CASE DETAILS v. BAFNA MOTORS (MUMBAI) PVT. LTD & Ors.

I. Why the decision of the Telangana High Court in the case of Amme Srisailam v. Union Bank of India, Regional Offi ce, Guntur, rep. by its Region Head & Deputy General Manager, Andhra Pradesh & Ors., W.P. No. 11435 of 2021, is not a good law? ...................................................................................................80-93* J. Sanctity of Public Auction................................................... ...........93-97* K. Exercise of Extraordinary Jurisdiction by the High Court under Article 226 of the Constitution in SARFAESI matters....... .........97-103* *Ed. Note: The pagination as per the original Judgment. 60 SUPREME COURT REPORTS [2023] 13 S.C.R. L. Conduct of the Bank...........................................................103-108* M. Summary of the Final Conclusion................................... 108-111*

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.

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).

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 fi led 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 fi nality. FACTUAL MATRIX

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. *Ed. Note: The pagination as per the original Judgment. CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. LTD. & ORS. [J. B. PARDIWALA, J.] 61

The borrower defaulted in repayment of the loan amount and accordingly the loan account was declared as a Non-Performing Asset (NPA).

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. 123.83 crore was due and payable by the borrower to the Bank.

Owing to the failure of the borrower & the guarantor in repaying the outstanding amount referred to above, the Bank proceeded to take measures for possession of the secured asset under the provisions of the SARFAESI Act. The Bank decided to put the secured asset to auction. It appears that between April 2022 & June 2023, the Bank attempted eight auctions but all failed.

In the meantime, the borrowers preferred a Securitization Application being SA No. 46 of 2022 before the Debt Recovery Tribunal-I, Mumbai (for short, “DRT”) inter alia challenging the demand notice issued under Section 13(2) of the SARFAESI Act and also for quashing of the sale notice dated 25.03.22 in respect of the secured asset. It is not in dispute that the said application as on date is still pending before the DRT.

It appears that the borrowers informed the Bank that they were trying to sell the secured asset but were not getting good off ers. The borrowers informed the Bank that the maximum they might be able to fetch from the sale of the secured asset would be around Rs. 91-92 crore and they were willing to settle the entire account by off ering such amount to the Bank.

The Bank decided to go for one more auction. On 14.06.23, the Bank published the auction notice for the 9th time for sale of the secured asset at a reserve price of Rs. 105 crore. On publication of the auction notice, the appellant herein participated in the auction proceedings conducted on 27.06.23 and submitted its bid of Rs. 105.05 crore, along with a deposit of Rs. 10.5 crore as earnest money.

In the 9th auction conducted by the Bank, the appellant herein was declared as the highest bidder. The Bank on 30.06.2023 vide its email sent a “Sale Confi rmation Letter” to the appellant, declaring him as the highest bidder / H1 in the auction of the secured asset and called upon the appellant to deposit 62 SUPREME COURT REPORTS [2023] 13 S.C.R. 25% of the bid amount by 01.07.23 and the balance amount on or before 15.07.23. The email is reproduced below: -

admin@mstcauction.com SALE CONFIRMATION LETTER (Property-UBINMUMSAM2888) To: Mac, Cc: samvmumbai@unionbankofindia.bank, ibapiop@ mstcauction.com CELIR LLP Date: 30-06-2023: C-708 teerth technospace 7th fl oor Sr no 103 baner Pune 411045 INDIA Dear Sir / Madam, Date: 30.06.2023 Time: 06:36 PM Your Bid of amount Rs.1050500000. for the property ID No. UBINMUMSAM2888 during online auction held on e-BKRAY portal on Date: 30-06-2023, is accepted as highest bid and accordingly you have been declared H1 bidder for the said property. In terms of Sale Notice issued under the provisions of SARFAESI Act, you are required to deposit 25% of the Bid amount, which comes to Rs.262625000. Including 10% of reserve price as EMO amount, which has been deducted from your Global EMO Wallet, immediately, but not later than 01-07-2023. In case 01.07.2023 is a holiday, payment should be made within the next working day at concerned branch of Bank in account No.087021980050000. Further, you are required to deposit the balance amount of Rs.787875000, being 75% of entire bid amount within 15 days i.e. on or before 15.07.2023 at Concerned Branch of Bank in account No.087021980050000. Please be informed that in case you fail to deposit due amount by scheduled dates, sale shall be cancelled and any amount deposited by you related to this bid, shall be forfeited. CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. LTD. & ORS. [J. B. PARDIWALA, J.] 63 Authorized offi cer Name of Authorized Offi cer: Sidharath S. Mhade Name of Bank: UNION BANK OF INDIA Contact No. or AO: 898-518779 e-Mail to or AO: samvmumbai@unionbankofi nida.bank (This mail is from Authorized Offi cer and being generated through computer system, hence needs no signature)

On 01.07.2023, the appellant deposited 25% of the total bid amount (minus the earnest money deposit). In the wake of such development, the borrowers fi led an Interim Application No. 2339 of 2023 on 04.07.2023, titled Redemption Application in S.A. No. 46 of 2022 before the DRT-I, Mumbai for redemption of the mortgage in respect of the secured asset by payment of the total outstanding sum of Rs 123.83 crore (approx.) on or before 31.08.23.

On 27.07.23, the appellant herein deposited the balance sum of the total bid amount which was duly received and accepted by the Bank. On the very same day, the redemption application referred to above was also heard by the DRT-I. The redemption application was opposed by both the appellant herein as well as the Bank. The DRT after hearing the parties at length, reserved orders to be pronounced on 02.08.23.

While the parties were awaiting for the DRT to pass appropriate an on order on the redemption application, the borrowers went to the High Court and fi led the Writ Petition No. 9523 of 2023, seeking directions to the Bank to permit them to redeem the mortgage of the secured asset.

The writ petition was fi led on the premise that the borrowers had strong apprehension that the DRT may reject their redemption application and the entire matter would become infructuous more particularly, the Bank having accepted the entire amount from the appellant herein of the total bid.

Before the High Court, the borrowers expressed their willingness to pay a total sum of Rs. 129 crore for redeeming the mortgage by 31.08.23. The Bank which had earlier opposed the plea for redemption of mortgage before the DRT for some good reason expressed its willingness before 64 SUPREME COURT REPORTS [2023] 13 S.C.R. the High Court to accept the off er of the borrowers. The Bank perhaps got lured by the fact that the borrowers were paying almost Rs. 23.95 crore more than what was paid by the appellant herein and Rs. 5 crore more than the outstanding amount.

It also appears that the appellant herein having come to know about such writ petition fi led in the High Court preferred Interim Application (ST) No. 21706 of 2023 for being impleaded in the writ petition.

The writ petition along with interim application was heard by the High Court and vide its impugned judgment and order dated 17.08.2023 allowed the writ petition and permitted the borrowers to redeem the mortgage of the secured asset subject to payment of Rs. 25 crore on the same day and the balance amount of Rs. 104 crore on or before 31.08.2023, failing which the sale of secured asset in favour of the appellant herein would be confi rmed.

The operative part of the impugned order passed by the High Court reads thus: “(a) The Petitioner shall hand over a sum of Rs. 25 crores to the Respondent Bank today. In compliance with this direction, Mr. Khandeparkar has handed over three Demand Drafts in the sum of Rs. 10 crores, 10 crores and 5 crores respectively to the learned Advocate appearing on behalf of the Respondent Bank which is duly acknowledged by him. The Bank is entitled to encash these Demand Drafts and appropriate the sum of Rs.25 crores towards the outstanding dues of the Petitioners. (b) The balance amount of Rs. 104 crores shall be paid by the Petitioners to the Respondent Bank on or before 31st August 2023 in the designated account below: - Union Bank of India IFSC A/c. No. Stressed Asset Management Branch, Mumbai UBIN0908703 087021980050000 (c) If the amount of Rs. 104 crores are paid in the said account on or before 31st August 2023, the same shall be appropriated by the Respondent-Bank towards the dues of the Petitioners.

It appears that during the pendency of the present appeals, the borrowers transferred the balance amount of Rs. 104 crore on 26.08.2023 to the Bank in terms of the impugned order passed by the High Court. With the transfer of the amount of Rs. 104 crore, the Bank issued a “No Dues Certificate” on 28.08.23. On the very same day, the borrowers entered into an Agreement of Assignment of Leasehold Rights with a third-party viz. M/s Greenscape I.T. Park LLP for the transfer of leasehold rights in the secured asset and the said agreement was registered before the Joint Sub Registrar, Thane 8 vide Registration No. 19286 of 2023.

Being aggrieved and dissatisfied with the aforesaid order passed by the High Court, the appellant is here before this Court with the present appeals. SUBMISSIONS ON BEHALF OF THE APPELLANT

Mr. Mukul Rohatgi, the learned Senior Counsel and Mr. Neeraj Kishan Kaul, the learned Senior Counsel appearing for the appellant made the following submissions: a. The writ petition filed by the borrowers before the High Court was not maintainable in view of the alternative remedy available to them under Section 17 of the SARFAESI Act and more particularly when such alternative remedy had already been availed by the borrowers. b. The High Court ought not to have entertained the writ petition on the ground that although the auction proceedings had attained finality and the appellant herein was declared as the successful highest bidder yet the bank was getting more amount as offered by the appellant compared to the sale bid. CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. LTD. & ORS. [J. B. PARDIWALA, J.] 67 c. Mere apprehension on the part of the litigant that an adverse order might be passed by a forum which was already looking into the issue cannot be a ground to invoke the extraordinary jurisdiction under Article 226 of the Constitution. d.

SUBMISSIONS ON BEHALF OF THE BORROWERS

Mr. Shyam Divan, the learned Senior Counsel and Mr. Nikhil Nayyer, the learned Senior counsel appearing for the borrowers made the following submissions: a. That after the impugned order was dictated in the open court on 17.8.2023 and subsequently uploaded on the website of Bombay High Court on 26.8.2023, the following developments took place: (i) The borrowers transferred an amount of Rs. 104 Crores to t h e U ni on Ba n k o f I nd i a vi d e RT G S, h avi ng UT R No. HDFCR52023082882894716. (ii) This was followed by the Respondent No.3, i.e., Union Bank of India issuing a No Dues Certifi cate dated 28.08.2023 thereby acknowledging that the borrowers do not owe any further amount to the Bank and releasing the personal guarantees as well. (iii) Further, after the No Dues Certifi cate was issued by the Bank, the borrowers executed a registered Deed of Release in favour of the Tata Motors Financial Solutions Limited registered with the Joint Sub Registrar, Thane 8 having registration No.

The mortgagor’s right to redeem will survive until there has been completion of sale by the mortgagee by a registered deed. In England a sale of property takes place by agreement but it is not so in our country. The power to sell shall not be exercised unless and until notice in writing requiring payment of the principal money has been served on the mortgagor. Further Section 69(3) of the Transfer of Property Act shows that when a sale has been made in professed exercise of such a power, the title of the purchaser shall not be impeachable on the ground that no case had arisen to authorise the sale. Therefore, until the sale is complete by registration the mortgagor does not lose right of redemption.” (Emphasis supplied) g. The aforesaid position has also been echoed in the case of Mathew Varghese v. M. Amritha Kumar and Ors., (2014) 5 SCC 610, wherein this Court held that upon a combined reading of Sections 60 and 54 respectively of the Act 1882 with Section 17 of the Registration Act, 1908, it can be concluded that the extension of the right of redemption comes much later than the sale notice. h.

It would, therefore, certainly be available to the petitioners herein before the issuance of sale certifi cate in favour of respondents No. 2 and 3. Point (a) is answered accordingly in favour of the petitioners and against the respondents.” l. The said judgment also considered and distinguished the judgment of this Court in Shakeena and Anr. v. Bank of India and Ors., (2021) 12 SCC 761, holding that the said case did not consider the concept of redemption under Section 60 of the Act 1882. The observations in para 30 of Shakeena are in the nature of obiter dicta as in the said case the auction had concluded prior to the amendment of Section 13(8) and in any event the sale certifi cate had already been issued. Thus, the question of interpretation of Section 13(8) was not directly in issue. m. A perusal of the Report (the report of Joint Committee on the Enforcement of Security Interest and Recovery of Debt Laws and Miscellaneous Provisions (Amendment) Bill, 2016), more particularly para 24, indicates that the proposed amendment to Section 13(8) of the Act was intended to deal with: - “Provisions to stop secured creditor to lease or assignment or sale in the prescribed conditions”.

The Telangana High Court in the case of Amme Srisailam v. Union Bank of India, Regional Offi ce, Guntur, rep. by its Region Head & Deputy General Manager, Andhra Pradesh & Ors., W.P. No. 11435 of 2021 decided on 17.08.2022 has referred to and relied upon on Concern Readymix (supra) and Pal Alloys (supra). The Telangana High Court in Amme Srisailam (supra) in turn has relied upon the decision of this Court in the case of S. Karthik & Ors. v. N. Subhash Chand Jain & Ors., (2022) 10 SCC 641. The Telangana High Court in Amme Srisailam (supra) held as under: “44. Before we revert back to the facts of the present case, we may also refer to Sections 35 and 37 of the SARFAESI Act. While Section 35 says that the provisions of the SARFAESI Act shall have eff ect notwithstanding anything inconsistent therewith contained in any other law for the time being in force, Section 37 clarifi es that provisions of the SARFAESI Act or the rules made thereunder shall be in addition to and not in derogation of any other law for the time being in force.

This brings us to Section 60 of the Transfer of Property Act, 1882. Section 60 says that at any time after the principal amount has become 74 SUPREME COURT REPORTS [2023] 13 S.C.R. due, the mortgagor has a right, on payment or tender, of the mortgage money, to require the mortgagee (a) to deliver to the mortgagor the mortgage deed and all documents relating to the mortgaged property which are in possession or power of the mortgagee, (b) where the mortgagee is in possession of the mortgaged property, to deliver possession thereof back to the mortgagor, and (c) at the cost of the mortgagor either to re-transfer the mortgaged property to him or to such third person as he may direct, or to execute and to have registered an acknowledgement in writing that any right in derogation of his interest transferred to the mortgagee has been extinguished. As per the proviso, the right conferred under the aforesaid provision shall not be extinguished by any act of the parties or by decree of a Court.

Therefore, on a careful application of Sections 35 and 37 of the SARFAESI Act, it is evident that the situation contemplated under Section 13(8) of the SARFAESI Act does not exclude application of Section 60 of the Transfer of Property Act, 1882. As explained by this Court in Concern Readymix (supra), a restriction on the right of the mortgagee to deal with the property post issuance of notice for public auction is not the same as the right of redemption available to the mortgagor.

In so far the present case is concerned, admittedly the bid amount of the petitioner was Rs.57.00 lakhs. Though the auction was conducted on 16.03.2021 and payment was made by the petitioner within the stipulated period, there is clear dispute between the parties as regards issuance of sale certifi cate by respondent Nos.1 and 2 in favour of the petitioner. However, admittedly there is no registration of any sale certifi cate. On the other hand, the borrower had approached respondent Nos.1 and 2 for settlement of the loan account under OTS Scheme on 18.03.2021 which was recommended by second respondent on 20.03.2021 and was accepted by fi rst respondent on 31.03.2021 for an amount of Rs.5.10 crores, which has been paid by the borrower i.e., third respondent. On the one hand petitioner’s amount was Rs.57.00 lakhs which the petitioner had paid but on the other hand third respondent has paid Rs.5.10 crores as CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. LTD. & ORS. [J. B. PARDIWALA, J.] 75 per the OTS. Lending of money, recovery of dues and entering into OTS are all commercial decisions which are taken by the banks/ fi nancial institutions in their best interest, subject of course within the statutory framework. In this case, we have already come to the conclusion that third respondent had not lost the right of redemption upon publication of notice for auction sale. If that be the position, then it should be left to the discretion of the secured creditor as to which course of action would be more benefi cial to it. Evidently, the OTS with the third respondent is much more benefi cial to the secured creditors i.e., respondent Nos.1 and 2 and as has been explained above such a course of action is not restricted or extinguished by Section 13(8) of the SARFAESI Act.

Right to property is a valuable right. Though no longer a fundamental right, it is still a constitutional right. The interpretation which we have adopted subserves such a right. That apart, third respondent had not lost the right of redemption upon publication of notice for auction sale; his right of redemption would have been lost only upon the sale certifi cate getting registered which admittedly has not taken place. Therefore, the action of respondent Nos.1 and 2 in accepting the higher OTS amount of the third respondent though after publication of notice for public auction and auction is justifi ed and cannot be faulted.”

In such circumstances referred to above, the learned counsel prayed that there being no merit in the present appeals, those may be dismissed. ANALYSIS

Having heard the learned counsel appearing for the parties and having gone through the materials on record the following questions fall for our consideration: (a) Whether the High Court was justifi ed in exercising its writ jurisdiction under Article 226 of the constitution more particularly when the alternative remedy available to the Borrowers had already been availed of? 76 SUPREME COURT REPORTS [2023] 13 S.C.R. (b) Whether the confi rmation of sale by the Bank under Rule 9(2) of the Rules of 2002 invests the successful auction purchaser with a vested right? (c) What is the impact of the amended Section 13(8) of the SARFAESI Act on the Borrowers’ right of redemption in an auction conducted under the SARFAESI Act? Or in other words, what is the eff ect of amendment to Section 13(8) of the SARFAESI Act read with Section 60 of the Act 1882? (d) Whether a Bank after having confi rmed the sale under Rule 9(2), can withhold the sale certifi cate under Rule 9(6) of the Rules of 2002 and enter into a private arrangement with a borrower? (e) Whether the High Court under Article 226, could have applied equitable considerations to override the outcome contemplated by the statutory auction process prescribed by the SARFAESI Act? (f) Whether the right of redemption of mortgage stood extinguished upon publication of notice of auction? Or in other words till what point of time the right of redemption of mortgage can be exercised in respect of secured asset under the SARFAESI Act? (g) Whether the decisions of Telangana High Court in the case of Concern Readymix (supra) and Amme Srisailam (supra) lay down the correct position of law? LEGISLATIVE HISTORY AND SCHEME OF THE SARFAESI ACT

Till early 1990s, the civil suits were being fi led for recovery of the dues of banks and fi nancial institutions under the Act 1882 and the Code of Civil Procedure, 1908 (CPC). Due to various diffi culties the banks and fi nancial institutions had to face in recovering loans and enforcement of securities, the Parliament enacted the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short, “the Act 1993” or “the RDBFI Act”).

On account of lack of infrastructure and manpower, the regular civil courts were not in a position to cope up with the speed in the adjudication of recovery cases. In the light of recommendations of the Tiwari Committee the special tribunals came to be set up under the provisions of the Act 1993 CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. LTD. & ORS. [J. B. PARDIWALA, J.] 77 referred to above for the recovery of huge accumulated NPA of the Bank loans.

On the continuing rise in number of Non-Performing Assets (NPA) at banks and other fi nancial institutions in India; a poor rate of loan recovery and the failure of the existing legislation in redressing the diffi culties of recovery by banks; the Narasimham Committee I & II and Andyarujina Committee were constituted by the Government for examining and suggesting banking reforms in India. These Committees in their reports observed that one out of every fi ve borrower was a defaulter, and that due to the long and tedious process of existing frame work of law and the overburdening of existing forums including the specialised tribunals under the 1993 Act, any attempt of recovery with the assistance of court/tribunal often rendered the secured asset nearly worthless due to the long delays. In this background the Committees thus, proposed new laws for securitisation in order to permit banks and fi nancial institutions to hold securities and sell them in a timely manner without the involvement of the courts.

On the recommendations of the Narasimham Committee and Andyarujina Committee, the SARFAESI Act was enacted to empower the banks and fi nancial institutions to take possession of the securities and to sell them without intervention of the court.

The statement of objects and reasons for which the Act has been enacted reads as under: -

STATEMENT OF OBJECTS AND REASONS The fi nancial sector has been one of the key drivers in India’s eff orts to achieve success in rapidly developing its economy. While the banking industry in India is progressively complying with the international prudential norms and accounting practices there are certain areas in which the banking and fi nancial sector do not have a level playing fi eld as compared to other participants in the fi nancial markets in the world. There is no legal provision for facilitating securitisation of fi nancial assets of banks and fi nancial institutions. Further, unlike international banks, the banks and fi nancial institutions in India do not have power to take possession of securities and sell them. Our existing legal framework relating to commercial transactions has not kept pace with 78 SUPREME COURT REPORTS [2023] 13 S.C.R. the changing commercial practices and fi nancial sector reforms. This has resulted in slow pace of recovery of defaulting loans and mounting levels of non-performing assets of banks and fi nancial institutions. Narasimham Committee I and II and Andhyarujina Committee constituted by the Central Government for the purpose of examining banking sector reforms have considered the need for changes in the legal system in respect of these areas. These Committees, inter alia, have suggested enactment of a new legislation for securitisation and empowering banks and fi nancial institutions to take possession of the securities and to sell them without the intervention of the court. Acting on these suggestions, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance, 2002 was promulgated on the 21st June, 2002 to regulate securitisation and reconstruction of fi nancial assets and enforcement of security interest and for matters connected therewith or incidental thereto. The provisions of the Ordinance would enable banks and fi nancial institutions to realise long-term assets, manage problem of liquidity, asset liability mismatches and improve recovery by exercising powers to take possession of securities, sell them and reduce nonperforming assets by adopting measures for recovery or reconstruction.

This Court in Mardia Chemicals Ltd. & Ors. v. Union of India & Ors. reported in (2004) 4 SCC 311, examined the history and legislative backdrop that ultimately led to the enactment of the SARFAESI Act as under: - “34. Some facts which need to be taken note of are that the banks and the fi nancial institutions have heavily fi nanced the petitioners and other industries. It is also a fact that a large sum of amount remains unrecovered. Normal process of recovery of debts through courts is lengthy and time taken is not suited for recovery of such dues. For fi nancial assistance rendered to the industries by the fi nancial institutions, fi nancial liquidity is essential failing which there is a blockade of large sums of amounts creating circumstances which retard the economic progress followed by a large number of other consequential ill eff ects. Considering all these circumstances, the Recovery of Debts Due to Banks and Financial Institutions Act was CELIR LLP v.

In its Second Report, the Narasimham Committee observed that NPAs in 1992 were uncomfortably high for most of the public sector banks. In Chapter VIII of the Second Report the Narasimham Committee deals about legal and legislative framework and observed:

8.1. A legal framework that clearly defi nes the rights and liabilities of parties to contracts and provides for speedy resolution of disputes is a sine qua non for effi cient trade and commerce, especially for fi nancial intermediation. In our system, the evolution of the legal framework has not kept pace with 80 SUPREME COURT REPORTS [2023] 13 S.C.R. changing commercial practice and with the fi nancial sector reforms. As a result, the economy has not been able to reap the full benefi ts of the reforms process. As an illustration, we could look at the scheme of mortgage in the Transfer of Property Act, which is critical to the work of fi nancial intermediaries….

One of the measures recommended in the circumstances was to vest the fi nancial institutions through special statutes, the power of sale of the assets without intervention of the court and for reconstruction of assets.

In this regard, reference may be made to the following observations of this Court in the case of Satyawati Tondon (supra). The relevant paras are being reproduced hereunder: “1. … With a view to give impetus to the industrial development of the country, the Central and State Governments encouraged the banks and other fi nancial institutions to formulate liberal policies for grant of loans and other fi nancial facilities to those who wanted to set up CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. LTD. & ORS. [J. B. PARDIWALA, J.] 81 new industrial units or expand the existing units. Many hundred thousand took advantage of easy fi nancing by the banks and other fi nancial institutions but a large number of them did not repay the amount of loan, etc. Not only this, they instituted frivolous cases and succeeded in persuading the civil courts to pass orders of injunction against the steps taken by banks and fi nancial institutions to recover their dues. Due to lack of adequate infrastructure and non-availability of manpower, the regular courts could not accomplish the task of expeditiously adjudicating the cases instituted by banks and other fi nancial institutions for recovery of their dues. As a result, several hundred crores of public money got blocked in unproductive ventures.

2. In order to redeem the situation, the Government of India constituted a committee under the Chairmanship of Shri T. Tiwari to examine the legal and other diffi culties faced by banks and fi nancial institutions in the recovery of their dues and suggest remedial measures. The Tiwari Committee noted that the existing procedure for recovery was very cumbersome and suggested that special tribunals be set up for recovery of the dues of banks and fi nancial institutions by following a summary procedure. The Tiwari Committee also prepared a draft of the proposed legislation which contained a provision for disposal of cases in three months and conferment of power upon the Recovery Offi cer for expeditious execution of orders made by adjudicating bodies.”

Section 13 of the SARFAESI Act contains the provisions relating to the enforcement of the security interest and the manner in which the same may be done by the secured creditor without the intervention of the Court or Tribunal in accordance with its provisions, and reads as under: - “13. Enforcement of security interest.–(1) Notwithstanding anything contained in section 69 or section 69A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act. (2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classifi ed by the secured creditor as non-performing asset, then, 82 SUPREME COURT REPORTS [2023] 13 S.C.R. the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section (4).

35. We are concerned in the present litigation with sub-section 8 of Section 13 of the SARFAESI Act referred to above. Section 13(8) is in two parts; (i) it enables the borrower to exercise his right of redemption upto a particular point of time and at the same time (ii) it enables the secured creditor to exercise its power to deal or dispose off the secured asset. First, CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. LTD. & ORS. [J. B. PARDIWALA, J.] 87 by stipulating the time limit during which the borrower can tender all the dues with interest, costs and charges to the secured creditor, and secondly, by providing as to when the secured creditor can proceed to sell, auction, assign or lease the secured asset.

36. Rules 8 and 9 respectively of the Rules of 2002 prescribe the procedure and formalities to be followed for the sale of immovable secured asset as per Section 13 of the SARFAESI Act and reads as under: - “8. Sale of immovable secured assets. – (1) Where the secured asset is an immovable property, the authorised offi cer shall take or cause to be taken possession, by delivering a possession notice prepared as nearly as possible in Appendix IV to these rules, to the borrower and by affi xing the possession notice on the outer door or at such conspicuous place of the property. (2) The possession notice as referred to in sub-rule (1) shall also be published, as soon as possible but in any case not later than seven days from the date of taking possession, in two leading newspaper one in vernacular language having suffi cient circulation in that locality, by the authorised offi cer. (2A) All notices under these rules may also be served upon the borrower through electronic mode of service, in addition to the modes prescribed under sub-rule (1) and sub-rule (2) of rule 8.

(3) In the event of possession of immovable property is actually taken by the authorised offi cer, such property shall be kept in his own custody or in the custody of any person authorised or appointed by him, who shall take as much care of the property in his custody as a owner of ordinary prudence would, under the similar circumstances, take of such property. (4) The authorised offi cer shall take steps for preservation and protection of secured assets and insure them, if necessary, till they are sold or otherwise disposed of. (5) Before eff ecting sale of the immovable property referred to in sub-rule (1) of rule 9, the authorised offi cer shall obtain valuation 88 SUPREME COURT REPORTS [2023] 13 S.C.R. of the property from an approved valuer and in consultation with the secured creditor, fi x the reserve price of the property and may sell the whole or any part of such immovable secured asset by any of the following methods:- (a) by obtaining quotations from the persons dealing with similar secured assets or otherwise interested in buying the such assets; (b) by inviting tenders from the public; (c) by holding public auction including through e-auction mode; (d) by private treaty.

Provided that in case of sale of immovable property in the State of Jammu and Kashmir, the provision of Jammu and Kashmir Transfer of Property Act, 1977 shall apply to the person who acquires such property in the State. (6) the authorised offi cer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets, under sub-rule (5): Provided that if the sale of such secured asset is being eff ected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice in the Form given in Appendix IV-A to be published in two leading newspapers including one in vernacular language having wide circulation in the locality. (7) every notice of sale shall be affi xed on the conspicuous part of the immovable property and the authorised offi cer shall upload the detailed terms and conditions of the sale, on the web-site of the secured creditor, which shall include; (a) the description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor; (b) the secured debt for recovery of which the property is to be sold; (c) reserve price of the immovable secured assets below which the property may not be sold; CELIR LLP v.

BAFNA MOTORS (MUMBAI) PVT. LTD. & ORS. [J. B. PARDIWALA, J.] 89 (d) time and place of public auction or the time after which sale by any other mode shall be completed; (e) deposit of earnest money as may be stipulated by the secured creditor; (f) any other terms and conditions, which the authorised offi cer considers it necessary for a purchaser to know the nature and value of the property. (8) Sale by any methods other than public auction or public tender, shall be on such terms as may be settled between the secured creditors and the proposed purchaser in writing.

9. Time of sale, issue of sale certifi cate and delivery of possession, etc.–(1) No sale of immovable property under these rules, in fi rst instance shall take place before the expiry of thirty days from the date on which the public notice of sale is published in newspapers as referred to in the proviso to sub-rule (6) of rule 8 or notice of sale has been served to the borrower: Provided further that if sale of immovable property by any one of the methods specifi ed by sub-rule (5) of rule 8 fails and sale is required to be conducted again, the authorised offi cer shall serve, affi x and publish notice of sale of not less than fi fteen days to the borrower, for any subsequent sale. (2) The sale shall be confi rmed in favour of the purchaser who has off ered the highest sale price in his bid or tender or quotation or off er to the authorised offi cer and shall be subject to confi rmation by the secured creditor: Provided that no sale under this rule shall be confi rmed, if the amount off ered by sale price is less than the reserve price, specifi ed under sub-rule (5) of rule 8: Provided further that if the authorised offi cer fails to obtain a price higher than the reserve price, he may, with the consent of the borrower and the secured creditor eff ect the sale at such price.

90 SUPREME COURT REPORTS [2023] 13 S.C.R. (3) On every sale of immovable property, the purchaser shall immediately, i.e. on the same day or not later than next working day, as the case may be, pay a deposit of twenty fi ve per cent. of the amount of the sale price, which is inclusive of earnest money deposited, if any, to the authorised offi cer conducting the sale and in default of such deposit, the property shall be sold again; (4) The balance amount of purchase price payable shall be paid by the purchaser to the authorised offi cer on or before the fi fteenth day of confi rmation of sale of the immovable property or such extended period as may be agreed upon in writing between the purchaser and the secured creditor, in any case not exceeding three months. (5) In default of payment within the period mentioned in sub-rule (4), the deposit shall be forfeited to the secured creditor and the property shall be resold and the defaulting purchaser shall forfeit all claim to the property or to any part of the sum for which it may be subsequently sold.

(6) On confi rmation of sale by the secured creditor and if the terms of payment have been complied with, the authorised offi cer exercising the power of sale shall issue a certifi cate of sale of the immovable property in favour of the purchaser in the Form given in Appendix V to these rules. (7) Where the immovable property sold is subject to any encumbrances, the authorised offi cer may, if he thinks fi t, allow the purchaser to deposit with him the money required to discharge the encumbrances and any interest due thereon together with such additional amount that may be suffi cient to meet the contingencies or further cost, expenses and interest as may be determined by him. Provided that if after meeting the cost of removing encumbrances and contingencies there is any surplus available out of money deposited by the purchaser such surplus shall be paid to the purchaser within fi fteen days, from date of fi nalisation of the sale.

(8) On such deposit of money for discharge of the encumbrances, the authorised offi cer shall issue or cause the purchaser to issue notices to the persons interested in or entitled to the money deposited with him and take steps to make, the payment accordingly. CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. LTD. & ORS. [J. B. PARDIWALA, J.] 91 (9) The authorised offi cer shall deliver the property to the purchaser free from encumbrances known to the secured creditor on deposit of money as specifi ed in sub-rule (7) above. (10) The certifi cate of sale issued under sub-rule (6) shall specifi cally mention that whether the purchaser has purchased the immovable secured asset free from any encumbrances known to the secured creditor or not.”

From the above provisions under Rule 8(6) it is clear that the authorised offi cer of the Bank shall serve on the borrower a notice of thirty days for sale of immovable property, and that if the sale of such secured assets is by way of public auction, the Bank/secured creditor, shall cause publication of such notice in two leading newspapers, one in vernacular, language having suffi cient circulation in the locality by setting the out the terms of sale, mentioned in the said provision; and under sub-rule (1) of Rule 9, such sale of immovable of property under these Rules shall not take place before the expiry of thirty days from the date on which the public notice of sale is published in newspapers as referred to in the proviso to sub-rule (6), or notice of sale has been served to the borrower.

In Mardia Chemicals (supra), this Court examined the provision of Section 13 of the SARFAESI Act and made the following relevant observations reproduced below: -

38. We may now consider the main enforcing provision which is pivotal to the whole controversy, namely, Section 13 in Chapter III of the Act. It provides that a secured creditor may enforce any security interest without intervention of the court or tribunal irrespective of Section 69 or Section 69-A of the Transfer of Property Act where according to sub-section (2) of Section 13, the borrower is a defaulter in repayment of the secured debt or any instalment of repayment and further the debt standing against him has been classifi ed as a non- performing asset by the secured creditor. Sub-section (2) of Section 13 further provides that before taking any steps in the direction of realising the dues, the secured creditor must serve a notice in writing to the borrower requiring him to discharge the liabilities within a period of 60 days failing which the secured creditor would be entitled to take any of the measures as provided in sub-section (4) of Section 13. It 92 SUPREME COURT REPORTS [2023] 13 S.C.R. may also be noted that as per sub-section (3) of Section 13 a notice given to the borrower must contain the details of the amounts payable and the secured assets against which the secured creditor proposes to proceed in the event of non-compliance with the notice given under sub-section (2) of Section 13.

Section 35 of the SARFAESI Act contains the overriding clause and provides that the Act shall override any other law which is inconsistent with its provisions, and reads as under: -

35. The provisions of this Act to override other laws.–The provisions of this Act shall have eff ect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having eff ect by virtue of any such law.

Section 37 of the SARFAESI Act provides that the provisions of the SARFAESI Act shall be in addition to the Acts mentioned in or and any other law for the time being in force and that the other laws shall also be applicable alongside the SARFAESI Act, and reads as under: -

37. Application of other laws not barred.–The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Companies Act, 1956 (1 of 1956), the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) or any other law for the time being in force.

This Court in Madras Petrochem Ltd. & Anr. v. Board for Industrial and Financial Reconstruction & Ors. reported in (2016) 4 SCC 1, recapitulated the object behind the enactment of the SARFAESI Act and in that context examined the purpose of Sections 13, 35 and 37 respectively of the SARFAESI Act with the following observations given as under: - “16. It is important at this stage to refer to the genesis of these three legislations. Each of them deals with diff erent aspects of recovery of debts due to banks and fi nancial institutions. Two of them refer to creditors’ interests and how best to deal with recovery of outstanding loans and advances made by them on the one hand, whereas the Sick Industrial Companies (Special Provisions) Act, 1985, on the other CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. LTD. & ORS. [J. B. PARDIWALA, J.] 93 hand, deals with certain debtors which are sick industrial companies [i.e. companies running industries named in the Schedule to the Industries (Development and Regulation) Act, 1951] and whether such “debtors” having become “sick”, are to be rehabilitated. The question, therefore, is whether the public interest in recovering debts due to banks and fi nancial institutions is to give way to the public interest in rehabilitation of sick industrial companies, regard being had to the present economic scenario in the country, as refl ected in parliamentary legislation.

19. While this Act had worked for a period of about 7 years, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 was brought into force, pursuant to various committee reports. The Statement of Objects and Reasons for this Act reads as follows: “Statement of Objects and Reasons of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993

1. Banks and financial institutions at present experience considerable diffi culties in recovering loans and enforcement of securities charged with them. The existing procedure for recovery of debts due to the banks and fi nancial institutions has blocked a signifi cant portion of their funds in unproductive assets, the value of which deteriorates with the passage of time. The Committee on the Financial System headed by Shri M. Narasimham has considered the setting up of the Special Tribunals with special powers for adjudication of such matters and speedy recovery as critical to the successful implementation of the fi nancial sector reforms. An urgent need was, therefore, felt to work out a suitable mechanism through which the dues to the banks and fi nancial institutions could be realised without delay. In 1981, a Committee under the Chairmanship of Shri T. Tiwari had examined the legal and other diffi culties faced by banks and fi nancial institutions and suggested remedial measures including changes in law. The Tiwari Committee had also suggested setting up of Special Tribunals for recovery of dues of the banks and fi nancial institutions by following a summary procedure. The setting up of Special Tribunals will not 94 SUPREME COURT REPORTS [2023] 13 S.C.R. only fulfi l a long-felt need, but also will be an important step in the implementation of the Report of Narasimham Committee. Whereas on 30-9-1990 more than fi fteen lakhs of cases fi led by the public sector banks and about 304 cases fi led by the fi nancial institutions were pending in various courts, recovery of debts involved more than Rs 5622 crores in dues of public sector banks and about Rs 391 crores of dues of the fi nancial institutions. The locking up of such huge amount of public money in litigation prevents proper utilisation and recycling of the funds for the development of the country.

2. The Bill seeks to provide for the establishment of Tribunals and Appellate Tribunals for expeditious adjudication and recovery of debts due to banks and fi nancial institutions. Notes on clauses explain in detail the provisions of the Bill.”

20. The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 took away the jurisdiction of the courts and vested this jurisdiction in tribunals established by the Act so as to ensure speedy recovery of debts due to the banks and fi nancial institutions mentioned therein. This Act also included one appeal to the Appellate Tribunal, and transfer of all suits or other proceedings pending before any court to tribunals set up under the Act. The Act contained a non obstante clause in Section 34 stating that its provisions will have eff ect notwithstanding anything inconsistent contained in any other law for the time being in force or in any instrument having eff ect by virtue of any other law. In the year 2000, this Act was amended so as to incorporate a new sub-section (2) in Section 34 together with a saving provision in sub-section (1). It is of some interest to note that this Act was to be in addition to and not in derogation of various Financial Corporation Acts and the Sick Industrial Companies (Special Provisions) Act, 1985. Clearly, therefore, the object of the 2000 Amendment to the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 was to make the Sick Industrial Companies (Special Provisions) Act, 1985 prevail over it.

21. Regard being had to the poor working of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 was brought into force in the year 2002. …” CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. LTD. & ORS. [J. B. PARDIWALA, J.] 95

22. This 2002 Act was brought into force as a result of two committee reports which opined that recovery of debts due to banks and fi nancial institutions was not moving as speedily as expected, and that, therefore, certain other measures would have to be put in place in order that these banks and fi nancial institutions would better be able to recover debts owing to them.

24. The “pivotal” provision, namely, Section 13 of the said Act makes it clear that banks and fi nancial institutions would now no longer have to wait for a tribunal judgment under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 to be able to recover debts owing to them. They could, by following the procedure laid down in Section 13, take direct action against the debtors by taking possession of secured assets and selling them; they could also take over the management of the business of the borrower. They could also appoint any person to manage the secured assets possession of which has been taken over by them, and could require, at any time by notice in writing to any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due from the borrower, to pay the secured creditor so much of the money as is suffi cient to pay the secured debt.

25. In order to further the objects of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the Act contains a non obstante clause in Section 35 and also contains various Acts in Section 37 which are to be in addition to and not in derogation of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Three of these Acts, namely, the Companies Act, 1956, the Securities Contracts (Regulation) Act, 1956 and the Securities and Exchange Board of India Act, 1992, relate to securities generally, whereas the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 relates to recovery of debts due to banks and fi nancial institutions. Signifi cantly, under Section 41 of this Act, three Acts are, by the Schedule to this Act, amended. We are concerned with the third of such Acts, namely, the Sick Industrial Companies (Special Provisions) 96 SUPREME COURT REPORTS [2023] 13 S.C.R. Act, 1985, in Section 15(1) of which two provisos have been added. It is the correct interpretation of the second of these provisos on which the fate of these appeals ultimately hangs.” (Emphasis supplied) REDEMPTION OF MORTGAGE UNDER SECTION 60 OF THE TRANSFER OF PROPERTY ACT, 1882

Section 60 of the Act 1882 provides the general statutory right of the mortgagor to redeem the mortgage and reads as below: -

60. Right of mortgagor to redeem.–At any time after the principal money has become due, the mortgagor has a right, on payment or tender, at a proper time and place, of the mortgage-money, to require the mortgagee (a) to deliver to the mortgagor the mortgage-deed and all documents relating to the mortgaged property which are in the possession or power of the mortgage, (b) where the mortgage is in possession of the mortgaged property, to deliver possession thereof to the mortgagor, and (c) at the cost of the mortgagor either to re- transfer the mortgaged property to him or to such third person as he may direct, or to execute and (where the mortgage has been eff ected by a registered instrument) to have registered an acknowledgment in writing that any right in derogation of his interest transferred to the mortgage has been extinguished: Provided that the right conferred by this section has not been extinguished by act of the parties or by decree of a Court. The right conferred by this section is called a right to redeem and a suit to enforce it is called a suit for redemption. Nothing in this section shall be deemed to render invalid any provision to the eff ect that, if the time fi xed for payment of the principal money has been allowed to pass or no such time has been fi xed, the mortgage shall be entitled to reasonable notice before payment or tender of such money. Redemption of portion of mortgaged property.—Nothing in this section shall entitle a person interested in a share only of the mortgaged property to redeem his own share only, on payment of a proportionate CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. LTD. & ORS. [J. B. PARDIWALA, J.] 97 part of the amount remaining due on the mortgage, except only where a mortgagee, or, if there are more mortgages than one, all such mortgages, has or have acquired, in whole or in part, the share of a mortgagor.

This Court in Narandas Karsondas (supra), upon examination of Section 60 of the Act 1882, held that the mortgagor’s right to redeem will be extinguished only after completion of sale by a registered deed, and made the following relevant observations reproduced below: - “28. The Rights and Liabilities of Mortgagor are dealt with in Section 60 of the Transfer of Property Act. It is that at any time after the principal money has become due, the mortgagor has a right, on payment or tender, at a proper time and place, of the mortgage-money, to require the mortgagee (a) to deliver to the mortgagor the mortgage- deed and all documents relating to the mortgaged property which are in the possession or power of the mortgagee, (b) where the mortgagee is in possession of the mortgaged property to deliver possession thereof to the mortgagor, and (c) at the cost of the mortgagor either to re- transfer the mortgaged property to him or to such third person as he may direct, or to execute and to have registered an acknowledgment in writing that any right in derogation of his interest transferred to the mortgagee has been extinguished. There is a proviso that the right conferred by this section has not been extinguished by the act of the parties or by decree of a Court. The right conferred by Section 60 of the Transfer of Property Act is called a right to redeem. Therefore, the said Section 60 provides for a right of redemption provided that the right has not been extinguished by the act of parties.

33. In India, the word “transfer” is defi ned with reference to the word “convey”. The word “transfer” in English law in its narrower and more usual sense refers to the transfer of an estate in land. Section 205 of the Law of Property Act in England defi nes: “Conveyance” includes a mortgage, charge, lease, assent, vesting declaration, vesting instrument. The word “conveys” in Section 5 of the Transfer of Property Act is used in the wider sense of conveying ownership. 98 SUPREME COURT REPORTS [2023] 13 S.C.R.

34. The right of redemption which is embodied in Section 60 of the Transfer of Property Act is available to the mortgagor unless it has been extinguished by the act of parties. The combined eff ect of Section 54 of the Transfer of Property Act and Section 17 of the Indian Registration Act is that a contract for sale in respect of immovable property of the value of more than one hundred rupees without registration cannot extinguish the equity of redemption. In India it is only on execution of the conveyance and registration of transfer of the mortgagor’s interest by registered instrument that the mortgagor’s right of redemption will be extinguished. The conferment of power to sell without intervention of the Court in a Mortgage Deed by itself will not deprive the mortgagor of his right to redemption. The extinction of the right of redemption has to be subsequent to the deed conferring such power. The right of redemption is not extinguished at the expiry of the period. The equity of redemption is not extinguished by mere contract for sale.

35. The mortgagor’s right to redeem will survive until there has been completion of sale by the mortgagee by a registered deed. In England a sale of property takes place by agreement but it is not so in our country. The power to sell shall not be exercised unless and until notice in writing requiring payment of the principal money has been served on the mortgagor. Further Section 69(3) of the Transfer of Property Act shows that when a sale has been made in professed exercise of such a power, the title of the purchaser shall not be impeachable on the ground that no case had arisen to authorise the sale. Therefore, until the sale is complete by registration the mortgagor does not lose right of redemption.

37. In view of the fact that only on execution of conveyance, ownership passes from one party to another it cannot be held that the mortgagor lost the right of redemption just because the property was put to auction. The mortgagor has a right to redeem unless the sale of the property was complete by registration in accordance with the provisions of the Registration Act.” (Emphasis supplied) CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. LTD. & ORS. [J. B. PARDIWALA, J.] 99

A similar view was taken by this Court in L.K. Trust v. EDC Limited and Others reported in (2011) 6 SCC 780 wherein it was observed as follows: “53. On analysis of arguments advanced at the Bar, this Court fi nds that the proposition that in India it is only on execution of conveyance and the registration of transfer of the mortgagor’s interest by registered instrument that the mortgagor’s right of redemption stands extinguished is well settled. Further it is not the case of the appellant that a registered Sale Deed had been executed between the appellant-trust and the respondent No. 1 pursuant to the Resolution passed by the respondent No. 1 and, therefore, in terms of Section 54 of the Transfer of Property Act 1882 no title relating to the disputed property had passed to the appellant at all.

What is ruled in Narandas Karsandas (Supra) is that in India, there is no equity or right in property created in favour of the purchaser by the contract between the mortgagee and the proposed purchaser and in view of the fact that only on execution of conveyance, ownership passes from one party to another, it cannot be held that the mortgagor lost the right of redemption just because the property was put to auction. In this case, the respondent Housing Society, the mortgagor, had taken loan from the co-respondent Finance Society and mortgaged the property to it under an English mortgage. On default, the mortgagee exercised its right under the mortgage to sell the property without intervention of Court and after notice, put the property to sale by public auction. The appellant auction purchaser paid the sums due. Before the sale was completed by registration etc. the mortgagor sought to exercise his right of redemption by tendering the amount due. The appellant had based his case on the plea that in such a situation the mortgagee acts as agent of the mortgagor and hence binds him.

Rejecting the appeal, this Court has held that the right of redemption which is embodied in Section 60 of the Transfer of Property Act is available to the mortgagor unless it has been extinguished by the act of parties or by decree of a court. What is held by this Court is that, in India it is only on execution of the conveyance and registration of transfer of the mortgagor’s interest by registered instrument that the 100 SUPREME COURT REPORTS [2023] 13 S.C.R. mortgagor’s right of redemption will be extinguished but the conferment of power to sell the mortgaged property without intervention of the Court, in a mortgage deed, in itself, will not deprive the mortgagor of his right of redemption. This Court in the said case further explained that the extinction of the right of redemption has to be subsequent to the deed conferring such power and the right to redemption is not extinguished at the expiry of the period. This Court emphasized in the said decision that the equity of redemption is not extinguished by mere contract for sale.” REDEMPTION OF MORTGAGE UNDER THE SARFAESI ACT

45. Sub-section (8) of Section 13 of the SARFAESI Act, as originally (Emphasis supplied) enacted, stated as under: -

13. Enforcement of security interest.– (8) If the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fi xed for sale or transfer, the secured asset shall not be sold or transferred by the secured creditor, and no further step shall be taken by him for transfer or sale of that secured asset.

46. In Mathew Varghese (supra), this Court had the occasion to consider the right of redemption of mortgage under the SARFAESI Act vis-à-vis the Act 1882, wherein, this Court made the following relevant observations, being reproduced below: - “38. … a mere conferment of power to sell without intervention of the court in the mortgage deed by itself will not deprive the mortgagor of his right to redemption, that the extinction of the right of redemption has to be subsequent to the deed conferring such power, that the right of redemption is not extinguished at the expiry of the period, that the equity of redemption is not extinguished by mere contract for sale and that the mortgagor’s right to redeem will survive until there has been completion of sale by the mortgagee by a registered deed. The ratio is also to the eff ect that the power to sell should not be exercised CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. LTD. & ORS. [J. B. PARDIWALA, J.] 101 unless and until notice in writing requiring payment of the principal money has been served on the mortgagor.

The above proposition of law of course was laid down by this Court in Narandas Karsondas [Narandas Karsondas v. S.A. Kamtam, (1977) 3 SCC 247] while construing Section 60 of the TP Act. But as rightly contended by Mr Shyam Divan, we fail to note any distinction to be drawn while applying the abovesaid principles, even in respect of the sale of secured assets created by way of a secured interest in favour of the secured creditor under the provisions of the SARFAESI Act, read along with the relevant Rules. We say so, inasmuch as, we fi nd that even while setting out the principles in respect of the redemption of a mortgage by applying Section 60 of the TP Act, this Court has envisaged the situation where such mortgage deed providing for resorting to the sale of the mortgage property without the intervention of the Court. Keeping the said situation in mind, it was held that the right of redemption will not get extinguished merely at the expiry of the period mentioned in the mortgage deed.

It was also stated that the equity of redemption is not extinguished by mere contract for sale and the most important and vital principle stated was that the mortgagor’s right to redeem will survive until there has been completion of sale by the mortgagee by a registered deed. The completion of sale, it is stated, can be held to be so unless and until notice in writing requiring payment of the principal money has been served on the mortgagor. Therefore, it was held that until the sale is complete by registration of sale, the mortgagor does not lose the right of redemption. It was also made clear that it was erroneous to suggest that the mortgagee would be acting as the agent of the mortgagor in selling the property.

39. When we apply the above principles stated with reference to Section 60 of the TP Act in respect of a secured interest in a secured asset in favour of the secured creditor under the provisions of the SARFAESI Act and the relevant Rules applicable, under Section 13(1), a free hand is given to a secured creditor to resort to a sale without the intervention of the court or tribunal. However, under Section 13(8), it is clearly stipulated that the mortgagor i.e. the borrower, who is otherwise called as a debtor, retains his full right to redeem the property by tendering all the dues to the secured creditor at any time 102 SUPREME COURT REPORTS [2023] 13 S.C.R. before the date fi xed for sale or transfer. Under sub-section (8) of Section 13, as noted earlier, the secured asset should not be sold or transferred by the secured creditor when such tender is made by the borrower at the last moment before the sale or transfer. The said sub-section also states that no further step should be taken by the secured creditor for transfer or sale of that secured asset. We fi nd no reason to state that the principles laid down with reference to Section 60 of the TP Act, which is general in nature in respect of all mortgages, can have no application in respect of a secured interest in a secured asset created in favour of a secured creditor, as all the abovestated principles apply on all fours in respect of a transaction as between the debtor and secured creditor under the provisions of the SARFAESI Act.

41. … even if there was some diff erence in the amount tendered by the borrower while exercising his right of redemption under Section 13(8), the question of diff erence in the amount should be kept open and can be decided subsequently, but on that score the right of redemption of the mortgagor cannot be frustrated. Elaborating the statement of law made therein, we wish to state that the endeavour or the role of a secured creditor in such a situation while resorting to any sale for the realisation of dues of a mortgaged asset, should be that the mortgagor is entitled for some lenience, if not more to be shown, to enable the borrower to tender the amounts due in order to ensure that the constitutional right to property is preserved, rather than it being deprived of.” (Emphasis supplied)

47. In Dwarika Prasad v. State of Uttar Pradesh reported in (2018) 5 SCC 491, this Court speaking through one of us Dr. D.Y. Chandrachud, CJI., considered the unamended Section 13(8) of the SARFAESI Act, keeping in mind the decision in the case of Mathew Varghese (supra). The Court took the view that the right of redemption of mortgage is not lost until there is a transfer by a registered instrument. The following observations as contained in para 8 of the judgment are reproduced below: CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. LTD. & ORS. [J. B. PARDIWALA, J.] 103

8. … These provisions have fallen for interpretation before this Court in Mathew Varghese. Dwelling on Section 60 of the Transfer of the Property Act, 1882 this Court held that the right of redemption is available to a mortgagor unless it stands extinguished by an act of parties. The right of the mortgagor to redeem the property survives until there has been a transfer of the mortgagor’s interest by a registered instrument of sale. …

In, yet one another decision of this Court in Allokam Peddabbayya & Anr. v. Allahabad Bank & Ors. reported in (2017) 8 SCC 272, a similar view was taken. The relevant observations made therein are as under:

23. The aforesaid discussion leads to the conclusion that the plaintiff s lost the right to sue for redemption of the mortgaged property by virtue of the proviso to Section 60 of the Act, no sooner that the mortgaged property was put to auction-sale in a suit for foreclosure and sale certifi cate was issued in favour of Defendant 2. There remained no property mortgaged to be redeemed. The right to redemption could not be claimed in the abstract.

Thus, prior to the amendment of Section 13(8) of the SARFAESI Act, this Court consistently held, that the borrower shall continue to have a right of redemption of mortgage until the execution of the conveyance of the secured asset by way of a registered instrument. Furthermore, this Court in Mathew Varghese (supra) found no inconsistency between the unamended Section 13(8) of SARFAESI Act and the general right of redemption under Section 60 of the Act 1882.

50. However, later on 1st September, 2016, the Enforcement of Security Interest and Recovery of Debt Laws and Miscellaneous Provisions (Amendment) Act, 2016 (“2016 Amendment”) was enacted which inter-alia amended sub-section 8 of Section 13 of the SARFAESI Act, and substituted the words “any time before the date fi xed for sale or transfer” of the original provision with “at any time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets”. The amended provision of Section 13 sub-section (8) of the SARFAESI Act, now reads as under: - 104 SUPREME COURT REPORTS [2023] 13 S.C.R.

13. Enforcement of security interest. – (8) Where the amount of dues of the secured creditor together with all costs, charges and expenses incurred by him is tendered to the secured creditor at any time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets,— (i) the secured assets shall not be transferred by way of lease, assignment or sale by the secured creditor; and (ii) in case, any step has been taken by the secured creditor for transfer by way of lease or assignment or sale of the assets before tendering of such amount under this sub-section, no further step shall be taken by such secured creditor for transfer by way of lease or assignment or sale of such secured assets.

The true purport and scope of the amended Section 13(8) of the SARFAESI Act was looked into by the Andhra Pradesh High Court in Sri. Sai Annadhatha Polymers & Anr. v. Canara Bank rep. by its Branch Manager, Mandanapalle reported in 2018 SCC OnLine Hyd 178. The court took the view that in accordance with the unamended Section 13(8) of the SARFAESI Act, the right of the borrower to redeem the secured asset was available till the sale or transfer of such secured asset. The court went on to say that the amended provisions of Section 13(8) of the SARFAESI Act brought in a radical change inasmuch as the right of the borrower to redeem the secured asset would stand extinguished thereunder on the very date of publication of the notice for public auction under Rule 9(1) of the Rules of 2002. It is pertinent to note that the High Court has referred to and relied upon the decision of this Court in Mathew Varghese (supra). The relevant observations made by the High Court are reproduced hereinbelow: “6. In terms of the amended provisions of Section 13(8) of the SARFAESI Act, the right of redemption given to the borrower would expire upon publication of such a notice. However, Rule 8(6) of the Rules of 2002, as interpreted by the Supreme Court in Mathew Varghese v. M. Amritha Kumar [(2014) 5 SCC 610], stipulates that the thirty day notice period mentioned therein is for the purpose of enabling the borrower to redeem his property. Signifi cantly, this CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. LTD. & ORS. [J. B. PARDIWALA, J.] 105 provision remains unaltered. Therefore, this statutory notice period of thirty days is sacrosanct and deviation therefrom would curtail the statutory right of redemption available to the borrower. However, in terms of the amended Section 13(8) of the SARFAESI Act, once the notice under Rule 9 of the Rules of 2002 is published, the said right stands extinguished.

20. In the light of the aforestated changes in the statutory scheme, certain crucial aspects may be noted. As per the unamended Section 13(8) of the SARFAESI Act, the right of the borrower to redeem the secured asset was available till the sale or transfer of such secured asset. Case law consistently held to the eff ect that a sale or transfer is not completed until all the formalities are completed and there is an eff ective transfer of the asset sold. In consequence, the borrower’s right of redemption did not stand terminated on the date of the auction sale of the secured asset itself and remained alive till the transfer was completed in favour of the auction purchaser, by registration of the sale certifi cate and delivery of possession of the secured asset. The recent judgment of the Supreme Court in ITC LIMITED v. BLUE COAST HOTELS LIMITED also affi rmed this legal position.

21. However, the amended provisions of Section 13(8) of the SARFAESI Act bring in a radical change, inasmuch as the right of the borrower to redeem the secured asset stands extinguished thereunder on the very date of publication of the notice for public auction under Rule 9(1) of the Rules of 2002. In eff ect, the right of redemption available to the borrower under the present statutory regime stands drastically curtailed and would be available only till the date of publication of the notice under Rule 9(1) of the Rules of 2002 and not till completion of the sale or transfer of the secured asset in favour of the auction purchaser. …

23. Therefore, even after the amendment of Section 13(8) of the SARFAESI Act, a secured creditor is bound to aff ord to the borrower a clear thirty day notice period under Rule 8(6) to enable him to exercise 106 SUPREME COURT REPORTS [2023] 13 S.C.R. his right of redemption. In consequence, a notice under Rule 9(1) of the Rules of 2002 cannot be published prior to expiry of this thirty day period in the new scenario, post-amendment of Section 13(8) of the SARFAESI Act, as such right of redemption would stand terminated immediately upon publication of the sale notice under Rule 9(1) of the Rules of 2002. The judgment of the Supreme Court in CANARA BANK v. M. AMARENDER REDDY, which was rendered in the context of the unamended provisions, would therefore have no application to the post-amendment scenario in the light of the change brought about in Section 13(8). To sum up, the post-amendment scenario inevitably requires a clear thirty day notice period being maintained between issuance of the sale notice under Rule 8(6) of the Rules of 2002 and the publication of the sale notice under Rule 9(1) thereof, as the right of redemption available to the borrower in terms of Rule 8(6) of the Rules of 2002, as pointed out in MATHEW VARGHESE, stands extinguished upon publication of the sale notice under Rule 9(1).” (Emphasis supplied)

The amended Section 13(8) of the SARFAESI Act was also looked into by the High Court of Telangana in the case of K.V.V. Prasad Rao Gupta v. State Bank of India reported in 2021 SCC OnLine TS 328 and relying on the decision of the Andhra Pradesh High Court in the case of Sri. Sai Annadhatha Polymers (supra), the court observed in para 21 as under:

21. Thus from the above judgments it is clear that under Rule 8(6) of the Rules of 2002, the petitioners are entitled for a thirty day notice period enabling them to clear the loan and to redeem the property as envisaged under Section 13(8) of the SARFAESI Act, and that if they fail to repay the amount within the stipulated period, after expiry of said period of 30 days, the secured creditor is entitled to issue publication of sale notice under Rule 9(1), and that on publication of such notice, the right of the borrower to redeem the property stands extinguished.

(Emphasis supplied)

The Telangana High Court in Concern Readymix (supra), examined the amended Section 13(8) of the SARFAESI Act, & held that the same only restricts the right of the secured creditor and not the borrowers CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. LTD. & ORS. [J. B. PARDIWALA, J.] 107 right of redemption, which will continue to exist until the execution of the conveyance. The following relevant observations are reproduced below: - “10. The fi rst distinction between the unamended and amended sub-section (8) of Section 13 is that before amendment, the facility of repayment of the entire dues along with the costs, charges and expenses, was available to the debtor at any time before the date fi xed for the sale or transfer. But after the amendment, the facility is available upto the time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty. The second distinction is that the unamended sub-section (8) did not provide for the contingency when the dues are tendered by the borrower before the date of completion of the sale or lease but after the issue of notice. But the amended sub-section (8) takes care of the contingency where steps have already been taken by the secured creditor for the transfer of the secured asset, before the payment was made. Except these two distinctions, there is no other distinction.

13. What is important to note both from the amended and unamended provisions of Section 13(8) and Rule 9(1) is that both of them do not speak in express terms, about the equity of redemption available to the mortgagor. The amended Section 13(8) merely prohibits the secured creditor from proceeding further with the transfer of the secured assets by way of lease, assignment or sale. A restriction on the right of the mortgagee to deal with the property is not exactly the same as the equity of redemption available to the mortgagor. The payment of the amounts mentioned in Section 13(8) ties the hands of the mortgagee (secured creditor) from exercising any of the powers conferred under the Securitisation Act, 2002. Redemption comes later. But unfortunately, some Courts, on a wrong reading of the decision of the Supreme Court in Mathew Varghese v. M. Amritha Kumar [(2014) 5 SCC 610], have come to the conclusion as though Section 13(8) speaks about the right of redemption. The danger of interpreting Section 13(8) as though it relates to the right of redemption, is that if payments are not made as per Section 13(8), the right of redemption may get lost even before the sale is complete in all respects. But in law it is not. It may be seen 108 SUPREME COURT REPORTS [2023] 13 S.C.R. from paragraphs-34 to 36 of the decision of the Supreme Court in Mathew Varghese that the Supreme Court took note of Section 60 of the Transfer of Property Act and the combined eff ect of Section 54 of the Transfer of Property Act and Section 17 of the Registration Act to come to the conclusion that the extinction of the right of redemption comes much later than the sale notice. Therefore, we should fi rst understand that the right of redemption is not lost immediately upon the highest bid made by a purchaser in an auction being accepted.

14. Perhaps the Courts were tempted to think that Section 13(8) speaks about redemption, only on account of what is found in Rule 3(5) of the Security Interest (Enforcement) Rules, 2002. Rule 3(5) inserted by way of amendment with eff ect from 04-11-2016 states that the demand notice issued under Section 13(2) should invite the attention of the borrower to the provisions of Section 13(8), in respect of the time available to the borrower to redeem the secured assets. Today, it may be convenient for one borrower to contend that the right of redemption will be lost immediately upon the issue of notice under Rule 9(1). But if it is held so, the same would tantamount to annulling the relevant provisions of the Transfer of Property Act, which do not stand expressly excluded, insofar as the question of redemption is concerned.” (Emphasis supplied)

54. We are conscious of the fact, that the aforesaid decision of Concern Readymix (supra) was carried upto and challenged before this Court by way of Special Leave Petition (C) No. 20500 of 2019, which came to be dismissed by this Court in limine, being as follows: - “ORDER Delay condoned. The Special Leave Petition is dismissed”

55. In Shakeena (supra), while primarily dealing with the unamended provision of Section 13(8) of the SARFAESI Act, this Court also made certain pertinent observations in respect of the amended provision of Section 13(8), which are being reproduced hereunder: - CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. LTD. & ORS. [J. B. PARDIWALA, J.] 109 “15. Be it noted that on 1-9-2016 amendment to Section 13(8) of the 2002 Act came into force as a result of which the dues of the secured creditor together with all costs, charges and expenses incurred by him are required to be tendered to the secured creditor at any time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets.

30. A fortiorari, it must follow that the appellants have failed to exercise their right of redemption in the manner known to law, much less until the registration of the sale certifi cate on 18-9-2007. In that view of the matter no relief can be granted to the appellants, assuming that the appellants are right in contending that as per the applicable provision at the relevant time [unamended Section 13(8) of the 2002 Act], they could have exercised their right of redemption until the registration of the sale certifi cate — which, indisputably, has already happened on 18-9-2007. Therefore, it is not possible to countenance the plea of the appellants to reopen the entire auction process. This is more so because, the narrative of the appellants that they had made a valid tender towards the subject loan accounts before registration of the sale certifi cate, has been found to be tenuous. Thus understood, their right of redemption in any case stood obliterated on 18-9-2007. Further, the amended Section 13(8) of the 2002 Act which has come into force w.e.f. 1-9-2016, will now stare at the face of the appellants. As per the amended provision, stringent condition has been stipulated that the tender of dues to the secured creditor together with all costs, charges and expenses incurred by him shall be at any time before the “date of publication of notice” for public auction or inviting quotations or tender from public or private deed for transfer by way of lease assessment or sale of the secured assets. …” (Emphasis supplied)

The Punjab & Haryana High Court while rendering its decision in Pal Alloys (supra), looked into the Report of the Joint Committee on the 2016 Amendment and the decision in Concern Readymix (supra), & concluded 110 SUPREME COURT REPORTS [2023] 13 S.C.R. that under the amended Section 13(8) of the SARFAESI Act, the right of redemption of mortgage would continue till the execution of conveyance or issuance of sale certifi cate. It further observed that the decision in Shakeena (supra) was not applicable inasmuch as it did not deal with the right of redemption under the Act 1882. The observations made in it are given below: “78. It is interesting to note that para 24 of the Report of the Joint Committee referred to above deals with the proposed amendment to Section 13(8) of the SARFAESI Act and gives a heading “Provisions to stop secure creditor to lease or assignment or sale in the prescribed conditions-Amendment to Section 13(8) of the SARFAESI Act.”

Thus the amendment was proposed w.r.t. when to stop the secured creditor from selling/transferring the secured asset. The words ‘when to stop the exercise of right of redemption by the borrower/mortgagor’ were not used.

In the said Report, at pg.12, Clause 11(ii) of the Bill which proposed to amend Section 13(8) of the SARFAESI Act is noted. After extracting the existing Section 13(8) of the Act which stands as under: —

If the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fi xed for sale or transfer, the secured asset shall not be sold or transferred by the secured creditor, and no further step shall be taken by him for transfer or sale of that secured asset.

The proposed modifi cation to Section 13(8) is set out also at pg.12 as under:—

(8) Where the amount of dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fi xed for lease, assignment or sale of the secured assets,- (i) the secured assets shall not be leased, assigned or sold by the secured creditor; and CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. LTD. & ORS. [J. B. PARDIWALA, J.] 111 (ii) in case, any step has been taken by the secured creditor for lease or assignment or sale of the assets before tendering of such amount under this sub-section, no further step shall be taken by such secured creditor for lease or assignment or sale of such secured assets.

Strangely, on the next page at page 13, the following is stated:- “The Committee after examining the proposed amendment and the existing Rules in this regard decide to modify proposed Clause 11(ii) [section 13(8) of the principal Act] as under:

(8) Where the amount of dues of the secured creditor together with all costs, charges and expenses incurred by him is tendered to the secured creditor at any time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets,- (i) the secured assets shall not be transferred by way of lease, assignment or sale by the secured creditor; and (ii) in case, any step has been taken by the secured creditor for transfer by way of lease or assignment or sale of the assets before tendering of such amount under this sub-section, no further step shall be taken by such secured creditor for transfer by way of lease or assignment or sale of such secured assets.

Nothing is mentioned as to why the proposal indicated in Page-12 was changed on page-13 diff erently.

Admittedly, what is stated in page-13 was passed in the Lok Sabha and the Rajya Sabha and then it became the Act 44 of 2016 and came into eff ect on 01.09.2016.

But the important thing to note is that this Report does not indicate that the Committee had even considered Section 60 of the Transfer of Property Act, 1882, which provides the general law of right to redeem a mortgaged asset of a mortgager vis-a-vis the provisions of the SARFAESI Act. 112 SUPREME COURT REPORTS [2023] 13 S.C.R.

It no where says that there was an intention to bring about a change with regard to the time before which a mortgagor can exercise his right to redeem the mortgage.

Even the heading of Para 24 of the Report which says “Provisions to stop secure creditor to lease or assignment or sale in the prescribed conditions - Amendment to Section 13(8) of the SARFAESI Act” seems to suggest that the focus of the Committee was on the date when the secured creditor’s right to lease or assignment or sale would stop.

In our considered opinion, it is clear that the legislature did not have any intention to deal with the right of mortgagor to redeem the mortgage when they amended Sec.13(8) or to modify it in any manner; and amendment cannot be said to have intended to modify the existing law which continued even when the un-amended Section 13(8) of the SARFAESI Act was in force. The amended Sec.13(8) was intended to only deal with the date when the secured creditor’s right to transfer the secured asset should stop and nothing more.

The view taken by the High Court for the State of Telangana and Andhra Pradesh in M/s. Concern Ready Mix [(2019) 3 ALD 384 : Law Finder Doc Id # 1380151] commends itself to us and we accept and approve the same.

We shall now consider the judgment of Supreme Court in Shakeena [(2019) 5 RCR (Civil) 689 (SC)]cited by the counsel for 1st respondent. In that case, sale certifi cate had been issued in favour of the auction purchasers on 06.01.2006 and a Writ Petition was fi led on 19.01.2006 challenging the auction and it was registered on 18.9.2007. The Court held that the appellants had failed to make a valid tender of amounts due or exercise their right of redemption in a manner known to law until the registration of the sale certifi cate on 18.09.2007 and that the right of redemption stood obliterated on 18.09.2007. The statement therein in para 29 that as per the amended provision stringent conditions have been stipulated that the tender of dues to the secured creditor shall be at CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. LTD. & ORS. [J. B. PARDIWALA, J.] 113 any time before the date of publication of notice for public auction does not, in our opinion, lead to an expression of opinion by the Supreme Court that the law of redemption as per Section 60 of the Transfer of Property Act would not apply in view of amendment to Section 13(8). We do not fi nd any discussion in the decision in Shakeena [(2019) 5 RCR (Civil) 689 (SC)] about the decisions of the apex court dealing with the right of redemption under Sec.60 of the Transfer of Property Act, 1872. So reliance on the said decision does not help the 1st respondent.

Keeping in mind (i) the Report of the Joint Committee on the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill, 2016 discussed above, (ii) the law laid down by the Supreme Court in Mathew Varghese [(2014) 5 SCC 610] and (iii) the decision in M/s. Concern Readymix [(2019) 3 ALD 384 : Law Finder Doc Id # 1380151] of the Telangana and Andhra Pradesh High Court, with which we respectfully agree, we hold that the amended Section 13(8) of the SARFAESI Act merely prohibits a secured creditor from proceeding further with the transfer of the secured asset by way of lease, assignment or sale; a restriction on the right of the mortgagee to deal with the property is not exactly the same as the equity of redemption available to the mortgagor; the payment of the amount mentioned in Section 13(8) of the SARFAESI Act ties the hands of the mortgagee (secured creditor) from exercising any of the powers conferred under the Act; that redemption comes later; extinction of the right of redemption comes much later than the sale notice; and the right of redemption is not lost immediately upon the highest bid made by a purchaser in an auction being accepted. We also hold that such a right would continue till the execution of a conveyance i.e. issuance of sale certifi cate in favour of the mortgagee. …

97. It would, therefore, certainly be available to the petitioners herein before the issuance of sale certifi cate in favour of respondents No. 2 and 3. Point (a) is answered accordingly in favor of the petitioners and against the respondents.” (Emphasis supplied) 114 SUPREME COURT REPORTS [2023] 13 S.C.R.

In S. Karthik (supra) a three-Judge Bench of this Court, made the following relevant observations given below: - “53. It could thus be seen that this Court in Mathew Varghese [Mathew Varghese v. M. Amritha Kumar, (2014) 5 SCC 610 : (2014) 3 SCC (Civ) 254] observed that the equity of redemption is not extinguished by mere contract for sale and that the mortgagor’s right to redeem will survive until there has been completion of sale by the mortgagee by a registered deed. This Court further observed that applying the principles stated with reference to Section 60 of the Transfer of Property Act in respect of a secured interest in a secured asset in favour of the secured creditor under the provisions of the SARFAESI Act and the relevant Rules applicable, a free hand is given to a secured creditor to resort to a sale without the intervention of the court or tribunal. It has, however, been held that under Section 13(8), it is clearly stipulated that the mortgagor i.e. the borrower, who is otherwise called as a debtor, retains his full right to redeem the property by tendering all the dues to the secured creditor at any time before the date fi xed for sale or transfer.

54. This Court in Mathew Varghese [Mathew Varghese v. M. Amritha Kumar, (2014) 5 SCC 610 : (2014) 3 SCC (Civ) 254] further held that if the tender is made by the borrower at the last moment before the sale or transfer, the secured asset should not be sold or transferred by the secured creditor. This Court held that there was no reason as to why the general principle laid down by this Court in Narandas Karsondas [Narandas Karsondas v. S.A. Kamtam, (1977) 3 SCC 247] with reference to Section 60 of the Transfer of Property Act could not have application in respect of a secured interest in a secured asset created in favour of a secured creditor. It has been held that the said principles will apply on all fours in respect of a transaction as between the debtor and secured creditor under the provisions of the SARFAESI Act.

Even if viewed from another angle, the claim of the appellants is not sustainable. The two-Judge Bench of this Court in Mathew Varghese [Mathew Varghese v. M. Amritha Kumar, (2014) 5 SCC 610 CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. LTD. & ORS. [J. B. PARDIWALA, J.] 115 : (2014) 3 SCC (Civ) 254], has heavily relied on the judgment of the three-Judge Bench of this Court in Narandas Karsondas . It has been held by this Court in Narandas Karsondas [Narandas Karsondas v. S.A. Kamtam, (1977) 3 SCC 247], that the right of redemption, which is embodied in Section 60 of the Transfer of Property Act, is available to the mortgagor unless it has been extinguished by the act of parties. It has been held, that only on execution of the conveyance and registration of transfer of the mortgagor’s interest by registered instrument, that the mortgagor’s right of redemption will be extinguished.