SARFAESI Act - not be really necessary for the borrower to liquidate the entire outstanding liability in the loan account and it is enough, if he pays the value fetched at the sale/public auction = where more than one collateral security has been created by the borrower as the security for the loan availed and now only one such security interest has fallen for sale by e-auction mode, the right of the borrower to retrieve that secured asset cannot be denied. For retrieving that particular secured asset, it may not be really necessary for the borrower to liquidate the entire outstanding liability in the loan account and it is enough, if he pays the value fetched at the sale/public auction of that particular secured asset and retrieve it. But, at the same time, the incidental costs, charges and expenses, which the bank may have incurred for undertaking the securitization measures, may also have to be tendered. = Hence, apart from repayment of Rs.3,60,10,000/-, which is the price offered and paid by the 2nd respondent herein for the secured asset, which was sold by the 1st respondent on 23.12.2015, the petitioner shall also pay the securitization expenses incurred by the bank and also such expenses in the form of compensatory costs to the 2nd respondent for the monies deposited by him in the form of interest, not exceeding @ 9% per annum, on or before 09.05.2016. The 1st respondent and/or State Bank of India, Main Branch, Srikakulam, shall not register the Sale Certificate already issued in favour of the 2nd respondent with regard to the secured asset sold on 23.12.2015. Should the petitioner commit any default in paying the aforesaid monies on or before 09.05.2016, the bank would be at perfect liberty to register the Sale Certificate already issued in favour of the 2nd respondent, at his expenses and deliver vacant possession of the secured asset purchased by him. Should the petitioner honour the commitment, which he made to this Court today, it is needless for us to observe that the Sale Certificate issued in favour of the 2nd respondent with regard to the secured asset shall be cancelled and possession of the secured asset should be restored to the writ petitioner.

THE HONBLE SRI JUSTICE NOOTY RAMAMOHANA RAO AND THE HONBLE Dr. JUSTICE B.SI
WRIT PETITION No.43082 of 2015  

06-04-2016

Mitra Educational and Welfare Society  Petitioner

The Authorised Officer, State Bank of India, Main Branch, GT Road, Srikakulam
and another. Respondents  

Counsel for the petitioner : Sri T. Rajinikanth Reddy

Counsel for Respondents  : Sri B.S.S. Prasad, SC for R.1
                            Sri M.V. Suresh,
                            Senior Counsel for Sri G.V.
                            Srirama Murthy for R.2

<Gist:

>Head Note:

?Cases referred:

1.AIR 1971 SC 310


THE HONBLE SRI JUSTICE NOOTY RAMAMOHANA RAO            
AND
THE HONBLE Dr. JUSTICE B.SIVA SANKARA RAO        

WRIT PETITION No.43082 of 2015  


ORDER: (per Hon'ble Sri Justice Nooty Ramamohana Rao)  


        The petitioner sought for a Writ of Mandamus for declaring
the action of the 1st respondent, the Authorised Officer of the State
Bank of India, Main Branch, Srikakulam, in issuing e-auction sale
notice dated 16.11.2015 without duly following the procedure
prescribed under the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002
(for brevity the SARFAESI Act), particularly in collusion with the
2nd respondent, as arbitrary and illegal.

2.      Heard Sri C. Raghu, learned Senior Counsel on behalf  of
Sri T. Rajinikanth Reddy, learned counsel for the petitioner, and
Sri B.S.S. Prasad, learned Standing Counsel for the State Bank of
India; and Sri M.V. Suresh, learned Senior Counsel on behalf of
Sri G.V. Srirama Murthy, learned counsel for the 2nd respondent.

3.      At the very outset, we need to observe that the plea taken by
Sri M.V. Suresh on behalf of the 2nd respondent, that there was an
allegation of collusion between the 2nd respondent and the 1st
respondent is incredulous, appears to be a sound contention. The
fact that the 2nd respondent also purchased the very same property
on a previous occasion when the 1st respondent-Bank conducted
sale and this time also he has emerged as the best bidder does not
necessarily and invariably lead to the conclusion that there was a
collusion between the Authorised Officer of the State Bank of India,
Srikakulam Main Branch, and the 2nd respondent. Fortunately, for
us, Sri C. Raghu, learned Senior Counsel has not pressed this
contention beyond this point.

4.      The petitioner herein, an Educational Welfare Society, has
availed certain financial benefits from the State Bank of India,
Main Branch, Srikakulam. It has also provided collateral security
by mortgaging the immovable property in favour of the bank. The
loan account has not been properly cycled, as a consequence, the
loan account came to be classified as a Non-performing Asset (NPA)
and since the petitioner herein answers the description of
borrower as defined under Section 2(f) of the SARFAESI Act and
also in view of the fact that the State Bank of India answers the
description of bank as defined under Section 2(1)(c) of the
SARFAESI Act and the security interest created by them also
answers the definition contained under Section 2(1)(z)(f) of the
SARFAESI Act, the State Bank of India, the creditor, is entitled to
take measures for securitization of the loan as provided for under
Section 13 of the SARFAESI Act. Under sub-section (2) of Section
13 of the SARFAESI Act, the secured creditor is required to draw a
demand notice calling upon the defaulting borrower to pay the
entire outstanding liability. Accordingly, a notice was drawn under
sub-section (2) of Section 13 of the SARFAESI Act on 30.11.2011
calling upon the petitioner herein to liquidate the outstanding
liability of Rs.4,38,47,732/- within a period of 60 days from the
date of receipt of the said notice. It appears that the petitioner paid
certain amount and got the loan account regularized. Once again,
the petitioner has committed default. Hence, the Bank has again
classified the loan account as Non-performing Asset on 19.01.2013
and once again a notice under sub-section (2) of Section 13 of the
SARFAESI Act demanding the petitioner to liquidate the entire
outstanding liability has been issued by the Bank. It is the claim of
the petitioner that it has deposited a sum of Rs.30,00,000/- on
09.03.2013, another sum of Rs.30,00,000/- on 31.03.2013, a
further sum of Rs.10,00,000/- on 08.06.2013, and a further sum
of Rs.25,50,000/- subsequently. Since the outstanding liability has
not been cleared, as demanded in the notice issued under sub-
section (2) of Section 13 of the SARFAESI Act, the bank has
proceeded in the matter by taking up the follow up action as
contemplated and provided for under sub-section (4) of Section 13
of the SARFAESI Act and has taken possession of the secured
asset on 03.05.2013. For the purpose of realizing the loan amount,
the secured asset was sought to be sold and hence a sale notice as
is required and provided for under Rule 8(6) r/w. Rule 9(1) of the
Security Interest (Enforcement) Rules, 2002 (for brevity the
Rules)  was issued on 04.12.2013. The same was also got
published in the Newspapers on 05.12.2013. It appears, auction
was conducted and Sale Certificate was also issued in favour of the
purchaser on 07.01.2014. Then the petitioner approached the
Debts Recovery Tribunal, Visakhapatnam, and the said Tribunal,
by order dated 12.02.2014 in S.A.No.245 of 2013, set aside the
sale by auction, including the issuance of Sale Certificate. The
Bank has approached the Debts Recovery Appellate Tribunal at
Kolkata, and the appeal preferred by it bearing No.48 of 2014 was
dismissed by order dated 04.12.2014, upholding the view taken by
the Debts Recovery Tribunal, Visakhapatnam. That is how, on the
second occasion, the sale by e-auction mode has to be initiated
once again. A sale notice dated 16.11.2015 was issued, it was got
published in Hindu Newspaper of Issue dated 18.11.2015. The
auctions were conducted on 23.12.2015 between 11.30 a.m. to
12.30 p.m. The Reserve Price was fixed as Rs.3.60 Crores and the
Earnest Money required to be deposited was Rs.36,00,000/-, being
10% of the upset price. The bid increment amount was fixed at
Rs.10,000/-. In the auctions so conducted, the 2nd respondent
once again participated and also emerged as the best bidder and
his offer of Rs.3,60,10,000/- was found to be the most responsive
offer, as no other bidder has come forward to purchase the
property. It is this sale notice, which came to be challenged in this
writ petition.

5.      When once the petitioner answers the description of
borrower and the secured creditor answers the description of the
bank as defined in the SARFAESI Act, the measures undertaken
by it for securitization of the loan account under Section 13 of the
SARFAESI Act cannot be faulted. This time around, the sale notice
issued on 16.11.2015 was also published in the newspapers on
18.11.2015 and the e-auctions were conducted on 23.12.2015,
thus maintaining more than 30 days time variation as is required
under Rule 8(6) r/w. Rule 9(1) of the Rules referred to supra. In
principle, therefore, we cannot find fault, in any manner, with the
sale of the secured asset conducted by the 1st respondent-Bank.

6.      However, one submission made by Sri C. Raghu, learned
Senior Counsel, requires to be taken into account and requires
consideration. He would urge that the petitioner has a right to
redeem the mortgaged property by paying the money, which it has
fetched in the e-auction mode.

7.      Since, every mortgager has a right to redeem the mortgaged
immovable property, at any time before the sale of it is held, in
accordance with law, and the title thereof is conveyed to the
purchaser, he can redeem the mortgaged property. This is a settled
principle of law and if one really requires an authority, the ratio
laid down by the Apex Court in MATHURALAL vs. KESHAR BAI    
AND ANOTHER , last 4 lines of para-15, and para-16 is a complete
answer. This apart, the Parliament has also noticed this valuable
right of the mortgager and hence incorporated the same in the
form of sub-section (8) of Section 13 of the SARFAESI Act, which
reads as under:

13. Enforcement of Security Interest :-
(1) to (7) ..

(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.


8.      Thus, the secured creditor can be tendered the dues any
time before the date fixed for transfer of the secured asset in favour
of the auction purchaser, in such an event, no further steps shall
be taken by the secured creditor for transfer of that secured asset.
In our opinion, the crucial expressions to be noticed, in this
regard, are that secured asset. Therefore, for the whole of the
entire loan transaction availed by a borrower and if he has created
different security interests in different movable/immovable
properties by using the expression that secured asset, an option
has been provided to the borrower to retrieve that particular
secured asset, which is sold by the secured creditor, like in the
instant case, where more than one collateral security has been
created by the borrower as the security for the loan availed and
now only one such security interest has fallen for sale by e-auction
mode, the right of the borrower to retrieve that secured asset
cannot be denied. For retrieving that particular secured asset, it
may not be really necessary for the borrower to liquidate the entire
outstanding liability in the loan account and it is enough, if he
pays the value fetched at the sale/public auction of that particular
secured asset and retrieve it. But, at the same time, the incidental
costs, charges and expenses, which the bank may have incurred  
for undertaking the securitization measures, may also have to be
tendered.

9.      Hence, apart from repayment of Rs.3,60,10,000/-, which is
the price offered and paid by the 2nd respondent herein for the
secured asset, which was sold by the 1st respondent on
23.12.2015, the petitioner shall also pay the securitization
expenses incurred by the bank and also such expenses in the form 
of compensatory costs to the 2nd respondent for the monies
deposited by him in the form of interest, not exceeding @ 9% per
annum, on or before 09.05.2016. The 1st respondent and/or State
Bank of India, Main Branch, Srikakulam, shall not register the
Sale Certificate already issued in favour of the 2nd respondent with
regard to the secured asset sold on 23.12.2015. Should the
petitioner commit any default in paying the aforesaid monies on or
before 09.05.2016, the bank would be at perfect liberty to register
the Sale Certificate already issued in favour of the 2nd respondent,
at his expenses and deliver vacant possession of the secured asset
purchased by him. 

10.     Should the petitioner honour the commitment, which he
made to this Court today, it is needless for us to observe that the
Sale Certificate issued in favour of the 2nd respondent with regard
to the secured asset shall be cancelled and possession of the
secured asset should be restored to the writ petitioner.

11.     Subject to the above direction, the writ petition stands
disposed of. No order as to costs.

12.     As a sequel, miscellaneous petitions pending, if any, shall
stand closed.

_____________________________________    
JUSTICE NOOTY RAMAMOHANA RAO          
___________________________________    
Dr. JUSTICE B.SIVA SANKARA RAO      
06.04.2016