1. Statutory Protection of Title:

Once a secured creditor (e.g., a bank) completes the auction process under Rule 9 of the Security Interest (Enforcement) Rules, 2002, and issues a sale certificate to the highest bidder, the auction purchaser is vested with legal title to the property.

Key Rights:

• Title free from encumbrance: Section 13(6) of the SARFAESI Act provides that once the sale is confirmed, the purchaser gets the property free from any encumbrances.

• Protection from prior owner's interference: The auction purchaser is entitled to peaceful possession and enjoyment of the property.

2. Right to Sale Certificate:

Upon full payment of the auction price, the secured creditor must issue a sale certificate in favor of the auction purchaser. It is the duty of the Secured Creditor to issue the Sale Certificate without delay. The Auction Purchaser is vested with this right and can sue the Secured Creditor in case of delay or denial. This is governed by Rule 9(6) of the Security Interest (Enforcement) Rules, 2002.

Key Points:

• The sale certificate is proof of ownership and forms the basis for mutation of the property in government records.

• It affirms that the auction was conducted under legal authority.

• It grants complete power over the asset to the Auction Purchaser, who shall thereafter be known as the “Absolute Owner” of  the Property. This means they have all rights and responsibilities associated with ownership, including the right to possess, use, and dispose of the property. 

3. Right to Possession:

While the purchaser gets legal title through the sale certificate, physical possession is also necessary.

What if possession is not given?

• The auction purchaser can request the secured creditor to assist in obtaining physical possession under Section 14 of the SARFAESI Act.

• Courts have held that the auction purchaser cannot be made to suffer for the delays caused by refusal of the borrower to vacate.

4. Right to Refund, in Case of Set Aside Sale:

If a court or tribunal sets aside the sale for procedural lapses, the auction purchaser has a right to get a refund of the purchase amount along with reasonable interest.

Related Case Law:

The Supreme Court in Janata Co-operative Bank Ltd. v. Joint Registrar, Co-operative Societies, emphasized compensation for the purchaser if the sale is invalidated through no fault of the Auction Purchaser.

5. Not Mandatory to Investigate Title:

Unlike private transactions, an auction under SARFAESI is deemed to be authoritative and conclusive. The purchaser has no duty to investigate the title. The liability shall be borne by the Secured Creditor (Bank) and the Borrower. The Supreme Court of India has ruled that auction will be nullified if there is Fraud, Undue Influence, Misrepresentation, illegality, procedural lapses etc.

Hence, purchasers should ensure:

• That proper procedures were followed during the auction,

• That the borrower has not secured an interim stay order.

6. Right to Seek Judicial Remedy:

If the auction purchaser is denied possession or faces harassment, the Auction Purchaser can:

• Approach the High Court under Article 226 of the Indian Constitution,

• Initiate civil proceedings for injunction and possession,

• File a Contempt Petition and initiate a Case, if court orders are disobeyed.

CONCLUSION:

The rights of an auction purchaser under the SARFAESI Act are not only statutorily protected but have also been reinforced consistently by Indian courts. The legal framework ensures that purchasers acquire a clean and marketable title. For investors and buyers seeking secured property acquisitions, SARFAESI auctions present a legally sound and economically viable opportunity. With a growing emphasis on transparency and due diligence by banks, participating in such auctions offers a reliable path to property ownership. Buyers can proceed with confidence, knowing that the law and judiciary stand firmly in support of their rights.

SOURCE: Various Sources

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Disclaimer : The content in this blog is for informative purposes only. Expert opinion may be sought as your case and circumstances may be.