Mortgagee Has Inherent Right To Put Property On Public Auction In Case Of Failure Of Payment: Punjab & Haryana HC

The Punjab & Haryana High Court has said that the mortgagee has a right to sell the mortgage property in a public auction if the borrower fails to pay the stipulated instalments. 

Justice Sureshwar Thakur and Justice Vikas Suri said, "there is an inherent right in the mortgagee to, on the failure of liquidation of the relevant installments by the borrower, thus to subject the subject plot to sale through public auction."

The Court was hearing a writ petition for directing Haryana Shehri Vikas Pradhikaran (HSVP) to issue the No Objection Certificate (NOC) and to transfer the Plot in the name of the petitioners.

The State Bank of India (respondent No.5) sold the property via public auction for ₹2.28 Crores (excluding TDS) and issued a letter of acceptance of the bid in February 2020.

After the petitioners completed payment, a sale certificate was issued in their favor, and possession was handed over by the District Magistrate, Gurugram, in October 2021.

The petitioners sought an NOC and re-allotment letter from respondents No.2 to 4 (Haryana Shehri Vikas Pradhikaran - HSVP) for proper registration of the property in their name.

The main argument raised by the Haryana Government authorities was that while permission was granted for mortgaging the property, the Bank did not obtain permission to sell it via public auction. It was submitted that without an NOC, the sale was illegal.

After hearing the submissions, the bench opined that, "As such, the lack of NOC by the respondents concerned, to the lending institution for making sale of the subject plot, through public auction, for therebys its ensuring realization of the money(ies) as lent to the borrower, rather is completely meaningless, as the same merges into no objection granted to the lending institution to make mortgage of the subject plots or the said permission is a necessary sequel of the initial permission, as became granted to the lending institution concerned."

The court said that once the mortgage was permitted, it was the inherent right of the lender to sell the property through public auction in case of borrower default.

The Respondents (State Government)  failed to prove any collusion or material illegality in the auction process. The only objection raised was the lack of NOC, which the court deemed immaterial since the initial mortgage approval already implied a right to auction in case of non-payment.

Consequently, the bench said that allowing a mortgage inherently grants the lender the right to recover dues through sale. Hence, the refusal to issue an NOC after a valid auction would be unjust.

In the light of the above, the plea was allowed.

Mr. K.S. Boparai, Advocate for the petitioners.

Mr. Ankur Mittal, Addl. AG Haryana with Ms. Svaneel Jaswal, Addl. A.G. Haryana, Mr. P.P. Chahar, Sr. DAG, Haryana,

Mr. Saurabh Mago, DAG, Haryana, Mr. Gaurav Bansal, DAG, Haryana and Mr. Karan Jindal, AAG, Haryana.

Mr. Pravindra Singh Chauhan, Senior Advocate with Ms. Vasundhra Asija Bhandari, Advocate for respondents Nos.2 to 4-HSVP.

Mr. Viren Sharma, Advocate for respondent No.5.

Title: SUNIL KUMAR AND OTHERS v. STATE OF HARYANA AND OTHERS

Citation: 2025 LiveLaw (PH) 115

Click here to read/download the order