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SUPREME COURT OF INDIA
DHANANJAYA Y. CHANDRACHUD, CJI., J.B. PARDIWALA, J.
Celir LLP – Appellant
Versus
Bafna Motors (Mumbai) Pvt. Ltd. and Others – Respondents
Civil Appeal Nos. 5542-5543 of 2023
Decided On : 21-09-2023
The right of redemption of a mortgaged property generally exists until the sale is finalized through a registered transfer or conveyance (!) . Under the amended SARFAESI Act, this right is considered to be extinguished once the auction notice is published (!) . After publication of the notice, the mortgagor's opportunity to redeem is waived or deemed waived, and the sale process proceeds to completion (!) (!) .
| Table of Content |
|---|
| 1. common issues in the appeals arise from the same underlying facts. (Para 1 , 2 , 3) |
| 2. discussion of the borrower's financial situation and auction processes. (Para 4 , 5 , 6 , 7 , 8 , 9 , 10) |
| 3. arguments regarding the law on redemption rights. (Para 22 , 23 , 34 , 35 , 36) |
| 4. conclusion directing bank actions following auction. (Para 106 , 108) |
JUDGMENT :
J.B. PARDIWALA, J.
| For the convenience of the exposition, this judgment is divided in the following parts: | |
| (A) | Factual Matrix |
| (B) | Submissions on behalf of the Appellant |
| (C) | Submissions on behalf of the Borrowers |
| (D) | Questions of Law falling for the determination of the Court |
| (E) | Legislative History and Scheme of the SARFAESI Act |
| (F) | Redemption of Mortgage under Section 60 of the Transfer of Property Act, 1882 |
| (G) | Redemption of Mortgage under the SARFAESI Act |
| (H) | Effect of the Amendment to Section 13 (8) of the SARFAESI Act |
| (I) | Why the decision of the Telangana High Court in the case of Amme Srisailam vs. Union Bank of India, Regional Office, Guntur, Rep. by its Region Head and Deputy General Manager, Andhra Pradesh and Others, W.P. No. 11435 of 2021, is not a good law? |
| (J) | Sanctity of Public Auction |
| (K) | Exercise of Extraordinary Jurisdiction by the High Court under Article 226 of the Constitution in SARFAESI matters |
| (L) | Conduct of the Bank |
| (M) | Summary of the Final Conclusion |
1. Since the issues raised in both the captioned appeals are same, the parties are also the same and the challenge is also to the self-same judgment and order passed by the High Court those were taken up for hearing analogously and are being disposed of by this common judgment and order.
2. For the sake of convenience, we clarify that the appellant herein is an auction purchaser, the respondent No. 1 is the Borrower, the respondent No. 2 is the Guarantor and the respondent No. 3 is the Bank (Secured Creditor).
3. These appeals are at the instance of an auction purchaser left high and dry by the respondents herein and is directed against the common judgment and order passed by the High Court of Judicature at Bombay in Writ Petition No. 9523 of 2023 with Interim Application (ST) No. 21706 of 2023 (for impleadment) by which the High Court allowed the writ petition filed by the borrowers and thereby directed the Bank to permit the borrowers to redeem the mortgage of the secured asset more particularly after the auction proceedings attained finality.
FACTUAL MATRIX
4. It appears from the materials on record that the borrowers had availed credit facility from the Bank on 03.07.2017. Accordingly, the Bank sanctioned Lease Rental Discounting (for short ‘the LRD’) credit facility to the tune of Rs. 100 crore in favour of the borrower with the respondent No. 2 standing as a guarantor. Out of the total amount sanctioned, the amount of Rs. 65 crore was adjusted against the then existing LRD facility granted by the previous bank and for the balance amount of Rs. 35 crore a security in the form of a simple mortgage was created over a parcel of land admeasuring 16200 sq. metres having buildings and ancillary structures on it at plot Nos. D-105, D-110 and D-111 respectively situated at the Trans Thane Creek Industrial Area MIDC Village Shirwane, Thane, Belapur Road, Nerul, Navi Mumbai, Thane, Maharashtra in lieu of the sanctioned credit.
5. The borrower defaulted in repayment of the loan amount and accordingly the loan account was declared as a Non-Performing Asset (NPA).
6. The Bank issued a demand notice under Section 13 (2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (for short ‘the SARFAESI Act’) for repayment of the principal amount along with interest, cost, charges, etc. As on 30.04.23, an aggregate sum of Rs.
The mortgagor's right of redemption under the amended Section 13(8) of the SARFAESI Act is extinguished upon publication of the auction notice.
The right to redeem mortgaged property under Section 13(8) of the SARFAESI Act is extinguished upon the publication of a sale notice, as amended in 2016.
Court ruled that non-compliance with SARFAESI rules voided sale; observed that the rights of borrowers can be waived through their conduct and failure to assert them timely.
The right to redeem mortgaged property under the SARFAESI Act is extinguished once the auction notice is published, indicating no entitlement to challenge the sale thereafter.
The auction sale under the SARFAESI Act may be annulled on equitable grounds if procedural delays, not attributable to borrowers, prevent confirmation and violate statutory requirements.
The main legal point established in the judgment is that the right of redemption of the borrower is not extinguished upon the publication of the auction notice, and the secured creditor has the discr....
The right of redemption is available to the mortgagor until the sale is complete by registration of sale, and the violation of statutory rules may entitle the borrower to redeem the property.
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