Brief facts necessary for adjudication of this matter are as under:-
1. Earlier the borrowers, i.e., respondents No.3,4 and 5 herein, filed a writ petition before this Court, which was registered as Writ Petition No.4898/2011. The said writ petition was filed on 23.7.2011. On 28.7.2011 the parties to the said litigation produced a settlement, which was entered into between them before the court and court passed the order in terms of settlement. The terms of settlement are as under:-
“(1) That, the present petition has been filed challenging the auction proceedings initiated by the State Bank of India under SARFAEST Act, 2002.
(2) That, as on date an amount of Rs.1,05,36,058/- (Rupees One Crore Five Lakh Thirty Six Thousand and Fifty Eight Only) is due against the petitioner. The property has already been auctioned on 26.07.2011.
(3) That, the petitioners are ready to deposit the aforesaid amount of Rs.1,05,36,058/- on or before 05.08.2011 in full and final settlement. If the aforesaid amount is deposited by the petitioners on or before 05.08.2011, in that case, the respondent Bank shall not finalize the auction held on 26.07.2011 in regard to the petitioner's property and the loan account shall be closed.
(4) That, if the petitioners' fails to deposit the aforesaid amount up to 05.08.2011 in that case, the said proposal shall come to an end and respondent State Bank of India shall finalize the auctions proceedings held on 26.07.2011 and shall proceed further against the petitioners for remaining dues.”
This court disposed of the said petition with the observation that since the parties have entered into a settlement, the petition is disposed of in terms of the settlement. It is further observed that settlement shall bind the parties.
2. This petition is filed by the auction-purchaser submitting that the action of the bank runs contrary to the mandate of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short 'the SARFAESI Act') and also against the settlement arrived at between the parties. To elaborate, Shri Dudawat, learned counsel for the present petitioner submits that as per the settlement the petitioner was required to pay the amount positively by 5th August, 2011. Interestingly, the settlement provides the consequence of not depositing of said amount by 5th August, 2011 in Clause 4, whereby it is mentioned that the proposal will come to an end and respondent-State Bank of India shall finalise the auction proceedings held on 26.7.2011 and shall proceed further against the petitioner for remaining dues. He vehemently argued that the amount was in fact realised on 10th August, 2011.
3. Learned counsel for the petitioner further submits that the action of the bank is contrary to the provision of Section 13 of the SARFAESI Act. Learned counsel by placing reliance on the documents filed by the bank submits that the cheque which was deposited on 6.8.2011 was realised on 10.8.2011 and the documents further show that on 6.8.2011 the requisite amount was not in the account of M/s. Agri Commex Warehousing and Logistics Pvt. Ltd.
4. Per Contra, Shri Raju Sharma, learned counsel for the bank and Shri N.K.Gupta, learned counsel for the borrowers, submit that the amount was admittedly required to be deposited as per the settlement on 5.8.2011 but on 5.8.2011 there was an All India Strike of employees of State Bank of India and, therefore, on that date the amount could not be deposited. However, on 6.8.2011 an amount of Rs.1,36,058/- was deposited by way of transfer and an amount of Rs. 1,04,00,000/- was deposited by way of cheques. They submit that the delay was unavoidable, inevitable and beyond the control of the parties because on 5.8.2011 there was an All India Strike. They further submit that there is no illegality in the action of the bank. Heavy reliance is placed on Section 13(8) of the SARFAESI Act, which reads as under:-
“13(8).-- If the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by the secured creditor, and no further step shall be taken by him for transfer or sale of that secured asset.”
5. Shri N.K.Gupta appearing for the borrower further submits that Section 2(2) of the SARFAESI Act provides that words and expressions used and not defined in this Act but defined in the Indian Contract Act, 1872 or the Transfer of Property Act, 1882 or the Companies Act, 1956 or the Security and Exchange Board of India Act, 1992 shall have the same meanings respectively assigned to them in those Acts. Shri Gupta submits that words “transfer” and “sale” are not defined in the SARFAESI Act and, therefore, to see the actual meaning of these words one has to revert to the Transfer of Property Act. Shri Gupta placed reliance on the definition of 'transfer' and 'sale' in Sections 5 and 54 of the Transfer of Property Act, 1882 (hereinafter called as 'TP Act'). The said definitions are reproduced here as under:-
“5. “Transfer of property” defined.-- In the following sections “transfer of property” means an act by which a living person conveys property, in present or in future, to one or more other living persons, or to himself, and one or more other living persons; and “to transfer property” is to perform such act.
In this section “living person” includes a company or association or body of individuals, whether incorporated or not, but nothing herein contained shall affect any law for the time being in force relating to transfer of property to or by companies, associations or bodies of individuals.
54. “Sale” defined.-- “Sale” is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised.
Salehow made.-- Such transfer, in the case of tangible immoveable property of the value of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be made only by a registered instrument.
In the case of tangible immoveable property of a value less than one hundred rupees, such transfer may be made either by a registered instrument or by delivery of the property.
Delivery of tangible immoveable property takes place when the seller places the buyer, or such person as he directs, in possession of the property.
Contract for sale.-- A contract for the sale of immoveable property is a contract that a sale of such property shall take place on terms settled between the parties.
It does not, of itself, create any interest in or charge on such property.”
6. It is the further stand of the learned counsel for the respondents that as per Section 13(8) of the SARFAESI Act, the actual sale or transfer never took place. On the contrary, by document dated 10.8.2011 the present petitioner was informed that as per Section 13(8) of the SARFAESI Act, the sale could not take place and therefore the amount deposited by present petitioner was returned to him. In the light of aforesaid, the stand of the respondents is that there is one day's delay in depositing the amount as per the order dated 28.7.2011 passed by this Court and that delay is because of unavoidable circumstances, i.e., All India Strike.
7. Reliance is further placed on the Security Interest (Enforcement) Rules, 2002 (hereinafter called as “2002 Rules”). By placing reliance on Rules, 9(1), 9(4) and 9(7), learned counsel for the respondents submits that unless an actual transfer or sale takes place, no right is created in favour of the present petitioner and bank was well within its jurisdiction to cancel the same and since amount in question was realised from the borrowers, there is no illegality in the action of the bank. Shri Raju Sharma also relied on AIR 2011 SC 2060 (M/s L.K.Trust v. EDC Ltd. and others) to submit that in absence of execution of a sale deed, right of borrower to redeem property is not lost.
8. Shri Dudawat has placed heavy reliance on the language of Section 13(8) of the SARFAESI Act, wherein the words used are “before the date fixed for sale or transfer” (emphasis supplied). In explicit, Shri Dudawat submits that the intention of legislature is not actual sale or transfer which is required to take place but is a date fixed for sale or transfer. Meaning thereby the date which is fixed for auction which is an exercise for sale in favour of the auction purchaser. He submits that admittedly the date of auction was 26.7.2011, on which date even a certificate was given to the petitioner, which is Annexure P/ 2. In Annexure P/2 it is made clear that the sale is confirmed in favour of the petitioner. He submits that the sale was confirmed and confirmation letter Annexure P/2 was issued in favour of the present petitioner and, therefore, after this neither under the garb of the settlement arrived at before this court nor as per Section 13(8) of the SARFAESI Act the bank could have taken 'U' turn and accommodated the borrowers.
9. Learned counsel for the respondents have taken a specific stand that a combined reading of Rules 9(1), 9(4), 9(6) and 9(7) of 2002 Rules clearly shows that there is a specific method prescribed for the sale of the property and merely because an auction has taken place, that does not mean that any legal right to enjoy the property is accrued in favour of the petitioner. Reliance is also placed on Conditions No.9 and 10 of Annexure P/1, which prescribe that the Specified Officer has a power to cancel the auction without assigning any reason and the said officer is not compelled to accept the amount from the auction purchaser. Shri Gupta submits that merely because some amount was deposited by the present petitioner, it will not bestow any right to the petitioner to enjoy the property and bank has acted strictly in consonance with the provisions of the SARFAESI Act and the rules made thereunder.
10. In the opinion of this Court, the attack on the action of the respondents is of two folds. Shri Dudawat firstly submitted that the amount was not deposited as per the settlement entered into and recorded by this Court. Secondly, he submits that as per Section 13(8) of the SARFAESI Act, after confirmation of sale, there was no occasion for the bank to accommodate the borrower.
11. The certificate Annexure P/2 shows that on deposition of an amount of Rs.25,05,500/- by the petitioner, the sale of the petitioner was certified and confirmed. Shri Raju Sharma heavily relied on the judgment of Apex Court in M/s. L.K. Trust (supra). The said case deals with Section 60 of TP Act. The case in hand is regarding Section 13(8) of the SARFAESI Act. This is settled in law that the judgments of Supreme Court are not Euclid's Theorum. The ratio decidendi of the Supreme Court judgments depends on the fact situation of the particular case and the Statute which was under consideration before the court. This is also settled in law that even a single fact may change texture of a ratio. Thus, examining Section 60 of TP Act in juxtaposition with Section 13(8) of SARFAESI Act shows that both the Statutes are not pari materia and are worded in a different language. Thus, the intention of the Legislature appears to be different in enacting the aforesaid provisions. However, the Apex Court in (2007) 5 SCC 745 (B. Arvind Kumar vs. Govt. of India and others) held as under:-
“12...... When a property is sold by public auction in pursuance of an order of the court and the bid is accepted and the sale is confirmed by the court in favour of the purchaser, the sale becomes absolute and the title vests in the purchaser. A sale certificate is issued to the purchaser only when the sale becomes absolute. The sale certificate is merely the evidence of such title. It is well settled that when an auction purchaser derives title on confirmation of sale in his favour, and the sale certificate is issued evidencing such sale and title, no further deed of transfer from the court is contemplated or required. In this case, the sale certificate itself was registered, though such a sale certificate issued by a court or an officer authorised by the court, does not require registration. Section 17(2) (xii) of the Registration Act, 1908 specifically provides that a certificate of sale granted to any purchaser of any property sold by a public auction by a civil or revenue officer does not fall under the category of no testamentary documents which require registration under sub-sections (b) and (c) of section 17 (1) of the said Act. We therefore hold that the High Court committed a serious error in holding that the sale certificate did not convey any right, title or interest to plaintiff's father for want of a registered deed of transfer.”
12. This issue came up for consideration before a Division Bench of Madras High Court in a case reported in AIR 2008 MADRAS 108 (K.Chidambara Manickam vs. Shakeena and others). The Madras High Court framed a question which reads as under:-
“(i) Whether the sale of the secured asset in public auction as per Section 13(4) of SARFAESI Act, which ended in issuance of a sale certificate as per Rule 9(7) of the Security Interest (Enforcement) Rules, 2002 (in short "the Rules") is a complete and absolute sale for the purpose of SARFAESI Act or whether the sale would become final only on the registration of the sale certificate?”
This question is answered by Madras High Court as under:-
“In our considered view, the borrowers should have approached the secured creditor or the authorized officer before the date fixed for sale and not after the sale, as provided under Sub-section (8) of Section 13 of the SARFAESI Act. As discussed earlier, only if the borrowers approach the secured creditor or the authorised officer before the date fixed for sale or transfer and tender or pay all the dues to the secured creditor, the Section creates a bar on the secured creditor or authorised officer to proceed further with the proposed sale or transfer. In this case, admittedly, the date fixed for the sale was 19-12-2005. But, even according to the version of the borrowers, they approached the secured creditor only on 2-1-2006. In such circumstances, the contention of the learned Counsel for the borrowers is without any basis and contrary to the provisions contained in Sub-section (8) of Section 13 of the Act.”
The crux of contention before the Single Judge of Madras High Court by the borrower was that even after issuance of sale certificate the right of redemption under Section 60 of TP Act is available. Learned Single Judge of Madras High Court agreed with the argument advanced by the borrower that the right of redemption which is embodied in Section 60 of TP Act is available to the mortgagor unless it has been extinguished by the act of parties and until the sale is completed by registration, and that the mortgagor does not lose his right of redemption, came to conclusion that the sale takes complete shape only after it gets registered and it does not come to an end by issuance of a sale certificate.
The Division Bench did not approve the said finding of the Single Judge and allowed the appeals and dismissed the writ petitions.
13. In the present case also, the stand of respondents is that mere issuance of sale certificate will not bestow any right in favour of the auction-purchaser and unless actual sale deed is executed, there is no “sale” in the eyes of law and power of redemption can be exercised by the bank. In the opinion of this Court, this argument is liable to be rejected. The language of Section 13(8) of SARFAESI Act is very clear, which contains the words “before the date fixed for sale or transfer”. The intention of the Legislature appears to be the date fixed for sale and not the actual sale. The Statute is accordingly designed and worded. Thus, before date fixed for sale, the borrower could have exercised the same and Section 13(8) permits the bank to do the same. In other words, Section 13(8) even prohibits the bank to transfer or sell the secured assets before the date fixed for sale and gives an opportunity to the borrower to repay all dues, costs, charges and expenses incurred by the bank. However, once sale certificate is issued, the bank cannot invoke Section 13(8) of SARFAESI Act and Section 60 of TP Act has no application. Accordingly, the judgment cited by Shri Raju Sharma in M/s. L.K.Trust (supra) has no application in the fact situation of this case.
14. The respondents have also relied on conditions No. 4,9 and 10 of Annexure P/1. Conditions No.9 and 10 are of no assistance to the respondents. Condition No.9 deals with power of the bank to postpone or cancel the auction. In the present case, auction has already taken place and auction-purchaser has been given a sale certificate. Thus, Condition No.9 has no relevance. Condition No.10 deals with the power of Specified Officer to not to accept the auction amount and reject the same. In the present case, the said amount has already been accepted and a sale certificate is issued. Thus, Condition No.10 also has no relevance.
15. Sub-Rule (4), (6) and (7) of Rule 9 of 2002 Rules are of no assistance to the respondents. Reading these rules with section 13 (8) of the SARFAESI Act shows that the intention of law-makers is that till the date fixed for sale and not after the sale if borrower tenders all dues to the secured creditor, the section prohibits the secured creditor or authorised officer to proceed further with proposed sale or transfer. In this case, admittedly, the date fixed for sale was 26.7.2011. This is also admitted position between the parties that no payment was made before 6.8.2011. Accordingly, the action of the bank cannot be said to be in consonance with section 13(8) of the SARFAESI Act. After the date of sale aforesaid, it was not open for the bank to accept the amount from the borrower and return the amount to the auctionpurchaser. This action runs contrary to the scheme of the SARFAESI Act and the rules made thereunder. I also find force in the argument of learned counsel for the petitioner that the settlement arrived at between the borrower and the bank will not bind the present petitioner, who was not a party in the said settlement. Thus, examining it from any angle, either as per Section 13(8) of SARFAESI Act or from the angle of implementation of the settlement, the action of the bank cannot be upheld.
16. The bank in order dated 10.8.2011 has solely relied on Section 13(8) of SARFAESI Act. As analyzed above, Section 13(8) does not permit the bank to accept the amount from the borrower after sale is confirmed. Thus, for the aforesaid reasons, the action of the bank cannot be approved.
17. Consequently, petition is allowed. The respondent-bank is directed to handover possession of the property to the petitioner. However, the bank is at liberty to do necessary formalities in accordance with the SARFAESI Act and rules made thereunder for doing the same. No costs.