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TMI Blog2007 (8) TMI 782X X X X Extracts X X X X X X X X Extracts X X X X ..... them to discharge the loan within sixty days. 2.2 As the borrowers have not complied with the said demand, the second respondent/Bank, alleging that as on 31-10-2004, a sum of Rs. 10,72,483/- was due from each of them, directed the borrowers to discharge the loan amounts with interest at the rate of 11.75% per annum within a period of sixty days. In replication, the borrowers by representations dated 10-12-2004 and 30-12-2004 requested the second respondent/ Bank to consider their case for one time settlement. The borrowers invoking Section 17 of the SARFAESI Act filed S.A. Nos. 21 and 22 of 2005 before the Debts Recovery Tribunal II, Chennai, challenging the said notices issued by the second respondent/ Bank, but the same were dismissed on 28-9-2005. 2.3 In view of the default in discharging the loans by the borrowers, the second respondent/Bank, exercising its powers under Section 13(4) of the SARFAESI Act issued the impugned notice dated 14-11-2005 informing the borrowers that constructive possession of the secured assets were taken over by them on 9-2-2005 and the same would be brought for sale after the expiry of 30 days from that date, by way of public auction. 2.4 In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the properties purchased in the public auction. 2.11 Learned single Judge, after hearing the counsel on either side, accepting the argument of the learned Counsel for the borrowers that, the borrowers, by exercising their right of redemption under Section 60 of the Transfer of Property Act, have approached the second respondent for re-payment of entire loan dues before the completion of the sale by registration of sale documents, allowed the writ petitions, as prayed for. Hence, these writ appeals. 3. We have heard Mr. AR. L. Sundaresan, learned senior counsel appearing for the appellant/auction-purchaser, Mr. R.S. Ramanathan, learned Counsel appearing for the first respondents/borrowers and Mr. F.B. Benjamin George, learned Counsel appearing for respondents 2 and 3/the secured creditor. 4.1 Mr. AR. L. Sundaresan, learned senior counsel appearing for the appellant submits that the borrowers, having invited a conditional order from Debts Recovery Tribunal II, Chennai directing them to pay a sum of Rs. 1,50,000/- for staying all further proceedings pursuant to notice under Section 13(2) of the SARFAESI Act, have not complied with the order and allowed the applications to be dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or sale or transfer, under Section 13(8) of the SARFAESI Act, the secured asset shall not be sold or transferred by the Bank or financial institutions and no further steps shall be taken in that regard. In this case, the borrowers have failed to discharge their liability in full before the date fixed for sale, and therefore, the second respondent/Bank brought the property for public auction on 19-12-2005, the sale was confirmed in favour of the highest bidder, sale certificate was issued on 6-1-2006 and thus, the sale has become absolute and complete. 4.6 The learned senior counsel further submitted that the appellant was the highest bidder in the public auction, whose bid was accepted and he has also paid the entire sale consideration within the time stipulated and the sale certificate was also issued to him. Once the sale certificate was issued, the registration of sale is only a formality and it cannot be contended that the sale or transfer has not been effected and once the sale certificate is issued, there is no provision under the SARFAESI Act to set aside the sale and the sale would become final and is binding on the parties. 5.1 The learned Counsel for the borrowers has s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption of property is completely lost. He has also placed reliance upon the decision reported in Mardia Chemicals Limited v. Union of India AIR2004SC2371 and Narandas Karsondas v. S.A. Kamtam [1977]2SCR341 . 5.4 The learned Counsel for the borrowers further contends that when they approached the second respondent/Bank and deposited three cheques for a total sum of Rs. 25.21,445/- to discharge the amount due and payable, the second respondent/ Bank informed the borrowers that the mortgaged property has already been sold and the sale was to be confirmed and returned the cheques on 4-2-2006, and this act of the second respondent/Bank is arbitrary, unreasonable, amounts to unjustified enrichment and is opposed to equity, justice and good conscience. 6.1 Learned Counsel appearing for respondents 2 and 3 has submitted that the borrowers have obtained various loans from the second respondent/Bank, but they have defaulted in re-payment. Hence, the second respondent/Bank issued notice dated 19-10-2004 under Section 13(2) of the SARFAESI Act. calling upon the borrowers to discharge the loan amount within a period of sixty days. Since the borrowers have not complied with the said notice, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n these appeals are that: (i) Whether the sale of the secured asset in public auction as per Section 13(4) of SARFAESI Act, which ended in issuance of a sale certificate as per Rule 9(7) of the Security Interest (Enforcement) Rules, 2002 (in short "the Rules") is a complete and absolute sale for the purpose of SARFAESI Act or whether the sale would become final only on the registration of the sale certificate? (ii) Whether the action of the second respondent in not accepting the amounts paid by the borrowers and not cancelling the sale certificate before the registration of the sale is in derogation of Section 60 of the Transfer of Property Act, in view of the Section 37 of SARFAESI Act? and (iii) Whether Section 35 of the SARFAESI Act has the effect of overriding Section 37 of the SARFAESI Act? 9.1 Before delving deep into the issues to be decided, it would be relevant to say about the object and purpose for which SARFAESI Act was enacted by the Parliament. 9.2 The prime propellant for the promulgation has been, of course, the worrisome state of the financial sector, where the snag of bad debt has almost snowballed into a crisis. The SARFAESI Act, however, also aims to smo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tificate. 10.2 In this case, admittedly, the notices under Section 13(2) of the Act were issued to the borrowers on 19-10-2004 and on 1-12-2004 requiring them to pay the outstanding dues within 60 days. As the borrowers did not settle the dues, sale notices, as provided under Section 13(4) of the Act, were issued on 14-11-2005 stating that constructive possession of the secured assets was taken over by the second respondent/secured creditor on 9-2-2005 and also informing that to realise the dues the secured assets would be brought for sale after expiry of 30 days from the date thereof. It is not disputed that the said notices were received by the borrowers and the sale was held on 19-12-2005. 10.3 It is the case of the borrowers that even prior to the issuance of the sale certificate to the appellant herein on 6-1-2006, they have sent three cheques for Rs. 25,21,246/- on 2-1-2006 to the second respondent/bank, which were returned on 4-1-2006, which is in contravention to the provisions of Section 13(8) of the SARFAESI Act. For better appreciation of the said contention, Section 13(8) of SARFAESI Act needs extraction and it reads as under: Section 13(8): If the dues of the secur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 17 of the Act. The Tribunal, as a pre-condition to stay the said notices, directed the borrowers to pay a sum of Rs. 1,50,000/- in each case and as the borrowers failed to pay the amount, the petitions filed by them were dismissed by the Tribunal. Thereafter, the borrowers did not pursue the matter further before the Tribunal. Later, when the sale was completed, the borrowers again approached the Tribunal to restore the original petitions dismissed for default along with petitions to condone the delay and when the matter came up before the Tribunal on 10-1-2006, the Tribunal dismissed the petitions filed by the borrowers recording the statement of the second respondent/Bank that sale has already completed and sale certificate was issued to the highest bidder/appellant herein. At this stage, instead of filing an appeal before the Appellate Tribunal, the borrowers have come before this Court by way of filing writ petitions, seeking the relief referred supra. 10.7 At the outset, it is to be stated that nothing survives in the notice dated 14-11-2005 to adjudicate, as, on the date of filing of the writ petitions, the entire proceedings under Section 13(4) of the Act have come ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer of the secured creditor in the proceedings under SARFAESI Act. 10.11 The crux of the contention of the learned senior counsel for the appellant is that after issuance of sale certificate, the borrowers, who allowed their property being sold in public auction, cannot claim the right of redemption placing reliance under Section 60 of the Transfer of Property Act, which right they should have exercised before the initiation of proceedings or before the date fixed for sale. 10.12 The learned single Judge, agreeing with the argument advanced by the learned Counsel for the borrowers that 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 and until the sale is complete by registration, and that the mortgagor does not lose their right of redemption, came to the conclusion that the sale takes complete shape only after it gets registered and it does not come to end by issuance of a sale certificate. But, after considering the relevant provisions in the Registration Act, 1908, we are not in agreement with the conclusion arrived by the learned single Judge in allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erely 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 plaintiffs father for want of a registered deed of transfer. (Emphasis supplied) 10.16 In this case, the authorised officer of the secured creditor, exercising the power conferred on him by SARFAESI Act, pursuant to the proceedings initiated by him b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per Rule 9(7) of the Rules is a complete and absolute sale for the purpose of SARFAESI Act and same need not be registered under the provisions of the Registration Act. 11.1 Point (ii): Whether the action of the second respondent in not accepting the amounts paid by the borrowers and not cancelling the sale certificate before the registration of the sale is in derogation of Section 60 of the Transfer of Property Act, in view of the Section 37 of SARFAESI Act? 11.2 To decide this point, a reference to Section 37 of SARFAESI Act, which reads as follows, is apposite: Section 37--Application of other laws not barred.--The provisions of this Act or the rules made thereunder shall be in addition to. and not in derogation of the Companies Act, 1956 (1 of 1956), the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) or any other law for the time being in force. (Emphasis supplied) 11.3 It is the contention of the learned Counsel for the borrowers that when the provisions of SARFAESI Act are not in derogation of the other la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sondas v. S.A. Kamtam, referred supra, the right of the mortgagor to redemption continues only till such time the sale of the property was complete by registration. In this case, our finding, following the decision of the Division Bench of this Court in Arumugham, S. v. C.K. Venugopal Chetty and the Supreme Court in B. Arvind Kumar v. Government of India, referred supra, is that the sale in this case has become absolute and complete by the issuance of sale certificate on 6-1-2006. Further, Section 17(2)(xii) of the Registration Act, 1908 does not require registration of a sale certificate granted to any purchaser of any property sold in public auction by a civil or revenue officer and it is the finding of the Supreme Court in B. Arvind Kumar v. Government of India, referred supra, that the sale certificate issued by a civil or revenue officer in respect of a property sold in public auction 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 Registration Act, 1908. 11.5.4 Fourthly, the right to redeem the mortgage, as provided in Section 60 of the Transfer of Property Act, is, of course, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the Transfer of Property Act, a law for the time being in force, is not taken away by the introduction of the SARFAESI Act, by virtue of Section 37 of the SARFAESI Act, as the provisions of the SARFAESI Act and the rules framed thereunder shall be in addition to and not in derogation of the right of redemption conferred under the Transfer of Property Act. But, we have already rendered a finding that the registration of sale certificate as per Section 17(2)(xii) of the Registration Act is not mandatory for the completion of the sale pursuant to the public auction and issuance of the sale certificate under the scheme of the SARFAESI Act. Assuming, the right of redemption conferred under the Transfer of Property Act is protected under Section 37 of the SARFAESI Act, and independently available without reference to the registration of the sale certificate under Section 17(2)(xii) of the Registration Act, the sale already effected satisfying the conditions contemplated under Section 13(8) of the SARFAESI Act, shall, by virtue of Section 35 of the SARFAESI Act. prevail over such other rights, much less the right of redemption conferred under Transfer of Property Act, which is protecte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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