Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – ss.13(2), 13(4), 14 and 17 – Security Interest (Enforcement) Rules, 2002 – r.8 r/w r.9 – Appellant (bank) granted term loan of Rs.100 lakhs and cash credit limit of Rs.95 lakhs to respondent (borrower) against security of two mortgaged properties – Borrower failed to repay the loan as per terms & conditions of the agreement – The account of the borrower became NPA on 31.10.2012 – Notice u/s.13(2) of SARFAESI Act served upon the borrower on 07.01.2013 demanding sum of Rs.1,85,37,218.80/- – Bank took symbolic possession of the immovable property / residential house and issued notice u/s. 13(4) of SARFAESI Act on 22.08.2013 – The bank issued sale notice by public auction of the residential property on 16.12.2013 – Reserve price fixed was Rs.48.65 lakhs – Date of auction notified was 20.01.2014 – Borrower challenged the auction by filing application u/s 17 of the SARFAESI Act before DRT – DRT passed interim order directing release / handover of possession of the mortgaged property to the borrower on deposit of Rs.48.65 lakhs – Bank filed appeal before DRAT which was dismissed – Single Judge of High Court set aside the orders passed by DRT & DRAT on ground that the orders were in contravention of s.13(8) of SARFAESI Act – Division Bench set aside the order of Single Judge and directed the bank to release the secured property (residential house) on the borrower depositing a further sum of Rs.17 lakhs to the bank and handover possession along with title deeds to the borrower – Propriety – Held: Not proper –The bank/secured creditor could be restrained from selling the mortgaged property/secured property if the borrower deposited entire dues that was Rs.1,85,37,218.80/- as on 07.01.2013 with the secured creditor – DRT in its order which as such was an interim relief order pending appeal u/s.17 of the SARFAESI Act was not justified in directing to release the mortgaged property and handover the possession along with the original title deeds to the borrower on payment of Rs.48.65 lakhs only which was the base price/ reserve price, which the Division Bench of the High Court increased to Rs.65.65 lakhs on the ground that the highest bid received was Rs.71 lakhs – Unless and until the borrower was ready to deposit /pay the entire amount payable together with all costs and expenses with the secured creditor, the borrower could not be discharged from the entire liability outstanding – It will be open for the appellant to proceed with the auction proceedings of the mortgaged properties – At the same time, DRT to decide and dispose of the application filed by the borrower u/s 17 of the SARFAESI Act in accordance with law.
Allowing the appeal, the Court
HELD:1. The bank had already initiated the proceedings under Section 13 of the SARFAESI Act and even the possession of the mortgaged property was taken over by the bank under Section 14 of the SARFAESI Act and thereafter the mortgaged property was put to sale by a public auction and at that stage the borrower wanted to stall the auction proceedings and restrain the secured creditor/ bank from selling the property. In such a situation the bank/secured creditor can be restrained from selling the mortgaged property/secured property where the borrower deposits entire dues that was Rs.1,85,37,218.80/- as on 18 07.01.2013 with the secured creditor. Therefore, the DRT in its order dated 17.01.2014 which as such was an interim relief order pending the appeal under Section 17 of the SARFAESI Act was not justified in directing to release the mortgaged property and handover the possession along with the original title deeds to the borrower on payment of Rs.48.65 lakhs only which was the base price/ reserve price, which the Division Bench of the High Court has increased to Rs.65.65 lakhs on the ground that the highest bid received was Rs.71 lakhs (which was not materialized as the highest bidder did not come forward). Unless and until the borrower was ready to deposit/pay the entire amount payable together with all costs and expenses with the secured creditor, the borrower cannot be discharged from the entire liability outstanding. Therefore, as such no order could have been passed either by the DRT and/or by the Division Bench of the High Court to discharge the borrower from the entire liability outstanding and to discharge the mortgaged property and handover the possession along with original title deeds to the borrower. As such the Single Judge rightly set aside the orders passed by the DRT as well as by the DRAT considering Section 13(8) of the SARFAESI Act. The Single Judge was right in setting aside the order passed by the DRT confirmed by the DRAT. The Division Bench of the High Court has erred in interfering with the order passed by the Single Judge and has erred in directing to release the mortgaged property/ secured property and handover the possession along with the original title deeds to the borrower on payment of a total sum of Rs.65.65 lakhs only. [Para 7.1] [1110-G-H; 1111-A-F]
2. However, at the same time the order dated 17.01.2014 passed by the DRT was an interim relief order in SA No.9/2014 and therefore even if the interim relief order is set aside by this Court the appeal/application will have to be decided and disposed of on merits and on whatever grounds which may be available to the borrower. However, at the same time the bank cannot be restrained from selling the mortgaged property by holding the public auction and realise the amount and recover the outstanding dues, unless the borrower deposits/pays the entire amount due and payable along with the costs incurred by the secured creditor as per Section 13(f) of the SARFAESI Act. [Para 7.2][1111-F-H]
3. It will be open for the appellant – Bank to proceed further with the auction proceedings of the mortgaged property in auction i.e. residential house by inviting the bids afresh and whatever the amount is already paid by the borrower, may be in pursuance to the interim relief order passed by the DRT and/or the impugned judgment and order passed by the Division Bench of the High Court, the same may be adjusted against the dues/total liability of the borrower. At the same time DRT to decide and dispose of SA No.09/2014 filed by the borrower under Section 17 of the SARFAESI Act in accordance with law and on its own merits and on the whatever grounds which may be available to the borrower. [Para 8][1112-B-D]
4. On public auction being finalized and the mortgaged property being sold by the bank the borrower has to handover the peaceful and vacant possession of the property to the bank and/or the auction purchaser. However, in the meantime the original title deeds of the mortgaged property be retained by the bank. Till the time the borrower remains in possession of the mortgaged property as per the present order and till the mortgaged property is sold in a public auction, the borrower shall not transfer and/or alienate the mortgaged property in any manner whatsoever including the possession. [Para 8][1112-E-G]
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
This page is for informational and research purposes only and does not constitute legal advice. Consult a qualified advocate for advice specific to your situation.