E. Muthurathinasabathy & Ors Vs Sri International & Ors. (Supreme Court of India)
Summary: The Supreme Court dismissed the appeals arising from the dispute between E. Muthurathinasabathy & Ors. and Sri International & Ors., thereby leaving undisturbed the relief granted in the connected Madras High Court proceedings on the supplied material.
The underlying dispute concerned loan facilities renewed on 29.03.2019 to Rs.4 crores, four mortgaged properties, classification of the loan account as NPA on 25.11.2018, a notice under Section 13(2) of the SARFAESI Act dated 10.02.2020 and symbolic possession under Section 13(4) on 21.04.2020. An auction was held on 04.09.2020. During successive proceedings before the High Court, DRT and DRAT, confirmation and further steps in the sale were subject to interim directions. By order dated 15.12.2020 in C.R.P.No.2187 of 2020, the High Court permitted the bank to accept the balance sale consideration from the auction purchasers but directed that no further steps take place until disposal of S.A.No.263 of 2020.
The DRT dismissed the securitisation appeals on 31.03.2022; the sale was confirmed that day, the balance 75% was appropriated from the auction purchasers’ fixed deposits and a sale certificate was issued and registered on 18.04.2022. DRAT, by common order dated 24.11.2022, upheld the auction. Before the Madras High Court, the borrowers contended that the balance 75% had not been paid within the period contemplated by Rule 9(4) of the Security Interest (Enforcement) Rules, 2002 and that, having paid the entire outstanding amount with interest, they retained the right to redeem.
The Bank and auction purchasers contended that confirmation had remained stayed until 31.03.2022 and that the balance consideration was therefore validly paid immediately upon confirmation. The High Court rejected that construction. It held that its order dated 15.12.2020 had enabled the Bank to receive the balance consideration and that waiting about 15 months until 31.03.2022 violated Rule 9(4), relying particularly on Mathew Varghese Vs. M. Amritha Kumar and Others, (2014) 5 SCC 610. It further held, on the exceptional facts, that the borrowers had continuously challenged the sale, had deposited the entire loan amount and could redeem the properties. The High Court set aside the DRAT order dated 24.11.2022, declared the auction sale dated 04.09.2020 invalid, set aside the sale certificate dated 18.04.2022, directed discharge of the mortgage and return of title deeds, and held that the auction purchasers were entitled to refund of Rs.4,95,21,000/- with interest at 12% per annum, with the borrowers liable for the interest component.
The supplied Supreme Court order records that Hon’ble Mr. Justice Dipankar Datta pronounced the judgment of the Bench comprising His Lordship and Hon’ble Mr. Justice Satish Chandra Sharma, leave was granted and the appeals were dismissed in terms of the signed non-reportable judgment, with pending applications disposed of. The detailed signed Supreme Court judgment and its reasoning are not contained in the supplied material and therefore no additional Supreme Court reasoning is attributed here.
Cases Discussed
- Hindon Forge Private Limited & Anr. Vs State of Uttar Pradesh, (2019) 2 SCC 198 (Supreme Court) — relied upon for the availability of the remedy under Section 17(1) after measures under Section 13(4), without a distinction between symbolic and actual possession.
- Canara Bank Vs M. Amarender Reddy & Anr., (2017) 4 SCC 735 (Supreme Court) — cited for the proposition concerning redemption after expiry of the clear notice period.
- K. Chidambara Manickam Vs Shakeena, 2008 (1) CTC 660 (Madras High Court) — cited on the mortgagor’s right of redemption under Section 60 of the Transfer of Property Act.
- Shakeena & Anr. Vs Bank of India & Ors., 2019 SCC OnLine SC 1059 (Supreme Court) — cited on completion of a SARFAESI auction sale and extinguishment of redemption rights; the High Court distinguished its application to the present factual scenario.
- Baby Saha Vs Bank of India, 2019 SCC OnLine Cal 5427 (Calcutta High Court) — cited on exercise of the right of redemption before sale.
- Bank of Baroda Vs Karwa Trading Company & Anr., (2022) 5 SCC 168 (Supreme Court) — cited regarding consequences of finalisation of a public auction and the borrower’s obligation to hand over possession.
- Dwarika Prasad Vs State of Uttar Pradesh, (2018) 5 SCC 491 (Supreme Court) — cited on Section 13(8) of the SARFAESI Act and the right of redemption.
- Concern Readymix, rep. by its Proprietor, Smt. Y. Sunitha Vs Authorised Officer, Corporation Bank & Anr., 2018 SCC OnLine Hyd 783 (Andhra Pradesh High Court) — relied upon for the distinction between amended Section 13(8) and the mortgagor’s equity of redemption.
- Pal Alloys & Metal India Private Limited & 2 Others Vs Allahabad Bank & Others, 2021 SCC OnLine P&H 2733 (Punjab & Haryana High Court) — relied upon in support of the borrowers’ contention concerning the continuing right of redemption.
- S. Karthik & Others Vs N. Subhash Chand Jain & Others, 2021 SCC OnLine SC 787 (Supreme Court) — cited by the auction purchasers regarding payment of auction price and delivery of possession.
- Mathew Varghese Vs M. Amritha Kumar & Others, (2014) 5 SCC 610 (Supreme Court) — relied upon by the High Court on mandatory compliance with the sale rules, the mortgagor’s right of redemption and protection of property under Article 300-A.
- Vernon Vs Bethel, (1792) 2 Eden 110, 113 : 28 ER 838, 839 — referred to on the equitable protection of redemption rights.
Alternative SEO Titles
1. Rule 9(4) Breach Invalidates SARFAESI Auction; Supreme Court Dismisses Appeals Against Madras HC Relief
2. Borrowers Retain Redemption Relief After Delayed SARFAESI Sale Payment: Supreme Court Dismisses Appeals
3. 15-Month Delay in Balance Auction Payment Invalidates SARFAESI Sale: Madras HC Ruling Survives Supreme Court Appeal
4. Supreme Court Dismisses Appeals in Rs.4.95 Crore SARFAESI Auction Dispute; Borrowers’ Redemption Relief Continues
5. SARFAESI Auction Set Aside for Delayed 75% Payment; Supreme Court Dismisses Challenge to Madras HC Order
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1.Hon’ble Mr. Justice Dipankar Datta pronounced the judgment of the Bench comprising His Lordship and Hon’ble Mr. Justice Satish Chandra Sharma.
2. Leave granted.
3. The appeals stand dismissed in terms of the signed non-reportable judgment.
4. Pending application(s) if any, shall stand disposed of.
