Property of dead person sold in auction: Is it bad in law? All HC elaborates

Allahabad High Court: Siddhartha Varma, J., while deciding a matter with regard to the auction of the property of a dead person held that the proceeding conducted against a dead person is bad in law.

Respondent 1 along with his father and mother took a housing loan from the petitioner-bank. On failing to pay the loan, a demand notice was issued under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest At, 2002.

Later, a notice for possession was issued under Section 13(1) of the SARFAESI Act and symbolic possession of the property was taken.

Mother along with the respondent and wife of the respondent filed for quashing of the recovery notice.

It was noted that the bank issued a sale notice and had scheduled the auction.

Borrower Kanti Devi who was also a person who had kept her personal property as collateral security had expired, respondent 1 informed the Bank to defer the auction. Further Bank requested respondent 1 to furnish the details of legal heirs but did not defer the auction and later the property of Kanti Devi was auctioned.

Respondent 1 filed a securitization application and alleged that before the auction took place and after the sale notice was issued, Kanti Devi died and without impleading the legal heirs and representatives of the deceased, the auction had taken place which was bad in law.

Further, it was alleged that the possession notice was also bad in law as Sri Bal Govind Singh had died.

The Debts Recovery Tribunal held that since the notice was issued in the lifetime of Kanti Devi and since the Bank was not having any details of her legal heirs and representatives prior to the issuing of the sale notice, there was no illegality in the auction proceedings.

Respondent 1 had filed an appeal with Appellate Tribunal, though the appellate tribunal maintained the DRT order with regard to the legality of the possession, it reversed the finding with regard to the auction dated 10-12-2018 was correct despite the fact that Kanti Devi died on 21-11-2018 and thereafter appeal was allowed; set aside the order of the DRT and also quashed the sale notice. Auction and sale certificates were also set aside.

Aggrieved with the above, the petitioner-bank filed the present petition.

Analysis, Law and Decision

High Court opined that since the portion of the order which was upheld by the Debts Recovery Appellate Tribunal of the Debts Recovery Tribunal by which it was held that the possession was correctly taken was not challenged by respondent 1.

However, Court added that after the sale notice was issued on 6-11-2018 and thereafter on 26-11-2018, respondent 1 had informed the Bank about the death of the deceased on 21-11-2018 and the Bank had also asked respondent 1 to provide the details of the legal heirs and representatives of the deceased, it was imperative for the Bank to have substituted the legal heirs and representatives for the Bank to have substituted the legal heirs and representatives of the deceased.

Hence, in view of the above discussion, it was clear that Bank had sold the property of a dead person.

Elaborating further, Court stated that the purpose of giving a 30 days’ sale notice was that the owner/borrower be given an opportunity to plead before the Bank to liquidate dues. A further purpose is that the persons to whom the notice had been issued may point out any discrepancy in the proceeding.

 Hence, Court declared the auction erroneous also the sale certificate was issued erroneously.

“…borrower/guarantor always had the right to get the dues paid off before the auction of the property was done as till the auction, no third party right had been created.”

 Therefore, petition was dismissed. [SBI v. Rakesh Singh, 2021 SCC OnLine All 796, decided on 9-11-2021]


Advocates before the Court:

 Counsel for Petitioner: Tarun Varma, Kaushalendra Nath Singh

Counsel for Respondent: Amit Kumar Asthana, Kushal Kant

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