Himachal Pradesh High Court shields buyer, blocks UCO Bank’s SARFAESI action over disputed Solan property
Photo used for indicative purpose only. Source internet
Shimla, Nov 28,
Relief for an unsuspecting homebuyer in Solan, the Himachal Pradesh High Court has ruled that UCO Bank cannot invoke the SARFAESI Act against a person who had no connection with a loan, its borrower, or the original mortgage—reaffirming that the law cannot be stretched to penalize an innocent purchaser.
The judgment came in the matter of UCO Bank & Anr. vs. Smt. Manjana Verma Sahni & Anr. (CMPMO No. 294 of 2022), where the Court upheld a lower court’s view that allegations of fraud surrounding property documents fall squarely within the jurisdiction of a civil court, not that of a Debt Recovery Tribunal (DRT) under SARFAESI.
A buyer caught in a hidden dispute
The case revolves around Manjana Sahni, who purchased a Solan property in 2019 after conducting all due diligence, including confirming with HIMUDA and ICICI Bank that no financial charges existed on the land. However, months after the purchase, she was confronted with UCO Bank’s move to take possession, claiming that the same property had been mortgaged earlier.
Sahni alleged that the mortgage papers presented by the Bank were fabricated, pointing to possible collusion between the mortgagor and certain bank officials. With no connection to the original borrower, she approached the civil court to protect her ownership.
Bank’s argument fails to convince court
UCO Bank argued that the civil court lacked jurisdiction and that Sahni must approach the DRT under SARFAESI. But the trial court rejected this stance, observing that the dispute was rooted in alleged fraud—an issue that only a civil court is empowered to examine.
Justice Ajay Mohan Goel of the High Court upheld this interpretation, clarifying that SARFAESI proceedings are meant to address borrower–lender disputes, not to drag unrelated third-party purchasers into recovery battles.
Fraud must be tested in Civil Court, not SARFAESI
The Court stressed that when allegations include fabrication of documents, the validity of mortgage deeds, and possible fraud, a civil court is the appropriate forum. It further held that Sahni, being a bona fide purchaser, had every right to seek redress in civil court, especially when the Bank was taking steps to seize the property.
A message for Banks: due diligence cannot be ignored
With this ruling, the High Court has reaffirmed a crucial principle: SARFAESI cannot be invoked against individuals who are complete strangers to the original loan transaction.
The decision also underscores the responsibility of banks to maintain clear, authentic documentation and ensure that innocent third parties are not harmed due to internal lapses or alleged collusion.
For buyers, the verdict serves as a reminder of the importance—and sometimes the limits—of due diligence, especially when property records are compromised by alleged fraud.
This ruling is likely to influence future disputes where financial institutions attempt to enforce SARFAESI against unsuspecting purchasers caught in legacy mortgage claims.
About the Author
The HimachalScape Bureau comprises seasoned journalists from Himachal Pradesh with over 25 years of experience in leading media conglomerates such as The Times of India and United News of India. Known for their in-depth regional insights, the team brings credible, research-driven, and balanced reportage on Himachal’s socio-political and developmental landscape.
