Case: Haryana Financial Corporation  Vs. Rajesh Gupta

of the opinion that the Division Bench was justified in further concluding that in law the appellants/Corporation undoubtedly has the power to forfeit the earnest money provided there was a failure on the part of the respondent to make the deposit. The Division Bench, however, observed that the respondent was dealing with an instrumentality of state. He was entitled to legitimately proceed on the assumption that the appellants, a Statutory Corporation, an instrumentality of the State, shall act fairly. The respondent could not have suspected that he would be called upon to pay the amount of Rs.50 lakhs without being given even a proper passage to the Unit that he was buying. We are of considered opinion that the respondent had deposited the sum of Rs.2.5 lakhs on the clear understanding that there would be an independent approach road to the Unit. This is understandable. Without any independent passage the plot of land would be not more than an agricultural plot, not suitable for development as a manufacturing unit. We therefore dont find any substance in the submission made by the learned counsel for the appellants/Corporation. 18. In our opinion, the appellants cannot be given the benefit of Clause 5 of the advertisement. The appellants /Corporation cannot be permitted to take advantage of their own wrong. Clause 5 undoubtedly permits the forfeiture of the earnest money deposited. But this can only be, if the auction purchaser fails to comply with the conditions of sale. In our opinion the respondent has not failed to comply with the conditions of sale. Rather, it is the appellants/Corporation which has acted unfairly, and is trying to take advantage of its own wrong. 19. In view of the aforesaid, we are of the considered opinion that the appellants/Corporation cannot be permitted to rely upon Section 55 of The Transfer of Property Act, 1882. The appellants/Corporation failed to disclose to the respondent the material defect about the non-existence of the independent 3 `Karam passage to the property. Therefore, the appellants/ Corporation clearly acted in breach of Section 55 (1) (a) and (b) of The Transfer of Property Act, 1882. The aforesaid Section provides as under: (1) The seller is bound- (a) to disclose to the buyer any material defect in the property [or in the sellers title thereto] of which the seller is, and the buyer is not, aware, and which the buyer could not with ordinary care discover; (b) to produce to the buyer on his request for examination all documents of title relating to the property which are in the sellers possession or power; 20. A mere perusal of the aforesaid provision will show that it was incumbent upon the appellants/Corporation to disclose to the respondent about the non-existence of the independent passage to the Unit. It was also the duty of the appellants/Corporation to inform the respondent that the passage mentioned in the revenue record was not fit for movement of vehicles. The appellant also failed to produce to the buyer the entire documentation as required by Section 51 (1) (b) of the aforesaid Section. We are therefore satisfied that the appellants/Corporation cannot seek to rely on the aforesaid provision of The Transfer of Property Act, 1882. 21. In our opinion, the reliance on Section 29 of the State Financial Corporations Act, 1951 is wholly misplaced. The aforesaid Section pertains to action which the Corporation can take against the Unit which had defaulted in payment of loan. In such circumstances the Corporation has the power to sell the property that has been hypothecated or mortgaged with the Corporation. Respondent herein is an auction purchaser and therefore cannot be confused with the defaulting unit. We are also of the considered opinion that the reliance placed on the judgment of this Court by the counsel for the appellants in the case of Union Bank of India vs. Official Liquidator and Ors. (1994) 1 SCC 575 is wholly misconceived. The aforesaid judgment relates to sale of the property and assets of a company in liquidation by the official liquidator under the orders of the Court. Therefore it is observed that the official liquidator cannot and does not hold any guarantee or warranty in respect of the property sold. That is because the official liquidator proceeds on the basis of what the records of the company in liquidation show. Therefore it is for the intending purchaser to satisfy himself in all respects as to the title and encumbrances and so forth of the immovable property that he proposes to purchase. In those circumstances it is held that the purchaser cannot after having purchased the property on such terms then claim diminution in the price on the ground of defect in the title or description of the property. The judgment clearly goes on to further hold as follows: "The case of the Official Liquidator selling the property of a company in liquidation under the orders of the Court is altogether different from the case of an individual selling immovable property belonging to himself." 22. The aforesaid observation would be clearly applicable to the Corporation as it is exercising the rights of an owner in selling the property. The appellants/Corporation is not selling the property as an official liquidator. 23. In any event, the facts of this case as narrated above would clearly indicate that the respondent had made all necessary inquiries. It was the appellants/Corporation that failed to perform its obligations in giving a fair description of the property offered for sale. Learned counsel had also relied on another judgment in the case of U.T. Chandigarh Administration and Anr. vs. Amarjeet Singh and Ors. (2009) 4 SCC 660. In our opinion, the aforesaid judgment is wholly inapplicable to the facts and circumstances of this case as it relates to the duties of a developer who carries on activities of development of land and invites application for allotment of sites in a developed layout. In our opinion the aforesaid judgment is not applicable to the facts of this case.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]18. In our opinion, the appellants cannot be given the benefit of Clause 5 of the advertisement. The appellants /Corporation cannot be permitted to take advantage of their own wrong. Clause 5 undoubtedly permits the forfeiture of the earnest money deposited. But this can only be, if the auction purchaser fails to comply with the conditions of sale. In our opinion the respondent has not failed to comply with the conditions of sale. Rather, it is the appellants/Corporation which has acted unfairly, and is trying to take advantage of its own wrong19. In view of the aforesaid, we are of the considered opinion that the appellants/Corporation cannot be permitted to rely upon Section 55 of The Transfer of Property Act, 1882. The appellants/Corporation failed to disclose to the respondent the material defect about the non-existence of the independent 3 `Karam passage to the property. Therefore, the appellants/ Corporation clearly acted in breach of Section 55 (1) (a) and (b) of The Transfer of Property Act, 188221. In our opinion, the reliance on Section 29 of the State Financial Corporations Act, 1951 is wholly misplaced. The aforesaid Section pertains to action which the Corporation can take against the Unit which had defaulted in payment of loan. In such circumstances the Corporation has the power to sell the property that has been hypothecated or mortgaged with the Corporation. Respondent herein is an auction purchaser and therefore cannot be confused with the defaulting unit. We are also of the considered opinion that the reliance placed on the judgment of this Court by the counsel for the appellants in the case of Union Bank of India vs. Official Liquidator and Ors. (1994) 1 SCC 575  is wholly misconceived. The aforesaid judgment relates to sale of the property and assets of a company in liquidation by the official liquidator under the orders of the Court. Therefore it is observed that the official liquidator cannot and does not hold any guarantee or warranty in respect of the property sold. That is because the official liquidator proceeds on the basis of what the records of the company in liquidation show. Therefore it is for the intending purchaser to satisfy himself in all respects as to the title and encumbrances and so forth of the immovable property that he proposes to purchase. In those circumstances it is held that the purchaser cannot after having purchased the property on such terms then claim diminution in the price on the ground of defect in the title or description of the property22. The aforesaid observation would be clearly applicable to the Corporation as it is exercising the rights of an owner in selling the property. The appellants/Corporation is not selling the property as an official liquidator23. In any event, the facts of this case as narrated above would clearly indicate that the respondent had made all necessary inquiries. It was the appellants/Corporation that failed to perform its obligations in giving a fair description of the property offered for sale. Learned counsel had also relied on another judgment in the case of U.T. Chandigarh Administration and Anr. vs. Amarjeet Singh and Ors. (2009) 4 SCC 660. In our opinion, the aforesaid judgment is wholly inapplicable to the facts and circumstances of this case as it relates to the duties of a developer who carries on activities of development of land and invites application for allotment of sites in a developed layoutIn our opinion the aforesaid judgment is not applicable to the facts of this case.