J. B. PARDIWALA, J.:

2 is the Guarantor and the respondent No. 3 is the Bank (Secured Creditor).

3. These appeals are at the instance of an auction purchaser left high and dry by the respondents herein and is directed against the common judgment and order passed by the High Court of Judicature at Bombay in Writ Petition No. 9523 of 2023 with Interim Application (ST) No. 21706 of 2023 (for impleadment) by which the High Court allowed the writ petition filed by the borrowers and thereby directed the Bank to permit the borrowers to redeem the mortgage of the secured asset more particularly after the auction proceedings attained finality.

FACTUAL MATRIX

4. It appears from the materials on record that the borrowers had availed credit facility from the Bank on 03.07.2017. Accordingly, the Bank sanctioned Lease Rental Discounting (for short, ‘the LRD’) credit facility to the tune of Rs. 100 crore in favour of the borrower with the respondent No. 2 standing as a guarantor. Out of the total amount sanctioned, the amount of Rs. 65 crore Page 3 of 111 was adjusted against the then existing LRD facility granted by the previous bank and for the balance amount of Rs. 35 crore a security in the form of a simple mortgage was created over a parcel of land admeasuring 16200 sq. metres having buildings and ancillary structures on it at plot Nos. D-105, D- 110 and D-111 respectively situated at the Trans Thane Creek Industrial Area MIDC Village Shirwane, Thane, Belapur Road, Nerul, Navi Mumbai, Thane, Maharashtra in lieu of the sanctioned credit.

5. The borrower defaulted in repayment of the loan amount and accordingly the loan account was declared as a Non-Performing Asset (NPA).

6. The Bank issued a demand notice under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (for short, ‘the SARFAESI Act ’) for repayment of the principal amount along with interest, cost, charges, etc. As on 30.04.23, an aggregate sum of Rs. 123.83 crore was due and payable by the borrower to the Bank.

7. Owing to the failure of the borrower & the guarantor in repaying the outstanding amount referred to above, the Bank proceeded to take measures for possession of the secured asset under the provisions of the SARFAESI Act . The Bank decided to put the secured asset to auction. It appears that between April 2022 & June 2023, the Bank attempted eight auctions but all failed.

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8. In the meantime, the borrowers preferred a Securitization Application being SA No. 46 of 2022 before the Debt Recovery Tribunal-I, Mumbai (for short, “DRT”) inter alia challenging the demand notice issued under Section 13(2) of the SARFAESI Act and also for quashing of the sale notice dated 25.03.22 in respect of the secured asset. It is not in dispute that the said application as on date is still pending before the DRT.

9. It appears that the borrowers informed the Bank that they were trying to sell the secured asset but were not getting good offers. The borrowers informed the Bank that the maximum they might be able to fetch from the sale of the secured asset would be around Rs. 91-92 crore and they were willing to settle the entire account by offering such amount to the Bank.

10. The Bank decided to go for one more auction. On 14.06.23, the Bank published the auction notice for the 9th time for sale of the secured asset at a reserve price of Rs. 105 crore. On publication of the auction notice, the appellant herein participated in the auction proceedings conducted on 27.06.23 and submitted its bid of Rs. 105.05 crore, along with a deposit of Rs. 10.5 crore as earnest money.

11. In the 9th auction conducted by the Bank, the appellant herein was declared as the highest bidder. The Bank on 30.06.2023 vide its email sent a “Sale Confirmation Letter” to the appellant, declaring him as the highest bidder / H1 in the auction of the secured asset and called upon the appellant Page 5 of 111 to deposit 25% of the bid amount by 01.07.23 and the balance amount on or before 15.07.23. The email is reproduced below: -

12. On 01.07.2023, the appellant deposited 25% of the total bid amount (minus the earnest money deposit). In the wake of such development, the borrowers filed an Interim Application No. 2339 of 2023 on 04.07.2023, titled Redemption Application in S.A. No. 46 of 2022 before the DRT-I, Mumbai for redemption of the mortgage in respect of the secured asset by payment of the total outstanding sum of Rs 123.83 crore (approx.) on or before 31.08.23.

13. On 27.07.23, the appellant herein deposited the balance sum of the total bid amount which was duly received and accepted by the Bank. On the very same day, the redemption application referred to above was also heard by the DRT-I. The redemption application was opposed by both the appellant herein as well as the Bank. The DRT after hearing the parties at length, reserved orders to be pronounced on 02.08.23.

14. While the parties were awaiting for the DRT to pass appropriate an on order on the redemption application, the borrowers went to the High Court and filed the Writ Petition No. 9523 of 2023, seeking directions to the Bank to permit them to redeem the mortgage of the secured asset. Page 7 of 111

15. The writ petition was filed on the premise that the borrowers had strong apprehension that the DRT may reject their redemption application and the entire matter would become infructuous more particularly, the Bank having accepted the entire amount from the appellant herein of the total bid.

16. Before the High Court, the borrowers expressed their willingness to pay a total sum of Rs. 129 crore for redeeming the mortgage by 31.08.23. The Bank which had earlier opposed the plea for redemption of mortgage before the DRT for some good reason expressed its willingness before the High Court to accept the offer of the borrowers. The Bank perhaps got lured by the fact that the borrowers were paying almost Rs. 23.95 crore more than what was paid by the appellant herein and Rs. 5 crore more than the outstanding amount.

17. It also appears that the appellant herein having come to know about such writ petition filed in the High Court preferred Interim Application (ST) No. 21706 of 2023 for being impleaded in the writ petition.

18. The writ petition along with interim application was heard by the High Court and vide its impugned judgment and order dated 17.08.2023 allowed the writ petition and permitted the borrowers to redeem the mortgage of the secured asset subject to payment of Rs. 25 crore on the same day and the balance amount of Rs. 104 crore on or before 31.08.2023, failing which the sale of secured asset in favour of the appellant herein would be confirmed. Page 8 of 111

19. The operative part of the impugned order passed by the High Court reads thus:

Bank, has brought to our attention that out of the entire amount of Rs. 105.05 crores deposited by the Auction Purchaser, the Respondent-Bank has appropriated the sum of Rs. 63,50,45,000/- towards the loan amount of the Petitioners. We therefore direct that the Respondent-Bank shall reverse this entry and immediately keep the entire amount of Rs. 105.05 crores [deposited by the auction purchaser] in a No Lien interest bearing account. If the Petitioners pay the balance amount of Rs.104 crores to the Respondent Bank Page 9 of 111 by 31st August 2023, then the Respondent-Bank shall refund the amount of Rs. 105.05 crores deposited by the Auction Purchaser together with accrued interest on or before 7th September 2023.

(e) In the event the balance amount of Rs. 104 crores are not paid by the Petitioners to the Respondent-Bank on or before 31st August 2023, the Respondent Bank shall then be entitled to appropriate the money from the No Lien interest bearing account towards the dues payable by the Petitioners and the sale of the secured asset shall be confirmed in favour of the Auction Purchaser and a sale certificate shall be issued in their favour. All formalities in relation to registration of that certificate shall also be done by the Respondent- Bank and the Auction Purchaser.

(f) In light of this order, Mr. Khandeparkar has stated that, nothing would survive in Securitization Application No. 46 of 2022 and/or the Interim Applications filed therein and seeks leave to withdraw the same within a period of one week from today. The said statement is accepted as an undertaking given to the Court. It is needless to clarify that even if the Petitioners do not withdraw the Securitization Application, the same shall stand dismissed in light of this order and the Petitioners will not be permitted to litigate any further with the Respondent Bank in relation to the secured asset. In other words, if the Petitioners default in making the balance payment of Rs.104 crores to the Respondent Bank by 31 st August 2023, the Auction Purchaser shall get the secured asset free from litigation. As per the statement made by Mr. Khandeparkar, and which is accepted as an undertaking given to the Court, if the Petitioners default in making the balance payment of Rs.104 crores by 31st August 2023, physical, vacant, quiet, and peaceful possession of the secured asset shall be handed over to the Auction Purchaser on or before 5th September 2023.”

20. It appears that during the pendency of the present appeals, the borrowers transferred the balance amount of Rs. 104 crore on 26.08.2023 to the Bank in terms of the impugned order passed by the High Court. With the transfer of the amount of Rs. 104 crore, the Bank issued a “No Dues Page 10 of 111 Certificate” on 28.08.23. On the very same day, the borrowers entered into an Agreement of Assignment of Leasehold Rights with a third-party viz. M/s Greenscape I.T. Park LLP for the transfer of leasehold rights in the secured asset and the said agreement was registered before the Joint Sub Registrar, Thane 8 vide Registration No. 19286 of 2023.

21. Being aggrieved and dissatisfied with the aforesaid order passed by the High Court, the appellant is here before this Court with the present appeals. SUBMISSIONS ON BEHALF OF THE APPELLANT

22. Mr. Mukul Rohatgi, the learned Senior Counsel and Mr. Neeraj Kishan Kaul, the learned Senior Counsel appearing for the appellant made the following submissions:

SUBMISSIONS ON BEHALF OF THE BORROWERS

23. Mr. Shyam Divan, the learned Senior Counsel and Mr. Nikhil Nayyer, the learned Senior counsel appearing for the borrowers made the following submissions:

b. Since there has been full compliance of the Impugned Order by the borrowers herein as well as the Bank, the appeals have essentially become infructuous.

c. The only issue which remains is the refund of the amount deposited by the appellant herein. This is an issue between the appellant and the Bank and the borrowers have no reason to come in the way of the refund of the amount to the appellant herein.

d. There is a specific direction issued by the High Court that the Respondent Bank shall immediately keep the entire amount of Rs. 105.05 crore (deposited by the Auction Purchaser/appellant herein) in a “No Lien Interest Bearing Account” and if the borrowers pay the balance amount of Rs. 104 crore to the Respondent Bank by 31.8.2023 (which it has), then the Respondent Bank shall refund the amount of Rs. 105.05 Crores deposited by the Auction Purchaser together with the accrued interest on or before 7.9.2023.

e. The High Court correctly interpreted Section 13(8) of the SARFAESI Act. The right of redemption is nowhere mentioned in the SARFAESI Act and in such circumstances, Section 60 of the Transfer of Property Act, 1882 (for short, ‘the Act 1882’) should be looked into. Section 60 of the Act 1882 has been interpreted to reserve the right of mortgagor to redeem the property till the stage of the same being conveyed /transferred to a third party. Page 15 of 111 f. The aforesaid interpretation is discernible from the decision of this Court in the case of Narandas Karsondas v. S.A. Kamtam and Another reported in 1977 (3) SCC 247, wherein it has been held that:

h. Although the decision in Mathew Varghese (supra) was prior to the 2016 amendment to the SARFAESI Act , yet its applicability has been held valid even after the amendment of the said Act. A Division Bench of the High Court of Telangana in the case of Concern Readymix, rep. by its Proprietor, Smt. Y. Sunitha v. Authorised Officer, Corporation Bank and Anr., reported in 2018 SCC OnLine Hyd 783 has held after juxtaposing the amended and unamended provisions of Section 13(8) of the SARFAESI Act, with respect to the right of redemption available to the Mortgagor that the amended Section 13(8) of the SARFAESI Act only puts a restriction on the right of the mortgagee to deal with the property and does not speak in express terms about the equity of redemption available to the mortgagor. It was further held that the danger of interpreting Section 13(8) as though it relates to the right of redemption is if the payments are not made in accordance with Section 13(8) , the right of redemption may get lost even before the sale is complete in all respects and that holding that the right of redemption would be extinguished at the stage of issue of notice under Rule 9(1) would tantamount to annulling the relevant provision of the Act 1882 which do not stand expressly excluded insofar as the question of redemption is concerned. The said judgment of the Page 17 of 111 Telangana High Court was challenged before this Court vide SLP(C) D. No. 28967 of 2019 and the same came to be dismissed.

i. The view expressed in Concern Readymix (supra) was echoed by a Division Bench of the High Court of Punjab and Haryana in the case of M/s Pal Alloys and Metal India Private Limited & Ors. v. Allahabad Bank & Ors. , reported in 2021 SCC OnLine P&H 2733, wherein the High Court, inter alia, considered the specific issue “(a) till what time and date can the right of redemption of the Mortgage can be exercised by the Mortgagors / Borrowers in the light of the amendment to Section 13(8) of the SARFAESI Act”. j. While answering the aforesaid question, the Court considered the report of the Joint Committee on the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill, 2016 (the Report) as well as the law laid down by this Court in Mathew Varghese (supra) and the judgment in Concern Readymix (supra), in order to determine whether the said right of redemption was available up to the date of transfer of the asset or only up to the date of publication of the sale notice. On a consideration of Section 60 of the Act 1882 as well as the judgment in Narandas Karsondas (supra), it was observed that:

m. A perusal of the Report (the report of Joint Committee on the Enforcement of Security Interest and Recovery of Debt Laws and Miscellaneous Provisions (Amendment) Bill, 2016), more particularly para 24, indicates that the proposed amendment to Section 13(8) of the Act was intended to deal with: - “Provisions to stop secured creditor to lease or assignment or sale in the prescribed conditions”. The important thing to note is also that the report does not indicate that the Committee had considered the effect of Section 60 of the Transfer of Property Act, 1882, which is a general law regarding redemption of mortgage vis-a-vis the provisions of SARFAESI.

n. The focus of the Committee in the said report is on the obligations of the Mortgagee to not create third party rights up to a certain time-period, but it is silent on the rights of the Mortgagor to exercise its redemption for which Section 60 of the Act 1882 is the relevant provision. o. It is further necessary to note that the non obstante clause in Section 13 specifically excludes only Sections 69 and 69A respectively of the Act 1882. This section does not specifically include the words "Notwithstanding anything contained in any other Act for the time being in force" which is the standard term used in non obstante clauses. In view thereof, the legislative intent should be interpreted to only exclude Sections 69 and 69A respectively Page 20 of 111 of the Act 1882 and the same does not affect the applicability of Section 60 of the Act 1882.

p. Various High Courts have consistently held that the right of redemption has to be exercised in terms of Section 60 of the Act 1882 and not under Section 13(8) of the SARFAESI Act and the amendment to Section 13(8) does not affect or take away this right in any manner.

24. The Telangana High Court in the case of Amme Srisailam v. Union Bank of India, Regional Office, Guntur, rep. by its Region Head & Deputy General Manager, Andhra Pradesh & Ors., W.P. No. 11435 of 2021 decided on 17.08.2022 has referred to and relied upon on Concern Readymix (supra) and Pal Alloys (supra). The Telangana High Court in Amme Srisailam (supra) in turn has relied upon the decision of this Court in the case of S. Karthik & Ors. v. N. Subhash Chand Jain & Ors. , (2022) 10 SCC 641. The Telangana High Court in Amme Srisailam (supra) held as under:

transfer the mortgaged property to him or to such third person as he may direct, or to execute and to have registered an acknowledgement in writing that any right in derogation of his interest transferred to the mortgagee has been extinguished. As per the proviso, the right conferred under the aforesaid provision shall not be extinguished by any act of the parties or by decree of a Court.

46. Therefore, on a careful application of Sections 35 and 37 of the SARFAESI Act, it is evident that the situation contemplated under Section 13(8) of the SARFAESI Act does not exclude application of Section 60 of the Transfer of Property Act, 1882. As explained by this Court in Concern Readymix (supra), a restriction on the right of the mortgagee to deal with the property post issuance of notice for public auction is not the same as the right of redemption available to the mortgagor.

47. In so far the present case is concerned, admittedly the bid amount of the petitioner was Rs.57.00 lakhs. Though the auction was conducted on 16.03.2021 and payment was made by the petitioner within the stipulated period, there is clear dispute between the parties as regards issuance of sale certificate by respondent Nos.1 and 2 in favour of the petitioner. However, admittedly there is no registration of any sale certificate. On the other hand, the borrower had approached respondent Nos.1 and 2 for settlement of the loan account under OTS Scheme on 18.03.2021 which was recommended by second respondent on 20.03.2021 and was accepted by first respondent on 31.03.2021 for an amount of Rs.5.10 crores, which has been paid by the borrower i.e., third respondent. On the one hand petitioner's amount was Rs.57.00 lakhs which the petitioner had paid but on the other hand third respondent has paid Rs.5.10 crores as per the OTS. Lending of money, recovery of dues and entering into OTS are all commercial decisions which are taken by the banks/financial institutions in their best interest, subject of course within the statutory framework. In this case, we have already come to the conclusion that third respondent had not lost the right of redemption upon publication of notice for auction sale. If that be the position, then it should be left to the discretion of the secured creditor as to which course of action would be Page 22 of 111 more beneficial to it. Evidently, the OTS with the third respondent is much more beneficial to the secured creditors i.e., respondent Nos.1 and 2 and as has been explained above such a course of action is not restricted or extinguished by Section 13(8) of the SARFAESI Act.

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50. Right to property is a valuable right. Though no longer a fundamental right, it is still a constitutional right. The interpretation which we have adopted subserves such a right. That apart, third respondent had not lost the right of redemption upon publication of notice for auction sale; his right of redemption would have been lost only upon the sale certificate getting registered which admittedly has not taken place. Therefore, the action of respondent Nos.1 and 2 in accepting the higher OTS amount of the third respondent though after publication of notice for public auction and auction is justified and cannot be faulted.”

25. In such circumstances referred to above, the learned counsel prayed that there being no merit in the present appeals, those may be dismissed. ANALYSIS

26. Having heard the learned counsel appearing for the parties and having gone through the materials on record the following questions fall for our consideration:

LEGISLATIVE HISTORY AND SCHEME OF THE SARFAESI ACT

27. Till early 1990s, the civil suits were being filed for recovery of the dues of banks and financial institutions under the Act 1882 and the Code of Civil Page 24 of 111 Procedure, 1908 ( CPC ). Due to various difficulties the banks and financial institutions had to face in recovering loans and enforcement of securities, the Parliament enacted the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short, “the Act 1993” or “the RDBFI Act”).

28. On account of lack of infrastructure and manpower, the regular civil courts were not in a position to cope up with the speed in the adjudication of recovery cases. In the light of recommendations of the Tiwari Committee the special tribunals came to be set up under the provisions of the Act 1993 referred to above for the recovery of huge accumulated NPA of the Bank loans.

29. On the continuing rise in number of Non-Performing Assets (NPA) at banks and other financial institutions in India; a poor rate of loan recovery and the failure of the existing legislation in redressing the difficulties of recovery by banks; the Narasimham Committee I & II and Andyarujina Committee were constituted by the Government for examining and suggesting banking reforms in India. These Committees in their reports observed that one out of every five borrower was a defaulter, and that due to the long and tedious process of existing frame work of law and the overburdening of existing forums including the specialised tribunals under the 1993 Act, any attempt of recovery with the assistance of court/tribunal often rendered the secured asset nearly worthless due to the long delays. In this background the Committees thus, proposed new laws for securitisation in order to permit banks and Page 25 of 111 financial institutions to hold securities and sell them in a timely manner without the involvement of the courts.

30. On the recommendations of the Narasimham Committee and Andyarujina Committee, the SARFAESI Act was enacted to empower the banks and financial institutions to take possession of the securities and to sell them without intervention of the court.

31. The statement of objects and reasons for which the Act has been enacted reads as under: -

32. This Court in Mardia Chemicals Ltd. & Ors. v. Union of India & Ors. reported in (2004) 4 SCC 311, examined the history and legislative backdrop that ultimately led to the enactment of the SARFAESI Act as under: -

33. In this regard, reference may be made to the following observations of this Court in the case of Satyawati Tondon (supra). The relevant paras are being reproduced hereunder:

34. Section 13 of the SARFAESI Act contains the provisions relating to the enforcement of the security interest and the manner in which the same may be done by the secured creditor without the intervention of the Court or Tribunal in accordance with its provisions, and reads as under: -

performing asset under this sub-section shall not apply to a borrower who has raised funds through issue of debt securities; and Page 30 of 111

(ii) in the event of default, the debenture trustee shall be entitled to enforce security interest in the same manner as provided under this section with such modifications as may be necessary and in accordance with the terms and conditions of security documents executed in favour of the debenture trustee;

(3) The notice referred to in sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non- payment of secured debts by the borrower.

(3A) If, on receipt of the notice under sub-section (2), the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within fifteen days of receipt of such representation or objection the reasons for non-acceptance of the representation or objection to the borrower:

section (2), transfer by way of sale, lease or otherwise (other than in the ordinary course of his business) any of his secured assets referred to in the notice, without prior written consent of the secured creditor.” (Emphasis supplied)

35. We are concerned in the present litigation with sub- section 8 of Section 13 of the SARFAESI Act referred to above . Section 13(8) is in two parts; (i) it enables the borrower to exercise his right of redemption upto a particular point of time and at the same time (ii) it enables the secured creditor to exercise its power to deal or dispose off the secured asset. First, by stipulating the time limit during which the borrower can tender all the dues with interest, costs and charges to the secured creditor, and secondly, by providing as to when the secured creditor can proceed to sell, auction, assign or lease the secured asset.

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36. Rules 8 and 9 respectively of the Rules of 2002 prescribe the procedure and formalities to be followed for the sale of immovable secured asset as per Section 13 of the SARFAESI Act and reads as under: -

Provided that in case of sale of immovable property in the State of Jammu and Kashmir, the provision of Jammu and Kashmir Transfer of Property Act, 1977 shall apply to the person who acquires such property in the State.

(6) the authorised officer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets, under sub- rule (5):

9. Time of sale, issue of sale certificate and delivery of possession, etc.–(1) No sale of immovable property under these rules, in first instance shall take place before the expiry of thirty days from the date on which the public notice of sale is published in newspapers as referred to in the proviso to sub-rule (6) of rule 8 or notice of sale has been served to the borrower:

Provided that if after meeting the cost of removing encumbrances and contingencies there is any surplus available out of money deposited by the purchaser such surplus shall be paid to the purchaser within fifteen days, from date of finalisation of the sale. (8) On such deposit of money for discharge of the encumbrances, the authorised officer shall issue or cause the purchaser to issue notices to the persons interested in or entitled to the money deposited with him and take steps to make, the payment accordingly.

(9) The authorised officer shall deliver the property to the purchaser free from encumbrances known to the secured creditor on deposit of money as specified in sub-rule (7) above. Page 39 of 111 (10) The certificate of sale issued under sub-rule (6) shall specifically mention that whether the purchaser has purchased the immovable secured asset free from any encumbrances known to the secured creditor or not.”

37. From the above provisions under Rule 8(6) it is clear that the authorised officer of the Bank shall serve on the borrower a notice of thirty days for sale of immovable property, and that if the sale of such secured assets is by way of public auction, the Bank/secured creditor, shall cause publication of such notice in two leading newspapers, one in vernacular, language having sufficient circulation in the locality by setting the out the terms of sale, mentioned in the said provision; and under sub-rule (1) of Rule 9, such sale of immovable of property under these Rules shall not take place before the expiry of thirty days from the date on which the public notice of sale is published in newspapers as referred to in the proviso to sub-rule (6), or notice of sale has been served to the borrower.

38. In Mardia Chemicals (supra), this Court examined the provision of Section 13 of the SARFAESI Act and made the following relevant observations reproduced below: -

39. Section 35 of the SARFAESI Act contains the overriding clause and provides that the Act shall override any other law which is inconsistent with its provisions, and reads as under: -

40. Section 37 of the SARFAESI Act provides that the provisions of the SARFAESI Act shall be in addition to the Acts mentioned in or and any other law for the time being in force and that the other laws shall also be applicable alongside the SARFAESI Act , and reads as under: -

41. This Court in Madras Petrochem Ltd. & Anr. v. Board for Industrial and Financial Reconstruction & Ors. reported in (2016) 4 SCC 1, recapitulated the object behind the enactment of the SARFAESI Act and in that context examined the purpose of Sections 13 , 35 and 37 respectively of the SARFAESI Act with the following observations given as under: -

The Committee on the Financial System headed by Shri M. Narasimham has considered the setting up of the Special Tribunals with special powers for adjudication of such matters and speedy recovery as critical to the successful implementation of the financial sector reforms. An urgent need was, therefore, felt to work out a suitable mechanism through which the dues to the banks and financial institutions could be realised without delay. In 1981, a Committee under the Chairmanship of Shri T. Tiwari had examined the legal and other difficulties faced by banks and financial institutions and suggested remedial measures including changes in law. The Tiwari Committee had also suggested setting up of Special Tribunals for recovery of dues of the banks and financial institutions by following a summary procedure. The setting up of Special Tribunals will not only fulfil a long-felt need, but also will be an important step in the implementation of the Report of Narasimham Committee. Whereas on 30-9-1990 more than fifteen lakhs of cases filed by the public sector banks and about 304 cases filed by the financial institutions were pending in various courts, recovery of debts involved more than Rs 5622 crores in dues of public sector banks and about Rs 391 crores of dues of the financial institutions. The locking up of such huge amount of public money in litigation prevents proper utilisation and recycling of the funds for the development of the country.

2. The Bill seeks to provide for the establishment of Tribunals and Appellate Tribunals for expeditious adjudication and recovery of debts due to banks and financial institutions. Notes on clauses explain in detail the provisions of the Bill.”

20. The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 took away the jurisdiction of the courts and vested this jurisdiction in tribunals established by the Act so as to ensure speedy recovery of debts due to the banks and financial institutions mentioned therein. This Act also included one appeal to the Appellate Tribunal, and transfer of all suits or other proceedings pending before any court to tribunals set up under the Act. The Act contained a non obstante clause in Section 34 stating that its provisions will have effect notwithstanding anything inconsistent contained in any other law for the time being in force or in any Page 43 of 111 instrument having effect by virtue of any other law. In the year 2000, this Act was amended so as to incorporate a new sub-section (2) in Section 34 together with a saving provision in sub-section (1). It is of some interest to note that this Act was to be in addition to and not in derogation of various Financial Corporation Acts and the Sick Industrial Companies (Special Provisions) Act, 1985 . Clearly, therefore, the object of the 2000 Amendment to the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 was to make the Sick Industrial Companies (Special Provisions) Act, 1985 prevail over it.

21. Regard being had to the poor working of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 , the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 was brought into force in the year 2002. …”

22. This 2002 Act was brought into force as a result of two committee reports which opined that recovery of debts due to banks and financial institutions was not moving as speedily as expected, and that, therefore, certain other measures would have to be put in place in order that these banks and financial institutions would better be able to recover debts owing to them.

xxx xxx xxx

24. The “pivotal” provision, namely, Section 13 of the said Act makes it clear that banks and financial institutions would now no longer have to wait for a tribunal judgment under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 to be able to recover debts owing to them. They could, by following the procedure laid down in Section 13 , take direct action against the debtors by taking possession of secured assets and selling them; they could also take over the management of the business of the borrower. They could also appoint any person to manage the secured assets possession of which has been taken over by them, and could require, at any time by notice in writing to any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due from the borrower, to pay the secured creditor so much of the money as is sufficient to pay the secured debt.

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25. In order to further the objects of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 , the Act contains a non obstante clause in Section 35 and also contains various Acts in Section 37 which are to be in addition to and not in derogation of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 . Three of these Acts, namely, the Companies Act, 1956 , the Securities Contracts (Regulation) Act, 1956 and the Securities and Exchange Board of India Act, 1992 , relate to securities generally, whereas the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 relates to recovery of debts due to banks and financial institutions. Significantly, under Section 41 of this Act, three Acts are, by the Schedule to this Act, amended. We are concerned with the third of such Acts, namely, the Sick Industrial Companies (Special Provisions) Act, 1985 , in Section 15(1) of which two provisos have been added. It is the correct interpretation of the second of these provisos on which the fate of these appeals ultimately hangs.” (Emphasis supplied) REDEMPTION OF MORTGAGE UNDER SECTION 60 OF THE TRANSFER OF PROPERTY ACT, 1882

42. Section 60 of the Act 1882 provides the general statutory right of the mortgagor to redeem the mortgage and reads as below: -

43. This Court in Narandas Karsondas (supra), upon examination of Section 60 of the Act 1882, held that the mortgagor’s right to redeem will be extinguished only after completion of sale by a registered deed, and made the following relevant observations reproduced below: -

44. A similar view was taken by this Court in L.K. Trust v. EDC Limited and Others reported in (2011) 6 SCC 780 wherein it was observed as follows:

45. Sub-section (8) of Section 13 of the SARFAESI Act, as originally enacted, stated as under: -

46. In Mathew Varghese (supra), this Court had the occasion to consider the right of redemption of mortgage under the SARFAESI Act vis-à-vis the Act 1882, wherein, this Court made the following relevant observations, being reproduced below: -

Elaborating the statement of law made therein, we wish to state that the endeavour or the role of a secured creditor in such a Page 51 of 111 situation while resorting to any sale for the realisation of dues of a mortgaged asset, should be that the mortgagor is entitled for some lenience, if not more to be shown, to enable the borrower to tender the amounts due in order to ensure that the constitutional right to property is preserved, rather than it being deprived of.” (Emphasis supplied)

47. In Dwarika Prasad v. State of Uttar Pradesh reported in (2018) 5 SCC 491, this Court speaking through one of us Dr. D.Y. Chandrachud, CJI., considered the unamended Section 13(8) of the SARFAESI Act, keeping in mind the decision in the case of Mathew Varghese (supra). The Court took the view that the right of redemption of mortgage is not lost until there is a transfer by a registered instrument. The following observations as contained in para 8 of the judgment are reproduced below:

48. In, yet one another decision of this Court in Allokam Peddabbayya & Anr. v. Allahabad Bank & Ors. reported in (2017) 8 SCC 272, a similar view was taken. The relevant observations made therein are as under:

49. Thus, prior to the amendment of Section 13(8) of the SARFAESI Act, this Court consistently held, that the borrower shall continue to have a right of redemption of mortgage until the execution of the conveyance of the secured asset by way of a registered instrument. Furthermore, this Court in Mathew Varghese (supra) found no inconsistency between the unamended Section 13(8) of SARFAESI Act and the general right of redemption under Section 60 of the Act 1882.

50. However, later on 1st September, 2016, the Enforcement of Security Interest and Recovery of Debt Laws and Miscellaneous Provisions (Amendment) Act, 2016 (“2016 Amendment”) was enacted which inter-alia amended sub- section 8 of Section 13 of the SARFAESI Act, and substituted the words “any time before the date fixed for sale or transfer” of the original provision with “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”. The amended provision of Section 13 sub-section (8) of the SARFAESI Act , now reads as under: -

51. The true purport and scope of the amended Section 13(8) of the SARFAESI Act was looked into by the Andhra Pradesh High Court in Sri. Sai Annadhatha Polymers & Anr. v. Canara Bank rep. by its Branch Manager, Mandanapalle reported in 2018 SCC OnLine Hyd 178. The court took the view that in accordance with the unamended Section 13(8) of the SARFAESI Act, the right of the borrower to redeem the secured asset was available till the sale or transfer of such secured asset. The court went on to say that the amended provisions of Section 13(8) of the SARFAESI Act brought in a radical change inasmuch as the right of the borrower to redeem the secured asset would stand extinguished thereunder on the very date of publication of the notice for public auction under Rule 9(1) of the Rules of 2002. It is pertinent to note that the High Court has referred to and relied upon the decision of this Court in Mathew Varghese (supra). The relevant observations made by the High Court are reproduced hereinbelow: Page 54 of 111

amendment of Section 13(8) of the SARFAESI Act, as such right of redemption would stand terminated immediately upon publication of the sale notice under Rule 9(1) of the Rules of 2002. The judgment of the Supreme Court in CANARA BANK v. M. AMARENDER REDDY , which was rendered in the context of the unamended provisions, would therefore have no application to the post-amendment scenario in the light of the change brought about in Section 13(8) . To sum up, the post-amendment scenario inevitably requires a clear thirty day notice period being maintained between issuance of the sale notice under Rule 8(6) of the Rules of 2002 and the publication of the sale notice under Rule 9(1) thereof, as the right of redemption available to the borrower in terms of Rule 8(6) of the Rules of 2002, as pointed out in MATHEW VARGHESE, stands extinguished upon publication of the sale notice under Rule 9(1).” (Emphasis supplied)

52. The amended Section 13(8) of the SARFAESI Act was also looked into by the High Court of Telangana in the case of K.V.V. Prasad Rao Gupta v. State Bank of India reported in 2021 SCC OnLine TS 328 and relying on the decision of the Andhra Pradesh High Court in the case of Sri. Sai Annadhatha Polymers (supra), the court observed in para 21 as under:

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)

54. We are conscious of the fact, that the aforesaid decision of Concern Readymix (supra) was carried upto and challenged before this Court by way of Special Leave Petition (C) No. 20500 of 2019, which came to be dismissed by this Court in limine, being as follows: - Page 58 of 111

55. In Shakeena (supra), while primarily dealing with the unamended provision of Section 13(8) of the SARFAESI Act, this Court also made certain pertinent observations in respect of the amended provision of Section 13(8) , which are being reproduced hereunder: -

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 18-9- 2007. Therefore, it is not possible to countenance the plea of the appellants to reopen the entire auction process. This is more so 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 18-9- 2007. Further, the amended Section 13(8) of the 2002 Act which has come into force w.e.f. 1-9-2016, will now stare at the face of the appellants. As per the amended provision, stringent condition Page 59 of 111 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. …” (Emphasis supplied)

56. The Punjab & Haryana High Court while rendering its decision in Pal Alloys (supra), looked into the Report of the Joint Committee on the 2016 Amendment and the decision in Concern Readymix (supra), & concluded that under the amended Section 13(8) of the SARFAESI Act, the right of redemption of mortgage would continue till the execution of conveyance or issuance of sale certificate. It further observed that the decision in Shakeena (supra) was not applicable inasmuch as it did not deal with the right of redemption under the Act 1882. The observations made in it are given below:

After extracting the existing Section 13(8) of the Act which stands as under: — Page 60 of 111 “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:-

83. Nothing is mentioned as to why the proposal indicated in Page- 12 was changed on page-13 differently.

84. Admittedly, what is stated in page-13 was passed in the Lok Sabha and the Rajya Sabha and then it became the Act 44 of 2016 and came into effect on 01.09.2016.

85. But the important thing to note is that this Report does not indicate that the Committee had even considered Section 60 of the Transfer of Property Act, 1882, which provides the general law of right to redeem a mortgaged asset of a mortgager vis-a-vis the provisions of the SARFAESI Act .

86. It no where says that there was an intention to bring about a change with regard to the time before which a mortgagor can exercise his right to redeem the mortgage.

87. Even the heading of Para 24 of the Report which says “Provisions to stop secure creditor to lease or assignment or sale in the prescribed conditions - Amendment to Section 13(8) of the SARFAESI Act” seems to suggest that the focus of the Committee was on the date when the secured creditor's right to lease or assignment or sale would stop.

88. In our considered opinion, it is clear that the legislature did not have any intention to deal with the right 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.

xxx xxx xxx

93. The view taken by the High Court for the State of Telangana and Andhra Pradesh in M/s. Concern Ready Mix [(2019) 3 ALD Page 62 of 111 384 : Law Finder Doc Id # 1380151] commends itself to us and we accept and approve the same.

94. We shall now consider the judgment of Supreme Court in Shakeena [(2019) 5 RCR (Civil) 689 (SC)]cited by the counsel for 1st respondent. In that case, sale certificate had been issued in favour of the auction purchasers on 06.01.2006 and a Writ Petition was filed on 19.01.2006 challenging the auction and it was registered on 18.9.2007. The Court held that the appellants had failed to make a valid tender of amounts due or exercise their right of redemption in a manner known to law until the registration of the sale certificate on 18.09.2007 and that the right of redemption stood obliterated on 18.09.2007. The statement therein in para 29 that as per the amended provision stringent conditions have been stipulated that the tender of dues to the secured creditor shall be at any time before the date of publication of notice for public auction does not, in our opinion, lead to an expression of opinion by the Supreme Court that the law of redemption as per Section 60 of the Transfer of Property Act would not apply in view of amendment to Section 13(8) . We do not find any discussion in the decision in Shakeena [(2019) 5 RCR (Civil) 689 (SC)] about the decisions of the apex court dealing with the right of redemption under Sec.60 of the Transfer of Property Act, 1872. So reliance on the said decision does not help the 1st respondent.

xxx xxx xxx

96. Keeping in mind (i) the Report of the Joint Committee on the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill, 2016 discussed above, (ii) the law laid down by the Supreme Court in Mathew Varghese [(2014) 5 SCC 610] and (iii) the decision in M/s. Concern Readymix [(2019) 3 ALD 384 : Law Finder Doc Id # 1380151] 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 a secured 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 Page 63 of 111 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. …

97. It would, therefore, certainly be available to the petitioners herein before the issuance of sale certificate in favour of respondents No. 2 and 3. Point (a) is answered accordingly in favor of the petitioners and against the respondents.” (Emphasis supplied)

57. In S. Karthik (supra) a three-Judge Bench of this Court, made the following relevant observations given below: -

54. This Court in Mathew Varghese [Mathew Varghese v. M. Amritha Kumar , (2014) 5 SCC 610 : (2014) 3 SCC (Civ) 254] further held that if the tender is made by the borrower at the last moment before the sale or transfer, the secured asset should Page 64 of 111 not be sold or transferred by the secured creditor. This Court held that there was no reason as to why the general principle laid down by this Court in Narandas Karsondas [Narandas Karsondas v. S.A. Kamtam , (1977) 3 SCC 247] with reference to Section 60 of the Transfer of Property Act could not have application in respect of a secured interest in a secured asset created in favour of a secured creditor. It has been held that the said principles will apply on all fours in respect of a transaction as between the debtor and secured creditor under the provisions of the SARFAESI Act .

xxx xxx xxx

115. Even if viewed from another angle, the claim of the appellants is not sustainable. The two-Judge Bench of this Court in Mathew Varghese [Mathew Varghese v. M. Amritha Kumar , (2014) 5 SCC 610 : (2014) 3 SCC (Civ) 254], has heavily relied on the judgment of the three-Judge Bench of this Court in Narandas Karsondas . It has been held by this Court in Narandas Karsondas [Narandas Karsondas v. S.A. Kamtam , (1977) 3 SCC 247], that the right of redemption, which is embodied in Section 60 of the Transfer of Property Act, is available to the mortgagor unless it has been extinguished by the act of parties. It has been held, that only on execution of the conveyance and registration of transfer of the mortgagor's interest by registered instrument, that the mortgagor's right of redemption will be extinguished.

xxx xxx xxx

118. It is further relevant to note that this Court in Dwarika Prasad [Dwarika Prasad v. State of U.P. , (2018) 5 SCC 491] and in Shakeena [Shakeena v. Bank of India , (2021) 12 SCC 761] held that the right to redemption stands extinguished on the sale certificate getting registered.” (Emphasis supplied)

58. Concern Readymix (supra) was referred to and relied upon later in another decision by the Telangana High Court titled Amme Srisailam (supra), wherein the following relevant observations were made: Page 65 of 111

While Section 35 says that the provisions of the SARFAESI Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force, Section 37 clarifies that provisions of the SARFAESI Act or the rules made thereunder shall be in addition to and not in derogation of any other law for the time being in force.

45. This brings us to Section 60 of the Transfer of Property Act, 1882. Section 60 says that at any time after the principal amount has become due, the mortgagor has a right, on payment or tender, of the mortgage money, to require the mortgagee (a) to deliver to the mortgagor the mortgage deed and all documents relating to the mortgaged property which are in possession or power of the mortgagee, (b) where the mortgagee is in possession of the mortgaged property, to deliver possession thereof back to the mortgagor, and (c) at the cost of the mortgagor either to re- transfer the mortgaged property to him or to such third person as Page 67 of 111 he may direct, or to execute and to have registered an acknowledgement in writing that any right in derogation of his interest transferred to the mortgagee has been extinguished. As per the proviso, the right conferred under the aforesaid provision shall not be extinguished by any act of the parties or by decree of a Court.

46. Therefore, on a careful application of Sections 35 and 37 of the SARFAESI Act, it is evident that the situation contemplated under Section 13(8) of the SARFAESI Act does not exclude application of Section 60 of the Transfer of Property Act, 1882. As explained by this Court in Concern Readymix (supra), a restriction on the right of the mortgagee to deal with the property post issuance of notice for public auction is not the same as the right of redemption available to the mortgagor.” (Emphasis supplied)

59. Thus, from the aforesaid, it is evident that the Telangana High Court in the Amme Srisailam (supra) has not referred to or looked into its earlier decision in the case of K.V.V. Prasad Rao Gupta (supra). The decision of the Andhra Pradesh High Court in Sri Sai Annadhatha Polymers (supra) was also not been looked into by the Telangana High Court in the case of Amme Srisailam (supra). It appears that the Telangana High Court in Concern Readymix (supra) and Amme Srisailam (supra) as well as the Punjab and Haryana High Court in the case of Pal Alloys (supra) have taken the view that the amended Section 13(8) of the SARFAESI Act does not exclude the application of Section 60 of the Act 1882 in view of Sections 35 and 37 respectively of the SARFAESI Act .

Page 68 of 111 EFFECT OF THE AMENDMENT TO SECTION 13(8) OF THE SARFAESI ACT

60. Before proceeding with the analysis of the provision of Section 13(8) of the SARFAESI Act, it would be appropriate to refer to the said provision as it stood prior to the amendment and as it stands after the amendment, which is given below: -

61. At this juncture, it would be apposite to refer to the decision of this Court in Embassy Hotels Private Ltd. v. Gajraj and Company & Ors. Page 69 of 111 reported in (2015) 14 SCC 316, wherein this Court had held that the expression “by act of the parties” in the Proviso to Section 60 would include the failure of the parties to settle the dispute and by their act allowing the mortgaged property to be sold in auction. The relevant observations made in it are reproduced below: -

62. It is equally well settled that the rights created for the benefit of the borrower under the SARFAESI Act , can be waived. Waiver can be contractual or by express conduct in consideration of some compromise. However, a statutory right may also be waived by implied conduct, like, by wanting to take a chance of a favourable decision. The fact that the other side has acted on it, is sufficient consideration, as observed by this Court in Arce Polymers Page 70 of 111 Pvt. Ltd. v. Alpine Pharmaceuticals Pvt. Ltd. & Ors. reported in (2022) 2 SCC 221, referred as under: -

In this background, the principle of equitable estoppel as a rule of evidence bars the borrower from complaining of violation.” (Emphasis supplied)

63. We are of the view that the failure on the part of the borrower in tendering the entire dues including the charges, interest, costs etc. before the publication of the auction notice as required by Section 13(8) of the Page 71 of 111 SARFAESI Act , would also sufficiently constitute extinguishment of right of redemption of mortgage by the act of parties as per the proviso to Section 60 of the Act 1882. Furthermore, in the case on hand, there was no claim for right of redemption by the borrower either before the publication of the auction notice or even thereafter. The borrowers entered into the fray only after coming to know of the confirmation of auction. Be that as it may, once the Section 13(8) stage was over and auction stood concluded, it could be said that there was an intentional relinquishment of his right of redemption under Section 13(8) , whereby the Bank declared the appellant as the successful auction purchaser having offered the highest bid in accordance with the terms of the auction notice.

64. The SARFAESI Act is a special law containing an overriding clause in comparison to any other law in force. Section 60 of the Act 1882, is a general law vis-a-vis the amended Section 13(8) of the SARFAESI Act which is special law. The right of redemption is clearly restricted till the date of publication of the sale notice under the SARFAESI Act , whereas the said right continues under Section 60 of the Act 1882 till the execution of conveyance of the mortgaged property. The legislative history has been covered in the preceding paragraphs of this judgment and how the Parliament desired to have express departure from the general provision of Section 60 of Act 1882. The SARFAESI Act is a special law of recovery with a paradigm shift that permits Page 72 of 111 expeditious recovery for the banks and the financial institutions without intervention of Courts. Similarly, Section 13(8) of the SARFAESI Act is a departure from the general right of redemption under the general law i.e. the Act 1882. Further, the legislature has in the objects and reasons while passing the amending Act specifically stated “to facilitate expeditious disposal of recovery applications, it has been decided to amend the said Acts….”. Thus, while interpreting Section 13(8) vis-à-vis Section 60 of the Act 1882, an interpretation which furthers the said object and reasons should be preferred and adopted. If the general law is allowed to govern in the manner as sought to be argued by the borrowers, it will defeat the very object and purpose as well as the clear language of the amended Section 13(8) .

65. In Mathew Varghese (supra) this Court had interpreted the unamended section 13(8) of SARFAESI Act and Section 60 of Act 1882 respectively. However, thereafter the legislature amended Section 13(8) of the SARFAESI Act. Thus, on this score, the decision in Mathew Varghese (supra) could be said to have been partially legislatively overruled as the substratum of the verdict stands altered / amended.

66. Even otherwise, we should not lose sight of the fact that in Mathew Varghese (supra) the court held in regard to the right of redemption that both the SARFAESI Act and Act 1882 are complimentary to each other and equally applicable. It had held this because, the words “before the date fixed for Page 73 of 111 transfer” in the unamended Section 13(8) , amongst other things also means and connotes the date of conveyance of the secured asset by a registered instrument (which is the ordinary process of extinguishment of right of redemption under Act 1882). Since, this Court observed that the stipulation or expression “date fixed for transfer” could also mean the date of conveyance / transfer of such secured asset and being so, is not much different from the ordinary process of redemption under the Act 1882, it could not be said that there was any material inconsistency between the SARFAESI Act & Act 1882, and thus it found no reason or hesitation to hold that the Act 1882 is inapplicable and thus made an endeavour of harmonizing the two.

67. It appears that while considering the right of redemption of mortgage under the unamended Section 13(8) , this Court in Mathew Varghese (supra) only went so far to say that in the absence of any material inconsistency between the SARFAESI Act & Act 1882, there was no good reason to hold that the Act 1882 would not be applicable and as such, held that general right of redemption of mortgage contained in Section 60 Act 1882 would apply even in respect of the SARFAESI Act .

68. However, with the advent of the 2016 Amendment, Section 13(8) of the SARFAESI Act now uses the expression “before the date of publication 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” Page 74 of 111 which by no stretch of imagination could be said to be in consonance with the general rule under the Act 1882 that the right of redemption is extinguished only after conveyance by registered deed. Thus, in the light of clear inconsistency between Section 13(8) of the SARFAESI Act and Section 60 of the Act 1882 the former special enactment overrides the latter general enactment in light of Section 35 of the SARFAESI Act. Thus, the right of redemption of mortgage is available to the borrower under the SARFAESI Act only till the publication of auction notice and not thereafter, in light of the amended Section 13(8) .

69. This aspect of inapplicability of the Act 1882 vis-a-vis the SARFAESI Act can be looked at from one another angle. In Madras Petrochem (supra) this Court made a pertinent observation that the Sections 35 and 37 respectively of the SARFAESI Act form a unique scheme of overriding provisions, however the scope and ambit of Section 37 is restricted only to the securities law. The relevant portion is given as under: -

70. This Court in M.D. Frozen Foods Exports Private Limited & Ors. v. Hero Fincorp Limited reported in (2017) 16 SCC 741, observed that since as per Section 37 SARFAESI Act, the RDBFI Act which also contemplates arbitration proceedings, is in addition to the SARFAESI Act , it held that both Arbitration & Conciliation Act, 1996 and the SARFAESI Act would go hand in hand. The relevant observations are reproduced below: -

The provisions of the SARFAESI Act are thus, a remedy in addition to the provisions of the Arbitration Act . In Transcore v. Union of India it was clearly observed that the SARFAESI Act was enacted to regulate securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith. Liquidation of secured interest through a more expeditious procedure is what has been envisaged under the Sarfaesi Act and the two Acts are cumulative remedies to the secured creditors.” (Emphasis supplied) Page 78 of 111

71. It would be also appropriate to refer to another decision of this Court rendered in Vishal N. Kalsaria v. Bank of India & Ors. reported in (2016) 3 SCC 762 wherein this Court while construing the expression “any other law” occurring in Section 35 of the SARFAESI Act, held the same would mean any other law operating in the same field. The relevant observations made in it are given below: -

72. Thus, it appears from a combined reading of the decisions rendered by this Court in Madras Petrochem (supra) and M.D. Frozen Foods Exports (supra) that this Court has consistently construed that only those laws which have either been enumerated in Section 37 SARFAESI Act or similar to it would be applicable in addition to the SARFAESI Act i.e., laws which deal with securities or occupy the same field as the SARFAESI Act . Thus, even on this aspect, we are of the view that the Act 1882 would not be applicable in addition to the SARFAESI Act . Suffice to say, that in view of the above Page 79 of 111 discussion, the statutory right of redemption under the Act 1882 will not be applicable to the SARFAESI Act at least in view of the amended Section 13(8) and any right of redemption of a borrower must be found within the SARFAESI Act in terms of the amended Section 13(8) . WHY THE DECISION OF THE TELANGANA HIGH COURT IN THE CASE OF AMME SRISAILAM (SUPRA) IS NOT A GOOD LAW?

73. The Telangana High Court’s judgment is in four parts. It takes the view as under:

74. We are of the view that each of the foundation of the judgment is incorrect for the following reasons:

13(8). Interestingly the same point also applies to S. Karthik (supra). A careful reading of the facts in S. Karthik (supra) in Para 3-26 clearly indicates that the sale auction notice and the auction in the said case took place in the year 2012. Para 59 of S. Karthik (supra) clinches the issue on the said score as this Court has limited its examination to the validity of the first sale notice dated 21.01.2012 i.e., the auction that took place before amendment of Section 13(8) :

We, therefore, do not wish to burden the present judgment by reproducing all those provisions since they have already been reproduced and considered in Mathew Varghese [Mathew Varghese v. M. Amritha Kumar , (2014) 5 SCC 610 : (2014) 3 SCC (Civ) 254]. …”

(iv) This Court in S. Karthik (supra) further noted that Section 13(8) supports the right of redemption at any time before the date fixed for Page 83 of 111 sale or transfer. This is clearly in reference to the old Section 13(8) as interpreted by Mathew Varghese (supra) and as rightly made applicable in the said case as the facts therein arose prior to the amendment in Section 13(8) . The said Section 13(8) now stands amended and provides a cut-off for the date of publication of the auction notice. Thus, now after the amendment the support of right of redemption is limited till the date of publication of the auction notice. The relevant Para is quoted for reference:

b. The reliance on Concern Readymix (supra) of the earlier Division Bench judgement of the High Court is misplaced because:

The only caveat being that after the success of the auction bid the auction purchaser is required to comply with all the rules.

c. The reliance on Section 37 of the SARFAESI Act is misplaced because this Court in Madras Petrochem (supra) has restricted its application to securities law only.

(i) The relevant portion is as under:-

Therefore, when general words are juxtaposed with specific words, general words cannot be read in isolation. Their colour and their contents are to be derived from their context. (See similar observations of Viscount Simonds in Attorney General v. Prince Ernest Augustus of Hanover [1957 AC 436 : (1957) 2 WLR 1 : (1957) 1 All ER 49 (HL)], AC at p. 461.)” Page 88 of 111 d. The argument of Right to property being a constitutional right and the High Court's interpretation subserving the same is irrelevant in light of the following:-

75. It also needs to be stated that, in Amme Srisailam (supra) the High Court did not apply the observations made by this Court in Shakeena (supra) as regards the amended Section 13(8) because it was of the view that the same were only obiter dicta and moreover because a subsequent and larger bench decision of this Court in S. Karthik (supra) had held that right of redemption would be extinguished only upon issuance and registration of the sale certificate.

76. We may however point out that, this Court in S. Karthik (supra) had made no reference as to whether it was considering the unamended or the amended Section 13(8) , nor any reference was made to the 2016 Amendment. Thus, in our opinion, the decision in S. Karthik (supra) cannot be said to have considered the amended provision of Section 13(8) especially in view of the fact that, it had placed strong reliance on Mathew Varghese (supra) which as discussed before had dealt with the unamended provision of Section 13(8) . Page 89 of 111

77. We also find that, in Pal Alloys (supra) the reliance on the Joint Committee Report specifically the heading “Provisions to stop secure creditor to lease or assignment or sale in the prescribed conditions-Amendment to Section 13(8) of the SARFAESI Act” occurring in it, to construe that the said amendment was only to restrict the secured creditor is misplaced. We say this, because, initially in the Report, the proposed amendment to sub-section (8) of Section 13 stated as under:

78. The amendment as initially proposed specifically used the words “at any time before the date fixed for lease, assignment or sale of the secured assets”. The heading it was placed under read as to only restricting the rights of the secured creditor. However, remarkably, the Joint Committee subsequently changed the proposal to as under: -

Page 90 of 111

79. Thus, without indicating any reason for the change, the proposal now used the words “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” and the same came to be incorporated by way of the 2016 Amendment. We feel, in such circumstances, given the abrupt and significant change in the proposal by the Joint Committee, the initial heading had been inadvertently left, and the same in no manner can be relied to construe the said provision as one intended to inhibit only the secured creditor. In any event, it is a well settled canon of law, that the sum and substance of a provision is determined by what is given in the provision and not by its heading or marginal note.

Page 91 of 111

80. To read it otherwise in a strict manner as to only stipulating a restriction upon the secured creditor and not on the borrower’s right of redemption would lead to a very chilling effect, where no auction conducted under the SARFAESI Act would have any form of sanctity, and in such a situation no person would be willing to come forward and participate in any auction due to the fear and apprehension that despite being declared a successful bidder, the borrower could still at any time come and redeem the mortgage and thereby thwart the very auction process.

81. Such a scenario is all the more worrisome, because the general public who participate in such auctions are often neither aware nor informed by the secured creditors conducting the auctions, that as long as the sale certificate is not issued, they will not have a right in the said asset and that the borrower whose asset is being auctioned could sweep-in and redeem the mortgage any time, and thereby thwart their rights and the very auction process.

82. Thus, it is necessary to interpret the amended Section 13(8) of the SARFAESI Act in such a manner where a legal sanctity is attached to an auction process and a bright line is drawn where a mischievous borrower is told ‘no more and no further’ and precluded from hastily exercising its right of redemption from nowhere at the very end of the process and thereby set the entire auction process at naught. If permitted to do so then all auctions under the SARFAESI Act would be meaningless and simply rendered otiose and the Page 92 of 111 very object of Section 13 and the overall scheme of the SARFAESI Act of enabling the banks from recovering its dues in a timely manner without intervention of the courts would be simply defeated. SANCTITY OF PUBLIC AUCTION

83. This Court in Valji Khimji (supra) held that once an auction is confirmed the same can be interfered on very limited grounds as otherwise no auction would ever be complete, with the following relevant observations, being reproduced hereunder: -

84. In another decision by this Court in K. Kumara Gupta v. Sri Markendaya and Sri Omkareswara Swamy Temple & Ors. reported in (2022) 5 SCC 710, it was held that repeated interferences with public auction would frustrate the sanctity and purpose of holding auctions. The relevant observations made in it are given below: -

85. In a recent decision by this Court in Eva Agro Feeds Private Limited v. Punjab National Bank & Anr. reported in 2023 SCC OnLine SC 1138, the following relevant observations were made, being reproduced as under: -

86. Thus, what is discernible from above is that, it is the duty of the courts to zealously protect the sanctity of any auction conducted. The courts ought to be loath in interfering with auctions, otherwise it would frustrate the very object and purpose behind auctions and deter public confidence and participation in the same.

87. Any other interpretation of the amended Section 13(8) will lead to a situation where multiple redemption offers would be encouraged by a mischievous borrower, the members of the public would be dissuaded and discouraged from in participating in the auction process and the overall sanctity of the auction process would be frustrated thereby defeating the very purpose of the SARFAESI Act . Thus, it is in the larger public interest to maintain the sanctity of the auction process under the SARFAESI Act . Page 96 of 111

88. In view of the aforesaid discussion, we hold that as per the amended Section 13(8) of the SARFAESI Act, once the borrower fails to tender the entire amount of dues with all cost & charges to the secured creditor before the publication of auction notice, his right of redemption of mortgage shall stand extinguished / waived on the date of publication of the auction notice in the newspaper in accordance with Rule 8 of the Rules of 2002. EXERCISE OF EXTRAORDINARY JURISDICTION BY THE HIGH COURT UNDER ARTICLE 226 OF THE CONSTITUTION IN SARFAESI MATTERS

89. We shall now consider whether in the factual score of the present matter, any interference was warranted by the High Court in exercise of its discretionary powers under Article 226.

90. The undisputed position that emerges is;

(a) the appellant was the successful auction purchaser with a bid of Rs.

105.05 crore;

(b) On 30.06.2023, the Bank confirmed the sale of the secured asset in the appellant’s favour;

(c) On 27.07.2023, the appellant had paid the entirety of the bid amount of Rs. 105.05 Crore to the Bank;

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(d) Out of this, a sum of Rs. 63,50,45,000/- was appropriated by the Bank against the Borrowers’ dues;

(e) The Bank did not issue the sale certificate in the appellant’s favour which it ought to have on 27.07.2023;

(f) After having initially invoked the jurisdiction of the DRT-I, Mumbai and invited an order on an application for redemption, the Borrowers invoked the Writ Jurisdiction of the Bombay High Court under Article 226 apprehending that the DRT may disallow their application;

(g) By the Impugned Judgment dated 17.07.2023, the Bombay High Court allowed the Writ Petition on the basis of a consent granted by the Bank to give the Borrowers, time till 31.08.2023 to repay the outstandings and this has been treated as a redemption.

91. The only justification for entertaining the Writ Petition is contained in paragraphs 11 and 14 respectively of the Impugned Judgment. Whilst the High Court has accepted that normally, such a Writ Petition would not be maintainable, it proceeded to entertain the same because of the “peculiar facts and circumstances of the present case”, “it would be in the interest of all concerned if the consensus reached between the Respondent Bank and the Petitioners is taken cognizance of by us.” Thereafter, it went on to say that the “arrangement referred to above is in the interest of all, including the Page 98 of 111 Auction Purchaser”. A perusal of paragraph 14 would indicate that since the outcome which the High Court considered to be ideal could be achieved, it did not hold the Writ Petition to be an abuse of process.

92. This Court has time and again, reminded the High Courts that they should not entertain petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person under the provisions of the SARFAESI Act . This Court in Satyawati Tondon (supra) made the following observations:

imposed restraint evolved by this Court, which every High Court is bound to keep in view while exercising power under Article 226 of the Constitution.

45. It is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the Constitution and pass interim order ignoring the fact that the petitioner can avail effective alternative remedy by filing application, appeal, revision, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance.

xxx xxx xxx

55. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and the SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection.”

93. In Commissioner of Income Tax & Ors. v. Chhabil Dass Agarwal reported in (2014) 1 SCC 603, this Court in para 15 made the following observations:

94. In Phoenix ARC Private Limited v. Vishwa Bharati Vidya Mandir & Ors. reported in (2022) 5 SCC 345, it was observed as under:

2015 was a notice under Section 13(4) , in that case also, in view of the statutory, efficacious remedy available by way of appeal under Section 17 of the SARFAESI Act, the High Court ought not to have entertained the writ petitions. Even the impugned orders passed by the High Court directing to maintain the status quo with respect to the possession of the secured properties on payment of Rs 1 crore only (in all Rs 3 crores) is absolutely unjustifiable. The dues are to the extent of approximately Rs 117 crores. The ad interim relief has been continued since 2015 and the secured creditor is deprived of proceeding further with the action under the SARFAESI Act . Filing of the writ petition by the borrowers before the High Court is nothing but an abuse of process of court. It appears that the High Court has initially granted an ex parte ad interim order mechanically and without assigning any reasons. The High Court ought to have appreciated that by passing such an interim order, the rights of the secured creditor to recover the amount due and payable have been seriously prejudiced. The secured creditor and/or its assignor have a right to recover the amount due and payable to it from the borrowers. The stay granted by the High Court would have serious adverse impact on the financial health of the secured creditor/assignor. Therefore, the High Court should have been extremely careful and circumspect in exercising its discretion while granting stay in such matters. In these circumstances, the proceedings before the High Court deserve to be dismissed.”

95. In Varimadugu OBI Reddy (supra), it was held as under:

96. More than a decade back, this Court had expressed serious concern despite its repeated pronouncements in regard to the High Courts ignoring the availability of statutory remedies under the RDBFI Act and the SARFAESI Act and exercise of jurisdiction under Article 226 of the Constitution. Even after, the decision of this Court in Satyawati Tondon (supra), it appears that the High Courts have continued to exercise its writ jurisdiction under Article 226 ignoring the statutory remedies under the RDBFI Act and the SARFAESI Act.

CONDUCT OF THE BANK

97. The genesis of the entire case lies in the illegitimate conduct of the Bank in placing different concerns above the clear provisions of the law. First, there was failure on the part of the Bank to issue sale certificate in favour of the auction purchaser despite the fact that the entire payment of auction bid was made. Secondly, although the right of redemption clearly stood lapsed under Section 13(8) of the SARFAESI Act and auction having taken place wherein full bid amount was received, yet the Bank proceeded to accept the Page 103 of 111 offer of full payment of the Borrower which is clearly impermissible in law. Once the auction notice is published in accordance with Section 13(8) of the SARFAESI Act, then unless and until the auction is held to be bad and illegal in the facts of the case, the right of redemption of mortgage is not available to the borrower.

98. It is an admitted fact that the entire bid amount was paid by the auction purchaser as observed at Para 10 of the Impugned Order. Thus, the Bank was legally bound to issue the sale certificate as per the language of Rule 9(6) of the Rules of 2002. The said provision employs the phrase "shall". Thus, it is an instance of mandatory provision. There is nothing more in the realm of law that the auction purchaser can do once he has made the entire payment to the Bank. The fact that the Respondent Bank failed to issue the sale certificate raises serious concerns, when there was no stay by any competent forum. Even otherwise the general conduct of the Respondent Bank has not been satisfactory. Once the entire bid price is paid and there is no stay granted by any forum known to law, the Bank is duty bound to issue a valid Sale Certificate and hand over the physical possession of the secured asset to the auction purchaser.

99. It is also pertinent to note that the Bank and its officers took absolutely inconsistent stand. Before the DRT, they opposed the offer for redemption of mortgage as recorded by the High Court at para 11, while before the High Page 104 of 111 Court they made a complete 360 degrees turn and accepted the offer. The lame and weak justification assigned for the same was to bring quietus to the matter. This again shows that the decisions of the Bank are not taken as per the provisions of law but according to the whims and fancies of the Bank officers.

100. Bank is duty bound to follow the provisions of the law as any other litigant. It is to be noted that the Bank i.e., the secured creditor acts under the SARFAESI Act through the authorised officer who is appointed under Section 13(2) . Thus, the authorised officer and the Bank cannot act in a manner so as to keep the sword hanging on the neck of the auction purchaser. The law treats everyone equally and that includes the Bank and its officers. The said enactments were enacted for speedy recovery and for benefitting the public at large and does not give any license to the Bank officers to act de hors the scheme of the law or the binding verdicts.

101. The Bank could be said to have acted contrary to two judgments of this Court: (i) Satyawati Tondon (supra) and (ii) the judgment dated 16.11.2022 in Varimadugu OBI Reddy (supra).

102. This Court in National Spot Exchange Ltd. v. Anil Kohli, Resolution Professional for Dunar Foods Ltd. reported in (2022) 11 SCC 761 after referring to a catena of its other judgements, had held that where the law is clear the consequence thereof must follow. The High Court has no option but Page 105 of 111 to implement the law. The relevant observations made in it are being reproduced below: -

15.2. In Raghunath Rai Bareja [Raghunath Rai Bareja v. Punjab National Bank , (2007) 2 SCC 230] , in paras 30 to 37, this Court observed and held as under : (SCC pp. 242-43) “30. Thus, in Madamanchi Ramappa v. Muthaluru Bojjappa [AIR 1963 SC 1633] (vide para 12) this Court observed: (AIR p. 1637) ‘12. … [W]hat is administered in Courts is justice according to law, and considerations of fair play and equity however important they may be, must yield to clear and express provisions of the law.’

31. In Council for Indian School Certificate Examination v. Isha Mittal [(2000) 7 SCC 521] (vide para 4) this Court observed:

32. Similarly, in P.M. Latha v. State of Kerala [(2003) 3 SCC 541 : 2003 SCC (L&S) 339] (vide para 13) this Court observed:

purchaser while disposing of the matter.” (Emphasis supplied)

104. The proposition of law as discernible from the aforesaid decisions is that equity cannot supplant the law. Equity has to follow law, if the law is clear and unambiguous.

105. We summarise our final conclusion as under:

106. In the result, both the appeals succeed and are hereby allowed.

107. The impugned judgment and order passed by the High Court is hereby set aside.

108. The respondent Bank shall refund the entire amount deposited by the borrowers i.e., an amount of Rs.129 crore paid by them in lieu of the Page 110 of 111 redemption of mortgage of the secured asset at the earliest. The appellant herein shall pay an additional amount of Rs. 23.95 crore to the Bank within a period of one week from today and subject to such deposit, the Bank shall issue the sale certificate in accordance with Rule 9(6) of the Rules of 2002.

109. The pending applications if any shall stand disposed of.

…..………………………………..CJI.

(Dr. Dhananjaya Y. Chandrachud) …………………………………….J. (J.B. Pardiwala) New Delhi;

Date: September 21, 2023.

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