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TMI Blog2015 (1) TMI 463X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the banks and merely a sale certificate was required to be issued. It is the appellant who is insisting for registration of a sale deed. In the case before the Supreme Court, the sale was confirmed by the Court in favour of the purchaser and a sale certificate was issued. Be that as it may, in the present case, though the appellant has become the highest bidder and paid the amount, the sale was not confirmed by the banks i.e. the secured creditor which is mandatory and a pre-condition as per the terms and conditions of tender notification. Therefore, in the absence of confirmation of sale by the banks, as required under Rule 9(6), the appellant derives no title to the property in question. It is only on confirmation of the sale by the respondent- banks the property vests in the appellant. Proceedings initiated by the borrower before the DRT are without jurisdiction, needless to state that against the sale proceedings of the authorized officer, the borrower has a right to approach the DRT under Section 17 of the Act. In the instant case, as already held, the sale is not confirmed by the secured creditor and the borrower has approached the DRT on 3.4.2012 and the Tribunal iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the secured asset i.e Sainag Complex Chandramoulipuram, Vijayawada. The Authorized Officer, Dena Bank and the Authorized Officer, Indian Overseas Bank jointly issued letter dated 31.3.2012 accepting the auction purchaser as the highest bidder and directing the purchaser to pay the balance of 25% after deducting EMD amount by 3.4.2012 and the balance bid amount of ₹ 1350 lakhs on or before 16.4.2012. It was indicated in the letter that the sale shall be confirmed in the name of M/s India Finlease Securities Ltd., on payment of the entire bid amount subject to confirmation by the banks. The purchaser paid ₹ 2.93 crores by cheque dated 3.4.2012 in favour of Dena Bank. In the meanwhile, the borrower, aggrieved by the auction filed S.A.No.139 of 2012 before the Debt Recovery Tribunal, Visakhapatnam under Section 17 of the Act. The respondent-banks filed counters and as per the directions of the DRT a statement of account showing the amount due by the borrower was also filed. The auction purchaser has paid the balance amount- ₹ 11.70 crores by demand draft dated 12.4.2012 and ₹ 1.80 crores by bankers cheque dated 13.4.2012, both in favour of Dena Bank. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed of the S.A observing that the borrower has a right to exercise his right of redemption before the date of sale or transfer and once the amount has been paid and the same having been accepted by both the banks, the applicant is well within it's right to exercise the right of redemption. Though a prayer was made by the auction purchaser to implead it as party to the proceedings the same was rejected. Accordingly, the matter was disposed of directing the banks to issue no due certificate and to return the title deeds to the borrower. The auction purchaser along with his advocate appeared before the DRT and prayed for impleadment, but the prayer was rejected on the ground that such a request should have been made earlier and that the auction purchaser has already filed the writ petition before the High Court. 4. During the pendency of the writ petition, the borrower was permitted to come on record. The respondents-banks and the borrower filed counter-affidavits detailing the proceedings before the DRT and the directions issued by the Tribunal. 5. Before the learned single Judge it was argued on behalf of the appellant that the creditor banks after having received the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant-writ petitioner also filed Rev.WPMP.No.26312 of 2012 which was dismissed by the learned single Judge by order dated 10.7.2012. 7. Aggrieved by the order of the learned single Judge, the auction purchaser has filed the present appeal. 8. Learned counsel appearing for the auction purchaser submitted that under sub-section (8) of Section 13 of the Securitization Act, the borrower is entitled to redeem the property by depositing the entire amount due together with all costs etc. only before the date fixed for sale but not later, therefore, the learned Judge ought to have held that receipt of the amount by the respondent-banks from the borrower after the date of auction has no legal sanctity and does not affect the sale in favour the auction-purchaser. Section 13(8) clearly provides that the borrower has right to pay the amount only before the date fixed for sale and he cannot be permitted to exercise this right after a particular date i.e. date fixed for sale. There is an emphasis in the wording 'before the date fixed for sale' fixing the parameter. Therefore, there is no ambiguity at all in the language of the section. After making full payment within the stipul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question whether sale is completed or not. Reliance has also been placed on the decision of the Madras High Court in K. Chidambhara Manickam v. Shakeena and others. 9. The learned counsel appearing for the respondents-bank submitted that the borrower approached the DRT even before the auction purchaser deposited the balance sale consideration and as per the directions of the Tribunal, the banks accepted the payments made by the borrower. He placed reliance on the decision of the Bombay High Court in Manoj D. Kapasi and another v. Union of India6 wherein the Bombay High Court following the judgment of the Supreme Court in Mardia Chemicals Ltd.'s case held that the right of redemption was a statutory right available to the borrower till the transfer took place and as such the learned single Judge has rightly appreciated the provisions. He further submitted that the bid was accepted subject to confirmation by the banks and while receiving the balance 75% bid amount it was clearly mentioned that the payment was received subject to the outcome of proceedings before the DRT. The decision of the Madras High Court in K. Chidambhara Manickam v. Shakeena and others has no applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtificate of sale of immovable property in favour of the purchaser as required under rule 9(6) of the Rules. He also submitted that the Judgment of the Madras High Court in K. Chidambhara Manickam v. Shakeena and others has no application to the present case. Referring to sub-section (8) of Section 13 learned counsel submitted that the interpretation sought to be put forth by the appellant is contrary to the intendment of the Legislature. Right to get redemption of the property can be exercised at any time before the date fixed for 'sale' or 'transfer' and that right of redemption is available till the 'transfer' is effected. He strenuously argued when the Legislature has designedly used the expression 'sale or transfer' the word 'transfer' cannot be ignored for considering the import of Section 13(8). In K. Chidambhara Manickam v. Shakeena and others the Court has not taken into consideration the same. In the instant case, the borrower has exercised his right of redemption before the transfer of property is effected. A transfer can validly be made only on confirmation of sale by the secured creditor and issuance of a sale certificate by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the provisions of the Act. Sub-section (2) of Section 13 provides that where a borrower makes any default in repayment of secured debt and where the account in respect of such debt is classified by the secured creditor as a non-performing asset, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section (4). Sub-section (4) provides that where the borrower has failed to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more measures of the following to recover his secured debt, namely,: (a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset; (b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset. However, the right to transfer by way of lease, assignment or sale shall be exercised o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (6) On confirmation of sale by the secured creditor and if the terms of payment have been complied with, the authorized officer exercising the powers of sale shall issue a certificate of sale of the immovable property in favour of the purchaser in the Form given in Appendix V to these rules. 13. From the above it is clear that where the borrower fails to discharge the liability of the secured creditor within sixty days of notice as provided in sub-section(2) of Section 13 of the Act, under sub-section (4) the secured creditor may take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset and has also power to take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset. Therefore, the 'sale' contemplated under sub- section (8) of Section 13 is by way of transfer of the secured asset. 14. Rule 8 of the Rules provide for sale of immovable secured assets. Sub-rule 6 of Rule 8 provides that sale of secured asset shall be effected by either inviting tenders from the public or by hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall not be sold in the auction. However, if the borrower failed to tender the dues before the date fixed for sale, the authorized officer will proceed further in the matter. However, the right of the borrower to redeem the property thereafter is not extinguished. He has still the right to redeem the property but at any time before the date fixed for transfer of the property. So long as the sale is not confirmed by the secured creditor as required under the Rules, the right of the borrower to redeem the property under the second contingency is not taken away. He has a right to redeem the property before the confirmation of the sale by the secured creditor under the Rules. Mere sale is not enough to conclude that the property is transferred to the purchaser. From a reading of Clause (a) of sub-section (4) of Section 13, it is clear that the secured creditor has the right to transfer the secured asset by way of lease, assignment or sale. Therefore, sale will be complete by transfer of property either by confirmation of sale by written proceedings of the 'secured creditor' or by issuance of a sale certificate by the 'authorized officer' as required under sub-rule (6) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary, natural and grammatical meaning. If, however, such a reading leads to absurdity and the words are susceptible of another meaning the Court may adopt the same. But if no such alternative construction is possible, the Court must adopt the ordinary rule of literal interpretation. The ordinary, natural and grammatical meaning of the phrase 'at any time before the date fixed' employed in sub-section (8) of Section 13 of the Act is clear that the Legislature has intended that the phrase has application both for 'sale' and 'transfer' and not exclusively for 'sale' only and application of the phrase to the exclusion of 'transfer' is contrary to the intendment of the Legislature. From the language employed in the section, it is not possible to read down any other alternative construction. 17. Assuming for argument sake that the phrase 'at any time before the date fixed' is relatable only to 'sale' and not 'transfer' even then it cannot be said that property would get transferred to the purchaser automatically after the bid was accepted by the authorized officer. The sale will be confirmed and the property would get ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... national Webster Comprehensive Dictionary Deluxe Encyclopedic 2003 Edn. Page 1333 the word 'transfer' means: To make over possession of to another, the act of transferring or the state of being transferred, a delivery of title or property to another. Ramanath Aiyar's Law Lexicon, 1997 Edn. At page 1911 defines transfer: To convey, to make over from one to another, to remove. Document whereby one person transfers property, securities, or rights to another. Transfer, with its grammatical variations and cognate expressions, means to make an alienation inter vivos. 20. From the above definitions and dictionary meanings of 'sale' and 'transfer', it is seen that 'sale' is not complete unless the property for which price was paid is transferred to the buyer by a written proceeding. In the instant case, though the bid of the auction purchaser was accepted by the authorized officer on 31.3.2012, the payments made on 13.4.2012 were received subject to the outcome of the proceedings before the DRT, Visakhapatnam. While accepting the Demand Drafts for ₹ 11.70 cores dated 12.4.2012 and ₹ 1.80 crores dated 13.4.2012 sent by the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o handover the delivery and possession of the property. Unless these formalities are complete, though the sale may be confirmed by the authorized officer, the property does not vest in the auction purchaser. Property would get transferred only after sale was confirmed by the secured creditor and not by the authorized officer. In the present case, the secured creditor has not confirmed the sale and the cheques issued on 13.4.2012 were received subject to the outcome of the proceedings pending before the DRT. Further, in the document Details of auction participants dated 31.3.2012 signed by the Authorized Officers and the authorized signatory of the appellant, it is mentioned as follows: The sale in favour of the highest bidder shall be confirmed on payment of the entire bid amount of ₹ 1800.00 lakhs (Rupees Eighteen crores only) and the Bank reserves its right to cancel/modify the sale before confirmation of the same. 21. Therefore, it is clear that though the bid amount was accepted by the authorized officer, it does not amount to confirmation by the secured creditor and the bank has the right to cancel/modify the sale before confirmation of the same. The auction pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate is merely the evidence of such title. It is well settled that when an auction-purchaser derives title on confirmation of sale in his favour and a sale certificate is issued evidencing such sale and title, no other deed for transfer from the court is contemplated or required. In this case, the sale certificate itself was registered, though such a sale certificate issued by a court or an officer authorized by the court does not require registration. From the above, it is clear that an auction purchaser derives title on confirmation of sale only. Though the above case arises under the provisions of Transfer of Property Act and deals with lease, the proposition can be made applicable to the cases arising under the Securitization Act as well. Even according to the respondent-banks, a sale certificate is not required to be registered nor were the banks required to execute a registered sale deed after the sale was confirmed by the banks and merely a sale certificate was required to be issued. It is the appellant who is insisting for registration of a sale deed. In the case before the Supreme Court, the sale was confirmed by the Court in favour of the purchaser and a sale certifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... great respect to the learned Judges, the Court has not correctly appreciated true implication of sub-section (8) of Section 13 of the Act. Further, in Manickam's case, a sale certificate was already issued and as such the Court has held that sale becomes complete and the property vests in the auction purchaser. In the instant case, the secured creditor has neither confirmed the sale nor issued any sale certificate. Therefore, the said decision has no application to the facts of the case. 25. In Manoj D. Kapasi's case following the decision of the Supreme Court in Mardia Chemicals Ltd., it was held that the right of redemption was a statutory right available to the borrower till the transfer took place. In Mardia Chemicals Ltd.'s case, the Supreme Court following the decision in Narandas case held that the mortgagor has a right to redeem until the sale was complete by registration in accordance with the provisions of the Registration Act. No doubt the requirement of registration is not necessary for the properties auctioned under the provisions of the Act as held by the Hon'ble Supreme Court in B. Arvind Kumar's case. But, in the instant case, the sale was not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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