M. Rajendran & Ors. Vs KPK Oils And Protiens India Pvt. Ltd. & Ors. (Supreme Court of India)
The Supreme Court considered two connected appeals arising from a common judgment of the Madras High Court, which had quashed a sale certificate issued in favour of auction purchasers under the SARFAESI Act and directed the bank to permit the borrowers to redeem the mortgaged property after clearing the loan dues. The dispute arose after the borrowers defaulted on credit facilities obtained from the bank, leading to classification of the account as a Non-Performing Asset (NPA), issuance of demand and possession notices under the SARFAESI Act, and eventual auction of the secured property. The auction purchasers deposited the entire sale consideration, following which the bank issued a sale certificate and appropriated the sale proceeds towards the outstanding loan. Thereafter, the borrowers paid substantial amounts to the bank, resulting in closure of the loan account.
Also Read: SC’s Continued Shift Toward Creditor-Centric Enforcement Under SARFAESI Act
The Debts Recovery Tribunal (DRT) dismissed the borrowers’ challenges to both the possession notice and the auction sale notice. Instead of filing a statutory appeal before the Debts Recovery Appellate Tribunal (DRAT), the borrowers approached the High Court through a writ petition. The High Court entertained the petition, relied upon the decision in Mathew Varghese v. Amritha Kumar, held that the borrowers retained their right of redemption, quashed the sale certificate, directed the bank to close the loan account, discharge the mortgage, refund the auction amount with 9% interest to the auction purchasers, and required the borrowers to bear the interest component.
