w w w . L a w y e r S e r v i c e s . i n



M/s. Durjaya Estates Private Limited, Rep. by its Director, Karan Ramsisaria v/s UCO Bank, Rep. by its Authorised Officer & Another

    Writ Appeal No. 147 of 2016 (GM-DRT)

    Decided On, 04 February 2020

    At, High Court of Karnataka

    By, THE HONOURABLE MR. JUSTICE RAVI MALIMATH & THE HONOURABLE MR. JUSTICE M. NAGAPRASANNA

    For the Appellant: Paras Jain, Advocate. For the Respondents: R1, K.R. Parashuram, R2, Nandish Patel, Advocates.



Judgment Text

(Prayer: This writ appeal is filed under Section 4 of the Karnataka High Court Act praying to set aside the order passed in the writ petition No. 57597 of 2014 dated 15.12.2015.)

M. Nagaprasanna, J.

1. Aggrieved by the order dated 15.12.2015 passed in writ petition 57597 of 2014 by the learned Single Judge, whereby the learned Single Judge has dismissed the writ petition, the writ petitioner-auction purchaser has preferred the instant writ appeal.

2. The parties will be referred to as per their ranking in the writ petition before the learned Single Judge.

3. Brief facts of the case are as follows:

One Sri Jayanna was originally the owner of the non-agricultural land bearing No.RS 21, Khata No. 3681, Mathadakurubarahatty, Pune-Bangalore Highway, Chitradurga Taluk. This property was purchased by Jayanna at a Court auction under the sale certificate on 23.1.1981. It transpires that Jayana died and his legal heirs were carrying on the business of the partnership firm that Jayanna had during his life time. The legal heris of Jayanna offered the above mentioned property as a security for a loan borrowed from M/s. UCO Bank for the sum of Rs.10.00 crore, in the year 2008.

4. On default of payment, the Bank initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ‘the Act’) by issuing notice under Section 13(2) of the Act. On further default of the borrower, the Bank assigned its right to recover the money under the mortgage deed and possession of the property was taken on 27.06.2013. Pursuant to which, a sale notice was issued on 10.1.2014 fixing the date of auction as 24.2.2014. The reserve price that was fixed was at Rs.7.5 crore. The writ petitioner, which is a Company incorporated under the provisions of the Indian Companies Act, 1956, having its registered office at Bengaluru, submitted its bid and was declared to be the highest bidder at Rs.8.01 Crore. The bid of the petitioner was accepted by the Bank and on such acceptance, he was called upon to pay 25 percent of the bid amount and the petitioner is said to have paid the said amount. The sale was endorsed by the Bank in favour of the auction purchaser namely, the writ petitioner.

5. After all the above stated proceedings, the Bank for the first time, informed the petitioner that the 2nd respondent-borrower had filed an appeal before the Debt Recovery Tribunal, Bangalore (hereinafter referred to as ‘the DRT’) in S.A. No. 205/2014 inter-alia praying to set aside the sale notice issued on 21.3.2014 by the 1st respondent-bank for sale of the secured asset. On 6.5.2014 i.e., the date on which the bank had to complete the transaction with the petitioner, the DRT at Bengaluru passed an order of stay, which read thus:

“The respondent Bank is at liberty to go ahead with the proposed sale of the schedule property to be held through e-auction on 09.05.2014 between 3.00 P.M. and 4.00 P.M. as required under law. However, confirmation of sale stands deferred in respect to the schedule property, subject to the condition that the appellant shall deposit Rs.200 lakh prior to sale and Rs.3.00 lakh on or before 30.05.2014 into the loan amount in question with the respondent Bank.

If applicant fails to comply with the stipulated conditions, the order granted today by this Tribunal stands automatically cancelled and respondent Bank is at liberty to proceed further as required under law”.

6. It transpires that no amount was deposited by the 2nd respondent-borrower in terms of the order of the DRT. In those circumstances, the 1st respondent confirmed the sale in favour of the petitioner and called upon the petitioner to pay 75 percent of the sale consideration by its communication dated 3.6.2014. The petitioner in reply to the letter, deposited the sale consideration of 75 percent of the auction purchase amount on 30.06.2014.

7. After this event, the 2nd respondent filed an application seeking further time to deposit the amount in the pending proceeding before the DRT. The DRT allowing the application again granted time to the 2nd respondent-borrower to deposit the entire amount that was in default by its order dated 25.11.2014, which reads thus:

“(1) The Confirmation of Sale in favour of respondent No.2 stands set aside subject to the condition that the petitioner/appellant shall pay entire loan amount to the satisfaction of the respondent Bank.

(2) The petitioner/appellant shall pay entire loan amount to the satisfaction of the respondent Bank on or before 15.12.2014 towards the loan account of the borrower.

(3) If the petitioner/appellant fail to pay loan amount as stipulated above, the Bank is at liberty to issue Sale Certificate in favour of respondent No.2.

(4) Respondent No.1 Bank shall return the entire deposited amount paid by respondent No.2 to respondent No.2 forthwith. However, petitioner/appellant shall pay interest on the said deposited amount of respondent No.2 at the rate of 11% p.a., with quarterly rests from the date of deposit of the amount of respondent No.2 till full amount is paid to respondent No.2 on or before 15.12.2014.

(5) If the petitioner/appellant fails to do so i.e., pay interest as stipulated above, the respondent No.1 Bank is at liberty to issue Sale Certificate as required under law in favour of respondent No.2 in respect to the secured asset.

(6) Respondent No.1 Bank is at liberty to return the documents deposited by the Borrower to the present petitioner/appellant only after obtaining the written consent and concurrence from the present Borrower-Cum-Owner of the secured asset as required under law.

(7) In the event of non-getting such written consent and concurrence from the Borrower-Cum-Owner of secured asset, respondent No.1 Bank shall not release the documents in favour of the present petitioner/appellant.

(8) Consequently, present SA stands disposed of as it does not survive for consideration in the light of disposal of Memo and I.A. NO. 5167/2014.”

It is the afore-extracted order of the DRT dated 25.11.2014, that was challenged before the learned Single Judge in the writ Petition, by the auction purchaser.

8. The sole contention of the Writ petitioner was that under the Act and the Rules framed thereof, the DRT could not have granted further time to the defaulter-borrower and could not have reversed or negated the auction sale in favour of the petitioner. It was the contention of the petitioner that he had a right to get the property transferred in his favour as he had deposited the entire amount and a sale certificate had been issued in his favour. It was further contention of the petitioner that under Section 13(8) of the Act, the Bank having confirmed the sale in favour of the petitioner, called upon him to pay the remaining balance of sale consideration. The only event that remained was the execution of the sale certificate in favour of the petitioner quoting Section 13(8) of the Act. The petitioner also contended that the DRT had no inherent powers of extending time contrary to the statute. The petitioner had placed reliance on several provisions of the Act to buttress his submission that the statute does not confer inherent powers upon the DRT. He has also placed reliance on the following judgments:

1. Sadashiv Prasad Singh Vs. Harendar Singh and other-(2015) 5 SCC 574

2. Mathew Varghese Vs. M. Amritha Kumar and others-(2014) 5 SCC 610

3. Annapurna Vs. Mallikarjun and another –(2014) 6 SCC 397

4. M/s. Gaurav Enterprises, Gwalior Vs. State-AIR 2012 MP 35

5. VedicaProcon Private Ltd. Vs. Balleshwar Greens Private Ltd and others-Air 2015 SC 3103

6. Standard Chartered Bank Vs. DharminderBhohi and others-(2013) 15 SCC 341

7. ValjiKhimji and Company Vs. Official Liguidator of Hindustan and Nitro Product (Gujarat) Limited and others-(2008) 9 SCC 299

9. The learned Single Judge, following the observations of the Apex Court in case of Mathew Varghese Vs. M. Amritha Kumar and Others-(2014) 5 SCC 610, observed that Section 13(8) of the Act, is specifically for the protection of the borrower inasmuch as the ownership of the secured asset is a constitutional right vested in the borrower and protected under Article 300A of the Constitution of India. The learned Single Judge further observed that the borrower is to be given an opportunity to take all possible steps for retrieving his property.

10. The learned Single Judge noticing the fact that no certificate of sale was issued in favour of the auction purchaser and in order to balance equities, ordered that the DRT was well within its power under the statute to grant time to give an opportunity to the borrower to make good the entire amount in default, unless it could be demonstrated that the transaction was vitiated by fraud or any other irregularity. Observing thus, the learned Single Judge dismissed the writ petition filed by the auction purchaser. Feeling aggrieved by the order passed by the learned Single Judge, the writ petitioner-auction purchaser has preferred the instant writ appeal.

11. We have heard Sri Paras Jain, learned Counsel appearing for appellant and Sri K.R. Parashuram, learned Counsel appearing for respondent No.1. Sri. Nandeesh Patel, learned Counsel appearing for caveator respondent No.2 remained absent.

12. The undisputed facts are that the property that was mortgaged to the Bank was brought to sale by the Bank by invoking the provisions of the Act. The possession of the property was also taken by the Bank and a sale notice on 10.1.2014 was issued fixing the date of auction as 24.2.2014. The petitioner emerged as the highest bidder and the Bank accepted the bid of the petitioner. The petitioner was called upon to deposit 25 percent of the amount, which the petitioner has complied. The sale was endorsed in favour of the petitioner. It was at that point of time, the Bank revealed to the auction purchaser that the borrower has initiated proceedings before the DRT. The very confirmation of sale in favour of the auction purchaser was to be kept in abeyance until further orders.

13. The conditions stipulated by the DRT were not complied with by the borrower, instead the borrower preferred another application seeking further time for making good the entire deposit amount. In the interregnum, the petitioner was called upon by the bank to pay the remaining amount of 75% as the borrower had not complied with the order of the DRT in depositing the amount to the Bank. The auction purchaser the deposited entire remaining amount of 75% on 30.06.2014. It transpires that even then, the borrower had not make good the entire amount in default to the Bank. But the borrower chose to file an application before the DRT for further extension of the time of pay the entire amount in default. The DRT considering the application filed by the borrower on 25.11.2014, allowed the same with certain further conditions and further time was granted to the borrower to make good the entire amount to the Bank on or before 15.12.2014. If the borrower would not make the entire amount on or before 15.12.2014, the Bank was given liberty to issue sale certificate in favour of the petitioner. Thus, the fact that would emerge from the aforesaid sequence of event is that as on date the DRT passed the order i.e. on 25.11.2014, no sale certificate was issued in favour of the petitioner.

14. Learned Counsel for the petitioner would contend that it is impermissible in law for the DRT to extend the date, thereby, negating the auction process and the right of the petitioner, being the auction purchaser. The learned Advocate for the petitioner would refer to various provisions of the Act. It would be useful to reproduce Sections 13 and 17 of the Act and Rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002, and they are extracted for the purpose of ready reference.

“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 secured creditor may be enforced, without the intervention 16 of court of tribunal, by such creditor in accordance with the provisions of this Act.

(2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under subsection (4).

(3) The notice referred to in sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower.

(3A) If, on receipt of the notice under sub-section (2), the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within one week of receipt of such representation or objection the reasons for non-acceptance of the representation or objection to the borrower:

Provided that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under Section 17 or the Court of District Judge under Section 17A.

(4) In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:-

(a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset;

(b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset:

Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt:

Provided further that where the management of whole of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security for the debt.

(c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor;

(d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt.

(5) Any payment made by any person referred to in clause (d) of sub-section (4) to the secured creditor shall give such person a valid discharge as if he has made payment to the borrower.

(5A) where the sale of an immovable property, for which a reserve price has been specified, has been postponed for want of a bid of an amount not less than such reserve price, it shall be lawful for any officer of the secure creditor, if so authorized by the secured creditor in this behalf, to bid for the immovable property on behalf of the secured creditor at any subsequent sale.

(5B) where the secured creditor, referred to in sub-section (5A), is declared to be the purchaser of the immovable property at any subsequent sale, the amount of the purchase price shall be adjusted towards the amount of the claim of the secured creditor for which the auction of enforcement of security interest is taken by the secured creditor, under sub-section (4) of section 13.

(5C) The provisions of Section 9 of the Banking Regulation Act, 1949 (10 of 1949) shall, as far as may be, apply to the immovable property acquired by secured creditor under sub-section (5A).

(6) Any transfer of secured asset after taking possession thereof or takeover of management under sub-section (4), by the secured creditor or by the manager on behalf of the secured creditor shall vest in the transferee all rights in, or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset.

(7) Where any action has been taken against a borrower under the provisions of sub-section (4), all costs, charges and expenses creditor, have been properly incurred by him or any expanses incidental thereto, shall be recoverable from the borrower and the money which is received by the secured creditor shall, in the absence of any contract to the contrary, be held by him in trust, to be applied, firstly, in payment of such costs, charges and expenses and secondly, in discharge of the dues of the secured creditor and the residue of the money so received shall be paid to the persons entitled thereto in accordance with his rights and interests.

(8) If the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by the secured creditor, and no further step shall be taken by him for transfer or sale of that secured asset.

(9) In the case of financing of a financial asset by more than one secured creditors or joint financing of a financial asset by secured creditors, no secured creditor shall be entitled to exercise any or all of the rights conferred on him under or pursuant to sub-section (4) unless exercise of such right is agreed upon by the secured creditors representing not less than three-fourth in value of the amount outstanding as on a record date and such action shall be binding on all the secured creditors:

Provided that in the case of a company in liquidation, the amount realised from the sale of secured assets shall be distributed in accordance with the provisions of section 529A of the Companies Act, 1956 (1 of 1956):

Provided further that in the case of a company being wound up on or after the commencement of this Act, the secured creditor of such company, who opts to realise his security instead of relinquishing his security and proving his debt under proviso to sub-section (1) of Section 529 of the Companies Act, 1956 (1 of 1956), may retain the sale proceeds of his secured assets after depositing the workmen’s dues with the liquidator in accordance with the provision of section 529A of the Act:

Provided also that the liquidator referred to in the second proviso shall intimate the secured creditors the workmen’s dues in accordance with the provisions of Section 529A of the Companies Act, 1956 (1 of 1956) and in case such workmen’s dues cannot be ascertained, the liquidator shall intimate the estimated amount of workmen’s dues under that section to the secured creditor and in such case the secured creditor may retain the sale proceeds of the secured assets after depositing the amount of such estimated dues with the liquidator:

Provided also that in case the secured creditor deposits the estimates amount of workmen’s dues, such creditor shall be liable to pay the balance of the workmen’s dues or entitled to receive the excess amount, if any, deposited by the secured creditor with the liquidator:

Provided also that the secured creditor shall furnish an undertaking to the liquidator to pay the balance of the workmen’s dues, if any.

Explanation: For the purposes of this sub-section:

(a) “record date” means the date agreed upon by the secured creditors representing not less than three-fourth in value of the amount outstanding on such date;

(b) “amount outstanding” shall include principal, interest and any other dues payable by the borrower to the secured creditor in respect of secured asset as per the books of account of the secured creditor.

(10) Where dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an application in the form and manner as may be prescribed to the Debts Recovery Tribunal having jurisdiction or a competent court, as the case may be, for recovery of the balance amount from the borrower.

(11) Without prejudice to the rights conferred on the secured creditor under or by this Section, the secured creditor shall be entitled to proceed against the guarantors or sell the pledged assets without first taking any of the measures specified in clauses (a) to (b) of sub-section (4) in relation to the secured assets under this Act.

(12) The rights of a secured creditor under this Act may be exercised by one or more of his officers authorised in this behalf in such manner as may be prescribed.

(13) No borrower shall, after receipt of notice referred to in sub-section (2), transfer by way of sale, lease or otherwise (other than in the ordinary course of his business) any of his secured assets referred to in the notice, without prior written consent of the secured creditor.”

17. Right to appeal-(1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor or his authorised officer under this Chapter, may make an application along with such fee, as may be prescribed to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measure had been taken:

Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.

Explanation: For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor a the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under sub-Section (1) of Section 17.

(2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder.

(3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub-section(4) of section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management of the secured assets to the borrower, or restoration of possession of the secured assets to be borrower, it may by order, declare the recourse to any one or more measure referred to in sub-section (4) of section 13 taken by the secured assets as in valid and restore the possession of the secured assets to the borrower or restore the management of the secured assets to the borrower, as the case may be, and pass such order as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under sub-section (4) of section 13.

(4) If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under sub-section (4) of section 13, is in accordance with the provisions of this Act and the rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force, the secured creditor shall be entitled to take recourse to one or more of the measures specified under sub-section (4) of Section 13 to recover his secured debt.

(5) Any application made under sub-section (1) shall be dealt with by the Debts Recovery Tribunal as expeditiously as possible and disposed of within sixty days from the date of such application:

Provided that the Debts Recovery Tribunal may, from time to time, extend the said period for reasons to be recorded in writing, so, however, that the total period of pendency of the application with the Debts Recovery Tribunal, shall not exceed four months from the date of making of such application made under sub-section (1).

(6) If the application is not disposed of by the Debts Recovery Tribunal within the period of four months as specified in sub-section (5), any party to the application may make an application, in such form as may be prescribed, to the Appellate Tribunal for directing the Debts Recovery Tribunal for expeditious disposal of the application pending before the Debts Recovery Tribunal and the Appellate Tribunal may, on such application, make an order for expeditious disposal of the pending application by the Debts Recovery Tribunal.

(7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the application in accordance with the provisions of the Recovery of Debuts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and the rules made thereunder.”

“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 Appendix IV to these rules, to the borrower and by affixing the possession notice on the outer door or at such conspicuous place of the property.

(2) [The possession notice as referred to in sub-rule (1) shall also be published, as soon as possible but in any case not later than seven days from the date of taking possession, in two leading newspapers] one in vernacular language having sufficient circulation in that locality, by the authorised officer.

(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 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.

(4) The authorised officer shall take steps for preservation and protection of secured assets and insure them, if necessary, till they are sold or otherwise disposed off.

(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 valuer and in consultation with the secured creditor, fix the reserve price of the property and may sell the whole or any 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 interest in buying the such assets; or

(b) by inviting tenders from the public;

(c) by holding public auction; or

(d) by private treaty.

(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):

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 newspapers one in vernacular language having sufficient circulation in the locality by setting out the terms of sale, which shall include-

(a) the description of the immovable property to be 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;

(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;

(e) depositing earnest money as may stipulated by the secured creditor;

(f) any other thing which the authorised officer considers it material for a purchaser to know in order to judge the nature and value of the property.

(7) Every notice of sale shall be affixed on a conspicuous part of the immovable property and may, if the authorised officer deems it fit, put on the website of the secured creditor on the Internet.

(8) Sale by any methods other than public auction or public tender, shall be on such terms as may be settled between the parties in writing.

9. Time of sale, Issue of sale certificate and delivery of possession, etc.

(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.

(2) The sale shall be confirmed in favour of the purchaser who has offered the highest sale price in his bid or tender or quotation or offer to the authorised officer and shall be subject to confirmation by the secured creditor:

Provided that no sale under this rule shall be confirmed, if the amount offered by sale price is less than the reserve price, specified under Sub-rule (5) of rule 9:

Provided further that if the authorised officer fails to obtain a price, he may, with the consent of the borrower and the secured creditor effect the sale at such price.

(3) On every sale of immovable property, the purchaser shall immediately pay a deposit of twenty-five per cent of the amount of the sale price, to the authorised officer conducting the sale and in default of such deposit, the property shall forthwith be sold again.

(4) The balance amount of purchase price payable shall be paid by the purchaser to the authorised officer on or before the fifteenth day of confirmation of sale of the immovable property or such extended period as may be agreed upon in writing between the parties.

(5) In default of payment within the period mentioned in sub-rule (4), the deposit shall be forfeited and the property shall be resold and the defaulting purchaser shall forfeit all claim to the property or to any part of the sum for which it may be subsequently sold.

(6) On confirmation of sale by the secured creditor and if the terms of payment have been complied with, the authorised officer exercising the power of sale shall issue a certificate of sale of the immovable property in favour of the purchaser in the Form given in Appendix V to these rules.

(7) Where the immovable property sold is subject to any encumbrances, the authorised officer may, if he thinks fit, allow the purchaser to deposit with him the money required to discharge the encumbrances and any interest due theorem together with such additional amount that may be sufficient to meet the contingencies or further cost, expenses and interest as may be determined by him.

[Provided that if after meeting the cost of removing encumbrances and contingencies there is any surplus available out of money deposited by the purchaser such surplus shall be paid to the purchaser within fifteen days, from date of finalisation of the sale.]

(8) On such deposit of money for discharge of the encumbrances, the authorised officer [shall] issue or cause the purchaser to issue notices to the persons interested in or entitled to the money deposited with him and take steps to make, the payment accordingly.

(9) The authorised officer shall deliver the property to the purchaser free from encumbrances known to the secured creditor on deposit of money as specified in sub-rule (7) above.

(10) The certificate of sale issued under sub-rule(6) shall specifically mention that whether the purchaser has purchased the immovable secured asset free from any encumbrances knowns to the secured creditor or not”.

15. Placing reliance on the judgments of the Apex Court, learned Counsel for the petitioner contends that these are binding precedents and are required to be followed in the case on hand as well. This contention is unacceptable to us, as the facts obtaining in each case would be different and in view of the law laid down by the Hon’ble Supreme Court in case of Haryana Financial Corporation And Another Vs. Jagadamba Oil Mills And Another reported in (2002) 3 SCC 496, wherein at paragraph Nos. 20 to 22, it is observed as follows:

“20. In Home Officer V. Dorset Yacht Co. [(1970) 2 All ER 294: 1970 Act 1004 (HL)] Lord Reid Said (at All ER P.297g-h), “Lord Atkin’s Speech… is not to be treated as if it were a statutory definition. It will required qualification in new circumstances”. Megarry, J. in (1971) 1 WLR 1062 observed: “One must not, of course, construe even a reserved judgment of even Russell, L.J. as if it were an Act of Parliament.” And, in Herrington V. British Railways Board [(1972) 2 WLR 537 [sub nom British Railway Board V. Herrington, (1972) 1 All ER 749 (HL)]] Lord Morris said: (All ER p.761c)

‘There is always peril in treating the words of a speech or a judgment as though they were words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case.’

21. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper.

22. The following words of Hidayatuallah, J. in the matter of applying precedents have become locus classlcus: (Abdul Kayoom V. CIT [AIR 1962 SC 680], AIR p. 688, para 19)

’10. .. Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect. In deciding such cases, one should avoid the temptation to decide cases (As said by Cardozo) by matching the colour of one case against the colour of another. To decide, therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive.’

‘Precedent should be followed only so far as it marks the path of justice, but you must cut the dead wood and trim off the side branches else you will find yourself lost in thickets and branches. My plea is to keep the path to justice clear of obstructions which could impede it.’”

In the light of the law laid down by the Apex Court, as extracted hereinabove, it is necessary to consider the facts obtaining in each of the cases, vis--vis, the provision of the Act, contentions of the learned counsel for the petitioner, keeping in mind the rights of both the borrower and the auction purchaser.

16. The first judgment relied on is in the case of Mathew Varghese Vs. M. Amritha Kumar and Others-(2014) 5 SCC 610, wherein the Hon’ble Supreme Court at paragraphs 55, 62, 65 and 68, has held thus:

55. 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 impediment for the secured creditor, namely, the fourth respondent Bank to resort to sale under the provisions of the SARFAESI Act, as held by us in the earlier paragraphs, there should have been a fresh notice issued in accordance with Rules 8(6) and 9(1) of the 2002 Rules. Unfortunately, the fourth 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 and also directed to deposit the balance amount within 15 days, which was deposited by the appellant on 11.1.2008. In fact, after the deposit of the 25% of the amount on 28.12.2007, the fourth respondent Bank is stated to have confirmed the sale in favour of the appellant on 31.12.2007. After the deposit of the balance amount on 11.1.2008 by communication dated 2.2.2008, the fourth respondent Bank informed the first and second 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 fourth respondent 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 fourth respondent Bank in effecting the sale on 28.12.2007 and the ultimate confirmation of the sale on 11.1.2018, 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 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, we are convinced that the judgment of the Division Bench dated 8.3.2010, passed in M. Amritha Kumar V. Union of India [Writ Appeal No. 1555 of 2009, decided on 8-3-2010 (Ker)], was perfectly justified and we do not find any infirmity with the same.

62. Before adverting to the details of the order dated 18.06.2010 passed in IA No. 437 of 2010, at the very cutset it will have to be stated that having regard to the specific direction contained in sub-paras (i) and (ii) of Para 5 of the judgment dated 8.3.2010 in M. Amritha Kumar V. Union of India [Writ Appeal No. 1555 of 2009, decided on 8.3.2010 (Ker)], by 8.5.2010, 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 Court. In fact, since the application for extension, namely, IA No. 437 of 2010 came to be filed only on 10.6.2010, it should be held that there was no right in Respondents 1 and 2 or for the eighth respondent herein to seek for any further indulgence before the Division Bench for further extension of time. It is relevant to note that the two months period expired on 8.5.2010. 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 eighth respondent herein to seek for any relief for claiming any right in favour of the eighth respondent, much less for cancellation of the sale already effected in favour of the appellant herein.

65. In the light of our conclusion that the judgment passed in M. Amritha Kumar V. Union of India [Writ Appeal No. 1555 of 2009, decided on 8.3.2010 (Ker)] dated 8.3.2010, was a self-contained one and due to the failure of the first and second 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 8.6.2010, the sale effected in favour of 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 8.3.2010 [Writ Appeal No. 1555 of 2009, decided on 8-3-2010 (Ker)], which worked itself out on 8-5-2010, is to be reversed for the flimsy grounds raised by the first and second 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.

68. At the risk of repetition it will have to be stated that the ownership right which got crystallised in favour of the appellant as on 9-5-2010, could not have been snatched away by the Division Bench by passing the present impugned orders dated 18-06-2010 and 8-7-2010. Whatever is stated by us with reference to the right of ownership of the first and second respondents with reliance upon Article 300-A 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 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 first and second respondents, along with the eighth respondent herein are not justified.
Therefore, while upholding the judgment of the Division Bench dated 8-3-2010 passed in M. Amritha Kumar V. Union of India [Writ appeal No. 1555 of 2009, decided on 8-3-2010 (Ker)], for the reasons stated herein, the orders dated 18-06-2010 and 8-7-2010 passed in IAS Nos. 437 and 507 of 2010 are set aside.”

Referring to the aforementioned paragraphs, the learned Counsel for the petitioner would contend that the extension of time that was granted by the DRT was unsustainable and the DRT could not have exercise its discretion to extend time for the final payment to the borrower.

17. It is to be noticed that the law that is laid down by the Hon’ble Supreme Court on the facts obtaining in the each of the cases.

The facts in Mathew Verghese’s case (Supra) were that the first and the second respondents therein were the guaranto’s in respect of a credit facility, granted by the bank, the fourth respondent therein, in favour of a company-JM. The guarantors had created an equitable mortgage in favour of the said bank, by depositing the title deeds pertaining to several items of properties. When the transaction became a non performing asset, (NPA, as it it popularly called by the bankers), the fourth respondent bank is said to have filed an application (OA 31/2002) for recovery of the money with interest thereon. It is said to have also issued a notice under Section 13(2) of the SARFAESI Act on 11.8.2006. On 20.2.2007, the bank is said to have taken possession of the mortgaged properties, invoking Section 13(4) of the said Act, read along with Rules 8 and 9 of the SIE Rules. The guarantors are said to have filed a securitisation application (SA 20/2007) before the DRT, challenging the possession notice and sought an order of restraint against the bank from evicting them. On 14.08.2007, the bank had issued a notice to the guarantors and others, of their intention to sell the property. The sale notice having been published in daily newspaper, the appellant and another are said to have submitted their tenders. It is thereafter that the guarantors had filed a writ petition before the High Court challenging the proceedings initiated under the SARFAESI Act. The petition is said to have been disposed of with a direction to the DRT to hear the application of the guarantors as well as that of the bank, referred to above. The Court also granted liberty to the parties to arrive at a settlement on certain conditions that were imposed. The proposed sale was directed to be deferred by six weeks. The settlement had not come about even after expiry of six weeks from the date of Order, passed by the High Court. It transpires that the application of the guarantors was dismissed by the DRT. The very next day, the bank is said to have accepted the tender of the appellant. In terms of the bid, the appellant is said to have deposited 25% of the bid amount and he was required to deposit the balance amount within 15 days. The sale is said to have been confirmed on 31.12.2007. The appellant is said to have deposited the entire sale price thereafter. The guarantors were then said to have been informed by the bank of the confirmation of sale in favour of the appellant. The guarantors had filed a Review petition before the High Court in the writ petition filed earlier. The said Review petition was said to have been summarily dismissed. the guarantors then were said to have filed another writ petition challenging the vires of the 2002 Rules, on the ground that it violated their right of redemption of denying them adequate opportunity and time to repay the borrowed sum and the action of the bank is having sold the property mortgaged, surreptitiously, without informing them. That petition was also said to have been dismissed as it was held that the guarantors had an alternative remedy. The bank then transferred the property in favour of the appellant under a duly registered certificate of sale. In an appeal filed before a Division Bench, against the order of the learned Single Judge, the appeal was allowed, holding that the sale was not conducted in fair and proper manner, that when the sale was initially postponed by six weeks, the Bank ought to have re-notified the sale of at least extended the time for receiving further tenders. And that the guarantors were also informed belatedly of the confirmation of sale. The sale was set aside on the condition that the guarantors deposit Rs.2 crore in favour of the appellant, within a period of two months. There was also a direction to the Sub-Registrar to restore the title in favour of the guarantors. The guarantors did not deposit the amount as required. They had sought further extension of time which was granted by the Division Bench. And ultimately at the instance of the guarantors, on the money being deposited, the sale was directed to be made in favour of one Koshi Phillip. It is in the above background that the appellant was before the Apex Court. After a detailed reference to the relevant provision of law, the Apex Court based upon the facts of the case as narrated hereinabove was pleased to hold, at paragraphs 27 to 35, which reads as follows:

“27. Under Section 13(1), it is provided that nay 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 nonobstante clause in the opening set of expression 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 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 enforcement should be in accordance with the provision 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 approaching the Tribunal, such enforcement should be in conformity with the other provisions of the SARFAESI Act.

28. Keeping the said stipulation contained in Section 13(1) in mind, it will have to be examined as to what are the other statutory requirement to be fulfilled when enforcement of a right created in favour of any 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 present we leave aside any other form or mode of enforcement, except the one relating to the equitable mortgage created in favour of the Bank. For that purpose, we find that sub-section (8) of Section 13 would be relevant.

29. A careful reading of sub-section (8), therefore, has to be made to appreciate the legal issue involved and the submissions made by the respective counsel on the said provision.

29. 1 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 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 soid 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 creditor asset. The contingency stipulated in the event of the tender being made by a debtor of the dues inclusive of the costs, charges, etc., would be that such sale or transfer, the secured creditor should step all further steps for effecting the sale or transfer. That apart, no further step should also be taken for transfer or sale.

29.2 When we analyse 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 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 SARFASI 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 300 A of the Constitution, which mandates that no persons shall be deprived of his property save by authority of law.

29.3. 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 property entrusted with the secured creditor for sale to realize money advanced without approaching any Court of 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 SARFAESI Act.’

It was further elucidated that the effect of the procedure prescribed under the SIE Rules and the significance of the same being complied with to the letter, thus:

“31. Once the said legal position is ascertained, the 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 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 (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 effecting any sale of immovable secured asset is a statutory mandate. It is also stipulated that no sale should be effected before the expiry of 30 days from the date on which the public notice of sale is published in the newspaper. Therefore, the requirement under Rule 8(6) and Rule 9(1) contemplates a clear 30 days individual notice to the borrower in the 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) 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.

32. 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 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 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 considers material for a purchaser to know in order to judge the nature and value of the property.

33. Such a detailed procedure while resorting to a sale of an immovable secured asset prescribed under Rules 8 and 9(1). In our considered opinion, it has got a twin objective to be achieved:

33. 1 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 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.

33.2 Secondly, when such a secured assets of an immovable property is 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 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 the bidders later on to express ignorance about the factors connected with the asset in question.

33.3 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 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.

34. At this juncture, it will also be worthwhile to refer to Rules 8(1) to (3) and in particular sub-rule (3), in order to note the responsibility of the secured creditor vis--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 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 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 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 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 right 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 enable the secured creditor to take possession of such an 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.

35. 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 creditor assets, movable or immovable 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 a 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 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 above said Rules mentioned by us.”

Thus, the facts in the case on hand and the facts in Mathew Vergthese’s case (Supra), are entirely different and not applicable to the facts on hand.

18. The second judgment that is relied on by the petitioner is in the case of Sadashiv Prasad Singh vs. Harendar Singh and Others –(2015) 5 SCC 574. He would seek to place reliance on paragraphs 17 and 22, as follows:

17. The learned counsel for the auction-purchaser Sadashiv Prasad Singh, in the first instance vehemently contended, that in terms of the law declared by this Court, property purchased by a third party auction-purchaser, in compliance with a court order, cannot be interfered with on the basis of the success or failure of parties to a proceeding, if the auction-purchaser had bona fide purchased the property. In order to substantiate his aforesaid contention, the learned counsel representing Sadashiv Prasad Singh placed emphatic reliance, firstly, on a judgment rendered by this Court in Ashwin S. Mehta V. Custodian [Ashwin S. Mehta V. Custodian, (2006) 2 SCC 385]. Our attention was drawn to the following observations recorded therein; (SCC p.407, para 70)

“70. In that view of the matter, evidently, creation of any third-party interest is no longer in dispute nor the same is subject to any order to this Court. In any event, ordinarily, a bona fide purchaser for value in an auction-sale is treated differently than a decree-holder purchasing such properties. In the former event, even if such a decree is set aside, the interest of the bone fide purchaser in an auction-sale is saved. (See Nawab Zain-ul-Abdin Khan V. Mohd. Asghar Ali Khan [(1887-88) 15 IA 12]). The said decision has been affirmed by this Court in Gurjoginder Singh Vs. Jaswant Kaur [(1994) 2 SCC 368].”

22. Since it was nobody’s case that Sadashiv Prasad Sinha, the highest bidder at the auction conducted on 28-8-2008, had purchased the property in question at a price lesser than the then prevailing market price, there was no justification whatsoever to set aside the auction-purchase made by him on account of escalation of prices thereafter. The High Court in ignoring the vested right of the appellant in the property in question, after his auction bid was accepted and confirmed, subjected him to grave injustice by depriving him to property which he had genuinely and legitimately purchased at a public auction. In our considered view, not only did the Division Bench of the High Court in the matter ignore the sound, legal and clear principles laid down by this Court in respect of a third-party auction-purchaser, the High Court also clearly overlooked the equitable rights vested in the auction-purchaser during the pendency of a lis. The High Court also clearly overlooked the equitable rights vested in the auction-purchaser while disposing of the matter.

19. Before considering the contention of the petitioner with reference to the afore-extracted paragraphs, it is necessary to consider the facts of Sadashiv Prasad Singh’s case (Supra) which were that, a partnership firm consisting of three partners had mortgaged certain properties to a bank to secure a loan. There was default in repayment and hence the bank had filed an application before the Debts Recovery Tribunal for recovery. The application was allowed.

A direction was issued for recovery. The bank had initiated recovery proceedings on 28.11.2000. During the pendency of the recovery proceedings, one of the partners had died. Just prior to his death a property belonging to him, which was mortgaged, was said to have been attached by the recovery officer. The deceased partner’s brother filed on objection petition before the recovery officer, to the effect that the attached property did not belong to the judgment debtors and that it had been purchased by him from his deceased brother under an unregistered agreement of sale. That objection was pursued for some time and abandoned. The recovery proceedings were kept pending for a further period of two years. Eventually, there was an order for sale of the property. At the auction, the appellant before the Apex Court was the highest bidder. Accordingly, the sale was ordered in favour of the appellant. And physical possession was also delivered. Mutation proceedings having been initiated by the purchaser, the mutation entries were also effected in favour of the purchaser-appellant. It was thereafter that the brother of the deceased partner, filed a petition before the High Court assailing the auction sale. That petition having been dismissed, by a learned single judge, an appeal was said to have been preferred on the principal contention that the original loan was Rs.14.70 lakh, the bank had sought to recover Rs.75.75 lakh. The property was sold for Rs.13.20 lakh. And that the appellant was ready to pay Rs.39 lakh before the court. It transpired that the Bank agreed to receive Rs.45 lakh, if Rs.15 lakh was paid immediately and Rs.30 lakh over a period of two years. However, there was no settlement. Eventually, the appellate bench held that the Recovery Officer had failed to comply with Rule 11, sub-rule (2) of the Second Schedule to the Income Tax Act, 1961, which is made applicable to proceedings before the Recovery Officer, and set aside the proceedings, including the sale of the property. The Apex Court held that in the absence of fraud or collusion, the High Court could not have interfered with the auction sale. It was held that the High Court could not have, in order to work out equities between the parties, proceeded to set aside the auction sale. The agreement of sale set up by the brother of the deceased to file objections before the Recovery Officer was held to be a sham document. Secondly, the Recovery Officer had not committed any fault in permitting the sale, as the objections filed before him were abandoned by the applicant. Further, there was a remedy of appeal under Section 30 of the RDDB Act.

Based on the facts as narrated above, the Apex Court at paragraphs 23.5 and 23.6 concluded as follows:

“23.5. All these facts cumulatively lead to the conclusion that after 26.10.2005, Harender Singh had lost all interest in the property in question and had therefore, remained a slient spectator to various orders which came to be passed from time to time. He had, therefore, no equitable right in his favour to assail the auction-purchase made by Sadashiv Prasad Sinha on 28.8.2008.

23.6. Finally, the publish auction under reference was held on 28.8.2008. Thereafter the same was confirmed on 22.09.2008. Possession of the property was handed over to the auction-purchaser Sadashiv Prasad Sinha on 11.3.2009. The auction-purchaser initiated mutation proceedings in respect of the property in question. Harender Singh did not raise any objections in the said mutation proceedings. The said mutation proceedings were also finalized in favour of Sadashiv Prasad Sinha. Harender Singh approached the High Court through CWJC No.16485 of 2009 only on 27.11.2009. We are of the view that the challenged raised by Harender Singh ought to have been rejected on the grounds of delay and latches, especially because third party rights had emerged in the meantime. More so, because the auction purchaser was a bona fide purchaser for consideration, having purchased the property in furtherance of a duly publicized public auction, interference by the High Court even on ground of equity was clearly uncalled for.”

Thus, the case of Sadashiv Prasad Singh (Supra) is also distinguishable with the facts of the case on hand and the law laid down therein is not applicable to the instant case.

20. The third judgement that is relied on is in the case of Standard Chartered Bank Vs. DharminderBhohi and Others –(2013) 15 SCC 341 to contend that the powers of the DRT to grant power of liberty were not inherent and the DRT had no power or liberty to decide a dispute in the manner contrary to law as it is not a Constitutional Court. The learned Counsel would seek to place reliance on paragraphs 32 and 34, which read thus:

32. At this juncture, we may clarify that we do not intend to dwell upon the subtle distinction between the compensation and damages as canvassed at the Bar as that is not needed in this case. The thrust of the matter is whether DRAT has the jurisdiction to grant any liberty and, more so, in a case when the borrower and the auction-purchaser have entered into a compromise. As has been stated earlier, the Bank was not a party to the compromise.

34. In this context, we may refer to a three-Judge Bench decision in Upper Doab Sugar Mills Ltd. V. Shahdara (Delhi) Saharanpur Light Railway Co. Ltd. [AIR 1963 SC 217] wherein it has been held that when the tribunal has not been conferred with the tribunal has not been conferred with the jurisdiction to direct for refund, it cannot do so. The said principle has been followed in Union of India V. Orient Paper and Industries Ltd. [(2009) 16 SCC 286]”.

The afore-extracted judgment would be distinguishable with the facts in the present case. The Hon’ble Supreme Court was considering the jurisdiction of the DRT to direct refund to the amount which would amount to abuse of the process. In that context, it was observed that the DRT did not have any inherent powers to give such directions in the garb of securing the ends of justice. The situation in the case on hand is not one of the kind. The DRT was well within its power to grant extension of time to the borrower to make good the entire amount in default. Thus, the afore-extracted judgment also is of no aid to the petitioner.

21. The fourth judgment that is relied upon by the learned Counsel for the petitioner is VedicaProcon Private Ltd. Vs. Balleshwar Greens Private Ltd and others-AIR 2015 SC 2013, he has placed reliance on paragraphs 31, 34 and 50, which are as follows:

31. In the alternative, it is submitted on behalf of the appellant that in the absence of any plea and proof that sale was vitiated by fraud, the inadequacy of consideration especially when none of the stakeholders in the company liquidation raised such an objection on 17.12.2013 can never be a ground for recalling an order of accepting the highest bid at the instance of an unsuccessful bidder on a subsequent date on the ground that on a subsequent date such unsuccessful bidder is willing to offer higher price. Approving such course of action would denude the proceedings of a court of law and the sales undertaken in the course of judicial proceedings, of all element of certainty and finality. Such uncertainty would be a disincentive for genuine prospective purchasers. It adversely affects the possibility of attracting best offers in court sales and would be detrimental to the public interest.

34. In support of the submission that a concluded sale in an auction by the Court cannot be reopened except on the ground of fraud, learned counsel for the appellant relied upon a judgment of this Court reported in ValjiKhimji& Company V. Official Liquidator of Hindustan Nitro Product (Gujarat) Limited & Others, (2008) 9 SCC 299. It was a case where the properties of a company in liquidation were put to sale in an auction. In the said auction, the highest bid was Rs.3.51 crores which was accepted by the Court and the sale was confirmed. The court directed the auction purchaser to pay the consideration in certain instalments. Some two and a half months later, a third party sent a letter to the official liquidator offering a higher amount of Rs.3.75 crores. Almost a year later, another party offered an amount of Rs.5 crores. Subsequently, both the parties approached the Company Judge seeking a recall of the order of confirmation of the sale. Such application was allowed by the Company Court. The auction purchaser unsuccessfully carried the matter in an intra court appeal and finally landed up in this Court. This Court allowed the appeal upholding the order confirming the sale. This Court held:

“11. It may be noted that the auction-sale was done after adequate publicity in well-known newspapers. Hence, if anyone wanted to make a bid in the auction he should have participated in the said auction and made his bid. Moreover, even after the auction the sale was confirmed by the High Court only on 30.7.2003, and any objection to the sale could have been filed prior to that date. However, in our opinion, entertaining objections after the sale is confirmed should not ordinarily be allowed, except on very limited grounds like fraud, otherwise no auction-sale will ever be complete.”

50. The first respondent submitted that the order dated 17.12.2013 only accepted the highest bid but it did not confirm the sale and, therefore, the Court is at liberty to decline confirmation of the sale in view of the subsequent development. In our opinion, the said submission is to be rejected because there is no specific format in which a sale conducted by the official liquidator is to be confirmed by the Company Court. The mere absence of the expression “that the sale is confirmed” in the order dated 17.12.2013 is not determinative of the question. The totality of the circumstances, such as, the very tenor of the order (Footnote 1 supra) that none of the stake-holders of the Company in liquidation ever objected to the offer of the appellant herein on the ground that it is inadequate consideration for the property; the fact that the official liquidator himself understood the order dated 17.12.2013 to be an order not only accepting the highest bid of the appellant herein but also as an order confirming the sale in favour of the appellant, as evidenced by his letter dated 19.12.2013, (the relevant portion of which is already extracted earlier) and the fact that the first instalment of the payment of 25% of the sale consideration was accepted both by the official liquidator and the Company Court without raising any objection for the same and the fact that the first respondent withdrew its earnest money deposit without raising any objection regarding adequacy of the price offered by the appellant herein, in our view, clearly indicate that the sale in favour of the appellant was confirmed by the order dated 17.12.2013. Assuming for the sake of argument that there is no confirmation, in the absence of any legally tenable ground for not confirming the sale, it cannot be declined to the appellant as it was observed in Navalkha case (supra) that “..no subsequent higher offer can constitute a valid ground for refusing confirmation of the sale or offer already made”

22. It is here again necessary to notice the facts of the case in the afore-extracted judgment and the facts were that, a company, O, was said to have been ordered to be wound up by the company judge of the High Court, by an order dated 6.3.1990. The Official liquidator was said to have been appointed as the liquidator of the Company. By an order dated 26.3.2013, the official liquidator was directed to put the freehold land of the company to auction for sale by inviting tenders. An upset price of Rs.55 crore and earnest money deposit of 10% was said to have been fixed. It appears several offers were received and after inter-se bidding, the appellant, before the Apex court, was said to be the highest bidder, with an offer of 148 crore. Whereas the first respondent, was said to be the second highest bidder. The High Court is said to have accepted the highest bid. The Official Liquidator (OL) is said to have confirmed the sale by a letter dated 19.12.2013. The appellant was called upon to deposit the sale amount in two instalments comprising of 25% and 75% by 16.2.2014 and 16.4.2014, respectively. The same was said to have been complied with. The OL had then called upon the appellant to take possession of the property by a letter dated 16.4.2014. Though the appellant had deposited the entire amount on 16.4.2014, it transpires that it had made an application prior to the said date seeking extension of time to deposit the 75% of the amount. The High Court is said to have granted time to deposit the same by 31.7.2014. However, the amount had been deposited earlier as stated above, without availing of the extension granted. The first respondent is said to have challenged the order of the company judge granting extension, in an appeal. The first respondent is said to have expressed its willingness to raise its offer to Rs.160 crore, in the appeal. On 17.4.2014, possession of the property is said to have been delivered to the appellant.

The Division Bench permitted the first respondent to move the company judge, seeking permission to apply afresh for the bid. The parties were directed to maintain status quo till such time. The said order was passed on 17.4.2014. The Single Judge is said to have recalled his earlier order directing sale and directed refund of the amount paid by the appellant and ordered a fresh auction to be held. The appellant having challenged the said order before a division bench, the same is said to have been dismissed.

The Apex Court held that the High Court was not justified in recalling the order dated 17.12.2013. The highest bid of the appellant was accepted by the Company Court and all the stake holders of the company in liquidation were heard before such an acceptance. None objected to it, including the first respondent, at that stage on any ground whatsoever, such as, that there was any fraud or irregularity in the sale nor was there any objection from any one of them that the price offered by the appellant was inadequate. The appeals were dismissed.

The petitioner cannot place reliance on the afore-extracted judgments on a plain reading of the facts in those judgments. All of them are distinguishable on the facts obtaining in each case.

23. The learned Counsel has further placed reliance on the judgement in case of Valjikhimji and Company Vs. Official Liquidator of Hindustan and Nitro Product (Gujarat) Limited and others-(2008) 9 SCC 299, wherein the relevant paragraphs 30 and 31, read as follows:

30. In the first case mentioned above i.e. where the auction is not subject to confirmation by any authority, the auction is complete on the fall of the hammer, and certain rights accrue in favour of the auction-purchaser. However, where the auction is subject to subsequent confirmation by some authority (under a statute or terms of the auction) the auction is not complete and no rights accrue until the sale is confirmed by the said authority. Once, however, the sale is confirmed by that authority, certain rights accrue in favour of the auction-purchaser, and these rights cannot be extinguished except in exceptional cases such as fraud.

31. In the present case, the auction having been confirmed on 30-7-2003 by the Court it cannot be set aside unless some fraud or collusion has been proved. We are satisfied that no fraud or collusion has been established by anyone in this case.

24. The facts of the case before the Hon’ble Supreme Court are again distinguishable on the facts of the case on hand. In the facts of auction before the Hon’ble Supreme Court, there was no necessity of confirmation by any Authority, the auction was complete on the fall of the hammer. In the instant case, the confirmation of sale itself was stayed by the DRT. Thus, there could have been no confirmation of sale in favour of the auction purchaser. Ultimately, what was challenged in the writ petition by the auction purchaser was an order of extension granted by the DRT to the borrower to make good the entire payment in default. The aforementioned judgment is also not applicable to the facts of this case.

25. One factor that would emerge from the law declared by the Hon’ble Supreme Court in the afore-extracted cases is that while assessing the rights of the borrower, the totality of the circumstances should be taken into consideration as the provisions of the Act or, as it stood at the relevant point of time, leaned in favour of protection of the borrower. On the principle of the totality of circumstances, the right of the auction purchaser vis--vis the right of the borrower will have to

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be analysed. In terms of the facts narrated hereinabove and the law declared by the Hon’ble Supreme Court and analysis of the same, it becomes unmistakably clear that unless the certificate of sale was issued in favour of the petitioner or the sale had been registered in favour of the auction purchaser, the right to the auction purchaser is always inchoate. If that happens, the Tribunal will have no power, once the sale is registered and the certificate of sale is issued in favour of the petitioner-auction purchaser. 26. The learned Counsel for the petitioner has filed a memo placing on record the communications between the petitioner and the bank with regard to acknowledgement of deposit of the entire amount. On this ground, he contends that since he is the highest bidder and he has performed his part of the duty by making good the entire bid amount, it would be a deemed confirmation of sale in his favour. He relies on the judgment of the Madhya Pradesh High Court in case of M/S. Gaurav Enterprises, Gwalior Vs. State reported in AIR 2012 MP 35 and to the following paragraphs 12, 13 and 15, which read thus: “12. This issue came up for consideration before a Division Bench of Madras High Court in a case reported in AIR 2008 MADRAS 108, K. ChidambaraManickam V. Shakeena. The Madras High Court framed a question which reads as under:- “(i) Whether the sale of the secured asset in public auction as per section 13(4) of SARFAESI Act, which ended in issuance of a sale certificate as per Rule 9(7) of the Security Interest (Enforcement) Rules, 2002 (in short “the Rules”) is a complete and absolute sale for the purpose of SARFAESI Act or whether the sale would become final only on the registration of the sale certificate?” This question is answered by Madras High Court as under:- “In our considered view, the borrowers should have approached the secured creditor or the authorised officer before the date fixed for sale and not after the sale, as provided under sub-section (8) of section 13 of the sARFAESI Act. As discussed earlier, only if the borrowers approach the secured creditor or the authorised officer before the date fixed for sale or transfer and tender or pay all the dues to the secured creditor, the section creates a bar on the secured creditor or authorised officer to proceed further with the proposed sale or transfer. In this case, admittedly, the date fixed for the sale was 19-12-2005. But, even according to the version of the borrowers, they approached the secured creditor only on 2-1-2006. In such circumstances, the contention learned Counsel for the borrowers is without any basis and contrary to the provisions contained in sub-section (8) of section 13 of the Act.” 13. In the present case also, the stand of respondents is that mere issuance of sale certificate will not bestow any right in favour of the auction-purchaser and unless actual sale deed is executed, there is no “sale” in the eyes of law and power of redemption can be exercised by the bank. In the opinion of this Court, this argument is liable to be rejected. The language of section 13(8) of SARFAESI Act is very clear which contains the words “before the date fixed for sale or transfer”. The intention of the Legislature appears to be the date fixed for sale and not the actual sale. The Statute is accordingly designed and worded. Thus before date fixed for sale, the borrower could have exercised the same and section 13(8) permits the bank to do the same. In other words Section 13(8) even prohibits the bank to transfer or sell the secure assets before the date fixed for sale and gives an opportunity to the borrower to repay all dues, costs, charges and expenses incurred by the bank. However, once sale certificate is issued, the bank cannot invoke section 13(8) of SARFAESI Act and section 60 of T.P. Act has no application. Accordingly, the judgment cited by Shri Raju Sharma in L.K. Trust (supra) has no application in the fact situation of this case. 15. Sub-Rules (4), 96) and (7) of Rule 9 of 2002 Rules are of no assistance to the respondents. Reading these rules with section 13(8) of the SARFAESI Act shows that the intention of law-makers is that till the date fixed for sale and not after the sale if borrower tenders all dues to the secured creditor, the section prohibits the secured creditor or authorised officer to proceed further with proposed sale or transfer. In this case, admittedly, the date fixed for sale was 26.7.2011. This is also admitted position between the parties that no payment was made before 6.8.2011. Accordingly, the action of the bank cannot be said to be in consonance with Section 13(8) of the SARFAESI Act. After the date of sale aforesaid, it was not open for the bank to accept the amount from the borrower and return the amount to the auction-purchaser. This action runs contrary to the scheme of the SARFAESI Act and the Rules made thereunder. I also find force in the argument of learned counsel for the petitioner that the settlement arrived at between the borrower and the bank will not bind the present petitioner, who was not a party in the said settlement. Thus, examining it from any angle, either as per section 13(8) of SARFAESI Act or from the angle of implementation of the settlement, the action of the bank cannot be upheld.” Relying on the afore-extracted paragraphs, it is contended that the auction purchaser, who is not a party for the settlement between the Bank and borrower, and since he is declared to be the highest bidder, the Bank cannot give an opportunity to the borrower to repay all his dues. Once the sale certificate was issued, the Bank cannot invoke Section 13(8) of the Act and grant further time to the borrower. The aforementioned judgment is also not applicable to the facts on hand as the law declared therein is that once the sale certificate was issued, the Bank or the Tribunal, cannot extend time or give an opportunity to the borrower in exercise of powers under Section 13(8) of the Act. 27. On a perusal of the memo, it is clear that it is only a communication and acknowledgement of payment of the entire amount and not the certificate of sale. All that the Bank had issued in favour of the petitioner-auction purchaser was a communication with regard to the auction purchase amount being made good. At no point of time, the Bank had issued a sale certificate favouring the petitioner. It was not the Bank that had extender time and gave an opportunity to the borrower, but it was DRT, in terms of Section 13(8) of the Act which extended time. Hence, the judgment, relied on in the case abovementioned, is wholly inapplicable to the facts of the case on hand. 28. All the judgments relied and considered above, would lead to the principle that if the sale certificate is issued or registration of the sale is made in favour of auction purchaser, the Bank or the DRT cannot extend the time or give an opportunity to the borrower to make good the dues. That is not the fact situation in the present case. Thus, the right of the auction purchaser had not crystallized to the extent that it would over the power the right of the borrower in terms of provisions of law and its interpretation by the Hon’ble Supreme Court and other High Courts. The right of the auction purchaser is always a nebulous right in comparison to that of the borrower. 29. In the light of the provisions of the Act and the law and down by the Hon’ble Supreme Court and the other High Courts, it is not possible to accept the contentions advanced by the petitioner that his rights were crystallised on the date of the public auction and on payment of the entire money and that the DRT had no power to extend the time. In our considered view and in terms of unamended Section 13 of the Act, the right of the borrower to make good the total due was available till the issuance of a sale certificate in favour of the petitioner-auction purchaser and the DRT was well within its power to extend time and give an opportunity to the borrower to clear the dues. This is the unequivocal tenor of the law as laid down by the Hon’ble Supreme Court interpreting the provisions of the Statute. 30. The learned Single Judge having analysed all the facts and considered the provision of the Act and the relevant law, has rightly passed the impugned order. The contentions of the prates are well considered. We do not find any ground to interfere with the well-considered order of the learned Single Judge which is based on the law declared by the Hon’ble Supreme Court of India. 31. For the aforesaid reasons, the writ appeal being devoid of merit, is dismissed. There shall be no order as to costs.
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