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Issues for consideration:The present appeals by the appellant-auction purchaser wereagainst the judgement passed by the High Court by which it allowedthe writ petition filed by respondent no.1-borrowers and directedthe respondent no.3-Bank to permit the borrowers to redeem themortgage of the secured asset after the auction proceedings hadattained finality. The questions for consideration were:-1. Whether the High Court was justified in exercising its writjurisdiction under Article 226 of the Constitution moreparticularly when the alternative remedy available to theBorrowers had already been availed of.2. Whether the confirmation of sale by the Bank under Rule 9(2)of the Security Interest (Enforcement) Rules, 2002 investsthe successful auction purchaser with a vested right.3. What is the impact of the amended Section 13(8) of theSecuritization and Reconstruction of Financial Assets andEnforcement of Securities Interest Act, 2002 (SARFAESI Act)on the Borrowers’ right of redemption in an auction conductedunder the SARFAESI Act. What is the effect of amendmentto Section 13(8) of the SARFAESI Act read with Section 60of the Transfer of Property Act, 1882.4. Whether a Bank after having confirmed the sale under Rule9(2), can withhold the sale certificate under Rule 9(6) of theRules of 2002 and enter into a private arrangement with aborrower.5. Whether the High Court under Article 226, could haveapplied equitable considerations to override the outcomecontemplated by the statutory auction process prescribedby the SARFAESI Act.6.Whether the right of redemption of mortgage stoodextinguished upon publication of notice of auction. Till whatpoint of time the right of redemption of mortgage can beexercised in respect of secured asset under the SARFAESIAct.Securitization and Reconstruction of Financial Assets andEnforcement of Securities Interest Act, 2002 (SARFAESI Act)– s.17 – Constitution of India – Art. 226 - Exercise of writjurisdiction u/ Art.226 of the Constitution when alternativeremedy u/s.17 of SARFAESI Act already availed by the borrower– If justified.Held: The Supreme Court has time and again, reminded the HighCourts that they should not entertain petition under Article 226 ofthe Constitution if an effective remedy is available to the aggrievedperson under the provisions of the SARFAESI Act – In the presentcase, the High Court was not justified in exercising its writ jurisdictionunder Article 226 of the Constitution more particularly when theborrowers had already availed the alternative remedy available tothem under s.17 of the SARFAESI Act. [Paras 92, 105]Security Interest (Enforcement) Rules, 2002 – r.9(2) - Whetherthe confirmation of sale by the Bank under r.9(2) invests thesuccessful auction purchaser with a vested right.Held: The confirmation of sale by the Bank under Rule 9(2) ofthe Rules of 2002 invests the successful auction purchaser with avested right to obtain a certificate of sale of the immovable propertyin form given in appendix (V) to the Rules i.e., in accordance withRule 9(6) of the SARFAESI. [Para 105]Securitization and Reconstruction of Financial Assets andEnforcement of Securities Interest Act, 2002 (SARFAESI Act) –ss.13(8) and 35 – Transfer of Property Act, 1882 – s.60 – Impactof amended s.13(8) of SARFAESI Act on the Borrowers’ rightof redemption in an auction conducted under the SARFAESIAct – Effect of amendment to s.13(8) of SARFAESI Act r/ws.60 of the Transfer of Property Act, 1882.Mortgage – Right of redemption of mortgage.Held: 1. In accordance with the unamended Section 13(8) of theSARFAESI Act, the right of the borrower to redeem the securedasset was available till the sale or transfer of such secured asset –The borrower’s right of redemption did not stand terminated on thedate of the auction sale of the secured asset itself and remained alivetill the transfer was completed in favour of the auction purchaser, byregistration of the sale certificate and delivery of possession of thesecured asset – However, the amended provisions of Section 13(8)of the SARFAESI Act, make it clear that the right of the borrowerto redeem the secured asset stands extinguished thereunder onthe very date of publication of the notice for public auction underRule 9(1) of the Rules of 2002 – In effect, the right of redemptionavailable to the borrower under the present statutory regime isdrastically curtailed and would be available only till the date ofpublication of the notice under Rule 9(1) of the Rules of 2002 andnot till the completion of the sale or transfer of the secured assetin favour of the auction purchaser. [Para 105]2. The SARFAESI Act is a special law containing an overridingclause in comparison to any other law in force – Section 60 ofthe Transfer of Property Act, 1882, is a general law vis-a-vis theamended Section 13(8) of the SARFAESI Act which is speciallaw – The right of redemption is clearly restricted till the date ofpublication of the sale notice under the SARFAESI Act, whereasthe said right continues under Section 60 of the Act 1882 tillthe execution of conveyance of the mortgaged property – TheSARFAESI Act is a special law of recovery with a paradigm shiftthat permits expeditious recovery for the banks and the financialinstitutions without intervention of Courts – Similarly, Section13(8) of the SARFAESI Act is a departure from the general rightof redemption under the general law i.e. the Act 1882 – Further,the legislature has in the objects and reasons while passing theamending Act specifically stated “to facilitate expeditious disposalof recovery applications, it has been decided to amend the saidActs....” – Thus, while interpreting Section 13(8) vis-à-vis Section60 of the Act 1882, an interpretation which furthers the said objectand reasons should be preferred and adopted – If the general lawis allowed to govern in the manner as sought to be argued by theborrowers, it will defeat the very object and purpose as well asthe clear language of the amended Section 13(8) – In the lightof clear inconsistency between Section 13(8) of the SARFAESIAct and Section 60 of the Act 1882 the former special enactmentoverrides the latter general enactment in light of Section 35 ofthe SARFAESI Act – Thus, the right of redemption of mortgageis available to the borrower under the SARFAESI Act only till thepublication of auction notice and not thereafter, in light of theamended Section 13(8). [Paras 64 and 68]Security Interest (Enforcement) Rules, 2002 – r.9(2) and r.9(6)– Whether a Bank after having confirmed the sale under r.9(2),can withhold the sale certificate u/r.9(6) and enter into a privatearrangement with a borrower.Held: The Bank after having confirmed the sale under Rule 9(2)of the Rules of 2002 could not have withhold the sale certificateunder Rule 9(6) of the Rules of 2002 and enter into a privatearrangement with a borrower. [Para 105]Constitution of India – Art. 226 – Scope u/Art. 226, to applyequitable considerations to override the outcome contemplatedby the statutory auction process prescribed by the SARFAESIAct – Securitization and Reconstruction of Financial Assets andEnforcement of Securities Interest Act, 2002 (SARFAESI Act).Held: The High Court under Article 226 of the Constitution couldnot have applied equitable considerations to overreach the outcomecontemplated by the statutory auction process prescribed underthe SARFAESI Act. [Para 105]The Securitisation and Reconstruction of Financial Assetsand Enforcement of Security Interest Act, 2002 – s.13(8) –Interpretation of.Auction - Auction process under the SARFAESI Act.Auction – Public Auction – Sanctity of – Courts ought to beloath in interfering with auctions.Held: As per the amended Section 13(8) of the SARFAESI Act,once the borrower fails to tender the entire amount of dues withall cost & charges to the secured creditor before the publicationof auction notice, his right of redemption of mortgage shall standextinguished / waived on the date of publication of the auctionnotice in the newspaper in accordance with Rule 8 of the Rulesof 2002 – It is the duty of the courts to zealously protect thesanctity of any auction conducted – The courts ought to be loathin interfering with auctions, otherwise it would frustrate the veryobject and purpose behind auctions and deter public confidenceand participation in the same – Any other interpretation of theamended Section 13(8) will lead to a situation where multipleredemption offers would be encouraged by a mischievous borrower,the members of the public would be dissuaded and discouragedfrom in participating in the auction process and the overall sanctityof the auction process would be frustrated thereby defeating thevery purpose of the SARFAESI Act – Thus, it is in the larger publicinterest to maintain the sanctity of the auction process under theSARFAESI Act. [Paras 86, 87 and 88]Equity – Law and Equity – Relationship.Held: Equity cannot supplant the law – Equity has to follow law,if the law is clear and unambiguous. [Para 104] |
