Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: ss. 13(2), 13(4) – Right of redemption – Loan taken by appellants from respondent Bank – In view of default in discharging the loan by appellants, respondent Bank exercised its power under s.13(4) and took over constructive possession of mortgaged property – Appellant filed applications before DRT which, however, were dismissed for non-prosecution – Thereafter, respondent bank brought secured property for sale – Respondent no. 3 was the highest bidder and he deposited 25% of sale consideration – On 2.1.2006, appellant deposited Rs.25 lacs in the account of his father followed by deposit of three cheques of Rs.25 lacs which were returned by respondent bank on the ground that same was not a valid tender – Meanwhile, respondent no. 3 complied with all terms and conditions of sale, as a result of which sale was confirmed in his favour – Respondent bank credited a sum in the loan accounts of appellants and closed both the loan accounts – On 6.1.2006, respondent bank issued a sale certificate in favour of respondent no.3 – Appellant filed applications for restoration of the main proceedings before DRT which was dismissed – Appellants thereafter forwarded demand drafts in the name of Authorised Officer of the bank which was also not accepted – Appellant filed writ petition before High Court for quashing of the auction of subject property – Whether the appellants had a subsisting right of redemption until the sale certificate was duly registered entailing in transfer of subject property – Held: There was substance in the stand taken by respondent bank that no valid tender was made by the appellants so as to discharge them from their obligation – The amount allegedly deposited in the account of father of appellant No.2 and not in their loan accounts was not be a valid tender – Similarly, appellants attempted to pay in the form of cheques on 2.1.2006 – However, as per the terms and conditions, payment by cheques was not permissible – Thus, the respondent bank was not obliged to accept the amount in the form of cheques – Even the third attempt made by appellants was to offer demand drafts drawn in favour of or in the name of the Authorised Officer of the respondent bank and not in the name of the bank or authorising the bank to appropriate it towards the subject loan accounts – Therefore, these demand drafts were rightly not accepted as a valid tender – Thus, appellants failed to exercise their right of redemption before the issue of sale certificate much less the registration thereof. Dismissing the appeals, the Court\
HELD: 1. Indisputably, after the disposal of the writ appeals by the Division Bench of the High Court, the auction purchaser (respondent No.3) got the sale certificate registered on 18 th September, 2007 and then transferred the property by a registered sale deed on 5th October, 2007 to third party. It was not the case of the appellants that some interim injunction prohibiting respondent No.3 from registering the sale certificate or transferring the suit property, was operating against him after the decision of the Division Bench of High Court. In fact, the impugned judgment was not even carried in appeal before this Court by the appellants until then. The special leave petitions came to be filed only on 13th October, 2007 and order of status quo was passed by this Court on 23rd November, 2007. In other words, there has been a paradigm shift in the rights of the parties upon registration of the sale certificate on 18th September, 2007 and also because of the registered sale deed in favour of third party on 5th October, 2007. [Para 25] [359-A-D]
2. The appellants had allowed the action taken by the respondent bank under Section 13(4) of the 2002 Act, to become final consequent to the order of the DRT rejecting challenge thereto due to non-compliance of the conditional order. Even the subsequent application for restoration of the DRT proceedings came to be rejected. The appellants then filed the subject writ petition on 19th January, 2006, by which date the auction had already concluded including the sale certificate was issued in favour of the highest bidder on 6th January, 2006. Moreover, the principal assertion of the appellants before the High Court was that they were wanting to exercise their right of redemption of mortgage, but due to fortuitous situation and the inappropriate stand taken by the respondent bank were prevented from doing so. No other plea was pursued by the appellants in support of the reliefs claimed by them before the High Court. The appellants cannot be permitted to assail the auction process on any other count. [Para 26] [359-D-G]
3. Reverting to the stand taken by the appellants that they had attempted to exercise their right of redemption by depositing an aggregate sum of Rs. 25 Lacs on 30th December, 2005 and 4th January, 2006, in the account of the father of appellant No.2 followed by issuing cheque(s) in the aggregate sum of Rs.25,21,446/- on 2nd January, 2006; and once again offering the amount by demand drafts in the sum of Rs.25,06,250/- on 18th January, 2006. This stand though attractive at the first blush, will have to be stated to be rejected. [Para 27] [359-G-H; 360-A-B]
4. Notably, the appellants took no steps, whatsoever, to pay the outstanding dues to the respondent bank by way of a valid tender nor moved any formal application before the High Court after filing of the writ petitions on 19 January, 2006, to permit them to deposit the requisite amount either in the concerned loan accounts or in the court. That was not done even until the disposal of the writ petitions by the Single Judge or during the pendency of the writ appeals before the Division Bench and until the disposal thereof vide the impugned judgment. The appellants, for reasons best known to them, have not chosen to deposit the amount in the loan accounts or attempted to seek permission of the Court to deposit the same in Court from 19th January, 2006 immediately after filing of writ petitions or for that matter until the registration of the sale certificate on 18 th September, 2007. In this backdrop, it is not possible to countenance the stand of the appellants that they had made a valid tender to the respondent bank or that the respondent bank had mischievously or malafide rejected their offer to defeat their rights, to redeem the mortgage before registration of the sale certificate on 18 th September, 2007. [Para 28] [360-F-H; 361-A-B]
5. No relief can be granted to the appellants, assuming that the appellants are right in contending that as per the applicable provision at the relevant time (unamended Section 13(8) of the 2002 Act), they could have exercised their right of redemption until the registration of the sale certificate – which, indisputably, has already happened on 18th September, 2007. Therefore, it is not possible to countenance the plea of the appellants to reopen the entire auction process. This is moreso because, the narrative of the appellants 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. The appellants have failed to make a valid and legal tender to the respondent bank before the issue of sale certificate on 6th January, 2006, muchless registration thereof on 18 th September, 2007. [Paras 29, 30] [360-C-F; H; 362-A]
B. Arvind Kumar v. Govt. of India and Others (2007) 5 SCC 745 ; Mardia Chemicals Ltd. and Others v. Union of India and Others (2004) 4 SCC 311 : [2004] 3 SCR
982 ; Narandas Karsondas v. S.A. Kamtam and Another (1977) 3 SCC 247 : [1977] 2 SCR 341 ; Mathew
Varghese v. M. Amritha Kumar and Others (2014) 5 SCC
610 : [2014] 2 SCR 736 ; Dwarika Prasad v. State of Uttar Pradesh and Others (2018) 5 SCC 491 : [2018]
3 SCR 29 ; J. Rajiv Subramaniyan and Another v. Pandiyas and Others (2014) 5 SCC 651 : [2014] 3 SCR 1140 ; T. Ravi and Another v. B. Chinna Narasimha and Others (2017) 7 SCC 342 : [2017] 3 SCR 1 ; Kirpal Kaur v. Jitender Pal Singh and Others (2015) 9 SCC
356 : [2015] 8 SCR 51 ; Kanaiyalal Lalchand Sachdev and Others v. State of Maharashtra and Others (2011)
2 SCC 782 : [2011] 2 SCR 602 – referred to.
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.
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