MATHEW VARGHESE v. M. AMRITHA KUMAR & Ors.

By the impugned order, the Division Bench set aside the sale on the ground that it was not conducted in a fair imposed condition on and proper manner and G Respondents 1 and 2 to furnish a Demand Draft of Rs.2 crores in favour of the appellant and if payment is not made, as directed, the sale in favour of the appellant would stand confirmed and the writ appeal would automatically stand dismissed. In the event of the H payment of Rs.2 crores, the appellant was directed to MATHEW VARGHESE v. M. AMRITHA KUMAR & ORS. 741 hand over the original sale deed obtained by him from the A Bank to enable Respondents no.1 and 2 to approach the Sub-Registrar and Revenue Authorities for cancellation of registration, consequent mutation, etc. Respondents no.1 and 2 did not make the payment 8 within the said date, as directed by the Division Bench. Instead an application was filed by the Respondents 1 and 2 seeking further six weeks time to effect the payment of Rs.2 crores. The Division Bench passed order on 18.06.2010, extending the time till 20.06.2010. The said C extension was granted by holding that on such deposit, sale made by the 4th Respondent-Bank in favour of the appellant would stand cancelled and the Bank should effect the sale in favour of the 8th Respondent. The 8th Respondent was directed to deposit Rs.2.03 crores before the 4th Respondent-Bank on 19.06.2010 and the D time granted for payment in terms of the judgment was extended till 20.06.2010. On 8.7.2010, after noting that appellant had not withdrawn the amounts deposited with the 4th respondent bank, the Division Bench allowed the I.A. and directed 4th respondent Bank to execute the sale E deed in favour of the 8th Respondent for the sale consideration of Rs.2.03 crores. The instant appeals were filed challenging the order of the Division Bench of the High Court .. Disposing of the appeals, the Court F HELD: 1. Under Section 13(1) of the SARFAESI Act, it is provided that any security interest created in favour of the SECURED CREDITOR may be enforced without the intervention of the Court and Tribunal by such creditor G in accordance with the provisions of this Act. The non obsta nte clause in the opening set of expressions contained in Section 13(1) is restricted to Section 69 or Section 69A of the T.P. Act. The only other relevant aspect contained in the said sub-section is that such H 742 SUPREME COURT REPORTS [2014] 2 S.C.R. A enforcement should be in accordance with the provisions of this Act. S~ction 13(1) says that while on the one hand, any SECURED CREDITOR may be entitled to enforce the SECURED ASSET created in its favour on its own without resorting to any court proceedings or approaching the B Tribunal, such enforcement should be in conformity with the other provisions of the SARFAESl·Act. [Paras 24) [767- G-H; 768-B-C] c E

2. Sub-section (8) of Section 13 states that a borrower can tender to the SECURED CREDITOR the dues together with all costs, charges and expenses incurred by the SECURED CREDITOR at any time before the date fixed for sale or transfer. In .the event of such tender once made as stipulated in the said provision, the mandate is that the SECURED ASSET should not be sold D or transferred by the SECURED CREDITOR. It is further reinforced to the effect that no further step should also be taken by the SECURED CREDITOR for transfer or sale of the SECURED ASSET. There is a valuable right recognized and asserted in favour of the borrower, who is the owner of the SECURED ASSET and who is extended an opportunity to take all efforts to stop the sale or transfer till the last minute before which the said sale or transfer is to be effected. Having regard to such a · valuable right of a debtor having been embedded in the uncontroverted terms that the said provision has been engrafted in the SARFAESI Act primarily with a view to protect the rights of a borrower, inasmuch as, such an ownership right is a Constitutional Right protected under G Article 300A of the Constitution, which mandates that no person shall be deprived of his property save by authority of law. Therefore, de hors, the extent of borrowing made and whatever costs, charges were incurred by the SECURED CREDITOR in respect of such H borrowings, when it comes to the question of realizing F said sub-section, ·it will have to be stated MATHEW VARGHESE v. M. AMRITHA KUMAR & ORS. 743 the dues by bringing the property entrusted with the A SECURED CREDITOR for sale to realize money advanced without approaching any Court or Tribunal, the SECURED CREDITOR as a TRUSTEE cannot deal with the said property in any manner it likes and can be disposed of only in the manner prescribed in the 8 SARFAESI Act. Therefore, the creditor should ensure that the borrower was clearly put on notice of the date and time by which either the sale or transfer will be effected in order to provide the required opportunity to the borrower to take all possible steps for retrieving his C property or at least ensure that in the process of sale the SECURED ASSET derives the maximum benefit and the SECURED CREDITOR or anyone on its behalf is not allowed to exploit the situation of the borrower by vk1:ue of the proceedings initiated under the SARFAESI Act. [Para 26) [768-F-H; 769-C-H; 770-A] 0 Valji Khimji and Company vs. Official Liquidator of Hindustan NitroProduct (Gujarat) Limited and Ors. (2008) 9 SCC 299: 2008 (12) SCR 1; United Bank of India vs. Satyawati Tondon and Ors. (2010) 8 SCC 110: 2010 (9) SCR E . 1; Narandas Karsondas vs. S.A. Kamtam and Anr. (1977) 3 SCC 247: 1977 (2) SCR 341; Mardia Chemicals Ltd. and Ors. vs. Union of India and Ors. (2004) 4 SCC 311: 2004 (3) SCR 982 - referred to.

3. Rules 8 and 9 of the Security Interest · F (Enforcement) Rules, 2002 prescribe the procedure to be followed by a SECURED CREDITOR while resorting to a sale after the issuance of the proceedings under Section 13(1) to (4) of the SARFAESI Act. Under Rule 9(1), it is prescribed that no sale of an immovable property under · G the rules should take place before the expiry of 30 days from the date on which the public notice of sale is published in the newspapers as referred to in the proviso to sub-rule (6) of Rule 8 or notice of sale has been served to the borrower. Sub-rule (6) of Rule 8 again states that H 744 SUPREME COURT REPORTS [2014] 2 S.C.R. A 8 D the authorized officer should serve to the borrower a notice of 30 days for the sale of the immovable SECURED ASSETS. Reading sub-rule (6) of Rule, 8 and sub-rule (1) of Rule 9 together, the service of individual notice to the borrower, specifying clear 30 days time gap for effecting any sale of immovable SECURED ASSET is a statutory mandate. It is also stipulated that no sale should be affected before the expiry of 30 days from the date on which the public notice of sale is published in the newspapers. The use of the expression 'or' in Rule 9(1) should be read as 'and' as that alone woufd- l;>e in C consonance with Section 13(8) of the SARFAESI Act. The_ other prescriptions contained in the- proviso to sub-rule (6) of Rule 8 relates to the details to be set out in the newspaper publication, one of which should be in 'vernacular language' with sufficient circulation in the locality by setting out the terms of the sale. While setting out the terms of the sale, it should contain the description of the immovable property to be sold, the known encumbrances of the SECURED CREDITOR, the secured debt for which the property is to be sold, the E reserve price below which the sale cannot be effected, the time and place of public auction or the time after which sale by any other mode would be completed, the deposit of earnest money to be made and any oth~r details which the authorized officer considers material for a purchaser to know in order to judge the nature and value of the F property. Such a detailed procedure while resorting to a sale of an immovable SECURED ASSET is prescribed under Rules 8 and 9(1). The paramount objective is to provide sufficient time and opportunity to the borrower to take all efforts to safeguard his right of ownership G either by tendering the dues to the creditor before the date and time of the sale or transfer, or ensure that the SECURED ASSET derives the maximum price and no one is allowed to exploit the vulnerable situation in which the borrower is placed. [Paras 28 to 30] [770-D-G; 771-B-F; H 772-C-D] MATHEW VARGHESE v. M. AMRITHA KUMAR & ORS. 745

4. Rules 8(1) to (3) and in particular sub-rule (3) A B speaks about the responsibility of the SECURED CREDITOR vis-a-vis the SECURED ASSET taken possession of. Under sub-rule (1) of Rule 8, the prescribed manner in which the possession is to be taken by issuing the notice in the format in which such notice of possession is to be issued to the borrower is stipulated. Under sub-rule (2) of Rule 8 again, it is stated as to how the SECURED CREDITOR should publish the notice of possession as prescribed under sub-rule (1) to be made in two leading newspapers, one of which should be in the vernacular language having sufficient C circulation in the locality and also such publication should have been made seven days prior to the intention of taking possession. Sub-rule (3) of Rule 8 really casts much more onerous responsibility on the SECURED CREDITOR once possession is actually taken by its D authorised officer. Under sub-rule (3) of Rule 8, the property taken possession of by the SECURED CREDITOR should be kept in its custody or in the custody of a person authorized or appointed by it and it is stipulated that such person holding possession should take as much care of the property in its custody as a owner of ordinary prudence would under similar circumstances take care of such property. The underlining purport of such a requirement is to ensure that under no circumstances, the rights of the owner till such right is transferred in the manner known to law is infringed. A reading of Rules 8 and 9, in particular, sub rule (1) to (4) and (6) of Rule 8 and sub-rule (1) of Rule 9 makes it clear that simply because a secured interest in a SECURED ASSET is created by the borrower in favour of the SECURED CREDITOR, the said asset in the event G of the same having become a NON-PERFORMING ASSET cannot be dealt with in a light-hearted manner by way of sale or transfer or disposed of in a casual manner or by not adhering to the prescriptions contained under the SARFAESI Act and the Rules. [paras 31, 32] [772-E-H; H E F 746 SUPREME COURT REPORTS [2014] 2 S.C.R. A 773-A-C, F-G]

5. A close reading of Section 37 shows that the provisions of the SARFAESI Act or the rules framed thereunder will be in addition to the provisions of the B RDDB Act. Section 35 of the SARFAESI Act states that the provisions of the SARFAESI Act will have overriding effect notwithstanding anything inconsistent contained in any other law for the time being in force. Therefore, reading Sections 35 and 37 together, it will have to be held that in the event of any of the provisions of RDDB C Act not being inconsistent with the provisions of the SARFAESI Act, the application of both the Acts, namely, SARFAESI Act and RDDB Act, would be complementary to each other. The HEADING of the said Section also makes the position clear that application of other laws are D not barred. The effect of Section 37 would, therefore, be that in addition to the provisions contained under the SARFAESI Act, in respect of proceedings initiated under the said Act, it will be in order for a party to fall back upon the provisions of the other Acts mentioned in Section 37, E namely, the Companies Act, 1956, the Securities Contracts (Regulation) Act, 1956, the Securities and Exchange Board of India Act, 1992, the Recovery of Debts Due to Banks and Finances Institutions Act, 1993, or any other law for the time being in force. [paras 42, 43] [780- F H; 781-A-C, H; 782-A-B]