Karnataka High Court
M/S Manza Polymers Private Ltd vs Karnataka State Financial ... on 28 June, 2022
Bench: Alok Aradhe, J.M.Khazi
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 28TH DAY OF JUNE 2022
PRESENT
THE HON'BLE MR. JUSTICE ALOK ARADHE
AND
THE HON'BLE MS.JUSTICE J.M. KHAZI
W.A. NO.1250 OF 2019(GM-KSFC)
IN
W.P.No.30220 OF 2012(GM-KSFC)
C/W
W.A. NO.1252 OF 2019(GM-KSFC)
IN
W.P.NO.63249 OF 2016(GM-KSFC)
C/W
W.A. NO.1251 OF 2019(GM-KSFC)
IN
W.P.NO.30221 OF 2012 (GM-KSFC)
IN W.A.NO.1250/2019:
BETWEEN:
M/S MANZA POLYMERS PVT LTD.,
A REGISTERED PRIVATE COMPANY,
HAVING ITS REGISTERED OFFICE AT
NO.37/12-1, ARCHANA COMPLEX,
4TH CROSS, LALBAGH ROAD,
BANGALORE - 560 027.
REP BY ITS DIRECTOR
SRI. LALIT KUMAR RAMSISARIA,
AGED BAOTU 56 YEARS,
... APPELLANT
(BY MR.PARAS JAIN, ADV.,)
2
AND:
1. KARNATAKA STATE FINANCIAL
CORPORATION,
1/1, THIMMAIAH ROAD,
OPP. CANT.RLY. STATION,
BANGALORE - 560 052.
REPRESENTED BY ITS
ASST. GENERAL MANAGER,
2. SRI.C.MUNISWAMAPPA,
S/O CHIKKAMUNIYAPPA,
#NO.1014/D,
BINNAMANGALA 2ND STAGE,
17TH E CROSS, INDIRANAGAR,
STAGE -II, BENGALURU - 560 038.
... RESPONDENTS
(BY MR.BIPIN HEGDE, ADV., FOR R1;
V.C.O DATED 18.08.2021 NOTICE TO R2 HELD
SUFFICIENT)
---
THIS WRIT APPEAL IS FILED U/S 4 OF THE
KARNATAKA HIGH COURT ACT, PRAYING TO SET ASIDE THE
ORDER DATED 18/09/2018 PASSED IN WRIT PETITION
NO.30220/2012.
IN W.A.NO.1252/2019:
BETWEEN:
M/S AVYUKTHA POLYMERS PVT LTD.,
A REGISTERED PRIVATE COMPANY,
HAVING ITS REGISTERED OFFICE AT
NO.37/12-1, ARCHANA COMPLEX,
4TH CROSS, LALBAGH ROAD,
BANGALORE - 560 027.
REP BY ITS DIRECTOR
SRI. LALIT KUMAR RAMSISARIA,
AGED BAOTU 56 YEARS ... APPELLANT
(BY MR.PARAS JAIN, ADV.,)
3
AND:
KARNATAKA STATE FINANCIAL
CORPORATION,
1/1, THIMMAIAH ROAD,
OPP. CANT.RLY. STATION,
BANGALORE - 560 052.
REPRESENTED BY ITS
AUTHORISED OFFICER.
... RESPONDENT
(BY MR.BIPIN HEGDE, ADV., FOR R1)
---
THIS WRIT APPEAL IS FILED U/S 4 OF THE
KARNATAKA HIGH COURT ACT, PRAYING TO SET ASIDE THE
ORDER DATED 18/09/2018 PASSED IN WRIT PETITION
NO.63249/2016.
IN W.A.NO.1251/2019:
BETWEEN:
M/S AVYUKTHA POLYMERS PVT LTD.,
A REGISTERED PRIVATE COMPANY,
HAVING ITS REGISTERED OFFICE AT
NO.37/12-1, ARCHANA COMPLEX,
4TH CROSS, LALBAGH ROAD,
BANGALORE - 560 027.
REP BY ITS DIRECTOR
SRI. LALIT KUMAR RAMSISARIA,
AGED BAOTU 56 YEARS,
... APPELLANT
(BY MR.PARAS JAIN, ADV.,)
AND:
1. KARNATAKA STATE FINANCIAL
CORPORATION,
1/1, THIMMAIAH ROAD,
OPP. CANT.RLY. STATION,
BANGALORE - 560 052.
4
REPRESENTED BY ITS
ASST. GENERAL MANAGER,
2. SMT. SINDHU,
NO.467(NEW NO.467/30),
45TH CROSS, 8TH BLOCK,
SANGAM CIRCLE,
JAYANAGAR,
BENGALURU - 560 082.
SINCE THE R2 IS DECEASED
REPRESENTED BY ITS LR
SRI.K.NAGARAJ.
(AMENDED V.C.O DATED 06.11.2019)
3. SRI.K.NAGARAJ,
S/O KAPILA RAO, 69 YEARS,
#467, 45TH CROSS, 8TH BLOCK,
SANGAM CIRCLE,
JAYANAGAR,
BENGALURU - 560 082. ... RESPONDENTS
(BY MR. B N TULSI KUMAR, ADV., FOR R3
MR.BIPIN HEGDE, ADV., FOR R1)
---
THIS WRIT APPEAL IS FILED U/S 4 OF THE
KARNATAKA HIGH COURT ACT, PRAYING TO SET ASIDE THE
ORDER DATED 18/09/2018 PASSED IN WRIT PETITION
NO.30221/2012.
THESE APPEALS COMING ON FOR PRELIMINARY
HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE
FOLLOWING:
5
JUDGMENT
These intra Court appeals emanate from a
common order dated 18.09.2018 passed by the
learned Single Judge by which the writ petitions
preferred by the appellants have been dismissed.
2. Facts giving rise to the filing of these appeals
briefly stated are that the appellants are Companies
incorporated under the Companies Act, 1956. The
Karnataka State Financial Corporation (hereinafter
referred to as 'the Corporation') is a Corporation
established under the State Financial Corporations
Act, 1951. The Corporation published e-auction notice
in English and Regional newspapers in respect of
property No.1014/D, Binnamangala 2nd Stage, 17th
E Cross, Indiranagar, Bangalore on 27.02.2012. The
auction was scheduled to be held on 31.03.2012. The
appellant participated in the auction and the bid of
the appellant was found to be the highest. The
appellant was informed that the bid has been
accepted subject to confirmation of the sale. The
appellant thereafter was required to remit a sum of
Rs.20,50,000/- which was tendered by the appellant
on 31.03.2012. The appellant was required to pay the
balance 75% of the bid amount.
3. In the meanwhile, the borrower had submitted
an application on 06.03.2012 under the one time
settlement scheme. Till then, the confirmation of sale
had not taken place. The borrower deposited the
entire amount due to the Corporation on 26.09.2012.
Thereafter, the Corporation remitted the earnest
money deposit to the appellant on 22.01.2013. Being
aggrieved, the appellant filed a writ petition namely
W.P.No.30220/2012 before the learned Single Judge
in which a prayer was made to convey the property
subject to deposit of 75% of the amount.
4. The Corporation issued another auction notice
on 15.03.2012 by which the auction in respect of
another property namely property bearing
Nos.467/30, 45th Cross Road, 8th Block, Sangam
Circle, Jayanagar, Bangalore - 560 082 was scheduled
to be held on 05.05.2012. The appellant also
participated in the aforesaid auction and his bid was
declared to be the highest. The appellant deposited
25% of the bid amount on 05.05.2012. In the
meanwhile, one of the legal representatives of the
borrower filed an appeal before the Debt Recovery
Tribunal in which an interim order was granted by the
Tribunal. By the aforesaid interim order, it was
directed by the Tribunal that in case the borrower
deposits a sum of Rs.10,00,000/-, the auction shall
remain in abeyance. The borrower deposited a sum of
Rs.10,00,000/- on 13.05.2012. The Corporation
therefore, vide communication dated 16.08.2012,
informed the appellant that the auction has been
temporarily cancelled. Thereafter, the appellant filed
a writ petition namely W.P.No.30221/2012.
5. However subsequently, the appeal filed by the
borrower before the Tribunal was dismissed on
10.10.2014. The Corporation thereupon issued
another sale notice on 25.11.2006 which was
published in the newspaper dated 27.11.2016. The
aforesaid sale notice was challenged by the appellant
in a writ petition namely W.P.No.63249/2016. The
learned Single Judge, by a common order dated
18.09.2018, dismissed the writ petitions preferred by
the appellant. In the aforesaid factual background,
these appeals have been filed.
6. Learned counsel for the appellant submitted
that the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest
Act, 2002 (hereinafter referred to as 'the SARFAESI
Act') is a special law and has a overriding effect over
any other provision of law. It is further submitted
that an auction in respect of the property held under
the provisions of the aforesaid Act, can be withdrawn
before the sale in the auction. It is further submitted
that once the sale takes place, the authority has no
jurisdiction to cancel the auction. In support of
aforesaid submission, reference has also been made to
provisions of Rule 8 of Security Interest (Enforcement)
Rules, 2002. Learned counsel for the appellant has
also relied on the decision of the Supreme Court in
'PEGASUS ASSETS RECONSTRUCTION (P) LTD. Vs.
HARYANA' (2016) 4 SCC 47 and Madras High Court
decision in K.CHIDAMBARA MANICKAM Vs.
SHAKEENA AND ORS.' AIR 2008 MADRAS 108.
7. On the other hand, learned counsel for the
Corporation has submitted that the issued involved in
these appeals is no longer res integra and is infact
covered by a decision of the Supreme Court in
'MATHEW VARGHESE Vs. M.AMRITHA KUMAR AND
OTHERS' (2014) 5 SCC 610.
8. We have considered the submissions made on
both sides and have perused the record. The core
issue involved in these appeals is whether the
mortgagee has a right to redeem the property after the
auction of the property has been held. The aforesaid
issue is no longer res integra and has been answered
by the Supreme Court in MATHEW VARGHESE,
supra. Paragraphs 37 to 39 of the aforesaid judgment
is reproduced below for the facility of reference:
"37. Mr Shyam Divan, learned Senior
Counsel relied upon the decision in Narandas
Karsondas, in which the right of a mortgagor
as prescribed under section 60 of the TP act
has been spelt out. Under section 60 of the
TP act, at any time after the principal money
fell due, there is a right in the mortgagor on
payment or tender at a proper time and place
of the mortgage money, to require a
mortgagee to restore the property to the
mortgagor with all rights prescribed as it
stood prior to the mortgage. Under the
proviso, the only impediment would be that if
such a right of a mortgagor stood
extinguished by the act of the parties or by
the decree of a court. Certain other conditions
are also stipulated in the said provision for
the mortgagor to seek for redemption of the
mortgaged property. Dealing with the said
provision, this Court held as under in paras
34 and 35. Paras 34 and 35 are as under:
(SCC p. 254)
"34. 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.
The combined effect of Section 54 of
the Transfer of Property Act and
Section 17 of the Registration Act is
that a contract for sale in respect of
immovable property of the value of
more than one hundred rupees
without registration cannot
extinguish the equity of redemption.
In India it is only on execution of the
conveyance and registration of
transfer of the mortgagor's interest
by registered instrument that the
mortgagor's right of redemption will
be extinguished. The conferment of
power to sell without intervention of
the court in a mortgage deed by itself
will not deprive the mortgagor of his
right to redemption. The extinction of
the right of redemption has to be
subsequent to the deed conferring
such power. The right of redemption
is not extinguished at the expiry of
the period. The equity of redemption
is not extinguished by mere contract
for sale.
35. The mortgagor's right to
redeem will survive until there has
been completion of sale by the
mortgagee by a registered deed. In
England a sale of property takes
place by agreement but it is not so in
our country. The power to sell shall
not be exercised unless and until
notice in writing requiring payment of
the principal money has been served
on the mortgagor. Further Section
69(3) of the Transfer of Property Act
shows that when a sale has been
made in professed exercise of such a
power, the title of the purchaser shall
not be impeachable on the ground
that no case had arisen to authorise
the sale. Therefore, until the sale is
complete by registration the
mortgagor does not lose right of
redemption." (emphasis added)
38. On a reading of the above paragraphs,
we are able to discern the ratio to the effect
that a mere conferment of power to sell
without intervention of the court in the
mortgage deed by itself will not deprive the
mortgagor of his right to redemption, that the
extinction of the right of redemption has to be
subsequent to the deed conferring such
power, that the right of redemption is not
extinguished at the expiry of the period, that
the equity of redemption is not extinguished
by mere contract for sale and that the
mortgagor's right to redeem will survive until
there has been completion of sale by the
mortgagee by a registered deed. The ratio is
also to the effect that the power to sell should
not be exercised unless and until notice in
writing requiring payment of the principal
money has been served on the mortgagor.
The above proposition of law of course was
laid down by this Court in Narandas
Karsondas while construing section 60 of the
TP act. But as rightly contended by Mr
Shyam Divan, we fail to note any distinction
to be drawn while applying the abovesaid
principles, even in respect of the sale of
secured assets created by way of a secured
interest in favour of the secured creditor
under the provisions of the SARFAESI Act,
read along with the relevant Rules. We say
so, inasmuch as, we find that even while
setting out the principles in respect of the
redemption of a mortgage by applying section
60 of the TP act, this Court has envisaged the
situation where such mortgage deed
providing for resorting to the sale of the
mortgage property without the intervention of
the Court. Keeping the said situation in mind,
it was held that the right of redemption will
not get extinguished merely at the expiry of
the period mentioned in the mortgage deed. It
was also stated that the equity of redemption
is not extinguished by mere contract for sale
and the most important and vital principle
stated was that the mortgagor's right to
redeem will survive until there has been
completion of sale by the mortgagee by a
registered deed. The completion of sale, it is
stated, can be held to be so unless and until
notice in writing requiring payment of the
principal money has been served on the
mortgagor. Therefore, it was held that until
the sale is complete by registration of sale,
the mortgagor does not lose the right of
redemption. It was also made clear that it
was erroneous to suggest that the mortgagee
would be acting as the agent of the
mortgagor in selling the property.
39. When we apply the above principles
stated with reference to section 60 of the TP
act in respect of a secured interest in a
secured asset in favour of the secured
creditor under the provisions of the
SARFAESI Act and the relevant Rules
applicable, under Section 13(1), a free hand
is given to a secured creditor to resort to a
sale without the intervention of the court or
tribunal. However, under Section 13(8), it is
clearly stipulated that the mortgagor i.e the
borrower, who is otherwise called as a
debtor, retains his full right to redeem the
property by tendering all the dues to the
secured creditor at any time before the date
fixed for sale or transfer. Under sub-section
(8) of Section 13, as noted earlier, the
secured asset should not be sold or
transferred by the secured creditor when
such tender is made by the borrower at the
last moment before the sale or transfer. The
said sub-section also states that no further
step should be taken by the secured creditor
for transfer or sale of that secured asset. We
find no reason to state that the principles laid
down with reference to section 60 of the TP
act, which is general in nature in respect of
all mortgages, can have no application in
respect of a secured interest in a secured
asset created in favour of a secured creditor,
as all the abovestated principles apply on all
fours in respect of a transaction as between
the debtor and secured creditor under the
provisions of the SARFAESI Act."
9. Thus, from perusal of the aforesaid decision, it
is evident that the principles laid down with reference
to Section 60 of the Property Act which is general in
nature in respect of all the mortgages, applies in
respect of a secured asset or a security interest
mortgaged in respect of secured creditor under the
provisions of the SARFAESI Act. Therefore, a secured
asset can be redeemed before a sale deed is executed
or the sale of the secured asset is confirmed in favor of
the purchaser.
10. In view of aforesaid enunciation of law by the
Supreme Court, the contention of the learned counsel
for the appellant that once a date of auction is fixed,
the Corporation has no right to postpone the auction
or to withdraw the auction notice, is misconceived and
is therefore, rejected.
11. In order to sell an asset, the Corporation is
required to be give 30 days' notice. In paragraph 53 of
the judgment in the case of MATHEW VARGHESE,
supra, the Supreme Court has held as under:
53. We, therefore, hold that unless and until
a clear 30 days' notice is given to the
borrower, no sale or transfer can be 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 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 Rule 9(1) has to be necessarily
followed, 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 Sarfaesi Act, in particular
Sections 13(1) and (8) of the said Act.
12. Thus, in compliance of the aforesaid
mandate, after dismissal of the appeal by the Debt
Recovery Tribunal on 10.10.2014, the Corporation
had issued auction notice dated 27.11.2016. The
aforesaid auction notice is in consonance with law
and does not suffer from any infirmity.
13. For the aforementioned reasons, we do not
find any ground to interfere with the order passed by
the learned Single Judge.
In the result, the appeals fail and are hereby
dismissed.
Sd/-
JUDGE
Sd/-
JUDGE
RV
