WP(C)/27/2021
2021 Latest Caselaw 1719 Gua

GAHC010194862020




         IN THE GAUHATI HIGH COURT
    (HIGH COURT OF ASSAM, NAGALAND, MIZORAM &
               ARUNACHAL PRADESH)

                   WP(C) NO.27 OF 2021
                   1. Shri Pratul Kumar Ghosh,
                   Proprietor of J.P. Advertiser,
                   Son of Pranab Kumar Ghosh,
                   Resident of Spanish Garden, Block
                   No.D, Flat No.1003, R.G. Baruah Road,
                   Guwahati.
                   2. J.P. Advertiser, represented by its
                   Proprietor Shri Pratul Kumar Ghosh,
                   Son of Pranab Kumar Ghosh, Spanish
                   Garden, Block No.D, Flat No.1003,
                   R.G. Baruah Road, Guwahati.
                                     ........Petitioners
                               -Versus-
                   1. Shri Ashish Agarwal,
                   Son of Shri Kamakhya Agarwal,
                   Resident of Flat No.3-C, Kumudinee
                   Apartment, F.A. Road, Kumarpara,
                   Guwahati- 781009.
                   2. Bank of India, Star House C-5, "G"
                   Block, Bandra Kurla Complex, Bandra
                   (East), Mumbai - 400051.
                   3. The Branch Manager, Bank of India,
                   Khanapara Branch, VIP Road, Chachal,
                   Six Mile, Guwahati - 781022.
                   4. The Authorised Officer, Bank of
                   India, Guwahati Zone, Khanapara
                   Branch, VIP Road, Chachal, Six Mile,
                   Guwahati - 781022.
                                   ........Respondents

For the Writ Petitioners : Mr. S. Mitra, Advocate. For Respondent No.1 : Mr. I.S. Majumdar, Advocate. For Respondent Nos.2 to 4 : Mr. S. Dutta, Advocate.

-BEFORE-

HON'BLE THE CHIEF JUSTICE MR. SUDHANSHU DHULIA HON'BLE MR. JUSTICE MANASH RANJAN PATHAK

Date of hearing & Judgment and order : 28th July, 2021.

                    JUDGMENT & ORDER (ORAL)
(Sudhanshu Dhulia, CJ)

           The      matter   is    taken    up    through     video
conferencing.

2. Heard Mr. S. Mitra, learned counsel for the petitioners. Also heard Mr. I.S. Majumdar, learned counsel appearing for the respondent No.1 and Mr. S. Dutta, learned counsel appearing for the respondent Nos.2, 3 & 4.

3. The petitioners before this Court had taken a loan from respondent Bank, i.e. Bank of India, in the year 2014 in the form of Cash Credit Limit of Rs.30,00,000/- (Rupees Thirty Lakhs only). The amount was not paid in time and thereafter the account of the petitioners was declared as Non-Performing Asset (NPA) by the respondent Bank on 31.03.2019, and proceedings were initiated under Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The petitioners received a notice under Section 13(2) of the SARFAESI Act on 06.05.2019 and not being satisfied with the reply of the petitioners, symbolic

possession was also taken and thereafter physical possession to the mortgaged property was taken on 06.12.2019. Till this stage, the petitioners did not approach either the Debts Recovery Tribunal or this Court. Thereafter, the petitioners filed a writ petition before this Court being WP(C) No.3414/2020 on 27.08.2020 and by order of this Court dated 03.09.2020, the petitioners were directed to approach the Debts Recovery Tribunal. Consequently, the petitioners approached the Debts Recovery Tribunal, Guwahati. The petitioners before the Debts Recovery Tribunal, inter alia, made a request that they may be allowed to deposit the entire amount as sale of the mortgaged property had not been completed. Although, the facts before this Court disclose that by the time the petitioners had approached the Debts Recovery Tribunal, the sale of the mortgaged property had already taken place. In any case, the request of the petitioners was accepted by the Tribunal vide its order dated 22.09.2019, and the entire amount was deposited by the petitioners before the Bank in the form of a Demand Draft on 23.09.2019.

4. Meanwhile, after hearing the learned counsel for the petitioners as well as the counsel for the respondent Bank, ultimately the application of the petitioners was dismissed by the Debts Recovery Tribunal vide its order dated 28.10.2020. This was done by the Tribunal on interpretation of Sub-Section (8) of Section 13 of the SARFAESI Act. It was held by the Debts Recovery Tribunal

that the right of redemption of the mortgaged property remains till the notice is published by the secured creditor for a public auction. The first notice is notice dated 06.03.2020. All the same, since no bid had been received in pursuance of this notice, another notice was given on 18.06.2020, which was published on 21.06.2020 on the basis of which the sale was conducted on 29.07.2020. The admitted position is that till that time the petitioners did not deposit the amount. The amount was deposited on 23.09.2020, i.e. after the sale had been conducted on 29.07.2020. Meanwhile, not only the sale had been completed but a sale certificate was also issued to the auction purchaser on 05.08.2020. The Demand Draft deposited by the petitioners was to be returned to the petitioners, in terms of the order of the Debts Recovery Tribunal dated 28.10.2020.

5. Aggrieved by the order dated 28.10.2020 passed by the Debts Recovery Tribunal, the petitioners approached the Appellate Tribunal at Kolkata, where their appeal was again dismissed on 23.12.2020. Aggrieved, the petitioners have approached this Court by filing the present writ petition.

6. The first ground of challenge to the two orders, i.e. order dated 28.10.2020 passed by the Debts Recovery Tribunal, and the order dated 23.12.2020 passed by the Appellate Tribunal is that the petitioners were not served with proper notice before auction of the mortgaged

property and the petitioners were not given the opportunity to deposit the amount before the Bank in time and hence the provision under Sub-Section (8) of Section 13 of the SARFAESI Act had not been complied with inasmuch as under the provision of Section 13(8), the amount can be deposited not only before the date of publication of the notice but also before the date of the sale. This is the first argument of the learned counsel for the petitioners before this Court also.

7. All the same, this appears to be a clear misinterpretation of Sub-Section (8) of Section 13 of the SARFAESI Act, as a bare reading of the provision shows that the rights of the mortgagor stand extinguished if this amount is not deposited with the secured creditor before the date of "publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer of lease, assignment or sale of the secured assets." Admittedly, this amount was deposited after the confirmation of sale, and not before the publication of the notice.

8. All the same, Mr. S. Mitra, learned counsel for the petitioners has relied upon two decisions of the Hon'ble Apex Court. The first is Mathew Varghese -Vs- M. Amritha

Kumar and the second is Dwarika Prasad -Vs- State of UP & Ors.2. On the strength of the aforesaid two decisions, the learned counsel would argue that in the 1 (2014) 5 SCC 610 2 (2018) SCC 491

present case, the rights given to the mortgagor of redemption of his mortgaged property have actually been denied to him by the mortgagee, i.e. the secured creditor, i.e. the Bank, which is in clear violation of the provisions of the Act.

9. It is an admitted position that a mortgagor has a right of redemption, also known as equity of redemption, which is given under Section 603 of the Transfer of Property Act, 1882 and also under Sub-Section (8) of Section 134 of the SARFAESI Act.

3 60. Right of mortgagor to redeem.--At any time after the principal money has become due, the mortgagor has a right, on payment or tender, at a proper time and place, of the mortgage-money, to require the mortgagee (a) to deliver [to the mortgagor the mortgage-deed and all documents relating to the mortgaged property which are in the possession or power of the mortgagee], (b) where the mortgagee is in possession of the mortgaged property, to deliver possession thereof to the mortgagor, and (c)at the cost of the mortgagor either to re-transfer the mortgaged property to him or to such third person as he may direct, or to execute and (where the mortgage has been effected by a registered instrument) to have registered an acknowledgement in writing that any right in derogation of his interest transferred to the mortgagee has been extinguished:

Provided that the right conferred by this section has not been extinguished by act of the parties or by [decree] of a Court.

The right conferred by this section is called a right to redeem, and a suit to enforce it is called a suit for redemption.

Nothing in this section shall be deemed to render invalid any provision to the effect that, if the time fixed for payment of the principal money has been allowed to pass or no such time has been fixed, the mortgagee shall be entitled to reasonable notice before payment or tender of such money.

Redemption of portion of mortgaged property.--Nothing in this section shall entitle a person interested in a share only of the mortgaged property to redeem his own share only, on payment of a proportionate part of the amount remaining due on the mortgage, except [only] where a mortgagee, or, if there are more mortgagees than one, all such mortgagees, has or have acquired, in whole or in part, the share of a mortgagor.

4 13.(8) Where the amount of dues of the secured creditor together with all costs, charges and expenses incurred by him is tendered to the secured creditor at any time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets, -

(i) the secured assets shall not be transferred by way of lease, assignment or sale by the secured creditor; and

10. Right of redemption of mortgaged property thus is a valuable right of a mortgagor but then this right is not absolute and can only be exercised before it is extinguished by law. In the present case, such a right exists with the mortgagor/borrower till the date of publication of notice by the secured creditor, "for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets." If the mortgagor/borrower chooses to exercise this right after the date of such publication, as it has happened in the present case, he has done so at his own peril, at a time when this right stood extinguished.

11. Before we deal with the two cases relied upon by the learned counsel for the petitioners in his favour, we must for the sake of records make it clear that both the above cases cited by the petitioners relate to the un- amended Sub-Section (8) of Section 13 of the SARFAESI Act. The provision of the SARFAESI Act [Sub-Section (8) of Section 13] at the relevant point of time when they were dealt with by the Hon'ble Apex Court, read as under:-

"13.(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 the secured asset."

(emphasis provided)

(ii) in case, any step has been taken by the secured creditor for transfer by way of lease or assignment or sale of the assets before tendering of such amount under this sub-section, no further step shall be taken by such secured creditor for transfer by way of lease or assignment or sale of such secured assets.

12. By an Act of Parliament, i.e. Act No.44 of 2016, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 was amended and one of the amendments was made in Sub- Section (8) of Section 13 of the SARFAESI Act. The Act was amended in 2016 w.e.f. 01.09.2016 and Sub-Section (8) of Section 13 now reads as under:-

"13.(8) Where the amount of dues of the secured creditor together with all costs, charges and expenses incurred by him is tendered to the secured creditor at any time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets, -

(i) the secured assets shall not be transferred by way of lease, assignment or sale by the secured creditor; and

(ii) in case, any step has been taken by the secured creditor for transfer by way of lease or assignment or sale of the assets before tendering of such amount under this sub-section, no further step shall be taken by such secured creditor for transfer by way of lease or assignment or sale of such secured assets."

(emphasis provided)

13. The important distinction is that whereas the crucial date in the earlier provision [un-amended Sub-

Section (8) of Section 13], was the date fixed for sale of the mortgaged property, under the present provision, which is applicable in the case at hand, the crucial date is the date of publication of notice for "public auction".

14. Reverting back to the submissions of the learned counsel for the petitioners and his reliance on the aforesaid two cases, we may first refer to the case of Mathew

Varghese. In the said case, inter alia, two important aspects were dealt by the Hon'ble Apex Court. The first was the applicability of Section 60 of the Transfer of Property Act, 1882 (Right of mortgagor to redeem) and the other provisions of Section 545 of the said Act (Defining as to what is sale), in relation to Sub-Section (8) of Section 13 of the SARFAESI Act and the Hon'ble Apex Court came to the conclusion that the mortgagor had right for redemption of his property before the sale had been concluded and the sale would mean before the sale was registered. Secondly, in terms of Sub-Section (8) of Section 13 and by reading of Sub-Rule (6) of Rule 8 as well as Sub-Rule (1) of Rule 9 made under the Act, a thirty days clear notice was also liable to be given to the borrower regarding the sale. In the case before the Hon'ble Apex Court, these provisions were not complied with and, therefore, the sale itself was held to be invalid.

15. The decision of the Hon'ble Apex Court in Mathew Varghese has further been relied upon by the Hon'ble Apex Court in the case of Dwarika Prasad. But again the fact as it was there before the Hon'ble Apex Court in the case of 5 54. "Sale" defined.--"Sale" is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised.

Sale how made.--Such transfer, in the case of tangible immovable property of the value of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be made only by a registered instrument. In the case of tangible immovable property of a value less than one hundred rupees, such transfer may be made either by a registered instrument or by delivery of the property.

Delivery of tangible immovable property takes place when the seller places the buyer, or such person as he directs, in possession of the property. Contract for sale.--A contract for the sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties.

It does not, of itself, create any interest in or charge on such property.

Dwarika Prasad was entirely different. In that case, the Hon'ble Apex Court had actually held that in the case before the Hon'ble Apex Court, the mortgagor had not exercised his right of redemption before the date of sale and since he had exercised his right after the date of sale, it was held that this will not be compliance under Section 13(8) of the Act. The Hon'ble Apex Court held as follows:-

"9. In the present case, the appellant failed to comply with the provisions of Section 13(8). The statute mandates that it is only where the dues of the secured creditor are tendered together with costs, charges and expenses before the date fixed for sale or transfer that the secured asset is not to be sold or transferred. The appellant was aware of the proceedings initiated by the Bank for asserting its right to recover its dues by selling the property. The appellant moved the DRT in Securitisation Application No. 176 of 2015. During the pendency of those proceedings, orders were passed by the Tribunal on 1-2-2016 and 3-2-2016. The appellant moved the Allahabad High Court which by its order dated 9-3-2016 [Dwarika Prasad v. State of U.P., 2016 SCC OnLine All 2564] restrained the Bank and the auction- purchaser from executing the sale deed until 15-3-2016. The stay was extended till 28-3-2016 by which date the appellant was to deposit an amount of Rs 7,00,000. The balance was required to be deposited by 30-4-2016. While the appellant deposited an amount of Rs 7,00,000 with the Bank, he failed to deposit the balance in accordance with the provisions of Section 13(8). Even after the writ proceedings before the High Court were withdrawn, the appellant did not deposit the balance due together with the costs, charges and expenses. The sale was confirmed, a sale certificate was issued and a registered sale deed was executed on 12-4-2016. The appellant failed to ensure compliance with Section 13(8). The right to redemption stands extinguished on the execution of the registered sale deed. This is also the view which has been expressed in the judgment in Mathew Varghese."

16. All the same, whereas the crucial date with which the Hon'ble Apex Court was dealing with in the aforesaid cases was the "date of sale", in our case, it would be the

"date of publication of notice". But for the sake of record we must also state that in the present case the sale was conducted on 29.07.2020 and the certificate of sale was issued on 05.08.2020, and till then the petitioners had not exercised their rights of redemption in any case. The petitioners had deposited the amount only on 23.09.2020, i.e. after the confirmation of sale. It is again an admitted position that by the time the amount was deposited by the petitioners, the sale deed had not been registered. But that has little relevance for our purposes as we have already stated above that in our case, the crucial date is not the date of sale but the date of publication of notice, which is 21.06.2020. We are only referring to the date of sale for the purposes that in any case by the time the amount had been deposited by the petitioners, a third party right had already been created as the property was validly purchased by the private respondent No.1, who was then burdened with the litigation since 2020. In fact, a point has also been raised before this Court by the learned counsel for the Bank as well as the learned counsel for the private respondent No.1 that in the present case, registration in any case was not necessary in view of Section 17(2)(xii) of the Registration Act, 1908. Section 17 of the Registration Act prescribes as to what is mandatory for registration and Sub-Section (2) of Section 17 exempts certain instruments from registration. Under Section 17(2)(xii) of the Registration Act, 1908, this includes "any certificate of sale granted to the purchaser of any property sold by public

auction by a Civil or Revenue-Officer". In fact, the Hon'ble Apex Court in the case of B. Arvind Kumar -Vs-

Government of India6 had stated as under:-

"12. ...... When a property is sold by public auction in pursuance of an order of the court and the bid is accepted and the sale is confirmed by the court in favour of the purchaser, the sale becomes absolute and the title vests in the purchaser. A sale certificate is issued to the purchaser only when the sale becomes absolute. The sale certificate is merely the evidence of such title. It is well settled that when an auction-purchaser derives title on confirmation of sale in his favour, and a sale certificate is issued evidencing such sale and title, no further deed of transfer from the court is contemplated or required. In this case, the sale certificate itself was registered, though such a sale certificate issued by a court or an officer authorised by the court, does not require registration. Section 17(2)(xii) of the Registration Act, 1908 specifically provides that a certificate of sale granted to any purchaser of any property sold by a public auction by a Civil or Revenue Officer does not fall under the category of non- testamentary documents which require registration under sub-sections (b) and (c) of Section 17(1) of the said Act. We therefore hold that the High Court committed a serious error in holding that the sale certificate did not convey any right, title or interest to plaintiff's father for want of a registered deed of transfer."

17. But we are not dealing with this question of registration here as it is not relevant for our purposes as the crucial date here is not the date of sale or when or how a sale is complete, because we are concerned with a date which is much prior to the date of sale, i.e. date of publication of notice.

18. The change in the conditions brought out by the 2016 amendment was also noticed by the Hon'ble Apex Court in a recent judgment of Shakeena -Vs- Bank of

6 (2007) 5 SCC 745

India & Ors.7 Although factually the case before the Hon'ble Apex Court (in Shakeena -Vs- Bank of India & Ors.) also pertains to a period when the Sub-Section (8) of Section 13 of the SARFAESI Act was un-amended, yet by the time the matter was considered by the Hon'ble Apex Court, amendment had already been done and, therefore, the following observations were made:-

"......Further, the amended Section 13(8) of the 2002 Act which has come into force w.e.f. 1st September, 2016, will now stare at the face of the appellants. As per the amended provision, stringent condition has been stipulated that the tender of dues to the secured creditor together with all costs, charges and expenses incurred by him shall be at any time before the "date of publication of notice" for public auction or inviting quotations or tender from public or private deed for transfer by way of lease assessment or sale of the secured assets. ....."

19. Another ground taken by the petitioners is that under Sub-Rule (6) of Rule 88 of the Security Interest

7 2019 SCC OnLine SC 1059 8 8. (1)..........

(2) ..........

(3) ..........

(4) ..........

(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 interested in buying the such assets; or

(b) by inviting tenders from the public;

(c) by holding public auction including through e-auction mode; or

(d) by private treaty.

(6) The authorized 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 the Form given in Appendix IV-A to be published in two leading newspapers including one in vernacular language having wide circulation in the locality.

(Enforcement) Rules, 2002 framed under the SARFAESI Act, the authorised office has to serve the borrower a thirty days' notice of sale of the immovable secured assets.

20. It was held in Mathew Varghese as well as Dwarika Prasad that thirty days' clear notice is liable to be given to the borrower prior to the date of sale under Sub- Rule (6) of Rule 8 is mandatory. The admitted position is that whereas the notice was published on 21.06.2020, the petitioners were admittedly served a notice by the authorised officer thirty days prior to the sale inasmuch as the notice was served on 23.06.2020 and the sale was conducted on 29.07.2020. So there was clearly a thirty days prior notice to the borrowers.

21. Mr. S. Mitra, learned counsel for the petitioners would, however, argue that thirty days in this case would mean thirty days prior to issuance of the notice for publication, i.e. thirty days prior to 21.06.2020. This argument is based on the logic that only if the borrower is aware of the date that the notice is now to be sent, could he arrange for funds for redeeming the property. This argument, however, is not tenable inasmuch as the intention of the legislature of issuing notice under Sub-Rule (6) of Rule 8 is merely to inform the borrower about the date of sale in advance. This is so because the mortgaged property can be sold not only by way of public auction but by way of different methods as contemplated in Sub-Rule (5) of Rule 8, which includes by way of private treaty. In

other words, there would have been no requirement of any notice to the borrower had the property been disposed by way of a private treaty. As far as opportunity being given to the petitioners/borrowers for depositing the amount, that opportunity the petitioners had in plenty prior to the date when the property was ultimately sold by way of auction. As we have seen that the account of the petitioners was as declared as Non-Performing Asset (NPA) on 31.03.2019. Thereafter, a notice was given to the petitioners under Section 13(2) of the SARFAESI Act and physical possession was taken under Sub-Section (4) of Section 13 of the SARFAESI Act on 06.12.2019. At no stage, the petitioners have come forward before the secured creditor with an offer of depositing the entire amount. In fact, they only approached the Debts Recovery Tribunal once the property had already been sold by way of auction. As we have already stated, even though for academic purposes it is true that although the right of the borrower for redemption of mortgaged property is extinguished on the date of publication, as referred above, but nothing stops the secured creditor from accepting this amount even after the date of publication as the Bank is only entitled to receive the loan amount, and the Bank cannot receive any amount over and above the liability of the borrowers, even if it is ultimately sold in auction. But once the auction takes place, third party rights are created and this definitely complicates the matter. Therefore, no relief can be granted to the petitioners as that would

amount to denying the rightful claim of the respondent No.1, who had purchased the property in a valid auction.

22. In view of the above, we find no merit in this case. Accordingly, the writ petition is dismissed.

23. The amount, which the petitioners had earlier deposited by way of Demand Draft be returned to the petitioners forthwith.

24. Interim orders passed earlier will stand vacated.

              JUDGE                      CHIEF JUSTICE




M. Sharma




Comparing Assistant