Madras High Court
A.Muthukrishna Pandi vs The Registrar on 8 April, 2024
Author: R.Suresh Kumar
Bench: R.Suresh Kumar
W.P.(MD)No.8789 of 2024
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED : 08.04.2024
CORAM
THE HON'BLE MR.JUSTICE R.SURESH KUMAR
AND
THE HON'BLE MR.JUSTICE G.ARUL MURUGAN
W.P(MD)No.8789 of 2024
and
W.M.P.(MD)Nos.8011 and 8012 of 2024
A.Muthukrishna Pandi ... Petitioner
vs
1.The Registrar,
The Debts Recovery Tribunal,
IV Floor, Kalyani Towers,
Melur Road, Madurai.
2.The Authorised Officer,
Indian Bank,
Avaniapuram Branch,
Madurai-625 012.
3.The Branch Manager,
Indian Bank,
Avaniapuram Branch,
Madurai-625 012.
4.V.Karuppaiah ...Respondents
1/14
https://www.mhc.tn.gov.in/judis
W.P.(MD)No.8789 of 2024
PRAYER: Writ Petition filed under Article 226 of the Constitution of India,
to issue a Writ of Certiorarified Mandamus, to call for the records pertaining
to the second respondent executed the impugned sale certificate in
Document No.85 of 2024, dated 05.01.2024 in favour of the fourth
respondent and to quash the same and to direct the second respondent to
receive the auction amount from the petitioner and release his property.
For Petitioner : Mr.R.Manickam
*****
ORDER
(Order of this Court was made by G.ARUL MURUGAN, J.)
This Writ Petition is filed challenging the impugned sale certificate
executed by the second respondent in Doc.No.85 of 2024, dated 05.01.2024
in favour of the fourth respondent and to quash the same and to direct the
second respondent to receive the auction amount from the petitioner and
release the property.
2.The petitioner is involved in the business of manufacturing plastic
suitcase beeding in the name and style of “M/s.Santhosh Plastic” at
Pottapalayam Village, Sivagangai District. For the purpose of his business,
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he had availed a working capital loan to the tune of Rs.7.50 lakhs, a term
loan of Rs.7.03 lakhs, working capital under PMEGP for Rs.1.50 lakhs and
emergency credit line scheme during COVID-19 for Rs.2.59 lahs and in all,
has availed a sum of Rs.18.62 lakhs. Due to intervening COVID-19
situation, the petitioner incurred huge loss and therefore, was not able to
service the interest properly, which resulted in initiation of the proceedings
under Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (hereinafter referred to as
“SARFAESI Act”). Notice under Section 13(2) of the Act was issued on
18.06.2022 demanding a sum of Rs.11,91,853/-. The Bank, without issuing
any possession notice, has issued the sale notice, dated 24.01.2023,
claiming a sum of Rs.13,71,857/- followed by another sale notice, dated
02.02.2023 fixing the auction date for sale of the property on 28.02.2023.
3.As the sale notice issued was not in compliance with the
SARFAESI Act and Rules, the petitioner had filed a Writ Petition in
W.P(MD)No.4596 of 2023. As the post of Presiding Officer was vacant in
the Debts Recovery Tribunal, Madurai, this Court had entertained the Writ
Petition and passed a conditional order for depositing of a sum of Rs.
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5,00,000/- and further directed the Bank to consider the one time settlement.
The petitioner has paid the sum of Rs.5,00,000/- and approached the Bank
for one time settlement, but however, without considering the proposal,
again a sale notice, dated 19.10.2023 was issued and since this sale notice
was also not as per the SARFAESI Act and Rules, the petitioner has
challenged the same before the Debts Recovery Tribunal in S.A.No.666 of
2023, wherein, an order of interim stay was passed on condition to pay a
sum of Rs.1,28,000/- each in three equal monthly instalments. As the said
order was not communicated in time by his Counsel to the petitioner, he was
not able to pay the first instalment within the prescribed time. However,
when he approached the third respondent Bank on 22.02.2024, with three
demand drafts, the Bank has refused to receive the same and informed that
the property has already been sold in an auction and the sale certificate has
also been executed in favour of the fourth respondent on 05.01.2024 and as
such, the petitioner has come up with the present Writ Petition challenging
the sale certificate.
4.The learned Counsel appearing for the petitioner reiterated the
averments made in the affidavit and submitted that even though the interim
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order was passed by the Debts Recovery Tribunal, since the same was not
communicated to the petitioner in time, the petitioner was not able to make
the payments, but however, he had approached the Bank on 22.02.2024 with
three demand drafts to comply with the interim orders granted by the
Tribunal, but however, the Bank had informed that already property has
been sold in the auction and also, a sale certificate has been executed on
05.01.2024 in favour of the fourth respondent. The learned Counsel
contended that when the interim order was granted and the SARFAESI
application is still pending before the Debts Recovery Tribunal, the auction
conducted by the Bank and the impugned sale certificate executed in favour
of the fourth respondent are not sustainable and therefore, sought to quash
the sale certificate and to direct the Bank to receive the payments.
5.The petitioner having availed loan from the second and third
respondents Bank for the purpose of his business, has not re-paid the loan
and therefore, the account was classified as non performing asset on
30.03.2022 and thereafter, proceedings were initiated under the SARFAESI
Act. The Bank had issued a notice under Section 13(2) of the Act on
18.06.2022 calling upon the petitioner to pay a sum of Rs.11,91,853/-
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within a period of sixty days and since the petitioner has not made the
payment, the Bank had taken possession of the property on 15.09.2022 as
per Section 13(4) of the Act. Thereafter, the sale notice was issued on
02.02.2023 by fixing the sale on 28.02.2023.
6.During that time, the post of Presiding Officer was vacant in the
Debts Recovery Tribunal, Madurai. Hence, the sale notice was challenged
before this Court in W.P.(MD)No.4596 of 2023 and the Division Bench by
order, dated 03.03.2023 had directed the petitioner to pay a sum of
Rs.5,00,000/- within two weeks and a liberty was given to the petitioner to
approach the Bank for one time settlement or for re-structuring the loan
amount.
7.Even though the Division Bench had, by order, dated 03.03.2023,
directed the petitioner to pay a sum of Rs.5,00,000/- within a period of two
weeks, ie., within 17.03.2023, the petitioner had not complied with such
direction by making the payment and thereafter, a fresh sale notice has been
issued on 19.10.2023. Challenging the sale notice, the petitioner has filed an
application in S.A.No.666 of 2023 before the Debts Recovery Tribunal,
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Madurai and the Debts Recovery Tribunal, by an order, dated 22.11.2023,
granted an interim stay not to confirm the sale till 23.02.2024, subject to
payment of 40% of the amount, ie., Rs.9,59,451/- in three equal monthly
instalments. In effect, the petitioner was directed to pay a sum of Rs.
1,28,000/- each on 22.12.2023, 22.01.2024 and 22.02.2024, failing which,
the interim order granted shall stand vacated automatically. The petitioner
has not complied with the interim order by making payments, as directed by
the Tribunal, but however, it is contended that on 22.02.2024, he
approached the Bank with three demand drafts, but the Bank has refused to
receive the payments and have informed him that already the sale has been
confirmed and a sale certificate has been executed in favour of the fourth
respondent on 05.01.2024.
8.When the petitioner approached the Debts Recovery Tribunal,
Madurai, and obtained an order of interim stay on 22.11.2023, whereby, the
petitioner was directed to pay a sum of Rs.1,28,000/- in three equal monthly
instalments commencing from 22.12.2023 and further, the Tribunal has
specifically imposed a condition that in the event of failure to pay any of the
instalments, as ordered, the respondent Bank are at liberty to proceed further
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and the interim order shall stand vacated automatically. As the petitioner,
admittedly, has not complied with the condition by making the payment of
instalment, the interim order stood automatically vacated and the respondent
Bank have confirmed the auction and the sale certificate has also been
executed in favour of the fourth respondent on 05.01.2024. Admittedly,
when the SARFAESI application filed by the petitioner is pending and if at
all the petitioner has any grievance, it is for the petitioner to proceed further
with the case pending before the Debts Recovery Tribunal, Madurai and the
present Writ Petition challenging the sale certificate issued in favour of the
fourth respondent is not maintainable.
9.The petitioner, as a borrower, has a right to redeem the property
only till the property is sold and the sale certificate is executed in favour of
the auction purchaser and when it is a settled proposition of law that once
the sale certificate is executed in favour of the auction purchaser, the right
of the borrower to redeem his property stands extinguished. When the
property has been sold in an auction and the sale certificate has been
executed in favour of the fourth respondent on 05.01.2024, the petitioner
has lost his right to redeem the property and his right over the property
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stands extinguished.
10.It is useful to refer the judgment of the Hon'ble Supreme Court in
the case of Dwarika Prasad vs State of Uttar Pradesh and others, reported
in (2018) 5 SCC 491, wherein, the Hon'ble Supreme Court held as follows:
“8. Section 13(8) of the SARFAESI Act provides as follows:
“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 that secured asset.”
These provisions have fallen for interpretation before this Court
in Mathew Varghese [Mathew Varghese v. M. Amritha Kumar, (2014)
5 SCC 610 : (2014) 3 SCC (Civ) 254] . Dwelling on Section 60 of the
Transfer of the Property Act, 1882 this Court held that the right of
redemption is available to a mortgagor unless it stands extinguished by
an act of parties. The right of the mortgagor to redeem the property
survives until there has been a transfer of the mortgagor's interest by a
registered instrument of sale. Applying these principles in the context of
the SARFAESI Act this Court held as follows : (SCC p. 638, para 39)
“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
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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. 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 [Mathew Varghese v. M. Amritha
Kumar, (2014) 5 SCC 610 : (2014) 3 SCC (Civ) 254] .
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11.Further, the Hon'ble Supreme Court in CELIR LLP -vs- Bafna
Motors (Mumbai) Private Limited and others, reported in (2023) 5 MLJ
649 (SC), held as follows:
“105. We summarise our final conclusion as under:
(i) The High Court was not justified in exercising its writ
jurisdiction under Article 226 of the Constitution more
particularly when the borrowers had already availed the
alternative remedy available to them under Section 17 of the
SARFAESI Act.
(ii) The confirmation of sale by the Bank under Rule 9(2) of the
Rules of 2002 invests the successful auction purchaser with a
vested right to obtain a certificate of sale of the immovable
property in form given in appendix (V) to the Rules i.e., in
accordance with Rule 9(6) of the SARFAESI.
(iii) 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.
In other words, 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. However, the
amended provisions of Section 13(8) of the SARFAESI Act, make
it clear that 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 is 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 the completion of the sale or
transfer of the secured asset in favour of the auction purchaser.
(iv) The Bank after having confirmed the sale under Rule 9(2) of
the Rules of 2002 could not have withhold the sale certificate
under Rule 9(6) of the Rules of 2002 and enter into a private
arrangement with a borrower.
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(v) The High Court under Article 226 of the Constitution could
not have applied equitable considerations to overreach the
outcome contemplated by the statutory auction process
prescribed under the SARFAESI Act.
(vi) The two decisions of the Telangana High Court in the case of
Concern Readymix (supra) and Amme Srisailam (supra) do not
lay down the correct position of law. In the same way, the
decision of the Punjab and Haryana High Court in the case of
Pal Alloys (supra) also does not lay down the correction position
of law.
(vii) The decision of the Andhra Pradesh High Court in Sri Sai
Annadhatha Polymers (supra) and the decision of the Telangana
High Court in the case of K.V.V. Prasad Rao Gupta (supra) lay
down the correct position of law while interpreting the amended
Section 13(8) of the SARFAESI Act.”
12.In view of the above, since already sale has been confirmed and
the sale certificate has been executed and registered on 05.01.2024 in
Doc.No.85 of 2024 in favour of the fourth respondent, the present Writ
Petition filed by the petitioner challenging the impugned sale certificate is
not maintainable and the petitioner has lost his right to redeem the property.
However, if, according to the petitioner, there are any procedural
irregularities or if the sale certificate has been executed in contravention of
the interim order passed by the Tribunal, it is open to the petitioner to
agitate his claim in the SARFAESI application, which is already pending
before the Debts Recovery Tribunal, Madurai. But, however, the present
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Writ Petition filed before this Court challenging the impugned sale notice is
not sustainable.
13.Accordingly, the Writ Petition stands dismissed. However, there
is no order as to costs. Consequently, connected Miscellaneous Petitions
are closed.
[R.S.K., J] & [G.A.M., J]
08.04.2024
Internet :Yes/No
Index :Yes/No
NCC :Yes/No
cmr
To
The Registrar,
The Debts Recovery Tribunal,
IV Floor, Kalyani Towers,
Melur Road, Madurai.
https://www.mhc.tn.gov.in/judis
R.SURESH KUMAR, J.
AND
G.ARUL MURUGAN, J.
cmr
Order made in
08.04.2024
https://www.mhc.tn.gov.in/judis
