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TMI Blog2020 (9) TMI 1202X X X X Extracts X X X X X X X X Extracts X X X X ..... d Corporate Insolvency Resolution Process ("CIRP") for the Corporate Debtor. Further, the first Coc meeting of the Corporate Debtor was held on 02.03.2020 and in that meeting the action of the bankers under the provision of SARFAESI Act, 2002 was discussed. 3. Further, the State Bank of India issued auction notice for proceeding against the Corporate Debtor under SERFAESI for recovery of debt and against auction notice, the Corporate Debtor filed an appeal before DRT and DRT vide order dated 24.10.2019 passed the order that the sale is subject to the provisions of Section 52 of the TP Act and on the same day i.e. 24.10.2019, the auction proceeding was conducted and on 30.12.2019, the sale letter/sale certificate was issued to successful bidder and the sale certificate was registered on 15.02.2020 that is after the initiation of CIRP on 24.01.2020 and during the course of moratorium, which was declared on the date of initiation of the CIRP i.e. on 24.01.2020. 4. Further, the bank was registered the property in violation of DRT order dated 24.10.2019 as well as order passed by this Adjudicating Authority on 24.01.2020. 5. Further, in view of the order passed by this Adjudicating A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 17.08.2019 gave a voluntary declaration to SBI for taking over physical possession of the Haridwar Factory on account of cancellation of OTS and sought a refund of the initial deposit given towards OTS and accordingly, the bank took the possession of the property on 27.08.2019 and the possession notice was duly published by the respondent bank in newspapers on 02.09.2019 and a letter dated 04.09.2019 was also sent to the Corporate Debtor by the SBI not to deal with the subject property and thereafter the respondent bank exercised its rights under the SARFAESI Act and rules and issued notice of sale under Rule 8(6) of the SARFAESI Rules with respect to the subject property and an auction sale notice was published on 21.09.2019 in the newspaper "Business Standard" (English) and "Business Standard" (Hindi) and the e-auction sale of the subject property was conducted by the State Bank of India on 24.10.2019 and M/s. Alucom Panels Pvt. Ltd. (R-3)/auction purchaser was declared as successful bidder vide Sale Confirmation Advice dated 24.10.2019. Further, the balance payment of 75% was made by the auction purchaser on 27.12.2019 and the sale certificate under Rule 9(6) was issued by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no further deed of transfer from the court is contemplated or required. 19. Further, rule 7 of the Security Interest (Enforcement) Rules 2002 deals with issuance of sale certificate in respect of movable secured assets and Rule 9 of the Security Interest (Enforcement) of Rules 2002 deals issuance of sale certificate and delivery of possession in respect of immovable secured assets. Under Rule 7(2) on payment of sale price, the Authorized Officer shall issue a certificate of sale under the prescribed form specifying the movable secured assets sold, price paid and the name of purchaser and thereafter, the sale shall become absolute. Under Rule 9(6) on confirmation of sale by the Secured Creditor and if the terms of payment have been complied with, the Authorized Officer by exercising the power of sale, shall issue a certificate of sale of immovable property in favour of purchaser, therefore, it is clear that an auction purchaser derives title on confirmation of sale in his favour and the issuance of sale certificate is only an evidence to prove that the sale was confirmed in his favour conveying the title. 20. Further, right of redemption under Section 60 of the TP Act will be avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was initiated on 24.01.2020 and the sale certificate was registered on 15.02.2020 that is after the initiation of CIRP, therefore, the said transaction is null and void and it is liable to be set aside. He further submitted that the Hon'ble Punjab and Haryana High Court in the case of Friends Trader Vs. State of Punjab and Ors. reported in by placing reliance upon the decision of Hon'ble Supreme Court reported in (2007) 5 Supreme Court Cases 745 B. Arvind Kumar Vs. Govt. of India and others and Hon'ble High Court Madras in M/s. P M Associates Vs. IFCI Limited (2013 (5) CTC 337) held that sale certificate is required to be registered and he further submitted that in view of Section 17 of the Registration Act, if the document is required to be compulsory registered in that case no transfer can be effected unless the document is registered. He further submitted that the contention of the respondent is that the sale has completed the day, when the sale certificate was issued is contrary to the finding given by the Hon'ble Punjab and Haryana High Court in the case of Friends Trader Vs. State of Punjab and Ors. reported in, which is based upon the decision of Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aser. To prove that the sale was confirmed in their favour, the Sale Certificate dated 16.09.2011 was issued. Therefore, after the confirmation of the sale in favour of the petitioner/auction purchaser, the second respondent Authorised Officer have no authority to cancel the sale on his own. The power of cancelling the sale vests only with the Competent Court/Forum and definitely not with the Authorised Officer. If the Authorised Officer cancels the Sale Certificate on his own, no case will reach finality at any point of time. Therefore, from the above it is clear that the second respondent Authorised Officer has no jurisdiction to cancel the Sale Certificate. The order dated 08.02.2012 was passed by the second respondent when he has no jurisdiction to pass such an order. Therefore, such an act of the second respondent should not be allowed to stand. 30. He further submitted, therefore, the contention of Ld. Counsel for petitioner, the sale is not completed after the issuance of sale certificate is not liable to be accepted. He further submitted that the Hon'ble Supreme Court in the judgment reported in (2007) 5 Supreme Court Cases 745 B. Arvind Kumar Vs. Govt. of India and ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d reliance. 34. Ld. Counsel for RP has not made any submissions. 35. Now, in the lights of the submissions raised on behalf of the parties and on the basis of averments made in the application, reply and rejoinder filed by the respective parties, we shall consider the case in hand. On consideration of the submissions raised on behalf of the parties and on the basis of averments made in the application, reply and rejoinder filed by the respective parties, we find that it is an admitted fact of the parties that sale certificate was issued prior to the initiation of the CIRP because according to the case of the petitioner this sale certificate was issued on 30.12.2019, whereas the CIRP was initiated on 24.01.2020, therefore, the only question which is required to be considered before us "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 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?" 36. Since it is admitted fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, we would like to refer at first, the decision, which the petitioner has referred in para 11 of the application though, this decision was not referred by the Ld. Counsel for petitioner in course of his arguments, since, this decision was referred in the application that is the reason, we have gone through that decision and we find that in this case, the advertisement was made for public auction and auction was not completed and that is the reasons the proceeding was quashed, therefore, the facts mentioned in that case is different from the facts of the case in hand. In the case in hand, the sale certificate has already been issued, hence, in our considered view, that decision would not help the applicant to substantiate its contention and that is the reason it appears to us, the Ld. Counsel for petitioner has not referred this decision in course of his arguments and placed reliance upon another decision of Hon'ble Punjab and Haryana High Court, which we have referred in the afore mentioned paras. We have also gone through the decision upon which the petitioner has placed reliance that is decision of Hon'ble Punjab and Haryana High Court and we find that, this decision is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Thus, the sale became complete and the right in the property vests in favour of the auction purchaser. Since the third respondent/borrower failed to exercise his right of redemption before sale of the property and also in view of the provisions of Section 13(8) of the SARFAESI Act, the borrower/third respondent cannot now (i.e.) after the completion of the sale in favour of the petitioner seek to redeem the property, that too, without the intervention of a Competent Court or Tribunal." 39. Since, this judgment is based upon the decision of K. Chidambara Manickam Vs.. Shakeena and others, therefore, we would like to discuss this decision of Hon'ble Madras High Court and in this decision Hon'ble Madras High Court in para 8 formulated 3 points and the same is quoted below:- The core and primal points that arise and require to be answered in 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, and the Hon'ble Madras High Court further held that in para 10.16 and 10.17 and the same is quoted below:- 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 brought the secured assets of the borrowers for sale in public auction, and, in view of the default in repayment of the loan, confirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ants that they had made a valid tender towards the subject loan accounts before registration of the sale certificate, has been found to be tenuous. Thus understood, their right of redemption in any case stood obliterated on 18th September, 2007. Further, the amended Section 13(8) of the 2002 Act which has come into force w.e.f 1st September, 2016, will now stare at the face of the Appellants. As per the amended provision, stringent condition has been stipulated that the tender of dues to the secured creditor together with all costs, charges and expenses incurred by him shall be at any time before the "date of publication of notice" for public auction or inviting quotations or tender from public or private deed for transfer by way of lease assessment or sale of the secured assets. That event happened before the institution of the subject writ petitions by the Appellants, and in para 30 Hon'ble Supreme Court held that Having said thus, in the peculiar facts of the present case, we do not deem it necessary to dilate further on the argument that registration of the sale certificate in relation to the auction conducted under the 2002 Act is essential. Similarly, it is not necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued evidencing such sale and title, no further deed of transfer from the Court is contemplated or required. 43. We further noticed, when the matter came up before the Hon'ble Supreme Court in the case of Sakeena and Ors. Vs. Bank of India and Ors. while deciding the appeal, Hon'ble Supreme Court further held that "we do not deem it necessary to dilate further on the argument that registration of the sale certificate in relation to the auction conducted under the 2002 Act is essential", therefore, the view taken by the Hon'ble Madras High Court in K. Chidambara Manickam Vs. Sakeena and Ors. is still a good law. It is also because of this fact that the decision of Hon'ble Madras high Court is by a Division Bench and after formulating a question on this issue finding has been given, whereas decision of Hon'ble Punjab & Harayana High Court is by a single Bench and no such question was formulated rather it was on different issue. 44. Even in the case of P.M. Associates Hon'ble Madras High Court has not decided that sale will be completed only after the registration rather in para 33 Hon'ble Madras High Court held that " Therefore, it is clear that an auctio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer exercising the power of sale shall issue a certificate of sale of immovable property in favour of the purchaser in the form given in the Appendix-V to these rules and in view of Rule 9(9), the Authorized Officer shall deliver the property to the buyer free from all encumbrances known to the secured creditor or not known to the secured creditor deposit of money as specified in Sub rule 7 above. 47. In view of the discussions made above, we are of the considered view that so far the SARFAESI Act is concerned since the sale is by public auction, therefore, in view the decisions, which we have discussed in the aforementioned para, the moment bid is accepted and authorised officer confirmed the sale in favour of purchaser, the sale become absolute and the title vests in the purchaser. A sale certificate is issued only when the sale become absolute. Purpose of registration is to pay only the stamp duty and registration charge and due to non registration of sale certificate, sale shall not be treated void and liable to set aside. 48. In view of the aforesaid factual position of law, when we shall consider the case in hand, then we find in this case, auction was conducted on 24/1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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