TaxTMI 
TaxTMI 
2021 (12) TMI 1462
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....ce dt. 23.11.2017 under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests Act, 2002 (hereinafter referred to as 'SARFAESI Act') demanding payment of Rs. 2,62,98,047.72. 5. The respondent-Bank filed an application under Section 14 of the SARFAESI Act before the District Magistrate, Faridabad. On 14.06.2018, the said application was allowed and the respondent-Bank was permitted to take physical possession of the residential house of the petitioners. 6. Since the possession was not being delivered, the respondent-Bank filed CWP No. 565 of 2019 before this Court impleading the petitioners herein as respondents No. 3 to 5. 7. Notice of motion was issued for 15.02.2019 by this Court. 8. But on 14.02.2019, the officials of the respondent-Bank along with the Tehsildar, Faridabad, went to the residential house of the petitioners to take possession. At that time, the 2nd petitioner gave a letter dt. 14.2.2019 to Tehsildar, Faridabad that he will himself give possession of the property within 15 days and undertook to repay whole amount due to respondent-Bank within 90 days. 9. But the possession of the prop....
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....to 5 therein (petitioners herein) that a sum of Rs. 70 Lacs would be deposited on or before 15.04.2019 and that the remaining amount due shall be deposited on or before 15.05.2019. Therefore, the Bench directed that a sum of Rs. 70 Lacs, in terms of the statement made by the petitioners' counsel, be deposited on or before 15.04.2019 and adjourned CWP No. 565 of 2019 to 22.04.2019. 18. On 29.03.2019, the petitioners deposited a sum of Rs. 1.75 Crore in no lien account of one Mr. Shirish Goel and wrote an Email dt. 29.03.2019 informing the 1st respondent-Bank of said deposit. 19. But on 28.03.2019, the auction was held and respondents No. 2 and 3 became the highest bidders by quoting Rs. 3,12,00,000/-. They also deposited Rs. 78,50,000/- equivalent to 25% of the bid amount as per the terms and conditions of sale notice and requested the Bank to declare them as the highest bidder and confirm the same. 20. On 29.03.2019, the 1st respondent-Bank wrote a letter to respondents No. 2 and 3 confirming that respondents No. 2 and 3 have been declared as the highest bidder and directed them to deposit the balance 75% by 12.04.2019. It also stated that in case default of balan....
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....ime, on 23.05.2019, written statement was filed by the 1st respondent-Bank. The stand of the 1st respondent-Bank: 29. Firstly, the 1st respondent-Bank contended that the petitioners have statutory remedy under the SARFAESI Act and they have not made out any case for invoking the jurisdiction of this Court under Article 226 of the Constitution of India. 30. They contended that the petitioners' intention is only to stall the recovery proceedings initiated by the 1st respondent-Bank under the SARFAESI Act, that they are defaulters and an amount of more than Rs. 4.70 Crore with future interest and other expenses w.e.f. 01.04.2019 was recoverable by the 1st respondent-Bank in the 3 loan accounts of the petitioners and their sister concern. 31. It is contended that the auction held on 28.03.2019 was conducted as per the provisions of the SARFAESI Act and the Rules made thereunder and it was sold in the said auction for Rs. 312 Lacs and there is no irregularity in the sale proceedings. 32. The respondent-Bank contended that even otherwise the petitioners had a remedy under Section 17(1) of the SARFAESI Act. 33. It was pointed out that the Writ Petition had come up ....
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....he petitioners did not allow possession of the secured assets in the loan account of M/s. Stuti Metals Private Limited in spite of the orders passed by the District Magistrate on 15.01.2019 after approaching this Court. 40. It is contended that the petitioners are seeking redemption of property which had been sold by the 1st respondent-Bank in a public auction and the said plea was not sustainable as per amended provisions of Section 13(8) of the SARFAESI Act which provided that only before issuance of sale notice, right of redemption is available and not thereafter. It was stated that prior to the amendment of Section 13(8) of the SARFAESI Act, the right of redemption was available to the mortgagor/borrower till the date of sale, but not after the amendment. 41. It is contended that even if the petitioners had deposited Rs. 1.70 Crore, said deposit had been made in the account of third party Mr. Shirish Goel and the respondent-Bank cannot appropriate it to the loan dues of the petitioners without any mandate from the account holder. It is also stated that on the last date of hearing, petitioners had undertaken to pay Rs. 70 Lacs in the loan account, but no such amount was ....
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....ssued and possession of the property had also not been granted to them. They prayed for issuance of sale certificate in favour of respondents No. 2 and 3. 47. Thereafter, matter was adjourned on 15.01.2020 to 20.01.2020, 21.01.2020, 29.01.2020. 48. On 29.01.2020, this Court recorded that the petitioners' counsel stated that a sum of Rs. 1.70 Crore was deposited with the 1st respondent-Bank, but the counsel for the 1st respondent-Bank stated that though the amount was deposited, but it was withdrawn on 24.04.2019. So he was permitted to file an affidavit to this effect on the said date. Subsequently, on account of Covid-19 Pandemic, the matter does not appear to have been listed for a considerable amount of time. 49. An application for preponement of date of hearing was filed by respondents No. 2 and 3 vide CM No. 11173-CWP of 2021 and the matter was preponed by order dt. 26.10.2021 to 22.11.2021 from 17.12.2021. 50. The matter was heard in part on 22.11.2021, 03.12.2021, 10.12.2021. 51. CM No. 3368-CWP of 2020 was filed by the Writ Petitioners to receive the following documents:- "(1) Copy of Email dt. 29.03.2019 written to the Bank (Annexure-A.1). ....
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.... either to re-transfer the mortgaged property to him or to such third person as he may direct, or to execute and (where the mortgage has been effected by a registered instrument) to have registered an acknowledgment in writing that any right in derogation of his interest transferred to the mortgagee has been extinguished: PROVIDED that the right conferred by this section has not been extinguished by the act of the parties or by decree of a court. xx xx xx xx xx" 59. In 1965, Murarilal v. Devkaran AIR 1965 SC 225, a mortgage deed sought to be redeemed was executed on 19.3.1919 for Rs. 6500/-. It stipulated that the mortgage should be repaid in 15 years. It further stipulated that if the payment was not made within 15 years, the mortgagee would become the owner of the property. In a suit for redemption, the mortgagor contended that his right to redeem was alive even though the stipulated period of 15 years had passed. The mortgagee took the stand that after the expiry of the period of 15 years, the property had become the absolute property of the mortgagee. Though the trial court dismissed the suit, the Rajasthan High Court allowed the appeal and held that the s....
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....borrower under Section 29 of the State Financial Corporations Act, the Supreme Court held in Gajraj Jain v. State of Bihar (2004)7 SCC 151 that the action of the State Financial Corporation in handing over the estates to the auction purchaser under a down payment of Rs. 28.85 Lacs, did not prevent the borrower from exercising the right of redemption. It held: "Under Sec. 60 of the Transfer of Property Act, 1882, equity of redemption existed in favor of the Company. A mere agreement of sale of it's assets cannot extinguish the equity of redemption, it is only on execution of conveyance that the mortgagor's right of redemption will be extinguished." 62. Thus even if the sale of secured assets is under a special statute like State Financial Corporations Act, there is no deviation from the general principle that the mortgagor's right of redemption is not extinguished till the execution of conveyance. 63. The above principle was reiterated in 2011 in M/s. L.K. Trust v. EDC Ltd., and others (2011) 6 SCC 780, and it was held that in India, there is no equity or right in property created in favor of the purchaser by the contract between the mortgagee and the pro....
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.... sale, the right of redemption might be lost. But that is not the what the Supreme Court held in Mathew Varghese v. M. Amritha Kumar and others (2014) 5 SCC 610. 69. In Mathew Varghese (supra), after referring in para 38, pg. 637 to the principle laid down in Narandas Karsondas (2 Supra) [that a mere conferment of power to sell without intervention of the Court in the mortgage deed itself will not deprive the mortgagor of his right to redemption, that the extinction of the right of redemption has to be subsequent to the deed conferring such power, that the right of redemption is not extinguished at the expiry of the period, that the equity of redemption is not extinguished by mere contract for sale and the mortgagor's right to redeem will survive until there has been completion of sale by the mortgagee by a registered deed ], the Supreme Court held: " .. we fail to note any distinction to be drawn while applying the above said principles, even in respect of the sale of secured assets created by way of a secured interest in favor of the secured creditor under the provisions of the SARFAESI Act, read along with the relevant rules. We say so, in as much as, we find tha....
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....treaty for transfer by way of lease, assignment or sale of the secured assets,--(i) the secured assets shall not be transferred by way of lease assignment or sale by the secured creditor; and (ii) in case, any step has been taken by the secured creditor for transfer by way of lease or assignment or sale of the assets before tendering of such amount under this sub-section, no further step shall be taken by such secured creditor for transfer by way of lease or assignment or sale of such secured assets.]" 74. It is the contention of the counsel for the petitioners that the law relating to redemption of mortgage was that such a right was incidental for the subsistence of mortgagor so long the mortgage itself subsists, that such a right cannot be extinguished except by the Act of parties or by the decree of Court, and a mortgage being security for the debt, the right of redemption continues although mortgagor failed to pay the debt at the due date, and in India it is only on execution of conveyance, the right of redemption gets extinguished. He contended that the amendment to Section 13(8) of the SARFAESI Act vide Act 44 of 2016 had no bearing on the right of redemption avai....
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....t. The words 'when to stop the exercise of right of redemption by the borrower/mortgagor' were not used. 80. In the said Report, at pg. 12, Clause 11(ii) of the Bill which proposed to amend Section 13(8) of the SARFAESI Act is noted. After extracting the existing Section 13(8) of the Act which stands as under:- "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." 81. the proposed modification to Section 13(8) is set out also at pg. 12 as under:- "(8) Where the amount of 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 lease, assignment or sale of the secured assets,- (i) the secured assets shall not be leased, assigned or sold by the secured creditor; and (ii) in case, any step has been taken by the secured creditor for l....
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....ed opinion, it is clear that the legislature did not have any intention to deal with the right of mortgagor to redeem the mortgage when they amended Sec. 13(8) or to modify it in any manner; and amendment cannot be said to have intended to modify the existing law which continued even when the un-amended Section 13(8) of the SARFAESI Act was in force. The amended Sec. 13(8) was intended to only deal with the date when the secured creditor's right to transfer the secured asset should stop and nothing more. 89. This aspect was also considered by a Division Bench of the Telangana and Andhra Pradesh High Court presided over by Justice V. Ramasubramanian (as his Lordship then was) in M/s. Concern Readymix, rep. By its Proprietor (7 Supra). 90. The Division Bench in M/s. Concern Readymix, rep. By its Proprietor (7 Supra) observed that the first distinction between un-amended Section 13(8) and amended Section 13(8) made through Act 44 of 2016 is that before amendment, the facility of repayment of the entire dues along with costs, charges and expenses, was available to the debtor at any time before the date fixed for the sale or transfer. But after the amendment, the facility is a....
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....ration Act to come to the conclusion that the extinction of the right of redemption comes much later than the sale notice. Therefore, we should first understand that the right of redemption is not lost immediately upon the highest bid made by a purchaser in an auction being accepted. 14. Perhaps the Courts were tempted to think that Section 13 (8) speaks about redemption, only on account of what is found in Rule 3(5) of the Security Interest (Enforcement) Rules, 2002. Rule 3(5) inserted by way of amendment with effect from 04-11-2016 states that the demand notice issued under Section 13(2) should invite the attention of the borrower to the provisions of Section 13 (8), in respect of the time available to the borrower to redeem the secured assets. Today, it may be convenient for one borrower to contend that the right of redemption will be lost immediately upon the issue of notice under Rule 9(1). But if it is held so, the same would tantamount to annulling the relevant provisions of the Transfer of Property Act, which do not stand expressly excluded, insofar as the question of redemption is concerned." (emphasis supplied) 92. We have been informed that the decis....
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....nd not just upto the date fixed for sale even though Sec. 13(8) (unamended) says so. 96. Keeping in mind (i) the Report of the Joint Committee on the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill, 2016 discussed above, (ii) the law laid down by the Supreme Court in Mathew Varghese (6 supra) and (iii) the decision in M/s. Concern Readymix (7 supra) of the Telangana and Andhra Pradesh High Court, with which we respectfully agree, we hold that the amended Section 13(8) of the SARFAESI Act merely prohibits asecured creditor from proceeding further with the transfer of the secured asset by way of lease, assignment or sale; a restriction on the right of the mortgagee to deal with the property is not exactly the same as the equity of redemption available to the mortgagor; the payment of the amount mentioned in Section 13(8) of the SARFAESI Act ties the hands of the mortgagee (secured creditor) from exercising any of the powers conferred under the Act; that redemption comes later; extinction of the right of redemption comes much later than the sale notice; and the right of redemption is not lost immediately upon the highest bid....
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....gagor/borrower in spite of amendment made to Section 13(8) of the SARFAESI Act has been raised by the petitioners in this Writ Petition. Therefore, this plea of the respondents that the Writ Petition should be dismissed as not maintainable, is rejected. 102. According to the notice dt. 23.11.2017 issued by the 1st respondent-Bank to the petitioners, a sum of Rs. 2,62,98,047.72 was due as on 22.11.2017 by the petitioners in the loan account of the first petitioner. 103. In July 2018, petitioners had paid Rs. 30 Lacs to the 1st respondent-Bank. Thereafter, two demand drafts of Rs. 25 Lacs each dt. 25.02.2019 were also handed over to the counsel for the 1st respondent-Bank during the course of hearing in CWP No. 565 of 2019. 104. Thus, by the date of filing of CWP No. 6402 of 2019 on 27.02.2019, the petitioners had paid Rs. 80 Lacs. 105. The petitioners had informed the Tehsildar, Faridabad on 14.02.2019, at the time of taking possession of their residential house that they would pay the whole amount of dues within 90 days. They had also filed an affidavit in CWP No. 565 of 2019 that they would deposit a further sum of Rs. 70 Lacs within one month from 15.02.2019 i.e.....
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....00 and petitioners had already paid Rs. 80 Lacs and were offering Rs. 1.7 Crore for settlement, the total amount being offered was more than Rs. 2.5 Crore, much more than the loan due, and the 1st respondent could have accepted it. 110. Since there was no response by the 1st respondent-Bank, petitioners contend that the said amount was taken out of the account of Mr. Shirish Goel on 24.04.2019 as the said deposit was not earning any interest. 111. But the 1st respondent points out to this withdrawal of amount of Rs. 1.7 Crore as a ground to deny any relief to the petitioners. According to it this was done two days after the instant WP was heard on 22.4.2019 and the interim order granted on 12.4.2019 was directed to continue. 112. We find no force in the above contention of the counsel for 1st respondent. When the 1st respondent Bank maintains a stoic silence and gives no response to the said deposit of Rs. 1.7 Crore and the request of the petitioners to settle the loan from 29.03.2019 till 22.04.2019, since the whole purpose of making the deposit was rendered futile, no exception can be taken to the withdrawal of the said amount. 113. The counsel for the 1st respon....
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.... 22.02.2019, and it can still exercise it. 120. It is not in dispute that the short summer break of 10 days was to commence the next day i.e. from 13.04.2019 and there was every possibility of the right of redemption getting extinguished by issuance of certificate of sale in the interregnum period. 121. Since the file of the case would have been before the Court on 12.04.2019, and the Court would have noticed that the 1st respondent-Bank was already represented by a counsel Sri. I.P. Singh and he had taken notice previously on 18.3.2019 and copy of CM No. 5896-CWP of 2019 was also served on 12.4.2019 on his Clerk, and since Sri. I.P. Singh, counsel for the 1st respondent was not present, the Bench issued notice of the application on 12.4.2019 and then proceeded to pass the order directing the 1st respondent not to confirm the sale, to protect the rights of the petitioners and to ensure that the Writ Petition does not become infructuous when the Court next takes up the matter on 22.04.2019. 122. In any event, admittedly, till today the said order dt. 12.04.2019 has been in vogue, and has not been vacated. 123. Therefore, we do not see much force in this contention. 12....
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....f Mr. Shirish Goel since the Bank had refused to open a no lien account at their instance and had informed the Bank of the same on 29.03.2019 along with a request for settlement by email dt. 29.03.2019, but the Bank chose to remain silent on that offer and now a technical plea of it not being a valid tender is sought to be raised by the Bank. 129. Had the Bank responded positively to the email dt. 29.03.2019 and insisted on receiving the said payment immediately, and the petitioners had obliged, no third party interest would have been created because by then the respondents No. 2 and 3 had not deposited 75% of the balance consideration out of Rs. 3,12,00,000/- quoted by them. Bu if the petitioners had not obliged and made the payment of Rs. 1.7 Crore to clear their loan dues after the Bank had insisted on such payment, then nothing prevented the Bank from proceeding to accept the bid of respondents No. 2 and 3 and confirming the sale. In the latter case, this Court would not have shown any indulgence to the petitioners. 130. It is true that the auction purchasers had deposited by 01.06.2019 the bid amount of Rs. 3,12,00,000/-, but they have been clearly informed by the 1st....