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TMI Blog2013 (8) TMI 1180X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 executed by the respondents in their favour in respect of the movable and immovable properties and to effect changes in the revenue records to record the ownership of the properties sold to them and to hand over physical possession of the same under the SARFAESI Act. 3. The petitioner filed the writ petition in W.P.No.4088 of 2012 to issue a writ of certiorarified mandamus to call for the records in proceedings/letter dated 08.02.2012 on the file of the second respondent and to quash the same as ultra vires, unconstitutional and contrary to the provisions of the SARFAESI Act and Rule 7(2) of the Rules thereunder and against the principles of natural justice and consequently to direct the respondents 1 & 2 to hand over physical possession of the properties, movable and immovable as well as the Sale Certificate dated 16.09.2011 to them in respect of the entire properties and directing the respondents 1 & 2 not to allow anyone including the third respondent who claims to have clinched a "Settlement" with the respondents, not to deal with the properties or to carry on operation or business in the said properties. 4. Since the issue involved in both the writ petitions are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hased properties. The respondents 1 & 2 are purposefully avoiding to hand over physical possession of the properties to the petitioner with a view to enable the third respondent to initiate several proceedings against them. (iv) But curiously suppressing the crucial fact that the petitioner has become the lawful owner of the entire properties under the Sale Certificate dated 16.09.2011, the respondents 1 & 2 as well as the third respondent have not disclosed or declared the factum of issuance of Sale Certificate dated 16.09.2011 executed by the respondents 1 & 2 in favour of the petitioner. The suppression of the said fact is evident from the affidavits filed in support of the writ petitions in W.P.Nos.21820 and 22837 of 2011 as well as in the petition and typed set of papers filed in S.L.P.No.27587 of 2011 by the third respondent before the Hon'ble Supreme Court. Even the respondents 1 & 2, who are the statutory authorities have suppressed to bring the said fact before this Court as well as before the Hon'ble Supreme Court. The respondents 1 & 2 have allowed the third respondent to carry on the business in the properties of the petitioner and the third respondent committ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, especially when the respondents 1 & 2 have no power under the SARFAESI Act either unilaterally or otherwise to cancel the Sale Certificate dated 16.09.2011. In view of the judgment of the Hon'ble Supreme Court reported in (2004) 4 Supreme Court Cases 311 : AIR 2004 SC 2371 (Mardia Chemicals Ltd. and others Vs. Union of India and others), the entire provisions of the SARFAESI Act have been upheld and there is no provision under the SARFAESI Act enabling or empowering the Authorised Officer to cancel the Sale Certificate issued in favour of the auction purchaser. When the registration of the Sale Certificate issued to the petitioner under the SARFAESI Act is not mandatory or compulsory, the sale concluded by the Authorised Officer under the SARFAESI Act in favour of the petitioner has become absolute and the petitioner has become the prima facie title holder of the properties and the Sale Certificate dated 16.09.2011 issued in favour of the petitioner has become an evidence as to the title acquired by the petitioner. (vii) Further, according to the petitioner, the impugned proceedings dated 08.02.2012 cancelling the Sale Certificate dated 16.09.2011 issued by the second r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of Special Leave Petition filed by the third respondent/borrower wherein the Hon'ble Supreme Court has already issued notice. On 20.10.2009, the Debt Recovery Tribunal, Delhi decreed the Original Application filed by the respondent and the same was challenged before the Debt Recovery Appellate Tribunal by way of appeals both by the first respondent/Financial Institution and the third respondent/borrower. (iii) The order of the Debt Recovery Appellate Tribunal was further challenged by way of writ petition before the Hon'ble High Court of Delhi where the writ petition filed by the third respondent/borrower was withdrawn with liberty to file review petition. The said review petition is still pending before the Debt Recovery Appellate Tribunal, Delhi. By order dated 06.09.2010, the Debt Recovery Appellate Tribunal, Delhi directed the third respondent to pay the decreetal amount along with interest at the rate of 16% per annum effectively 10.03% per annum with quarterly rests. (iv) According to the respondent, the following is the list of litigation pursued by them and against the third respondent/borrower: 1. Original Application No.277 of 2000. 2 .SA No.189 of 2009. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mounts become available for further investment which would commercially benefit the first respondent/Financial Institution. In any event, the entire auction amount was neither utilised nor appropriated by the first respondent, since the matter was sub-judice before this Court. The said amount was kept in interest-bearing-no-lien account and subsequent to the settlement with the third respondent, the entire amount along with the interest has been returned back to the petitioner. The first respondent had tried its level best to conclude the sale and in that regard, not only had approached the Metropolitan Magistrate by filing an application under Section 14 of the SARFAESI Act, but also tried to hand over the physical possession to the petitioner. However, in obedience of the orders passed by this Court and in view of the pendency of the issues raised by the third respondent before this Court, no further actions were taken. The first respondent had duly disclosed the factum of issuance of Sale Certificate in favour of the petitioner in the counter affidavit filed by them in W.P.No.21820 of 2011 on 17.10.2011. In these circumstances, the first respondent prayed for dismissal of the wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the third respondent to deposit a sum of Rs.1.00 crore. The said amount was deposited on 08.04.2010. The Debt Recovery Appellate Tribunal by its order dated 09.03.2011 set aside the orders of Debt Recovery Tribunal-I, Chennai dated 05.03.2010. The first respondent filed a writ petition in W.P.No.6710 of 2011 before this Court and this Court passed an interim order on 17.03.2011 giving certain direction to the parties. The writ petition was finally disposed of on 06.09.2011 setting aside the order dated 09.03.2011 passed by the Debt Recovery Appellate Tribunal, Chennai. By these proceedings in Debt Recovery Appellate Tribunal and before this Court, no action was taken by the respondents 1 & 2 pursuant to the tender notice dated 25.03.2010. (iii) As a matter of fact, the respondents issued a sale notice on 25.03.2010 during the pendency of the appeal proceedings before the Debt Recovery Appellate Tribunal, Chennai accepting the order of Debt Recovery Tribunal-I, Chennai dated 05.03.2010. In the meanwhile, the Debt Recovery Tribunal-I, New Delhi by its order dated 23.10.2009 passed a decree quantifying the debt due by the third respondent and directing the third respondent to pay R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d another writ petition in W.P.No.22837 of 2011. The Hon'ble Supreme Court permitted the third respondent to deposit the balance dues with the first respondent in terms of decree dated 23.10.2009 passed by the Debt Recovery Tribunal, New Delhi as modified by the Debt Recovery Appellate Tribunal, New Delhi by its order dated 06.08.2010 after adjusting the amount deposited by the third respondent pursuant to the orders of the Hon'ble Supreme Court. The third respondent deposited a total sum of Rs.8,80,00,000/- and thereafter, approached the first respondent expressing its intention to pay the balance, if any, as per the first respondent's calculation. (vii) Thereafter, by letter dated 03.02.2012, the first respondent informed that a sum of Rs.3,72,00,000/- was payable towards the full and final settlement of dues and requested the third respondent to pay the same on or before 06.02.2012. In terms of the said letter, the third respondent remitted the said amount of Rs.3,72,00,000/- totalling a sum of Rs.12,50,00,000/- towards full and final settlement of all dues to the first respondent. The first respondent had also handed over a copy of the letter dated 08.02.2012 addr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng with the tender document were not based on any inventory and were taken only from the valuation done in the year 2006. The petitioner lodged a false police complaint against the third respondent. The Inspector of Police filed a negative final report before the Judicial Magistrate, Uthagamandalam on 02.03.2012, treating the complaint filed by the petitioner as a case of civil nature and referred the same to the Judicial Magistrate, Uthagamandalam as mistake of fact. Since the procedures in the tender document were not followed and no letter of confirmation of the sale was issued in favour of the petitioner in terms of the tender document, issuance of Sale Certificate itself after a period of one year from the date fixed for opening of the tender is void ab initio. (x) Further, the Sale Certificate attracts stamp duty under Article 23 of the Indian Stamp Act and 8% of the market value of the property is liable to be paid for the document. This Hon'ble Court in the judgment reported in 2010 (2) CTC 113 [In Re, The Official Liquidator, High Court, Madras] held that when a Sale Certificate has not been issued by the Civil or Revenue Officer, the exemption under Section 17 (2) ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egistration Act, 1908 specifically provides that a certificate of sale granted to any purchaser of any property sold by a public auction by a Civil or Revenue Officer does not fall under the category of nontestamentary documents which require registration under sub-sections (b) and (c) of Section 17(1) of the said Act. We therefore hold that the High Court committed a serious error in holding that the sale certificate did not convey any right, title or interest to plaintiff's father for want of a registered deed of transfer." (ii) AIR 2008 Madras 108 [K. Chidambara Manickam Vs. Shakeena & Ors.] wherein a Division Bench of this Court relying upon the judgment reported in 2007 5 Supreme Court Cases 745 held that when the sale of secured assets in public auction ended in issuance of Sale Certificate as per Rule 9(7) of Security Interest (Enforcement) Rules, 2002 in favour of the auction purchaser, the sale becomes absolute and title vests in the auction purchaser and such a Sale Certificate does not require registration. Further, the Division Bench held that the right of redemption provided to the borrower under Section 60 of the Transfer of Property Act will be available t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt Cases 193 [Eureka Forbes Limited Vs. Allahabad Bank and others]. In this judgment, the Hon'ble Supreme Court in paragraph nos.76, 77 & 78 held as follows: "76. The legislative object of expeditious recovery of all public dues and due protection of security available with the Bank to ensure prepayments of debts cannot be achieved when the officers/officials of the Bank act in such a callous manner. There is a public duty upon all such officers/officials to act fairly, transparently and with a sense of responsibility to ensure recovery of public dues. Even, an inaction on the part of the public servant can lead to a failure of public duty and can jeopardize the interest of the State or its instrumentality. 77. In our considered opinion, the scheme of the Recovery Act and language of its various provisions imposes an obligation upon the Banks to ensure a proper and expeditious recovery of its dues. In the present case, there is certainly ex facie failure of statutory obligation on the part of the Bank and its officers/officials. In the entire record before us, there is no explanation much less any reasonable explanation as to why effective steps were not taken and wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely because the mortgagor failed to execute the final decree for redemption and the mortgagor can maintain a subsequent suit for redemption once again. Further, the Hon'ble Apex Court held that under Order 34 Rule 5 of the Civil Procedure Code, notwithstanding the confirmation of sale, Rule 5 would still be attracted where appeal against the order of confirmation is pending and till the appeal is finally decided, the sale does not become absolute. (ii) (1977) 3 Supreme Court Cases 247 [Narandas Karsondas Vs. S.A.Kamtam and another] wherein the Hon'ble Apex Court held 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. Further, the Hon'ble Apex Court held that in India it is only on execution of conveyance and registration of transfer of the mortgagor's interest by registered instrument that the mortgagor's right of redemption will be extinguished. The conferment of power to sell without intervention of the Court in a mortgage deed by itself will not deprive the mortgagor of his right to redemption. (iii) (2004) 4 Supreme Court Cases 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Order 34 Rule 5 or Order 21 Rule 92 (1) and Order 21 Rule 90, when an application to deposit the balance mortgage money would be maintainable even after confirmation of sale but during pendency of appeal filed by the judgment debtor against an order passed by an Executing Court rejecting the application for setting aside the sale effected in execution of decree passed in mortgage suit or against an order rejecting the application for restoration of application for setting aside the sale. The Hon'ble Apex Court held that sale is deemed to be absolute not on confirmation of sale but on and from the date of disposal of such appeal. (iii) 2008 (1) CTC 721 [Hanu Reddy Realty India Pvt. Ltd., rep by its Director, Mr.C.Suresh Reddy, New No.18, Bishop Wallers Avenue East, Mylapore, Chennai-600004 and others Vs. Jignesh and others] wherein a Division Bench of this Court held that the Recovery Officer is required to act fairly and in reasonable manner while dealing with the property of defaulters and the Recovery Officer should give sufficient publicity to get better offers and for attracting more purchasers. The power to confirm sale given to Recovery Officer enjoins upon Recovery O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent before the Debt Recovery Appellate Tribunal, New Delhi. The Debt Recovery Appellate Tribunal, New Delhi disposed of the appeals filed by the first respondent as well as the third respondent. The order of the Debt Recovery Appellate Tribunal was challenged by way of two writ petitions before the High Court of Delhi where the third respondent/borrower withdrew the writ petitions with liberty to file a review petition before the Debt Recovery Appellate Tribunal, Delhi. By order dated 06.08.2010 the Debt Recovery Appellate Tribunal, Delhi directed the third respondent to pay the decreetal amount along with the interest at the rate of 16% per annum with quarterly rests. As per the said order, Debt Recovery Appellate Tribunal found that the first respondent/Financial Institution was entitled to a sum of Rs.10,06,36,973/- as on 31.12.2011. 12. According to the third respondent, they sent a communication dated 28.07.2009 requesting the first respondent to accept one time settlement offer of Rs.111.86 lakhs, but the same was refused by the first respondent by their letter dated 13.08.2009, which was received by the third respondent on 20.08.2009. By the time the refusal letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted their bid for a sum of Rs.20,00,10,000/-. 14. The learned counsel appearing for the first respondent submitted that apart from the writ petitioner, the second respondent also received bid from another person. Since, the Debt Recovery Appellate Tribunal, Chennai granted interim injunction on 07.04.2010 restraining the respondents 1 & 2 from proceedings further with SARFAESI action, the tender was not opened on 28.04.2010. Ultimately Debt Recovery Appellate Tribunal, Chennai set aside the order of Debt Recovery Tribunal-I, Chennai dated 05.03.2010 against which the first respondent filed W.P.No.6710 of 2011 and this Court by order dated 06.09.2011 set aside the order of the Debt Recovery Appellate Tribunal, Chennai and allowed the writ petition. 15. According to the learned counsel for the first respondent, after disposal of the writ petition on 06.09.2011, the tenders which were received pursuant to the sale notice dated 25.03.2010 fixing the auction sale on 28.04.2010 were opened on 12.09.2011 and it was found that the petitioner had quoted the highest bid amount of Rs.20,00,10,000/-. Though the learned counsel for the third respondent submitted that the petitioner did n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent also filed another writ petition in W.P.No. 22837 of 2011. 17. On a reading of the counter affidavit filed by the first respondent/Financial Institution, it could be seen in paragraph-9 of the counter affidavit, the first respondent has stated as follows: "I say that the present petition is also not maintainable in view of the fact that the sale of the secured assets has already been concluded as per the provisions of SARFAESI Act, 2002, subsequent to which a Sale Certificate dated 16.09.2011 has been issued in favour of the successful bidder. Copy of the Sale Certificate dated 16.09.2011 is annexed hereto and marked as Annexure-1." Further in the counter affidavit they have stated that the third respondent, who is the defaulting borrower cannot pray for exercise of equitable jurisdiction. Further, also stated that the third respondent is a chronic defaulter, who has not only cheated the creditors, but also successfully dragged the recovery proceedings for more than 20 years. With regard to the OTS proposal of Rs.111.86 lakhs given by the third respondent in their counter, in W.P. No. 21820 of 2011, the first respondent has stated that since the proposal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f in terms of the said prayer." 18. The learned senior counsel appearing for the respondent submitted that as per the directions of the Hon'ble Supreme Court, the third respondent had deposited a sum of Rs.8,80,00,000/-. It is brought to the notice of this Court by the learned counsel for the petitioner that the fact regarding issuance of Sale Certificate dated 16.09.2011 was not brought to the notice of the Hon'ble Supreme Court at the time of filing of Special Leave Petition. Further, the learned counsel for the petitioner submitted that there was no direction given by the Hon'ble Supreme Court to the third respondent to deposit the amount and the deposit was made voluntarily and at their request, the Hon'ble Supreme Court permitted them to deposit without prejudice to the rights and contentions of both the parties. Since, the sale was challenged before this Court in the writ petition in W.P.NO.22837 of 2011, the third respondent did not press for the relief in terms of the second prayer before the Hon'ble Supreme Court. 19. It is an admitted fact that the petitioner was not made a party in the writ petitions in W.P. Nos. 21820 and 22837 of 2011. But wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondents, it could be seen that the right of redemption provided under Section 60 of the Transfer of Property Act is available to the mortgagor and the said right can be exercised and put into service by Competent Court. In the case on hand, the Sale Certificate was not set aside by a Tribunal or a Competent Court and it was cancelled by the person by whom the said certificate was issued. For cancelling the Sale Certificate, the Authorised Officer must have authority provided under the Act. There is no provision under the Act authorising an officer to cancel the Sale Certificate once issued in favour of the auction purchaser. 22. Under Section 13(8) of the SARFAESI Act, the borrower can make payment of the dues of the secured creditor together with all costs, charges and expenses incurred by him at any time before the date fixed for sale or transfer and if such payment is made, the secured asset shall not be sold or transferred by the secured creditor, and no further step shall be taken by him for transfer or sale of that secured asset. In the case on hand, though the third respondent had an opportunity to make the payment as contemplated under Section 13(8) of the SARFAESI Act, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court on 14.02.2012 in W.P.Nos.21820 and 22837 of 2011. It is pertinent to note that on the date of filing of the memo of compromise before this Court, the first respondent/Financial Institution realised the entire dues by selling the properties to the petitioner/auction purchaser for a sum of Rs.20,00,10,000/-. Therefore, the stand taken by the first respondent that their decision to settle the matter with the third respondent since they found it a commercially prudent decision cannot be accepted at any point of time. When they realised the entire amount on 16.09.2011 itself, getting further amount from the third respondent for settling the dues which were already settled by selling the properties is against the principles of any law. 25. That apart, the letter of cancellation of sale dated 08.02.2012 by the second respondent was issued without notice to the petitioner/auction purchaser. When the petitioner purchased the property and obtained the Sale Certificate on 16.09.2011, even without notice, the second respondent erroneously without applying the principles of natural justice, cancelled the sale made in favour of the petitioner, that too, when the second respondent have no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bliged to pay stamp duty for sale value calculated as per the Stamp Act. 30. In the judgment reported in (2007) 5 Supreme Court Cases 745 [B. Arvind Kumar Vs. Govt. of India and others], it is clear that when a property is sold by public auction in pursuance of an order of the Court and 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. The Sale Certificate is issued to the purchaser only when the sale becomes absolute, further, it is clear that the Sale Certificate is merely an evidence of such title. It is also well settled that when an auction purchaser derives title on confirmation of sale in his favour, the Sale Certificate is issued evidencing such sale and title, no further deed of transfer from the Court is contemplated or required. So far as the registration of the Sale Certificate is concerned, under Section 17(2)(xii) of the Registration Act, the Sale Certificate issued by a Civil or Revenue Officer does not fall under the category of non-testamentary documents which requires registration under sub-section 17(1)(b)and(c) of the said Act. In the case on hand, the Sale Certific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be registered. Since the auction purchaser was not informed that they are liable to pay stamp duty and that the Sale Certificate has to be registered, they cannot be now blamed that non registration of the Sale Certificate is fatal to their case. One can understand if the auction purchaser was duly informed that they are liable to pay the stamp duty and the document is also compulsorily registrable. If, in spite of the same, the auction purchaser failed to pay stamp duty and register the document in that case the auction purchaser can be made liable for the non payment of stamp duty and for non registration of the document. In the case on hand, there is nothing on record to show that the petitioner was put on notice with regard to the payment of stamp duty and registration of the document. 33. Therefore, we are of the view that at least in future the Authorised Officers must inform the prospective bidders with regard to the payment of stamp duty and registration of the Sale Certificate even at the time of issuance of sale notice enabling the prospective bidders to know about the stamp duty and registration at the earliest point of time. 34. Therefore, it is clear that an auction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondents so as to hand over the physical possession of the entire properties. 38. In the affidavit filed in support of the petition, the petitioner has stated that the respondents 1 & 2 suppressed the issuance of Sale Certificate in various proceedings pending before this Court as well as before the Hon'ble Supreme Court when the SLP was filed by the third respondent. 39. Since the learned counsels on either side have not advanced any arguments in this petition, the same is dismissed. 40. So far as the writ petition in W.P.No.1937 of 2012 is concerned, the petitioner has given up the first portion of their prayer (i.e.) to direct the respondents 1 & 2 to register the Sale Certificate dated 16.09.2011. However, since we are setting aside the proceedings/letter dated 08.02.2012 on the file of the second respondent and directing the respondents 1 & 2 to hand over physical possession to the petitioner, the petitioner/auction purchaser is also entitled to effect changes in the revenue records with regard to the ownership of the properties sold to them. But the petitioner has not made the Revenue Authorities as parties in the writ petition. However, it is for the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X
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