The sale of a property during its seizure proceedings by government agencies is illegal and the new owner who purchases it in good faith cannot lay its claim over it,the Supreme Court ruled.
A bench of justices R M Lodha and A R Dave said once the notice is issed by the government agency for forfeiture,the right over the property stands vested in the government and it cannot be sold by its owner.
“Such sale has no legal sanction. The sale is null and void. It is not protected so as to enable the purchaser to prove that he is transferee in good faith for adequate consideration. As a matter of law,no title came to be vested in the appellants (purchaser),” the bench said.
The verdict came on a plea by one Winston Tan seeking court’s direction to the Enforcement Directorate to grant him the possession of a flat in Bengaluru,sold to him when it was being forfeited by the ED.
The ED had issued notice for seizure of the property after its owner Ismail Shabandari was charged under Conservation of Foreign Exchange and Prevention of Smuggling Activities Act (COFEPOSA).
Ismail was detained after it was found that he had received Rs 92 lakh from Dubai and had made payments in India to various persons.
During the proceeding for forfeiture of his flat,he stealthily sold the property to Tan who was not aware about the action taken by ED which refused to allow him to take possession of the flat.
Tan then approached the apex court after the trial court and then the Karnataka High Court refused to grant him the relief. The apex court too dismissed his plea.
“It is true that appellant (Tan) had obtained encumbrances certificates from the sub-registrar prior to purchase which show that there were no encumbrances to the subject flat. It is also true that the appellants had obtained loan from Vijaya Bank for purchase of the said flat.
“…But unfortunately these facts are of no help to him as the sale in their favour was effected after notices were issued to the vendors. Such sale has no legal sanction,” the bench said.