Kolkata: Clarifying an apparent grey area in SARFAESI law, the Calcutta High Court has ruled that borrowers need not be party to a private-treaty sale agreement under Rule 8(8), holding that the requirement of a written agreement is confined to the secured creditor and the purchaser.
The Division Bench of Justice Rajasekhar Mantha and Justice Ajay K. Gupta delivered the ruling while allowing appeals by the State Bank of India and purchaser Dr. TK Karmakar. The court set aside earlier Single Judge orders that had invalidated the sale on the ground that the borrower’s consent was not obtained in writing.
The dispute arose from a loan account declared non-performing in 2004, following which the bank issued demand and possession notices. After failed attempts at auction, the property was sold by private treaty to Karmakar for Rs 2 crore, with a registered sale certificate executed in June 2010. Borrowers challenged the sale in writ proceedings, despite earlier having approached the Debt Recovery Tribunal without success.
The Bench stressed that the 2016 amendment to Rule 8(8) was clarificatory, endorsing the interpretation that “parties” means only the secured creditor and the buyer. It observed that the sale complied with statutory requirements since terms were settled in writing between the bank and the purchaser. The court further held that writ jurisdiction under Article 226 should not have been exercised once statutory remedies under SARFAESI had been pursued and dismissed.
It noted that the borrowers had suppressed material facts, including an inflated claim of the property’s value at Rs 9 crore without documentary support, and the fact that their company was struck off from official records. Such concealment, the judges said, disentitled them to equitable relief. Allowing the appeals, the Bench vacated interim orders, restored the registered sale in favour of the purchaser and disposed of connected applications.
The ruling provides clarity on private-treaty sales and reinforces the principle that High Courts will not intervene where statutory forums exist and petitioners conceal
material facts.