Prachi Pandey vs State Of U.P. Thru. Prin. Secy. Home U.P. Lko.

1. Heard Sri Saksham Agarwal, learned Counsel for the petitioner, learned Standing Counsel for the State Respondents nos.1 to 5 and Sri Sarvesh Tewari, Advocate, who has filed power on behalf of the respondent no.6- Rajdhani Nagar Sahkari Bank Ltd.

2. In view of the order proposed to be passed, issuance of notice to Respondent nos.7 to 11 is dispensed with.

3. This petition has been filed by the auction purchaser with the following prayers:- "(i) Issue a writ order or direction in the nature of mandamus commanding the O.P. No.5&6 to give the physical possession of the House No.E-4/346 Sector-O, Mansarowar, Kanpur Road Yojana, Lucknow to the petitioner. (ii) Issue a writ, order or direction in the nature of Certiorari quashing the order dated 22.05.2025 passed by the Respondent No.5 contained as Annexure-2 to this petition".

4. It is the case of the petitioner that the respondent no.7- Shree Balaji Enterprises through Proprietor Ankit Gupta, the borrower had approached the Bank at Jankipuram Branch at Lucknow for a Cash Credit Limit of Rs.18 lakhs which was sanctioned. He mortgaged two 2 WRIC No. 9328 of 2025 properties, one residential house situated at Mansarovar, Sector-O, Kanpur Road Yojana, Lucknow, and the other residential house situated over Plot no.2, portion of khasra No.763, Area-1200 Sq.ft. (111.524 sq. mtr.) situated at Village Para, Lucknow.

5. The Bank sanctioned a loan through its letter dated 08.06.2016. The loan was sanctioned to the Proprietor of Sri Balaji Enterprises, Ankit Gupta the borrower, on the basis of guarantee extended by four guarantors, namely, Smt. Sunita Gupta, one Pankaj Gupta and one Anil Agarwal and Dinesh Kumar Sharma. When the loan account was not settled and there were dues of more than Rs.28 lakhs, notice under Section 13(2) of the SARFAESI Act, 2002, (hereinafter referred to as "the Act of 2002") was issued on 14.06.2023 by the Bank to the Borrower and the Guarantor. No representation being received by the Bank from the Borrower or by the Guarantor, the Bank proceeded to take possession under Section 13(4) of the Act, 2002. Such notices were addressed to the Borrower as well as to the Guarantors. Even thereafter, the Borrower did not inform the Guarantor of his intent to settle the loan dues. The Bank proceeded under Section 14 of the SARFAESI Act, 2002, and made an application on 17.02.2024 before the District Magistrate for physical possession of the secured asset i.e. the residential property situated at House No.E-4/346, Sector-O, Mansoarowar, Kanpur Road Yojana Lucknow. While this application was moved, an E-auction was held in which the petitioner emerged the highest bidder and after payment of the entire sale consideration, a valid Sale Certificate was issued.

6. However, during the proceedings under Section 14 of the Act of 2002, the Borrower informed the District Magistrate on notice being issued to him that one of the Guarantors, Anil Agarwal, had died even before the notice under Section 13(2) and 13(4) was issued to him and his legal representatives should have also been issued notice. However, no notice was issued to the legal representatives, instead the Bank proceeded to auction the property. The respondent no.5 proceeded to reject the application under Section 14 with the observation that the Bank should have been issued notice to the legal representatives of the dead Guarantor without looking into the fact 3 WRIC No. 9328 of 2025 that the petitioner had already purchased the property through a valid auction held on 12.11.2024 by paying an amount of Rs.26,05,000/- as against the loan account dues of Rs.28,54,278/-.

7. It has been submitted by learned Counsel for the petitioner that the Bank had proceeded against the other secured asset of the Borrower i.e. the residential house constructed over 1200 sq.ft. of Khasra No763 at Village Para (Shivpuram), Ward-Alamnagar, Tehsil & District- Lucknow, U.P., which property had also been auctioned by the Bank by resorting to proceedings initiated under the Act of 2002 by issuing notice under Section 13(2) and 13(4) to the Guarantors and the Borrower, and thereafter filing an application under Section 14 before the District Magistrate for delivery of actual physical possession of the property. The case was registered as Case No.747 of 2024, which has been decided by another Additional District Magistrate nominated for the said purpose by the District Magistrate. He has considered the arguments raised by the Bank that although the Guarantor had died, the Borrower was still alive and it was the Borrower whose property was proposed to be auctioned first as he had created a mortgage in favour of the Bank as security for the loan that he had taken and rejected the arguments of the Borrower.

8. It has been submitted that just because a person who has decided the application under Section 14 is now different from the person who had decided the earlier application under Section 14 of the Act preferred by the Bank on 15.04.2025, the result of the two applications could not be dynamically opposite to each other.

9. Having gone through the order dated 15.04.2025 which has not been challenged before this Court, we find that there is a legal infirmity in the order but since it has not been challenged, it cannot be set aside in collateral proceedings.

10. The liability of the Borrower and Guarantor is co-extensive in nature. If the loan account dues are not settled by the Borrower and his secured asset is auctioned and the money received from such sale proceedings, does not satisfy the loan amount/ dues of the Bank, then the Bank is entitled to proceed against the property of the 4 WRIC No. 9328 of 2025 Guarantors and such Guarantors should be properly noticed before the Bank can proceed for auction sale of their property. In this case, admittedly one of the Guarantors had died before notice under Section 13(2) and Section 13(4) was issued.

11. In case, the loan account which was of Rs.28,54,278/- as on

14.06.2023, from the property of the Borrower then the property of the Guarantor is vis-a-vis, without any opportunity being given to such Guarantor to settle the loan account. If his legal representatives are noticed, then they can certainly come forward under Section 13(A) and make the payment as is due to the Borrower.

12. We find no legal infirmity in the order impugned, but we dispose of this petition with a direction to the Bank to return the money of the auction purchaser i.e. the petitioner along with interest at bank rate within a period of three weeks from today. The Bank is free to proceed against the Borrower, Guarantor and representatives in accordance with the provisions of the Act by properly noticing them. September 24, 2025 N.PAL (Brij Raj Singh,J.) (Mrs. Sangeeta Chandra,J.) NARESH PAL High Court of Judicature at Allahabad, Lucknow Bench

1. Heard Sri Saksham Agarwal, learned Counsel for the petitioner, learned Standing Counsel for the State Respondents nos.1 to 5 and Sri Sarvesh Tewari, Advocate, who has filed power on behalf of the respondent no.6- Rajdhani Nagar Sahkari Bank Ltd.

2. In view of the order proposed to be passed, issuance of notice to Respondent nos.7 to 11 is dispensed with.

3. This petition has been filed by the auction purchaser with the following prayers:- "(i) Issue a writ order or direction in the nature of mandamus commanding the O.P. No.5&6 to give the physical possession of the House No.E-4/346 Sector-O, Mansarowar, Kanpur Road Yojana, Lucknow to the petitioner. (ii) Issue a writ, order or direction in the nature of Certiorari quashing the order dated 22.05.2025 passed by the Respondent No.5 contained as Annexure-2 to this petition".

4. It is the case of the petitioner that the respondent no.7- Shree Balaji Enterprises through Proprietor Ankit Gupta, the borrower had approached the Bank at Jankipuram Branch at Lucknow for a Cash Credit Limit of Rs.18 lakhs which was sanctioned. He mortgaged two 2 WRIC No. 9328 of 2025 properties, one residential house situated at Mansarovar, Sector-O, Kanpur Road Yojana, Lucknow, and the other residential house situated over Plot no.2, portion of khasra No.763, Area-1200 Sq.ft. (111.524 sq. mtr.) situated at Village Para, Lucknow.

5. The Bank sanctioned a loan through its letter dated 08.06.2016. The loan was sanctioned to the Proprietor of Sri Balaji Enterprises, Ankit Gupta the borrower, on the basis of guarantee extended by four guarantors, namely, Smt. Sunita Gupta, one Pankaj Gupta and one Anil Agarwal and Dinesh Kumar Sharma. When the loan account was not settled and there were dues of more than Rs.28 lakhs, notice under Section 13(2) of the SARFAESI Act, 2002, (hereinafter referred to as "the Act of 2002") was issued on 14.06.2023 by the Bank to the Borrower and the Guarantor. No representation being received by the Bank from the Borrower or by the Guarantor, the Bank proceeded to take possession under Section 13(4) of the Act, 2002. Such notices were addressed to the Borrower as well as to the Guarantors. Even thereafter, the Borrower did not inform the Guarantor of his intent to settle the loan dues. The Bank proceeded under Section 14 of the SARFAESI Act, 2002, and made an application on 17.02.2024 before the District Magistrate for physical possession of the secured asset i.e. the residential property situated at House No.E-4/346, Sector-O, Mansoarowar, Kanpur Road Yojana Lucknow. While this application was moved, an E-auction was held in which the petitioner emerged the highest bidder and after payment of the entire sale consideration, a valid Sale Certificate was issued.

6. However, during the proceedings under Section 14 of the Act of 2002, the Borrower informed the District Magistrate on notice being issued to him that one of the Guarantors, Anil Agarwal, had died even before the notice under Section 13(2) and 13(4) was issued to him and his legal representatives should have also been issued notice. However, no notice was issued to the legal representatives, instead the Bank proceeded to auction the property. The respondent no.5 proceeded to reject the application under Section 14 with the observation that the Bank should have been issued notice to the legal representatives of the dead Guarantor without looking into the fact 3 WRIC No. 9328 of 2025 that the petitioner had already purchased the property through a valid auction held on 12.11.2024 by paying an amount of Rs.26,05,000/- as against the loan account dues of Rs.28,54,278/-.

7. It has been submitted by learned Counsel for the petitioner that the Bank had proceeded against the other secured asset of the Borrower i.e. the residential house constructed over 1200 sq.ft. of Khasra No763 at Village Para (Shivpuram), Ward-Alamnagar, Tehsil & District- Lucknow, U.P., which property had also been auctioned by the Bank by resorting to proceedings initiated under the Act of 2002 by issuing notice under Section 13(2) and 13(4) to the Guarantors and the Borrower, and thereafter filing an application under Section 14 before the District Magistrate for delivery of actual physical possession of the property. The case was registered as Case No.747 of 2024, which has been decided by another Additional District Magistrate nominated for the said purpose by the District Magistrate. He has considered the arguments raised by the Bank that although the Guarantor had died, the Borrower was still alive and it was the Borrower whose property was proposed to be auctioned first as he had created a mortgage in favour of the Bank as security for the loan that he had taken and rejected the arguments of the Borrower.

8. It has been submitted that just because a person who has decided the application under Section 14 is now different from the person who had decided the earlier application under Section 14 of the Act preferred by the Bank on 15.04.2025, the result of the two applications could not be dynamically opposite to each other.

9. Having gone through the order dated 15.04.2025 which has not been challenged before this Court, we find that there is a legal infirmity in the order but since it has not been challenged, it cannot be set aside in collateral proceedings.

10. The liability of the Borrower and Guarantor is co-extensive in nature. If the loan account dues are not settled by the Borrower and his secured asset is auctioned and the money received from such sale proceedings, does not satisfy the loan amount/ dues of the Bank, then the Bank is entitled to proceed against the property of the 4 WRIC No. 9328 of 2025 Guarantors and such Guarantors should be properly noticed before the Bank can proceed for auction sale of their property. In this case, admittedly one of the Guarantors had died before notice under Section 13(2) and Section 13(4) was issued.

11. In case, the loan account which was of Rs.28,54,278/- as on

14.06.2023, from the property of the Borrower then the property of the Guarantor is vis-a-vis, without any opportunity being given to such Guarantor to settle the loan account. If his legal representatives are noticed, then they can certainly come forward under Section 13(A) and make the payment as is due to the Borrower.

12. We find no legal infirmity in the order impugned, but we dispose of this petition with a direction to the Bank to return the money of the auction purchaser i.e. the petitioner along with interest at bank rate within a period of three weeks from today. The Bank is free to proceed against the Borrower, Guarantor and representatives in accordance with the provisions of the Act by properly noticing them. September 24, 2025 N.PAL (Brij Raj Singh,J.) (Mrs. Sangeeta Chandra,J.) NARESH PAL High Court of Judicature at Allahabad, Lucknow Bench