Summary
The Supreme Court restored a confirmed SARFAESI auction displaced by a later borrower–bank settlement. Under Section 13(8) as amended in 2016, redemption ends upon publication of the public-auction notice; the general redemption rule in Section 60 of the Transfer of Property Act cannot extend that deadline. A compliant purchaser is entitled to the sale certificate after confirmation and payment. The High Court could not bypass an already invoked DRT remedy or override the auction through equitable considerations.
Issues
- When does redemption end under amended Section 13(8), read with Section 60 of the Transfer of Property Act?
- Whether a bank may withhold a sale certificate after confirmation and full payment to accommodate a later settlement.
- Whether the High Court properly entertained the borrowers’ writ petition while their redemption application was pending before the DRT.
Provisions considered
- Section 13(8), as amended in 2016, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002Full dues, costs and charges must be tendered before publication of the auction notice. Failure extinguishes the borrower’s redemption right at publication; this changed the earlier statutory position. (¶¶ 34, 35, 45, 49, 50, 60, 63, 64, 65, 66, 67, 68, 88, 105(iii))
- Sections 35 and 37, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002The special amended redemption provision prevails over the inconsistent general rule. Section 37 cannot be read to nullify Section 35 or preserve the general redemption deadline notwithstanding the amendment. (¶¶ 39, 40, 64, 68, 69, 72, 74)
- Section 60 and proviso, Transfer of Property Act, 1882The general right surviving until conveyance does not extend redemption under the inconsistent amended SARFAESI regime; failure to tender before the statutory deadline was also treated as extinguishment by the parties’ acts. (¶¶ 42, 43, 49, 61, 63, 64, 68, 72)
- Rules 8 and 9, particularly Rules 9(2) and 9(6), Security Interest (Enforcement) Rules, 2002Confirmation gives the successful purchaser a right to obtain the sale certificate upon compliance with payment terms. The bank cannot withhold the mandatory certificate to substitute a later private arrangement. (¶¶ 36, 37, 97, 98, 105(ii), 105(iv), 108)
- Article 226, Constitution of IndiaThe borrowers had already invoked the effective statutory remedy. Apprehension of an adverse DRT decision and a financially preferable settlement did not justify writ intervention overriding the statutory auction. (¶¶ 89, 90, 91, 92, 93, 95, 96, 102, 104, 105(i), 105(v))
Held
- The 2016 amendment materially advanced the redemption cutoff to publication of the public-auction notice. Decisions applying the earlier provision, including Mathew Varghese and S. Karthik, cannot preserve the former deadline for an auction governed by the amended provision. (¶¶ 49, 50, 63, 64, 65, 66, 67, 68, 74, 75, 76, 88, 105(iii))
- The Court disapproved Concern Readymix, Amme Srisailam and Pal Alloys on the amended redemption rule, and approved Sri Sai Annadhatha Polymers and K.V.V. Prasad Rao Gupta. The special statute’s overriding provision defeats reliance on inconsistent general mortgage law. (¶¶ 68, 72, 73, 74, 77, 78, 79, 105(vi), 105(vii))
- Confirmation of the sale, followed by full payment in compliance with the auction, entitled the purchaser to a sale certificate. Without a stay or an invalid auction, the bank had to honour that process rather than withhold the certificate and accept the borrower’s later redemption proposal. (¶¶ 83, 86, 87, 90, 97, 98, 99, 100, 105(ii), 105(iv))
- An apprehended adverse decision in the pending DRT proceedings did not justify the borrowers’ resort to writ jurisdiction. Equity and the prospect of a higher recovery could not override the statutory process or the purchaser’s accrued rights; the rule respecting effective statutory remedies remained applicable. (¶¶ 14, 15, 89, 90, 91, 92, 93, 95, 96, 102, 103, 104, 105(i), 105(v))
Result
Both appeals allowed and High Court order set aside. Bank directed to refund the borrowers’ Rs 129 crore at the earliest. Purchaser to deposit an additional Rs 23.95 crore within one week; subject to that deposit, bank to issue the sale certificate under Rule 9(6). Pending applications disposed of.