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TMI Blog2007 (8) TMI 782X X X X Extracts X X X X X X X X Extracts X X X X ..... tificate? - The crux of the contention of the learned senior counsel for the appellant is that after issuance of sale certificate, the borrowers, who allowed their property being sold in public auction, cannot claim the right of redemption placing reliance u/s 60 of the Transfer of Property Act, which right they should have exercised before the initiation of proceedings or before the date fixed for sale. The learned single Judge, agreeing with the argument advanced by the learned Counsel for the borrowers that the right of redemption which is embodied in Section 60 of the Transfer of Property Act is available to the mortgagor, unless it has been extinguished by the act of parties and until the sale is complete by registration, and that the mortgagor does not lose their right of redemption, came to the conclusion that the sale takes complete shape only after it gets registered and it does not come to end by issuance of a sale certificate. But, after considering the relevant provisions in the Registration Act, 1908, we are not in agreement with the conclusion arrived by the learned single Judge in allowing the writ petitions. In this case, the authorised officer of the secured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing the decision of the Division Bench of this Court in Arumugham, S. v. C.K. Venugopal Chetty [ 1986 (8) TMI 450 - MADRAS HIGH COURT] and the Supreme Court in B. Arvind Kumar v. Government of India, is that the sale in this case has become absolute and complete by the issuance of sale certificate on 6-1-2006. Further, Section 17(2)(xii) of the Registration Act, 1908 does not require registration of a sale certificate granted to any purchaser of any property sold in public auction by a civil or revenue officer and it is the finding of the Supreme Court in B. Arvind Kumar v. Government of India, referred supra, that the sale certificate issued by a civil or revenue officer in respect of a property sold in public auction does not fall under the category of non-testamentary documents which require registration under Sub-sections (b) and (c) of Section 17(1) of the Registration Act, 1908. The right to redeem the mortgage, as provided in Section 60 of the Transfer of Property Act, is, of course, a very valuable right possessed by the mortgagor. At the same time, such a right to redeem the mortgage can be exercised before it is foreclosed, or the estate is sold. It has been held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly implied to give overriding effect to certain provisions over some contrary provisions that may be found either in the same enactment or some other enactment, that is to say, to avoid the operation of all contrary provisions, Union of India v. G.M. Kokil [ 2006 (11) TMI 349 - SUPREME COURT] . For the reasons point (iii) is answered in affirmative. Resultantly, these appeals are allowed and the order of the learned single Judge made in W.P. is set aside and the writ petitions are dismissed. - P.D. Dinakaran and P.R. Shivakumar For the Appellant: AR. L. Sundaresan, Sr. Counsel for AL. Ganthimathi, Advs. For the Respondents: R.S. Ramanathan and F.B. Benjamin George, Advs. JUDGMENT P.D. Dinakaran, J. 1. These writ appeals have been preferred by the appellant against the common order dated 9-3-2007 of the learned single Judge made in W.P. (MD) Nos. 634 and 635 of 2006. 2. Brief facts, sans unnecessary details, leading to the filing of these writ appeals are stated herein under : 2.1. The first respondent in both the writ appeals, who have obtained a loan of ₹ 10,00,000/- each from the second respondent/Bank, are hereinafter referred to as borrowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Tribunal II, Chennai, by an order dated 10-1-2006, recording the submission of the second respondent/Bank that the auction-purchaser had paid the entire sale consideration and sale certificate was issued to him on 6-1-2006, dismissed the applications of the borrowers with liberty to pursue their remedies. 2.7 The borrowers, thereafter, sent a lawyer's notice dated 13-1-2006 by enclosing a Demand Draft for a sum of ₹ 25,00,000/- drawn in favour of the second respondent/Bank. The second respondent Bank, after receiving the demand draft, without setting aside the sale, sent another notice dated 18-1-2006 to the borrowers, directing them to remove the articles found in the secured assets within three days. 2.8 Contending that when the borrowers had paid the entire loan amount, the second respondent/Bank cannot proceed with taking of possession of the secured assets, the borrowers filed W.P. (MD) Nos. 634 and 635 of 2006 for issue of Writ of Certiorarified mandamus to call for the records of the respondent in respect of the auction of their properties held in pursuance to the auction notice dated 14-11-2005, to quash the same and to direct the second and third responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the sale as per the provisions contained in Sub-section (8) of Section 13 of the SARFAESI Act, it is not open to them to seek for cancellation or setting aside of the sale certificates issued to the appellant/auction-purchaser on 6-1-2006 by approaching the secured creditor, who has no power under the Act to cancel such sale certificate already issued, at a belated stage and, therefore, the prayer of the borrowers is liable to be rejected. 4.4 It is the further contention of the learned senior counsel that the provision contained in Section 13(8) of the SARFAESI Act is not in derogation of Section 60 of the Transfer of Property Act as the validity of the said provision of SARFAESI Act has been upheld by the Supreme Court in the decision in Mardia Chemicals Limited v. Union of India AIR2004SC2371 and therefore, if the contention of the borrowers is accepted, it would defeat the entire object for which SARFAESI Act was enacted by the Parliament. Argued that if the sale certificates issued to the bona fide purchasers in the public auction as per the provisions of the law are sought to be cancelled at a belated stage, it would cause great prejudice to those who have invested h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by the Bank or financial institutions to the asset reconstruction company and no further steps shall be taken in that regard. Learned Counsel for the first respondent took a firm stand that the words employed in Section 13(8) of the SARFAESI Act that ...for sale or transfer... and ...sold or transfer... indicate that even though auction was over and sale certificate was Issued, till the transfer of possession is effected by registration, the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered has to be accepted by the second respondent/Bank. But, even though the first respondent tendered three cheques for a sum of ₹ 25,21,246/- on 2-1-2006, the second respondent/Bank returned the cheques and, therefore, the sale in favour of the appellant herein cannot be contended as valid. 5.3 The learned Counsel for the borrowers further argued that the right of redemption which is embodied in Section 60 of the Transfer of Property Act is available to the mortgagor unless it has been extinguished by the act of the parties. It cannot be he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time being in force and by virtue of Section 13(4) read with Section 13(6), the mortgaged assets shall vest with the Bank free from all encumbrances. He has also placed reliance upon the decision reported in Transcore v. Union of India AIR2007SC712 . 6.3 The learned Counsel for respondents 2 and 3 has submitted that the borrowers, challenging the possessing notice dated 9-2-2005, by invoking Section 17 of the SARFAESI Act filed S.A. Nos. 21 and 22 of 2005 before the Debts Recovery Tribunal-II, Chennai which were subsequently dismissed on 28-9-2005. The auction was held on 19-12-2005, in which the appellant has offered highest amount of ₹ 42,51,000/-, which was accepted and he paid 25% and on 4-1-2006, he paid the entire balance amount and on 6-1-2006, sale certificate was issued to him. He added that the borrowers sent three cheques for a sum of ₹ 25,27,446/- on 2-1-2006. As the mortgaged property was sold in the auction and the highest bidder paid 25% of the amount, the second respondent/Bank returned the cheques to the borrowers. With regard to the Demand Draft for a sum of ₹ 25 lakhs sent by the borrowers along with a lawyer's notice dated 13-1-2006, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossession of securities, sell them and thereby reduce non-performing assets by adopting measures for recovery and reconstruction. The Act further provides for setting up of asset reconstruction companies which are empowered to take possession of secured assets of the borrower including the right to transfer by way of lease, assignment or sale. The said Act also empowers the said asset reconstruction companies to take over the management of the business of the borrower. 9.4. The Constitutional validity of SARFAESI Act has been upheld in the case of Mardia Chemicals Limited v. Union of India AIR2004SC2371 . In the said judgment, the Supreme Court has held that in cases where the Secured Creditor has taken action under Section 13(4), it would be open to any person, including the borrower to file an appeal under Section 17 of the Act. 9.5 Taking note of the fact that liquidity of finances and flow of money is essential for any healthy and growth oriented economy, that law should not be in derogation of the rights which are guaranteed to the people under the Constitution, that the procedure should be fair, reasonable and valid, and keeping in mind the above owed object of the SA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or before 19-12-2005, viz., the date fixed for sale. The borrowers approached the secured creditor, by way of three cheques to the value of 25,21, 446/- only on 2-1-2006, i.e. after the sale was confirmed and therefore, got concluded by the authorised officer in favour of the appellant, who is the highest bidder and therefore, the secured creditor rightly returned those cheques on 4-1-2006 stating that the sale was already over and sale certificate alone was to be issued, which would be done shortly. Subsequently, the sale certificate came to be issued by the third respondent-authorised officer on 6-1-2006 as per Sub-rule (7) of Rule 9 of the Rules. 10.5 When the matter stood thus, on 13-1-2006, the borrowers sent a letter dated 13-1-2006 to the authorised officer, enclosing a demand draft for ₹ 25,00,000/-drawn in favour of the second respondent/ Bank and requested the authorised officer to set aside the sale certificate. However, the authorised officer refused to accept the demand drafts and returned the same stating that sale certificate had already been issued and there is no scope for setting aside or cancelling the sale certificate. Thereafter, the borrowers have app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has returned those cheques, in contravention of Sub-section (8) of Section 13 of the Act on the ground that sale was already over and confirmation of the same was to be made shortly, allowed the writ petitions. 10.9 In our considered view, the borrowers should have approached the secured creditor or the authorised officer before the date fixed for sale and not after the sale, as provided under Sub-section (8) of Section 13 of the SARFAESI Act. As discussed earlier, only if the borrowers approach the secured creditor or the authorised officer before the date fixed for sale or transfer and tender or pay all the dues to the secured creditor, the Section creates a bar on the secured creditor or authorised officer to proceed further with the proposed sale or transfer. In this case, admittedly, the date fixed for the sale was 19-12-2005. But, even according to the version of the borrowers, they approached the secured creditor only on 2-1-2006. In such circumstances, the contention of the learned Counsel for the borrowers is without any basis and contrary to the provisions contained in Sub-section (8) of Section 13 of the Act. 10.10 The contention of the learned senior counsel app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not require registration under Section 17 of the Registration Act. The Division Bench has held as follows: Under Ex. D-7, the Court permitted the Official Assignee to transfer to the guarantor the assets of the insolvent that are in excess. Being a transfer by order of Court, the document does not require registration under Section 54 of the Transfer of Property Act, since Section 2(d) of the Transfer of Property Act says that nothing in the Act (except Section 57 and Chapter IV) applies to transfers by orders of Court. The document in question does not require registration and there was a valid conveyance of the 2nd defendant's 1/4th share to G. 10.15 When the effect and validity of the sale certificate issued to a purchaser of a property sold in public auction came up for consideration before the Supreme Court in the recent decision in B. Arvind Kumar v. Government of India , the Supreme Court, after referring to Section 17(2) (xii) of the Registration Act, held that when a property is sold in public auction in pursuance of an order of the Court and the bid is accepted and the Court confirms the sale in favour of the purchaser, the sale becomes absolute and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the sale certificate and he has become the absolute owner of the property. Further, as held by the Division Bench of this Court in Arumugham, S. v. C.K. Venugopal Chetty and the Supreme Court in B. Arvind Kumar v. Government of India, referred supra, the sale certificate issued in favour of the appellant does not require any registration in view of Section 17(2)(xii) of the Registration Act as the same has been granted pursuant to the sale held in public auction by the authorised officer under SARFAESI Act. 10.18 The finding of the learned single Judge that the sale is not complete without registration of sale certificate, therefore, is not sustainable in law and the same is liable to be set aside. 10.19 If the argument of the borrowers that even after the issuance of the sale certificate, prior to registration, they are entitled to redeem the property is accepted, it would make the provisions of the SARFAESI Act redundant and the very object of the SARFAESI Act enabling the Banks and Financial Institutions to realise long term assets, manage problems of liquidity, asset liability mismatch and to improve recovery of debts by exercising powers to take possession of securi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention of the learned Counsel for the borrowers. 11.5.1 Firstly, as held by us, while answering point (i) the sale in this case has become absolute and complete on the date when the sale was confirmed on the appellant/auction purchaser and he is vested with all the rights in relation to the property purchased by him in the public auction on issuance of sale certificate on 6-1-2006, i.e., prior to the date on which the borrowers have approached the second respondent for repayment, contrary to the provisions of Section 13(8) of the SARFAESI Act. 11.5.2 Secondly, the sale certificate issued in this case does not require any registration as per Section 17(2)(xii) of the Registration Act, 1908 and our said view is fortified with the decisions of the Division Bench of this Court in Arumugham, S. v. C. K. Venugopal Chetty and the Supreme Court in B. Arvind Kumar v. Government of India, referred supra. 11.5.3.1 Thirdly, it is true that the borrowers have the right of redemption as provided under Section 60 of the Transfer of Property Act, 1882, in view of Section 37 of SARFAESI Act and to substantiate the said stand, the learned Counsel for the borrowers relies on the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant. 11.6 We, accordingly, find no irregularity or illegality in the procedure followed by respondents 2 and 3. 12.1 Point (iii): Whether Section 35 of the SARFAESI Act has the effect of overriding Section 37 of the SARFAESI Act? 12.2 A comparative study of Sections 35 and 37 of the SARFAESI Act, which read as under, is indispensable to decide this point: Section 35.--The provisions of this Act to override other laws.--The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. Section 37--Application of other laws not barred.--The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of the Companies Act, 1956 (1 of 1956), the Securities Contracts (Regulation) Act. 1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15 of 1992). the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) or any other law for the time being in force. 12.3 The Apex Court has also upheld the validity of the SARFAESI Act in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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