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2023 (10) TMI 48 - SC - Indian LawsRight of the auction purchaser of the property - Right of the Defaulter of Loan / Borrowers to redeem the secured property - Exercise of writ jurisdiction under Article 226 of the constitution - alternative remedy available to the Borrowers had already been availed of - confirmation of sale by the Bank under Rule 9(2) of the Rules of 2002 invests the successful auction purchaser with a vested right or not - impact of the amended Section 13(8) of the SARFAESI Act on the Borrowers right of redemption in an auction conducted under the SARFAESI Act - withholding of sale certificate under Rule 9(6) of the Rules of 2002 and enter into a private arrangement with a borrower - applicability of equitable considerations to override the outcome contemplated by the statutory auction process prescribed by the SARFAESI Act - right of redemption of mortgage stood extinguished upon publication of notice of auction or not - decisions of Telangana High Court in the case of CONCERN READYMIX AND ORS. VERSUS THE AUTHORISED OFFICER, CORPORATION BANK AND ORS. 2018 (12) TMI 1982 - TELANGANA HIGH COURT and AMME SRISAILAM VERSUS UNION BANK OF INDIA AND ORS. 2022 (8) TMI 1440 - TELANGANA HIGH COURT lay down the correct position of law or not. HELD THAT - The conclusion is summarised as below (i) The High Court was not justified in exercising its writ jurisdiction under Article 226 of the Constitution more particularly when the borrowers had already availed the alternative remedy available to them under Section 17 of the SARFAESI Act. (ii) The confirmation of sale by the Bank under Rule 9(2) of the Rules of 2002 invests the successful auction purchaser with a vested right to obtain a certificate of sale of the immovable property in form given in appendix (V) to the Rules i.e., in accordance with Rule 9(6) of the SARFAESI. (iii) 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. In other words, the borrower s right of redemption did not stand terminated on the date of the auction sale of the secured asset itself and remained alive till the transfer was completed in favour of the auction purchaser, by registration of the sale certificate and delivery of possession of the secured asset. However, the amended provisions of Section 13(8) of the SARFAESI Act, make it clear that the right of the borrower to redeem the secured asset stands extinguished thereunder on the very date of publication of the notice for public auction under Rule 9(1) of the Rules of 2002. In effect, the right of redemption available to the borrower under the present statutory regime is drastically curtailed and would be available only till the date of publication of the notice under Rule 9(1) of the Rules of 2002 and not till the completion of the sale or transfer of the secured asset in favour of the auction purchaser. (iv) The Bank after having confirmed the sale under Rule 9(2) of the Rules of 2002 could not have withhold the sale certificate under Rule 9(6) of the Rules of 2002 and enter into a private arrangement with a borrower. (v) The High Court under Article 226 of the Constitution could not have applied equitable considerations to overreach the outcome contemplated by the statutory auction process prescribed under the SARFAESI Act. (vi) The two decisions of the Telangana High Court in the case of Concern Readymix and Amme Srisailam do not lay down the correct position of law. In the same way, the decision of the Punjab and Haryana High Court in the case of Pal Alloys 2021 (12) TMI 1462 - PUNJAB AND HARYANA HIGH COURT also does not lay down the correction position of law. The Telangana High Court in Concern Readymix (supra), examined the amended Section 13(8) of the SARFAESI Act, held that the same only restricts the right of the secured creditor and not the borrowers right of redemption, which will continue to exist until the execution of the conveyance. (vii) The decision of the Andhra Pradesh High Court in Sri Sai Annadhatha Polymers 2018 (6) TMI 1840 - ANDHRA PRADESH HIGH COURT and the decision of the Telangana High Court in the case of K.V.V. Prasad Rao Gupta 2021 (2) TMI 1361 - TELANGANA HIGH COURT lay down the correct position of law while interpreting the amended Section 13(8) of the SARFAESI Act. 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. 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. 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 2021 (2) TMI 1361 - TELANGANA HIGH COURT and relying on the decision of the Andhra Pradesh High Court in the case of Sri. Sai Annadhatha Polymers, the court observed under Rule 8(6) of the Rules of 2002, the petitioners are entitled for a thirty day notice period enabling them to clear the loan and to redeem the property as envisaged under Section 13(8) of the SARFAESI Act, and that if they fail to repay the amount within the stipulated period, after expiry of said period of 30 days, the secured creditor is entitled to issue publication of sale notice under Rule 9(1), and that on publication of such notice, the right of the borrower to redeem the property stands extinguished. Appeal allowed.
Issues Involved:
1. Maintainability of the writ petition under Article 226 of the Constitution. 2. Confirmation of sale and vested rights of the auction purchaser. 3. Impact of the amended Section 13(8) of the SARFAESI Act on the right of redemption. 4. Bank's authority to withhold the sale certificate. 5. Equitable considerations by the High Court. 6. Correctness of the decisions of various High Courts on the amended Section 13(8) of the SARFAESI Act. Summary: 1. Maintainability of the writ petition under Article 226 of the Constitution: The High Court was not justified in exercising its writ jurisdiction under Article 226 of the Constitution, especially when the borrowers had already availed the alternative remedy available under Section 17 of the SARFAESI Act. The Supreme Court emphasized that High Courts should not entertain such petitions if an effective remedy is available under the SARFAESI Act, as reiterated in cases like Satyawati Tondon and Phoenix ARC Private Limited. 2. Confirmation of sale and vested rights of the auction purchaser: The confirmation of sale by the Bank under Rule 9(2) of the Rules of 2002 invests the successful auction purchaser with a vested right to obtain a certificate of sale of the immovable property in form given in appendix (V) to the Rules i.e., in accordance with Rule 9(6) of the SARFAESI. The Bank's failure to issue the sale certificate despite the full payment by the auction purchaser was deemed illegitimate. 3. Impact of the amended Section 13(8) of the SARFAESI Act on the right of redemption: The amended Section 13(8) of the SARFAESI Act significantly curtails the right of the borrower to redeem the secured asset, which now stands extinguished on the date of publication of the notice for public auction under Rule 9(1) of the Rules of 2002. This is a departure from the unamended provision, where the right of redemption was available till the sale or transfer of the secured asset was completed. 4. Bank's authority to withhold the sale certificate: The Bank, after confirming the sale under Rule 9(2), could not withhold the sale certificate under Rule 9(6) and enter into a private arrangement with the borrower. The Bank's actions were found inconsistent and contrary to the provisions of the SARFAESI Act. 5. Equitable considerations by the High Court: The High Court under Article 226 of the Constitution could not apply equitable considerations to override the statutory auction process prescribed by the SARFAESI Act. Equity cannot supplant the law, and the court must implement the clear provisions of the law. 6. Correctness of the decisions of various High Courts on the amended Section 13(8) of the SARFAESI Act: The decisions of the Telangana High Court in Concern Readymix and Amme Srisailam, and the Punjab and Haryana High Court in Pal Alloys, were found incorrect. The Andhra Pradesh High Court's decision in Sri Sai Annadhatha Polymers and the Telangana High Court's decision in K.V.V. Prasad Rao Gupta correctly interpreted the amended Section 13(8) of the SARFAESI Act. Final Conclusion: The appeals were allowed, the High Court's impugned judgment was set aside, and directions were issued for the Bank to refund the amount deposited by the borrowers and for the appellant to pay an additional amount to the Bank, following which the Bank must issue the sale certificate.
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