DRAT Chennai Orders Return of Original Title Documents Of Secured Asset Sold Under SARFAESI To Lender

The Chennai Bench of the Debts Recovery Appellate Tribunal recently directed the Debts Recovery Tribunal in Madurai to return original title documents to State Bank of India in recovery proceedings against Rukmini Mills and others, after finding that there was no reason to retain them once a 1.80-acre property was sold for 66 crore under the SARFAESI Act in 2017 and the sale had attained finality.

A Bench of Chairperson Justice G. Chandrasekharan observed, “When the property is sold under SARFAESI Act, there is no possibility of recovery made on the basis of this property. The Original Application, if allowed, the recovery has to be made only from the other properties, if any, of the Defendants or holding them personally liable. After the sale of this property in SARFAESI proceedings, there is no need to keep this property in the Schedule to the Original Application"

The tribunal was dealing with an appeal filed by the bank against an order of the Debts Recovery Tribunal in Madurai, which had refused to return the documents citing pending title disputes.

The case arose from recovery proceedings initiated by the bank against Rukmini Mills and others. During the pendency of the proceedings, the secured asset measuring 1.80 acres was sold on February 9, 2017 to Tripower Enterprises Limited for 66 crore, and a sale certificate was issued on April 29, 2017. Despite this, the tribunal declined to release the original title deeds, pointing to unresolved claims over the property by a third party.

Before the appellate tribunal, the bank argued that the sale had never been challenged and had therefore attained finality. It submitted that although the Supreme Court had earlier excluded this property from the return of documents due to competing claims, it later clarified that the rights of the parties were to be examined independently. Pursuant to directions of the Madras High Court, an enquiry was conducted by the Commissioner of Land Administration, which concluded that the rival claim was based on fraudulent documents, though certain defects in the purchaser's title were also noted.

The Tribunal found that subsequent proceedings had confirmed the sale in favour of the auction purchaser and that no challenge to the sale was pending. It held that once the asset had been sold, it could not be relied upon for recovery in the pending case.

Setting aside the earlier order, the Tribunal directed the Debts Recovery Tribunal in Madurai to return the original title documents to the bank after obtaining proper acknowledgment and allowed the appeal.

For Appellant: Mr. N. Ramesh

For R10: C Uma Shankar