Madhya Pradesh High Court
M/S Dinesh Agarwal And Associates vs Pawan Kumar Jain on 10 August, 2017
Bench: Sanjay Yadav, S.K. Awasthi
1 WP.8646.2013
HIGH COURT OF MADHYA PRADESH
BENCH AT GWALIOR
DIVISION BENCH:
HON'BLE SHRI JUSTICE SANJAY YADAV
&
HON'BLE SHRI JUSTICE S.K. AWASTHI
WRIT PETITION NO.8646 OF 2013
M/s Dinesh Agarwal & Associates
Vs.
Pawan Kumar Jain and others
******************
Shri D.K. Agrawal, learned counsel for the
petitioner.
Shri K.N. Gupta, learned Senior Counsel with
Shri R.S. Dhakad, learned counsel for respondent
No.1.
Shri M.P. Agrawal, learned counsel for
respondent No.2.
********************
Whether approved for reporting : Yes
Law Laid down:
The petitioner has locus to challenge the order
passed by the Debt Recovery Appellate Tribunal.
The petitioner has an interest accrued in his
favour to protect the right under the auction
sale.
It was within the right of respondent No.1 to
secure the mortgaged property even without
bringing a suit for redemption, subject to
payment of entire dues to the Bank.
That the decision by the Debt Recovery Tribunal
will not operate as a clog on the right of
respondent No.1 to secure the property on
payment of entire amount due and recoverable
even at the stage of auction sale proceedings.
Significant Paragraphs: 15 to 19 and 20 to
37
2 WP.8646.2013
ORDER
(10/08/2017) Per Justice Sanjay Yadav:
Present petition is directed against the order dated 29.10.2013 passed by the Debts Recovery Appellate Tribunal, Allahabad whereby the appeal directed against the order dated 08.03.2013 passed by the Debts Recovery Tribunal has been disposed of with certain directions.
(2) Relevant facts briefly are that respondent No.1 sole proprietor of M/s Arpit Brothers availed cash credit facility from respondent No.2/Bank. As respondent No.1 defaulted in repayment, proceedings were brought by respondent No.2 for recovery of Rs.21,49,778.92 on 12.01.2005 before the Debts Recovery Tribunal along with pendente lite and future interest @ 15.50% per annum with quarterly rests. Respondent No.1 remained ex parte. Consequently, ex parte judgment was passed on 08/11/2005 whereby respondent No.1 was directed to pay to respondent No.2 sum of Rs.21,49,778.92 along with interest @ 12%, pendente lite and future interest, from 12/01/2005 and costs. Failing which it was ordered that the Bank shall have the right to recover by sale of charge/hypothecated/mortgaged properties. Since respondent No.1 failed to honour the judgment, respondent No.2 took recourse to auction the property bearing land bearing Survey No.1541 admeasuring 0.531 and 5681 Sq. Ft. Built up area at ground floor with RCC and built 3 WP.8646.2013 up area at ground floor with GI sheet roof 1500 Sq. Ft situated at Ward No.13, opposite old ice factory, Sironj Guna Road, District Vidisha on 14.12.2007 with an upset price Rs.25,00,000/- (Rupees Twenty Five Lacs). The petitioner participated in the auction held on 21.01.2008, as his price bid of Rs.25,12,000/- was highest, he was declared the highest bidder. Petitioner deposited earnest money Rs.2,50,000/- on 18.1.2008. Further deposited Rs.3,78,000/- on 21.01.2008 i.e. the date of acceptance of bid and remaining amount was deposited on 28.01.2008. (3) However, before the issuance of sale certificate respondent No.1 filed a Writ Petition bearing number 2868/2008 wherein on 12.03.2008, taking note of the contentions that the order has been passed ex parte and that application for recalling is pending and the respondent judgment Debtor has expressed the willingness to retain the property by depositing the entire amount received in the auction held for the sale of property, further steps for confirmation of sale and issuance of sale certificate in pursuance to the auction was stayed. Later on, in the same proceedings, i.e. in W.P.No.2868/2008 learned Single Judge recording the demeanor of the respondent No.1 borrower/judgment Debtor, directed for his personal presence as to why he be not proceeded in contempt. The order records:
"In the present case, petitioner has given a written undertaking before this Court that he shall deposit all the amounts due to be paid to the respondent-Bank. The amount has not yet been paid. This Court on 14.05.2008 4 WP.8646.2013 recorded the statement of the petitioner that he is willing to deposit the entire amount due against him on or before the next date of hearing. The case was fixed for 28.7.2008. The matter was taken up on 30.07.2008. Again on behalf of the petitioner it was stated that petitioner went to deposit the amount with the Bank but the Bank has not accepted the same.
Today, the petitioner is present before this Court and as against the total dues of Rs.51,50,000/- he is not even willing to deposit a sum of Rs.40.00 Lac. On basis of the same, it is apparent that petitioner is prima facie guilty of breach of the undertaking given by him in writing and a statement was also given before this Court that the entire amount shall be deposited by the next date of hearing i.e. 28.07.2008 as per order of this Court dated 14.05.2008 and thus he has made himself liable for contempt of this Court in view of the breach of the undertaking given before the Court.
At this stage, the petitioner has handed over the two cheques of Rs.25.00 Lac and Rs.15.00 Lac dated 19.08.2008 and 5.9.2008 respectively in the name of respondent No.1 Bank to the learned counsel appearing for respondent No.1."
(4) This order was assailed in Writ Appeal No.939/2008 which was disposed of on 02.09.2008 in the following terms:
"Though the matter was listed as regards the maintainability of the appeal without entering into the same we have thought it apt to hear the learned counsel for the parties and accordingly, we have heard Mr. R.K. Verma, learned counsel for the appellant and Mr. Rajesh Maindiratta, learned counsel for the respondent No.1 the real contesting party.
Be it noted, under certain
5 WP.8646.2013
circumstances the appellant had
handed over the two cheques
amounting to Rs.25 lacs and Rs.15 lacs dated 19.08.2008 and 05.09.2008 respectively in the name of respondent No.1 Bank. Number of submission have been put forth by Mr. R.K. Verma but we do not enter into the same. We have been apprised by Mr. Maindiratta that the Cheque of Rs.25 lacs has been dishonored. However, Mr. Maindiratta submits that Bank will not take any action if the appellant deposits a sum of Rs.40 lacs by way of bank drafts.
Having heard learned counsel for the parties and without entering into any kind of debate with regard to the merits of the case and the contentions which have been raised before us, we direct that the appellant shall present a bank draft of Rs.25 lacs in the respondent No.1, Bank by 17.09.2008 and further sum of Rs.7.5 lacs by 13.10.2008 positively failing which it will open to the Bank to take appropriate steps against the petitioner. If the aforesaid direction is complied with, we would request the learned Single judge to take up the writ petition and dispose of the same as expeditiously as possible. We repeat at the cost of repetition that we have made such a request regard being had to lis in question. It needs no special emphasis to state that the deposition of the amount in the bank is without prejudice to the contentions raised by either of the parties.
The writ appeal is disposed of accordingly. There shall be no order as to costs.
C.C. as per rules in course of the day."
(5) Respondent No.1 who was required to deposit Rs.32,50,000/- (Rs.25 lacs by 17.09.2008 and Rs.7.5 lacs by 13.10.2008) in the account of M/s Arpit Brothers, deposited Rs.15 Lacs in M/s 6 WP.8646.2013 Arpit Brothers' account and Rs.10 Lacs in M/s Jain Brothers' account on 17.10.2008, as is evident from the certificate issued by the Bank on 17.09.2008 (Annexure R/5). That on 13.10.2008 respondent No.1 deposited Rs.2,50,000/- in the account of M/s Jain Brothers and Rs.5,00,000/- in the account of M/s Arpit Brothers. Thus, instead of depositing Rs.32,50,000/- in the account of M/s Arpit Brothers, respondent No.1 deposited only Rs.20 lacs in the said account. It can be argued that since the auction proceedings were in respect of two properties respectively mortgaged in the account of M/s Arpit Brothers and M/s Jain Brothers and therefore respondent No.1 was justified in depositing the amount in both the accounts, though may sound well but does not reason to logic as the auction was only in respect of property which was mortgaged to secure the cash credit limit in account of M/s Arpit Brothers. The respondent No.1, thus prima facie, violated the direction in Writ Appeal No.939/2008. Be that as it may.
(6) The Writ Petition No.2868/2008 was later on disposed of on 09/12/2009 with the liberty to respondent No.1 to avail the remedy before the Debts Recovery Tribunal. It was ordered that in case if the appeal is filed within 30 days, the same was directed to be decided on merit. (7) Pertinent it is to note at this juncture that the auction proceedings which were initiated to recover the decreetal amount was as per second schedule to the Income Tax Act 1961 and the Income-Tax (Certificate Proceedings) Rules 1962, 7 WP.8646.2013 made applicable by virtue of Section 29 of the Recovery of Debtss. Due to Banks and Financial Institutions Act 1993. That Rule 60, 61, 62 and 63 of said second schedule provides that:
"60. Application to set aside sale of immovable property on deposit.-(1) Where immovable property has been sold in execution of a certificate, the defaulter, or any person whose interests are affected by the sale, may, at any time within thirty days from the date of the sale, apply to the Tax Recovery Officer to set aside the sale, on his depositing-
(a) the amount specified in the proclamation of sale as that for the recovery of which the sale was ordered, with interest thereon at the rate of one and one-fourth per cent for every month or part of a month calculated from the date of the proclamation of sale to the date when the deposit is made;
and
(b) for payment to the
purchaser, as penalty, a sum equal to five per cent. of the purchase money, but not less than one rupee.
(2) Where a person makes an application under rule 61 for setting aside the sale of his immovable property, he shall not, unless he withdraws that application, be entitled to make or prosecute an application under this rule.
61. Application to set aside sale of immovable property on ground of non- service of notice or irregularity.- Where immovable property has been sold in execution of a certificate, such Income- tax officer as may be authorized by the Principal Chief Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner in this behalf, the defaulter, or any person whose interests are affected by the sale, 8 WP.8646.2013 may at any time within thirty days from the date of the sale, apply to the Tax Recovery Officer to set aside the sale of the immovable property on the ground that notice was not served on the defaulter to pay the arrears as required by this Schedule or on the ground of a material irregularity in publishing or conducting the sale:
Provided that-
(a) no sale shall be set aside on any such ground unless the Tax Recovery Officer is satisfied that the applicant has sustained substantial injury by reason of the non-service or irregularity; and
(b) An application made by a defaulter under this rule shall be disallowed unless the applicant deposit the amount recoverable from him in execution of the certificate.
62. Setting aside sale where defaulter has no saleable interest. -At any time within thirty days of the sale, the purchaser may apply to the Tax Recovery Officer to set aside the sale on the ground that the default had no saleable interest in the property sold.
63. Confirmation of sale.-(1) where no application is made for setting aside the sale under the foregoing rules or where such an application is made and disallowed by the Tax Recovery Officer, the Tax Recovery Officer shall (if the full amount of the purchase-money has been paid) make an order confirming the sale, and, thereupon, the sale shall become absolute.
(2) Where such application is made and allowed, and where, in the case of an application made to set aside the sale on deposit of the amount and penalty and charges, the deposit is made within thirty days from the date of the sale, the Tax Recovery Officer shall make an order setting aside the sale:
Provided that no order shall be made unless notice of the application has 9 WP.8646.2013 been given to the persons affected thereby."
(8) Furthermore in case any order is passed by the recovery officer on the objections raised in respect of the auction proceedings, such order is made appealable vide Section 30 of the Act of 1993.
(9) In the case at hand though the respondent of his own wanting sought leave to avail the remedy of appeal under Section 30 of 1993 Act but there was no cause because there was no order by the Recovery Officer under Rule 61, 62 or 63 of Second Schedule since the petitioner had not raised any objection before the Recovery Officer. This aspect led the Debts Recovery Tribunal record a finding in its order dated 08.03.2013 that the respondent No.1 has not complied with Rule 61 of second schedule. Be it noted that the Debts Recovery Tribunal was in seisin with the appeal after its remand from the Debts Recovery Appellate Tribunal by its order dated 06.07.2012 to decide the appeal on merit. The Debt Recovery Tribunal observed:
"As seen rightly contended by the Bank the appellant had not deposited the amount of Rs.36,26,816/- along with interest at 12% w.e.f. 12.01.05 as required under Rule 61 proviso (b) of Income Tax Act and therefore, he is not entitled to challenge the auction proceedings in this claim specially when the 2nd respondent had deposited the purchase price in Jan.08 and no illegality is proved by the appellant. So also it is revealed that ground raised in this appeal and the amount raised in the W.P.2868/2008 are totally different which reveals an after though on the 10 WP.8646.2013 part of the appellant for deliberately delaying the recovery proceedings seen conducted by the RO. The decision in S.A.No.71/09 of this Tribunal is not applicable to the case of the appellant because the facts is entirely different. In this case against the dues of Rs.36,26,816/- he is intending to settle for Rs.27.00 lacs since the property was sold for an lesser amount. He could have easily participated in the bid and purchased the property for Rs.27.00 lacs instead of doing so he is now attempting to set aside the sale illegally without complying Rule 61 of the Income Tax Rules which cannot be permitted. The collusion between the Bank, RO and Advocate Commissioner is not seen pleaded in the Writ Petition which was lodged against the very same auction. On 04.09.12 an IA was lodged for taking subsequent development on record and producing some more documents. These pleadings do not form part of the appeal as the same ought to have been incorporated in the appeal by way of amendment. Therefore, these documents are not taken on record for the purpose of this appeal. Moreover, the signature of the appellant on page 20, 40 & 48 reveal that different signatures are being put by the appellant for his convenience as seen rightly submitted by Respondent no.2 in its reply to the IA. When it is revealed that no illegality as pleaded is seen proved against the recovery proceedings, there is no scope for allowing the prayer of the appellant in this appeal. Therefore, the appeal found to be devoid of merits is dismissed with costs of Rs.25,000/- each to the Respondents Bank.
(10) Respondent No.1 challenged the order dated 08/03/2013 in appeal which was disposed of on 29.10.2013 in the following terms:
"1. The Bank shall be entitled to the 11 WP.8646.2013 amount of Rs.22.16 lacs in addition to the amount already paid by the appellant in full and final settlement of the claim.
2. Since the auction purchaser has deposited the amount on 21.01.2008 and 29.01.2008 and the auction has not yet been confirmed, therefore, the auction purchaser shall be entitled to the interest @ 12% per annum on the amount deposited with the Recovery Officer and the total amount to which the auction purchaser is entitled to receive is Rs.42,44,660/-. This amount includes the interest @ 12% per annum inclusive of deposit made by the auction purchaser.
3. Since the amount deposited by the auction purchaser is lying with the Recovery Officer, therefore, whatever the amount with interest paid by the Recovery Officer on deposit of the amount, the balance of the amount of interest to make it Rs.42,44,660/- shall be paid by the appellant.
4. The appellant shall pay the aforesaid amount to the Bank as well as to the Auction Purchaser through two demand drafts before the Recovery Officer on or before
09.12.2013. If the amount as such is not paid by the appellant within the period of 40 days from today as directed, then the Recovery Officer shall be free to issue the sale certificate in favour of the auction purchaser and the appellant shall lose all rights to claim the property.
5. The Recovery Officer shall return the amount to the auction purchaser within 10 days from today and shall also intimate the borrower with respect to the total amount paid to the auction purchaser. On such intimation the difference amount payable to the auction purchaser shall be paid by the borrower within the stipulated period 12 WP.8646.2013 as stated herein above.
6. The Bank has filed its calculation sheet and on the basis of the same, the Bank has to recover the total amount of Rs.22.16 lacs from the borrower. The borrower is ready to pay the said amount. The amount which has been arrived at by the Bank is in accordance with the Recovery Certificate, wherein the DRT has directed to pay the simple rate of interest @ 12% per annum and against the same the Bank has not preferred any appeal to this Tribunal, therefore, the judgment passed by the DRT has attained the finality so far as not only the rate of interest but also wherein the amount is also quantified. The borrower is prepared to pay the full amount.
7. On payment of full amount as aforesaid, the Bank shall release the title deed in favour of the appellant."
(11) Interestingly, there is no whisper in the appellate order as to whether the order under challenge is modified or set aside. Be that as it may.
(12) There are a few more developments which have taken place after passing of the order by DRAT. Petitioner in compliance to said order deposited Rs.29,10,000/- by 06/12/2013, a certificate to said effect was issued by the Recovery Officer, Second, DRT. Though as per the petitioner the respondent No.1 who was required to deposit as per direction by the Appellate Tribunal did not deposit the entire amount. It is urged that the respondent was to deposit Rs.22,16,000/- in favour of Bank and Rs.17,32,660/- in favour of the auction purchasee: total amount of Rs.39,48,660/-. The 13 WP.8646.2013 amount of Rs.17,32,660/- is arrived at as per paragraph 3 of the judgment by the DRAT. It is urged that the respondent No.1 is still in default of Rs.10,38,660/-. This aspect will be dwelt at later stage.
(13) It is pertinent to note that in the earlier round, this petition was dismissed on 26.04.2016 on the ground that appeal before Debt Recovery Tribunal was belatedly filed on 08/02/2010, instead of 08/01/2010 without an application for condonation of delay. Consequently, the orders passed by DRT and DRAT were quashed. The said order has been reversed in Civil Appeal No.11730/2016 (Arising out of Special Leave Petition (Civil) No.24319/2016 decided on 05/12/2016 whereby their Lordships were pleased to remit the matter for adjudication on merit.
(14) The parties were heard at length. Issues which arise for consideration are:
1. Whether the petitioner has any locus to challenge the order passed by the Debt Recovery Appellate Tribunal?
2. Whether it can be said that the petitioner had acquired any right to protect the auction sale proceedings?
3. Whether the respondent No.1 had any right to question the auction sale proceedings?
4. Whether the decision by the Debt Recovery Tribunal would operate as a clog on the right of respondent No.1 to secure the property on payment of entire amount due and recoverable at
14 WP.8646.2013 the stage of auction sale proceedings? Issue No.1 and 2: As these issues compliment each other are taken up together. (15) It is contended on behalf of respondent No.1 that the auction having not culminated into a sale, as no sale certificate has been issued because of stay of entire proceedings by order dated 12.03.2008 in Writ Petition No.2868/2008, there is no accrual of right in favour of the petitioner who is an alien to entire transaction between respondent No.1 and respondent No.2, Bank, has no locus standi to question the order passed by the Appellate Tribunal which has directed for restoration of mortgaged property in favour of the respondent No.1, its owner. It is urged that since the mortgage remains with non- confirmation of sale, the petitioner has no legal right to enforce the auction sale. The petitioner on his turn has refuted the contentions. It is urged that there being the order for recovery of debt due with a further direction to recover the same by auctioning the property mortgaged; and the creditor Bank having exercised the option, the petitioner being the highest bidder and the bid having been settled in his favour, in furtherance whereof the petitioner has deposited the entire sale amount within the stipulated period which is being duly acknowledged the Appellate Tribunal, the petitioner has the right to protect the interest which has accrued in him. It is urged that the petitioner is, thus, not an alien to the cause, which is the sale of property. It is also contended that the respondent No.1 at no point of time during auction proceedings raised 15 WP.8646.2013 any objection when the bid was finalized in favour of petitioner. On these contentions, it is submitted on behalf of the petitioner that the objection as to locus of the petitioner to question the order by Appellate Tribunal is sans merit. Petitioner has placed reliance on the decision in "Sadashiv Prasad Singh v. Harendar Singh and others [(2015) 5 SCC 574]" wherein issue having close similarity to the question raised herein as to accrual of interest of the auction purchaser was under consideration. It was held:
"19. It is, therefore, apparent that the rights of an auction-purchaser in the property purchased by him cannot be extinguished except in cases where the said purchase can be assailed on grounds of fraud or collusion."
(16) While holding so following judicial precedence was taken into consideration; in "Ashwin S. Mehta and another Vs. Custodian and others [(2006) 2 SCC 385]" it was held:
"70. In that view of the matter, evidently, creation of any third-party interest is no longer in dispute nor the same is subject to any order of this Court. In any event, ordinarily, a bona fide purchaser for value in an auction- sale is treated differently than a decree-holder purchasing such properties. In the former event, even if such a decree is set aside, the interest of the bona fide purchaser in an auction-sale is saved. [See Nawab Zain-ul-Abdin Khan v. Mohd. Asghar Ali Khan -(1887) 15 IA 12]. The said decision has been affirmed by this Court in Gurjoginder Singh v. Jaswant Kaur (Smt.) and Another [(1994) 2 SCC 368]."
(17) In "Janatha Textiles and others Vs. Tax 16 WP.8646.2013 Recovery Officer and another [(2008) 12 SCC 582]", it was held:
"18. It is an established principle of law that in a third party auction purchaser's interest in the auctioned property continues to be protected notwithstanding that the underlying decree is subsequently set aside or otherwise. This principle has been stated and re-affirmed in a number of judicial pronouncements by the Privy Council and this court. Reliance has been placed on the following decisions:
(i) The Privy Council in Nawab Zain-Ul-Abdin Khan v. Muhammad Asghar Ali Khan & others (1887-88) 15 IA 12 for the first time crystallized the law on this point, wherein a three Judge Bench held as follows: (IA p.16) "A great distinction has been made between the case of bona fide purchasers who are not parties to a decree at a sale under execution and the decree-
holders themselves. In Bacon's Abridgment, it is laid down, citing old authorities, that "If a man recovers damages, and hath execution by fieri facias, and upon the fieri facias the sheriff sells to a stranger a term for years, and after the judgment is reversed, the party shall be restored only to the money for which the term was sold, and not to the term itself, because the sheriff had sold it by the command of the writ of fieri facias.". So in this case, those bona fide purchasers who were no parties to the decree which was then valid and in force, had nothing to do further than to look to the decree and to the order of sale."
(ii) In Janak Raj vs. Gurdial Singh & Another (1967) 2 SCR 77, the Division 17 WP.8646.2013 Bench comprising Wanchoo, J. and Mitter, J. held that in the facts of the said case the appellant auction-
purchaser was entitled to a confirmation of the sale
notwithstanding the fact that after the holding of the sale, the decree was set aside. It was observed: (AIR p.613, para 24) "24. ......The policy of the Legislature seems to be that unless a stranger auction-
purchaser is protected against the vicissitudes of the fortunes of the suit, sales in execution would not attract customers and it would be to the detriment of the interest of the borrower and the creditor alike if sales were allowed to be impugned merely because the decree was ultimately set aside or modified."
(iii) In Gurjoginder Singh v. Jaswant Kaur (Smt.) & Another (1994) 2 SCC 368, this court relying on the judgment rendered by the Privy Council held that the status of a bona fide purchaser in an auction sale in execution of a decree to which he was not a party stood on a distinct and different footing from that of a person who was inducted as a tenant by a decree-holder-landlord. It was held as follows: (SCC p.370, para 3) "3. ...A stranger auction purchaser does not derive his title from either the decree- holder or the judgment-debtor and therefore restitution may not be granted against him but a tenant who obtains possession from the decree-holder landlord cannot avail of the same right as his possession as a tenant is derived from the landlord."
(iv) In Padanathil Ruqmini Amma v. P. K. Abdulla (1996) 7 SCC 668, this court in para 11 observed as under:
(SCC p.672) 18 WP.8646.2013 "11. In the present case, as the ex parte decree was set aside, the judgment-debtor was entitled to seek restitution of the property which had been sold in court auction in execution of the ex parte decree. There is no doubt that when the decree-
holder himself is the auction- purchaser in a court auction sale held in execution of a decree which is subsequently set aside, restitution of the property can be ordered in favour of the judgment-debtor. The decree-holder auction-
purchaser is bound to return the property. It is equally well settled that if at a court auction sale in execution of a decree, the properties are purchased by a bona fide purchaser who is a stranger to the court proceedings, the sale in his favour is protected and he cannot be asked to restitute the property to the judgment-debtor if the decree is set aside. The ratio behind this distinction between a sale to a decree-
holder and a sale to a stranger is that the court, as a matter of policy, will protect honest outsider purchasers at sales held in the execution of its decrees, although the sales may be subsequently set aside, when such purchasers are not parties to the suit. But for such protection, the properties which are sold in court auctions would not fetch a proper price and the decree-holder himself would suffer. The same consideration does not apply when the decree- holder is himself the purchaser and the decree in his favour is set aside. He is a party to the litigation and is very much aware of the vicissitudes of 19 WP.8646.2013 litigation and needs no protection."
In Para 16, the court further elaborated the distinction between the decree-holder auction purchaser and a stranger who is a bona fide purchaser in auction. Para 16 reads as under: (P.K. Abdulla case, p.674) "16. The distinction between a stranger who purchases at an auction sale and an assignee from a decree-holder purchaser at an auction sale is quite clear. Persons who purchase at a court auction who are strangers to the decree are afforded protection by the court because they are not in any way connected with the decree. Unless they are assured of title; the court auction would not fetch a good price and would be detrimental to the decree- holder. The policy, therefore, is to protect such purchasers. This policy cannot extend to those outsiders who do not purchase at a court auction. When outsiders purchase from a decree-holder who is an auction-purchaser clearly their title is dependent upon the title of decree-holder auction- purchaser. It is a defeasible title liable to be defeated if the decree is set aside. A person who takes an assignment of the property from such a purchaser is expected to be aware of the defeasibility of the title of his assignor. He has not purchased the property through the court at all. There is, therefore, no question of the court extending any protection to him. The doctrine of a bona fide purchaser for value also cannot extend to such an outsider who derives his title through a decree-holder auction-purchaser. He is aware 20 WP.8646.2013 or is expected to be aware of the nature of the title derived by his seller who is a decree-holder auction- purchaser."
(v) In Ashwin S. Mehta & Another v. Custodian & Others (2006) 2 SCC 385, this court whilst relying upon the aforementioned two judgments stated the principle in the following words:
(SCC p.407, para 70) "70. ....In any event, ordinarily, a bona fide purchaser for value in an auction sale is treated differently than a decree holder purchasing such properties. In the former event, even if such a decree is set aside, the interest of the bona fide purchaser in an auction sale is saved."
20. Law makes a clear distinction between a stranger who is a bona fide purchaser of the property at an auction sale and a decree holder purchaser at a court auction. The strangers to the decree are afforded protection by the court because they are not connected with the decree.
Unless the protection is extended to them the court sales would not fetch market value or fair price of the property."
(18) In "Valji Khimji and Company Vs. Official Liquidator of Hindustan Nitro Product (Gujarat) Limited and others [(2008) 9 SCC 299]", it is held:
"30. In the first case mentioned above i.e. where the auction is not subject to confirmation by any authority, the auction is complete on the fall of the hammer, and certain rights accrue in favour of the auction purchaser. However, where the auction is subject to subsequent confirmation by some authority (under a statute or terms of
21 WP.8646.2013 the auction) the auction is not complete and no rights accrue until the sale is confirmed by the said authority. Once, however, the sale is confirmed by that authority, certain rights accrue in favour of the auction purchaser, and these rights cannot be extinguished except in exceptional cases such as fraud."
(19) In the present case, evidently, the proceedings for auction of property in question is as per Rule 60 of the Rules of 1962. Sub-Rule (1) of Rule 63 of the Rules 1962 provides that where no application is made for setting aside the sale under the foregoing rules or where such an application is made and disallowed by the Tax Recovery Officer, the Tax Recovery Officer shall if the full amount of the purchase money has been paid make an order confirming the sale, and, therefore, the sale shall become absolute. That no objection to set aside the sale is shown to have been filed by the respondent No.1 and except that there was an interim order passed on 12.03.2008 in W.P.2868/2008 which is much after the entire deposit made by the petitioner on 28.01.2008, the petitioner, in our considered opinion, has an interest accrued in his favour to protect the right under the auction in his favour to protect the right under the auction sale. The first and second question is thus answered in favour of the petitioner. The petition is, thus, held maintainable at the instance of auction- purchaser. These issues are answered in favour of the petitioner.
Issues No.3 and 4:
(20) Issues No.3 and 4 are jointly taken up.
22 WP.8646.2013 Evidently, respondent no.1 suffered an order of recovery in an original application preferred by the Bank respondent no.2 for recovery of dues in cash credit limit. The Tribunal has passed an order for recovery of Rs.21,49,778.92 and the interest thereon @ 12% per annum pendente lite and future w.e.f. 12.01.2005 and the cost with a further direction that if the amount is not paid, the Bank would be at liberty to recover the same through auction of mortgaged property. Admittedly, the respondent No.1 did not challenge the order of recovery and has allowed the same to attain finality. The question is whether with the attainment of finality of the recovery order, the respondent No.1 can be deprived to secure the property without taking recourse to redeem by bringing a suit for redemption. The question is more pertinent in the backdrop of the fact that the sale has not been made absolute under Rule 63(1) of the Rules of 1962.
(21) It is urged on behalf of the petitioner that incumbent it was on the part of the respondent No.1 to have raised objection against the auction sale proceedings. Having not objected to the proceedings, the respondent No.1 borrower had waived his right to secure the property mortgaged. Reliance is placed on the Rules viz. Rule. 61, 62 and 63 of the Rules 1962 and Section 29 of Act 1993 to substantiate the contention that they being mandatory in nature cannot be surpassed. These submissions, as evident, are to meet the course resorted by the respondent No.1 by filing Writ Petition 23 WP.8646.2013 2868/2008 and depositing the dues as directed therein.
(22) It must be remembered at this juncture that the Act of 1993 aims at recovery of dues to the Bank and the object of the Act of 1993 is not to declare that the order passed by it would tantamount to foreclose the right of the borrower. Be it also noted that the petitioner had not perfected his right over the suit property for want of an order from the Recovery Officer that the sale has become absolute under sub-rule (1) of Rule 63 of the Rules of 1962. Though in earlier part of this judgment we have opined that an executable right accrues in favour of the petitioner to protect the interest in property even before sale has become absolute; however, since the sale has not attained the stage of absoluteness, the borrower has the right to protect its title over the mortgaged property, subject to his paying of the entire dues adjudged by the Tribunal. No such provisions under the Act of 1993 have been commended at that, with the order of recovery the borrower's right to retain the mortgaged property is extinguished. On the contrary the scheme of Section 29 read with the Rules of 1962, more particularly Rule 60, 61, 62 and 63 that the borrower has a right to defend the title over the mortgaged property even at the stage of its sale by auction. Thus even if the adherence to the procedure prescribed in these Rules are held to be mandatory as suggested on behalf of the petitioner, they do not lead to conclusion as to exclusion of the right of the owner of the mortgaged property to retain 24 WP.8646.2013 the same if he is willing and ready to pay of entire dues. Petitioner has placed reliance on the decisions in Mathew Varghese v. M. Amritha Kumar (2014) 5 SCC 610, Annapurna v. Mallikarjun (2014) 6 SCC 397, Sadashiv Prasad Singh v. Harendar Singh, (2015) 5 SCC 574, Transcore v. Union of India, (2008) 1 SCC 125, Allahabad Bank v. Canara Bank, (2000) 4 SCC 406, Vishal N. Kalsaria Vs. Bank of India and others (2016) 3 SCC 762, Vedica Procon (P) Ltd. v. Balleshwar Greens (P) Ltd., (2015) 10 SCC 94, Embassy Hotels (P) Ltd. v. Gajaraj & Co. (2015) 14 SCC 316 and Official Liquidator v. Allahabad Bank, (2013) 4 SCC 381 to substantiate the contentions that the Rules of 1962 are imperative and unless taken recourse to, the borrower's right to retain the property extinguishes. (23) The case of Mathew Varghese (supra) was in regard to the interpretation of Section 13(8) of the SARFASI Act read with Rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002. Sub-section (8) of Section 13 envisages that 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 fixed for sale or transfer, the secured asset shall not be sold or transferred by the secured creditor, and no further step shall be 25 WP.8646.2013 taken by him for transfer or sale of that secured asset. Paragraph 49 whereon reliance is placed envisages:
"49. Reference to the above principles laid down in the various decisions also supports our conclusion that the application of the SARFAESI Act will be in addition to, in the present case to Section 29 of the RDDB Act. Once we steer clear of the said position without any hesitation, it can be held that whatever stipulations contained in Section 29 as regards the application of certain provisions of the Income Tax Act, 1961 in particular Schedule II Part I Rule 15 of the Income Tax Act, 1961 for effecting a sale or transfer would apply automatically. We have already extracted Section 29 of the RDDB Act, as well as Schedule 2 Part I Rule 15 of the Income Tax Act, 1961. Therefore, what is to be considered is as to what is the mode prescribed under the above provisions, namely, Rule 15 prescribed under Schedule 2 Part I of the Income Tax Act, 1961.
However, in paragraph 50, it is held:
"50. Section 29 of the RDDB Act is an enabling provision under which the Second and Third Schedules to the Income Tax Act, 1961 (43 of 1961) and the Income Tax Rules, 1962 can be applied as far as possible with necessary modifications as if the provisions and the Rules are referable to the debt due, instead of the income tax due. Therefore, fictionally, by virtue of section 29 of the RDDB Act, the mode and method by which a recovery of income tax can be resorted to under the Second and Third Schedules to the Income Tax Act and the Income Tax Rules, 1962 have to be followed. Therefore, reading Section 37 of the SARFAESI Act and Section 29 of the RDDB Act,
26 WP.8646.2013 the only aspect which has to be taken care of is that while applying the procedure prescribed under Rule 15 of the Income Tax Rules, 1962 (Ed.:
The reference is to Rule 15 of Schedule II Part I of the Income Tax Act, 1961.), no conflict with reference to any of the provisions of the SARFAESI Act, takes place."
Furthermore affirming the decision in Ram Kishun V. State of U.P. [(2012) 11 SCC 511], it is held:
"43.The above principles laid down by this Court also make it clear that though the recovery of public dues should be made expeditiously, it should be in accordance with the procedure prescribed by law and that it should not frustrate a constitutional right, as well as the human right of a person to hold a property and that in the event of a fundamental procedural error occurred in a sale, the same can be set aside.
(24) Thus, unless the sale is confirmed as absolute the borrower's right to hold the property in question does not get extinguished.
The procedure laid down in Section 29 of 1993 Act is held to be an enabling provision. Therefore, even if the borrower has, instead of taking recourse to the stipulations contained under Rules 61, 62 & 63 of the Rules of 1962, approaches the High Court where instead of non- suiting him his interest in the mortgaged property is protected subject to certain direction, the right to retain the mortgaged property cannot be said to have been waived by the borrower.
(25) In Sadashiv Prasad Singh (supra), the 27 WP.8646.2013 Court was concerned with an absolute right vesting in the auction purchaser, which is not the present case. In this context it was observed:
"22. Since it was nobody's case that Sadashiv Prasad Sinha, the highest bidder at the auction conducted on 28- 8-2008, had purchased the property in question at a price lesser than the then prevailing market price, there was no justification whatsoever to set aside the auction-purchase made by him on account of escalation of prices thereafter. The High Court in ignoring the vested right of the appellant in the property in question, after his auction bid was accepted and confirmed, subjected him to grave injustice by depriving him to property which he had genuinely and legitimately purchased at a public auction. In our considered view, not only did the Division Bench of the High Court in the matter ignore the sound, legal and clear principles laid down by this Court in respect of a third-party auction-purchaser, the High Court also clearly overlooked the equitable rights vested in the auction-purchaser during the pendency of a lis. The High Court also clearly overlooked the equitable rights vested in the auction-purchaser while disposing of the matter.
23. At the time of hearing, we were thinking of remanding the matter to the Recovery Officer to investigate into the objection of Harender Singh under Rule 11 of the Second Schedule to the Income Tax Act, 1961. But considering the delay such a remand may cause, we have ourselves examined the objections of Harender Singh and rejected the objections for a variety of reasons:
23.1. Firstly, the contention raised at the hands of the respondents before the High Court, that the facts narrated by Harender Singh
28 WP.8646.2013 [the appellant in Special Leave Petition (C) No. 26550 of 2010] were a total sham, as he was actually the brother of one of the judgment-debtors, namely, Jagmohan Singh. And that Harender Singh had created an unbelievable story with the connivance and help of his brother, so as to save the property in question. The claim of Harender Singh in his objection petition was based on an unregistered agreement to sell dated 10-1-1991. Not only that such an agreement to sell would not vest any legal right in his favour, it is apparent that it may not have been difficult for him to have had the aforesaid agreement to sell notarised in connivance with his brother, for the purpose sought to be achieved.
23.2. Secondly, it is apparent from the factual position depicted in the foregoing paragraphs that Harender Singh, despite his having filed objections before the Recovery Officer, had abandoned the contest raised by him by not appearing (and by not being represented) before the Recovery Officer after 26-10- 2005, whereas, the Recovery Officer had passed the order of sale of the property by way of public auction more than two years thereafter, only on 5-5-2008. Having abandoned his claim before the Recovery Officer, it was not open to him to have reagitated the same by filing a writ petition before the High Court.
23.3. Thirdly, a remedy of appeal was available to Harender Singh in respect of the order of the Recovery Officer assailed by him before the High Court under Section 30, which is being extracted herein to assail the order dated 5-5-2008:
"30. Appeal against the order 29 WP.8646.2013 of Recovery Officer.--(1) Notwithstanding anything contained in Section 29, any person aggrieved by an order of the Recovery Officer made under this Act may, within thirty days from the date on which a copy of the order is issued to him, prefer an appeal to the Tribunal.
(2) On receipt of an appeal under sub-section (1), the Tribunal may, after giving an opportunity to the appellant to be heard, and after making such inquiry as it deems fit, confirm, modify or set aside the order made by the Recovery Officer in exercise of his powers under Sections 25 to 28 (both inclusive)."
The High Court ought not to have interfered with in the matter agitated by Harender Singh in exercise of its writ jurisdiction. In fact, the learned Single Judge rightfully dismissed the writ petition filed by Harender Singh.
23.4. Fourthly, Harender Singh could not be allowed to raise a challenge to the public auction held on 28-8-2008 because he had not raised any objection to the attachment of the property in question or the proclamations and notices issued in newspapers in connection with the auction thereof.
23.5. All these facts cumulatively lead to the conclusion that after 26- 10-2005, Harender Singh had lost all interest in the property in question and had therefore, remained a silent spectator to various orders which came to be passed from time to time. He had, therefore, no equitable right in his favour to assail the auction- purchase made by Sadashiv Prasad 30 WP.8646.2013 Sinha on 28-8-2008.
23.6. Finally, the public auction under reference was held on 28-8- 2008. Thereafter the same was confirmed on 22-9-2008. Possession of the property was handed over to the auction-purchaser Sadashiv Prasad Sinha on 11-3-2009. The auction-purchaser initiated mutation proceedings in respect of the property in question. Harender Singh did not raise any objections in the said mutation proceedings. The said mutation proceedings were also finalised in favour of Sadashiv Prasad Sinha. Harender Singh approached the High Court through CWJC No. 16485 of 2009 only on 27-11-2009. We are of the view that the challenged raised by Harender Singh ought to have been rejected on the grounds of delay and laches, especially because third-party rights had emerged in the meantime. More so, because the auction-purchaser was a bona fide purchaser for consideration, having purchased the property in furtherance of a duly publicised public auction, interference by the High Court even on the ground of equity was clearly uncalled for."
(26) The factual scenario of the case at hand is, however, totally different. The title in the property is not transferred in favour of the petitioner because of the stay order as such no absolute right accrued in favour of the petitioner. Since there is no vested right in favour of the petitioner there was no merger of mortgaged debt in the decreetal debt, as would create further right in the petitioner to impede the borrower from retaining the property after paying the entire amount due. Thus, the decision 31 WP.8646.2013 in Sadashiv Prasad Singh (supra) is also of no assistance to the petitioner. (27) In Annapurna (supra), the issue was whether the High Court could have ignored the settled law that under Article 127 of the Limitation Act, 1963 and application to set aside a sale under Order XXI Rule 89 CPS has to be filed within 60 days from the date of sale and the same is the period for making the required deposit, is also of not much help to the petitioner in present fact situation.
(28) Reliance is also placed on the decision in Transcore v. Union of India (supra), wherein it is held:
"18. On analysing the above provisions of the DRT Act, we find that the said Act is a complete code by itself as far as recovery of debt is concerned. It provides for various modes of recovery. It incorporates even the provisions of the Second and Third Schedules to the Income Tax Act, 1961. Therefore, the debt due under the recovery certificate can be recovered in various ways. The remedies mentioned therein are complementary to each other. The DRT Act provides for adjudication. It provides for adjudication of disputes as far as the debt due is concerned. It covers secured as well as unsecured debts. However, it does not rule out applicability of the provisions of the TP Act, in particular Sections 69 and 69-A of that Act. Further, in cases where the debt is secured by pledge of shares or immovable properties, with the passage of time and delay in the DRT proceedings, the value of the pledged assets or mortgaged properties invariably falls. On account of inflation, value of the assets in the hands of the bank/FI invariably depletes which, in turn, leads to asset-
32 WP.8646.2013 liability mismatch. These contingencies are not taken care of by the DRT Act and, therefore, Parliament had to enact the NPA Act, 2002.
22. Section 13 falls in Chapter III which deals with enforcement of security interest. It begins with a non obstante clause. It states inter alia that notwithstanding anything contained in Section 69 or Section 69- A of the TP Act, any security interest created in favour of any secured creditor may be enforced, without the court's intervention, by such creditor in accordance with the provisions of this Act. When we refer to the word "court", it includes DRT. We quote hereinbelow sub-section (2) of Section 13 of the NPA Act:
"13. Enforcement of security interest.--
(1) * * * (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 classified by the secured creditor as non-performing asset, then, 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)."
(29) Furthermore, in the case of Allahabad Bank (supra), it is held:
"23. Even in regard to "execution", the jurisdiction of the Recovery Officer is exclusive. Now a procedure 33 WP.8646.2013 has been laid down in the Act for recovery of the debt as per the certificate issued by the Tribunal and this procedure is contained in Chapter V of the Act and is covered by Sections 25 to 30. It is not the intendment of the Act that while the basic liability of the defendant is to be decided by the Tribunal under Section 17, the banks/financial institutions should go to the civil court or the Company Court or some other authority outside the Act for the actual realisation of the amount. The certificate granted under Section 19(22) has, in our opinion, to be executed only by the Recovery Officer. No dual jurisdictions at different stages are contemplated. Further, Section 34 of the Act gives overriding effect to the provisions of the RDB Act. That section reads as follows:
"34. (1) Act to have overriding effect.--(1) Save as provided under sub-section (2), the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act.
(2) The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Industrial Finance Corporation Act, 1948 (15 of 1948), the State Financial Corporations Act, 1951 (63 of 1951), the Unit Trust of India Act, 1963 (52 of 1963), the Industrial Reconstruction Bank of India Act, 1984 (62 of 1984) and the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986)."
34 WP.8646.2013 The provisions of Section 34(1) clearly state that the RDB Act overrides other laws to the extent of "inconsistency". In our opinion, the prescription of an exclusive Tribunal both for adjudication and execution is a procedure clearly inconsistent with realisation of these debts in any other manner."
(30) The question is whether Section 60 of the Transfer of Property Act will have any bearing in the matter as would attract the principle of law laid down in Transcore (supra) and Allahabad Bank (supra). Section 60 of Transfer of Property Act provides:
"60. Right of mortgagor to redeem.--At any time after the principal money has become 1[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 2[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 (where the mortgage has been effected by a registered instrument) to have registered an acknowledgment in writing that any right in derogation of his interest transferred to the mortgagee has been extinguished:
Provided that the right conferred by this section has not been extinguished by act of the parties or by 3[decree] of a Court.
35 WP.8646.2013 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 effect that, if the time fixed for payment of the principal money has been allowed to pass or no such time has been fixed, the mortgagee 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 part of the amount remaining due on the mortgage, except 4[only] where a mortgagee, or, if there are more mortgagees than one, all such mortgagees, has or have acquired, in whole or in part, the share of a mortgagor.
(31) In "Embassy Hotels (P) Ltd. v. Gajaraj & Co. [(2015) 14 SCC 316]", it is held:
"16. Section 60 of the Transfer of Property Act protects the right of redemption available to a mortgagor by providing that the mortgagor can exercise such a right by paying the mortgaged money at any time after the principal money has become due. But the proviso clarifies that the right conferred by that section is available only if it has not been extinguished by act of the parties or by decree of the court. The act of the parties would cover act of the mortgagor and the mortgagee, if they are unable to settle the dispute arising out of money claim covered by the mortgage and by their action,
36 WP.8646.2013 allow the mortgaged property to be sold through auction in favour of a third party. Hence, it is not possible to accept the case of the plaintiff- respondent that in spite of sale of the suit property becoming final through court auction, for the purpose of grant of specific relief to the plaintiff in the present suit, the first defendant would be deemed to still retain the right to redeem the mortgage and transfer the suit property to the plaintiff regardless of the right, title and possession already legally vested in the auction- purchaser the appellant."
(32) First of all it is to be seen as to whether Section 60 is attracted in the case at hand wherein the order of recovery precedes the sale of property to recover the money due. In this context reference can be had of the decision in "Nahar Industrial Enterprises Ltd. v. Hong Kong and Shanghai Banking Corpn., Reported in [(2009) 8 SCC 646]" wherein it is held:
"85. If the Tribunal was to be treated to be a civil court, the debtor or even a third party must have an independent right to approach it without having to wait for the bank or financial institution to approach it first. The continuance of its counterclaim is entirely dependent on the continuance of the applications filed by the bank. Before it no declaratory relief can be sought for by the debtor. It is true that claim for damages would be maintainable but the same have been provided by way of extending the right of counterclaim.
86. The Debts Recovery Tribunal cannot pass a decree. It can issue only recovery certificates. [See
37 WP.8646.2013 Sections 19(2) and 19(22) of the Act.] The power of the Tribunal to grant interim order is attenuated with circumspection. [See Dataware Design Labs (P) Ltd. v. SBI (2005) 127 Comp Cas 176 (Ker) Comp Cas at p. 184.] Concededly in the proceeding before the Debts Recovery Tribunal detailed examination, cross-examinations, provisions of the Evidence Act as also application of other provisions of the Code of Civil Procedure like interrogatories, discoveries of documents and admission need not be gone into. Taking recourse to such proceedings would be an exception. Entire focus of the proceedings before the Debts Recovery Tribunal centres round the legally recoverable dues of the bank.
92. We have held that the Tribunals are neither civil courts nor courts subordinate to the High Court. The High Court ordinarily can be approached in exercise of its writ jurisdiction under Article 226 or its jurisdiction under Article 227 of the Constitution of India. The High Court exercises such jurisdiction not only over the courts but also over the Tribunals. The Appellate Tribunals have been constituted for determining the appeals from judgments and orders of the Tribunal.
(33) That sub-section (1) of Section 34 of 1993 Act mandates that the Act of 1993 overrides other laws to the extent of "inconsistency". However, no provision in the Act of 1993 or any rule made thereunder is commended at which may be "inconsistent" with Section 60 of the Transfer of Property Act particularly proviso thereto. Consequently, no provision in the Act of 38 WP.8646.2013 1993 can be read in derogation of the said Section 60.
(34) In "Maganlal Vs. M/s Jaiswal Industries, Neemach and others [(1989) 4 SCC 344]", it is held:
"13. It was further held that in a suit for redemption of a mortgage other than a mortgage by conditional sale or an anomalous mortgage, the mortgagor has a right of redemption even after the sale has taken place pursuant to the final decree, but before the confirmation of such sale. In view of these provisions the question of merger of mortage-debt in the decretal-debt does not arise at all.
14. In this view of the matter we are of the opinion that in case the provisions of Order 34 Rule 5 of the Code are held to be applicable to the facts of the instant case appropriate relief can be granted thereunder as the order of confirmation of the sale passed by the High Court in favour of the first purchaser has not become absolute due to the pendency of these appeals against that order nor has the right of redemption of Maganlal yet extinguished.
21. In this connection, it is relevant to note that in neither of the two cases namely, Gujarat State Financial Corporation and M/s Everest India Corporation, (supra) Sub- section (8) of the Section 32 of the Act came up for consideration. Section 46-B of the Act reads as hereunder:
"46B. The provisions of this Act and of any rules or orders made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time
39 WP.8646.2013 being in force or in the memorandum or articles of association of an industrial concern or in any other instrument having effect by virtue of any law other than this Act, but save as aforesaid, the provisions of this Act shall be in addition to, and not in derogation of, any other law for the time being applicable to an industrial concern."
22. No provision in the Act or any Rule or Order made thereunder has been brought to our notice stating that the effect of any action taken thereunder including the passing or orders of attachment and sale under Sections 31 and 32 thereof, is to extinguish the right of redemption. In other words, there is nothing in the Act or in any Rule or Order made thereunder which may be inconsistent with Section 60 of the Transfer of Property Act particularly the proviso there- to. Consequently no provision in the Act can be read "in derogation" of the said Section
60."
(35) In "Mhadagonda Ramgonda Patil and others Vs. Shripal Balwant Rainade and others [(1988) 3 SCC 298]", it is observed that...... "in a final decree in a suit for foreclosure, on the failure of the defendant to pay all amounts due, the extinguishment of the right of redemption has to be specifically declared. Again, in a final decree in a suit for redemption of mortgage by conditional sale or for redemption of an anomalous mortgage, the extinguishment of the right of redemption has to be specifically declared, as provided in clause (a) of sub-rule (3) of Rule 8 of Order XXXIV of the 40 WP.8646.2013 Code of Civil Procedure. These are the two circumstances-(1) a final decree in a suit for foreclosure under Order XXXIV, Rule 3(2); and (2) a final decree in a suit for redemption under Order XXXIV, Rule 8(3)(a) of the Code of Civil Procedure-when the right of redemption is extinguished."
(36) In "New Kenilworth Hotels (P) Ltd. v. Ashoka Industries Ltd. [(1995) 1 SCC 161]", it is held:-
"4. It is also equally settled law that in the suit for redemption unless it is a conditional sale or anomalous mortgage so long as the sale is not confirmed, the debtor has a right to deposit the entire sale money including the sale expenses and poundage fee and the court is under the statutory duty to accept the payment and direct redemption of the mortgage. In the light of the above law, it is not open to the appellant to contend that under the proviso to Section 60 of the T.P. Act, the Corporation has acted in derogation of its right as a mortgagee but acted as an owner under Section 29 of the Act. As stated earlier, the limited right given to the Corporation under Section 29 is to act as an owner to bring the properties of the defaulter to sale and not in derogation of the right under Section 60. The fiction of law under Section 29 does not have the effect of wiping out the statutory right of redemption under Section 60 of the T.P. Act. Therefore, the right of the mortgagee still subsists and that thereby the mortgagor is entitled to exercise the right under Section 60 of the T.P. Act."
(37) In view whereof the issues No.3 and 4 are to be answered in favour of the borrower 41 WP.8646.2013 respondent No.1. That, it was within his right to secure the mortgaged property even without bringing a suit for redemption, subject to payment of entire dues of the Bank. (38) Since respondent No.1 has already deposited Rs.20 Lacs (Rs.15 Lacs on 17.10.2008) + 5 Lacs on 13.10.2008) and Rs.29,10,000/- by 06/12/2013. Thus, total amount of Rs.49,10,000/- Lacs having been deposited, the settlement arrived at by the Debt Recovery Appellate Tribunal cannot be found fault with. The petitioner is at liberty to recover Rs.42,44,660/- from respondent No.2 Bank.
(39) As we are not inclined to interfere with the order passed by the DRAT, petition fails and is dismissed. There shall be no costs.
(Sanjay Yadav) (S.K. Awasthi)
Judge Judge
(10/08/2017) (10/08/2017)
pd