SHAKEENA & ANR. versus BANK OF INDIA & ORS. on 20 August 2019

[2019] 11 S.C.R. 341

SHAKEENA & ANR.

v.

BANK OF INDIA & ORS.

(Civil Appeal Nos. 8097-8098 of 2009)

AUGUST 20, 2019

[A. M. KHANWILKAR AND AJAY RASTOGI, JJ.]

Securitisation and Reconstruction of Financial Assets andEnforcement of Security Interest Act, 2002: ss. 13(2), 13(4) – Rightof redemption – Loan taken by appellants from respondent Bank –In view of default in discharging the loan by appellants, respondentBank exercised its power under s.13(4) and took over constructivepossession of mortgaged property – Appellant filed applicationsbefore DRT which, however, were dismissed for non-prosecution –Thereafter, respondent bank brought secured property for sale –Respondent no. 3 was the highest bidder and he deposited 25% ofsale consideration – On 2.1.2006, appellant deposited Rs.25 lacsin the account of his father followed by deposit of three cheques ofRs.25 lacs which were returned by respondent bank on the groundthat same was not a valid tender – Meanwhile, respondent no. 3complied with all terms and conditions of sale, as a result of whichsale was confirmed in his favour – Respondent bank credited a sumin the loan accounts of appellants and closed both the loan accounts– On 6.1.2006, respondent bank issued a sale certificate in favourof respondent no.3 – Appellant filed applications for restoration ofthe main proceedings before DRT which was dismissed – Appellantsthereafter forwarded demand drafts in the name of AuthorisedOfficer of the bank which was also not accepted – Appellant filedwrit petition before High Court for quashing of the auction of subjectproperty – Whether the appellants had a subsisting right ofredemption until the sale certificate was duly registered entailing intransfer of subject property – Held: There was substance in thestand taken by respondent bank that no valid tender was made bythe appellants so as to discharge them from their obligation – Theamount allegedly deposited in the account of father of appellantNo.2 and not in their loan accounts was not be a valid tender –Similarly, appellants attempted to pay in the form of cheques on

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A2.1.2006 – However, as per the terms and conditions, payment bycheques was not permissible – Thus, the respondent bank was notobliged to accept the amount in the form of cheques – Even thethird attempt made by appellants was to offer demand drafts drawnin favour of or in the name of the Authorised Officer of therespondent bank and not in the name of the bank or authorisingBthe bank to appropriate it towards the subject loan accounts –Therefore, these demand drafts were rightly not accepted as a validtender – Thus, appellants failed to exercise their right of redemptionbefore the issue of sale certificate much less the registration thereof.

Dismissing the appeals, the Court\C

HELD: 1. Indisputably, after the disposal of the writ appealsby the Division Bench of the High Court, the auction purchaser(respondent No.3) got the sale certificate registered on 18[th]September, 2007 and then transferred the property by aregistered sale deed on 5[th] October, 2007 to third party. It wasDnot the case of the appellants that some interim injunctionprohibiting respondent No.3 from registering the sale certificateor transferring the suit property, was operating against him afterthe decision of the Division Bench of High Court. In fact, theimpugned judgment was not even carried in appeal before thisECourt by the appellants until then. The special leave petitionscame to be filed only on 13[th] October, 2007 and order of statusquo was passed by this Court on 23[rd] November, 2007. In otherwords, there has been a paradigm shift in the rights of the partiesupon registration of the sale certificate on 18[th] September, 2007and also because of the registered sale deed in favour of thirdFparty on 5[th] October, 2007. [Para 25] [359-A-D]

2. The appellants had allowed the action taken by therespondent bank under Section 13(4) of the 2002 Act, to becomefinal consequent to the order of the DRT rejecting challengethereto due to non-compliance of the conditional order. Even theGsubsequent application for restoration of the DRT proceedingscame to be rejected. The appellants then filed the subject writpetition on 19[th] January, 2006, by which date the auction hadalready concluded including the sale certificate was issued infavour of the highest bidder on 6[th] January, 2006. Moreover, the H

principal assertion of the appellants before the High Court wasthat they were wanting to exercise their right of redemption ofmortgage, but due to fortuitous situation and the inappropriatestand taken by the respondent bank were prevented from doingso. No other plea was pursued by the appellants in support of thereliefs claimed by them before the High Court. The appellantscannot be permitted to assail the auction process on any othercount. [Para 26] [359-D-G]

3. Reverting to the stand taken by the appellants that theyhad attempted to exercise their right of redemption by depositingan aggregate sum of Rs. 25 Lacs on 30[th] December, 2005 and 4[th]January, 2006, in the account of the father of appellant No.2followed by issuing cheque(s) in the aggregate sum ofRs.25,21,446/- on 2[nd] January, 2006; and once again offering theamount by demand drafts in the sum of Rs.25,06,250/- on 18[th]January, 2006. This stand though attractive at the first blush, willhave to be stated to be rejected. [Para 27] [359-G-H; 360-A-B]

4. Notably, the appellants took no steps, whatsoever, topay the outstanding dues to the respondent bank by way of avalid tender nor moved any formal application before the HighCourt after filing of the writ petitions on 19 January, 2006, topermit them to deposit the requisite amount either in theconcerned loan accounts or in the court. That was not done evenuntil the disposal of the writ petitions by the Single Judge orduring the pendency of the writ appeals before the Division Benchand until the disposal thereof vide the impugned judgment. Theappellants, for reasons best known to them, have not chosen todeposit the amount in the loan accounts or attempted to seekpermission of the Court to deposit the same in Court from 19[th]January, 2006 immediately after filing of writ petitions or for thatmatter until the registration of the sale certificate on 18[th]September, 2007. In this backdrop, it is not possible tocountenance the stand of the appellants that they had made avalid tender to the respondent bank or that the respondent bankhad mischievously or malafide rejected their offer to defeat theirrights, to redeem the mortgage before registration of the salecertificate on 18[th] September, 2007. [Para 28] [360-F-H;361-A-B]

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344SUPREME COURT REPORTS

A5. No relief can be granted to the appellants, assuming thatthe appellants are right in contending that as per the applicableprovision at the relevant time (unamended Section 13(8) of the2002 Act), they could have exercised their right of redemptionuntil the registration of the sale certificate – which, indisputably,has already happened on 18[th] September, 2007. Therefore, it isBnot possible to countenance the plea of the appellants to reopenthe entire auction process. This is moreso because, the narrativeof the appellants that they had made a valid tender towards thesubject loan accounts before registration of the sale certificate,has been found to be tenuous. Thus understood, their right ofCredemption in any case stood obliterated on 18[th] September, 2007.Further, the amended Section 13(8) of the 2002 Act which hascome into force w.e.f. 1[st] September, 2016, will now stare at theface of the appellants. As per the amended provision, stringentcondition has been stipulated that the tender of dues to the securedcreditor together with all costs, charges and expenses incurredDby him shall be at any time before the “date of publication ofnotice” for public auction or inviting quotations or tender frompublic or private deed for transfer by way of lease assessment orsale of the secured assets. That event happened before theinstitution of the subject writ petitions by the appellants. TheEappellants have failed to make a valid and legal tender to therespondent bank before the issue of sale certificate on 6[th] January,2006, muchless registration thereof on 18[th] September, 2007.[Paras 29, 30] [360-C-F; H; 362-A]

B. Arvind Kumar v. Govt. of India and Others (2007) 5FSCC 745 ; Mardia Chemicals Ltd. and Others v. Unionof India and Others (2004) 4 SCC 311 : [2004] 3 SCR982 ; Narandas Karsondas v. S.A. Kamtam and Another(1977) 3 SCC 247 : [1977] 2 SCR 341 ; MathewVarghese v. M. Amritha Kumar and Others (2014) 5 SCC610 : [2014] 2 SCR 736 ; Dwarika Prasad v. State ofGUttar Pradesh and Others (2018) 5 SCC 491 : [2018]3 SCR 29 ; J. Rajiv Subramaniyan and Another v.Pandiyas and Others (2014) 5 SCC 651 : [2014] 3 SCR1140 ; T. Ravi and Another v. B. Chinna Narasimha and Others (2017) 7 SCC 342 : [2017] 3 SCR 1 ; KirpalKaur v. Jitender Pal Singh and Others (2015) 9 SCC356 : [2015] 8 SCR 51 ; Kanaiyalal Lalchand Sachdevand Others v. State of Maharashtra and Others (2011)2 SCC 782 : [2011] 2 SCR 602 – referred to.

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Case Law Reference

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 8097-8098 of 2009.

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From the final Judgment dated 10.08.2007 of the High Court ofJudicature at Madras in W.A. (MD) Nos.145 and 146 of 2007.

Dr. A. Francis Julian, Sr. Adv., Antony R. Julian, Danish ZabairKhan, M/s Arputham Aruna and Co., Advs. for the Appellants.

Pranab Kumar Mullick, Mrs. Soma Mullick, Sebat Kumar Devria, F

K.K. Mani, Ms. T. Archana, Advs. for the Respondents.

The Judgment of the Court was delivered by

A. M. KHANWILKAR, J.

1. These appeals take exception to the impugned judgment andorder of the Madras High Court, Madurai Bench dated 10[th] August,2007 in Writ Appeal (MD) Nos.145 and 146 of 2007 respectively;whereby, the Division Bench of the High Court dismissed the writ petitionsfiled by the appellants praying for setting aside of notice issued by therespondent bank in exercise of powers under the Securitisation and G

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AReconstruction of Financial Assets and Enforcement of Security InterestAct, 2002 (for short, “2002 Act”) dated 14[th] November, 2005 and theconsequent public notice dated 15[th] November, 2005 for sale of the subjectproperty, the public auction conducted in furtherance thereof on 19[th]December, 2005, declaration of respondent No.3 as the highest bidder inthe said public auction and the sale certificate issued in his favour datedB6[th] January, 2006.

2. Briefly stated, in 2003, Shri P. Shahul Hameed and Smt.Shakeena (appellants/borrowers) were sanctioned a term loan of Rs.10Lacs each under Star Mortgage Loan by the respondent bank. Theaccounts became NPA (Non-Performing Assets) from 30[th] June, 2004.CAs there was default in re-payment, the respondent bank issued legalnotice dated 19[th] October, 2004 to repay the dues within seven days. On1[st] December, 2004, notice was issued under Section 13(2) of the 2002Act to the appellants, calling upon them to discharge the loan withinsixty days. In reply, the appellants by representations dated 10[th]DDecember, 2004, requested the respondent bank to grant time for bringingthe account in order. In view of the default in discharging the loans bythe appellants, the respondent bank, exercised its power under Section13(4) of the 2002 Act. Accordingly, constructive possession of themortgaged property was taken over by the respondent bank on 8[th]February, 2005.

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3. The appellants then filed S.A. Nos.21 and 22 of 2005, by invokingSection 17 of the 2002 Act, before the Debts Recovery Tribunal II,Chennai, challenging the notices, issued by the respondent bank. On 18[th]March, 2005, DRT-II, Chennai passed an order in S.A. Nos.21 and 22of 2005 staying all further proceedings on condition that the appellantsFwould pay Rs.1.50 Lac in each appeal. However, the appellants failedto comply with the said order and, therefore, the order being a self-operating order, stood automatically vacated. Later on, S.A. Nos.21 &22 of 2005 were eventually dismissed for non-prosecution/default on28[th] September, 2005, for non-payment of court fee.

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4. The respondent bank then brought the secured property forsale by inviting sealed tenders vide sale notice dated 15[th] November,2005. Notice was also given to the appellants on 14[th] November, 2005.The appellants herein neither objected to the said sale notice norchallenged the same. Thus, the sale was held on 19[th] December, 2005,Hin which one Mr. Chidhamaramanickam, respondent No.3 herein was declared as the highest bidder who had quoted a sum of Rs.42,51,000/-(Rupees Forty-Two Lacs Fifty-One Thousand Only). He also deposited25% of the sale consideration immediately, as per the rules. On 2[nd]January, 2006, the appellants approached the respondent bank anddeposited three cheques for total sum of Rs.25,21,446/- (Rupees Twenty-Five Lacs Twenty-One Thousand Four Hundred Forty-Six Only). Thesecheques were duly returned by the respondent bank on 4[th] February,2006 as it could not be treated as a valid tender.

5. The highest bidder (respondent No.3) in the meantime hadcomplied with all the terms and conditions of sale as a result of whichthe sale was confirmed in his favour. In that, he paid the entire saleconsideration of Rs.42,51,000/- (Rupees Forty-Two Lacs Fifty-OneThousand Only) by 4[th] January, 2006. On payment of sale consideration,the respondent bank credited a sum of Rs.12,40,000/- (Rupees TwelveLacs Forty Thousand Only) in the loan account of appellant No.2 hereinand a sum of Rs.12,52,350/- (Rupees Twelve Lacs Fifty-Two ThousandThree Hundred Fifty Only) in the loan account of appellant No.1 hereinand closed both the loan accounts.

6. On 6[th] January, 2006, the respondent bank issued a salecertificate in favour of respondent No.3. According to the respondentbank upon issue of sale certificate, the sale had become final.

7. Be that as it may, the appellants filed applications for restorationof the main proceedings before DRT. However, the said applicationscame to be dismissed on 10[th] January, 2006. Even that order has beenallowed to become final by the appellants.

8. As aforementioned, consequent to sale of the secured asset, asum of Rs.24,92,750/- (Rupees Twenty-Four Lacs Ninety-Two ThousandSeven Hundred Fifty Only) was adjusted towards the loan accounts ofthe appellants and a sum of Rs.10,000/- (Rupees Ten Thousand Only)towards legal expenses. Out of the balance sum of Rs.17,48,250/-(Rupees Seventeen Lacs Forty-Eight Thousand Two Hundred FiftyOnly), the bank returned a sum of Rs.17,25,000/- (Rupees SeventeenLacs Twenty-Five Thousand Only) to the appellant (Petitioner in WritPetition No.634 of 2006) by way of a bankers cheque along with letterdated 18[th] January, 2006. However, the said appellant did not encash thebankers cheque and instead returned the same. The bank had retained asum of Rs.23,250/- (Rupees Twenty-Three Thousand Two Hundred Fifty A

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AOnly) towards future legal expenses with the undertaking that the balanceamount will be returned after adjusting the lawyer charges/legal expenses.

9. The Appellants then forwarded demand drafts forRs. 25,06,250/- (Rupees Twenty-Five Lacs Six Thousand Two HundredFifty Only), which was received by the respondent bank on 17[th] January,B2006. According to the respondent bank, the appellants had ante datedthe covering letter as if it was written on 12[th] January, 2006, undertakingto pay the balance amount. The respondent bank, however, did not acceptor encash the said demand drafts as a valid tender - as it were drawn inthe name of the Authorised Officer of the bank i.e. respondent No.2herein; and also because the sale certificate had already been issued onC6[th] January, 2006.

10. On 19[th] January, 2006 the appellants, feeling aggrieved by theaction of respondent bank for having taken constructive possession ofthe secured assets and the notice of sale dated 14[th] November, 2005,filed subject Writ Petition (MD) Nos.634 and 635 of 2006 before theDHigh Court of Madras at Madurai Bench for quashing of the auction ofthe subject property and further to direct the respondents to receive theamount offered by them towards settlement of loan accounts. Respondentno.3 herein (auction purchaser) got himself impleaded as a party-respondent in the said writ petitions, filed by the appellants herein, andEopposed the same.

11. The Learned Single Judge vide judgment dated 9[th] March,2007, allowed the writ petitions filed by the appellants herein, holdingthat the appellants had a subsisting right of redemption until the salecertificate was duly registered entailing in transfer of the subject property.FIt has been noted that such registration was not done in the present caseuntil the filing of writ petitions and until disposal thereof.

12. Against the judgment of the Learned Single Judge, respondentNo.3 herein (auction purchaser) filed Writ Appeal Nos.145 and 146 of2007 before the Madurai Bench of Madras High Court. By the impugnedGjudgment dated 10[th] August, 2007, the Division Bench allowed the appealsfiled by respondent No.3 herein and set aside the Order dated 9[th] March,2007 passed by the Learned Single Judge.

13. On 18[th] September, 2007, the stated sale certificate in respectof the suit property had been registered and soon thereafter on 5[th] October,2007, respondent No.3 sold the property to a third party.H

14. Feeling aggrieved by the decision of the Division Bench of theHigh Court, the appellants have approached this Court by way of presentappeals. This Court, on 23[rd] November, 2007, ordered that status quo ason that date be maintained with regard to the suit property. Later on, thisCourt granted leave to appeal on 27[th] November, 2009 and the interimorder continued during the pendency of the appeals.

15. Be it noted that on 1[st] September, 2016 amendment to Section3(8) of the 2002 Act came into force as a result of which the dues of thesecured creditor together with all costs, charges and expenses incurredby him are required to be tendered to the secured creditor at any timebefore the date of publication of notice for public auction or invitingquotations or tender from public or private treaty for transfer by way oflease, assignment or sale of the secured assets.

16. Reverting to the impugned judgment of the Division Bench ofHigh Court, it essentially considered three points as noted in paragraph 8of the impugned judgment. The same reads thus:

(i) Whether the sale of the secured asset in public auction as persection 13(4) of SARFAESI Act, which ended in issuance of asale certificate as per rule 9(7) of the Security Interest(Enforcement) Rules, 2003 (in short “the rules”) is a completeand absolute sale for the purpose of SARFAESI Act or whetherthe sale would become final only on the registration of the salecertificate?

(ii) Whether the action of the second respondent in not acceptingthe amounts paid by the borrowers and not cancelling the salecertificate before the registration of the sale is in derogation ofsection 60 of the Transfer of Property Act, in view of the Section37 of SARFAESI Act? And

(iii) Whether section 35 of the SARFAESI Act has the effect ofoverriding section 37 of the SARFAESI Act?”

While answering the first point, the Court observed thus:

“10.7 At the outset, it is to be stated that nothing survives in thenotice dated 14.11.2005 to adjudicate, as, on the date of filing ofthe writ petitions, the entire proceedings under Section 13(4) ofthe Act have come to an end and become final, by issuance ofsale certificate under sub-rule (7) of rule 9 of the rules on A

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A06.01.2006. The writ petitions have been prepared and signed bythe parties only on 19.01.2006. In such circumstances, the propercourse for the borrowers would be to prefer an appeal before theAppellate Tribunal against the order of the Tribunal dated10.01.2006 under the provisions of the SARFAESI Act. Theborrowers, however, have approached this court invoking ArticleB226 of the Constitution of India.”

And again, in paragraph No.10.9

“10.9 In our considered view, the borrowers should haveapproached the secured creditor or the authorized officer beforethe date fixed for sale and not after the sale, as provided undersub-section (8) to section 13 of the SARFAESI Act. As discussedearlier, only if the borrowers approach the secured creditor or theauthorized officer before the date fixed for sale or transfer andtender or pay all the dues to the secured creditor, the Sectioncreates a bar on the secured creditor or authorized officer toproceed further with the proposed sale or transfer. In this case,admittedly, the date fixed for the sale was 19.12.2005. But, evenaccording to the version of the borrowers, they approached thesecured creditor only on 02.01.2006 in such circumstances, thecontention of the learned counsel for the borrowers is withoutany basis contrary and to the provisions contained in sub section(8) of Section 13 of the Act.”

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The Court then relied upon the decision of this Court in B. ArvindKumar Vs. Govt. of India and Others[1]and applying the principleunderlying the said decision concluded that registration of sale certificatewas not essential. The Court observed thus:

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“10.17 The ratio laid down by the Division Bench of this court inArumugham, S. & 2 others v. C.K.Venugopal Chetty & 5 othersand the Supreme Court in B. Arvind Kumar vs. Government ofIndia and others, referred supra, squarely applies to the case onhand and we, therefore, have no incertitude to hold that the salewhich took place on 19.12.2005 has become final when it isconfirmed in favour of the auction purchaser and the auctionpurchaser is vested with rights in relation to the property purchasedin auction on issuance of the sale certificate and he has become G

the absolute owner of the property. Further, as held by the Divisionbench of this court in Arumugham, S. & 2 others v. C.K. VenugopalChetty & 5 others and the Supreme Court in B. Arvind KumarVs. Government of India and others, referred supra, the salecertificate issued in favour of the appellant does not require anyregistration in view of section 17(2) (xii) of the Registration Actas the same has been granted pursuant to the sale held in publicauction by the authorized officer under SARFAESI Act.

10.18 The finding of the learned Single Judge that the sale is notcomplete without registration of sale certificate, therefore, is notsustainable in law and the same is liable to be set aside.

10.19 If the argument of the borrowers that even after the issuanceof the sale certificate, prior to registration, they are entitled toredeem the property is accepted, it would make the provisions ofthe SARFAESI Act redundant and the very object of theSARFAESI Act enabling the Banks and financial Institutions torealize long term assets, manage problems of liquidity, asset liabilitymismatch and to improve recovery of debts by exercising powersto take possession of securities, sell them and thereby reduce nonperforming assets by adopting measures for recovery andreconstruction would fail and would open a pandora’s box for thelitigations upsetting the sale confirmed in favour of the bonafideauction purchasers, who invested huge money.

10.20 In view of our finding on this point, we hold that the sale ofthe secured asset in public auction as per section 13(4) ofSARFAESI Act, which ended in issuance of a sale certificate asper rule 9(7) of the Rules is a complete and absolute sale for thepurpose of SARFAESI Act and same need not be registered underthe provisions of the Registration Act.”

While considering the second point, after noticing the Section 37of the 2002 Act and Section 60 of the Transfer of Property Act, theCourt rejected the argument of the appellants for the following reasons:

“11.4 We have more than one reasons to reject the said contentionof the learned counsel for the borrowers.

11.5.1 Firstly, as held by us, while answering point (i) the sale inthis case has become absolute and complete on the date when AB

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the sale was confirmed on the appellant/auction purchaser and heis vested with all the rights in relation to the property purchasedby him in the public auction on issuance of sale certificate on06.01.2006, i.e., prior to the date on which the borrowers haveapproached the second respondent for repayment, contrary tothe provisions of Section 13(8) of the SARFAESI Act.

11.5.2 Secondly, the sale certificate issued in this case does notrequire any registration as per section 17(2) (xii) of the RegistrationAct, 1908 and our said view is fortified with the decisions of theDivision bench of this Court in Arumugham, S. & 2 others v. C.K.Venugopal Chetty & 5 others and the Supreme Court in B. ArvindKumar vs. Government of India and others, referred supra.

11.5.3.1 thirdly, it is true that the borrowers have the right ofredemption as provided under Section 60 of the Transfer ofProperty Act, 1882, in view of Section 37 of SARFAESI Act andto substantiate the said stand, the learned counsel for the borrowersrelies on the decision of the Supreme Court in Narandas Karsondasvs. S.A. Kamtam and another, (1977) 3 SCC 247 wherein it isheld that the mortgagor has a right to redemption unless the saleof the property was complete by registration in accordance withthe provisions of the Registration Act.

11.5.3.2 With great respect, we are of the view that the decisionof the Supreme Court in Narandas Karsondas vs. S.A. Kamtamand another, referred supra, is not applicable to the facts of thiscase. Even, as held by the Supreme Court in Narandas Karsondasvs. S.A. Kamtam and another, referred supra, the right of themortgagor to redemption continues only till such time the sale ofthe property was complete by registration. In this case, our finding,following the decision of the Division bench of this court inArumugham, S. & 2 others vs. C.K. Venugopal Chetty & 5 othersand the Supreme Court in B. Arvind Kumar vs. Government ofIndia and others, referred supra, is that the sale in this case hasbecome absolute and complete by the issuance of sale certificateon 6.1.2006. Further, section 17(2) (xii) of the Registration Act,1908 does not require registration of a sale certificate granted toany purchaser of any property sold in public auction by a civil orrevenue officer and it is the finding of the Supreme Court in B.Arvind Kumar vs. Government of India and others, referred supra, that the sale certificate issued by a civil or revenue officer inrespect of a property sold in public auction does not fall under thecategory of non-testamentary documents which require registrationunder Sub-section (b) and (c) of Section 17(1) of the RegistrationAct 1908.

11.5.4 Fourthly, the right to redeem the mortgage, as provided insection 60 of the Transfer of Property Act, is, of course, a veryvaluable right possessed by the mortgagor. At the same time, sucha right to redeem the mortgage can be exercised before it isforeclosed, or the estate is sold. It has been held that the mortgagorcan adopt the course provided under section 60 of the Transfer ofProperty Act only before the mortgage has filed a suit forenforcement of the mortgage and not thereafter, vide Pouloseand another vs. State Bank of Travancore, AIR 1989 Kerala 79.In this case, as discussed earlier, the borrowers approached thesecond respondent/Bank only after initiation of the proceedingsunder Section 13(4) of the SARFAESI Act, and that too after theproperty was sold in public auction and the sale was confirmed infavour of the appellant.”

The Court then proceeded to examine the third point andconsidering the interplay between Sections 35 and 37 of the 2002 Act,including the dictum in Mardia Chemicals Ltd. and Others Vs. Unionof India and Others[2] went on to observe thus:

“12.4 As per the section 37 of the SARFAESI Act, the provisionsof this act shall be “in addition to” and “not in derogation of” anyother law for the time being in force. There is no ambiguity in theunderstanding the legislative intent behind the framing of thissection.

12.5 On behalf of borrowers it is contended that a right ofredemption available to them before the sale is completed by wayof a registered deed under the Transfer of Property Act, a law forthe time being in force, is not taken away by the introduction ofthe SARFAESI Act, by virtue of section 37 of the SARFAESIAct, as the provisions of the SARFAESI Act and the rules framedthereunder shall be in addition to and not in derogation of the rightof redemption conferred under the transfer of property act. But, A

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we have already rendered a finding that the registration of salecertificate as per section 17(2)(xii) of the Registration Act is notmandatory for the completion of the sale pursuant to the publicauction and issuance of the sale certificate under the scheme ofthe SARFAESI Act. Assuming, the right of redemption conferredunder the Transfer of Property act is protected under Section 37of the SARFAESI Act, and independently available withoutreference to the registration of the sale certificate under Section17(2)(xii) of the Registration Act, the sale already effectedsatisfying the conditions contemplated under Section 13(8) of theSARFAESI Act, shall by virtue of section 37 of the SARFAESIAct, prevail over such other rights, much less the right ofredemption conferred under transfer of property act, which isprotected under section 37 of the SARFAESI Act, in view of thenon obstante clause provided under section 35 of the SARFAESIAct, because a non obstante clause provided under section 35 ofthe SARFAESI Act makes it clear that even though there areinconsistencies to such other rights conferred under any otherlaw for the time being in force that are protected under section 37of the SARFAESI Act, the action initiated under the provisions ofthe SARFAESI Act shall have the overriding effect as per section35 of the SARFAESI Act, because SARFAESI Act is a specialact which aims to accelerate the growth of economy of our countryempowering the lenders, namely Nationalized Banks, Private Sectorbanks and other Financial Institutions to realize their dues fromthe defaulted borrowers who are very lethargic in repayment ofthe loans borrowed by them, by exercising their right of expeditiousattachment and foreclosure for the enforcement of security andtherefore, sections 35 and 37 of the SARFAESI Act have to beread conjointly to achieve the object of the SARFAESI Act, butnot to defeat the same and therefore, we do not see any conflictbetween them.”

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On the above analysis, the Division Bench of the High CourtGallowed the appeals filed by respondent No.3 and dismissed the writpetitions filed by the appellants.

17. The appellants would contend that as per 2002 Act and Rulesframed thereunder, the right of the mortgagor to redeem the mortgagegets extinguished only upon registration of the sale certificate, resulting H

in transfer of the auctioned property. For that, reliance has been placedon the exposition in Narandas Karsondas Vs. S.A. Kamtam andAnother[3]and in particular in Mathew Varghese Vs. M. Amritha Kumarand Others[4]. Reliance is also placed on a recent decision of this Court(three Judge Bench) in Dwarika Prasad Vs. State of Uttar Pradeshand Others[5]. The appellants have assailed the conclusion recorded inthe impugned judgment that registration of sale certificate was notessential on the ground that the same was based on a decision in B.Arvind Kumar (supra), which had no application to the public auctionconducted under the provisions of the 2002 Act. On the other hand,registration of sale certificate is the quintessence for transfer of theauctioned property in favour of the auction purchaser. In that, the publicauction conducted under the 2002 Act by the secured creditor is not onaccount of order of any court; and neither is the Authorised Officer aCivil or Revenue Officer for the purposes of Section 17(2)(xii) of theRegistration Act. Reliance is placed on Rule 2(a) of the EnforcementRules, which defines Authorised Officer as an officer not less than aChief Manager of a Public Sector Bank or equivalent, as specified bythe Board of Directors or Board of Trustees of the secured creditor orany other person or authority exercising power of superintendence,direction and control of the business or affairs of the secured creditor, asthe case may be, to exercise the rights of a secured creditor under the2002 Act. Thus, the Authorised Officer is essentially an employee of thebank and not a Civil or Revenue Officer as such. There is no deemingprovision in the 2002 Act or the Rules framed thereunder, to construethe Authorised Officer of the bank as a civil or revenue officer for thepurpose of Section 17(2)(xii) of the Registration Act.

18. It is then submitted that public auction of the subject propertyhas been conducted without a valuation report by an approved valuer asrequired under the Enforcement Rules, 2002. Further, the reserve pricefixed by the respondent bank as Rs.40,00,000/- (Rupees Forty LacsOnly) did not reflect the actual market value of the property on the dateof auction. The value ought to have been no less than Rs.2 Crores.Reliance is placed on J. Rajiv Subramaniyan and Another Vs.Pandiyas and Others[6]to contend that the secured creditor has a duty 3 (1977) 3 SCC 247

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Ato ensure that the borrower gets maximum yield from the sale of theassets, failing which the auction sale would vitiate. As regards thesubsequent sale of subject property by respondent No.3 to third party, itis contended that the same is hit by the doctrine of lis pendens in termsof Section 52 of the Transfer of Property Act, 1882. Further, thesubsequent purchaser is not a bonafide purchaser for considerationBwithout notice; and in any case cannot be heard to resist the claim of theappellants which ought to succeed against the respondent bank and theauction purchaser (respondent No.3). Reliance is placed on T. Raviand Another Vs. B. Chinna Narasimha and Others[7] and Kirpal KaurVs. Jitender Pal Singh and Others[8] to buttress the above submissions.CIt is lastly contended that this Court, in the peculiar facts of the presentcase, must exercise powers under Article 142 of the Constitution ofIndia to declare the subsequent sale of the mortgaged property as nulland void and direct the concerned persons to immediately handover thevacant and peaceful possession thereof to the appellants.

D19. The respondent No.1(bank) and respondent No.2 (AuthorisedOfficer of the bank) would however, submit that the appellants failed todeposit the dues payable to the respondent bank in terms of Section13(8) of the 2002 Act as applicable at the relevant time and did notchallenge the notice of auction before the date of auction despite sufficientopportunity was given to them in that behalf. Whereas, the auction wasEconducted on 19[th] December, 2005 and respondent No.3 being the highestbidder was issued sale certificate on 6[th] January, 2006 upon payment ofthe consideration amount on 4[th] January, 2006. With issuance of salecertificate, it is urged that the sale transaction in favour of respondentNo.3 had become final. According to the respondents Section 13(8) ofFthe 2002 Act, mandates tender of the dues by the debtor/borrower to thesecured creditor at any time before the date fixed for sale which in thiscase was 19[th] December, 2005. Our attention was invited to the factthat sub-section (8) has undergone a change and has been made morestringent, requiring tender of dues to the secured creditor together with all costs, charges and expenses incurred by him at any time before theG“date of publication of notice” for public auction or inviting quotations ortender from public or private treaty for transfer by way of lease,assignment or sale of the secured assets.

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20. It is then urged that the appellants had failed to make a validtender to pay the outstanding dues till the date of registration of the salecertificate on 18[th] September, 2007. Indeed, the appellants had depositeda sum of rupees twenty-five lac by 4[th] January, 2006, but that amountwas deposited in the account of the father of appellant No.2. Thus, therespondent bank did not accept the same as a valid tender made by theappellants towards the loan accounts. Similarly, the cheques issued bythe appellants on 2[nd] January, 2006 in the sum of Rs.25,21,446/- (RupeesTwenty-Five Lacs Twenty-One Thousand Four Hundred Forty-Six Only),were of no avail not being a valid tender as per the agreed terms. Thethird attempt was allegedly made by the appellants, to pay the dues inthe form of demand drafts for an aggregate amount of Rs.25,06,250/-(Rupees Twenty-Five Lacs Six Thousand Two Hundred Fifty Only), on18[th] January, 2006. That again is of no avail as the demand drafts weredrawn in the name of respondent No.2 i.e. Shri B. Jagathkumar(Authorised Officer) instead of in the name of the respondent bank.Hence, even this was not a valid tender. Notably, the appellants made noattempt to deposit the amount in their loan accounts until the impugneddecision was passed by the Division Bench including the date ofregistration of sale certificate on 18[th] September, 2007. The sale in favourof respondent No.3 stood complete and final on that day.

21. It is urged that the exposition in the decisions pressed intoservice by the appellants in Mathew Varghese (supra) and DwarikaPrasad (supra), in fact, would go against the appellants. Further, theHigh Court was right in concluding that the sale certificate issued infavour of respondent No.3 did not require registration and that the saleprocess was complete on issuance of the sale certificate on 6[th] January,2006. For this, reliance has been placed on the dictum in B. ArvindKumar (supra). Additionally, reliance is placed upon the provisions ofRule 65 of Schedule II of Income Tax Act, 1961 as applicable at therelevant time. Lastly, it is contended that the appellants have failed toavail alternative efficacious remedy against the order dated 10[th] January,2006 passed by the Debt Recovery Tribunal dismissing the proceedingsinitiated by the appellants to challenge the action taken by the respondentbank under Section 13(4) of the 2002 Act. It is urged that the appellantsshould be non - suited on the basis of the dictum in Kanaiyalal LalchandSachdev and Others Vs. State of Maharashtra and Others[9].

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A22. The respondent No.3, besides supporting the view taken bythe High Court in the impugned judgment, would additionally urge thatthe said respondent has paid the entire consideration amount, Rs.42,51,000/- (Rupees Forty-Two Lacs Fifty One Thousand Only), on 4[th] January,2006. Whereafter, the sale certificate was issued in his favour on 6[th]January, 2006. The appellants, however, filed writ petitions only on 19[th]BJanuary, 2006. The appellants did not avail the option of redemption bytendering the dues to the respondent bank before the date fixed for saleor public auction which in this case was 19[th] December, 2005.Furthermore, the legal notice issued at the instance of appellants alsodoes not clearly indicate their intention to redeem the mortgage by closingCloan accounts and readiness and willingness to pay the entire dues. Thetender made by the appellants was not a valid tender and no fault can befound with the respondent bank for having returned the cheques/draftsand not to encash the same. Further, after the High Court rendered theimpugned decision on 10[th] August, 2007, the sale certificate has beenduly registered on 18[th] September, 2007 and even until that date no validDoffer or tender has been made by the appellants for payment of theoutstanding dues to the respondent bank. The title of the subject propertyhad already passed on to respondent No.3. Therefore, respondent No.3was within his rights to sell the property to a third party by a registeredsale deed on 5[th] October, 2007. By not impleading the subsequentEpurchaser, the civil appeals cannot proceed any further and no relief canbe granted to the appellants.

23. We have heard Dr. A. Francis Julian, leaned Senior Counselfor the appellants, Mr. Pranab Kumar Mullick, Advocate for respondentNos.1 & 2 and Mr. K.K. Mani, Advocate for respondent No.3.F

24. After cogitating over the factual matrix and perusing therelevant records, it is seen that the ground of challenge considered bythe High Court at the behest of the appellants in the impugned judgment,in our opinion, has become unavailable. In that, the matter proceededbefore the High Court for setting aside the entire auction process on theGpremise that the sale certificate was yet to be registered in favour of thehighest bidder (respondent No.3); and the appellants had made(unsuccessful) attempts to exercise their right of redemption by offeringthe outstanding dues to the respondent bank. It was argued by theappellants that only upon registration of the sale certificate, the right ofthe borrower to redeem the mortgage would get extinguished andHobliterated.

25. Indisputably, after the disposal of the writ appeals by theDivision Bench of the High Court vide impugned judgment on 10[th] August,2007, the auction purchaser (respondent No.3) got the sale certificateregistered on 18[th] September, 2007 and then transferred the property bya registered sale deed on 5[th] October, 2007 to third party. It is not thecase of the appellants that some interim injunction prohibiting respondentNo.3 from registering the sale certificate or transferring the suit property,was operating against him after the decision of the Division Bench ofHigh Court. In fact, the impugned judgment was not even carried inappeal before this Court by the appellants until then. The special leavepetitions came to be filed only on 13[th] October, 2007 and order of statusquo was passed by this Court on 23[rd] November, 2007. In other words,there has been a paradigm shift in the rights of the parties upon registrationof the sale certificate on 18[th] September, 2007 and also because of theregistered sale deed in favour of third party on 5[th] October, 2007. Thecontention pursued before the High Court by the appellants, therefore,has now become unavailable.

26. Be it noted that the appellants had allowed the action taken bythe respondent bank under Section 13(4) of the 2002 Act, to becomefinal consequent to the order of the DRT rejecting challenge thereto dueto non-compliance of the conditional order. Even the subsequentapplication for restoration of the DRT proceedings came to be rejected.The appellants then filed the subject Writ Petition (C) Nos.634-635 of2006 on 19[th] January, 2006, by which date the auction had alreadyconcluded including the sale certificate was issued in favour of the highestbidder on 6[th] January, 2006. Moreover, the principal assertion of theappellants before the High Court was that they were wanting to exercisetheir right of redemption of mortgage, but due to fortuitous situation andthe inappropriate stand taken by the respondent bank were preventedfrom doing so. No other plea was pursued by the appellants in support ofthe reliefs claimed by them before the High Court, as can be discernedfrom the three points formulated in paragraph No.8 of the impugnedjudgment (reproduced in paragraph No.16 hereinabove). The appellantscannot be permitted to assail the auction process on any other count.

27. Reverting to the stand taken by the appellants that they hadattempted to exercise their right of redemption by depositing an aggregatesum of Rupees Twenty Five Lacs on 30[th] December, 2005 and 4[th] January,2006, in the account of the father of appellant No.2 followed by issuing A

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Acheque(s) in the aggregate sum of Rs.25,21,446/- (Rupees Twenty-FiveLacs Twenty-One Thousand Four Hundred Forty-Six Only), on 2[nd]January, 2006; and once again offering the amount by demand drafts inthe sum of Rs.25,06,250/- (Rupees Twenty-Five Lacs Six ThousandTwo Hundred Fifty Only), on 18[th] January, 2006. This stand thoughattractive at the first blush, will have to be stated to be rejected. On theBother hand, we find substance in the stand taken by the respondent bankthat none of the above was a valid tender so as to extricate or dischargethe appellants from their obligation - to deposit the outstanding duespayable by them before the specified date. In that, the amount wasallegedly deposited by them in the account of the father of appellantCNo.2 and not in their loan accounts as such. Unless the amount wastransferred/deposited in the loan accounts of the appellants in relation towhich the mortgage operated, it would not be a valid tender for payingthe outstanding dues. Similarly, on the second occasion the appellantsattempted to pay in the form of cheque(s) issued on 2[nd] January, 2006.However, as per the terms and conditions for grant of loan payment byDcheque(s) was not permissible. Thus, the respondent bank was not obligedto accept the amount in the form of cheque(s). The respondent bank,therefore, justly declined to accept the cheque(s), not being a valid tender.Even the third attempt made by the appellants was to offer demanddrafts drawn in favour of or in the name of the Authorised Officer of theErespondent bank and not in the name of the bank or authorising the bankto appropriate it towards the subject loan accounts. Hence, these demanddrafts were rightly not accepted as a valid tender.

28. Notably, the appellants took no steps, whatsoever, to pay theoutstanding dues to the respondent bank by way of a valid tender norFmoved any formal application before the High Court after filing of thewrit petitions on 19 January, 2006, to permit them to deposit the requisiteamount either in the concerned loan accounts or in the court. That wasnot done even until the disposal of the writ petitions by the Single Judgeor during the pendency of the writ appeals before the Division Benchand until the disposal thereof vide the impugned judgment. We must alsoGnotice the stand taken by the respondent bank that even the legal noticesent by the appellants to the respondent bank, in no way expressesunambiguous commitment of the appellants to exercise their right ofredemption. Suffice it to observe that the appellants, for reasons bestknown to them, have not chosen to deposit the amount in the loan accountsHor attempted to seek permission of the Court to deposit the same in Court from 19[th] January, 2006 immediately after filing of writ petitionsor for that matter until the registration of the sale certificate on 18[th]September, 2007. In this backdrop, it is not possible to countenance thestand of the appellants that they had made a valid tender to the respondentbank or that the respondent bank had mischievously or malafide rejectedtheir offer to defeat their rights, to redeem the mortgage before registrationof the sale certificate on 18[th] September, 2007.

29. A fortiorari, it must follow that the appellants have failed toexercise their right of redemption in the manner known to law, muchlessuntil the registration of the sale certificate on 18[th] September, 2007. Inthat view of the matter no relief can be granted to the appellants, assumingthat the appellants are right in contending that as per the applicableprovision at the relevant time (unamended Section 13(8) of the 2002Act), they could have exercised their right of redemption until theregistration of the sale certificate – which, indisputably, has alreadyhappened on 18[th] September, 2007. Therefore, it is not possible tocountenance the plea of the appellants to reopen the entire auctionprocess. This is moreso because, the narrative of the appellants thatthey had made a valid tender towards the subject loan accounts beforeregistration of the sale certificate, has been found to be tenuous. Thusunderstood, their right of redemption in any case stood obliterated on18[th] September, 2007. Further, the amended Section 13(8) of the 2002Act which has come into force w.e.f. 1[st] September, 2016, will nowstare at the face of the appellants. As per the amended provision, stringentcondition has been stipulated that the tender of dues to the secured creditortogether with all costs, charges and expenses incurred by him shall be atany time before the “date of publication of notice” for public auction orinviting quotations or tender from public or private deed for transfer byway of lease assessment or sale of the secured assets. That eventhappened before the institution of the subject writ petitions by theappellants.

30. Having said thus, in the peculiar facts of the present case, wedo not deem it necessary to dilate further on the argument that registrationof the sale certificate in relation to the auction conducted under the 2002Act is essential. Similarly, it is not necessary to examine other groundsurged by the appellants, in light of our conclusion that the appellantshave failed to make a valid and legal tender to the respondent bank AB

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Abefore the issue of sale certificate on 6[th] January, 2006, muchlessregistration thereof on 18[th] September, 2007.

31. For the view we have taken, it is not possible for us tocountenance the argument of the appellants that we should exerciseplenary powers under Article 142 of the Constitution of India. TheBreported decisions pressed into service by both sides also need not detainus as the appellants have, in law, lost their option to exercise right ofredemption, consequent to registration of the sale certificate on 18[th]September, 2007 and their failure to pay the dues to the secured creditorsbefore that date.

C32. Accordingly, these appeals must fail and same are dismissedwith no order as to costs. Ordered accordingly.

All applications are also disposed of in the above terms.

DDevika Gujral

Appeals dismissed.

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