Recovery Officer Required To Cancel Auction Sale If Bank Is Satisfied That Dues Are Paid Before Sale: Allahabad High Court

The Allahabad High Court has observed that in case Bank/financial institution is satisfied that its dues are paid before the auction sale is confirmed, then the Recovery Officer would be required to cancel the auction sale.

The Bench of Justice Dinesh Singh observed thus while dealing with a Writ Petition seeking to quash a 2015 order passed by the Debts Recovery Tribunal, Lucknow ordering the Recovery Officer to take forcible possession of the mortgaged property from the petitioner.

The facts in brief 

Petitioner Dinesh Kumar Tiwari had taken a loan of Rs. 12 lakhs for business purposes from the Bank Of Baroda in November 2004 and had mortgaged the property in question, being building constructed over land measuring 5000.00 sq. ft. in Lucknow.

BOB auctioned the mortgaged property in favor of respondent no. 3 in January 2013 and he even deposited some token amount with the BOB.

However, before the confirmation of the sale, the petitioner deposited the entire amount with up-to-date interest with the BOB and thereafter, BOB issued 'no dues certificate' to the petitioner and, also wrote a letter, in May 2013, to the Recovery Officer of the Tribunal requesting the Recovery Officer to drop the proceedings pursuant to the auction sale.

However, the Recovery Officer, on June 28, 2013, rejected the request of the BOB for dropping the proceedings and ordered the BOB to refund the amount accepted by the petitioner to the petitioner. The Recovery Officer, thereafter, on the same day, confirmed the sale in favor of respondent no. 3.

Now, against the June 28, 2013 order of the Recovery Officer rejecting the request of the BOB for dropping the sale proceedings, the Petitioner moved an appeal under Section-30 of The Recovery of Debts Due to Bank and Financial Institutions Act, 1993. The said appeal is presently pending.

Further, in May 2015, the Recovery Officer passed another order directing the Senior Superintendent of Police, Lucknow for providing police protection to respondent no.3 for taking forcible possession of the mortgaged property from the petitioner (subject matter of the instant petition).

However, in May 2015 itself, the High Court ordered that the possession of the property in question should not be taken from the petitioner.

Court's observations

The Court, at the outset, noted that the BOB itself had written to the Recovery Officer not to proceed with the confirmation of sale as its entire dues were paid by the petitioner, and therefore, the Court added, the Recovery Officer had no right to ignore such a request of the BOB.

"In case Bank/financial institution is satisfied that its dues are paid before auction sale is confirmed, then the Recovery Officer would be required to cancel the auction sale, otherwise it would be a travesty of justice to complete the sale of property of the borrower despite payment of entire dues and having been issued no dues certificate by Bank/financial institution," the Court held. (emphasis supplied)

The Court further observed that the auction purchaser has no right, title, or interest over the immovable property till confirmation of sale of the said immovable property in his favor and that the title of the property passes to the auction purchaser with effect from the date of confirmation and not before confirmation of sale.

"The BOB had already received the entire amount and, written an application to the Recovery Officer for cancellation of the sale process, but despite that the Recovery Officer had proceeded to confirm the sale wholly illegally and unauthorizedly," the Court stressed

With this, the Court disposed of the instant plea with a direction to the Tribunal to decide the appeal filed by the petitioner expeditiously in accordance with law within a period of one month.

Till the appeal is decided by the Tribunal, the interim order passed by the Court in may 2015 shall remain in operation, ordered the Court.

Case title - Dinesh Kumar Tiwari v. Bank Of Baroda A Body Corporate And Ors
Case Citation: 2022 LiveLaw (AB) 66

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