Writ Appeal No. 893 of 2012. Case: Ms. India Finlease Securities Ltd., Chennai Vs Indian Overseas Ban. High Court of Andhra Pradesh (India)
| Case Number | Writ Appeal No. 893 of 2012 |
| Counsel | For Appellant: D. Prakash Reddy, Sr. Counsel Sr. Counsel for C. Ramachandra Raju, Advs. and For Respondents: A. Krishnam Raju, (for Nos. 1 and 2) B. Adinarayana Rao, (for No. 3), for Challa Gunaranjan, Advs. |
| Judges | Dr. Pinaki Chandra Ghosh, Actg. C.J. and Vilas V. Afzulpurkar , J. |
| Issue | Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (54 of 2002) - Section 13(2)(4)(8); Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Enforcements) Rules (2002) - Rules 9(2)(4)(6), 8(2)(6); Transfer of Property Act (4 of 1882) - Sections 5, 54 |
| Citation | AIR 2013 AP 10 |
| Judgement Date | September 12, 2012 |
| Court | High Court of Andhra Pradesh (India) |
Judgment:
Pinaki Chandra Ghose, Actg. C.J.
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Whether under sub-section (8) of Section 13 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Act 54 of 2002) (hereinafter referred to as 'the Securitization Act") a borrower is permitted to redeem the immovable secured asset after the secured asset was sold but before the confirmation of sale by the secured creditor under the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as 'the Rules') is the question involved in this appeal filed by the auction purchaser under Clause 15 of the Letters Patent challenging the order of the learned single Judge opining that the borrower is entitled to redeem the immovable secured asset before the confirmation of sale.
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Facts leading to the controversy may briefly be noted: Respondent No.3 herein - M/s. Sruthi 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" Chandra-moulipuram, 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.13.50 lakhs on or before 16.4.2012. It was indicated in the letter that the sale shall be confirmed in the name of M/s. India Finlease Securities Ltd., on payment of the entire bid amount subject to confirmation by the banks. The purchaser paid Rs.2.93 crores by cheque dated 3.4.2012 in favour of Dena Bank.
In the meanwhile, the borrower, aggrieved by the auction filed S.A.No.139 of 2012 before the Debt Recovery Tribunal, Visakha-patnam under Section 17 of the Act. The respondent-banks filed counters and as per the directions of the DRT a statement of account showing the amount due by the borrower was also filed. The auction purchaser has paid the balance amount- Rs.11.70 crores by demand draft dated 12.4.2012 and Rs.1.80 crores by bankers cheque dated 13.4.2012, both in favour of Dena Bank. Both the amounts were accepted by the bank subject to the outcome of S.A.No.139 of 2012 on the file of DRT, Visakhapatnam. It was also indicated that confirmation of sale shall also be only subject to the outcome of S.A.No.139 of 2012. On 16.8.2012, the borrower filed an interlocutory application under section 13(8) of the Securitization Act to permit it to redeem the secured asset by discharge of the debt due to the respondent banks. By order dated 16.4.2012, the DRT allowed the application permitting the borrower to pay the amounts within five weeks as undertook by the borrower in the affidavit filed before the DRT and in default liberty was given to the respondent-banks to confirm the sale in favour of the successful highest bidder and the banks were directed to maintain status quo as on the date. So far as the amounts paid by the auction purchaser is concerned, the DRT directed that the same shall be kept in an interest bearing account in the form of term deposit, if agreed upon by the auction purchaser. Accordingly, it appears that the 2nd respondent wrote a letter to the auction purchaser to convey their approval for keeping the bid amount in term deposit as per the directions of the DRT. On 18.6.2012, the 1st respondent bank filed a memo before the DRT stating that the borrower paid the entire amount due of Rs.9,96,50,579/- by 20.5.2012. The borrower also filed a memo to dismiss the S.A as not pressed since the entire loan liability has been discharged. The IOB issued no due certificate and the Dena bank is yet to issue no due certificate.
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At this stage, the appellant-auction purchaser filed 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.
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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 disposed of directing the banks to issue no due certificate and to return the title deeds to the borrower. The auction purchaser along with his advocate appeared before the DRT and prayed for impleadment, but the prayer was rejected on the ground that such a request should have been made earlier and that the auction purchaser has already filed the writ petition before the High Court.
4A. During the pendency of the writ petition, the borrower was permitted to come on record. The respondents-banks and the borrower filed counter-affidavits detailing the proceedings before the DRT and the directions issued by the Tribunal.
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Before the learned single Judge it was argued on behalf of the appellant that the creditor banks after having received the total bid amount from the appellant ought not to have received any payment from the borrower after the sale was over as the borrower has no right for redemption of the secured asset after the auction was over and the order passed by the DRT is without jurisdiction. It was further contended that under section 13(8) of the Securitization Act, the borrower has got right of redemption only up to conducting of auction, but not later, since the auction was concluded on 31.3.2012, before which date no payment was made, the borrower has no right to redeem the secured asset.
On behalf of the creditor banks it was argued that the borrower moved S.A.No.139 of 2012 even before the auction purchaser deposited the balance sale consideration and therefore the banks received the balance sale consideration subject to the result of S.A.No.139 of 2012. The borrower paid the entire dues and the same has been recorded by the DRT and the property came to be redeemed as per the order of the DRT dated 16.4.2012. It was contended on behalf of the borrower that the borrower has exercised his right to redeem the property well before the sale was confirmed by the secured creditor and the interpretation sought to be put forth by the auction purchaser to sub-section (8) of Section 13 is not correct.
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On a consideration of the rival submissions, the learned single Judge by order dated 25.6.2012, placing reliance on the decision of the Supreme Court in Narandas Karsondas v. S.A. Kamtam, (1977) 3 SCC 247: (AIR 1977 SC 774) and Mardia Chemicals Ltd. v. Union of India, (2004) 4 SCC 311: (AIR 2004 SC 2371) wherein it was held that the mortgagor has right to redeem unless the sale of the property was complete by registration 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.
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Aggrieved by the order of the learned single Judge, the auction purchaser has filed the present appeal.
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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 amount due together with all costs etc. only "before the date fixed for sale" but not later, therefore, the learned Judge ought to have held that receipt of the amount by the respondent-banks from the borrower after the date of auction has no legal sanctity and does not affect the sale in favour of the auction-purchaser. Section 13(8) clearly provides that the borrower has right to pay the amount only before the date fixed for sale and he cannot be permitted to exercise this right after a particular date i.e. date fixed for sale. There is an emphasis in the wording 'before the date fixed for sale' fixing the parameter. Therefore, there is...
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