The High Court dismisses a writ petition by third-party purchasers claiming fraud against an original owner. The Court holds there is no privity of contract with the mortgagee bank, precluding OTS claims and barring intervention in the bank's statutory auction rights.
Writ Petition dismissed; connected interim relief disposed of as infructuous.
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The Hon’ble Sri Justice C.V.Nagarjuna Reddy
and
The Hon’ble Sri Justice G.Shyam Prasad
Writ Petition No.29473 of 2016
Date: 01.09.2016
Between:
K.Vijayasimha Reddy and 2 others
..Petitioners
and
Bank of India rep. by its Branch Manager Malakpet Branch, Hyderabad and 2 others
..Respondents
Counsel for the Petitioners: Mr.GL.Narasimha Rao
The Court made the following:
CVNR, J & GSP, J WP.No.29473 of 2016 Dt: 01.09.2016
2
Order: (Per the Hon’ble Sri Justice C.V.Nagarjuna Reddy)
The petitioners, who claim to be the third in line purchasers of certain properties, which were allegedly mortgaged by respondent No.3 to respondent No.1, filed this Writ Petition feeling aggrieved by the purported inaction of respondent Nos.1 and 2 in accepting their offer for One Time Settlement (OTS).
From the pleadings of the petitioners, it is evident that respondent No.3 was the original owner of the properties and that she has sold the same to a third party, who in turn sold them to the petitioners’ vendor, and that the petitioners have purchased the same under registered sale deeds. They further pleaded that after the properties were purchased by them, they came to know that respondent No.3 has played fraud by not disclosing the fact of mortgaging those properties to respondent No.1, as a result of which, none of the purchasers down the line were aware of the encumbrance she has created over those properties.
The grievance of the petitioners is that respondent Nos.1 and 2 have not been entertaining their request for OTS and are seeking to auction the properties under the Securitisation and
CVNR, J & GSP, J WP.No.29473 of 2016 Dt: 01.09.2016
3
Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short ‘the Act’).
In our opinion, this Writ Petition is wholly misconceived for the reason that there is no privity of contract between the petitioners on one side and respondent Nos.1 and 2 on the other side. If respondent No.3 has committed fraud in suppressing the fact of mortgage of the properties sold to her purchasers, the latter are entitled to avail civil and criminal remedies available to them in law. Indeed, the petitioners have pleaded that they have already initiated criminal action against respondent No.3. Respondent Nos.1 and 2 being the mortgagees cannot be prevented from exercising their rights flowing from the deeds of mortgage as well as the statutory provisions under the Act.
As regards the OTS, the petitioners have not placed before us any statutory provisions or the scheme formulated by respondent Nos.1 and 2 under which third parties like them were entitled to insist on settlement of dues under the OTS. In the absence of any privity of contract between the petitioners and respondent Nos.1 and 2, such a request cannot be countenanced in law.
CVNR, J & GSP, J WP.No.29473 of 2016 Dt: 01.09.2016
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For the afore-mentioned reasons, we do not find any merit in this Writ Petition and the same is, accordingly, dismissed.
As a sequel to dismissal of the Writ Petition, WPMP.No.36482 of 2016, filed by the petitioners for interim relief, is disposed of as infructuous.
_____
(C.V.Nagarjuna Reddy, J)
(G.Shyam Prasad, J)
Dt: 1 st September, 2016
lur
2 issues framed by the court
Whether a third-party purchaser of mortgaged property without privity of contract can seek a One Time Settlement from the mortgagee bank.
Whether the petitioner can restrain the mortgagee from exercising statutory rights under the SARFAESI Act.
1 provisions across 1 enactments
K.Vijayasimha Reddy and 2 others
Bank of India
C.V. Nagarjuna Reddy
G. Shyam Prasad
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
