Orissa High Court
Divyam Agarwal vs Indian Bank on 11 April, 2025
Author: S.K. Panigrahi
Bench: S.K. Panigrahi
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 15-Apr-2025 16:40:34
IN THE HIGH COURT OF ORISSA AT CUTTACK
W.P.(C) No.31914 of 2024
(In the matter of an application under Articles 226 and 227 of the
Constitution of India, 1950).
Divyam Agarwal .... Petitioner(s)
-versus-
Indian Bank, represented through .... Opposite Party (s)
its Branch Manager, Padampur,
Odisha & Ors.
Advocates appeared in the case through Hybrid Mode:
For Petitioner(s) : Mr. S.S. Mohanty, Adv.
For Opposite Party (s) : Ms. Gayatri Patra, ASC
Mr. Sitansu Kumar Dey,
Advocate for O.P No.2
Chinmaya Ku. Jena,
Advocate for O.P No.3
CORAM:
DR. JUSTICE S.K. PANIGRAHI
DATE OF HEARING:-06.03.2025
DATE OF JUDGMENT:-11.04.2025
Dr. S.K. Panigrahi, J.
1. The Petitioner, in the present Writ Petition, challenges the E-auction sale
notice dated 20.08.2023 and the E-auction held on 21.08.2023, conducted
by Opposite Party Nos.1 and 2 Bank as being illegal, arbitrary, and
violative of the principles of natural justice.
I. FACTUAL MATRIX OF THE CASE:
2. The brief facts of the case are as follows:
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Date: 15-Apr-2025 16:40:34
(i) The Opposite Party No.2 Bank issued an E-auction sale notice dated
02.08.2023 for the sale of M/s Samleswari Rice Mill, including its plant
and machinery, located over Khata No. 83/253, Plot No. 34 (Area: Ac.
0.970 Dec.) and Plot No. 38 (Area: Ac. 1.480 Dec.) of Mouza Pudelkhar,
Tahasil Padampur, District Bargarh, as well as Khata No. 21112, Plot
Nos. 205/451 and 206/452 (Area: Ac. 3.580 Dec.) of Mouza Salebahali,
Tahasil Padampur, District Bargarh.
(ii) The Petitioner, being interested in the said property, approached
Opposite Party No.2 seeking further details. Upon examining the
documents provided, including a sketch map, the Petitioner decided to
participate in the E-auction.
(iii) On 19.08.2023, the Petitioner deposited 10% of the Earnest Money
Deposit (EMD), amounting to ₹37,20,000/- (Rupees Thirty-Seven Lakhs
Twenty Thousand Only). The Petitioner participated in the auction on
21.08.2023 and was declared the highest bidder vide email dated
22.08.2023.
(iv) The Petitioner deposited an additional ₹89,55,000/- (Rupees Eighty-
Nine Lakhs Fifty-Five Thousand Only) towards 25% of the bid amount
on 23.08.2023 and requested a period of 20 days to deposit the
remaining 75%.
(v) The Opposite Party Nos. 1 and 2 permitted the request, subject to the
condition that interest would be payable on the delayed deposit.
(vi) On 28.09.2023, the Petitioner deposited the remaining ₹3,80,25,000/-
(Rupees Three Crores Eighty Lakhs Twenty-Five Thousand Only),
partly financed by a loan of ₹3,09,00,000/- (Rupees Three Crores Nine
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Lakhs Only) availed from Opposite Party No.3, i.e., Canara Bank,
Sambalpur.
(vii) On 30.09.2023, the Petitioner deposited ₹3,36,912/- (Rupees Three Lakhs
Thirty-Six Thousand Nine Hundred Twelve Only) as interest for the
delayed period (07.09.2023 to 28.09.2023), bringing the total payment to
₹5,10,36,912/- (Rupees Five Crores Ten Lakhs Thirty-Six Thousand Nine
Hundred Twelve Only). A Certificate of Sale was issued in the
Petitioner’s favour on the same day.
(viii) For the purpose of registration and mutation, the Petitioner, on
18.10.2023, requested Opposite Party Nos.1 and 2 to provide the sketch
map of the property. In response, the Bank, on 19.10.2023, shared the
sketch map via email, clarifying that the property was sold based on
that sketch map, which depicted an access road to the auctioned
property.
(ix) Upon initiating steps for registration before the concerned Sub-
Registrar, the Petitioner became aware that the property inherently
lacked an approach road. The Petitioner promptly contacted the Bank
for clarification and started becoming inquisitive about the approach
road.
(x) On 20.10.2023, the Bank forwarded a modified sketch map following a
demarcation of the property. The updated map indicated that the
auctioned plots were surrounded by private lands and had no clear
access road, raising concerns regarding ingress and egress to the
property.
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Date: 15-Apr-2025 16:40:34
(xi) The Petitioner approached the Bank, requesting that the property be
delivered with access as depicted in the initial sketch map. However, no
further steps were taken by the Bank in this regard.
(xii) The Petitioner then approached the Orissa Human Rights Commission.
Vide order dated 12.08.2024, the said Commission directed the Bank
either to deliver the property with ingress and egress or to refund the
full bid amount with commercial interest, along with compensation of
₹20,00,000/- (Rupees Twenty Lakhs Only), within one month.
(xiii) The Opposite Party Nos. 1 and 2 challenged the Orissa Human Rights
Commission order in W.P.(C) No. 26023 of 2024, which is currently
pending before this Court.
(xiv) Due to the absence of road access, the rice mill and the purchased
property have become functionally unusable. In the meantime, the
Opposite Party No. 3 has informed the Petitioner of the outstanding
dues and indicated that, in the event of non-payment, the loan account
may be classified as a Non-Performing Asset (NPA) in accordance with
applicable banking regulations.
(xv) Aggrieved by the circumstances arising from the E-auction process and
the subsequent developments, the Petitioner has approached this Court
by way of the present writ petition.
II. SUBMISSIONS ON BEHALF OF THE PETITIONER:
3. Learned counsel for the Petitioner earnestly made the following
submissions in support of his contentions:
(i) The Petitioner submitted that the sketch map initially provided by the
Opposite Parties No. 1 and 2 as part of the auction documents clearly
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Date: 15-Apr-2025 16:40:34depicted road access to the auctioned plot. However, after the Petitioner
had paid the entire bid amount, a revised sketch map was shared on
20.10.2023, which revealed that no such access road existed. The
property was, in fact, landlocked and inaccessible. The Petitioner
contended that this vital fact was deliberately suppressed at the time of
auction, amounting to suppression of facts, fraud and
misrepresentation.
(ii) The Petitioner submitted that Opposite Party Nos.1 and 2 failed to
disclose material discrepancies associated with the auctioned property
and, by suppressing such crucial information, extracted a substantial
amount of ₹5,10,36,912/- (Rupees Five Crores Ten Lakhs Thirty-Six
Thousand Nine Hundred Twelve Only), including interest, from the
Petitioner. This is nothing but suppression of facts by a Public Financial
Institution to the Petitioner.
(iii) The Petitioner asserted that Opposite Party Nos.1 and 2, through their
official communication, expressly admitted that the original sketch map
was the basis upon which the loan was sanctioned and the property was
put to auction. Having acknowledged the said map, Opposite Parties
are now estopped from denying road access and are duty-bound either
to provide the auctioned property with a well-defined ingress and
egress within a time-bound manner or, failing that, refund the entire bid
amount with commercial interest.
(iv) The Petitioner contended that Opposite Party Nos.1 and 2, being entities
incorporated under the Banking Regulation Act, 1949 and licensed by
the Reserve Bank of India, are public institutions discharging essential
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banking functions. The suppressing of material facts in the present case
constitutes a serious lapse, unbecoming of a responsible banking
institution entrusted with public confidence.
(v) The Petitioner further contended that Opposite Party Nos.1 and 2 have,
through official emails, admitted that the original sketch map showing
road access was the basis for both sanctioning the loan and conducting
the E-auction. Having acknowledged the foundational document of the
transaction, the Opposite Parties are now barred from denying its
implications. They must either provide road access within a reasonable
timeframe or refund the entire bid amount with applicable commercial
interest.
(vi) The Petitioner further reiterated that the Opposite Parties, being public
sector banks regulated under the Banking Regulation Act, were under
a legal and fiduciary obligation to act fairly, transparently, and in good
faith. The suppression of a material fact concerning the property’s access
constitutes a breach of public trust and falls short of the high standards
of integrity expected from banking institutions.
(vii) The Petitioner also submitted that the Opposite Parties violated Section
55(1)(a) and (b) of the Transfer of Property Act, 1882, by failing to
disclose the material defect of non-existent road access. In support of
this submission, the Petitioner placed reliance on the decision of the
Supreme Court in Haryana Financial Corporation v. Rajesh Gupta1
1
(2010) 1 SCC 655.
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Date: 15-Apr-2025 16:40:34
wherein it was held that such non-disclosure amounts to breach of
statutory duty, warranting the auction’s invalidation.
(viii) The Petitioner submitted that the act of auctioning a landlocked plot
based on a fraudulent and misleading sketch map amounts to an
arbitrary and illegal exercise of power. The deliberate suppression of
material facts renders the auction sale void ab initio. Furthermore,
Opposite Party No. 2, being the Authorized Officer under the Security
Interest (Enforcement) Rules, 2002, failed to comply with Rule 8(7)(a)
and (f), which mandate disclosure of material facts and encumbrances.
This omission vitiates the transparency and integrity of the auction
process and defeats the statutory protections afforded to auction
purchasers.
(ix) The Petitioner submitted that the failure of the Bank to deliver
possession of the property with proper ingress and egress has caused
significant financial hardship, as the Petitioner has been unable to
implement intended development plans. The Petitioner continues to
suffer mental and emotional distress due to the prolonged inaction.
(x) The Petitioner further submitted that a loan was availed from Opposite
Party No. 3, Canara Bank, for the purpose of purchasing the property.
Due to the non-existence of road access, the rice mill and the land
remain unusable. Nevertheless, Opposite Party No. 3 is pressuring the
Petitioner to repay the loan and has issued warnings regarding
classification of the loan account as a Non-Performing Asset (NPA),
despite the impossibility of utilizing the property for its intended
purpose.
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(xi) The Petitioner submitted that in light of the aforesaid facts and
circumstances, the E-auction sale notice dated 02.08.2023 and the
consequential sale of the subject property stand vitiated by fraud,
misrepresentation, and material non-disclosure. The Petitioner,
therefore, seeks a direction to Opposite Parties No. 1 and 2 to refund the
entire amount paid, along with interest at commercial rates, within a
period of fifteen days. The Petitioner further prays that Opposite Party
No. 3 be restrained from taking any coercive action in respect of the loan
account until such refund is effected by Opposite Parties No. 1 and 2.
III. SUBMISSIONS ON BEHALF OF THE OPPOSITE PARTIES:
4. The Learned Counsel for the Opposite Parties earnestly made the
following submissions in support of his contentions:
(i) The writ petition is not maintainable as the alleged cause of action arises
from a contractual obligation. The relief sought is a money claim, which
cannot be adjudicated under writ jurisdiction. The petition amounts to
an abuse of process and deserves to be dismissed with exemplary costs.
(ii) The Petitioner, being an auction purchaser under a competitive bid
conducted as per Section 13(4) of the SARFAESI Act, 2002, has an
alternate statutory remedy under Section 17 of the said Act. Therefore,
the writ petition is not maintainable and is liable to be rejected on this
ground alone.
(iii) The sale notice clearly stated that the property was being sold on “AS
IS WHERE IS,” “AS IS WHAT IS,” and “WITHOUT RECOURSE” basis.
It was also explicitly mentioned that the Authorized Officer had taken
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possession under Section 13(2) of the SARFAESI Act. Further, a specific
inspection period from 07.08.2023 to 20.08.2023 was indicated,
providing the Petitioner ample opportunity to verify the property’s
condition and access.
(iv) On 04.11.2023, physical possession of the secured assets was taken
following due process under Section 14 of the SARFAESI Act, in the
presence of the Assistant Collector and local police. The Petitioner was
repeatedly intimated in person and through communications including
letter dated 02.12.2023 to take over possession and complete registration
of the Sale Certificate but failed to do so. The secured premises are
enclosed within a compound wall with a gate, and due to the
Petitioner’s inaction, the Opposite Parties have been compelled to incur
continuous expenditure towards watch and ward by deploying six
security personnel.
(v) While the matter stood thus and the Petitioner did not come forward to
take possession of the property sold, the Opposite Party Bank received
a notice from the Odisha Human Rights Commission in Case No.
3384/2023, along with a complaint filed by the Petitioner on identical
allegations as raised in the present writ petition.
(vi) In response to the said notice, the Opposite Party Bank submitted a
detailed reply, narrating the aforesaid facts and further stating that a
similar application had also been filed by the Petitioner before the
Banking Ombudsman on the very same grounds. It was also submitted
that the action initiated under the SARFAESI Act, 2002, had been
assailed by the borrowers before the Debts Recovery Tribunal, Cuttack,
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under Section 17 of the SARFAESI Act in SA No. 138/2023, wherein the
Petitioner-auction purchaser was impleaded as a party.
(vii) The said SA was subsequently withdrawn with liberty to file afresh, and
another SA has been filed by the borrower before the Debts Recovery
Tribunal, Cuttack. It was further contended that the SARFAESI Act,
2002, is a self-contained statute, and there has been no fault, illegality,
or procedural irregularity on the part of the Bank in enforcing its rights
under the Act. There has been no suppression of material facts nor any
allegation by the Petitioner that the actions taken by the Bank were not
in accordance with the provisions of the SARFAESI Act or the Rules
framed thereunder. Moreover, there is no provision under the statute
for refund of the bid amount after issuance of the Sale Certificate unless
a competent Tribunal, under Section 17 of the SARFAESI Act, records a
finding that the measures adopted by the Secured Creditor were not in
accordance with the Act or the Rules.
(viii) Despite the above submissions made by the Opposite Party Bank in its
response, the Learned Odisha Human Rights Commission, vide order
dated 12.08.2024, disposed of the complaint with a recommendation to
the appropriate authority of the Bank to either (a) deliver possession of
the auctioned property along with ingress and egress rights, as shown
in the sketch map, to the Petitioner within one month, and pay
compensation equivalent to the interest paid by the Petitioner at
commercial rates for the period until physical delivery of the property
is effected, or (b) in the alternative, return the entire deposited amount
with interest at the commercial rate applicable to the loan allegedly
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availed by the Petitioner from Canara Bank for financing the bid
amount. It was further observed that the Petitioner had received a notice
from Canara Bank demanding repayment of the said loan, and that a
compensation of ₹20,00,000/- was to be paid to the Petitioner by 31st
October for the alleged violation of his human rights.
(ix) The Petitioner has challenged the said order of the Odisha Human
Rights Commission before this Court in W.P.(C) No. 26023/2024, and
the operation of the said order has been stayed by this Court vide order
dated 21.10.2024. In the said Writ Petition, though the present Petitioner
has entered appearance, repeated adjournments are being sought on his
behalf.
(x) It is further submitted that the Opposite Party Bank has not violated any
provision of the SARFAESI Act, 2002 or the Rules made thereunder.
Therefore, the contentions made under Section 8(7)(a) and 8(7)(b) are
misconceived and denied, especially since no appeal has been filed
under Section 17 of the said Act. It is also clarified that no sketch map
was provided with the sale notice or formed part of the auction
documents. The alleged sketch map dated 20.10.2023 was never part of
the official sale documents. The Opposite Parties did not suppress any
material information at the time of auction, as wrongly alleged by the
Petitioner. The allegations regarding discrepancies in the auctioned
property, claims of fraud, misrepresentation, or that the Bank extorted
any amount, are baseless, incorrect, and are expressly denied.
(xi) Despite repeated requests made to the Petitioner to take over possession
of the property, the Petitioner has failed to do so. As a result, the
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Opposite Party Bank has been compelled to incur unnecessary expenses
towards watch and ward for safeguarding the secured assets. The
Petitioner is liable to reimburse the Opposite Parties for such expenses.
(xii) The writ petition fails to disclose that the dispute arises under the
SARFAESI Act, 2002, in respect of which an alternative statutory
remedy of appeal under Section 17 is available. Suppression of this
material fact disentitles the Petitioner from invoking the extraordinary
jurisdiction of this Court.
IV. COURT’S REASONING AND ANALYSIS:
5. Heard the learned counsel for the Parties and perused the materials
placed on record.
6. This Writ Petition has been filed seeking relief against the actions of the
Opposite Parties Bank concerning the sale of a property purchased by
the petitioner through an auction. The petitioner contends that the Bank
failed to disclose a material defect in the property, specifically the
absence of access roads, which is crucial for the intended use of the
property as a rice mill.
7. Before delving into the specifics of the case, it is pertinent to examine
the relevant legal framework that governs such transactions.
8. The “As Is Where Is” clause in property transactions signifies that the
property is sold in its current condition, with all visible or hidden
defects, and the buyer accepts it as such.
9. However, while this clause relieves the seller from liability for defects
that are discoverable with ordinary diligence, it does not absolve the
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seller from the duty to disclose material defects that are not readily
apparent and which the buyer could not have reasonably discovered.
10. Section 55 of the Transfer of Property Act, 1882, imposes a clear duty on
the seller to disclose any material defects in the property known to
them, which the buyer could not have reasonably discovered. This duty
extends to defects that are substantial enough to affect the value or
usability of the property, which would, in turn, influence the buyer’s
decision. The relevant portion of the provision is replicated
hereinunder:
“55. Rights and liabilities of buyer and seller.–In the
absence of a contract to the contrary, the buyer and the seller
of immoveable property respectively are subject to the
liabilities, and have the rights, mentioned in the rules next
following, or such of them as are applicable to the property
sold: (1) The seller is bound–
(a) to disclose to the buyer any material defect in the
property [or in the seller’s title thereto] of which the seller is,
and the buyer is not, aware, and which the buyer could not
with ordinary care discover;
(b) to produce to the buyer on his request for examination all
documents of title relating to the property which are in the
seller’s possession or power;”
11. In Haryana Financial Corporation (supra), the Supreme Court in this
regard observed:
“A mere perusal of the aforesaid provision will show that it
was incumbent upon the appellant Corporation to disclose to
the respondent about the non-existence of the independentPage 13 of 17
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Date: 15-Apr-2025 16:40:34passage to the unit. It was also the duty of the appellant
Corporation to inform the respondent that the passage
mentioned in the revenue record was not fit for the movement
of vehicles. The appellant Corporation also failed to produce
to the buyer the entire documentation as required by Section
55(1)(b) of the aforesaid section. We are therefore satisfied
that the appellant Corporation cannot seek to rely on the
aforesaid provision of the Transfer of Property Act, 1882.”
12. In the present case, the petitioner purchased the property, which was a
rice mill, from the Opposite Party Bank through an auction. On
18.10.2023, the petitioner requested the Bank to provide a sketch map of
the property for registration and mutation purposes. The Bank
provided the requested map on 19.10.2023, confirming that the property
was sold with an access road. This representation was crucial for the
petitioner, as the presence of an access road was necessary for the
operation of a rice mill, a commercial enterprise is bound to have
vehicular access for delivery and transportation purposes.
13. However, during the registration process, the petitioner discovered that
the property lacked an approach road. The petitioner immediately
contacted the Bank for clarification. On 20.10.2023, the Bank sent a
revised map, revealing that the property was surrounded by Rayati
land, making it landlocked. This discovery was highly detrimental to
the petitioner, as the absence of access roads rendered the property
essentially useless for its intended purpose as a rice mill. The Bank’s
failure to disclose this defect at the time of the auction had led the
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petitioner to make a significant financial commitment based on an
inaccurate representation.
14. In its defence, the Bank invokes the “As Is Where Is” clause, arguing that
the property was sold in its existing condition, and the buyer should
have been aware of the absence of details regarding the access road. The
Bank claims no liability for the lack of access, asserting that the
petitioner should have performed due diligence before proceeding with
the auction. The Bank further contends that it is under no obligation to
ensure the suitability of the property for the buyer’s intended use,
especially when the buyer has agreed to purchase the property in its
existing state and form.
15. However, the law is settled that the duty of disclosure extends beyond
physical defects to include functional defects such as a lack of access
that significantly impacts the use of the property. The failure to disclose
such a material defect, which impedes the intended use of the property,
constitutes a violation of the seller’s duty under Section 55 of the
Transfer of Property Act, 1882. In this case, the Bank’s failure to disclose
the landlocked nature of the property amounts to a non-disclosure of a
material defect, which is detrimental to the petitioner’s ability to use the
property for its intended purpose.
16. As a public sector bank, the Bank is bound by principles of fairness,
transparency, and good faith in all its dealings, especially when it
concerns the sale of public property. Public authorities, such as the Bank
in this case, cannot rely on technical clauses like “As Is Where Is” to
shield themselves from the duty of disclosure when such information is
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material to the buyer’s decision-making process. The Bank’s actions are
governed not only by contractual obligations but also by the
overarching duty to act in the public interest and with due regard to the
buyer’s rights.
17. In the present case, the petitioner relied on the Bank’s representations,
including the sketch map provided, in good faith, assuming that the
property was accessible. The subsequent revelation that the property
was landlocked due to the Bank’s failure to disclose this material defect
severely impacted the petitioner’s intended use of the property as a rice
mill. The petitioner has now found themselves in a position where they
are unable to use the property for its intended commercial purpose,
leading to significant financial hardship.
18. This Court finds that the Opposite Party Bank, failed to discharge its
legal and ethical duty to disclose a material defect that would
significantly affect the utility of the property. The petitioner’s reliance
on the Bank’s representations was reasonable, and the Bank’s failure to
disclose the defect in the property constitutes an actionable wrong
under the Transfer of Property Act. The Bank’s actions amount to
misrepresentation, and as a result, the petitioner is entitled to
appropriate relief.
19. Accordingly, this Court holds that the Bank is liable for failing to
disclose the material defect in the property. The petitioner is entitled to
appropriate relief.
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V. CONCLUSION:
20. In light of the foregoing, The Opposite Party Bank is directed to either
deliver the property to the Petitioner with the ingress and egress rights
available for access to the property, as shown in the sketch map, within
one month from the date of this judgment/order.
21. Alternatively, the Bank shall refund the entire amount deposited by the
Petitioner, along with interest at the commercial rate for the entire
period until the physical delivery of the auction property.
22. The Petitioner is entitled to interest at the commercial rate for the period
of non-delivery of the property until the full restitution or delivery of
the property as per the option chosen by the Petitioner. This interest is
to be calculated from the date of the auction until the full performance
of the Bank’s obligations under this order.
23. In the event the Bank fails to comply with either of the options within
the prescribed time, the Petitioner shall be entitled to take appropriate
legal action to enforce this order and claim further damages, if any, for
the continued non-performance of the Bank’s duties under the
agreement.
24. Accordingly, the Writ Petition is allowed.
25. Interim order, if any, passed earlier stands vacated.
(Dr. S.K. Panigrahi)
Judge
Orissa High Court, Cuttack,
Dated the 11th April, 2025/
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