Continuous application with the interest to protract litigation is not sustainable in law

S. Karthik Vs N. Subhash Chand Jain (Supreme Court of India)

Fact- The main issue involved in the present matter is that the auction sale of mortgaged property which was continuously blocked by the guarantors on some pretext or other. Ultimately Indian Overseas Bank disposed off the property via auction sale by way of a second notice under SARFESI Act by giving notice of 10 days. The main question is whether in a subsequent sale, the mandatory 30 days’ notice has to be given or not.

Conclusion- Appellants had more than one opportunity for redemption of the mortgage. However, from their conduct, it appears that they were only interested in protracting the litigation. It is the appellants at whose intervention and on whose incorrect representation, the sale, which was scheduled to be held on 27.2.2012 in pursuance of the notice dated 21.1.2012, could not be held.

Even after the dismissal of S.A. No.69 of 2012 on 2.7.2012, the respondent­Bank again issued a Second Sale Notice on 9.7.2012 scheduling the sale on 20.7.2012 in which the auction purchaser emerged as a successful bidder. It is thus clear that the appellants had enough time from 21.1.2012 till 2.7.2012 for redemption of their mortgaged properties. However, they did not avail of that opportunity. Even after the auction purchaser emerged successful in the bid and had paid the bid money, an opportunity was given by the DRT, Chennai, vide order dated 7.8.2012, to the appellants to deposit the amount of Rs.4.80 crore within one month. However, without complying with the same, the appellants continued with their dilatory tactics by filing an application being I.A. No.437 of 2012 in S.A. No.227 of 2012. Even thereafter, they continued with the proceedings before the High Court, wherein certain interim orders were passed, and finally, the High Court, finding that in view of the sale being confirmed and the sale being registered no interference could be warranted, dismissed the Civil Revision Petitions. Thereafter again, they approached this Court by way of Special Leave Petitions, which were subsequently withdrawn. Ideally, the litigation ought to have stopped at least at that stage.

FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER

1. Leave granted.

2. This case is a classic example as to how an ingenious litigant, by taking recourse to a series of proceedings one after the other, has been successful in blocking the enforcement of a security interest, created in favour of a secured creditor, thereby defeating the very purpose for which the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ‘the SARFAESI Act’) was enacted.

3. The present appeals challenge the common judgment and order dated 18.11.2019 passed by the High Court of Judicature at Madras in Writ Petition Nos. 30710 and 30712 of 2019 filed by respondent No.1­N. Subhash Chand Jain herein (hereinafter referred to as ‘the auction purchaser’) and in Writ Petition Nos. 28034 and 28036 of 2019 filed by the appellants herein, thereby disposing of all the four writ petitions.

4. The facts, in brief, giving rise to the present appeals are as under:

Ace Concrete Private Limited (hereinafter referred to as ‘the borrower’) was a company engaged in the manufacture and sale of ready mixed concrete and related business activities.

The borrower had availed loans from respondent No.5 –Indian Overseas Bank (hereinafter referred to as ‘the respondent­Bank’). The appellants and respondent Nos. 2 to 4 herein had mortgaged their four properties as collateral security and executed guarantee for the credit facility granted to the borrower. As per the sanction of the respondent­ Bank dated 30.3.2010, the respondent ­Bank extended financial assistance to the tune of Rs.21,14,00,000/­ to the borrower. The guarantees, which were signed and executed by the appellants and respondent Nos. 2 to 4, were for an amount of Rs.22,74,74,000/­.

It appears that thereafter there was a transaction/Memorandum of Understanding between the borrower and one M/s. AKR Holdings Private Limited (hereinafter referred to as ‘AKR Holdings’), as per which the entire share­capital of the borrower was to be transferred to AKR Holdings and the Management was also to be transferred in favour of AKR Holdings. As per the agreement, AKR Holdings was to take over the entire liability of the borrower and also to get the four mortgaged properties released to the appellants and respondent Nos. 2 to 4. It is, however, the contention of the appellants that the said AKR Holdings in collusion with the respondent­Bank sold all the assets of the borrower hypothecated to the respondent­Bank and also did not get the mortgaged properties released, as agreed. The borrower was, therefore, categorised as ‘Non­Performing Asset (NPA)’ on 1.4.2011. The respondent­Bank on 23.5.2011 issued notice under Section 13(2) of the SARFAESI Act for a liability of Rs.20,24,05,000/­. It is the contention of the appellants that the respondent­Bank instead of proceeding against the actual borrowers, i.e., the new Management, who had taken over the control/management of the borrower, invoked its power mala fidely against the subsisting guarantors. As such, vide reply dated 11.7.2011, the appellant Nos. 1 and 6, and respondent Nos. 3 and 4 denied the claim of the respondent­Bank. According to the appellants, ignoring the same, on 25.8.2011, the respondent­Bank took symbolic possession of all the four properties. The respondent­Bank issued a sale notice dated 21.1.2012 (First Sale Notice) in respect of all the four mortgaged properties claiming a sum of Rs.23,39,54,702/­ as outstanding. The date of sale was scheduled to be 27.2.2012.

On 20.2.2012, the appellants and respondent Nos. 2 to 4 filed a Securitisation Application being S.A. No.69 of 2012 before the Debts Recovery Tribunal­III, Chennai (hereinafter referred to as ‘the DRT, Chennai’), thereby praying to quash the First Sale Notice dated 21.1.2012. The DRT, Chennai, vide order dated 27.2.2012 granted an interim stay restraining the respondent­Bank from proceeding further with the First Sale Notice dated 21.1.2012 for a period of 30 days. However, this was subject to deposit of 50% of the outstanding amount within the said period.

On 28.3.2012, a sum of Rs.12.25 crores was remitted to the respondent­Bank after sale of the mortgaged property at Item ‘B’ in the Schedule of Properties. The said sale was through a private treaty. According to the appellants, they had already deposited an amount of Rs.50 lakh on 17.8.2011 and 23.8.2011, i.e., prior to the issuance of the First Sale Notice dated 21.1.2012.

Vide order dated 2.7.2012, the DRT, Chennai, dismissed S.A. No.69 of 2012 filed by the appellants and respondent Nos. 2 to 4.

After the dismissal of S.A. No.69 of 2012, the respondent­ Bank issued a fresh sale notice dated 9.7.2012 (Second Sale Notice) calling upon the appellants and respondent Nos. 2 to 4 to pay the revised outstanding amount of Rs.11,99,53,926/­ within 10 days. The date of sale for the remaining three mortgaged properties was scheduled to be 20.7.2012.

Being aggrieved by the said Second Sale Notice dated 9.7.2012, the appellants and respondent Nos. 2 to 4 filed S.A. No.227 of 2012 before the DRT, Chennai, thereby praying to quash the Second Sale Notice dated 9.7.2012, inter alia, on the ground that the auction/sale has been fixed before the expiry of 30 days from the date of service of Second Sale Notice. There is some dispute with regard to the actual date of filing of the said S.A.No.227 of 2012. However, for adjudication of the present appeals, it is not necessary to go into the said aspect.

On 20.7.2012, the mortgaged properties at Item ‘A’ and Item ‘D’ of the Schedule of Properties mentioned in the First Sale Notice dated 21.1.2012 were sold for a sale consideration of Rs.4,86,21,000/­ to the auction purchaser. Vide interim order dated 24.7.2012, the DRT, Chennai, directed the appellants and respondent Nos. 2 to 4 to deposit Rs. 1 crore to show their bona fides and granted a month’s time to procure prospective purchasers to clear the entire dues by selling the mortgaged properties. Accordingly, an amount of Rs.1 crore came to be deposited on 31.7.2012.

The claim of the appellants and respondent Nos. 2 to 4 before the DRT, Chennai, in S.A. No. 227 of 2012 came to be resisted by the respondent­Bank by filing a reply statement dated 2.8.2012.

The DRT, Chennai, passed an interim order dated 7.8.2012, thereby restraining the respondent­Bank from bringing the mortgaged properties for sale pursuant to the Second Sale Notice dated 9.7.2012 for a period of 30 days subject to deposit of Rs.4,80,00,000/­ by the appellants and respondent Nos. 2 to 4 within the said period, failing which the said interim order dated 7.8.2012 was to stand vacated.

However, instead of complying with the said order, the guarantors filed an application being I.A. No.437 of 2012 in S.A. No.227 of 2012. By the said application, they sought a direction that the amount so directed to be deposited (i.e. Rs.4,80,00,000/­) by the DRT, Chennai, vide order dated 7.8.2012, should be permitted to be deposited either in the purchasers account or in separate suspense account in the Indian Overseas Bank, Kilpauk Branch. This was on the pretext of an ongoing investigation by the CBI with regard to some fraudulent activities of the Officers of the respondent­Bank. The said I.A. No.437 of 2012 came to be dismissed by the DRT, Chennai, on 12.9.2012. Vide the said order dated 12.9.2012, the respondent­Bank was granted liberty to proceed with the sale and the main S.A. No.227 of 2012 was directed to be posted for final hearing on 20.9.2012

After the deposit of the balance sale consideration by the auction purchaser on 12.9.2012, a sale certificate came to be issued on 13.9.2012.

Being aggrieved by the order passed by the DRT, Chennai, dated 12.9.2012, Civil Revision Petition No.3487 of 2012 came to be filed before the High Court of Judicature at Madras. Another Civil Revision Petition No.3597 of 2012 came to be filed against the interim order passed by the DRT, Chennai, dated 7.8.2012 in S.A. No. 227 of 2012 before the Madras High Court.

During the pendency of the said Civil Revision Petitions before the Madras High Court, a Third Sale Notice dated 27.9.2012 was issued by the respondent­Bank for recovery of a sum of Rs.6,76,07,054/­. The date of sale was scheduled to be 30.10.2012.

Vide various interim orders passed in the said Civil Revision Petitions, the Madras High Court restrained the respondent­Bank and the auction purchaser from taking physical possession of the mortgaged properties. During the pendency of the said Civil Revision Petitions, a sum of Rs.12 crore was paid to the respondent­Bank against the sale of mortgaged property at Item ‘C’ of the Schedule of Properties in First Sale Notice dated 21.1.2012, owned by respondent No.3­Shanthi Sivasamy.

Vide common order dated 29.7.2013, the High Court dismissed the said Civil Revision Petitions. The appellants and respondent Nos. 2 to 4 challenged the said order dated 29.7.2013 before this Court by filing Special Leave Petition (Civil) Nos. 28402 and 28403 of 2013. This Court vide order dated 7.7.2014 issued notice in the said Special Leave Petitions confined to the question as to whether any excess payment made by the appellants and respondent Nos. 2 to 4 was to be refunded by the respondent­Bank. This Court also directed the Debts Recovery Appellate Tribunal, Chennai (hereinafter referred to as ‘the DRAT, Chennai’), to dispose of M.A.(S.A.) No.70 of 2014 expeditiously and preferably within a month’s time.

The said Special Leave Petition (Civil) Nos. 28402 and 28403 of 2013 filed by the appellants and respondent Nos. 2 to 4 were permitted to be withdrawn by this Court vide order dated 17.4.2015. While granting leave to withdraw, this Court observed that since the special leave petitions are withdrawn, there will be no impediment for the Tribunal to pass final orders.

It appears that in the meantime on 21.6.2013 since the appellants and respondent Nos. 2 to 4 were unrepresented, the S.A. No.227 of 2012 came to be dismissed in default by the DRT, Chennai. An application being M.A. No.112 of 2013 was preferred by the appellants and respondent Nos. 2 to 4 to recall the said dismissal order dated 21.6.2013. The said application was rejected on 20.9.2013. The said order came to be challenged by the appellants and respondent Nos. 2 to 4 before the High Court by filing C.R.P. PD. No.4410 of 2013. However, the said C.R.P. PD. No.4410 of 2013 came to be dismissed by the High Court vide order dated 3.12.2013 with liberty to the appellants and respondent Nos. 2 to 4 to approach the DRAT, Chennai. It appears that the appellants and respondent Nos. 2 to 4 approached the DRAT, Chennai, by filing M.A. (S.A.) No.70 of 2014. The DRAT, Chennai, vide order dated 10.7.2014 allowed the said M.A. (S.A.) No.70 of 2014 and directed the DRT, Chennai, to restore S.A. No.227 of 2012 and dispose of the same in accordance with law as expeditiously as possible.

It also appears from the record that there were certain proceedings initiated at the instance of the auction purchaser praying for transfer of the proceedings from the DRT­III, Chennai, which was seized of S.A. No.227 of 2012, wherein the auction purchaser reached upto the High Court, but could not succeed.

It appears from the record that in the meantime the third respondent­Shanthi Sivasamy filed I.A. No.903 of 2016 in S.A. No.227 of 2012 seeking refund of the excess amount of Rs.4.48 crore lying with the respondent­Bank claiming that she was the owner of the mortgaged property situated at Chrompet, Chennai, that was sold and that the excess money lying with the respondent­Bank belonged to her.

The DRT, Chennai, vide order dated 25.6.2018, allowed S.A. No.227 of 2012 and set aside the Second Sale Notice dated 9.7.2012 and consequent sale of the mortgaged properties and imposed cost of Rs.50,000/­ on the respondent­Bank for wilfully violating the provisions of law. Vide the said order dated 25.6.2018, the DRT, Chennai, directed the respondent­Bank to refund the amounts paid by the auction purchaser along with 10% interest per annum. It further directed the respondent­Bank to refund the surplus sum of Rs.4.48 crore to the third respondent­ Shanthi Sivasamy with 10% interest per annum.

The aforesaid order dated 25.6.2018 passed by the DRT, Chennai, came to be challenged before the DRAT, Chennai, by the respondent­Bank as well as by the auction purchaser by filing appeals being R.A. (S.A.) No.143 of 2018 and R.A. (S.A.) No. 141 of 2018 respectively.

Vide common order dated 6.9.2019, the DRAT, Chennai, allowed both the appeals and set aside the order dated 25.6.2018 passed by the DRT, Chennai. It, however, maintained the direction of the DRT, Chennai, insofar as the payment of excess amount to the third respondent is concerned.

The said order dated 6.9.2019 passed by the DRAT, Chennai, came to be challenged by the appellants before the High Court by filing Writ Petition Nos. 28034 and 28036 of 2019. The auction purchaser also challenged the said order dated 6.9.2019 passed by the the DRAT, Chennai, before the High Court by filing Writ Petition Nos. 30710 and 30712 of 2019.

Vide the impugned common order dated 18.11.2019, all the four writ petitions were disposed of.

Hence, the present appeals by way of special leave.

5. We have heard Shri K.V. Viswanathan, learned Senior Counsel appearing on behalf of the appellants, Ms. Anitha Shenoy, learned Senior Counsel appearing on behalf of the respondent­Bank, Mr. K.K. Mani, learned counsel appearing on behalf of the auction purchaser and Mr. Saju Jakob, learned counsel appearing on behalf of respondent No.3.

6. Shri K.V. Viswanathan, learned Senior Counsel appearing on behalf of the appellants, submitted that in the Second Sale Notice dated 9.7.2012, the period given for paying revised outstanding dues was only 10 days. Learned Senior Counsel submitted that the date fixed for auction was immediately on the next day, i.e., the 11^th day. Learned Senior Counsel therefore submits that the said notice was in blatant breach of Rule 8(6) and Rule 9(1) of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as ‘the said Rules’). It is submitted that the said Rules statutorily mandate that there must be 30 days’ time gap between the date of notice and the date of sale of the immovable assets.

Relying on the judgment of this Court in the case of Mathew Varghese v. M. Amritha Kumar and others¹, the learned Senior Counsel submits that if the sale does not take place pursuant to a notice issued under Rules 8 and 9 of the said Rules, then the procedure prescribed by the said Rules will have to be followed afresh, and a fresh notice of 30 days’ period will have to be given.

Relying on the judgment of this Court in the case of Vasu P. Shetty v. Hotel Vandana Palace and others², Shri K.V. Viswanathan, learned Senior Counsel, would submit that the sale, which is in breach of the mandatory requirements imposed by the Rules, would be null and void. He submits that it has been held by this Court in the case of Vasu P. Shetty (supra) that the earlier attempts of the borrower to thwart the sale would not constitute a waiver, and the Bank could not be relieved from its obligation to follow the mandatory procedure contained in the Rules. He further submits that this Court, in the case of J. Rajiv Subramaniyan and another v. Pandiyas and others³, has reiterated the same legal position.

Learned Senior Counsel further submits that the respondent­Bank also understood that even for a subsequent notice, a 30 days’ mandatory period has to be provided inasmuch as in the First Sale Notice dated 21.1.2012, and in the Third Sale Notice dated 27.9.2012, a period of more than one month has been provided. It is only with regard to the Second Sale Notice dated 9.7.2012, a period of only 10 days has been provided. It is submitted that this has been done in haste and with a mala fide intention.

Learned Senior Counsel would further submit that the contention of the respondent­Bank that the Second Sale Notice dated 9.7.2012 is a continuation of the First Sale Notice dated 21.1.2012 is totally erroneous. He submitted that the schedule of the properties in the First Sale Notice dated 21.1.2012 and in the Second Sale Notice dated 9.7.2012 is totally different. Not only that, but the amount called upon to be paid is also totally different.

Shri Viswanathan further submits that the finding of all the Authorities, i.e., the DRT, Chennai, the DRAT, Chennai, as well as the High Court, that the third respondent­ Shanthi Sivasamy was entitled to the excess amount is contrary to the record and the pleadings. He submitted that the amount that was received, was received from the sale of all the four mortgaged properties of which two were sold through a private treaty and the remaining two were sold through an auction sale. As such, the excess amount, which was generated, was on account of the sale of all the four mortgaged properties and not only on account of the sale of the mortgaged property of the respondent No.3. He further submits that it was a consistent stand of the appellants as well as the respondent Nos. 2 to 4 that the said amount was required to be kept by the respondent­Bank in an Escrow account so that in the event the auction sale in respect of properties at Item ‘A’ and Item ‘D’ of the Schedule of Properties in First Sale Notice dated 21.1.2012 is set aside, the amount can be refunded to the auction purchaser with interest. It is, however, submitted that the said amount has, in an illegal manner, been permitted to be withdrawn by the respondent No.3, along with interest accrued thereon.

Shri Viswanathan, learned Senior Counsel, further submits that the present appeals need to be allowed by quashing and setting aside the sale in respect of properties at Items ‘A’ and ‘D’ of the Schedule of Properties in the First Sale Notice dated 21.1.2012. He further submits that a direction needs to be issued to respondent No.3 to pay back the amount to the respondent­ Bank, which should be directed to utilise the said amount to compensate the auction purchaser.

7. Ms. Anitha Shenoy, learned Senior Counsel appearing on behalf of the respondent­ Bank, submits that the Second Sale Notice dated 9.7.2012 cannot be construed to be a fresh notice, but a continuation of the First Sale Notice dated 21.1.2012. Learned Senior Counsel submits that the Second Sale Notice dated 9.7.2012 was issued in line with the law laid down by the Division Bench of the Madras High Court in the case of Kalpesh P.C. Surana v. Indian Bank⁴. It is submitted that it has been held in the case of Kalpesh P.C. Surana (supra) that though a 30 days’ period is to be provided for auction sale in the First Notice, there is no requirement under the law to provide a 30 day’s clear period in the subsequent notice. She further submits that though the DRT, Chennai, the DRAT, Chennai, and the High Court had granted several opportunities to the appellants to make the payments, they have defaulted to do so. It is submitted that only in pursuance to the directions of the DRT, Chennai, dated 12.9.2012, the sale was completed in favour of the auction purchaser. Learned Senior Counsel therefore submits that since the respondent­ Bank has always acted in compliance with the orders passed by the Tribunals and the High Court, no fault could be attributed to the respondent ­Bank.

8. Shri K.K. Mani, learned counsel appearing on behalf of the respondent No.1­the auction purchaser, submitted that on account of the litigation, though the auction purchaser has deposited the entire amount in the year 2012 itself, he is deprived of the benefit of the said sale. Learned counsel relying on the judgment of this Court in the case of Dwarika Prasad v. State of Uttar Pradesh and others⁵, submitted that though the appellants have lost before all the forums in several rounds of litigation and that the auction purchaser by virtue of law is the owner of the properties since 2012 onwards, he is being deprived of the benefit of the rent from the properties at Items ‘A’ and ‘D’ of the Schedule of Properties in First Sale Notice dated 21.1.2012, which rent is being received by the appellants. Learned counsel also relying on the judgment of this Court in the case of Shakeena and Anr. v. Bank of India & Ors.⁶, further submits that the role of the respondent ­Bank in the present case also needs to be noted. He submits that though the respondent­ Bank could very well have taken steps under Section 14 of the SARFAESI Act for recovery of physical possession, for last 9 years, the respondent ­Bank has not taken any steps.

9. Shri Saju Jakob, learned counsel appearing for respondent No.3­Shanthi Sivasamy, submits that all the appellants are either Promoters/Directors or their direct relatives. He submits that respondent No.3 is not directly related to any of the Promoters or Directors but is related only through marriage of her daughter in one of the appellants’ family. He submits that the amount of Rs.12 crore received by the respondent­Bank was with regard to Third Sale Notice dated 27.9.2012, which was only with respect to the mortgaged property at Item ‘C’ in the Schedule of Properties in First Sale Notice dated 21.1.2012 owned exclusively by her. He submits that since the said sale notice was for an amount of Rs.6,76,07,054/­, the excess amount of Rs.4.48 crore was lying with the respondent­Bank in respect of sale of the said property. It is submitted that the amount towards the First and Second Sale Notice was already accounted by the respondent­Bank through sale of the mortgaged properties at Items ‘A’, ‘B’ and ‘D’ in the Schedule of Properties in the First Sale Notice dated 21.1.2012, which properties belonged either to Promoters/Directors or their family members. Learned counsel submits that since the Third Sale Notice dated 27.9.2012 was only for an amount of Rs.6,76,07,054/­ and in respect of the property owned by the respondent No.3, there is no error in directing refund of the excess amount along with interest to the respondent No.3.

10. The sheet­anchor of the contentions made on behalf of the appellants is that even in case of Second Sale Notice dated 9.7.2012, a mandatory period of 30 days has to be provided. It is therefore the submission on behalf of the appellants that since the Second Sale Notice dated 9.7.2012 does not provide for 30 days’ mandatory period and provides for a period of only 10 days, the said notice and the consequent sale is invalid in law. Heavy reliance has been placed on the judgment of this Court in the case of Mathew Varghese (supra).

11. This Court in the case of Mathew Varghese (supra) has elaborately considered the provisions of Section 13(1), 13(8), 35 and 37 of the SARFAESI Act so also Rules 8 and 9 of the said Rules. We, therefore, do not wish to burden the present judgment by reproducing all those provisions since they have already been reproduced and considered in the case of Mathew Varghese (supra). We only refer to the relevant paragraphs, which are relied upon by the learned counsel for the parties.

12. Before adverting to the observations made by this Court in the case of Mathew Varghese (supra), it will be relevant to note the facts therein.

The first and second respondents therein stood as guarantors in respect of a credit facility granted by the fourth respondent Bank therein in favour of a Company called ‘Jerry Merry Exports Pvt. Ltd.’. As guarantors, they created an equitable mortgage in favour of the fourth respondent Bank therein by depositing the title deeds of their property. When the transaction became a non­performing asset, the respondent­Bank issued notices under Section 13(2) and 13(4) of the SARFAESI Act. The guarantors filed a Securitisation Application (S.A.) No.20 of 2007 before the DRT, Ernakulam, challenging the possession notice issued under Section 13(4) of the SARFAESI Act. After issuance of notices under Section 13(2) and 13(4) of the SARFAESI Act, the respondent­Bank issued a notice on 14.8.2007 to the guarantors as well as others of its intention to sell the property under Rule 8(6) of the said Rules by fixing a reserve price of Rs.1,25,00,000/­. On 23.8.2007, the respondent­Bank published its notice of sale of property in Indian Express and Mathrubhoomi, inviting tenders­cum­auction from the public. The guarantors vide notice dated 30.8.2007 were informed by the respondent­Bank about the publication made on 23.8.2007. In pursuance of the tender notice, the appellant­Mathew Varghese and one M/s Kent Construction submitted their tenders on 30.8.2007 and 1.9.2007 respectively. The guarantors filed a writ petition being WP No.27182 of 2007 before the Kerala High Court challenging the proceedings initiated under the SARFAESI Act. The said writ petition was disposed of by a learned single judge of the Kerala High Court by order dated 20.9.2007. The High Court after taking note of the Original Application (OA) filed by the respondent­Bank as well as Securitisation Application (SA) filed by the guarantors, directed the DRT to hear the parties and dispose of the cases without any delay. While disposing of the writ petition, the High Court also gave liberty to the parties to settle the liability and directed the respondent­ Bank to defer the sale posted on 25.9.2007 by six weeks. While doing so, the High Court imposed a condition on the guarantors to deposit a sum of Rs.10 lakh before the date of sale, i.e., 25.9.2007. As such, the sale, which was scheduled to be held on 25.9.2007, was postponed. Even after the expiry of period of six weeks prescribed in the order of the High Court dated 20.9.2007, the sale was not effected. It was the case of the guarantors that in pursuance of the order passed by the High Court, they had deposited a sum of Rs.10 lakh with the respondent­Bank. The said S.A. No.20 of 2007 came to be dismissed by the DRT vide order dated 27.12.2007. Immediately on the next day, i.e., 28.12.2007, the respondent­Bank accepted the tender of the appellant­Mathew Varghese and asked him to deposit 25% of the amount on that day itself, which was accordingly deposited. He was asked to pay the balance amount within 15 days. Mathew Varghese deposited the balance amount on 11.1.2008. After deposit of 25% of the bid amount on 31.12.2007 by Mathew Varghese, the fourth respondent­Bank confirmed the sale in his favour and granted him further time of 15 days for depositing the balance amount.

13. It is only upon deposit of the balance amount by Mathew Varghese on 11.1.2008 and the confirmation of the sale in his favour, the fourth respondent­Bank informed the guarantors on 2.2.2008 about the confirmation of the sale in favour of Mathew Varghese and also the receipt of the entire consideration. The respondent­Bank directed the guarantors to collect the balance amount available with it. As such, the guarantors filed Review Petition in the Writ Petition, which was disposed of on 20.9.2007. The said review petition was dismissed on 12.2.2008 giving liberty to the guarantors to challenge the sale. The guarantors thereafter filed another Writ Petition being Writ Petition No.5876 of 2008 on 18.2.2008, challenging the vires of the 2002 Rules. It was their specific case that the respondent­Bank had acted surreptitiously in selling the property without informing them. The said writ petition was dismissed by the learned single judge of the High Court by order dated 12.6.2009. Being aggrieved thereby, an appeal was carried before the Division Bench of the High Court. The Division Bench of the High Court took the view that the sale was not conducted in a fair and proper manner inasmuch as when the sale was initially postponed by six weeks from 25.9.2007, the respondent­Bank ought to have renotified the sale or at least extended the time for receiving further tenders. The Division bench set aside the sale by imposing a condition that the guarantors furnish a demand draft of Rs.2,00,00,000/­ from a local branch of a nationalized bank in favour of Mathew Varghese and hand over the same to him within a period of two months from the date of the order. The Division Bench further directed that if payment was not made, as directed, the sale in favour of Mathew Varghese would stand confirmed and the writ appeal would automatically stand dismissed. There were further directions to the sub­Registrar with regard to restoration of the property etc.

14. The guarantors did not make the payment within the said date, as directed by the Division Bench. Instead, an application was filed by the guarantors, thereby seeking for further six weeks’ time to effect the payment of Rs.2,00,00,000/­ to Mathew Varghese. In the said application, the Division Bench passed an order dated 18.6.2010 extending the time period till 20.6.2010. It appears that the guarantors had agreed to sell the property in favour of Mr. Koshi Phillip. The High Court therefore by the said order dated 18.6.2010 directed said Mr. Koshi Phillip to deposit an amount of Rs.2,03,00,000/­ before the respondent­ Bank and further directed that on such deposit being made, the sale made by the respondent­ Bank in favour of Mathew Varghese stood cancelled and the respondent­Bank should effect the sale in favour of said Mr. Koshi Phillip. In this background, Mathew Varghese had approached this Court.

15. It will be relevant to refer to the following observations of this Court in the case of Mathew Varghese (supra):

“29.1. A plain reading of sub­section (8) would show that a borrower can tender to the secured creditor the dues together with all costs, charges and expenses incurred by the secured creditor at any time before the date fixed for sale or transfer. In the event of such tender once made as stipulated in the said provision, the mandate is that the secured asset should not be sold or trans­ferred by the secured creditor. It is further reinforced to the effect that no further step should also be taken by the secured credi­tor for transfer or sale of the secured asset. The contingency stipulated in the event of the tender being made by a debtor of the dues inclusive of the costs, charges, etc., would be that such tender being made be­fore the date fixed for sale or transfer, the secured creditor should stop all further steps for effecting the sale or transfer. That apart, no further step should also be taken for transfer or sale.

29.2. When we analyse in depth the stipu­lations contained in the said sub­section (8), we find that there is a valuable right recognised and asserted in favour of the borrower, who is the owner of the secured asset and who is extended an opportunity to take all efforts to stop the sale or trans­fer till the last minute before which the said sale or transfer is to be effected. Having re­gard to such a valuable right of a debtor having been embedded in the said sub­sec­tion, it will have to be stated in uncontro­verted terms that the said provision has been engrafted in the SARFAESI Act primar­ily with a view to protect the rights of a bor­rower, inasmuch as, such an ownership right is a constitutional right protected un­der Article 300­A of the Constitution, which mandates that no person shall be deprived of his property save by authority of law.

29.3. Therefore, dehors the extent of bor­rowing made and whatever costs, charges were incurred by the secured creditor in re­spect of such borrowings, when it comes to the question of realising the dues by bring­ing the property entrusted with the secured creditor for sale to realise money advanced without approaching any court or tribunal, the secured creditor as a TRUSTEE cannot deal with the said property in any manner it likes and can be disposed of only in the manner prescribed in the SARFAESI Act.

29.4. Therefore, the creditor should ensure that the borrower was clearly put on notice of the date and time by which either the sale or transfer will be effected in order to provide the required opportunity to the bor­rower to take all possible steps for retriev­ing his property or at least ensure that in the process of sale the secured asset de­rives the maximum benefit and the secured creditor or anyone on its behalf is not al­lowed to exploit the situation of the bor­rower by virtue of the proceedings initiated under the SARFAESI Act. More so, under Section 13(1) of the SARFAESI Act, the se­cured creditor is given a free hand to resort to sale of the property without approaching the court or Tribunal.

30. Therefore, by virtue of the stipulations contained under the provisions of the SARFAESI Act, in particular, Section 13(8), any sale or transfer of a secured as­set, cannot take place without duly inform­ing the borrower of the time and date of such sale or transfer in order to enable the borrower to tender the dues of the secured creditor with all costs, charges and ex­penses and any such sale or transfer ef­fected without complying with the said statutory requirement would be a constitu­tional violation and nullify the ultimate sale.

31. Once the said legal position is ascer­tained, the statutory prescription contained in Rules 8 and 9 have also got to be exam­ined as the said Rules prescribe as to the procedure to be followed by a secured cred­itor while resorting to a sale after the is­suance of the proceedings under Sections 13(1) to (4) of the SARFAESI Act. Under Rule 9(1), it is prescribed that no sale of an im­movable property under the Rules should take place before the expiry of 30 days from the date on which the public notice of sale is published in the newspapers as referred to in the proviso to sub­rule (6) of Rule 8 or notice of sale has been served to the bor­rower. Sub­rule (6) of Rule 8 again states that the authorised officer should serve to the borrower a notice of 30 days for the sale of the immovable secured assets. Reading sub­rule (6) of Rule 8 and sub­rule (1) of Rule 9 together, the service of individ­ual notice to the borrower, specifying clear 30 days’ time­gap for effecting any sale of immovable secured asset is a statutory mandate. It is also stipulated that no sale should be affected before the expiry of 30 days from the date on which the public no­tice of sale is published in the newspapers. Therefore, the requirement under Rule 8(6) and Rule 9(1) contemplates a clear 30 days’ individual notice to the borrower and also a public notice by way of publication in the newspapers. In other words, while the pub­lication in newspaper should provide for 30 days’ clear notice, since Rule 9(1) also states that such notice of sale is to be in accordance with the proviso to sub­rule (6) of Rule 8, 30 days’ clear notice to the bor­rower should also be ensured as stipulated under Rule 8(6) as well. Therefore, the use of the expression “or” in Rule 9(1) should be read as “and” as that alone would be in consonance with Section 13(8) of the SARFAESI Act.

32. The other prescriptions contained in the proviso to sub­rule (6) of Rule 8 relates to the details to be set out in the newspa­per publication, one of which should be in “vernacular language” with sufficient circu­lation in the locality by setting out the terms of the sale. While setting out the terms of the sale, it should contain the de­scription of the immovable property to be sold, the known encumbrances of the se­cured creditor, the secured debt for which the property is to be sold, the reserve price below which the sale cannot be effected, the time and place of public auction or the time after which sale by any other mode would be completed, the deposit of earnest money to be made and any other details which the authorised officer considers ma­terial for a purchaser to know in order to judge the nature and value of the property.

33. Such a detailed procedure while resort­ing to a sale of an immovable secured asset is prescribed under Rules 8 and 9(1). In our considered opinion, it has got a twin objective to be achieved:

33.1. In the first place, as already stated by us, by virtue of the stipulation contained in Section 13(8) read along with Rules 8(6) and 9(1), the owner/borrower should have Clear notice of 30 days before the date and time when the sale or transfer of the se­cured asset would be made, as that alone would enable the owner/borrower to take all efforts to retain his or her ownership by tendering the dues of the secured creditor before that date and time.

33.2. Secondly, when such a secured asset of an immovable property is brought for sale, the intending purchasers should know the nature of the property, the extent of liability pertaining to the said property, any other encumbrances pertaining to the said property, the minimum price below which one cannot make a bid and the total liability of the borrower to the secured creditor. Since, the proviso to sub­rule (6) also mentions that any other material as­pect should also be made known when ef­fecting the publication, it would only mean that the intending purchaser should have entire details about the property brought for sale in order to rule out any possibility of the bidders later on to express ignorance about the factors connected with the asset in question.

33.3. Be that as it may, the paramount ob­jective is to provide sufficient time and op­portunity to the borrower to take all efforts to safeguard his right of ownership either by tendering the dues to the creditor before the date and time of the sale or transfer, or ensure that the secured asset derives the maximum price and no one is allowed to exploit the vulnerable situation in which the borrower is placed.”

16. It could thus be seen that this Court has held that the creditor should ensure that the borrower was clearly put on notice of the date and time by which either the sale or transfer will be effected in order to provide the required opportunity to the borrower to take all possible steps for retrieving his property or at least to ensure that in the process of sale, the secured asset derives the maximum benefit, and that the secured creditor or anyone on its behalf, is not allowed to exploit the situation of the borrower. This Court held that Rule 9(1) of the said Rules prescribed that no sale of an immovable property under the said Rules should take place before the expiry of 30 days from the date on which the public notice of sale was published in the newspapers or notice of sale has been served to the borrower. This Court further held that the expression “or” in Rule 9(1) should be read as “and” and as such there should be clear notice of 30 days between the notice of sale to the borrower so also the publication in the newspaper and the actual date of sale. This Court held that this would serve twin purpose. Firstly, the owner/borrower should have clear notice of 30 days before the date and time when the sale or transfer of the secured asset would be made inasmuch as, that would enable the owner/borrower to take all efforts to retain his or her ownership by tendering the dues of the secured creditor before that date and time. Secondly, when such a secured asset of an immovable property is brought for sale, the intending purchasers should know the nature of the property, the extent of liability pertaining to the said property, any other encumbrances pertaining to the said property, the minimum price below which one cannot make a bid and the total liability of the borrower to the secured creditor. This Court further held that the purpose of the Rule is to ensure that the secured asset derives the maximum price, and no one is allowed to exploit the vulnerable situation in which the borrower is placed.

17. After referring to the judgment of this Court in the case of Narandas Karsondas v. S.A. Kamtam and another⁷, this Court in the case of Mathew Varghese (supra) observed thus:

“38. On a reading of the above para­graphs, we are able to discern the ratio to the effect that a mere conferment of power to sell without intervention of the court in the mortgage deed by itself will not deprive the mortgagor of his right to redemption, that the extinction of the right of redemption has to be subse­quent to the deed conferring such power, that the right of redemption is not extin­guished at the expiry of the period, that the equity of redemption is not extin­guished by mere contract for sale and that the mortgagor’s right to redeem will survive until there has been completion of sale by the mortgagee by a registered deed. The ratio is also to the effect that the power to sell should not be exercised unless and until notice in writing requir­ing payment of the principal money has been served on the mortgagor. The above proposition of law of course was laid down by this Court in Narandas Karson­das [(1977) 3 SCC 247] while construing Section 60 of the TP Act. But as rightly contended by Mr Shyam Divan, we fail to note any distinction to be drawn while applying the abovesaid principles, even in respect of the sale of secured assets created by way of a secured interest in favour of the secured creditor under the provisions of the SARFAESI Act, read along with the relevant Rules. We say so, inasmuch as, we find that even while setting out the principles in respect of the redemption of a mortgage by apply­ing Section 60 of the TP Act, this Court has envisaged the situation where such mortgage deed providing for resorting to the sale of the mortgage property with­out the intervention of the Court. Keep­ing the said situation in mind, it was held that the right of redemption will not get extinguished merely at the expiry of the period mentioned in the mortgage deed. It was also stated that the equity of redemption is not extinguished by mere contract for sale and the most important and vital principle stated was that the mortgagor’s right to redeem will survive until there has been completion of sale by the mortgagee by a registered deed. The completion of sale, it is stated, can be held to be so unless and until notice in writing requiring payment of the prin­cipal money has been served on the mortgagor. Therefore, it was held that until the sale is complete by registration of sale, the mortgagor does not lose the right of redemption. It was also made clear that it was erroneous to suggest that the mortgagee would be acting as the agent of the mortgagor in selling the property.

39. When we apply the above principles stated with reference to Section 60 of the TP Act in respect of a secured interest in a secured asset in favour of the secured creditor under the provisions of the SARFAESI Act and the relevant Rules applicable, under Section 13(1), a free hand is given to a secured creditor to re­sort to a sale without the intervention of the court or tribunal. However, under Section 13(8), it is clearly stipulated that the mortgagor i.e. the borrower, who is otherwise called as a debtor, retains his full right to redeem the property by ten­dering all the dues to the secured credi­tor at any time before the date fixed for sale or transfer. Under sub­section (8) of Section 13, as noted earlier, the secured asset should not be sold or transferred by the secured creditor when such ten­der is made by the borrower at the last moment before the sale or transfer. The said sub­section also states that no fur­ther step should be taken by the secured creditor for transfer or sale of that se­cured asset. We find no reason to state that the principles laid down with refer­ence to Section 60 of the TP Act, which is general in nature in respect of all mortgages, can have no application in respect of a secured interest in a secured asset created in favour of a secured creditor, as all the abovestated principles apply on all fours in respect of a transac­tion as between the debtor and secured creditor under the provisions of the SARFAESI Act.”

18. It could thus be seen that this Court observed that the equity of redemption is not extinguished by mere contract for sale and that the mortgagor’s right to redeem will survive until there has been completion of sale by the mortgagee by a registered deed. This Court further observed that applying the principles stated with reference to Section 60 of the Transfer of Property Act in respect of a secured interest in a secured asset in favour of the secured creditor under the provisions of the SARFAESI Act and the relevant Rules applicable, a free hand is given to a secured creditor to resort to a sale without the intervention of the court or tribunal. It has, however, been held that under Section 13(8), it is clearly stipulated that the mortgagor, i.e., the borrower, who is otherwise called as a debtor, retains his full right to redeem the property by tendering all the dues to the secured creditor at any time before the date fixed for sale or transfer. This Court further held that if the tender is made by the borrower at the last moment before the sale or transfer, the secured asset should 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 the case of Narandas Karsondas (supra) 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.

19. The most relevant observation of this Court could be found in paragraph 53 of the judgment in the case of Mathew Varghese (supra), which reads thus:

“53. We, therefore, hold that unless and until a clear 30 days’ notice is given to the borrower, no sale or transfer can be re­sorted to by a secured creditor. In the event of any such sale properly notified after giving 30 days’ clear notice to the borrower did not take place as scheduled for reasons which cannot be solely at­tributable to the borrower, the secured creditor cannot effect the sale or trans­fer of the secured asset on any subse­quent date by relying upon the notifica­tion issued earlier. In other words, once the sale does not take place pursuant to a notice issued under Rules 8 and 9, read along with Section 13(8) for which the entire blame cannot be thrown on the borrower, it is imperative that for ef­fecting the sale, the procedure pre­scribed above will have to be followed afresh, as the notice issued earlier would lapse. In that respect, the only other provi­sion to be noted is sub­rule (8) of Rule 8 as per which sale by any method other than public auction or public tender can be on such terms as may be settled between the parties in writing. As far as sub­rule (8) is concerned, the parties referred to can only relate to the secured creditor and the bor­rower. It is, therefore, imperative that for the sale to be effected under Section 13(8), the procedure prescribed under Rule 8 read along with Rule 9(1) has to be necessarily followed, inasmuch as that is the prescrip­tion of the law for effecting the sale as has been explained in detail by us in the earlier paragraphs by referring to Sections 13(1), 13(8) and 37, read along with Section 29 and Rule 15. In our considered view any other construction will be doing violence to the provisions of the SARFAESI Act, in par­ticular Sections 13(1) and (8) of the said Act.”

(emphasis supplied)

20. This Court, in unequivocal terms, held that unless and until a clear 30 days’ notice is given to the borrower, no sale or transfer can be resorted to by a secured creditor. It further held that in the event of any such sale properly notified after giving a 30 days’ clear notice to the borrower did not take place as scheduled for reasons, which cannot be solely attributable to the borrower, the secured creditor cannot effect the sale or transfer of the secured asset on any subsequent date by relying upon the notification issued earlier. This Court held that once the sale does not take place pursuant to a notice issued under Rules 8 and 9, read with Section 13(8) for which the entire blame cannot be thrown on the borrower, it is imperative that for effecting the sale, the procedure prescribed will have to be followed afresh.

21. In the light of these observations, we have to consider the factual position in the present matter.

22. It is not in dispute that an equitable mortgage in favour of the respondent­Bank guaranteeing the loan taken by the borrower was in respect of four properties. The chart showing the schedule of properties, the owners (as mentioned in the First Sale Notice dated 21.1.2012) and the mode of sale is as under:

“SALE NOTICE DT. 21.01.2012 –
SCHEDULE OF PROPERTIES