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2022 (2) TMI 447 - SC - Indian LawsSeeking release of property - handover of possession along with the title deeds of the residential/housing property in question to the borrower - Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - HELD THAT - From the impugned judgment and order passed by the High Court it appears that the Division Bench of the High Court has treated and/or considered the market value of the mortgaged property at ₹ 71 lakhs. The DRT when initially granted the interim relief in favour of the borrower which was the subject matter before the DRAT and the learned Single Judge and thereafter before the Division Bench of the High Court, directed to handover the possession of the mortgaged property to the borrower on payment of ₹ 48.65 lakhs which was the reserve price/base price. The possession was taken over by the bank under the provisions of the SARFAESI Act and after following the proceedings as required under Section 13 of the SARFAESI Act, the mortgaged property was put to auction and at that stage the borrower preferred an appeal/application before the DRT under Section 17 of the SARFAESI Act and as such the said appeal can be said to be technically pending as the order dated 17.01.2014 passed by the DRT was an interim order. It is required to be noted that ₹ 65.65 lakhs was not the amount realized by selling the mortgaged property in a public auction. It was only a highest bid received and before any further auction proceedings were conducted, the DRT passed an interim order directing to handover the possession and handover the original title deeds on payment of ₹ 48.65 lakhs which was the base price, which was the subject matter before the DRAT and before the learned Single Judge. Therefore, the borrower did not deposit and was not ready to deposit the entire amount of dues with secured creditor with all costs, charges and expenses incurred by the secured creditor. Therefore, it was open for the secured creditor to sell the mortgaged property which was put as a security and realize the amount by selling it in a public auction. At this stage, it is required to be noted that even as per the Division Bench of the High Court the borrower made an offer to deposit/pay ₹ 71 lakhs as a purchaser and not by way of redeeming the mortgaged property. Therefore, the impugned judgment and order passed by the Division Bench of the High Court directing to release the mortgaged property/secured property and to handover the possession as well as the original title deeds to the borrower on payment of a total sum of ₹ 65.65 lakhs only is contrary to Subsection (8) of Section 13 of the SARFAESI Act. Even otherwise on making the payment i.e. ₹ 65.65 lakhs against the total dues ₹ 1,85,37,218.80/as on 07.01.2013 the entire liability outstanding against the borrower cannot be said to have been discharged. Even if the mortgaged property would have been sold in a public auction say for an amount of ₹ 71 lakhs and the bank has realized ₹ 71 lakhs by selling the mortgaged property, in that case also the liability of the borrower to pay the balance amount would still continue - the liability of the borrower with respect to the balance outstanding dues would still be continued. Therefore, the Division Bench of the High Court has erred in directing to release the mortgaged property/secured property and to handover the possession along with the original title deeds to the borrower on payment of a total sum of ₹ 65.65 lakhs only. The DRT in its order dated 17.01.2014 which as such was an interim relief order pending the appeal under Section 17 of the SARFAESI Act was not justified in directing to release the mortgaged property and handover the possession along with the original title deeds to the borrower on payment of ₹ 48.65 lakhs only which was the base price/ reserve price, which the Division Bench of the High Court has increased to ₹ 65.65 lakhs on the ground that the highest bid received was ₹ 71 lakhs (which was not materialized as the highest bidder did not come forward). Unless and until the borrower was ready to deposit/pay the entire amount payable together with all costs and expenses with the secured creditor, the borrower cannot be discharged from the entire liability outstanding. Therefore, as such no order could have been passed either by the DRT and/or by the Division Bench of the High Court to discharge the borrower from the entire liability outstanding and to discharge the mortgaged property and handover the possession along with original title deeds to the borrower - The Division Bench of the High Court has erred in interfering with the order passed by the learned Single Judge and has erred in directing to release the mortgaged property/secured property and handover the possession along with the original title deeds to the borrower on payment of a total sum of ₹ 65.65 lakhs only. The impugned judgment and order dated 20.09.2017 passed by the Division Bench of the High Court in DBSAW No.349/2017 is hereby quashed and set aside and the order passed by the learned Single Judge quashing and setting aside the order passed by the DRT dated 17.01.2014 confirmed by the DRAT is hereby restored - Appeal allowed.
Issues Involved:
1. Validity of the Division Bench of the High Court's direction to release the mortgaged property on partial payment. 2. Interpretation and application of Section 13(8) of the SARFAESI Act, 2002. 3. Determination of the amount required to discharge the borrower's liability. 4. The legality of interim orders passed by the DRT and DRAT regarding the release of the mortgaged property. Issue-wise Detailed Analysis: 1. Validity of the Division Bench of the High Court's direction to release the mortgaged property on partial payment: The Division Bench of the High Court directed the bank to release the secured property and hand over possession along with the title deeds to the borrower upon the borrower depositing a further sum of ?17 lakhs, making a total of ?65.65 lakhs. This decision was based on the highest bid received during the auction process. However, the Supreme Court found that this direction was contrary to the provisions of Section 13(8) of the SARFAESI Act, 2002, which mandates that the secured asset shall not be sold unless the borrower pays the entire amount due along with all costs and expenses incurred by the secured creditor. The Supreme Court emphasized that the liability of the borrower could not be discharged merely by depositing ?65.65 lakhs against the total dues of ?1,85,37,218.80 as on 07.01.2013. 2. Interpretation and application of Section 13(8) of the SARFAESI Act, 2002: Section 13(8) of the SARFAESI Act, 2002, stipulates that the secured asset shall not be sold if the borrower tenders the entire amount due to the secured creditor along with all costs, charges, and expenses before the date of publication of notice for public auction. In this case, the Division Bench of the High Court's direction to release the property on partial payment was found to be in violation of this provision. The Supreme Court reiterated that the borrower must pay the entire outstanding amount to prevent the sale of the secured asset. 3. Determination of the amount required to discharge the borrower's liability: The Supreme Court noted that the amount of ?65.65 lakhs was not sufficient to discharge the borrower's entire liability, which was ?1,85,37,218.80 as on 07.01.2013. Even if the property was sold for ?71 lakhs, the borrower would still be liable for the balance amount. The Court emphasized that the borrower could not be discharged from the entire liability without paying the full amount due along with all costs and expenses. 4. The legality of interim orders passed by the DRT and DRAT regarding the release of the mortgaged property: The DRT had initially granted interim relief by directing the bank to release the mortgaged property on payment of ?48.65 lakhs, which was the reserve price. This interim order was challenged by the bank before the DRAT and subsequently before the High Court. The Supreme Court found that the interim order was not justified as it was contrary to Section 13(8) of the SARFAESI Act. The Court restored the order of the learned Single Judge, which had set aside the DRT's interim order. Conclusion: The Supreme Court quashed and set aside the judgment and order of the Division Bench of the High Court and restored the order of the learned Single Judge. The bank was allowed to proceed with the auction of the mortgaged property, and any amount already paid by the borrower would be adjusted against the total liability. The DRT was directed to decide and dispose of the borrower's application on merits. The borrower was allowed to remain in possession of the property until the auction was finalized, but was prohibited from transferring or alienating the property. The appeal was allowed with no order as to costs.
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