In Asset Reconstruction Company (India) Ltd. Vs. Florita Buildcon Private Limited, the auction purchaser had successfully bid a secured asset being sold mortgaged property on “as is where is and as is what is basis”. The various terms and conditions forming the part of bid document clearly casted the responsibility and liability on the bidder to ensure that the title of the mortgaged property is verified by the bidder and the property is being sold clearly on “as is where is and as is what is basis”.
The purchaser (Respondent No. 1) filed application in the Debts Recovery Tribunal, Mumbai to set aside the sale on the count that the mortgaged property was falling in Coastal Regulation Zone (CRZ) and was a plot reserved for Recreation Ground (RG) and, therefore, there was no saleable interest in the mortgaged property. It was also contended that Respondent No.1 came to know about the same only when Respondent No.1 started erecting shed on the said property.
ARCL challenged the Securitization Application by contending inter alia that (1) the Debts Recovery Tribunal will not have jurisdiction to entertain and try the said Application at the instance of the purchaser, as the sale was concluded and finalized and the possession was also given to the purchaser. (2) It was also contended that the purchaser cannot take advantage of his own wrong, especially when the property was sold on “as is where is and as is what is basis”.
For the first question, the Hon'ble Bombay High Court held that "If one considers the fact that the SARFAESI Act is a complete Code in itself, meant for providing efficacious and expeditious remedies to the party, aggrieved on account of the measures taken under the said Act, then, in our considered opinion, such remedy is available to the Auction Purchaser also in respect of measures taken by the Petitioner-Bank under Section 13(4) of the SARFAESI Act. Therefore, as far as this aspect is concerned, in our considered opinion, both the Tribunal and Appellate Tribunal have rightly held that the Application filed by Respondent No.1 before it under Section 17 of the Act was maintainable.
As for the matter of "as is where is and as is what is basis", , the the Hon'ble Bombay High Court held that "The perusal of these various clauses in the Tender Bid, Appendix-II and Respondent No.1’s letter dated 16th September, 2009 thus makes it very clear that, it was entirely the responsibility and liability of the bidder/purchaser, Respondent No.1 herein, to make necessary enquiries as to the title of the mortgaged property. Clause No.12 of the Tender Document makes it abundantly clear that successful bidder shall be deemed to purchase the property with full knowledge and subject to all the reservations, if any, in the Master Plan or Development Plan or Draft Development Plan or Town Planning Scheme, affecting the said property. Thus, it was not only a sale on “as is where is and as is what is basis” but it was also casting a positive burden on the purchaser to ensure that he has made the necessary enquiries with all the relevant authorities to know that the property is not affected, in any way, either in its title or even under Development Control Regulations. Respondent No.1 has also, vide its letter dated 16th September, 2009, accepted these terms and conditions, with a categorical statement that Respondent No.1 is deemed to have verified the Secured Assets, conducted the due diligence in respect of the same, as well as has ascertained the known and unknown liability, encumbrance etc. over the secured assets. It was also made clear in the said letter that the Authorized Officer of the Petitioner has not made any representation as to the correctness, validity, adequacy or otherwise of the information pertaining to the assets, liabilities etc.
Thus in this case, it is clear that the Auction Sale was held on the terms and conditions reproduced above, which were binding on both the parties. These terms and conditions had put the positive burden and liability on Respondent No.1, the purchaser, of satisfaction of the valid title as also the satisfaction that the said property is not reserved under development plan or town planning scheme. "
The purchaser (Respondent No. 1) filed application in the Debts Recovery Tribunal, Mumbai to set aside the sale on the count that the mortgaged property was falling in Coastal Regulation Zone (CRZ) and was a plot reserved for Recreation Ground (RG) and, therefore, there was no saleable interest in the mortgaged property. It was also contended that Respondent No.1 came to know about the same only when Respondent No.1 started erecting shed on the said property.
ARCL challenged the Securitization Application by contending inter alia that (1) the Debts Recovery Tribunal will not have jurisdiction to entertain and try the said Application at the instance of the purchaser, as the sale was concluded and finalized and the possession was also given to the purchaser. (2) It was also contended that the purchaser cannot take advantage of his own wrong, especially when the property was sold on “as is where is and as is what is basis”.
For the first question, the Hon'ble Bombay High Court held that "If one considers the fact that the SARFAESI Act is a complete Code in itself, meant for providing efficacious and expeditious remedies to the party, aggrieved on account of the measures taken under the said Act, then, in our considered opinion, such remedy is available to the Auction Purchaser also in respect of measures taken by the Petitioner-Bank under Section 13(4) of the SARFAESI Act. Therefore, as far as this aspect is concerned, in our considered opinion, both the Tribunal and Appellate Tribunal have rightly held that the Application filed by Respondent No.1 before it under Section 17 of the Act was maintainable.
As for the matter of "as is where is and as is what is basis", , the the Hon'ble Bombay High Court held that "The perusal of these various clauses in the Tender Bid, Appendix-II and Respondent No.1’s letter dated 16th September, 2009 thus makes it very clear that, it was entirely the responsibility and liability of the bidder/purchaser, Respondent No.1 herein, to make necessary enquiries as to the title of the mortgaged property. Clause No.12 of the Tender Document makes it abundantly clear that successful bidder shall be deemed to purchase the property with full knowledge and subject to all the reservations, if any, in the Master Plan or Development Plan or Draft Development Plan or Town Planning Scheme, affecting the said property. Thus, it was not only a sale on “as is where is and as is what is basis” but it was also casting a positive burden on the purchaser to ensure that he has made the necessary enquiries with all the relevant authorities to know that the property is not affected, in any way, either in its title or even under Development Control Regulations. Respondent No.1 has also, vide its letter dated 16th September, 2009, accepted these terms and conditions, with a categorical statement that Respondent No.1 is deemed to have verified the Secured Assets, conducted the due diligence in respect of the same, as well as has ascertained the known and unknown liability, encumbrance etc. over the secured assets. It was also made clear in the said letter that the Authorized Officer of the Petitioner has not made any representation as to the correctness, validity, adequacy or otherwise of the information pertaining to the assets, liabilities etc.
Thus in this case, it is clear that the Auction Sale was held on the terms and conditions reproduced above, which were binding on both the parties. These terms and conditions had put the positive burden and liability on Respondent No.1, the purchaser, of satisfaction of the valid title as also the satisfaction that the said property is not reserved under development plan or town planning scheme. "
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