Registered Sale Deed Alone Does Not Dismantle Prior Security Interest: Gauhati High Court Rejects Buyer’s Writ Against SARFAESI Action, Cites Expanded Statutory Definition

“Security Interest Can Arise Even From a Contractual Agreement”: Gauhati High Court in Shri Apurba Dev Sarma v. District Magistrate, Kamrup (Metro) & Ors. Rejected a writ petition challenging SARFAESI proceedings initiated by HDFC Bank against a residential flat, ruling that a valid “security interest” existed in favour of the bank despite the absence of a registered sale deed in its name. A Division Bench of Chief Justice Vijay Bishnoi and Justice N. Unni Krishnan Nair held that “the expression ‘security interest’ as amended under the 2016 Act includes even agreements securing unpaid obligations towards acquisition of assets.” The Court reaffirmed that the petitioner had an alternate remedy under Section 17 of the SARFAESI Act before the Debts Recovery Tribunal and dismissed the writ. 
  
The petitioner, Shri Apurba Dev Sarma, purchased a flat through a registered sale deed dated 27.09.2023 from one Ester Rupa Sahu Jyrwa, who had earlier acquired the same from the original builder. Unbeknownst to him—or so he claimed—the flat was already the subject of a loan granted in 2015 by HDFC Bank to two other individuals (respondents 6 and 7), who had defaulted on their repayments, resulting in the account being classified as a Non-Performing Asset (NPA). 
 
Prior to the actual construction of the flat, a tripartite agreement dated 20.08.2015 was executed between HDFC Bank, the builder, and the original borrowers, wherein the builder committed to secure the loan by conferring first charge over the flat to the bank. Based on this agreement, the bank disbursed Rs.36.5 lakhs as loan. However, the flat was later sold in 2022 by the builder in breach of this prior obligation. 
 
The petitioner challenged the possession notice under Section 14 SARFAESI Act, arguing that he was a bona fide purchaser for value with a registered deed and that the bank’s claim based only on a loan and tripartite agreement had no legal sanctity absent a registered conveyance. 

The central question before the Court was: “Whether a valid security interest under the SARFAESI Act can be created in favour of the bank merely on the basis of a tripartite agreement and without any registered sale deed?” 
 
Mr. D. Das, senior counsel for the petitioner, argued: “It is settled law that no title or interest can pass in immovable property merely on the basis of an 
agreement for sale.” 
 
He cited the Suraj Lamp ruling [(2012) 1 SCC 656] and other precedents such as Rambhau Namdeo Gajre [(2004) 8 SCC 614], and Shakeel Ahmed [(2023) SCC OnLine SC 1526], reinforcing the statutory mandate of Section 54 of the Transfer of Property Act, which states that a contract for sale does not by itself create any interest in or charge upon the property. 
 
He also contended that since the petitioner was not a party to the loan, he could not be covered under the expression “any person” under Section 17(1) of the SARFAESI Act. 
 
On the other hand, Mr. K.P. Pathak, counsel for HDFC Bank, argued that with the 2016 amendment to Section 2(1)(zf) of the SARFAESI Act, the definition of “security interest” was expanded to include any right created through agreements that secure an unpaid obligation or enable acquisition of a tangible asset. 
 
“The petitioner cannot disregard the security interest merely because he holds a registered sale deed. His vendor had no clean title, as the property was already under charge by contractual agreement.” 
 
He emphasized that public notices were issued in newspapers as early as March 2018 alerting to the 
bank’s interest. 
 
 The Court agreed with the bank and held: “From the definition of ‘security interest’ provided in Section 2(1)(zf) of the SARFAESI Act, it is clear that in the present case, a security interest was created in favour of the HDFC Bank.” 
 
The Bench rejected the petitioner’s reliance on the pre-2016 definition, stating: “The petitioner has placed reliance on the old definition of ‘security interest’… which is no longer the law in force.” 
 
Referring to the Vishwanath M. Pai v. Corporation Bank decision (2019 SCC OnLine Mad 29493), the Court cited the Madras High Court’s finding that a security interest can validly arise even when the property was not yet in existence, based on agreements and intention to create mortgage through contractual documents. 
 
The Bench observed that: “The petitioner is at liberty to approach the Debts Recovery Tribunal under Section 17 of the SARFAESI Act against the action of the respondent Bank, if so advised.” 
 
On the contention that the petitioner is not an aggrieved “person” under Section 17, the Court cited the Supreme Court in United Bank of India v. Satyawati Tondon [(2010) 8 SCC 110]: “The expression ‘any person’ used in Section 17(1) is of wide import. It takes within its fold not only the borrower but also any other person who may be affected by the action taken under Section 13(4) or Section 14.” 
 
The Gauhati High Court upheld the primacy of contractual obligations under the amended SARFAESI regime and held that even absent a registered sale deed, a valid security interest can arise under a tripartite arrangement. The judgment strengthens the hands of financial institutions and reinforces the doctrine of constructive notice against subsequent purchasers. 
  
Date of Decision: April 3, 2025