Court’s decision
The Delhi High Court dismissed a writ petition challenging a Debts Recovery Appellate Tribunal (DRAT) order that refused interim protection against SARFAESI proceedings. The Court held that the petitioners failed to establish prima facie title over the third floor of the property, which formed the secured asset. Relying on the doctrine of nemo dat quod non habet, the Bench ruled that a prior registered sale deed of 1992 had already divested the original owner of his rights, thereby rendering the subsequent 1999 conveyance ineffective to the extent of overlapping claims.
Facts
The petitioners approached the High Court under Article 226 challenging the DRAT’s order dated 16 February 2024, which declined to grant status quo over a property situated in Azadpur, Delhi.
They claimed ownership of the subject property on the basis of a registered sale deed dated 5 November 1999 executed by their grandfather. According to them, the property originally consisted of ground and first floors, which were later demolished and reconstructed up to three floors after availing a loan from Allahabad Bank in 2002.
In June 2022, officials of a housing finance company visited the property and asked them to vacate, asserting that the property had been mortgaged by Respondent Nos. 2 and 3. The petitioners alleged fraud, claiming that Respondent Nos. 2 and 3 had falsely represented themselves as owners and created a mortgage.
The petitioners filed a civil suit, lodged police complaints, and moved the Debts Recovery Tribunal (DRT) under Section 17 of the SARFAESI Act challenging the symbolic possession taken in March 2023. The DRT declined interim protection. The DRAT also refused to grant status quo, holding that the sale deed relied upon did not cover the third floor. This led to the present writ petition.
Issues
The primary issue before the High Court was whether the petitioners had established a prima facie right, title, or interest in the third floor of the property, which constituted the secured asset under SARFAESI proceedings.
A secondary issue concerned whether the DRAT’s refusal to grant interim protection warranted interference under Article 226.
The case also raised the legal question of the effect of a prior registered conveyance on subsequent transfers involving the same property.
Petitioners’ arguments
The petitioners argued that they were lawful owners in settled possession of the subject property under a registered sale deed dated 5 November 1999. They contended that Respondent Nos. 2 and 3 fraudulently mortgaged the property without valid title.
It was submitted that symbolic possession was taken without serving them notice under Section 13(2) of the SARFAESI Act. They maintained that the DRAT erred in refusing interim relief and failed to appreciate their settled possession and ownership rights.
Respondent’s arguments
The respondent financial institution relied upon a prior registered sale deed dated 15 October 1992 executed by the petitioners’ grandfather. It was argued that the original owner had alienated his rights in the property in 1992, well before the 1999 sale deed relied upon by the petitioners.
It was further submitted that subsequent conveyances conferred rights upon Respondent Nos. 2 and 3, enabling them to mortgage the third floor. The respondent emphasized that the 1999 deed only covered the ground and first floors and did not extend to the third floor.
Analysis of the law
The Court examined the principle that once a valid conveyance has been executed, the vendor retains no transferable interest in the property. The doctrine of nemo dat quod non habet—no one can transfer a better title than he possesses—was central to the decision.
The Bench observed that if the property had already been alienated in 1992, any subsequent transaction purporting to convey overlapping rights would be legally ineffective.
The Court also noted that writ jurisdiction under Article 226 should not interfere with DRAT findings unless patent illegality or perversity is demonstrated. Interim relief in SARFAESI matters requires establishment of a prima facie right over the secured asset.
Precedent analysis
Though no elaborate precedent discussion was undertaken, the Court applied settled principles of property law governing title transfer and the maxim nemo dat quod non habet. It reaffirmed that registered conveyances carry presumptive validity unless prima facie evidence of fraud or fabrication is shown.
The judgment also reflects established jurisprudence limiting High Court interference in SARFAESI proceedings when alternative statutory remedies are available.
Court’s reasoning
The High Court noted that the 1992 sale deed executed by the petitioners’ grandfather had alienated his rights in the property long before the 1999 transaction. There was no material produced by the petitioners to show that the 1992 deed was sham or fraudulent.
Furthermore, a plain reading of the 1999 sale deed revealed that it covered only the ground and first floors. There was no reference to the third floor, which constituted the secured asset under SARFAESI proceedings.
Given the absence of any express conveyance of rights over the third floor, and in light of the earlier registered instrument, the Court held that the petitioners failed to establish prima facie ownership over the secured asset.
The DRAT’s conclusion that no irreparable injury would occur and that balance of convenience did not favour the petitioners was found to be legally sound.
Conclusion
The Delhi High Court dismissed the writ petition, holding that no interference was warranted with the DRAT’s order. It clarified that dismissal would not prejudice the parties’ rights in pending proceedings before competent forums.
The Court underscored that equitable relief cannot be granted in the absence of a prima facie title over the secured asset.
Implications
This ruling strengthens the application of the nemo dat principle in property disputes arising under SARFAESI proceedings. It reinforces that borrowers or third parties must establish clear title over the secured asset before seeking interim protection.
The judgment also signals judicial restraint in interfering with DRAT decisions under writ jurisdiction, especially when statutory remedies remain available.
For property and banking law practitioners, the case highlights the importance of tracing title history and examining prior registered conveyances before challenging mortgage enforcement actions.
Case law references
- Application of the maxim nemo dat quod non habet — no person can convey better title than he possesses.
- Principles governing writ interference in SARFAESI proceedings — High Court will not interfere absent prima facie illegality or lack of jurisdiction.
FAQs
1. Can a later sale deed override an earlier registered conveyance?
No. Once property rights are transferred by a valid registered deed, the transferor retains no interest to convey subsequently.
2. What must a petitioner show to stop SARFAESI possession?
The petitioner must establish a prima facie legal right or title over the secured asset and demonstrate irreparable injury and balance of convenience.
3. Does settled possession alone prevent SARFAESI action?
No. Possession without demonstrable legal title over the secured asset may not be sufficient to obtain interim protection.