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L. NAGESWARA RAO, B. R. GAVAI, B. V. NAGARATHNA
S. Karthik – Appellant
Versus
N. Subhash Chand Jain – Respondent
Key Points: - The judgment holds that unless a clear 30 days' notice is given to the borrower, no sale or transfer can be resorted to by a secured creditor under SARFAESI Act; if a scheduled sale does not occur for reasons not solely attributable to the borrower, the creditor must initiate the procedure de novo. (!) (!) - Rule 8(6) and Rule 9(1) require a 30-day clear notice to the borrower before sale, and the 30 days must be reflected both in the newspaper publication and the borrower notice (the "or" in Rule 9(1) should be read as "and"). (!) (!) (!) - The right of redemption under Section 60 of the Transfer of Property Act remains with the mortgagor unless extinguished by act of parties, and redemption rights can survive until completion of sale, with tender of dues stopping further sale steps. The Court reiterates that redemption rights persist until a registered conveyance occurs, and improper sale without proper notice can nullify the sale. (!) (!) (!) (!) - If a sale is properly notified and then does not take place due to reasons solely attributable to the borrower/guarantors, the creditor must restart the sale process de novo with proper 30-day notice. (!) (!) - In the case at hand, the properties were sold through a Second Sale Notice with 10 days, which was challenged; the Court ultimately held the process compliant given the facts distinguishable from Mathew Varghese, and upheld the sale notices and results, including a separate entitlement to refund of excess sale proceeds to the third party owner (respondent No.3). (!) (!) (!) (!) - The Court awarded possession and rent-related remedies to the auction purchaser and directed the appellants to vacate and pay rents, with costs, after considering the entire litigation history. (!) (!)
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 purpose for which the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 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.1 N. 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 manufac
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