Redemption of Property: Release of property to borrower: SARFAESI

Redemption of Property: Release of property to borrower: SARFAESI: Constitution of India, 1950 Article 226 Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 Section 13 (8) Redemption of mortgage properties after its sale in public auction under SARFAESI Act – Claim by borrowers by filing a writ petition under Article 227 – Borrowers failed to clear the liability even within the extended time granted – Writ petition dismissed by Single Judge – Sale subsequently confirmed issuing sale certificate to auction purchaser – Writ appeal filed by borrowers – Meanwhile, the liability was cleared by borrowers pending writ appeal – Held, equity of redemption will survive until completion of sale by a registered deed – High Court can order the release of property to the borrower and order the return of money to the auction purchase along with interest.

N. Ramalinga Iyer, Represented by Its Partner N. Natarajan, Ernakulam
v.
The Chief Manager & Authorized Officer, Syndicate Bank, Ernakulam
(High Court Of Kerala)
Writ Appeal No. 723, 724 Of 2017 () In Original Petition (Debt Recovery Tribunal) No. 123 Of 2016 | 08-06-2017

N. Ramalinga Iyer, Represented by Its Partner N. Natarajan, Ernakulam v. The Chief Manager & Authorized Officer, Syndicate Bank, Ernakulam

Navaniti Prasad Singh, CJ

1. We have heard learned counsel for the appellants, learned counsel for the Bank as also learned counsel for the impleaded respondents at length and with their consent, we are disposing of both the appeals at this stage itself.
2. Both the appeals are filed by the appellants being aggrieved by the common judgment of the learned Single Judge dated 10.2.2017 passed in O.P.(DRT) Nos.122 of 2016 and 123 of 2016, whereby, while dismissing the said Original Petitions, learned Single Judge granted time till 3.3.2017 to the petitioners/appellants to pay the complete dues. Let it be noted that upon the writ appeals being filed, by various interim orders, this Court restrained the parties from registering the sale certificate, which had been confirmed on 4.3.2017 by the Bank, after the date fixed by the learned Single Judge expired without full payment. We may also note that the Bank has received complete payment from the appellants of the dues along with interest as also the appellants have deposited interest to be paid to the auction purchasers upto 3.3.2017. Since the Bank dues having been liquidated and the certificate of sale not having been registered, we set aside the sale and direct to refund the money as deposited by the purchasers with interest already deposited by the appellants. Any further demand of interest for the period after 3.3.2017 would be worked out between the parties. The reasons for this are as follows:
3. It appears that the appellants had taken substantial financial accommodation from the respondent, Syndicate Bank. There were admittedly dues. SARFAESI proceedings were resorted to and the properties were noticed for auction sale. The properties were in fact sold to the impleaded respondents being additional respondents 3 to 5 in both the appeals. The property was auctioned on 28.3.2016 for a value of about `4.70 Crores. Subsequently, the Bank confirmed the sale. The matter being before the Debt Recovery Tribunal (the ‘Tribunal’ for short), Ernakulam. The appellants moved various applications including seeking time to pay off the entire dues and consequently, if so permitted, to withdraw the challenge to the same. Various applications were filed before the Tribunal, but, the net result was that the appellants did not pay the entire dues and the Tribunal dismissed the applications. It is this that brought the appellants to this Court in the said writ proceedings. Learned Single Judge heard the matter and was not impressed upon the conduct of the petitioners/appellants. He, accordingly, dismissed the Original Petitions by common judgment dated 10.2.2017, but, while doing so, granted one opportunity to the petitioners to pay off the entire dues by 3.3.2017. The petitioners did not pay off the entire dues by 3.3.2017. Accordingly, on 4.3.2017 the Bank confirmed the sale.
4. Let it be noted that the auction purchasers did not object to the order of the Tribunal. It had granted liberty to the appellants to pay and redeem the mortgage even though the auction purchasers had paid the full amount that was required under the auction sale. The auction purchasers were also aware of the judgment of the learned Single Judge, but, they did not choose to object the same. We hold so because the auction purchasers, in whose favour the sale certificate had to be issued, were not being allowed to register the sale certificate. However, once the learned Single Judge dismissed the Original Petitions, the present appeals were filed, this Court stayed the registration of sale certificate, as in the mean time, the Bank had already confirmed the sale on failure of the appellants discharging the dues. This Court then passed various interim orders including orders for impleading the auction purchasers. They were duly impleaded as additional respondents 3 to 5. Pursuant to various orders passed by this Court, the appellants deposited interest dues and other dues, totalling to about Rs. 6.10 Crores, which the Bank was directed to keep in the Suspense Account. Thus, it is clear that the entire dues of the Bank has been paid off by the petitioners/ appellants.
5. So far as the auction purchasers are concerned, the compensation interest upto 3.3.2017 has also been deposited with the Bank. Let it be noted that the dues of the Bank was about Rs. 5.86 Crores and the property had been auctioned for about Rs. 4.70 Crores. Since the Bank dues having been fully liquidated before registration of the sale certificate, we have decided to cancel the sale, as in view of the judgment of the Supreme Court in the case of Mathew Varghese v. M.Amritha Kumar and others [(2014) 5 SCC 610], equity of redemption will survive until completion of sale by a registered deed.
6. In fairness to learned Senior Counsel, who appeared for the auction purchasers, he raised certain fundamental issues, which in view of the fact that the debts having been discharged and the course of the Bank to sell the property having ceased, is of little importance. Even though academic, we may note that the first challenge was that if at all the Original Petition/writ appeal is to be allowed, the matter must be relegated to the Tribunal at the stage where the proceedings before the Tribunal were terminated. We find no substance in the submission for the simple reason that once the dues are fully paid up, even jurisdiction of the Tribunal to deal with the matter would extinguish. The whole exercise is for the recovery of the dues. The second submission was that the Original Petition was originally filed under Article 227 of the Constitution of India and as such, in terms of Sec.5 of the Kerala High Court Act, no appeal would lie. It is too late in the day to urge such a ground for, the nature of order and the nature of jurisdiction exercised by the Court has to be seen from the order of the Court.
7. Learned Single Judge did not exercise the power of superintendence under Article 227 of the Constitution of India but exercised the extra ordinary discretionary jurisdiction as contained under Article 226 of the Constitution of India. Thus, the proceedings though instituted under Article 227 were disposed of as a proceeding under Article 226 and 227 of the Constitution of India and that being the position, the appeal is maintainable.
8. Thus, in view of the events noted above, we allow these writ appeals and set aside the sale dated 28.3.2016 as made in favour of the impleaded respondents as also the sale certificate and its confirmation. The auction purchasers shall be entitled to total refund of the money along with 5% interest per annum from the date, amounts were deposited by them with the Bank. We would also consequently direct the Bank to appropriate the entire amount as deposited by the appellants towards liquidation of the dues as also to ensure that the entire amount as deposited by additional respondents 3 to 5 in both the writ appeals be returned to them forthwith, with interest as indicated above. In case of any further demand on account of interest on this count, the Bank and the appellants would settle the matter as among themselves. We would also observe that in spite of the fact that the appellants have cleared the entire dues of the Bank, in case, they are entitled to any relief from the Bank, it would be open to them to pursue the same notwithstanding the order of the learned Single Judge.

To conclude, we direct that the possession of the security to be handed over to the appellants in peaceful vacant possession by whomsoever it is in possession of.
N. Ramalinga Iyer, Represented by Its Partner N. Natarajan, Ernakulam v. The Chief Manager & Authorized Officer, Syndicate Bank, Ernakulam