TMI Blog2021 (12) TMI 1462X X X X Extracts X X X X X X X X Extracts X X X X ..... ht of mortgagor to redeem the mortgage when they amended Sec. 13(8) or to modify it in any manner; and amendment cannot be said to have intended to modify the existing law which continued even when the un-amended Section 13(8) of the SARFAESI Act was in force. The amended Sec. 13(8) was intended to only deal with the date when the secured creditor's right to transfer the secured asset should stop and nothing more. The amended Section 13(8) of the SARFAESI Act merely prohibits asecured creditor from proceeding further with the transfer of the secured asset by way of lease, assignment or sale; a restriction on the right of the mortgagee to deal with the property is not exactly the same as the equity of redemption available to the mortgagor; the payment of the amount mentioned in Section 13(8) of the SARFAESI Act ties the hands of the mortgagee (secured creditor) from exercising any of the powers conferred under the Act; that redemption comes later; extinction of the right of redemption comes much later than the sale notice; and the right of redemption is not lost immediately upon the highest bid made by a purchaser in an auction being accepted - It is held that such a right wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... District Magistrate, Faridabad. On 14.06.2018, the said application was allowed and the respondent-Bank was permitted to take physical possession of the residential house of the petitioners. 6. Since the possession was not being delivered, the respondent-Bank filed CWP No. 565 of 2019 before this Court impleading the petitioners herein as respondents No. 3 to 5. 7. Notice of motion was issued for 15.02.2019 by this Court. 8. But on 14.02.2019, the officials of the respondent-Bank along with the Tehsildar, Faridabad, went to the residential house of the petitioners to take possession. At that time, the 2nd petitioner gave a letter dt. 14.2.2019 to Tehsildar, Faridabad that he will himself give possession of the property within 15 days and undertook to repay whole amount due to respondent-Bank within 90 days. 9. But the possession of the property was taken by the respondent-Bank on 14.02.2019 in spite of the said letter. 10. In CWP No. 565 of 2019, the 2nd petitioner filed an affidavit of undertaking (Annexure-P.3) to clear outstanding amount within 3 months from 15.02.2019 and sought restoration of the house of the petitioners. He also undertook to deposit ₹ 70 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel, be deposited on or before 15.04.2019 and adjourned CWP No. 565 of 2019 to 22.04.2019. 18. On 29.03.2019, the petitioners deposited a sum of ₹ 1.75 Crore in no lien account of one Mr. Shirish Goel and wrote an Email dt. 29.03.2019 informing the 1st respondent-Bank of said deposit. 19. But on 28.03.2019, the auction was held and respondents No. 2 and 3 became the highest bidders by quoting ₹ 3,12,00,000/-. They also deposited ₹ 78,50,000/- equivalent to 25% of the bid amount as per the terms and conditions of sale notice and requested the Bank to declare them as the highest bidder and confirm the same. 20. On 29.03.2019, the 1st respondent-Bank wrote a letter to respondents No. 2 and 3 confirming that respondents No. 2 and 3 have been declared as the highest bidder and directed them to deposit the balance 75% by 12.04.2019. It also stated that in case default of balance payment by the said date the amount deposited would be forfeited. It also mentioned in the said letter that the sale is subject to the outcome in the instant Writ Petition i.e. CWP No. 6402 of 2019 wherein the auction of the property has been challenged. CM No. 5896-CWP-2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oking the jurisdiction of this Court under Article 226 of the Constitution of India. 30. They contended that the petitioners' intention is only to stall the recovery proceedings initiated by the 1st respondent-Bank under the SARFAESI Act, that they are defaulters and an amount of more than ₹ 4.70 Crore with future interest and other expenses w.e.f. 01.04.2019 was recoverable by the 1st respondent-Bank in the 3 loan accounts of the petitioners and their sister concern. 31. It is contended that the auction held on 28.03.2019 was conducted as per the provisions of the SARFAESI Act and the Rules made thereunder and it was sold in the said auction for ₹ 312 Lacs and there is no irregularity in the sale proceedings. 32. The respondent-Bank contended that even otherwise the petitioners had a remedy under Section 17(1) of the SARFAESI Act. 33. It was pointed out that the Writ Petition had come up for hearing earlier, but no stay order was granted by the Court though the petitioners had offered to deposit their amount with the respondent-Bank. 34. It is stated that CM No. 5896-CWP-2019 had been filed by the petitioners without serving a copy of the same on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioners are seeking redemption of property which had been sold by the 1st respondent-Bank in a public auction and the said plea was not sustainable as per amended provisions of Section 13(8) of the SARFAESI Act which provided that only before issuance of sale notice, right of redemption is available and not thereafter. It was stated that prior to the amendment of Section 13(8) of the SARFAESI Act, the right of redemption was available to the mortgagor/borrower till the date of sale, but not after the amendment. 41. It is contended that even if the petitioners had deposited ₹ 1.70 Crore, said deposit had been made in the account of third party Mr. Shirish Goel and the respondent-Bank cannot appropriate it to the loan dues of the petitioners without any mandate from the account holder. It is also stated that on the last date of hearing, petitioners had undertaken to pay ₹ 70 Lacs in the loan account, but no such amount was deposited as per the undertaking given by them. 42. It is also stated that the 1st respondent-Bank could get physical possession of the secured assets only after orders were passed by this Court in CWP No. 565 of 2019 as the petitioners have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20, 29.01.2020. 48. On 29.01.2020, this Court recorded that the petitioners' counsel stated that a sum of ₹ 1.70 Crore was deposited with the 1st respondent-Bank, but the counsel for the 1st respondent-Bank stated that though the amount was deposited, but it was withdrawn on 24.04.2019. So he was permitted to file an affidavit to this effect on the said date. Subsequently, on account of Covid-19 Pandemic, the matter does not appear to have been listed for a considerable amount of time. 49. An application for preponement of date of hearing was filed by respondents No. 2 and 3 vide CM No. 11173-CWP of 2021 and the matter was preponed by order dt. 26.10.2021 to 22.11.2021 from 17.12.2021. 50. The matter was heard in part on 22.11.2021, 03.12.2021, 10.12.2021. 51. CM No. 3368-CWP of 2020 was filed by the Writ Petitioners to receive the following documents:- (1) Copy of Email dt. 29.03.2019 written to the Bank (Annexure-A.1). (2) Copy of the Statement of Account depicting deposit of ₹ 1,75,10,000/- (Annexure-A.2). (3) Email dt. 12.04.2019 to respondent-Bank stating that he has bona fide intention to settle the account and requested to conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s interest transferred to the mortgagee has been extinguished: PROVIDED that the right conferred by this section has not been extinguished by the act of the parties or by decree of a court. xx xx xx xx xx 59. In 1965, Murarilal v. Devkaran AIR 1965 SC 225, a mortgage deed sought to be redeemed was executed on 19.3.1919 for ₹ 6500/-. It stipulated that the mortgage should be repaid in 15 years. It further stipulated that if the payment was not made within 15 years, the mortgagee would become the owner of the property. In a suit for redemption, the mortgagor contended that his right to redeem was alive even though the stipulated period of 15 years had passed. The mortgagee took the stand that after the expiry of the period of 15 years, the property had become the absolute property of the mortgagee. Though the trial court dismissed the suit, the Rajasthan High Court allowed the appeal and held that the stipulation as to the mortgagor's liability to repay the loan within 15 years did not bar the suit for redemption, because the said stipulation amounted to a clog on the equity of redemption and as such, could not affect the mortgagor's right to redeem; tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 28.85 Lacs, did not prevent the borrower from exercising the right of redemption. It held: Under Sec. 60 of the Transfer of Property Act, 1882, equity of redemption existed in favor of the Company. A mere agreement of sale of it's assets cannot extinguish the equity of redemption, it is only on execution of conveyance that the mortgagor's right of redemption will be extinguished. 62. Thus even if the sale of secured assets is under a special statute like State Financial Corporations Act, there is no deviation from the general principle that the mortgagor's right of redemption is not extinguished till the execution of conveyance. 63. The above principle was reiterated in 2011 in M/s. L.K. Trust v. EDC Ltd., and others (2011) 6 SCC 780, and it was held that in India, there is no equity or right in property created in favor of the purchaser by the contract between the mortgagee and the proposed purchaser; only on execution of conveyance, ownership passes from one party to another; and that the mortgagor cannot be held to have lost the right of redemption just because the property was put to auction. 64. It was also held that a mortgage being a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2 Supra) [that a mere conferment of power to sell without intervention of the Court in the mortgage deed itself will not deprive the mortgagor of his right to redemption, that the extinction of the right of redemption has to be subsequent to the deed conferring such power, that the right of redemption is not extinguished at the expiry of the period, that the equity of redemption is not extinguished by mere contract for sale and the mortgagor's right to redeem will survive until there has been completion of sale by the mortgagee by a registered deed ], the Supreme Court held: .. we fail to note any distinction to be drawn while applying the above said principles, even in respect of the sale of secured assets created by way of a secured interest in favor of the secured creditor under the provisions of the SARFAESI Act, read along with the relevant rules. We say so, in as much as, we find that even while setting out the principles in respect of redemption of a mortgage by applying Sec. 60 of the TP Act, this Court has envisaged the situation where such mortgagedeed provided for resorting to the sale of the mortgaged property without the intervention of the Court 70. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.] 74. It is the contention of the counsel for the petitioners that the law relating to redemption of mortgage was that such a right was incidental for the subsistence of mortgagor so long the mortgage itself subsists, that such a right cannot be extinguished except by the Act of parties or by the decree of Court, and a mortgage being security for the debt, the right of redemption continues although mortgagor failed to pay the debt at the due date, and in India it is only on execution of conveyance, the right of redemption gets extinguished. He contended that the amendment to Section 13(8) of the SARFAESI Act vide Act 44 of 2016 had no bearing on the right of redemption available to a mortgagor and the law in India continues to be the same. 75. He also placed on record the Report of the Joint Committee on the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill, 2016, on the basis of which 2016 Amendment of Section 13(8) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under:- 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. 81. the proposed modification to Section 13(8) is set out also at pg. 12 as under:- (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 fixed for lease, assignment or sale of the secured assets,- (i) the secured assets shall not be leased, assigned or sold by the secured creditor; and (ii) in case, any step has been taken by the secured creditor for 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 lease or assignment or sale of such secured assets. 82. Strangely, on the next page at page 13, the following is stated:- The Committee after examining the propose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... force. The amended Sec. 13(8) was intended to only deal with the date when the secured creditor's right to transfer the secured asset should stop and nothing more. 89. This aspect was also considered by a Division Bench of the Telangana and Andhra Pradesh High Court presided over by Justice V. Ramasubramanian (as his Lordship then was) in M/s. Concern Readymix, rep. By its Proprietor (7 Supra). 90. The Division Bench in M/s. Concern Readymix, rep. By its Proprietor (7 Supra) observed that the first distinction between un-amended Section 13(8) and amended Section 13(8) made through Act 44 of 2016 is that before amendment, the facility of repayment of the entire dues along with costs, charges and expenses, was available to the debtor at any time before the date fixed for the sale or transfer. But after the amendment, the facility is available upto the time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty. The second distinction was that the un-amended Section 13(8) did not provide for the contingency when the dues are tendered by the borrower before the date of completion of the sale or lease, but af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (8) speaks about redemption, only on account of what is found in Rule 3(5) of the Security Interest (Enforcement) Rules, 2002. Rule 3(5) inserted by way of amendment with effect from 04-11-2016 states that the demand notice issued under Section 13(2) should invite the attention of the borrower to the provisions of Section 13 (8), in respect of the time available to the borrower to redeem the secured assets. Today, it may be convenient for one borrower to contend that the right of redemption will be lost immediately upon the issue of notice under Rule 9(1). But if it is held so, the same would tantamount to annulling the relevant provisions of the Transfer of Property Act, which do not stand expressly excluded, insofar as the question of redemption is concerned. (emphasis supplied) 92. We have been informed that the decision in M/s. Concern Readymix, rep. By its Proprietor (7 Supra) was challenged in the Supreme Court by the Corporation Bank, and vide order dt. 26.08.2019 in Diary No. 28967 of 2019, the same was dismissed. 93. The view taken by the High Court for the State of Telangana and Andhra Pradesh in M/s. Concern Ready Mix (7 Supra) commends itself to us and we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d (iii) the decision in M/s. Concern Readymix (7 supra) of the Telangana and Andhra Pradesh High Court, with which we respectfully agree, we hold that the amended Section 13(8) of the SARFAESI Act merely prohibits asecured creditor from proceeding further with the transfer of the secured asset by way of lease, assignment or sale; a restriction on the right of the mortgagee to deal with the property is not exactly the same as the equity of redemption available to the mortgagor; the payment of the amount mentioned in Section 13(8) of the SARFAESI Act ties the hands of the mortgagee (secured creditor) from exercising any of the powers conferred under the Act; that redemption comes later; extinction of the right of redemption comes much later than the sale notice; and the right of redemption is not lost immediately upon the highest bid made by a purchaser in an auction being accepted. We also hold that such a right would continue till the execution of a conveyance i.e. issuance of sale certificate in favour of the mortgagee. A similar view has been taken by this Bench in M/s. Hoshiarpur Roller Flour Mill Private Limited and another v. Punjab National Bank CWP No. 14440 of 2021, decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 2,62,98,047.72 was due as on 22.11.2017 by the petitioners in the loan account of the first petitioner. 103. In July 2018, petitioners had paid ₹ 30 Lacs to the 1st respondent-Bank. Thereafter, two demand drafts of ₹ 25 Lacs each dt. 25.02.2019 were also handed over to the counsel for the 1st respondent-Bank during the course of hearing in CWP No. 565 of 2019. 104. Thus, by the date of filing of CWP No. 6402 of 2019 on 27.02.2019, the petitioners had paid ₹ 80 Lacs. 105. The petitioners had informed the Tehsildar, Faridabad on 14.02.2019, at the time of taking possession of their residential house that they would pay the whole amount of dues within 90 days. They had also filed an affidavit in CWP No. 565 of 2019 that they would deposit a further sum of ₹ 70 Lacs within one month from 15.02.2019 i.e. by 15.3.2019. 106. Though a demand draft for the said amount of ₹ 70 Lacs appears to have been taken on 15.04.2019 (copy is filed as Annexure-A.4 in CM No. 3368-CWP of 2020), there was delay of 1 month as undertaken by them before this Court on 15.02.2019 and so the 1st respondent did not accept it. But the intention of the petitioners t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tend that the said amount was taken out of the account of Mr. Shirish Goel on 24.04.2019 as the said deposit was not earning any interest. 111. But the 1st respondent points out to this withdrawal of amount of ₹ 1.7 Crore as a ground to deny any relief to the petitioners. According to it this was done two days after the instant WP was heard on 22.4.2019 and the interim order granted on 12.4.2019 was directed to continue. 112. We find no force in the above contention of the counsel for 1st respondent. When the 1st respondent Bank maintains a stoic silence and gives no response to the said deposit of ₹ 1.7 Crore and the request of the petitioners to settle the loan from 29.03.2019 till 22.04.2019, since the whole purpose of making the deposit was rendered futile, no exception can be taken to the withdrawal of the said amount. 113. The counsel for the 1st respondent-Bank contends that even on 29.01.2020, the petitioners acted as if such deposit was subsisting and available for adjustment and refers to the order dt. 29.01.2020 to buttress this argument and contends that the petitioners misled the Court by their conduct. 114. The said order dt. 29.01.2020 recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 121. Since the file of the case would have been before the Court on 12.04.2019, and the Court would have noticed that the 1st respondent-Bank was already represented by a counsel Sri. I.P. Singh and he had taken notice previously on 18.3.2019 and copy of CM No. 5896-CWP of 2019 was also served on 12.4.2019 on his Clerk, and since Sri. I.P. Singh, counsel for the 1st respondent was not present, the Bench issued notice of the application on 12.4.2019 and then proceeded to pass the order directing the 1st respondent not to confirm the sale, to protect the rights of the petitioners and to ensure that the Writ Petition does not become infructuous when the Court next takes up the matter on 22.04.2019. 122. In any event, admittedly, till today the said order dt. 12.04.2019 has been in vogue, and has not been vacated. 123. Therefore, we do not see much force in this contention. 124. Likewise the failure of the petitioners to deposit the entire dues at a prior point of time either within 90 days of the filing of the affidavit on 15.02.2019 or before 15.04.2019 also cannot extinguish their right of redemption because as held in M/s. L.K. Trust (4 Supra) there is no equity or rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t being a valid tender is sought to be raised by the Bank. 129. Had the Bank responded positively to the email dt. 29.03.2019 and insisted on receiving the said payment immediately, and the petitioners had obliged, no third party interest would have been created because by then the respondents No. 2 and 3 had not deposited 75% of the balance consideration out of ₹ 3,12,00,000/- quoted by them. Bu if the petitioners had not obliged and made the payment of ₹ 1.7 Crore to clear their loan dues after the Bank had insisted on such payment, then nothing prevented the Bank from proceeding to accept the bid of respondents No. 2 and 3 and confirming the sale. In the latter case, this Court would not have shown any indulgence to the petitioners. 130. It is true that the auction purchasers had deposited by 01.06.2019 the bid amount of ₹ 3,12,00,000/-, but they have been clearly informed by the 1st respondent-Bank through letter dt. 29.03.2019 that the sale in their favour is subject to the outcome of the Writ Petition. So they cannot claim any prejudice. 131. The counsel for the auction purchasers-respondents 2 and 3 contended that that no one shall suffer by an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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