Authority: High Court of Judicature at Bombay

Order Date: 11 September 2026 (pronounced)

Case Overview

  • Petitioner: Indian Overseas Bank (IOB) as secured creditor, represented by senior counsel.
  • Respondents: State of Maharashtra, District Industries Centre (Directorate of Industries, Maharashtra), Tahsildar (Taluka Khalapur, Raigad), Talati (Kumbhavali Village, Khalapur, Raigad), and the borrower (respondent No.5) who mortgaged the land.
  • In 2007 IOB sanctioned financial facilities to the borrower, securing them by equitable mortgage of the land; title deeds were deposited with IOB and charge registered on 31 Jan 2007.
  • Borrower defaulted; account classified as NPA on 31 Dec 2010.
  • IOB issued SARFAESI Act notice under Sec. 13(2) on 28 Sep 2012 and possession notice under Sec. 13(4) on 20 Dec 2012.
  • IOB later auctioned the mortgaged property on 26 Nov 2021; sale certificate issued on 22 Feb 2022 to M/s. Kaushal Metal and Steel Pvt Ltd and M/s. TGK Special Steel Pvt Ltd. However, IOB could not take control of the parcel bearing Survey No. 43/1/B due to discrepancy in survey numbers.
  • Investigation revealed that original Survey No. 46/1/2 had been renumbered as 43/1/B without change in area; the name of the borrower was deleted and replaced by the State of Maharashtra under "Clan, Vol. and Other Rights".
  • An encumbrance of Rs 2,68,99,000 was created in favour of the District Industries Centre (respondent No.2).
  • The Tahsildar (respondent No.3) received a collector’s letter on 23 Oct 2012 to recover the same amount as land revenue arrears under the MLR Code, 1966, and issued notices to the borrower.
  • The borrower failed to pay; consequently, on 8 Feb 2013 the Tahsildar directed seizure of the property under Maharashtra Realisation of Land Revenue Rules, 1967.
  • An auction was scheduled for 7 Apr 2018; no public bids were received, and the Talati purchased the land on behalf of the Government of Maharashtra for a nominal Rs 1, issuing a purchase certificate dated 7 Apr 2018 and recording a mutation entry (No. 1959) on 16 Apr 2018.
  • IOB contended that the 2018 auction was conducted while SARFAESI enforcement measures were already in force and that the sale was void as it violated the priority of a secured creditor under Sec. 26E of the SARFAESI Act.
  • Respondents argued that the government’s claim of Rs 2,68,99,000 arose from land‑revenue dues and that the attachment and proclamation under the MLR Code were valid, giving them priority.
  • The Court examined the Full Bench judgment in Jalgaon Janta Sahakari Bank Ltd. vs. Joint Commissioner of Sales Tax, particularly paragraphs 85, 151‑154, 297‑300, which clarify that priority of a secured creditor prevails unless a valid attachment and public proclamation were made before the SARFAESI Act’s Chapter IV‑A came into force.
  • The Court found no evidence that the respondents had effected a proper public proclamation of attachment, nor that any CERSAI registration of the government’s claim existed.
  • Consequently, the Court held that the respondents’ encumbrance could not override IOB’s first charge.

Final Outcome

  • The writ petition is allowed in full.
  • The auction dated 7 Apr 2018 is quashed and declared null and void; the transfer to the Government of Maharashtra is set aside.
  • Respondent Nos. 3 and 4 are directed to restore rightful control and possession of the land (old Survey No. 46/1/2, now 43/1/B) to IOB.
  • Respondent Nos. 2‑4 must delete Mutation Entry No. 1959 (dated 16 Apr 2018) from the 7/12 extract within four weeks of the order.
  • IOB’s sale to Kaushal Metal and Steel Pvt Ltd and TGK Special Steel Pvt Ltd will stand, providing IOB a clear title free from the respondents’ encumbrances.
  • After IOB’s dues are satisfied, any surplus proceeds from the sale may be claimed by Respondents Nos. 2‑4.
  • Respondents retain the right to enforce recovery of the borrower’s other assets in accordance with law.

Topics: Secured Creditor Priority, SARFAESI Act, Land Auction Quash