1) the issue that would arise was whether you were aware of the encumbrance . ?
2) if you were aware and yet submitted your bid you cannot now refuse to pay balance 75%
3) bank would refuse to refund your 25%of earnest money paid by you
4) the Madras High Court in Jai Logistic's case
(supra) has observed in para no.5 as under :
“We have considered the submissions. Of
course, in the aforesaid judgment, the Supreme Court,
while considering a sale by the Official Liquidator, has
held that it is the duty of the intending purchaser to
satisfy himself as to the encumbrance before
participating in the bid. Having participated in the
bid, the intending purchaser cannot later on turn
around and question the Official Liquidator on the
ground that the encumbrance was not notified. In that
case, the provisions of the Rules as applicable in the
present case are not applicable to the Official
Liquidator. But in the case on hand, once possession
is taken over under section 13(4) or under Section 14 of
the SARFAESI Act, whenever the secured creditor
contemplates a sale of immovable property, they will
have to follow Rule 8 of the Rules of 2002. Rule 8(6)(f)
mandates the secured creditors to set out in the terms
of sale notice any other thing which the authorized
officer considers it material for a purchaser to know in
order to judge the nature and value of the property. A
reading of the said rule, in our opinion, would also
include the encumbrance relating to the property. We
are inclined to read the rule in that way keeping in
mind the interest of the intending purchaser to be put
on notice as to the encumbrance, as otherwise he/she
will be purchasing the property and simultaneously
buying the litigation as well and an intending
purchaser may not bid in the event he/she came to
know of any encumbrance over the property. That is
why the rule specifically contemplates a provision for
the authorized officer, while notifying the sale, to
specifically state as to the encumbrance. It will be a
different issue in the event the auction notice indicated
that it is the duty of the intending purchaser to verify
not only the encumbrance by way of alienation of the
property, but also the other statutory liabilities and in
:::
that case, the intending purchaser cannot later on turn
around and seek for either the refund of the earnest
money deposited or insist the bank to clear the
encumbrance. In the absence of such indication in the
sale notice, in our considered view, the respondentbank
would not be justified in compelling a purchaser
to go ahead with the sale by depositing the balance
sale consideration together with the encumbrance.”
Madras High Court, therefore, allowed the writ petition
and set aside the impugned order of forfeiture.
