Introduction:

In the case of Sunil Kumar and Others v. State of Haryana and Others [2025 LiveLaw (PH) 115], the Punjab & Haryana High Court, comprising Justice Sureshwar Thakur and Justice Vikas Suri, ruled that a mortgagee has an inherent right to sell the mortgaged property through a public auction if the borrower defaults on payments. The case arose from a writ petition filed by Sunil Kumar and others, seeking directions to the Haryana Shehri Vikas Pradhikaran (HSVP) to issue a No Objection Certificate (NOC) and transfer a plot in their name. The dispute centered on whether an additional NOC was required for the sale of the mortgaged property through public auction. The petitioners had purchased the plot in a public auction conducted by the State Bank of India (SBI) for ₹2.28 crores in 2020, following the borrower’s default. After completing the payment, they were issued a sale certificate, and possession was transferred in October 2021. However, HSVP refused to issue an NOC, arguing that while mortgage permission was granted, separate permission was required for the auction. The state contended that, without this additional NOC, the sale was illegal. The court rejected this argument, holding that once a mortgage is permitted, the lender has an inherent right to auction the property in case of default, and a refusal to issue the NOC was unjust.

Arguments of Both Sides:

The petitioners, represented by Advocate K.S. Boparai, argued that the bank had lawfully exercised its right as a mortgagee by auctioning the property after the borrower failed to meet the repayment obligations. They asserted that once mortgage permission was granted, the right to sell upon default was implicit and did not require a separate NOC. They further contended that they had purchased the property in good faith through a legally conducted auction, duly completed the payment, and took possession as per the sale certificate. The refusal by HSVP to issue the NOC was arbitrary and hindered their rights as legitimate owners. On the other hand, the Haryana government, represented by Additional Advocate General Ankur Mittal and others, argued that while the bank had permission to mortgage the property, it did not have explicit authorization to sell it through auction. The state maintained that any transfer of property required an additional NOC, which was never sought by the bank. They contended that, in the absence of this approval, the sale was illegal and should not be recognized. They also attempted to raise concerns regarding possible irregularities in the auction process but failed to provide any substantive evidence of wrongdoing or collusion.

Court’s Judgment:

The Punjab & Haryana High Court rejected the state’s argument, emphasizing that the right to sell a mortgaged property through auction is an inherent aspect of mortgage rights. The court observed that requiring an additional NOC beyond the initial mortgage approval was “completely meaningless,” as the permission to mortgage necessarily includes the right to auction in case of default. The bench ruled that the absence of an additional NOC did not invalidate the sale, especially when no material illegality or collusion was demonstrated in the auction process. The court clarified that administrative approvals should not be used as a tool to create unnecessary hurdles in the legitimate transfer of property. The refusal to issue an NOC, despite a valid auction and possession transfer, was deemed unjust and unsustainable in law. Consequently, the court allowed the plea, directing HSVP to issue the necessary NOC and facilitate the transfer of the property in favor of the petitioners. This judgment reinforces the principle that a mortgagee’s right to recover dues through auction is fundamental and cannot be curtailed by arbitrary administrative restrictions.