The Supreme Court bench comprising Justices M. R. Shah and C.T. Ravikumar was on Tuesday, hearing an appeal on the SARFAESI proceeding and held that against any steps taken by the Bank under Section 13(4) of the SARFAESI Act, the aggrieved party has a remedy under the SARFAESI Act by way of appeal under Section 17 of the SARFAESI Act to approach the DRT.
In the present case, the borrower filed S.A. No. 253 of 2012 before the DRT, Hyderabad against the action taken by the Bank under Section 13(4) of the SARFAESI Act. The DRT, Hyderabad by order dated 19.12.2016 gave the liberty to the borrower to file the list of intending buyers of the property and to bring forth with the buyers so as to enable the Tribunal to consider the same for repayment of the dues of the Bank. Thereafter on 25.02.2016 the DRT passed the order and the Bank was directed to go ahead with the sale as proposed excluding the Flat to be identified and communicated by the Applicant to the Respondent Bank by 29.02.2016 with full details of all the Purchasers to the Bank Officers on an affidavit so as to enable the Bank Officer to exclude those Flats, provided the remaining Flats were sufficient for recovery of the dues.
The flat in question namely Flat No.6401 was not the seven flats identified by the borrower to be kept out of the auction proceedings. At the relevant time, the flat in question was not sold among the seven flats mentioned before the Tribunal. That thereafter during the pendency of the S.A. No. 253 of 2012 and without obtaining prior approval and/or intimation to the DRT and even the bank, the borrower entered into the sale agreement with respondent no. 1 on 16.06.2016. At this stage, and in the MoU dated 10.04.2016 between the borrower and respondent no. 1 in Clause No. 4, it was specifically provided that first, the party should obtain clearance of sale from DRT/SBH so that they can process with the further agreement to sale. Thus, as such respondent No. 1 at the relevant time was aware of the pending DRT proceedings. Still, respondent No. 1 entered into the agreement to sell with the borrower on 16.06.2016. It is pertinent to note that thereafter when the Bank issued a public notice on 28.07.2016 for auctioning the properties of the borrower. Before the date of the auction, on 24.08.2016 the borrower filed an application before the DRT praying for a stay of all proceedings of the Bank pursuant to the auction notice dated 28.07.2016. The DRT was pleased to reject the said application for stay vide the order dated 24.08.2016 by observing that the sale of the flat in question without the permission of the Bank or the Tribunal is void. Thus, as such the transaction in favour of respondent no. 1 with respect to Flat no.6401 was already held to be void by the DRT. That thereafter, after the borrower has failed to obtain any order, respondent no.1 had straightway filed the writ petition challenging the e-auction notice which the borrower failed to get any relief before the DRT. If respondent no. 1 had approached the DRT against the e-auction notice he would have been non-suited in view of the earlier order passed by the DRT dated 24.08.2016. Therefore, calculatively respondent no. 1 filed the writ petition before the High Court challenging the e-auction notice and that too after conducting the e-auction on 31.08.2016 and the sale in favour of the appellant was confirmed. The Supreme Court noted that the aforesaid facts were pointed out before the High Court and despite the same the High Court has allowed the writ petition which was not sustainable at all. By the impugned order respondent no.1 has got the relief which as such the borrower failed to get from the DRT. On the aforesaid grounds, the impugned judgment and order passed by the High Court was unsustainable.
It is required to be noted that what was challenged before the High Court by respondent no. 1 in a writ petition under Article 226 of the Constitution of India was the e-auction notice which was pursuant to the action initiated by the Bank in the exercise of powers under Section 13(4) of the SARFAESI Act. At this stage, the e-auction was held/conducted on 31.08.2016 in which the appellant participated and was declared as a successful bidder and made a payment of 25% of the bid amount on the very day i.e., on 31.08.2016. However, thereafter respondent no.1 filed the writ petition before the High Court challenging the e-auction notice dated 28.07.2016 on 14.09.2016 that was after conducting of the auction.
The Supreme Court noted that against any steps taken by the Bank under Section 13(4) of the SARFAESI Act, the aggrieved party has a remedy under the SARFAESI Act by way of appeal under Section 17 of the SARFAESI Act to approach the DRT. Therefore, in view of the availability of the alternative statutory remedy available by way of proceedings/appeal under Section 17 of the SARFAESI Act, the High Court ought not to have entertained the writ petition under Article 226 of the Constitution of India in which the e-auction notice was under challenge. Therefore, the High Court has committed a very serious error in entertaining the writ petition under Article 226 of the Constitution of India challenging the e-auction notice issued by the Bank in the exercise of power under Section 13(4) of the SARFAESI Act.
In the present case, it is very debatable whether Section 13(8) of the SARFAESI Act shall be applicable in favour of a person who is only an agreement to the sale holder or Section 13(8) of the SARFAESI Act shall be applicable only in case of the borrower who is ready and willing to pay the entire debt. The borrower did not apply and/or invoke Section 13(8) and did not agree to clear the entire dues. The borrower failed to get any relief from the DRT. Therefore, the High Court has materially erred in allowing the writ petition.
In the present case, it is to be noted that as such what exact relief was granted by the High Court is not clear. The High Court has simply stated that the writ petition was allowed. However, what was challenged before the High Court was the e-auction notice dated 28.07.2016 which was already conducted on 31.08.2016. Therefore, the writ petition was filed much after conducting the e-auction on 31.08.2016. No consequential relief has been granted by the High Court. Therefore, also the impugned judgment and order passed by the High Court was unsustainable.
Now so far as the submission on behalf of respondent no.1 that the respondent no.1 has paid/deposited the amount of sale consideration and now the respondent no.1 has died his heirs will have to vacate the flat in question and on the other hand the appellant shall be entitled to return the amount of Rs. 6,45,250/- deposited at the relevant time being 25% of the auction sale consideration with interest is concerned, at the outset it is required to be noted that as such the transaction between the respondent no.1 and the borrower pursuant to the agreement to sale dated 16.06.2016 was absolutely illegal and behind the back of the DRT as well as the Bank and during the pendency of the proceedings before the Tribunal. In the order dated 24.08.2016, the Tribunal had in fact already held the sale transaction as void. As observed hereinabove even at the time when respondent no. 1 entered into the agreement to sale/MoU he was aware of the proceedings pending before the DRT which is apparent from Clause 4 of the MoU referred to hereinabove. Therefore, respondent no. 1 and/or his heirs cannot be permitted to get the benefit of his own wrong and cannot be permitted to get the benefit of a void transaction.
The Supreme Court quashed and set aside the order passed by the High Court and directed that on the full payment of the auction sale consideration by the appellant (after deducting the 25% of the amount already deposited earlier) with 9% interest from the date of the auction, till the actual amount is paid, to be paid within a period of four weeks, the sale certificate be issued in favour of the appellant with respect to Flat No. 6401. Whatever the amount was already deposited by respondent no. 1/his heirs shall be returned to respondent no. 1 (now his heirs) with interest at 9% from the date of such deposit till the actual date of return which shall be returned within a period of four weeks from today. The heirs of original respondent no. 1 were granted three months’ time to vacate the flat in question and are directed to hand over the peaceful and vacant possession of Flat No. 6401 to the appellant within a period of three months from today as ordered above.
Present appeals were allowed.
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