Stating that the Authorised Officer of a nationalised bank had committed serious irregularities in the sale of a property at Besant Nagar here, the Madras High Court has directed the bank’s Chairman-cum-Managing Director to conduct an inquiry in the matter and take appropriate action against all concerned.

The enquiry should be conducted by an officer not below the rank of a General Manager.

A Division Bench comprising Justices D. Murugesan and K.K. Sasidharan passed the order while allowing a writ petition by one Hemalatha Ranganathan who sought the quashing of an order of the Chief Metropolitan Magistrate of February 22 this year and consequently direct the bank to hand over possession of a portion of the property to her.

By the February order, the CMM had permitted the bank to take possession of the property from one Rajalakshmi who died in December last year. The petitioner had succeeded to the estate.

The writ petition’s substance related to the collusive sale made by the Authorised Officer (AO), Indian Bank, Circle Office, here, in favour of a person who was not even a bidder. The auction proceedings had been conducted in spite of a High Court stay that restrained the bank from proceeding further with the sale.

Subsequently, the officer had taken action to take possession of the property by approaching the CMM, Egmore, under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act without divulging the background facts. This was followed by the issue of a sale certificate in favour of a stranger.

Writing the order for the Bench, Mr. Justice Sasidharan said a perusal of the file revealed that the AO had committed serious irregularities in the sale. It had been made in utter violation of the mandatory provisions of the SARFAESI Act besides the terms and conditions of the bank’s auction notification. The AO confirmed the sale in the name of a third party, accepted 75 per cent of the sale consideration after 17 months and ultimately sold the property to yet another person.

‘Classic example of misusing power’

“The present case is a classic example as to how Authorised Officers of the banks are dealing with the secured assets by misusing the enormous power at their command,” Mr. Justice Sasidharan said.

The Bench said Magistrates should not pass orders under Section 14 of the Act in a routine manner. They should satisfy themselves that the court’s intervention was necessary to take possession of the property concerned.

There were instances where Advocate-Commissioner (AC) with police assistance locked the premises without even allowing the inmates to take the cooked food or uniform and books of school-going children. In the normal circumstances, it was not necessary to order police protection and permission to break-open the lock and similar drastic steps at the first instance. It was always open to magistrates to issue suitable directions to execute the order under Section 14 of the Act depending upon the AC’s report after the initial inspection.

Setting aside the CMM’s order, the Bench directed the CMM to put the petitioner in vacant possession of the property by deputing the very same AC or another AC within two weeks.