SHAKEENA & ANR. versus BANK OF INDIA & ORS.
[2019] 11 S.C.R. 341, Supreme Court of India, 2019
Outcome: Dismissed (Dismissed)
Segment: Body
A
B
C
D
E
F
G
H
341
SHAKEENA & ANR.
v.
BANK OF INDIA & ORS.
(Civil Appeal Nos. 8097-8098 of 2009)
AUGUST 20, 2019
[A. M. KHANWILKAR AND AJAY RASTOGI, JJ.]
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
   [2019] 11 S.C.R. 341
341
A
B
C
D
E
F
G
H
342
SUPREME COURT REPORTS
[2019] 11 S.C.R.
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 18th
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
A
B
C
D
E
F
G
H
343
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 18th
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 18th September, 2007. [Para 28] [360-F-H;
361-A-B]
SHAKEENA & ANR. v. BANK OF INDIA & ORS.
A
B
C
D
E
F
G
H
344
SUPREME COURT REPORTS
[2019] 11 S.C.R.
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 18th 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
A
B
C
D
E
F
G
H
345
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.
Case Law Reference
(2007) 5 SCC 745
referred to
Para 16
[2004] 3 SCR 982
referred to
Para 16
[1977] 2 SCR 341
referred to
Para 17
[2014] 2 SCR 736
referred to
Para 17
[2018] 3 SCR 29
referred to
Para 17
[2014] 3 SCR 1140
referred to
Para 18
[2017] 3 SCR 1
referred to
Para 18
[2015] 8 SCR 51
referred to
Para 18
[2011] 2 SCR 602
referred to
Para 21
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 8097-
8098 of 2009.
From the final Judgment dated 10.08.2007 of the High Court of
Judicature at Madras in W.A. (MD) Nos.145 and 146 of 2007.
Dr. A. Francis Julian, Sr. Adv., Antony R. Julian, Danish Zabair
Khan, M/s Arputham Aruna and Co., Advs. for the Appellants.
Pranab Kumar Mullick, Mrs. Soma Mullick, Sebat Kumar Devria,
K.K. Mani, Ms. T. Archana, Advs. for the Respondents.
The Judgment of the Court was delivered by
A. M. KHANWILKAR, J.
1. These appeals take exception to the impugned judgment and
order of the Madras High Court, Madurai Bench dated 10th August,
2007 in Writ Appeal (MD) Nos.145 and 146 of 2007 respectively;
whereby, the Division Bench of the High Court dismissed the writ petitions
filed by the appellants praying for setting aside of notice issued by the
respondent bank in exercise of powers under
the Securitisation and
SHAKEENA & ANR. v. BANK OF INDIA & ORS.
A
B
C
D
E
F
G
H
346
SUPREME COURT REPORTS
[2019] 11 S.C.R.
Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002 (for short, “2002 Act”) dated 14th November, 2005 and the
consequent public notice dated 15th November, 2005 for sale of the subject
property, the public auction conducted in furtherance thereof on 19th
December, 2005, declaration of respondent No.3 as the highest bidder in
the said public auction and the sale certificate issued in his favour dated
6th January, 2006.
2. Briefly stated, in 2003, Shri P. Shahul Hameed and Smt.
Shakeena (appellants/borrowers) were sanctioned a term loan of Rs.10
Lacs each under Star Mortgage Loan by the respondent bank. The
accounts became NPA (Non-Performing Assets) from 30th June, 2004.
As there was default in re-payment, the respondent bank issued legal
notice dated 19th October, 2004 to repay the dues within seven days. On
1st December, 2004, notice was issued under Section 13(2) of the 2002
Act to the appellants, calling upon them to discharge the loan within
sixty days. In reply, the appellants by representations dated 10th
December, 2004, requested the respondent bank to grant time for bringing
the account in order. In view of the default in discharging the loans by
the appellants, the respondent bank, exercised its power under Section
13(4) of the 2002 Act. Accordingly, constructive possession of the
mortgaged property was taken over by the respondent bank on 8th
February, 2005.
3. The appellants
then filed S.A. Nos.21 and 22 of 2005, by invoking
Section 17 of the 2002 Act, before the Debts Recovery Tribunal II,
Chennai, challenging the notices, issued by the respondent bank. On 18th
March, 2005, DRT-II, Chennai passed an order in S.A. Nos.21 and 22
of 2005 staying all further proceedings on condition that the appellants
would pay Rs.1.50 Lac in each appeal. However, the appellants failed
to comply with the said order and, therefore, the order being a self-
operating order, stood automatically vacated. Later on, S.A. Nos.21 &
22 of 2005 were eventually dismissed for non-prosecution/default on
28th September, 2005, for non-payment of court fee.
4. The respondent bank then brought the secured property for
sale by inviting sealed tenders vide sale notice dated 15th November,
2005. Notice was also given to the appellants on 14th November, 2005.
The appellants herein neither objected to the said sale notice nor
challenged the same. Thus, the sale was held on 19th December, 2005,
in which one Mr. Chidhamaramanickam, respondent No.3 herein was
A
B
C
D
E
F
G
H
347
declared as the highest bidder who had quoted a sum of Rs.42,51,000/-
(Rupees Forty-Two Lacs Fifty-One Thousand Only). He also deposited
25% of the sale consideration immediately, as per the rules. On 2nd
January, 2006, the appellants approached the respondent bank and
deposited three cheques for total sum of Rs.25,21,446/- (Rupees Twenty-
Five Lacs Twenty-One Thousand Four Hundred Forty-Six Only). These
cheques were duly returned by the respondent bank on 4th February,
2006 as it could not be treated as a valid tender.
5. The highest bidder (respondent No.3) in the meantime had
complied with all the terms and conditions of sale as a result of which
the sale was confirmed in his favour. In that, he paid the entire sale
consideration of Rs.42,51,000/- (Rupees Forty-Two Lacs Fifty-One
Thousand Only) by 4th January, 2006. On payment of sale consideration,
the respondent bank credited a sum of Rs.12,40,000/- (Rupees Twelve
Lacs Forty Thousand Only) in the loan account of appellant No.2 herein
and a sum of Rs.12,52,350/- (Rupees Twelve Lacs Fifty-Two Thousand
Three Hundred Fifty Only) in the loan account of appellant No.1 herein
and closed both the loan accounts.
6. On 6th January, 2006, the respondent bank issued a sale
certificate in favour of respondent No.3. According to the respondent
bank upon issue of sale certificate, the sale had become final.
7. Be that as it may, the appellants filed applications for restoration
of the main proceedings before DRT.
However, the said applications
came to be dismissed on 10th January, 2006. Even that order has been
allowed to become final by the appellants.
8. As aforementioned, consequent to sale of the secured asset, a
sum of Rs.24,92,750/- (Rupees Twenty-Four Lacs Ninety-Two Thousand
Seven Hundred Fifty Only) was adjusted towards the loan accounts of
the appellants and a sum of Rs.10,000/- (Rupees Ten Thousand Only)
towards legal expenses. Out of the balance sum of Rs.17,48,250/-
(Rupees Seventeen Lacs Forty-Eight Thousand Two Hundred Fifty
Only), the bank returned a sum of Rs.17,25,000/- (Rupees Seventeen
Lacs Twenty-Five Thousand Only) to the appellant (Petitioner in Writ
Petition No.634 of 2006) by way of a bankers cheque along with letter
dated 18th January, 2006. However, the said appellant did not encash the
bankers cheque and instead returned the same. The bank had retained a
sum of Rs.23,250/- (Rupees Twenty-Three Thousand Two Hundred Fifty
SHAKEENA & ANR. v. BANK OF INDIA & ORS.
[A. M. KHANWILKAR, J.]
A
B
C
D
E
F
G
H
348
SUPREME COURT REPORTS
[2019] 11 S.C.R.
Only) towards future legal expenses with the undertaking that the balance
amount will be returned after adjusting the lawyer charges/legal expenses.
9. The Appellants then forwarded demand drafts for
Rs. 25,06,250/- (Rupees Twenty-Five Lacs Six Thousand Two Hundred
Fifty Only), which was received by the respondent bank on 17th January,
2006. According to the respondent bank, the appellants had ante dated
the covering letter as if it was written on 12th January, 2006, undertaking
to pay the balance amount. The respondent bank, however, did not accept
or encash the said demand drafts as a valid tender - as it were drawn in
the name of the Authorised Officer of the bank i.e. respondent No.2
herein; and also because the sale certificate had already been issued on
6th January, 2006.
10. On 19th January, 2006 the appellants, feeling aggrieved by the
action of respondent bank for having taken constructive possession of
the secured assets and the notice of sale dated 14th November, 2005,
filed subject Writ Petition (MD) Nos.634 and 635 of 2006 before the
High Court of Madras at Madurai Bench for quashing of the auction of
the subject property and further to direct the respondents to receive the
amount offered by them towards settlement of loan accounts. Respondent
no.3 herein (auction purchaser) got himself impleaded as a party-
respondent in the said writ petitions, filed by the appellants herein, and
opposed the same.
11.
The Learned Single Judge vide judgment dated 9th March,
2007, allowed the writ petitions filed by the appellants herein, holding
that the appellants had a subsisting right of redemption until the sale
certificate was duly registered entailing in transfer of the subject property.
It has been noted that such registration was not done in the present case
until the filing of writ petitions and until disposal thereof.
12. Against the judgment of the Learned Single Judge, respondent
No.3 herein (auction purchaser) filed Writ Appeal Nos.145 and 146 of
2007 before the Madurai Bench of Madras High Court. By the impugned
judgment dated 10th August, 2007, the Division Bench allowed the appeals
filed by respondent No.3 herein and set aside the Order dated 9th March,
2007 passed by the Learned Single Judge.
13. On 18th September, 2007, the stated sale certificate in respect
of the suit property had been registered and soon thereafter on 5th October,
2007, respondent No.3 sold the property to a third party.
A
B
C
D
E
F
G
H
349
14. Feeling aggrieved by the decision of the Division Bench of the
High Court, the appellants have approached this Court by way of present
appeals. This Court, on 23rd November, 2007, ordered that status quo as
on that date be maintained with regard to the suit property. Later on, this
Court granted leave to appeal on 27th November, 2009 and the interim
order continued during the pendency of the appeals.
15. Be it noted that on 1st September, 2016 amendment to Section
3(8) of the 2002 Act came into force as a result of which the dues of the
secured creditor together with all costs, charges and expenses incurred
by him are required to be tendered to the secured creditor at any time
before the date of publication of notice for public auction or inviting
quotations or tender from public or private treaty for transfer by way of
lease, assignment or sale of the secured assets.
16. Reverting to the impugned judgment of the Division Bench of
High Court, it essentially considered three points as noted in paragraph 8
of the impugned judgment. The same reads thus:
(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, 2003 (in short “the rules”) 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?
(ii) Whether the
action of the second respondent in not accepting
the amounts paid by the borrowers and not cancelling the sale
certificate before the registration of the sale is in derogation of
section 60 of the Transfer of Property Act, in view of the Section
37 of SARFAESI Act? And
(iii) Whether section 35 of the SARFAESI Act has the effect of
overriding section 37 of the SARFAESI Act?”
While answering the first point, the Court observed thus:
“10.7 At the outset, it is to be stated that nothing survives in the
notice dated 14.11.2005 to adjudicate, as, on the date of filing of
the writ petitions, the entire proceedings under Section 13(4) of
the Act have come to an end and become final, by issuance of
sale certificate under sub-rule (7) of rule 9 of the rules on
SHAKEENA & ANR. v. BANK OF INDIA & ORS.
[A. M. KHANWILKAR, J.]
A
B
C
D
E
F
G
H
350
SUPREME COURT REPORTS
[2019] 11 S.C.R.
06.01.2006. The writ petitions have been prepared and signed by
the parties only on 19.01.2006. In such circumstances, the proper
course for the borrowers would be to prefer an appeal before the
Appellate Tribunal against the order of the Tribunal dated
10.01.2006 under the provisions of the SARFAESI Act. The
borrowers, however, have approached this court invoking Article
226 of the Constitution of India.”
And again, in paragraph No.10.9
“10.9 In our considered view, the borrowers should have
approached the secured creditor or the authorized officer before
the date fixed for sale and not after the sale, as provided under
sub-section (8) to section 13 of the SARFAESI Act. As discussed
earlier, only if the borrowers approach the secured creditor or the
authorized officer before the date fixed for sale or transfer and
tender or pay all the dues to the secured creditor, the Section
creates a bar on the secured creditor or authorized officer to
proceed further with the proposed sale or transfer. In this case,
admittedly, the date fixed for the sale was 19.12.2005. But, even
according to the version of the borrowers, they approached the
secured creditor only on 02.01.2006 in such circumstances, the
contention of the learned counsel for the borrowers is without
any basis contrary and to the provisions contained in sub section
(8) of Section 13 of the Act.”
The Court then relied upon the decision of this Court in B. Arvind
Kumar Vs. Govt. of India and Others1 and applying the principle
underlying the said decision concluded that registration of sale certificate
was not essential. The Court observed thus:
“10.17 The ratio laid down by the Division Bench of this court in
Arumugham, S. & 2 others v. C.K.Venugopal Chetty & 5 others
and the Supreme Court in B. Arvind Kumar vs. Government of
India and others, referred supra, squarely applies to the case on
hand and we, therefore, have no incertitude to hold that the sale
which took place on 19.12.2005 has become final when it is
confirmed in favour of the auction purchaser and the auction
purchaser is vested with rights in relation to the property purchased
in auction on issuance of the sale certificate and he has become
1 (2007) 5 SCC 745
A
B
C
D
E
F
G
H
351
the absolute owner of the property. Further, as held by the Division
bench of this court in Arumugham, S. & 2 others v. C.K. Venugopal
Chetty & 5 others and the Supreme Court in B. Arvind Kumar
Vs. Government of India and others, referred supra, the sale
certificate issued in favour of the appellant does not require any
registration in view of section 17(2) (xii) of the Registration Act
as the same has been granted pursuant to the sale held in public
auction by the authorized officer under SARFAESI Act.
 10.18 The finding of the learned Single Judge that the sale is not
complete without registration of sale certificate, therefore, is not
sustainable in law and the same is liable to be set aside.
10.19 If the argument of the borrowers that even after the issuance
of the sale certificate, prior to registration, they are entitled to
redeem the property is accepted, it would make the provisions of
the SARFAESI Act redundant and the very object of the
SARFAESI Act enabling the Banks and financial Institutions to
realize long term assets, manage problems of liquidity, asset liability
mismatch and to improve recovery of debts by exercising powers
to take possession of securities, sell them and thereby reduce non
performing assets by adopting measures for recovery and
reconstruction would fail and would open a pandora’s box for the
litigations upsetting the sale confirmed in favour of the bonafide
auction purchasers, who invested huge money.
10.20 In view of our
finding on this point, we hold that 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 Rules is a complete and absolute sale for the
purpose of SARFAESI Act and same need not be registered under
the provisions of the Registration Act.”
While considering the second point, after noticing the Section 37
of the 2002 Act and Section 60 of the Transfer of Property Act, the
Court rejected the argument of the appellants for the following reasons:
“11.4 We have more than one reasons to reject the said contention
of the learned counsel for the borrowers.
11.5.1 Firstly, as held by us, while answering point (i) the sale in
this case has become absolute and complete on the date when
SHAKEENA & ANR. v. BANK OF INDIA & ORS.
[A. M. KHANWILKAR, J.]
A
B
C
D
E
F
G
H
352
SUPREME COURT REPORTS
[2019] 11 S.C.R.
the sale was confirmed on the appellant/auction purchaser and he
is vested with all the rights in relation to the property purchased
by him in the public auction on issuance of sale certificate on
06.01.2006, i.e., prior to the date on which the borrowers have
approached the second respondent for repayment, contrary to
the provisions of Section 13(8) of the SARFAESI Act.
11.5.2 Secondly, the sale certificate issued in this case does not
require any registration as per section 17(2) (xii) of the Registration
Act, 1908 and our said view is fortified with the decisions of the
Division bench of this Court in Arumugham, S. & 2 others v. C.K.
Venugopal Chetty & 5 others and the Supreme Court in B. Arvind
Kumar vs. Government of India and others, referred supra.
11.5.3.1 thirdly, it is true that the borrowers have the right of
redemption as provided under Section 60 of the Transfer of
Property Act, 1882, in view of Section 37 of SARFAESI Act and
to substantiate the said stand, the learned counsel for the borrowers
relies on the decision of the Supreme Court in Narandas Karsondas
vs. S.A. Kamtam and another, (1977) 3 SCC 247 wherein it is
held that the mortgagor has a right to redemption unless the sale
of the property was complete by registration in accordance with
the provisions of the Registration Act.
11.5.3.2 With great respect, we are of the view that the decision
of the Supreme Court in Narandas Karsondas vs. S.A.
Kamtam
and another, referred supra, is not applicable to the facts of this
case. Even, as held by the Supreme Court in Narandas Karsondas
vs. S.A. Kamtam and another, referred supra, the right of the
mortgagor to redemption continues only till such time the sale of
the property was complete by registration. In this case, our finding,
following the decision of the Division bench of this court in
Arumugham, S. & 2 others vs. C.K. Venugopal Chetty & 5 others
and the Supreme Court in B. Arvind Kumar vs. Government of
India and others, referred supra, is that the sale in this case has
become absolute and complete by the issuance of sale certificate
on 6.1.2006. Further, section 17(2) (xii) of the Registration Act,
1908 does not require registration of a sale certificate granted to
any purchaser of any property sold in public auction by a civil or
revenue officer and it is the finding of the Supreme Court in B.
Arvind Kumar vs. Government of India and others, referred supra,
A
B
C
D
E
F
G
H
353
that the sale certificate issued by a civil or revenue officer in
respect of a property sold in public auction does not fall under the
category of non-testamentary documents which require registration
under Sub-section (b) and (c) of Section 17(1) of the Registration
Act 1908.
11.5.4 Fourthly, the right to redeem the mortgage, as provided in
section 60 of the Transfer of Property Act, is, of course, a very
valuable right possessed by the mortgagor. At the same time, such
a right to redeem the mortgage can be exercised before it is
foreclosed, or the estate is sold. It has been held that the mortgagor
can adopt the course provided under section 60 of the Transfer of
Property Act only before the mortgage has filed a suit for
enforcement of the mortgage and not thereafter, vide Poulose
and another vs. State Bank of Travancore, AIR 1989 Kerala 79.
In this case, as discussed earlier, the borrowers approached the
second respondent/Bank only after initiation of the proceedings
under Section 13(4) of the SARFAESI Act, and that too after the
property was sold in public auction and the sale was confirmed in
favour of the appellant.”
The Court then proceeded to examine the third point and
considering the interplay between Sections 35 and 37 of the 2002 Act,
including the dictum in Mardia Chemicals Ltd. and Others Vs. Union
of India and Others2 went on to observe thus:
“12.4 As per the section 37 of the SARFAESI Act, the provisions
of this act shall be “in addition
to” and “not in derogation of” any
other law for the time being in force. There is no ambiguity in the
understanding the legislative intent behind the framing of this
section.
 12.5 On behalf of borrowers it is contended that a right of
redemption available to them before the sale is completed by way
of a registered deed under the Transfer of Property Act, a law for
the time being in force, is not taken away by the introduction of
the SARFAESI Act, by virtue of section 37 of the SARFAESI
Act, as the provisions of the SARFAESI Act and the rules framed
thereunder shall be in addition to and not in derogation of the right
of redemption conferred under the transfer of property act. But,
2 (2004) 4 SCC 311
SHAKEENA & ANR. v. BANK OF INDIA & ORS.
[A. M. KHANWILKAR, J.]
A
B
C
D
E
F
G
H
354
SUPREME COURT REPORTS
[2019] 11 S.C.R.
we have already rendered a finding that the registration of sale
certificate as per section 17(2)(xii) of the Registration Act is not
mandatory for the completion of the sale pursuant to the public
auction and issuance of the sale certificate under the scheme of
the SARFAESI Act. Assuming, the right of redemption conferred
under the Transfer of Property act is protected under Section 37
of the SARFAESI Act, and independently available without
reference to the registration of the sale certificate under Section
17(2)(xii) of the Registration Act, the sale already effected
satisfying the conditions contemplated under Section 13(8) of the
SARFAESI Act, shall by virtue of section 37 of the SARFAESI
Act, prevail over such other rights, much less the right of
redemption conferred under transfer of property act, which is
protected under section 37 of the SARFAESI Act, in view of the
non obstante clause provided under section 35 of the SARFAESI
Act, because a non obstante clause provided under section 35 of
the SARFAESI Act makes it clear that even though there are
inconsistencies to such other rights conferred under any other
law for the time being in force that are protected under section 37
of the SARFAESI Act, the action initiated under the provisions of
the SARFAESI Act shall have the overriding effect as per section
35 of the SARFAESI Act, because SARFAESI Act is a special
act which aims to accelerate the growth of
economy of our country
empowering the lenders, namely Nationalized Banks, Private Sector
banks and other Financial Institutions to realize their dues from
the defaulted borrowers who are very lethargic in repayment of
the loans borrowed by them, by exercising their right of expeditious
attachment and foreclosure for the enforcement of security and
therefore, sections 35 and 37 of the SARFAESI Act have to be
read conjointly to achieve the object of the SARFAESI Act, but
not to defeat the same and therefore, we do not see any conflict
between them.”
On the above analysis, the Division Bench of the High Court
allowed the appeals filed by respondent No.3 and dismissed the writ
petitions filed by the appellants.
17. The appellants would contend that as per 2002 Act and Rules
framed thereunder, the right of the mortgagor to redeem the mortgage
gets extinguished only upon registration of the sale certificate, resulting
A
B
C
D
E
F
G
H
355
in transfer of the auctioned property. For that, reliance has been placed
on the exposition in Narandas Karsondas Vs. S.A. Kamtam and
Another3 and in particular in Mathew Varghese Vs. M. Amritha Kumar
and Others4. Reliance is also placed on a recent decision of this Court
(three Judge Bench) in Dwarika Prasad Vs. State of Uttar Pradesh
and Others5. The appellants have assailed the conclusion recorded in
the impugned judgment that registration of sale certificate was not
essential on the ground that the same was based on a decision in B.
Arvind Kumar (supra), which had no application to the public auction
conducted under the provisions of the 2002 Act. On the other hand,
registration of sale certificate is the quintessence for transfer of the
auctioned property in favour of the auction purchaser. In that, the public
auction conducted under the 2002 Act by the secured creditor is not on
account of order of any court; and neither is the Authorised Officer a
Civil or Revenue Officer for the purposes of Section 17(2)(xii) of the
Registration Act. Reliance is placed on Rule 2(a) of the Enforcement
Rules, which defines Authorised Officer as an officer not less than a
Chief Manager of a Public Sector Bank or equivalent, as specified by
the Board of Directors or Board of Trustees of the secured creditor or
any other person or authority exercising power of superintendence,
direction and control of the business or affairs of the secured creditor, as
the case may be,
to exercise the rights of a secured creditor under the
2002 Act. Thus, the Authorised Officer is essentially an employee of the
bank and not a Civil or Revenue Officer as such. There is no deeming
provision in the 2002 Act or the Rules framed thereunder, to construe
the Authorised Officer of the bank as a civil or revenue officer for the
purpose of Section 17(2)(xii) of the Registration Act.
18. It is then submitted that public auction of the subject property
has been conducted without a valuation report by an approved valuer as
required under the Enforcement Rules, 2002. Further, the reserve price
fixed by the respondent bank as Rs.40,00,000/- (Rupees Forty Lacs
Only) did not reflect the actual market value of the property on the date
of auction. The value ought to have been no less than Rs.2 Crores.
Reliance is placed on J. Rajiv Subramaniyan and Another Vs.
Pandiyas and Others6 to contend that the secured creditor has a duty
3 (1977) 3 SCC 247
4 (2014) 5 SCC 610
5 (2018) 5 SCC 491
6 (2014) 5 SCC 651
SHAKEENA & ANR. v. BANK OF INDIA & ORS.
[A. M. KHANWILKAR, J.]
A
B
C
D
E
F
G
H
356
SUPREME COURT REPORTS
[2019] 11 S.C.R.
to ensure that the borrower gets maximum yield from the sale of the
assets, failing which the auction sale would vitiate. As regards the
subsequent sale of subject property by respondent No.3 to third party, it
is contended that the same is hit by the doctrine of lis pendens in terms
of Section 52 of the Transfer of Property Act, 1882. Further, the
subsequent purchaser is not a bonafide purchaser for consideration
without notice; and in any case cannot be heard to resist the claim of the
appellants which ought to succeed against the respondent bank and the
auction purchaser (respondent No.3). Reliance is placed on T. Ravi
and Another Vs. B. Chinna Narasimha and Others7 and Kirpal Kaur
Vs. Jitender Pal Singh and Others8 to buttress the above submissions.
It is lastly contended that this Court, in the peculiar facts of the present
case, must exercise powers under Article 142 of the Constitution of
India to declare the subsequent sale of the mortgaged property as null
and void and direct the concerned persons to immediately handover the
vacant and peaceful possession thereof to the appellants.
19. The respondent No.1(bank) and respondent No.2 (Authorised
Officer of the bank) would however, submit that the appellants failed to
deposit the dues payable to the respondent bank in terms of Section
13(8) of the 2002 Act as applicable at the relevant time and did not
challenge the notice of auction before the date of auction
despite sufficient
opportunity was given to them in that behalf. Whereas, the auction was
conducted on 19th December, 2005 and respondent No.3 being the highest
bidder was issued sale certificate on 6th January, 2006 upon payment of
the consideration amount on 4th January, 2006. With issuance of sale
certificate, it is urged that the sale transaction in favour of respondent
No.3 had become final. According to the respondents Section 13(8) of
the 2002 Act, mandates tender of the dues by the debtor/borrower to the
secured creditor at any time before the date fixed for sale which in this
case was 19th December, 2005. Our attention was invited to the fact
that sub-section (8) has undergone a change and has been made more
stringent, requiring tender of dues to the secured creditor together with
all costs, charges and expenses incurred by him at any time before the
“date of publication of notice” for public auction or inviting quotations or
tender from public or private treaty for transfer by way of lease,
assignment or sale of the secured assets.
7 (2017) 7 SCC 342
8 (2015) 9 SCC 356
A
B
C
D
E
F
G
H
357
20. It is then urged that the appellants had failed to make a valid
tender to pay the outstanding dues till the date of registration of the sale
certificate on 18th September, 2007. Indeed, the appellants had deposited
a sum of rupees twenty-five lac by 4th January, 2006, but that amount
was deposited in the account of the father of appellant No.2. Thus, the
respondent bank did not accept the same as a valid tender made by the
appellants towards the loan accounts. Similarly, the cheques issued by
the appellants on 2nd January, 2006 in the sum of Rs.25,21,446/- (Rupees
Twenty-Five Lacs Twenty-One Thousand Four Hundred Forty-Six Only),
were of no avail not being a valid tender as per the agreed terms. The
third attempt was allegedly made by the appellants, to pay the dues in
the form of demand drafts for an aggregate amount of Rs.25,06,250/-
(Rupees Twenty-Five Lacs Six Thousand Two Hundred Fifty Only), on
18th January, 2006. That again is of no avail as the demand drafts were
drawn in the name of respondent No.2 i.e. Shri B. Jagathkumar
(Authorised Officer) instead of in the name of the respondent bank.
Hence, even this was not a valid tender. Notably, the appellants made no
attempt to deposit the amount in their loan accounts until the impugned
decision was passed by the Division Bench including the date of
registration of sale certificate on 18th September, 2007. The sale in favour
of respondent No.3 stood complete and final on that day.
21. It is urged
that the exposition in the decisions pressed into
service by the appellants in Mathew Varghese (supra) and Dwarika
Prasad (supra), in fact, would go against the appellants. Further, the
High Court was right in concluding that the sale certificate issued in
favour of respondent No.3 did not require registration and that the sale
process was complete on issuance of the sale certificate on 6th January,
2006. For this, reliance has been placed on the dictum in B. Arvind
Kumar (supra). Additionally, reliance is placed upon the provisions of
Rule 65 of Schedule II of Income Tax Act, 1961 as applicable at the
relevant time. Lastly, it is contended that the appellants have failed to
avail alternative efficacious remedy against the order dated 10th January,
2006 passed by the Debt Recovery Tribunal dismissing the proceedings
initiated by the appellants to challenge the action taken by the respondent
bank under Section 13(4) of the 2002 Act. It is urged that the appellants
should be non - suited on the basis of the dictum in Kanaiyalal Lalchand
Sachdev and Others Vs. State of Maharashtra and Others9.
9 (2011) 2 SCC 782
SHAKEENA & ANR. v. BANK OF INDIA & ORS.
[A. M. KHANWILKAR, J.]
A
B
C
D
E
F
G
H
358
SUPREME COURT REPORTS
[2019] 11 S.C.R.
22. The respondent No.3, besides supporting the view taken by
the High Court in the impugned judgment, would additionally urge that
the said respondent has paid the entire consideration amount, Rs.42,51,000/
- (Rupees Forty-Two Lacs Fifty One Thousand Only), on 4th January,
2006. Whereafter, the sale certificate was issued in his favour on 6th
January, 2006. The appellants, however, filed writ petitions only on 19th
January, 2006. The appellants did not avail the option of redemption by
tendering the dues to the respondent bank before the date fixed for sale
or public auction which in this case was 19th December, 2005.
Furthermore, the legal notice issued at the instance of appellants also
does not clearly indicate their intention to redeem the mortgage by closing
loan accounts and readiness and willingness to pay the entire dues. The
tender made by the appellants was not a valid tender and no fault can be
found with the respondent bank for having returned the cheques/drafts
and not to encash the same. Further, after the High Court rendered the
impugned decision on 10th August, 2007, the sale certificate has been
duly registered on 18th September, 2007 and even until that date no valid
offer or tender has been made by the appellants for payment of the
outstanding dues to the respondent bank. The title of the subject property
had already passed on to respondent No.3. Therefore, respondent No.3
was within his rights to
sell the property to a third party by a registered
sale deed on 5th October, 2007. By not impleading the subsequent
purchaser, the civil appeals cannot proceed any further and no relief can
be granted to the appellants.
23. We have heard Dr. A. Francis Julian, leaned Senior Counsel
for the appellants, Mr. Pranab Kumar Mullick, Advocate for respondent
Nos.1 & 2 and Mr. K.K. Mani, Advocate for respondent No.3.
24. After cogitating over the factual matrix and perusing the
relevant records, it is seen that the ground of challenge considered by
the High Court at the behest of the appellants in the impugned judgment,
in our opinion, has become unavailable. In that, the matter proceeded
before the High Court for setting aside the entire auction process on the
premise that the sale certificate was yet to be registered in favour of the
highest bidder (respondent No.3); and the appellants had made
(unsuccessful) attempts to exercise their right of redemption by offering
the outstanding dues to the respondent bank. It was argued by the
appellants that only upon registration of the sale certificate, the right of
the borrower to redeem the mortgage would get extinguished and
obliterated.
A
B
C
D
E
F
G
H
359
25. Indisputably, after the disposal of the writ appeals by the
Division Bench of the High Court vide impugned judgment on 10th August,
2007, the auction purchaser (respondent No.3) got the sale certificate
registered on 18th September, 2007 and then transferred the property by
a registered sale deed on 5th October, 2007 to third party.  It is 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. The
contention pursued before the High Court by the appellants, therefore,
has now become unavailable.
26. Be it noted that 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 (C) Nos.634-635 of
2006 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, as can be discerned
from the three points formulated in paragraph No.8 of the impugned
judgment (reproduced in paragraph No.16 hereinabove). The appellants
cannot be permitted to assail the auction process on any other count.
27. Reverting to the stand taken by the appellants that they had
attempted to exercise their right of redemption by depositing an aggregate
sum of Rupees Twenty Five Lacs on 30th December, 2005 and 4th January,
2006, in the account of the father of appellant No.2 followed by issuing
SHAKEENA & ANR. v. BANK OF INDIA & ORS.
[A. M. KHANWILKAR, J.]
A
B
C
D
E
F
G
H
360
SUPREME COURT REPORTS
[2019] 11 S.C.R.
cheque(s) in the aggregate sum of Rs.25,21,446/- (Rupees Twenty-Five
Lacs Twenty-One Thousand Four Hundred Forty-Six Only), on 2nd
January, 2006; and once again offering the amount by demand drafts in
the sum of Rs.25,06,250/- (Rupees Twenty-Five Lacs Six Thousand
Two Hundred Fifty Only), on 18th January, 2006. This stand though
attractive at the first blush, will have to be stated to be rejected. On the
other hand, we find substance in the stand taken by the respondent bank
that none of the above was a valid tender so as to extricate or discharge
the appellants from their obligation - to deposit the outstanding dues
payable by them before the specified date. In that, the amount was
allegedly deposited by them in the account of the father of appellant
No.2 and not in their loan accounts as such. Unless the amount was
transferred/deposited in the loan accounts of the appellants in relation to
which the mortgage operated, it would not be a valid tender for paying
the outstanding dues. Similarly, on the second occasion the appellants
attempted to pay in the form of cheque(s) issued on 2nd January, 2006.
However, as per the terms and conditions for grant of loan payment by
cheque(s) was not permissible. Thus, the respondent bank was not obliged
to accept the amount in the form of cheque(s). The respondent bank,
therefore, justly declined to accept the cheque(s), not being a valid tender.
Even the third attempt made by
the 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. Hence, these demand
drafts were rightly not accepted as a valid tender.
28. 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. We must also
notice the stand taken by the respondent bank that even the legal notice
sent by the appellants to the respondent bank, in no way expresses
unambiguous commitment of the appellants to exercise their right of
redemption. Suffice it to observe that 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
A
B
C
D
E
F
G
H
361
Court from 19th January, 2006 immediately after filing of writ petitions
or for that matter until the registration of the sale certificate on 18th
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 18th September, 2007.
29. A fortiorari, it must follow that the appellants have failed to
exercise their right of redemption in the manner known to law, muchless
until the registration of the sale certificate on 18th September, 2007. In
that view of the matter 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.
30. 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 to examine other grounds
urged by the appellants, in light of our conclusion that the appellants
have failed to make a valid and legal tender to the respondent bank
SHAKEENA & ANR. v. BANK OF INDIA & ORS.
[A. M. KHANWILKAR, J.]
A
B
C
D
E
F
G
H
362
SUPREME COURT REPORTS
[2019] 11 S.C.R.
before the issue of sale certificate on 6th January, 2006, muchless
registration thereof on 18th September, 2007.
31. For the view we have taken, it is not possible for us to
countenance the argument of the appellants that we should exercise
plenary powers under Article 142 of the Constitution of India. The
reported decisions pressed into service by both sides also need not detain
us as the appellants have, in law, lost their option to exercise right of
redemption, consequent to registration of the sale certificate on 18th
September, 2007 and their failure to pay the dues to the secured creditors
before that date.
32. Accordingly, these appeals must fail and same are dismissed
with no order as to costs. Ordered accordingly.
All applications are also disposed of in the above terms.
Devika Gujral
Appeals dismissed.