DWARIKA PRASADversusSTATE OF UTTAR PRADESH AND ORS.

                          [2018] 3 S.C.R. 29                            29


                       DWARIKA PRASAD                                   A
                                 v.
            STATE OF UTTAR PRADESH AND ORS.
                 (Civil Appeal No. 000148 of 2018)
                         MARCH 06, 2018                                 B
       [DIPAK MISRA, CJI, A. M. KHANWILKAR AND
                 DR. D. Y. CHANDRACHUD, JJ.]
       Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 – s. 13 (8) – Right to
                                                                        C
redemption – Extinguishment of – Held: s. 13(8) 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 – On
facts, appellant guarantor to sanctioned loan, created an equitable
mortgage in respect of immovable property and the said property         D
was auctioned by the bank – Appellant was aware of the proceedings
initiated by the bank for asserting its right to recover its dues by
selling the property – While appellant deposited an amount of
Rs 7,00,000/- with the bank, but failure to deposit the balance in
accordance with the provisions of s.13(8) – Even after the writ
                                                                        E
proceedings before the High Court was withdrawn, appellant did
not deposit the balance due together with the costs, charges and
expenses – Sale was confirmed and registered sale deed was executed
– Thus, the right to redemption stood extinguished on the execution
of the registered sale deed – However, appellant to be refunded the
deposit of Rs 7,00,000/- with interest at 9% p.a.                       F
     The issue arose for consideration whether the right of the
appellant-mortgagor to redeem the property survives on the
execution of the registered sale deed.
      Disposing of the appeal, the Court
                                                                        G
      HELD : The appellant failed to comply with the provisions
of Section 13(8) of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002.
The statute mandates that it is only where the dues of the secured
creditor are tendered together with costs, charges and expenses
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                                 29
30            SUPREME COURT REPORTS                          [2018] 3 S.C.R.


A    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
     Securitization Application. During the pendency of those
     proceedings, orders were passed by the Tribunal on 1 February
B
     2016 and 3 February 2016. The appellant moved the High Court
     which restrained the bank and the auction purchaser from
     executing the sale deed until 15 March 2016. The stay was
     extended till 28 March 2016 by which date the appellant was to
     deposit an amount of Rs 7,00,000/-. The balance was required to
C    be deposited by 30 April 2016. While 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 was withdrawn,
     the appellant did not deposit the balance due together with the
     costs, charges and expenses. The sale was confirmed, a sale
D
     certificate was issued and a registered sale deed was executed
     on 12 April 2016. The right to redemption stands extinguished
     on the execution of the registered sale deed. 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.
E    [Para 6, 7] [35-B-G]
           Mathew Varghese v M. Amritha Kumar [2014] 2 SCR
           736 : (2014) 5 SCC 610 – relied on.
                              Case Law Reference

F          [2014] 2 SCR 736             relied on               Para 6
           CIVIL APPELLATE JURISDICTION : Civil Appeal No.000148
     of 2018.
            From the Judgment and Order dated 24.05.2016 of the High Court
     of Judicature at Allahabad in Civil Misc. Writ Petition No.24089 of 2016.
G
          Nalin Tripathi, R.K. Maheshwari, Ms. Sampa Sengupta Ray,
     Rameshwar Prasad Goyal, Advs for the Appellant.
           Sanjay Kumar Tyagi, Aviral Saxena, Amit Sharma, Ms. Ekta
     Choudhary, T. Mahipal, Sri Ram Krishna, Abhas Kumar, Deepak Sharma,
     Advs for the Respondents.
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      DWARIKA PRASAD v. STATE OF UTTAR PRADESH                                31
                     AND ORS.

      The Judgment of the Court was delivered by                              A
       DR. D.Y. CHANDRACHUD, J. 1 The appellant was a
guarantor to a loan sanctioned for educational purposes to one Jitendra
Kumar. Under the letter of sanction dated 20 June 2009, there was a
‘repayment holiday’ of 24 months (comprised of a grace period of 12
months and an additional 12 months) or six months after the borrower          B
obtained a job, whichever was earlier. Repayment was to commence
from 20 June 2011. In order to secure the liability, the appellant created
an equitable mortgage in respect of an immovable property bearing
Khasra Nos.185, 186 and 188, Central Doon, Dehradun. At the request
of the appellant, the period prescribed for repayment was extended by
two periods each of six months (29 June 2011 to 20 December 2011 and          C
again upto 30 June 2012). The loan was not repaid.The account was
classified as a non-performing asset on 3 September 2013. Corporation
bank (the second respondent) which had disbursed the loan initiated
proceedings by issuing a recall notice under Section 13(2) of the
Securitisation and Reconstruction of Financial Assets and Enforcement         D
of Security Interest Act, 2002(‘SARFAESI Act’) on 12 September 2013.
Neither was a representation made nor was any money deposited. The
bank took symbolic possession on 14 February 2015. The property was
put to e-auction on 30 March 2015. No bid was received. A second e-
auction was scheduled on 30 January 2016. After the bank received one
bid in response to the auction, the appellant initially proposed to deposit   E
the amount of Rs 2,00,000 as against the dues of Rs.36 lakhs. This was
not acceptable. The proceedings before the DRT were listed on 1
February 2016 during the course of which the appellant stated that he
would move a redemption application within three days. The proceedings
were adjourned to 4 February 2016. No stay was granted on the                 F
confirmation of the sale. The sale was confirmed on 2 February 2016.
The appellant moved a redemption proposal on 3 February 2016. During
the pendency of the proceedings before the DRT, the appellant filed a
writ petition before the Allahabad High Court (Writ (C ) 10877 of 2016).
The following order was passed on 15 March 2016 by a Division Bench
of the Allahabad High Court:                                                  G

      “Learned counsel for the petitioner upon instructions states that
      the petitioner is ready and wiling to deposit the entire loan amount
      within a month. He further submits that on or before 28.3.2016
      the petitioner will deposit Rs. 7,00,000/- and the remaining amount
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32             SUPREME COURT REPORTS                           [2018] 3 S.C.R.


A          as may be intimated by the Bank would be deposited on or before
           30.4.2016
           Put up this case as a fresh case on 28.3.2016. By the said date
           the petitioner will fill a supplementary affidavit annexing proof of
           receipt of deposit of Rs. 7,00,000/- with the respondent Bank.
B          The execution of the sale deed will remain stayed till 28.3.2016"
            From the record it is not in dispute that the appellant paid the
     amount of Rs 7,00,000 by demand drafts of the State Bank of India.
     However, on 28 March 2016 the attention of the court was drawn to the
     fact that the appellant had already initiated proceedings before the DRT.
C    The objection raised by the bank to the maintainability of the writ petition
     being noted, the appellant sought leave to withdraw the writ petition and
     to pursue the proceedings initiated by him before the DRT. Hence, on 28
     March 2016, the following order was passed:
           “Sri Shashi Dhar Sahai, learned counsel for the respondent-Bank
D          on the basis of instructions has brought to our notice that petitioner
           who is a guarantor to the loan has already initiated proceedings
           before the Debt Recovery Tribunal, Lucknow for the same relief
           which is being claimed in the writ petition and same cause of
           action. An application for temporary relief has also been moved
E          before the Debt Recovery Tribunal, Lucknow, which is pending.
           Learned counsel for the petitioner when confronted with the
           aforesaid facts sought leave of the Court to permit withdrawal of
           the writ petition with the liberty to pursue before the Debts
           Recovery Tribunal.
F          Prayer made is allowed.
           Writ petition stands dismissed as withdrawn.”
           After the dismissal of the writ petition, the sale certificate was
     issued on 5 April, 2016 in favour of the auction purchaser. After the
     confirmation of the sale the bank executed a registered sale deed against
G    the receipt of a total consideration of Rs 54,41,500. The auction
     purchasers (respondent nos 3 and 4) took possession of the property.
           2. The appellant filed a writ petition before the Allahabad High
     Court contending that since he was ready and willing to clear the

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         DWARIKA PRASAD v. STATE OF UTTAR PRADESH                               33
            AND ORS. [DR. D.Y. CHANDRACHUD, J.]

outstanding dues of the bank, he has a right of redemption to the mortgaged     A
property and that the auction sale without consideringhis offer for
redemption was illegal and void. The Division Bench of the High Court
rejected the writ petition, placing reliance on the provisions of Section
13(8) of the SARFAESI Act. The High Court held that the exercise of
the right of redemption is permissible before the execution of the sale in
                                                                                B
favour of the auction purchaser. In this view, once the sale was complete
and was registered, it was not open to the appellant to exercise the
equity of redemption. The High Court has relied on the judgment of this
Court in Mathew Varghese v M. Amritha Kumar1.
       3. The learned counsel appearing on behalf of the appellant
submits that prior to the confirmation of the sale, the appellant voluntarily   C
offered to defray an amount of Rs 36,00,000 towards claim of the bank
and indicated his willingness to make an initial deposit of Rs 6,00,000.
Though before the DRT the bank had on 1 February 2016 stated that the
appellant should apply for redemption, when the application was moved
on 3 February 2016 it was arbitrarily rejected. Thereafter in pursuance         D
of the order of the High Court dated 15 March 2016, the appellant
deposited a sum of Rs 7,00,000 and was ready to deposit the balance
within 30 days, the time stipulated in the order dated 15 March 2016.
Hence it was urged that there was no reason or justification for the bank
to issue a certificate of sale on 12 April 2016. The fact that the appellant
did not obtain an interim order before the DRT was not a circumstance           E
within his control and the appellant demonstrated his willingness by making
a part payment of Rs 7,00,000.
       4. On the other hand, the learned counsel appearing on behalf of
the bank and for the auction purchasers supported the order of the High
Court. It was urged that despite moving the DRT, the appellant sought           F
relief before the Allahabad High Court in proceeding under Article 226
of the Constitution. After the High Court passed an order on 15 March
2016 recording the statement that the appellant would deposit an amount
of Rs 7,00,000 by 28 March 2016 and the balance by 30 April 2016 the
writ petition was withdrawn on 28 March 2016 with liberty to pursue the         G
proceedings before the Tribunal. At no stage did the Tribunal interdict
the issuance of a certificate of sale. The sale certificate was issued and
was followed by the registration of the sale deed in April 2016. The
bank had advertised the proposed sale by auction and followed all requisite
1
    (2014) 5 SCC 610                                                            H
34             SUPREME COURT REPORTS                            [2018] 3 S.C.R.


A    procedure under law.The appellant failed to comply with the provisions
     of Section 13(8). Having failed to do so, the appellant cannot assert an
     equity of redemption upon the completion of the sale and the registration
     of the sale deed.
            5. Section 13(8) of the SARFAESI Act provides as follows:
B           “(8)If the duesof 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
C           sale of that secured asset.”
            These provisions have fallen for interpretation before this Court
     in Mathew Varghese (supra). Dwelling on Section 60 of the Transfer
     of the Property Act, this Court held that the right of redemption is available
     to a mortgagor unless it stands extinguished by an act of parties. The
D    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:
            “39.When we apply the above principles stated with reference to
E           Section 60 of the T.P. 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
F           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
G           secured creditor when 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 T.P. Act, which is general in nature in respect of
H           all mortgages, can have no application in respect of a secured
       DWARIKA PRASAD v. STATE OF UTTAR PRADESH                                   35
          AND ORS. [DR. D.Y. CHANDRACHUD, J.]

        interest in a secured asset created in favour of a secured creditor,      A
        as all the above-stated principles apply in all fours in respect of a
        transaction as between the debtor and secured creditor under the
        provisions of the SARFAESI Act”.
       6. In the present case, the appellant failed to comply with the
provisions of Section 13(8). The statute mandates that it is only where           B
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
Securitization Application 176 of 2015. During the pendency of those              C
proceedings, orders were passed by the Tribunal on 1 February 2016
and 3 February 2016. The appellant moved the Allahabad High Court
which by its order dated 9 March 2016 restrained the bank and the
auction purchaser from executing the sale deed until 15 March 2016.
The stay was extended till 28 March 2016 by which date the appellant              D
was to deposit an amount of Rs 7,00,000. The balance was required to
be deposited by 30 April 2016. While 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 was withdrawn, the appellant did not deposit the
balance due together with the costs, charges and expenses.The sale                E
was confirmed,a sale certificate was issued and a registered sale deed
was executed on 12 April 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 (supra).                        F
       7. 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              G
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.


Nidhi Jain                                                  Appeal disposed of.   H