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TMI Blog2015 (1) TMI 463X X X X Extracts X X X X X X X X Extracts X X X X ..... uthi Builders Private Limited - secured loan from the respondent- banks - Indian Overseas Bank, Andhra Loyola College Branch, Vijayawada and Dena Bank, Vijayawada Branch, Governorpet, Vijayawada respectively. When Respondent No.3 has become a non-performing asset recourse was taken to the provisions of the Securitization Act and accordingly a tender notification was issued on 27.2.2012 for sale of the immovable secured asset of the borrower and the date for auction was fixed as 31.3.2012. The borrower requested for one time settlement on 29.3.2012 by paying Rs. 1.00 crore and Rs. 27.00 lakhs to the respondents-banks respectively, but they proceeded with the auction. The auction purchaser - M/s India Finlease Securities Ltd., Chennai has become the highest bidder for Rs. 18.00 crores for the secured asset i.e "Sainag Complex" Chandramoulipuram, Vijayawada. The Authorized Officer, Dena Bank and the Authorized Officer, Indian Overseas Bank jointly issued letter dated 31.3.2012 accepting the auction purchaser as the highest bidder and directing the purchaser to pay the balance of 25% after deducting EMD amount by 3.4.2012 and the balance bid amount of Rs. 1350 lakhs on or before 16.4.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled Writ Petition No.16254 of 2012 on 4.6.2012 without impleading the authorized officers of the banks and the borrower for a direction to the respondent-banks to execute sale deed in favour of the appellant or its nominees and register the same in respect of the property in question and for a further direction to pay a sum of Rs. 10.00 lakhs to the appellant towards damages for the delay of each day in executing the sale deed in favour of the appellant by declaring the inaction of the respondents-banks in executing the sale deed in spite of the payment of the amount by 13.4.2012 is unjust, contrary to the terms and conditions of auction notice and violative of Articles 14 and 21 of the Constitution of India. 4. The DRT by order dated 18.6.2012 disposed of the S.A observing that the borrower has a right to exercise his right of redemption before the date of sale or transfer and once the amount has been paid and the same having been accepted by both the banks, the applicant is well within it's right to exercise the right of redemption. Though a prayer was made by the auction purchaser to implead it as party to the proceedings the same was rejected. Accordingly, the matter was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in accordance with the provisions of the Registration Act, came to the conclusion that since the acceptance of the amount by the auction purchaser was subject to the outcome of the proceedings before the DRT, confirmation of sale cannot be made absolute and the creditor banks cannot be compelled to execute registered sale deed in respect of the mortgaged property which has already been redeemed by the borrower. However, the learned Judge held that since the auction purchaser paid the entire amount, the auction purchaser is entitled for some compensation and accordingly awarded damages quantified at Rs. 5.00 lakhs and directed creditor banks and the borrower to pay the same as compensation to the auction purchaser in equal proportion. The appellant-writ petitioner also filed Rev.WPMP.No.26312 of 2012 which was dismissed by the learned single Judge by order dated 10.7.2012. 7. Aggrieved by the order of the learned single Judge, the auction purchaser has filed the present appeal. 8. Learned counsel appearing for the auction purchaser submitted that under sub-section (8) of Section 13 of the Securitization Act, the borrower is entitled to redeem the property by depositing the entire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the sale transaction as it does not require any registration. The sale certificate contemplated in an auction of statutory authority is totally different from that of a registered sale deed in a private sale and placed reliance on the decisions of the Supreme Court in B. Arvind Kumar v. Government of India and others3 and Sagar Mahila Vidyalaya, Sagar v. Pandit Sadashi Rao Harshe and others4 contending that once the sale is confirmed the sale becomes absolute and the auction purchaser has got a vested right in the property, whether the sale certificate is issued or not. The Supreme Court also held that the sale certificate does not require any registration and as such issuance of sale certificate has no significance at all to decide the question whether sale is completed or not. Reliance has also been placed on the decision of the Madras High Court in K. Chidambhara Manickam v. Shakeena and others. 9. The learned counsel appearing for the respondents-bank submitted that the borrower approached the DRT even before the auction purchaser deposited the balance sale consideration and as per the directions of the Tribunal, the banks accepted the payments made by the borrower. He pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 2nd respondent, but the banks without considering the same proceeded to open the bids on 31.3.2012. Under those circumstances, 3rd respondent was compelled to approach DRT on 3.4.2012 by filing S.A.No.139 of 2012 and the 3rd respondent complied with the directions of the DRT dated 16.4.2012 and paid the amounts due. Referring to Rule 9(2) of the Rules and the conditions of auction notification, learned counsel argued that confirmation of sale by the "secured creditor" is mandatory and the appellant is not correct in contending that sale automatically becomes confirmed on payment of the balance of sale consideration. Further, on confirmation of sale by the secured creditor only, the Authorized Officer has to issue a certificate of sale of immovable property in favour of the purchaser as required under rule 9(6) of the Rules. He also submitted that the Judgment of the Madras High Court in K. Chidambhara Manickam v. Shakeena and others has no application to the present case. Referring to sub-section (8) of Section 13 learned counsel submitted that the interpretation sought to be put forth by the appellant is contrary to the intendment of the Legislature. Right to get redemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, submitted that since the borrower has redeemed the property in accordance with sub-section (8) of Section 13 before the sale was confirmed by the secured creditor, the appellant is not entitled for the relief which was rightly rejected by the learned single Judge and prayed for dismissal of the appeal. 11. Before we deal with the issues, we may briefly refer to the relevant provisions of the Securitization Act and the Rules made thereunder. Chapter III of the Act deals with Enforcement of Security Interest. Sub-section (1) of Section 13 provides that any security interest created in favour of any secured creditor may be enforced without the intervention of the Court or Tribunal by such creditor in accordance with the provisions of the Act. Sub-section (2) of Section 13 provides that where a borrower makes any default in repayment of secured debt and where the account in respect of such debt is classified by the secured creditor as a non-performing asset, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sit of twenty-five per cent of the amount of the sale price, to the authorized officer conducting the sale and in default of such deposit, the property shall forthwith be sold again. (4) The balance amount of purchase price payable shall be paid by the purchaser to the authorized officer on or before the fifteenth day of confirmation of sale of the immovable property or such extended period as may be agreed upon in writing between the parties. (5) In default of payment within the period mentioned in sub-rule (4), the deposit shall be forfeited and the property shall be resold and the defaulting purchaser shall forfeit all claim to the property or to any part of the sum for which it may be subsequently sold. (6) On confirmation of sale by the secured creditor and if the terms of payment have been complied with, the authorized officer exercising the powers of sale shall issue a certificate of sale of the immovable property in favour of the purchaser in the Form given in Appendix V to these rules. 13. From the above it is clear that where the borrower fails to discharge the liability of the secured creditor within sixty days of notice as provided in sub-section(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the secured creditor' referred to in sub-rules (2) and (6) of Rule by the Legislature would be insignificant. Sub-section (8) of Section 13, in our view, permits two contingencies where the borrower has a right to redeem the property. "At any time before the date fixed" cannot be said to be exclusively intended for 'sale' only, it was intended to be applied to 'transfer' also. Otherwise, there is no meaning in employing the words 'transfer' and 'transferred' in sub-section (8). Under the first contingency, if the borrower tenders the dues of the secured creditor together with all costs, charges and expenses incurred at any time before the date fixed for sale, then the secured asset shall not be sold in the auction. However, if the borrower failed to tender the dues before the date fixed for sale, the authorized officer will proceed further in the matter. However, the right of the borrower to redeem the property thereafter is not extinguished. He has still the right to redeem the property but at any time before the date fixed for transfer of the property. So long as the sale is not confirmed by the secured creditor as required under the Rules, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute Laws, Seventh ed. Pages 83-85). In the well known treatise -Principles of Statutory Interpretation by Justice G.P. Singh, the learned author has enunciated the same principle that the words of the Statute are first understood in their natural, ordinary or popular sense and phrases and sentences are construed according to their grammatical meaning, unless that leads to some absurdity or suggest the contrary (See Chapter - The Rule of Literal Construction -page 78-Ninth Ed.). In Jugualkishore Saraf v. M/s Raw Cotton Co. Ltd.8 S.R. Das, J (as his Lordship then was) said: "The cardinal rule of construction of statutes is to read the statute literally that is, by giving to the words used by the legislature their ordinary, natural and grammatical meaning. If, however, such a reading leads to absurdity and the words are susceptible of another meaning the Court may adopt the same. But if no such alternative construction is possible, the Court must adopt the ordinary rule of literal interpretation." The ordinary, natural and grammatical meaning of the phrase 'at any time before the date fixed' employed in sub-section (8) of Section 13 of the Act is clear that the Legislature ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer of ownership in exchange for a price paid or promised or part-paid and part-promised". Section 5 of Transfer of Property Act defines 'transfer of property' to mean an act by which a living person conveys property, in present or in future, to one or more other living persons, or to himself, and one or more other living persons; and 'to transfer property' is to perform such act. We may also look into the meaning of the word 'transfer'. Wests Legal Thesaurus Dictionary by W William Startsky, page 754 -1985 defines the word 'transfer': To convey or remove from place or person to another (transfer title). Deliver, assign, pass. According to the New International Webster Comprehensive Dictionary Deluxe Encyclopedic 2003 Edn. Page 1333 the word 'transfer' means: To make over possession of to another, the act of transferring or the state of being transferred, a delivery of title or property to another. Ramanath Aiyar's Law Lexicon, 1997 Edn. At page 1911 defines transfer: To convey, to make over from one to another, to remove. Document whereby one person transfers property, securities, or rights to another. Transfer, with its grammat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not confirmation of sale by the secured creditor. The confirmation stated in Rule 9(2) and 9(4) of the Rules is the confirmation by the authorized officer and not the secured creditor i.e banks. Sub-rule (2) of Rule 9 clearly provides that sale shall be "subject to confirmation by the secured creditor". Only after compliance of sub-rule (4), the secured creditor has to confirm the sale. It is only on confirmation of sale by the secured creditor sub-rule (6) of Rule 9 comes into operation and the authorized officer is empowered to issue a certificate of sale of the immovable property in favour of the purchaser in the form given in Appendix V to the Rules and to handover the delivery and possession of the property. Unless these formalities are complete, though the sale may be confirmed by the authorized officer, the property does not vest in the auction purchaser. Property would get transferred only after sale was confirmed by the secured creditor and not by the authorized officer. In the present case, the secured creditor has not confirmed the sale and the cheques issued on 13.4.2012 were received subject to the outcome of the proceedings pending before the DRT. Further, in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right in the property whether sale certificate is issued or not. It was also held that issuance of sale certificate is only a ministerial act evidencing the transaction of sale that has already taken place and the sale certificate does not require any registration. In B.Arvind Kumar vs. Government of India it was held: 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 other deed for 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 authorized by the court does not require registration." From the above, it is clear that an auction purchaser derives title on confirmation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s case and Sagar Mahila Vidyalaya's case that only on confirmation of sale by the secured creditor, transfer would take place. In the view we have taken on the interpretation of sub-section(8) of Section 13 of the Act, we are unable to subscribe to the view taken by the Madras High Court that a borrower should approach the secured creditor or the authorized officer before the date fixed for sale and not after the sale. Even if the borrower has failed to redeem the property before the date fixed for sale, still the right of the borrower to redeem the property before the sale was confirmed by the secured creditor is not taken away. With great respect to the learned Judges, the Court has not correctly appreciated true implication of sub-section (8) of Section 13 of the Act. Further, in Manickam's case, a sale certificate was already issued and as such the Court has held that sale becomes complete and the property vests in the auction purchaser. In the instant case, the secured creditor has neither confirmed the sale nor issued any sale certificate. Therefore, the said decision has no application to the facts of the case. 25. In Manoj D. Kapasi's case following the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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