sec.60 of T.P.Act - Right of redemption Section 13 [8]of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, 'the SARFAESI Act'), = Be that as it may, sub-section (8) of Section 13 of the SARFAESI Act empowers any borrower to retrieve the secured asset by depositing all 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 of the secured asset. In the event of any such payment being tendered by the borrower, the sale, even if has been conducted, but the title of which has not yet been transferred by the secured creditor in favour of the best bidder/highest bidder, then the secured creditor shall take no further steps to transfer or sell the secured asset- This is the salutary principle incorporated in the statute, based upon the legal principle that 'the mortgagor has a right to redeem the mortgaged debt at any time before it is sold and title thereto is transferred in accordance with law'.- Supreme Court in Mathuralal v. Keshar Bai and another , in paragraphs 15 and 16, which is to the following effect: "15. ...................So long as the mortgagor had a right to redeem the mortgage he can always pay off the mortgagee and get back possession. This position would continue so long as the property is not sold under a final decree for sale under the provisions of Order 34 C.P.C. 16. In our opinion the second contention put forward on behalf of the appellant has no force. The rights of a mortgagee do not merge in his rights under the preliminary decree for sale. As already mentioned, the mortgagee lost his right to recover the money by sale of the mortgaged property; otherwise his security remained intact and the mortgagor continued to have his right to redeem the property."- Section 60 of the Transfer of Property Act, recognizing the right of redemption in the hands of the mortgagor. Therefore, all we need to observe in this case is that if the petitioner immediately approaches to deposit either the entire loan amount, which is outstanding, or at least such amount, which is equivalent to the highest bid offered at the auctions that were conducted on 14-03-2016, together with costs and incidental expenses incurred by the respondent bank for the securitization measures, including any interest payable to such highest/best bidder, which may not exceed 9 percent per annum on the monies so deposited, his right to redeem the property subsists. if the sale certificate has not yet been registered by the respondent bank in favour of the best bidder, it may not do so till 18.04.2016 05.00 P.M. before which time, the petitioner seeks to redeem his property.

THE HON'BLE SRI JUSTICE NOOTY RAMAMOHANA RAO AND THE HON'BLE DR. JUSTICE B.SIVA SANKARA RAO                      

WRIT PETITION No. 11711 OF 2016  

Dated 11-04-2016

G.Yadaiah.... Petitioner

Vs.

State Bank of Hyderabad, Rep. by its Authorized Officer and another.....Respondents

Counsel for the Petitioner:Sri D. Raghavulu

Counsel for the 1st respondent:

<GIST:

>HEAD NOTE:  

?Cases referred
AIR 1971 Supreme Court 310

O R D E R : (per Hon'ble Sri Justice Nooty Ramamohana Rao)
      The petitioner in this Writ Petition challenges the validity of
the tender-cum-auction sale notice, dated 10-02-2016 published
by the Authorized Officer of the 1st respondent State Bank of
Hyderabad proposing to conduct the sale on 14-03-2016 from
11.00 A.M. to 1.00 P.M.
      It is not in dispute that the petitioner has availed certain
financial assistance from the respondent State Bank of Hyderabad
and he committed default in repaying the loan amount.  Therefore,
the loan account has been declared as a 'non-performing asset' by
the bank and measures provided for under sub-section (2) of
Section 13 of the Securitization and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002 (for short,
'the SARFAESI Act'), for securitization of the loan account, have
been undertaken by it.  When the demand notice issued under 
sub-section (2) of Section 13 providing sixty days' time to liquidate
the liability did not evoke any response from him, the follow-up
action contemplated under sub-section (4) of Section 13 has been
initiated by putting to sale the secured asset.  E-auction sale notice
was published by the 1st respondent on 10.02.2016 in the New
India Express.  The last date for submission of request letter for
participation and furnishing the relevant documents and proof of
EMD was put as 11-03-2016 05.00 P.M.  The minimum reserve  
price fixed was Rs.28.10 lacs.  At that stage, the petitioner herein
seems to have approached the Debts Recovery Tribunal at
Hyderabad by instituting S.A.No. 79 of 2016 on or around
07-03-2016.  The Debts Recovery Tribunal, entertaining the same
on 11-03-2016, passed an order while holding that no ground is
made out to interfere with the action of the respondent bank, but
however, liberty was granted for participation in the auction
process.  The respondent bank and the service provider were
directed to make necessary arrangement, so that the applicant
before the Debts Recovery Tribunal participates in the bidding
process without any pre-deposit so as to enable the applicant to
take the property at the highest price and only in the event the
applicant before the Debts Recovery Tribunal emerges as the
highest bidder, but fails to deposit the amount, then the second
highest bidder would get the opportunity to purchase the secured
asset put to sale.  The matter was again fixed to 16-05-2016 for
further hearing.
      It is the case of the petitioner before us that in spite of his
approaching the respondent bank and then offering to participate
in the e-auction sale slated for 14-03-2016, the respondent bank
has not generated the necessary password and consequently, the
petitioner could not participate in the said auction sale.  Hence,
the present Writ Petition is instituted.
       We are at a loss to understand the true purport of the
orders passed by the Debts Recovery Tribunal on 11-03-2016 in
S.A.No. 79 of 2016 instituted by this very writ petitioner.  While
making any assessment of balance of convenience, particularly
when the Debts Recovery Tribunal has not found anything
improper in the action of the respondent bank, should we be
reasonable and practical too.  If an order is passed on 11-03-2016,
it becomes so difficult for the bank and the service provider as well
to comply with the said order before 05.00 P.M. on the same day.
When once a minimum reserve price/upset price is fixed and a
condition is incorporated in the terms of the auction sale that 10 percent
of the minimum reserve price/upset price has got to be paid as
Earnest Money Deposit (EMD), the same cannot be asked to be   
dispensed with by the Debts Recovery Tribunal in the case of the
applicant before it, the present writ petitioner.  The conduct of the
writ petitioner herein does not warrant any such extraordinary
measure to be undertaken by the Debts Recovery Tribunal.  The
writ petitioner is a defaulter.  He had not complied with the
demand notice raised under sub-section (2) of Section 13 of the
SARFAESI Act, in spite of issuing him a minimum of sixty days
notice.  It is only thereafter that the measures under sub-section
(4) of Section 13 of the SARFAESI Act have been initiated by the
respondent bank. Further, the respondent bank is required to
conduct the sale of immovable secured assets by strictly following
the legal regime prescribed under Rule 8 read with Rule 9 of the
Security Interest (Enforcement) Rules, 2002, which have been
framed under Section 38 of the SARFAESI Act by the Central 
Government.  They are enforceable rules.  Rule 8(6)(e) requires
depositing of earnest money as stipulated by the secured creditor.
Across the spectrum, all secured creditors have prescribed deposit
of 10 percent of the minimum reserve price/upset price as earnest
money.  Hence, it has got to be deposited.  For what reasons the
Debts Recovery Tribunal has preferred the respondent bank not to
follow Rule 8(6)(e) is not clear at all.  The Debts Recovery Tribunal,
therefore, in our opinion, went wrong in issuing the directions as it
did on 11.03.2016. Unless the competent Court records a finding
that fixing 10 percent of the minimum reserve price/upset price as EMD
is unreasonable or unwarranted, it is not open to the Court to
dispense with payment of any such EMD.  Further, such a favour
cannot be conferred upon the applicant before the Debts Recovery
Tribunal, who is the writ petitioner herein.  There may be several
persons, who may be equally-interested in participating in the e-
auction sale mode.  If the requirement of depositing EMD at the
rate of 10 percent of the minimum reserve price/upset price is to be
dispensed with, hundreds of people would queue up, so that they
can indulge in speculation and if possible, derive some advantage
or benefit thereafter.  For instance, if EMD is not deposited by a
bidder, he would show no restraint whatsoever in offering his bids.
In the process, he will not hesitate to offer unrealistic and totally
fanciful bids. He can always resile from the said bidding process at
any later stage, because he loses nothing and his money in the
form of EMD is not available with the banker for him to suffer any
loss, hardship or difficulty in the process.  If a bidder, ultimately,
emerges as the highest/best bidder, he has the fundamental
obligation to comply with the requirement of making a deposit in
accordance therewith.  Initially, he has to deposit 15percent of his bid
amount, so that together with the 10 percent EMD already deposited by
him prior to participation in the bidding process, he would have
paid 25 percent of his bid amount. If he fails to pay this 15 percent initially, or
even subsequently, to pay balance 75 percent, the secured creditor will
acquire a right to forfeit the 10 percent EMD.  That is the pain, which
compels the bidder not to indulge in speculation or fanciful offers
being made. That would also help in a genuine and realistic
competition amongst the purchasers. One would go as far as one is
required to only in such a situation.  In such circumstances, the
prospects of realizing the upfront initial amount of 15 percent, after the
bidding process has come to an end, and the balance 75 percent would
be truly bright and realistic.  Lest, the activity will reduce itself into
a meaningless exercise. Therefore, the Debts Recovery Tribunal
ought to have been very careful and cautious while passing such
orders.
      Be that as it may, sub-section (8) of Section 13 of the
SARFAESI Act empowers any borrower to retrieve the secured  
asset by depositing all 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 of the secured asset.  In the event
of any such payment being tendered by the borrower, the sale,
even if has been conducted, but the title of which has not yet been
transferred by the secured creditor in favour of the best
bidder/highest bidder, then the secured creditor shall take no
further steps to transfer or sell the secured asset.  This is the
salutary principle incorporated in the statute, based upon the legal
principle that 'the mortgagor has a right to redeem the mortgaged
debt at any time before it is sold and title thereto is transferred in
accordance with law'.  The legal principle in this regard has been
clearly spelt out by the Supreme Court in Mathuralal v. Keshar
Bai and another , in paragraphs 15 and 16, which is to the
following effect:
"15.    ...................So long as the mortgagor had
a right to redeem the mortgage he can always pay off
the mortgagee and get back possession. This position
would continue so long as the property is not sold
under a final decree for sale under the provisions of
Order 34 C.P.C. 
16.             In our opinion the second contention put
forward on behalf of the appellant has no force. The
rights of a mortgagee do not merge in his rights under
the preliminary decree for sale. As already mentioned,
the mortgagee lost his right to recover the money by
sale of the mortgaged property; otherwise his security
remained intact and the mortgagor continued to have
his right to redeem the property."

      In fact, this right has also taken the firm shape in the form
of Section 60 of the Transfer of Property Act, recognizing the right
of redemption in the hands of the mortgagor.  Therefore, all we
need to observe in this case is that if the petitioner immediately
approaches to deposit either the entire loan amount, which is
outstanding, or at least such amount, which is equivalent to the
highest bid offered at the auctions that were conducted on
14-03-2016, together with costs and incidental expenses incurred
by the respondent bank for the securitization measures, including
any interest payable to such highest/best bidder, which may not
exceed 9 percent per annum on the monies so deposited, his right to
redeem the property subsists.
      As requested by Sri D. Raghavulu, learned counsel for the
petitioner, if the sale certificate has not yet been registered by the
respondent bank in favour of the best bidder, it may not do so till
18.04.2016 05.00 P.M. before which time, the petitioner seeks to
redeem his property.
      With this, the Writ Petition stands disposed of. No costs.
      Consequently, the miscellaneous applications, if any shall
also stand disposed of.

-----------------------------------------
NOOTY RAMAMOHANA RAO, J        

----------------------------------------
DR. B. SIVA SANKARA RAO, J    

11th April 2016

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