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V. Ganesan v. Canara Bank & Ors. S
Factual and Procedural Background
Respondent No. 2, the borrower, defaulted on his repayment obligations, leading the Recovery Officer to auction the mortgaged property on 13 December 2005. The appellant emerged as the auction-purchaser.
Key procedural steps thereafter were:
- 10 January 2006: Respondent No. 2 applied to set aside the sale; the Recovery Officer rejected the request on 20 January 2006.
- 20 January 2006: The auction sale was confirmed and a sale certificate issued to the appellant.
- 21 January 2006: A sale deed was executed and title deeds delivered to the appellant.
- 3 February 2006: A second application under Section 27(2) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 to deposit the sale amount was dismissed.
- Respondent No. 2 filed Transfer Petition No. 61 of 2006 before the DRAT, Chennai, seeking transfer of the proceedings from DRT Coimbatore to DRT Chennai because DRT Coimbatore lacked a Presiding Officer.
- 19 June 2006: While the transfer petition was pending, Respondent No. 2 filed an interlocutory application under Rule 22 of the DRAT (Procedure) Rules, 1994 to set aside the sale.
- 19 October 2006: DRAT, Chennai allowed the application and set aside the confirmed sale, imposing conditions.
- The appellant’s writ petition challenging the DRAT order was dismissed by the High Court of Madras on 29 March 2007.
- The appellant appealed to the Supreme Court, resulting in the present decision.
Legal Issues Presented
- Whether the DRAT, Chennai, seized only of a transfer petition, had jurisdiction under Rule 22 of the DRAT (Procedure) Rules, 1994 to set aside a sale already confirmed by the Recovery Officer and perfected by execution of a sale deed.
- Whether the grounds relied upon by the DRAT and affirmed by the High Court—namely that the auctioned property was the borrower’s sole remaining asset and that the appellant had received the sale consideration—were sufficient in law to annul the confirmed sale.
- Whether the Supreme Court should exercise its discretionary jurisdiction under Article 136 of the Constitution to reinstate the appellant’s title despite the equities urged by Respondent No. 2.
Arguments of the Parties
Appellant’s Arguments
- The sale had twice survived challenges before the Recovery Officer and had culminated in a sale deed; therefore, it was beyond the DRAT’s competence, in a transfer proceeding, to reopen it.
- Receipt of the sale amount was under protest and without prejudice; this could not justify nullifying the auction.
- The DRAT’s invocation of Rule 22 was misconceived because the tribunal was not seized of the merits of the dispute.
Respondent No. 2’s Arguments
- Relied on the Supreme Court decisions in Taherakhatoon v. Salambin Mohammad and Sukumar De v. Bimala Auddy to urge that equitable considerations—particularly that the property was his sole asset and the appellant still held the money—should dissuade the Court from granting relief to the appellant.
- Sought to uphold the DRAT’s order on the ground that allowing him to redeem the property would “secure the ends of justice.”
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Taherakhatoon (D) by Lrs. v. Salambin Mohammad, (1999) 2 SCC 635 | Court’s discretion to withhold relief where peculiar equities favour the respondent. | The Supreme Court distinguished the case, holding that the confirmed sale and lack of DRAT jurisdiction outweighed such equities. |
| Sukumar De v. Bimala Auddy, (2014) 1 SCC 584 | Similar principle of equitable restraint in exercising appellate powers. | The Court found the principle inapplicable given the statutory framework and procedural defects in the DRAT’s order. |
Court's Reasoning and Analysis
The Supreme Court emphasised that once the Recovery Officer had twice declined to set aside the sale and a sale deed had been executed, the auction-purchaser’s rights had crystallised. The DRAT’s power under Rule 22 could not be exercised in a matter where the tribunal was only seized of a transfer petition, not the substantive dispute. Equitable considerations—such as the borrower’s ownership of no other property and the appellant’s receipt of the sale amount—were deemed insufficient to override statutory finality, especially since the money was accepted under protest.
The Court also rejected the reliance on Taherakhatoon and Sukumar De, noting that the facts and statutory context differed materially and did not limit its jurisdiction under Article 136. Consequently, the orders of the DRAT and the High Court were held to be legally unsustainable.
Holding and Implications
Appeal Allowed. The Supreme Court set aside the DRAT order dated 19 October 2006 and the High Court order dated 29 March 2007. It directed:
- The appellant to refund Rs 23,50,000 to Respondent No. 2 with 6% interest per annum forthwith.
- Upon such payment, Respondent No. 2 must hand over possession of the property to the appellant within three months.
Implications are confined to the parties: the appellant’s title is reinstated and the borrower regains the sale consideration with interest. The decision turns on jurisdictional limits of the DRAT and does not establish a new broader precedent.
1. The respondent No. 2 in this appeal is the borrower whose persistent failure to pay the agreed amounts led to the sale of the mortgaged property which was purchased by the appellant in an auction held on 13 December, 2005.
2. On 10 January, 2006, the second respondent filed an application for setting aside the aforesaid sale which was rejected by the Recovery Officer on 20 January, 2006. On the same day, i.e 20 January, 2006, the sale in favour of the appellant was confirmed and sale certificate was issued. On the next date i.e 21 January, 2006, a sale deed was executed in favour of the appellant and the title deeds were handed over to the said appellant. Thereafter on 3 February, 2006 the respondent No. 2 filed another application under Section 27(2) of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 seeking leave to deposit the amount at which the property was purchased by the appellant. The said application was once again dismissed.
3. Thereafter, it appears that the second respondent preferred Transfer Petition No. 61 of 2006 before the Debts Recovery Appellate Tribunal, Chennai (hereinafter referred to as “the DRAT, Chennai”) for transfer of proceedings from Debts Recovery Tribunal, Coimbatore (“DRT, Coimbatore” for short) where it was pending to Debts Recovery Tribunal, Chennai (“DRT, Chennai” for short) on the ground that the DRT, Coimbatore was not in a position to hear the case due to the absence of a Presiding Officer. During the pendency of the aforesaid Transfer Petition, the second respondent on 19 June, 2006 filed an I.A under Rule 22 of the DRAT (Procedure) Rules, 1994 seeking the same relief i.e setting aside of the sale. The aforesaid relief was sought, ostensibly, to secure the ends of justice as according to the said respondent the property in question was the only piece of property left with him. Though the aforesaid prayer was opposed by the appellant, the DRAT, Chennai by order dated 19 October, 2006 allowed the said application and set aside the sale made in favour of the appellant on certain conditions. Aggrieved, the appellant moved the High Court of Madras by way of a writ petition which was dismissed by the impugned order dated 29 March, 2007. Hence the present appeal.
4. A reading of the order of the DRAT, Chennai as well as the order of the High court would go to show that what had prompted the said authorities to hold in favour of the respondent No. 2 was the fact that the property in question was the sole item of property owned by the said respondent and furthermore as the appellant had received the amount paid by him in the auction sale from the respondent No. 2.
5. Having considered the matter we are of the view that the said grounds cannot constitute a sufficient basis for setting aside a confirmed sale in favour of the appellant which has also crystallized into execution of a sale deed in his favour. Even the jurisdiction of the DRAT to pass the impugned order in purported exercise of powers under Rule 22 of the DRAT (Procedure) Rules, 1994 would remain in serious doubt as the DRAT was only in seisin of the issue of transfer of the proceedings from the DRT at Coimbatore to the DRT at Chennai and not the merits of the dispute. The receipt of the money paid by the respondent No. 2 to the appellant under the orders of the DRAT cannot also be a sufficient ground for granting relief to the respondent No. 2 as apparently from the order of the DRAT, Chennai itself, it appears that the said amount was received by the appellant under protest and without prejudice to his rights. The sale in favour of the appellant having been refused to be set aside by the Recovery Officer on two occasions we do not think that the impugned order passed by the DRAT, Chennai while in seisin of a transfer petition would be justified in law.
6. Learned counsel for the respondent No. 2 has relied on two decisions of this Court in Taherakhatoon (D) by Lrs. v. Salambin Mohammad [(1999) 2 SCC 635 and Sukumar De v. Bimala Auddy [(2014) 1 SCC 584 to submit that on the ratio of the aforesaid decisions this Court should decline relief to the appellant in view of the peculiar facts of the case, namely, that the property in question is the sole property left with the respondent No. 2 and that the amount paid by the said respondent No. 2 to the appellant continues to remain with the appellant.
7. We do not consider that in the facts of the case when the sale has been confirmed and the same has been refused to be set aside by the Recovery Officer the exercise of jurisdiction under Article 136 of the Constitution of India should be, in any way, inhibited or restrained on the grounds urged.
8. For the aforesaid reasons, we allow this appeal; set aside the order of the DRAT, Chennai dated 19 October, 2006 and the order of the High Court of Madras dated 29 March, 2007 and direct that the possession of the property in question be handed over by the respondent No. 2 to the appellant. The appellant shall pay amount of Rs. 23,50,000/- received by him under the orders of the DRAT, Chennai to the respondent No. 2 with interest at the rate of 6% per annum forthwith. Once the said amount is paid, the property in question, as directed by the present order, will be handed back to the appellant by the respondent No. 2 within a period of three months after the payment of amount by the appellant.
9. The appeal is disposed of in the above terms.
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