Summary
The High Court directed a bank to release a mortgaged house and its title deeds upon a payment far below the outstanding debt. The Court reversed that direction: the reserve price or an uncompleted auction bid did not satisfy the borrower’s redemption liability, and sale proceeds would not erase any remaining debt. Fresh auction was permitted, prior payments were to be adjusted, and the borrower’s securitisation application remained for merits determination with limited interim protection of existing residential possession.
Issues
- Whether a mortgaged property could be released on payment of its reserve price or an amount linked to an uncompleted auction bid instead of the full secured dues.
- What directions should govern further auction, pending proceedings and residential possession.
Provisions considered
- Section 13(8), Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002Payment well short of the secured dues and associated costs did not justify the ordered release of the mortgaged property. (¶ 6-7.2)
Held
- The directed payment of Rs.65.65 lakhs was substantially below the outstanding dues. Neither the reserve price nor the unmaterialised highest bid constituted a completed sale or full payment supporting release of the security and title deeds. (¶¶ 6-6.1, 7.1)
- Even a completed auction for less than the debt would leave the borrower liable for the balance. The bank’s willingness to release this property on an earlier proposed payment was not a discharge of the entire outstanding liability. (¶¶ 2.3, 7-7.1)
- The Division Bench judgment was set aside and the Single Judge’s order quashing the tribunal’s interim release direction restored. The bank could invite fresh bids; amounts already paid by the borrower were to be adjusted against the debt. The DRT was still to decide the borrower’s application on its own merits. (¶ 7.2-8)
- If the borrower had regained residential possession under the earlier orders, it was protected until the auction was finalised and the property sold. Thereafter peaceful vacant possession had to be delivered. The bank retained the title deeds, and the borrower could not transfer or alienate the property or its possession meanwhile. (¶ 8)
Result
Appeal allowed. Conditional release order reversed; fresh auction permitted with credit for prior payments. Pending securitisation application to be decided on merits. Existing residential possession protected only until completed sale, subject to retention of title deeds by the bank and prohibition on alienation. No costs.