Madhya Pradesh High Court
Rasheed Khan vs Authorised Officer Uco Bank And Anr. on 16 January, 2025
Author: Vivek Rusia
Bench: Vivek Rusia
NEUTRAL CITATION NO. 2025:MPHC-IND:1099
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IN THE HIGH COURT OF MADHYA PRADESH
AT INDORE
BEFORE
HON'BLE SHRI JUSTICE VIVEK RUSIA
&
HON'BLE SHRI JUSTICE GAJENDRA SINGH
WRIT PETITION No. 7534 of 2013
RASHEED KHAN
Versus
AUTHORISED OFFICER UCO BANK AND ANR. AND OTHERS
Appearance:
Shri Vivek Dalal - Advocate for the petitioner.
None present on behalf of the respondents.
Reserved on : 08.01.2025
Delivered on : 16.01.2025
ORDER
Per: Justice Vivek Rusia
The petitioner has filed the present petition being aggrieved by
an order dated 06.05.2013 passed by the Debt Recovery Appellate
Tribunal (in short "DRAT"), whereby Appeal No.R-164/2012 filed by
respondent No.2 has been allowed. The matter has been remanded back
to the Debt Recovery Tribunal (in short "DRT") for fresh adjudication.
The facts of the case in short are as follows:
02. M/s Ratlam Recycle Board Industries through its proprietor
Miss Kiran Badera. Miss Kiran Badera took a loan of Rs.15 Lacs from
respondent No.1 / UCO Bank by creating a property mortgaged on
31.03.2006. Respondent No.2 stood as a guarantor by mortgaging her
property. Since the borrower could not repay the loan, therefore, the
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bank initiated the proceeding and declared the account as NPA. The
bank issued a notice under Section 13(2) of Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002 (in short "SARFAESI Act") on 25.01.2011 to respondent
No.2 who stood as guarantor, for recovery of Rs.37,25,778.15 as on
01.01.2011 along with interest, incidental expenses, costs, etc. The bank
conducted an auction sale of the properties of respondent No.2 on
16.08.2011. Being aggrieved by the aforesaid auction sale, respondent
No. 2 approached the DRT by way of S.A. No.136 of 2011 along with
an application for interim relief. The learned Tribunal rejected the
interim injunction thereafter, respondent No. 2 approached the DRAT by
way of Appeal No.R-113 of 2011. The learned DRAT vide order dated
26.08.2011 directed respondent No.2 to deposit the amount of Rs.12
Lacs within 30 days and further Rs.8 Lacs within 3 days and in the
meanwhile, directed the parties to maintain status quo. Finally, the
DRAT disposed of the appeal with the direction to the DRT to decide the
pending securitization application.
03. Vide order dated 07.02.2012, the learned DRT dismissed the
securitization application on the ground that respondent No.2 failed to
deposit the amount as directed by the learned DRAT, whereas
respondent No.2 came up with the plea that she had handed over 7
demand drafts totalling Rs.34.75 Lacs to the bank and the rest of the
amount given by way of demand draft of Rs.2.55 Lacs and despite that
the learned DRT dismissed the securitization application.
04. Being aggrieved by the dismissal of the securitization
application, respondent No.2 being a guarantor preferred an appeal on
the ground that she extended the guarantee for a sum of Rs.15 Lacs +
interest thereon, but the bank enhanced the loan facility upto 20 lakhs
without her consent
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05. The learned DRAT found that no guarantee deed prior to or
later than 18.01.2007 is available, and no detail or mortgage on
31.03.2006 is available to ascertain as to how much the amount was
secured first time which was subjected to increase by Rs.5 Lacs on
18.01.2007, therefore, the learned DRT did not ascertain as to how much
amount was secured by guarantee and mortgage. Neither the petitioner
nor the bank submitted any document before the learned DRT and as per
the bank guarantee dated 18.01.2007, the liability and the guarantee are
only Rs.20 Lacs hence, the learned DRAT has set aside the impugned
order and remanded the matter back to the DRT to decide the appeal
afresh and also directed the bank to return the amount deposited by the
auction purchaser together with the interest @ 10%. Being aggrieved by
the aforesaid order, the present petitioner who is an auction purchaser
filed the present writ petition. Vide order dated 15.07.2023, this Court
stayed the proceedings of the DRT.
06. Respondents No.1 & 2 both have been served but did not file
any reply or application for vacating stay. Even today, no one is present
to argue on their behalf.
07. Shri Vivek Dalal, learned counsel for the petitioner submits that
the learned DRAT has wrongly interfered with the impugned order
passed by the DRT without considering the provisions of sub-section (8)
of Section 13 of SARFAESI Act as stood before the amendment on
15.01.2013. The borrower / respondent No.2 was required to deposit the
entire amount of dues together with all costs, charges, and expenses at
any time before the date of publication of notice for public auction then
only the borrower has the right to protect his property. In the present
case, admittedly, the amount was not deposited before the auction sale
hence, the auction sale has wrongly been set aside by the DRAT. In
support of his contention, Shri Dalal, learned counsel for the petitioner
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has placed reliance on judgments passed by the Hon'ble Apex Court in
the cases of Celir LLP V/s Bafna Motors (Mumbai) (P) Ltd., (2024) 2
SCC 1 (Relevant Paragraphs - 110.3) and State of Punjab and another
V/s Ferrous Alloy Forgings P Ltd. and others, 2024 SCC OnLine SC
3372. He has also placed reliance on the case of Hindon Forge Private
Limited V/s State of Uttar Pradesh, (2019) 2 SCC 198 (Relevant
Paragraphs - 25, 26, 32 & 41).
08. For the ready reference, original Section 13(8) of SARFAESI
Act prior to amendment dated 15.01.2013 is reproduced below:
(8) Where the amount of 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 of
publication of notice for public auction or inviting quotations
tender from public or private treaty for transfer by or 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.]
09. It is clear from the aforesaid provision that if dues of the
secured creditor together with all costs, charges and expenses are
tendered at any time before the date fixed for sale or transfer, the
secured asset shall not be sold by the secured creditor. Respondent No.2
approached the DRT against the UCO Bank challenging the proceedings
initiated under Sections 13 & 14 of the SARFAESI Act only on the
ground that the bank had proceeded against the mortgage property of the
guarantor without proceeding against the hypothecated goods of the
borrower. The bank took possession of the secured assets after
complying with the provisions of Section 8(1) & (2) of the Security
Interest (Enforcement) Rules, 2002. The bank scheduled the sale on
16.08.2011 for recovery of Rs.38.19 Lacs with interest from 01.01.2011,
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therefore, respondent No.2 being a guarantor ought to have deposited
the amount before the scheduled date. However, the respondent
approached the Tribunal and vide interim order dated 11.08.2011, the
interim relief was refused. Thereafter, they approached the learned
DRAT. The learned DRAT vide order dated 26.08.2011 directed the
respondent No.2 guarantor to deposit Rs.12 Lacs within 30 days and a
further Rs.8 Lacs within 3 months. It was made clear that if he does not
pay any of the instalments as undertaken, the bank shall be free to take
appropriate action to dispose of the suit house. Admittedly respondent
No.2 did not deposit Rs. 20 lakhs within the aforesaid time limit
10. Thereafter, vide order dated 05.01.2012, the appeal was finally
disposed of by holding that the DRT shall not be influenced by the
deposit made by the appellant and shall decide the case independently.
The sale certificate had already been issued in favour of the present
petitioner on 24.08.2011, therefore, respondent No.2 ought to have
produced the documents to show that the amount of Rs.12 Lacs and
Rs.8 Lacs had been deposited within 30 days and 3 months respectively
after 26.08.2011. As per provisions of Section 13(8) of the SARFAESI
Act, respondent No.2 was required to clear the dues before 16.08.2011
when the auction sale was scheduled, no amount was offered, therefore,
the bank rightly sold the secured interest and issued a sale certificate on
24.08.2011. The sale certificate was registered on 27.08.2011.
Respondent No.2 did not comply with the interlocutory order dated
26.08.2011 by depositing Rs.20 Lacs. In fact Appeal No.R-113/2011
came up for hearing on 05.01.2012 and on the said date, respondent
No.2 handed over 7 drafts totaling sum of Rs.34.75 Lacs to the counsel
appearing for the bank. The learned DRAT disposed of the appeal with a
liberty to the bank to encash the same, however, observed that any
action so taken shall be subject to the outcome. By that time, the sale
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had already been completed, the sale certificate was issued on
24.08.2011 and the same was registered also.
11. The learned DRAT while disposing of the appeal observed that
DRT shall not be influenced by any deposit made by the appellant
and shall decide the case independently, therefore, the deposit of
Rs.34.75 Lacs on 05.01.2012 did not give any right in favour of the
respondent No.2 guarantor, therefore, on merit, in view of Section 13(8)
of SARFAESI Act, the respondent No.2 did not clear the dues from the
date of the auction, therefore, the deposit of Rs.34.75 Lacs on
05.01.2012 would have no effect. The Apex Court in the case of Celir
LLP (supra) has held that in accordance with the un-amended Section
13(8) of the SARFAESI Act, the right of a borrower to redeem the
secured asset shall be available till the sale or transfer of such secured
asset. The relevant Paragraph No.51 is reproduced below:
51. The true purport and scope of the amended Section 13(8) of the
SARFAESI Act was looked into by the Andhra Pradesh High Court
in Sri. Sai Annadhatha Polymers & Anr. v. Canara Bank rep. by its
Branch Manager, Mandanapalle reported in 2018 SCC OnLine
Hyd 178. The court took the view that in accordance with the
unamended Section 13(8) of the SARFAESI Act, the right of the
borrower to redeem the secured asset was available till the sale or
transfer of such secured asset. The court went on to say that the
amended provisions of Section 13(8) of the SARFAESI Act
brought in a radical change inasmuch as the right of the borrower to
redeem the secured asset would stand extinguished thereunder on
the very date of publication of the notice for public auction under
Rule 9(1) of the Rules of 2002. It is pertinent to note that the High
Court has referred to and relied upon the decision of this Court in
Mathew Varghese (supra). The relevant observations made by the
High Court are reproduced hereinbelow:
"6. In terms of the amended provisions of Section 13(8)
of the SARFAESI Act, the right of redemption given to
the borrower would expire upon publication of such a
notice. However, Rule 8(6) of the Rules of 2002, as
interpreted by the Supreme Court in Mathew Varghese v.
M. Amritha Kumar [(2014) 5 SCC 610], stipulates that
the thirty day notice period mentioned therein is for the
purpose of enabling the borrower to redeem his property.
Significantly, this provision remains unaltered.
Therefore, this statutory notice period of thirty days is
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sacrosanct and deviation therefrom would curtail the
statutory right of redemption available to the borrower.
However, in terms of the amended Section 13(8) of the
SARFAESI Act, once the notice under Rule 9 of the
Rules of 2002 is published, the said right stands
extinguished.
xxx xxx xxx
20. In the light of the aforestated changes in the statutory
scheme, certain crucial aspects may be noted. As per the
unamended Section 13(8) of the SARFAESI Act, the
right of the borrower to redeem the secured asset was
available till the sale or transfer of such secured asset.
Case law consistently held to the effect that a sale or
transfer is not completed until all the formalities are
completed and there is an effective transfer of the asset
sold. In consequence, the borrower's right of redemption
did not stand terminated on the date of the auction sale of
the secured asset itself and remained alive till the transfer
was completed in favour of the auction purchaser, by
registration of the sale certificate and delivery of
possession of the secured asset. The recent judgment of
the Supreme Court in ITC LIMITED v. BLUE COAST
HOTELS LIMITED also affirmed this legal position.
21. However, the amended provisions of Section 13(8) of
the SARFAESI Act bring in a radical change, inasmuch
as the right of the borrower to redeem the secured asset
stands extinguished thereunder on the very date of
publication of the notice for public auction under Rule
9(1) of the Rules of 2002. In effect, the right of
redemption available to the borrower under the present
statutory regime stands drastically curtailed and would
be available only till the date of publication of the notice
under Rule 9(1) of the Rules of 2002 and not till
completion of the sale or transfer of the secured asset in
favour of the auction purchaser. ...
xxx xxx xxx
23. Therefore, even after the amendment of Section
13(8) of the SARFAESI Act, a secured creditor is bound
to afford to the borrower a clear thirty day notice period
under Rule 8(6) to enable him to exercise his right of
redemption. In consequence, a notice under Rule 9(1) of
the Rules of 2002 cannot be published prior to expiry of
this thirty day period in the new scenario, post-
amendment of Section 13(8) of the SARFAESI Act, as
such right of redemption would stand terminated
immediately upon publication of the sale notice under
Rule 9(1) of the Rules of 2002. The judgment of the
Supreme Court in CANARA BANK v. M.
AMARENDER REDDY, which was rendered in the
context of the unamended provisions, would therefore
have no application to the post-amendment scenario in
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the light of the change brought about in Section 13(8). To
sum up, the post-amendment scenario inevitably requires
a clear thirty day notice period being maintained between
issuance of the sale notice under Rule 8(6) of the Rules
of 2002 and the publication of the sale notice under Rule
9(1) thereof, as the right of redemption available to the
borrower in terms of Rule 8(6) of the Rules of 2002, as
pointed out in MATHEW VARGHESE, stands
extinguished upon publication of the sale notice under
Rule 9(1)."
(Emphasis supplied)
12. In the case of Hindon Forge Private Limited and another
(supra), it is held that the bank and financial institutions can recover
their debt by selling the properties outside the Court process under the
SARFAESI Act by adhering to the statutory conditions laid down by the
said Act. It is only when such statutory conditions are not adhered to
that the Debts Recovery Tribunal comes in at the behest of the borrower.
Therefore, the deposit of the amount by respondent No.2 on 05.01.2012
was much after the date of the auction dated 16.08.2011 which will not
help. Hence, the learned DRAT ought not to have interfered with the
order passed by the learned DRT.
13. In view of the above, this Writ Petition is allowed. The
impugned order dated 06.05.2013 passed by the Debt Recovery
Appellate Tribunal in Appeal No.R-164/2012 is hereby set aside. The
order passed by the learned District Magistrate for handing over the
possession of the sold property to the petitioner be complied with. The
amount deposited by respondent No.2 with the bank before the learned
DRAT be returned to respondent No.2 with interest at the prevailing
interest rate, if already not returned so far.
(VIVEK RUSIA) (GAJENDRA SINGH)
JUDGE JUDGE
Divyansh
