2023INSC838 Page 1 of 111

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 5542 - 5543 OF 2023

CELIR LLP …..APPELLANT

VERSUS

BAFNA MOTORS (MUMBAI) …..RESPONDENT(S)

PVT. LTD. & ORS.

J U D G M E N T

J. B. PARDIWALA, J.:

For the convenience of the exposition, this judgment is divided in the

following parts:

A. Factual Matrix................................................................................. 3-10

B. Submissions on behalf of the Appellant.......................................... 10-13

C. Submissions on behalf of the Borrowers......................................... 13-23

D. Questions of Law falling for the determination of the Court........... 23-24

E. Legislative History and Scheme of the SARFAESI Act.................. 24-45

Page 2 of 111

F. Redemption of Mortgage under Section 60 of the Transfer of

Property Act, 1882..........................................................................

45-49

G. Redemption of Mortgage under the SARFAESI Act...................... 49-68

H. Effect of the Amendment to Section 13(8) of the SARFAESI Act... 69-80

I. Why the decision of the Telangana High Court in the case of

Amme Srisailam v. Union Bank of India, Regional Office, Guntur,

rep. by its Region Head & Deputy General Manager, Andhra

Pradesh & Ors., W.P. No. 11435 of 2021, is not a good law?..........

80-93

J. Sanctity of Public Auction.............................................................. 93-97

K. Exercise of Extraordinary Jurisdiction by the High Court under

Article 226 of the Constitution in SARFAESI matters....................

97-103

L. Conduct of the Bank........................................................................ 103-108

M. Summary of the Final Conclusion................................................... 108-111

Page 3 of 111

1. Since the issues raised in both the captioned appeals are same, the

parties are also the same and the challenge is also to the self-same judgment

and order passed by the High Court those were taken up for hearing

analogously and are being disposed of by this common judgment and order.

2. For the sake of convenience, we clarify that the appellant herein is an

auction purchaser, the respondent No. 1 is the Borrower, the respondent No.

2 is the Guarantor and the respondent No. 3 is the Bank (Secured Creditor).

3. These appeals are at the instance of an auction purchaser left high and

dry by the respondents herein and is directed against the common judgment

and order passed by the High Court of Judicature at Bombay in Writ Petition

No. 9523 of 2023 with Interim Application (ST) No. 21706 of 2023 (for

impleadment) by which the High Court allowed the writ petition filed by the

borrowers and thereby directed the Bank to permit the borrowers to redeem

the mortgage of the secured asset more particularly after the auction

proceedings attained finality.

FACTUAL MATRIX

4. It appears from the materials on record that the borrowers had availed

credit facility from the Bank on 03.07.2017. Accordingly, the Bank sanctioned

Lease Rental Discounting (for short, ‘the LRD’) credit facility to the tune of

Rs. 100 crore in favour of the borrower with the respondent No. 2 standing as

a guarantor. Out of the total amount sanctioned, the amount of Rs. 65 crore

Page 4 of 111

was adjusted against the then existing LRD facility granted by the previous

bank and for the balance amount of Rs. 35 crore a security in the form of a

simple mortgage was created over a parcel of land admeasuring 16200 sq.

metres having buildings and ancillary structures on it at plot Nos. D-105, D-

110 and D-111 respectively situated at the Trans Thane Creek Industrial Area

MIDC Village Shirwane, Thane, Belapur Road, Nerul, Navi Mumbai, Thane,

Maharashtra in lieu of the sanctioned credit.

5. The borrower defaulted in repayment of the loan amount and

accordingly the loan account was declared as a Non-Performing Asset (NPA).

6. The Bank issued a demand notice under Section 13(2) of the

Securitization and Reconstruction of Financial Assets and Enforcement of

Securities Interest Act, 2002 (for short, ‘the SARFAESI Act’) for repayment

of the principal amount along with interest, cost, charges, etc. As on 30.04.23,

an aggregate sum of Rs. 123.83 crore was due and payable by the borrower

to the Bank.

7. Owing to the failure of the borrower & the guarantor in repaying the

outstanding amount referred to above, the Bank proceeded to take measures

for possession of the secured asset under the provisions of the SARFAESI

Act. The Bank decided to put the secured asset to auction. It appears that

between April 2022 & June 2023, the Bank attempted eight auctions but all

failed.

Page 5 of 111

8. In the meantime, the borrowers preferred a Securitization Application

being SA No. 46 of 2022 before the Debt Recovery Tribunal-I, Mumbai (for

short, “DRT”) inter alia challenging the demand notice issued under Section

13(2) of the SARFAESI Act and also for quashing of the sale notice dated

25.03.22 in respect of the secured asset. It is not in dispute that the said

application as on date is still pending before the DRT.

9. It appears that the borrowers informed the Bank that they were trying

to sell the secured asset but were not getting good offers. The borrowers

informed the Bank that the maximum they might be able to fetch from the

sale of the secured asset would be around Rs. 91-92 crore and they were

willing to settle the entire account by offering such amount to the Bank.

10. The Bank decided to go for one more auction. On 14.06.23, the Bank

published the auction notice for the 9

th

time for sale of the secured asset at a

reserve price of Rs. 105 crore. On publication of the auction notice, the

appellant herein participated in the auction proceedings conducted on

27.06.23 and submitted its bid of Rs. 105.05 crore, along with a deposit of Rs.

10.5 crore as earnest money.

11. In the 9

th

auction conducted by the Bank, the appellant herein was

declared as the highest bidder. The Bank on 30.06.2023 vide its email sent a

“Sale Confirmation Letter” to the appellant, declaring him as the highest

bidder / H1 in the auction of the secured asset and called upon the appellant

Page 6 of 111

to deposit 25% of the bid amount by 01.07.23 and the balance amount on or

before 15.07.23. The email is reproduced below: -

“admin@mstcauction.com

SALE CONFIRMATION LETTER (Property -

UBINMUMSAM2888)

To: Mac, Cc: samvmumbai@unionbankofindia.bank,

ibapiop@mstcauction.com

CELIR LLP Date: 30-06-2023:

C-708 teerth technospace 7

th

floor Sr no 103 baner

Pune

411045

INDIA

Date: 30.06.2023

Time: 06:36 PM

Dear Sir / Madam,

Your Bid of amount Rs.1050500000. for the property ID No.

UBINMUMSAM2888 during online auction held on e-BKRAY

portal on Date: 30-06-2023, is accepted as highest bid and

accordingly you have been declared H1 bidder for the said

property.

In terms of Sale Notice issued under the provisions of SARFAESI

Act, you are required to deposit 25% of the Bid amount, which

comes to Rs.262625000. Including 10% of reserve price as EMO

amount, which has been deducted from your Global EMO Wallet,

immediately, but not later than 01-07-2023. In case 01.07.2023 is

a holiday, payment should be made within the next working day at

concerned branch of Bank in account No.087021980050000.

Further, you are required to deposit the balance amount of

Rs.787875000, being 75% of entire bid amount within 15 days i.e.

on or before 15.07.2023 at Concerned Branch of Bank in account

No.087021980050000.

Please be informed that in case you fail to deposit due amount by

scheduled dates, sale shall be cancelled and any amount deposited

by you related to this bid, shall be forfeited.

Authorized officer

Name of Authorized Officer: Sidharath S. Mhade

Page 7 of 111

Name of Bank: UNION BANK OF INDIA

Contact No. or AO: 898-518779

e-Mail to or AO: samvmumbai@unionbankofinida.bank

(This mail is from Authorized Officer and being generated

through computer system, hence needs no signature)”

12. On 01.07.2023, the appellant deposited 25% of the total bid amount

(minus the earnest money deposit). In the wake of such development, the

borrowers filed an Interim Application No. 2339 of 2023 on 04.07.2023, titled

Redemption Application in S.A. No. 46 of 2022 before the DRT-I, Mumbai

for redemption of the mortgage in respect of the secured asset by payment of

the total outstanding sum of Rs 123.83 crore (approx.) on or before 31.08.23.

13. On 27.07.23, the appellant herein deposited the balance sum of the total

bid amount which was duly received and accepted by the Bank. On the very

same day, the redemption application referred to above was also heard by the

DRT-I. The redemption application was opposed by both the appellant herein

as well as the Bank. The DRT after hearing the parties at length, reserved

orders to be pronounced on 02.08.23.

14. While the parties were awaiting for the DRT to pass appropriate an on

order on the redemption application, the borrowers went to the High Court

and filed the Writ Petition No. 9523 of 2023, seeking directions to the Bank

to permit them to redeem the mortgage of the secured asset.

Page 8 of 111

15. The writ petition was filed on the premise that the borrowers had strong

apprehension that the DRT may reject their redemption application and the

entire matter would become infructuous more particularly, the Bank having

accepted the entire amount from the appellant herein of the total bid.

16. Before the High Court, the borrowers expressed their willingness to pay

a total sum of Rs. 129 crore for redeeming the mortgage by 31.08.23. The

Bank which had earlier opposed the plea for redemption of mortgage before

the DRT for some good reason expressed its willingness before the High Court

to accept the offer of the borrowers. The Bank perhaps got lured by the fact

that the borrowers were paying almost Rs. 23.95 crore more than what was

paid by the appellant herein and Rs. 5 crore more than the outstanding amount.

17. It also appears that the appellant herein having come to know about

such writ petition filed in the High Court preferred Interim Application (ST)

No. 21706 of 2023 for being impleaded in the writ petition.

18. The writ petition along with interim application was heard by the High

Court and vide its impugned judgment and order dated 17.08.2023 allowed

the writ petition and permitted the borrowers to redeem the mortgage of the

secured asset subject to payment of Rs. 25 crore on the same day and the

balance amount of Rs. 104 crore on or before 31.08.2023, failing which the

sale of secured asset in favour of the appellant herein would be confirmed.

Page 9 of 111

19. The operative part of the impugned order passed by the High Court

reads thus:

“(a) The Petitioner shall hand over a sum of Rs. 25 crores to the

Respondent Bank today. In compliance with this direction, Mr.

Khandeparkar has handed over three Demand Drafts in the sum of

Rs. 10 crores, 10 crores and 5 crores respectively to the learned

Advocate appearing on behalf of the Respondent Bank which is duly

acknowledged by him. The Bank is entitled to encash these Demand

Drafts and appropriate the sum of Rs.25 crores towards the

outstanding dues of the Petitioners.

(b) The balance amount of Rs. 104 crores shall be paid by the

Petitioners to the Respondent Bank on or before 31

st

August 2023

in the designated account below: -

Union Bank of

India

Stressed Asset Management

Branch, Mumbai

IFSC UBIN0908703

A/c. No. 087021980050000

(c) If the amount of Rs. 104 crores are paid in the said account on

or before 31

st

August 2023, the same shall be appropriated by the

Respondent-Bank towards the dues of the Petitioners. The Bank

shall then return the original title deeds of the secured asset to the

Petitioners, execute all such documents for cancellation of

mortgage, and issue a ‘No Dues Certificate’ to the Petitioners.

(d) Mr. Shinde, the learned Advocate appearing for the Respondent-

Bank, has brought to our attention that out of the entire amount of

Rs. 105.05 crores deposited by the Auction Purchaser, the

Respondent-Bank has appropriated the sum of Rs. 63,50,45,000/-

towards the loan amount of the Petitioners. We therefore direct that

the Respondent-Bank shall reverse this entry and immediately keep

the entire amount of Rs. 105.05 crores [deposited by the auction

purchaser] in a No Lien interest bearing account. If the Petitioners

pay the balance amount of Rs.104 crores to the Respondent Bank

Page 10 of 111

by 31

st

August 2023, then the Respondent-Bank shall refund the

amount of Rs. 105.05 crores deposited by the Auction Purchaser

together with accrued interest on or before 7

th

September 2023.

(e) In the event the balance amount of Rs. 104 crores are not paid

by the Petitioners to the Respondent-Bank on or before 31

st

August

2023, the Respondent Bank shall then be entitled to appropriate the

money from the No Lien interest bearing account towards the dues

payable by the Petitioners and the sale of the secured asset shall be

confirmed in favour of the Auction Purchaser and a sale certificate

shall be issued in their favour. All formalities in relation to

registration of that certificate shall also be done by the Respondent-

Bank and the Auction Purchaser.

(f) In light of this order, Mr. Khandeparkar has stated that, nothing

would survive in Securitization Application No. 46 of 2022 and/or

the Interim Applications filed therein and seeks leave to withdraw

the same within a period of one week from today. The said statement

is accepted as an undertaking given to the Court. It is needless to

clarify that even if the Petitioners do not withdraw the

Securitization Application, the same shall stand dismissed in light

of this order and the Petitioners will not be permitted to litigate any

further with the Respondent Bank in relation to the secured asset.

In other words, if the Petitioners default in making the balance

payment of Rs.104 crores to the Respondent Bank by 31

st

August

2023, the Auction Purchaser shall get the secured asset free from

litigation. As per the statement made by Mr. Khandeparkar, and

which is accepted as an undertaking given to the Court, if the

Petitioners default in making the balance payment of Rs.104 crores

by 31

st

August 2023, physical, vacant, quiet, and peaceful

possession of the secured asset shall be handed over to the Auction

Purchaser on or before 5

th

September 2023.”

20. It appears that during the pendency of the present appeals, the

borrowers transferred the balance amount of Rs. 104 crore on 26.08.2023 to

the Bank in terms of the impugned order passed by the High Court. With the

transfer of the amount of Rs. 104 crore, the Bank issued a “No Dues

Page 11 of 111

Certificate” on 28.08.23. On the very same day, the borrowers entered into an

Agreement of Assignment of Leasehold Rights with a third-party viz. M/s

Greenscape I.T. Park LLP for the transfer of leasehold rights in the secured

asset and the said agreement was registered before the Joint Sub Registrar,

Thane 8 vide Registration No. 19286 of 2023.

21. Being aggrieved and dissatisfied with the aforesaid order passed by the

High Court, the appellant is here before this Court with the present appeals.

SUBMISSIONS ON BEHALF OF THE APPELLANT

22. Mr. Mukul Rohatgi, the learned Senior Counsel and Mr. Neeraj Kishan

Kaul, the learned Senior Counsel appearing for the appellant made the

following submissions:

a. The writ petition filed by the borrowers before the High Court was not

maintainable in view of the alternative remedy available to them under

Section 17 of the SARFAESI Act and more particularly when such alternative

remedy had already been availed by the borrowers.

b. The High Court ought not to have entertained the writ petition on the

ground that although the auction proceedings had attained finality and the

appellant herein was declared as the successful highest bidder yet the bank

was getting more amount as offered by the appellant compared to the sale bid.

Page 12 of 111

c. Mere apprehension on the part of the litigant that an adverse order

might be passed by a forum which was already looking into the issue cannot

be a ground to invoke the extraordinary jurisdiction under Article 226 of the

Constitution.

d. The High Court failed to consider that in view of the amended provision

of Section 13(8) of the SARFAESI Act, the right of redemption of mortgage

stood extinguished upon publication of the auction notice. If the Borrower is

permitted to redeem the mortgage at the very last moment, more particularly

even after payment of entire amount by the auction purchaser, then no auction

would ever attain finality and indirectly, the borrower is given indefinite time

to repay the outstanding amount.

e. The High Court failed to appreciate an important fact that the Bank had

already confirmed the sale of the secured asset to the appellant and as such

the appellant had a vested right to the secured asset. Once the sale was

confirmed, the Bank in accordance with Rule 9(2) read with Rule 9(6) of the

Security Interest (Enforcement) Rules, 2002, (“Rules of 2002”) was under a

legal obligation to issue a sale certificate to the appellant. The Bank could not

have consented before the High Court to the borrowers’ plea of redemption.

f. The High Court committed a serious error of law in considering the

equities in favour of the borrowers unmindful of the fact that equity follows

the law.

Page 13 of 111

g. In the last, Mr. Rohatgi submitted that his client is ready and willing to

make good the entire amount of Rs. 129 crore by depositing Rs. 23.95 crore

with the Bank, in addition to the amount of Rs. 105.05 already deposited with

the Bank.

h. With a view to fortify the aforesaid submissions reliance was placed on

the following decisions:

i) United Bank of India v. Satyawati Tondon & Ors., (2010) 8 SCC 110;

ii) Varimadugu OBI Reddy v. B. Sreenivasulu & Ors., (2023) 2 SCC 168;

iii) Valji Khimji and Company v. Official Liquidator of Hindustan Nitro

Product (Gujarat) Ltd. and Ors., (2008) 9 SCC 299;

iv) Authorised Officer State Bank of India v. C. Natarajan and Anr., 2023

SCC OnLine SC 510; and

v) Sadashiv Prasad Singh v. Harendar Singh & Ors., (2015) 5 SCC 574.

SUBMISSIONS ON BEHALF OF THE BORROWERS

23. Mr. Shyam Divan, the learned Senior Counsel and Mr. Nikhil Nayyer,

the learned Senior counsel appearing for the borrowers made the following

submissions:

a. That after the impugned order was dictated in the open court on

17.8.2023 and subsequently uploaded on the website of Bombay High Court

on 26.8.2023, the following developments took place:

Page 14 of 111

(i) The borrowers transferred an amount of Rs. 104 Crores to the Union

Bank of India vide RTGS, having UTR No. HDFCR52023082882894716.

(ii) This was followed by the Respondent No.3, i.e., Union Bank of India

issuing a No Dues Certificate dated 28.08.2023 thereby acknowledging that

the borrowers do not owe any further amount to the Bank and releasing the

personal guarantees as well.

(iii) Further, after the No Dues Certificate was issued by the Bank, the

borrowers executed a registered Deed of Release in favour of the Tata Motors

Financial Solutions Limited registered with the Joint Sub Registrar, Thane 8

having registration No. 19283/2023, whereby the second charge that the Tata

Motors Finance Solutions Limited had on the second property came to be

released, pursuant to payment of Rs. 15 Crore (Rs. 10 Crore on 18.08.2023

and Rs. 5 Crore on 22.08.2023 ), which came to be duly acknowledged by the

Tata Motors Finance Solutions Limited.

(iv) Following this, the borrowers have also entered into a registered

Agreement of Assignment of Leasehold Rights for the transfer of leasehold

rights in the secured asset with M/s Greenscape L.T. Park LLP on 28.8.2023,

which came to be registered before the Joint Sub Registrar, Thane 8 having

registration No. 19286/2023.

Page 15 of 111

b. Since there has been full compliance of the Impugned Order by the

borrowers herein as well as the Bank, the appeals have essentially become

infructuous.

c. The only issue which remains is the refund of the amount deposited by

the appellant herein. This is an issue between the appellant and the Bank and

the borrowers have no reason to come in the way of the refund of the amount

to the appellant herein.

d. There is a specific direction issued by the High Court that the

Respondent Bank shall immediately keep the entire amount of Rs. 105.05

crore (deposited by the Auction Purchaser/appellant herein) in a “No Lien

Interest Bearing Account” and if the borrowers pay the balance amount of Rs.

104 crore to the Respondent Bank by 31.8.2023 (which it has), then the

Respondent Bank shall refund the amount of Rs. 105.05 Crores deposited by

the Auction Purchaser together with the accrued interest on or before

7.9.2023.

e. The High Court correctly interpreted Section 13(8) of the SARFAESI

Act. The right of redemption is nowhere mentioned in the SARFAESI Act and

in such circumstances, Section 60 of the Transfer of Property Act, 1882 (for

short, ‘the Act 1882’) should be looked into. Section 60 of the Act 1882 has

been interpreted to reserve the right of mortgagor to redeem the property till

the stage of the same being conveyed /transferred to a third party.

Page 16 of 111

f. The aforesaid interpretation is discernible from the decision of this

Court in the case of Narandas Karsondas v. S.A. Kamtam and Another

reported in 1977 (3) SCC 247, wherein it has been held that:

“34. 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. The combined effect

of Section 54 of the Transfer of Property Act and Section 17 of the

Indian Registration Act is that a contract for sale in respect of

immovable property of the value of more than one hundred rupees

without registration cannot extinguish the equity of redemption. In

India it is only on execution of the 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. The extinction of the right of redemption has to be

subsequent to the deed conferring such power. The right of

redemption is not extinguished at the expiry of the period. The

equity of redemption is not extinguished by mere contract for sale.

35. The mortgagor's right to redeem will survive until there has

been completion of sale by the mortgagee by a registered deed. In

England a sale of property takes place by agreement but it is not

so in our country. The power to sell shall not be exercised unless

and until notice in writing requiring payment of the principal

money has been served on the mortgagor. Further Section 69(3) of

the Transfer of Property Act shows that when a sale has been made

in professed exercise of such a power, the title of the purchaser

shall not be impeachable on the ground that no case had arisen to

authorise the sale. Therefore, until the sale is complete by

registration the mortgagor does not lose right of redemption.”

(Emphasis supplied)

g. The aforesaid position has also been echoed in the case of Mathew

Varghese v. M. Amritha Kumar and Ors., (2014) 5 SCC 610, wherein this

Court held that upon a combined reading of Sections 60 and 54 respectively

Page 17 of 111

of the Act 1882 with Section 17 of the Registration Act, 1908, it can be

concluded that the extension of the right of redemption comes much later than

the sale notice.

h. Although the decision in Mathew Varghese (supra) was prior to the

2016 amendment to the SARFAESI Act, yet its applicability has been held

valid even after the amendment of the said Act. A Division Bench of the High

Court of Telangana in the case of Concern Readymix, rep. by its Proprietor,

Smt. Y. Sunitha v. Authorised Officer, Corporation Bank and Anr., reported

in 2018 SCC OnLine Hyd 783 has held after juxtaposing the amended and

unamended provisions of Section 13(8) of the SARFAESI Act, with respect

to the right of redemption available to the Mortgagor that the amended Section

13(8) of the SARFAESI Act only puts a restriction on the right of the

mortgagee to deal with the property and does not speak in express terms about

the equity of redemption available to the mortgagor. It was further held that

the danger of interpreting Section 13(8) as though it relates to the right of

redemption is if the payments are not made in accordance with Section 13(8),

the right of redemption may get lost even before the sale is complete in all

respects and that holding that the right of redemption would be extinguished

at the stage of issue of notice under Rule 9(1) would tantamount to annulling

the relevant provision of the Act 1882 which do not stand expressly excluded

insofar as the question of redemption is concerned. The said judgment of the

Page 18 of 111

Telangana High Court was challenged before this Court vide SLP(C) D. No.

28967 of 2019 and the same came to be dismissed.

i. The view expressed in Concern Readymix (supra) was echoed by a

Division Bench of the High Court of Punjab and Haryana in the case of M/s

Pal Alloys and Metal India Private Limited & Ors. v. Allahabad Bank &

Ors., reported in 2021 SCC OnLine P&H 2733, wherein the High Court, inter

alia, considered the specific issue “(a) till what time and date can the right of

redemption of the Mortgage can be exercised by the Mortgagors / Borrowers

in the light of the amendment to Section 13(8) of the SARFAESI Act”.

j. While answering the aforesaid question, the Court considered the report

of the Joint Committee on the Enforcement of Security Interest and Recovery

of Debts Laws and Miscellaneous Provisions (Amendment) Bill, 2016 (the

Report) as well as the law laid down by this Court in Mathew Varghese

(supra) and the judgment in Concern Readymix (supra), in order to determine

whether the said right of redemption was available up to the date of transfer

of the asset or only up to the date of publication of the sale notice. On a

consideration of Section 60 of the Act 1882 as well as the judgment in

Narandas Karsondas (supra), it was observed that:

“62. Thus even if the sale of secured assets is under a special

statute like State Financial Corporations Act, there is no deviation

from the general principle that the mortgagor’s right of

redemption is not extinguished till the execution of conveyance.”

Page 19 of 111

k. It was ultimately held as below:-

“96. … that the amended Section 13(8) of the SARFAESI Act

merely prohibits a secured creditor from proceeding further with

the transfer of the secured asset by way of lease, assignment or

sale; a restriction on the right of the mortgagee to deal with the

property is not exactly the same as the equity of redemption

available to the mortgagor, the payment of the amount mentioned

in Section 13 (8) of the SARFAESI Act ties the hands of the

mortgagee (secured creditor) from exercising any of the powers

conferred under the Act; that redemption comes later; extinction

of the right of redemption comes much later than the sale notice;

and the right of redemption is not lost immediately upon the

highest bid made by a purchaser in an auction being accepted. We

also hold that such a right would continue till the execution of a

conveyance i.e. issuance of sale certificate in favour of the

mortgagee. A similar view has been taken by this Bench in

Hoshiarpur Roller Flour Mill Private Limited V/s Punjab National

Bank (CWP No. 14440 of 2021, decided on 10.12.2021).

97. It would, therefore, certainly be available to the petitioners

herein before the issuance of sale certificate in favour of

respondents No. 2 and 3. Point (a) is answered accordingly in

favour of the petitioners and against the respondents.”

l. The said judgment also considered and distinguished the judgment of

this Court in Shakeena and Anr. v. Bank of India and Ors., (2021) 12 SCC

761, holding that the said case did not consider the concept of redemption

under Section 60 of the Act 1882. The observations in para 30 of Shakeena

are in the nature of obiter dicta as in the said case the auction had concluded

prior to the amendment of Section 13(8) and in any event the sale certificate

had already been issued. Thus, the question of interpretation of Section 13(8)

was not directly in issue.

Page 20 of 111

m. A perusal of the Report (the report of Joint Committee on the

Enforcement of Security Interest and Recovery of Debt Laws and

Miscellaneous Provisions (Amendment) Bill, 2016), more particularly para

24, indicates that the proposed amendment to Section 13(8) of the Act was

intended to deal with: - “Provisions to stop secured creditor to lease or

assignment or sale in the prescribed conditions”. The important thing to note

is also that the report does not indicate that the Committee had considered

the effect of Section 60 of the Transfer of Property Act, 1882, which is a

general law regarding redemption of mortgage vis-a-vis the provisions of

SARFAESI.

n. The focus of the Committee in the said report is on the obligations of

the Mortgagee to not create third party rights up to a certain time-period, but

it is silent on the rights of the Mortgagor to exercise its redemption for which

Section 60 of the Act 1882 is the relevant provision.

o. It is further necessary to note that the non obstante clause in Section

13 specifically excludes only Sections 69 and 69A respectively of the Act

1882. This section does not specifically include the words "Notwithstanding

anything contained in any other Act for the time being in force" which is the

standard term used in non obstante clauses. In view thereof, the legislative

intent should be interpreted to only exclude Sections 69 and 69A respectively

Page 21 of 111

of the Act 1882 and the same does not affect the applicability of Section 60

of the Act 1882.

p. Various High Courts have consistently held that the right of

redemption has to be exercised in terms of Section 60 of the Act 1882 and

not under Section 13(8) of the SARFAESI Act and the amendment to Section

13(8) does not affect or take away this right in any manner.

24. The Telangana High Court in the case of Amme Srisailam v. Union

Bank of India, Regional Office, Guntur, rep. by its Region Head & Deputy

General Manager, Andhra Pradesh & Ors., W.P. No. 11435 of 2021 decided

on 17.08.2022 has referred to and relied upon on Concern Readymix (supra)

and Pal Alloys (supra). The Telangana High Court in Amme Srisailam

(supra) in turn has relied upon the decision of this Court in the case of S.

Karthik & Ors. v. N. Subhash Chand Jain & Ors., (2022) 10 SCC 641. The

Telangana High Court in Amme Srisailam (supra) held as under:

“44. Before we revert back to the facts of the present case, we

may also refer to Sections 35 and 37 of the SARFAESI Act.

While Section 35 says that the provisions of the SARFAESI

Act shall have effect notwithstanding anything inconsistent

therewith contained in any other law for the time being in

force, Section 37 clarifies that provisions of the SARFAESI Act or

the rules made thereunder shall be in addition to and not in

derogation of any other law for the time being in force.

45. This brings us to Section 60 of the Transfer of Property Act,

1882. Section 60 says that at any time after the principal amount

has become due, the mortgagor has a right, on payment or tender,

of the mortgage money, to require the mortgagee (a) to deliver to

the mortgagor the mortgage deed and all documents relating to

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the mortgaged property which are in possession or power of the

mortgagee, (b) where the mortgagee is in possession of the

mortgaged property, to deliver possession thereof back to the

mortgagor, and (c) at the cost of the mortgagor either to re-

transfer the mortgaged property to him or to such third person as

he may direct, or to execute and to have registered an

acknowledgement in writing that any right in derogation of his

interest transferred to the mortgagee has been extinguished. As

per the proviso, the right conferred under the aforesaid provision

shall not be extinguished by any act of the parties or by decree of

a Court.

46. Therefore, on a careful application of Sections 35 and 37 of

the SARFAESI Act, it is evident that the situation contemplated

under Section 13(8) of the SARFAESI Act does not exclude

application of Section 60 of the Transfer of Property Act, 1882.

As explained by this Court in Concern Readymix (supra), a

restriction on the right of the mortgagee to deal with the property

post issuance of notice for public auction is not the same as the

right of redemption available to the mortgagor.

47. In so far the present case is concerned, admittedly the bid

amount of the petitioner was Rs.57.00 lakhs. Though the auction

was conducted on 16.03.2021 and payment was made by the

petitioner within the stipulated period, there is clear dispute

between the parties as regards issuance of sale certificate by

respondent Nos.1 and 2 in favour of the petitioner. However,

admittedly there is no registration of any sale certificate. On the

other hand, the borrower had approached respondent Nos.1 and

2 for settlement of the loan account under OTS Scheme on

18.03.2021 which was recommended by second respondent on

20.03.2021 and was accepted by first respondent on 31.03.2021

for an amount of Rs.5.10 crores, which has been paid by the

borrower i.e., third respondent. On the one hand petitioner's

amount was Rs.57.00 lakhs which the petitioner had paid but on

the other hand third respondent has paid Rs.5.10 crores as per

the OTS. Lending of money, recovery of dues and entering into

OTS are all commercial decisions which are taken by the

banks/financial institutions in their best interest, subject of

course within the statutory framework. In this case, we have

already come to the conclusion that third respondent had not lost

the right of redemption upon publication of notice for auction

sale. If that be the position, then it should be left to the discretion

of the secured creditor as to which course of action would be

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more beneficial to it. Evidently, the OTS with the third respondent

is much more beneficial to the secured creditors i.e., respondent

Nos.1 and 2 and as has been explained above such a course of

action is not restricted or extinguished by Section 13(8) of the

SARFAESI Act.

xxx xxx xxx

50. Right to property is a valuable right. Though no longer a

fundamental right, it is still a constitutional right. The

interpretation which we have adopted subserves such a right.

That apart, third respondent had not lost the right of redemption

upon publication of notice for auction sale; his right of

redemption would have been lost only upon the sale certificate

getting registered which admittedly has not taken place.

Therefore, the action of respondent Nos.1 and 2 in accepting the

higher OTS amount of the third respondent though after

publication of notice for public auction and auction is justified

and cannot be faulted.”

25. In such circumstances referred to above, the learned counsel prayed that

there being no merit in the present appeals, those may be dismissed.

ANALYSIS

26. Having heard the learned counsel appearing for the parties and having

gone through the materials on record the following questions fall for our

consideration:

(a) Whether the High Court was justified in exercising its writ jurisdiction

under Article 226 of the constitution more particularly when the alternative

remedy available to the Borrowers had already been availed of?

(b) Whether the confirmation of sale by the Bank under Rule 9(2) of the

Rules of 2002 invests the successful auction purchaser with a vested right?

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(c) What is the impact of the amended Section 13(8) of the SARFAESI Act

on the Borrowers’ right of redemption in an auction conducted under the

SARFAESI Act? Or in other words, what is the effect of amendment to

Section 13(8) of the SARFAESI Act read with Section 60 of the Act 1882?

(d) Whether a Bank after having confirmed the sale under Rule 9(2), can

withhold the sale certificate under Rule 9(6) of the Rules of 2002 and enter

into a private arrangement with a borrower?

(e) Whether the High Court under Article 226, could have applied equitable

considerations to override the outcome contemplated by the statutory auction

process prescribed by the SARFAESI Act?

(f) Whether the right of redemption of mortgage stood extinguished upon

publication of notice of auction? Or in other words till what point of time the

right of redemption of mortgage can be exercised in respect of secured asset

under the SARFAESI Act?

(g) Whether the decisions of Telangana High Court in the case of Concern

Readymix (supra) and Amme Srisailam (supra) lay down the correct position

of law?

LEGISLATIVE HISTORY AND SCHEME OF THE SARFAESI ACT

27. Till early 1990s, the civil suits were being filed for recovery of the dues

of banks and financial institutions under the Act 1882 and the Code of Civil

Page 25 of 111

Procedure, 1908 (CPC). Due to various difficulties the banks and financial

institutions had to face in recovering loans and enforcement of securities, the

Parliament enacted the Recovery of Debts Due to Banks and Financial

Institutions Act, 1993 (for short, “the Act 1993” or “the RDBFI Act”).

28. On account of lack of infrastructure and manpower, the regular civil

courts were not in a position to cope up with the speed in the adjudication of

recovery cases. In the light of recommendations of the Tiwari Committee the

special tribunals came to be set up under the provisions of the Act 1993

referred to above for the recovery of huge accumulated NPA of the Bank loans.

29. On the continuing rise in number of Non-Performing Assets (NPA) at

banks and other financial institutions in India; a poor rate of loan recovery and

the failure of the existing legislation in redressing the difficulties of recovery

by banks; the Narasimham Committee I & II and Andyarujina Committee

were constituted by the Government for examining and suggesting banking

reforms in India. These Committees in their reports observed that one out of

every five borrower was a defaulter, and that due to the long and tedious

process of existing frame work of law and the overburdening of existing

forums including the specialised tribunals under the 1993 Act, any attempt of

recovery with the assistance of court/tribunal often rendered the secured asset

nearly worthless due to the long delays. In this background the Committees

thus, proposed new laws for securitisation in order to permit banks and

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financial institutions to hold securities and sell them in a timely manner

without the involvement of the courts.

30. On the recommendations of the Narasimham Committee and

Andyarujina Committee, the SARFAESI Act was enacted to empower the

banks and financial institutions to take possession of the securities and to sell

them without intervention of the court.

31. The statement of objects and reasons for which the Act has been

enacted reads as under: -

“STATEMENT OF OBJECTS AND REASONS

The financial sector has been one of the key drivers in India's

efforts to achieve success in rapidly developing its economy. While

the banking industry in India is progressively complying with the

international prudential norms and accounting practices there are

certain areas in which the banking and financial sector do not

have a level playing field as compared to other participants in the

financial markets in the world. There is no legal provision for

facilitating securitisation of financial assets of banks and financial

institutions. Further, unlike international banks, the banks and

financial institutions in India do not have power to take possession

of securities and sell them. Our existing legal framework relating

to commercial transactions has not kept pace with the changing

commercial practices and financial sector reforms. This has

resulted in slow pace of recovery of defaulting loans and mounting

levels of non-performing assets of banks and financial institutions.

Narasimham Committee I and II and Andhyarujina Committee

constituted by the Central Government for the purpose of

examining banking sector reforms have considered the need for

changes in the legal system in respect of these areas. These

Committees, inter alia, have suggested enactment of a new

legislation for securitisation and empowering banks and financial

institutions to take possession of the securities and to sell them

without the intervention of the court. Acting on these suggestions,

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the Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Ordinance, 2002 was

promulgated on the 21st June, 2002 to regulate securitisation and

reconstruction of financial assets and enforcement of security

interest and for matters connected therewith or incidental thereto.

The provisions of the Ordinance would enable banks and financial

institutions to realise long-term assets, manage problem of

liquidity, asset liability mismatches and improve recovery by

exercising powers to take possession of securities, sell them and

reduce nonperforming assets by adopting measures for recovery

or reconstruction."

32. This Court in Mardia Chemicals Ltd. & Ors. v. Union of India & Ors.

reported in (2004) 4 SCC 311, examined the history and legislative backdrop

that ultimately led to the enactment of the SARFAESI Act as under: -

“34. Some facts which need to be taken note of are that the banks

and the financial institutions have heavily financed the petitioners

and other industries. It is also a fact that a large sum of amount

remains unrecovered. Normal process of recovery of debts

through courts is lengthy and time taken is not suited for recovery

of such dues. For financial assistance rendered to the industries

by the financial institutions, financial liquidity is essential failing

which there is a blockade of large sums of amounts creating

circumstances which retard the economic progress followed by a

large number of other consequential ill effects. Considering all

these circumstances, the Recovery of Debts Due to Banks and

Financial Institutions Act was enacted in 1993 but as the figures

show it also did not bring the desired results. Though it is

submitted on behalf of the petitioners that it so happened due to

inaction on the part of the Governments in creating Debts

Recovery Tribunals and appointing presiding officers, for a long

time. Even after leaving that margin, it is to be noted that things

in the spheres concerned are desired to move faster. In the present-

day global economy it may be difficult to stick to old and

conventional methods of financing and recovery of dues. Hence,

in our view, it cannot be said that a step taken towards

securitisation of the debts and to evolve means for faster recovery

of NPAs was not called for or that it was superimposition of

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undesired law since one legislation was already operating in the

field, namely, the Recovery of Debts Due to Banks and Financial

Institutions Act. It is also to be noted that the idea has not erupted

abruptly to resort to such a legislation. It appears that a thought

was given to the problems and the Narasimham Committee was

constituted which recommended for such a legislation keeping in

view the changing times and economic situation whereafter yet

another Expert Committee was constituted, then alone the

impugned law was enacted. Liquidity of finances and flow of

money is essential for any healthy and growth-oriented economy.

But certainly, what must be kept in mind is that the law should not

be in derogation of the rights which are guaranteed to the people

under the Constitution. The procedure should also be fair,

reasonable and valid, though it may vary looking to the different

situations needed to be tackled and object sought to be achieved.

xxx xxx xxx

36. In its Second Report, the Narasimham Committee observed

that NPAs in 1992 were uncomfortably high for most of the public

sector banks. In Chapter VIII of the Second Report the

Narasimham Committee deals about legal and legislative

framework and observed:

“8.1. A legal framework that clearly defines the rights and

liabilities of parties to contracts and provides for speedy

resolution of disputes is a sine qua non for efficient trade and

commerce, especially for financial intermediation. In our

system, the evolution of the legal framework has not kept pace

with changing commercial practice and with the financial

sector reforms. As a result, the economy has not been able to

reap the full benefits of the reforms process. As an illustration,

we could look at the scheme of mortgage in the Transfer of

Property Act, which is critical to the work of financial

intermediaries….”

One of the measures recommended in the circumstances was to

vest the financial institutions through special statutes, the power

of sale of the assets without intervention of the court and for

reconstruction of assets. It is thus to be seen that the question of

non-recoverable or delayed recovery of debts advanced by the

banks or financial institutions has been attracting attention and

the matter was considered in depth by the Committees specially

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constituted consisting of the experts in the field. In the prevalent

situation where the amounts of dues are huge and hope of early

recovery is less, it cannot be said that a more effective legislation

for the purpose was uncalled for or that it could not be resorted

to. It is again to be noted that after the Report of the Narasimham

Committee, yet another Committee was constituted headed by Mr

Andhyarujina for bringing about the needed steps within the legal

framework. We are therefore, unable to find much substance in the

submission made on behalf of the petitioners that while the

Recovery of Debts Due to Banks and Financial Institutions Act

was in operation it was uncalled for to have yet another legislation

for the recovery of the mounting dues. Considering the totality of

circumstances and the financial climate world over, if it was

thought as a matter of policy to have yet speedier legal method to

recover the dues, such a policy decision cannot be faulted with nor

is it a matter to be gone into by the courts to test the legitimacy of

such a measure relating to financial policy.”

33. In this regard, reference may be made to the following observations of

this Court in the case of Satyawati Tondon (supra). The relevant paras are

being reproduced hereunder:

“1. … With a view to give impetus to the industrial development of

the country, the Central and State Governments encouraged the

banks and other financial institutions to formulate liberal policies

for grant of loans and other financial facilities to those who wanted

to set up new industrial units or expand the existing units. Many

hundred thousand took advantage of easy financing by the banks

and other financial institutions but a large number of them did not

repay the amount of loan, etc. Not only this, they instituted frivolous

cases and succeeded in persuading the civil courts to pass orders of

injunction against the steps taken by banks and financial

institutions to recover their dues. Due to lack of adequate

infrastructure and non-availability of manpower, the regular courts

could not accomplish the task of expeditiously adjudicating the

cases instituted by banks and other financial institutions for

recovery of their dues. As a result, several hundred crores of public

money got blocked in unproductive ventures.

Page 30 of 111

2. In order to redeem the situation, the Government of India

constituted a committee under the Chairmanship of Shri T. Tiwari

to examine the legal and other difficulties faced by banks and

financial institutions in the recovery of their dues and suggest

remedial measures. The Tiwari Committee noted that the existing

procedure for recovery was very cumbersome and suggested that

special tribunals be set up for recovery of the dues of banks and

financial institutions by following a summary procedure. The Tiwari

Committee also prepared a draft of the proposed legislation which

contained a provision for disposal of cases in three months and

conferment of power upon the Recovery Officer for expeditious

execution of orders made by adjudicating bodies.”

34. Section 13 of the SARFAESI Act contains the provisions relating to the

enforcement of the security interest and the manner in which the same may

be done by the secured creditor without the intervention of the Court or

Tribunal in accordance with its provisions, and reads as under: -

“13. Enforcement of security interest.–(1) Notwithstanding

anything contained in section 69 or section 69A of the Transfer of

Property Act, 1882 (4 of 1882), any security interest created in

favour of any secured creditor may be enforced, without the

intervention of the court or tribunal, by such creditor in

accordance with the provisions of this Act.

(2) Where any borrower, who is under a liability to a secured

creditor under a security agreement, makes any default in

repayment of secured debt or any instalment thereof, and his

account in respect of such debt is classified by the secured creditor

as non-performing asset, then, the secured creditor may require

the borrower by notice in writing to discharge in full his liabilities

to the secured creditor within sixty days from the date of notice

failing which the secured creditor shall be entitled to exercise all

or any of the rights under sub-section (4).

Provided that –

(i) the requirement of classification of secured debt as non-

performing asset under this sub-section shall not apply to a

borrower who has raised funds through issue of debt securities;

and

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(ii) in the event of default, the debenture trustee shall be entitled

to enforce security interest in the same manner as provided under

this section with such modifications as may be necessary and in

accordance with the terms and conditions of security documents

executed in favour of the debenture trustee;

(3) The notice referred to in sub-section (2) shall give details of

the amount payable by the borrower and the secured assets

intended to be enforced by the secured creditor in the event of non-

payment of secured debts by the borrower.

(3A) If, on receipt of the notice under sub-section (2), the borrower

makes any representation or raises any objection, the secured

creditor shall consider such representation or objection and if the

secured creditor comes to the conclusion that such representation

or objection is not acceptable or tenable, he shall

communicate within fifteen days of receipt of such representation

or objection the reasons for non-acceptance of the representation

or objection to the borrower:

Provided that the reasons so communicated or the likely action of

the secured creditor at the stage of communication of reasons shall

not confer any right upon the borrower to prefer an application to

the Debts Recovery Tribunal under section 17 or the Court of

District Judge under section 17A.

(4) In case the borrower fails to discharge his liability in full

within the period specified in sub-section (2), the secured creditor

may take recourse to one or more of the following measures to

recover his secured debt, namely:—

(a) take possession of the secured assets of the borrower including

the right to transfer by way of lease, assignment or sale for

realising the secured asset;

(b) take over the management of the business of the borrower

including the right to transfer by way of lease, assignment or sale

for realising the secured asset:

Provided that the right to transfer by way of lease, assignment or

sale shall be exercised only where the substantial part of the

business of the borrower is held as security for the debt:

Page 32 of 111

Provided further that where the management of whole of the

business or part of the business is severable, the secured creditor

shall take over the management of such business of the borrower

which is relatable to the security for the debt;

(c) appoint any person (hereafter referred to as the manager), to

manage the secured assets the possession of which has been

taken over by the secured creditor;

(d) require at any time by notice in writing, any person who has

acquired any of the secured assets from the borrower and from

whom any money is due or may become due to the borrower, to

pay the secured creditor, so much of the money as is sufficient to

pay the secured debt.

(5) Any payment made by any person referred to in clause (d) of

sub-section (4) to the secured creditor shall give such person a

valid discharge as if he has made payment to the borrower.

(5A) Where the sale of an immovable property, for which a reserve

price has been specified, has been postponed for want of a bid of

an amount not less than such reserve price, it shall be lawful for

any officer of the secured creditor, if so authorised by the secured

creditor in this behalf, to bid for the immovable property on behalf

of the secured creditor at any subsequent sale.

(5B) Where the secured creditor, referred to in sub-section (5A),

is declared to be the purchaser of the immovable property at any

subsequent sale, the amount of the purchase price shall be

adjusted towards the amount of the claim of the secured creditor

for which the auction of enforcement of security interest is taken

by the secured creditor, under sub-section (4) of section 13.

(5C) The provisions of section 9 of the Banking Regulation Act,

1949 (10 of 1949) shall, as far as may be, apply to the immovable

property acquired by secured creditor under sub-section (5A).

(6) Any transfer of secured asset after taking possession thereof or

take over of management under sub-section (4), by the secured

creditor or by the manager on behalf of the secured creditor shall

vest in the transferee all rights in, or in relation to, the secured

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asset transferred as if the transfer had been made by the owner of

such secured asset.

(7) Where any action has been taken against a borrower under the

provisions of sub-section (4), all costs, charges and expenses

which, in the opinion of the secured creditor, have been properly

incurred by him or any expenses incidental thereto, shall be

recoverable from the borrower and the money which is received

by the secured creditor shall, in the absence of any contract to the

contrary, be held by him in trust, to be applied, firstly, in payment

of such costs, charges and expenses and secondly, in discharge of

the dues of the secured creditor and the residue of the money so

received shall be paid to the person entitled thereto in accordance

with his rights and interests.

(8) Where the amount of dues of the secured creditor together with

all costs, charges and expenses incurred by him is tendered to the

secured creditor at any time before the date of publication of

notice for public auction or inviting quotations or tender from

public or private treaty for transfer by way of lease, assignment or

sale of the secured assets,-

(i) the secured assets shall not be transferred by way of lease

assignment or sale by the secured creditor; and

(ii) in case, any step has been taken by the secured creditor for

transfer by way of lease or assignment or sale of the assets before

tendering of such amount under this sub-section, no further step

shall be taken by such secured creditor for transfer by way of lease

or assignment or sale of such secured assets.

(9) Subject to the provisions of the Insolvency and Bankruptcy

Code, 2016, in the case of financing of a financial asset by more

than one secured creditors or joint financing of a financial asset

by secured creditors, no secured creditor shall be entitled to

exercise any or all of the rights conferred on him under or

pursuant to sub-section (4) unless exercise of such right is agreed

upon by the secured creditors representing not less than sixty per

cent. in value of the amount outstanding as on a record date and

such action shall be binding on all the secured creditors:

Provided that in the case of a company in liquidation, the amount

realised from the sale of secured assets shall be distributed in

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accordance with the provisions of section 529A of the Companies

Act, 1956 (1 of 1956):

Provided further that in the case of a company being wound up on

or after the commencement of this Act, the secured creditor of such

company, who opts to realise his security instead of relinquishing

his security and proving his debt under proviso to sub-section (1)

of section 529 of the Companies Act, 1956 (1 of 1956), may retain

the sale proceeds of his secured assets after depositing the

workmen’s dues with the liquidator in accordance with the

provisions of section 529A of that Act:

Provided also that liquidator referred to in the second proviso

shall intimate the secured creditor the workmen’s dues in

accordance with the provisions of section 529A of the Companies

Act, 1956 (1 of 1956) and in case such workmen’s dues cannot be

ascertained, the liquidator shall intimate the estimated amount of

workmen’s dues under that section to the secured creditor and in

such case the secured creditor may retain the sale proceeds of the

secured assets after depositing the amount of such estimate dues

with the liquidator:

Provided also that in case the secured creditor deposits the

estimated amount of workmen’s dues, such creditor shall be liable

to pay the balance of the workmen’s dues or entitled to receive the

excess amount, if any, deposited by the secured creditor with the

liquidator:

Provided also that the secured creditor shall furnish an

undertaking to the liquidator to pay the balance of the workmen’s

dues, if any.

Explanation.— For the purposes of this sub-section,—

(a) “record date” means the date agreed upon by the secured

creditors representing not less than sixty per cent. in value of the

amount outstanding on such date;

(b) “amount outstanding” shall include principal, interest and any

other dues payable by the borrower to the secured creditor in

respect of secured asset as per the books of account of the secured

creditor.

Page 35 of 111

(10) Where dues of the secured creditor are not fully satisfied with

the sale proceeds of the secured assets, the secured creditor may

file an application in the form and manner as may be prescribed

to the Debts Recovery Tribunal having jurisdiction or a competent

court, as the case may be, for recovery of the balance amount from

the borrower.

(11) Without prejudice to the rights conferred on the secured

creditor under or by this section, secured creditor shall be entitled

to proceed against the guarantors or sell the pledged assets

without first taking any of the measured specifies in clauses (a) to

(d) of sub-section (4) in relation to the secured assets under this

Act.

(12) The rights of a secured creditor under this Act may be

exercised by one or more of his officers authorised in this behalf

in such manner as may be prescribed.

(13) No borrower shall, after receipt of notice referred to in sub-

section (2), transfer by way of sale, lease or otherwise (other than

in the ordinary course of his business) any of his secured assets

referred to in the notice, without prior written consent of the

secured creditor.”

(Emphasis supplied)

35. We are concerned in the present litigation with sub-section 8 of Section

13 of the SARFAESI Act referred to above. Section 13(8) is in two parts; (i)

it enables the borrower to exercise his right of redemption upto a particular

point of time and at the same time (ii) it enables the secured creditor to

exercise its power to deal or dispose off the secured asset. First, by stipulating

the time limit during which the borrower can tender all the dues with interest,

costs and charges to the secured creditor, and secondly, by providing as to

when the secured creditor can proceed to sell, auction, assign or lease the

secured asset.

Page 36 of 111

36. Rules 8 and 9 respectively of the Rules of 2002 prescribe the procedure

and formalities to be followed for the sale of immovable secured asset as per

Section 13 of the SARFAESI Act and reads as under: -

“8. Sale of immovable secured assets. – (1) Where the secured

asset is an immovable property, the authorised officer shall take

or cause to be taken possession, by delivering a possession notice

prepared as nearly as possible in Appendix IV to these rules, to

the borrower and by affixing the possession notice on the outer

door or at such conspicuous place of the property.

(2) The possession notice as referred to in sub-rule (1) shall also

be published, as soon as possible but in any case not later than

seven days from the date of taking possession, in two leading

newspaper one in vernacular language having sufficient

circulation in that locality, by the authorised officer.

(2A) All notices under these rules may also be served upon the

borrower through electronic mode of service, in addition to the

modes prescribed under sub-rule (1) and sub-rule (2) of rule 8.

(3) In the event of possession of immovable property is actually

taken by the authorised officer, such property shall be kept in his

own custody or in the custody of any person authorised or

appointed by him, who shall take as much care of the property in

his custody as a owner of ordinary prudence would, under the

similar circumstances, take of such property.

(4) The authorised officer shall take steps for preservation and

protection of secured assets and insure them, if necessary, till they

are sold or otherwise disposed of.

(5) Before effecting sale of the immovable property referred to in

sub-rule (1) of rule 9, the authorised officer shall obtain valuation

of the property from an approved valuer and in consultation with

the secured creditor, fix the reserve price of the property and may

sell the whole or any part of such immovable secured asset by any

of the following methods:-

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(a) by obtaining quotations from the persons dealing with

similar secured assets or otherwise interested in buying the

such assets; or

(b) by inviting tenders from the public;

(c) by holding public auction including through e-auction

mode; or

(d) by private treaty.

Provided that in case of sale of immovable property in the State of

Jammu and Kashmir, the provision of Jammu and Kashmir

Transfer of Property Act, 1977 shall apply to the person who

acquires such property in the State.

(6) the authorised officer shall serve to the borrower a notice of

thirty days for sale of the immovable secured assets, under sub-

rule (5):

Provided that if the sale of such secured asset is being effected by

either inviting tenders from the public or by holding public

auction, the secured creditor shall cause a public notice in the

Form given in Appendix IV-A to be published in two leading

newspapers including one in vernacular language having wide

circulation in the locality.

(7) every notice of sale shall be affixed on the conspicuous part of

the immovable property and the authorised officer shall upload the

detailed terms and conditions of the sale, on the web-site of the

secured creditor, which shall include;

(a) the description of the immovable property to be sold,

including the details of the encumbrances known to the

secured creditor;

(b) the secured debt for recovery of which the property is to

be sold;

(c) reserve price of the immovable secured assets below

which the property may not be sold;

(d) time and place of public auction or the time after which

sale by any other mode shall be completed;

Page 38 of 111

(e) deposit of earnest money as may be stipulated by the

secured creditor;

(f) any other terms and conditions, which the authorised

officer considers it necessary for a purchaser to know the

nature and value of the property.

(8) Sale by any methods other than public auction or public tender,

shall be on such terms as may be settled between the secured

creditors and the proposed purchaser in writing.

9. Time of sale, issue of sale certificate and delivery of

possession, etc.–(1) No sale of immovable property under these

rules, in first instance shall take place before the expiry of thirty

days from the date on which the public notice of sale is published

in newspapers as referred to in the proviso to sub-rule (6) of rule

8 or notice of sale has been served to the borrower:

Provided further that if sale of immovable property by any one of

the methods specified by sub-rule (5) of rule 8 fails and sale is

required to be conducted again, the authorised officer shall serve,

affix and publish notice of sale of not less than fifteen days to the

borrower, for any subsequent sale.

(2) The sale shall be confirmed in favour of the purchaser who has

offered the highest sale price in his bid or tender or quotation or

offer to the authorised officer and shall be subject to confirmation

by the secured creditor:

Provided that no sale under this rule shall be confirmed, if the

amount offered by sale price is less than the reserve price,

specified under sub-rule (5) of rule 8:

Provided further that if the authorised officer fails to obtain a

price higher than the reserve price, he may, with the consent of the

borrower and the secured creditor effect the sale at such price.

(3) On every sale of immovable property, the purchaser shall

immediately, i.e. on the same day or not later than next working

day, as the case may be, pay a deposit of twenty five per cent. of

the amount of the sale price, which is inclusive of earnest money

deposited, if any, to the authorised officer conducting the sale and

in default of such deposit, the property shall be sold again;

Page 39 of 111

(4) The balance amount of purchase price payable shall be paid

by the purchaser to the authorised officer on or before the fifteenth

day of confirmation of sale of the immovable property or such

extended period as may be agreed upon in writing between the

purchaser and the secured creditor, in any case not exceeding

three months.

(5) In default of payment within the period mentioned in sub-rule

(4), the deposit shall be forfeited to the secured creditor and the

property shall be resold and the defaulting purchaser shall forfeit

all claim to the property or to any part of the sum for which it may

be subsequently sold.

(6) On confirmation of sale by the secured creditor and if the terms

of payment have been complied with, the authorised officer

exercising the power of sale shall issue a certificate of sale of the

immovable property in favour of the purchaser in the Form given

in Appendix V to these rules.

(7) Where the immovable property sold is subject to any

encumbrances, the authorised officer may, if he thinks fit, allow

the purchaser to deposit with him the money required to discharge

the encumbrances and any interest due thereon together with such

additional amount that may be sufficient to meet the contingencies

or further cost, expenses and interest as may be determined by

him.

Provided that if after meeting the cost of removing encumbrances

and contingencies there is any surplus available out of money

deposited by the purchaser such surplus shall be paid to the

purchaser within fifteen days, from date of finalisation of the sale.

(8) On such deposit of money for discharge of the encumbrances,

the authorised officer shall issue or cause the purchaser to issue

notices to the persons interested in or entitled to the money

deposited with him and take steps to make, the payment

accordingly.

(9) The authorised officer shall deliver the property to the

purchaser free from encumbrances known to the secured creditor

on deposit of money as specified in sub-rule (7) above.

Page 40 of 111

(10) The certificate of sale issued under sub-rule (6) shall

specifically mention that whether the purchaser has purchased the

immovable secured asset free from any encumbrances known to

the secured creditor or not.”

37. From the above provisions under Rule 8(6) it is clear that the authorised

officer of the Bank shall serve on the borrower a notice of thirty days for sale

of immovable property, and that if the sale of such secured assets is by way of

public auction, the Bank/secured creditor, shall cause publication of such

notice in two leading newspapers, one in vernacular, language having

sufficient circulation in the locality by setting the out the terms of sale,

mentioned in the said provision; and under sub-rule (1) of Rule 9, such sale of

immovable of property under these Rules shall not take place before the expiry

of thirty days from the date on which the public notice of sale is published in

newspapers as referred to in the proviso to sub-rule (6), or notice of sale has

been served to the borrower.

38. In Mardia Chemicals (supra), this Court examined the provision of

Section 13 of the SARFAESI Act and made the following relevant

observations reproduced below: -

“38. We may now consider the main enforcing provision which is

pivotal to the whole controversy, namely, Section 13 in Chapter

III of the Act. It provides that a secured creditor may enforce any

security interest without intervention of the court or tribunal

irrespective of Section 69 or Section 69-A of the Transfer of

Property Act where according to sub-section (2) of Section 13, the

borrower is a defaulter in repayment of the secured debt or any

instalment of repayment and further the debt standing against him

Page 41 of 111

has been classified as a non-performing asset by the secured

creditor. Sub-section (2) of Section 13 further provides that before

taking any steps in the direction of realising the dues, the secured

creditor must serve a notice in writing to the borrower requiring

him to discharge the liabilities within a period of 60 days failing

which the secured creditor would be entitled to take any of the

measures as provided in sub-section (4) of Section 13. It may also

be noted that as per sub-section (3) of Section 13 a notice given to

the borrower must contain the details of the amounts payable and

the secured assets against which the secured creditor proposes to

proceed in the event of non-compliance with the notice given under

sub-section (2) of Section 13.”

39. Section 35 of the SARFAESI Act contains the overriding clause and

provides that the Act shall override any other law which is inconsistent with

its provisions, and reads as under: -

“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.”

40. Section 37 of the SARFAESI Act provides that the provisions of the

SARFAESI Act shall be in addition to the Acts mentioned in or and any other

law for the time being in force and that the other laws shall also be applicable

alongside the SARFAESI Act, and reads as under: -

“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.”

Page 42 of 111

41. This Court in Madras Petrochem Ltd. & Anr. v. Board for Industrial

and Financial Reconstruction & Ors. reported in (2016) 4 SCC 1,

recapitulated the object behind the enactment of the SARFAESI Act and in

that context examined the purpose of Sections 13, 35 and 37 respectively of

the SARFAESI Act with the following observations given as under: -

“16. It is important at this stage to refer to the genesis of these

three legislations. Each of them deals with different aspects of

recovery of debts due to banks and financial institutions. Two of

them refer to creditors' interests and how best to deal with

recovery of outstanding loans and advances made by them on the

one hand, whereas the Sick Industrial Companies (Special

Provisions) Act, 1985, on the other hand, deals with certain

debtors which are sick industrial companies [i.e. companies

running industries named in the Schedule to the Industries

(Development and Regulation) Act, 1951] and whether such

“debtors” having become “sick”, are to be rehabilitated. The

question, therefore, is whether the public interest in recovering

debts due to banks and financial institutions is to give way to the

public interest in rehabilitation of sick industrial companies,

regard being had to the present economic scenario in the country,

as reflected in parliamentary legislation.

xxx xxx xxx

19. While this Act had worked for a period of about 7 years, the

Recovery of Debts Due to Banks and Financial Institutions Act,

1993 was brought into force, pursuant to various committee

reports. The Statement of Objects and Reasons for this Act reads

as follows:

“Statement of Objects and Reasons of the Recovery of Debts

Due to Banks and Financial Institutions Act, 1993

1. Banks and financial institutions at present experience

considerable difficulties in recovering loans and enforcement of

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securities charged with them. The existing procedure for

recovery of debts due to the banks and financial institutions has

blocked a significant portion of their funds in unproductive

assets, the value of which deteriorates with the passage of time.

The Committee on the Financial System headed by Shri M.

Narasimham has considered the setting up of the Special

Tribunals with special powers for adjudication of such matters

and speedy recovery as critical to the successful implementation

of the financial sector reforms. An urgent need was, therefore,

felt to work out a suitable mechanism through which the dues to

the banks and financial institutions could be realised without

delay. In 1981, a Committee under the Chairmanship of Shri T.

Tiwari had examined the legal and other difficulties faced by

banks and financial institutions and suggested remedial

measures including changes in law. The Tiwari Committee had

also suggested setting up of Special Tribunals for recovery of

dues of the banks and financial institutions by following a

summary procedure. The setting up of Special Tribunals will not

only fulfil a long-felt need, but also will be an important step in

the implementation of the Report of Narasimham Committee.

Whereas on 30-9-1990 more than fifteen lakhs of cases filed by

the public sector banks and about 304 cases filed by the

financial institutions were pending in various courts, recovery

of debts involved more than Rs 5622 crores in dues of public

sector banks and about Rs 391 crores of dues of the financial

institutions. The locking up of such huge amount of public

money in litigation prevents proper utilisation and recycling of

the funds for the development of the country.

2. The Bill seeks to provide for the establishment of Tribunals

and Appellate Tribunals for expeditious adjudication and

recovery of debts due to banks and financial institutions. Notes

on clauses explain in detail the provisions of the Bill.”

20. The Recovery of Debts Due to Banks and Financial Institutions

Act, 1993 took away the jurisdiction of the courts and vested this

jurisdiction in tribunals established by the Act so as to ensure

speedy recovery of debts due to the banks and financial institutions

mentioned therein. This Act also included one appeal to the

Appellate Tribunal, and transfer of all suits or other proceedings

pending before any court to tribunals set up under the Act. The Act

contained a non obstante clause in Section 34 stating that its

provisions will have effect notwithstanding anything inconsistent

contained in any other law for the time being in force or in any

Page 44 of 111

instrument having effect by virtue of any other law. In the year

2000, this Act was amended so as to incorporate a new sub-section

(2) in Section 34 together with a saving provision in sub-section

(1). It is of some interest to note that this Act was to be in addition

to and not in derogation of various Financial Corporation Acts

and the Sick Industrial Companies (Special Provisions) Act, 1985.

Clearly, therefore, the object of the 2000 Amendment to the

Recovery of Debts Due to Banks and Financial Institutions Act,

1993 was to make the Sick Industrial Companies (Special

Provisions) Act, 1985 prevail over it.

21. Regard being had to the poor working of the Recovery of Debts

Due to Banks and Financial Institutions Act, 1993, the

Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002 was brought into force

in the year 2002. …”

22. This 2002 Act was brought into force as a result of two

committee reports which opined that recovery of debts due to

banks and financial institutions was not moving as speedily as

expected, and that, therefore, certain other measures would have

to be put in place in order that these banks and financial

institutions would better be able to recover debts owing to them.

xxx xxx xxx

24. The “pivotal” provision, namely, Section 13 of the said Act

makes it clear that banks and financial institutions would now no

longer have to wait for a tribunal judgment under the Recovery of

Debts Due to Banks and Financial Institutions Act, 1993 to be able

to recover debts owing to them. They could, by following the

procedure laid down in Section 13, take direct action against the

debtors by taking possession of secured assets and selling them;

they could also take over the management of the business of the

borrower. They could also appoint any person to manage the

secured assets possession of which has been taken over by them,

and could require, at any time by notice in writing to any person

who has acquired any of the secured assets from the borrower and

from whom any money is due or may become due from the

borrower, to pay the secured creditor so much of the money as is

sufficient to pay the secured debt.

Page 45 of 111

25. In order to further the objects of the Securitisation and

Reconstruction of Financial Assets and Enforcement of Security

Interest Act, 2002, the Act contains a non obstante clause in

Section 35 and also contains various Acts in Section 37 which are

to be in addition to and not in derogation of the Securitisation and

Reconstruction of Financial Assets and Enforcement of Security

Interest Act, 2002. Three of these Acts, namely, the Companies

Act, 1956, the Securities Contracts (Regulation) Act, 1956 and the

Securities and Exchange Board of India Act, 1992, relate to

securities generally, whereas the Recovery of Debts Due to Banks

and Financial Institutions Act, 1993 relates to recovery of debts

due to banks and financial institutions. Significantly, under

Section 41 of this Act, three Acts are, by the Schedule to this Act,

amended. We are concerned with the third of such Acts, namely,

the Sick Industrial Companies (Special Provisions) Act, 1985, in

Section 15(1) of which two provisos have been added. It is the

correct interpretation of the second of these provisos on which the

fate of these appeals ultimately hangs.”

(Emphasis supplied)

REDEMPTION OF MORTGAGE UNDER SECTION 60 OF THE

TRANSFER OF PROPERTY ACT, 1882

42. Section 60 of the Act 1882 provides the general statutory right of the

mortgagor to redeem the mortgage and reads as below: -

“60. Right of mortgagor to redeem.–At any time after the principal

money has become due, the mortgagor has a right, on payment or

tender, at a proper time and place, of the mortgage-money, to

require the mortgagee (a) to deliver to the mortgagor the mortgage-

deed and all documents relating to the mortgaged property which

are in the possession or power of the mortgage, (b) where the

mortgage is in possession of the mortgaged property, to deliver

possession thereof to the mortgagor, and (c) at the cost of the

mortgagor either to re-transfer the mortgaged property to him or to

such third person as he may direct, or to execute and (where the

mortgage has been effected by a registered instrument) to have

registered an acknowledgment in writing that any right in

Page 46 of 111

derogation of his interest transferred to the mortgage has been

extinguished:

Provided that the right conferred by this section has not been

extinguished by act of the parties or by decree of a Court.

The right conferred by this section is called a right to redeem and a

suit to enforce it is called a suit for redemption.

Nothing in this section shall be deemed to render invalid any

provision to the effect that, if the time fixed for payment of the

principal money has been allowed to pass or no such time has been

fixed, the mortgage shall be entitled to reasonable notice before

payment or tender of such money.

Redemption of portion of mortgaged property.—Nothing in this

section shall entitle a person interested in a share only of the

mortgaged property to redeem his own share only, on payment of a

proportionate part of the amount remaining due on the mortgage,

except only where a mortgagee, or, if there are more mortgages

than one, all such mortgages, has or have acquired, in whole or in

part, the share of a mortgagor.”

43. This Court in Narandas Karsondas (supra), upon examination of

Section 60 of the Act 1882, held that the mortgagor’s right to redeem will be

extinguished only after completion of sale by a registered deed, and made the

following relevant observations reproduced below: -

“28. The Rights and Liabilities of Mortgagor are dealt with in

Section 60 of the Transfer of Property Act. It is that at any time

after the principal money has become due, the mortgagor has a

right, on payment or tender, at a proper time and place, of the

mortgage-money, to require the mortgagee (a) to deliver to the

mortgagor the mortgage-deed and all documents relating to the

mortgaged property which are in the possession or power of the

mortgagee, (b) where the mortgagee is in possession of the

mortgaged property to deliver possession thereof to the mortgagor,

and (c) at the cost of the mortgagor either to re-transfer the

mortgaged property to him or to such third person as he may

Page 47 of 111

direct, or to execute and to have registered an acknowledgment in

writing that any right in derogation of his interest transferred to

the mortgagee has been extinguished. There is a proviso that the

right conferred by this section has not been extinguished by the act

of the parties or by decree of a Court. The right conferred by

Section 60 of the Transfer of Property Act is called a right to

redeem. Therefore, the said Section 60 provides for a right of

redemption provided that the right has not been extinguished by

the act of parties.

xxx xxx xxx

33. In India, the word “transfer” is defined with reference to the

word “convey”. The word “transfer” in English law in its

narrower and more usual sense refers to the transfer of an estate

in land. Section 205 of the Law of Property Act in England defines:

“Conveyance” includes a mortgage, charge, lease, assent, vesting

declaration, vesting instrument. The word “conveys” in Section 5

of the Transfer of Property Act is used in the wider sense of

conveying ownership.

34. 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. The combined effect of

Section 54 of the Transfer of Property Act and Section 17 of the

Indian Registration Act is that a contract for sale in respect of

immovable property of the value of more than one hundred rupees

without registration cannot extinguish the equity of redemption. In

India it is only on execution of the 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. The extinction of the right of redemption has to be

subsequent to the deed conferring such power. The right of

redemption is not extinguished at the expiry of the period. The

equity of redemption is not extinguished by mere contract for sale.

35. The mortgagor's right to redeem will survive until there has

been completion of sale by the mortgagee by a registered deed. In

England a sale of property takes place by agreement but it is not

so in our country. The power to sell shall not be exercised unless

Page 48 of 111

and until notice in writing requiring payment of the principal

money has been served on the mortgagor. Further Section 69(3) of

the Transfer of Property Act shows that when a sale has been made

in professed exercise of such a power, the title of the purchaser

shall not be impeachable on the ground that no case had arisen to

authorise the sale. Therefore, until the sale is complete by

registration the mortgagor does not lose right of redemption.

xxx xxx xxx

37. In view of the fact that only on execution of conveyance,

ownership passes from one party to another it cannot be held that

the mortgagor lost the right of redemption just because the

property was put to auction. The mortgagor has a right to redeem

unless the sale of the property was complete by registration in

accordance with the provisions of the Registration Act.”

(Emphasis supplied)

44. A similar view was taken by this Court in L.K. Trust v. EDC Limited

and Others reported in (2011) 6 SCC 780 wherein it was observed as follows:

“53. On analysis of arguments advanced at the Bar, this Court

finds that the proposition that in India it is only on execution of

conveyance and the registration of transfer of the mortgagor's

interest by registered instrument that the mortgagor's right of

redemption stands extinguished is well settled. Further it is not the

case of the appellant that a registered Sale Deed had been

executed between the appellant-trust and the respondent No. 1

pursuant to the Resolution passed by the respondent No. 1 and,

therefore, in terms of Section 54 of the Transfer of Property Act

1882 no title relating to the disputed property had passed to the

appellant at all.

54. What is ruled in Narandas Karsandas (Supra) is that in India,

there is no equity or right in property created in favour of the

purchaser by the contract between the mortgagee and the

proposed purchaser and in view of the fact that only on execution

of conveyance, ownership passes from one party to another, it

cannot be held that the mortgagor lost the right of redemption just

because the property was put to auction. In this case, the

respondent Housing Society, the mortgagor, had taken loan from

Page 49 of 111

the co-respondent Finance Society and mortgaged the property to

it under an English mortgage. On default, the mortgagee exercised

its right under the mortgage to sell the property without

intervention of Court and after notice, put the property to sale by

public auction. The appellant auction purchaser paid the sums

due. Before the sale was completed by registration etc. the

mortgagor sought to exercise his right of redemption by tendering

the amount due. The appellant had based his case on the plea that

in such a situation the mortgagee acts as agent of the mortgagor

and hence binds him.

55. Rejecting the appeal, this Court has 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 or by decree of a court. What is

held by this Court is that, in India it is only on execution of the

conveyance and registration of transfer of the mortgagor's interest

by registered instrument that the mortgagor's right of redemption

will be extinguished but the conferment of power to sell the

mortgaged property without intervention of the Court, in a

mortgage deed, in itself, will not deprive the mortgagor of his right

of redemption. This Court in the said case further explained that the

extinction of the right of redemption has to be subsequent to the

deed conferring such power and the right to redemption is not

extinguished at the expiry of the period. This Court emphasized in

the said decision that the equity of redemption is not extinguished

by mere contract for sale.”

(Emphasis supplied)

REDEMPTION OF MORTGAGE UNDER THE SARFAESI ACT

45. Sub-section (8) of Section 13 of the SARFAESI Act, as originally

enacted, stated as under: -

“13. Enforcement of security interest.–

(8) If the dues of the secured creditor together with all costs,

charges and expenses incurred by him are tendered to the secured

creditor at any time before the date fixed for sale or transfer, the

secured asset shall not be sold or transferred by the secured

Page 50 of 111

creditor, and no further step shall be taken by him for transfer or

sale of that secured asset.”

46. In Mathew Varghese (supra), this Court had the occasion to consider

the right of redemption of mortgage under the SARFAESI Act vis-à-vis the

Act 1882, wherein, this Court made the following relevant observations, being

reproduced below: -

“38. … a mere conferment of power to sell without intervention of

the court in the mortgage deed by itself will not deprive the

mortgagor of his right to redemption, that the extinction of the

right of redemption has to be subsequent to the deed conferring

such power, that the right of redemption is not extinguished at the

expiry of the period, that the equity of redemption is not

extinguished by mere contract for sale and that the mortgagor's

right to redeem will survive until there has been completion of sale

by the mortgagee by a registered deed. The ratio is also to the

effect that the power to sell should not be exercised unless and

until notice in writing requiring payment of the principal money

has been served on the mortgagor. The above proposition of law

of course was laid down by this Court in Narandas Karsondas

[Narandas Karsondas v. S.A. Kamtam, (1977) 3 SCC 247] while

construing Section 60 of the TP Act. But as rightly contended by

Mr Shyam Divan, we fail to note any distinction to be drawn while

applying the abovesaid principles, even in respect of the sale of

secured assets created by way of a secured interest in favour of the

secured creditor under the provisions of the SARFAESI Act, read

along with the relevant Rules. We say so, inasmuch as, we find that

even while setting out the principles in respect of the redemption

of a mortgage by applying Section 60 of the TP Act, this Court has

envisaged the situation where such mortgage deed providing for

resorting to the sale of the mortgage property without the

intervention of the Court. Keeping the said situation in mind, it

was held that the right of redemption will not get extinguished

merely at the expiry of the period mentioned in the mortgage deed.

It was also stated that the equity of redemption is not extinguished

by mere contract for sale and the most important and vital

principle stated was that the mortgagor's right to redeem will

Page 51 of 111

survive until there has been completion of sale by the mortgagee

by a registered deed. The completion of sale, it is stated, can be

held to be so unless and until notice in writing requiring payment

of the principal money has been served on the mortgagor.

Therefore, it was held that until the sale is complete by registration

of sale, the mortgagor does not lose the right of redemption. It was

also made clear that it was erroneous to suggest that the

mortgagee would be acting as the agent of the mortgagor in selling

the property.

39. When we apply the above principles stated with reference to

Section 60 of the TP Act in respect of a secured interest in a

secured asset in favour of the secured creditor under the

provisions of the SARFAESI Act and the relevant Rules

applicable, under Section 13(1), a free hand is given to a secured

creditor to resort to a sale without the intervention of the court or

tribunal. However, under Section 13(8), it is clearly stipulated that

the mortgagor i.e. the borrower, who is otherwise called as a

debtor, retains his full right to redeem the property by tendering

all the dues to the secured creditor at any time before the date fixed

for sale or transfer. Under sub-section (8) of Section 13, as noted

earlier, the secured asset should not be sold or transferred by the

secured creditor when such tender is made by the borrower at the

last moment before the sale or transfer. The said sub-section also

states that no further step should be taken by the secured creditor

for transfer or sale of that secured asset. We find no reason to state

that the principles laid down with reference to Section 60 of the

TP Act, which is general in nature in respect of all mortgages, can

have no application in respect of a secured interest in a secured

asset created in favour of a secured creditor, as all the abovestated

principles apply on all fours in respect of a transaction as between

the debtor and secured creditor under the provisions of

the SARFAESI Act.

xxx xxx xxx

41. … even if there was some difference in the amount tendered by

the borrower while exercising his right of redemption under

Section 13(8), the question of difference in the amount should be

kept open and can be decided subsequently, but on that score the

right of redemption of the mortgagor cannot be frustrated.

Elaborating the statement of law made therein, we wish to state

that the endeavour or the role of a secured creditor in such a

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situation while resorting to any sale for the realisation of dues of

a mortgaged asset, should be that the mortgagor is entitled for

some lenience, if not more to be shown, to enable the borrower to

tender the amounts due in order to ensure that the constitutional

right to property is preserved, rather than it being deprived of.”

(Emphasis supplied)

47. In Dwarika Prasad v. State of Uttar Pradesh reported in (2018) 5 SCC

491, this Court speaking through one of us Dr. D.Y. Chandrachud, CJI.,

considered the unamended Section 13(8) of the SARFAESI Act, keeping in

mind the decision in the case of Mathew Varghese (supra). The Court took

the view that the right of redemption of mortgage is not lost until there is a

transfer by a registered instrument. The following observations as contained

in para 8 of the judgment are reproduced below:

“8. … These provisions have fallen for interpretation before this

Court in Mathew Varghese. Dwelling on Section 60 of the Transfer

of the Property Act, 1882 this Court held that the right of

redemption is available to a mortgagor unless it stands

extinguished by an act of parties. The right of the mortgagor to

redeem the property survives until there has been a transfer of the

mortgagor's interest by a registered instrument of sale. …”

48. In, yet one another decision of this Court in Allokam Peddabbayya &

Anr. v. Allahabad Bank & Ors. reported in (2017) 8 SCC 272, a similar view

was taken. The relevant observations made therein are as under:

“23. The aforesaid discussion leads to the conclusion that the

plaintiffs lost the right to sue for redemption of the mortgaged

property by virtue of the proviso to Section 60 of the Act, no sooner

that the mortgaged property was put to auction-sale in a suit for

foreclosure and sale certificate was issued in favour of Defendant

Page 53 of 111

2. There remained no property mortgaged to be redeemed. The

right to redemption could not be claimed in the abstract.”

49. Thus, prior to the amendment of Section 13(8) of the SARFAESI Act,

this Court consistently held, that the borrower shall continue to have a right

of redemption of mortgage until the execution of the conveyance of the

secured asset by way of a registered instrument. Furthermore, this Court in

Mathew Varghese (supra) found no inconsistency between the unamended

Section 13(8) of SARFAESI Act and the general right of redemption under

Section 60 of the Act 1882.

50. However, later on 1

st

September, 2016, the Enforcement of Security

Interest and Recovery of Debt Laws and Miscellaneous Provisions

(Amendment) Act, 2016 (“2016 Amendment”) was enacted which inter-alia

amended sub-section 8 of Section 13 of the SARFAESI Act, and substituted

the words “any time before the date fixed for sale or transfer” of the original

provision with “at any time before the date of publication of notice for public

auction or inviting quotations or tender from public or private treaty for

transfer by way of lease, assignment or sale of the secured assets”. The

amended provision of Section 13 sub-section (8) of the SARFAESI Act, now

reads as under: -

“13. Enforcement of security interest. –

(8) Where the amount of dues of the secured creditor together with

all costs, charges and expenses incurred by him is tendered to the

Page 54 of 111

secured creditor at any time before the date of publication of

notice for public auction or inviting quotations or tender from

public or private treaty for transfer by way of lease, assignment or

sale of the secured assets,—

(i) the secured assets shall not be transferred by way of lease,

assignment or sale by the secured creditor; and

(ii) in case, any step has been taken by the secured creditor for

transfer by way of lease or assignment or sale of the assets before

tendering of such amount under this sub-section, no further step

shall be taken by such secured creditor for transfer by way of lease

or assignment or sale of such secured assets.”

51. The true purport and scope of the amended Section 13(8) of the

SARFAESI Act was looked into by the Andhra Pradesh High Court in Sri. Sai

Annadhatha Polymers & Anr. v. Canara Bank rep. by its Branch Manager,

Mandanapalle reported in 2018 SCC OnLine Hyd 178. The court took the

view that in accordance with the unamended Section 13(8) of the SARFAESI

Act, the right of the borrower to redeem the secured asset was available till

the sale or transfer of such secured asset. The court went on to say that the

amended provisions of Section 13(8) of the SARFAESI Act brought in a

radical change inasmuch as the right of the borrower to redeem the secured

asset would stand extinguished thereunder on the very date of publication of

the notice for public auction under Rule 9(1) of the Rules of 2002. It is

pertinent to note that the High Court has referred to and relied upon the

decision of this Court in Mathew Varghese (supra). The relevant observations

made by the High Court are reproduced hereinbelow:

Page 55 of 111

“6. In terms of the amended provisions of Section 13(8) of the

SARFAESI Act, the right of redemption given to the borrower

would expire upon publication of such a notice. However, Rule

8(6) of the Rules of 2002, as interpreted by the Supreme Court in

Mathew Varghese v. M. Amritha Kumar [(2014) 5 SCC 610],

stipulates that the thirty day notice period mentioned therein is for

the purpose of enabling the borrower to redeem his property.

Significantly, this provision remains unaltered. Therefore, this

statutory notice period of thirty days is sacrosanct and deviation

therefrom would curtail the statutory right of redemption available

to the borrower. However, in terms of the amended Section 13(8)

of the SARFAESI Act, once the notice under Rule 9 of the Rules of

2002 is published, the said right stands extinguished.

xxx xxx xxx

20. In the light of the aforestated changes in the statutory scheme,

certain crucial aspects may be noted. As per the unamended

Section 13(8) of the SARFAESI Act, the right of the borrower to

redeem the secured asset was available till the sale or transfer of

such secured asset. Case law consistently held to the effect that a

sale or transfer is not completed until all the formalities are

completed and there is an effective transfer of the asset sold. In

consequence, the borrower's right of redemption did not stand

terminated on the date of the auction sale of the secured asset itself

and remained alive till the transfer was completed in favour of the

auction purchaser, by registration of the sale certificate and

delivery of possession of the secured asset. The recent judgment of

the Supreme Court in ITC LIMITED v. BLUE COAST HOTELS

LIMITED also affirmed this legal position.

21. However, the amended provisions of Section 13(8) of the

SARFAESI Act bring in a radical change, inasmuch as the right of

the borrower to redeem the secured asset stands extinguished

thereunder on the very date of publication of the notice for public

auction under Rule 9(1) of the Rules of 2002. In effect, the right of

redemption available to the borrower under the present statutory

regime stands drastically curtailed and would be available only

till the date of publication of the notice under Rule 9(1) of the Rules

of 2002 and not till completion of the sale or transfer of the secured

asset in favour of the auction purchaser. …

xxx xxx xxx

Page 56 of 111

23. Therefore, even after the amendment of Section 13(8) of the

SARFAESI Act, a secured creditor is bound to afford to the

borrower a clear thirty day notice period under Rule 8(6) to enable

him to exercise his right of redemption. In consequence, a notice

under Rule 9(1) of the Rules of 2002 cannot be published prior to

expiry of this thirty day period in the new scenario, post-

amendment of Section 13(8) of the SARFAESI Act, as such right of

redemption would stand terminated immediately upon publication

of the sale notice under Rule 9(1) of the Rules of 2002. The

judgment of the Supreme Court in CANARA BANK v. M.

AMARENDER REDDY, which was rendered in the context of the

unamended provisions, would therefore have no application to the

post-amendment scenario in the light of the change brought about

in Section 13(8). To sum up, the post-amendment scenario

inevitably requires a clear thirty day notice period being

maintained between issuance of the sale notice under Rule 8(6) of

the Rules of 2002 and the publication of the sale notice under Rule

9(1) thereof, as the right of redemption available to the borrower

in terms of Rule 8(6) of the Rules of 2002, as pointed out in

MATHEW VARGHESE, stands extinguished upon publication of

the sale notice under Rule 9(1).”

(Emphasis supplied)

52. The amended Section 13(8) of the SARFAESI Act was also

looked into by the High Court of Telangana in the case of K.V.V. Prasad

Rao Gupta v. State Bank of India reported in 2021 SCC OnLine TS

328 and relying on the decision of the Andhra Pradesh High Court in

the case of Sri. Sai Annadhatha Polymers (supra), the court observed

in para 21 as under:

“21. Thus from the above judgments it is clear that under Rule 8(6)

of the Rules of 2002, the petitioners are entitled for a thirty day

notice period enabling them to clear the loan and to redeem the

property as envisaged under Section 13(8) of the SARFAESI Act,

and that if they fail to repay the amount within the stipulated

period, after expiry of said period of 30 days, the secured creditor

is entitled to issue publication of sale notice under Rule 9(1), and

Page 57 of 111

that on publication of such notice, the right of the borrower to

redeem the property stands extinguished.”

(Emphasis supplied)

53. The Telangana High Court in Concern Readymix (supra), examined

the amended Section 13(8) of the SARFAESI Act, & held that the same only

restricts the right of the secured creditor and not the borrowers right of

redemption, which will continue to exist until the execution of the

conveyance. The following relevant observations are reproduced below: -

“10. The first distinction between the unamended and amended

sub-section (8) of Section 13 is that before amendment, the

facility of repayment of the entire dues along with the costs,

charges and expenses, was available to the debtor at any time

before the date fixed for the sale or transfer. But after the

amendment, the facility is available upto the time before the date

of publication of notice for public auction or inviting quotations

or tender from public or private treaty. The second distinction is

that the unamended sub-section (8) did not provide for the

contingency when the dues are tendered by the borrower before

the date of completion of the sale or lease but after the issue of

notice. But the amended sub-section (8) takes care of the

contingency where steps have already been taken by the secured

creditor for the transfer of the secured asset, before the payment

was made. Except these two distinctions, there is no other

distinction.

xxx xxx xxx

13. What is important to note both from the amended and

unamended provisions of Section 13(8) and Rule 9(1) is that both

of them do not speak in express terms, about the equity of

redemption available to the mortgagor. The amended Section

13(8) merely prohibits the secured creditor from proceeding

further with the transfer of the secured assets by way of lease,

assignment or sale. A restriction on the right of the mortgagee to

deal with the property is not exactly the same as the equity of

redemption available to the mortgagor. The payment of the

Page 58 of 111

amounts mentioned in Section 13(8) ties the hands of the

mortgagee (secured creditor) from exercising any of the powers

conferred under the Securitisation Act, 2002. Redemption comes

later. But unfortunately, some Courts, on a wrong reading of the

decision of the Supreme Court in Mathew Varghese v. M.

Amritha Kumar [(2014) 5 SCC 610], have come to the

conclusion as though Section 13(8) speaks about the right of

redemption. The danger of interpreting Section 13(8) as though

it relates to the right of redemption, is that if payments are not

made as per Section 13(8), the right of redemption may get lost

even before the sale is complete in all respects. But in law it is

not. It may be seen from paragraphs-34 to 36 of the decision of

the Supreme Court in Mathew Varghese that the Supreme Court

took note of Section 60 of the Transfer of Property Act and the

combined effect of Section 54 of the Transfer of Property Act and

Section 17 of the Registration Act to come to the conclusion that

the extinction of the right of redemption comes much later than

the sale notice. Therefore, we should first understand that the

right of redemption is not lost immediately upon the highest bid

made by a purchaser in an auction being accepted.

14. Perhaps the Courts were tempted to think that Section 13(8)

speaks about redemption, only on account of what is found in

Rule 3(5) of the Security Interest (Enforcement) Rules, 2002.

Rule 3(5) inserted by way of amendment with effect from 04-11-

2016 states that the demand notice issued under Section 13(2)

should invite the attention of the borrower to the provisions of

Section 13(8), in respect of the time available to the borrower to

redeem the secured assets. Today, it may be convenient for one

borrower to contend that the right of redemption will be lost

immediately upon the issue of notice under Rule 9(1). But if it is

held so, the same would tantamount to annulling the relevant

provisions of the Transfer of Property Act, which do not stand

expressly excluded, insofar as the question of redemption is

concerned.” (Emphasis supplied)

54. We are conscious of the fact, that the aforesaid decision of Concern

Readymix (supra) was carried upto and challenged before this

Court by way of Special Leave Petition (C) No. 20500 of 2019, which came

to be dismissed by this Court in limine, being as follows: -

Page 59 of 111

“ORDER

Delay condoned.

The Special Leave Petition is dismissed”

55. In Shakeena (supra), while primarily dealing with the unamended

provision of Section 13(8) of the SARFAESI Act, this Court also made certain

pertinent observations in respect of the amended provision of Section 13(8),

which are being reproduced hereunder: -

“15. Be it noted that on 1-9-2016 amendment to Section 13(8) of

the 2002 Act came into force as a result of which the dues of the

secured creditor together with all costs, charges and expenses

incurred by him are required to be tendered to the secured creditor

at any time before the date of publication of notice for public

auction or inviting quotations or tender from public or private

treaty for transfer by way of lease, assignment or sale of the

secured assets.

xxx xxx xxx

30. A fortiorari, it must follow that the appellants have failed to

exercise their right of redemption in the manner known to law,

much less until the registration of the sale certificate on 18-9-

2007. In that view of the matter no relief can be granted to the

appellants, assuming that the appellants are right in contending

that as per the applicable provision at the relevant time

[unamended Section 13(8) of the 2002 Act], they could have

exercised their right of redemption until the registration of the sale

certificate — which, indisputably, has already happened on 18-9-

2007. Therefore, it is not possible to countenance the plea of the

appellants to reopen the entire auction process. This is more so

because, the narrative of the appellants that they had made a valid

tender towards the subject loan accounts before registration of the

sale certificate, has been found to be tenuous. Thus understood,

their right of redemption in any case stood obliterated on 18-9-

2007. Further, the amended Section 13(8) of the 2002 Act which

has come into force w.e.f. 1-9-2016, will now stare at the face of

the appellants. As per the amended provision, stringent condition

Page 60 of 111

has been stipulated that the tender of dues to the secured creditor

together with all costs, charges and expenses incurred by him shall

be at any time before the "date of publication of notice" for public

auction or inviting quotations or tender from public or private

deed for transfer by way of lease assessment or sale of the secured

assets. …”

(Emphasis supplied)

56. The Punjab & Haryana High Court while rendering its decision in Pal

Alloys (supra), looked into the Report of the Joint Committee on the 2016

Amendment and the decision in Concern Readymix (supra), & concluded that

under the amended Section 13(8) of the SARFAESI Act, the right of

redemption of mortgage would continue till the execution of conveyance or

issuance of sale certificate. It further observed that the decision in Shakeena

(supra) was not applicable inasmuch as it did not deal with the right of

redemption under the Act 1882. The observations made in it are given below:

“78. It is interesting to note that para 24 of the Report of the Joint

Committee referred to above deals with the proposed amendment

to Section 13(8) of the SARFAESI Act and gives a heading

“Provisions to stop secure creditor to lease or assignment or sale

in the prescribed conditions-Amendment to Section 13(8) of the

SARFAESI Act.”

79. Thus the amendment was proposed w.r.t. when to stop the

secured creditor from selling/transferring the secured asset. The

words ‘when to stop the exercise of right of redemption by the

borrower/mortgagor’ were not used.

80. In the said Report, at pg.12, Clause 11(ii) of the Bill which

proposed to amend Section 13(8) of the SARFAESI Act is noted.

After extracting the existing Section 13(8) of the Act which stands

as under: —

Page 61 of 111

“If the dues of the secured creditor together with all costs,

charges and expenses incurred by him are tendered to the

secured creditor at any time before the date fixed for sale or

transfer, 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.”

81. The proposed modification to Section 13(8) is set out also at

pg.12 as under:—

“(8) Where the amount of dues of the secured creditor together

with all costs, charges and expenses incurred by him are

tendered to the secured creditor at any time before the date fixed

for lease, assignment or sale of the secured assets,-

(i) the secured assets shall not be leased, assigned or sold by the

secured creditor; and

(ii) in case, any step has been taken by the secured creditor for

lease or assignment or sale of the assets before tendering of

such amount under this sub-section, no further step shall be

taken by such secured creditor for lease or assignment or sale

of such secured assets.”

82. Strangely, on the next page at page 13, the following is stated:-

“The Committee after examining the proposed amendment and

the existing Rules in this regard decide to modify proposed

Clause 11(ii) [section 13(8) of the principal Act] as under:

“(8) Where the amount of dues of the secured creditor

together with all costs, charges and expenses incurred by him

is tendered to the secured creditor at any time before the date

of publication of notice for public auction or inviting

quotations or tender from public or private treaty for transfer

by way of lease, assignment or sale of the secured assets,-

(i) the secured assets shall not be transferred by way of lease,

assignment or sale by the secured creditor; and

(ii) in case, any step has been taken by the secured creditor

for transfer by way of lease or assignment or sale of the assets

before tendering of such amount under this sub-section, no

Page 62 of 111

further step shall be taken by such secured creditor for

transfer by way of lease or assignment or sale of such secured

assets.”

83. Nothing is mentioned as to why the proposal indicated in Page-

12 was changed on page-13 differently.

84. Admittedly, what is stated in page-13 was passed in the Lok

Sabha and the Rajya Sabha and then it became the Act 44 of 2016

and came into effect on 01.09.2016.

85. But the important thing to note is that this Report does not

indicate that the Committee had even considered Section 60 of the

Transfer of Property Act, 1882, which provides the general law of

right to redeem a mortgaged asset of a mortgager vis-a-vis the

provisions of the SARFAESI Act.

86. It no where says that there was an intention to bring about a

change with regard to the time before which a mortgagor can

exercise his right to redeem the mortgage.

87. Even the heading of Para 24 of the Report which says

“Provisions to stop secure creditor to lease or assignment or sale

in the prescribed conditions - Amendment to Section 13(8) of the

SARFAESI Act” seems to suggest that the focus of the Committee

was on the date when the secured creditor's right to lease or

assignment or sale would stop.

88. In our considered opinion, it is clear that the legislature did

not have any intention to deal with the right of mortgagor to

redeem the mortgage when they amended Sec.13(8) or to modify

it in any manner; and amendment cannot be said to have intended

to modify the existing law which continued even when the un-

amended Section 13(8) of the SARFAESI Act was in force. The

amended Sec.13(8) was intended to only deal with the date when

the secured creditor's right to transfer the secured asset should

stop and nothing more.

xxx xxx xxx

93. The view taken by the High Court for the State of Telangana

and Andhra Pradesh in M/s. Concern Ready Mix [(2019) 3 ALD

Page 63 of 111

384 : Law Finder Doc Id # 1380151] commends itself to us and

we accept and approve the same.

94. We shall now consider the judgment of Supreme Court in

Shakeena [(2019) 5 RCR (Civil) 689 (SC)]cited by the counsel for

1

st

respondent. In that case, sale certificate had been issued in

favour of the auction purchasers on 06.01.2006 and a Writ

Petition was filed on 19.01.2006 challenging the auction and it

was registered on 18.9.2007. The Court held that the appellants

had failed to make a valid tender of amounts due or exercise their

right of redemption in a manner known to law until the registration

of the sale certificate on 18.09.2007 and that the right of

redemption stood obliterated on 18.09.2007. The statement

therein in para 29 that as per the amended provision stringent

conditions have been stipulated that the tender of dues to the

secured creditor shall be at any time before the date of publication

of notice for public auction does not, in our opinion, lead to an

expression of opinion by the Supreme Court that the law of

redemption as per Section 60 of the Transfer of Property Act

would not apply in view of amendment to Section 13(8). We do not

find any discussion in the decision in Shakeena [(2019) 5 RCR

(Civil) 689 (SC)] about the decisions of the apex court dealing

with the right of redemption under Sec.60 of the Transfer of

Property Act, 1872. So reliance on the said decision does not help

the 1

st

respondent.

xxx xxx xxx

96. Keeping in mind (i) the Report of the Joint Committee on the

Enforcement of Security Interest and Recovery of Debts Laws and

Miscellaneous Provisions (Amendment) Bill, 2016 discussed

above, (ii) the law laid down by the Supreme Court in Mathew

Varghese [(2014) 5 SCC 610] and (iii) the decision in M/s.

Concern Readymix [(2019) 3 ALD 384 : Law Finder Doc Id #

1380151] of the Telangana and Andhra Pradesh High Court, with

which we respectfully agree, we hold that the amended Section

13(8) of the SARFAESI Act merely prohibits a secured creditor

from proceeding further with the transfer of the secured asset by

way of lease, assignment or sale; a restriction on the right of the

mortgagee to deal with the property is not exactly the same as the

equity of redemption available to the mortgagor; the payment of

the amount mentioned in Section 13(8) of the SARFAESI Act ties

the hands of the mortgagee (secured creditor) from exercising any

Page 64 of 111

of the powers conferred under the Act; that redemption comes

later; extinction of the right of redemption comes much later than

the sale notice; and the right of redemption is not lost immediately

upon the highest bid made by a purchaser in an auction being

accepted. We also hold that such a right would continue till the

execution of a conveyance i.e. issuance of sale certificate in favour

of the mortgagee. …

97. It would, therefore, certainly be available to the petitioners

herein before the issuance of sale certificate in favour of

respondents No. 2 and 3. Point (a) is answered accordingly in

favor of the petitioners and against the respondents.”

(Emphasis supplied)

57. In S. Karthik (supra) a three-Judge Bench of this Court, made the

following relevant observations given below: -

“53. It could thus be seen that this Court in Mathew Varghese

[Mathew Varghese v. M. Amritha Kumar, (2014) 5 SCC 610 :

(2014) 3 SCC (Civ) 254] observed that the equity of redemption is

not extinguished by mere contract for sale and that the

mortgagor's right to redeem will survive until there has been

completion of sale by the mortgagee by a registered deed. This

Court further observed that applying the principles stated with

reference to Section 60 of the Transfer of Property Act in respect

of a secured interest in a secured asset in favour of the secured

creditor under the provisions of the SARFAESI Act and the

relevant Rules applicable, a free hand is given to a secured

creditor to resort to a sale without the intervention of the court or

tribunal. It has, however, been held that under Section 13(8), it is

clearly stipulated that the mortgagor i.e. the borrower, who is

otherwise called as a debtor, retains his full right to redeem the

property by tendering all the dues to the secured creditor at any

time before the date fixed for sale or transfer.

54. This Court in Mathew Varghese [Mathew Varghese v. M.

Amritha Kumar, (2014) 5 SCC 610 : (2014) 3 SCC (Civ)

254] further held that if the tender is made by the borrower at the

last moment before the sale or transfer, the secured asset should

Page 65 of 111

not be sold or transferred by the secured creditor. This Court held

that there was no reason as to why the general principle laid down

by this Court in Narandas Karsondas [Narandas Karsondas v.

S.A. Kamtam, (1977) 3 SCC 247] with reference to Section 60 of

the Transfer of Property Act could not have application in respect

of a secured interest in a secured asset created in favour of a

secured creditor. It has been held that the said principles will apply

on all fours in respect of a transaction as between the debtor and

secured creditor under the provisions of the SARFAESI Act.

xxx xxx xxx

115. Even if viewed from another angle, the claim of the appellants

is not sustainable. The two-Judge Bench of this Court in Mathew

Varghese [Mathew Varghese v. M. Amritha Kumar, (2014) 5 SCC

610 : (2014) 3 SCC (Civ) 254], has heavily relied on the judgment

of the three-Judge Bench of this Court in Narandas Karsondas . It

has been held by this Court in Narandas Karsondas [Narandas

Karsondas v. S.A. Kamtam, (1977) 3 SCC 247], 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. It has been held, that only on

execution of the conveyance and registration of transfer of the

mortgagor's interest by registered instrument, that the mortgagor's

right of redemption will be extinguished.

xxx xxx xxx

118. It is further relevant to note that this Court in Dwarika

Prasad [Dwarika Prasad v. State of U.P., (2018) 5 SCC 491] and

in Shakeena [Shakeena v. Bank of India, (2021) 12 SCC 761] held

that the right to redemption stands extinguished on the sale

certificate getting registered.”

(Emphasis supplied)

58. Concern Readymix (supra) was referred to and relied upon later in

another decision by the Telangana High Court titled Amme Srisailam (supra),

wherein the following relevant observations were made:

Page 66 of 111

“38. After referring to the amendments brought to the Security

Interest (Enforcement) Rules, 2002, this Court took the view that

amended Section 13(8) merely prohibits the secured creditor from

proceeding further with the transfer of the secured assets by way of

lease, assignment or sale if the dues are paid before issuance of

notice for public auction. Thereafter it has been held that a

restriction on the right of the mortgagee to deal with the property

is not exactly the same as the equity of redemption available to the

mortgagor. Payment of the amounts mentioned in Section 13(8) ties

the hands of the mortgagee (secured creditor) from exercising any

of the powers conferred under the SARFAESI Act. Redemption

comes later. It has been held as follows:

The danger of interpreting Section 13(8) as though it relates to

the right of redemption, is that if payments are not made as per

Section 13(8), the right of redemption may get lost even before

the sale is complete in all respects. But in law it is not.

39. Thus this Court emphasised that the right of redemption is not

lost immediately upon the highest bid made by the purchaser in an

auction is accepted.

40. A three-Judge Bench of the Supreme Court in S.Karthik (supra)

held that the right of redemption which is embodied in Section 60

of the Transfer of Property Act, 1882 is available to the mortgagor

unless it has been extinguished by the act of the parties. Only on

execution of the conveyance and registration of transfer of

mortgagor’s interest by registered instrument that the mortgagor’s

right of redemption will be extinguished. Referring to the previous

decisions of the Supreme Court, it has been held that the right to

redemption stands extinguished only on the sale certificate getting

registered.

41. This position has been explained by the Punjab & Haryana High

Court in Pal Alloys & Metal India Private Limited (supra), wherein

it has been clarified that the amended Section 13(8) of the

SARFAESI Act merely prohibits the secured creditor from

proceeding further with the transfer of the secured asset by way of

lease, assignment or sale if the dues are paid before issuance of sale

notice for public auction. A restriction on the right of the mortgagee

to deal with the property is not exactly the same as the equity of

redemption available to the mortgagor.

Page 67 of 111

42. Let us now examine the decision of the Supreme Court in

Shakeena (supra) relied upon by the petitioner. As opposed to

S.Karthik (supra) which was rendered by a three-Judge Bench,

Shakeena (supra) was delivered by a two-Judge Bench of the

Supreme Court. That was a case which dealt with Section 13(8) of

the SARFAESI Act prior to amendment. In this case, the appellants

failed to exercise their right of redemption until registration of the

sale certificate; therefore, relief was declined. While coming to the

above conclusion, the Division Bench of the Supreme Court

adverted to the amended Section 13(8) of the SARFAESI Act

observing by way of obiter that tender of dues to the secured

creditor with all costs, charges and expenses incurred by him shall

be at any time before the date of publication of notice for public

auction etc.

43. The decision in Shakeena (supra) was rendered by a two-Judge

Bench of the Supreme Court on 20.08.2019. On the other hand, the

decision in S.Karthik (supra) was rendered by a three-Judge Bench

of the Supreme Court much later i.e., on 23.09.2021. The decision

in S.Karthik (supra) being a later judgment and by a larger bench

therefore will be binding on us and this decision says that the right

of redemption stands extinguished only on the sale certificate

getting registered.

44. Before we revert back to the facts of the present case, we

may also refer to Sections 35 and 37 of the SARFAESI Act.

While Section 35 says that the provisions of the SARFAESI

Act shall have effect notwithstanding anything inconsistent

therewith contained in any other law for the time being in

force, Section 37 clarifies that provisions of the SARFAESI Act or

the rules made thereunder shall be in addition to and not in

derogation of any other law for the time being in force.

45. This brings us to Section 60 of the Transfer of Property Act,

1882. Section 60 says that at any time after the principal amount

has become due, the mortgagor has a right, on payment or tender,

of the mortgage money, to require the mortgagee (a) to deliver to

the mortgagor the mortgage deed and all documents relating to

the mortgaged property which are in possession or power of the

mortgagee, (b) where the mortgagee is in possession of the

mortgaged property, to deliver possession thereof back to the

mortgagor, and (c) at the cost of the mortgagor either to re-

transfer the mortgaged property to him or to such third person as

Page 68 of 111

he may direct, or to execute and to have registered an

acknowledgement in writing that any right in derogation of his

interest transferred to the mortgagee has been extinguished. As

per the proviso, the right conferred under the aforesaid provision

shall not be extinguished by any act of the parties or by decree of

a Court.

46. Therefore, on a careful application of Sections 35 and 37 of

the SARFAESI Act, it is evident that the situation contemplated

under Section 13(8) of the SARFAESI Act does not exclude

application of Section 60 of the Transfer of Property Act, 1882.

As explained by this Court in Concern Readymix (supra), a

restriction on the right of the mortgagee to deal with the property

post issuance of notice for public auction is not the same as the

right of redemption available to the mortgagor.”

(Emphasis supplied)

59. Thus, from the aforesaid, it is evident that the Telangana High Court in

the Amme Srisailam (supra) has not referred to or looked into its earlier

decision in the case of K.V.V. Prasad Rao Gupta (supra). The decision of the

Andhra Pradesh High Court in Sri Sai Annadhatha Polymers (supra) was also

not been looked into by the Telangana High Court in the case of Amme

Srisailam (supra). It appears that the Telangana High Court in Concern

Readymix (supra) and Amme Srisailam (supra) as well as the Punjab and

Haryana High Court in the case of Pal Alloys (supra) have taken the view that

the amended Section 13(8) of the SARFAESI Act does not exclude the

application of Section 60 of the Act 1882 in view of Sections 35 and 37

respectively of the SARFAESI Act.

Page 69 of 111

EFFECT OF THE AMENDMENT TO SECTION 13(8) OF THE

SARFAESI ACT

60. Before proceeding with the analysis of the provision of Section 13(8)

of the SARFAESI Act, it would be appropriate to refer to the said provision

as it stood prior to the amendment and as it stands after the amendment, which

is given below: -

Pre-amendment Section 13(8) Post-amendment Section 13(8)

(8) If the dues of the secured

creditor together with all costs,

charges and expenses incurred

by him are tendered to the

secured creditor at any time

before the date fixed for sale or

transfer, 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.

(8) Where the amount of dues of the

secured creditor together with all costs,

charges and expenses incurred by him

is tendered to the secured creditor at

any time before the date of

publication of notice for public

auction or inviting quotations or

tender from public or private treaty

for transfer by way of lease,

assignment or sale of the secured

assets,—

(i) the secured assets shall not be

transferred by way of lease assignment

or sale by the secured creditor; and

(ii) in case, any step has been taken by

the secured creditor for transfer by way

of lease or assignment or sale of the

assets before tendering of such amount

under this sub-section, no further step

shall be taken by such secured creditor

for transfer by way of lease or

assignment or sale of such secured

assets.

61. At this juncture, it would be apposite to refer to the decision of this

Court in Embassy Hotels Private Ltd. v. Gajraj and Company & Ors.

Page 70 of 111

reported in (2015) 14 SCC 316, wherein this Court had held that the

expression “by act of the parties” in the Proviso to Section 60 would include

the failure of the parties to settle the dispute and by their act allowing the

mortgaged property to be sold in auction. The relevant observations made in

it are reproduced below: -

“16. Section 60 of the Transfer of Property Act protects the right

of redemption available to a mortgagor by providing that the

mortgagor can exercise such a right by paying the mortgaged

money any time after the principal money has become due. But the

proviso clarifies that the right conferred by that section is

available only if it has not been extinguished by act of the parties

or by decree of the court. The act parties would cover act of the

mortgagor and mortgagee, if they are unable to settle the dispute

arising out of money claim covered by the mortgage and by their

action, allow the mortgaged property to be sold through auction

in favour of a third party. Hence, it is not possible to accept the

case of the plaintiff-respondent that in spite of sale of suit property

becoming final through court auction, for the purpose of grant of

specific relief to the plaintiff in the present suit, the first defendant

would be deemed to still retain the right to the mortgage and

transfer the suit property to the plaintiff regardless of the right,

title and possession already legally vested in the auction-

purchaser the appellant.”

(Emphasis supplied)

62. It is equally well settled that the rights created for the benefit of the

borrower under the SARFAESI Act, can be waived. Waiver can be contractual

or by express conduct in consideration of some compromise. However, a

statutory right may also be waived by implied conduct, like, by wanting to

take a chance of a favourable decision. The fact that the other side has acted

on it, is sufficient consideration, as observed by this Court in Arce Polymers

Page 71 of 111

Pvt. Ltd. v. Alpine Pharmaceuticals Pvt. Ltd. & Ors. reported in (2022) 2

SCC 221, referred as under: -

“16. Waiver is an intentional relinquishment of a known right.

Waiver applies when a party knows the material facts and is

cognizant of the legal rights in that matter, and yet for some

consideration consciously abandons the existing legal right,

advantage, benefit, claim or privilege. Waiver can be contractual

or by express conduct in consideration of some compromise.

However, a statutory right may also be waived by implied conduct,

like, by wanting to take a chance of a favourable decision. The fact

that the other side has acted on it, is sufficient consideration.

17. It is correct that waiver being an intentional relinquishment is

not to be inferred by mere failure to take auction, but the present

case is of repeated positive acts post the notices under Sections

13(2) and (4) of the SARFAESI Act. Not only did the borrower not

question or object to the auction of the Bank, but it by express and

deliberate conduct had asked the Bank to compromise its position

and alter the contractual terms. The borrower wrote repeated

request letters for restructuring of loans, which prayers were

considered by the Bank by giving indulgence, time and

opportunities. The borrower, aware and conscious of its rights,

chose to abandon the statutory claim and took its chance and even

procured favourable decisions. Even if we are to assume that the

borrower did not waive the remedy, its conduct had put the Bank

in a position where they have lost time, and suffered on account of

delay and laches, which aspects are material. Auction on the

subject property was delayed by more than a year as at the behest

of the borrower, the Bank gave them a long rope to regularise the

account. To ignore the conduct of the borrower would not be

reasonable to the Bank once third-party rights have been created.

In this background, the principle of equitable estoppel as a rule of

evidence bars the borrower from complaining of violation.”

(Emphasis supplied)

63. We are of the view that the failure on the part of the borrower in

tendering the entire dues including the charges, interest, costs etc. before the

publication of the auction notice as required by Section 13(8) of the

Page 72 of 111

SARFAESI Act, would also sufficiently constitute extinguishment of right of

redemption of mortgage by the act of parties as per the proviso to Section 60

of the Act 1882. Furthermore, in the case on hand, there was no claim for right

of redemption by the borrower either before the publication of the auction

notice or even thereafter. The borrowers entered into the fray only after

coming to know of the confirmation of auction. Be that as it may, once the

Section 13(8) stage was over and auction stood concluded, it could be said

that there was an intentional relinquishment of his right of redemption under

Section 13(8), whereby the Bank declared the appellant as the successful

auction purchaser having offered the highest bid in accordance with the terms

of the auction notice.

64. The SARFAESI Act is a special law containing an overriding clause in

comparison to any other law in force. Section 60 of the Act 1882, is a general

law vis-a-vis the amended Section 13(8) of the SARFAESI Act which is

special law. The right of redemption is clearly restricted till the date of

publication of the sale notice under the SARFAESI Act, whereas the said right

continues under Section 60 of the Act 1882 till the execution of conveyance

of the mortgaged property. The legislative history has been covered in the

preceding paragraphs of this judgment and how the Parliament desired to have

express departure from the general provision of Section 60 of Act 1882. The

SARFAESI Act is a special law of recovery with a paradigm shift that permits

Page 73 of 111

expeditious recovery for the banks and the financial institutions without

intervention of Courts. Similarly, Section 13(8) of the SARFAESI Act is a

departure from the general right of redemption under the general law i.e. the

Act 1882. Further, the legislature has in the objects and reasons while passing

the amending Act specifically stated “to facilitate expeditious disposal of

recovery applications, it has been decided to amend the said Acts….”. Thus,

while interpreting Section 13(8) vis-à-vis Section 60 of the Act 1882, an

interpretation which furthers the said object and reasons should be preferred

and adopted. If the general law is allowed to govern in the manner as sought

to be argued by the borrowers, it will defeat the very object and purpose as

well as the clear language of the amended Section 13(8).

65. In Mathew Varghese (supra) this Court had interpreted the unamended

section 13(8) of SARFAESI Act and Section 60 of Act 1882 respectively.

However, thereafter the legislature amended Section 13(8) of the SARFAESI

Act. Thus, on this score, the decision in Mathew Varghese (supra) could be

said to have been partially legislatively overruled as the substratum of the

verdict stands altered / amended.

66. Even otherwise, we should not lose sight of the fact that in Mathew

Varghese (supra) the court held in regard to the right of redemption that both

the SARFAESI Act and Act 1882 are complimentary to each other and equally

applicable. It had held this because, the words “before the date fixed for

Page 74 of 111

transfer” in the unamended Section 13(8), amongst other things also means

and connotes the date of conveyance of the secured asset by a registered

instrument (which is the ordinary process of extinguishment of right of

redemption under Act 1882). Since, this Court observed that the stipulation or

expression “date fixed for transfer” could also mean the date of conveyance /

transfer of such secured asset and being so, is not much different from the

ordinary process of redemption under the Act 1882, it could not be said that

there was any material inconsistency between the SARFAESI Act & Act

1882, and thus it found no reason or hesitation to hold that the Act 1882 is

inapplicable and thus made an endeavour of harmonizing the two.

67. It appears that while considering the right of redemption of mortgage

under the unamended Section 13(8), this Court in Mathew Varghese (supra)

only went so far to say that in the absence of any material inconsistency

between the SARFAESI Act & Act 1882, there was no good reason to hold

that the Act 1882 would not be applicable and as such, held that general right

of redemption of mortgage contained in Section 60 Act 1882 would apply

even in respect of the SARFAESI Act.

68. However, with the advent of the 2016 Amendment, Section 13(8) of the

SARFAESI Act now uses the expression “before the date of publication notice

for public auction or inviting quotations or tender from public or private

treaty for transfer by way of lease, assignment or sale of the secured assets”

Page 75 of 111

which by no stretch of imagination could be said to be in consonance with the

general rule under the Act 1882 that the right of redemption is extinguished

only after conveyance by registered deed. Thus, in the light of clear

inconsistency between Section 13(8) of the SARFAESI Act and Section 60 of

the Act 1882 the former special enactment overrides the latter general

enactment in light of Section 35 of the SARFAESI Act. Thus, the right of

redemption of mortgage is available to the borrower under the SARFAESI

Act only till the publication of auction notice and not thereafter, in light of the

amended Section 13(8).

69. This aspect of inapplicability of the Act 1882 vis-a-vis the SARFAESI

Act can be looked at from one another angle. In Madras Petrochem (supra)

this Court made a pertinent observation that the Sections 35 and 37

respectively of the SARFAESI Act form a unique scheme of overriding

provisions, however the scope and ambit of Section 37 is restricted only to

the securities law. The relevant portion is given as under: -

“39. This is what then brings us to the doctrine of harmonious

construction, which is one of the paramount doctrines that is

applied in interpreting all statutes. Since neither Section 35 nor

Section 37 of the Securitisation and Reconstruction of Financial

Assets and Enforcement of Security Interest Act, 2002 is subject to

the other, we think it is necessary to interpret the expression “or

any other law for the time being in force” in Section 37. If a literal

meaning is given to the said expression, Section 35 will become

completely otiose as all other laws will then be in addition to and

not in derogation of the Securitisation and Reconstruction of

Financial Assets and Enforcement of Security Interest Act, 2002.

Obviously this could not have been the parliamentary intendment,

Page 76 of 111

after providing in Section 35 that the Securitisation and

Reconstruction of Financial Assets and Enforcement of Security

Interest Act, 2002 will prevail over all other laws that are

inconsistent therewith. A middle ground has, therefore, necessarily

to be taken. According to us, the two apparently conflicting sections

can best be harmonised by giving meaning to both. This can only be

done by limiting the scope of the expression “or any other law for

the time being in force” contained in Section 37. This expression

will, therefore, have to be held to mean other laws having relation

to the securities market only, as the Recovery of Debts Due to Banks

and Financial Institutions Act, 1993 is the only other special law,

apart from the Securitisation and Reconstruction of Financial

Assets and Enforcement of Security Interest Act, 2002, dealing with

recovery of debts due to banks and financial institutions. On this

interpretation also, the Sick Industrial Companies (Special

Provisions) Act, 1985 will not be included for the obvious reason

that its primary objective is to rehabilitate sick industrial

companies and not to deal with the securities market.”

(Emphasis supplied)

70. This Court in M.D. Frozen Foods Exports Private Limited & Ors. v.

Hero Fincorp Limited reported in (2017) 16 SCC 741, observed that since as

per Section 37 SARFAESI Act, the RDBFI Act which also contemplates

arbitration proceedings, is in addition to the SARFAESI Act, it held that both

Arbitration & Conciliation Act, 1996 and the SARFAESI Act would go hand

in hand. The relevant observations are reproduced below: -

“27. On the SARFAESI Act being brought into force seeking to

recover debts against security interest, a question was raised

whether parallel proceedings could go on under the RDDB Act

and the SARFAESI Act. This issue was clearly answered in favour

of such simultaneous proceedings in Transcore v. Union of India.

A later judgment in Mathew Varghese v. M. Amritha Kumar also

discussed this issue in the following terms: (Mathew Varghese

case, SCC pp. 640-41, paras 45-46)

Page 77 of 111

“45. A close reading of Section 37 shows that the provisions

of the SARFAESI Act or the Rules framed thereunder will be

in addition to the provisions of the RDDB Act. Section 35 of

the SARFAESI Act states that the provisions of

the SARFAESI Act will have overriding effect notwithstanding

anything inconsistent contained in any other law for the time

being in force. Therefore, reading Sections 35 and 37 together,

it will have to be held that in the event of any of the provisions

of the RDDB Act not being inconsistent with the provisions of

the SARFAESI Act, the application of both the Acts, namely,

the SARFAESI Act and the RDDB Act, would be

complementary to each other. In this context reliance can be

placed upon the decision in Transcore v. Union of India. In

para 64 it is stated as under after referring to Section 37 of

the SARFAESI Act: (SCC p. 162)

‘64. … According to American Jurisprudence, 2d, Vol. 25,

p. 652, if in truth there is only one remedy, then the

doctrine of election does not apply. In the present case, as

stated above, the NPA Act is an additional remedy to the

DRT Act. Together they constitute one remedy and,

therefore, the doctrine of election does not apply. Even

according to Snell's Principles of Equity (31st Edn., p.

119), the doctrine of election of remedies is applicable only

when there are two or more co-existent remedies available

to the litigants at the time of election which are repugnant

and inconsistent. In any event, there is no repugnancy nor

inconsistency between the two remedies, therefore, the

doctrine of election has no application.’

46. A reading of Section 37 discloses that the application of

the SARFAESI Act will be in addition to and not in derogation of

the provisions of the RDDB Act. In other words, it will not in any

way nullify or annul or impair the effect of the provisions of the

RDDB Act. We are also fortified by our above statement of law

as the heading of the said section also makes the position clear

that application of other laws is not barred. The effect of Section

37 would, therefore, be that in addition to the provisions

contained under the SARFAESI Act, in respect of proceedings

initiated under the said Act, it will be in order for a party to fall

back upon the provisions of the other Acts mentioned in Section

37, namely, the Companies Act, 1956; the Securities Contracts

(Regulation) Act, 1956; the Securities and Exchange Board of

Page 78 of 111

India Act, 1992; the Recovery of Debts Due to Banks and

Financial Institutions Act, 1993, or any other law for the time

being in force.”

xxx xxx xxx

29. The aforesaid two Acts are, thus, complementary to each other

and it is not a case of election of remedy.

30. The only twist in the present case is that, instead of the

recovery process under the RDDB Act, we are concerned with an

arbitration proceeding. It is trite to say that arbitration is an

alternative to the civil proceedings. In fact, when a question was

raised as to whether the matters which came within the scope and

jurisdiction of the Debt Recovery Tribunal under the RDDB Act,

could still be referred to arbitration when both parties have

incorporated such a clause, the answer was given in the

affirmative. That being the position, the appellants can hardly be

permitted to contend that the initiation of arbitration proceedings

would, in any manner, prejudice their rights to seek relief under

the SARFAESI Act.

xxx xxx xxx

32. The aforesaid is not a case of election of remedies as was

sought to be canvassed by the learned Senior Counsel for the

appellants, since the alternatives are between a civil court,

Arbitral Tribunal or a Debt Recovery Tribunal constituted under

the RDDB Act. Insofar as that election is concerned, the mode of

settlement of disputes to an Arbitral Tribunal has been elected.

The provisions of the SARFAESI Act are thus, a remedy in addition

to the provisions of the Arbitration Act. In Transcore v. Union of

India it was clearly observed that the SARFAESI Act was enacted

to regulate securitisation and reconstruction of financial assets

and enforcement of security interest and for matters connected

therewith. Liquidation of secured interest through a more

expeditious procedure is what has been envisaged under the

Sarfaesi Act and the two Acts are cumulative remedies to the

secured creditors.”

(Emphasis supplied)

Page 79 of 111

71. It would be also appropriate to refer to another decision of this Court

rendered in Vishal N. Kalsaria v. Bank of India & Ors. reported in (2016) 3

SCC 762 wherein this Court while construing the expression “any other law”

occurring in Section 35 of the SARFAESI Act, held the same would mean any

other law operating in the same field. The relevant observations made in it are

given below: -

“37. It is a settled position of law that once tenancy is created, a

tenant can be evicted only after following the due process of law,

as prescribed under the provisions of the Rent Control Act. A

tenant cannot be arbitrarily evicted by using the provisions of the

SARFAESI Act as that would amount to stultifying the statutory

rights of protection given to the tenant. A non obstante clause

(Section 35 of the SARFAESI Act) cannot be used to bulldoze the

statutory rights vested in the tenants under the Rent Control Act.

The expression "any other law for the time being in force" as

appearing in Section 35 of the SARFAESI Act cannot mean to

extend to each and every law enacted by the Central and State

Legislatures. It can only extend to the laws operating in the same

field.” (Emphasis supplied)

72. Thus, it appears from a combined reading of the decisions rendered by

this Court in Madras Petrochem (supra) and M.D. Frozen Foods Exports

(supra) that this Court has consistently construed that only those laws which

have either been enumerated in Section 37 SARFAESI Act or similar to it

would be applicable in addition to the SARFAESI Act i.e., laws which deal

with securities or occupy the same field as the SARFAESI Act. Thus, even on

this aspect, we are of the view that the Act 1882 would not be applicable in

addition to the SARFAESI Act. Suffice to say, that in view of the above

Page 80 of 111

discussion, the statutory right of redemption under the Act 1882 will not be

applicable to the SARFAESI Act at least in view of the amended Section 13(8)

and any right of redemption of a borrower must be found within the

SARFAESI Act in terms of the amended Section 13(8).

WHY THE DECISION OF THE TELANGANA HIGH COURT IN THE

CASE OF AMME SRISAILAM (SUPRA) IS NOT A GOOD LAW?

73. The Telangana High Court’s judgment is in four parts. It takes the view

as under:

a. That amended Section 13(8) does not take away the right of redemption

under Section 60 of the Act 1882 and for this proposition reliance was

placed on the decisions in Concern Readymix (supra) and S. Karthik

(supra). (Paras 37-40)

b. Shakeena (supra) would not apply as it considered a litigation prior to

the amendment to Section 13(8) of the SARFAESI Act and as such the

observations made in it regarding the amended Section 13(8) were

obiter dicta. Furthermore because S. Karthik (supra) is a subsequent

decision of a three-Judge Bench, thus, Shakeena (supra) cannot be

relied upon. (Paras 42-43)

c. It placed reliance on Section 37 of SARFAESI Act which clarifies that

the provisions of the SARFAESI Act or the Rules made thereunder shall

Page 81 of 111

be in addition to and not in derogation of any other law for the time

being in force. Thus, the amended Section 13(8) does not exclude the

application of Section 60 of the Act 1882. (Paras 44 and 46)

d. Right to property is a constitutional right and such an interpretation of

the amended section 13(8) subserves the said constitutional right. (Para

50)

74. We are of the view that each of the foundation of the judgment is

incorrect for the following reasons:

a. The reliance on S. Karthik (supra) is misplaced because:-

(i) Amme Srisailam's case relies on S. Karthik (supra) to overcome

Shakeena's case on the ground that the latter deals with the unamended s.

13(8). Interestingly the same point also applies to S. Karthik (supra). A

careful reading of the facts in S. Karthik (supra) in Para 3-26 clearly

indicates that the sale auction notice and the auction in the said case took

place in the year 2012. Para 59 of S. Karthik (supra) clinches the issue on

the said score as this Court has limited its examination to the validity of the

first sale notice dated 21.01.2012 i.e., the auction that took place before

amendment of Section 13(8):

“59. It can thus be seen that the properties at Items ‘B’ and ‘C’ in

the schedule of properties in first sale notice dated 21-1-2012 have

been sold through a private treaty, and as such, the said sales are

not impugned in the present appeals. It is only the properties at

Page 82 of 111

Items ‘A’ and ‘D’ in the schedule of properties in first sale notice

dated 21-1-2012, which have been sold consequent to second sale

notice dated 9-7-2012 by public auction in favour of the auction-

purchaser, are impugned. We will therefore have to examine the

correctness of the submission that since the second sale notice

dated 9-7-2012 provided for a period of only 10 days, the auction-

sale held on 20-7-2012 is vitiated in view of the law laid down by

this Court in Mathew Varghese [Mathew Varghese v. M. Amritha

Kumar, (2014) 5 SCC 610 : (2014) 3 SCC (Civ) 254] . For that, it

will be necessary to refer to various orders passed by the tribunals

as well as the High Court.”

(Emphasis supplied)

(ii) The amendment to Section 13(8) is subsequent in point of time

and came into effect from 01.09.2016. Thus, there was no scope for

any discussion on the amendment of Section 13(8) in S. Karthik

(supra). Strikingly, Shakeena (supra) though arising from an auction

prior to amendment in Section 13(8) yet has taken notice of the

amendment of Section 13(8). The relevant para of Shakeena (supra)

is as under:-

“30. A fortiorari, it must follow that the appellants have failed to

exercise their right of redemption in the manner known to law,

much less until the registration of the sale certificate on 18-9-

2007. In that view of the matter no relief can be granted to the

appellants, assuming that the appellants are right in contending

that as per the applicable provision at the relevant time

[unamended Section 13(8) of the 2002 Act], they could have

exercised their right of redemption until the registration of the sale

certificate — which, indisputably, has already happened on 18-9-

2007. Therefore, it is not possible to countenance the plea of the

appellants to reopen the entire auction process. This is more so

because, the narrative of the appellants that they had made a valid

tender towards the subject loan accounts before registration of the

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sale certificate, has been found to be tenuous. Thus understood,

their right of redemption in any case stood obliterated on 18-9-

2007. Further, the amended Section 13(8) of the 2002 Act which

has come into force w.e.f. 1-9-2016, will now stare at the face of

the appellants. As per the amended provision, stringent condition

has been stipulated that the tender of dues to the secured creditor

together with all costs, charges and expenses incurred by him shall

be at any time before the "date of publication of notice" for public

auction or inviting quotations or tender from public or private

deed for transfer by way of lease assessment or sale of the secured

assets. That event happened before the institution of the subject

writ petitions by the appellants.”

(Emphasis supplied)

(iii) S. Karthik (supra) has followed Mathew Varghese's case and

hence not elaborated on the provisions, more particularly Section

13(8). Further Mathew Varghese’s case was decided prior to the

amendment in Section 13(8). [See relevant para of S. Karthik

(supra)]

“39. This Court in Mathew Varghese [Mathew Varghese v. M.

Amritha Kumar, (2014) 5 SCC 610 : (2014) 3 SCC (Civ) 254] has

elaborately considered the provisions of Sections 13(1), 13(8), 35

and 37 of the SARFAESI Act so also Rules 8 and 9 of the said Rules.

We, therefore, do not wish to burden the present judgment by

reproducing all those provisions since they have already been

reproduced and considered in Mathew Varghese [Mathew

Varghese v. M. Amritha Kumar, (2014) 5 SCC 610 : (2014) 3 SCC

(Civ) 254]. …”

(iv) This Court in S. Karthik (supra) further noted that Section 13(8)

supports the right of redemption at any time before the date fixed for

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sale or transfer. This is clearly in reference to the old Section 13(8)

as interpreted by Mathew Varghese (supra) and as rightly made

applicable in the said case as the facts therein arose prior to the

amendment in Section 13(8). The said Section 13(8) now stands

amended and provides a cut-off for the date of publication of the

auction notice. Thus, now after the amendment the support of right

of redemption is limited till the date of publication of the auction

notice. The relevant Para is quoted for reference:

“53. It could thus be seen that this Court in Mathew Varghese

[Mathew Varghese v. M. Amritha Kumar, (2014) 5 SCC 610 :

(2014) 3 SCC (Civ) 254] observed that the equity of redemption is

not extinguished by mere contract for sale and that the

mortgagor's right to redeem will survive until there has been

completion of sale by the mortgagee by a registered deed. This

Court further observed that applying the principles stated with

reference to Section 60 of the Transfer of Property Act in respect

of a secured interest in a secured asset in favour of the secured

creditor under the provisions of the SARFAESI Act and the

relevant Rules applicable, a free hand is given to a secured

creditor to resort to a sale without the intervention of the court or

tribunal. It has, however, been held that under Section 13(8), it is

clearly stipulated that the mortgagor i.e. the borrower, who is

otherwise called as a debtor, retains his full right to redeem the

property by tendering all the dues to the secured creditor at any

time before the date fixed for sale or transfer.”

(Emphasis supplied)

(v) S. Karthik (supra) also noted Shakeena’s case but it seems the

attention of the court was not drawn to the amendment in Section

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13(8) and the observation by this Court in Shakeena on the said

amendment. The para 118 of S. Karthik (supra) may be noted as

below:-

“118. It is further relevant to note that this Court in Dwarika

Prasad [Dwarika Prasad v. State of U.P., (2018) 5 SCC 491]

and in Shakeena [Shakeena v. Bank of India, (2021) 12 SCC

761] held that the right to redemption stands extinguished on

the sale certificate getting registered.”

(Emphasis supplied)

(vi) Thus, the verdict of this Court in S. Karthik (supra) is wrongly

interpreted & understood in Amme Srisailam (supra) by the High

Court.

b. The reliance on Concern Readymix (supra) of the earlier Division

Bench judgement of the High Court is misplaced because:

(i) It has failed to consider that the Securitisation Act, 2002 is a special

enactment and the Act 1882 is a general enactment.

(ii) It has failed to take note of the overriding clause under Section 35 of

the Securitisation Act, 2002.

(iii) Originally Section 13(8) retained the right akin to s. 60 of the Transfer

of Property Act, 1882. By amendment there was a conscious departure

by the legislature.

Page 86 of 111

(iv) In Mathew Varghese (supra) this Court held that the original Section

13(8) retained the borrowers right to redeem. Thus, it is important to

note that till the amendment took place under Section 13(8), there was

nothing inconsistent between 13(8) of the SARFAESI Act and the Act

1882. It is only after the amendment of Section 13(8) the inconsistency

arose between the two Acts on the said subject, which is clearly

covered by Section 35 of the SARFAESI Act whereby now the

amended Section 13(8) achieves supremacy over Section 60 of the Act

1882. Thus, leading to upholding of the SARFAESI Act as the special

law against the Act 1882 which is a general law. [See Para 53 of S.

Karthik (supra) also quoted above.]

(v) That the secured creditor, borrower as well as the auction purchaser

under the SARFAESI Act are equally bound by the provisions of the

enactment including Section 13(8). The secured creditor cannot act de

hors the Section 13(8). An interpretation that declares secured creditor

not bound by Section 13(8) makes it a bull in the china house and it

leaves the entire process at the whims and fancies of the secured

creditor. The auction purchaser is the most important actor of the

enactment and it is on him the success of the enactment resides. Thus,

any interpretation which discourages the auction purchaser to

participate has a direct bearing on the implementation of the

Page 87 of 111

enactment and recovery of public dues and the same has to be avoided.

The only caveat being that after the success of the auction bid the

auction purchaser is required to comply with all the rules.

c. The reliance on Section 37 of the SARFAESI

Act is misplaced because this Court in Madras Petrochem (supra) has

restricted its application to securities law only.

(i) The relevant portion is as under:-

“39. This is what then brings us to the doctrine of harmonious

construction, which is one of the paramount doctrines that is

applied in interpreting all statutes. Since neither Section 35 nor

Section 37 of the Securitisation and Reconstruction of Financial

Assets and Enforcement of Security Interest Act, 2002 is subject to

the other, we think it is necessary to interpret the expression “or

any other law for the time being in force” in Section 37. If a literal

meaning is given to the said expression, Section 35 will become

completely otiose as all other laws will then be in addition to and

not in derogation of the Securitisation and Reconstruction of

Financial Assets and Enforcement of Security Interest Act, 2002.

Obviously this could not have been the parliamentary intendment,

after providing in Section 35 that the Securitisation and

Reconstruction of Financial Assets and Enforcement of Security

Interest Act, 2002 will prevail over all other laws that are

inconsistent therewith. A middle ground has, therefore, necessarily

to be taken. According to us, the two apparently conflicting sections

can best be harmonised by giving meaning to both. This can only be

done by limiting the scope of the expression “or any other law for

the time being in force” contained in Section 37. This expression

will, therefore, have to be held to mean other laws having relation

to the securities market only, as the Recovery of Debts Due to Banks

and Financial Institutions Act, 1993 is the only other special law,

apart from the Securitisation and Reconstruction of Financial

Assets and Enforcement of Security Interest Act, 2002, dealing with

recovery of debts due to banks and financial institutions. On this

interpretation also, the Sick Industrial Companies (Special

Page 88 of 111

Provisions) Act, 1985 will not be included for the obvious reason

that its primary objective is to rehabilitate sick industrial

companies and not to deal with the securities market.”

(Emphasis supplied)

(ii) The court applied the Latin Expression “ejusdem generis” which

has been held to be a facet of "Noscitur a sociis". The decision

hereunder is of relevance:

Maharashtra University of Health Sciences v. Satchikitsa

Prasarak Mandal, (2010) 3 SCC 786:

“27. The Latin expression “ejusdem generis” which means

“of the same kind or nature” is a principle of construction,

meaning thereby when general words in a statutory text are

flanked by restricted words, the meaning of the general words

are taken to be restricted by implication with the meaning of

the restricted words. This is a principle which arises “from

the linguistic implication by which words having literally a

wide meaning (when taken in isolation) are treated as

reduced in scope by the verbal context”. It may be regarded

as an instance of ellipsis, or reliance on implication. This

principle is presumed to apply unless there is some contrary

indication [see Glanville Williams, The Origins and Logical

Implications of the Ejusdem Generis Rule, 7 Conv (NS) 119].

28. This ejusdem generis principle is a facet of the principle

of noscitur a sociis. The Latin maxim noscitur a sociis

contemplates that a statutory term is recognised by its

associated words. The Latin word “sociis” means “society”.

Therefore, when general words are juxtaposed with specific

words, general words cannot be read in isolation. Their

colour and their contents are to be derived from their context.

(See similar observations of Viscount Simonds in Attorney

General v. Prince Ernest Augustus of Hanover [1957 AC 436

: (1957) 2 WLR 1 : (1957) 1 All ER 49 (HL)], AC at p. 461.)”

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d. The argument of Right to property being a constitutional right

and the High Court's interpretation subserving the same is irrelevant

in light of the following:-

(i) Because once it is established that Section 60 of the

Transfer of Property, 1882 has no application under the

Securitisation Act, 2002, nothing survives on the said count.

75. It also needs to be stated that, in Amme Srisailam (supra) the High

Court did not apply the observations made by this Court in Shakeena (supra)

as regards the amended Section 13(8) because it was of the view that the same

were only obiter dicta and moreover because a subsequent and larger bench

decision of this Court in S. Karthik (supra) had held that right of redemption

would be extinguished only upon issuance and registration of the sale

certificate.

76. We may however point out that, this Court in S. Karthik (supra) had

made no reference as to whether it was considering the unamended or the

amended Section 13(8), nor any reference was made to the 2016 Amendment.

Thus, in our opinion, the decision in S. Karthik (supra) cannot be said to have

considered the amended provision of Section 13(8) especially in view of the

fact that, it had placed strong reliance on Mathew Varghese (supra) which as

discussed before had dealt with the unamended provision of Section 13(8).

Page 90 of 111

77. We also find that, in Pal Alloys (supra) the reliance on the Joint

Committee Report specifically the heading “Provisions to stop secure creditor

to lease or assignment or sale in the prescribed conditions-Amendment to

Section 13(8) of the SARFAESI Act” occurring in it, to construe that the said

amendment was only to restrict the secured creditor is misplaced. We say this,

because, initially in the Report, the proposed amendment to sub-section (8) of

Section 13 stated as under:

“The proposed modified section 13(8) provides as under:-

“(8) Where the amount of dues of the secured creditor together

with all costs, charges and expenses incurred by him are

tendered to the secured creditor at any time before the date fixed

for lease, assignment or sale of the secured assets,-

(i) the secured assets shall not be leased, assigned or sold

by the secured creditor; and

(ii) in case, any step has been taken by the secured creditor

for lease or assignment or sale of the assets before tendering of

such amount under this sub-section, no further step shall be

taken by such secured creditor for lease or assignment or sale

of such secured assets.”” (Emphasis supplied)

78. The amendment as initially proposed specifically used the words “at

any time before the date fixed for lease, assignment or sale of the secured

assets”. The heading it was placed under read as to only restricting the rights

of the secured creditor. However, remarkably, the Joint Committee

subsequently changed the proposal to as under: -

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“The Committee after examining the proposed amendment and the

existing Rules in this regard decide to modify proposed Clause

11(ii) [section 13(8) of the principal Act] as under:

“(8) Where the amount of dues of the secured creditor together

with all costs, charges and expenses incurred by him is tendered

to the secured creditor at any time before the date of publication

of notice for public auction or inviting quotations or tender from

public or private treaty for transfer by way of lease, assignment

or sale of the secured assets:-

(i) the secured assets shall not be transferred by way of lease,

assignment or sale by the secured creditor; and

(ii) in case, any step has been taken by the secured creditor for

transfer by way of lease or assignment or sale of the assets

before tendering of such amount under this sub-section, no

further step shall be taken by such secured creditor for transfer

by way of lease or assignment or sale of such secured assets.””

(Emphasis supplied)

79. Thus, without indicating any reason for the change, the proposal now

used the words “before the date of publication of notice for public auction or

inviting quotations or tender from public or private treaty for transfer by way

of lease, assignment or sale of the secured assets” and the same came to be

incorporated by way of the 2016 Amendment. We feel, in such circumstances,

given the abrupt and significant change in the proposal by the Joint

Committee, the initial heading had been inadvertently left, and the same in no

manner can be relied to construe the said provision as one intended to inhibit

only the secured creditor. In any event, it is a well settled canon of law, that

the sum and substance of a provision is determined by what is given in the

provision and not by its heading or marginal note.

Page 92 of 111

80. To read it otherwise in a strict manner as to only stipulating a restriction

upon the secured creditor and not on the borrower’s right of redemption would

lead to a very chilling effect, where no auction conducted under the

SARFAESI Act would have any form of sanctity, and in such a situation no

person would be willing to come forward and participate in any auction due

to the fear and apprehension that despite being declared a successful bidder,

the borrower could still at any time come and redeem the mortgage and

thereby thwart the very auction process.

81. Such a scenario is all the more worrisome, because the general public

who participate in such auctions are often neither aware nor informed by the

secured creditors conducting the auctions, that as long as the sale certificate

is not issued, they will not have a right in the said asset and that the borrower

whose asset is being auctioned could sweep-in and redeem the mortgage any

time, and thereby thwart their rights and the very auction process.

82. Thus, it is necessary to interpret the amended Section 13(8) of the

SARFAESI Act in such a manner where a legal sanctity is attached to an

auction process and a bright line is drawn where a mischievous borrower is

told ‘no more and no further’ and precluded from hastily exercising its right

of redemption from nowhere at the very end of the process and thereby set the

entire auction process at naught. If permitted to do so then all auctions under

the SARFAESI Act would be meaningless and simply rendered otiose and the

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very object of Section 13 and the overall scheme of the SARFAESI Act of

enabling the banks from recovering its dues in a timely manner without

intervention of the courts would be simply defeated.

SANCTITY OF PUBLIC AUCTION

83. This Court in Valji Khimji (supra) held that once an auction is

confirmed the same can be interfered on very limited grounds as otherwise no

auction would ever be complete, with the following relevant observations,

being reproduced hereunder: -

“11. It may be noted that the auction-sale was done after adequate

publicity in well-known newspapers. Hence, if any one wanted to

make a bid in the auction he should have participated in the said

auction and made his bid. Moreover, even after the auction the

sale was confirmed by the High Court only on 30-7-2003, and any

objection to the sale could have been filed prior to that date.

However, in our opinion, entertaining objections after the sale is

confirmed should not ordinarily be allowed, except on very limited

grounds like fraud, otherwise no auction-sale will ever be

complete.

xxx xxx xxx

29. … It may be mentioned that auctions are of two types – (1)

where the auction is not subject to subsequent confirmation, and

(2) where the auction is subject to subsequent confirmation by

some authority after the auction is held.

30. In the first case mentioned above, i.e. where the auction is not

subject to confirmation by any authority, the auction is complete

on the fall of the hammer, and certain rights accrue in favour of

the auction-purchaser. However, where the auction is subject to

subsequent confirmation by some authority (under a statute or

terms of the auction) the auction is not complete and no rights

accrue until the sale is confirmed by the said authority. Once,

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however, the sale is confirmed by that authority, certain rights

accrue in favour of the auction-purchaser, and these rights cannot

be extinguished except in exceptional cases such as fraud.”

84. In another decision by this Court in K. Kumara Gupta v. Sri

Markendaya and Sri Omkareswara Swamy Temple & Ors. reported in

(2022) 5 SCC 710, it was held that repeated interferences with public auction

would frustrate the sanctity and purpose of holding auctions. The relevant

observations made in it are given below: -

“14. Once the appellant was found to be the highest bidder in a

public auction in which 45 persons had participated and thereafter

when the sale was confirmed in his favour and even the sale deed

was executed, unless and until it was found that there was any

material irregularity and/or illegality in holding the public

auction and/or auction-sale was vitiated by any fraud or collusion,

it is not open to set aside the auction or sale in favour of a highest

bidder on the basis of some representations made by third parties,

who did not even participate in the auction proceedings and did

not make any offer.

xxx xxx xxx

16. It is also required to be noted that the sale was confirmed

in favour of the appellant by the Commissioner, Endowments

Department after obtaining the report of the Assistant

Commissioner. Therefore, we are of the opinion that in the

aforesaid facts and circumstances of the case, the High Court

ought not to have ordered re-auction of the land in question after

a period of 23 years of confirmation of the sale and execution of

the sale deed in favour of the auction-purchaser by observing that

the value of the property might have been much more, otherwise,

the object and purpose of holding the public auction and the

sanctity of the public auction will be frustrated. Unless there is

concrete material and it is established that there was any fraud

and/or collusion or the land in question was sold at a throwaway

price, the sale pursuant to the public auction cannot be set aside

at the instance of strangers to the auction proceeding.

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17. The sale pursuant to the public auction can be set aside in

an eventuality where it is found on the basis of material on record

that the property had been sold away at a throwaway price and/or

on a wholly inadequate consideration because of the fraud and/or

collusion and/or after any material irregularity and/or illegality is

found in conducing/holding the public auction. After the public

auction is held and the highest bid is received and the property is

sold in a public auction in favour of a highest bidder, such a sale

cannot be set aside on the basis of some offer made by third parties

subsequently and that too when they did not participate in the

auction proceedings and made any offer and/or the offer is made

only for the sake of making it and without any serious intent. In the

present case, as observed hereinabove, though Shri Jagat Kumar

immediately after finalising the auction stated that he is ready and

willing to pay a higher price, however, subsequently, he backed

out. If the auction-sale pursuant to the public auction is set aside

on the basis of such frivolous and irresponsible representations

made by such persons then the sanctity of a public auction would

be frustrated and the rights of a genuine bidder would be adversely

affected.” (Emphasis supplied)

85. In a recent decision by this Court in Eva Agro Feeds Private Limited

v. Punjab National Bank & Anr. reported in 2023 SCC OnLine SC 1138, the

following relevant observations were made, being reproduced as under: -

“84. … mere expectation of the Liquidator that a still higher price

may be obtained can be no good ground to cancel an otherwise

valid auction and go for another round of auction. Such a cause

of action would not only lead to incurring of avoidable expenses

but also erode credibility of the auction process itself. That apart,

post auction it is not open to the Liquidator to act on third party

communication and cancel an auction, unless it is found that fraud

or collusion had vitiated the auction. The necessary corollary that

follows therefrom is that there can be no absolute or unfettered

discretion on the part of the Liquidator to cancel an auction which

is otherwise valid. As it is in an administrative framework

governed by the rule of law there can be no absolute or unfettered

discretion of the Liquidator. Further, upon a thorough analysis of

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all the provisions concerning the Liquidator it is evident that the

Liquidator is vested with a host of duties, functions and powers to

oversee the liquidation process in which he is not to act in any

adversarial manner while ensuring that the auction process is

carried out in accordance with law and to the benefit of all the

stakeholders. Merely because the Liquidator has the discretion of

carrying out multiple auction it does not necessarily imply that he

would abandon or cancel a valid auction fetching a reasonable

price and opt for another round of auction process with the

expectation of a better price. Tribunal had rightly held that there

were no objective materials before the Liquidator to cancel the

auction process and to opt for another round of auction.”

(Emphasis supplied)

86. Thus, what is discernible from above is that, it is the duty of the courts

to zealously protect the sanctity of any auction conducted. The courts ought

to be loath in interfering with auctions, otherwise it would frustrate the very

object and purpose behind auctions and deter public confidence and

participation in the same.

87. Any other interpretation of the amended Section 13(8) will lead to a

situation where multiple redemption offers would be encouraged by a

mischievous borrower, the members of the public would be dissuaded and

discouraged from in participating in the auction process and the overall

sanctity of the auction process would be frustrated thereby defeating the very

purpose of the SARFAESI Act. Thus, it is in the larger public interest to

maintain the sanctity of the auction process under the SARFAESI Act.

Page 97 of 111

88. In view of the aforesaid discussion, we hold that as per the amended

Section 13(8) of the SARFAESI Act, once the borrower fails to tender the

entire amount of dues with all cost & charges to the secured creditor before

the publication of auction notice, his right of redemption of mortgage shall

stand extinguished / waived on the date of publication of the auction notice in

the newspaper in accordance with Rule 8 of the Rules of 2002.

EXERCISE OF EXTRAORDINARY JURISDICTION BY THE HIGH

COURT UNDER ARTICLE 226 OF THE CONSTITUTION IN

SARFAESI MATTERS

89. We shall now consider whether in the factual score of the present

matter, any interference was warranted by the High Court in exercise of its

discretionary powers under Article 226.

90. The undisputed position that emerges is;

(a) the appellant was the successful auction purchaser with a bid of Rs.

105.05 crore;

(b) On 30.06.2023, the Bank confirmed the sale of the secured asset in the

appellant’s favour;

(c) On 27.07.2023, the appellant had paid the entirety of the bid amount of

Rs. 105.05 Crore to the Bank;

Page 98 of 111

(d) Out of this, a sum of Rs. 63,50,45,000/- was appropriated by the Bank

against the Borrowers’ dues;

(e) The Bank did not issue the sale certificate in the appellant’s favour

which it ought to have on 27.07.2023;

(f) After having initially invoked the jurisdiction of the DRT-I, Mumbai

and invited an order on an application for redemption, the Borrowers

invoked the Writ Jurisdiction of the Bombay High Court under Article

226 apprehending that the DRT may disallow their application;

(g) By the Impugned Judgment dated 17.07.2023, the Bombay High Court

allowed the Writ Petition on the basis of a consent granted by the Bank

to give the Borrowers, time till 31.08.2023 to repay the outstandings

and this has been treated as a redemption.

91. The only justification for entertaining the Writ Petition is contained in

paragraphs 11 and 14 respectively of the Impugned Judgment. Whilst the

High Court has accepted that normally, such a Writ Petition would not be

maintainable, it proceeded to entertain the same because of the “peculiar facts

and circumstances of the present case”, “it would be in the interest of all

concerned if the consensus reached between the Respondent Bank and the

Petitioners is taken cognizance of by us.” Thereafter, it went on to say that

the “arrangement referred to above is in the interest of all, including the

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Auction Purchaser”. A perusal of paragraph 14 would indicate that since the

outcome which the High Court considered to be ideal could be achieved, it

did not hold the Writ Petition to be an abuse of process.

92. This Court has time and again, reminded the High Courts that they

should not entertain petition under Article 226 of the Constitution if an

effective remedy is available to the aggrieved person under the provisions of

the SARFAESI Act. This Court in Satyawati Tondon (supra) made the

following observations:

“43. Unfortunately, the High Court overlooked the settled law that

the High Court will ordinarily not entertain a petition under

Article 226 of the Constitution if an effective remedy is available

to the aggrieved person and that this rule applies with greater

rigour in matters involving recovery of taxes, cess, fees, other

types of public money and the dues of banks and other financial

institutions. In our view, while dealing with the petitions involving

challenge to the action taken for recovery of the public dues, etc.

the High Court must keep in mind that the legislations enacted by

Parliament and State Legislatures for recovery of such dues are a

code unto themselves inasmuch as they not only contain

comprehensive procedure for recovery of the dues but also

envisage constitution of quasi-judicial bodies for redressal of the

grievance of any aggrieved person. Therefore, in all such cases,

the High Court must insist that before availing remedy under

Article 226 of the Constitution, a person must exhaust the remedies

available under the relevant statute.

44. While expressing the aforesaid view, we are conscious that the

powers conferred upon the High Court under Article 226 of the

Constitution to issue to any person or authority, including in

appropriate cases, any Government, directions, orders or writs

including the five prerogative writs for the enforcement of any of

the rights conferred by Part III or for any other purpose are very

Page 100 of 111

wide and there is no express limitation on exercise of that power

but, at the same time, we cannot be oblivious of the rules of self-

imposed restraint evolved by this Court, which every High Court

is bound to keep in view while exercising power under Article 226

of the Constitution.

45. It is true that the rule of exhaustion of alternative remedy is a

rule of discretion and not one of compulsion, but it is difficult to

fathom any reason why the High Court should entertain a petition

filed under Article 226 of the Constitution and pass interim order

ignoring the fact that the petitioner can avail effective alternative

remedy by filing application, appeal, revision, etc. and the

particular legislation contains a detailed mechanism for redressal

of his grievance.

xxx xxx xxx

55. It is a matter of serious concern that despite repeated

pronouncement of this Court, the High Courts continue to ignore

the availability of statutory remedies under the DRT Act and

the SARFAESI Act and exercise jurisdiction under Article 226 for

passing orders which have serious adverse impact on the right of

banks and other financial institutions to recover their dues. We

hope and trust that in future the High Courts will exercise their

discretion in such matters with greater caution, care and

circumspection.”

93. In Commissioner of Income Tax & Ors. v. Chhabil Dass Agarwal

reported in (2014) 1 SCC 603, this Court in para 15 made the following

observations:

“15. Thus, while it can be said that this Court has recognised some

exceptions to the rule of alternative remedy i.e. where the statutory

authority has not acted in accordance with the provisions of the

enactment in question, or in defiance of the fundamental principles

of judicial procedure, or has resorted to invoke the provisions

which are repealed, or when an order has been passed in total

violation of the principles of natural justice, the proposition laid

down in Thansingh Nathmal case [AIR 1964 SC 1419], Titaghur

Paper Mills case [Titaghur Paper Mills Co. Ltd. v. State of Orissa,

Page 101 of 111

(1983) 2 SCC 433 : 1983 SCC (Tax) 131] and other similar

judgments that the High Court will not entertain a petition under

Article 226 of the Constitution if an effective alternative remedy is

available to the aggrieved person or the statute under which the

action complained of has been taken itself contains a mechanism

for redressal of grievance still holds the field. Therefore, when a

statutory forum is created by law for redressal of grievances, a

writ petition should not be entertained ignoring the statutory

dispensation.”

94. In Phoenix ARC Private Limited v. Vishwa Bharati Vidya Mandir &

Ors. reported in (2022) 5 SCC 345, it was observed as under:

“18. Even otherwise, it is required to be noted that a writ petition

against the private financial institution — ARC — the appellant

herein under Article 226 of the Constitution of India against the

proposed action/actions under Section 13(4) of the SARFAESI Act

can be said to be not maintainable. In the present case, the ARC

proposed to take action/actions under the SARFAESI Act to recover

the borrowed amount as a secured creditor. The ARC as such

cannot be said to be performing public functions which are

normally expected to be performed by the State authorities. During

the course of a commercial transaction and under the contract, the

bank/ARC lent the money to the borrowers herein and therefore

the said activity of the bank/ARC cannot be said to be as

performing a public function which is normally expected to be

performed by the State authorities. If proceedings are initiated

under the SARFAESI Act and/or any proposed action is to be taken

and the borrower is aggrieved by any of the actions of the private

bank/bank/ARC, borrower has to avail the remedy under

the SARFAESI Act and no writ petition would lie and/or is

maintainable and/or entertainable. Therefore, decisions of this

Court in Praga Tools Corpn. [Praga Tools Corpn. v. C.A.

Imanual, (1969) 1 SCC 585] and Ramesh Ahluwalia [Ramesh

Ahluwalia v. State of Punjab, (2012) 12 SCC 331 : (2013) 3 SCC

(L&S) 456 : 4 SCEC 715] relied upon by the learned counsel

appearing on behalf of the borrowers are not of any assistance to

the borrowers.

xxx xxx xxx

Page 102 of 111

21. Applying the law laid down by this Court in Mathew

K.C. [State Bank of Travancore v. Mathew K.C., (2018) 3 SCC 85

: (2018) 2 SCC (Civ) 41] to the facts on hand, we are of the opinion

that filing of the writ petitions by the borrowers before the High

Court under Article 226 of the Constitution of India is an abuse of

process of the court. The writ petitions have been filed against the

proposed action to be taken under Section 13(4). As observed

hereinabove, even assuming that the communication dated 13-8-

2015 was a notice under Section 13(4), in that case also, in view

of the statutory, efficacious remedy available by way of appeal

under Section 17 of the SARFAESI Act, the High Court ought not to

have entertained the writ petitions. Even the impugned orders

passed by the High Court directing to maintain the status quo with

respect to the possession of the secured properties on payment of

Rs 1 crore only (in all Rs 3 crores) is absolutely unjustifiable. The

dues are to the extent of approximately Rs 117 crores. The ad

interim relief has been continued since 2015 and the secured

creditor is deprived of proceeding further with the action under

the SARFAESI Act. Filing of the writ petition by the borrowers

before the High Court is nothing but an abuse of process of court.

It appears that the High Court has initially granted an ex parte ad

interim order mechanically and without assigning any reasons.

The High Court ought to have appreciated that by passing such an

interim order, the rights of the secured creditor to recover the

amount due and payable have been seriously prejudiced. The

secured creditor and/or its assignor have a right to recover the

amount due and payable to it from the borrowers. The stay granted

by the High Court would have serious adverse impact on the

financial health of the secured creditor/assignor. Therefore, the

High Court should have been extremely careful and circumspect

in exercising its discretion while granting stay in such matters. In

these circumstances, the proceedings before the High Court

deserve to be dismissed.”

95. In Varimadugu OBI Reddy (supra), it was held as under:

“36. In the instant case, although the respondent borrowers

initially approached the Debts Recovery Tribunal by filing an

application under Section 17 of the SARFAESI Act, 2002, but the

order of the Tribunal indeed was appealable under Section 18 of

the Act subject to the compliance of condition of pre-deposit and

without exhausting the statutory remedy of appeal, the respondent

borrowers approached the High Court by filing the writ

Page 103 of 111

application under Article 226 of the Constitution. We deprecate

such practice of entertaining the writ application by the High

Court in exercise of jurisdiction under Article 226 of the

Constitution without exhausting the alternative statutory remedy

available under the law. This circuitous route appears to have been

adopted to avoid the condition of pre-deposit contemplated under

2nd proviso to Section 18 of the 2002 Act.”

96. More than a decade back, this Court had expressed serious concern

despite its repeated pronouncements in regard to the High Courts ignoring the

availability of statutory remedies under the RDBFI Act and the SARFAESI

Act and exercise of jurisdiction under Article 226 of the Constitution. Even

after, the decision of this Court in Satyawati Tondon (supra), it appears that

the High Courts have continued to exercise its writ jurisdiction under Article

226 ignoring the statutory remedies under the RDBFI Act and the SARFAESI

Act.

CONDUCT OF THE BANK

97. The genesis of the entire case lies in the illegitimate conduct of the

Bank in placing different concerns above the clear provisions of the law. First,

there was failure on the part of the Bank to issue sale certificate in favour of

the auction purchaser despite the fact that the entire payment of auction bid

was made. Secondly, although the right of redemption clearly stood lapsed

under Section 13(8) of the SARFAESI Act and auction having taken place

wherein full bid amount was received, yet the Bank proceeded to accept the

Page 104 of 111

offer of full payment of the Borrower which is clearly impermissible in law.

Once the auction notice is published in accordance with Section 13(8) of the

SARFAESI Act, then unless and until the auction is held to be bad and illegal

in the facts of the case, the right of redemption of mortgage is not available to

the borrower.

98. It is an admitted fact that the entire bid amount was paid by the auction

purchaser as observed at Para 10 of the Impugned Order. Thus, the Bank was

legally bound to issue the sale certificate as per the language of Rule 9(6) of

the Rules of 2002. The said provision employs the phrase "shall". Thus, it is

an instance of mandatory provision. There is nothing more in the realm of law

that the auction purchaser can do once he has made the entire payment to the

Bank. The fact that the Respondent Bank failed to issue the sale certificate

raises serious concerns, when there was no stay by any competent forum.

Even otherwise the general conduct of the Respondent Bank has not been

satisfactory. Once the entire bid price is paid and there is no stay granted by

any forum known to law, the Bank is duty bound to issue a valid Sale

Certificate and hand over the physical possession of the secured asset to the

auction purchaser.

99. It is also pertinent to note that the Bank and its officers took absolutely

inconsistent stand. Before the DRT, they opposed the offer for redemption of

mortgage as recorded by the High Court at para 11, while before the High

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Court they made a complete 360 degrees turn and accepted the offer. The lame

and weak justification assigned for the same was to bring quietus to the matter.

This again shows that the decisions of the Bank are not taken as per the

provisions of law but according to the whims and fancies of the Bank officers.

100. Bank is duty bound to follow the provisions of the law as any other

litigant. It is to be noted that the Bank i.e., the secured creditor acts under the

SARFAESI Act through the authorised officer who is appointed under Section

13(2). Thus, the authorised officer and the Bank cannot act in a manner so as

to keep the sword hanging on the neck of the auction purchaser. The law treats

everyone equally and that includes the Bank and its officers. The said

enactments were enacted for speedy recovery and for benefitting the public at

large and does not give any license to the Bank officers to act de hors the

scheme of the law or the binding verdicts.

101. The Bank could be said to have acted contrary to two judgments of this

Court: (i) Satyawati Tondon (supra) and (ii) the judgment dated 16.11.2022

in Varimadugu OBI Reddy (supra).

102. This Court in National Spot Exchange Ltd. v. Anil Kohli, Resolution

Professional for Dunar Foods Ltd. reported in (2022) 11 SCC 761 after

referring to a catena of its other judgements, had held that where the law is

clear the consequence thereof must follow. The High Court has no option but

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to implement the law. The relevant observations made in it are being

reproduced below: -

“15.1. In Mishri Lal [BSNL v. Mishri Lal, (2011) 14 SCC 739 :

(2014) 1 SCC (L&S) 387], it is observed that the law prevails over

equity if there is a conflict. It is observed further that equity can

only supplement the law and not supplant it.

15.2. In Raghunath Rai Bareja [Raghunath Rai Bareja v. Punjab

National Bank, (2007) 2 SCC 230] , in paras 30 to 37, this Court

observed and held as under : (SCC pp. 242-43)

“30. Thus, in Madamanchi Ramappa v. Muthaluru Bojjappa

[AIR 1963 SC 1633] (vide para 12) this Court observed: (AIR

p. 1637)

‘12. … [W]hat is administered in Courts is justice according

to law, and considerations of fair play and equity however

important they may be, must yield to clear and express

provisions of the law.’

31. In Council for Indian School Certificate Examination v. Isha

Mittal [(2000) 7 SCC 521] (vide para 4) this Court observed:

(SCC p. 522)

‘4. … Considerations of equity cannot prevail and do not

permit a High Court to pass an order contrary to the law.’

32. Similarly, in P.M. Latha v. State of Kerala [(2003) 3 SCC

541 : 2003 SCC (L&S) 339] (vide para 13) this Court observed:

(SCC p. 546)

‘13. Equity and law are twin brothers and law should be

applied and interpreted equitably but equity cannot override

written or settled law.’

33. In Laxminarayan R. Bhattad v. State of Maharashtra

[(2003) 5 SCC 413] (vide para 73) this Court observed: (SCC

p. 436)

‘73. It is now well settled that when there is a conflict between

law and equity the former shall prevail.’

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34. Similarly, in Nasiruddin v. Sita Ram Agarwal [(2003) 2 SCC

577] (vide para 35) this Court observed: (SCC p. 588)

‘35. In a case where the statutory provision is plain and

unambiguous, the court shall not interpret the same in a

different manner, only because of harsh consequences arising

therefrom.’

35. Similarly, in E. Palanisamy v. Palanisamy [(2003) 1 SCC

123] (vide para 5) this Court observed: (SCC p. 127)

‘5. Equitable considerations have no place where the statute

contained express provisions.’

36. In India House v. Kishan N. Lalwani [(2003) 9 SCC 393]

(vide para 7) this Court held that: (SCC p. 398)

‘7. … The period of limitation statutorily prescribed has to be

strictly adhered to and cannot be relaxed or departed from

for equitable considerations.’…”

103. This Court in Sadashiv Prasad Singh (supra), made the following

observations relevant to the aforesaid discussion, reproduced below: -

“21. A perusal of the impugned order [Harendar Singh v. State of

Bihar, LPA No. 844 2010, order dated 17-5-2010 (Pat)] especially

paras 8, 12 and 13 extracted hereinabove reveal that the impugned

order came to be passed in order to work out the equities between

the parties. The entire deliberation at the hands of the High Court

were based on offers and counter-offers, inter se between the

Allahabad Bank, on the one hand, and the objector, Harender

Singh on the other, whereas the rights of Sadashiv Prasad Sinha,

the auction-purchaser, were not at all taken into consideration. As

a matter of fact, it is Sadashiv Prasad Sinha who was to be

deprived of the property which came to be vested in him as far

back as on 28-8-2008. It is nobody’s case, that at the time of the

auction-purchase, the value of the property purchased by Sadashiv

Prasad Sinha was in excess of his bid. In fact, the factual position

depicted under para 8 of the impugned judgment [Harendar Singh

v. State of Bihar, LPA No. 844 2010, order dated 17-5-2010 (Pat)]

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reveals that the escalation of prices had taken place thereafter,

and the value of the property purchased by Sadashiv Prasad Sinha

was presently much higher than the bid amount.

22. Since it was nobody’s case that Sadashiv Prasad Sinha, the

highest bidder at the auction conducted on 28-8-2008, had

purchased the property in question at a price lesser than the then

prevailing market price, there was no justification whatsoever to

set aside the auction-purchase made by him on account of

escalation of prices thereafter. The High Court in ignoring the

vested right of the appellant in the property in question, after his

auction bid was accepted and confirmed, subjected him to grave

injustice by depriving him to property which he had genuinely and

legitimately purchased at a public auction. In our considered view,

not only did the Division Bench of the High Court in the matter

ignore the sound, legal and clear principles laid down by this

Court in respect of a third-party auction-purchaser, the High

Court also clearly overlooked the equitable rights vested in the

auction-purchaser during the pendency of a lis. The High Court

also clearly overlooked the equitable rights vested in the auction-

purchaser while disposing of the matter.”

(Emphasis supplied)

104. The proposition of law as discernible from the aforesaid decisions is

that equity cannot supplant the law. Equity has to follow law, if the law is clear

and unambiguous.

105. We summarise our final conclusion as under:

(i) The High Court was not justified in exercising its writ jurisdiction under

Article 226 of the Constitution more particularly when the borrowers had

already availed the alternative remedy available to them under Section 17 of

the SARFAESI Act.

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(ii) The confirmation of sale by the Bank under Rule 9(2) of the Rules of

2002 invests the successful auction purchaser with a vested right to obtain a

certificate of sale of the immovable property in form given in appendix (V) to

the Rules i.e., in accordance with Rule 9(6) of the SARFAESI.

(iii) In accordance with the unamended Section 13(8) of the SARFAESI Act,

the right of the borrower to redeem the secured asset was available till the sale

or transfer of such secured asset. In other words, the borrower’s right of

redemption did not stand terminated on the date of the auction sale of the

secured asset itself and remained alive till the transfer was completed in favour

of the auction purchaser, by registration of the sale certificate and delivery of

possession of the secured asset. However, the amended provisions of Section

13(8) of the SARFAESI Act, make it clear that the right of the borrower to

redeem the secured asset stands extinguished thereunder on the very date of

publication of the notice for public auction under Rule 9(1) of the Rules of

2002. In effect, the right of redemption available to the borrower under the

present statutory regime is drastically curtailed and would be available only

till the date of publication of the notice under Rule 9(1) of the Rules of 2002

and not till the completion of the sale or transfer of the secured asset in favour

of the auction purchaser.

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(iv) The Bank after having confirmed the sale under Rule 9(2) of the Rules

of 2002 could not have withhold the sale certificate under Rule 9(6) of the

Rules of 2002 and enter into a private arrangement with a borrower.

(v) The High Court under Article 226 of the Constitution could not have

applied equitable considerations to overreach the outcome contemplated by

the statutory auction process prescribed under the SARFAESI Act.

(vi) The two decisions of the Telangana High Court in the case of Concern

Readymix (supra) and Amme Srisailam (supra) do not lay down the correct

position of law. In the same way, the decision of the Punjab and Haryana High

Court in the case of Pal Alloys (supra) also does not lay down the correction

position of law.

(vii) The decision of the Andhra Pradesh High Court in Sri Sai Annadhatha

Polymers (supra) and the decision of the Telangana High Court in the case of

K.V.V. Prasad Rao Gupta (supra) lay down the correct position of law while

interpreting the amended Section 13(8) of the SARFAESI Act.

106. In the result, both the appeals succeed and are hereby allowed.

107. The impugned judgment and order passed by the High Court is hereby

set aside.

108. The respondent Bank shall refund the entire amount deposited by the

borrowers i.e., an amount of Rs.129 crore paid by them in lieu of the

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redemption of mortgage of the secured asset at the earliest. The appellant

herein shall pay an additional amount of Rs. 23.95 crore to the Bank within a

period of one week from today and subject to such deposit, the Bank shall

issue the sale certificate in accordance with Rule 9(6) of the Rules of 2002.

109. The pending applications if any shall stand disposed of.

…..………………………………..CJI.

(Dr. Dhananjaya Y. Chandrachud)

…………………………………….J.

(J.B. Pardiwala)

New Delhi;

Date: September 21, 2023.