J. RAJIV SUBRAMANIYAN & ANR.versusM/S. PANDIYAS & ORS.

                         [2014] 3 S.C.R. 1140


A                J. RAJIV SUBRAMANIYAN & ANR.
                                    v.
                       M/S. PANDIYAS & ORS
                   (Civil Appeal No. 3865 of 2014)
                           MARCH 14, 2014
B
        [SURINDER SINGH NIJJAR AND A.K. SIKRI, JJ.]

     SECURITISATION AND RECONSTRUCT/ON OF
  FINANCIAL ASSETS AND ENFORCEMENT OF
C SECURITY INTEREST ACT, 2002:

          s. 13(8) - Right of borrower - Held: The provision
    contained in s. 13(8) is specifically for the protection of the
    borrowers in as much as, ownership of the secured assets is
    a constitutional right vested in the borrowers and protected ul
0 Article 300A of the Constitution - Therefore, the secured
    creditor as a trustee of the secured asset cannot deal with the
    same in any manner it likes and such an asset can be
  . disposed of only in the manner prescribed in the SARFAESI
    Act - Therefore, the creditor should ensure that the borrower
E was clearly put on notice of the date and time by which either
    the sale or transfer will be effected in order to provide the
    required opportunity to the borrower to take all possible steps
    for retrieving his property - Such a notice is a/so necessary
    to ensure that the process of sale will ensure that the secured
F assets will be sold to provide maximum benefit to the
    borrowers - The notice is a/so necessary to provide the
    required opportunity to the borrower to take all possible steps
    for retrieving his property or at least ensure that in the process
    of sale the secured asset derives the maximum benefit and
G the secured creditor or anyone on its behalf is not allowed to
    exploit the situation of the borrower by virtue of the
    proceedings initiated under the SARFAESI Act - Constitution
    of India, 1950 - Article 300A.

                                  1140
H
  J. RAJIV SUBRAMANIYAN & ANR. v. PANDIYAS & 1141
                     ORS.
     s. 13 - Sale of Non performing asset - Sale consideration     A
only Rs. 10, 000 above the reserve price whereas property
worth much more - Held: The secured creditors are expected
to take bonafide measures to ensure that there is maximum
yield from such secured assets for the borrowers - Sale nil/I
and void being in violation of provisions of s. 13 and rr. 8 and   B
9 and liable to be set aside - Security Interest (Enforcement)
Rules, 2002 - rr.8 and 9.

     s. 13 - Sale of Non performing asset - Single judge of the
High Court after holding that the sale was invalid as there was
violation of rules, directed making of payments by borrowers       C
to the Bank with clear direction that on such payment, insofar
as the bank is concerned its dues would be settled - Not only
borrowers made the payment as directed which was accepted
by bank, the Bank even accepted the said judgment and did
not file any appeal thereagainst - Only the buyer filed the        D
appeal - In the facts of the case, once the payment is made
to the buyer by borrowers the possession of the property shall
be delivered to the borrowers with no further liability towards
the bank.
                                                                   E
    SECURITY .INTEREST (ENFORCEMENT) RULES,
2002:

     rr.8 and 9 - Held: Any sale effected without complying with
the rules would be unconstitutional and null and void.
                                                                   F
      r. 8(8) - Sale by any method other than public auction or
public tender shall be on such terms as may be settled
between the parties in writing - In the instant case, no terms
 were settled between the parties that the sale can be effected
by Private Treaty - The Borrowers were not even called to the      G
joint meeting between the Bank and the Sale Agent - There
 was violation of rules rendering the sale void.

    Respondent no.1 and 2 had taken various loans from
respondent no.3-Bank. Upon failure of respondent no.1
                                                                   H
   1142    SUPREME COURT REPORTS             [2014] 3 S.C.R.

A and 2 to repay the loan, their assets mortgaged with
  respondent no.3-Bank were classified as Non-Performing
  Assets. Respondent no.3-Bank issued a demand notice
  and then a possession notice under the SARFAESI Act.
  Respondent no.1 and 2 challenged the two notices
B before the High Court. Meanwhile, auction sale was fixed
  but no sale took place as there were no bidders.
  Respondent no.1 and 2 sought cancellation of auction
  notice and sought permission of respondent no3-Bank
  to sell the secured assets by private treaty. The
c outstanding balance to the bank was Rs.1.57 crores.
       Respondent Nos.1 and 2 made a payment of Rs.42
  lacs to respondent no.3-Bank, by selling machinery with
  the permission of respondent no.3-Bank. A request was
  also made for an extension of two months for paying the
D remaining amount after selling the secured assets.
  Respondent no.3-Bank gave approval for private sale of
  the immovable property and the secured assets were sold
  in favour of the appellant for a consideration of 123.10
  lacs. The sale was affected through Ge-Winn
E Management Company, Resolution Agents.

       The reserve price of the secured assets was fixed at
  123 lacs. Sale deed was executed in favour of the
  appellants by respondent No.3 on 20th December, 2006,
F as the entire consideration was paid on 15th December,
  2006. On 21st December, 2006, respondent Nos.1 and 2
  were informed by respondent No.3-Bank that the
  secured assets had been sold for more than the amount
  offered by them. Respondent Nos.1 and 2 filed writ
G petition without disclosing that the earlier writ petition
  challenging the auction notice had been withdrawn
  without the court giving liberty to respondent Nos. 1 and
  2 to file a fresh writ petition.

       The single judge of the High Court allowed the writ
H petitions. The sale in favour of the appellant was held to
 J. RAJIV SUBRAMANIYAN & ANR. v. PANDIYAS & 1143
                    ORS.
be vitiated on the ground that respondent No.3-Bank             A
failed to follow the mandatory provisions of Rules 8(5),
8(6) and 9(2) of the Security Interest (Enforcement) Rules,
2002. But a direction was issued to refund the amount
paid by the petitioner i.e. Rs.1crore 41 lacs with interest
at 9% per annum from April, 2007. The Division Bench of         8
the High Court upheld the order of the single judge. The
instant appeals were filed challenging the order of the
High Court.

    Disposing of the appeals, the Court
                                                                c
      HELD: 1. The findings recorded by the High Court
that there has been a violation of Security Interest
(Enforcement) Rules, 2002 were perfectly justified. The
provision contained in Section 13(8) of the SARFAESI
Act, 2002 is specifically for the protection of the             o
borrowers in as much as, ownership of the secured
assets is a constitutional right vested in the borrowers
and protected under Article 300A of the Constitution of
India. Therefore, the secured creditor as a trustee of the
secured asset can not deal with the same in any manner          E
it likes and such an asset can be disposed of only in the
manner prescribed in the SARFAESI Act, 2002. Therefore,
the creditor should ensure that the borrower was clearly
put on notice of the date and time by which either the sale
or transfer will be effected in order to provide the required
                                                                F
opportunity to the borrower to take all possible steps for
retrieving his property. Such a notice is also necessary
to ensure that the process of sale will ensure that the
secured assets will be sold to provide maximum benefit
to the borrowers. The notice is also necessary to ensure
that the secured creditor or any one on its behalf is not       G
allowed to exploit the situation by virtue of proceedings
initiated under the SARFAESI Act, 2002. In view of Rules
8 and 9(1 ), any sale effected without complying with the
same would be unconstitutional and, therefore, null and
                                                                H
   1144    SUPREME COURT REPORTS              [2014] 3 S.C.R.

A void. In the present case, there is an additional reason for
  declaring that sale in favour of the appellant was a nullity.
  Rule 8(8) states that sale by any method other than public
  auction or public tender, shall be on such terms as may
  be settled between the parties in writing. There were no
8 terms settled in writing between the parties that the sale
  can be affected by Private Treaty. In fact, the borrowers -
  respondent Nos. 1 and 2 were not even called to the joint
  meeting between the Bank - Respondent No.3 and Ge-
  Winn held on 8th December, 2006. Therefore, there was
C a clear violation of the aforesaid Rules rendering the sale
  illegal. Generally proceedings under the SARFAESI Act,
  2002 against the borrowers are initiated only when the
  borrower is in dire-straits. The provisions of the
  SARFAESI Act, 2002 and the Rules, 2002 have been
  enacted to ensure that the secured asset is not sold for
D a song. It is expected that all the banks and financial
  institutions which resort to the extreme measures under
  the SARFAESI Act, 2002 for sale of the secured assetS to
  ensure, that such sale of the asset provides maximum
  benefit to the borrower by the sale of such asset.
E Therefore, the secured creditors are expected to take
  bonafide measures to ensure that there is maximum yield
  from such secured assets for the borrowers. In the
  present case, sale consideration is only Rs.10,000/- over
  the reserve price whereas the property was worth much
F more. The sale is null and void being in violation of the 1
  provision of Section 13 of the SARFAESI Act, 2002 and
  Rules 8 and 9 of the Rules, 2002. The sale effected in
  favour of the appellants on 18th December, 2006 is liable
  to be set aside. [paras 11, 13 to 18] [1150-E; 1151-D-G;
G 1152-B-H; 1153-A-C]
       Mathew Varghese vs. M.Amritha Kumar & Ors. 2014 (2)
   Scale 331 - relied on.
      2. The borrowers -Respondent No.1 and 2 had
H evaluated the property at Rs.117 lakhs which was
 J. RAJIV SUBRAMANIYAN & ANR. v. PANDIYAS & 1145
                    ORS.
acknowledged in their letter dated 28th August, 2006. A
Therefore, the reserve price was fixed based upon, the
said figures. The appellants bought the property for more
than the reserve price. The appellants paid the entire
consideration within three days of the sale, i.e., on 15th
December, 2006. The Sale Deed was executed in their B
favour on 20th December, 2006. Possession was
admittedly delivered on 20th December, 2006 also. The
appellants have also incurred substantial loss as they
have been unnecessarily dragged into litigation. [Para 21]
[1153-G-H; 1154-B]                                         ·C
     3. The single judge of the High Court after holding
that the sale in question was invalid, directed making of
payments by respondent Nos. 1 and 2 to respondent No.3
bank with clear direction that on such payment, insofar
as the bank is concerned its dues shall stand settled. Not     D
only respondent Nos. 1 and 2 made the payment as
directed which was accepted by respondent No.3 bank,
insofar as respondent No.3 bank is concerned it even
accepted the said judgment and did not file any appeal
thereagainst. Only the appellant filed the appeal. Though      E
the order of the Single Judge about the validity of the sale
had been affirmed, the Division Bench interfered with the
other direction of the Single Judge which should not
have been done as bank had not challenged the order
of the Single Judge. In the facts of this case, once the       F
payment is made to the appellant by respondent Nos.1
and 2, the possession of the property shall be delivered
to the respondent Nos.1 and 2 with no further liability
towards the bank. [para 27] [1155-G-H; 1156-A-C]
    4. The sale in favour of the appellants and the            G
subsequent delivery of possession to the appellants is
null and void. The sale is accordingly set aside. The
appellants are directed to deliver the possession of the
property purchased by them under the Sale Deed dated
to Respondent Nos. 1 and 2 immediately upon receiving          H
    1146    SUPREME COURT REPORTS                 [2014] 3 S.C.R.


A the entire amount; Respondent No.3 directed to refund
  the entire proceeds of the FDR in which the sale
  consideration was deposited together with accrued
  interest forthwith. Respondent Nos. 1 and 2 will ensure
  that the entire amount due to the appellants is paid on
B or before 15th June, 2014. Upon receipt of the entire
  amount, the possession shall be delivered to
  Respondent Nos. 1 and 2. [Para 28] (1156-D-G]

       United Bank of India vs. Satyawati Tandon & Ors. 2010
C (8) SCC 110: 2010 (9) SCR 1 - referred to.

                          Case Law Reference:
        2010 (9) SCR 1            referred to           Para 4
        2014 (2) Scale 331        relied on             Para 12
D
        CIVIL APPELLATE JURISDICTION : Civil Appeal No.
    3865 of 2014.
        From the Judgment and Order dated 14.06.2011 of the
    High Court of Madras at Madurai at W.A. No. 417 of 2011.
E                                WITH
    Civil Appeal No. 3866 of 2014.
      Ashok Desai, Dhruv Mehta, Vikas Singh, T. Harish Kumar,
  Y. Prakash, T.K. Dharmarajan, N. Shoba, Sri Ram J.
F Thalapathy, V. Adihmoolam, Sanjay Kapur, Priyanka Das,
  Lekha Vishwanath, Anmol Chandan for the appearing parties.
        The Judgment of the Court was delivered by
        SURINDER SINGH NIJJAR, J. 1. Leave granted.
G         2. These special leave petitions are directed against the
    final judgment and order dated 14th June, 2011 passed by the
    Madras High Court (Madurai Bench) in W.A.No.417 of 2011
    dismissing the aforesaid Writ Appeal filed by the appellants.
       3. We have heard the learned counsel for the parties at
H length.
  J. RAJIV SUBRAMANIYAN & ANR. v. PANDIYAS &                    1147
         ORS. [SURINDER SINGH NIJJAR, J.]
      4. Mr. Ashok Desai learned senior counsel appearing on             A
·behalf of the appellants has submitted that although many issues
 have been raised in the SLP, he is not pressing the point that
 the High Court erred in entertaining the writ petition filed by
 respondent Nos.1 and 2. The point with regard to the
 maintainability of the writ petition was taken on the basis of a        B
 judgment of this Court in the case of United Bank of India vs.
 Satyawati Tandon & Ors. 1• It was urged before the High Court
 that an alternative remedy being available to respondent Nos.1
 and 2 under the Securitization and Reconstruction of Financial
 Assets and Enforcement of Security Interest Act, 2002                   c
 (hereinafter referred to as "SARFAESI Act, 2002), the writ
 petition would not be maintainable. The second issue with
 regard to the maintainability was based on the fact that earlier
 respondent Nos. 1 and 2 had filed Writ Petition Nos.5027-28
 of 2006 challenging the auction sale notice dated 23rd May,             D
 2006. However, these writ petitions were withdrawn on 3rd July,
 2006. The High Court did not give any liberty to respondent Nos.
  1 and 2 to file fresh writ petition. Mr. Desai very fairly submitted
 that it is not necessary to examine the issues on maintainability
 of the writ petition, as the entire issue is before this Court on       E
  merits.

     5. Mr. Ashok Desai has pointed out that respondent Nos.1
and 2 had taken various loans from respondent No.3-Bank.
Upon failure of Respondent Nos. 1 and 2 to repay the loan, the
assets of respondent Nos.1 and 2 which had been mortgaged                F
with respondent No.3-Bank were classified as non-performing
assets (NPA). lnspite of such action having been taken by
respondent No.3-Bank, respondent Nos.1 and 2 failed to
regularize the bank account. Therefore, on 8th June, 2005, the
bank-respondent No.3 issued notice under Section 13(2) of the            G
SARFAESI Act, 2002 followed by a possession notice on 12th
January, 2006 under Section 13(4) of the said Act. Respondent
Nos.1 and 2 challenged the aforesaid two notices by filing Writ
Petition Nos. 4174/2006, 4175/2006, 5027/2006 and 5028/
1.   2010 (Bl sec 110.                                                   H
     1148    SUPREME COURT REPORTS                 [2014] 3 S.C.R.


A 2006. In the meantime, auction sale was fixed on 7th July, 2006.
  But no sale took place as there were no bidders. On 28th
  August, 2006, respondent Nos. 1 and 2 sought cancellation of
  the auction notice and sought permission of respondent No.3-
  Bank to sell the secured assets by private Treaty. It was stated
B that as on that date the outstanding balance due to the bank
  was a sum of Rs.1.57 crores. A request was made to break
  up the aforesaid amount as follows :

         (a) Machineries of M/s. Suruthi Fabrics       - 0.40 lacs
c        (b) Land and building of M/s. Suruthi Fabrics - 0.70 lacs

         (c) Pandias Garment Factory land and Building - 0.47 lacs
            And Suruthi Fabrics 5.51 acres Land

          6. Permission was sought to sell the assets as stated
D    above within six months. On 11th September, 2006,
    respondent Nos.1 and 2 made a payment of Rs.42 lacs to
    respondent No.3-Bank, by selling machinery with the
    permission of respondent No.3-Bank. A request was also made
    for an extension of two moths for paying the remaining amount
E   after selling the secured assets. On     8th December, 2006,
    respondent No.3-Bank gave approval for private sale of the
    immovable property to the appellants and for issue of sale
    certificate. On the very same date, the secured assets were
    sold in favour of the petitioner for a consideration of 123.10
F   lacs. It is not disputed by Mr. Vikas Singh, learned senior
    counsel appearing for Respondent No.3, that the sale was
    affected through Ge-Winn Management Company, Resolution
    Agents. This is also evident from the proceedings of the
    meeting held between respondent No.3-Bank and Ge-Winn on
G   8th December, 2006.
       7. We may point out here that the reserve price of the
  secured assets was fixed at 123 lacs. Sale deed was executed
  in favour of the appellants by respondent No.3 on 20th
  December, 2006, as the entire considerations have been paid
H on 15th December, 2006. On 21st December, 2006,
  J. RAJIV SUBRAMANIYAN & ANR. v. PANDIYAS & 1149
         ORS. [SURINDER SINGH NIJJAR, J.]
respondent Nos.1 and 2 were informed by respondent No.3-                A
Bank that the secured assets had been sold for more than the
amount offered by them in the letter dated 28th August, 2006.
At that stage, respondent Nos.1 and 2 filed Writ Petition
No.325 of 2007 without disclosing that the earlier Writ Petition
Nos.5027-28/2006 challenging the auction notice dated 23rd              B
May, 2006 had b.een withdrawn without the court giving liberty
to respondent Nos. 1 and 2 to file a fresh writ petition.

     8. Upon completion of the proceedings inspite of the
preliminary objections taken by the appellants, the learned
Single Judge allowed the writ petitions. The sale in favour of          C
the petitioner was held to be vitiated on the ground that
respondent No.3-Bank failed to follow the mandatory provisions
of Rules 8(5). 8(6) and 9(2) of the Security Interest
(Enforcement) Rules, 2002 (hereinafter referred to as 'Rules,
2002'). But a direction was issued to refund the amount paid            D
by the petitioner i.e. Rs.1 crore 41 lacs with interest at 9% per
annum from April, 2007.
     9. Aggrieved by the aforesaid order, the appellants filed
Writ Appeal No.4127/2011 in the High Court, which has also              E
been dismissed.
        10. Mr. Ashok Desai submits that ttfe petitioner is a bona
  fide purchaser and has paid the full consideration. Sale deed
  has been duly executed. Possession of the property is with the
  appellants since 2006. Therefore, respondent Nos.1 and 2              F
  should not be permitted at this stage to clalm that the sale is
  vitiated on the ground that it has been affected through an agent
  of respondent No.3-Bank, namely, Ge-Winn'. Mr. Desai
  submitted that the Single Judge as well as the Division Bench
  have wrongly held that there has been violation of Rules 8(5),        G
  8(6), 8(8) and 9(2) of the Rules, 2002·::--Mr. Desai further
  submitted that it would be equitable ~o permit the petitioner to
. keep. the plot which is adjacent to the property of the petitioner.
  Resppndent Nos.1 and 2 can be permitted to take the other
  plots.                                    ·
                                                                        H
    1150     SUPREME COURT REPORTS                 (2014] 3 S.C.R.


A         11. Mr. Dhruv Mehta, learned senior counsel appearing on
    behalf of the respondent Nos. 1 and 2 relying on the judgment
    of this Court in Mathew Varghese Vs. M.Amritha Kumar & Ors.
    in C.A.No.1927-1929 of 2014 decided on 10th February, 2014
    submits that the Rules, 2002 are mandatory in nature. In the
B   present case, the sale has been effected in violation of the
    aforesaid rules. Both the learned Single Judge as well as the
    Division Bench have come to the conclusion that the provisions
    of the aforesaid rules have not been followed. It is not disputed
    by any of the parties that there is no agreement between
C   respondent Nos. 1 and 2 and respondent No.3-Bank, in writing,
    to affect the sale by Private Treaty. Mr. Vikas Singh, learned
    senior counsel appearing for respondent No.3-Bank, however,
    pointed out that the respondent Nos.1 and 2 had filed a review
    petition in which it was averred that they may be permitted to
    sell the secured assets by Private Treaty. Therefore, according
D   to Mr. Vikas Singh, respondent Nos. 1 and 2 cannot now be
    heard to say that they had not given their consent to affect the
    sale by Private Treaty. We are unable to accept the submission
    made by Mr. Vikas Singh that there is no violation of the Rules,
    2002. In our opinion, the findings recorded by the learned Single
E   Judge as well as the Division Bench of the High Court that there
    has been a violation of Rules, 2002 are perfectly justified.
        12. This Court in the case of Mathew Varghese Vs.
  M.Amritha Kumar & Ors. 2 examined the procedure required
  to be followed by the banks or other financial institutions when
F the secured assets of the borrowers are sought to be sold for
  settlement of the dues of the banks/financial institutions. The
  Court examined in detail the provisions of the SARFAESI Act,
  2002. The Court also examined the detailed procedure to be
  followed by the bank/financial institutions under the Rules, 2002.
G This Court took notice of Rule 8, which relates to Sale of
  immovable secured assets and Rule 9 which relates to time of
  sale, issue of sale certificate and delivery of possession etc.
  With regard to Section 13(1), this Court observed that Section
  13(1) of SARFAESI Act, 2002 gives a free hand to the secured
H 2. 2014 (2) Scale 331.
  J. RAJIV SUBRAMANIYAN & ANR. v. PANDIYAS & 1151
         ORS. [SURINDER SINGH NIJJAR, J.]
creditor, for the purpose of enforcing the secured interest           A
without ~he intervention of Court or Tribunal. But such
enforcement should be strictly in conformity with the provisions
of the SARFAESI Act, 2002. Thereafter, it is observed as
follows:-
     "A reading of Section13(1 ), therefore, is clear to the effect   B
     that while on the one hand any SECURED CREDITOR
     may be entitled to enforce the SECURED ASSET 'created
      in its favour on its own without resorting to any court
      proceedings or approaching the Tribunal, such
    . enforcement should be in conformity with the other              C
      provisions of the SARFAESI Act."
      13. This Court further observed that the provision contained
in Section 13(8) of the SARFAESI Act, 2002 is specifically for
the protection of the borrowers in as much as, ownership of the
secured assets is a constitutional right vested in the borrowers      D
and protected under Article 300A of the Constitution of India.
Therefore, the secured creditor as a trustee of the secured
asset can not deal with the same in any manner it likes and
such an asset can be disposed of only in the manner
prescribed in the SARFAESI Act, 2002. Therefore, the creditor         E
should ensure that the borrower was clearly put on notice of the
date and time by which either the sale or transfer will be effected
in order to provide the required opportunity to the borrower to
take all possible steps for retrieving his property. Such a notice
is also necessary to ensure that the process of sale will ensure      F
that the secured assets will be sold to provide maximum benefit
to the borrowers. The notice is also necessary to ensure that
the secured creditor or any one on its behalf is not allowed to
exploit the situation by virtue of proceedings initiated under the
SARFAESI Act, 2002. Thereafter, in Paragraph 27, this Court           G
observed as follows:-
     "27. Therefore, by virtue of the stipulations contained under
     the provisions of the SARFAESI Act, in particular, Section
     13(8), any sale or transfer of a SECURED ASSET, cannot.
     take place without duly informing the borrower of the time H
     1152    SUPREME COURT REPORTS                   [2014] 3 S.C.R.


A        and date of such sale or transfer in order to enable the
         borrower to tender the dues of the SECURED CREDITOR
         with all costs, charges and expenses and any such sale
         or transfer effected without complying with the said
         statutory requirement would be a constitutional violation
         and nullify the ultimate sale."
B
       14. As noticed above, this Court also examined Rules 8
  and 9 of the Rules, 2002. On a detailed analysis of Rules 8
  and 9(1), it has been held that any sale effected without
  complying with the same would be unconstitutional and,
C therefore, null and void.

         15. In the present case, there is an additional reason for
    declaring that sale in favour of the appellant was a nullity. Rule
    8(8) of the aforesaid Rules is as under:-

D       "Sale by any method other than public auction or public
        tender, shall be on such terms as may be settled between
        the parties in writing."

       16. It is not disputed before us that there were no terms
  settled in writing between the parties that the sale can be
E affected by Private Treaty. In fact, the borrowers - respondent
  Nos. 1 and 2 were not even called to the joint meeting between
  the Bank - Respondent No.3 and Ge-Winn held on 8th
  December, 2006. Therefore, there was a clear violation of the
  aforesaid Rules rendering the sale illegal.
F
         17. It must be emphasized that generally proceedings
  under the SARFAESI Act, 2002 against the borrowers are
  initiated only when the borrower is in dire-straits. The provisions
  of the SARFAESI Act, 2002 and the Rules, 2002 have been
  enacted to ensure that the secured asset is not sold for a song.
G It is expected that all the banks and financial institutions which
  resort to the extreme measures under the SARFAESI Act, 2002
  for sale of the secured assets to ensure, that such sale of the
  asset provides maximum benefit to the borrower by the sale
  of such asset. Therefore, the secured creditors are expected
H
   J. RAJIV SUBRAMANIYAN & ANR. v. PANDIYAS & 1153
          ORS. [SURINDER SINGH NIJJAR, J.]

  to take bonafide measures to ensure that there is maximum            A
  yield from such secured assets for the borrowers. In the present
  case, Mr. Dhruv Mehta has pointed out that sale consideration
, is only Rs.10,000/- over the reserve price whereas the property
  was worth much more. It is not necessary for us to go into this
  question as, in our opinion, the sale is null and void being in      B
  violation of the provision of Section 13 of the SARFAESI Act,
  2002 and Rules 8 and 9 of the Rules, 2002.

      18. We, therefore, have no hesitation in upholding the
 judgments of the learned Single Judge and the Division Bench
 of the High Court to' the effectthat the sale effected in favour of   C
 the.appellants on 18th December, 2006 is liable to be set
 aside.

      19. This now brings us to moulding the relief in the peculiar
 facts and circumstances of this case.
                                                                       D
      20. As noticed earlier, Mr. Ashok Desai had emphasized
 on behalf of the appellants that no blame at all can be attributed
 to them. The bank had decided to sell the immovable
 properties to the appellants for Rs.1,23, 10,000/- against the
 reserve price of Rs.1,23,00,000. This is evident from the joint       E
 meeting of the bank held with Ge-Winn on 10th December,
 2006, wherein it is observed as follows:-

     "Referring to the above in the presence of the undersigned
     it has been decided to effect the sale to Mis. Susee
     Automobiles Pvt. Ltd., Madurai and Smt. Nirmala                   F
     Jeyablan, W/o Shri Jayabaaalan, No.4, S.V. Nagar, S.S.
     Colony, Madurai for a consideration of Rs.123.10 lakhs
     (Rupees one crore twenty three lakhs and ten thousand
     only) against the reserve price of Rs.123.00 lakhs and
     issue Sale Certificate for registration under private treaty."    G
      21. Mr. Desai had also pointed out that the borrowers -
 Respondent No.1 and 2 had evaluated the property at Rs.117
 lakhs. The evaluation was acknowledged by Respondent Nos.
 1 and 2. in the letter dated 28th August, 2006. Therefore, the        H
    1154    SUPREME COURT REPORTS                [2014] 3 S.C.R.


A reserve price was fixed based upon the aforesaid· figures. The
  ·appellants bought the property for more than the reserve price.
   The appellants paid the entire consideration within three days
   of the sale, i.e., on 15th December, 2006. The Sale Deed was
   executed in their favour on 20th December, 2006, Possession
8  was  admittedly delivered on 20th December, 2006 also. The
   appellants have also incurred substantial loss as they have
   been unnecessarily dragged into litigation. He pointed out that
   the appellants have in fact incurred losses of Rs.3 crores as
   they were deprived of using the property in view of the interim
   orders passed by the High Court and they were forced to take
C other property on monthly rent of Rs.3 lakhs from January 2007.
   He, therefore, submitted that the proposal made by the
   appellants for being permitted to keep the plot adjacent to the
   property already owned by them, be accepted. In the
   alternative, learned senior counsel submitted that the High
D Court has unnecessarily reduced the amount of interest on the
   amount deposited by the appellants with the bank would bear
   only 4% interest. He submitted that the appellants are entitled
   to 18% compound interest since the date the amount was
   deposited till refund.
E
      22. On the other hand, Mr. Dhruv Mehta pointed out that
  property of Respondent No.1 has been sold for a ridiculously
  low price, as the bank is interested only in regularizing the
  account of the borrower. He has submitted that respondent
  Nos. 1 and 2 are prepared to compensate the appellants, to a
F reasonable extent, but not to the extent claimed by Mr. Desai.
       23. On the other hand, Mr. Vikas Singh has submitted that
  in case the sale is to be set aside and the properties have to
  be returned to the borrowers, the dues of the bank also have
G to be secured, which are now in the region of Rs.4 crores.
         24. We have considered the submissions made by the
    learned counsel for the parties.
      25. Initially on our suggestion, respondent Nos. 1 and 2 had
H quantified the amount in accordance with the directions issued
   J. RAJIV SUBRAMANIYAN & ANR. v. PANDIYAS & 1155
          ORS. [SURINDER SINGH NIJJAR, J.]
 by the learned Single Judge. The learned Single Judge had            A
 ordered refund of Rs.1,41,00,000/-, (Representing
 Rs.1,23, 10,000/- towards Sale Price and Rs.18,90,000/-
 towards Stamp Duty with interest @9% per annum from April
 2007). However, since we had accepted the second
 alternative (partially) of Mr. Ashok Desai, the appellants and       8
 respondents have jointly submitted the following chart:-

  Amount quantified         Interest@ 18%       Total
  by the Learned            from April 2007
  Single Judge               to 15.06.2014
                                                                      c
  Rs. 1,41,00,000/-         Rs. 1,84,00,500/- Rs. 3,25,00,500/-
  Rs. 1,23, 10,000/-
  Sale Price
  Rs. 18,90,000/-
  (Stamp Duty)                    ;
                                                                      D
       26. Mr. Dhruv Mehtq has stated that Respondent Nos. 1
  and 2 are prepared to.· refund the sale amount paid by the
  appellants as Sale Price together ,iwith 18% simple interest from
  1st July, 2007 till 15th June, 2014. The total amount spent on
 ·Stamp Duty shall also be refunded' to the appellants. The total     E
  amount shall be paid to the appellants by 15th June, 2014. Mr.
  Desai had pointed out that the amount deposited with the bank,
  which is said to be lying in a FDR Bearing 8.25% per annum
  ought to be refunded by the bank to the appellants. Upon the
  entire amount being repaid to the appellants, the possession        F
  of the property purchased by the appellants will be delivered
· to the Respondent Nos.1 and 2.

   ) 27. Insofar as the submission of Mr. Vikas Singh learned
 senior counsel is concerned we are unable to accept the same
 in the facts and circ~mstances of this case ft would be relevant G
 to point out that thl11earned Single Jupge of the High Court after
 holding that the sale in question was invalid, directed making
 of payments by respondent Nos. 1 and 2 to respondent No.3
 bank with clear direction that on such payment, insofar as the
 bank is concerned its dues st:ii:ill stand settled. Not only- 1::1
                                      '   '             -
    1156          SUPREME COURT REPORTS              [2014] 3 S.C.R.


A respondent Nos. 1 and 2 made the payment as directed which
  was accepted by respondent No.3 bank, insofar as respondent
  No.3 bank is concerned it even accepted the said judgment
  and did not file any appeal thereagainst. Only the appellant
  filed the appeal. Though the order of the learned Single Judge
B about the validity of the sale had been affirmed, the Division
  Bench interfered with the other direction of the learned Single
  Judge which should not have been done as bank had not
  challenged the order of the learned Single Judge. We are,
  therefore, of the opinion that in the facts of this case, once lhe
  payment is made to the appellant by respondent Nos.1 and 2
C in the manner stated hereinafter, the possession of the property
  shall be delivered to the respondent Nos.1 and 2 with no further
  liability towards the bank.

       28. In view of the aforesaid, we hold that the sale in favour
D of the appellants dated 18th December, 2006 and the
  subsequent delivery of possession to the appellants is null and
  void. The sale is accordingly set aside. The appellants are
  directed to deliver the possession of the property purchased
  by them under the Sale Deed dated 20th December, 2006 to
E Respondent Nos. 1 and 2 immediately upon receiving the entire
  amount as directed hereunder:-
           (i)      The State Bank of India - Respondent No.3 directed
                    to refund the entire proceeds of the FDR in which
                    the sale consideration was deposited together with
F                   accrued interest forthwith.

           (ii)     The Respondent Nos. 1 and 2 will ensure that the
                    entire amount due to the appellants is paid on or
                    before 15th June, 2014.
G          (iii)    Upon receipt of the entire amount, the possession
                    shall be delivered to Respondent Nos. 1 and 2.
         29. With these observations, the appeals are disposed of
    with no order as to costs.

H D.G.                                          Appeals disposed of.