Rule 8(6)(f) of the Security Enforcement Rules protects the interest of the intending purchaser to be put on notice as to encumbrance as otherwise, he or she would be purchasing property, and simultaneously buying litigation as well, and the intending purchaser may not bid in the event, if he or she came to know any encumbrance over the property – Llovegeet Dhuria Vs. State Bank of India and Others – Punjab & Haryana High Court

Rule 8(6)(f) of the Rules protects the interest of the intending purchaser to be put on notice as to encumbrance as otherwise, he or she would be purchasing property, and simultaneously buying litigation as well, and the intending purchaser may not bid in the event, if he or she came to know any encumbrance over the property. That is why the Rules specifically contemplate a provision for the Authorized Officer, while notifying the sale, to specifically state as to the encumbrance. Merely by mentioning in the e-auction notice that the sale is on as is where is basis, as is what is basis and whatever there is basis, the Bank is not absolved of its statutory obligation of disclosing the “encumbrances” attached to the property brought for sale by way of tender or any auction or sale by public auction. Since, the petitioner is also placed in a similar situation, on parity, the Bank ought to have granted the refund of the earnest money deposited by the petitioner and ought not to have forfeited it. By doing so, it has discriminated against the petitioner and has acted arbitrarily in violation of Articles 14 and 300 A of the Constitution of India. So we hold that it was not proper for a secured creditor like SBI to suppress from persons intending to participate in the e-auction being conducted by it under the SARFAESI Act, 2002, the factum of the pendency of litigation in respect of the secured asset being put to sale by it; and that it ought to have refunded the amount deposited by petitioner, instead of forfeiting it.

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