafter

referred to as the borrower) was not able to

Civil Appeal Nos. 3152­3153 of 2023

                                                                            Page 2 of 35

repay the security interest to the Bank, the

Bank   initiated   proceedings   against   the

borrower under Section 13 of the Securitization

and   Reconstruction   of   Financial   Assets   and

Enforcement   of   Security   Interest   Act,   2002

(hereinafter referred to as ‘the SARFAESI Act,

2002).  The Bank attached the properties of the

borrower under Section 13(4) of the SARFAESI

Act.  Against the measures taken by the Bank

under Section 13(4) of the SARFAESI Act, the

borrower filed S.A. No.253 of 2012 before the

Debt   Recovery   Tribunal   (DRT),   Hyderabad.

S.A. No.253 of 2012 was listed before the DRT

on 19.02.2016, when the borrower was given

liberty to file a list of intending buyers of the

property and bring forth with the buyers so as

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                                                                            Page 3 of 35

to enable the Tribunal to consider the same for

the repayment of the dues of the Bank.   On

25.02.2016,   the   DRT   passed   an   order

permitting the Bank to go ahead with the sale

as proposed excluding flat to be identified and

communicated by the borrower to the Bank by

29.02.2016 with full details of all purchasers to

the bank officials on affidavit so as to enable

the bank officer to exclude those flats, provided

the remaining flats are sufficient for recovery of

the dues.  The Tribunal directed that the bank

may   proceed   with   the   sale   but   shall   not

confirm the sale till the next date of hearing.

At this stage it is required to be noted that the

aforesaid order was passed by the Tribunal in

view of the submissions made by the borrower

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                                                                            Page 4 of 35

that he had sold seven flats out of 37 flats

which were to be sold by the Bank to some

third persons.  Flat No.6401 – flat in question

was not amongst the said seven flats.

2.2A Memorandum of Understanding (MoU) was

entered into between the respondent no.1 and

the borrower with respect to the sale of Flat

No.6401   on   10.04.2016   for   a   lumpsum

consideration of Forty­five lakhs.  It is pertinent

to   note   that   in   the   MoU   itself   there   was   a

reference to some proceedings going on before

the DRT and that the Bank and the borrower

will obtain clearance in order to process the

agreement to sale.  That an agreement to sale

was   executed   between   the   bank   and   the

borrower   for   a   sale   of   Flat   No.6401   on

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                                                                            Page 5 of 35

16.06.2016.  At this stage, it is required to be

noted   that   the   said   agreement   to   sale   was

executed   by   the   borrower   without

informing/obtaining any consent from the DRT

as well as the Bank and the permission, if any,

given to the borrower earlier obtained only to

the seven flats which were already recognized

by the DRT on 25.02.2016.

2.3That thereafter the Bank issued a public notice

on 28.07.2016 for auctioning the properties of

the borrower.  The said notice was published in

the newspaper on 29.07.2016.  The property in

question, i.e. Flat No.6401 was also subjected

to auction.  It was placed in Lot No.1 for which

the e­auction was proposed on 30.08.2016.

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2.4The borrower filed an application before the

DRT praying for stay on all proceedings of the

Bank   pursuant   to   the   auction   notice   dated

28.07.2016.     On   24.08.2016   the   DRT   was

pleased to reject the application for stay filed

by   the   borrower.     While   rejecting   the   stay

application and refusing to grant the stay as

prayed, the DRT observed as under:

“…Pending the decision, this Tribunal has

directed   to   sell   the   property   and   the

Applicant   now   has   entered   into   an

agreement to be sold for some other flats.

This   is   utter   violation   of   the   SARFAESI

action   as   also   the   direction   of   the

Tribunal.”

“7.     As   stated   hereinabove,   it   is   also

question   of   great   concern   that   the

Applicant has entered into an agreement

with   third  party   in  respect   of   few   other

flats i.e. Flat No.3202, 6401, 7101, 7202

and 3201 without the permission of the

Respondent   Bank   or   this   Tribunal.

Hence, any such transaction is declared

as void.”

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2.5That thereafter e­auction was conducted by the

Bank on 31.08.2016 in which the appellant

also participated.  The appellant was declared

as   a   successful   bidder   with   respect   to   Flat

No.6401 in Lot No.1.  Accordingly, he made a

payment   of   25%   of   the   bid   amount   i.e.

Rs.6,45,250/­.     The   Bank   also   issued   a

confirmation   receipt   to   the   appellant   on

31.08.2016.

2.6That thereafter the respondent no.1 filed a Writ

Petition   No.31098   of   2016   before   the   High

Court on 14.09.2016 challenging the e­auction

notice   dated   28.07.2016   to   the   extent   it

concerns Flat No.6401.  The said writ petition

was filed much after the auction was complete

and the appellant was declared as a successful

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bidder.  The respondent no.1 did not disclose

in the writ petition that the auction has already

taken place.  The appellant herein was also not

made party. By impugned judgment and order

dated 15.09.2016 the High Court stayed the

auction qua Flat No.6401 as notified under the

e­auction   sale   notice   subject   to   respondent

no.1 (original wit petitioner) paying to the bank

not less than 25.81 lakhs before the scheduled

date and time of the auction, failing which, the

Bank shall be free to proceed with the auction.

The Bank issued a letter to the appellant dated

20.09.2016 stating   that  the   High Court  has

stayed the auction proceedings with respect to

Flat   No.6401   and   that   the   respondent   no.1

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herein has paid the amount to the Bank as

directed by the High Court.

2.7On becoming aware of the pending proceedings

in Writ Petition No.31098 of 2016 the appellant

herein   filed   an   application   for   getting

impleaded in the said writ petition and filed the

counter affidavit.  In the counter affidavit it was

specifically stated that the DRT has declared

the   agreement  of   sale  executed  between  the

respondent no.1 and the borrower as void and

that   the   appellant   is   the   successful   auction

purchaser and that the respondent no.1 had

not disclosed the complete and correct facts of

the case.  It was also stated that the right, if

any, available to the respondent no.1 (original

writ petitioner) would have been under Section

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17   of   the   SARFAESI   Act   and   not   the   writ

petition filed by him.   It was also stated that

the   respondent   no.1   had   not   informed   the

Court   that   the   auction   proceedings   were

already over at the time when the stay order

was passed.   The Bank also filed the counter

affidavit in the writ petition seeking dismissal

of the writ petition primarily on the ground that

an alternative remedy under Section 17 of the

SARFAESI Act was available.  The High Court

allowed the impleadment application.  Despite

the   above,   by   the   impugned   judgment   and

order   the   High   Court   has   allowed   the   writ

petition filed by respondent no.1 herein.  That

thereafter   the   appellant   herein   the   auction

purchaser filed the review petition which has

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been  dismissed  by   the   High  Court.     Hence,

against the final decision of the High Court in

the  main writ petition allowing  the same in

favour   of   the   respondent   no.1   herein   and

rejecting   the   review   application   filed   by   the

appellant, the appellant – successful auction

purchaser has preferred the present appeals.

3.Shri   A.   Sirajudeen,   learned   Senior   Advocate

has appeared on behalf of the appellant.  Shri

Buddy A. Ranganadhan, learned counsel has

appeared   on   behalf   of   respondent   no.1   –

original   writ   petitioner   and   Shri   Ananga

Bhattacharyya, learned counsel has appeared

on behalf of respondent no.3.

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4.Shri   A.   Sirajudeen,   learned   Senior   counsel

appearing on behalf of the appellant has made

the following submissions:

(i)That the High Court has materially erred

in entertaining the writ petition filed by

respondent no.1 which was against the

steps taken by the Bank under Section

13(4) of the SARFAESI Act namely against

e­auction notice;

(ii)That   the   respondent   no.1   being   the

agreement to sale holder had no right title

in the flat in question and therefore could

not have filed the writ petition challenging

e­auction   notice   on   the   basis   of   the

agreement to sale in his favour;

Civil Appeal Nos. 3152­3153 of 2023

                                                                            Page 13 of 35

(iii)Even if the respondent no.1 had any right,

if any, in that case also he had alternative

efficacious   statutory   remedy   available

under Section 17 of the SARFAESI Act

challenging the e­auction notice;

(iv)That there was suppression of material

facts on the part of respondent no.1 which

was   specifically   pointed   out   by   the

appellant in the counter affidavit that at

the time when the writ petition was filed

and the interim relief was obtained the

auction   had   taken   place   in   which   the

appellant   was   declared   the   successful

bidder;

(v)That in fact the DRT in the earlier order

dated   24.08.2016   declared   the   sale

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agreement   in   favour   of   the   respondent

no.1 by the borrower as void as the same

was entered into without prior permission

of the DRT or even the Bank; and

(vi)The High Court has materially erred in

relying   upon   Section   13(8)   of   the

SARFAESI Act.

4.1It   is   further   submitted   by   learned   counsel

appearing on behalf of the appellant that the

High Court has not properly appreciated the

fact that a sale agreement holder cannot seek

redemption of a property under Section 91 of

the Transfer of Property Act, 1882 and cannot

be   treated   at   par   with   an   auction­sale

purchaser under Section 54 of the Transfer of

Property Act makes it clear that no interest

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                                                                            Page 15 of 35

/charge is created upon a property only by way

of sale­agreement.  It is stated that in fact the

impugned judgment passed by the High Court

that   the   respondent   no.1   be   able   to   seek

redemption of the subject property which was

attached by the Bank.  It is submitted that the

bank   attached   the   property   as   against   the

borrower and the respondent No.1 was only the

sale­agreement holder.  It is submitted that as

such by virtue of the impugned judgment and

order, the High Court has granted the decree

for specific performance of the agreement to

sale which is not permissible while exercising

the   powers   under   Article   226   of   the

Constitution of India.  

Civil Appeal Nos. 3152­3153 of 2023

                                                                            Page 16 of 35

4.2It   is   further   submitted   by   learned   counsel

appearing on behalf of the appellant that the

High Court has materially erred in observing

that   the   equity   would   be   in   favour   of

respondent no. 1 as he has deposited the entire

amount as directed.   It is submitted that the

High Court has materially erred in observing

that if the sale is confirmed the respondent

no.1 will suffer greater hardship and if the sale

is not confirmed at the most, the appellant may

lose interest on Rs.6,45,250/­.

4.3It is further submitted that as such there is no

clarity in the impugned judgment and order

passed by the High Court on what exact relief

the High Court has granted except observing

that the writ petition is allowed.

Civil Appeal Nos. 3152­3153 of 2023

                                                                            Page 17 of 35

5.While   opposing   the   present   appeal   learned

counsel appearing on behalf of the respondent

no.1   has   vehemently   submitted   that   in   the

present case Section 13(8) of the SARFAESI Act

shall   be applicable and therefore when the

respondent no.1 being the agreement to sale

holder   of   the   flat   in   question   agreed   to

pay/deposit the entire sale consideration the

High Court has not  committed any error in

entertaining the writ petition under Article 226

of the Constitution of India challenging the e­

auction notice.

5.1It is submitted that as soon as respondent no.1

came to know that the flat in question which

was agreed to be sold in favour of respondent

no.1 for which part consideration was paid is

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                                                                            Page 18 of 35

put to auction, immediately he filed the writ

petition showing his inclination to deposit the

entire amount of sale consideration which is

permissible   under   Section   13(8)   of   the

SARFAESI Act.  It is submitted that the object

and purpose of Section 13(8) of the SARFAESI

Act is to save the property from auction in case

the borrower and/or the person interested in

the property agrees to clear the dues.

5.2It is submitted that in the present case at the

relevant time there was no concluded sale in

favour of the appellant, as at the relevant time

the appellant deposited only 25% of the auction

sale consideration.  It is submitted that as per

the   catena   of   decisions   unless   the   full   sale

consideration is paid; the sale deed is executed

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and/or the sale certificate is issued in favour of

the auction purchaser there is no concluded

sale.   It is submitted that if the sale is not

concluded, Section 13(8) of the SARFAESI Act

shall be applicable and/or can be invoked.  In

support of his submissions, he has relied upon

the   decisions   of   this   Court   in   the   case   of

Mathew   Varghese   v.   M.   Amritha   Kumar,

(2014)   5   SCC   610   (para   38);  Narandas

Karsondas vs. S.A. Kamtam, (1977) 3 SCC

247; B. Arvind Kumar vs. Govt. of India &

Ors., (2007) 5 SCC 745 (para 12).    He has

also relied upon the decision of the Punjab and

Haryana High Court in the case of Pal Alloys

&   Metal   India   Pvt.   Ltd.   &   Ors.   vs.

Civil Appeal Nos. 3152­3153 of 2023

                                                                            Page 20 of 35

Allahabad Bank & Ors., 2021 SCC OnLine

P&H   2733 as   well   as   the   decision   of   the

Andhra Pradesh High Court in the case of M/s

India   Finlease   Securities   Ltd.   vs.   Prasad

Indian Overseas Bank, 2012 SCC OnLine AP

205. 

5.3It   is   further   submitted   by   learned   counsel

appearing   on   behalf   of   the   respondent   no.1

that   the   respondent   no.1   has   subsequently

died   and   his   heirs   including   the   widow   are

residing in the flat in question since long and

that they have paid/deposited the entire sale

consideration and therefore if now the appeal is

allowed in that case, they have to vacate the

premises   which   will   not   be   equitable.

Civil Appeal Nos. 3152­3153 of 2023

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Therefore, it is prayed to dismiss the present

appeal.

6.Learned   counsel   appearing   on   behalf   of   the

Bank   has   though   opposed   the   writ   petition

before the High Court, has stated that whatever

the decision, the Bank shall abide by the same.

7.Heard learned counsel appearing on behalf of

the respective parties at length.

8.At the outset, it is required to be noted that

what was challenged before the High Court by

respondent no.1 in a writ petition under Article

226 of the Constitution of India was the e­

auction   notice   which   was   pursuant   to   the

action   initiated   by   the   Bank   in   exercise   of

powers under Section 13(4) of the SARFAESI

Act.  At this stage it is required to be noted that

Civil Appeal Nos. 3152­3153 of 2023

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e­auction was held/conducted on 31.08.2016

in which the appellant participated and was

declared as a successful bidder and he made a

payment of 25% of the bid amount on the very

day i.e., on 31.08.2016.   However, thereafter

the   respondent   no.1   filed   the   writ   petition

before the High Court challenging the e­auction

notice dated 28.07.2016 on 14.09.2016 that is

after conducting of the auction.  It is required

to be noted that against any steps taken by the

Bank under Section 13(4) of the SARFAESI Act

the aggrieved party has a remedy under the

SARFAESI Act by way of appeal under Section

17 of the SARFAESI Act to approach the DRT.

Therefore,   in   view   of   the   availability   of   the

alternative statutory remedy available by way of

Civil Appeal Nos. 3152­3153 of 2023

                                                                            Page 23 of 35

proceedings/appeal   under   Section   17   of   the

SARFAESI Act, the High Court ought not to

have entertained the writ petition under Article

226 of the Constitution of India in which the e­

auction notice was under challenge.  Therefore,

the High Court has committed a very serious

error  in entertaining  the  writ petition under

Article   226   of   the   Constitution   of   India

challenging the e­auction notice issued by the

Bank in exercise of power under Section 13(4)

of the SARFAESI Act. 

8.1Even otherwise it is required to be noted that

the respondent no.1 – original writ petitioner

filed   the   writ   petition   as   agreement   to   sale

holder of the flat in question.  At this stage it is

required to be noted that earlier against the

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measures   taken  by  the   Bank   under   Section

13(4) of the SARFAESI Act the borrower filed

S.A.No.253 of 2012 before the DRT, Hyderabad.

The   DRT,   Hyderabad   by   order   dated

19.12.2016 gave the liberty to the borrower to

file the list of intending buyers of the property

and to bring forth with the buyers so as to

enable the Tribunal to consider the same for

repayment   of   the   dues   of   the   Bank.     That

thereafter on 25.02.2016 the DRT passed the

following order:

"The Bank is directed to go ahead with the

sale as proposed excluding the Flat to be

identified   and   communicated   by   the

Applicant   to   the   Respondent   Bank   by

29.02.2016   with   full   detailed   of   all   the

Purchasers   to   the   Bank   Officers   on

affidavit so as to enable the Bank Officer

to   exclude   those   Flats,   provided   the

remaining Flats are sufficient for recovery

of the dues. The Bank may proceed with

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the sale but shall not confirm the same till

the next date of hearing."

8.2At this stage it is required to be noted that the

flat in question namely Flat No.6401 was not

the seven flats identified by the borrower to be

kept out of the auction proceedings.   At the

relevant time the flat in question was not sold

amongst the seven flats mentioned before the

Tribunal.  That thereafter during the pendency

of   the   S.A.   No.253   of   2012   and   without

obtaining prior approval and/or intimation to

the   DRT   and   even   the   bank,   the   borrower

entered   into   the   sale   agreement   with   the

respondent no.1 on 16.06.2016.  At this stage,

it is required to be noted that in the MoU dated

10.04.2016   between   the   borrower   and   the

respondent   no.1   in   Clause   No.4   it   was

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specifically provided that first the party should

obtain clearance of sale from DRT/SBH so that

they   can   process   with   further   agreement   to

sale.   Thus, as such respondent no.1 at the

relevant   time   was   aware   about   the   pending

DRT proceedings.   Still the respondent no.1

entered into the  agreement  to sale with the

borrower on 16.06.2016.   At this stage, it is

pertinent to note that thereafter when the Bank

issued   a   public   notice   on   28.07.2016   for

auctioning   the   properties   of   the   borrower.

Before the date of auction, on 24.08.2016 the

borrower filed an application before the DRT

praying for stay of all proceedings of the Bank

pursuant   to   the   auction   notice   dated

28.07.2016.  The DRT was pleased to reject the

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said application for stay vide the order dated

24.08.2016 by observing that the sale of the

flat in question without the permission of the

Bank or the Tribunal is void.  The order dated

24.08.2016 is reproduced hereinabove.  Thus,

as   such   the   transaction   in   favour   of   the

respondent no.1 with respect to Flat no.6401

was already held to be void by the DRT.  That

thereafter, after the borrower having failed to

obtain   any   order,   the   respondent   no.1   had

straightway filed the writ petition challenging

the e­auction notice which the borrower failed

to   get   any   relief   before   the   DRT.     If   the

respondent no.1 would have approached the

DRT   against   the   e­auction   notice   he   would

have   been   non­suited   in   view   of   the   earlier

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order passed by the DRT dated 24.08.2016.

Therefore,   calculatively   the   respondent   no.1

filed the writ petition before the High Court

challenging the e­auction notice and that too

after   conducting   of   the   e­auction   on

31.08.2016   and   the   sale   in   favour   of   the

appellant was confirmed.   The aforesaid facts

were pointed out before the High Court and

despite the same the High Court has allowed

the writ petition which is not sustainable at all.

By the impugned order the respondent no.1

has got the relief which as such the borrower

failed to get from the DRT.   On the aforesaid

grounds   the   impugned   judgment   and   order

passed by the High Court is unsustainable.

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8.3Even  otherwise   it   is   very  debatable   whether

Section   13(8)   of  the   SARFAESI  Act   shall  be

applicable in favour of a person who is only an

agreement to sale holder or Section 13(8) of the

SARFAESI Act shall be applicable only in case

of the borrower who is ready and willing to pay

the   entire   debt.     In   the   present   case   the

borrower failed to get any relief from the DRT.

The   borrower   did   not   apply   and/or   invoke

Section 13(8) and did not agree to clear the

entire dues.  Therefore, also the High Court has

materially erred in allowing the writ petition.

8.4Even otherwise it is required to be noted that

as such what exact relief is granted by the High

Court is not clear.  The High Court has simply

stated   that   the   writ   petition   is   allowed.

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However, it is required to be noted that what

was challenged before the High Court was the

e­auction notice dated 28.07.2016 which was

already conducted on 31.08.2016.   Therefore,

the   writ   petition   was   filed   much   after

conducting the e­auction on 31.08.2016.   No

consequential relief has been granted by the

High   Court.     Therefore,   also   the   impugned

judgment and order passed by the High Court

is unsustainable.

8.5Now so far as the submission on behalf of the

respondent no.1 that the respondent no.1 has

paid/deposited   the   amount   of   sale

consideration and now the respondent no.1 has

died his heirs will have to vacate the flat in

question and on the other hand the appellant

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shall   be   entitled   to   return   the   amount   of

Rs.6,45,250/­ deposited at the relevant time

being 25% of the auction sale consideration

with interest is concerned, at the outset it is

required   to   be   noted   that   as   such   the

transaction between the respondent no.1 and

the borrower pursuant to the agreement to sale

dated   16.06.2016   was   absolutely   illegal   and

behind the back of the Tribunal as well as the

Bank   and   during   the   pendency   of   the

proceedings   before   the   Tribunal.     In   order

dated   24.08.2016   the   Tribunal   had   in   fact

already held the sale transaction as void.   As

observed hereinabove even at the time when

the respondent no.1 entered into the agreement

to   sale/MoU   he   was   aware   about   the

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proceedings pending before the DRT which is

apparent from Clause 4 of the MoU referred to

hereinabove.     Therefore,   respondent   no.1

and/or his heirs cannot be permitted to get the

benefit   of   his   own   wrong   and   cannot   be

permitted   to   get   the   benefit   of   a   void

transaction.

9.In view of the above and for the reasons stated

above,   the   impugned   judgment   and   order

passed by the High Court is hereby quashed

and set aside.   It is directed that on the full

payment of the auction sale consideration by

the appellant (after deducting the 25% of the

amount   already   deposited   earlier)   with   9%

interest from the date of auction till the actual

amount is paid, to be paid within a period of

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four weeks from today, the sale certificate be

issued in favour of the appellant with respect to

Flat No.6401.  Whatever the amount is already

deposited   by   the   respondent   no.1/his   heirs

shall be returned to the respondent no.1 (now

his heirs) with the interest at 9% from the date

of such deposit till the actual date of return

which shall be returned within a period of four

weeks   from   today.     The   heirs   of   original

respondent   no.1   are   granted   three   months’

time   to   vacate   the   flat   in   question   and   are

directed to hand over the peaceful and vacant

possession of the Flat No.6401 to the appellant

within a period of three months from today as

ordered above.

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Present appeals are allowed.   However, in the

facts and circumstances of the case there shall

be no order as to costs. 

……………………………J.

             (M. R. SHAH)

……………………………J.

                                 (C.T. RAVIKUMAR)

New Delhi, 

May 2, 2023 

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