DRT-II Delhi (2026.07.02) in Pradeep Gupta Vs, PNB Housing [SA/233/2026] held that;
The builder has given NOC in favour of the applicant and has agreed that on completion of the project the original documents will be handed over to the respondent FI. The allotment letter and other documents have been deposited with the respondent FI. Therefore, it cannot be said that there is no valid mortgage in favour of the respondent FI. Merely because the entire flat has not been constructed, the respondent FI cannot be restrained from proceeding under provisions of the SARFAESI Act if the applicant has made a default in repayment and the account has been declared as NPA..
Blogger’s Comments; It is interesting to note the following rulings of Hon’ble Supreme court;
i). Supreme Court (2011.10.11) in Suraj Lamp & Industries (P) Ld.Tr.Dir vs State Of Haryana & Anr (Special Leave Petition (C) No.13917 Of 2009) held that: -
# 11 . . . . . . . It is thus clear that a transfer of immovable property by way of sale can only be by a deed of conveyance (sale deed). In the absence of a deed of conveyance (duly stamped and registered as required by law), no right, title or interest in an immovable property can be transferred.
# 12. Any contract of sale (agreement to sell) which is not a registered deed of conveyance (deed of sale) would fall short of the requirements of Sections 54 and 55 of the TP Act and will not confer any title nor transfer any interest in an immovable property (except to the limited right granted under Section 53-A of the TP Act). According to the TP Act, an agreement of sale, whether with possession or without possession, is not a conveyance. Section 54 of the TP Act enacts that sale of immovable property can be made only by a registered instrument and an agreement of sale does not create any interest or charge on its subject-matter.”
ii). Supreme Court (2004.08.25) in Rambhau Namdeo Gajre v. Narayan Bapuji Dhotra [Appeal (civil) 4610 of 2000] held that; -
“The agreement to sell does not create an interest of the proposed vendee in the suit property. As per Section 54 of the Act, the title in immovable property valued at more than Rs. 100/- can be conveyed only by executing a registered sale deed.
“Section 54” - specifically provides that a contract for sale of immovable property is a contract evidencing the fact that the sale of such property shall take place on the terms settled between the parties, but does not, of itself, create any interest in or charge on such property.
iii). Supreme Court (1964.02.11) K.J. Nathan vs. S.V. Maruty Reddy [ 1965 AIR 430, 1964 SCR (6) 727, Civil Appeal No. 407 of 1962.] held that;
“Under this definition the essential requisites of a mortgage by deposit of title deeds are, (i) debt, (ii) deposit of title deeds, and (iii) an intention that the deeds shall be security for the debt. Though such a mortgage is often described as an equitable mortgage, there is an essential distinction between an equitable mortgage as understood in English law and the mortgage by deposit of title deeds recognised under the Transfer of Property Act in India.”
The question is when the borrower does not have any charge or interest on the property on the basis of allotment letter/agreement to sale, then how come the financier bank can be treated as secured creditor & whether financier bank can invoke the provisions of SARFAESI in absence of any security interest.
Secondly, as per the provisions of SARFAESI, possession of property by secured creditor under section 13(4) is a mandatory precondition for proceeding with the auction of the property. In the present case the property is under construction and the possession is with the builder & the borrower does not possess the title of the property.
Excerpts of the Order;
Matter is taken through VC/Hybrid mode.
# 2. The Ld. Counsel for the S.applicant submitted that in the year 2009, the applicants submitted their application for allotment of residential villas in its project known as "Alder Grove, Nirvana Country-II" situated at Sector-71 & 72, Gurugram, Haryana to M/s Unitech Limited for allotment of a residential villa and paid a sum of Rs.21,95,000/- towards booking amount. Pursuant thereto, M/s Unitech Limited provisionally allotted Villa No. AG-0206, Alder Grove, Nirvana Country-II, Sector-71 & 72, Gurugram, Haryana, for a total sale consideration of Rs.2,41,44,250/-. The builder represented to the applicants that the project would be completed within the stipulated period and possession would be handed over within approximately twenty-four months. A Buyer's Agreement dated 28.06.2010 was executed between the applicants and M/s Unitech Limited. The Ld. Counsel for the applicant has relied upon Clause 4(a) and submitted that there is no mortgage in favour of the respondent as no sale deed has been executed in his favour and possession has not been handed over to the applicant and possession of the property is still with the Unitech. Therefore, there is no mortgage in favour of the respondent. The property is still in the name of Unitech and there is moratorium against Unitech as per direction of Hon'ble Supreme Court. It is submitted that for financing the property, the applicants initially obtained a housing loan and thereafter transferred the same to respondent No.1, PNB Housing Finance Limited, which sanctioned a loan of Rs.1,93,00,000/- vide sanction letter dated 23.05.2012. However, the actual amount disbursed by Respondent No.1 was only Rs.1,53,43,428/- as against the sanctioned amount of Rs.1,93,00,000/-. Despite the said admitted disbursement, respondent No.2 has claimed an amount of Rs.3,47,00,246.96 as on 14.04.2026. A Tripartite Agreement was executed between the Applicants, Respondent No.1 and M/s Unitech Limited and relied upon the para no. C & D of the Tripartite agreement at page no. 60 of the SA. It is submitted that the builder has failed to complete the project within the contractual period. It is submitted that the respondent no.2 has issued the impugned e.auction Sale Notice dated 28.05.2026 proposing sale of the secured asset on 03.07.2026 for a reserve price of Rs.3,50,00,438/-. It is submitted that no demand notice under Section 13(2) & notice under Section 13(4) of the SARFAESI Act was ever served upon the applicants. It is submitted that the sale notice has been served upon the applicant on 28.05.2026 after publication of the same in the newspaper on 27.05.2026. It is submitted that the valuation of the secured asset has not been carried out by an approved valuer and the reserve price of Rs.3,50,00,438/- fixed by the respondent without appreciating that the market value of the property in question is above Rs.6 Crores. It is submitted that the property in question is admittedly an incomplete and unfinished property and construction thereof has not been completed till date. Therefore, request is made that this Tribunal may stay the operation and effect of the e.auction sale notice dated 28.05.2026 and the proposed e.auction of the secured asset bearing Unit No. AG-0206, Alder Grove, Nirvana Country-II, Sector-71 & 72, Gurugram, Haryana, scheduled to be held on 03.07.2026 and restrain the respondents from conducting, proceeding with, giving effect to, confirming or finalizing the proposed e.auction in respect of the secured asset and from issuing any Sale Certificate, transferring title, handing over possession or creating any third party rights, title or interest in respect thereof during the pendency of the present SA. .
# 3. The Ld. Senior Advocate for respondent no. 2 has submitted that the applicants had availed the housing loan facility and duly executed and delivered all requisite loan and security documents in favour of the Respondent No. 1 and the Respondent No. 1 had assigned the subject loan account, together with all underlying security interest and attendant rights, in favour of Respondent No. 2 by way of a valid Assignment Agreement dt. 30.09.2022. Therefore, respondent no.2 is entitled to exercise all rights and remedies under the provisions of the SARFAESI Act, 2002. It is submitted that the charge of the respondent has duly been registered with CERSAI on 21.08.2012 and on 18.10.2022. It is submitted that the liability of the borrower under the loan agreement is absolute and independent of any dispute between the borrower and the builder. It is submitted that the builder has issued the NOC regarding permission to mortgage the property in favour of respondent FI. It is submitted that the Notice under Section 13(2) of SARFAESI Act, 2002 dated 15.04.2021 was duly served by post and published in the Business Standard New Delhi Newspaper (Hindi & English) and the Notice under Section 13(4) of SARFAESI Act, 2002 dated 07.03.2023 was duly served by way of speed post & affixation and published in the Financial Express New Delhi English Edition Newspaper & Jansatta Hindi Edition Newspaper in compliance with Rule 3 of the SARFAESI Rules, 2002. It is submitted that the respondent has also filed an Original Application in March,2023 and applicants are appearing in the OA proceedings therefore, they are aware about the measures taken by the respondents. It is submitted that the valuation of the secured asset has duly been conducted by the Government approved valuer and accordingly, the reserve price of the property has been fixed. It is further submitted that the applicants never objected to the quantum or manner of disbursement during the subsistence of the loan and accepted the benefits thereof without protest. It is submitted that the loan facility was duly sanctioned and disbursed upon the request of the applicants, who voluntarily executed all the requisite loan and security documents and created a valid mortgage over the secured asset in favour of the respondents. It is submitted that the proceedings pending before the Hon'ble Apex court are not concerned with insolvency/liquidation proceedings. It is submitted that the respondent has every right to enforce the security interest under the provisions of the SARFAESI Act, 2002. Therefore, applicant is not entitled for any interim relief from this Tribunal.
# 4. Heard the Ld. Counsel of applicant and the Ld. Senior Advocate of respondent no.2 and perused the record.
# 5. The first contention of the Ld. counsel of the applicant is that the construction of the flat has still not been completed and the property has not been transferred in favour of the applicant and therefore, there can be no mortgage in favour of the respondent FI. It is submitted that the respondent has no authority to proceed against the property as per Tripartite Agreement and Buyer agreement. From perusal of the record it is clear that the applicant has taken loan for purchase of the under construction flat and the amount was to be disbursed on the basis of construction and it was a construction link loan. The builder has given NOC in favour of the applicant and has agreed that on completion of the project the original documents will be handed over to the respondent FI. The allotment letter and other documents have been deposited with the respondent FI. Therefore, it cannot be said that there is no valid mortgage in favour of the respondent FI. Merely because the entire flat has not been constructed, the respondent FI cannot be restrained from proceeding under provisions of the SARFAESI Act if the applicant has made a default in repayment and the account has been declared as NPA.
# 6. The next contention of the Ld. counsel of the applicant is that the proceedings are pending against the builder before the Hon'ble Supreme Court and the construction is being monitored is being monitored by the Hon'ble Supreme Court and therefore, the respondent FI cannot proceed against the property pending litigation before the Hon'ble Supreme Court. The matter is pending before the Hon'ble Supreme Court regarding non construction of the project and the Hon'ble Supreme Court has initiated process for completion of the project under the supervision of the Hon'ble Supreme Court. Therefore, the dispute is between the builder and the creditors of the builder. In the present matter there is no moratorium against the applicant. Therefore, the contention of the applicant has no force.
# 7. The next contention of the Ld. counsel of the applicant is that the demand notice and the possession notice has not been properly served upon the applicant and therefore, the entire action taken by the respondent FI is bad in law. On the other hand the Ld. Senior Advocate of the respondent FI has filed the evidence regarding the service of the demand notice and the possession notice. From perusal of the evidence prima facie it appears that there is compliance of the provisions of the SARFAESI Act and SARFAESI Rules with regard to the service of the demand notice and possession notice. There appears no illegality or irregularity in this regard.
# 8. The next contention of the Ld. counsel of the applicant is that the property is being sold at a very low price and the valuation has not been done properly. From perusal of the valuation report filed by the respondent FI prima facie there appears no illegality in the valuation report. Therefore, the contention of the applicant has no force.
In view of the above the interim prayer of the applicant is liable to be dismissed on merits. The Ld. counsel of the applicant has submitted that the proposed sale may be stayed subject to the deposit of amount by the applicant as per direction of the Tribunal. Though the right of redemption has already been extinguished, the applicant is given an opportunity to save the property from sale. As the property has still not been sold and no third party right has been created, therefore, no prejudice will be caused to a third party. In the light of the above, if the applicant deposits 50% of the amount due as on today before the date of auction and file an undertaking that he will deposit the rest of the amount within a period of three months, the respondent FI is directed to postponed the auction. If the applicant failed to comply the order and fails to deposit 50% of the amount before the date of auction, the respondent FI is free to proceed with the auction.
Order The interim prayer of the applicant is disposed of accordingly. It is hereby made clear that all the above conclusions are merely prima facie conclusion and will have no bearing at the time of final disposal of the present SA. The SA will be decided in accordance with law after marshalling of the evidence filed by both the parties.
List the matter on 01.09.2026 before Registrar for completion of pleadings.
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