Bajaj Housing Finance ltd vs State Bank of India on 12 June 2026

JUDGEMENT

1. 1. The present Appeal No. 04 of 2025 has been filed before the Ld. Debts Recovery Tribunal-II, Ahmedabad under Section 30 of the Recovery of Debts and Bankruptcy Act, 1993 by Bajaj Housing Finance Ltd, challenging the order dated 16.06.2025 passed by the Ld. Recovery Officer in Recovery Proceedings No. 67 of 2021 arising out of Original Application No. 1420 of 2019.

2. 2. The Appellant is a third-party objector and claims to be the secured creditor having first charge over the property bearing **R.S. No. 53/P3 & P4, C.S. No. 3575/B/4/BP, Pitru Krupa Block-A/25, Shree Ram Park ST 1, Morbi Road, Rajkot, Gujarat.**

3. 3. The case of the Appellant is that it had sanctioned financial assistance of Rs.19,19,000/- and Rs.10,85,000/- on 30.12.2017 to Mr. Vallabhhai L. Pipaliya and others. To secure the said financial facilities, the borrowers created an equitable mortgage by deposit of title deeds of the property in question in favour of the Appellant. The Appellant has further submitted that the charge over the property was registered before the Central Registry on 08.02.2018 and that all original title documents are in possession of the Appellant.

1. 4. It is the grievance of the Appellant that Respondent No.1 Bank initiated recovery proceedings against the borrowers and sought attachment of the property before the Ld. Recovery Officer by treating the same as personal property of the judgment debtor. According to the Appellant, Respondent No.1 had neither any mortgage over the property nor produced any ownership or encumbrance documents before the Ld. Recovery Officer while seeking attachment.

2. 5. It is stated that the first auction notice was issued on 07.02.2023 fixing auction on 27.03.2023, which failed for want of bids. Thereafter, a fresh auction was conducted on 31.05.2023 wherein Respondent No.2, namely Smt. Krishnaben Kanubhai Chavda emerged as successful auction purchaser for Rs.23,50,000/-. Consequently, a sale certificate dated 18.07.2023 was issued in her favour and physical possession was handed over through Court Commissioner/Receiver.

3. 6. The Appellant submitted that it came to know about the auction and transfer of possession only after the borrowers defaulted in March-2024 and informed the Appellant that the property had already been sold through DRT proceedings. Upon verification, the Appellant filed objections before the Ld. Recovery Officer by way of I.A. No. 135 of 2024, challenging the attachment and auction proceedings. However, the objections came to be dismissed by order dated 16.06.2025 of Ld. Recovery Officer, which is impugned in the present Appeal.

4. 7. The Appellant has contended that the Learned Recovery Officer failed to appreciate that the property was already mortgaged with the Appellant since 2017 and that the Appellant held the first charge over the property. It is further contended that State Bank of India neither produced any proof of encumbrance nor followed due procedure before seeking attachment of the property. According to the Appellant, the impugned order has been passed without proper application of mind, without considering material facts and without adjudicating the Appellant's objections in accordance with law.

1. 8. The Appellant has further stated that after the borrowers committed default, it initiated proceedings under the SARFAESI Act, 2002 by issuing demand notice dated 20.06.2024, taking symbolic possession on 08.01.2025, filing proceedings under Section 14, and ultimately taking physical possession of the property on 24.05.2025 from the Auction Purchaser in this case, the Respondent No: 2. The Auction Purchaser has thereafter challenged such action by filing Securitisation Application No. 431 of 2025 before the Tribunal.

2. 9. By way of the present Appeal, the Appellant has prayed for quashing and setting aside the order dated 16.06.2025 passed by the Ld. Recovery Officer, cancellation of the auction sale dated 31.05.2023 and the consequential sale certificate/sale deed executed in favour of Respondent No.2, and for declaration that the Appellant holds the first charge over the property in question.

3. 10. Per contra, the Ld. Counsel for the Respondent Bank has opposed the Appeal and sought its dismissal on the grounds of delay, laches, and non-joinder of necessary parties.

4. 11. It is further submitted that recovery proceedings were initiated pursuant to the Recovery Certificate issued in O.A. No. 1420/2019 and in accordance with the final order dated 24.02.2021. Acting under Section 25(a) of the RDB Act, the Recovery Officer issued notices, attached the subject property, and thereafter conducted auction proceedings strictly in accordance with the provisions of the Act and the Rules. The first auction failed for want of bidders, but in the second auction held on 31.05.2023, Mrs. Krishnaben Kanubhai Chavda emerged as the highest bidder and deposited the entire sale consideration amounting to Rs.23,50,000/-. Since no objections were received within the prescribed period, the sale was confirmed on 18.07.2023, a Sale Certificate was issued, and physical possession was subsequently handed over to the Auction Purchaser on 06.04.2024.

1. 12. The Ld. Counsel for the Respondent Bank has denied the Appellant's claim that the property was mortgaged in its favour. According to the Respondent Bank, the Appellant has failed to produce any document evidencing creation of a valid equitable mortgage. The documents relied upon by the Appellant are stated to be merely sanction letters and loan agreements and not mortgage documents. It is further contended that a CERSAI registration by itself does not create or establish a valid mortgage or any right in the absence of a legally enforceable security interest.

2. 13. It is further submitted that the Appellant was aware, or ought to have been aware, of the recovery proceedings and auction process, as auction notices were duly published in newspapers on two occasions. Despite this, the objections were raised only after completion of the sale and creation of third-party rights in favour of the Auction Purchaser. Therefore, the challenge is highly belated and not maintainable.

3. 14. It is further submitted that ownership documents of the property were already placed on record before the Tribunal in September 2020, when an application for attachment before judgment was filed. The allegation that attachment proceedings were initiated without proof of ownership is therefore denied.

4. 15. It is further submitted that the Recovery Officer, while passing the impugned order dated 16.06.2025, correctly appreciated the facts, evidences, and legal position and rightly concluded that there was no material to establish any mortgage in favour of the Appellant. It is further submitted that title and possession have already been passed to the Auction Purchaser, who was not impleaded as a party before the Recovery Officer when objections were filed.

5. 16. In view of the above, Ld. Counsel for the Respondent Bank has submitted that the Appeal is devoid of merit and that the Appeal deserves to be dismissed with exemplary costs.

1. 17. Ld. Counsel for Respondent No: 2, the Auction Purchaser has also opposed the Appeal filed by Bajaj Housing Finance Ltd and supported the orders passed by the Ld. Recovery Officer, DRT-II, Ahmedabad and has contended that the Auction Purchaser is a bona fide purchaser who has acquired the property through a valid public e-auction conducted by the Ld. Recovery Officer, DRT-II, Ahmedabad on 31.05.2023. He has further submitted that she has paid the entire sale consideration of Rs.23,50,000, following which the sale was confirmed on 18.07.2023, a Sale Certificate was issued and registered, and physical possession was delivered to her.

2. 18. It is further submitted that the Appellant raised objections only after completion of the auction proceedings and confirmation of sale. The Ld. Recovery Officer considered and rejected such objections. According to Respondent No. 2, any dispute regarding charge or entitlement to sale proceeds is an inter-se dispute between Respondent No: 1 Bank and Appellant and cannot affect the rights of a bona fide Auction Purchaser.

3. 19. Respondent No. 2 further alleged that Appellant, despite being aware of the auction sale and transfer of possession, initiated proceedings under Section 14 of the SARFAESI Act and obtained an order from the Ld. CJM, Rajkot by suppressing material facts and misleading the Court. She has also contended the Appellant's claim of a valid security interest and contended that the Appellant lacks a valid registered mortgage over the property.

4. 20. Relying upon judgments of the Hon'ble Supreme Court, Respondent No. 2 submitted that a confirmed auction sale cannot be set aside except in cases of fraud, collusion, or material irregularity, none of which are established in the present case.

5. 21. Accordingly, Respondent No. 2 prays for dismissal of the Appeal, restoration of possession of the property to her, return of all original documents, and award of compensatory costs @ 5% of sale consideration and interest for the hardship caused by the Appellant's action.

22. I have heard the Ld. Counsels for all the parties and perused the records of this Appeal and also the records of RP No: 67/2021 arising out of Original Application No: 1420/2019 for deciding this appeal.

23. On the basis of contentions of all the three parties there are following points of determinations in this Appeal which appears to be necessary to be determined to reach at any conclusion in this Appeal. These points are as following:

- **I) Whether this Appeal is filed beyond limitation period and accordingly it is time barred?**

- **II) Whether the Appellant has successfully established that the property in question which was sold as a personal property of the certified defaulter in the RC proceedings was mortgaged with the third party Applicant/Appellant in this case since 2017 i.e. much prior to the initiation of RP proceeding in the year 2021?**

- **III) Whether the Ld. Recovery Officer has misapplied the procedure i.e. Rule-11 of the Second Schedule to the Income Tax Act while conducting inquiry prior to auction sale?**

- **IV) Whether the principles of natural justice were not applied while proceeding with the auction proceeding of the disputed property with regard to the Appellant third party?**

- **V) To what relief, if any, the Appellant is entitled.**

**Point of Determination No: 1 :**

**Whether this Appeal is filed beyond limitation period and accordingly it is time barred?**

24. Preliminary objection raised by the Respondent No: 1 State Bank of India (SBI) in this case that the objection filed by the Appellant/TPO before the Ld. Recovery Officer was barred by limitation and Ld. Recovery Officer should not have entertained the objection of the Applicant at the first place. It has further been objected by the Respondent No: 1 CH Bank that the objection was filed on 23-04-2024 much after the impugned auction

was confirmed on 18-07-2023 and Ld. Recovery Officer is not having any legal jurisdiction or power to review or recall own order which was passed in the RP proceeding from time to time. Accordingly, the objection filed by the Appellant in the RP proceeding on which impugned order has been passed suffered from vice of delay and laches.

25. In this connection, it is an admitted fact that all proceedings including issuance of notice under Form 16 & 52 and thereafter Form 53 were issued and served. SCN under Section 25(a) was already issued and duly served. The property in question was put on auction not once but twice and on both the occasions, both the notices were duly issued and served by way of affixation on the property and also paper publication was done. Notices were also passed on e-auction site. Then after lapse of more than 30 days of successful e-auction dated 30-05-2023 and having no objection for the same from any party, the sale was confirmed on 18-07-2023 in favour of the successful H 1 bidder and from the date of confirmation of sale, the objection by the Appellant was filed before the Ld. Recovery Officer in March 2024 i.e. almost eight months after the sale was confirmed. Apparently, the objection before the Ld. Recovery Officer was filed at a very delayed stage but as the Ld. Counsel for the Appellant has submitted that the Appellant TPO was not personally served with any of the attachment or auction proceedings. He only came to know about the auction sale in the month of March 2024 when the borrower defaulted in paying the further instalments and disclosed that the property has been sold and the Applicant immediately objected by filing IA No: 135/2024. According to the Ld. Counsel for the Appellant, the delay if any, is purely on account of lack of notice and concealment of material facts by SBI Respondent No: 2 during the recovery proceedings. The objection was filed immediately on discovery of the sale and the allegation of the Respondent that the objection suffered from delay and laches, is not sustainable as per Ld. Counsel for the Appellant.

26. In the fact as placed before this Tribunal, it appears that the Appellant should be given a benefit of doubt as there is no thread of evidence to show that the TPO/Appellant has got any notice or information with regard to the impugned sale proceedings.

Otherwise also, the object of justice is to provide an opportunity of hearing to all concerned parties and decide their dispute on merits. Denying any opportunity of hearing on any hyper technical ground will not serve the purpose of justice. Accordingly, in the considered views of this Tribunal, Ld. Recovery Officer has not done any illegality in permitting the TPO/Appellant to proceed with his IA No: 1350/2024.

**Whether the Appellant has successfully established that the property in question which was sold as a personal property of the certified defaulter in the RC proceedings was mortgaged with the third party Applicant/Appellant in this case since 2017 i.e. much prior to the initiation of RP proceeding in the year 2021?**

1. 27. This point of determination is foremost important and the Appellant/TPO has challenged the auction sale on the strength of his claim that it has provided financial assistance of Rs.19,19,000/- and Rs.10,85,000/- to the CD Mr. Vallabhhai L. Pipaliya (who is not party in this case) & Others on 30-12-2017 and to secure the financial assistance Mr. Vallabhhai L. Pipaliya & Others have mortgaged the property in question by depositing the original documents of title with the TPO/Appellant. Accordingly, TPO/Appellant registered the charge before the Central Registry on 08-02-2018. Accordingly, to establish his right with regard to the disputed property in this case, it was necessary for the Appellant to prove before the Ld. Recovery Officer that a valid security interest in favour of the Appellant/TPO existed when the sale proceedings were initiated, conducted and confirmed by the Ld. Recovery Officer on initiation of the CH Bank i.e. SBI but on perusal of the record of RP case, it appears that there is no proof which has been filed by the Appellant/TPO to establish that a valid registered equitable mortgage was created and executed by CH Bank in favour of the TPO/Appellant. It is observed that after the reply of the CH Bank was filed in the RP proceedings against the objection of the TPO/Appellant, the TPO/Appellant produced original sale deed of the subject property for verification and also filed copy of a series of documents and by those it revealed that the disputed property was first

mortgaged by HDFC and after release from HDFC in the Year 2013, the same was mortgaged with Axis Bank and that mortgage was released on 08-02-2018 but there is no proof that this property was mortgaged by way of equitable mortgage or simple mortgage or by any means any charge was created by the CD in the RP proceedings in favour of the TPO/Appellant. On the contrary it is established from the evidences provided by the TPO/Appellant himself that the disputed property was under mortgage with Axis Bank till 08-02-2018 whereas the TPO/Appellant provided financial assistance to the CD on 13-12-2017. Accordingly, it is not established that loan facility was provided after securing the mortgage with a valid security interest. Merely, registration under CERSAI Act without any supportive proof of mortgage, the Appellant/TPO has failed to establish before Ld. Recovery Officer that the property in question which was put under auction by Ld. Recovery Officer was mortgaged with the Appellant/TPO.

1. 28. In this connection, the Appellant/TPO made serious objection against the proceedings initiated by Ld. Recovery Officer on the ground that before proceeding to issue notice for sale the Ld. Recovery Officer has not asked the CH Bank SBI to produce proof of ownership of the CD over the disputed property. This argument appears to be an argument for the sake of argument only because it is clear mandate of judgement dated 24-02-2001 passed by the then Ld. Recovery Officer in OA No: 1420/2019 that in case of shortfall, the same shall be recovered from sale of other personal, movable and immovable properties of the Defendants and the Ld. Recovery Officer has duly followed the procedure as laid down under Section 25 RDB Act 1993 which provides modes of recovery for debts and as such there was no secured assets available for recovery of dues so the present property of the CD was attached and sold to recover the dues in accordance with RDB Act and the judgement dated 24-02-2021 in OA No: 1420/2019. Even the Appellant/TPO cannot deny that the property in question is personal property of CD No: 2 Mr. Vallabhhai L. Pipaliya in the RP proceeding. The contention of Ld. Counsel of Applicant that as the property was allegedly mortgaged by the borrower, with the Appellant the creditor, the Borrower has ceased to be owner of property in question, and he has got no better title of the property, is an argument

against legal proposition as simply because a property is mortgaged, the mortgager does not lose his ownership rights and title over the property. Accordingly, there appears no illegality in action of Ld. Recovery Officer in proceeding to put the personal property of the CD under auction sale when there were no secured assets and it is a well established legal principle that the fact admitted need not be proved.

1. 29. In the facts and circumstances of the case, it is established that the Appellant/TPO has not provided the evidence before the Ld. Recovery Officer with regard to any valid security interest created in his favour by the CD Mr. Vallabhhai L. Pipaliya who was admittedly the owner of the property when the attachment and auction proceeding against the personal properties of the CD were initiated by the Ld. Recovery Officer in RP proceeding. It is also established from the record of the RP proceedings that from attachment to sale confirmation due process has been followed before attachment and SCN under Section 25(a) was issued and it was duly served and then attachment Form 16 and Form 52 were issued and got served, then Form 53 was issued and served. Then the disputed property was put for auction twice and on both occasions the sale notice was duly complied. Notices were affixed on the property, paper publication was done and notices were published on e-auction site and after passing of 30 days from the date of successful e-auction on 30-05-2023 and having no objection for the same from any parties, the impugned sale was confirmed on 08-02-2018 in favour of the successful H 1 bidder Respondent No: 2 in this case. It is noteworthy that in his objection before the Ld. Recovery Officer, the TPO/Appellant has also not raised any question with regard to failure of any compliance process. This point of determination is decided accordingly.

**Whether the Ld. Recovery Officer has misapplied the procedure i.e. Rule-11 of the second schedule to the Income Tax Act while conducting inquiry prior to auction sale?**

30. In this regard, the Appellant/TPO has submitted that the Ld. Recovery Officer has laid down under Rule-11 of the Second Schedule of the Income Tax Act which provides mechanism for determining that the Respondent Balaji Housing Finance Ltd had a valid subsisting and legally recognizable interest in the property on the date of attachment and consequent sale. In this connection, the Ld. Counsel for the Appellant has relied on citation of Hon'ble Apex Court in **Tax Recovery Officer V/s Gangadhar Vishwanath Ranade (1998) 6 SCC 658** in which it was observed that Rule-11 proceedings are summary in nature and Ld. Recovery Officer is required to ascertain the existing nature and extent of the objected interest as on the date of attachment.

31. It is submitted by the Appellant that Ld. Recovery Officer has totally ignored the fact of existence of valuable security interest in favour of the Appellant prior to date of attachment and also that the security interest was registered under SARFAESI Act which is a deemed public notice.

32. I am not convinced with the arguments of the Ld. Counsel for the Appellant. As it is mentioned above that the Appellant has taken all the pain of appearing before the Ld. Recovery Officer after passing of almost eight months from the date of confirmation of the impugned attachment sale. While the Appellant has emphasized that the CERSAI registration is a public notice, the Appellant has no reasonable explanation as to how it has not been aware about the attachment and sale of the property in which it has got so called valid security interest in spite of several public notices by way of publication of sale notice. Accordingly, Ld. Recovery Officer has very rightly observed that the legal principle of "vigilantibus non dormientibus jura subveniunt (the law assists those who are vigilant and not those who sleep over their right) is fully applicable in this case. Apart from that as it has been discussed earlier even after filing his objection the Appellant failed to produce any convincing proof of the fact that it has got any kind of equitable mortgage/simple mortgage of the disputed property in this case. On the contrary, it was observed that much after the financial assistance given by the Appellant

to the (CD in the RP proceeding) to the borrower in the Year 2017, the disputed property was under mortgage with the Axis Bank till 08-02-2018.

1. 33. Rule-11 provides for enquiries if any objection is raised during the proceeding of attachment and auction or within a reasonable period of objection, subsequent to that but in this case the objection itself was filed after eight months of the conclusion of the auction sale and even then, the Ld. Recovery Officer has provided every opportunity to the Appellant to prove his case which he has failed to do.

2. 34. Accordingly, this Tribunal does not find that Ld. Recovery Officer has done any wrong in complying Rule-11 of the second schedule of the Income Tax Act.

**Whether the principles of natural justice were not applied while proceeding with the auction proceeding of the disputed property with regard to the Appellant third party?**

1. 35. It is argued by the Ld. Counsel for the Appellant that no notice of opportunity of hearing was even given to the Appellant though it was a prior secured creditor. The Auction Purchaser obtained possession without any intimation to the Appellant thereby vitiating fundamental principle of natural justice. This objection is totally against the reality. It is established fact that in this case not only the SCN under Section 25(a) was issued and served but attachment Form 16 & 52 were also issued and served along with Form 53 were also issued and served. Thereafter, the notice for sale was not only affixed on the secured assets but it was also published in newspaper and also published in e-auction site. This is more than sufficient notice to any aggrieved party including the Appellant and it is the Appellant who has been found ignoring these notices. There was no reason before the Ld. Recovery Officer to issue personal notice to the Appellant/TPO because there was no source of knowledge before the Ld. Recovery Officer to be aware of any interest of the Appellant/TPO in the disputed property. Accordingly, it is observed that the objection with regard to violation of principle of

natural justice in this case by Ld. Recovery Officer while conducting the attachment and auction sale proceeding is totally baseless.

**Point of Determination No: 5**

**To what relief, if any, the Appellant is entitled.**

36. On the basis of the conclusion as arrived with regard to the point of Determination Nos: I to IV, it is concluded that no irregularity, illegality or wrong has been observed in the impugned order. It has been passed after giving appropriate opportunity to all parties concerned elaborately discussing all the contentions raised by the parties. Accordingly, in the considered views of this Tribunal, the Appellant does not deserve any relief in this case and the Appeal appears to be without any merit and liable to be rejected without any order as to cost.

37. Accordingly following order is passed :

**ORDER**

1. 1. The Appeal No: 04/2025 is hereby dismissed with no order as to cost.

2. 2. Let the file of the RP No: 67/2021 be returned back to the Ld. Recovery Officer with a copy of this judgement for the needful.

3. 3. File be consigned to records.

Pronounced in the Open Tribunal on **12^th June, 2026**

**(PANKAJ KUMAR UPADHYAY) PRESIDING OFFICER, DRT-II, AHMEDABAD.**

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