TaxTMI 
TaxTMI 
2019 (8) TMI 904
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.... 2003, Shri P. Shahul Hameed and Smt. Shakeena (appellants/borrowers) were sanctioned a term loan of Rs. 10 Lacs each under Star Mortgage Loan by the respondent bank. The accounts became NPA (Non--Performing Assets) from 30th June, 2004. As there was default in repayment, the respondent bank issued legal notice dated 19th October, 2004 to repay the dues within seven days. On 1st December, 2004, notice was issued under Section 13(2) of the 2002 Act to the appellants, calling upon them to discharge the loan within sixty days. In reply, the appellants by representations dated 10th December, 2004, requested the respondent bank to grant time for bringing the account in order. In view of the default in discharging the loans by the appellants, the respondent bank, exercised its power under Section 13(4) of the 2002 Act. Accordingly, constructive possession of the mortgaged property was taken over by the respondent bank on 8th February, 2005. 3. The appellants then filed S.A. Nos.21 and 22 of 2005, by invoking Section 17 of the 2002 Act, before the Debts Recovery Tribunal II, Chennai, challenging the notices, issued by the respondent bank. On 18th March, 2005, DRTII, Chennai passed an o....
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....ven that order has been allowed to become final by the appellants. 8. As aforementioned, consequent to sale of the secured asset, a sum of Rs. 24,92,750/( Rupees Twenty Four Lacs Ninety Two Thousand Seven Hundred Fifty Only) was adjusted towards the loan accounts of the appellants and a sum of Rs. 10,000/( Rupees Ten Thousand Only) towards legal expenses. Out of the balance sum of Rs. 17,48,250/( Rupees Seventeen Lacs Forty Eight Thousand Two Hundred Fifty Only), the bank returned a sum of Rs. 17,25,000/( Rupees Seventeen Lacs Twenty Five Thousand Only) to the appellant (Petitioner in Writ Petition No.634 of 2006) by way of a bankers cheque along with letter dated 18th January, 2006. However, the said appellant did not encash the bankers cheque and instead returned the same. The bank had retained a sum of Rs. 23,250/( Rupees Twenty Three Thousand Two Hundred Fifty Only) towards future legal expenses with the undertaking that the balance amount will be returned after adjusting the lawyer charges/legal expenses. 9. The Appellants then forwarded demand drafts for Rs. 25,06,250/( Rupees Twenty Five Lacs Six Thousand Two Hundred Fifty Only), which was received by the respondent ba....
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....suit property. Later on, this Court granted leave to appeal on 27th November, 2009 and the interim order continued during the pendency of the appeals. 15. Be it noted that on 1st September, 2016 amendment to Section 13(8) of the 2002 Act came into force as a result of which the dues of the secured creditor together with all costs, charges and expenses incurred by him are required to be tendered to the secured creditor at any time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets. 16. Reverting to the impugned judgment of the Division Bench of High Court, it essentially considered three points as noted in paragraph 8 of the impugned judgment. The same reads thus: (i) Whether the sale of the secured asset in public auction as per section 13(4) of SARFAESI Act, which ended in issuance of a sale certificate as per rule 9(7) of the Security Interest (Enforcement) Rules, 2003 (in short "the rules") is a complete and absolute sale for the purpose of SARFAESI Act or whether the sale would become final only on the registration of the ....
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....registration of sale certificate was not essential. The Court observed thus: "10.17 The ratio laid down by the Division Bench of this court in Arumugham, S. & 2 others v. C.K.Venugopal Chetty & 5 others and the Supreme Court in B. Arvind Kumar vs. Government of India and others, referred supra, squarely applies to the case on hand and we, therefore, have no incertitude to hold that the sale which took place on 19.12.2005 has become final when it is confirmed in favour of the auction purchaser and the auction purchaser is vested with rights in relation to the property purchased in auction on issuance of the sale certificate and he has become the absolute owner of the property. Further, as held by the Division bench of this court in Arumugham, S. & 2 others v. C.K. Venugopal Chetty & 5 others and the Supreme Court in B. Arvind Kumar Vs. Government of India and others, referred supra, the sale certificate issued in favour of the appellant does not require any registration in view of section 17(2) (xii) of the Registration Act as the same has been granted pursuant to the sale held in public auction by the authorized officer under SARFAESI Act. 10.18 The finding of the....
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...., S. & 2 others v. C.K. Venugopal Chetty & 5 others and the Supreme Court in B. Arvind Kumar vs. Government of India and others, referred supra. 11.5.3.1 thirdly, it is true that the borrowers have the right of redemption as provided under Section 60 of the Transfer of Property Act, 1882, in view of Section 37 of SARFAESI Act and to substantiate the said stand, the learned counsel for the borrowers relies on the decision of the Supreme Court in Narandas Karsondas vs. S.A. Kamtam and another, (1977) 3 SCC 247 wherein it is held that the mortgagor has a right to redemption unless the sale of the property was complete by registration in accordance with the provisions of the Registration Act. 11.5.3.2 With great respect, we are of the view that the decision of the Supreme Court in Narandas Karsondas vs. S.A. Kamtam and another, referred supra, is not applicable to the facts of this case. Even, as held by the Supreme Court in Narandas Karsondas vs. S.A. Kamtam and another, referred supra, the right of the mortgagor to redemption continues only till such time the sale of the property was complete by registration. In this case, our finding, following the decision of the ....
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....ore the sale is completed by way of a registered deed under the Transfer of Property Act, a law for the time being in force, is not taken away by the introduction of the SARFAESI Act, by virtue of section 37 of the SARFAESI Act, as the provisions of the SARFAESI Act and the rules framed thereunder shall be in addition to and not in derogation of the right of redemption conferred under the transfer of property act. But, we have already rendered a finding that the registration of sale certificate as per section 17(2)(xii) of the Registration Act is not mandatory for the completion of the sale pursuant to the public auction and issuance of the sale certificate under the scheme of the SARFAESI Act. Assuming, the right of redemption conferred under the Transfer of Property act is protected under Section 37 of the SARFAESI Act, and independently available without reference to the registration of the sale certificate under Section 17(2) (xii) of the Registration Act, the sale already effected satisfying the conditions contemplated under Section 13(8) of the SARFAESI Act, shall by virtue of section 37 of the SARFAESI Act, prevail over such other rights, much less the right of redemption co....
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....ned property in favour of the auction purchaser. In that, the public auction conducted under the 2002 Act by the secured creditor is not on account of order of any court; and neither is the Authorised Officer a Civil or Revenue Officer for the purposes of Section 17(2) (xii) of the Registration Act. Reliance is placed on Rule 2(a) of the Enforcement Rules, which defines Authorised Officer as an officer not less than a Chief Manager of a Public Sector Bank or equivalent, as specified by the Board of Directors or Board of Trustees of the secured creditor or any other person or authority exercising power of superintendence, direction and control of the business or affairs of the secured creditor, as the case may be, to exercise the rights of a secured creditor under the 2002 Act. Thus, the Authorised Officer is essentially an employee of the bank and not a Civil or Revenue Officer as such. There is no deeming provision in the 2002 Act or the Rules framed thereunder, to construe the Authorised Officer of the bank as a civil or revenue officer for the purpose of Section 17(2)(xii) of the Registration Act. 18. It is then submitted that public auction of the subject property has been c....
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....) of the 2002 Act, mandates tender of the dues by the debtor/borrower to the secured creditor at any time before the date fixed for sale which in this case was 19th December, 2005. Our attention was invited to the fact that subsection (8) has undergone a change and has been made more stringent, requiring tender of dues to the secured creditor together with all costs, charges and expenses incurred by him at any time before the "date of publication of notice" for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets. 20. It is then urged that the appellants had failed to make a valid tender to pay the outstanding dues till the date of registration of the sale certificate on 18th September, 2007. Indeed, the appellants had deposited a sum of rupees twentyfive lac by 4th January, 2006, but that amount was deposited in the account of the father of appellant No.2. Thus, the respondent bank did not accept the same as a valid tender made by the appellants towards the loan accounts. Similarly, the cheques issued by the appellants on 2nd January, 2006 in the sum of Rs. 25,21,446/( Rupees TwentyF....
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....ever, filed writ petitions only on 19th January, 2006. The appellants did not avail the option of redemption by tendering the dues to the respondent bank before the date fixed for sale or public auction which in this case was 19th December, 2005. Furthermore, the legal notice issued at the instance of appellants also does not clearly indicate their intention to redeem the mortgage by closing loan accounts and readiness and willingness to pay the entire dues. The tender made by the appellants was not a valid tender and no fault can be found with the respondent bank for having returned the cheques/drafts and not to encash the same. Further, after the High Court rendered the impugned decision on 10th August, 2007, the sale certificate has been duly registered on 18th September, 2007 and even until that date no valid offer or tender has been made by the appellants for payment of the outstanding dues to the respondent bank. The title of the subject property had already passed on to respondent No.3. Therefore, respondent No.3 was within his rights to sell the property to a third party by a registered sale deed on 5th October, 2007. By not impleading the subsequent purchaser, the civil ap....
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....to the order of the DRT rejecting challenge thereto due to non-compliance of the conditional order. Even the subsequent application for restoration of the DRT proceedings came to be rejected. The appellants then filed the subject Writ Petition (C) Nos.634635 of 2006 on 19th January, 2006, by which date the auction had already concluded including the sale certificate was issued in favour of the highest bidder on 6th January, 2006. Moreover, the principal assertion of the appellants before the High Court was that they were wanting to exercise their right of redemption of mortgage, but due to fortuitous situation and the inappropriate stand taken by the respondent bank were prevented from doing so. No other plea was pursued by the appellants in support of the reliefs claimed by them before the High Court, as can be discerned from the three points formulated in paragraph No.8 of the impugned judgment (reproduced in paragraph No.16 hereinabove). The appellants cannot be permitted to assail the auction process on any other count. 27. Reverting to the stand taken by the appellants that they had attempted to exercise their right of redemption by depositing an aggregate sum of Rupees Twe....
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....vide the impugned judgment. We must also notice the stand taken by the respondent bank that even the legal notice sent by the appellants to the respondent bank, in no way expresses unambiguous commitment of the appellants to exercise their right of redemption. Suffice it to observe that the appellants, for reasons best known to them, have not chosen to deposit the amount in the loan accounts or attempted to seek permission of the Court to deposit the same in Court from 19th January, 2006 immediately after filing of writ petitions or for that matter until the registration of the sale certificate on 18th September, 2007. In this backdrop, it is not possible to countenance the stand of the appellants that they had made a valid tender to the respondent bank or that the respondent bank had mischievously or malafide rejected their offer to defeat their rights, to redeem the mortgage before registration of the sale certificate on 18th September, 2007. 29. A fortiorari, it must follow that the appellants have failed to exercise their right of redemption in the manner known to law, muchless until the registration of the sale certificate on 18th September, 2007. In that view of the matter....