Celir LLP V/s Bafna Motors [CIVIL APPEAL NOS. 5542 – 5543 OF 2023]
The Supreme Court held that authorised officer and the Bank cannot act in a manner so as to keep the sword hanging on the neck of the auction purchaser.
The division bench headed by CJI Dhananjaya Y. Chandrachud and Justice J.B. Pardiwala has observed that bank is duty bound to follow the provisions of the law as any other litigant. It is to be noted that the Bank i.e., the secured creditor acts under the SARFAESI Act through the authorised officer who is appointed under Section 13(2). Thus, the authorised officer and the Bank cannot act in a manner so as to keep the sword hanging on the neck of the auction purchaser. The law treats everyone equally and that includes the Bank and its officers. The said enactments were enacted for speedy recovery and for benefitting the public at large and does not give any license to the Bank officers to act de hors the scheme of the law or the binding verdicts.
The court said that the Bank after having confirmed the sale under Rule 9(2) of the Rules of 2002 could not have withhold the sale certificate under Rule 9(6) of the Rules of 2002 and enter into a private arrangement with a borrower.
The genesis of the entire case lies in the illegitimate conduct of the Bank in placing different concerns above the clear provisions of the law. First, there was failure on the part of the Bank to issue sale certificate in favour of the auction purchaser despite the fact that the entire payment of auction bid was made.
Secondly, although the right of redemption clearly stood lapsed under Section 13(8) of the SARFAESI Act and auction having taken place wherein full bid amount was received, yet the Bank proceeded to accept the offer of full payment of the Borrower which is clearly impermissible in law.
Once the auction notice is published in accordance with Section 13(8) of the SARFAESI Act, then unless and until the auction is held to be bad and illegal in the facts of the case, the right of redemption of mortgage is not available to the borrower.
The entire bid amount was paid by the auction purchaser. Thus, the Bank was legally bound to issue the sale certificate as per the language of Rule 9(6) of the Rules of 2002. The provision employs the phrase “shall”. Thus, it is an instance of mandatory provision. There is nothing more in the realm of law that the auction purchaser can do once he has made the entire payment to the Bank. The fact that the Respondent Bank failed to issue the sale certificate raises serious concerns, when there was no stay by any competent forum. Even otherwise the general conduct of the Respondent Bank has not been satisfactory.
Once the entire bid price is paid and there is no stay granted by any forum known to law, the Bank is duty bound to issue a valid Sale Certificate and hand over the physical possession of the secured asset to the auction purchaser.
The Bank and its officers took absolutely inconsistent stand. Before the DRT, they opposed the offer for redemption of mortgage as recorded by the High Court, while before the High Court they made a complete 360 degrees turn and accepted the offer. The lame and weak justification assigned for the same was to bring quietus to the matter. This again shows that the decisions of the Bank are not taken as per the provisions of law but according to the whims and fancies of the Bank officers.
The Apex court ruled that the amended provisions of Section 13(8) of the SARFAESI Act, make it clear that 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 effect, the right of redemption available to the borrower under the present statutory regime is 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 the completion of the sale or transfer of the secured asset in favour of the auction purchaser.
The court directed that the respondent Bank shall refund the entire amount deposited by the borrowers i.e., an amount of Rs.129 crore paid by them in lieu of the redemption of mortgage of the secured asset at the earliest. The appellant shall pay an additional amount of Rs. 23.95 crore to the Bank within a period of one week from today and subject to such deposit, the Bank shall issue the sale certificate in accordance with Rule 9(6) of the Rules of 2002.