Supreme Court Quashes Criminal Proceedings Against Officer Not Authorised At Time Of SARFAESI Sale

A bench of Justices Vikram Nath and Sandeep Mehta heard appeals by the accused‑appellant challenging a Madras High Court order that had refused to quash a chargesheet arising from CC No. 308 of 2016, where the appellant faced allegations of cheating, forgery and issuance of false certificate in connection with a SARFAESI auction sale.

The Court allowed the appeals, set aside the impugned High Court order dated 12.01.2023 and quashed the criminal proceedings against the appellant on the ground that he had no role in the transaction at the relevant time. The Court held that the appellant was not the authorised officer when the auction process was conducted and when the sale certificate was issued, and therefore criminal liability could not be fastened on him. The Court, in its reasoning, observed: "It is evident that the sale certificate was issued by the appellant’s predecessor and, at the relevant time, the appellant was not the authorized officer empowered to issue the certificate. In fact, right from the initiation of the auction process to the issuance of sale certificate, no direct involvement of the appellant can be seen as he was not the authorized officer during the said period and assumed the office of Manager only in November, 2014. Therefore, it becomes clear as day that the appellant had no role to play in the transaction leading to the FIR as he was not a signatory to the sale certificate. Since the appellant was neither the authorized officer at the relevant time nor responsible for the auction process or issuance of the sale certificate, the allegations against him are baseless and do not attract criminal liability. The continuation of the instant criminal proceedings against the appellant shall lead to abuse of process of law, cause nothing but miscarriage of justice and inordinately harass the appellant who has been implicated without due cause."

Background The dispute arose from a loan taken by A. Kannan in 2004 from HDFC Ltd., secured by immovable property in Keela Natham Village, Tirunelveli. After default, HDFC initiated proceedings under the SARFAESI Act and issued an auction notice on 22.05.2012. The de‑facto complainant purchased the property at public auction for Rs. 7,25,000 and received a sale certificate in July 2012. On attempting registration, she discovered that the property had allegedly been acquired earlier by the Tamil Nadu Housing Board. She filed a consumer complaint (Consumer O.P. No.58/2013) and a criminal complaint under Section 190 Cr.P.C.; the Magistrate directed investigation under Section 156(3) Cr.P.C., and Crime No.21/2014 was registered under Sections 197, 417, 418, 467, 468 and 420 IPC. A chargesheet followed and the Judicial Magistrate took cognizance in CC No. 308 of 2016.

The appellant moved the High Court under Section 482 Cr.P.C. to quash the proceedings. The Madras High Court dismissed the petition, recording that a prima facie case of cheating, issuance of false certificate and forgery was made out and that the appellant had allegedly suppressed the acquisition by the Housing Board and induced the complainant to purchase. The appellant contended before the Supreme Court that he assumed the office of Manager only on 03.11.2014, was not the authorised officer during the auction or issuance of the sale certificate, and thus could not be criminally liable; he relied on Section 32 of the SARFAESI Act and precedent in K. Virupaksha v. State of Karnataka (2020) 4 SCC 440. The respondent maintained that the complainant was unaware of the Housing Board acquisition and that concealment and misrepresentation defeated any claim of good faith.

The Supreme Court examined the material and accepted the appellant’s factual plea regarding the timing of his appointment and absence from the auction process. The Court found no direct involvement or signature by the appellant on the sale certificate and concluded that continuing the criminal prosecution would amount to "abuse of process of law" and "miscarriage of justice". The appeals were allowed, the impugned High Court order was set aside, and the criminal proceedings arising out of CC No. 308 of 2016 on the file of Judicial Magistrate No.1, Tirunelveli were quashed. Interlocutory applications, if any, were disposed of. The record noted that no counsel appeared for respondent No.2.

Case No.: 2025 INSC 558 Case Title: Sivakumar v. The Inspector of Police & Anr. Appearances: For the Petitioner(s): Ms. Sonia Mathur, Senior Counsel For the Respondent(s): Mr. V. Krishnamurthy, Additional Advocate General (no appearance for Respondent No.2)