Supreme Court of India
MATHEW VARGHESEversusM. AMRITHA KUMAR & ORS.
- Citation
- [2014] 2 S.C.R. 736
- Decided
- 10 February 2014
- Disposal
- Disposed off
- Bench
- A K PATNAIK
Holding
A sale of a secured asset under the SARFAESI Act is invalid unless a fresh 30‑day notice is given to the borrower in compliance with s.13(8) and Rules 8 and 9, and any interim orders extending time or altering the sale are beyond the court’s jurisdiction.
Summary
The case concerned the sale of a mortgaged property by a bank under the SARFAESI Act. The Supreme Court examined whether the bank, as a secured creditor, had complied with Section 13(8) of the Act and Rules 8 and 9, which require a 30‑day individual notice and a public notice before any sale. It held that the sale effected on 28‑December‑2007 without a fresh notice was invalid, and that the Division Bench’s interim orders extending time and altering the sale were beyond its jurisdiction. The Court also clarified the relationship between the SARFAESI Act, the RDDB Act and the Income‑Tax Rules, confirming that they are complementary and do not override the notice requirement. Consequently, the appellant’s purchase price of Rs.1.27 crore was deemed insufficient and the appellant was ordered to pay a further Rs.76 lakh to the borrowers. The appeals against the interim orders were allowed, while the appeal against the original judgment was dismissed.
Issues considered
- Whether a secured creditor may enforce a security interest without court intervention but must comply with the procedural safeguards of the SARFAESI Act, particularly s.13(8).
- Whether the borrower’s right under s.13(8) mandates a fresh 30‑day notice to the borrower under Rules 8(6) and 9(1) before any sale or transfer.
- Whether the sale on 28‑December‑2007 complied with the statutory notice requirements.
- Whether the non‑obstante clause in s.13(1) is limited to sections 69 and 69A of the Transfer of Property Act.
- How the SARFAESI Act interacts with the RDDB Act and Income‑Tax Rules, especially Rule 15 of the 1962 Rules.
- Whether the Division Bench could validly extend time and set aside the sale through interim orders.
Legislation cited
- Companies Act, 1956
- Income Tax Act, 1961s. Schedule II Part I Rule 15 (as applied)
- Income Tax (Certificate Proceedings) Rules, 1962s. Rule 15
- Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDB Act)s. 29
- Securities and Exchange Board of India Act, 1992
- Securities Contracts (Regulation) Act, 1956
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act)s. 13(1), s. 13(8), s. 35, s. 37
- Transfer of Property Act, 1882s. 60, s. 69, s. 69A
Subjects
SARFAESI Actsecured creditorsale of secured assetnotice requirementright of redemptionSection 13(8)Rules 8 and 9non‑obstante clauseRDDB ActIncome‑Tax Rulesconstitutional rightArticle 300A
Judgment
[2014] 2 S.C.R. 736
A MATHEW VARGHESE
v.
M. AMRITHA KUMAR & ORS.
(Civil Appeal Nos. 1927-1929 of 2014)
FEBRUARY 10, 2014
B
[A.K. PATNAIK AND FAKKIR MOHAMED
IBRAHIM KALIFULLA, JJ.]
SEGUR/TISA T/ON AND RECONSTRUCT/ON OF
C FINANCIAL ASSETS AND ENFORCEMENT OF
SECURITY INTEREST ACT, 2002:
s.13(1) - Held: Any secured creditor may be entitled to
enforce the secured asset created in its favour on its own
0 without resorting to any court proceedings or approaching the
Tribunal, however, such enforcement should be in conformity
with the other provisions of the SARFAESI Act.
s.13(8) - Right of borrower - Held: There is a valuable
right recognized and asserted in favour of the borrower, who
E is the owner of the secured asset and who is extended an
opportunity to take all efforts to stop the sale or transfer till the
last minute before which the said sale or transfer is to be
effected - Such an ownership right is a Constitutional Right
protected under Article 300A of the Constitution, which
F mandates that no person shall be deprived of his property
save by authority of law - Therefore, de hors, the extent of
borrowing made and whatever costs, charges were incurred
by the secured creditor in respect of such borrowings, when it
comes to the question of realizing the dues by bringing the
G property entrusted with the secured creditor for sale to realize
money advanced without approaching any Court or Tribunal,
the secured creditor as a trustee cannot deal with the said
property in any manner it likes and property. can be disposed
of only in the manner prescribed in the SARFAESI Act -
H 736
MATHEW VARGHESE v. M. AMRITHA KUMAR & 737
ORS.
Therefore, the creditor should ensure that the borrower was A
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 or at least ensure that in the process
of sale the secured asset derives the maximum benefit and B
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.
s.13(8) - Conflict with r.15(1) of Income Tax Rules, 1962 C
- Held: r. 15 of the Income Tax Rules, 1962 does not in any
way conflict with either s.13(8) of the SARFAESI Act or rr.8
and 9 of the Security Interest (Enforcement) Rules, 2002 - The
sub-rule (1) of r. 15 only deals, with the discretion of the Tax.
Recovery Officer to adjourn the sale by recording his reasons· D
for such adjournment - As far as sub-rule (2) is concerned,
the same is clear to the effect that a sale of immovable
property once adjourned under sub-rule (1) for a longer period
than one calendar month, a fresh proclamation of sale should
be made unless the defaulter consents to waive it - The said E
sub-rule also does not conflict with any of the provisions of
the SARFAESI Act, in particular s.13 or rr.8 and 9.
s.35 - Non obstante clause - Held: s.35 states that the
provisions of the SARFAESI Act will have overriding effect F
notwithstanding anything inconsistent contained in any other
law for the time being in force - Therefore, reading s.35 and
s.37 together, it will have to be held that in the event of any of
the provisions of RDDB Act not being inconsistent with the
provisions of the SARFAESI Act, the application of both the G
Acts, namely, SARFAESI Act and RDDB Act, would be
complementary to each other - The effect of s.37 would,
therefore, be that in addition to the provisions contained under
the SARFAESI Act, in respect of proceedings initiated under
the said Act, it will be in order for a party to fall back upon the H
738 SUPREME COURT REPORTS [2014] 2 S.C.R.
A provisions of the other Acts mentioned in s.37 namely, the
Companies Act, 1956, the Securities Contract& (Regulation)
Act, 1956, the Securities and Exchange Board of India Act,
1992, the Recovery of Debts Due to Banks and Finances
Institutions Act, 1993, or any other law for the time being in
B forc.e - Recovery of Debts Due to Banks and Finances
Institutions Act, 1993.
SECURITY INTEREST (ENFORCEMENT) RULES,
2002:
C rr.8 and 9 - Procedure to be followed by a secured
creditor while resorting to a sale after the issuance of the
proceedings u/ss.13(1) to (4) of the SARFAESI Act - Held:
Reading sub-rule (6) of r.8 and sub-rule (1) of r.9 together, the
service of individual notice to the borrower, specifying clear
D 30 days time gap for effecting any sale of immovable
secured asset is a statutory mandate - No sale should be
affected before the expiry of 30 days from the date on which
the public notice of sale is published in the newspapers -
Therefore, the requirement u/r.8(6) and r.9(1) contemplates
E a clear 30 days individual notice to the borrower and also a
public notice by way of publication in the newspapers.
rr.8 and 9 - Sale effected in favour of appellant without
complying with the mandatory requirement of 30 days notice
to the borrower - High Court set aside the sale and passed
F interim order directing the borrower to furnish demand draft
of Rs.2 crores in favour of appellant and in case of non-
payment directed to confirm sale in favour of appellant -
Payment not made by borrowers - Request by borrowers for
six weeks time to arrange money - By another interim order,
G High Court extended time and permitted 8th respondent to
deposit Rs.2.03 crores and on such deposit to cancel sale in
favour of appellant - Held: Since very valuable rights of the
appellant were at stakes, there was no justification at all for
High Court to interfere with the said right in such a casual
H manner by passing interim orders on flimsy grounds raised
MATHEW VARGHESE v. M. AMRITHA KUMAR & 739
ORS.
by borrowers - Ownership right which accrued in favour bf A
appellant ought not to have been interfered with by the High
Court - Interim orders set aside - Value of the property was
knocked out in favour of the appellant for Rs. 1. 27 crores -
Since proper procedure for effecting sale was not followed, the
price fetched through the appellant cannot be held to be the B
correct price for the mortgaged property - In the year 2010 the
property could fetch Rs.2.03 crores while the price paid by the
appellant was Rs.1.27 crores - Therefore, after giving credit
of Rs.1.27 crores, the appellant directed to pay a further sum
of Rs. 76 lacs to the borrowers.
c
Respondents no.1 and 2 stood guarantors in respect
of credit facility for Rs.30 lacs granted by the 4th
respondent bank and created an equitable mortgage in
favour of bank by depositing the title deeds of their
property. The transaction became non performing asset D
and the respondent bank filed recovery suit. The
respondent bank also issued a notice under Section
13(2) of SARFAESI Act for Rs. 77 lacs. The respondents
no.1 and 2 filed a Securitisation Application before the
ORT challenging the possession notice issued by E
respondent bank and also restraining the bank from
evicting them. The attempts for one time settlement
between them failed and the bank withdrew its offer of
OTS of Rs.55 lacs.
F
On 14.8.2007, the 4th respondent bank issued a
notice to Respondents no.1 and 2 of its intention to sell
the property under Rule 8(6) of the Security. Interest
(Enforcement) Rules, 2002 by fixing reserve price of
Rs.1.25 crores. The notice was issued in two newspapers
inviting tenders-cum-auction from public. The appellant G
and one M/s KC submitted their tenders.
Respondents no.1 and 2 filed a writ petition before
the High Court. The single judge of the High Court
disposed of the writ petition directing ORT to hear the H
740 SUPREME COURT REPORTS [2014] 2 S.C.R.
A parties and dispose of cases without delay and directed
respondent bank to defer the sale posted on 25.9.2007
by six weeks by imposing condition on respondents no.1
and 2 to deposit Rs.10 lacs before the date of sale. On
27.12.2007, the ORT dismissed the Securitisation
9 Application. On 28.12.2007, the 4th Respondent-Bank
accepted the tender of Rs.1.27 crores offered by the
appellant and asked the appellant to deposit 25% of the
amount on that day itself and pay the balance amount
within 15 days. The appellant complied with it. The
C respondent bank confirmed the sale in favour of the
appellant. Respondents no.1 and 2 were informed about
the confirmation of sale and were directed to collect the
balance amount available with the 4th Respondent-Bank.
Respondents no.1 and 2 filed a writ petition challenging
the vires of the Rules, 2002 on the ground that it violated
D their right of redemption by denying them adequate
opportunity and time to repay the borrowed sum and the
action of the Bank in having acted surreptitiously in
selling the property without informing them. The said writ
petition was dismissed by the single judge on the ground
E that the Respondents no.1 and 2 got an alternative
efficacious remedy available under the SARFAESI Act.
Respondents no.1 and 2 filed writ appeal. In the
meantime, on 24.06.2009, the 4th Respondent-Bank
transferred the property in favour of the appellant under
F a duly registered certificate of sale.
By the impugned order, the Division Bench set aside
the sale on the ground that it was not conducted in a fair
and proper manner and imposed condition on
G Respondents 1 and 2 to furnish a Demand Draft of Rs.2
crores in favour of the appellant and if payment is not
made, as directed, the sale in favour of the appellant
would stand confirmed and the writ appeal would
automatically stand dismissed. In the event of the
H payment of Rs.2 crores, the appellant was directed to
MATHEW VARGHESE v. M. AMRITHA KUMAR & 741
ORS.
hand over the original sale deed obtained by him from the A
Bank to enable Respondents no.1 and 2 to approach the
Sub-Registrar and Revenue Authorities for cancellation
of registration, consequent mutation, etc.
Respondents no.1 and 2 did not make the payment 8
within the said date, as directed by the Division Bench.
Instead an application was filed by the Respondents 1
and 2 seeking further six weeks time to effect the payment
of Rs.2 crores. The Division Bench passed order on
18.06.2010, extending the time till 20.06.2010. The said C
extension was granted by holding that on such deposit,
sale made by the 4th Respondent-Bank in favour of the
appellant would stand cancelled and the Bank should
effect the sale in favour of the 8th Respondent. The 8th
Respondent was directed to deposit Rs.2.03 crores
before the 4th Respondent-Bank on 19.06.2010 and the D
time granted for payment in terms of the judgment was
extended till 20.06.2010. On 8.7.2010, after noting that
appellant had not withdrawn the amounts deposited with
the 4th respondent bank, the Division Bench allowed the
I.A. and directed 4th respondent Bank to execute the sale E
deed in favour of the 8th Respondent for the sale
consideration of Rs.2.03 crores. The instant appeals were
filed challenging the order of the Division Bench of the
High Court..
F
Disposing of the appeals, the Court
HELD: 1. Under Section 13(1) of the SARFAESI Act,
it is provided that any security interest created in favour
of the SECURED CREDITOR may be enforced without
the intervention of the Court and Tribunal by such creditor G
in accordance with the provisions of this Act. The non-
obsta nte clause in the opening set of expressions
contained in Section 13(1) is restricted to Section 69 or
Section 69A of the T.P. Act. The only other relevant aspect
contained in the said sub-section is that such H
742 SUPREME COURT REPORTS [2014] 2 S.C.R.
A enforcement should be in accordance with the provisions
of this Act. S~ction 13(1) says 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
B Tribunal, such enforcement should be in conformity with
the other provisions of the SARFAESl·Act. [Paras 24) [767-
G-H; 768-B-C]
2. Sub-section (8) of Section 13 states that a
borrower can tender to the SECURED CREDITOR the
c dues together with all costs, charges and expenses
incurred by the SECURED CREDITOR at any time before
the date fixed for sale or transfer. In .the event of such
tender once made as stipulated in the said provision, the
mandate is that the SECURED ASSET should not be sold
D or transferred by the SECURED CREDITOR. It is further
reinforced to the effect that no further step should also
be taken by the SECURED CREDITOR for transfer or sale
of the SECURED ASSET. There is a valuable right
recognized and asserted in favour of the borrower, who
E is the owner of the SECURED ASSET and who is
extended an opportunity to take all efforts to stop the sale
or transfer till the last minute before which the said sale
or transfer is to be effected. Having regard to such a ·
valuable right of a debtor having been embedded in the
F said sub-section, ·it will have to be stated in
uncontroverted terms that the said provision has been
engrafted in the SARFAESI Act primarily with a view to
protect the rights of a borrower, inasmuch as, such an
ownership right is a Constitutional Right protected under
G Article 300A of the Constitution, which mandates that no
person shall be deprived of his property save by
authority of law. Therefore, de hors, the extent of
borrowing made and whatever costs, charges were
incurred by the SECURED CREDITOR in respect of such
H borrowings, when it comes to the question of realizing
MATHEW VARGHESE v. M. AMRITHA KUMAR & 743
ORS.
the dues by bringing the property entrusted with the A
SECURED CREDITOR for sale to realize money
advanced without approaching any Court or Tribunal, the
SECURED CREDITOR as a TRUSTEE cannot deal with
the said property in any manner it likes and can be
disposed of only in the manner prescribed in the 8
SARFAESI Act. 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 opportunity to the
borrower to take all possible steps for retrieving his C
property or at least ensure that in the process of sale the
SECURED ASSET derives the maximum benefit and the
SECURED CREDITOR or anyone on its behalf is not
allowed to exploit the situation of the borrower by vk1:ue
of the proceedings initiated under the SARFAESI Act.
[Para 26) [768-F-H; 769-C-H; 770-A] 0
Valji Khimji and Company vs. Official Liquidator of
Hindustan NitroProduct (Gujarat) Limited and Ors. (2008) 9
SCC 299: 2008 (12) SCR 1; United Bank of India vs.
Satyawati Tondon and Ors. (2010) 8 SCC 110: 2010 (9) SCR E
. 1; Narandas Karsondas vs. S.A. Kamtam and Anr. (1977) 3
SCC 247: 1977 (2) SCR 341; Mardia Chemicals Ltd. and
Ors. vs. Union of India and Ors. (2004) 4 SCC 311: 2004 (3)
SCR 982 - referred to.
3. Rules 8 and 9 of the Security Interest · F
(Enforcement) Rules, 2002 prescribe the procedure to be
followed by a SECURED CREDITOR while resorting to a
sale after the issuance of the proceedings under Section
13(1) to (4) of the SARFAESI Act. Under Rule 9(1), it is
prescribed that no sale of an immovable property under · G
the rules should take place before the expiry of 30 days
from the date on which the public notice of sale is
published in the newspapers as referred to in the proviso
to sub-rule (6) of Rule 8 or notice of sale has been served
to the borrower. Sub-rule (6) of Rule 8 again states that H
744 SUPREME COURT REPORTS [2014] 2 S.C.R.
A the authorized officer should serve to the borrower a
notice of 30 days for the sale of the immovable
SECURED ASSETS. Reading sub-rule (6) of Rule, 8 and
sub-rule (1) of Rule 9 together, the service of individual
notice to the borrower, specifying clear 30 days time gap
8 for effecting any sale of immovable SECURED ASSET is
a statutory mandate. It is also stipulated that no sale
should be affected before the expiry of 30 days from the
date on which the public notice of sale is published in the
newspapers. The use of the expression 'or' in Rule 9(1)
should be read as 'and' as that alone woufd- l;>e in
C consonance with Section 13(8) of the SARFAESI Act. The_
other prescriptions contained in the- proviso to sub-rule
(6) of Rule 8 relates to the details to be set out in the
newspaper publication, one of which should be in
'vernacular language' with sufficient circulation in the
D locality by setting out the terms of the sale. While setting
out the terms of the sale, it should contain the description
of the immovable property to be sold, the known
encumbrances of the SECURED CREDITOR, the
secured debt for which the property is to be sold, the
E reserve price below which the sale cannot be effected,
the time and place of public auction or the time after which
sale by any other mode would be completed, the deposit
of earnest money to be made and any oth~r details which
the authorized officer considers material for a purchaser
to know in order to judge the nature and value of the
F property. Such a detailed procedure while resorting to a
sale of an immovable SECURED ASSET is prescribed
under Rules 8 and 9(1). The paramount objective is to
provide sufficient time and opportunity to the borrower
to take all efforts to safeguard his right of ownership
G either by tendering the dues to the creditor before the
date and time of the sale or transfer, or ensure that the
SECURED ASSET derives the maximum price and no one
is allowed to exploit the vulnerable situation in which the
borrower is placed. [Paras 28 to 30] [770-D-G; 771-B-F;
H 772-C-D]
MATHEW VARGHESE v. M. AMRITHA KUMAR & 745
ORS.
4. Rules 8(1) to (3) and in particular sub-rule (3) A
speaks about the responsibility of the SECURED
CREDITOR vis-a-vis the SECURED ASSET taken
possession of. Under sub-rule (1) of Rule 8, the
prescribed manner in which the possession is to be
taken by issuing the notice in the format in which such B
notice of possession is to be issued to the borrower is
stipulated. Under sub-rule (2) of Rule 8 again, it is stated
as to how the SECURED CREDITOR should publish the
notice of possession as prescribed under sub-rule (1) to
be made in two leading newspapers, one of which
should be in the vernacular language having sufficient C
circulation in the locality and also such publication
should have been made seven days prior to the intention
of taking possession. Sub-rule (3) of Rule 8 really casts
much more onerous responsibility on the SECURED
CREDITOR once possession is actually taken by its D
authorised officer. Under sub-rule (3) of Rule 8, the
property taken possession of by the SECURED
CREDITOR should be kept in its custody or in the custody
of a person authorized or appointed by it and it is
stipulated that such person holding possession should E
take as much care of the property in its custody as a
owner of ordinary prudence would under similar
circumstances take care of such property. The
underlining purport of such a requirement is to ensure
that under no circumstances, the rights of the owner till
such right is transferred in the manner known to law is F
infringed. A reading of Rules 8 and 9, in particular, sub-
rule (1) to (4) and (6) of Rule 8 and sub-rule (1) of Rule 9
makes it clear that simply because a secured interest in
a SECURED ASSET is created by the borrower in favour
of the SECURED CREDITOR, the said asset in the event G
of the same having become a NON-PERFORMING ASSET
cannot be dealt with in a light-hearted manner by way of
sale or transfer or disposed of in a casual manner or by
not adhering to the prescriptions contained under the
SARFAESI Act and the Rules. [paras 31, 32] [772-E-H; H
746 SUPREME COURT REPORTS [2014] 2 S.C.R.
A 773-A-C, F-G]
5. A close reading of Section 37 shows that the
provisions of the SARFAESI Act or the rules framed
thereunder will be in addition to the provisions of the
B RDDB Act. Section 35 of the SARFAESI Act states that
the provisions of the SARFAESI Act will have overriding
effect notwithstanding anything inconsistent contained
in any other law for the time being in force. Therefore,
reading Sections 35 and 37 together, it will have to be
held that in the event of any of the provisions of RDDB
C Act not being inconsistent with the provisions of the
SARFAESI Act, the application of both the Acts, namely,
SARFAESI Act and RDDB Act, would be complementary
to each other. The HEADING of the said Section also
makes the position clear that application of other laws are
D not barred. The effect of Section 37 would, therefore, be
that in addition to the provisions contained under the
SARFAESI Act, in respect of proceedings initiated under
the said Act, it will be in order for a party to fall back upon
the provisions of the other Acts mentioned in Section 37,
E namely, the Companies Act, 1956, the Securities
Contracts (Regulation) Act, 1956, the Securities and
Exchange Board of India Act, 1992, the Recovery of Debts
Due to Banks and Finances Institutions Act, 1993, or any
other law for the time being in force. [paras 42, 43] [780-
F H; 781-A-C, H; 782-A-B]
Transcore Vs. Union of India and Anr. (2008) 1 SCC 125:
2006 (9) Suppl. SCR 785; Ram Kishun and Ors. vs. State
of Uttar Pradesh and Ors. (2012) 11 SCC 511: 2012 (6) SCR
105; Bhinka and Ors. vs. Charan Singh AIR 1959 SC 960:
G 1959 Suppl. SCR 798 - relied on.
Eastern Counties etc. Railway Vs. Marriage (1861) 9
HLC 32 - referred to.
Craias on Statute Law, Seventh Edition, p.207- referred
H to.
MATHEW VARGHESE v. M. AMRITHA KUMAR & 747
ORS.
6. The application of the SARFAESI Act will be in A
addition to, in the instant case to Section 29 of the RDDB
Act. Whatever stipulations contained in Section 29 as
regards the application of certain provisions of the
Income Tax Act, 1961 in particular Schedule 2 Part I Rule
15 of the Income Tax Rules, 1962 for effecting a sale or B
transfer would apply automatically. Therefore, what is to
be considered is as to what is the mode prescribed under
the above provisions, namely, Rule 15 prescribed under
Schedule 2 Part I of the Income Tax Rules, 1962. Section
29 of the RDDB Act is an enabling provision under which c
the Second and Third schedule to the Income Tax Act,
1961 (43 of 1961) and the Income Tax Rules, 1962 can be
applied as far as possible with necessary modifications
as if the provisions and the rules are referable to the
DEBT DUE, instead of the income tax due. Therefore, 0
fictionally, by virtue of Section 29 of the RDDB Act, the
mode and method by which a recovery of income tax can
be resorted to under the Second and Third Schedule to
the Income Tax Act and the Income Tax Rules, 1962 have
to be followed. Therefore, a reading Section 37 of the E
SARFAESI Act and Section 29 of the RDDB Act, the only
aspect which has to be taken care of is that while
applying the procedure prescribed under Rule 15 of the
Income Tax Rules, 1962, no conflict with reference to any
of the provisions of the SARFAESI Act, takes place. [paras
45, 46] [783-B-H] F
7. A reading of the Rule 15 of the Income Tax Rules,
1962 does not in any way conflict with either Section 13(8)
of the SARFAESI Act or Rules 8 and 9 of the Rules, 2002.
Sub-rule (1) of Rule 15 only deals with the discretion of G
the Tax Recovery Officer to adjourn the sale by recording
his reasons for such adjournment. The said Rule does
not in any way conflict with either Rures 8 or 9 or Section
13, in particular sub-section (1) or sub-section (8) of the
SARFAESI Act. Therefore, to that extent there is no H
748 SUPREME COURT REPORTS [2014] 2 S.C.R.
A difficulty in applying Rule 15. As far as sub-rule (2) is
concerned, the same is clear to the effect that a sale of
immovable property once adjourned under sub-rule (1)
for a longer period than one calendar month, a fresh
proclamation of sale should be made unless the defaulter
B consents to waive it. The said sub-rule also does not
conflict with any of the provisions of the SARFAESI Act,
in particular Section 13 or Rules 8 and 9. In fact there is
no provision relating to grant of adjournment or issuance
of a fresh proclamation for effecting the sale after the
c earlier date of sale was not adherered to in the SARFAESI
Act. In such circumstances going by the prescription
contained in Section 37 of the SARFAESI Act, the
provision contained in Section 29 of the RDDB Act will
be in addition to and not in derogation of the provisions
of the SARFAESI Act, the provisions contained in Rule 15,
0
which is applicable by virtue of the stipulation contained
in Section 29 of the RDDB Act, whatever stated in sub-
rule (2) of Rule 15 should be followed in a situation where
a notice of sale notified as per Rules 8 and 9(1) of the
E Securitisation Trust Rules, read along with Section 13(8)
gets postponed. Such a construction of the provisions,
namely, Sections 37, 13(8) and 37 of the SARFAESI Act,
read along with Section 29 with the aid of Rule 15 could
alone be made and in no other manner, therefore, hold
that unless and until a clear 30 days notice is given to the
F borrower, no sale or transfer can be resorted to by a
SECURED CREDITOR. In the event of any such sale
properly notified after giving 30 days clear notice to the
borrower did not take place as scheduled for reasons
which cannot be solely attributable to the borrower, the
G SECURED C.REDITOR cannot effect the sale or transfer
of the SECURED ASSET on any subsequent date by
relying upon the notification issued earlier. In other
words, once the sale does not take place pursuant to a
notice issued under Rules 8 and 9, read along with
H Section 13(8) for which the entire blame cannot be
MATHEW VARGHESE v. M. AMRITHA KUMAR & 749
ORS.
thrown on the borrower, it is imperative that for effecting A
the sale, the procedure prescribed above will have to be
followed afresh, as the notice issued earlier would lapse.
As per sub-rule (8) of Rule 8, sale by any method other
than public auction or public tender can be on such
terms as may be settled between the parties in writing. B
As far as sub-rule (8) is concerned, the parties referred
to can only relate to the SECURED CREDITOR and the
borrower. It is, therefore, imperative that for the sale to be
effected under Section 13(8), the procedure prescribed
under Rule 8 read along with 9(1) has to be necessarily c
followed, inasmuch as that is the prescription of the law
for effecting the sale. Any other construction will be doing
violence to the provisions of the SARFAESI Act, in
particular Section 13(1) and (8) of the said Act. [para 48,
49] [784-D-H; 785-A-H; 786-A-B] D
8. In the instant case, the initial sale was notified to
take place on 25.09.2007. The paper publication was
made on 23.08.2007. Respondents 1 and 2 were informed
by the 4th Respondent-Bank only on 30.08.2007.
Therefore, as the sale date was 25.09.2007 it did not fulfill E
the mandatory requirement of 30 clear days notice to the
borrower as stipulated under sub-rule (6) of Rule 8. But
at the intervention of the Court, the sale date fixed on
25.09.2007 was adjourned by six weeks. In any case, the
sale was not effected even after the six weeks period F
expired as directed. The Securitisation Application came
to be disposed of by the ORT only on 27 .12.2007.
Therefore, once the Securitisation Application was
dismissed on 27.12.2007, even assuming that there was
no impediment for the SECURED CREDITOR, namely, G
the 4th Respondent-Bank to resort to sale under the
provisions of the SARFAESI Act, there should have been
a fresh notice issued in accordance with Rules 8(6) and
9(1) of the Rules, 2002. Unfortunately, the 4th
Respondent-Bank stated to have effected the sale on H
750 SUPREME COURT REPORTS [2014] 2 S.C.R.
A 28.12.2007 by accepting the tender of the appellant and
by way of further process, directed the appellant to
deposit the 25% of the amount on that very day and also
directed to deposit the balance amount within 15 days,
which was deposited by the appellant on 11.01.2008. In
B fact, after the deposit of the 25% of the amount on
28.12.2007, the 4th Respondent-Bank stated to have
confirmed the sale in favour of the appellant on
31.12.2007. After the deposit of the balance amount on
11.01.2008, the 4th Respondent-Bank informed the
c Respondents no.1 and 2 about the confirmation of sale
and thereby, provided no scope for Respondents no.1
and 2 to tender the dues of the SECURED CREDITOR,
namely, the 4th Respondent-Bank with all charges,
expenses etc., as has been provided under Section 13(8)
of the SARFAESI Act. Therefore, the whole procedure
0
followed by the 4th Respondent-Bank in effecting the sale
on 28.12.2007 and the ultimate confirmation of the sale
on 11.01.2008, stood vitiated as the same was not in
conformity with the provisions of the SARFAESI Act and
the Rules framed thereunder. Though, such a detailed
E consideration of the legal issues was not made by the
Division Bench while setting aside the sale effected in
favour of the appellant, having regard to the construction
of the provisions of the SARFAESI Act, the RDDB Act and
the relevant Rules, the Judgment of the Division Bench
F was perfectly justified. [Paras 50, 51] [786-C-H; 787-A-G]
9. In the order dated 18.06.2010 passed by the
Division Bench, reference was made to the stand of
Respondents 1 and 2 that they had to raise funds by
G arranging for the sale of the very same SECURED
ASSET, which took time as many buyers were reluctant
to come forward because of the chance of continued
litigation. The Division Bench without anything more,
accepted the said reason (lnd by allowing the I.A.
H permitted the 8th Respondent to deposit 2.03 crores by
MATHEW VARGHESE v. M. AMRITHA KUMAR & 751
ORS.
19.06.2001 and on such deposit it held that the time A
granted for payment stood extended till 20.06.2010. It
further held that on such deposit being. made, the sale
made by the 4th Respondent-Bank in favour of the
appellant would be cancelled and the 4th Respondent
should effect a sale in favour of the 8th Respondent. In B
the subsequent I.A., the Division Bench directed the 4th
Respondent-Bank to execute the sale in favour of the 8th
Respondent taking ote of the fact of deposit of Rs.2.03
crores by the 8th Respondent with the 4th RespondQnt-
Bank. After the Order dated 18.06.2010 and 08.07.20·10, c
the Appellant filed the Special Leave Petition in this Court.
Vide Order dated 08.08.2013, while declining to vacate
Status Quo Order dated 30.07 .2010, the Special Leave
Petition itself was directed to be listed for final hearing.
Though the 8th Respondent is stated to have deposited
D
the sum of Rs.2.03 crores with the 4th Respondent-Bank,
as per the Order dated 18.06.2010 in IA, the other
directions in the main Order and the subsequent
directions contained in the Orders dated 18.06.2010 and
08.07.2010, were not carried out. The sale which was
already fixed in favour of the appellant continued to. E
remain in force and the sum of Rs.2.03 crores deposited
by the 8th Respondent remained with the 4th
Respondent-Bank. [Paras 56, 57) [791-B-F; 792-A-C]
10. There was absolutely no justifiable grounds for F
the Division Bench to grant further time in its Order dated
18.06.2010, it will be travesty of justice if the earlier
Judgment dated 08.03.2010, which worked itself out on
08.05.2010, is to be reversed for the flimsy grounds raised
by the Respondents no. 1 and 2 that they could not raise G
funds in spite of two months time granted to them for
paying a sum of Rs.2 crores in favour of the appellant.
While the time granted by_ the Division Bench expired by
08.05.2010, the application for extension was filed 40
days later, i.e. on 10.06.2010. Therefore, for such a H
752 SUPREME COURT REPORTS [2014] 2 S.C.R.
A recalcitrant attitude displayed by Respondents 1 and 2
in respect of a litigation which involved very high stakes,
the Division Bench should not have come for their rescue
in the absence of any weighty reasons. The reason
adduced on behalf of Respondent 1 and 2 is the
B standard reason which any party would plead while
seeking for extension of time. Since very valuable rights
of the appellant were at stakes and the Order of the
Division Bench also remained in force, in so far as it
related to the cancellation of the sale deed, which existed
C in favour of the appellant till 08.05.2010 and by virtue of
the non-compliance of the conditions imposed in the said
Judgment dated 08.03.2010 by the Respondents no.1 and
2, the ownership rights of the appellant got crystallized
on and after 09.05.2010, there was no justification at all
for the Division Bench to interfere with the said right in
0
such a casual manner by accepting the flimsy reasons
of the Respondents no.1 and 2. The ownership right
which got crystallized in favour of the appellant as on
09.05.2010, could not have been snatched away by the
Division Bench by passing the impugned orders dated
E 18.06.2010 and 08.07.2010. With reference to the right of
ownership of the Respondents 1 and 2 with reliance
upon Article 300A of the Constitution would equally apply
to the appellant as well in such a situation. Therefore,
such a right which accrued in favour of the appellant
F ought not to have been interfered with by the Division
Bench and the Orders passed in the interim application
filed at the instance of the Respondents no.1 and 2, along
with the 8th Respondent herein are not justified.
Therefore, while upholding the Judgment of the Division
G Bench dated 08.03.2010, the Orders dated 18.06.2010 and
08.07.2010 are set aside. [Para 58] [792-E-H; 793-A-F]
11. There is another very relevant factor which
cannot be ignored, namely, that the value of the property
H which was knocked out in favour of the appellant in a
MATHEW VARGHESE v. M. AMRITHA KUMAR & 753
ORS.
sum of Rs.1.27 crores by confirming the sale by the 4th A
Respondent-Bank on 31.12.2007 and 11.01.2008, the
same was found to be not in accordance with the
provisions of the SARFAESI Act. Since the proper
procedure for effecting the sale was not followed, it will
have to be held that the price fetched through the B
appellant cannot be held to be the correct price for the
mortgaged property involved in these proceedings.
Further, the very fact that in the year 2010 the property
could fetch Rs.2.03 crores, in all fairness even while
confirming the Order of the Division Bench, by which the c
sale in favour of the appellant came to be confirmed, the
difference in the sale price should .. be directed to be paid
by the Appellant. While the price paid by the appellant
was Rs.1.27 crores, the price ultimately fetched at the
im;tance of the Respondents no.1 and 2 was Rs.2.03 0
crores. Therefore, after giving credit to Rs.1.27 crores, the
appellant would still be liable to pay a further sum of
Rs.76 lacs to the Respondents no.1 and 2. Accordingly,
the order is passed. [Para 59] [793-G-H; 794-A-D]
Case Law Reference: E
2008 (12) SCR 1 referred to Para 16
2010 (9) SCR 1 referred to Para 16
1977 (2) SCR 341 referred to Para 17 F
2012 (6) SCR 105 relied on Para 21
2004 (3) SCR 982 referred to Para 37
2006 (9) Suppl. SCR 785 relied on Para 42
G
(1861) 9 HLC 32 referred to Para 43
1959 Suppl. SCR 798 relied on Para 44
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.
1927-1929 of 2014. H
754 $UPREME COURT REPORTS [2014] 2 S.C.R.
A From the Judgment and Order dated 08.03.2010 in WA
No. 1555/2009 dated 18/06/2010 in IA No. 437/2010 in WA
No.1555/2009 and dated 08/07/2010 in IA No. 507/2010 in WA
No. 1555/2009 of the High Court of Kerala at Ernakulam.
B Krishnan Venugopal, Abir Phukhan, Uday Rathore, A.
Raghunath for the Appellant.
Shyam Diwan, M.K.S. Menon, Meena, C.R., K.
Prabhakaran, Himanshu Munshi, Manish Garani, Durga Dutt,
Robin V.S., Abhinav Malhotra, Usha Nandini V. for the
C Respondents.
The Judgment of the Court was delivered by
FAKKIR MOHAMED IBRAHIM KALIFULLA, J. 1. Leave
D granted.
2. This appeal by the purchaser, in a tender-cum-auction
sale held by the 4th Respondent-Bank, is directed against the
judgments and final orders dated 08.03.2010 in Writ Appeal
No: 1555 of 2009, Order dated 18.06.2010 in I.A. No.437 of
E 2010 in Writ Appeal No.1555 of 2009 and Order dated
08.07.2010 in I.A. No.507 of 2010 in Writ Appeal No.1555 of
2009 passed by the High Court of Kerala at Ernakulam.
3. The interesting but very serious question that arises for
F consideration in this appeal is as regards the interpretation of
Section 13(8) of the SARFAESI Act read with Rules 8 and 9
of the Security Interest (Enforcement) Rules, 2002 (hereinafter
referred to as "the Rules, 2002").
4. The 1st and 2nd Respondents herein stood as
G guarantors in respect of a credit facility to the tune of
Rs.30,00,000/- granted by the 4th Respondent-Bank in favour
of a company called 'Jerry Merry Exports Private Limited'. As
guarantors, the 1st and 2nd Respondents created an
EQUITABLE MORTGAGE in favour of 4th Respondent-Bank
H by depositing the title deeds of their property bearing Survey
MATHEW VARGHESE v. M. AMRITHA KUMAR & 755
ORS. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.l
No.150/12A (40.20 cents), ~urvey No.150/12C (11 cents) and A
Survey No.150/13 (26 cents) totaling 77.20 cents situated in
Padivattom Kana, Edappally South Village, Kanayanoor Taluk,
Emakulam District Kochi, Kerala (hereinafter referred to as "the
mortgage property"). When the transaction became a NON-
PERFORMING ASSET, the 4th Respondent-Bank filed O.A. B
No.31 of 2002 for recovery of Rs.33,77,053/- along with interest
@ 18% per annum. The 4th Respondent-Bank also issued a
notice under Section 13(2) of the SARFAESI Act on
11.08.2006 for a sum of Rs.70,77,590/-. On 20.02.2007, the
4th Respondent-Bank is stated to have taken possession of the c
mortgaged property by invoking Section 13(4) of SARFAESI
Act, read along with Rules 8 and 9 of the Ru_les, 2002.
5. The 1st and 2nd Respondents filed a Securitisation
Application i.e. S.A. No.20 of 2007, before the Debt Recovery
Tribunal (hereinafter referred to as "the ORT") Ernakulam, D
challenging the possession notice dated 20.02.2007 and
additionally also for an Order to restrain the 4th Respondent-
Bank from evicting Respondents 1 and 2. Between 09.05.2007
and 24.07.2007 the attempts made for One Time Settlement
(hereinafter referred to as "OTS") also failed and the 4th E
Respondent-Bank withdrew its offer of OTS, which was in a
sum of Rs.55,00,000/-.
6. On 14.08.2007, the 4th Respondent-Bank issued a
notice to Respondents 1 and 2, as well as others of its intention
F
to sell the property under Rule 8(6) of the Rules, 2002 by fixing
a reserve price of Rs.1,25,00,000/-. On 23.08.2007, the 4th
Respondent-Bank published its notice of sale of property in
Indian Express and Mathrubhoomi, inviting tenders-cum-auction
from the public. The 1st and 2nd Respondents were informed
by the 4th Respondent-Bank by its notice dated 30.08.2007, G
about the publication made on 23.08.2007 and also enclosed
a tender form along with the terms and conditions for
participation in the tender. The Appellant and one M/s Kent
Construction stated to have submitted their tenders on
30.08.2007 and 01.09.2007. H
756 SUPREME COURT REPORTS [2014] 2 S.C.R.
A 7. On 20.09.2007, the 1st and 2nd Respondents filed W.P.
No.27182 of 2007 challenging the proceedings initiated under
the SARFAESI Act. The said writ petition was disposed of by
a learned Single Judge of the Kerala High Court by Order
dated 20.09.2007. By the said order, the High Court after
B taking note of the O.A. filed by the 4th Respondent-Bank, as
well as S.A. filed by the 1st and 2nd Respondents, directed the
DRT to hear the parties and dispose of both the cases or at
least the Securitisation Application filed by the 1st and 2nd
Respondents without any delay. The High Court also noted that
c at that point of time, the DRT had fixed 12.10.2007 as the date
for disposal of both the applications. While issuing the said
directions, the learned Judge gave liberty to the parties to settle
the liability and also directed the 4th Respondent-Bank to defer
the sale posted on 25.09.2007 by six weeks, by imposing a
condition on Respondents 1 and 2 to deposit a sum of
D Rs.10,00,000/- before the date of sale, i.e. 25.09.2007. It was
also observed therein that since the 4th Respondent-Bank had
agreed for OTS in a sum of Rs.55,00,000/-, the bank should
waive interest if the 1st and 2nd Respondents offer a settlement
within a reasonable time and by making payment of the said
E amount.
8. It is common ground that pursuant to the said Order
dated 20.09.2007, the sale which was scheduled to be held on
25.09.2007 was postponed. In fact, though the six weeks period
F prescribed in the Order dated 20.09.2007 expired by
10.11.2007, it is stated that even thereafter the sale was not
effected. Pursuant to the said order, the 1st and 2nd
Respondents stated to have deposited the sum of
Rs.10,00,000/- with the 4th Respondent-Bank. On 27.12.2007,
G the DRT passed Orders in S.A. No.20 of 2007 dismissing the
said application with costs, On the next day i.e. on 28.12.2007,
the 4th Respondent-Bank accepted the tender of the Appellant
who offered a sum of Rs.1,27,00,101/- and asked the Appellant
to deposit 25% of the amount i.e. Rs.31,75,025/- on that day
H itself and pay the balance amount within 15 days. The Appellant
MATHEW VARGHESE v. M. AMRITHA KUMAR & 757
ORS. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]
is stated to have ,deposited the 25% of the total bid amount A
offered by it with the 4th Respondent-Bank. The Appellant is
also stated to have deposited the balance amount on
11.61.2008. After deposit of 25% of the bid amount on
31.12.2007, the 4th Respondent-Bank confirmed the sale in
favour of the Appellant and gave further time of 15 days for B
depositing the balance amount.
9. After depositing the balance amount by the Appellant
on 11.01.2008 and the confirmation of the sale in favour of the
Appellant, the 4th Respondent-Bank informed the Respondents c
1 and 2 on 02.02.2008, about the confirmation of sale in favour
of the Appellant and also the receipt of the entire consideration.
The Respondents 1 and 2 were directed to collect the balance
amount available with the 4th Respondent-Bank. On
12.02.2008, the Respondents 1 and 2 filed a Review Petition D
No.157 of 2008 in W.P. No.27182 of 2007. The said Review
Petition was dismissed giving liberty to Respondents 1 and 2
to challenge the sale. The Respondents 1 and 2 filed a Writ
Petition No.5876 of 2008 on 18.02.2008, challenging the vires
of the Rules, 2002 on the ground that it violated their right of E
redemption by denying them adequate opportunity and time to
repay the borrowed sum and the action of the Bank in having
acted surreptitiously in selling the property without informing
them. The said writ petition was dismissed by the learned
Single Judge by Order dated 12.06.2009, on the ground that
the Respondents 1 and 2 got an alternative efficacious remedy F
available under the SARFAESI Act. As against the said Order,
Respondents 1 and 2 filed Writ Appeal No.1555 of 2009, on
16.07.2009. In the meantime, on 24.06.2009, the 4th
Respondent-Bank transferred the property in favour of the
Appellant unde.r a duly registered certificate of sale. G
10. By the order impugned, 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 25.09.2007, the Bank ought to have renotified the sale or H
758 SUPREME COURT REPORTS [2014] 2 S.C.R.
A 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
B 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
c 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
confirmed and the Writ Appeal would automatically stand
dismissed. In the event of the payment of Rs.2,00,00,000/- being
0 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-
Reg is tra r and Revenue Authorities for cancellation of
registration, consequent mutation, etc.
E 11. There was also a direction to the Sub-Registrar to
restore the property in the name of the 1st and 2nd
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
F 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
G 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 08.05.2010.
12. Respondents 1 and 2 did not make the payment within
H the said date, as directed by the Division Bench. Instead an
MATHEW VARGHESE v. M. AMRITHA KUMAR & 759
ORS. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]
application was filed by the Respondents 1 and 2 in I.A. No.437 A
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 I.A. No.437 of 2010, the Oivisior: Bench
passed its order on 18.06.2010, extending the time till
20.06.2010. The said extension was granted by holding that on B
such deposit, sale made by the 4th Respondent-Bank in favour
of the Appellant would stand cancelled and the Bank should
effect the sale in favour of the 8th 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 8th c
Respondent. The 8th Respondent herein was directed to
depositRs.2,03,00,000/- before the 4th Respondent-Bank on
19.06.2010 and the time granted for payment in terms of the
judgment was extended till 20.06.2010. Subsequently, in I.A.
No.507 of 2010, the Division Bench after noting that the 0
Appellant had not withdrawn the amounts deposited with the
4th 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 E
in favour of the 8th Respondent who had deposited the entire
amount. In effect, the said I.A. 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 8th Respondent for the
sale consideration of Rs.2,03,00,000/-.
F
13. As against the judgment in Writ Appeal No.1555 of
2009 and the orde1s ·passed in I.A Nos.437 of 2010 and 507
of 2010, the Appellant has come forward with these appeals.
14. We heard Mr. Krishnan Venugopal, Senior Counsel for G
the Appellant, Mr. Shyam Divan, Senior Counsel for the 8th
Respondent and Mr. C.U. Singh, Senior Counsel for the
Respondents 1 and 2. Mr. Krishnan Venugopal, Senior Counsel
for the Appellant in his submissions after referring to Section
13(8) of the SARFAESI Act and Rules 8 and 9 of the Rules,
H
760 SUPREME COURT REPORTS [2014] 2 S.C.R.
A 2002 and after drawing our attention to the initial order of the
learned Single Judge dated 20.09.2007 in Writ Petition
No.27182 of 2007, submitted that by virtue of the said order of
the High Court, the requirement of Section 13(8), as well as
corresponding Rules were duly taken care of and the outer date
B for sale was prescribed in the said order itself and once the
debtor, namely, Respondents 1 and 2 failed to avail the said
opportunity extended by the High Court, they cannot be allowed
to complain about the ultimate sale effected on 28.12.2007.
The learned Senior Counsel contended that in the Order dated
c 20.09.2007, the High Court while directing the ORT to hear the
parties and dispose of the O.A. and S.A. without any delay gave
an option to Respondents 1 and 2 to settle the dues by making
the payment of Rs.55,00,000/-, which was the OTS offered by
the 4th Respondent-Bank with an observation that in the event
of Respondents 1 and 2 making the said payment, the 4th
0
Respondent-Bank should consider waiving interest on the said
amount.
15. According to the learned Senior Counsel, when the 1st
and 2nd Respondents failed to avail the said opportunity
E offered in the Order dated 20.09.2007, by which order, the sale
which was scheduled to be held on 25.09.2007 was directed
to be postponed by six weeks, the 1st and 2nd Respondents
cannot subsequently be heard to complain of any irregularity
in the sale. The learned Senior Counsel would, therefore,
F contend that in effect, the said Order dated 20.09.2007 of the
High Court, took into account the entitlements of the guarantors
who stepped into the shoes of the borrowers as provided under
Section 13(8) of the SARFAESI Act, and therefore, the sale
effected after the expiry of the period of six weeks granted by
G the High Court and after the dismissal of the guarantors
application, namely, S.A. by the ORT, i.e. on 28.12.2007,
cannot be held to be in violation of the Section 13(8) of the
SARFAESI Act.
16. The learned Senior Counsel further contended that by
H
MATHEW VARGHESE v. M. AMRITHA KUMAR & 761
ORS. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]
the impugned order, the Division Bench exercised its A
jurisdiction urider 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 B
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 c
are entertained. In support of his submissions, the learned
Senior Counsel relied upon Valji Khimji and Company Vs.
Official Liquidator of Hindustan Nitro Product (Gujarat) Limited
and others - (2008) 9 SCC 299 and United Bank of India Vs.
Satyawati Tandon and others - (2010) 8 SCC 110. The learned D
Senior Counsel also contended that i.n any event, once the
Division Bench ultimately directed Respondents 1 and 2 to
deposit the sum of Rs.2,00,00,000/- within two months, i.e. on
or before 08.05.2010, and the Respondents 1 and 2 failed to
comply with the said condition, the order worked itself out and E
the Writ Appeal stood dismissed without any further reference
to the Court. According to the counsel, the extension of further
time granted by the Division Bench in a belated application of
Respondents 1 and 2 and modification of the conditional
payment to be made by the 8th Respondent, was beyond the
powers of the Court and consequently the sale already effected F
by the 4th Respondent-Bank in favour of the Appellant became
final and conclusive. The learned senior counsel, therefore,
contended that the subsequent Order of the Division Bench
dated 18.06.2010 in I.A. No.437 of 2010 and the order dated
08.07.2010 in I.A. No.507 of 2010, cannot be sustained. G
17. As against the above submissions made on behalf of
the Appellant, the submission of Mr. Shyam Divan, learned
Senior Counsel for the 8th Respondent was six-fold. According
to Mr. Divan, the mortgagor's right of redemption is a statutorily H
762 SUPREME COURT REPORTS [2014] 2 S.C.R.
A recognized one and continues till the time of registration of the
sale, that the said general principle is engrafted in Section
13(8) of the SARFAESI Act read with Rules 8 and 9 of the
Rules, 2002, that it is incumbent upon the Bank to have
informed the borrower about the date and time of the sale,
B which is implicit in ~he provision, that admittedly no notice was
given by the Bank with reference to the sale held on
28.12.2007, that in any case since there was a postponement
of the original sale scheduled, there ought to have been a fresh
notification and, therefore, the High Court's conclusion about
c non-issuance of sale notice was well justified. The learned
senior counsel contended that eventually the order of the
Division Bench of the High Court was equitable and, therefore,
does not call for interference. Mr. Divan, learned Senior
Counsel, drew support from Section 60 of the Transfer of
D Property Act, 1882 (hereinafter referred to as "the T.P. Act")
by relying upon the interpretation made by this Court on
mortgagor's right of redemption engrafted in Section 60 of the
T.P. Act in the decision reported in Narandas Karsondas Vs.
S.A. Kamtam and another - (1977) 3 SCC 247.
E 18. By drawing a parallel to Section 13(8) of the
SARFAESI Act vis-a-vis Section 60 of the T.P. Act, the learned
Senior Counsel submitted that there should have been a
definite intimation to the borrower before the sale or transfer,
which is a legal requirement both under Section 13(8) read with
F Rules 8(6) and 9(1), as well as Section 60 of the T.P. Act. By
referring to the initial notice issued by the Bank on 23.08.2007,
the learned Senior Counsel contended that the period
mentioned therein did not survive after the passing of the order
by the ORT on 27.12.2007 and if that initial notice was to be
G revived for the purpose of effecting the sale and transfer, the
borrower ought to have been mandatorily put on notice as
prescribed under Section 13(8) of the SARFAESI Act. The
learned Senior Counsel also relied upon Order XXI Rules 64
to 69 and submitted that in common law as well, when once a
H sale is adjourned to a specified date, a future proclamation
MATHEW YARGHESE v. M. AMRITHA ~UMAR & 763
ORS. [FAKKIR MOHAMED IBRAHIM KAUFULLA, J.]
was the requirement as that alone would enable the mortgagor A
to ensure that his valuable right of ownership is not frittered away
without providing any opportunity for redemption.
19. The learned Senior Counsel by relying upon Section
29 of the Recovery of Debts Due to Banks and Financial
B
Institutions Act, 1993 (hereinafter referred to as "the RDDB
Act") and Section 37 of the SARFAESI Act, read along with
Rule 15 of the Second Schedule of the Income Tax (Certificate
Proceedings Rules, 1962) (hereinafter referred to as "the
Income Tax Rules, 1962"), contended that even under the C
provisions of the SARFAESI Act, there is· a statutory
requirement for renotification to effect the sale and, therefore,
the non-compliance of the said requirement would render the
sale effected by the Bank on 28.12.2007 invalid in law.
20. The learned Senior Counsel pointed out that after the D
postponement of the. sale pursua.nt to the deposit of
Rs.10,00,000/- on 25.09.2007, based on the judgment of the
High Court dated 20.09.2007, the only intimation to the
borrower at the instance of the Bank was dated 02.02.2008,
which only said that surplus amount over and above the money E
due to the Bank was adjusted and, therefore, the said notice
was not in consonance with the provisions of the SARFAESI
Act and the other statutory provisions required to be complied
with and, therefore, the judgment of the Division Bench of the
High Court does not call for interference. The learned Senior F
Counsel drew our attention to various grounds raised in the writ
petition wherein the above contentions of the borrower have
been set out.
21. Supporting the submissions made by Mr. Shyam Divan,
Mr. C.U. Singh, learned Senior Counsel for the Respondents G
No.1 and 2, submitted that the non-obstante clause in Section
13(1) of the SARFAESI Act read along with Section 60, as well
as, Sections 69 and 69A of the T.P. Act, would show that under
Section 13(1) of the SARFAESI Act the non-obstante clause
is restricted to Section 69 or 69A of the T.P. Act, and that the H
764 SUPREME COURT REPORTS [2014] 2 S.C.R.
A implication of Section 60 of the T.P. Act would apply in full force.
According to the learned Senior Counsel, while the 4th
Respondent-Bank made no mention about the other bidders
in the High Court and merely submitted that the bid submitted
by the Appellant was opened and confirmed, in the counter filed
B before this Court, they came forward with a statement that
pursuant to the paper publication two tenders were received
and the Appellant was one of them, while the other one was
one M/s Kent Construction. The learned Senior Counsel also
pointed out that in paragraph 35 of the said Counter Affidavit
c of the Bank before this Court, they further stated that the
conclusion of the Division Bench that there was a sole bidder
was incorrect, as there were two bidders wherein one of them
Withdrew from bid on account of the earlier order of the High
Court dated 20.09.2007. By referring to the above facts stated
D on behalf of the Bank before the High Court and before this
Court, the learned Senior Counsel contended that the only
conclusion that can be drawn was that there was no
transparency at all in conducting the sale. The learned Senior
Counsel relied upon in Ram Kishun and others Vs. State of
Uttar Pradesh and others - (2012) 11 SCC 511.
E
22. Having heard the learned counsel for the respective
parties and having perused the Judgments and the Orders
impugned in these appeals and other material papers, in the
first instance, we wish to deal with the appeal filed against the
. F Judgment dated 08.03.2010 in Writ Appeal No.1555 of 2009 ..
The Division Bench, after holding that the sale was not
conducted in a fair and reasonable manner and thereby the
borrowers' rights have been seriously infringed, set aside the
sale effected on 28.12.2007, in favour of the Appellant and
G directed the borrowers to give a Demand Draft for
Rs.2,00,00,000/- drawn on 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 Judgment. It
•
further held that if the payment was not made, as directed, the
H sale in favour of the Appellant would stand confirmed and the
MATHEW VARGHESE v. M. AMRITHA KUMAR & 765
ORS. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]
writ appeal would stand dismissed. A
23. In order to examine the correctness of the impugned
Judgment of the Division Bench, a serious look into Section
13, in particular sub-section (8) of the SARFAESI Act along with
Rules 8 and 9 of the Rules, 2002 is required. We, therefore, 8
deem it appropriate to extract Sections 2(zc), 2(zf), 13(1) and
(8) of the SARFAESI Act, as well as Rule 8 sub-rules (1 ), (3),
(5) and (6) and. also Rule 9(1) which are as under:
"2(zc) "secured asset" means the property on which
security interest is. created; C
2(zf) "security interest" means right, title and interest of any
kind whatsoever upon property, created in favour of any
secured creditor and includes any mortgage, charge,
hypothecation, assignment other than those specified in D
section 31;
13. Enforcement of security interest.- (1)
Notwithstanding anything contained in section 69 or
section 69A of the Transfer of Property Act, 1882 (4 of
1882), any security interest created in favour of any E
secured creditor may be enforced, without the intervention
of the court or tribunal, by such creditor in accordance with
the provisions of this Act.
(8). If the dues of the secured creditor together with all F
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. G
Rule 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 Appenoix IV to these rules, to the borrower and H
766 SUPREME COURT REPORTS [2014) 2 S.C.R.
A by affixing the possession notice on the outer door or at
such conspicuous place of the property.
(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
B
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.
c (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
valuP-~ and in consultation with the. secured creditor, fix the
reserve price of the property and may sell the whole or any
D part of such immovable secured asset by any of the
following methods:-
(a) by obtaining quotations from the persons dealing
with similar secured assets or otherwise interested
!n buying the such assets; or
E
(b) by inviting tenders from the public;
(c) by holding public auction; or
(d) by private treaty.
F
(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):
G 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 two leading newspaper.s one in
vernacular language having sufficient circulation in the
H locality by setting out the terms of sale, which shall include;-
MATHEW VARGHESE v. M. AMRITHA KUMAR & 767
ORS. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.] ·
(a) The description of the immovable property to be A
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; B
(c) reserve price, 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; C
(e) depositing earnest money as may be stipulated by
the secured creditor;
{f) any other thing which the authorised officer
0
considers it material for a purchaser to know in
order to judge the nature and value of the property.
Rule 9. Time of sale, issue of sale certificate and
delivery of possession, etc.-
E
(1) No sale of immovable property under these 'rules shall
take place before the expiry of thirty days from the date
on which the public notice of sale is published in
newspapers as referred to in the proviso to sub-rule (6)
or notice of sale has been served to the borrower. F
24. Under Section 13(1 ), it is provided that any security
interest created in _favour of the SECURED CREDITOR may
be enforced without the intervention of the Court and Tribunal
by such creditor in accordance with the provisions of this Act.
The non-obstante clause in the opening set of expressions G
contained in Section 13(1 ), as· pointed out by Mr. Singh,
learned Senior Counsel for the borrowers, is restricted to
Section.69 or Section 69A of the T.P. Act. Apart from noting
the said statutory impediment, to be noted in Section 13(1), the
H
768 SUPREME COURT REPORTS [2014) 2 S.C.R.
A more important feature to be noted is that a free hand is given
to the SECURED CREDITOR for the purpose of enforcing any
security interest created in favour of SECURED CREDITOR,
without the intervention of the Court or Tribunal. The only other
relevant aspect contained in the said sub-section is that such
B enforcement should be in accordance with the provisions of this
Act. A reading of Section 13(1 ), therefore, is clear to the effect
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
c approaching the Tribunal, such enforcement should be in
conformity with the other provisions of the SARFAESI Act.
25. Keeping the said stipulation contained in Section 13(1)
in mind, it will have to be examined as to what are the other
statutory requirements to be fulfilled when enforcement of a right
D created in favour of ;;my SECURED CREDITOR in respect of
a security interest is created. As we are concerned with the
sale of property mortgaged by the borrowers, for the prese~t
we leave aside any other form or mode of enforcement, except
the one relating to the equitable mortgage created in favour of
E the Bank. For that purpose, we find thatsub-section (8) of
Section 13 would be relevant.
26. A careful reading of sub-section (8), therefore, has to
be made to appreciate the legal issue involved and the
F submissions made by the respective counsel on the said
provision. A plain reading of sub-section (8) would show that a
borrower can tender to the SECURED CREDITOR the dues
together with all costs, charges and expenses incurred by the
SECURED CREDITOR at any time before the date fixed for
G sale or transfer. In the event of such tender once made as
stipulated in the said provision, the mandate is that the
SECURED ASSET should not be sold or transferred by the
SECURED CREDITOR. It is further reinforced to the effect that
no further step should also be taken by the SECURED
H
MATHEW VARGHESE v. M. AMRITHA KUMAR & 769
ORS. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]
CREDITOR for transfer or sale of the SECURED ASSET. The A
contingency stipulated in the event of the tender beiog made
by a debtor of the dues inclusive of the costs, charges, etc.,
would be that such tender being made before the date fixed
for sale or transfer, the SECURED CREDITOR should stop all
further steps for effecting the sale or transfer. That apart, no B
further step should also be taken for transfer or sale. When we
analyze in depth the stipulations contained in the said sub-
section (8), we find that there is a valuable right recognized and
asserted in favour of the borrower, who is the owner of the
SECURED ASSET and who is extended an opportunity to take c
all efforts to stop the sale or transfer till the last minute before
which the said sale or transfer is to be effected. Having regard
to such a valuable right of a debtor having been embedded in
the said sub-section, it will have to be stated in uncontroverted
terms that the said provision has been engrafted in the D
SARFAESI Act primarily with a view to protect the rights of a
borrower, inasmuch as, such an ownership right is a
Constitutional Right protected under Article 300A of the
Constitution, which mandates that no person shall be deprived
of his property save by authotity of law. Therefore, de hors, the
E
extent of borrowing made and whatever costs, charges were
incurred by the SECURED CREDITOR in respect of such
borrowings, when it comes to the question of realizing the dues
by bringing the property entrusted with the SECURED
CREDITOR for sale to realize money advanced without
approaching any Court or Tribunal, the SECURED CREDITOR F
as a TRUSTEE cannot deal with the said property in any
manner it likes and can be disposed of only in the manner
prescribed in the SARFAESI Act. 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 G
order 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 the SECURED CREDITOR or anyone
on its behalf is not allowed to exploit the situation of the borrower H
770 SUPREME COURT REPORTS [2014] 2 S.C.R.
A by virtue of the proceedings initiated under the SARFAESI Act.
More so, under Section 13(1) of the SAR FAES I Act, the
SECURED CREDITOR is given a free hand to resort to sale
of the property without approaching the Court or Tribunal.
8 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 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
C expenses and any such sale or transfer effected without
complying with the said statutory requirement w.ould be a
constitutional violation and nullify the ultimate sale.
28. Once the said legal position is ascertained, the
D statutory prescription contained in Rules 8 and 9 have also got
to be examined as the said rules prescribe as to the procedure
to be followed by a SECURED CREDITOR while resorting to
a sale after the issuance of the proceedings under Section
13(1) to (4) of the SARFAESI Act. Under Rule 9(1 ), it is
E prescribed that no sale of an immovable property under the rules
should take place before the expiry of 30 days from the date
on which the public notice of sale is published in the
newspapers as referred to in the proviso to sub-rule (6) of Rule
8 or notice of sale has been served to the borrower. Sub-rule
F (6) of Rule 8 again states that the authorized officer should serve
to the borrower a notice of 30 days for the sale of the
immovable SECURED ASSETS. Reading sub-rule (6) of Rule
8 and sub-rule (1) of Rule 9 together, the service of individual
notice to the borrower, specifying clear 30 days time gap for
G effecting any sale of immovable SECURED ASSET is a
statutory mandate. It is also stipulated that no sale should be
affected before the expiry of 30 days from the date on which
the public notice of sale is published in the newspapers.
Therefore, the requirement under Rule 8(6) and Rule 9(1)
H contemplates a clear 30 days individual notice to the borrower
MATHEW VARGHESE v. M. AMRITHA KUMAR & 771
ORS. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]
and also a public notice by way of publication in the A
newspapers. In other words, while the publication in newspaper
should provide for 30 days clear notice, since Rule 9(1) also
states that such notice of sale is to be in accordance with
proviso to sub-rule (6) of Rule 8, 30 days clear notice to the
borrower should also be ensured as stipulated under Rule 8(6) B
as well. Therefore, the use of the expression 'or' in Rule 9(1)
should be read as 'and' as that alone would be in consonance
with Section 13(8) of the SARFAESI Act.
29. The other prescriptions contained in the proviso to sub- C
rule (6) of Rule 8 relates to the details to be set out in the
newspaper publication, one of which should be in 'vernacular
language' with sufficient circulation in the locality by setting out
the terms of the sale. While setting out the terms of the sale, it
should contain the description of the immovable property to be
sold, the known encumbrances of the SECURED CREDITOR, D
the secured debt for which the property is to be sold, the reserve
price below which the sale cannot be effected, the time and
place of public auction or the time after which sale by any other
mode would be completed, the deposit of earnest money to be
made and any other details which the authorized officer E
considers material for a purchaser to know in order to judge
the nature and value of the property.
30. Such a detailed procedure while resorting to a sale of
an immovable SECURED ASSET is prescribed under Rules F
8 and 9(1 ). In our considered opinion, it has got a twin objective
to be achieved. In the first place, as already stated by us, by
virtue of the stipulation contained in Section 13(8) read along
with Rules 8(6) and 9(1), the owner/borrower should have clear
notice of 30 days before the date and time when the sale or G
transfer of the SECURED ASSET would be made, as that
alone would enable the owner/borrower to take all efforts to
retain his or her ownership by tendering the dues of the
SECURED CREDITOR before that date and time. Secondly,
when such a SECURED ASSET of an immovable property is H
772 SUPREME COURT REPORTS [2014] 2 S.C.R.
A brought for sale, the intending purchasers should know the
nature of the property, the extent of liability pertaining to the said
property, any other encumbrances pertaining to the said
property, the minimum price below which one cannot make a
bid and the total liability of the borrower to the SECURED
B CREDITOR. Since, the proviso to sub-rule (6) also mentions
that any other material aspect should also be made known
when effecting the publication, it would only mean that the
intending purchaser should have entire details about the
property brought for sale in order to rule out any possibility of
c the bidders later on to express ignorance about the factors
connected with the asset in question. Be that as it may, the
paramount objective is to provide sufficient time and opportunity
to the borrower to take all efforts to safeguard his right of
ownership either by tendering the dues to the creditor before
D the date and time of the sale or transfer, or ensure that the
SECURED ASSET derives the maximum price and no one is
allowed to exploit the vulnerable situation in which the borrower
is placed.
31. At this juncture, it will also be worthwhile to refer to
E Rules 8(1) to (3) and in particular sub-rule (3), in order to note
the responsibility of the SECURED CREDITOR vis-a-vis the
SECURED ASSET taken possession of. Under sub-rule (1) of
Rule 8, the prescribed manner in which the possession is to
be taken by issuing the notice in the format in which such notice
F of possession is to be issued to the borrower is stipulated.
Under sub-rule (2) of Rule 8 again, it is stated as to how the
SECURED CREDITOR should publish the notice of
possession as prescribed under sub-rule (1) to be made in two
leading newspapers, one of which should be in the vernacular
G language having sufficient circulation in the locality and also such
publication should have been made seven days prior to the
intention of taking possession. Sub.-rule (3) of Rule 8 really
casts much more onerous responsibility on the SECURED·
CREDITOR once possession is actually taken by its authorised
H officer. Under sub-rule (3) of Rule 8, the property taken
MATHEW VARGHESE v. M. AMRITHA KUMAR & 773
ORS. [FAKKIR MOHAM~D IBRAHIM KALIFULLA, J.]
possession of by the S~CURED CREDITOR should be kept A
in its custody or in the 'custody of a person authorized or
appointed by it and it is stipulated that such person holding
possession should take as much care of the property in its
custody as a owner of ordinary prudence would under similar
circumstances take care of such property. The underlining B
purport of such a requirement is to ensure that under no ·
circumstances, the rights of the owner till such right is transferred
in the manner known to law is infringed. Merely because the
provisions of the SARFAESI Act and the Rules enable the
SECURED CREDITOR to take possession of such an c
immovable property belonging to the owner and also empowers
to deal with it by way of sale or transfer for the purpose of
realizing the secured debt of the borrower, it does not mean
that such wide power can be exercised arbitrarily or whimsically
to the utter disadvantage of the borrower.
D
32. Under sub-rule (4) of Rule 8, it is further stipulated that
the authorized officer should take steps for preservation and
protection of SECURED ASSETS and INSURE them if
necessary till they are sold or otherwise disposed of. Sub-rule
(4), governs all SECURED ASSETS, movable or immovable E
and a further responsibility is created on the authorised officer
to take steps for the preservation and protection of SECURED
ASSETS and for that purpose can even INSURE such assets,
until it is sold or otherwise disposed of. Therefore, a reading
of Rules 8 and 9, in particular, sub-rule (1) to (4) and (6) of Rule F
8 and sub-rule (1) of Rule 9 makes it clear that simply because
a secured interest in a SECURED ASSET is created by the
borrower in favour of the SECURED CREDITOR, the said asset
in the event of the same having become a NON-PERFORMING
ASSET cannot be dealt with in a light-hearted manner by way G
of sale or transfer or disposed of in a casual manner or by not
adhering to the prescriptions contained under the SARFAESI
Act and the abovesaid Rules mentioned by us.
33. Having analyzed the relevant statutory prescriptions
H
774 SUPREME COURT REPORTS [2014] 2 S.C.R.
A under the SARFAESI Act, as well as, the Rules, 2002 it will be
necessary to refer to the decisions placed before us on the
above aspects, before examining the manner in which the sale
of the SECURED ASSET of the 1st and 2nd Respondents was
dealt with by the 4th Respondent-Bank and by effecting the sale
B in favour of the Appellant herein.
34. Mr. Shyam Divan, learned Senior Counsel relied upon
the decision in Narandas Karsondas (supra), in which the right
of a mortgagor as prescribed under Section 60 of the T.P. Act
has been spelt out. Under Section 60 of the T.P. Act, at any
C 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
D would be that if such a right of a mortgagor stood extinguished
by 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
E paragraphs 34 and 35. Paragraphs 34 and 35 are as under:
"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
F parties. The combined effect of Section 54 of the Transfer
of Property Act and Section 17 of the Indian 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
G
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 a mortgage
deed by itself will not deprive the mortgagor of his right to
H
MATHEW VARGHESE v. M. AMRITHA KUMAR & 775
ORS. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]
redemption. The extinction of the right of redemption has A
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
B
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 C
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 68uthorize the. sale. Therefore, until the D
sale is complete by registration the mortgagor does not
lose right of redemption."
(Emphasis added)
E
35. On a reading of the above paragraphs, we are able
to discern the Ratio to the effect that a mere conferment of
power to sell without intervention of the Court in the mortgage
deed by 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 F
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 that the mortgagor's right to redeem
will survive until there has been completion of sale by the
mortgagee by a registered deed. The ratio is also to the effect G
that the power to sell should not be exercised unless and until
notice in writing requiring payment of the principal money has
been served on the mortgagor. The above proposition of law
of course was laid down by this Court while construing Section
60 of the T.P. Act. But as rightly contended by Mr. Shyam H
776 SUPREME COURT REPORTS [2014] 2 S.C.R.
A Divan, we fail to note any distinction to be drawn while applying
the abovesaid principles, even in respect of the sale of
SECURED ASSETS created by way of a secured interest in
favour of the SECURED CREDITOR under the provisions of
the SARFAESI Act, read along with the relevant Rules. We say
B so, inasmuch as, we find that even while setting out.. the
principles in respect of the redemption of a mortgage by
.applying Section 60. of the T.P. Act, this Court has envisaged
the situation where such mortgage deed providing for resorting
to the sale of the mortgage property without the intervention of
c the Court. Keeping the said situation in mind, it was held that
the right of redemption will riot get extinguished merely at the
expiry of the period mentioned in the mortgage deed. It was .
also stated that the equity of redemption is not extinguished by
mere contract for sale and the most important and vital principle
D stated was that the mortgagor's right to redeem will survive until
there has been completion of sale by the mortgagee by a
registered deed .•The completion of sale, it is stated, can be
held to be so unless and until notice in writing requiring payment
of the principal money has been servea on the mortgagor.
Therefore, it was held that until the sale is complete by
E registration of sale, the mortgagor does not loose the right of
redemption. It was also made clear that it was erroneous to
suggest that the mortgagee would be acting as ·the agent of
the mortgagor in selling the property.
F 36. When we apply the above principles stated with
reference to 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
G 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
H SECURED CREDITOR at any time before the date fixed for
MATHEW VARGHESE v. M. AMRITHA KUMAR & 777
ORS. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]
sale or transfer. Under sub-section (8) of Section 13, as noted A
earlier, the SECURED ASSET should not be sold or transferred
by the SECURED CREDITOR when such tender is made by
the borrower at the last moment pefore 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 B
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 all mortgages, can
have no application in respect of a secured interest in a
SECURED ASSET created in favoar of a SECURED c
CREDITOR, 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.
37. Reliance was also placed upon the decision in Mardia D
Chemicals Ltd. and others Vs. Union of India & others. -
(2004) 4 SCC 311. In paragraph 54, while dealing with the
contention raised on behalf of the SECURED CREDITOR that
the right of redemption would be available to the mortgagor only
. if the amourt due according to the SECURED -CREDITOR is E
deposited, this Court held as under:
"54 .... Shri Sibal, however, submits that it is the amount due
according to the secured creditor which shall have to be
deposited to redeem the property. Maybe so, some F
difference regarding the amount due may be there but it
cannot be said that right of redemption of property is
completely lost. In cases where no such dispute is there,
the right can be exercised and in other cases the question
of difference in amount may be kept open and got decided G
before sale of property."
(underlining is ours)
38. Here again we find that even if there were some
difference in the amount tendered by the borrower while H
778 SUPREME COURT REPORTS [2014] 2 S.C.R.
A exercising his right of redemption under Section 13(8), the
question of difference in the amount should be kept open and
can be decided subsequently, but on that score the right of
redemption of the mortgagor cannot be frustrated. Elaborating
the statement of law made therein, we wish to state that the
B endeavour or the role of a SECURED CREDITOR in such a
situation while resorting to any sale for the realization of dues
of a mortgaged asset, should be that the mortgagor is entitled
for some lenience, if not more to be shown, to enable the
borrower to tender the amounts due in order to ensure that the
c Constitutional Right to property is preserved, rather than it being
deprived of.
39. In Ram Kishun (supra), paragraphs 13, 14 and 28 are
relevant for our purpose, which are as under:
D "13. Undoubtedly, public money should be recovered and
recovery should be made expeditiously. But it does not
mean that the financial institutions which are concerned
only with the recovery of their loans. may be permitted to
behave like property dealers and be permitted further to
E dispose of the secured assets in any unreasonable or
arbitrary manner in flagrant violation of the statutory
provisions.
14. A right to hold property is a constitutional right as well
as a human right. A person cannot be deprived of his
F property except in accordance with the provisions of a
statute. (Vide Lachhman Dass v: Jagat Ram and State
of M.P. v. Narmada Bachao Ando/an) Thus, the condition
precedent for taking away someone's property or
disposing of the secured assets, is that the authority must
G ensure compliance with the statutory provisions.
28. In view of the above, the law can be 68ummarized to
the effect that the recovery of the public dues must be
made strictly in accordance with the procedure prescribed
H by law. The liability of a surety is coextensive with that of
MATHEW VARGHESE v. M. AMRITHA KUMAR & 779
ORS. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]
the principal debtor. In case there are more than one surety A
the liability is to be divided equally among the sureties for
unpaid amount of loan. Once the sale has been confirmed
it cannot be set aside unless a fundamental procedural
error has occurred or sale certificate had been obtained
by misrepresentation or fraud." B
(Emphasis added)
40. The above principles laid down by this Court also
makes it clear that though the recovery of public dues should
be made expeditiously, it should be in accordance with the C
procedure prescribed by law and that it should not frustrate a
Constitutional Right, as well as the Human Right of a person
to hold a property and that in the event of a fundamental
procedural error occurred in a sale, the same can be set aside.
D
41. Before taking up the facts of the case on hand, it is
necessary to refer to certain other provisions referred to and
relied upon by Mr. Shyam Divan, learned Senior Counsel
appearing for the 8th Respondent. The learned Senior Counsel
referred to Section 37 of the SARFAESI Act, Section 29 of the
E
RDDB Act and Rule 15 of the Income Tax Rules, 1962. The said
provisions have to be noted in detail and therefore, the same
are extracted hereunder:
"Section 37 - Application of other laws not barred:-
F
The provisions of this Act or the rules made thereunder
shall be in addition to, and not in derogation of, the
Companies Act, 1956 (1 of 1956), the Securities
Contracts (Regulation) Act, 1956 (42 of 1956), the
Securities and Exchange Board of India Act, 1992 (15 of G
1992), the Recovery of Debts Due to Banks and Financial
Institutions Act, 1993 (51 of 1993) or any other law for the
time being in force.
Section 29 - Application of certain provisions of
Income-tax Act:- H
780 SUPREME COURT REPORTS [2014] 2 S.C.R.
A The provisions of the Second and Third Schedules to the
Income-tax Act, 1961 (43 of 1961), and the Income-tax
(Certificate Proceedings) Rules, 1962, as in force from
time to time shall, as far as possible, apply with necessary
modifications as if the said provisions and the rules referred
B to the amount of debt due under this Act instead of to the
income-tax:
Provided that any reference under the said provisions and
the rules to the assessee shall be construed as a reference
to the defendant under this Act.
c
Sch. II Part I Rule 15 - Adjournment or Stoppage of
Sale:-
(1) The Tax Recovery Officer may, in his discretion, adjourn
D aay .sale hereunder to a specified day and 'hour; and the
officer conducting any such sale may, in his discretion,
adjourn the sale, recording his reasons for such
adjournment:
Provided that, where the sale is made in, or within the
E precincts of, the office of the Tax Recovery Officer, no such
adjournment shall be made without the leave of the Tax
Recovery Officer.
(2) Where a sale of immovable property is adjourned under
F sub-rule (1) for a longer period than one calendar month,
a fresh proclamation of sale under this Schedule shall be
made unless the defaulter consents to waive it.
(3) Every sale shall be stopped if, before the lot is knocked
down, the arrears and costs (including the costs of the
G sale) are tendered to the officer conducting the sale, or
proof is given to his satisfaction that the amount of such
arrears and costs has been paid to the Tax Recovery
Officer who ordered the sale."
H 42. A close reading of Section 37 shows that the provisions
MATHEW VARGHESE v. M. AMRITHA KUMAR & 781
ORS. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]
of the SARFAESI Act or the rules framed thereunder will be in A
addition to the provisions of the RDDB Act. Section 35 of the
SAR FAES I Act states that the provisions of the SARFAESI Act
will have overriding effect notwithstanding anything inconsistent
contained in any other law for the time being in force. Therefore,
reading Sections 35 and 37 together, it will have to be held that B
in the event of any of the provisions of RDDB Act not being
inconsistent with the provisions of the SARFAESI Act, the
application of both the Acts, namely, SARFAESI Act and RDDB
Act, would be complementary to each other. In this context
reliance can be placed upon the decision in Transcore Vs. c
Union of India and another reported in (2008) 1 sec 125. In
paragraph 64 it is stated as under after referring to Section 37
of the SARFAESI Act.
" ....... According to American Jurisprudence, 2d, Vol. 25,
p. 652, if in truth there is only one remedy, then the doctrine D
of election does not apply. In the present case, as stated
above. the NPA Act is an additional remedy to the ORT
Act. Together they constitute one remedy and. therefore.
the doctrine of election does not apply. Even according to
Snell's Principles of Equity (31st Edn., p. 119), the doctrine E
of election of remedies is applicable only when there are
two or more co-existent remedies available to the litigants
at the time of election which are repugnant and
inconsistent. In any event. there is no repugnancy nor
inconsistency between the two remedies. therefore, the F
doctrine of election has no application."
(Emphasis added)
43. A reading of Section 37 discloses that the application
of SARFAESI Act will be in addition to and not in derogation G
of the provisions of the RDDB Act. In other words, it will not in
any way nullify or annul or impair the effect of the provisions of
the RDDB Act. We are also fortified by our above statement
of law as the HEADING of the said Section also makes the
position clear that application of other laws are not barred. The H
782 SUPREME COURT REPORTS [2014] 2 S.C.R.
A effect of Section 37 would, therefore, be that in addition to the
provisions contained under the SARFAESI Act, in respect of
proceedings initiated under the said Act, it will be in order for
a party to fall back upon the provisions of the other Acts
mentioned in Section 37, namely, the Companies Act, 1956,
B the Securities Contracts (Regulation) Act, 1956, the Securities
and Exchange Board of India Act, 1992, the Recovery of Debts
Due to Banks and Finances Institutions Act, 1993, or any other
law for the time being in force. On this aspect, it would be
apposite to refer to a principle set down in Eastern Counties
c etc. Railway Vs. Marriage reported in (1861) 9 HLC 32, as
stated in Craies on Statute Law, Seventh Edition, p.207. The
proposition of law as regards the HEADINGS of a provision
has been succinctly stated as under:
"These various headings", "are not to be treated as if they
D were marginal notes, or were introduced into the Act merely
for the purpose of classifying the enactments. They
constitute an important part of the Act itself, and m~y be
read not only as explaining the sections which immediately
follow them, as a preamble to a statute may be looked to
E explain its enactments, but as affording as it appears to
me a better key to the constructions of the sections which
follow them than might be afforded by the mere preamble."
(Emphasis added)
F 44. We can also rely upon a similar principle declared by
this Court by His Lordship Justice Subba Rao, as His Lordship
then was, speaking for the Bench in Bhinka and others Vs.
Charan Singh reported in AIR 1959 SC 960. In paragraph 15,
the learned Judge after referring to the HEADING of Section
G 180 of the UP Tenancy Act, (17 of 1939) held as under. "The
heading reads thus:
"Ejectment of person occupying land without Title."
"Maxwell On Interpretation of Statutes", 10th Edn., gives
H the scope of the user of such a heading in the
MATHEW VARGHESE v. M. AMRITHA KUMAR & 783
ORS. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]
interpretation of a section thus, at p.50: A
"The headings prefixed to sections or sets of sections in
some modern statutes are regarded as preambles to
those sections. They cannot control the plain words of the
statute but they may explain ambiguous words".
B
45. Reference to the above principles laid down in the
various decisions also supports our conclusion that the
application of the SARFAESI Act will be in addition to, in the
present case to Section 29 of the RDDB Act. Once we steer
clear of the said position without any hesitation, it can be held C
that whatever stipulations contained in Section 29 as regards
the application of certain provisions of the Income Tax Act, 1961
in particular Schedule 2 Part I Rule 15 of the Income Tax Rules,
1962 for effecting a sale or transfer would apply automatically.
We have already extracted Section 29 of the RDDB Act, as D
well as Schedule 2 Part I Rule 15 of the Income Tax Rules, 1962.
Therefore, what is to be considered is as to what is the mode
prescribed under the above provisions, namely, Rule 15
prescribed under Schedule 2 Part I of the Income Tax Rules,
1962. E
46. Section 29 of the RDDB Act is an enabling provision
under which the Second and Third schedule to the Income Tax
Act, 1961 (43 of 1961) and the Income Tax Rules, 1962 can
be applied as far as possible with necessary modifications as
if the provisions and the rules are referable to the DEBT DUE,
F
instead of the income tax due. Therefore, fictionally, by virtue
of Section 29 of the RDDB Act, the mode and method by which
a recovery of income tax can be resorted to under the Second
and Third Schedule to the Income Tax Act and the Income Tax
Rules, 1962 have to be followed. Therefore, a reading Section G
37 of the SARFAESI Act and Section 29 of the RDDB Act, the
only aspect which has to be taken care of is that while applying
the procedure prescribed under Rule 15 of the Income Tax
Rules, 1962, no conflict with reference to any of the provisions
of the SARFAESI Act, takes place. H
784 SUPREME COURT REPORTS [2014] 2 S.C.R.
A 47. Mr. Shyam Divan, learned Senior Counsel, also
referred to Order XXI Rule 64 to 69 of the Civil Procedure Code
in support of his submission that by virtue of Section 37 of
SARFAESI Act, as it states that the provisions of SARFAESI
Act will be in addition to and not in derogation of any other law
B for time being in force apart from Companies Act, RDDB Act
etc., the provisions contained in CPC can also be imparted to
support the stand of the Respondents 1 & 2. Since we have
held that by applying Section 37 of SARFAESI Act, read along
with Section 29 of the RDDB Act, the requirement of the
C statutory prescription under Section 13(8) read along with Rule
8 and 9(1) of the Security Interest Rule would be sufficiently
supported, we do not find any necessity to delve into the
submission made by referring to Rules 64 to 69 of Order XXI
CPC.
D 48. Keeping the said basic principle in applying the above
provisions in mind, when we refer to Rule 15 of the Income Tax
Rules, 1962, in the first place it will have to be stated that a
reading of the said rule does not in any way conflict with either
Section 13(8) of the SARFAESI Act or Rules 8 and 9 of the
E Rules, 2002. As far as sub-rule (1) of Rule 15 is concerned, it
only deals with the discretion of the Tax Recovery Officer to
adjourn the sale by recording his reasons for such adjournment.
The said Rule does not in any way conflict with either Rules 8
or 9 or Section 13, in particular sub-section (1) or sub-section
F (8) of the SARFAESI Act. Therefore, to that extent there is no
difficulty in applying Rule 15. As far as sub-rule (2) is concerned,
the same is clear to the effect that a sale of immovable property
once adjourned under sub-rule (1) for a longer period than one
calendar month, a fresh proclamation of sale should be made
G unless the defaulter consents to waive it. The said sub-rule alsp
does not conflict with any of the provisions of the SARFAESI
Act, in particular Section 13 or Rules 8 and 9. In fact there is
no provision relating to grant of adjournment or issuance of a
fresh proclamation for effecting the sale after the earlier date
H of sale was not adherered to in the SARFAESI Act. In such
MATHEW VARGHESE v. M. AMRITHA KUMAR & 785
ORS. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]
circumstances going by the prescription contained in Section A
37 of the SARFAESI Act, as we have reached a conclusion that
the provision contained in Section 29 of the RDDB Act will be
in addition to and not in derogation of the provisions of the
SARFAESI Act, the provisions contained in Rule 15, which is
applicable by virtue of the stipulation contained in Section 29 B
of the RDDB Act, whatever stated in sub-rule (2) of Rule 15
should be followed in a situation where a notice of sale notified
as per Rules 8 and 9(1) of the Securitisation Trust Rules, read
along with Section 13(8) gets postponed. In our considered view
such a construction of the provisions, namely, Sections 37, c
13(8) and 37 of the SARFAESI Act, read along with Section
29 with the aid of Rule 15 could alone be made and in no other
manner.
49. We, therefore, hold that unless and until a clear 30 days
notice is given to the borrower, no sale or transfer can be D
resorted to by a SECURED CREDITOR. In the event of any
such sale properly notified after giving 30 days clear notice to
the borrower did not take place as scheduled for reasons which
cannot be solely attributable to the borrower, the SECURED
CREDITOR cannot effect the sale or transfer of the SECURED E
ASSET on any subsequent date by relying upon the notification
issued earlier. In other words, once the sale does not take place
pursuant to a notice issued under Rules 8 and 9, read along
with Section 13(8) for which the entire blame cannot be thrown
on the borrower, it is imperative that for effecting the sale, the F
procedure prescribed above will have to be followed afresh, as
the notice issued earlier would lapse. In that respect, the only
other provision to be noted is sub-rule (8) of Rule 8 as per which
sale by any method other than public auction or public tender
can be on such terms as may be settled between the parties G
in writing. As far as sub-rule (8) is concerned, the parties
referred to can only relate to the SECURED CREDITOR and
the borrower. It is, therefore, imperative that for the sale to be
effected under Section 13(8), the procedure prescribed under
Rule 8 read along with 9(1) has to be necessarily followed, H
786 SUPREME COURT REPORTS [2014] 2 S.C.R.
A inasmuch as that is the prescription of the law for effecting the
sale as has been explained in detail by us in the earlier
paragraphs by referring to Sections 13(1 ), 13(8) and 37, read
along with Section 29 and Rule 15. In our considered view any
other construction will be doing violence to the provisions of the
B SARFAESI Act, in particular Section 13(1) and (8) of the said
Act.
50. Having pronounced the legal position as above, when
we refer to the facts of the present case, the initial sale was
C notified to take place on 25.09.2007. The paper publication
was made on 23.08.2007. Therefore, applying Rule 9(1) read
along with the proviso to sub-rule (6) of Rule 8, there can be
no quarrel as to the procedure followed in effecting the
publication for resorting to sale on 25.09.2007. When it comes
to the question of the intimation to the borrower as required
D under sub-rule (6) of Rule 8, we find that admittedly
Respondents 1 and 2 were informed by the 4th Respondent-
Bank only on 30.08.2007. Therefore, as the sale date was
25.09.2007 it did not fulfill the mandatory requirement of 30 clear
days notice to the borrower as stipulated under sub-rule (6) of
E Rule 8. In fact, on this score itself it can be held that if the sale
had been effected on 25.09.2007, it would not have been in
accordance with Section 13(8) of the SARFAESI Act, read
along with Rules 8 and 9(1). But at the intervention of the Court,
namely, the orders passed in Writ Petition 27182 of 2007 dated
F 20.09.2007, the sale date fixed on 25.09.2007 was adjourned
by six weeks. In any case, the sale was not effected even after
the six weeks period expired as directed in the said Order
dated 20.09.2007. The Securitisation Application No.20 of
2007, came to be disposed of by the ORT only on 27.12.2007.
G
51. Therefore, once the Securitisation Application of the
borrowers, namely, Respondents 1 and 2 was dismissed on
27.12.2007, even assuming that there was no impedimer.it for
the SECURED CREDITOR, namely, the 4th Respondent-Bank
to resort to sale under the provisions of the SARFAESI Act, as
H
MATHEW VARGHESE v. M. AMRITHA KUMAR & 787
ORS. [FAKKIR MOHAMED IBRAHIM KALIF.ULLA, J.]
held by us in the earlier paragraphs, there should have been a A
fresh notice issued in accordance with Rules 8(6) and 9(1) of
the Rules, 2002. Unfortunately, the 4th Respondent-Bank stated
to have effected the sale on 28.12.2007 by accepting the
tender of the Appellant and by way of further process, directed
the Appellant to deposit the 25% of the amount on that very day B
and also directed to deposit the balance amount within 15 days,
which was deposited by the Appellant on 11.01.2008. In fact,
after the deposit of the 25% of the amount on 28.12.2007, the
4th Respondent-Bank stated to have confirmed the sale in
favour of the Appellant on 31.12.2007. After the deposit of the c
balance amount on 11.01.2008 by coml'.Tlunication dated
02.02.2008, the 4th Respondent-Bank informed the 1st and 2nd
Respondents about the confirmation of sale and thereby,
provided no scope for Respondents 1 and 2 to tender the dues
of the SECURED CREDITOR, namely, the 4th Respondent- D
Bank with all charges, expenses etc., as has been provided
under Section 13(8) of the SARFAESI Act. Therefore, the whole
procedure followed by the 4th Respondent-Bank in effecting the
sale on 28.12.2007 and the ultimate confirmation of the sale
on 11.01.2008, stood vitiated as the same was not in
conformity with the provisions of the SARFAESI Act and the E
Rules framed thereunder. Though, such a detailed
consideration of the legal issues was not made by the Division
Bench while setting aside the sale effected in favour of the
Appellant, having regard to the construction of the provisions
of the SARFAESI Act, the RDDB Act and the relevant Rules, F
we are convinced that the Judgment of the Division Bench
dated 08.03.2010, passed in Writ Appeal 1·555 of 2009, was
perfectly justified and we do not find any infirmity with the same.
52. We now take up for consideration the correctness of G
the Order of the Division Bench dated 18.06.201 O in I.A. 437
of 2010 in Writ Appeal 1555 of 2009 and the order dated
08.07.2010 in l.A.507 of 2010 in Writ Appeal 1555 of 2009.
Though we have held that the Judgment of the Division Bench
in Writ Appeal 1555 of 2009 cannot be found fault with, when H
788 SUPREME COURT REPORTS [2014] 2 S.C.R.
A we examined the subsequent Orders dated 18.06.201 O and
08.07.2010 in l.A.437 of2010 and l.A.507 of 2010, we are of
the view that in the peculiar facts of this case and the ultimate
directions issued by the Division Bench in its marn Judgment
of 08.03.2010 in Writ Appeal 1555 of 2009, the said Orders
B could not have been validly issued.
53. In the foremost, it will have to be noted that the Olvision
Bench of the High Court while allowing the Writ Appeal in its
order dated 08.03.2010, held as under:
c "(i} The sale by the Bank of the appellant's property in
favour of the fifth respondent will stand set aside
and the sale deed shall stand invalidated on
condition that appellant gives a DD for Rs.2 crores
from a local Branch of a Nationalised Bank in
D favour of the fifth respondent and the same will be
handed over to him within two months from now. If
payment is not made as above, sale in favour of
the fifth respondent will stand confirmed and Writ
Appeal will stand dismissed.
E
(ii} If appellant makes payment as above, and sale
gets cancelled by operation of judgment, then on
giving DD the fifth respondent will hand over original
sale deed obtained by him from the Bank to the
appellant for the appellant to produce before the
F Sub Registry and revenue authorities for
cancellation of registration, mutation, if any
effected, and for restoration of property in the
records of the Sub Registry and revenue authorities
in favour of the appellant.
G
(iii} The Bank will remit the excess amount available
with them to the Tax Recovery Officer in pursuance
to the demand to be credited in 'the account of the
appellant, and it is for the appellant to claim refund,
H if eligible for him.
MATHEW VARGHESE v. M. AMRITHA KUMAR & 789
ORS. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]
(iv) We l@ave it open to the appellant to claim refund A
of stamp duty, if refund is eligible. However, we
make it clear that in view of the above judgment, if
there is eligibility for refund of stamp duty, the same,
should be the appellant."
B
54. In the High Court, the Appellant herein was arrayed as
the 5th Respondent. The Division Bench taking into account the
amount remitted by the Appellant, namely, Rs.1,27,00, 101/- and
the stamp duty and registration charges of Rs.23,00,000/- in
all Rs.1,50,00, 101 /- directed Respondents 1 and 2 to pay a
lump sum of Rs.2,00,00,000/- to the Appellant for cancelling the C
sale. The amount of 2,00,00,000/- was arrived at taking into
account the rate of interest at 18% per annum and the stamp
duty and registration charges spent by the Appellant. However,
the direction number (i) made it clear that while the sale in favour
of the Appellant would stand set aside and invalidated on a D
condition that Respondents 2 and 3 forwarded a Demand Draft
of Rs.2,00,00,000/- from a local branchI of a Nationalised Bank
in favour of the Appellant by handing it over to him within 2
months from the date of the Order, namely, 08.03.2010, made
it tacitly clear that if the payment was not made as directed, E
the sale in favour of the Appellant would stand confirmed and
the writ appeal would stand dismissed. Therefore, subject to
the compliance of the directions contained in sub-para (i) of
paragraph 5, the cancellation of the sale in favour of the
Appellant was ordered. Under sub-para (ii) of paragraph 5, F
once the sale gets cancelled by virtue of the operation of the
Judgment, namely, by handing over the Demand Draft in favour
of the Appellant, the original sale deed obtained by the
Appellant was directed to be produced before the Sub-
Registrar and other Revenue Authorities for the cancellation of G
registration/mutation etc. On such compliance of the said
direction contained in sub-para (ii), the restoration of the
property in the records of the sub-registry and revenue
authorities were also directed to be effected in favour of
Respondents 1 and 2. Under sub-para (iii) of paragraph 5, the H
790 SUPREME COURT REPORTS [2014] 2 S.C.R.
A 4th Respondent-Bank was directed to remit the excess amount
available with it, i.e over and above the dues to the bank to the
Tax Recovery Officer, in pursuance to their demand by crediting
into the account of Respondents 1 and 2, with further liberty to
Respondents 1 and 2 to claim for refund if they were eligible.
B Lib~rty was also given to Respondents 1 and 2 to claim refund
of stamp duty if eligible.
55. The said period of two months stipulated in sub-para
(i) of paragraph 5 expired by 08:05.2010. It was pointed out to
us by Mr. Krishnan, learned Senior Counsel for the Appellant
C that the very application seeking further six weeks time from
08.05.2010 for giving the Demand Draft of Rs.2,00,00,000/- to
the Appellant as per the Judgment dated 08.03.2010, was filed
only on 10.06.2010 and that the Division Bench thereafter
passed the present Order dated 18.06.2010 in l.A.437, i.e.
D more than a month after the expiry of the initial two months
period, ·namely, 08.05.2010. Before adverting to the details of
the Order dated 18.06.2010 passed in I.A. 437 pf 2010, at the
very out:;et it will have to be stated that having regard to the
specific direction contained in sub-para (i) and (ii) of para 5 of
E the Judgment dated 08.03.2010 in Writ Appeal 1555 of 2009,
by 08.05.2010, when Respondents 1 and 2 failed to hand over
the Demand Draft of Rs.2,00,00,000/-, as directed by the
Division Bench to the Appellant, the Writ Appeal stood
dismissed without any further reference to anyone, even to the
F Court. In fact, since the application for extension, namely, I.A.
437 of 2010 came to be filed only on 10.06.2010, it should be
held that there was no right in Respondents 1 and 2 or for the
8th Respondent herein to seek for any further indulgence before
the Division Bench for further extension of time. It is relevant to
G note that the two months period expired on 08.05.2010.
Thereafter, Respondents 1 and 2 took their own time to file the
application for extension, namely, after more than 30 days, by
which time the writ appeal stood dismissed and there was no
right available with Respondents 1 and· 2 or with the 8th
H Respondent herein to seek for any relief for claiming any right
\
MATHEW VARGHESE v. M. AMRITHA KUMAR & 791
ORS. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]
in favour of the 8th Respondent, much less for cancellation of A
the sale already effected in favour of the Appellant herein.
56. When we refer to the said order dated 18.06.2010 to
examine the reasons which weighed with the Division Bench,
we find that the sum and substance of the grievance expressed
8
on behalf of Respondents 1 and 2 herein was that they had to
raise funds by arranging for the sale of the very same
SECURED ASSET, which took time as many buyers were
reluctant to come forward because of the chance of continued
litigation. By making reference to the stand of Respondents 1 C
and 2, the Division Bench without anything more, accepted the
said reason and by allowing the I.A. permitted the 8th
Respondent herein to deposit 2,03,00,000/- by 19.06.2001 and
on such deposit it held that the time granted for payment in
terms of the Judgment dated 08.03.2010, stood extended till
20.06.2010. It further held that on such deposit being made, the D
sale made by the 4th Respondent-Bank in favour of the
Appellant would be cancelled and the 4th Respondent should
effect a sale in favour of the 8th Respondent herein. The other
directions contained in sub-para (iv) of para 5 was maintained.
In the subsequent l.A.507 of 2010 the Division Bench directed E
the 4th Respondent-Bank to execute the sale in favour of the
8th Respondent herein, taking note of the fact of deposit of
Rs.2,03,00,000/- by the 8th Respondent with the 4th
Respondent-Bank.
F
57. Be that as it may, after the Order dated 18.06.2010
and 08.07.2010, the Appellant filed the Special Leave Petition
in this Court on 26.07.2010 and the Special Leave Petition
came up for orders on 30.07.2010. While directing the Registry
to list the SLP on the notified date, the parties were directed G
to maintain status quo with regard. to the impugned order of the
High Court dated 08.03.2010 till then. Thereafter, on
09.08.2010, service of notice on the Respondent was
dispensed with since a caveat was entered on behalf of the 1st
and 8th Respondents. While granting time for filing counter H
792 SUPREME COURT REPORTS [2014] 2 S.C.R.
A affidavit, as well as rejoinder, the Interim Order dated
30.07.2010, was directed to be continued. Vide Order dated
08.08.2013, while declining to vacate Status Quo Order dated
30.07.2010, the Special Leave Petition itself was directed to
be listed for final hearing. Though the 8th Respondent is stated
B to have deposited the sum of Rs.2,03,00,000/- with the 4th
Respondent-Bank, as per the Order dated 18.06.201 O in IA
No.437 of 2010, the other directions in the main Order dated
08.03.2010 in Writ Appeal No.1555 of 2009 and the
subsequent directions contained in the Orders dated
c 18.06.2010 and 08.07.2010, were not carried out. The sale
which was already fixed in favour of the Appellant continued to
remain in force and the sum of Rs.2,03,00,000/- deposited by
the 8th Respondent remains with the 4th Respondent-Bank.
58. In the light of our conclusion that the Judgment passed
D in Writ Appeal No.1555 of 2009 dated 08.03.2010, was a self
contained one and due to the failure of the 1st and 2nd
Respondents in not handing over the Demand Draft for
Rs.2,00,00,000/- to the Appellant within the stipulated time limit,
namely, on or before 08.06.2010, the sale effected in favour of
E the Appellant stood confirmed. Inasmuch as we have found
there was absolutely no justifiable grounds for the Division
Bench to grant further time in its Order dated 18.06.2010, we
are of the view that it will be travesty of justice if the earlier
Judgment dated 08.03.2010, which worked itself out on
F 08.05.2010, is to be reversed for the flimsy grounds raised by
the 1st and 2nd Respondents that they could not raise funds in
spite of two months time granted to them for paying a sum of
Rs.2,00,00,000/- in favour of the Appellant. We have also found
that while the time granted by the Division Bench expired by
G 08.05.2010, the application for extension was filed 40 days
later, i.e. on 10.06.2010. Therefore, for such a recalcitrant
attitude displayed by Respondents 1 and 2 in respect of a
litigation which involved very high stakes, the Division Bench
should not have come for their rescue in the absence of any
H weighty reasons. The reason adduced on behalf of Respondent
MATHEW VARGHESE v. M. AMRITHA KUMAR & 793
ORS. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]
1 and· 2 is the standard reason which any party used to plead A
while seeking for extension of time. Since very valuable rights
of the Appellant were at stakes and the Order of the Division
Bench also remained in force, in so far as it related to the
cancellation of the sale deed, which existed in favour of the
Appellant till 08.05.2010 and by virtue of the non-compliance B
of the conditions imposed in the said Judgment dated
08.03.2010 by the 1st and 2nd Respondents the ownership
rights of the Appellant got crystallized on and after 09.05.2010,
we fail to find any justification at all for the Division Bench to
interfere with the said right in such a casual manner by c
accepting the flimsy reasons of the 1st and 2nd Respondents.
At the risk of repetition it will have to be stated that the
ownership right which got crystallized in favour of the Appellant
as on 09.05.2010, could not have been snatched away by the
Division Bench by passing the present impugned order dated D
18.06.2010 and 08.07 .2010. Whatever stated by us with
reference to the right of ownership of the 1st and 2nd
Respondents with reliance upon Article 300A of the Constitution
/ would equally apply to the Appellant as well in such a situation.
Therefore, such a right which accrued in favour of the Appellant E
ought not to have been interfered with by the Division Bench
and the Orders passed in the interim application filed at the
instance of the 1st and 2nd Respondents, along with the 8th
Respondent herein are not justified°' Therefore, while upholding
the Judgment of the Division Bench dated 08.03.2010 passed
in Writ Appeal 1555 of 2009, for the reasons stated herein, the F
Orders dated 18.06.2010 and 08.07.2010 passed in I.A.
Nos.437 and 507 of 2010 are set aside.
59. Though we have found good grounds in favour of the
Appellant to set at naught the above Orders passed in I.A. G
Nos.437 and 507 of 2010, we cannot also ignore one other very
relevant factor, namely, that the value of the property which was
knocked out in favour of the Appellant in a sum of
Rs.1,27,00, 101/- by confirming the sale by the 4th Respondent-
Bank on 31.12.2007 and 11.01.2008, the same was found to H
794 SUPREME COURT REPORTS [2014] 2 S.C.R.
A be not in accordance with the provisions of the SARFAESI Act.
Since the proper procedure for effecting the sale was not
followed, it will have to be held that the price fetched through
the Appellant cannot be held to be the correct price for the
mortgaged property involved in these proceedings. Further, the
B very fact that in the year 2010 the property could fetch
Rs.2,03,00,000/-, we are of the view that in all fairness even
while confirming the Order of the Division Bench, by which the
sale in favour of the Appellant came to be confirmed, the
difference in the sale price should be directed to be paid by
c the Appellant. While the price paid by the Appellant was
Rs.1,27,00, 101/-, the price ultimately fetched at the instance of
the 1st and 2nd Respondents was Rs.2,03,00,000/-. Therefore,
after giving credit to Rs.1,27,00,000/-, the Appellant would still
be liable to pay a further sum of Rs.76,00,000/- to the 1st and
2nd Respondents.
0
60. Accordingly, while disposing of these appeals as
directed above, we pass the following Order:
(A) The 4th Respondent-Bank shall refund a sum of
E Rs.2,03,00,000/- deposited by the 8th Respondent, along
with 18% interest. Such refund shall be made by the 4th
Respondent to the 8th Respondent by way of Bank's Pay
Order within two weeks from the date of production of copy
of this Order.
F (B) The 4th Respondent-Bank having adjusted its due from
and out of the sale consideration paid by the Appellant,
shall pay the balance amount to the Tax Recovery Officer
pursuant to the demand, which is to be credited in the
account of the Appellant. Such deposit shall also be made
G along with accrued interest @ 18% per annum while
making the deposit. It is for the Respondents 1 & 2 to claim
refund if they are eligible for the same by approaching the
concerned Authority under the Income Tax Act and in the
manner known to Law.
H
MATHEW VARGHESE v. M. AMRITHA KUMAR & 795
ORS. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]
(C) The Appellant shall deposit the balance sale A
consideration determined by us in a sum of Rs. 76,00,000/
- with the 4th Respondent-Bank, which shall be kept in an
interest bearing account. If there is any further demand by
way of tax recovery, it would be open for the Tax Recovery
Officer concerned to raise such a demand and forward it B
to the 4th Respondent-Bank and on such demand being
made, the 4th Respondent-Bank shall deposit the same
to the credit of the Tax Recovery Officer in the name of the
1st and 2nd Respondents and it will be for the 1st and 2nd
Respondents to claim for refund if eligible. If there is no C
tax due, the 4th Respondent - Bank shall release the said
sum of Rs.76,00,000/- forthwith on deposit being made by
the Appellant to Respondents 1 and 2.
(D) Such deposit of Rs. 76,00,000/- shall be made by the
Appellant within four weeks from the date of receipt of the D
copy of this Judgment. As and when the Appellant deposit
the sum of Rs.76,00,000/- towards the sale price of the
property transferred in its favour, necessary receipt for the
said payment by way of additional sale price shall be
executed by the 4th Respondent-Bank along with the 1st E
and 2nd Respondents and whatever stamp duty and
registration charges payable for that purpose shall be
borne by the Appellant.
(E) If the Appellant fails to deposit the balance sale
F
consideration of Rs.76,00,000/- within the stipulated time
limit, as directed in paragraph 60(0), the sale already
effected by the 4th Respondent-Bank shall stand cancelled
automatically without any further reference to this Court.
Eventually, the sale consideration deposited by the
Appellant with the 4th Respondent-Bank shall be refunded G
to him after deducting the amount due and payable by the
borrower as on the date of previous sale i.e. 31.12.2007
and the balance amount alone shall be refunded to the
Appellant. Further the 4th Respondent-Bank shall bring the
H
796 SUPREME COURT REPORTS [2014] 2 S.C.R.
A property for auction afresh, following the provisions of the
SARFAESI Act. Thereafter, from and out of the money
realized from the said sale, the 4th Respondent-Bank shall
refund the amount retained by it towards the amounts due
from the borrower to the Appellant. After paying the said
B amount to the Appellant, it shall arrange for refund of the
balance amount to the 1st and 2nd Respondents after
meeting whatever tax liability to the Income Tax Department
or any other statutory dues for which any demand was
already raised and pending with the 4th Respondent-Bank.
C 61. With the above directions, appeal filed against the
Judgment dated 08.03.2010 passed in Writ Appeal No.1555
of 2009 stands dismissed and appeals filed against the Orders
dated 18.06.2010 and 08.07.2010, passed in I.A. Nos.437 of
2010 and 507 of 2010 in Writ Appeal No.1555 of 2009 stand
D allowed. No costs.
D.G. Appeals disposed of.
Search Indian case law
Ask in plain English, not just keywords. 25,000 AI words free, no card.
Try "SARFAESI Act"Sign in to search