2017 Supreme(MP) 1091

IN THE HIGH COURT OF MADHYA PRADESH
SANJAY YADAV, S.K. AWASTHI, JJ.
Dinesh Agarwal and Associates - Petitioner
Versus
Pawan Kumar Jain and others - Respondents
W.P. No. 8646 of 2013
Decided On : 10-08-2017

The right of a borrower to redeem the mortgaged property under section 60 of the Transfer of Property Act is not extinguished unless it has been extinguished by act of the parties or by decree of a Court.

Headnote:

RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993 - SECTION 29 - RULES 60, 61, 62 AND 63 OF SECOND SCHEDULE - TRANSFER OF PROPERTY ACT, 1882 - SECTION 60 - INCOME TAX ACT, 1961 - SECOND SCHEDULE, PART I, RULE 15 - AUCTION SALE - RIGHT OF AUCTION PURCHASER - RIGHT OF MORTGAGOR TO REDEEM - APPLICABILITY OF SECTION 60 OF TRANSFER OF PROPERTY ACT - EFFECT OF SALE NOT BECOMING ABSOLUTE - WAIVER OF RIGHT TO REDEEM - APPLICABILITY OF RULES 60, 61, 62 AND 63 OF SECOND SCHEDULE TO INCOME TAX ACT - SCOPE OF SECTION 29 OF RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT - DISTINCTION BETWEEN DECREE-HOLDER AUCTION PURCHASER AND STRANGER AUCTION PURCHASER - PROTECTION OF BONA FIDE PURCHASERS AT AUCTION SALES - APPLICABILITY OF DOCTRINE OF MERGER - EFFECT OF STAY ORDER ON TRANSFER OF TITLE - RIGHT TO RETAIN MORTGAGED PROPERTY - PAYMENT OF ENTIRE DUES - JURISDICTION OF DEBTS RECOVERY TRIBUNAL AND DEBTS RECOVERY APPELLATE TRIBUNAL - SCOPE OF JUDICIAL REVIEW.

Fact of the Case:

Petitioner participated in an auction held for the sale of property mortgaged to secure a cash credit facility availed by respondent No. 1 from respondent No. 2 Bank. Petitioner was declared the highest bidder and deposited the earnest money. However, before the issuance of sale certificate, respondent No. 1 filed a writ petition wherein the High Court stayed the further steps for confirmation of sale and issuance of sale certificate. Later, in the same proceedings, the High Court directed respondent No. 1 to deposit certain amounts in the account of respondent No. 2 Bank. Respondent No. 1 deposited a part of the amount in the account of respondent No. 2 Bank and a part in the account of another bank. The writ petition was later disposed of with the liberty to respondent No. 1 to avail the remedy before the Debts Recovery Tribunal. The Debts Recovery Tribunal dismissed the appeal filed by respondent No. 1 challenging the auction proceedings. The Debts Recovery Appellate Tribunal modified the order of the Debts Recovery Tribunal and directed respondent No. 1 to pay the balance amount to the Bank and the auction purchaser. The petitioner challenged the order of the Debts Recovery Appellate Tribunal.

Finding of the Court:

1. The petitioner, as an auction purchaser, had an interest accrued in his favor to protect the right under the auction sale. 2. The respondent No. 1, as the borrower, had the right to retain the mortgaged property by paying the entire dues adjudged by the Tribunal. 3. The provisions of Rules 60, 61, 62 and 63 of the Second Schedule to the Income Tax Act, 1961 are mandatory and must be followed. 4. Section 29 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 is an enabling provision and does not extinguish the borrower's right to retain the mortgaged property. 5. The right to redeem the mortgaged property under section 60 of the Transfer of Property Act is not extinguished unless it has been extinguished by act of the parties or by decree of a Court. 6. The sale of the mortgaged property does not extinguish the right of redemption unless the sale has become absolute. 7. The right to redeem the mortgaged property can be exercised even after the sale has taken place pursuant to the final decree, but before the confirmation of such sale. 8. The right of redemption is not extinguished by the merger of the mortgage-debt in the decretal-debt. 9. The Debts Recovery Tribunal and the Debts Recovery Appellate Tribunal have exclusive jurisdiction to adjudicate disputes relating to the recovery of debts due to banks and financial institutions.

Issues: 1. Whether the petitioner has any locus standi to challenge the order passed by the Debt Recovery Appellate Tribunal? 2. Whether it can be said that the petitioner had acquired any right to protect the auction sale proceedings? 3. Whether the respondent No. 1 had any right to question the auction sale proceedings? 4. Whether the decision by the Debt Recovery Tribunal would operate as a clog on the right of respondent No. 1 to secure the property on payment of entire amount due and recoverable at the stage of auction sale proceedings?

Ratio Decidendi: 1. An auction purchaser has an interest accrued in his favor to protect the right under the auction sale. 2. The borrower has the right to retain the mortgaged property by paying the entire dues adjudged by the Tribunal. 3. The provisions of Rules 60, 61, 62 and 63 of the Second Schedule to the Income Tax Act, 1961 are mandatory and must be followed. 4. Section 29 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 is an enabling provision and does not extinguish the borrower's right to retain the mortgaged property. 5. The right to redeem the mortgaged property under section 60 of the Transfer of Property Act is not extinguished unless it has been extinguished by act of the parties or by decree of a Court. 6. The sale of the mortgaged property does not extinguish the right of redemption unless the sale has become absolute. 7. The right to redeem the mortgaged property can be exercised even after the sale has taken place pursuant to the final decree, but before the confirmation of such sale. 8. The right of redemption is not extinguished by the merger of the mortgage-debt in the decretal-debt. 9. The Debts Recovery Tribunal and the Debts Recovery Appellate Tribunal have exclusive jurisdiction to adjudicate disputes relating to the recovery of debts due to banks and financial institutions.

Final Decision: The petition was dismissed. The order of the Debts Recovery Appellate Tribunal was upheld.