Decided on June 01,2020

Telangana State Southern Power Distribution Company Limited Appellant
Srigdhaa Beverages Respondents


SANJAY KISHAN KAUL,J. - (1.)The respondent is an auction-purchaser of a unit owned by M/s. SB Beverages Private Limited, which failed to pay its dues, resulting in the auction by Syndicate Bank (Secured Creditor) under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the 'SARFAESI Act'). The moot point of law, which arises for consideration, is whether the liability towards previous electricity dues of the last owner could be mulled on to the respondent.
(2.)The unit in question is a mineral water bottling plan situated in land measuring 1 acre 13 guntas in Sy. No.283 at Rampally Village, Keesara Mandal, Medchal District. As mentioned aforesaid, on account of failure to repay a loan, the creditor, Syndicate Bank, brought the property to auction for which an E-auction sale notice dated 25.5.2017 was issued in this behalf, in which the respondent was the successful auction-purchaser. In order to appreciate the controversy before us, it is necessary to reproduce some of the relevant clauses of the auction notice:
"The property described below is being sold on "AS IS WHERE IS, WHATEVER THERE IS AND WITHOUT RECOURSE BASIS" under the rule no.8 and 9 of the Security Interest (Enforcement) Rules (hereinafter referred to as the rules) for the recovery of the dues detailed as under:

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21. The successful bidder shall bear the stamp duties, charges including those of sale certificate, registration charges, all statutory dues payable to central/state government, taxes and rates and outgoing, both existing and future relating to the properties.

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24. The property is sold in "AS IS WHERE IS, WHAT IS THERE IS AND WITHOUT ANY RECOURSE BASIS" in all respects and subject to statutory dues if any. The intending bidders should make discrete enquiry as regards any claim, charges/encumbrances on the properties, of any authority, besides the bank's charges and should satisfy themselves about the title, extent, quality and quantity of the property before submitting their bid. For any discrepancy in the property the participating bidder is solely responsible for all future recourses from the date of submission of bid.

25. No claim of whatsoever nature regarding the property put for sale, charges/encumbrances over the property or on any other matter etc., will be entertained after submission of the bid/confirmation of sale.

26. The Authorised Officer will not be responsible for any charge, lien, encumbrance, property tax dues, electricity dues, etc., or any other dues to the Government, local authority or anybody, in respect of the property under sale."

(3.)The aforesaid auction notice shows that the unit was being sold on "as is where is, what is there is and without any recourse basis", as per Rules 8 & 9 of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as the 'said Rules'). The aforesaid clauses of the E-auction sale notice show that the total outstanding dues were much larger, but the reserve price fixed was lower, and the actual sale consideration of the successful auctioneer was Rs.9,18,65,000, which is approximately Rs.10 lakh more than the minimum reserve price. Clause 24 reproduced aforesaid makes it clear that when the reference is to a sale on "as is where is, what is there is and without any recourse basis", the same is "in all respects and subject to statutory dues". This clause was further subject to another Clause 26, where the Authorised Officer carrying out the auction absolved himself of the liability for any charge, lien, encumbrance, property tax dues, electricity dues, etc. The purpose is to emphasise that a holistic reading of all these clauses left little in doubt that the auction notice provided for a reserve price, with a bid being made about Rs.10 lakh over and above that, and certain nature of charges, lien, encumbrances, including electricity dues were clearly beyond the sale consideration paid.

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