S Karthik vs N Subhash Chand Jain on 23 September, 2021


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Supreme Court of India

S Karthik vs N Subhash Chand Jain on 23 September, 2021

Author: Sanjay Kishan Kaul

Bench: Sanjay Kishan Kaul, B.R. Gavai

                                                       1

                                                                        REPORTABLE


                                    IN THE SUPREME COURT OF INDIA
                                     CIVIL APPELLATE JURISDICTION

                                  CIVIL APPEAL NOS. 5920 – 5923/2021
                         [Arising out of Special Leave Petition (Civil) No.8614­8617 of
                                                     2020]

                         S. KARTHIK & ORS.                          ...APPELLANT(S)

                                                   VERSUS

                         N. SUBHASH CHAND JAIN & ORS.            .... RESPONDENT(S)


                                              JUDGMENT

B.R. GAVAI, J.

1. Leave granted.

2. This case is a classic example as to how an

ingenious litigant, by taking recourse to a series of

proceedings one after the other, has been successful in

blocking the enforcement of a security interest, created in

favour of a secured creditor, thereby defeating the very

Signature Not Verified

Digitally signed by
purpose for which the Securitisation and Reconstruction of
RASHI GUPTA
Date: 2021.09.23
17:37:33 IST

Financial Assets and Enforcement of Security Interest Act,
Reason:

2

2002 (hereinafter referred to as ‘the SARFAESI Act’) was

enacted.

3. The present appeals challenge the common

judgment and order dated 18.11.2019 passed by the High

Court of Judicature at Madras in Writ Petition Nos. 30710

and 30712 of 2019 filed by respondent No.1­N. Subhash

Chand Jain herein (hereinafter referred to as ‘the auction

purchaser’) and in Writ Petition Nos. 28034 and 28036 of

2019 filed by the appellants herein, thereby disposing of all

the four writ petitions.

4. The facts, in brief, giving rise to the present

appeals are as under:

Ace Concrete Private Limited (hereinafter referred

to as ‘the borrower’) was a company engaged in the

manufacture and sale of ready mixed concrete and related

business activities.

The borrower had availed loans from respondent

No.5 –Indian Overseas Bank (hereinafter referred to as ‘the

respondent­Bank’). The appellants and respondent Nos. 2

to 4 herein had mortgaged their four properties as collateral

security and executed guarantee for the credit facility

granted to the borrower. As per the sanction of the
3

respondent­Bank dated 30.3.2010, the respondent­Bank

extended financial assistance to the tune of

Rs.21,14,00,000/­ to the borrower. The guarantees, which

were signed and executed by the appellants and respondent

Nos. 2 to 4, were for an amount of Rs.22,74,74,000/­.

It appears that thereafter there was a

transaction/Memorandum of Understanding between the

borrower and one M/s. AKR Holdings Private Limited

(hereinafter referred to as ‘AKR Holdings’), as per which the

entire share­capital of the borrower was to be transferred to

AKR Holdings and the Management was also to be

transferred in favour of AKR Holdings. As per the

agreement, AKR Holdings was to take over the entire

liability of the borrower and also to get the four mortgaged

properties released to the appellants and respondent Nos. 2

to 4. It is, however, the contention of the appellants that

the said AKR Holdings in collusion with the respondent­

Bank sold all the assets of the borrower hypothecated to the

respondent­Bank and also did not get the mortgaged
4

properties released, as agreed. The borrower was, therefore,

categorised as ‘Non­Performing Asset (NPA)’ on 1.4.2011.

The respondent­Bank on 23.5.2011 issued notice

under Section 13(2) of the SARFAESI Act for a liability of

Rs.20,24,05,000/­. It is the contention of the appellants

that the respondent­Bank instead of proceeding against the

actual borrowers, i.e., the new Management, who had taken

over the control/management of the borrower, invoked its

power mala fidely against the subsisting guarantors. As

such, vide reply dated 11.7.2011, the appellant Nos. 1 and

6, and respondent Nos. 3 and 4 denied the claim of the

respondent­Bank. According to the appellants, ignoring the

same, on 25.8.2011, the respondent­Bank took symbolic

possession of all the four properties. The respondent­Bank

issued a sale notice dated 21.1.2012 (First Sale Notice) in

respect of all the four mortgaged properties claiming a sum

of Rs.23,39,54,702/­ as outstanding. The date of sale was

scheduled to be 27.2.2012.

On 20.2.2012, the appellants and respondent

Nos. 2 to 4 filed a Securitisation Application being S.A.

No.69 of 2012 before the Debts Recovery Tribunal­III,
5

Chennai (hereinafter referred to as ‘the DRT, Chennai’),

thereby praying to quash the First Sale Notice dated

21.1.2012. The DRT, Chennai, vide order dated 27.2.2012

granted an interim stay restraining the respondent­Bank

from proceeding further with the First Sale Notice dated

21.1.2012 for a period of 30 days. However, this was

subject to deposit of 50% of the outstanding amount within

the said period.

On 28.3.2012, a sum of Rs.12.25 crores was

remitted to the respondent­Bank after sale of the mortgaged

property at Item ‘B’ in the Schedule of Properties. The said

sale was through a private treaty. According to the

appellants, they had already deposited an amount of Rs.50

lakh on 17.8.2011 and 23.8.2011, i.e., prior to the issuance

of the First Sale Notice dated 21.1.2012.

Vide order dated 2.7.2012, the DRT, Chennai,

dismissed S.A. No.69 of 2012 filed by the appellants and

respondent Nos. 2 to 4.

After the dismissal of S.A. No.69 of 2012, the

respondent­Bank issued a fresh sale notice dated 9.7.2012

(Second Sale Notice) calling upon the appellants and
6

respondent Nos. 2 to 4 to pay the revised outstanding

amount of Rs.11,99,53,926/­ within 10 days. The date of

sale for the remaining three mortgaged properties was

scheduled to be 20.7.2012.

Being aggrieved by the said Second Sale Notice

dated 9.7.2012, the appellants and respondent Nos. 2 to 4

filed S.A. No.227 of 2012 before the DRT, Chennai, thereby

praying to quash the Second Sale Notice dated 9.7.2012,

inter alia, on the ground that the auction/sale has been

fixed before the expiry of 30 days from the date of service of

Second Sale Notice. There is some dispute with regard to

the actual date of filing of the said S.A.No.227 of 2012.

However, for adjudication of the present appeals, it is not

necessary to go into the said aspect.

On 20.7.2012, the mortgaged properties at Item

‘A’ and Item ‘D’ of the Schedule of Properties mentioned in

the First Sale Notice dated 21.1.2012 were sold for a sale

consideration of Rs.4,86,21,000/­ to the auction purchaser.

Vide interim order dated 24.7.2012, the DRT,

Chennai, directed the appellants and respondent Nos. 2 to 4

to deposit Rs. 1 crore to show their bona fides and granted a
7

month’s time to procure prospective purchasers to clear the

entire dues by selling the mortgaged properties.

Accordingly, an amount of Rs.1 crore came to be deposited

on 31.7.2012.

The claim of the appellants and respondent Nos.

2 to 4 before the DRT, Chennai, in S.A. No. 227 of 2012

came to be resisted by the respondent­Bank by filing a reply

statement dated 2.8.2012.

The DRT, Chennai, passed an interim order dated

7.8.2012, thereby restraining the respondent­Bank from

bringing the mortgaged properties for sale pursuant to the

Second Sale Notice dated 9.7.2012 for a period of 30 days

subject to deposit of Rs.4,80,00,000/­ by the appellants and

respondent Nos. 2 to 4 within the said period, failing which

the said interim order dated 7.8.2012 was to stand vacated.

However, instead of complying with the said

order, the guarantors filed an application being I.A. No.437

of 2012 in S.A. No.227 of 2012. By the said application,

they sought a direction that the amount so directed to be

deposited (i.e. Rs.4,80,00,000/­) by the DRT, Chennai, vide

order dated 7.8.2012, should be permitted to be deposited
8

either in the purchasers account or in separate suspense

account in the Indian Overseas Bank, Kilpauk Branch. This

was on the pretext of an ongoing investigation by the CBI

with regard to some fraudulent activities of the Officers of

the respondent­Bank. The said I.A. No.437 of 2012 came

to be dismissed by the DRT, Chennai, on 12.9.2012. Vide

the said order dated 12.9.2012, the respondent­Bank was

granted liberty to proceed with the sale and the main S.A.

No.227 of 2012 was directed to be posted for final hearing

on 20.9.2012
After the deposit of the balance sale consideration

by the auction purchaser on 12.9.2012, a sale certificate

came to be issued on 13.9.2012.

Being aggrieved by the order passed by the DRT,

Chennai, dated 12.9.2012, Civil Revision Petition No.3487

of 2012 came to be filed before the High Court of Judicature

at Madras. Another Civil Revision Petition No.3597 of 2012

came to be filed against the interim order passed by the

DRT, Chennai, dated 7.8.2012 in S.A. No. 227 of 2012

before the Madras High Court.

9

During the pendency of the said Civil Revision

Petitions before the Madras High Court, a Third Sale Notice

dated 27.9.2012 was issued by the respondent­Bank for

recovery of a sum of Rs.6,76,07,054/­. The date of sale was

scheduled to be 30.10.2012.

Vide various interim orders passed in the said

Civil Revision Petitions, the Madras High Court restrained

the respondent­Bank and the auction purchaser from

taking physical possession of the mortgaged properties.

During the pendency of the said Civil Revision Petitions, a

sum of Rs.12 crore was paid to the respondent­Bank

against the sale of mortgaged property at Item ‘C’ of the

Schedule of Properties in First Sale Notice dated 21.1.2012,

owned by respondent No.3­Shanthi Sivasamy.

Vide common order dated 29.7.2013, the High

Court dismissed the said Civil Revision Petitions. The

appellants and respondent Nos. 2 to 4 challenged the said

order dated 29.7.2013 before this Court by filing Special

Leave Petition (Civil) Nos. 28402 and 28403 of 2013. This

Court vide order dated 7.7.2014 issued notice in the said

Special Leave Petitions confined to the question as to
10

whether any excess payment made by the appellants and

respondent Nos. 2 to 4 was to be refunded by the

respondent­Bank. This Court also directed the Debts

Recovery Appellate Tribunal, Chennai (hereinafter referred

to as ‘the DRAT, Chennai’), to dispose of M.A.(S.A.) No.70 of

2014 expeditiously and preferably within a month’s time.

The said Special Leave Petition (Civil) Nos. 28402

and 28403 of 2013 filed by the appellants and respondent

Nos. 2 to 4 were permitted to be withdrawn by this Court

vide order dated 17.4.2015. While granting leave to

withdraw, this Court observed that since the special leave

petitions are withdrawn, there will be no impediment for the

Tribunal to pass final orders.

It appears that in the meantime on 21.6.2013

since the appellants and respondent Nos. 2 to 4 were

unrepresented, the S.A. No.227 of 2012 came to be

dismissed in default by the DRT, Chennai. An application

being M.A. No.112 of 2013 was preferred by the appellants

and respondent Nos. 2 to 4 to recall the said dismissal order

dated 21.6.2013. The said application was rejected on

20.9.2013. The said order came to be challenged by the
11

appellants and respondent Nos. 2 to 4 before the High Court

by filing C.R.P. PD. No.4410 of 2013. However, the said

C.R.P. PD. No.4410 of 2013 came to be dismissed by the

High Court vide order dated 3.12.2013 with liberty to the

appellants and respondent Nos. 2 to 4 to approach the

DRAT, Chennai. It appears that the appellants and

respondent Nos. 2 to 4 approached the DRAT, Chennai, by

filing M.A. (S.A.) No.70 of 2014. The DRAT, Chennai, vide

order dated 10.7.2014 allowed the said M.A. (S.A.) No.70 of

2014 and directed the DRT, Chennai, to restore S.A. No.227

of 2012 and dispose of the same in accordance with law as

expeditiously as possible.

It also appears from the record that there were

certain proceedings initiated at the instance of the auction

purchaser praying for transfer of the proceedings from the

DRT­III, Chennai, which was seized of S.A. No.227 of 2012,

wherein the auction purchaser reached upto the High

Court, but could not succeed.

It appears from the record that in the meantime

the third respondent­Shanthi Sivasamy filed I.A. No.903 of

2016 in S.A. No.227 of 2012 seeking refund of the excess
12

amount of Rs.4.48 crore lying with the respondent­Bank

claiming that she was the owner of the mortgaged property

situated at Chrompet, Chennai, that was sold and that the

excess money lying with the respondent­Bank belonged to

her.

The DRT, Chennai, vide order dated 25.6.2018,

allowed S.A. No.227 of 2012 and set aside the Second Sale

Notice dated 9.7.2012 and consequent sale of the mortgaged

properties and imposed cost of Rs.50,000/­ on the

respondent­Bank for wilfully violating the provisions of law.

Vide the said order dated 25.6.2018, the DRT, Chennai,

directed the respondent­Bank to refund the amounts paid

by the auction purchaser along with 10% interest per

annum. It further directed the respondent­Bank to refund

the surplus sum of Rs.4.48 crore to the third respondent­

Shanthi Sivasamy with 10% interest per annum.

The aforesaid order dated 25.6.2018 passed by

the DRT, Chennai, came to be challenged before the DRAT,

Chennai, by the respondent­Bank as well as by the auction

purchaser by filing appeals being R.A. (S.A.) No.143 of 2018

and R.A. (S.A.) No. 141 of 2018 respectively.
13

Vide common order dated 6.9.2019, the DRAT,

Chennai, allowed both the appeals and set aside the order

dated 25.6.2018 passed by the DRT, Chennai. It, however,

maintained the direction of the DRT, Chennai, insofar as

the payment of excess amount to the third respondent is

concerned.

The said order dated 6.9.2019 passed by the

DRAT, Chennai, came to be challenged by the appellants

before the High Court by filing Writ Petition Nos. 28034 and

28036 of 2019. The auction purchaser also challenged the

said order dated 6.9.2019 passed by the the DRAT,

Chennai, before the High Court by filing Writ Petition Nos.

30710 and 30712 of 2019.

Vide the impugned common order dated

18.11.2019, all the four writ petitions were disposed of.

Hence, the present appeals by way of special leave.

5. We have heard Shri K.V. Viswanathan, learned

Senior Counsel appearing on behalf of the appellants, Ms.

Anitha Shenoy, learned Senior Counsel appearing on behalf

of the respondent­Bank, Mr. K.K. Mani, learned counsel

appearing on behalf of the auction purchaser and Mr. Saju
14

Jakob, learned counsel appearing on behalf of respondent

No.3.

6. Shri K.V. Viswanathan, learned Senior Counsel

appearing on behalf of the appellants, submitted that in the

Second Sale Notice dated 9.7.2012, the period given for

paying revised outstanding dues was only 10 days. Learned

Senior Counsel submitted that the date fixed for auction

was immediately on the next day, i.e., the 11 th day. Learned

Senior Counsel therefore submits that the said notice was

in blatant breach of Rule 8(6) and Rule 9(1) of the Security

Interest (Enforcement) Rules, 2002 (hereinafter referred to

as ‘the said Rules’). It is submitted that the said Rules

statutorily mandate that there must be 30 days’ time gap

between the date of notice and the date of sale of the

immovable assets.

Relying on the judgment of this Court in the case

of Mathew Varghese v. M. Amritha Kumar and others 1,

the learned Senior Counsel submits that if the sale does not

take place pursuant to a notice issued under Rules 8 and 9

of the said Rules, then the procedure prescribed by the said

1 (2014) 5 SCC 610
15

Rules will have to be followed afresh, and a fresh notice of

30 days’ period will have to be given.

Relying on the judgment of this Court in the case

of Vasu P. Shetty v. Hotel Vandana Palace and others2,

Shri K.V. Viswanathan, learned Senior Counsel, would

submit that the sale, which is in breach of the mandatory

requirements imposed by the Rules, would be null and void.

He submits that it has been held by this Court in the case

of Vasu P. Shetty (supra) that the earlier attempts of the

borrower to thwart the sale would not constitute a waiver,

and the Bank could not be relieved from its obligation to

follow the mandatory procedure contained in the Rules. He

further submits that this Court, in the case of J. Rajiv

Subramaniyan and another v. Pandiyas and others3,

has reiterated the same legal position.

Learned Senior Counsel further submits that the

respondent­Bank also understood that even for a

subsequent notice, a 30 days’ mandatory period has to be

provided inasmuch as in the First Sale Notice dated

21.1.2012, and in the Third Sale Notice dated 27.9.2012, a
2 (2014) 5 SCC 660
3 (2014) 5 SCC 651
16

period of more than one month has been provided. It is

only with regard to the Second Sale Notice dated 9.7.2012, a

period of only 10 days has been provided. It is submitted

that this has been done in haste and with a mala fide

intention.

Learned Senior Counsel would further submit

that the contention of the respondent­Bank that the Second

Sale Notice dated 9.7.2012 is a continuation of the First

Sale Notice dated 21.1.2012 is totally erroneous. He

submitted that the schedule of the properties in the First

Sale Notice dated 21.1.2012 and in the Second Sale Notice

dated 9.7.2012 is totally different. Not only that, but the

amount called upon to be paid is also totally different.

Shri Viswanathan further submits that the

finding of all the Authorities, i.e., the DRT, Chennai, the

DRAT, Chennai, as well as the High Court, that the third

respondent­Shanthi Sivasamy was entitled to the excess

amount is contrary to the record and the pleadings. He

submitted that the amount that was received, was received

from the sale of all the four mortgaged properties of which

two were sold through a private treaty and the remaining
17

two were sold through an auction sale. As such, the excess

amount, which was generated, was on account of the sale of

all the four mortgaged properties and not only on account of

the sale of the mortgaged property of the respondent No.3.

He further submits that it was a consistent stand of the

appellants as well as the respondent Nos. 2 to 4 that the

said amount was required to be kept by the respondent­

Bank in an Escrow account so that in the event the auction

sale in respect of properties at Item ‘A’ and Item ‘D’ of the

Schedule of Properties in First Sale Notice dated 21.1.2012

is set aside, the amount can be refunded to the auction

purchaser with interest. It is, however, submitted that the

said amount has, in an illegal manner, been permitted to be

withdrawn by the respondent No.3, along with interest

accrued thereon.

Shri Viswanathan, learned Senior Counsel,

further submits that the present appeals need to be allowed

by quashing and setting aside the sale in respect of

properties at Items ‘A’ and ‘D’ of the Schedule of Properties

in the First Sale Notice dated 21.1.2012. He further
18

submits that a direction needs to be issued to respondent

No.3 to pay back the amount to the respondent­Bank,

which should be directed to utilise the said amount to

compensate the auction purchaser.

7. Ms. Anitha Shenoy, learned Senior Counsel

appearing on behalf of the respondent­Bank, submits that

the Second Sale Notice dated 9.7.2012 cannot be construed

to be a fresh notice, but a continuation of the First Sale

Notice dated 21.1.2012. Learned Senior Counsel submits

that the Second Sale Notice dated 9.7.2012 was issued in

line with the law laid down by the Division Bench of the

Madras High Court in the case of Kalpesh P.C. Surana v.

Indian Bank4. It is submitted that it has been held in the

case of Kalpesh P.C. Surana (supra) that though a 30

days’ period is to be provided for auction sale in the First

Notice, there is no requirement under the law to provide a

30 day’s clear period in the subsequent notice. She further

submits that though the DRT, Chennai, the DRAT, Chennai,

and the High Court had granted several opportunities to the

appellants to make the payments, they have defaulted to do
4 (2010) 3 CTC 287
19

so. It is submitted that only in pursuance to the directions

of the DRT, Chennai, dated 12.9.2012, the sale was

completed in favour of the auction purchaser. Learned

Senior Counsel therefore submits that since the

respondent­Bank has always acted in compliance with the

orders passed by the Tribunals and the High Court, no fault

could be attributed to the respondent­Bank.

8. Shri K.K. Mani, learned counsel appearing on

behalf of the respondent No.1­the auction purchaser,

submitted that on account of the litigation, though the

auction purchaser has deposited the entire amount in the

year 2012 itself, he is deprived of the benefit of the said

sale. Learned counsel relying on the judgment of this Court

in the case of Dwarika Prasad v. State of Uttar Pradesh

and others5, submitted that though the appellants have

lost before all the forums in several rounds of litigation and

that the auction purchaser by virtue of law is the owner of

the properties since 2012 onwards, he is being deprived of

the benefit of the rent from the properties at Items ‘A’ and

‘D’ of the Schedule of Properties in First Sale Notice dated
5 (2018) 5 SCC 491
20

21.1.2012, which rent is being received by the appellants.

Learned counsel also relying on the judgment of this Court

in the case of Shakeena and Anr. v. Bank of India &

Ors.6, further submits that the role of the respondent­Bank

in the present case also needs to be noted. He submits that

though the respondent­Bank could very well have taken

steps under Section 14 of the SARFAESI Act for recovery of

physical possession, for last 9 years, the respondent­Bank

has not taken any steps.

9. Shri Saju Jakob, learned counsel appearing for

respondent No.3­Shanthi Sivasamy, submits that all the

appellants are either Promoters/Directors or their direct

relatives. He submits that respondent No.3 is not directly

related to any of the Promoters or Directors but is related

only through marriage of her daughter in one of the

appellants’ family. He submits that the amount of Rs.12

crore received by the respondent­Bank was with regard to

Third Sale Notice dated 27.9.2012, which was only with

respect to the mortgaged property at Item ‘C’ in the

Schedule of Properties in First Sale Notice dated 21.1.2012
6 2019 SCC Online SC 1059
21

owned exclusively by her. He submits that since the said

sale notice was for an amount of Rs.6,76,07,054/­, the

excess amount of Rs.4.48 crore was lying with the

respondent­Bank in respect of sale of the said property. It

is submitted that the amount towards the First and Second

Sale Notice was already accounted by the respondent­Bank

through sale of the mortgaged properties at Items ‘A’, ‘B’ and

‘D’ in the Schedule of Properties in the First Sale Notice

dated 21.1.2012, which properties belonged either to

Promoters/Directors or their family members. Learned

counsel submits that since the Third Sale Notice dated

27.9.2012 was only for an amount of Rs.6,76,07,054/­ and

in respect of the property owned by the respondent No.3,

there is no error in directing refund of the excess amount

along with interest to the respondent No.3.

10. The sheet­anchor of the contentions made on

behalf of the appellants is that even in case of Second Sale

Notice dated 9.7.2012, a mandatory period of 30 days has to

be provided. It is therefore the submission on behalf of the

appellants that since the Second Sale Notice dated 9.7.2012
22

does not provide for 30 days’ mandatory period and provides

for a period of only 10 days, the said notice and the

consequent sale is invalid in law. Heavy reliance has been

placed on the judgment of this Court in the case of Mathew

Varghese (supra).

11. This Court in the case of Mathew Varghese

(supra) has elaborately considered the provisions of Section

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 the case of Mathew Varghese (supra). We

only refer to the relevant paragraphs, which are relied upon

by the learned counsel for the parties.

12. Before adverting to the observations made by this

Court in the case of Mathew Varghese (supra), it will be

relevant to note the facts therein.

The first and second respondents therein stood as

guarantors in respect of a credit facility granted by the

fourth respondent Bank therein in favour of a Company

called ‘Jerry Merry Exports Pvt. Ltd.’. As guarantors, they
23

created an equitable mortgage in favour of the fourth

respondent Bank therein by depositing the title deeds of

their property. When the transaction became a non­

performing asset, the respondent­Bank issued notices

under Section 13(2) and 13(4) of the SARFAESI Act. The

guarantors filed a Securitisation Application (S.A.) No.20 of

2007 before the DRT, Ernakulam, challenging the

possession notice issued under Section 13(4) of the

SARFAESI Act. After issuance of notices under Section

13(2) and 13(4) of the SARFAESI Act, the respondent­Bank

issued a notice on 14.8.2007 to the guarantors as well as

others of its intention to sell the property under Rule 8(6) of

the said Rules by fixing a reserve price of Rs.1,25,00,000/­.

On 23.8.2007, the respondent­Bank published its notice of

sale of property in Indian Express and Mathrubhoomi,

inviting tenders­cum­auction from the public. The

guarantors vide notice dated 30.8.2007 were informed by

the respondent­Bank about the publication made on

23.8.2007. In pursuance of the tender notice, the

appellant­Mathew Varghese and one M/s Kent Construction
24

submitted their tenders on 30.8.2007 and 1.9.2007

respectively. The guarantors filed a writ petition being WP

No.27182 of 2007 before the Kerala High Court challenging

the proceedings initiated under the SARFAESI Act. The said

writ petition was disposed of by a learned single judge of the

Kerala High Court by order dated 20.9.2007. The High

Court after taking note of the Original Application (OA) filed

by the respondent­Bank as well as Securitisation

Application (SA) filed by the guarantors, directed the DRT to

hear the parties and dispose of the cases without any delay.

While disposing of the writ petition, the High Court also

gave liberty to the parties to settle the liability and directed

the respondent­Bank to defer the sale posted on 25.9.2007

by six weeks. While doing so, the High Court imposed a

condition on the guarantors to deposit a sum of Rs.10 lakh

before the date of sale, i.e., 25.9.2007. As such, the sale,

which was scheduled to be held on 25.9.2007, was

postponed. Even after the expiry of period of six weeks

prescribed in the order of the High Court dated 20.9.2007,

the sale was not effected. It was the case of the guarantors
25

that in pursuance of the order passed by the High Court,

they had deposited a sum of Rs.10 lakh with the

respondent­Bank. The said S.A. No.20 of 2007 came to be

dismissed by the DRT vide order dated 27.12.2007.

Immediately on the next day, i.e., 28.12.2007, the

respondent­Bank accepted the tender of the appellant­

Mathew Varghese and asked him to deposit 25% of the

amount on that day itself, which was accordingly deposited.

He was asked to pay the balance amount within 15 days.

Mathew Varghese deposited the balance amount on

11.1.2008. After deposit of 25% of the bid amount on

31.12.2007 by Mathew Varghese, the fourth respondent­

Bank confirmed the sale in his favour and granted him

further time of 15 days for depositing the balance amount.

13. It is only upon deposit of the balance amount by

Mathew Varghese on 11.1.2008 and the confirmation of the

sale in his favour, the fourth respondent­Bank informed the

guarantors on 2.2.2008 about the confirmation of the sale

in favour of Mathew Varghese and also the receipt of the

entire consideration. The respondent­Bank directed the
26

guarantors to collect the balance amount available with it.

As such, the guarantors filed Review Petition in the Writ

Petition, which was disposed of on 20.9.2007. The said

review petition was dismissed on 12.2.2008 giving liberty to

the guarantors to challenge the sale. The guarantors

thereafter filed another Writ Petition being Writ Petition

No.5876 of 2008 on 18.2.2008, challenging the vires of the

2002 Rules. It was their specific case that the respondent­

Bank had acted surreptitiously in selling the property

without informing them. The said writ petition was

dismissed by the learned single judge of the High Court by

order dated 12.6.2009. Being aggrieved thereby, an appeal

was carried before the Division Bench of the High Court.

The Division Bench of the High Court took the view that the

sale was not conducted in a fair and proper manner

inasmuch as when the sale was initially postponed by six

weeks from 25.9.2007, the respondent­Bank ought to have

renotified the sale or at least extended the time for receiving

further tenders. The Division bench set aside the sale by

imposing a condition that the guarantors furnish a demand
27

draft of Rs.2,00,00,000/­ from a local branch of a

nationalized bank in favour of Mathew Varghese and hand

over the same to him within a period of two months from

the date of the order. The Division Bench further directed

that if payment was not made, as directed, the sale in

favour of Mathew Varghese would stand confirmed and the

writ appeal would automatically stand dismissed. There

were further directions to the sub­Registrar with regard to

restoration of the property etc.

14. The guarantors did not make the payment within

the said date, as directed by the Division Bench. Instead,

an application was filed by the guarantors, thereby seeking

for further six weeks’ time to effect the payment of

Rs.2,00,00,000/­ to Mathew Varghese. In the said

application, the Division Bench passed an order dated

18.6.2010 extending the time period till 20.6.2010. It

appears that the guarantors had agreed to sell the property

in favour of Mr. Koshi Phillip. The High Court therefore by

the said order dated 18.6.2010 directed said Mr. Koshi

Phillip to deposit an amount of Rs.2,03,00,000/­ before the
28

respondent­Bank and further directed that on such deposit

being made, the sale made by the respondent­Bank in

favour of Mathew Varghese stood cancelled and the

respondent­Bank should effect the sale in favour of said Mr.

Koshi Phillip. In this background, Mathew Varghese had

approached this Court.

15. It will be relevant to refer to the following

observations of this Court in the case of Mathew Varghese

(supra):

“29.1. A plain reading of sub­section (8)
would show that a borrower can tender to
the secured creditor the dues together with
all costs, charges and expenses incurred by
the secured creditor at any time before the
date fixed for sale or transfer. In the event
of such tender once made as stipulated in
the said provision, the mandate is that the
secured asset should not be sold or trans­
ferred by the secured creditor. It is further
reinforced to the effect that no further step
should also be taken by the secured credi­
tor for transfer or sale of the secured asset.

The contingency stipulated in the event of
the tender being made by a debtor of the
dues inclusive of the costs, charges, etc.,
would be that such tender being made be­
fore the date fixed for sale or transfer, the
secured creditor should stop all further
steps for effecting the sale or transfer. That
29

apart, no further step should also be taken
for transfer or sale.

29.2. When we analyse in depth the stipu­
lations contained in the said sub­section
(8), we find that there is a valuable right
recognised and asserted in favour of the
borrower, who is the owner of the secured
asset and who is extended an opportunity
to take all efforts to stop the sale or trans­
fer till the last minute before which the said
sale or transfer is to be effected. Having re­
gard to such a valuable right of a debtor
having been embedded in the said sub­sec­
tion, it will have to be stated in uncontro­
verted terms that the said provision has
been engrafted in the SARFAESI Act primar­
ily with a view to protect the rights of a bor­
rower, inasmuch as, such an ownership
right is a constitutional right protected un­
der Article 300­A of the Constitution, which
mandates that no person shall be deprived
of his property save by authority of law.

29.3. Therefore, dehors the extent of bor­
rowing made and whatever costs, charges
were incurred by the secured creditor in re­
spect of such borrowings, when it comes to
the question of realising the dues by bring­
ing the property entrusted with the secured
creditor for sale to realise money advanced
without approaching any court or tribunal,
the secured creditor as a TRUSTEE cannot
deal with the said property in any manner
it likes and can be disposed of only in the
manner prescribed in the SARFAESI Act.

30

29.4. Therefore, the creditor should ensure
that the borrower was clearly put on notice
of the date and time by which either the
sale or transfer will be effected in order to
provide the required opportunity to the bor­
rower to take all possible steps for retriev­
ing his property or at least ensure that in
the process of sale the secured asset de­
rives the maximum benefit and the secured
creditor or anyone on its behalf is not al­
lowed to exploit the situation of the bor­
rower by virtue of the proceedings initiated
under the SARFAESI Act. More so, under
Section 13(1) of the SARFAESI Act, the se­
cured creditor is given a free hand to resort
to sale of the property without approaching
the court or Tribunal.

30. Therefore, by virtue of the stipulations
contained under the provisions of
the SARFAESI Act, in particular, Section
13(8)
, any sale or transfer of a secured as­
set, cannot take place without duly inform­
ing the borrower of the time and date of
such sale or transfer in order to enable the
borrower to tender the dues of the secured
creditor with all costs, charges and ex­
penses and any such sale or transfer ef­
fected without complying with the said
statutory requirement would be a constitu­
tional violation and nullify the ultimate
sale.

31. Once the said legal position is ascer­
tained, the statutory prescription contained
in Rules 8 and 9 have also got to be exam­
31

ined as the said Rules prescribe as to the
procedure to be followed by a secured cred­
itor while resorting to a sale after the is­
suance of the proceedings under Sections
13(1)
to (4) of the SARFAESI Act. Under Rule
9(1), it is prescribed that no sale of an im­
movable property under the Rules should
take place before the expiry of 30 days from
the date on which the public notice of sale
is published in the newspapers as referred
to in the proviso to sub­rule (6) of Rule 8 or
notice of sale has been served to the bor­
rower. Sub­rule (6) of Rule 8 again states
that the authorised officer should serve to
the borrower a notice of 30 days for the
sale of the immovable secured assets.

Reading sub­rule (6) of Rule 8 and sub­rule
(1) of Rule 9 together, the service of individ­
ual notice to the borrower, specifying clear
30 days’ time­gap for effecting any sale of
immovable secured asset is a statutory
mandate. It is also stipulated that no sale
should be affected before the expiry of 30
days from the date on which the public no­
tice of sale is published in the newspapers.
Therefore, the requirement under Rule 8(6)
and Rule 9(1) contemplates a clear 30 days’
individual notice to the borrower and also a
public notice by way of publication in the
newspapers. In other words, while the pub­
lication in newspaper should provide for 30
days’ clear notice, since Rule 9(1) also
states that such notice of sale is to be in
accordance with the proviso to sub­rule (6)
of Rule 8, 30 days’ clear notice to the bor­
rower should also be ensured as stipulated
under Rule 8(6) as well. Therefore, the use
32

of the expression “or” in Rule 9(1) should
be read as “and” as that alone would be in
consonance with Section 13(8) of
the SARFAESI Act.

32. The other prescriptions contained in
the proviso to sub­rule (6) of Rule 8 relates
to the details to be set out in the newspa­
per publication, one of which should be in
“vernacular language” with sufficient circu­
lation in the locality by setting out the
terms of the sale. While setting out the
terms of the sale, it should contain the de­
scription of the immovable property to be
sold, the known encumbrances of the se­
cured creditor, the secured debt for which
the property is to be sold, the reserve price
below which the sale cannot be effected,
the time and place of public auction or the
time after which sale by any other mode
would be completed, the deposit of earnest
money to be made and any other details
which the authorised officer considers ma­
terial for a purchaser to know in order to
judge the nature and value of the property.

33. Such a detailed procedure while resort­
ing to a sale of an immovable secured asset
is prescribed under Rules 8 and 9(1). In
our considered opinion, it has got a twin
objective to be achieved:

33.1. In the first place, as already stated by
us, by virtue of the stipulation contained in
Section 13(8) read along with Rules 8(6)
and 9(1), the owner/borrower should have
33

clear notice of 30 days before the date and
time when the sale or transfer of the se­
cured asset would be made, as that alone
would enable the owner/borrower to take
all efforts to retain his or her ownership by
tendering the dues of the secured creditor
before that date and time.

33.2. Secondly, when such a secured asset
of an immovable property is brought for
sale, the intending purchasers should
know the nature of the property, the extent
of liability pertaining to the said property,
any other encumbrances pertaining to the
said property, the minimum price below
which one cannot make a bid and the total
liability of the borrower to the secured
creditor. Since, the proviso to sub­rule (6)
also mentions that any other material as­
pect should also be made known when ef­
fecting the publication, it would only mean
that the intending purchaser should have
entire details about the property brought
for sale in order to rule out any possibility
of the bidders later on to express ignorance
about the factors connected with the asset
in question.

33.3. Be that as it may, the paramount ob­
jective is to provide sufficient time and op­
portunity to the borrower to take all efforts
to safeguard his right of ownership either
by tendering the dues to the creditor before
the date and time of the sale or transfer, or
ensure that the secured asset derives the
maximum price and no one is allowed to
34

exploit the vulnerable situation in which
the borrower is placed.”

16. It could thus be seen that this Court has held

that the creditor should ensure that the borrower was

clearly put on notice of the date and time by which either

the sale or transfer will be effected in order to provide the

required opportunity to the borrower to take all possible

steps for retrieving his property or at least to ensure that in

the process of sale, the secured asset derives the maximum

benefit, and that the secured creditor or anyone on its

behalf, is not allowed to exploit the situation of the

borrower. This Court held that Rule 9(1) of the said Rules

prescribed that no sale of an immovable property under the

said Rules should take place before the expiry of 30 days

from the date on which the public notice of sale was

published in the newspapers or notice of sale has been

served to the borrower. This Court further held that the

expression “or” in Rule 9(1) should be read as “and” and as

such there should be clear notice of 30 days between the

notice of sale to the borrower so also the publication in the
35

newspaper and the actual date of sale. This Court held that

this would serve twin purpose. Firstly, the owner/borrower

should have clear notice of 30 days before the date and time

when the sale or transfer of the secured asset would be

made inasmuch as, that would enable the owner/borrower

to take all efforts to retain his or her ownership by tendering

the dues of the secured creditor before that date and time.

Secondly, when such a secured asset of an immovable

property is brought for sale, the intending purchasers

should know the nature of the property, the extent of

liability pertaining to the said property, any other

encumbrances pertaining to the said property, the

minimum price below which one cannot make a bid and the

total liability of the borrower to the secured creditor. This

Court further held that the purpose of the Rule is to ensure

that the secured asset derives the maximum price, and no

one is allowed to exploit the vulnerable situation in which

the borrower is placed.

17. After referring to the judgment of this Court in

the case of Narandas Karsondas v. S.A. Kamtam and
36

another7, this Court in the case of Mathew Varghese

(supra) observed thus:

“38. On a reading of the above para­
graphs, we are able to discern the ratio
to the effect that 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 subse­
quent to the deed conferring such power,
that the right of redemption is not extin­
guished at the expiry of the period, that
the equity of redemption is not extin­
guished 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 requir­
ing 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 Karson­
das [(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
7 (1977) 3 SCC 247
37

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 apply­
ing 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 with­
out the intervention of the Court. Keep­
ing 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 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 prin­
cipal 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
38

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 re­
sort 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 ten­
dering all the dues to the secured credi­
tor at any time before the date fixed for
sale or transfer. Under sub­section (8) of
Section 13, as noted earlier, the secured
asset should not be sold or transferred
by the secured creditor when such ten­
der is made by the borrower at the last
moment before the sale or transfer. The
said sub­section also states that no fur­
ther step should be taken by the secured
creditor for transfer or sale of that se­
cured asset. We find no reason to state
that the principles laid down with refer­
ence 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 transac­
tion as between the debtor and secured
creditor under the provisions of
the SARFAESI Act.”
39

18. It could thus be seen that this Court 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. This Court further held that if the tender is

made by the borrower at the last moment before the sale or

transfer, the secured asset should not be sold or transferred

by the secured creditor. This Court held that there was no
40

reason as to why the general principle laid down by this

Court in the case of Narandas Karsondas (supra) 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.

19. The most relevant observation of this Court could

be found in paragraph 53 of the judgment in the case of

Mathew Varghese (supra), which reads thus:

“53. We, therefore, hold that unless and
until a clear 30 days’ notice is given to the
borrower, no sale or transfer can be re­
sorted to by a secured creditor. In the
event of any such sale properly notified
after giving 30 days’ clear notice to the
borrower did not take place as scheduled
for reasons which cannot be solely at­
tributable to the borrower, the secured
creditor cannot effect the sale or trans­
fer of the secured asset on any subse­
quent date by relying upon the notifica­
tion issued earlier. In other words, once
the sale does not take place pursuant to
a notice issued under Rules 8 and 9,
read along with Section 13(8) for which
41

the entire blame cannot be thrown on
the borrower, it is imperative that for ef­
fecting the sale, the procedure pre­
scribed above will have to be followed
afresh, as the notice issued earlier would
lapse. In that respect, the only other provi­
sion to be noted is sub­rule (8) of Rule 8 as
per which sale by any method other than
public auction or public tender can be on
such terms as may be settled between the
parties in writing. As far as sub­rule (8) is
concerned, the parties referred to can only
relate to the secured creditor and the bor­
rower. It is, therefore, imperative that for
the sale to be effected under Section 13(8),
the procedure prescribed under Rule 8 read
along with Rule 9(1) has to be necessarily
followed, inasmuch as that is the prescrip­
tion of the law for effecting the sale as has
been explained in detail by us in the earlier
paragraphs by referring to Sections 13(1),
13(8) and 37, read along with Section 29
and Rule 15. In our considered view any
other construction will be doing violence to
the provisions of the SARFAESI Act, in par­
ticular Sections 13(1) and (8) of the said
Act.”
(emphasis supplied)

20. This Court, in unequivocal terms, held that

unless and until a clear 30 days’ notice is given to the

borrower, no sale or transfer can be resorted to by a secured

creditor. It further held that in the event of any such sale

properly notified after giving a 30 days’ clear notice to the
42

borrower did not take place as scheduled for reasons, which

cannot be solely attributable to the borrower, the secured

creditor cannot effect the sale or transfer of the secured

asset on any subsequent date by relying upon the

notification issued earlier. This Court held that once the

sale does not take place pursuant to a notice issued under

Rules 8 and 9, read with Section 13(8) for which the entire

blame cannot be thrown on the borrower, it is imperative

that for effecting the sale, the procedure prescribed will have

to be followed afresh.

21. In the light of these observations, we have to

consider the factual position in the present matter.

22. It is not in dispute that an equitable mortgage in

favour of the respondent­Bank guaranteeing the loan taken

by the borrower was in respect of four properties. The chart

showing the schedule of properties, the owners (as

mentioned in the First Sale Notice dated 21.1.2012) and the

mode of sale is as under:

“SALE NOTICE DT. 21.01.2012 ­
SCHEDULE OF PROPERTIES

S.NO. SCHEDULE OWNERS MODE OF
PROPERTY SALE
43

1 Item­A – Late Mr. C. Surendran, Impugned
Vepery Mr. C.Ravindran [R­2] auction
Property Mrs. R. Rajalakshmi [P­6] sale to
Mr. R. Rajarajan [P­3] Respondent
Mr. R. Rajasekaran [P­2] No. 1
Ms. R. Abirami [P­5]

2 Item­B – Late Mr. C. Surendran Private
Madura­ Mrs. R. Sivasakthi [R­4] Treaty Sale
voyal Mrs. R. Rajalakshmi [P­6]
Property

3 Item­C – Mrs. Shanti Sivaswamy Private
Chrompet [R­3] Treaty Sale
Property

4 Item­ D Late Mr. C. Surendran Impugned
Sholingan Mr. S.Karthik [P­1] auction sale
allur to
Property Respondent
No. 1

23. 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 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
44

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 the case of

Mathew Varghese (supra). For that, it will be necessary to

refer to various orders passed by the Tribunals as well as

the High Court.

24. It is not in dispute that the First Sale Notice

dated 21.1.2012 notifying auction sale on 27.2.2012 was for

recovery of Rs.23,39,54,702/­ and in respect of all the four

scheduled properties at Items ‘A’, ‘B’, ‘C’ and ‘D’. It is also

not in dispute that the First Sale Notice dated 21.1.2012

provided for a clear period of 30 days’ notice.

25. It is pertinent to note that immediately after the

First Sale Notice was issued on 21.1.2012, a Securitisation

Application being S.A. No. 69 of 2012 under Section 17(1) of

the SARFAESI Act came to be filed before the DRT, Chennai,

by the appellants and respondent Nos. 2 to 4. It will be

relevant to refer to the interim order passed by DRT,

Chennai, on 27.2.2012 in S.A. No. 69 of 2012, which reads

thus:

45

“4. The Ld. Counsel for the applicant
submitted that he can sell the property
within 15 days and make substantial
payment (entire sale consideration) with
the bank within 15 days and the balance
amount due to the bank will be settled
within one month. If an interim
injunction is not granted at this
juncture, it will cause irreparable injury
to the applicants.

5. Hence in the interest of justice
interim stay is granted for a period of 30
days restraining the respondent bank
from proceeding further pursuant to the
sale notice dated 21.01.2012 subject to
deposit of 50% of the outstanding
amount within the period. For
compliance call on 29.03.2012.”

26. It could thus be seen that the counsel for the

applicants therein, i.e., the appellants and the respondent

Nos. 2 to 4 herein submitted that the applicants could sell

the property within 15 days and make substantial payment,

i.e., the entire sale consideration with the respondent­Bank

within 15 days, and the balance amount due to the

respondent­Bank will be settled within one month. Acting

on the said statement made by the appellants and

respondent Nos. 2 to 4, the DRT, Chennai, granted interim

stay for a period of 30 days restraining the respondent­Bank
46

from proceeding further pursuant to the First Sale Notice

dated 21.1.2012. However, this was subject to deposit of

50% of the outstanding amount within the said period. The

matter was kept for compliance on 29.3.2012.

27. It is not in dispute that during the pendency of

the said S.A. No.69 of 2012, an amount of Rs.12.25 crore,

which was received from the sale of mortgaged property at

Item ‘B’ through a private treaty on 28.3.2012, was remitted

to the respondent­Bank. It is the further contention of the

appellants that they had also deposited a sum of Rs.50 lakh

with the respondent­Bank prior to the receipt of First Sale

Notice dated 21.1.2012, and as such, an amount of

Rs.12.75 crore was already paid to the respondent­Bank.

28. When the said S.A. No.69 of 2012 came up for

final hearing before the DRT, Chennai, on 2.7.2012, the

DRT, Chennai, made the following observation:

“As I said earlier, the impugned Sale
Notice was published in two dailies
namely, New Sunday Express and
Dinamani on 22.1.2012. The applicants
have no case that these dailies have no
wide circulation in the locality. It is also
evident that Sale Notice was properly
served to the borrower. It is evident that
there is clear notice of 30 days from the
date on which public notice of sale is
47

published in newspapers. Therefore,
there is no violation of sub­rule (1) of
Rule 9 as contended. Hence I could not
find any merit in the contention raised by
the Ld. Counsel for the applicants.”

29. With these observations, S.A. No.69 of 2012 came

to be dismissed by the DRT, Chennai, vide order dated

2.7.2012.

30. After the said S.A. No. 69 of 2012 was dismissed,

the respondent­Bank issued a fresh notice on 9.7.2012

(Second Sale Notice), thereby informing the guarantors that

an amount of Rs. 11,99,53,926/­ was due to the

respondent­Bank. It was therefore informed that sale of the

mortgaged properties at Items ‘A’, ‘C’ and ‘D’ in the Schedule

of Properties in the First Sale Notice dated 21.1.2012 will be

held on 20.7.2012. The Schedule of Properties in the

Second Sale Notice dated 9.7.2012 consisted of three

properties out of four properties mentioned in the earlier

notice dated 21.1.2012 (First Sale Notice) excluding the

property mentioned at item ‘B’ in the First Sale Notice,

which was sold by a private treaty on 28.3.2012.

31. The second round of litigation starts with S.A.

No.227 of 2012. It is the contention of the appellants that
48

the guarantors had immediately challenged the Second Sale

Notice dated 9.7.2012 before the DRT, Chennai, by filing

S.A. No.227 of 2012 on 18.7.2012. However, on account of

some technical difficulties, S.A. No.227 of 2012 could be

first heard on 24.7.2012. On 24.7.2012, the DRT, Chennai,

passed the following order in S.A. No.227 of 2012:

“Advanced. Both parties present. Heard.
Petitioner agreed to deposit Rs.1 crore
within 2.8.2012 to show their bonafides.
They want breathing time to procure
prospective purchaser to clear the entire
dues within one month from today by
selling the remaining property. They
want one month time since it is Aady
month, no sale would be taken place.
Hence for compliance, call on 2.8.2012.”

32. It could thus be seen that the guarantors

represented to the DRT, Chennai, that they want some

breathing time to procure prospective purchaser and that

they would clear the entire dues of the respondent­Bank

within one month from that day by selling the remaining

property.

33. The matter thereafter came up for hearing on

7.8.2012 on which date the DRT, Chennai, passed the

following interim order:

49

“8. The applicants have made out a
strong case and the balance of
convenience is also in their favour.
Therefore, interim injunction is granted
for 30 days restraining the Authorised
Officer of respondent bank from brining
the properties described in the Schedule
for sale consequent upon the impugned
Auction Sale Notice dated 9.7.2012,
subject to deposit of Rs.4,80,00,000/­
(Rupees Four Crores Eighty Lakhs only)
with the respondent bank within the
period, failing which this order will stand
vacated.”

34. Perusal of the aforesaid interim order would

reveal that an interim injunction was granted for a period of

30 days restraining the Authorised Officer of the

respondent­Bank from bringing the properties described in

the Schedule for sale consequent upon the impugned Sale

Notice dated 9.7.2012. This was made subject to deposit of

Rs.4,80,00,000/­ with the respondent­Bank within the said

period. It was, however, clarified that failing the same, the

interim order would stand vacated. The matter was kept for

compliance on 10.9.2012.

35. However, instead of complying with the said

order, the guarantors filed an application being I.A. No.437

of 2012 in S.A. No.227 of 2012. By the said application,
50

they sought a direction that the amount so directed to be

deposited (i.e. Rs.4,80,00,000/­) by the DRT, Chennai, vide

order dated 7.8.2012, should be permitted to be deposited

either in the purchasers account or in separate suspense

account in the Indian Overseas Bank, Kilpauk Branch. This

was on the pretext of an ongoing investigation by the CBI

with regard to some fraudulent activities of the Officers of

the respondent­Bank. The said I.A. No.437 of 2012 came to

be dismissed by the DRT, Chennai, on 12.9.2012. Vide the

said order dated 12.9.2012, the respondent­Bank was

granted liberty to proceed with the sale and the main S.A.

No.227 of 2012 was directed to be posted for final hearing

on 20.9.2012.

36. The orders passed by the DRT, Chennai, dated

7.8.2012 and 12.9.2012 came to be challenged by the

appellants and respondent Nos. 2 to 4 before the High Court

of Judicature at Madras by way of Civil Revision Petitions

being C.R.P No.3597 of 2012 and C.R.P. No.3487 of 2012

respectively. On 9.11.2012, the Madras High Court passed

the following order in the said Civil Revision Petitions:
51

“2. Considering the submissions made
by the learned senior counsel for the
petitioners that the Petitioners are
prepared to pay entire dues to the Bank
including the amount deposited by the
auction purchaser, without prejudice to
their other contentions, and taking into
account the fact that the ultimate
beneficiary in the Bank in view of the
offer of the Petitioners to make the entire
payment, we restrain the bank and the
auction purchaser from taking physical
possession of the properties from the
Petitioners and their tenants, until
further orders.”

37. It could thus be seen that again a representation

was made to the Division Bench of the High Court that the

appellants were prepared to pay entire dues to the

respondent­Bank including the amount deposited by the

auction purchaser, without prejudice to their other

contentions. Acting on the said representation, the Division

Bench of the High Court granted interim protection to the

appellants.

38. It appears that in the meantime since the

property at Item ‘C’ belonging to respondent No.3 could not

be sold in pursuance of the earlier sale notices, a third

notice dated 27.9.2012 was issued in respect of property at
52

Item ‘C’. It further appears that in the said Civil Revision

proceedings, the Division Bench of the Madras High Court

was informed about the said sale notice and the appellants

again made a representation that they were willing to make

payment of the entire amount. It will be relevant to refer to

the following part of the order passed by the Division Bench

of the Madras High Court dated 15.11.2012 in the Civil

Revision proceedings:

“5. Taking into consideration the
affidavit filed by the Petitioners agreeing
to pay the entire amount within 90 days
and part payment of Rs.4,80,00,000/­
within 45 days and also in view of the
submission made by the Bank that there
would be no bidders in case permission is
not granted to confirm the bid, we stay
the auction scheduled to be held on
Friday 16 November 2012.”

39. When the Civil Revision Petitions were listed on

8.1.2013, the Division Bench of the Madras High Court

passed the following order:

“2. The learned senior counsel for the
petitioners submitted that, the petitioners
have now identified a purchaser by name
Redbrick Realtors Private Limited and
they have agreed to purchase the
property at Old No.99, New No.51, Anna
Salai, Nagalkeni, Pammal Village,
Chromepet, Chennai­44 (Item No.4) for a
53

total consideration of Rs.12 crores. The
prospective purchaser has taken a
demand draft for a sum of Rs.75 lakh in
the name of respondent Bank. Even
though the prospective purchaser has
agreed to settle the remaining amount
within a period of sixty days, during the
course of submission, the representative
of the prospective purchaser sought 90
days time to pay the remaining amount.
The prospective purchaser agreed to file
an affidavit indicating that a sum of Rs.6
crore will be paid on or before 28.3.2013
and the balance amount will be paid on
or before 26.4.2013.

… … …

5. The Director, Redbrick Realtors
Private Limited, is directed to file an
affidavit indicating that a sum of Rs.6
crores would be paid by 26 March 2013
and the balance of Rs.5.25 crore would
be paid on or before 26 April 2013. The
affidavit should contain a clear
undertaking that in case of failure to
adhere to the time limit, the purchase
has no objection for forfeiting the amount
of Rs.75 lakhs.”

40. On, 22.1.2013, the Division Bench passed the

following order:

“2. Pursuant to our earlier orders dated
8.1.2013 and 11.1.2013, the Bank is
permitted to appropriate the amount of
Rs.75 lakhs towards the loan account of
M/s Ace Concrete Pvt. Ltd. Similarly, the
amount of Rs.6 crore payable by the
prospective purchaser, as per our earlier
54

order dated 8.1.2013 shall be paid to the
loan account of M/s Ace Concrete Pvt.
Ltd. On such payment, the Bank is
permitted to appropriate the said
amount.”

41. It appears that during the pendency of the

proceedings before the High Court, the mortgaged property

at Item ‘C’ was sold by a private treaty, and an amount of

Rs. 9 crore was paid by the purchaser M/s. Redbrick

Realtors Private Limited on different dates. It is also the

contention of the appellants that an amount of Rs.3 crore

was deposited on 2.4.2013 by late Shri C. Surendran in

compliance of the undertaking given to the High Court.

42. When the said Civil Revision Petitions came up

for hearing on 30.4.2013, a grievance was made on behalf of

the auction purchaser that even after issuance of sale

certificate, he was not able to enjoy the fruits of the sale. It

was also contended that the guarantors were collecting huge

amount of rent of more than Rs.4 lakh, and though the

auction purchaser was the owner of the property, he was

deprived of the same. It will be relevant to refer to the
55

following observations of the Division Bench in the said

order dated 30.4.2013 passed in the Civil Revision Petitions:

“….According to him, even after issuance
of sale certificate, as early as on
30.09.2012, they are not able to enjoy the
fruits of the sale. Further, according
Petitions, if the petitioner is allowed to
collect rent from the premises in
question, they have to face hardship in
getting back the rent collected by the
petitioner during the pendency of the
Civil Revision Petitions. In view of this,
we are of the opinion that ends of justice
will be met by directing the petitioners to
deposit the amount collected by way of
rent before the Debt Recovery Tribunal
No.III, Chennai.

2. Consequently, the petitioner is
directed to deposit the amount collected
by way of rent before the Debt Recovery
Tribunal No.III, Chennai.”

43. It will be further relevant to note that it was

sought to be urged on behalf of the respondent­Bank that

balance amount of Rs.4.48 crore was lying with the

respondent­Bank. However, the EPF and ESI authorities

were pressuring to make payment to them. The Division

Bench of the High Court vide order dated 30.4.2013

therefore directed that status quo be maintained with regard

to the said amount.

56

44. The said Civil Revision Petitions were finally

heard and dismissed by the Division Bench of the High

Court on 29.7.2013. While dismissing the said Civil

Revision Petitions, the Division Bench of the High Court

observed thus:

“10. Under such circumstances, after
the confirmation of sale and after the
issue of sale certificate, when that issue
is not before this Court, certainly, we
cannot entertain the request of the
learned Senior Counsel appearing for the
petitioners to set aside the sale. Further,
as pointed out earlier, with regard to the
orders which are under challenge in
these Civil Revision Petitions, no
infirmity has been brought to the notice,
of this Court. Consequently, both the
Civil Revision Petitions are dismissed.
Connected Miscellaneous Petitions are
closed.

Further, this Court is constrained
to impose costs of Rs. 5,000/­ on the
petitioners, payable to the Chief Justice
Relief fund, far the reason that, though,
from the very beginning of the argument,
it was brought to the notice of the
learned Senior Counsel appearing for the
petitioners that this Court cannot
entertain any submission regarding the,
alleged irregularity or illegality in the
sale effected and this Court cannot set
aside the sale also in the absence of any
challenge to the same, this Court has
57

been pressurized by the learned Senior
Counsel appearing for the petitioners to
grant the relief of setting aside the
sale ,and by this, in the considered
opinion of this Court, the time of this
Court has been wasted, Whatever be the
length of time consumed in advancing
arguments with regard to the relief
sought in the Civil Revision Petitions,
certainly, arguments have to be heard by
this Court, But, arguments at length
cannot be allowed for a relief which is
not sought in these Civil Revision
Petitions.”

45. It could thus be seen that the Division Bench of

the High Court also imposed costs of Rs.5,000/­ on the

petitioners therein as it was of the view that the learned

counsel for the petitioners therein had exceeded in his limit

while arguing the matter.

46. Litigation did not stop right there, rather it came

upto this Court by way of Special Leave Petition (Civil) Nos.

28402 and 28403 of 2013. This Court vide order dated

7.7.2014 in the said Special Leave Petitions, passed the

following order:

“Issue notice confined to the question as
to whether any excess payment made by
the petitioners is to be refunded by the
bank. We also direct the Debts Recovery
Appellate Tribunal to dispose of the
appeal, M.A. (S.A.) No.70/2014,
58

expeditiously preferably within a month’s
time.”

47. It could thus be seen that this Court had issued

notice confined only to the question as to whether any

excess payment made by the petitioners therein was to be

refunded by the respondent­Bank. This Court also directed

the DRAT, Chennai to dispose of the appeal, M.A. (S.A.)

No.70/2014, expeditiously preferably within a month’s time.

48. The said Special Leave Petitions subsequently

were permitted to be withdrawn by this Court vide order

dated 17.4.2015, which reads thus:

“The special leave petitions are permitted
to be withdrawn.

Since, the special leave petitions are
withdrawn, there is no impediment for
the Tribunal to pass final orders.”

49. It appears that in the meantime on 21.6.2013

since the appellants and respondent Nos. 2 to 4 were

unrepresented, the S.A. No.227 of 2012 came to be

dismissed in default by the DRT, Chennai. An application

being M.A. No.112 of 2013 was preferred by the appellants

and respondent Nos. 2 to 4 to recall the said dismissal order

dated 21.6.2013. The said application was rejected by the
59

DRT, Chennai, vide order dated 20.9.2013. The said order

came to be challenged by the appellants and respondent

Nos. 2 to 4 before the High Court by filing C.R.P. No.4410 of

2013. However, the said C.R.P. No.4410 of 2013 came to be

disposed of by the High Court with liberty to the appellants

and respondent Nos. 2 to 4 to approach the DRAT, Chennai.

It further appears that the appellants and the

respondent Nos. 2 to 4 approached the DRAT, Chennai, by

filing M.A. (S.A.) No.70 of 2014. The DRAT, Chennai, vide

order dated 10.7.2014 allowed the said M.A. (S.A.) No.70 of

2014 and directed the DRT, Chennai, to restore S.A. No.227

of 2012 and dispose of the same in accordance with law as

expeditiously as possible.

50. It also appears from the record that there were

certain proceedings initiated at the instance of the auction

purchaser praying for transfer of the proceedings from the

DRT­III, Chennai, which was seized of S.A. No.227 of 2012,

which reached upto the High Court, wherein the auction

purchaser could not succeed.

51. It appears from the record that in the meantime

the third respondent­Shanthi Sivasamy filed I.A. No.903 of
60

2016 in S.A. No.227 of 2012 seeking refund of the excess

amount of Rs.4.48 crore lying with the respondent­Bank

claiming that she was the owner of the mortgaged property

situated at Chrompet, Chennai, that was sold and that the

excess money lying with the respondent­Bank belonged to

her.

52. The third round of litigation begins with the order

passed by DRT, Chennai, dated 25.6.2018 in S.A. No.227 of

2012 in pursuance of the order of the DRAT, Chennai, dated

10.7.2014 restoring S.A. No.227 of 2012. The relevant

paragraphs of the order dated 25.6.2018 passed by the

DRT, Chennai, in S.A. No.227 of 2012 read thus:

“10.8 From the perusal of records
and written submissions filed by all the
parties, It is evident that the first
respondent bank did not follow the
procedure as far as the subject
impugned sale notice is concerned as
warranted under law and it is settled
principle of law that every notice of sale
shall have a distinct cause of action and
hence requires the statutory compliance
of Rule 9(1) of the Security Interest
(Enforcement) Rules, 2002, which
mandates issuance of 30 days clear
notice to the borrowers before initiating
the process of sale. As the respondent
bank has failed to adhere to the same,
61

the sale notice dated 9.7.2012
scheduling the sale on 20.7.2012 is
riddled with infirmity and hence is liable
to be set aside. Accordingly, owing to
infirmities the sale notice dated 9.7.2012
is set aside, Consequent to which, the
sale purported to have been conducted
and confirmed in favour of the second
respondent over Item ‘A’ and ‘C’ schedule
properties is also set aside.

Point 8 (III)

11.0        In the result SA No. 227/2012

is allowed setting aside the sale notice’
dated 9.7.2012 and the consequent sale
of Item ‘A’ and ‘C’ schedule properties of
the subject impugned sale notice with
costs of Rs.∙ 50,000 /­ payable by the
1st respondent bank to the appellant for
willfully violating the provisions of law
and continuing their allegation on the
same ground for several years without
conceding to their defect and correcting
themselves at the first opportune time,
This fact is evident, when the same
respondent bank, in the same matter,
had got issued yet another sale notice
trying to bring the Item ‘B’ schedule
mentioned property of the subject
impugned sale notice by a sale notice
dated 27.9.2012 scheduling the sale to
30.10.2012, which concludes that the
first respondent bank is very much
aware of the compliance of provisions of
law, but had willfully, exhibited their
disrespect for the same, owing to which
imposition of costs is necessitated as a
deterrent and not to repeat the same.

62

11. l Further, in view of the
foregoing, the First Respondent bank is
directed to refund the amounts as
received from the 2nd
respondent/auction purchaser together
with interest @ 10% p.a. (simple) from
the respective dates of receipt till the
date of payment in full.

11.2 The further facts of the case is
that during the pendency of these
proceedings, the appellants had
augmented funds to the tune of Rs.

5,23,92,946/­ and remitted the same.

Both parties viz., the appellants and the
1st respondent bank had filed their
calculation memos into this Tribunal,
where under it has been commonly
conceded to and accepted that a sum of
Rs. 4,48,00,000/­ being the surplus sale
proceeds of ‘B’ schedule property is lying
with the bank from the date of deposit
by the auction purchaser of item ‘B’
schedule property, which was sold
pursuant to the sale notice dated
27.09.2012 scheduling the auction sale
to 30.10.2012, and which sale was never
challenged and thus attained finality.
Therefore, the 1st respondent bank is
directed to refund the said sum of Rs.

4,48,00,000/­ (sic however, a sum of Rs.
4,46 crores is claimed by the 4th
appellant in IA No. 903/2013) to the 4 th
appellant herein, who is the
owner/mortgagor of the said Item ‘B’
schedule property since that is the
property which has been sold for
recovering the overdue amounts after
63

adjusting the payments made by the
appellants, together with subsequent
interest @ 10% p.a. (simple) from the
date of receipt till the date of actual
payment by the 1st respondent bank.”

53. It could thus be seen that the DRT, Chennai,

came to the conclusion that the notice dated 9.7.2012,

scheduling the sale on 20.7.2012, was contrary to the

provisions as contained in Rule 9(1) of the said Rules, and

as such, was liable to be set aside. Consequently, the sale

purported to have been conducted and confirmed in favour

of the auction purchaser over Item ‘A’ and Item ‘C’

properties in the Schedule of Properties in Second Sale

Notice dated 9.7.2012 was also set aside. Vide the said

order dated 25.6.2018, the DRT, Chennai, directed the

respondent­Bank to refund the amounts as received from

the auction purchaser together with interest at the rate of

10% per annum. The DRT, Chennai, also directed the

respondent­Bank to refund sum of Rs.4.48 crore with

interest at the rate of 10% per annum to respondent No.3,

who was the owner and mortgagor of the property sold

pursuant to the notice dated 27.9.2012. While allowing S.A.
64

No. 227 of 2012, the DRT, Chennai, had also imposed costs

of Rs.50,000/­ on the respondent­Bank.

54. Being aggrieved thereby, the auction purchaser

as well as the respondent­Bank approached the DRAT,

Chennai, by filing R.A. (S.A.) No.141 of 2018 and R.A. (S.A.)

No.143 of 2018 respectively. Vide common order dated

6.9.2019, the DRAT, Chennai, allowed the said appeals.

The DRAT, Chennai, reversed the order of the DRT,

Chennai, dated 25.6.2018 insofar as setting aside the sale

and imposition of costs is concerned. However, insofar as

direction to pay amount of Rs.4.48 crore with interest at the

rate of 10% per annum to respondent No.3 is concerned, the

same was maintained.

55. Being aggrieved thereby, four writ petitions were

filed before the Madras High Court; two writ petitions being

Writ Petition Nos. 28034 and 28036 of 2019 were filed by

the appellants and two writ petitions being Writ Petition

Nos. 30710 and 30712 of 2019 were filed by the auction

purchaser. The writ petitions filed by the auction purchaser

was with limited grievance that though he had purchased

the properties, he was deprived of the rent realised
65

therefrom since 2012 onwards, and therefore, either the

borrowers or the respondent­Bank should be directed to pay

him the rent realized from the properties purchased by him

in the year 2012 or in the alternative, to set aside the

auction and refund the amount deposited by him with

interest. Insofar as the present appellants are concerned,

they were aggrieved by the finding of the DRAT, Chennai,

reversing the order passed by the DRT, Chennai, setting

aside the sale.

56. It will be relevant to note that this Court in the

case of Mathew Varghese (supra) itself has held that in the

event of any such sale properly notified after giving a 30

days’ clear notice to the borrower does not take place as

scheduled for the reasons, which are not solely attributable

to the borrower, then the secured creditor cannot effect the

sale and he will have to initiate the procedure de novo.

Therefore, the question, that will have to be considered, is,

as to whether the sale, which was notified as per the notice

dated 21.1.2012, could not take place on the date
66

scheduled in the said notice for the reasons, which are

solely attributable to the guarantors or not.

57. It could be seen that immediately after the notice

was issued on 21.1.2012, the guarantors approached the

DRT, Chennai, by way of S.A. No.69 of 2012. The

guarantors gave an impression to the DRT, Chennai, that

they can sell the property within 15 days and make the

payment of the entire consideration within 15 days, and

that the balance amount could be settled within one month.

Acting on the representation of the guarantors, the DRT,

Chennai, vide order dated 27.2.2012 granted interim stay

for a period of 30 days, restraining the respondent­Bank

from proceeding further, pursuant to the sale notice dated

21.1.2012. However, this was subject to deposit of 50% of

the outstanding amount within the said period. It could

thus be seen that the sale as per the notice dated

21.1.2012, which was scheduled to take place on

27.2.2012, could not take place on the scheduled date on

account of interim orders passed by the DRT, Chennai,

which were passed on the representation of the guarantors.
67

58. It is not in dispute that notice dated 21.1.2012

clearly provided a 30 days’ period as prescribed in the said

Rules. It is also not in dispute that as per the

representation made to the DRT, Chennai, on 27.2.2012,

the appellants did not settle the entire amount within a

period of one month. It appears that S.A. No.69 of 2012

was pending till 2.7.2012 and it came to be dismissed on

the said date, i.e., 2.7.2012. In the meanwhile, the

appellants had sold the property at Item ‘B’ in the Schedule

of Properties in the First Sale Notice dated 21.1.2012

through a private treaty for an amount of Rs.12.25 crore,

and the said amount was deposited with the respondent­

Bank. However, it is not in dispute that the entire claim of

the respondent­Bank was not satisfied till 2.7.2012 on

which date the DRT, Chennai, dismissed S.A. No.69 of

2012.

59. After dismissal of S.A. No.69 of 2012 on 2.7.2012

by the DRT, Chennai, a fresh notice dated 9.7.2012 (Second

Sale Notice) came to be issued by the respondent­Bank to

the appellants. In the said notice, the Schedule of Properties
68

was the same as that in the First Sale Notice dated

21.1.2012, except the property at Item ‘B’, which was sold

through a private treaty. Therefore, in the Second Sale

Notice dated 9.7.2012, the property at Item ‘C’ became Item

‘B’ and the property at Item ‘D’ became Item ‘C’. The

amount claimed in the Second Sale Notice dated 9.7.2012

was Rs.11,99,53,926/­, i.e., the amount claimed in the First

Sale Notice dated 21.1.2012 minus the amount realized

from the sale of property at Item ‘B’ through a private treaty.

60. It could thus be seen that the Second Sale Notice

dated 9.7.2012 was in continuation of the proceedings of

the First Sale Notice dated 21.1.2012, which sale could not

be effected only on account of the interim orders passed by

the DRT, Chennai, on the representation made by the

appellants and respondent Nos. 2 to 4. It could further be

seen that even in view of the law laid down by this Court in

the case of Mathew Varghese (supra), since the sale

scheduled on 27.2.2012, as per the First Sale Notice dated

21.1.2012, could not be held due to the reasons attributable

solely to the guarantors, there was no necessity of again
69

following the same procedure of providing a 30 days’ clear

notice. In any case, the respondent­Bank issued a fresh

Second Sale Notice on 9.7.2012 to the appellants,

scheduling the sale on 20.7.2012. There is a substantial

distinction of facts in the present case as compared to those

in the case of Mathew Varghese (supra). In the case of

Mathew Varghese (supra) after the dismissal of S.A., the

respondent­Bank had surreptitiously accepted the tender of

the auction purchaser on the very next day of dismissal of

S.A. without issuing a notice to the guarantors/borrowers

and also confirmed the sale, and only after the confirmation

of sale and receipt of the entire amount, informed the

borrowers/guarantors about the sale being confirmed. It is

not the case here. In the present case, after the S.A. was

dismissed on 2.7.2012, the respondent­Bank again issued a

fresh Notice on 9.7.2012 scheduling the sale on 20.7.2012.

61. The facts in the case of Mathew Varghese

(supra) are also distinguishable inasmuch as though

between the date of publication of notice in the newspapers

and the date scheduled for sale, a clear 30 days’ period was
70

provided, but insofar as the individual notice to the

borrowers/guarantors and the date scheduled for sale, a 30

days’ clear period was not provided. And this was with

regard to the very first notice. On the aforesaid premise,

this Court in the case of Mathew Varghese (supra) held

that the word ‘or’ used in Rule 9 of the said Rules will have

to be read as ‘and’, and that there should be a clear 30 days’

period between the date of publication of notice in the

newspapers as well as individual notice to the

borrower/guarantor and the date scheduled for sale.

Clearly, in the present case, there has been compliance with

the same, insofar as the first notice is concerned, whereas

in the case of Mathew Varghese (supra), there was no 30

days’ period between individual notice and the date of sale.

62. The matter does not rest at that. Immediately

after the Second Sale Notice dated 9.7.2012 is issued, the

appellants along with respondent Nos. 2 to 4 filed S.A.

No.227 of 2012 challenging the notice dated 9.7.2012.

There is some dispute between the parties with regard to the

date on which the said S.A. No.227 of 2012 was filed.
71

However, in the light of the view that we are taking, the

same would not be relevant.

63. When the matter (S.A. No.227 of 2012) came up

for hearing before the DRT, Chennai, on 24.7.2012, a

representation was made by the appellants to the DRT,

Chennai, that they wanted some breathing time to procure

prospective purchaser to clear the entire dues within one

month from the said date by selling the remaining property.

The said S.A. No.227 of 2012 thereafter came up for hearing

before the DRT, Chennai, on 7.8.2012. On the said date,

the DRT, Chennai, passed an order of interim injunction for

a period of 30 days restraining the respondent­Bank from

giving effect to the sale notice dated 9.7.2012 subject to

deposit of Rs.4.80 crore within the said period of 30 days.

The said order dated 7.8.2012 also made it clear that on

failure to make such payment, the said order would stand

vacated.

64. It is not in dispute that in pursuance of the said

order dated 7.8.2012, the appellants have not deposited the

amount of Rs.4.80 crore within 30 days. It is to be noted

that the order dated 7.8.2012 was self­operative. On failure
72

on the part of the appellants to deposit the amount of

Rs.4.80 crore prior to 7.9.2012, the interim injunction stood

automatically vacated. It could thus be seen that even on

this occasion, the appellants had an opportunity for

redemption of the mortgage and clearing their properties

from encumbrances. However, the appellants, even during

this period, did not avail of the said opportunity.

65. It is to be noted that in the meanwhile, the

auction purchaser had bid for the properties at Items ‘A’

and ‘C’ in the Schedule of Properties in the Second Sale

Notice dated 9.7.2012 (i.e. the properties at Items ‘A’ and ‘D’

in the Schedule of Properties in the First Sale Notice dated

21.1.2012). In the said sale, which was held on 20.7.2012,

the auction purchaser was the successful bidder having bid

for Rs.1,45,66,000/­ and Rs.3,40,55,000/­ respectively, in

all totaling to Rs.4,86,21,000/­. Upon payment of the entire

amount, the sale was confirmed on 21.7.2012. Not only

that, the sale was duly registered on 14.9.2012 after the

auction purchaser had spent a sum of Rs.38,89,880/­

towards the registration charges. It is to be noted that the
73

appellants instead of complying with the directions, had

filed I.A. No.437 of 2012 in S.A. No.227 of 2012 seeking

certain directions with regard to deposit of the amount in

some other account. The DRT, Chennai, vide order dated

12.9.2012, dismissed the said I.A. No.437 of 2012, and

thereby, granted liberty to the respondent­Bank to proceed

with the sale. It is only thereafter, that the sale came to be

registered in favour of the auction purchaser on 14.9.2012.

It is, thus, clear that the sale came to be registered in favour

of the auction purchaser in view of the liberty granted by

the DRT, Chennai, in its order dated 12.9.2012.

66. Even thereafter, the guarantors continued with

their effort to prolong the proceedings. Various orders came

to be passed in the Civil Revision Petitions, which we have

already referred to hereinabove. In one of the orders passed

by the High Court, i.e., the order dated 30.4.2013, the

appellants were also directed to deposit the amount

collected by way of rent before the DRT, Chennai. Finally,

finding that after the confirmation of sale and after the

issuance of the sale certificate, the Court could not
74

interfere, the said Civil Revision Petitions came to be

dismissed on 29.7.2013.

67. Being aggrieved thereby, the appellants

approached this Court by way of Special Leave Petition

(Civil) Nos. 28402 and 28403 of 2013, wherein this Court

issued notice vide order dated 7.7.2014. The said Special

Leave Petitions subsequently were permitted to be

withdrawn by this Court vide order dated 17.4.2015.

However, in view of the observations made by this Court in

its order dated 7.7.2014, the M.A. No.70 of 2014, which was

filed before the DRAT, Chennai, challenging the order of the

DRT, Chennai dated 20.9.2013 refusing to restore the S.A.

No.227 of 2012, which was dismissed in default, was heard

on 10.7.2014 and the S.A. No.227 of 2012 was restored to

the file. As already pointed out hereinabove, the said S.A.

No.227 of 2012 was allowed by the DRT, Chennai, vide

order dated 25.6.2018, which order was reversed by the

DRAT, Chennai, vide order dated 6.9.2019, and the order of

the DRAT, Chennai, dated 6.9.2019 was maintained by the
75

High Court vide the impugned judgment and order dated

18.11.2019.

68. It could thus be seen that the appellants had

more than one opportunity for redemption of the mortgage.

However, from their conduct, it appears that they were only

interested in protracting the litigation. It is the appellants

at whose intervention and on whose incorrect

representation, the sale, which was scheduled to be held on

27.2.2012 in pursuance of the notice dated 21.1.2012,

could not be held. Even after the dismissal of S.A. No.69 of

2012 on 2.7.2012, the respondent­Bank again issued a

Second Sale Notice on 9.7.2012 scheduling the sale on

20.7.2012 in which the auction purchaser emerged as a

successful bidder. It is thus clear that the appellants had

enough time from 21.1.2012 till 2.7.2012 for redemption of

their mortgaged properties. However, they did not avail of

that opportunity. Even after the auction purchaser emerged

successful in the bid and had paid the bid money, an

opportunity was given by the DRT, Chennai, vide order

dated 7.8.2012, to the appellants to deposit the amount of
76

Rs.4.80 crore within one month. However, without

complying with the same, the appellants continued with

their dilatory tactics by filing an application being I.A.

No.437 of 2012 in S.A. No.227 of 2012. Even thereafter,

they continued with the proceedings before the High Court,

wherein certain interim orders were passed, and finally, the

High Court, finding that in view of the sale being confirmed

and the sale being registered no interference could be

warranted, dismissed the Civil Revision Petitions. Thereafter

again, they approached this Court by way of Special Leave

Petitions, which were subsequently withdrawn. Ideally,

the litigation ought to have stopped at least at that stage.

69. However, after the M.A. No.70 of 2014 was

allowed and the S.A. No.227 of 2012 was restored, it gave

fresh lease to the litigation, wherein the S.A. No.227 of 2012

was allowed by the DRT, Chennai. The order of the DRT,

Chennai, was reversed by the DRAT, Chennai, which was in

turn upheld by the High Court vide the impugned judgment.

70. As we have already discussed hereinabove, the

facts in the case of Mathew Varghese (supra) and the facts

in the present case are totally different. In any case, in view
77

of the observations made in paragraph 53 of the judgment

of this Court in the case of Mathew Varghese (supra), we

are of the view that since the sale scheduled on 27.2.2012

in pursuance to the notice dated 21.1.2012 could not be

held on account of the reasons solely attributable to the

appellants/guarantors, there was no necessity to provide 30

days’ period in the Second Sale Notice dated 9.7.2012,

which was in continuation of the First Sale Notice dated

21.1.2012.

71. Insofar as the reliance placed on the judgment of

this Court in the case of J. Rajiv Subramaniyan (supra) is

concerned, the said judgment relies on the judgment of this

Court in the case of Mathew Varghese (supra). However,

on facts, the issue in the said case was different. In the

said case, the property was sold by the respondent­Bank

through a private treaty. This Court found that there were

no terms settled in writing between the borrowers and the

Bank that the sale can be effected by a private treaty, and

as such, it was in violation of the provisions of Rule 8 (8) of

the said Rules.

78

72. In the case of Vasu P. Shetty (supra), after the

first notice was issued, the same was challenged before the

High Court. Though the High Court did not grant stay

against the scheduled auction, it granted stay against the

confirmation of sale. It was the Bank’s case therein that in

view of the partial stay order by the High Court, nobody

came forward to participate in the auction and the exercise

went into futility. After dismissal of the writ petition, it

came to the notice of the Bank that there were other

encumbrances on the property, which required the reserve

price to be changed. Thereafter, there were proposals

exchanged between the Bank and the borrower with regard

to One Time Settlement (‘OTS’). On failure to arrive at OTS,

a fresh notice came to be issued. In the said notice, the

mandatory period of 30 days from the date of publication

was not provided. The matter was proceeded in this

background.

73. The present case is totally on different facts.

Though the appellants had ample opportunities for
79

redemption of mortgage, they failed to avail of the said

opportunities.

74. Even if viewed from another angle, the claim of

the appellants is not sustainable. The two­judges Bench of

this Court in the case of Mathew Varghese (supra), has

heavily relied on the judgment of the three­judges Bench of

this Court in the case of Narandas Karsondas (supra). It

has been held by this Court in the case of Narandas

Karsondas (supra), 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. In the

present case, the DRT, Chennai, vide order dated

12.9.2012, had granted liberty to the respondent­Bank to

proceed with the sale. The sale came to be registered in

favour of the auction purchaser on 14.9.2012. As such, in

any case, the mortgagor’s right of redemption stood
80

extinguished on 14.9.2012. The Division Bench of the

Madras High Court had, therefore, rightly dismissed the

Civil Revision Petitions, vide order dated 29.7.2013. The

said order of the Madras High Court dated 29.7.2013 came

to be challenged before this Court by way of Special Leave

Petitions. This Court, vide order dated 7.7.2014, had issued

limited notice in the said Special Leave Petitions. However,

vide order dated 17.4.2015, the said Special Leave Petitions

came to be dismissed as withdrawn. It is in the third round

of litigation, that the DRT, Chennai, allowed the S.A. No.227

of 2012, vide order dated 25.6.2018. Applying the law, as

laid in the case of Narandas Karsondas (supra) and in the

case of Mathew Varghese (supra), the order passed by the

DRT, Chennai, dated 25.6.2018, was not sustainable

insofar as setting aside the sale notice dated 9.7.2012 and

the consequent sale. The DRAT, Chennai, has rightly

reversed the same, which has been upheld by the High

Court vide the impugned judgment.

75. It is further relevant to note that, this Court in

the case of Dwarika Prasad (supra) and in the case of
81

Shakeena (supra) held that the right to redemption stands

extinguished on the sale certificate getting registered.

76. We will have to take into consideration the

purpose with which the SARFAESI Act came to be enacted.

Unlike international banks, the banks and financial

institutions in India did not have power to take possession

of securities and sell them. It was, therefore, noticed, that it

had resulted in slow pace of recovery of defaulting loans and

mounting levels of non­performing assets of banks and

financial institutions. It was also noticed that there were

certain areas in which the banking and financial sector did

not have a level playing field as compared to other

participants in the financial markets in the world. It was

further noticed that the existing legal framework relating to

commercial transactions had not kept pace with the

changing commercial practices and financial sector reforms.

As such, the SARFAESI Act was enacted with the purpose

for securitization and empowering banks and financial

institutions to take possession of the securities and to sell

them without the intervention of the Court.
82

77. If we look at the facts in the present case, it

would show that, every attempt has been made to frustrate

the purpose of the SARFAESI Act. The respondent­Bank

was required to indulge in three rounds of litigations, out of

which, the two have reached upto this Court.

78. Though the auction purchaser emerged as the

successful bidder, in the bids held on 20.7.2012, and

though the sale was confirmed on 21.7.2012, and though

the sale has been registered in his favour on 14.9.2012, for

a period of last 9 years, he could not enjoy the fruits of the

said sale. Not only that, but the appellants continued to

enjoy the rent of the properties, the ownership of which

vests in the auction purchaser.

79. In that view of the matter, we do not find any

merit insofar as the challenge to the notice dated 9.7.2012

is concerned.

80. That leaves us with the other issue raised by Shri

K.V. Viswanathan, learned Senior Counsel. Shri

Viswanathan submitted that the amount received by the

respondent­Bank was on account of sale of all the four

properties mentioned in the First Sale Notice dated
83

21.1.2012, and as such, the direction to pay an amount of

Rs.4.48 crore with interest only to respondent No.3 is not

sustainable.

81. We find no merit in this submission. The

property at Item ‘B’ of the Schedule of Properties in First

Sale Notice dated 21.1.2012 was sold through a private

treaty during the pendency of the first round of litigation.

The properties at Item ‘A’ and Item ‘D’ of the Schedule of

Properties in First Sale Notice dated 21.1.2012 came to be

sold in pursuance of the sale taken place on 20.7.2012,

which was in pursuance of the Second Sale Notice dated

9.7.2012. As such, the only property left was the property

at Item ‘C’ belonging to the respondent No.3 in respect of

which a third notice dated 27.9.2012 came to be issued. It

is only in pursuance of the said notice dated 27.9.2012,

that the property at Item ‘C’ was sold by a private treaty to

M/s. Redbrick Realtors Private Limited. As such, the excess

amount, which remained with the respondent­Bank, has

rightly been directed to be paid to respondent No.3 by the
84

DRT, Chennai, which has been concurrently upheld by the

DRAT, Chennai, as well as the High Court.

82. Even on equitable grounds, rest of the guarantors

are either the Promoters/Directors or their family members,

it is only the respondent No.3, who happens to be outside

the family and is only connected on account of her daughter

being married in the family of one of the

Promoters/Directors. As such, on equitable grounds, we do

not find any reason to interfere with the said direction.

83. The appeals are therefore found to be without

merit, and as such, are dismissed with costs. The appel­

lants shall pay the costs quantified at Rs.1,00,000/­ (Ru­

pees One lakh only) payable each to the respondent­Bank

and the auction purchaser. Pending applications, if any,

shall also stand disposed of.

84. While dismissing the appeals, taking into consid­

eration the fact that, though the auction purchaser has be­

come the owner of the properties at Items ‘A’ and ‘D’ of the

Schedule of Properties in the First Sale Notice dated

21.1.2012, he could not enjoy the fruits of the same, and
85

that the appellants have continued to enjoy the rent of the

properties, we find that this is a fit case wherein the powers

under Article 142 of the Constitution of India need to be in­

voked.

85. We, therefore, direct the appellants to handover

the vacant and peaceful possession of the properties at

Items ‘A’ and ‘D’ of the Schedule of Properties in the First

Sale Notice dated 21.1.2012, within a period of 8 weeks

from the date of this judgment to the auction purchaser.

We further direct the appellants to pay the rent, received by

them, from the said properties, since 15.9.2012 till date,

within a period of three months from the date of this judg­

ment. However, in the facts of this case, we do not intend to

pass any orders with regard to interest on the said amount.

…….……………………, J.

[L. NAGESWARA RAO]

…….……………………, J.

[B.R. GAVAI]

…….……………………, J.

[B.V. NAGARATHNA]

NEW DELHI;

SEPTEMBER 23, 2021



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