Celir LLP v. Mr. Sumati Prasad Bafna & Ors.

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the Sale Certificate to the Secured Asset. Thus, the Borrower’s themselves were under the impression and understanding that once the Sale Certificate is issued, the sale to the Secured Asset becomes absolute and would in turn render the entire matter infructuous. In such circumstances, the contention of the Borrower as-well as the Subsequent Transferee that the Sale Certificate that was issued in pursuance of the decision in the Main Appeals was always subject to the outcome of the S.A. No. 46 of 2022 pending before the DRT, is nothing but an after-thought which the Borrower now seeks to espouse having lost in the Main Appeals and as such the said contention deserves to be rejected. (v) Even though the petitioner had specifically prayed for the issuance of the Sale Certificate to the Secured Asset, not once did the Borrower dispute the same or assert that such certificate would be contingent to on the outcome of the DRT proceedings. The Borrower neither in the Main Appeals nor in the review thereto raised the issue of validity of the 9th auction notice or brought to the notice of this court the terms of the auction, more particularly that such auction was subject to the outcome of the S.A. No. 46 of 2022. Having admittedly failed to do so, the espousal of the aforesaid contention by the Borrower now is nothing but an abuse of process and an attempt to indirectly circumvent the decision of this Court in the Main Appeals and collaterally challenge the determination of rights therein. (vi) Furthermore, the direction of this Court in the Main Appeals for issuance of Sale Certificate conferred absolute ownership to the petitioner to the Secured Asset, in view of the fact that: -: - a. The impugned order passed by the High Court had been set-aside in toto. b. It was held that the Borrower could not have redeemed its mortgage upon publication of the 9th auction notice. c. The Bank was further directed to refund the amount paid by the Borrower towards redemption. d. It was also held that the Bank after having confirmed the sale under Rule 9(2) of the Rules of 2002 could not have withhold the sale certificate to the Secured Asset.

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In view of the above, it is clear as a noon day that this Court never held that the Sale Certificate to be issued to the petitioner was subject to the outcome of the DRT proceedings. As such, once the sale of the Secured Asset under Section 13(4) of the SARFAESI Act ended in issuance of a Sale Certificate as per Rule 9 (7) of the SARFAESI Rules, such sale was complete and absolute. (vii) Lastly, this court in its decision in the Main Appeals by no means either preserved the right or permitted the Borrower to continue pursuing the proceedings in S.A. No. 46 of 2022 pending before the DRT. This is in view of the maxim Expressio Unius Est Exclusio Alterius i.e., the expression of one thing is the exclusion of another. Where a court consciously and specifically grants certain reliefs but does not advert to other reliefs or rights, the relief so expressly provided necessarily leads to the implied exclusion of the other reliefs and rights. Thus, when this Court directed the issuance of the Sale Certificate it necessarily excluded the right to pursue the DRT proceedings. (viii) Mere reference to the pendency of the DRT Proceedings in the judgment by no means could lead to the inference that this Court had preserved the rights of the Borrower herein to pursue the same. One cannot assume or infer any right by referring to a stray sentence here and a stray sentence there in the judgment. It is trite that judgments of courts are not to be construed as statutes.

ii. Applicability of Lis Pendens in the absence of any registration as required under the State Amendment to Section 52 of the TPA.

155Copy pinpoint155. The term “lis pendens” as explained in the Law Lexicon is as under: - “Lis means a suit, action controversy, or dispute, and lis pendens means a pending suit. The doctrine denotes those principles and rules of law which define and limit the operation of the common-law maxim pendente lite nihil innovetur, that is, pending the suit nothing should be changed.

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A pending suit. As soon as proceedings are commenced to recover or charge some specific property [Ex parte Thornton (1867)2 Ch.p.178] there is “lis pendens” - a pending suit, the consequence of which is that until the litigation is at an end neither litigant can deal with the property to the prejudice of the other.”

156Copy pinpoint156. As per the Doctrine of lis pendens, nothing new can be introduced during the pendency of a petition and if at all anything new is introduced, the same would also be subject to the final outcome of the petition, which would decide the rights and obligations of the parties.

157Copy pinpoint157. The doctrine of lis pendens is duly recognized in Section 52 of the TPA which states that during the pendency in any court of any suit in which any right to immovable property is directly and specifically in question, the property cannot be transferred or otherwise dealt with by any party to the suit or proceedings. The explanation to the provision states that for the purposes of the Section, the pendency of a suit or proceedings shall be deemed to commence from the date of the presentation of the plaint or institution of the proceeding in a Court, and shall continue until the suit or proceeding is disposed by a “final decree or order” and complete satisfaction of the order is obtained, unless it has become unobtainable by reason of the expiry of any period of limitation. The said provision reads as under: - “52. Transfer of property pending suit relating thereto. — During the pendency in any Court having authority within the limits of India excluding the State of Jammu and Kashmir or established beyond such limits by the Central Government of any suit or proceeding which is not collusive and in which any right to immovable property is directly and specifically in question, the property cannot be transferred or otherwise dealt with by any party to the suit or proceeding so as to affect the rights of any other party thereto under any decree or order which may be made therein, except under the authority of the Court and on such terms as it may impose.

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Explanation.-- For the purposes of this section, the pendency of a suit or proceeding shall be deemed to commence from the date of the presentation of the plaint or the institution of the proceeding in a Court of competent jurisdiction, and to continue until the suit or proceeding has been disposed of by a final decree or order and complete satisfaction or discharge of such decree or order has been obtained, or has become unobtainable by reason of the expiration of any period of limitation prescribed for the execution thereof by any law for the time being in force.”

158Copy pinpoint158. The following conditions ought to be fulfilled for the doctrine of lis pendens to apply: - (i) There must be a pending suit or proceeding; (ii) The suit or proceeding must be pending in a competent court; (iii) The suit or proceeding must not be collusive; (iv) The right to immovable property must be directly and specifically in question in the suit or proceeding; (v) The property must be transferred by a party to the litigation; and (vi) The alienation must affect the rights of any other party to the dispute.

159Copy pinpoint159. In short, the doctrine of lis pendens, which Section 52 of the TPA encapsulates, bars the transfer of a suit property during the pendency of litigation. The only exception to the principle is when it is transferred under the authority of the court and on terms imposed by it. Where one of the parties to the suit transfers the suit property (or a part of it) to a third-party, the latter is bound by the result of the proceedings even if he did not have notice of the suit or proceeding.

160Copy pinpoint160. In the landmark decision of the English Court of Chancery in Bellamy v. Sabine reported in (157) 1 De G&J 566, Lord Turner underscored and explained the rationale of the principle underlying lis pendens and observed that if any alienation or material change to the subject matter during the pendency of a proceeding were permitted to prevail, it would defeat the very course of such proceedings before the courts. The relevant observations read as under: -

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“It is, as I think, a doctrine common to the courts both of Law and Equity and rests, as I apprehend, upon this foundation that it would plainly be impossible that any action or suit could be brought to a successful termination, if alienations pendente lite were permitted to prevail. The plaintiff would be liable in every case to be defeated by the defendants alienating before the judgment or decree, and would be driven to commence his proceedings de novo, subject again to be defeated by the same course of proceedings.” (Emphasis supplied)

161Copy pinpoint161. In Jayaram Mudaliar v. Ayyaswami reported in AIR 1973 SC 569 this Court explained that where any proceeding in respect of a property is pending, the doctrine of lis pendens vests the courts with the control or dominion over such subject-matter so that no party or person may remove the subject-matter outside of the power of the court to deal with it in accordance with law and thereby render the proceedings infructuous. The relevant observations read as under: - “14. The background of the provision set out above was indicated by one of us (Beg, J.,) in Jayaram Mudaliar v. Ayyaswami [(1972) 2 SCC 200, 217 : AIR 1973 SC 569]. There, the following definition of the lis pendens from Corpus Juris Secundum (Vol. LIV, p. 570) was cited: “Lis pendens literally means a pending suit, and the doctrine of lis pendens has been defined as the jurisdiction, power, or control which a court acquires over property involved in a suit pending the continuance of the action, and until final judgment therein.” It was observed there: “Expositions of the doctrine indicate that the need for it arises from the very nature of the jurisdiction of Courts and their control over the subject-matter of litigation so that parties litigating before it may not remove any part of the subject-matter outside the power of the Court to deal with it and thus make the proceedings infructuous.” (Emphasis supplied)

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162Copy pinpoint162. In the present case, it has been canvassed on behalf of the Subsequent Transferee that it is a bona-fide third party purchaser of the Secured Asset since it was neither arrayed as a party to proceedings in the Main Appeals nor issued a notice of the said proceedings either by the petitioner or by the Bank.

163Copy pinpoint163. In Sanjay Verma v. Manik Roy reported in (2006) 13 SCC 608 this Court held that the principle of lis pendens enshrined in Section 52 of the TPA is not only based on equity, good conscience and justice but is also a principle of public policy and as such no party can claim exemption from the application of this doctrine on the ground of bona fide or good faith. The relevant observations read as under: - “12. The principles specified in Section 52 of the TP Act are in accordance with equity, good conscience or justice because they rest upon an equitable and just foundation that it will be impossible to bring an action or suit to a successful termination if alienations are permitted to prevail. A transferee pendente lite is bound by the decree just as much as he was a party to the suit. The principle of lis pendens embodied in Section 52 of the TP Act being a principle of public policy, no question of good faith or bona fide arises. The principle underlying Section 52 is that a litigating party is exempted from taking notice of a title acquired during the pendency of the litigation. The mere pendency of a suit does not prevent one of the parties from dealing with the property constituting the subject-matter of the suit. The section only postulates a condition that the alienation will in no manner affect the rights of the other party under any decree which may be passed in the suit unless the property was alienated with the permission of the court.” (Emphasis supplied)

164Copy pinpoint164. In another decision of this Court in Guruswamy Nadar v. P. Lakshmi Ammal reported in (2008) 5 SCC 796 it was held that the principle of lis pendens incorporated in Section 52 of the TPA will apply irrespective of whether the subsequent purchaser had bought the property, which is a subject matter of a pending proceeding, in good faith or not. The relevant observations read as under: -

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“9. Section 19 of the Specific Relief Act clearly says subsequent sale can be enforced for good and sufficient reason but in the present case, there is no difficulty because the suit was filed on 3-5-1975 for specific performance of the agreement and the second sale took place on 5-5-1975. Therefore, it is the admitted position that the second sale was definitely after the filing of the suit in question. Had that not been the position then we would have evaluated the effect of Section 19 of the Specific Relief Act read with Section 52 of the Transfer of Property Act. But in the present case it is more than apparent that the suit was filed before the second sale of the property. Therefore, the principle of lis pendens will govern the present case and the second sale cannot have the overriding effect on the first sale. xxx xxx xxx

15. So far as the present case is concerned, it is apparent that the appellant who is a subsequent purchaser of the same property, has purchased in good faith but the principle of lis pendens will certainly be applicable to the present case notwithstanding the fact that under Section 19(b) of the Specific Relief Act his rights could be protected.” (Emphasis supplied)

165Copy pinpoint165. Similarly in a recent decision of this Court in Chander Bhan (D) through Lr. Sher Singh v. Mukhtiar Singh & Ors. reported in 2024 INSC 377 it was held that once the transaction in question is found to be illegal due to the doctrine of lis pendens, any defence of the subsequent transferee that they are a bona-fide purchaser is liable to be rejected. The relevant observations read as under: - “21. Once it has been held that the transactions executed by the respondents are illegal due to the doctrine of lis pendens the defence of the respondents 1-2 that they are bonafide purchasers for valuable consideration and thus, entitled to protection under Section 41 of the Act of 1882 is liable to be rejected.” (Emphasis supplied)

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166Copy pinpoint166. Thus, the question to be examined is whether the transfer of the secured asset in favour of the Subsequent Transferee is hit by lis pendens or not. It is an undisputed fact that on 25.08.2023 Special Leave Petition Nos. 19523-19524 of 2023 (later renumbered as Civil Appeal Nos. 5542-5543 of 2023) came to be filed by the petitioner challenging the impugned order dated 17.08.2023 passed by the High Court permitting the Borrower herein to redeem the mortgage created over the Secured Asset. It is also not in dispute that on 28.08.2023 the Borrower pursuant to the aforesaid order of the High Court redeemed the mortgage and transferred the said property to the Subsequent Transferee herein on the very same day by executing the aforesaid Assignment Agreement. It is also undisputed that the transfer of the Secured Asset in favour of the Subsequent Transferee was effected by the Borrower on the strength of its right of redemption pursuant to the High Court’s impugned order dated 17.08.2023. Thus, admittedly, when the mortgage was redeemed and the Secured Asset was transferred to the Subsequent Transferee by way of the Assignment Agreement dated 28.08.2023, Special Leave Petition Nos. 19523-19524 of 2023 challenging the exercise of such right of redemption was already filed and pending before this Court.

167Copy pinpoint167. In M/s Siddamsetty Infra Projects Pvt. Ltd. v. Katta Sujatha Reddy & Ors. reported in 2024 INSC 861 this Court held that doctrine of lis pendens kicks in the moment a proceeding is instituted/filed irrespective of whether such filing is still defective or notice is yet to be issued by the court. It further held that any transfer made during the pendency of such proceeding would be subject to the final result of the litigation or in other words would be hit by lis pendens under Section 52 of the TPA. The relevant observations read as under: - “49. The purpose of lis pendens is to ensure that the process of the court is not subverted and rendered infructuous. In the absence of the doctrine of lis pendens, a defendant could defeat the purpose of the suit by alienating the suit property. This purpose of the provision is clearly elucidated in the explanation clause to Section 52 which defines “pendency”. Amending Act 20 of 1929 substituted the word “pendency” in place of “active prosecution”. The Amending Act also included the Explanation defining the expression “pendency of suit or proceeding”. “Pendency” is defined to commence from the “date of institution” until

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the “disposal”. The argument of the respondents that the doctrine of lis pendens does not apply because the petition for review was lying in the registry in a defective state cannot be accepted. The review proceedings were “instituted” within the period of limitation of thirty days. The doctrine of lis pendens kicks in at the stage of “institution” and not at the stage when notice is issued by this Court. Thus, Section 52 of the Transfer of Property Act would apply to the third-party purchaser once the sale was executed after the review petition was instituted before this Court. Any transfer that is made during the pendency is subject to the final result of the litigation.” (Emphasis supplied)

168Copy pinpoint168. Since, in the present case the Special Leave Petitions were already instituted and pending before this Court as on 28.08.2023 i.e., the date of execution of the Assignment Agreement for the transfer of the Secured Asset in favour of the Subsequent Transferee, the said Assignment Agreement dated 28.08.2023 and the transfer thereto is beyond a shadow of doubt hit by lis pendens.

169Copy pinpoint169. It has been contended by the Subsequent Transferee that Section 52 of the TPA has a modified application in Maharashtra i.e., the area in which the said property is situated by virtue of the State Amendment made to Section 52 of the TPA by the Bombay Amendment Act, 1939 (Act XIV of 1939). The relevant provision as amended reads as under: - “52. Transfer of property pending suit relating thereto. — (1) During the pendency in any court having authority within the limits of India excluding the State of Jammu and Kashmir established beyond such limits by the Central Government, of any suit or proceeding which is not collusive and in which any right to immovable property is directly and specifically in question, if a notice of the pendency of such suit or proceeding is registered under Section 18 of the Indian Registration Act, 1908, the property after the notice is so registered cannot be

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transferred or otherwise dealt with by any party to the suit or proceeding so as to affect the rights of any other party thereto under any decree or order which may be made therein, except under the authority of the court and on such terms as it may impose. (2) Every notice of pendency of a suit or proceeding referred to in sub-section (1) shall contain the following particular, namely: (a) the name and address of the owner of immovable property or other person whose right to the immovable property is in question; (b) the description of the immovable property the right to which is in question; (c) the Court in which the suit or proceeding is pending; (d) the nature and title of the suit or proceeding; and (e) the date on which the suit or proceeding was instituted. Explanation. — For the purposes of this section, the pendency of a suit or proceeding shall be deemed to commence from the date of the presentation of the plaint or the institution of the proceedings in a Court of competent jurisdiction, and to continue until the suit or proceeding has been disposed of by a final decree or order and compete satisfaction or discharge of such decree or order has been obtained, or has become unobtainable by reason of the expiration of any period of limitation prescribed for the execution thereof by any law for the time being in force.” (Emphasis supplied)

170Copy pinpoint170. It was submitted on behalf of the Subsequent Transferee that in view of the aforesaid state amendment to Section 52 of the TPA, in order to invoke lis pendens under the said provision it is mandatory as per sub-section (1) that a notice of pendency of a suit or proceeding is registered in respect of the property which is the subject-matter of such proceeding in the manner laid down in sub-section (2) and in the

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event no such notice of pendency is registered then lis pendens will not be applicable. It was further submitted that since in the present case admittedly there was no registration of notice of pendency by the petitioner in respect of the Secured Asset, the Assignment Agreement dated 28.08.2023 and the transfer of the said property in pursuance thereto is not hit by lis pendens.

171Copy pinpoint171. We have carefully gone through the aforesaid state amendment made to Section 52 of the TPA. The amended Section 52 sub- section (1) of the TPA casts upon a party who is claiming any right to a property which is a subject-matter of any pending suit or proceeding an additional duty to register a notice of pendency in respect of such property so as to caution and put to notice any third-party who might otherwise be unaware of such proceeding or litigation despite the best of due diligence either due to inadvertence or deliberate misleading by one of the parties to the lis and as result might be genuinely considering to purchase or acquire any right in the subject-matter proceeding. The requirement of registration of notice of pendency is to prevent any undue or unwarranted hardship to such third-parties who even after a reasonable due diligence have bona-fidely purchased the property believing it to be free from the encumbrances of any pending proceeding only to later face the adverse consequence of losing their rights by a mechanical application of lis pendens.

172Copy pinpoint172. This additional requirement of registration of notice of pendency is for the benefit of the party claiming any right in such subject-matter property and also for the benefit of any third-party interested in such subject-matter property by enabling the former to claim the benefit of lis pendens as an absolute right after having duly taken steps towards ensuring that the public is well-aware of the impeding litigation in respect of such property by registering a notice of pendency and to enable the latter to ascertain the veracity of title of such property by exercise of its due diligence. Although, the said provision is for the benefit of the third-party, yet such subsequent purchasers cannot as a matter of absolute right claim any title to such property solely on the ground of want of any notice of pendency being registered. To hold otherwise would undermine the object and purpose of the doctrine of lis pendens which is based on the principle of equity, good conscience, and public policy and discourage any thwarting or

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frustration of rights of the parties so litigating by unscrupulous and unanticipated transactions.

173Copy pinpoint173. The vital essence of this additional duty imposed upon the party claiming a right to a property which is a subject matter of a pending proceeding, is only to aid a third-party to exercise its due diligence and obviate the possibility of any dishonesty, misrepresentation or fraud by a party in order to gain an undue advantage or benefit despite the pendency of proceedings. However, if the absence of notice registration were to render the doctrine entirely inapplicable, it would lead to exploitation of procedural gaps by parties who deliberately delay or avoid registering such notices to defeat substantive rights of the parties and undermine the very sanctity of judicial proceedings. Such an interpretation would lead to a very chilling effect whereby, third-parties despite being expected to verify the title and status of the property would simply abdicate their duty to conduct thorough due diligence in transactions involving immovable properties or that despite being fully aware of the pendency of such proceedings would be able to deviously claim absolute rights to such property or worse, mischievously execute back-dated agreements in collusion with a party to a lis prior to registration of such notice of pendency to circumventing the very proceedings and render them infructuous.

174Copy pinpoint174. In Sanjay Verma (supra) this Court cautioned that the doctrine of lis pendens is a principle of public policy without which it will be impossible to bring an action or suit to a successful termination if alienations are permitted to prevail thereby undermining the sanctity of judicial proceedings and rights of parties so involved therein. Thus, we are of the considered view that even in the absence of a registered notice of pendency in terms of the amended Section 52 of TPA the said provision will not be rendered ipso-facto inapplicable, at best it would preclude the party seeking benefit of this doctrine to claim it as a matter of right, but by no stretch would it mean that the third-party conversely would be able to as matter of absolute right claim inapplicability of this doctrine. It would be the discretion of the courts to see keeping in mind the peculiar facts of the case to ascertain whether such doctrine ought to be applied or not. Where the courts are satisfied that the third-party had genuinely purchased the subject-matter property after an exercise of a reasonable degree of care and caution and that it was otherwise unaware of the pendency of proceedings, the courts would be circumspect to displace the

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rights of such bona-fide third-party by a mechanical application of the doctrine of lis pendens. Even otherwise, in view of the peculiar facts of this case, more particularly the fact that the petitioner could not have registered the same being only an auction purchaser and that it was the duty of the Bank to register the notice of pendency which we are inclined to believe was not reasonably possible in view of the haste that was shown by the Borrower and the Subsequent Transferee in redeeming the mortgage and thereafter immediately transferring the Secured Asset, we are of the opinion that the non- registration of notice of pendency is not fatal to the application of the doctrine of lis pendens in the present case.

175Copy pinpoint175. During the course of hearing of the present case, we had inquired from the Subsequent Transferee whether it was aware of the pendency of the Main Appeals before this Court at the time of execution of the Assignment Agreement dated 28.08.2023 and at what point of time did the Subsequent Transferee and the Borrower entered into negotiations for the redemption of mortgage and the transfer of the Secured Asset. Mr. Sibal, the learned Senior Counsel appearing for the Subsequent Transferee, replied to the aforesaid saying that the parties started contemplating the possibility of entering such transaction in June, 2023 and that the Borrower had informed the Subsequent Transferee about the pendency of the proceedings before this Court. Thus, it is not as if the Subsequent Transferee was not aware of what was happening however, when things went wrong, they now cry foul of not being impleaded as parties and heard by this Court in the Main Appeals. Even otherwise, assuming that the petitioner and the Bank herein deliberately chose not to implead the Subsequent Transferee herein in order to mislead this Court in the Main Appeals, the same is immaterial as the Subsequent Transferee too failed to implead itself despite being aware of the pendency of the proceedings before this Court. If at all they were so concerned about the transfer of the Secured Asset in their favour, either they ought to have themselves attempted to implead itself before this Court or requested the Borrower to do the same. In view of the Doctrine of Pari Delicto i.e.., ‘in equal fault, the law aids neither party’, the Subsequent Transferee cannot seek any benefit from the fault of the petitioner or the Bank when it is itself equally at fault.

176Copy pinpoint176. In view of the aforesaid, we are of the considered view that the execution of the Assignment Agreement dated 28.08.2023 and the

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transfer of the Secured Asset in pursuance thereto in favour of the Subsequent Transferee is hit by lis pendens despite the fact that no notice of pendency was registered in terms of the amended Section 52 of the TPA.

177Copy pinpoint177. We are aware of the two decisions of this Court one in the case of Thomson Press (India) Limited v. Nanak Builders and Investors Private Limited & Ors. reported in (2013) 5 SCC 397 and T. Ravi & Anr. v. B. Chinna Narasimha & Ors. reported in (2017) 7 SCC 342. In both these decisions, the view taken is that Section 52 of the TPA does not render transfers affected during the pendency of the suit void but only render such transfers subservient to the rights as may be eventually determined by the court.

178Copy pinpoint178. In Thomson Press (supra), T.S. Thakur, J. (as he then was) in his separate judgment while supplementing the judgment authored by M.Y. Eqbal, J., observed as under: - “53. There is, therefore, little room for any doubt that the transfer of the suit property pendente lite is not void ab initio and that the purchaser of any such property takes the bargain subject to the rights of the plaintiff in the pending suit. Although the above decisions do not deal with a fact situation where the sale deed is executed in breach of an injunction issued by a competent court, we do not see any reason why the breach of any such injunction should render the transfer whether by way of an absolute sale or otherwise ineffective. The party committing the breach may doubtless incur the liability to be punished for the breach committed by it but the sale by itself may remain valid as between the parties to the transaction subject only to any directions which the competent court may issue in the suit against the vendor.” (Emphasis supplied)

179Copy pinpoint179. The decision in Thomson Press (supra) referred to above has been relied upon in T. Ravi (supra) for the proposition that the effect of Section 52 of the Act 1882 is not to render transfers effected during the pendency of a suit by a party to the suit void; the transfer remains valid subject, of course, to the result of the suit. The pendente lite purchaser would be entitled to or suffer the same legal rights and obligations of his vendor as may be eventually determined by the Court.

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180Copy pinpoint180. Thus, although Section 52 of the Act 1882 does not render a transfer pendente lite void yet the court while exercising contempt jurisdiction may be justified to pass directions either for reversal of the transactions in question by declaring the said transactions to be void or proceed to pass appropriate directions to the concerned authorities to ensure that the contumacious conduct on the part of the contemnor does not continue to enure to the advantage of the contemnor or anyone claiming under him.

181Copy pinpoint181. Since in the present case, the Assignment Agreement dated 28.08.2023 whereby the Secured Asset was transferred in favour of Greenscape/the Subsequent Transferee herein was effected by the Borrower on the strength of its right of redemption pursuant to the High Court’s impugned order which was ultimately set-aside by this Court in its judgment and order dated 21.09.2023 in the Main Appeals, the same rendered Borrower’s right to transfer the Secured Asset non-est and by extension the Assignment Agreement void.

iii. Whether any contempt is said to have been committed by the respondents herein?

182Copy pinpoint182. In order to decide whether the appellants are guilty of civil contempt, it would be apposite to refer to Section 2(b) of the Act, 1971, which reads as under: - “2. Definitions.— In this Act, unless the context otherwise requires,— xxx xxx xxx (b) “civil contempt” means wilful disobedience to any judgment, decree, direction, order, writ or other process of a court or wilful breach of an undertaking given to a court;”

183Copy pinpoint183. The Black’s Law Dictionary, Sixth Edition, at page 1599, defines “willful” as hereunder: - “Proceeding from a conscious motion of the will; voluntary; knowingly; deliberate. Intending the result which actually comes to pass; designed; intentional; purposeful; not accidental or involuntary. Premeditated; malicious; done with evil intent, or with a bad motive or purpose, or with indifference to the natural consequences; unlawful; without legal justification. An act or omission is “willfully” done, if

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done voluntarily and intentionally and with the specific intent to do something the law forbids, or with the specific intent to fail to do something the law requires to be done; that is to say, with bad purpose either to disobey or to disregard the law. It is a word of many meanings, with its construction often influenced by its context. In civil actions, the word (willfully) often denotes an act which is intentional, or knowing, or voluntary, as distinguished from accidental. But when used in a criminal context it generally means an act done with a bad purpose; without justifiable excuse; stubbornly, obstinately, perversely.”

184Copy pinpoint184. In Ashok Paper Kamgar Union v. Dharam Godha and Ors. reported in (2003) 11 SCC 1, the expression ‘wilful disobedience’ in the context of Section 2(b) of the Act, 1971 was read to mean an act or omission done voluntarily and intentionally with the specific intent to do something, which the law forbids or with the specific intention to fail to do something which the law requires to be done. Wilfulness signifies deliberate action done with evil intent and bad motive and purpose. It should not be an act, which requires and is dependent upon, either wholly or partly, any act or omission by a third party for compliance.

185Copy pinpoint185. Hence, the expression or word “wilful” means act or omission which is done voluntarily or intentionally and with the specific intent to do something which the law forbids or with the specific intent to fail to do something the law requires to be done, that is to say with bad purpose either to disobey or to disregard the law. It signifies a deliberate action done with evil intent or with a bad motive or purpose.

186Copy pinpoint186. Article 129 of the Constitution declares this Court as a “a court of record” and states that it shall have all the powers of such a court including the power to punish for contempt of itself. The provisions of the Act, 1971 and the Rules framed thereunder form a part of a special statutory jurisdiction that is vested in courts to punish an offending party for its contemptuous conduct. It needs no emphasis that the power of contempt ought to be exercised sparingly with great care and caution. The contemptuous act complained of must be such that would result in obstruction of justice, adversely affect the majesty of law and impact the dignity of the courts of law.

187Copy pinpoint187. It must also be understood that contempt proceedings are sui generis inasmuch as the Law of Evidence and the Code of Criminal

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Procedure, 1973 are not to be strictly applied. At the same time, the procedure adopted during the contempt proceedings must be fair and just that is to say the principles governing the Rule of law must be extended to the party against whom contempt proceedings have been initiated. The party must have every opportunity to place its position before the Court. Such a party must not be left unheard under any circumstances.

188Copy pinpoint188. In Ram Kishan v. Tarun Bajaj & Ors. reported in (2014) 16 SCC 204 it was held that the contempt jurisdiction conferred on to the law courts power to punish an offender not only for his wilful disobedience but also for contumacious conduct or obstruction to the majesty of law. It further observed that such power has been conferred for the simple reason that the respect and authority commanded by the courts of law are the greatest guarantee to an ordinary citizen that his rights shall be protected and the entire democratic fabric of the society will crumble down if the respect of the judiciary is undermined. The relevant observations read as under: - “11. The contempt jurisdiction conferred on to the law courts power to punish an offender for his wilful disobedience/ contumacious conduct or obstruction to the majesty of law, for the reason that respect and authority commanded by the courts of law are the greatest guarantee to an ordinary citizen that his rights shall be protected and the entire democratic fabric of the society will crumble down if the respect of the judiciary is undermined. Undoubtedly, the contempt jurisdiction is a powerful weapon in the hands of the courts of law but that by itself operates as a string of caution and unless, thus, otherwise satisfied beyond reasonable doubt, it would neither be fair nor reasonable for the law courts to exercise jurisdiction under the Act. The proceedings are quasi-criminal in nature, and therefore, standard of proof required in these proceedings is beyond all reasonable doubt. It would rather be hazardous to impose sentence for contempt on the authorities in exercise of the contempt jurisdiction on mere probabilities. [...]” (Emphasis supplied)

189Copy pinpoint189. In Murray & Co. v. Ashok Kr. Newatia & Anr. reported in (2000) 2 SCC 367 this Court held that the purpose of contempt jurisdiction

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is to uphold the majesty and dignity of the courts of law since the image of such a majesty in the minds of the people cannot be led to be distorted, as any indulgence which can even remotely be termed to affect the majesty of law would result in the society losing its confidence and faith in the judiciary and the law courts forfeiting the trust and confidence of the people in general. The relevant observations read as under: - “9 [...] The purpose of contempt jurisdiction is to uphold the majesty and dignity of the courts of law since the image of such a majesty in the minds of the people cannot be led to be distorted. The respect and authority commanded by courts of law are the greatest guarantee to an ordinary citizen and the entire democratic fabric of the society will crumble down if the respect for the judiciary is undermined. It is true that the judiciary will be judged by the people for what the judiciary does, but in the event of any indulgence which can even remotely be termed to affect the majesty of law, the society is bound to lose confidence and faith in the judiciary and the law courts thus, would forfeit the trust and confidence of the people in general.” (Emphasis supplied)

190Copy pinpoint190. In Pushpaben & Anr. v. Narandas Badiani & Anr. reported in (1979) 2 SCC 394, it was held that contempt of court is a special jurisdiction to be exercised sparingly and with caution whenever an act adversely affects the administration of justice or which tends to impede its course or tends to shake public confidence in the judicial institutions. It further held that this jurisdiction is to be exercised not for the protection of the dignity of an individual judge but to protect the administration of justice from being maligned and ensure that the authority of the courts is neither imperilled nor is the administration of justice by it interfered with in any manner. The relevant observations read as under: - “42. The contempt of court is a special jurisdiction to be exercised sparingly and with caution whenever an act adversely affects the administration of justice or which tends to impede its course or tends to shake public confidence in the judicial institutions. This jurisdiction may also be

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exercised when the act complained of adversely affects the majesty of law or dignity of the courts. The purpose of contempt jurisdiction is to uphold the majesty and dignity of the courts of law. It is an unusual type of jurisdiction combining “the jury, the judge and the hangman” and it is so because the court is not adjudicating upon any claim between litigating parties. This jurisdiction is not exercised to protect the dignity of an individual judge but to protect the administration of justice from being maligned. In the general interest of the community it is imperative that the authority of courts should not be imperilled and there should be no unjustifiable interference in the administration of justice. It is a matter between the court and the contemner and third parties cannot intervene. It is exercised in a summary manner in aid of the administration of justice, the majesty of law and the dignity of the courts. No such act can be permitted which may have the tendency to shake the public confidence in the fairness and impartiality of the administration of justice.” (Emphasis supplied)

191Copy pinpoint191. In Reliance Petrochemicals Ltd. v. Proprietors of Indian Express Newspapers, Bombay Pvt. Ltd. & Ors. reported in (1988) 4 SCC 592 it was observed that the process of due course of administration of justice must remain unimpaired. Public interest demands that there should be no interference with judicial process and the effect of the judicial decision should not be pre-empted or circumvented. The relevant observations read as under: - “35. The question of contempt must be judged in a particular situation. The process of due course of administration of justice must remain unimpaired. Public interest demands that there should be no interference with judicial process and the effect of the judicial decision should not be pre- empted or circumvented by public agitation or publications. It has to be remembered that even at turbulent times through which the developing countries are passing, contempt of court means interference with the due administration of justice.” (Emphasis supplied)

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192Copy pinpoint192. In Rita Markandey v. Surjit Singh Arora reported in (1996) 6 SCC 14, it was observed that even if parties have not filed an undertaking before the court but if the court was induced to sanction a particular course of action or inaction on the representation made by a party and the court ultimately finds that the party never intended to act on the said representation or such representation was false, the party would be guilty of committing contempt. The relevant observations read as under: - “12. Law is well settled that if any party gives an undertaking to the court to vacate the premises from which he is liable to be evicted under the orders of the court and there is a clear and deliberate breach thereof it amounts to civil contempt but since, in the present case, the respondent did not file any undertaking as envisaged in the order of this Court the question of his being punished for breach thereof does not arise. However, in our considered view even in a case where no such undertaking is given, a party to a litigation may be held liable for such contempt if the court is induced to sanction a particular course of action or inaction on the basis of the representation of such a party and the court ultimately finds that the party never intended to act on such representation or such representation was false. In other words, if on the representation of the respondent herein the Court was persuaded to pass the order dated 5-10-1995 extending the time for vacation of the suit premises, he may be held guilty of contempt of court, notwithstanding non-furnishing of the undertaking, if it is found that the representation was false and the respondent never intended to act upon it. [...]” (Emphasis supplied)

193Copy pinpoint193. The Borrower and the Subsequent Transferee/the alleged contemnors herein placing reliance on the decision of this Court in Patel Rajnikant (supra) have contended that in the absence of any disobedience or wilful breach of a prohibitory order no contempt could be said to have been committed. It has been further canvased that this Court in the Main Appeals never issued any specific direction either to the Borrower or the Subsequent Transferee, & therefore no contempt could be said to have been committed.

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194Copy pinpoint194. In Patel Rajnikant (supra) this Court upon examining Section 2(b) of the Act, 1971 held that to hold a person guilty of having committed contempt, there must be a judgment, order, direction etc. by a court, there must be disobedience of such judgment, order, direction etc and that such disobedience must be willful. The relevant provisions read as under: - “58. The provisions of the Contempt of Courts Act, 1971 have also been invoked. Section 2 of the Act is a definition clause. Clause (a) enacts that contempt of court means “civil contempt or criminal contempt”. Clause (b) defines “civil contempt” thus: “2. (b) ‘civil contempt’ means wilful disobedience to any judgment, decree, direction, order, writ or other process of a court or wilful breach of an undertaking given to a court;” Reading of the above clause makes it clear that the following conditions must be satisfied before a person can be held to have committed a civil contempt: (i) there must be a judgment, decree, direction, order, writ or other process of a court (or an undertaking given to a court); (ii) there must be disobedience to such judgment, decree, direction, order, writ or other process of a court (or breach of undertaking given to a court); and (iii) such disobedience of judgment, decree, direction, order, writ or other process of a court (or breach of undertaking) must be wilful.”

195Copy pinpoint195. However, the subsequent observations made by this Court in Patel Rajnikant (supra) are significant. It observed that the court should not hesitate in wielding the potent weapon of contempt, it is for the proper administration of justice and to ensure due compliance with the orders passed by it in order to uphold and maintain the dignity of courts and majesty of law. The relevant observations read as under: - “70. From the above decisions, it is clear that punishing a person for contempt of court is indeed a drastic step and normally such action should not be taken. At the same time, however, it is not only the power but the duty of the court

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to uphold and maintain the dignity of courts and majesty of law which may call for such extreme step. If for proper administration of justice and to ensure due compliance with the orders passed by a court, it is required to take strict view under the Act, it should not hesitate in wielding the potent weapon of contempt.” (Emphasis supplied)

196Copy pinpoint196. What can be discerned from the above exposition of law is that any act of disobedience, defiance, or any attempt to malign the authority of the court would amount to contempt because they undermine the respect and trust that the public reposes in judicial institutions. The judicial process relies on the confidence of society, and any act that disrupts or disrespects this process threatens to erode the foundation of justice and order.

197Copy pinpoint197. Contempt jurisdiction exists to preserve the majesty and sanctity of the law. Courts are the guardians of justice, and their decisions must command respect and compliance to ensure the proper functioning of society. When individuals or entities challenge the authority of courts through wilful disobedience or obstructive behaviour, they undermine the rule of law and create the risk of anarchy. Contempt serves as a mechanism to protect the integrity of the courts, ensuring that they remain a symbol of fairness, impartiality, and accountability.

198Copy pinpoint198. When judicial orders are openly flouted or court proceedings are disrespected, it sends a signal that the rule of law is ineffective, leading to a loss of trust in the system. Judicial decisions must remain unimpaired, free from external pressures, manipulation, or circumvention. Acts that attempt to mislead the court, obstruct its functioning or frustrate its decisions distort the process of justice and would amount to contempt.

199Copy pinpoint199. The contempt jurisdiction of this court cannot be construed by any formulaic or rigid approach. Merely because there is no prohibitory order or no specific direction issued the same would not mean that the parties cannot be held guilty of contempt. The Contempt jurisdiction of the court extends beyond the mere direct disobedience of explicit orders or prohibitory directions issued by the court. Even in the absence of such specific mandates, the deliberate conduct of parties aimed at frustrating court proceedings or circumventing its

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eventual decision may amount to contempt. This is because such actions strike at the heart of the judicial process, undermining its authority and obstructing its ability to deliver justice effectively. The authority of courts must be respected not only in the letter of their orders but also in the broader spirit of the proceedings before them.

200Copy pinpoint200. Any contumacious conduct of the parties to bypass or nullify the decision of the court or render it ineffective, or to frustrate the proceedings of the court, or to enure any undue advantage therefrom would amount to contempt. Attempts to sidestep the court’s jurisdiction or manipulate the course of litigation through dishonest or obstructive conduct or malign or distort the decision of the courts would inevitably tantamount to contempt sans any prohibitory order or direction to such effect.

201Copy pinpoint201. Thus, the mere conduct of parties aimed at frustrating the court proceedings or circumventing its decisions, even without an explicit prohibitory order, constitutes contempt. Such actions interfere with the administration of justice, undermine the respect and authority of the judiciary, and threaten the rule of law.

202Copy pinpoint202. However, at the same time, the power of contempt ought to be exercised sparingly and with caution and care. It operates with a string of caution and unless otherwise satisfied beyond doubt, it would neither be fair nor reasonable for the courts to resort to such powers. The standard of proof required before a person is held guilty of committing contempt of court must be beyond all reasonable doubt.

203Copy pinpoint203. The courts while exercising its contempt jurisdiction must remain circumspect, more particularly, where there exists a possibility of the order being amenable to more than one interpretation. In Jhareshwar Prasad Paul v. Tarak Nath Ganguly reported in (2002) 5 SCC 352 it was held that if an order does not contain any specific direction regarding a matter or if there is any ambiguity in the directions issued therein then it would be appropriate to direct the parties to approach the court which disposed of the matter for necessary clarification of the order instead of the court exercising its contempt jurisdiction thereby taking upon itself the power to decide the original proceeding in a manner not dealt with by the court passing the judgment or order. The relevant observations read as under: - “The contempt jurisdiction should be confined to the question whether there has been any deliberate

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disobedience of the order of the court and if the conduct of the party who is alleged to have committed such disobedience is contumacious. The court exercising contempt jurisdiction is not entitled to enter into questions which have not been dealt with and decided in the judgment or order... The court has to consider the direction issued in the judgment or order and not to consider the question as to what the judgment or order should have contained. At the cost of repetition, be it stated here that the court exercising contempt jurisdiction is primarily concerned with the question of contumacious conduct of the party, which is alleged to have committed deliberate default in complying with the directions in the judgment or order. If the judgment or order does not contain any specific direction regarding a matter or if there is any ambiguity in the directions issued therein then it will be better to direct the parties to approach the court which disposed of the matter for clarification of the order instead of the court exercising contempt jurisdiction taking upon itself the power to decide the original proceeding in a manner not dealt with by the court passing the judgment or order.” (Emphasis supplied)

204Copy pinpoint204. It is true that this Court in its decision rendered in the Main Appeals had not issued any specific direction either to the Borrower or the Subsequent Transferee as regards the handing over of physical possession and the original title deed to the Secured Asset, or the proceedings pending before the DRT in S.A. No. 46 of 2022. However, the same would not mean that the decision of this Court in the Main Appeal was bereft of any direction as to the outcome of its findings. This Court in the operative portion of the Main Appeals stated in unequivocal terms that the confirmation of the sale by Bank under Rule 9(2) of the SARFAESI Rules had vested the petitioner herein with a right to obtain the certificate of sale of the Secured Asset. It further held categorically that the Borrower herein could not have redeemed the mortgage upon publication of the 9th auction notice. Furthermore, this Court explicitly directed the Bank to not only issue the Sale Certificate to the petitioner herein in accordance with Rule 9(6) of the SARFAESI Rules but also directed the refund of the amount

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of Rs. 129 crore paid by the Borrower. Moreover, the impugned order of the High Court had been set-aside by this Court in toto. As already discussed in paragraph 154, the natural corollary to the aforesaid was that the judgment and order dated 21.09.2023 of this Court in Civil Appeals Nos. 5542-5543 of 2023 had held as under: - (i) The auction proceedings and the sale conducted thereto in favour of the petitioner herein pursuant to the 9th auction notice dated 12.06.2023 had been categorically affirmed and upheld. (ii) After having directed the issuance of the Sale Certificate in terms of Rule 9(6) of the SARFAESI Rules, nothing remained thereafter, as issuance of sale certificate is absolute and as such the proceedings before the DRT had been rendered infructuous. (iii) Having directed not only the issuance of the Sale Certificate to the Secured Asset but also the refund of the amount paid by the Borrower, towards redemption of mortgage, necessarily entailed that the Borrower was duty bound to return the possession and title deeds of the secured asset to the Bank for the purpose of handing the same over to the petitioner. (iv) Having set aside the impugned order passed by the High Court in toto rendered any and all acts done pursuant thereto as null and void, and the Borrower and the Subsequent Transferee herein were required to get the Release Deed and the Assignment Agreement dated 28.08.2023 cancelled. (v) Having expressly directed the issuance of the Sale Certificate it necessarily excluded all other inconsistent and contrary rights and reliefs including the right to pursue the DRT proceedings in view of the maxim Expressio Unius Est Exclusio Alterius.

205Copy pinpoint205. Where a decision is rendered and the impugned order is set-aside, it behoves any logic that an express direction to act must be given in respect of every aspect of the decision. The parties are duty bound to act in accordance with common sense. It is axiomatic that a party should obey both the letter and the spirit of a court order, and it is neither open for the parties to adopt a myopic and blinkered view of such decision nor any such interpretation or view that sub-serves their own interests. It is ultimately the purpose for which the order was granted that will be the lodestar in guiding the parties as to the true effect of the order and determination of the court.

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206Copy pinpoint206. If at all the parties are in doubts over the judgment and order of a court, the correct approach is to prefer a miscellaneous application for seeking clarification rather than proceeding to presume a self-serving interpretation of the decision. At this stage, we may also explain the correct approach to be adopted by the other courts and forums where a party seeks to espouse a cause based on its own understanding or interpretation of a decision of an higher authority. In such situations, the courts or forums should neither aid the parties in their attempt to reinterpret the decision of a higher court nor should they embark on an inquisitorial exercise of their own in order to derive the scope or intent of the order in question. The courts and tribunals should not conflate a decision of a higher court that declares a law with a decision that declares the inter-se rights of a parties, the former only operates as a precedent and thus, it is open for the lower courts to apply their minds to assess whether the same is applicable to the issues before it or what law has been laid down therein. However, the latter not only has precedential value but also carries with it the weight of determination of the issues directly involved between the very parties before it, the subject-matter itself and by extension the entire cause of action. Since such decisions have directly decided or given a finding on the inter-se rights and issues of the same parties that are before it and as such has to a certain extent a direct and palpable effect on the cause of action before it, in such circumstances, the courts and tribunals should refrain from interpreting or examining the scope or effect of such decisions on their own as the same would amount to relitigating the very same issues and rather should relegate the parties to seek clarification from the court that passed the order and adjourn further proceedings sine die.

207Copy pinpoint207. We further take note of the fact that both the Borrower and the Subsequent Transferee made several attempts to prevent the effective implementation of the judgement and order dated 21.09.2023 passed by this Court and thereby thwart the attempts of the Bank to hand over the physical possession and the original title deeds of the Secured Asset to the petitioner. (i) First, both the Borrower and the Subsequent Transferee addressed a letter to the MIDC in whose industrial area the Secured Asset was situated asking them not to entertain any request from the Bank or the petitioner regarding the transfer of the leasehold rights of the Secured Asset in favour of the petitioner.

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(ii) Secondly, the Subsequent Transferee vide its letter dated 05.10.2023 even asked the Sub-Registrar Office, Nerul Thane not to entertain any request of the petitioner regarding the transfer of the Secured Asset. (iii) The self-serving stance of the Borrower to initially contend that it no longer had any role or authority over the secured asset in view of its transfer and thus, cannot handover the physical possession and the original title deeds to the same, yet in the same breath filing an application seeking stay of the notice for obtaining physical possession of the Secured Asset. (iv) The police complaint lodged by the Subsequent Transferee against the Bank by distorting the decision of this Court in the Main Appeals and to thwart the attempts for its implementation. (v) The patently false contention of the Subsequent Transferee that it instituted the suit to prevent its unlawful dispossession of the Secured Asset due to the alleged illegal attempts of the petitioner to take the same forcefully yet, in the said suit instead of seeking permanent injunction, the Subsequent Transferee not only sought the relief of declaration of title in its favour but also the invalidation of the Sale Certificate issued to the petitioner, contrary to the decision of this Court in the Main Appeals.

208Copy pinpoint208. In the facts of the case, we are convinced that both the Borrower and the Subsequent Transferee have committed contempt of this Court’s judgment and order dated 21.09.2023 in the Main Appeals. The aforementioned acts of the contemnors are nothing more than a gamble on their part to circumvent and undermine the findings and directions passed by this Court in the Main Appeals. Similarly, the lame excuses offered by them for explaining their conduct are also nothing more than a calculated attempt in the hope that they would get away with legitimizing the illegal Assignment Agreement even after the decision of this Court, and is equally contemptuous.

209Copy pinpoint209. However, on an overall conspectus of the facts of the present case, while the initial acts of the Borrower and the Subsequent Transferee are in violation of this Court’s judgment and order dated 21.09.2023, yet the efforts on their part to take steps and make amends by withdrawing the Special Civil Suit No. 5 of 2024 along with their belated unconditional undertaking to comply with any further order

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that this Court may deem fit and proper to pass, demonstrates their effort and willingness to purge themselves of their contemptuous conducts. Thus, we are inclined to provide one last opportunity to the Borrower herein and the Subsequent Transferee to abide by the judgement and order dated 21.09.2023 passed by this Court and further comply with the directions issued in the present contempt petition, and thus, deem it fit not to hold them guilty of contempt for the present moment.

iv. Circumstances when a sale of property by auction or other means under the SARFAESI Act may be set-aside after its confirmation.

210Copy pinpoint210. We must also address one very important aspect as regards when the sale of secured asset either by auction or any other method under the SARFAESI Act may be challenged or set-aside after its confirmation.

211Copy pinpoint211. In B. Arvind Kumar v. Govt of India & Ors. reported in (2007) 5 SCC 745 this Court whilst dealing with a plea to set-aside the sale of the property therein by way of public auction by the official receiver, it was held that when the sale is confirmed by the court, the sale becomes absolute and therefrom the title vests in the auction purchaser. The relevant observations read as under: - “12. [...] When a property is sold by public auction in pursuance of an order of the court and the bid is accepted and the sale is confirmed by the court in favour of the purchaser, the sale becomes absolute and the title vests in the purchaser. A sale certificate is issued to the purchaser only when the sale becomes absolute. The sale certificate is merely the evidence of such title. It is well settled that when an auction-purchaser derives title on confirmation of sale in his favour, and a sale certificate is issued evidencing such sale and title, no further deed of transfer from the court is contemplated or required. In this case, the sale certificate itself was registered, though such a sale certificate issued by a court or an officer authorised by the court, does not require registration. Section 17(2)(xii) of the Registration Act, 1908 specifically provides that a certificate of sale granted to any purchaser of any property sold by a public auction

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by a Civil or Revenue Officer does not fall under the category of non-testamentary documents which require registration under sub-sections (b) and (c) of Section 17(1) of the said Act. We therefore hold that the High Court committed a serious error in holding that the sale certificate did not convey any right, title or interest to plaintiff’s father for want of a registered deed of transfer.” (Emphasis supplied)

212Copy pinpoint212. In LICA (P) Ltd. v. Official Liquidator reported in (1996) 85 Comp Cas 788 (SC) this Court held that the purpose of an open auction is to get the most remunerative price with the highest possible public participation, and as such the courts shall exercise their discretion to interfere where the auction suffers from any fraud or inadequate pricing or underbidding that too with circumspection, keeping in view the facts of each case. The relevant observations read as under: - “The purpose of an open auction is to get the most remunerative price and it is the duty of the court to keep openness of the auction so that the intending bidders would be free to participate and offer higher value. If that path is cut down or closed the possibility of fraud or to secure inadequate price or underbidding would loom large. The court would, therefore, have to exercise its discretion wisely and with circumspection and keeping in view the facts and circumstances in each case.” (Emphasis supplied)

213Copy pinpoint213. This Court in Valji Khimji (supra) held that once an auction is confirmed the objections to the same should not ordinarily be allowed, except on very limited grounds like fraud as otherwise no auction would ever be complete. The relevant observations read as under: - “11. It may be noted that the auction-sale was done after adequate publicity in well-known newspapers. Hence, if any one wanted to make a bid in the auction he should have participated in the said auction and made his bid. Moreover, even after the auction the sale was confirmed by the High Court only on 30-7-2003, and any objection to the sale could have been filed prior to that date. However,

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in our opinion, entertaining objections after the sale is confirmed should not ordinarily be allowed, except on very limited grounds like fraud, otherwise no auction-sale will ever be complete. xxx xxx xxx

29. [...] It may be mentioned that auctions are of two types – (1) where the auction is not subject to subsequent confirmation, and (2) where the auction is subject to subsequent confirmation by some authority after the auction is held. 30. In the first case mentioned above, i.e. where the auction is not subject to confirmation by any authority, the auction is complete on the fall of the hammer, and certain rights accrue in favour of the auction-purchaser. However, where the auction is subject to subsequent confirmation by some authority (under a statute or terms of the auction) the auction is not complete and no rights accrue until the sale is confirmed by the said authority. Once, however, the sale is confirmed by that authority, certain rights accrue in favour of the auction- purchaser, and these rights cannot be extinguished except in exceptional cases such as fraud.” (Emphasis supplied)

214Copy pinpoint214. In Ram Kishun & Ors. v. State of Uttar Pradesh & Ors. reported in (2012) 11 SCC 511 this Court although held that where public money is to be recovered such recovery should be done expeditiously, yet the same must be done strictly in accordance with the procedure prescribed by law. However, this Court after examining a plethora of other decisions further held that once the sale has been confirmed it cannot be set aside unless a fundamental procedural error has occurred or sale certificate had been obtained by misrepresentation or fraud. The relevant observations read as under: - “13. Undoubtedly, public money should be recovered and recovery should be made expeditiously. But it does not mean that the financial institutions which are concerned only with the recovery of their loans, may be permitted to behave like property dealers and be permitted further to dispose of the secured assets in any unreasonable

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or arbitrary manner in flagrant violation of the statutory provisions. xxx xxx xxx

28. In view of the above, the law can be summarised to the effect that the recovery of the public dues must be made strictly in accordance with the procedure prescribed by law. The liability of a surety is coextensive with that of the principal debtor. In case there are more than one surety the liability is to be divided equally among the sureties for unpaid amount of loan. Once the sale has been confirmed it cannot be set aside unless a fundamental procedural error has occurred or sale certificate had been obtained by misrepresentation or fraud.” (Emphasis supplied)

215Copy pinpoint215. In PHR Invent Educational Society v. UCO Bank reported in (2024) 6 SCC 579 it was again reiterated that an auction-sale which stands confirmed can only be interfered with when there was any fraud or collusion, and entertaining of issues regarding the validity of such auction would amount to reopening issues which have achieved finality. The relevant observations read as under: - “34. In our view, the High Court ought to have taken into consideration that the confirmed auction-sale could have been interfered with only when there was a fraud or collusion. The present case was not a case of fraud or collusion. The effect of the order of the High Court would be again reopening the issues which have achieved finality.”

216Copy pinpoint216. In V.S. Palanivel v. P. Sriram reported in 2024 INSC 659 this Court again reiterated unless there are some serious flaws in the conduct of the auction as for example perpetration of a fraud/collusion, grave irregularities that go to the root of such an auction, courts must ordinarily refrain from setting them aside keeping in mind the domino effect such an order would have. The relevant observations read as under: - “36.14. This Court must underscore the well settled legal position that once an auction is confirmed, it ought to be interfered with on fairly limited grounds. (Refer: Valji Khimji

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and Co. v. Hindustan Nitro Product (Gujarat) Ltd. (Official Liquidator) MANU/SC/3408/2008 : 2008 : INSC:925 : (2008) 9 SCC 299 and Celir LLP v. Bafna Motors (Mumbai) Private Limited and Ors. MANU/SC/1042/2023 : 2023:INSC:838 : (2024) 2 SCC 1). Repeated interferences in public auction also results in causing uncertainty and frustrates the very purpose of holding auctions. (Refer : K. Kumara Gupta v. Sri Markendaya and Sri Omkareswara Swamy Temple and Ors. MANU/SC/0213/2022 : 2022 : INSC : 207 : (2022) 5 SCC 710). Unless there are some serious flaws in the conduct of the auction as for example perpetration of a fraud/collusion, grave irregularities that go to the root of such an auction, courts must ordinarily refrain from setting them aside keeping in mind the domino effect such an order would have. Given the facts noted above, we shall refrain from cancelling the sale or declaring the Sale Deed as void. Instead, it is deemed appropriate to balance the equities by directing the Auction Purchaser to pay an additional amount in respect of the subject property.” (Emphasis supplied)

217Copy pinpoint217. In the present lis, it is not the case of the Borrower herein that the 9th auction conducted by the Bank was a result of any collusion or fraud either at the behest of the Bank or the Successful Auction Purchaser herein. Aside from the lack of any 15-days gap between the notice of sale and the notice of auction, no other illegality has been imputed to the aforesaid auction proceedings. It is also not the case of the Borrower that due to the absence of the aforesaid statutory period, any prejudice was caused or that it was prevented from effectively exercising its rights due to such procedural infirmity. Despite a total of eight auctions being conducted by the Bank from April, 2022 to June, 2023, not once did the Borrower express its desire to redeem the mortgage. Even when the auction notice came to be issued on 12.06.2023, the Borrower never intimated that it was in process of redeeming the mortgage with the aid of the Subsequent Transferee and that the auction be delayed even though, as per the parties own submissions, they started exploring the possibility of redeeming the mortgage and thereafter transferring in June, 2023 itself. In such circumstances, given the

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fact that although the S.A. No. 46 of 2022 was still pending, yet since there was nothing before this Court to doubt the validity of the 9th auction, this Court in the Main Appeals confirmed the sale in favour of the petitioner and brought the auction proceedings to its logical conclusion by directing the issuance of the sale certificate. The Borrower never raised the issue of the validity of the 9th auction notice despite having sufficient opportunities to do so even after the pronouncement of the decision in the Main Appeals, and that such pleas are being raised only after the auction was confirmed in favour of the petitioner, we find no good reason to interfere with the 9th auction conducted by the Bank.

218Copy pinpoint218. Any sale by auction or other public procurement methods once already confirmed or concluded ought not to be set-aside or interfered with lightly except on grounds that go to the core of such sale process, such as either being collusive, fraudulent or vitiated by inadequate pricing or underbidding. Mere irregularity or deviation from a rule which does not have any fundamental procedural error does not take away the foundation of authority for such proceeding. In such cases, courts in particular should be mindful to refrain entertaining any ground for challenging an auction which either could have been taken earlier before the sale was conducted and confirmed or where no substantial injury has been caused on account of such irregularity.

219Copy pinpoint219. In the present lis, apart from the want of statutory notice period, no other challenge has been laid to the 9th auction proceedings on the ground of it being either collusive, fraudulent or vitiated by inadequate pricing or underbidding, thus, the auction cannot be said to suffer from any fundamental procedural error, and as such does not warrant the interference of this Court, particularly when the plea sought to be raised to challenge the same could have been raised earlier.

220Copy pinpoint220. The aforesaid may be looked at from one another angle. Even if the 9th auction were to be held illegal and bad in law by virtue of the aforesaid S.A. No. 46 of 2022, it would not mean that the auction purchaser would by virtue of such finding lose all its rights to the secured asset, even after having the sale confirmed in its favour. In this regard we may refer to the decision of this Court in Janak Raj v. Gurdilal Singh & Ors. reported in AIR 1967 SC 608 wherein it was held that even if a decree pursuant to which auction was

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previously conducted was later set-aside, the successful auction purchaser’s rights will remain unaffected and he would still be entitled to confirmation of sale in its favour. The relevant observations read as under: - “27. For the reasons already given and the decisions noticed, it must be held that the appellant-auction purchaser was entitled to a confirmation of the sale notwithstanding the fact that after the holding of the sale the decree had been set aside. The policy of the Legislature seems to be that unless a stranger auction-purchaser is protected against the vicissitudes of the fortunes of the suit, sales in execution would not attract customers and it would be to the detriment of the interest of the borrower and the creditor alike if sales were allowed to be impugned merely because the decree was ultimately set aside or modified. The Code of Civil Procedure of 1908 makes ample provision for the protection of the interest of the judgment-debtor who feels that the decree ought not to have been passed against him. On the facts of this case, it is difficult to see why the judgment-debtor did not take resort to the provisions of O. XXI r. 89. The decree was for a small amount and he could have easily deposited the decretal amount besides 5 per cent of the purchase money and thus have the sale set aside. For reasons which are not known to us he did not do so.” (Emphasis supplied)

E. FINAL ORDER

221Copy pinpoint221. Before we close this judgment, we may address yet another submission canvassed on behalf of the respondents herein. It was contended by the Borrower and the Subsequent Transferee that the petitioner herein having not prayed for the relief of physical possession in the original proceedings cannot be permitted to expand the scope of the said proceedings and now seek the relief which it previously did not. In this regard, we may only refer to the decision of this Court in Baranagore Jute Factory Plc. Mazdoor v. Baranagore Jute Factory Plc. reported in AIR ONLINE 2017 SC 410 wherein it was held the court not only has a duty to issue appropriate directions

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for remedying or rectifying the things done in violation of its orders but also the power to take restitutive measures at any stage of the proceedings. The relevant observations read as under: - “... As held by this Court in Delhi Development Authority v. Skipper Construction Co. (P) Ltd. and another, and going a step further, the Court has a duty to issue appropriate directions for remedying or rectifying the things done in violation of the orders. In that regard, the Court may even take restitutive measures at any stage of the proceedings. [...]” (Emphasis supplied)

222Copy pinpoint222. Similarly, a Three-Judge Bench of this Court in the case of State Bank of India & Ors. v. Dr. Vijay Mallya reported in 2022 SCC Online SC 826, in clear terms said that apart from punishing the contemnor for his contumacious conduct, the majesty of law may demand that appropriate directions be issued by the Court so that any advantage secured as a result of such contumacious conduct is completely nullified. The approach may require the Court to issue directions either for reversal of the transactions in question by declaring said transactions to be void or passing appropriate directions to the concerned authorities to see that the contumacious conduct on the part of the contemnor does not continue to enure to the advantage of the contemnor or anyone claiming under him.

223Copy pinpoint223. In view of the aforesaid, we pass the following orders and directions: - (i) The legality and validity of the 9th auction proceedings conducted pursuant to the notice of sale dated 12.06.2022 is upheld. The sale of the Secured Asset to the petitioner is hereby confirmed and the title conferred through the Sale Certificate dated 27.09.2023 is declared to be absolute. (ii) The Borrower and the Bank shall immediately take steps for the cancellation of the Release Deed dated 28.08.2023 within a period of one week from the date of pronouncement. (iii) The Borrower shall also unconditionally withdraw the S.A. No. 46 of 2022 pending before the DRT within a period of one week from the date of pronouncement.

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(iv) The Assignment Agreement dated 28.08.2023 is hit by lis pendens and hereby declared void. The Subsequent Transferee shall hand over the peaceful physical possession of the Secured Asset along with its original title deeds to the Bank within a period of one week from the date of pronouncement of this judgment. In the event of any further hinderance or any obstruction that may be caused by the Borrower or the Subsequent Transferee while taking over the possession of the property then in such circumstances the Bank shall take the assistance of police. (v) The Subsequent Transferee shall also withdraw the police complaint dated 17.01.2024 lodged by it within a period of one week from the date of pronouncement of this judgment. (vi) We clarify that the Subsequent Transferee is not entitled to recover the amount paid by it towards redeeming the second charge over the Secured Asset or any other dues or amount paid in respect of the same from the petitioner herein. (vii) The Bank shall refund the amount of Rs. 129 crore paid by the Borrower towards the redemption of mortgage without any interest only after the aforesaid directions have been complied to the letter and spirit. (viii) The Subsequent Transferee is at liberty to recover the amount paid by it towards the Assignment Agreement dated 28.08.2023 and any other amount from the Borrower by availing appropriate legal remedy as may be available under the law.

224Copy pinpoint224. Let this matter be notified once again before this Bench after a period of two weeks to report compliance of the aforesaid directions.

225Copy pinpoint225. There shall be no order as to costs.

Result of the case: Directions issued.

† Headnotes prepared by: Bibhuti Bhushan Bose