S. KARTHIK & ORS. v. N. SUBHASH CHAND JAIN & ORS.
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6060. It could thus be seen that the Second Sale Notice dated 9.7.2012 was in continuation of the proceedings of the First Sale Notice dated 21.1.2012, which sale could not be effected only on account of the interim orders passed by the DRT, Chennai, on the representation made by the appellants and respondent Nos. 2 to 4. It could further be seen that even in view of the law laid down by this Court in the case of Mathew B Varghese (supra), since the sale scheduled on 27.2.2012, as per the First Sale Notice dated 21.1.2012, could not be held due to the reasons attributable solely to the guarantors, there was no necessity of again following the same procedure of providing a 30 days’ clear notice. In any case, the respondent-Bank issued a fresh Second Sale Notice on C 9.7.2012 to the appellants, scheduling the sale on 20.7.2012. There is a substantial distinction of facts in the present case as compared to those in the case of Mathew Varghese (supra). In the case of Mathew Varghese (supra) after the dismissal of S.A., the respondent-Bank had surreptitiously accepted the tender of the auction purchaser on the very next day of dismissal of S.A. without issuing a notice to the guarantors/ D borrowers and also confirmed the sale, and only after the confirmation of sale and receipt of the entire amount, informed the borrowers/ guarantors about the sale being confirmed. It is not the case here. In the present case, after the S.A. was dismissed on 2.7.2012, the respondent- Bank again issued a fresh Notice on 9.7.2012 scheduling the sale on E 20.7.2012.
6161. The facts in the case of Mathew Varghese (supra) are also distinguishable inasmuch as though between the date of publication of notice in the newspapers and the date scheduled for sale, a clear 30 days’ period was provided, but insofar as the individual notice to the borrowers/guarantors and the date scheduled for sale, a 30 days’ clear period was not provided. And this was with regard to the very first notice. On the aforesaid premise, this Court in the case of Mathew Varghese (supra) held that the word ‘or’ used in Rule 9 of the said Rules will have to be read as ‘and’, and that there should be a clear 30 days’ period between the date of publication of notice in the newspapers as well as individual notice to the borrower/guarantor and the date scheduled for sale. Clearly, in the present case, there has been compliance with the same, insofar as the first notice is concerned, whereas in the case of Mathew Varghese (supra), there was no 30 days’ period between individual notice and the date of sale. H
S. KARTHIK & ORS. v. N. SUBHASH CHAND JAIN & ORS. 1139 [B. R. GAVAI, J. ]
6262. The matter does not rest at that. Immediately after the Second A Sale Notice dated 9.7.2012 is issued, the appellants along with respondent Nos. 2 to 4 filed S.A. No.227 of 2012 challenging the notice dated 9.7.2012. There is some dispute between the parties with regard to the date on which the said S.A. No.227 of 2012 was filed. However, in the light of the view that we are taking, the same would not be relevant. B
6363. When the matter (S.A. No.227 of 2012) came up for hearing before the DRT, Chennai, on 24.7.2012, a representation was made by the appellants to the DRT, Chennai, that they wanted some breathing time to procure prospective purchaser to clear the entire dues within one month from the said date by selling the remaining property. The said S.A. No.227 of 2012 thereafter came up for hearing before the DRT, C Chennai, on 7.8.2012. On the said date, the DRT, Chennai, passed an order of interim injunction for a period of 30 days restraining the respondent-Bank from giving effect to the sale notice dated 9.7.2012 subject to deposit of Rs.4.80 crore within the said period of 30 days. The said order dated 7.8.2012 also made it clear that on failure to make such payment, the said order would stand vacated.
6464. It is not in dispute that in pursuance of the said order dated 7.8.2012, the appellants have not deposited the amount of Rs.4.80 crore within 30 days. It is to be noted that the order dated 7.8.2012 was self- operative. On failure on the part of the appellants to deposit the amount of Rs.4.80 crore prior to 7.9.2012, the interim injunction stood automatically vacated. It could thus be seen that even on this occasion, the appellants had an opportunity for redemption of the mortgage and clearing their properties from encumbrances. However, the appellants, even during this period, did not avail of the said opportunity. F
6565. It is to be noted that in the meanwhile, the auction purchaser had bid for the properties at Items ‘A’ and ‘C’ in the Schedule of Properties in the Second Sale Notice dated 9.7.2012 (i.e. the properties at Items ‘A’ and ‘D’ in the Schedule of Properties in the First Sale Notice dated 21.1.2012). In the said sale, which was held on 20.7.2012, the auction purchaser was the successful bidder having bid for Rs.1,45,66,000/- and G Rs.3,40,55,000/- respectively, in all totaling to Rs.4,86,21,000/-. Upon payment of the entire amount, the sale was confirmed on 21.7.2012. Not only that, the sale was duly registered on 14.9.2012 after the auction purchaser had spent a sum of Rs.38,89,880/- towards the registration charges. It is to be noted that the appellants instead of complying with H
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A the directions, had filed I.A. No.437 of 2012 in S.A. No.227 of 2012 seeking certain directions with regard to deposit of the amount in some other account. The DRT, Chennai, vide order dated 12.9.2012, dismissed the said I.A. No.437 of 2012, and thereby, granted liberty to the respondent- Bank to proceed with the sale. It is only thereafter, that the sale came to be registered in favour of the auction purchaser on 14.9.2012. It is, thus, B clear that the sale came to be registered in favour of the auction purchaser in view of the liberty granted by the DRT, Chennai, in its order dated 12.9.2012.
6666. Even thereafter, the guarantors continued with their effort to prolong the proceedings. Various orders came to be passed in the Civil C Revision Petitions, which we have already referred to hereinabove. In one of the orders passed by the High Court, i.e., the order dated 30.4.2013, the appellants were also directed to deposit the amount collected by way of rent before the DRT, Chennai. Finally, finding that after the confirmation of sale and after the issuance of the sale certificate, the D Court could not interfere, the said Civil Revision Petitions came to be dismissed on 29.7.2013.
6767. Being aggrieved thereby, the appellants approached this Court by way of Special Leave Petition (Civil) Nos. 28402 and 28403 of 2013, wherein this Court issued notice vide order dated 7.7.2014. The said E Special Leave Petitions subsequently were permitted to be withdrawn by this Court vide order dated 17.4.2015. However, in view of the observations made by this Court in its order dated 7.7.2014, the M.A. No.70 of 2014, which was filed before the DRAT, Chennai, challenging the order of the DRT, Chennai dated 20.9.2013 refusing to restore the S.A. No.227 of 2012, which was dismissed in default, was heard on F 10.7.2014 and the S.A. No.227 of 2012 was restored to the file. As already pointed out hereinabove, the said S.A. No.227 of 2012 was allowed by the DRT, Chennai, vide order dated 25.6.2018, which order was reversed by the DRAT, Chennai, vide order dated 6.9.2019, and the order of the DRAT, Chennai, dated 6.9.2019 was maintained by the G High Court vide the impugned judgment and order dated 18.11.2019.
6868. It could thus be seen that the appellants had more than one opportunity for redemption of the mortgage. However, from their conduct, it appears that they were only interested in protracting the litigation. It is the appellants at whose intervention and on whose incorrect representation, the sale, which was scheduled to be held on 27.2.2012 in
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pursuance of the notice dated 21.1.2012, could not be held. Even after the dismissal of S.A. No.69 of 2012 on 2.7.2012, the respondent-Bank again issued a Second Sale Notice on 9.7.2012 scheduling the sale on 20.7.2012 in which the auction purchaser emerged as a successful bidder. It is thus clear that the appellants had enough time from 21.1.2012 till 2.7.2012 for redemption of their mortgaged properties. However, they did not avail of that opportunity. Even after the auction purchaser emerged successful in the bid and had paid the bid money, an opportunity was given by the DRT, Chennai, vide order dated 7.8.2012, to the appellants to deposit the amount of Rs.4.80 crore within one month. However, without complying with the same, the appellants continued with their dilatory tactics by filing an application being I.A. No.437 of 2012 in S.A. C No.227 of 2012. Even thereafter, they continued with the proceedings before the High Court, wherein certain interim orders were passed, and finally, the High Court, finding that in view of the sale being confirmed and the sale being registered no interference could be warranted, dismissed the Civil Revision Petitions. Thereafter again, they approached D this Court by way of Special Leave Petitions, which were subsequently withdrawn. Ideally, the litigation ought to have stopped at least at that stage.
6969. However, after the M.A. No.70 of 2014 was allowed and the S.A. No.227 of 2012 was restored, it gave fresh lease to the litigation, wherein the S.A. No.227 of 2012 was allowed by the DRT, Chennai. E The order of the DRT, Chennai, was reversed by the DRAT, Chennai, which was in turn upheld by the High Court vide the impugned judgment.
7070. As we have already discussed hereinabove, the facts in the case of Mathew Varghese (supra) and the facts in the present case are totally different. In any case, in view of the observations made in F paragraph 53 of the judgment of this Court in the case of Mathew Varghese (supra), we are of the view that since the sale scheduled on 27.2.2012 in pursuance to the notice dated 21.1.2012 could not be held on account of the reasons solely attributable to the appellants/guarantors, there was no necessity to provide 30 days’ period in the Second Sale G Notice dated 9.7.2012, which was in continuation of the First Sale Notice dated 21.1.2012.
7171. Insofar as the reliance placed on the judgment of this Court in the case of J. Rajiv Subramaniyan (supra) is concerned, the said judgment relies on the judgment of this Court in the case of Mathew H
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A Varghese (supra). However, on facts, the issue in the said case was different. In the said case, the property was sold by the respondent- Bank through a private treaty. This Court found that there were no terms settled in writing between the borrowers and the Bank that the sale can be effected by a private treaty, and as such, it was in violation of the provisions of Rule 8 (8) of the said Rules. B
7272. In the case of Vasu P. Shetty (supra), after the first notice was issued, the same was challenged before the High Court. Though the High Court did not grant stay against the scheduled auction, it granted stay against the confirmation of sale. It was the Bank’s case therein that in view of the partial stay order by the High Court, nobody came forward C to participate in the auction and the exercise went into futility. After dismissal of the writ petition, it came to the notice of the Bank that there were other encumbrances on the property, which required the reserve price to be changed. Thereafter, there were proposals exchanged between the Bank and the borrower with regard to One Time Settlement (‘OTS’). D On failure to arrive at OTS, a fresh notice came to be issued. In the said notice, the mandatory period of 30 days from the date of publication was not provided. The matter was proceeded in this background.
7373. The present case is totally on different facts. Though the appellants had ample opportunities for redemption of mortgage, they E failed to avail of the said opportunities.
7474. Even if viewed from another angle, the claim of the appellants is not sustainable. The two-judges Bench of this Court in the case of Mathew Varghese (supra), has heavily relied on the judgment of the three-judges Bench of this Court in the case of Narandas Karsondas F (supra). It has been held by this Court in the case of Narandas Karsondas (supra), that the right of redemption, which is embodied in Section 60 of the Transfer of Property Act, is available to the mortgagor unless it has been extinguished by the act of parties. It has been held, that only on execution of the conveyance and registration of transfer of the mortgagor’s interest by registered instrument, that the mortgagor’s right G of redemption will be extinguished. In the present case, the DRT, Chennai, vide order dated 12.9.2012, had granted liberty to the respondent-Bank to proceed with the sale. The sale came to be registered in favour of the auction purchaser on 14.9.2012. As such, in any case, the mortgagor’s right of redemption stood extinguished on 14.9.2012. The Division Bench H of the Madras High Court had, therefore, rightly dismissed the Civil
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Revision Petitions, vide order dated 29.7.2013. The said order of the A Madras High Court dated 29.7.2013 came to be challenged before this Court by way of Special Leave Petitions. This Court, vide order dated 7.7.2014, had issued limited notice in the said Special Leave Petitions. However, vide order dated 17.4.2015, the said Special Leave Petitions came to be dismissed as withdrawn. It is in the third round of litigation, that the DRT, Chennai, allowed the S.A. No.227 of 2012, vide order dated 25.6.2018. Applying the law, as laid in the case of Narandas Karsondas (supra) and in the case of Mathew Varghese (supra), the order passed by the DRT, Chennai, dated 25.6.2018, was not sustainable insofar as setting aside the sale notice dated 9.7.2012 and the consequent sale. The DRAT, Chennai, has rightly reversed the same, which has been upheld by the High Court vide the impugned judgment.
7575. It is further relevant to note that, this Court in the case of Dwarika Prasad (supra) and in the case of Shakeena (supra) held that the right to redemption stands extinguished on the sale certificate getting registered. D
7676. We will have to take into consideration the purpose with which the SARFAESI Act came to be enacted. Unlike international banks, the banks and financial institutions in India did not have power to take possession of securities and sell them. It was, therefore, noticed, that it had resulted in slow pace of recovery of defaulting loans and mounting levels of non-performing assets of banks and financial institutions. It was also noticed that there were certain areas in which the banking and financial sector did not have a level playing field as compared to other participants in the financial markets in the world. It was further noticed that the existing legal framework relating to commercial transactions had not kept pace with the changing commercial practices and financial sector reforms. As such, the SARFAESI Act was enacted with the purpose for securitization and empowering banks and financial institutions to take possession of the securities and to sell them without the intervention of the Court.
7777. If we look at the facts in the present case, it would show that, every attempt has been made to frustrate the purpose of the SARFAESI Act. The respondent-Bank was required to indulge in three rounds of litigations, out of which, the two have reached upto this Court.
7878. Though the auction purchaser emerged as the successful bidder, in the bids held on 20.7.2012, and though the sale was confirmed on H
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A 21.7.2012, and though the sale has been registered in his favour on 14.9.2012, for a period of last 9 years, he could not enjoy the fruits of the said sale. Not only that, but the appellants continued to enjoy the rent of the properties, the ownership of which vests in the auction purchaser.
7979. In that view of the matter, we do not find any merit insofar as B the challenge to the notice dated 9.7.2012 is concerned.
8080. That leaves us with the other issue raised by Shri K.V. Viswanathan, learned Senior Counsel. Shri Viswanathan submitted that the amount received by the respondent-Bank was on account of sale of all the four properties mentioned in the First Sale Notice dated 21.1.2012, C and as such, the direction to pay an amount of Rs.4.48 crore with interest only to respondent No.3 is not sustainable.
8181. We find no merit in this submission. The property at Item ‘B’ of the Schedule of Properties in First Sale Notice dated 21.1.2012 was sold through a private treaty during the pendency of the first round of litigation. The properties at Item ‘A’ and Item ‘D’ of the Schedule of Properties in First Sale Notice dated 21.1.2012 came to be sold in pursuance of the sale taken place on 20.7.2012, which was in pursuance of the Second Sale Notice dated 9.7.2012. As such, the only property left was the property at Item ‘C’ belonging to the respondent No.3 in respect of which a third notice dated 27.9.2012 came to be issued. It is only in pursuance of the said notice dated 27.9.2012, that the property at Item ‘C’ was sold by a private treaty to M/s. Redbrick Realtors Private Limited. As such, the excess amount, which remained with the respondent-Bank, has rightly been directed to be paid to respondent No.3 by the DRT, Chennai, which has been concurrently upheld by the DRAT, F Chennai, as well as the High Court.
8282. Even on equitable grounds, rest of the guarantors are either the Promoters/Directors or their family members, it is only the respondent No.3, who happens to be outside the family and is only connected on account of her daughter being married in the family of one of the G Promoters/Directors. As such, on equitable grounds, we do not find any reason to interfere with the said direction.
8383. The appeals are therefore found to be without merit, and as such, are dismissed with costs. The appellants shall pay the costs quantified at Rs.1,00,000/- (Rupees One lakh only) payable each to the respondent-Bank and the auction purchaser. Pending applications, if any, shall also stand disposed of.
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8484. While dismissing the appeals, taking into consideration the fact that, though the auction purchaser has become the owner of the properties at Items ‘A’ and ‘D’ of the Schedule of Properties in the First Sale Notice dated 21.1.2012, he could not enjoy the fruits of the same, and that the appellants have continued to enjoy the rent of the properties, we find that this is a fit case wherein the powers under Article 142 of the Constitution of India need to be invoked.
8585. We, therefore, direct the appellants to handover the vacant and peaceful possession of the properties at Items ‘A’ and ‘D’ of the Schedule of Properties in the First Sale Notice dated 21.1.2012, within a period of 8 weeks from the date of this judgment to the auction purchaser. We further direct the appellants to pay the rent, received by them, from the said properties, since 15.9.2012 till date, within a period of three months from the date of this judgment. However, in the facts of this case, we do not intend to pass any orders with regard to interest on the said amount. D
Ankit Gyan Appeals dismissed.
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