Acting Chief Justice

Whether under sub-section (8) of Section 13 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Act 54 of 2002) (hereinafter referred to as ‘the Securitization Act”) a borrower is permitted to redeem the immovable secured asset after the secured asset was sold but before the confirmation of sale by the secured creditor under the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as ‘the Rules’) is the question involved in this appeal filed by the auction purchaser under Clause 15 of the Letters Patent challenging the order of the learned single Judge opining that the borrower is entitled to redeem the immovable secured asset before the confirmation of sale.

2. Facts leading to the controversy may briefly be noted: Respondent No.3 herein – M/s Sruthi Builders Private Limited - secured loan from the respondent-banks - Indian Overseas Bank, Andhra Loyola College Branch, Vijayawada and Dena Bank, Vijayawada Branch, Governorpet, Vijayawada respectively. When Respondent No.3 has become a non-performing asset recourse was taken to the provisions of the Securitization Act and accordingly a tender notification was issued on 27.2.2012 for sale of the immovable secured asset of the borrower and the date for auction was fixed as 31.3.2012. The borrower requested for one time settlement on 29.3.2012 by paying Rs.1.00 crore and Rs.27.00 lakhs to the respondents-banks respectively, but they proceeded with the auction. The auction purchaser – M/s India Finlease Securities Ltd., Chennai has become the highest bidder for Rs.18.00 crores for the secured asset i.e “Sainag Complex” Chandramoulipuram, Vijayawada. The Authorized Officer, Dena Bank and the Authorized Officer, Indian Overseas Bank jointly issued letter dated 31.3.2012 accepting the auction purchaser as the highest bidder and directing the purchaser to pay the balance of 25% after deducting EMD amount by 3.4.2012 and the balance bid amount of Rs.1350 lakhs on or before 16.4.2012. It was indicated in the letter that the sale shall be confirmed in the name of M/s India Finlease Securities Ltd., on payment of the entire bid amount subject to confirmation by the banks. The purchaser paid Rs.2.93 crores by cheque dated 3.4.2012 in favour of Dena Bank.

In the meanwhile, the borrower, aggrieved by the auction filed S.A.No.139 of 2012 before the Debt Recovery Tribunal, Visakhapatnam under Section 17 of the Act. The respondent-banks filed counters and as per the directions of the DRT a statement of account showing the amount due by the borrower was also filed. The auction purchaser has paid the balance amount- Rs.11.70 crores by demand draft dated 12.4.2012 and Rs.1.80 crores by bankers cheque dated 13.4.2012, both in favour of Dena Bank. Both the amounts were accepted by the bank subject to the outcome of S.A.No.139 of 2012 on the file of DRT, Visakhapatnam. It was also indicated that confirmation of sale shall also be only subject to the outcome of S.A.No.139 of 2012. On 16.8.2012, the borrower filed an interlocutory application under section 13(8) of the Securitization Act to permit it to redeem the secured asset by discharge of the debt due to the respondent banks. By order dated 16.4.2012, the DRT allowed the application permitting the borrower to pay the amounts within five weeks as undertook by the borrower in the affidavit filed before the DRT and in default liberty was given to the respondent-banks to confirm the sale in favour of the successful highest bidder and the banks were directed to maintain status quo as on the date. So far as the amounts paid by the auction purchaser is concerned, the DRT directed that the same shall be kept in an interest bearing account in the form of term deposit, if agreed upon by the auction purchaser. Accordingly, it appears that the 2nd respondent wrote a letter to the auction purchaser to convey their approval for keeping the bid amount in term