S.Rajeswari v. The Recovery Officer

[Cites 6, Cited by 0] Madras High Court S.Rajeswari vs The Recovery Officer on 27 August, 2026 2026:MHC:3482 W.P.No.4074 of 2024 IN THE HIGH COURT OF JUDICATURE AT MADRAS RESERVED ON : 21.08.2026 DELIVERED ON : 27.08.2026 CORAM : THE HONOURABLE MR. SUSHRUT ARVIND DHARMADHIKARI, CHIEF JUSTICE AND THE HONOURABLE MR.JUSTICE G.ARUL MURUGAN W.P.No.4074 of 2024 S.Rajeswari New No.30, Old No.20, Udhayasuriyan 1st Street Sathumangar, Tiruvottiyur Chennai - 600 019. Petitioner(s) Vs 1. The Recovery Officer Debts Recovery Tribunal III Shastri Bhavan, Subba Road Avenue Nungambakkam, Chennai - 600 008. 2. The Asset Recovery Management Branch Indian Overseas Bank, Co Annexure Building 1st Floor, 763, Anna Salai Chennai - 600 002. Respondent(s) PRAYER: Petition filed under Article 226 of the Constitution of India seeking issuance of a writ of mandamus directing the respondents to forthwith refund the entire bid amount of Rs.62,75,000/- with accrued compoundable rate of interest from the date of payment to till the date ______________ Page 1 of 16 https://www.mhc.tn.gov.in/judis  2026:MHC:3482 W.P.No.4074 of 2024 of refund along with nominal damages for the unbearable sufferings caused to the petitioner within the time to be stipulated by this court. For Petitioner(s): Ms.Hema Srinivasan For Respondent(s):Mr.F.B.Benjamin George for R2 R1-Tribunal ORDER THE CHIEF JUSTICE The petitioner, who is an auction purchaser, has invoked the jurisdiction of this court under Article 226 of the Constitution seeking a direction to the respondents to refund the sum of Rs.62,75,000/-, paid by her towards the purchase of the secured asset, together with interest. 2. The case raises a narrow but important question, viz., when a person purchases property in a public auction conducted by a statutory Recovery Officer, pays the entire consideration and obtains a sale certificate, can she be compelled to remain indefinitely without the property, particularly when the circumstances surrounding the title and encumbrances were not fairly disclosed before the auction? ______________ https://www.mhc.tn.gov.in/judis  2026:MHC:3482 3.1. The facts in a nutshell are that the petitioner is the widow of late S.Subbarayan Subramanian. The respondent/bank had extended financial assistance to S.Parthiban, proprietor of S.K.Appliances. His father, M.Shanmugam, and his mother, Smt.S.Kasthuri, stood as guarantors. The property in question measures about 2834 sq. ft. and is described as land with a residential building at No.6, Indira Gandhi Street, Karapakkam, Chennai, comprised in Survey No.114, within the Neelankarai Sub- Registration District and South Chennai Registration District. The respondent/Bank states that the property was mortgaged to secure the borrower's liability. 3.2. The respondent/bank had earlier proceeded against the borrower and guarantors under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. It thereafter instituted O.A.No.121 of 2007 before the Debts Recovery Tribunal for recovery of its dues. The Original Application was allowed and Recovery Certificate No.184 of 2008 came to be issued. The Recovery Certificate was subsequently ______________ https://www.mhc.tn.gov.in/judis  2026:MHC:3482 put into execution. The property was brought to public auction on 14.12.2016. The petitioner and her husband participated in the auction. Their bid of Rs.62,75,000/- was accepted. The entire consideration was paid. The sale was confirmed and a sale certificate was issued on 24.01.2017. The sale certificate was registered. The order confirming the sale records that the entire sale consideration and the prescribed poundage fee had been paid and that the sale stood confirmed. It identifies the purchasers as the petitioner and her husband. 3.3. The Recovery Officer passed an order on 19.05.2017 directing the certificate debtors to hand over vacant possession. An Advocate Commissioner was appointed. The efforts to obtain possession repeatedly failed for want of effective police assistance and because the occupants continued to remain in the property. The respondent/Bank itself admits that, despite the appointment of three Advocate Commissioners, physical possession could not be secured and delivered to the petitioner. ______________ https://www.mhc.tn.gov.in/judis  2026:MHC:3482 3.4. The petitioner then approached this court in W.P.No.34830 of 2022 seeking delivery of possession. By order dated 27.09.2023, this Court directed the Recovery Officer to take effective steps to place the auction purchaser in possession and observed that the police authorities could not refuse protection when acting pursuant to the orders of the Recovery Officer. 3.5. The material placed before this Court shows that even in 2025 and 2026 the Bank was corresponding with the police authorities and seeking assistance for execution of the warrant. The correspondence records the proposed eviction of eight families occupying the premises. Thus, a purchaser who paid the full consideration in December 2016 has remained without the property for several years. 4.1. Learned counsel for the petitioner submits that the petitioner and her late husband were bona fide auction purchasers and they paid the entire sale consideration believing that the property offered for public auction could lawfully be sold and ______________ https://www.mhc.tn.gov.in/judis  2026:MHC:3482 delivered, however, nearly a decade has passed since the auction and till date the possession has not been delivered. 4.2. Learned counsel further submits that the property was purchased from their hard-earned money and that the petitioner has never been able to enjoy the property despite having paid the entire consideration and, therefore, seeks restitution of the amount paid by her, with interest. 5.1. Learned counsel appearing on behalf of the respondent/ bank does not dispute the essential fact that the petitioner and her husband paid Rs.62,75,000/- and that the sale certificate was issued on 24.01.2017. It is submitted that the respondent/Bank and the Recovery Officer made repeated efforts to secure possession and attributes the failure principally to the lack of police assistance. It also further stated that the sale was conducted by the Recovery Officer under the Recovery of Debts and Bankruptcy Act and that the sale consideration remains with the Recovery Officer. ______________ https://www.mhc.tn.gov.in/judis  2026:MHC:3482 5.2. Learned counsel for the respondent/bank contends that the petitioner ought to approach the Recovery Officer for redressal of her grievance and that the petitioner had earlier approached this Court in W.P.No.34830 of 2022 and subsequently filed M.A.No.415 of 2025 before the Recovery Officer. The said application was dismissed on 20.01.2026. It is, therefore, contended that the petitioner should pursue the statutory appellate remedy rather than invoking Article 226 of the Constitution of India. 5.3. It is further submitted that the sale certificate has been registered and that unless it is cancelled, the petitioner cannot seek refund of the sale consideration and that a purchaser takes the risk of delay in delivery of possession in an auction sale. 6. The sale in the present case was conducted by the Recovery Officer in execution of a Recovery Certificate under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 [now the Recovery of Debts and Bankruptcy Act, 1993]. Section 29 of that Act makes the Second and Third Schedules to the Income- tax Act, 1961, and the Income-tax (Certificate Proceedings) Rules, ______________ https://www.mhc.tn.gov.in/judis  2026:MHC:3482 1962, applicable, with necessary modifications, to recovery proceedings under the RDB Act. 7. The Supreme Court has recently examined the precise significance of these provisions in Delhi Development Authority v. Corporation Bank and Others1. Rule 53 of the Second Schedule to the Income-tax Act requires the proclamation of sale to state, as fairly and accurately as possible, the property to be sold, the revenue assessed on it, the amount for which the sale is ordered and any other matter which the Recovery Officer considers material for a purchaser to know in order to judge the nature and value of the property. Rule 16 of the Income-tax (Certificate Proceedings) Rules, 1962 is also significant. It enables the Recovery Officer to summon persons and call for documents concerning matters relevant to the proclamation of sale. 8. The statutory scheme, therefore, does not treat a sale proclamation as a mere invitation to bid. The proclamation is intended to give a prospective purchaser enough information to 1 2025 SCC OnLine SC 2071 ______________ https://www.mhc.tn.gov.in/judis  2026:MHC:3482 make an informed decision. That principle is equally reflected in the SARFAESI framework. Under Rule 8(7)(a) of the Security Interest (Enforcement) Rules, 2002, the terms and conditions of sale are required to include the details of the encumbrances, if any, known to the secured creditor. The requirement is not ornamental. It exists to protect the bidder from purchasing a property without knowing a material burden affecting its title, value or enjoyment. 9. A public auction proceeds on a basic assumption. The bidder is entitled to know what is being sold. The expression "as is where is" cannot be used to defeat that principle. It cannot be stretched to mean that the purchaser must accept an undisclosed legal burden or a material defect in title which was within the knowledge of the secured creditor or the Recovery Officer. 10. There is a fundamental difference between purchasing a property after knowingly accepting a risk and purchasing a property without being told of a material fact which substantially affects its value or title. The latter is not a genuine informed auction. This distinction assumes particular importance where the person ______________ https://www.mhc.tn.gov.in/judis  2026:MHC:3482 conducting the sale is a statutory authority and the secured creditor is a public sector bank. The auction purchaser is not dealing with a private seller acting solely for his own benefit. The sale is conducted under statutory authority and carries with it an assurance that the material facts known to the authorities have not been withheld. 11. In Delhi Development Authority (supra), the Bank was aware of the lease conditions and the claims of the DDA. The Recovery Officer had specifically called upon the Bank to bring to his notice the encumbrances, charges and liabilities attached to the property. Nevertheless, the e-auction notice did not disclose the DDA's claim. The Supreme Court held that the omission violated the Rules and concluded that no sanctity could be attached to the auction notice, confirmation of sale or sale certificate. The principle is directly relevant here. 12. The auction proceedings placed before this court merely identify the property, state the upset price and record the successful bid. They do not disclose, in any meaningful form, the complicated title history or the competing claims which the respondent/Bank ______________ https://www.mhc.tn.gov.in/judis  2026:MHC:3482 itself now places before this Court. A purchaser who knew before the auction that the property was embroiled in title disputes, cancellation of settlement deeds, conflicting revenue records and continuing occupation by third parties could have made a different decision. She could have declined to bid. 13. The respondent/Bank places considerable reliance on the petitioner's earlier proceedings and submits that an appeal lies against the order of the Recovery Officer. The order dated 20.01.2026 passed in M.A.No.415 of 2025 arose in the context of the continued failure to secure police assistance and physical possession. The Recovery Officer expressed sympathy for the auction purchaser, but dismissed the application and directed the respondent/Bank to take steps seeking police protection. The earlier writ petition, W.P.No.34830 of 2022, was filed by the petitioner seeking delivery of physical possession of the property. This Court directed the Recovery Officer to take effective steps for that purpose. The existence of a statutory remedy is an important consideration in the exercise of Article 226 jurisdiction. It is not, however, an absolute bar. The present case involves more than a ______________ https://www.mhc.tn.gov.in/judis  2026:MHC:3482 routine challenge to an interlocutory order of the Recovery Officer. In any event, that order did not finally adjudicate the petitioner's present claim for restitution of the purchase money with interest. 14. The petitioner has paid the entire consideration under a statutory auction. A sale certificate has been issued. Years have passed. Possession has not been delivered. The record also raises a substantial question as to whether material facts concerning the property were disclosed before the auction. The petitioner has been kept out of both the property and her money. The statutory sale has not yielded the benefit for which she paid. The court cannot shut its eyes to that consequence merely because the petitioner had earlier sought possession. 15. In the present case, the respondent/Bank was itself in possession of the title documents and was aware of the history of the mortgage and the property. The counter affidavit refers to the settlement deed, its cancellation and subsequent transactions. The purchaser cannot be expected to know more than what the respondent/Bank and the Recovery Officer disclosed to her. ______________ https://www.mhc.tn.gov.in/judis  2026:MHC:3482 16. The respondent/Bank next contends that the sale certificate has been registered and that the petitioner cannot obtain a refund unless the sale certificate is cancelled. The relief of refund necessarily carries with it the consequence that the auction sale and the sale certificate cannot continue to operate in favour of the petitioner. The court is, therefore, entitled to mould the relief so that the parties are restored, as far as possible, to their original position. In Delhi Development Authority (supra), after holding the auction and the consequential sale documents to be unsustainable, the Supreme Court quashed the auction notice, auction proceedings, confirmation of sale and sale certificate and directed restitution of the amount paid by the auction purchaser. The objection regarding the registered sale certificate, therefore, cannot stand in the way of effective relief. In the same judgment, the Supreme Court has directly addressed the question of interest in the context of an auction purchaser deprived of the use of her money. It held that the purchaser was entitled to interest because the money could have earned value elsewhere and directed payment at 9% per annum from the date of deposit until ______________ https://www.mhc.tn.gov.in/judis  2026:MHC:3482 repayment. The said proposition applies on all fours to the case on hand. 17. For the aforegiven reasons, the writ petition is allowed. The auction sale conducted on 14.12.2016 in DRC No.184 of 2008 and the consequential order confirming the sale and the sale certificate dated 24.01.2017 in favour of the petitioner and her late husband, shall stand set aside. The respondents shall refund the entire sum of Rs.62,75,000/- paid by the petitioner towards the auction purchase together with interest at 9% per annum from the date of deposit/payment until the date of actual repayment, in accordance with the principle laid down by the Supreme Court in Delhi Development Authority (supra). The amount shall be refunded within a period of four weeks from the date of receipt of a copy of this order. There shall be no order as to costs. (SUSHRUT ARVIND DHARMADHIKARI,CJ) (G.ARUL MURUGAN,J) 27.08.2026 Index : Yes Neutral Citation : Yes sasi ______________ https://www.mhc.tn.gov.in/judis  2026:MHC:3482 To: 1. The Recovery Officer Debts Recovery Tribunal III Shastri Bhavan, Subba Road Avenue Nungambakkam, Chennai - 600 008. 2. The Asset Recovery Management Branch Indian Overseas Bank, Co Annexure Building 1st Floor, 763, Anna Salai Chennai - 600 002. ______________ https://www.mhc.tn.gov.in/judis  2026:MHC:3482 THE HON'BLE CHIEF JUSTICE AND G.ARUL MURUGAN,J. (sasi) 27.08.2026 ______________ https://www.mhc.tn.gov.in/judis