High Court Upholds Rights of SARFAESI Property Buyers in Landmark Khata Transfer Case
In a significant ruling that clarifies property rights under asset reconstruction law, the Karnataka High Court has declared that an individual who acquires a property through proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act is legally entitled to seek the transfer of its khata into their name. Justice Suraj Govindaraj delivered this pivotal order while adjudicating a petition filed by Nagabhushana, a resident of Hassan, thereby setting a crucial precedent for similar cases across the state.
Background of the Property Dispute and Auction Process
The case originated when Nagabhushana purchased a flat located in P&T Colony, Sanjaynagar, Bengaluru, from SV Naresh, who had emerged as the successful bidder in an auction conducted by the State Bank of India (SBI). The flat's previous owner, Revathi, had initially pledged the property with the bank as collateral for a loan. Upon her failure to repay the loan, the bank initiated SARFAESI proceedings, leading to the auction of the flat to recover the outstanding dues.
Following the purchase, Nagabhushana applied for the transfer of the property's khata to his name. However, the Bruhat Bengaluru Mahanagara Palike (BBMP), now known as the Greater Bengaluru Authority, rejected his application and subsequently cancelled the existing khata. The municipal body cited that the building was an unauthorised construction as the primary reason for their decision. In a related development, the Bangalore Electricity Supply Company (Bescom) authorities disconnected the power supply to the flat in 2024, further complicating the situation for Nagabhushana.
Legal Arguments and Statutory Limitations Presented in Court
During the court proceedings, Rameshchandra, the counsel representing the petitioner, presented compelling arguments highlighting the statutory limitations under municipal laws. He pointed out that the khata in question had been transferred to Revathi back in 2003, and objections to this transfer were only raised in 2011, with the final cancellation occurring in 2023. According to BBMP regulations, no review or objection can be entertained after a period of three years, making the actions taken by the authority time-barred and legally unsustainable.
Furthermore, Rameshchandra emphasised that there were no allegations of fraud or suppression of facts against the previous owner, Revathi. He argued that the cancellation of the khata lacked justification and that Bescom's decision to disconnect the power supply following this cancellation was arbitrary and without legal basis, causing undue hardship to the lawful purchaser.
Court's Rationale and Directive on Khata Transfer and Power Restoration
Justice Suraj Govindaraj meticulously examined the facts and legal provisions, noting that the sale under the SARFAESI Act and the issuance of a certificate to this effect carry a presumption of regularity. The judge underscored that the alleged illegality or unauthorised nature of the construction could not justify the cancellation of the khata independent of, or beyond, the statutory limitation period prescribed under municipal laws.
In his ruling, Justice Govindaraj stated that the consequential disconnection of power supply by Bescom was not sustainable in law. He directed the immediate restoration of power supply to the flat and instructed the authorities to duly consider Nagabhushana's application for the transfer of the khata in his name. This decision reinforces the legal protections afforded to buyers under the SARFAESI Act and underscores the importance of adhering to statutory timelines in municipal governance.
Implications for Property Transactions and Municipal Compliance
This ruling has far-reaching implications for property transactions conducted under the SARFAESI Act, providing clarity and assurance to buyers regarding their rights to khata transfer. It also serves as a reminder to municipal authorities about the necessity of complying with statutory limitations and avoiding arbitrary actions that could infringe upon the lawful interests of citizens. The case highlights the judiciary's role in upholding procedural fairness and protecting individuals from administrative overreach in property matters.
