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The Karnataka High Court has ruled that a buyer who purchases a property through a bank auction conducted under the SARFAESI Act is entitled to seek transfer of the khata in their name. The decision came while hearing a petition filed by Hassan resident Nagabhushana, who had bought a flat in Bengaluru that was auctioned by State Bank of India after the original owner defaulted on a loan. The civic authority had cancelled the khata citing unauthorised construction. The court held that such action was not justified and directed authorities to reconsider the buyer's request and restore electricity supply.
The Karnataka High Court has clarified that a person who purchases a property through a bank auction under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act has the right to seek transfer of the property's khata in their name. The court observed that when a property is sold through a statutory recovery process by a bank, the transaction carries legal validity and civic authorities cannot arbitrarily refuse to update municipal records. Advertisement
The order was passed by Justice Suraj Govindaraj while allowing a petition filed by Hassan resident Nagabhushana. The petitioner had purchased a flat located in P&T Colony in Sanjaynagar, Bengaluru. The property originally belonged to Revathi, who had mortgaged the flat to State Bank of India while availing a loan.
After the borrower failed to repay the loan, the bank initiated recovery proceedings under the SARFAESI Act. As part of the process, the property was auctioned and later purchased by a successful bidder. Nagabhushana subsequently acquired the property from the auction purchaser and received the relevant sale documents.
Following the purchase, the buyer approached the Bruhat Bengaluru Mahanagara Palike (BBMP) seeking transfer of the khata in his name. Khata is an important municipal record that identifies the owner of a property for the purpose of property tax and civic administration.
However, the municipal authority cancelled the existing khata and refused to transfer it to the petitioner. The civic body cited that the building was an unauthorised construction and therefore the transfer request could not be processed.
The issue did not stop at the khata dispute. Electricity supply to the property was also disconnected by the Bangalore Electricity Supply Company, which created further difficulties for the new owner in occupying and using the flat.
Faced with these developments, the petitioner approached the Karnataka High Court challenging the cancellation of the khata and the refusal to process the transfer application. The petition also sought restoration of electricity supply to the property.
During the hearing, the court examined the nature of the property transaction and the process through which the sale had taken place. The judge noted that the property had been sold through statutory recovery proceedings initiated by a bank and the sale certificate issued under such proceedings carries a presumption of legality.
The court observed that once a property is sold through a legally recognised auction process under the SARFAESI Act, municipal authorities cannot invalidate or disregard the transaction without following due legal procedure.
It also noted that the civic authority had taken action beyond the prescribed limitation period. The court stated that administrative bodies cannot reopen or question such transactions after the legally permitted timeframe unless there are specific allegations of fraud or irregularities.
The judgment further clarified that while civic authorities have the power to take action against unauthorised constructions, such concerns cannot automatically result in the cancellation of municipal records related to ownership, particularly when the property has been sold through a statutory recovery process.
Based on these observations, the High Court directed the Bangalore Electricity Supply Company to restore electricity supply to the property. It also instructed the municipal authority to reconsider the petitioner's application for khata transfer in accordance with the law and the findings recorded in the order.
Khata remains a key document for property owners in Bengaluru. It is required for paying property tax, applying for water and electricity connections, and completing future transactions such as resale or securing loans against the property. Without a valid khata entry, buyers often face difficulties in establishing municipal ownership records and carrying out regular property transactions.
In recent years, several property buyers in Bengaluru have faced similar issues after purchasing properties through bank auctions or distressed sales. Civic record updates, including khata transfer, often become a challenge due to pending regulatory or construction-related issues attached to the property.
The High Court's ruling provides clarity that buyers who acquire properties through lawful auction processes should not face administrative hurdles in updating municipal ownership records.
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