In a stern and precedent-setting decision, Justice Sangeeta Chandra of the Allahabad High Court, Lucknow Bench, has imposed ₹25 lakh in exemplary costs on two petitioners for abusing the process of law and misleading the Court through false pleadings, suppression of material facts, and shifting legal stands.
The Court held that withholding vital facts from a constitutional court is nothing short of fraud, and such conduct deserves to be penalized with the strictest judicial response.
Case Background
The case arose out of a property dispute linked to recovery proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
Petitioners Sunita Nishad and her husband Om Prakash had jointly owned House No. 13/88, Sector-13, Indira Nagar Vistar Yojna, Lucknow. The property was mortgaged to Bank of Baroda against a housing loan of ₹29.5 lakh. Later, their relative Jai Prakash (brother of Om Prakash) took a commercial loan of ₹90 lakh under the Kamdhenu Dairy Scheme, which was also secured by extending mortgage over the same house.
When Jai Prakash defaulted and the loan was declared an NPA, the Bank initiated SARFAESI proceedings and auctioned the property. The petitioners approached the Debt Recovery Tribunal (DRT), which initially ruled in their favor, citing non-service of notices. However, the Bank succeeded in appeal before the Debt Recovery Appellate Tribunal (DRAT), which upheld the auction.
The petitioners then challenged the DRAT order before the Allahabad High Court, claiming they never guaranteed Jai Prakash’s loan and that the Bank had committed fraud by extending the mortgage over their house without consent.
Important Legal Issues
- Whether the petitioners were indeed guarantors and had extended the mortgage over their property for Jai Prakash’s loan.
- Whether service of demand notice under Section 13(2) of the SARFAESI Act was valid despite a minor error in the postal receipt.
- Whether non-disclosure of encumbrance in the auction notice vitiated the sale.
- Whether repeated litigation with inconsistent pleas amounts to fraud on the court.
Key Observations of the Court
Justice Chandra, after scrutinizing documents and prior proceedings, held that the petitioners had willfully concealed critical facts and adopted inconsistent legal stands over the years:
“This Court finds that the petitioners have resorted to misrepresentation and deliberate falsehood… They have not approached the Court with clean hands.”
On service of notice:
“A minor typographical error (‘Savita’ instead of ‘Sunita’) in the postal receipt does not vitiate valid service. The notice was correctly addressed and never returned unserved. Under Section 27 of the General Clauses Act, service is deemed complete.”
On guarantee and mortgage:
“The petitioners themselves signed extension of mortgage documents… They cannot now turn around and disown what they solemnly affirmed under their own signatures.”
On multiple contradictory petitions:
“The process of this Court is not a game of chess where a litigant can play with facts to suit convenience. Courts cannot be used as testing grounds for collusive or dishonest litigation.”
Decision of the Court
The High Court dismissed the writ petition with ₹25 lakh cost, breaking it into:
- ₹15 lakh to be paid to Mamta Yadav, the auction purchaser, who had paid the full consideration and taken a housing loan in 2017 but was deprived of possession for over seven years due to the petitioners’ actions.
- ₹10 lakh to be deposited with the U.P. State Legal Services Authority (UPSLSA).
The Court refused to accept the petitioners’ plea that they were unaware of the mortgage or were coerced into guaranteeing Jai Prakash’s loan. It also upheld the DRAT’s ruling affirming the auction and the sale certificate issued to Mamta Yadav.
“Such conduct amounts to fraud on the Court and must be punished to maintain the sanctity of judicial process,” Justice Chandra concluded.
Case Details
- Case Title: Sunita Nishad and Anr. vs. Debt Recovery Appellate Tribunal & Ors.
- Case No.: Writ-C No. 35050 of 2019
- Judgment Reserved: November 5, 2024
- Judgment Delivered: April 1, 2025
- Neutral Citation: 2025:AHC-LKO:17786
- Bench: Justice Sangeeta Chandra
- Petitioners’ Advocates: Sushil Kumar, Abhiuday Pratap Singh, Amrendra Nath Tripathi, Meenakshi Singh Parihar, Rakesh Chandra Tewari
- Respondents’ Advocates: Prashant K. Srivastava, Rakesh Pal, P.C. Chauhan, Ramesh Chandra, S.C. Tiwari, Vidya Kant Sharma
- Auction Purchaser’s Advocate: Shailendra Singh Rajawat
