Auction Sale Bound by Final Outcome of Appeal – Delhi High Court

In a significant ruling, the Delhi High Court has held that the auction sale of a property will remain bound by the final outcome of the pending appeal. The decision came in the case of Sushil Kumar Chadha vs Canara Bank & Ors., concerning the release of title deeds of a property auctioned by Canara Bank.

Legal Point of Judgement: The court’s judgement revolved around the legality of the auction sale of a property and the obligations of both the auction purchaser and the bank in such proceedings. Central to this was the compliance with Rules 60 and 61 of the Second Schedule of the Income Tax Act, 1961.

Facts and Issues: The petitioner, Sushil Kumar Chadha, acquired a property through an auction sale which was later challenged by the deceased original owners in an appeal before the Debt Recovery Tribunal (DRT). Despite being in physical possession since 2008, the legality of the auction and subsequent sales came under scrutiny.

Misrepresentation and Legal Compliance: The court observed that the petitioner may have misrepresented the status of the auction sale and failed to comply with the court’s earlier direction to inform subsequent purchasers about the pending litigation.

Role of Canara Bank: The court scrutinized the bank’s conduct, especially regarding its incorrect submission about the appeal’s status as abated, highlighting the need for strict compliance with legal procedures in auction sales.

Expedited Appeal Hearing: Recognizing the lengthy delay since the appeal’s filing in 2008, the court directed an expedited hearing of the pending appeal.

Decision of the Judgement: The court ruled that the auction sale of the property shall remain bound by the final outcome of the pending appeal. It was directed that any further sale of the property during the pendency of the appeal should clearly mention the ongoing litigation in the sale documents. The court disposed of the related applications and dismissed the contempt petition, finding no grounds for initiating contempt proceedings.

Date of Decision – 19^th February, 2024

Shri Sushil Kumar Chadha vs Canara Bank & Ors.