In a significant ruling, the Supreme Court of India reiterated that ownership of immovable property can only be legally transferred through a registered sale deed, as required under Section 54 of the Transfer of Property Act, 1882, and Section 17 of the Registration Act, 1908. The judgment was delivered in the case of Sanjay Sharma vs. Kotak Mahindra Bank Ltd. (Civil Appeal No. ___/2024), bringing clarity to the legal framework surrounding property transactions and public auctions under the SARFAESI Act.
Background of the Case
The case arose from a dispute over the auction of a secured property—a basement in Old Rajinder Nagar, New Delhi—by Kotak Mahindra Bank Ltd. (Respondent No. 1) to recover unpaid dues from Champa Bhen Kundia, the original owner and borrower. Sanjay Sharma, the appellant, emerged as the successful bidder in the public auction conducted on December 21, 2010. However, respondent No. 2, claiming ownership through an unregistered agreement to sell, challenged the auction.
Respondent No. 2 argued that the property was sold to him in 2001 through an unregistered agreement to sell and a General Power of Attorney. These claims were initially upheld by the Debt Recovery Tribunal (DRT) but overturned by the Appellate Tribunal in 2014. The Delhi High Court later reinstated the DRT’s decision, prompting the appellant to approach the Supreme Court.
Legal Issues
The key legal questions revolved around:
1. Validity of Ownership Claims: Whether an unregistered agreement to sell could establish ownership rights over immovable property.
2. Scope of the Right of Redemption: Whether Respondent No. 2 had the right to redeem the mortgaged property under Section 13(8) of the SARFAESI Act after the auction.
3. Conduct of the Auction: Whether the auction conducted by Kotak Mahindra Bank adhered to the statutory requirements of the SARFAESI Act.
Supreme Court’s Observations and Decision
The bench, comprising Justice B.V. Nagarathna and Justice Nongmeikapam Kotiswar Singh, unequivocally held that ownership of immovable property requires a registered sale deed, regardless of possession or consideration paid. The Court emphasized:
“Ownership does not pass until the sale deed is registered, even if possession is transferred and consideration is paid. Registration is the sine qua non for validating the transfer.”
The Court noted that the documents relied upon by Respondent No. 2, including the agreement to sell and General Power of Attorney, were unregistered and therefore insufficient to establish ownership rights under Section 54 of the Transfer of Property Act.
On the issue of the right of redemption, the Court observed that Respondent No. 2 had multiple opportunities to pay the outstanding dues and redeem the property but failed to do so. The Court highlighted that the right of redemption under Section 13(8) of the SARFAESI Act is not unfettered and must be exercised within the prescribed statutory timelines.
The Court also upheld the validity of the auction, stating that it was conducted in compliance with the SARFAESI Act and did not suffer from any material irregularities or fraud. Citing its earlier decisions, the bench remarked:
“A public auction cannot be set aside lightly unless there is evidence of fraud, collusion, or grave irregularities.”
The Supreme Court set aside the High Court’s order, restored the Appellate Tribunal’s decision, and directed the bank to hand over possession of the property to the appellant. It also permitted the appellant to take further legal steps to secure possession if necessary.
Parties and Representation
– Appellant: Sanjay Sharma, represented by Mr. R.C. Kaushik and Mr. M.K. Goel.
– Respondent No. 1: Kotak Mahindra Bank Ltd., represented by Mr. Arun Aggarwal and Ms. Anshika Agarwal.
– Respondent No. 2: Represented by Ms. Kanika Agnihotri and Mr. Rajeev Singh.
