"19. Conjoint reading of Section 13(4) of the SARFAESI Act and Rule 9 clauses 9 and 10 would clearly show that the authorised officer, shall deliver the property to the purchaser, free from encumbrances known to the secured creditor, on deposit of money as specified in subrule 2. However, the above said rule does not prevent the bank to bring the property for auction, when there are encumbrances attached to the property. Hence, the contention of the petitioner that bank cannot bring the property for auction, when there is encumbrance attached to it, cannot be sustained. However, bank is duty bound to disclose the encumbrances, attached to the properties and litigations or occupation by a tenant if there is any lis or lien attached to the property. Merely by including a clause as is where is basis or as is what is condition stated in the sale notice does not obviate the bank from disclosing the encumbrance attached to the property, brought for in auction. When there is no notification or mention of encumbrance, it is difficult to accept the contention of the bank that the property was auctioned as is where is basis and as is what is condition. Though it would satisfy the Rules of Security Interest Enforcement Rules, 2002, bank cannot, in any situation, wash away the responsibility in disclosing the encumbrances, in the notification or taking clear possession under Section 14 of the SARFAESI Act 2002 and handing over possession to the auction purchaser. There is no mention neither in the counter nor by the respondent counsel that whether possession has been taken under Section 14 of the Act. Unless the bank takes possession, the question of bringing the property for e-auction under Section 13(4) is not completed. Though as a secured creditor on the assets of the borrower or mortgaged or collateral, the right of the bank on such property will assume only after taking possession under Section 14 of the Act and only thereafter, the bank can initiate steps to bring the property for auction."
