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TMI Blog2020 (9) TMI 1202X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Respondent no. 3 Alucom Penals Pvt. Ltd. and subsequently on 30/12/2019, sale certificate was issued, therefore, the sale become absolute on the day, when his bid was accepted and sale confirmation advice was issued, i.e. on 24/10/2019 and title is vested with the purchaser and issuance of sale certificate on 30/12/2019 is merely an evidence of that title and the registration of the sale certificate is merely the formality, which is required under the Registration Act. Unlike the transfer of the immovable property made under the TP Act, the sale under the public auction is completed, the moment the bid is accepted and sale confirmation advice is issued. The contention of the Ld. Counsel for petitioner the sale can only be completed when the registration of the sale certificate is made, is not liable to be accepted. Section 52 T.P. Act - HELD THAT:- Although this point has not been raised by the Ld. Counsel for petitioner in course of his arguments but since it is stated in the application, therefore, we wanted to make comments on this issue also. It is the settled principle of law that the transactions made during the pendency of the suit or proceeding under Section 52 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order passed by this Adjudicating Authority thus, the transaction is null and void and liable to be cancelled. 6. Further, the sale certificate was issued by the Recovery officer under the SARFAESI Act do not amount to transfer of property rather evidencing the factum of statutory sale and the actual transfer of property is deemed to be effected only when registration of that sale certificate is done under the Indian Registration Act. 7. Further, Hon'ble Supreme Court in Civil Appeal Nos. 8800-8801 of 2019 decided on 18.11.2019 in the matter of Mr. Anand Rao Lorada, Resolution Professional Vs. M/s. Varsha Fabrics Pvt. Ltd. held In view of the provisions of the IBC, the High Court ought not to have proceeded with the auction of the property of the Corporate Debtor - Respondent No. 4 herein, once the proceedings under the IBC had commenced, and an Order declaring moratorium was passed by the NCLT. 8. Further, the applicant being the MSME wanted to submit the Resolution Plan and the CoC has already given the approval vide its 2nd CoC meeting held on 26.05.2020 and if the sale is not cancelled then it will be prejudiced to the interest of the applicant. 9. Respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the sale certificate under Rule 9(6) was issued by the Authorized Officer of the Respondent Bank under the SARFAESI Act on 30.12.2019 and thereafter, the sale certificate was registered on 15.02.2020. 13. Further, the Corporate Debtor had instituted SA No. 211/2019 before the Debts Recovery Tribunal-II against the e-auction sale notice issued by the respondent bank vide order dated 24.10.2019 and the DRT directed that the sale shall be subject to Section 52 of the TP Act and no stay was granted by the DRT. 14. Further, the sale of the subject property stood completed concluded much before the initiation of CIRP against the Corporate Debtor. 15. Further, it is settled legal position that the effect of Section 52 is not render transfers effected during the pendency of a suit by a party to the suit void but only to render such transfers subservient to the rights of the parties to such suit as may be eventually determined in the suit. 16. The facts mentioned in the reply filed by the Successful Bidder i.e. M/s. Alupan Composite Pvt. Ltd. as R-3 in short is that as per Section 18 of the IBC, 2016, on commencement of a CIRP, all assets of the Corporate Debtor including asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther, right of redemption under Section 60 of the TP Act will be available to the borrower before it is foreclosed or estate is sold. 21. Apart from the aforesaid facts, this respondent has also stated the other facts, which have already been stated by the State Bank of India as Respondent no. 1 in its reply. 22. The petitioner has also filed the rejoinder to the reply filed by the respondents and the facts mentioned in the rejoinder in short is that the sale is deemed to be completed once the registration of the deed/sale letter is effected under the Registration Act as required under Section 17 of the Indian Registration Act, which dealt with the provision of compulsory registration of documents. 23. Further, the Authorized Officer of the State Bank of India is not a civil or revenue officer, so, the sale letter issued by the SBI is not covered under the exemption provided under Section 17(2)(xii) of the Registration Act, 1908, so, the sale certificate is required to be compulsory registered under the Indian Registration Act. 24. Further, in the case of M/s. P M Associates Vs. IFCI Limited reported as MANU/TN/1638/2013 : 2013 (5) CTC 337 Hon'ble Madras High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State of Punjab and Ors. reported in, which is based upon the decision of Hon'ble Supreme Court reported in (2007) 5 Supreme Court Cases 745 B. Arvind Kumar Vs. Govt. of India and others and Hon'ble Madras High Court in M/s. P M Associates vs. IFCI Limited (2013(5) CTC 337) and on this ground alone, he further submitted to cancel the sale certificate registered by the SBI in favour of R-3 M/s. Alucom Panels Pvt. Ltd. 29. On the other hand, Ld. Counsel for R-1/SBI, in course of arguments submitted that the Corporate Debtor earlier entered into One Time Settlement with the bank and when Corporate Debtor fails to pay the amount in terms of OTS then vide letter dated 17.08.2019, Corporate debtor offered the voluntary physical possession of the property in question i.e. Haridwar Factory. He further submitted that the respondent has enclosed that letter at page 32 of its reply as Annexure R-3. He further submitted that in terms of that letter, the respondent took the possession of that property and proceeded under the SARFAESI Act, thereafter, e-auction was conducted and the Respondent no. 3 M/s. Alucom Panels Pvt. Ltd. being the successful bidder issued a Sale Confirmation Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt reported in (2007) 5 Supreme Court Cases 745 B. Arvind Kumar Vs. Govt. of India and others upon which the petitioner's counsel also placed reliance, held that the certificate of sale granted to any purchaser of any property sold by public auction by civil or revenue officer does not fall under the category of non-testamentary documents which require registration under Sub Section 17(1)(b) and (c) of the Registration Act. He further submitted that in the said judgment, the Hon'ble Supreme Court also held that when a property is sold by public auction in pursuance of the order of the court and the bid is accepted and the sale is confirmed by the court in favour of the purchaser, the sale becomes absolute and the title vests in the purchaser and the sale certificate is issued to the purchaser only when the sale becomes absolute and the sale certificate is merely the evidence of such title. He further submitted that therefore, the contention the Ld. Counsel of petitioner, on the date of registration of sale certificate, the sale becomes absolute in the case of public auction is not liable to be accepted. He further submitted that the Hon'ble Supreme Court in the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e final only on the registration of the sale certificate? 36. Since it is admitted fact that the public auction was advertised and thereafter, the e-auction was conducted, in which, the Respondent -3 was declared successful bidder and State Bank of India had issued sale certificate after receiving the auction amount under Rule 9 of the Security Interest (Enforcement) Rules 2002, therefore, at this juncture, we would like to consider this submission of respondent no. 1/SBI, whether the petitioner had written any letter to the State Bank of India as stated by the SBI in its reply, by which, the petitioner made a request to the SBI to take over the possession of the said property. We have gone through the reply filed by the SBI and we find that at page 32 of the reply filed by the SBI, the SBI has enclosed the letter written by Mr. Nitin Garg, who is the petitioner before us and the letter was addressed to the AGM, SBI, Assets Management Branch-II, SBI House, Karol Bagh, New Delhi and the subject of the letter was voluntary declaration for taking over physical possession on Haridwar Factory by the Bank and this letter is annexed as Annexure R-3 of the reply filed by the SBI, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance that is decision of Hon'ble Punjab and Haryana High Court and we find that, this decision is based upon the two decisions i.e. Hon'ble Madras High Court passed in M/s. P M Associates vs. IFCI Limited (2013 : 2013 (5) CTC 337) Hon'ble Supreme Court reported in (2007) 5 Supreme Court Cases 745 B. Arvind Kumar Vs. Govt. of India and others. Therefore, we would like to refer the decision of M/s. P M Associates vs. IFCI Limited (2013(5) CTC 337) and decision of (2007) 5 Supreme Court Cases 745 B. Arvind Kumar Vs. Govt. of India and others and we have gone through these decisions and we find, Hon'ble Supreme Court in the judgment reported in MANU/SC/2834/2007 : (2007) 5 Supreme Court Cases 745 B. Arvind Kumar Vs. Govt. of India and others in para 12 held that The sale certificate declared Bhowrilal to be the owner of the leasehold right in respect of the suit property. When a property is sold by public auction in pursuance of an order of the court and the bid is accepted and the sale is confirmed by the court in favour of the purchaser, the sale becomes absolute and te title vests in the purchaser. A sale certificate is issued to the purchaser only when the sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ules, 2002 (in short the Rules ) is a complete and absolute sale for the purpose of SARFAESI Act or whether the sale would become final only on the registration of the sale certificate? (ii) Whether the action of the second respondent in not accepting the amounts paid by the borrowers and not cancelling the sale certificate before the registration of the sale is in derogation of Section 60 of the Transfer of Property Act, in view of the Section 37 of SARFAESI Act? and (iii) Whether Section 35 of the SARFAESI Act has the effect of overriding Section 37 of the SARFAESI Act? The first point formulated by the Hon'ble Madras High Court in this decision is the same, which has been formulated by us Whether the sale of the secured asset in public auction as per Section 13(4) of SARFAESI Act, which ended in issuance of a sale certificate as per Rule 9(7) of the Security Interest (Enforcement) Rules, 2002 is a complete and absolute sale for the purpose of SARFAESI Act or whether the sale would become final only on the registration of the sale certificate and Hon'ble Madras High Court in para 10.15 after placing the reliance upon the decision of Hon'ble Supreme Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red assets of the borrowers for sale in public auction, and, in view of the default in repayment of the loan, confirmed the sale in favour of the highest bidder, the appellant herein and issued the sale certificate on 6-1-2006. 10.17 The ratio laid down 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, squarely applies to the case on hand and we, therefore, have no incertitude to hold that the sale which took place on 19-12-2005 has become final when it is confirmed in favour of the auction purchaser and the auction purchaser is vested with rights in relation to the property purchased in auction on issuance 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale certificate in relation to the auction conducted under the 2002 Act is essential. Similarly, it is not necessary to examine other grounds urged by the Appellants, in light of our conclusion that the Appellants have failed to make a valid and legal tender to the Respondent bank before the issue of sale certificate on 6th January, 2006, muchless registration thereof on 18th September, 2007. 41. On the basis of aforesaid discussions, we find that the decision upon which the petitioner has placed reliance is based upon the decisions, which we have discussed in afore mentioned paras and we find that decision upon which the petitioner has placed reliance i.e. the decision of Hon'ble Punjab and Haryana High Court in that case matter was regarding the registration of sale certificate issued by the DRTA on the basis of circular issued by the Stamp and Registration Branch of Punjab Government vide Memo no. 24/151/2012-ST-1/8905-26 dt. 24/07/14 and question when sale become absolute was not before the Hon'ble Punjab Harayana High Court therefore, the Hon'ble Punjab and Haryana High Court has not decided the issue when the sale has become absolute rather Hon'ble Mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d only after the registration rather in para 33 Hon'ble Madras High Court held that Therefore, it is clear that an auction purchaser derives title on confirmation of sale in his favour and the issuance of certificate is only an evidence to prove that sale was confirmed in his favour convening the title . 45. At this juncture, we would also like to refer the decision of Hon'ble Supreme Court Transcore v. UOI (2008) 1 SCC 125 in which Hon'ble Supreme Court in para 74 of the judgment held that Keeping the above conceptual aspect in mind, we find that Section 13(4) of the NPA Act proceeds on the basis that the borrower, who is under liability, has failed to discharge his liability within the period prescribed under Section 13(2), which enables the secured creditor to take recourse to one of the measures, namely, taking possession of the secured asset including the right to transfer by way of lease, assignment or sale for realising the secured assets. Section 13(4-A) refers to the word possession' simpliciter. There is no dichotomy in sub-section (4A) as pleaded on behalf of the borrowers. Under Rule 8 of the 2002 Rules, the authorised officer is empowered to take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid factual position of law, when we shall consider the case in hand, then we find in this case, auction was conducted on 24/10/2019 and on the same day, Sale confirmation Advice was issued in favour of Respondent no. 3 Alucom Penals Pvt. Ltd. and subsequently on 30/12/2019, sale certificate was issued, therefore, the sale become absolute on the day, when his bid was accepted and sale confirmation advice was issued, i.e. on 24/10/2019 and title is vested with the purchaser and issuance of sale certificate on 30/12/2019 is merely an evidence of that title and the registration of the sale certificate is merely the formality, which is required under the Registration Act. Unlike the transfer of the immovable property made under the TP Act, the sale under the public auction is completed, the moment the bid is accepted and sale confirmation advice is issued. Hence, the contention of the Ld. Counsel for petitioner the sale can only be completed when the registration of the sale certificate is made, for the reasons discussed above and in view of decisions, which we have referred in above mentioned paras, not liable to be accepted. Accordingly, the point formulated by us is decided i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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