MATHEW VARGHESE v. M. AMRITHA KUMAR & ORS.

49Copy pinpoint49. We, therefore, hold that unless and until a clear 30 days notice is given to the borrower, no sale or transfer can be D resorted to by a SECURED CREDITOR. In the event of any such sale properly notified after giving 30 days clear notice to the borrower did not take place as scheduled for reasons which cannot be solely attributable to the borrower, the SECURED CREDITOR cannot effect the sale or transfer of the SECURED E ASSET on any subsequent date by relying upon the notification issued earlier. In other words, once the sale does not take place pursuant to a notice issued under Rules 8 and 9, read along with Section 13(8) for which the entire blame cannot be thrown on the borrower, it is imperative that for effecting the sale, the procedure prescribed above will have to be followed afresh, as the notice issued earlier would lapse. In that respect, the only other provision to be noted is sub-rule (8) of Rule 8 as per which sale by any method other than public auction or public tender can be on such terms as may be settled between the parties in writing. As far as sub-rule (8) is concerned, the parties referred to can only relate to the SECURED CREDITOR and the borrower. It is, therefore, imperative that for the sale to be effected under Section 13(8), the procedure prescribed under Rule 8 read along with 9(1) has to be necessarily followed, H

786 SUPREME COURT REPORTS [2014] 2 S.C.R.

A inasmuch as that is the prescription of the law for effecting the sale as has been explained in detail by us in the earlier paragraphs by referring to Sections 13(1 ), 13(8) and 37, read along with Section 29 and Rule 15. In our considered view any other construction will be doing violence to the provisions of the B SARFAESI Act, in particular Section 13(1) and (8) of the said Act.

50Copy pinpoint50. Having pronounced the legal position as above, when we refer to the facts of the present case, the initial sale was notified to take place on 25.09.2007. The paper publication was made on 23.08.2007. Therefore, applying Rule 9(1) read along with the proviso to sub-rule (6) of Rule 8, there can be no quarrel as to the procedure followed in effecting the publication for resorting to sale on 25.09.2007. When it comes to the question of the intimation to the borrower as required under sub-rule (6) of Rule 8, we find that admittedly Respondents 1 and 2 were informed by the 4th Respondent- Bank only on 30.08.2007. Therefore, as the sale date was 25.09.2007 it did not fulfill the mandatory requirement of 30 clear days notice to the borrower as stipulated under sub-rule (6) of E Rule 8. In fact, on this score itself it can be held that if the sale had been effected on 25.09.2007, it would not have been in accordance with Section 13(8) of the SARFAESI Act, read along with Rules 8 and 9(1). But at the intervention of the Court, namely, the orders passed in Writ Petition 27182 of 2007 dated F 20.09.2007, the sale date fixed on 25.09.2007 was adjourned by six weeks. In any case, the sale was not effected even after the six weeks period expired as directed in the said Order dated 20.09.2007. The Securitisation Application No.20 of 2007, came to be disposed of by the ORT only on 27.12.2007. G

51Copy pinpoint51. Therefore, once the Securitisation Application of the borrowers, namely, Respondents 1 and 2 was dismissed on 27.12.2007, even assuming that there was no impedimer.it for the SECURED CREDITOR, namely, the 4th Respondent-Bank to resort to sale under the provisions of the SARFAESI Act, as H

MATHEW VARGHESE v. M. AMRITHA KUMAR & 787 ORS. [FAKKIR MOHAMED IBRAHIM KALIF.ULLA, J.] held by us in the earlier paragraphs, there should have been a A fresh notice issued in accordance with Rules 8(6) and 9(1) of the Rules, 2002. Unfortunately, the 4th Respondent-Bank stated to have effected the sale on 28.12.2007 by accepting the tender of the Appellant and by way of further process, directed the Appellant to deposit the 25% of the amount on that very day B and also directed to deposit the balance amount within 15 days, which was deposited by the Appellant on 11.01.2008. In fact, after the deposit of the 25% of the amount on 28.12.2007, the 4th Respondent-Bank stated to have confirmed the sale in favour of the Appellant on 31.12.2007. After the deposit of the c balance amount on 11.01.2008 by coml'.Tlunication dated 02.02.2008, the 4th Respondent-Bank informed the 1st and 2nd Respondents about the confirmation of sale and thereby, provided no scope for Respondents 1 and 2 to tender the dues of the SECURED CREDITOR, namely, the 4th Respondent- D Bank with all charges, expenses etc., as has been provided under Section 13(8) of the SARFAESI Act. Therefore, the whole procedure followed by the 4th Respondent-Bank in effecting the sale on 28.12.2007 and the ultimate confirmation of the sale on 11.01.2008, stood vitiated as the same was not in conformity with the provisions of the SARFAESI Act and the E Rules framed thereunder. Though, such a detailed consideration of the legal issues was not made by the Division Bench while setting aside the sale effected in favour of the Appellant, having regard to the construction of the provisions of the SARFAESI Act, the RDDB Act and the relevant Rules, F we are convinced that the Judgment of the Division Bench dated 08.03.2010, passed in Writ Appeal 1·555 of 2009, was perfectly justified and we do not find any infirmity with the same.

52Copy pinpoint52. We now take up for consideration the correctness of G the Order of the Division Bench dated 18.06.201 O in I.A. 437 of 2010 in Writ Appeal 1555 of 2009 and the order dated 08.07.2010 in l.A.507 of 2010 in Writ Appeal 1555 of 2009. Though we have held that the Judgment of the Division Bench in Writ Appeal 1555 of 2009 cannot be found fault with, when H

788 SUPREME COURT REPORTS [2014] 2 S.C.R.

A we examined the subsequent Orders dated 18.06.201 O and 08.07.2010 in l.A.437 of2010 and l.A.507 of 2010, we are of the view that in the peculiar facts of this case and the ultimate directions issued by the Division Bench in its marn Judgment of 08.03.2010 in Writ Appeal 1555 of 2009, the said Orders B could not have been validly issued.

53Copy pinpoint53. In the foremost, it will have to be noted that the Olvision Bench of the High Court while allowing the Writ Appeal in its order dated 08.03.2010, held as under:

c "(i} The sale by the Bank of the appellant's property in favour of the fifth respondent will stand set aside and the sale deed shall stand invalidated on condition that appellant gives a DD for Rs.2 crores from a local Branch of a Nationalised Bank in D favour of the fifth respondent and the same will be handed over to him within two months from now. If payment is not made as above, sale in favour of the fifth respondent will stand confirmed and Writ Appeal will stand dismissed. E (ii} If appellant makes payment as above, and sale gets cancelled by operation of judgment, then on giving DD the fifth respondent will hand over original sale deed obtained by him from the Bank to the appellant for the appellant to produce before the F Sub Registry and revenue authorities for cancellation of registration, mutation, if any effected, and for restoration of property in the records of the Sub Registry and revenue authorities in favour of the appellant. G (iii} The Bank will remit the excess amount available with them to the Tax Recovery Officer in pursuance to the demand to be credited in 'the account of the appellant, and it is for the appellant to claim refund, if eligible for him.

MATHEW VARGHESE v. M. AMRITHA KUMAR & 789 ORS. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.] (iv) We l@ave it open to the appellant to claim refund of stamp duty, if refund is eligible. However, we make it clear that in view of the above judgment, if there is eligibility for refund of stamp duty, the same, should be the appellant." B

54Copy pinpoint54. In the High Court, the Appellant herein was arrayed as the 5th Respondent. The Division Bench taking into account the amount remitted by the Appellant, namely, Rs.1,27,00, 101/- and the stamp duty and registration charges of Rs.23,00,000/- in all Rs.1,50,00, 101 /- directed Respondents 1 and 2 to pay a lump sum of Rs.2,00,00,000/- to the Appellant for cancelling the C sale. The amount of 2,00,00,000/- was arrived at taking into account the rate of interest at 18% per annum and the stamp duty and registration charges spent by the Appellant. However, the direction number (i) made it clear that while the sale in favour of the Appellant would stand set aside and invalidated on a D condition that Respondents 2 and 3 forwarded a Demand Draft of Rs.2,00,00,000/- from a local branchI of a Nationalised Bank in favour of the Appellant by handing it over to him within 2 months from the date of the Order, namely, 08.03.2010, made it tacitly clear that if the payment was not made as directed, E the sale in favour of the Appellant would stand confirmed and the writ appeal would stand dismissed. Therefore, subject to the compliance of the directions contained in sub-para (i) of paragraph 5, the cancellation of the sale in favour of the Appellant was ordered. Under sub-para (ii) of paragraph 5, F once the sale gets cancelled by virtue of the operation of the Judgment, namely, by handing over the Demand Draft in favour of the Appellant, the original sale deed obtained by the Appellant was directed to be produced before the Sub- Registrar and other Revenue Authorities for the cancellation of G registration/mutation etc. On such compliance of the said direction contained in sub-para (ii), the restoration of the property in the records of the sub-registry and revenue authorities were also directed to be effected in favour of Respondents 1 and 2. Under sub-para (iii) of paragraph 5, the H

790 SUPREME COURT REPORTS [2014] 2 S.C.R.

A 4th Respondent-Bank was directed to remit the excess amount available with it, i.e over and above the dues to the bank to the Tax Recovery Officer, in pursuance to their demand by crediting into the account of Respondents 1 and 2, with further liberty to Respondents 1 and 2 to claim for refund if they were eligible. B Lib~rty was also given to Respondents 1 and 2 to claim refund of stamp duty if eligible.

55Copy pinpoint55. The said period of two months stipulated in sub-para (i) of paragraph 5 expired by 08:05.2010. It was pointed out to us by Mr. Krishnan, learned Senior Counsel for the Appellant C that the very application seeking further six weeks time from 08.05.2010 for giving the Demand Draft of Rs.2,00,00,000/- to the Appellant as per the Judgment dated 08.03.2010, was filed only on 10.06.2010 and that the Division Bench thereafter passed the present Order dated 18.06.2010 in l.A.437, i.e. D more than a month after the expiry of the initial two months period, ·namely, 08.05.2010. Before adverting to the details of the Order dated 18.06.2010 passed in I.A. 437 pf 2010, at the very out:;et it will have to be stated that having regard to the specific direction contained in sub-para (i) and (ii) of para 5 of E the Judgment dated 08.03.2010 in Writ Appeal 1555 of 2009, by 08.05.2010, when Respondents 1 and 2 failed to hand over the Demand Draft of Rs.2,00,00,000/-, as directed by the Division Bench to the Appellant, the Writ Appeal stood dismissed without any further reference to anyone, even to the F Court. In fact, since the application for extension, namely, I.A. 437 of 2010 came to be filed only on 10.06.2010, it should be held that there was no right in Respondents 1 and 2 or for the 8th Respondent herein to seek for any further indulgence before the Division Bench for further extension of time. It is relevant to G note that the two months period expired on 08.05.2010. Thereafter, Respondents 1 and 2 took their own time to file the application for extension, namely, after more than 30 days, by which time the writ appeal stood dismissed and there was no right available with Respondents 1 and· 2 or with the 8th H Respondent herein to seek for any relief for claiming any right \

MATHEW VARGHESE v. M. AMRITHA KUMAR & 791 ORS. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.] in favour of the 8th Respondent, much less for cancellation of A the sale already effected in favour of the Appellant herein.

56Copy pinpoint56. When we refer to the said order dated 18.06.2010 to examine the reasons which weighed with the Division Bench, we find that the sum and substance of the grievance expressed 8 on behalf of Respondents 1 and 2 herein was that they had to raise funds by arranging for the sale of the very same SECURED ASSET, which took time as many buyers were reluctant to come forward because of the chance of continued litigation. By making reference to the stand of Respondents 1 C and 2, the Division Bench without anything more, accepted the said reason and by allowing the I.A. permitted the 8th Respondent herein to deposit 2,03,00,000/- by 19.06.2001 and on such deposit it held that the time granted for payment in terms of the Judgment dated 08.03.2010, stood extended till 20.06.2010. It further held that on such deposit being made, the sale made by the 4th Respondent-Bank in favour of the Appellant would be cancelled and the 4th Respondent should effect a sale in favour of the 8th Respondent herein. The other directions contained in sub-para (iv) of para 5 was maintained. In the subsequent l.A.507 of 2010 the Division Bench directed the 4th Respondent-Bank to execute the sale in favour of the 8th Respondent herein, taking note of the fact of deposit of Rs.2,03,00,000/- by the 8th Respondent with the 4th Respondent-Bank. F

57Copy pinpoint57. Be that as it may, after the Order dated 18.06.2010 and 08.07.2010, the Appellant filed the Special Leave Petition in this Court on 26.07.2010 and the Special Leave Petition came up for orders on 30.07.2010. While directing the Registry to list the SLP on the notified date, the parties were directed G to maintain status quo with regard. to the impugned order of the High Court dated 08.03.2010 till then. Thereafter, on 09.08.2010, service of notice on the Respondent was dispensed with since a caveat was entered on behalf of the 1st and 8th Respondents. While granting time for filing counter H

792 SUPREME COURT REPORTS [2014] 2 S.C.R.

A affidavit, as well as rejoinder, the Interim Order dated 30.07.2010, was directed to be continued. Vide Order dated 08.08.2013, while declining to vacate Status Quo Order dated 30.07.2010, the Special Leave Petition itself was directed to be listed for final hearing. Though the 8th Respondent is stated B to have deposited the sum of Rs.2,03,00,000/- with the 4th Respondent-Bank, as per the Order dated 18.06.201 O in IA No.437 of 2010, the other directions in the main Order dated 08.03.2010 in Writ Appeal No.1555 of 2009 and the subsequent directions contained in the Orders dated c 18.06.2010 and 08.07.2010, were not carried out. The sale which was already fixed in favour of the Appellant continued to remain in force and the sum of Rs.2,03,00,000/- deposited by the 8th Respondent remains with the 4th Respondent-Bank.

58Copy pinpoint58. In the light of our conclusion that the Judgment passed in Writ Appeal No.1555 of 2009 dated 08.03.2010, was a self contained one and due to the failure of the 1st and 2nd Respondents in not handing over the Demand Draft for Rs.2,00,00,000/- to the Appellant within the stipulated time limit, namely, on or before 08.06.2010, the sale effected in favour of the Appellant stood confirmed. Inasmuch as we have found there was absolutely no justifiable grounds for the Division Bench to grant further time in its Order dated 18.06.2010, we are of the view that it will be travesty of justice if the earlier Judgment dated 08.03.2010, which worked itself out on F 08.05.2010, is to be reversed for the flimsy grounds raised by the 1st and 2nd Respondents that they could not raise funds in spite of two months time granted to them for paying a sum of Rs.2,00,00,000/- in favour of the Appellant. We have also found that while the time granted by the Division Bench expired by G 08.05.2010, the application for extension was filed 40 days later, i.e. on 10.06.2010. Therefore, for such a recalcitrant attitude displayed by Respondents 1 and 2 in respect of a litigation which involved very high stakes, the Division Bench should not have come for their rescue in the absence of any weighty reasons. The reason adduced on behalf of Respondent

MATHEW VARGHESE v. M. AMRITHA KUMAR & 793 ORS. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.] 1 and· 2 is the standard reason which any party used to plead while seeking for extension of time. Since very valuable rights of the Appellant were at stakes and the Order of the Division Bench also remained in force, in so far as it related to the cancellation of the sale deed, which existed in favour of the Appellant till 08.05.2010 and by virtue of the non-compliance of the conditions imposed in the said Judgment dated 08.03.2010 by the 1st and 2nd Respondents the ownership rights of the Appellant got crystallized on and after 09.05.2010, we fail to find any justification at all for the Division Bench to interfere with the said right in such a casual manner by c accepting the flimsy reasons of the 1st and 2nd Respondents. At the risk of repetition it will have to be stated that the ownership right which got crystallized in favour of the Appellant as on 09.05.2010, could not have been snatched away by the Division Bench by passing the present impugned order dated D 18.06.2010 and 08.07 .2010. Whatever stated by us with reference to the right of ownership of the 1st and 2nd Respondents with reliance upon Article 300A of the Constitution / would equally apply to the Appellant as well in such a situation. Therefore, such a right which accrued in favour of the Appellant E ought not to have been interfered with by the Division Bench and the Orders passed in the interim application filed at the instance of the 1st and 2nd Respondents, along with the 8th Respondent herein are not justified°' Therefore, while upholding the Judgment of the Division Bench dated 08.03.2010 passed in Writ Appeal 1555 of 2009, for the reasons stated herein, the F Orders dated 18.06.2010 and 08.07.2010 passed in I.A. Nos.437 and 507 of 2010 are set aside.

59Copy pinpoint59. Though we have found good grounds in favour of the Appellant to set at naught the above Orders passed in I.A. G Nos.437 and 507 of 2010, we cannot also ignore one other very relevant factor, namely, that the value of the property which was knocked out in favour of the Appellant in a sum of Rs.1,27,00, 101/- by confirming the sale by the 4th Respondent- Bank on 31.12.2007 and 11.01.2008, the same was found to H

794 SUPREME COURT REPORTS [2014] 2 S.C.R.

A be not in accordance with the provisions of the SARFAESI Act. Since the proper procedure for effecting the sale was not followed, it will have to be held that the price fetched through the Appellant cannot be held to be the correct price for the mortgaged property involved in these proceedings. Further, the B very fact that in the year 2010 the property could fetch Rs.2,03,00,000/-, we are of the view that in all fairness even while confirming the Order of the Division Bench, by which the sale in favour of the Appellant came to be confirmed, the difference in the sale price should be directed to be paid by c the Appellant. While the price paid by the Appellant was Rs.1,27,00, 101/-, the price ultimately fetched at the instance of the 1st and 2nd Respondents was Rs.2,03,00,000/-. Therefore, after giving credit to Rs.1,27,00,000/-, the Appellant would still be liable to pay a further sum of Rs.76,00,000/- to the 1st and 2nd Respondents. 0

60Copy pinpoint60. Accordingly, while disposing of these appeals as directed above, we pass the following Order:

(A) The 4th Respondent-Bank shall refund a sum of E Rs.2,03,00,000/- deposited by the 8th Respondent, along with 18% interest. Such refund shall be made by the 4th Respondent to the 8th Respondent by way of Bank's Pay Order within two weeks from the date of production of copy of this Order. F (B) The 4th Respondent-Bank having adjusted its due from and out of the sale consideration paid by the Appellant, shall pay the balance amount to the Tax Recovery Officer pursuant to the demand, which is to be credited in the account of the Appellant. Such deposit shall also be made G along with accrued interest @ 18% per annum while making the deposit. It is for the Respondents 1 & 2 to claim refund if they are eligible for the same by approaching the concerned Authority under the Income Tax Act and in the manner known to Law. H

MATHEW VARGHESE v. M. AMRITHA KUMAR & 795 ORS. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.] (C) The Appellant shall deposit the balance sale consideration determined by us in a sum of Rs. 76,00,000/ - with the 4th Respondent-Bank, which shall be kept in an interest bearing account. If there is any further demand by way of tax recovery, it would be open for the Tax Recovery Officer concerned to raise such a demand and forward it to the 4th Respondent-Bank and on such demand being made, the 4th Respondent-Bank shall deposit the same to the credit of the Tax Recovery Officer in the name of the 1st and 2nd Respondents and it will be for the 1st and 2nd Respondents to claim for refund if eligible. If there is no tax due, the 4th Respondent - Bank shall release the said sum of Rs.76,00,000/- forthwith on deposit being made by the Appellant to Respondents 1 and 2.

(D) Such deposit of Rs. 76,00,000/- shall be made by the Appellant within four weeks from the date of receipt of the copy of this Judgment. As and when the Appellant deposit the sum of Rs.76,00,000/- towards the sale price of the property transferred in its favour, necessary receipt for the said payment by way of additional sale price shall be executed by the 4th Respondent-Bank along with the 1st E and 2nd Respondents and whatever stamp duty and registration charges payable for that purpose shall be borne by the Appellant.

(E) If the Appellant fails to deposit the balance sale consideration of Rs.76,00,000/- within the stipulated time limit, as directed in paragraph 60(0), the sale already effected by the 4th Respondent-Bank shall stand cancelled automatically without any further reference to this Court. Eventually, the sale consideration deposited by the Appellant with the 4th Respondent-Bank shall be refunded to him after deducting the amount due and payable by the borrower as on the date of previous sale i.e. 31.12.2007 and the balance amount alone shall be refunded to the Appellant. Further the 4th Respondent-Bank shall bring the H

796 SUPREME COURT REPORTS [2014] 2 S.C.R.

A property for auction afresh, following the provisions of the SARFAESI Act. Thereafter, from and out of the money realized from the said sale, the 4th Respondent-Bank shall refund the amount retained by it towards the amounts due from the borrower to the Appellant. After paying the said B amount to the Appellant, it shall arrange for refund of the balance amount to the 1st and 2nd Respondents after meeting whatever tax liability to the Income Tax Department or any other statutory dues for which any demand was already raised and pending with the 4th Respondent-Bank.

61Copy pinpoint61. With the above directions, appeal filed against the Judgment dated 08.03.2010 passed in Writ Appeal No.1555 of 2009 stands dismissed and appeals filed against the Orders dated 18.06.2010 and 08.07.2010, passed in I.A. Nos.437 of 2010 and 507 of 2010 in Writ Appeal No.1555 of 2009 stand D allowed. No costs.

D.G. Appeals disposed of.