1. [Gurpreet Singh Ahluwalia vs. District Magistrate Dehradun & Ors.]
(Uttarakhand HC, 13.01.2015)
Properties of the borrower were taken into possession by the Bank followed by auction notices for sale of the properties in question calling upon the bids from the interested purchasers. Pursuant to completion of bidding process, part deposit was made by the successful bidder out of total consideration amount with the Bank and bank was requested to get the properties auctioned demarcated so that sale deed may be executed in favour of the successful bidder after receiving balance consideration and physical possession thereof could also be handed over. Several requests were made to the concerned authority to demarcate the properties auctioned so that Bank may receive the balance of the consideration from the bidder and to also execute the sale deed in favour of the highest bidder. However still no demarcation was carried out and the Bank instead of pursuing the demarcation proceedings with the Revenue Authorities called upon the successful bidder to make balance payment failing which deposit amount was informed to be liable for forfeiture. The bidder due to failure of revenue authorities filed a writ petition.
It was contended by the Bank that as per sale notice, bids were invited on "as is whereas basis", therefore, it was not the duty of the Bank to get the property demarcated before the execution of the sale deed and it was the duty of the bidder to satisfy himself about the identity of the property before submitting the bids.
The Court held that the condition "as is whereas basis" does not mean that property may not be in existence at all. It only means whatever the condition of the property on the spot is same shall be sold in the same condition. However, if property is not at all in existence on the spot or is not identifiable/can be located on the spot, then neither sale deed can be executed of the non existing property nor purchaser can be handed over possession thereof.
In the instant matter Bank had made several requests to the authorities for demarcation of the property auctioned, therefore, it ought to have persuaded the authority to undertake the demarcation proceedings at the earliest. The bidder should not be allowed to suffer adversely for the lapses on the part of the Revenue Authorities or the Bank and at the same time Bank should also not loose interest on the outstanding amount to be paid by the bidder. A direction was accordingly passed to the Bank to get the property demarcated preferably and to execute the sale deed of the auctioned property besides bidder to deposit balance amount with the Bank.
2)In agreements of sale entered into on ‘as is where is' basis, the buyer can not repudiate the contract on the grounds of defects in quality of goods sold, the Supreme Court has ruled.
The Apex Court vide its recent order in Industrial Promotion and Investment Corporation of Orissa Limited (IPICOL) vs. Tuobro Furguson Steels Private Limited and Others, held that when a unit is sold on ‘as-is-where-is' basis, the buyer must exercise due diligence about the condition of the machinery and other assertions made by the seller.
The respondent, having bought an undertaking for Rs 40 lakh from IPICOL, which had made such sale in exercise of power to that effect conferred by Section 29 of the State Finance Corporation Act when a third party borrower was remiss in payment of his dues to the petitioner; it does not lie in his mouth to renege from his obligation to pay the full sale consideration on grounds like machinery later on turning out to be not in working order, electricity dues being in arrears etc. even if these grounds are genuine.
Any latent or patent defects in the quality of the items being sold must be pointed out upfront before entering into the sale agreement. It is possible to drive down the selling price in the face of such latent defects. Any laxity in this regard could prove to be costly because the seller has in any case saved his skin by inserting the as-is-where-is clause.
(Uttarakhand HC, 13.01.2015)
Properties of the borrower were taken into possession by the Bank followed by auction notices for sale of the properties in question calling upon the bids from the interested purchasers. Pursuant to completion of bidding process, part deposit was made by the successful bidder out of total consideration amount with the Bank and bank was requested to get the properties auctioned demarcated so that sale deed may be executed in favour of the successful bidder after receiving balance consideration and physical possession thereof could also be handed over. Several requests were made to the concerned authority to demarcate the properties auctioned so that Bank may receive the balance of the consideration from the bidder and to also execute the sale deed in favour of the highest bidder. However still no demarcation was carried out and the Bank instead of pursuing the demarcation proceedings with the Revenue Authorities called upon the successful bidder to make balance payment failing which deposit amount was informed to be liable for forfeiture. The bidder due to failure of revenue authorities filed a writ petition.
It was contended by the Bank that as per sale notice, bids were invited on "as is whereas basis", therefore, it was not the duty of the Bank to get the property demarcated before the execution of the sale deed and it was the duty of the bidder to satisfy himself about the identity of the property before submitting the bids.
The Court held that the condition "as is whereas basis" does not mean that property may not be in existence at all. It only means whatever the condition of the property on the spot is same shall be sold in the same condition. However, if property is not at all in existence on the spot or is not identifiable/can be located on the spot, then neither sale deed can be executed of the non existing property nor purchaser can be handed over possession thereof.
In the instant matter Bank had made several requests to the authorities for demarcation of the property auctioned, therefore, it ought to have persuaded the authority to undertake the demarcation proceedings at the earliest. The bidder should not be allowed to suffer adversely for the lapses on the part of the Revenue Authorities or the Bank and at the same time Bank should also not loose interest on the outstanding amount to be paid by the bidder. A direction was accordingly passed to the Bank to get the property demarcated preferably and to execute the sale deed of the auctioned property besides bidder to deposit balance amount with the Bank.
2)In agreements of sale entered into on ‘as is where is' basis, the buyer can not repudiate the contract on the grounds of defects in quality of goods sold, the Supreme Court has ruled.
The Apex Court vide its recent order in Industrial Promotion and Investment Corporation of Orissa Limited (IPICOL) vs. Tuobro Furguson Steels Private Limited and Others, held that when a unit is sold on ‘as-is-where-is' basis, the buyer must exercise due diligence about the condition of the machinery and other assertions made by the seller.
The respondent, having bought an undertaking for Rs 40 lakh from IPICOL, which had made such sale in exercise of power to that effect conferred by Section 29 of the State Finance Corporation Act when a third party borrower was remiss in payment of his dues to the petitioner; it does not lie in his mouth to renege from his obligation to pay the full sale consideration on grounds like machinery later on turning out to be not in working order, electricity dues being in arrears etc. even if these grounds are genuine.
Any latent or patent defects in the quality of the items being sold must be pointed out upfront before entering into the sale agreement. It is possible to drive down the selling price in the face of such latent defects. Any laxity in this regard could prove to be costly because the seller has in any case saved his skin by inserting the as-is-where-is clause.
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