Judgment:
1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU R DATED THIS THE14H DAY OF DECEMBER, 2022 BEFORE THE HON'BLE MR. JUSTICE M. NAGAPRASANNA WRIT PETITION No.19756 OF2021(GM - RES) BETWEEN:
1. . SRI.T.S NATARAJ S/O LATE C.SHIVAKUMAR, AGED ABOUT62YEARS, R/AT NO.9, PREETHI COTTAGE, 6TH MAIN ROAD, MAHALAKSHMI NAGAR, TUMAKURU – 572 103. 2 . SRI HARSHA N., S/O T.S.NATARAJ, AGED ABOUT35YEARS, R/AT NO.9, PREETHI COTTAGE, 6TH MAIN ROAD, MAHALAKSHMI NAGAR, TUMAKURU – 572 103. 3 . SMT.N.SEEMA S/O T.S.NATARAJ, AGED ABOUT31YEARS, R/AT NO.9, PREETHI COTTAGE, 6TH MAIN ROAD, MAHALAKSHMI NAGAR, TUMAKURU – 572 103. ... PETITIONERS (BY SRI ASHOK HARANAHALLI, SR.ADVOCATE A/W SRI VINAYAKA B., ADVOCATE) 2 AND:
1. . STATE BANK OF INDIA STRESSED ASSETS RECOVERY BRANCH (05173) NO.11/90, 3RD FLOOR, NEAR OLD SHIVAJI THEATRE, JC ROAD, BENGALURU – 560 002, REPRESENTED BY ITS CHIEF MANAGER. 2 . AUTHORIZED OFFICER STRESSED ASSETS RECOVERY BRANCH (05173) STATE BANK OF INDIA, NO.11/90, 3RD FLOOR, NEAR OLD SHIVAJI THEATRE, JC ROAD, BENGALURU – 560 002 REPRESENTED BY ITS CHIEF MANAGER. 3 . STATE BANK OF INDIA SME BRANCH, 4TH CROSS, ASHOKA NAGAR, TUMAKURU – 572 103, REPRESENTED BY ITS CHIEF MANAGER. 4 . M/S SHRI CHAAMUNDI ALDEHYDES R/AT PLOT NO.5, KIDBA INDUSTRIAL LAYOUT, SATYAMANGALA, TUMAKURU – 572 104. ... RESPONDENTS (BY SRI B.N.TULSI KUMAR, ADVOCATE FOR C/R-1; R2 AND R3 ARE SERVED, SRI UDAYA HOLLA, SENIOR ADVOCATE A/W SRI M.S.RAJENDRA, ADVOCATE FOR R-4) 3 THIS WRIT PETITION IS FILED UNDER ARTICLES226AND227OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE E-AUCTION NOTICE ISSUED BY THE R2 DATED0809.2021 ANNEXURE-A AND QUASH THE SALE CERTIFICATE ISSUED BY THE R2 DATED0710.2021 REGISTERED ON DOCUMENT AT SUB-REGISTRAR TUMKUR (ANNEXURE-A1) AND DIRECT THE R1 AND2TO CONSIDER THE CASE OF THE PETITIONERS FOR OTS SCHEME. THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED FOR
ORDERS ON2111.2022, COMING ON FOR PRONOUNCEMENT THIS DAY, THE COURT MADE THE FOLLOWING:-
ORDERThe petitioners are before this Court calling in question e- auction notice dated 08-09-2021 which was notified to sell the property of the petitioners and have also sought quashment of sale certificate issued in favour of the 4th respondent/auction purchaser and seek consequential direction to consider the case of the petitioners under the OTS scheme.
2. Brief facts that lead the petitioners to this Court in the present petition, as borne out from the pleadings, are as follows:- The 1st petitioner (hereinafter referred as the ‘petitioner’ for the sake of convenience) was the proprietor of M/s Sree Mahadeva Rice Mill, Tumkur as described in the schedule appended to the 4 petition. The petitioner was into the rice processing business after the property had fallen to his share from a family partition on 21-10-2005. In order to expand his business the petitioner sought and was granted a credit limit of Rs.2 crores and a term loan of Rs.30 lakhs under small scale industry category by the erstwhile State Bank of Mysore (‘the Bank’ for short). The title deeds of properties were mortgaged with the Bank as collateral security for grant of the said loan. Up to the year 2017-18 the loan was paid at regular intervals. It is the averment in the petition that from the year 2017-18 in view of market fluctuations the petitioner suffered huge loss and the account slipped into a non-performing asset and was treated as such on 29-12-2017.
3. A notice under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest At, 2002 (hereinafter referred to as ‘the Act’ for short) was issued upon the petitioner seeking to discharge liabilities within 60 days from the date of the said notice. When the petitioner did not comply with the contents of the notice, symbolic possession of the scheduled property was taken under Section 13(4) of the Act in terms of a 5 communication dated 31-03-2018 and later physical possession was handed over to the 3rd respondent by order of the Deputy Commissioner dated 30-05-2019 in terms of Section 14(1) of the Act. It appears that the loan account of the petitioner was transferred to Stressed Assets Recovery Branch of the 1st respondent Bank who on 19-10-2020 issued a notice to the petitioner offering one time settlement. The one time settlement that was offered on 19-10-2020 was for Rs.1,72,49,708/-. The petitioners claim that due to out-break of COVID-19 they could not avail of the said settlement and that too passed by.
4. The Bank, later seeks to sell the property to redeem the amount that was in due as it was the secured creditor of the property of the petitioner. In the year 2018 efforts were made to sell the property at a reserve price and when no buyer came forward to buy the property, the reserve price was grossly reduced and was sold ultimately at Rs.5.78 crores on 29-09-2021. The sale fructified on 29-09-2021 after four auction notices issued by the Bank. Those auction notices were challenged by the petitioner before the Debts Recovery Tribunal which were all dismissed. Later 6 auction was conducted by the Bank on 29-09-2021 in which the 4th respondent purchases the property and pursuant thereof a certificate of sale was issued in his favour by the Bank. It is these actions that are called in question in the case at hand.
5. Heard Sri Ashok Haranahalli, learned senior counsel appearing for the petitioners, Sri B.N. Tulsi Kumar, learned counsel appearing for respondents 1 to 3 and Sri Udaya Holla, learned senior counsel appearing for respondent No.4.
6. The learned senior counsel Sri.Ashok Haranahalli appearing for the petitioners would contend with vehemence that the schedule property whose reserve price as on the date it was sold was Rs.12.75 crores; it was grossly undervalued at Rs.5.78 crores and sold to the 4th respondent; the sale is in blatant violation of Rule 8 of the Security Interest (Enforcement) Rules, 2002 (‘the Rules’ for short); that petitioners missing great opportunity of availing OTS settlement when it was offered does not mean that the Bank could sell the property by undervaluing it. For all these reasons, the petitioners have knocked the doors of this Court, at this juncture, contending that they would compensate the auction purchaser and 7 pay the amount in its entirety to the Bank. He would also contend that the loan amount as on date it became due was Rs.3/- crores and the property is sold at Rs.5.78 crores and the petitioners have not taken back those Rs.2.78 crores which would demonstrate that the petitioners protested for grossly undervaluing the property.
7. On the other hand, the learned senior counsel Sri.Udaya Holla appearing for the auction purchaser/respondent No.4 would seek to contend that the Bank auctioned the property for a particular reserve price and the 4th respondent has emerged as the successful bidder in the auction. Sale certificate is issued and the 4th respondent is put in possession of the property. Therefore, he would contend that the petitioners have lost their right in the land on the sale certificate being executed in favour of the auction purchaser. He would seek to place reliance upon the judgment of the Apex Court in the case of DWARIKA PRASAD v. STATE OF UTTAR PRADESH AND OTHERS – (2018) 5 SCC491to buttress his submission that once the transfer happens, the right to redeem the property by the borrower gets extinguished. 8
8. The learned counsel Sri.B.N.Tulsi Kumar representing the respondent/Bank would admit that the reserve price of the property was higher for which no buyer had come forward to buy the property at that price and since the Bank had to recover the loan, it has sold the property by reducing the reserve price. No fault can be found with the action of the Bank, since all the time the petitioner was put on notice with regard to the sale of the property and reduction in reserve price. The petitioner having not challenged the same prior to the e-auction, cannot now contend that he is entitled to a relief at the hands of this Court.
9. To counter these submissions, the learned senior counsel appearing for the petitioners would submit that though the petitioners were put on notice of the auction, the auction takes place and the sale certificate was also issued within no time. Everything happened in such quick succession and as such, the petitioners had to challenge the action post auction and could not do it before that. He would seek to rely on the judgment of the Apex Court in the case of MATHEW VARGHESE v. M.AMRITHA KUMAR AND OTHERS – (2014)5 SCC610 the judgment of the 9 Madras High Court in R.PORSELVI v. AUTHORISED OFFICER – W.P.No.13695 of 2018 decided on 19.07.2018 and K.T. UNNIKRISHNAN v. THE AUTHORISED OFFICER – 2018 SCC OnLine Ker 692 of the Kerala High Court, all to contend that the property sold cannot be at a grossly undervalued price and merely because the auction purchaser has purchased it and a sale deed is registered, it would not take away the power of this Court to annul such sale.
10. I have given my anxious consideration to the submissions made by the respective learned counsel and perused the material on record.
11. The afore-narrated facts are not in dispute. The loan availed by the petitioner from the erstwhile State Bank of Mysore is a matter of record. The loan becoming sticky and being slipped into non-performing asset is again a matter of record. What drives the petitioners to this Court in this petition is the action of the Bank. The fault of the Bank as alleged is selling of the property grossly undervaluing it and in violation of the Rules. Therefore, it becomes 10 germane to notice the Rule under which the petitioner seeks to take support for his case. Rule 8 of the Rules reads as follows: “8. Sale of immovable secured assets.—(1) Where the secured asset is an immovable property, the authorised officer shall take or cause to be taken possession, by delivering a possession notice prepared as nearly as possible in Appendix IV to these rules, to the borrower and by affixing the possession notice on the outer door or at such conspicuous place of the property. (2) The possession notice as referred to in sub-rule (1) shall also be published as soon as possible but in any case not later than seven days from the date of taking possession, in two leading newspapers, one in vernacular language having sufficient circulation in that locality, by the authorised officer. (2A) All notices under these rules may also be served upon the borrower through electronic mode of service, in addition to the modes prescribed under sub-rule (1) and sub-rule (2) of rule 8. (3) In the event of possession of immovable property is actually taken by the authorised officer, such property shall be kept in his own custody or in the custody of any person authorised or appointed by him, who shall take as much care of the property in his custody as a owner of ordinary prudence would, under the similar circumstances, take of such property. (4) The authorised officer shall take steps for preservation and protection of secured assets and insure them, if necessary, till they are sold or otherwise disposed of. (5) Before effecting sale of the immovable property referred to in sub-rule (1) of rule 9, the authorised officer shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor, fix the reserve price of the property and may sell the whole or any part of such immovable secured asset by any of the following methods:— 11 (a) by obtaining quotations from the persons dealing with similar secured assets or otherwise interested in buying the such assets; or (b) by inviting tenders from the public; (c) by holding public auction including through e-auction mode; or (d) by private treaty. Provided, that in case of sale of immovable property in the State of Jammu and Kashmir, the provisions of Jammu and Kashmir Transfer of Property Act, 1977 shall apply to the person who acquires such property in the State. (6) The authorised officer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets, under sub-rule (5); Provided that if the sale of such secured asset is being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice in the Form given in Appendix IV-A to be published in two leading newspapers including one in vernacular language having sufficient circulation in the locality. (7) Every notice of sale shall be affixed on the conspicuous part of the immovable property and the authorised officer shall upload the detailed terms and conditions of the sale, on the web-site of the secured creditor which shall include; (a) The description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor; (b) the secured debt for recovery of which the property is to be sold; 12 (c) reserve price of the immovable secured assets below which the property may not be sold; (d) time and place of public auction or the time after which sale by any other mode shall be completed; (e) depositing earnest money as may be stipulated by the secured creditor; (f) any other terms and conditions, which the authorised officer considers it necesssary for a purchaser to know the nature and value of the property. (8) Sale by any method other than public auction or public tender, shall be on such terms as may be settled between the secured creditors and the proposed purchaser in writing.” (Emphasis supplied) Sub-rule (5) of Rule 8 mandates that before effecting sale of immovable property referred to sub-rule (1) of Rule 9, the authorised officer shall obtain valuation of the property from an approved valuer in consultation with the secured creditor, fix the reserve price of the property, and may sell whole or part of such immovable property. The mandate of sub-rule (5) is that valuation of the immovable property from an approved valuer should be first secured and then the property should be put to sale. 13
12. The loan, in the case at hand, had become sticky and the amount that was due as on the date the Bank sought to put the property to auction was close to Rs.3/- crores. The first auction notice putting the property of the petitioner to sale was in the year 2018. This was called in question by the petitioners before the Debts Recovery Tribunal in S.A.No.174 of 2018. Both taking possession and putting the property to sale were called in question. Initially an interim order was granted by the Tribunal. The challenge comes to be dismissed by an order dated 31-10-2020. The said dismissal is not called in question by the petitioner. Later the Bank again made efforts to sell the property by bringing down the reserve price.
13. Therefore, it becomes germane to notice, the notice issued by the Bank at every point in time when sale was sought to be made. A notice comes to be issued to the petitioners holding that the auction of the property would be conducted on 31-08-2018 when the reserve price was Rs.9.37 crores. No buyer comes forward to purchase the property. Then the reserve price comes to be reduced on 21.11.2019. Again no buyer comes forward which 14 results in further reduction of the reserve price and ultimately the property comes to be sold in terms of the auction dated 29- 09-2021 for Rs.5.78 crores plus Rs.23/- lakhs for plant and machinery. For quick reference notice of sale, dates of sale and reserve price are as indicated in the chart below: Date of Sale Date of Reserve Price (in Rs.) Notice Sale 12-07-2018 31-08-2018 9,37,00,000/- (for Land & Building) 21-11-2019 21-12-2019 7,59,00,000/- (for land and building) 42,00,000/- (for plant and machinery 26-11-2020 16-12-2020 7,65,00,000/- (for land and building) 32,00,000/- (for Plant & machinery) 29-07-2021 18-08-2021 6,50,00,000/- (for land & building) 27,00,000/- (for plant & machinery) 08-09-2021 29-09-2021 5,78,00,000/- (for land & building) 23,00,000/- (for plant and machinery) A perusal of the chart would clearly indicate that the first auction was on 31-08-2018 and the reserve price indicated was Rs.9.37 crores. After three years the value of the property comes down and the reserve price is quoted at Rs.3.5 crores less than what was earlier quoted and it comes down to Rs.5.78/- crores. The 15 justification of the Bank is that there were no buyers to buy the property. Therefore, the reserve price had to be pulled down. The last auction notice that was issued was on 08-09-2021. The Bank claims that sale notices were affixed at the conspicuous places of the asset and also published in two newspapers and then the property was sold. After the sale of property, the petitioners have knocked the doors of this Court.
14. The contention of the petitioners, as observed hereinabove, is that the value of the property is at Rs.12/- crores. The loan amount due as on the date of sale was Rs.3,67,33,172/- Therefore, even according to the sale notice, for a loan amount of Rs.3,67,33,172/- the property worth Rs.12/- crores was sold at Rs.5.78/- crores. According to the learned counsel for the petitioners, the property has been grossly undervalued and sold. The value of the property on the date of auction i.e., 29-09-2021 was close to Rs.12/- crores and a property of Rs.12/- crores is sold for Rs.5.78 crores. It is this that the learned senior counsel alleges that there is fraud played by the Bank in selling the property to the 4th respondent for a song. 16
15. It is now germane to notice the rights of parties as determined by the Apex Court and other constitutional Courts, as the borrower is now ready and willing to clear the entire loan amount and also avail of OTS facility that was earlier offered. The right of the auction purchaser has crystallized by becoming the successful bidder and the sale certificate is also issued and he is put in possession. Therefore, the right of the borrower has extinguished or otherwise vis-à-vis the right of the auction purchaser, is what is to be considered. The Apex Court in the case of MATHEW VARGHESE v. M.AMRITHA KUMAR AND OTHERS1 (supra) has held as follows: “9. By the order impugned [Writ Appeal No.1555 of 2009, decided on 8-3-2010 (Ker)]. , the Division Bench took the view that the sale was not conducted in a fair and proper manner, that when the sale was initially postponed by six weeks from 25-9-2007, the Bank ought to have renotified the sale or at least extended the time for receiving further tenders, particularly when only one valid tender was received on the last date notified for sale. The Division Bench further held that the sale was not even informed to Respondents 1 and 2 and they were informed only after the confirmation of the sale and after receipt of their full consideration. The Division Bench, therefore, set aside the sale which was already executed in favour of the appellant by imposing a condition that Respondents 1 and 2 furnish a demand draft of Rs 2,00,00,000 from a local branch of a nationalised bank in favour of the appellant and hand over the same to him, within a period of two months from the date of the order. It further held that if payment was not made, as directed, the sale in favour of the appellant would stand 1 (2014)5 SCC61017 confirmed and the writ appeal would automatically stand dismissed. In the event of the payment of Rs 2,00,00,000 being made in the form of a demand draft, the appellant was directed to hand over the original sale deed obtained by him from the Bank to enable Respondents 1 and 2 to approach the Sub-Registrar and Revenue Authorities for cancellation of registration, consequent mutation, etc.
10. There was also a direction to the Sub-Registrar to restore the property in the name of the first and second respondents. On payment of the sum of Rs 2,00,00,000, the Bank was directed to remit the excess amount available with them to the Tax Recovery Officer in pursuance of the demand already made by it and to credit the said amount in the account of Respondents 1 and 2. Liberty was also given to Respondents 1 and 2 to claim for refund, if they were eligible for any. Additionally, liberty was also given to Respondents 1 and 2 to refund the stamp duty, if they were eligible for such refund. The period of two months granted by the Division Bench for Respondents 1 and 2 to deposit a sum of Rs 2,00,00,000 expired by 8.5.2010.
11. Respondents 1 and 2 did not make the payment within the said date, as directed by the Division Bench. Instead an application was filed by Respondents 1 and 2 in IA No.437 of 2010 in Writ Appeal No.1555 of 2009 seeking for further six weeks' time to effect the payment of Rs 2,00,00,000 to the appellant. In the said IA No.437 of 2010, the Division Bench passed its order on 18- 6-2010, extending the time till 20-6-2010. The said extension was granted by holding that on such deposit, sale made by the fourth respondent Bank in favour of the appellant would stand cancelled and the Bank should effect the sale in favour of the eighth respondent in Special Leave Petition No.21434 of 2010, namely, Mr Koshi Phillip, s/o Mathai Koshi, who shall hereinafter be referred to as the eighth respondent. The eighth respondent herein was directed to deposit Rs 2,03,00,000 before the fourth respondent Bank on 19-6-2010 and the time granted for payment in terms of the judgment was extended till 20-6-2010. Subsequently, in IA No.507 of 2010, the Division Bench after noting that the appellant had not withdrawn the amounts deposited with the fourth respondent Bank by stating that he has approached this Court by way of a special leave petition and after finding that mere steps taken by the appellant for filing the special leave petition need not stand in the way of executing the sale deed in favour of the eighth respondent 18 who had deposited the entire amount. In effect, the said IA No.507 of 2010 in Writ Appeal No.1555 of 2009 was allowed and the Bank was directed to execute the sale deed in favour of the eighth respondent for the sale consideration of Rs 2,03,00,000. … … … 17. The learned Senior Counsel further contended that by the impugned order [Writ Appeal No.1555 of 2009, decided on 8- 3-2010 (Ker)]. , the Division Bench exercised its jurisdiction under Article 226 of the Constitution, which this Court held ought not to have been exercised, when Respondents 1 and 2, as guarantors, had every right to work out their remedy as against the sale effected on 28-12-2007, under the provisions of the SARFAESI Act. The learned Senior Counsel also contended that once the sale has been effected and confirmed in accordance with law, merely because someone else can offer a higher amount, the Court should not have interfered with the already confirmed sale as that would become an unending affair if such approach made by parties are entertained. In support of his submissions, the learned Senior Counsel relied upon Valji Khimji and Co. v. Official Liquidator [(2008) 9 SCC299 and United Bank of India v. Satyawati Tondon [(2010) 8 SCC110: (2010) 3 SCC (Civ) 260].. … … … 37. Mr Shyam Divan, learned Senior Counsel relied upon the decision in Narandas Karsondas [(1977) 3 SCC247 , in which the right of a mortgagor as prescribed under Section 60 of the TP Act has been spelt out. Under Section 60 of the TP Act, at any time after the principal money fell due, there is a right in the mortgagor on payment or tender at a proper time and place of the mortgage money, to require a mortgagee to restore the property to the mortgagor with all rights prescribed as it stood prior to the mortgage. Under the proviso, the only impediment would be that if such a right of a mortgagor stood extinguished by the act of the parties or by the decree of a court. Certain other conditions are also stipulated in the said provision for the mortgagor to seek for redemption of the mortgaged property. Dealing with the said provision, this Court held as under in paras 34 and 35. Paras 34 and 35 are as under: (SCC p.
254) “34. The right of redemption which is embodied in Section 60 of the Transfer of Property Act is available to the mortgagor unless it has been extinguished by the act of parties. The combined effect of Section 54 of the Transfer of 19 Property Act and Section 17 of the Registration Act is that a contract for sale in respect of immovable property of the value of more than one hundred rupees without registration cannot extinguish the equity of redemption. In India it is only on execution of the conveyance and registration of transfer of the mortgagor's interest by registered instrument that the mortgagor's right of redemption will be extinguished. The conferment of power to sell without intervention of the court in amortgage deed by itself will not deprive the mortgagor of his right to redemption. The extinction of the right of redemption has to be subsequent to the deed conferring such power. The right of redemption is not extinguished at the expiry of the period. The equity of redemption is not extinguished by mere contract for sale.
35. The mortgagor's right to redeem will survive until there has been completion of sale by the mortgagee by a registered deed. In England a sale of property takes place by agreement but it is not so in our country. The power to sell shall not be exercised unless and until notice in writing requiring payment of the principal money has been served on the mortgagor. Further Section 69(3) of the Transfer of Property Act shows that when a sale has been made in professed exercise of such a power, the title of the purchaser shall not be impeachable on the ground that no case had arisen to authorise the sale. Therefore, until the sale is complete by registration the mortgagor does not lose right of redemption.” (emphasis added) A perusal at the afore-quoted paragraphs of the judgment, what could be gathered is that if the property is grossly undervalued and sold, interference under Article 226 of the Constitution would become permissible, but an element of fraud should be demonstrable in the case if it is to be maintainable. The Apex Court in the subsequent judgment considering MATHEW VARGHESE in 20 DWARIKA PRASAD v. STATE OF UTTAR PRADESH AND OTHERS2 (supra) holds as follows:
8. Section 13(8) of the SARFAESI Act provides as follows: “13. (8) If the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by the secured creditor, and no further step shall be taken by him for transfer or sale of that secured asset.” These provisions have fallen for interpretation before this Court in Mathew Varghese [Mathew Varghese v. M. Amritha Kumar, (2014) 5 SCC610: (2014) 3 SCC (Civ) 254]. . Dwelling on Section 60 of the Transfer of the Property Act, 1882 this Court held that the right of redemption is available to a mortgagor unless it stands extinguished by an act of parties. The right of the mortgagor to redeem the property survives until there has been a transfer of the mortgagor's interest by a registered instrument of sale. Applying these principles in the context of the SARFAESI Act this Court held as follows: (SCC p. 638, para
39) “39. When we apply the above principles stated with reference to Section 60 of the TP Act in respect of a secured interest in a secured asset in favour of the secured creditor under the provisions of the SARFAESI Act and the relevant Rules applicable, under Section 13(1), a free hand is given to a secured creditor to resort to a sale without the intervention of the court or tribunal. However, under Section 13(8), it is clearly stipulated that the mortgagor i.e. the borrower, who is otherwise called as a debtor, retains his full right to redeem the property by tendering all the dues to the secured creditor at any time before the date fixed for sale or transfer. Under sub- section (8) of Section 13, as noted earlier, the secured asset should not be sold or transferred by the secured creditor when 2 (2018) 5 SCC49121 such tender is made by the borrower at the last moment before the sale or transfer. The said sub-section also states that no further step should be taken by the secured creditor for transfer or sale of that secured asset. We find no reason to state that the principles laid down with reference to Section 60 of the TP Act, which is general in nature in respect of all mortgages, can have no application in respect of a secured interest in a secured asset created in favour of a secured creditor, as all the above stated principles apply on all fours in respect of a transaction as between the debtor and secured creditor under the provisions of the SARFAESI Act.
9. In the present case, the appellant failed to comply with the provisions of Section 13(8). The statute mandates that it is only where the dues of the secured creditor are tendered together with costs, charges and expenses before the date fixed for sale or transfer that the secured asset is not to be sold or transferred. The appellant was aware of the proceedings initiated by the Bank for asserting its right to recover its dues by selling the property. The appellant moved the DRT in Securitisation Application No.176 of 2015. During the pendency of those proceedings, orders were passed by the Tribunal on 1-2-2016 and 3-2-2016. The appellant moved the Allahabad High Court which by its order dated 9-3-2016 [Dwarika Prasad v. State of U.P., 2016 SCC OnLine All 2564]. restrained the Bank and the auction-purchaser from executing the sale deed until 15-3-2016. The stay was extended till 28-3-2016 by which date the appellant was to deposit an amount of Rs 7,00,000. The balance was required to be deposited by 30-4-2016. While the appellant deposited an amount of Rs 7,00,000 with the Bank, he failed to deposit the balance in accordance with the provisions of Section 13(8). Even after the writ proceedings before the High Court were withdrawn, the appellant did not deposit the balance due together with the costs, charges and expenses. The sale was confirmed, a sale certificate was issued and a registered sale deed was executed on 12-4-2016. The appellant failed to ensure compliance with Section 13(8). The right to redemption stands extinguished on the execution of the registered sale deed. This is also the view which has been expressed in the judgment in Mathew Varghese [Mathew Varghese v. M. Amritha Kumar, (2014) 5 SCC610: (2014) 3 SCC (Civ) 254].. 22
10. The appellant, is however, entitled to a refund of his deposit of Rs 7,00,000 with interest at 9% per annum from the date of deposit till payment. The Bank has in its counter- affidavit stated that it was at all times ready and willing to do so. The Bank shall refund this amount of Rs 7,00,000 with interest at 9% per annum within 8 weeks. For the above reasons, save and except for the above direction to refund Rs 7,00,000 with interest, we find no merit in the appeal. The appeal shall accordingly stand disposed of. There shall be no order as to costs.” (Emphasis supplied) The Apex Court in DWARIKA PRASAD considers MATHEW VARGHESE, the purport of sub-section (8) of Section 13 of the Act and holds that the borrower would have the right of redemption of the property till execution of registered sale deed. Once the sale deed is executed, the right of redemption stands extinguished. Therefore, till the property is sold or sale confirmation is made the right of the borrower though would be nebulous is still in existence. Once the sale deed is executed/confirmation of sale is made in favour of the auction purchaser, the right of the borrower to redeem the mortgage gets extinguished. The Apex Court a little earlier to the afore-rendered judgment in the case of ALLOKAM PEDDABBAYYA AND ANOTHER v. ALLAHABAD BANK AND OTHERS3 has held as follows:
3. (2017) 8 SCC27223 “23. The aforesaid discussion leads to the conclusion that the plaintiffs lost the right to sue for redemption of the mortgaged property by virtue of the proviso to Section 60 of the Act, no sooner that the mortgaged property was put to auction-sale in a suit for foreclosure and sale certificate was issued in favour of Defendant 2. There remained no property mortgaged to be redeemed. The right to redemption could not be claimed in the abstract.” The Apex Court holds that the plaintiff has lost the right to sue for redemption of the mortgaged property by virtue of the proviso to Section 60 of the Transfer of Property Act no sooner that the mortgaged property was put to auction sale and sale certificate was issued in favour of the auction purchaser. The Apex Court holds that there remained no property mortgaged to be redeemed as the redemption cannot be claimed in the abstract. The facts of the case are identical to that of the case in the afore-quoted judgments of the Apex Court.
16. The property was put to auction on 29-09-2021 which is the 4th time in line. Every time the petitioner had notice of the auction and did not come forward to pay the reserve price and clear the property from it being auctioned. The defence of the Bank is that opinions of two independent valuers were taken and sale 24 notices were affixed at conspicuous places in the asset and paper publications were also made. I conclude this only to observe that the petitioner had notice of the auction that was taking place. Even then the petitioner did not protest or come forward with any offer to the Bank for clearance of the loan and therefore, the property is auctioned. The 4th respondent emerges as the successful bidder on 29-09-2021 and certificate of sale comes to be issued in favour of the 4th respondent on 07-10-2021, the same is registered before the Sub-Registrar and the 4th respondent is put in possession of the property. For close to 4 years the petitioner was given opportunity to redeem the mortgage by paying the amount. OTS was also offered to the petitioner but he has not availed it. Once having failed to avail all the benefits that the Bank wanted to grant, it cannot be seen that the petitioner now after the sale certificate is issued, to contend that he is ready and willing to pay the auction amount, as also compensate the auction purchaser. The Apex Court clearly holds that once the certificate of sale is registered, the right of the borrower to redeem the mortgage stands extinguished and thereafter there is no mortgage exists in the eye of law. 25
17. For the aforesaid reasons, the petition lacking in merit stands dismissed. Sd/- JUDGE bkp CT:MJ