High Court Holds: Auction Purchaser Cannot Claim Relief for Undisclosed Society Dues under ‘As Is Where Is’ Sale
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REEDLAW Legal News Network reports: In a significant ruling, the Allahabad High Court clarified that an auction purchaser acquiring a property on an ‘as is where is’ and ‘as is what is’ basis cannot later seek relief for undisclosed society dues or liabilities discovered after the sale. The Court underscored that such sales impose a duty of due diligence upon the bidder, and failure to verify encumbrances cannot be grounds to seek post-auction relief or modification of sale terms.
The Allahabad High Court Division Bench comprising Justice Swarupama Chaturvedi and Justice Ajit Kumar, while adjudicating a Writ Petition filed by an auction purchaser under Article 226 of the Constitution of India, held that an auction purchaser who acquires property on an ‘as is where is’ and ‘as is what is’ basis cannot claim relief for undisclosed society dues or liabilities discovered post-sale. The Bench emphasised that the responsibility to verify all encumbrances or dues rests solely upon the bidder prior to purchase, and any subsequent discovery of liabilities does not entitle the purchaser to seek redress from the auctioning authority.
The petitioner, an auction purchaser, had approached the High Court under Article 226 of the Constitution of India seeking directions for the restoration of water supply to a flat purchased through a SARFAESI e-auction. The petitioner contended that substantial society dues, accrued under the account of the previous owner, were neither disclosed by the bank at the time of auction nor reflected in the encumbrance certificate. It was argued that the respondent bank had failed to obtain a no-dues certificate from the resident welfare society before conducting the auction, and therefore, could not absolve itself of responsibility by relying on the “as is where is” clause in the sale notice.
The respondent bank contended that the property was sold strictly on an “as is where is”, “as is what is” and “whatever there is” basis, and that it bore no liability for undisclosed dues, since the auction purchaser was expected to verify all encumbrances independently before bidding. It was further submitted that no communication regarding the society dues was received from the society prior to the auction.
The Court, after hearing the parties and examining the record, referred to the decisions in South Indian Bank Limited and Another v. JAC Olivol Products Private Limited and Others, REEDLAW 2024 Cal 04280 and K.C. Ninan v. Kerala State Electricity Board and Others, REEDLAW 2023 SC 05294, wherein it was held that bidders participating in an auction conducted on an “as is where is” basis cannot later claim relief for pre-existing liabilities, as the seller undertakes no responsibility for any such dues. Applying these principles, the Court held that the petitioner, having participated in the e-auction with full knowledge of its terms, was bound by the same and could not subsequently raise grievances regarding undisclosed liabilities or non-compliance under the Uttar Pradesh Apartment (Promotion of Construction, Ownership and Maintenance) Act, 2010.
The writ petition was accordingly dismissed, with liberty reserved to the petitioner to pursue remedies available under the aforesaid Act, if so advised.
Mr. Mohd. Sauood, Advocate, represented the Petitioner.
C.S.C., Mr. Satish Chaturvedi, appeared for the Respondents.
Mr. Pankaj Srivastava, Advocate, appeared for the Respondent No. 3.
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