# MATHEW VARGHESE v. M. AMRITHA KUMAR & ORS

- **Citation:** [2014] 2 S.C.R. 736
- **Court:** Supreme Court of India
- **Decided:** 2014-02-10
- **Case number:** Civil Appeal Nos. 1927-1929 of 2014
- **Bench:** A.K. Patnaik, Fakkir Mohamed Ibrahim Kalifulla
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mathew-varghese-v-m-amritha-kumar-ors-29861
- **Pages:** 61

## Headnote

SEGUR/TISA T/ON AND RECONSTRUCT/ON OF
C FINANCIAL
ASSETS
AND
ENFORCEMENT
OF
SECURITY INTEREST ACT, 2002:
s.13(1) - Held: Any secured creditor may be entitled to
enforce the secured asset created in its favour on its own
0 without resorting to any court proceedings or approaching the
Tribunal, however, such enforcement should be in conformity
with the other provisions of the SARFAESI Act.
s.13(8) - Right of borrower - Held: There is a valuable
right recognized and asserted in favour of the borrower, who
E is the owner of the secured asset and who is extended an
opportunity to take all efforts to stop the sale or transfer till the
last minute before which the said sale or transfer is to be
effected - Such an ownership right is a Constitutional Right
protected under Article 300A of the Constitution, which
F mandates that no person shall be deprived of his property
save by authority of law - Therefore, de hors, the extent of
borrowing made and whatever costs, charges were incurred
by the secured creditor in respect of such borrowings, when it
comes to the question of realizing the dues by bringing the
G property entrusted with the secured creditor for sale to realize
money advanced without approaching any Court or Tribunal,
the secured creditor as a trustee cannot deal with the said
property in any manner it likes and property. can be disposed
of only in the manner prescribed in the SARFAESI Act -
H
736
MATHEW VARGHESE v. M. AMRITHA KUMAR &
737
ORS.
Therefore, the creditor should ensure that the borrower was
A
clearly put on notice of the date and time by which either the
sale or transfer will be effected in order to provide the required
opportunity to the borrower to take all possible steps for
retrieving his property or at least ensure that in the process
of sale the secured asset derives the maximum benefit and
B
the secured creditor or anyone on its behalf is not allowed to
exploit the situation of the borrower by virtue of the
proceedings initiated under the SARFAESI Act - Constitution
of India, 1950 - Article 300A.
s.13(8) - Conflict with r.15(1) of Income Tax Rules, 1962 C
- Held: r. 15 of the Income Tax Rules, 1962 does not in any
way conflict with either s.13(8) of the SARFAESI Act or rr.8
and 9 of the Security Interest (Enforcement) Rules, 2002 - The
sub-rule (1) of r. 15 only deals, with the discretion of the Tax.
Recovery Officer to adjourn the sale by recording his reasons·
D
for such adjournment - As far as sub-rule (2) is concerned,
the same is clear to the effect that a sale of immovable
property once adjourned under sub-rule (1) for a longer period
than one calendar month, a fresh proclamation of sale should
be made unless the defaulter consents to waive it - The said
E
sub-rule also does not conflict with any of the provisions of
the SARFAESI Act, in particular s.13 or rr.8 and 9.
s.35 - Non obstante clause - Held: s.35 states that the
provisions of the SARFAESI Act will have overriding effect
F
notwithstanding anything inconsistent contained in any other
law for the time being in force - Therefore, reading s.35 and
s.37 together, it will have to be held that in the event of any of
the provisions of RDDB Act not being inconsistent with the
provisions of the SARFAESI Act, the application of both the
G
Acts, namely, SARFAESI Act and RDDB Act, would be
complementary to each other - The effect of s.37 would,
therefore, be that in addition to the provisions contained under
the SARFAESI Act, in respect of proceedings initiated under
the said Act, it will be in order for a party to fall back upon the
H
738
SUPREME COURT REPORTS
[2014] 2 S.C.R.
A provisions of the other Acts mentioned in s.37 namely, the
Companies Act, 1956, the Securities Contract& (Regulation)
Act, 1956, the Securities and Exchange Board of India Act,
1992, the Recovery of Debts Due to Banks and Finances
Institutions Act, 1993, or any other law for the time being in
B forc.e - Recovery of Debts Due to Banks and Finances
Institutions Act, 1993.
SECURIT

## Text

_Characters 0–39,876 of 123,417. This is a partial read: ask again with offset=39876 for what follows._

A
B
[2014] 2 S.C.R. 736
MATHEW VARGHESE
v.
M. AMRITHA KUMAR & ORS.
(Civil Appeal Nos. 1927-1929 of 2014)
FEBRUARY 10, 2014
[A.K. PATNAIK AND FAKKIR MOHAMED
IBRAHIM KALIFULLA, JJ.]
SEGUR/TISA T/ON AND RECONSTRUCT/ON OF
C FINANCIAL
ASSETS
AND
ENFORCEMENT
OF
SECURITY INTEREST ACT, 2002:
s.13(1) - Held: Any secured creditor may be entitled to
enforce the secured asset created in its favour on its own
0 without resorting to any court proceedings or approaching the
Tribunal, however, such enforcement should be in conformity
with the other provisions of the SARFAESI Act.
s.13(8) - Right of borrower - Held: There is a valuable
right recognized and asserted in favour of the borrower, who
E is the owner of the secured asset and who is extended an
opportunity to take all efforts to stop the sale or transfer till the
last minute before which the said sale or transfer is to be
effected - Such an ownership right is a Constitutional Right
protected under Article 300A of the Constitution, which
F mandates that no person shall be deprived of his property
save by authority of law - Therefore, de hors, the extent of
borrowing made and whatever costs, charges were incurred
by the secured creditor in respect of such borrowings, when it
comes to the question of realizing the dues by bringing the
G property entrusted with the secured creditor for sale to realize
money advanced without approaching any Court or Tribunal,
the secured creditor as a trustee cannot deal with the said
property in any manner it likes and property. can be disposed
of only in the manner prescribed in the SARFAESI Act -
H
736
MATHEW VARGHESE v. M. AMRITHA KUMAR &
737
ORS.
Therefore, the creditor should ensure that the borrower was
A
clearly put on notice of the date and time by which either the
sale or transfer will be effected in order to provide the required
opportunity to the borrower to take all possible steps for
retrieving his property or at least ensure that in the process
of sale the secured asset derives the maximum benefit and
B
the secured creditor or anyone on its behalf is not allowed to
exploit the situation of the borrower by virtue of the
proceedings initiated under the SARFAESI Act - Constitution
of India, 1950 - Article 300A.
s.13(8) - Conflict with r.15(1) of Income Tax Rules, 1962 C
- Held: r. 15 of the Income Tax Rules, 1962 does not in any
way conflict with either s.13(8) of the SARFAESI Act or rr.8
and 9 of the Security Interest (Enforcement) Rules, 2002 - The
sub-rule (1) of r. 15 only deals, with the discretion of the Tax.
Recovery Officer to adjourn the sale by recording his reasons·
D
for such adjournment - As far as sub-rule (2) is concerned,
the same is clear to the effect that a sale of immovable
property once adjourned under sub-rule (1) for a longer period
than one calendar month, a fresh proclamation of sale should
be made unless the defaulter consents to waive it - The said
E
sub-rule also does not conflict with any of the provisions of
the SARFAESI Act, in particular s.13 or rr.8 and 9.
s.35 - Non obstante clause - Held: s.35 states that the
provisions of the SARFAESI Act will have overriding effect
F
notwithstanding anything inconsistent contained in any other
law for the time being in force - Therefore, reading s.35 and
s.37 together, it will have to be held that in the event of any of
the provisions of RDDB Act not being inconsistent with the
provisions of the SARFAESI Act, the application of both the
G
Acts, namely, SARFAESI Act and RDDB Act, would be
complementary to each other - The effect of s.37 would,
therefore, be that in addition to the provisions contained under
the SARFAESI Act, in respect of proceedings initiated under
the said Act, it will be in order for a party to fall back upon the
H
738
SUPREME COURT REPORTS
[2014] 2 S.C.R.
A provisions of the other Acts mentioned in s.37 namely, the
Companies Act, 1956, the Securities Contract& (Regulation)
Act, 1956, the Securities and Exchange Board of India Act,
1992, the Recovery of Debts Due to Banks and Finances
Institutions Act, 1993, or any other law for the time being in
B forc.e - Recovery of Debts Due to Banks and Finances
Institutions Act, 1993.
SECURITY INTEREST (ENFORCEMENT) RULES,
2002:
C
rr.8 and 9 - Procedure to be followed by a secured
creditor while resorting to a sale after the issuance of the
proceedings u/ss.13(1) to (4) of the SARFAESI Act - Held:
Reading sub-rule (6) of r.8 and sub-rule (1) of r.9 together, the
service of individual notice to the borrower, specifying clear
D 30 days time gap for effecting any sale of immovable
secured asset is a statutory mandate - No sale should be
affected before the expiry of 30 days from the date on which
the public notice of sale is published in the newspapers -
Therefore, the requirement u/r.8(6) and r.9(1) contemplates
E a clear 30 days individual notice to the borrower and also a
public notice by way of publication in the newspapers.
rr.8 and 9 - Sale effected in favour of appellant without
complying with the mandatory requirement of 30 days notice
to the borrower - High Court set aside the sale and passed
F interim order directing the borrower to furnish demand draft
of Rs.2 crores in favour of appellant and in case of nonpayment directed to confirm sale in favour of appellant -
Payment not made by borrowers - Request by borrowers for
six weeks time to arrange money - By another interim order,
G High Court extended time and permitted 8th respondent to
deposit Rs.2.03 crores and on such deposit to cancel sale in
favour of appellant - Held: Since very valuable rights of the
appellant were at stakes, there was no justification at all for
High Court to interfere with the said right in such a casual
H manner by passing interim orders on flimsy grounds raised
MATHEW VARGHESE v. M. AMRITHA KUMAR &
739
ORS.
by borrowers - Ownership right which accrued in favour bf A
appellant ought not to have been interfered with by the High
Court - Interim orders set aside - Value of the property was
knocked out in favour of the appellant for Rs. 1. 27 crores -
Since proper procedure for effecting sale was not followed, the
price fetched through the appellant cannot be held to be the
B
correct price for the mortgaged property - In the year 2010 the
property could fetch Rs.2.03 crores while the price paid by the
appellant was Rs.1.27 crores - Therefore, after giving credit
of Rs.1.27 crores, the appellant directed to pay a further sum
of Rs. 76 lacs to the borrowers.
c
Respondents no.1 and 2 stood guarantors in respect
of credit facility for Rs.30 lacs granted by the 4th
respondent bank and created an equitable mortgage in
favour of bank by depositing the title deeds of their
property. The transaction became non performing asset D
and the respondent bank filed recovery suit. The
respondent bank also issued a notice under Section
13(2) of SARFAESI Act for Rs. 77 lacs. The respondents
no.1 and 2 filed a Securitisation Application before the
ORT challenging the possession notice issued by
E
respondent bank and also restraining the bank from
evicting them. The attempts for one time settlement
between them failed and the bank withdrew its offer of
OTS of Rs.55 lacs.
On 14.8.2007, the 4th respondent bank issued a
notice to Respondents no.1 and 2 of its intention to sell
F
the property under Rule 8(6) of the Security. Interest
(Enforcement) Rules, 2002 by fixing reserve price of
Rs.1.25 crores. The notice was issued in two newspapers
G
inviting tenders-cum-auction from public. The appellant
and one M/s KC submitted their tenders.
Respondents no.1 and 2 filed a writ petition before
the High Court. The single judge of the High Court
disposed of the writ petition directing ORT to hear the
H
740
SUPREME COURT REPORTS
[2014] 2 S.C.R.
A parties and dispose of cases without delay and directed
respondent bank to defer the sale posted on 25.9.2007
by six weeks by imposing condition on respondents no.1
and 2 to deposit Rs.10 lacs before the date of sale. On
27.12.2007, the ORT dismissed the Securitisation
9 Application. On 28.12.2007, the 4th Respondent-Bank
accepted the tender of Rs.1.27 crores offered by the
appellant and asked the appellant to deposit 25% of the
amount on that day itself and pay the balance amount
within 15 days. The appellant complied with it. The
C respondent bank confirmed the sale in favour of the
appellant. Respondents no.1 and 2 were informed about
the confirmation of sale and were directed to collect the
balance amount available with the 4th Respondent-Bank.
Respondents no.1 and 2 filed a writ petition challenging
the vires of the Rules, 2002 on the ground that it violated
D their right of redemption by denying them adequate
opportunity and time to repay the borrowed sum and the
action of the Bank in having acted surreptitiously in
selling the property without informing them. The said writ
petition was dismissed by the single judge on the ground
E that the Respondents no.1 and 2 got an alternative
efficacious remedy available under the SARFAESI Act.
Respondents no.1 and 2 filed writ appeal. In the
meantime, on 24.06.2009, the 4th Respondent-Bank
transferred the property in favour of the appellant under
F a duly registered certificate of sale.
By the impugned order, the Division Bench set aside
the sale on the ground that it was not conducted in a fair
and proper manner and imposed condition on
G Respondents 1 and 2 to furnish a Demand Draft of Rs.2
crores in favour of the appellant and if payment is not
made, as directed, the sale in favour of the appellant
would stand confirmed and the writ appeal would
automatically stand dismissed. In the event of the
H payment of Rs.2 crores, the appellant was directed to
MATHEW VARGHESE v. M. AMRITHA KUMAR &
741
ORS.
hand over the original sale deed obtained by him from the
A
Bank to enable Respondents no.1 and 2 to approach the
Sub-Registrar and Revenue Authorities for cancellation
of registration, consequent mutation, etc.
Respondents no.1 and 2 did not make the payment
8
within the said date, as directed by the Division Bench.
Instead an application was filed by the Respondents 1
and 2 seeking further six weeks time to effect the payment
of Rs.2 crores. The Division Bench passed order on
18.06.2010, extending the time till 20.06.2010. The said
C
extension was granted by holding that on such deposit,
sale made by the 4th Respondent-Bank in favour of the
appellant would stand cancelled and the Bank should
effect the sale in favour of the 8th Respondent. The 8th
Respondent was directed to deposit Rs.2.03 crores
before the 4th Respondent-Bank on 19.06.2010 and the
D
time granted for payment in terms of the judgment was
extended till 20.06.2010. On 8.7.2010, after noting that
appellant had not withdrawn the amounts deposited with
the 4th respondent bank, the Division Bench allowed the
I.A. and directed 4th respondent Bank to execute the sale
E
deed in favour of the 8th Respondent for the sale
consideration of Rs.2.03 crores. The instant appeals were
filed challenging the order of the Division Bench of the
High Court ..
F
Disposing of the appeals, the Court
HELD: 1. Under Section 13(1) of the SARFAESI Act,
it is provided that any security interest created in favour
of the SECURED CREDITOR may be enforced without
the intervention of the Court and Tribunal by such creditor G
in accordance with the provisions of this Act. The nonobsta nte clause in the opening set of expressions
contained in Section 13(1) is restricted to Section 69 or
Section 69A of the T.P. Act. The only other relevant aspect
contained in the said sub-section is that such
H
742
SUPREME COURT REPORTS
[2014] 2 S.C.R.
A enforcement should be in accordance with the provisions
of this Act. S~ction 13(1) says that while on the one hand,
any SECURED CREDITOR may be entitled to enforce the
SECURED ASSET created in its favour on its own without
resorting to any court proceedings or approaching the
B Tribunal, such enforcement should be in conformity with
the other provisions of the SARFAESl·Act. [Paras 24) [767G-H; 768-B-C]
c
2. Sub-section (8) of Section 13 states that a
borrower can tender to the SECURED CREDITOR the
dues together with all costs, charges and expenses
incurred by the SECURED CREDITOR at any time before
the date fixed for sale or transfer. In .the event of such
tender once made as stipulated in the said provision, the
mandate is that the SECURED ASSET should not be sold
D or transferred by the SECURED CREDITOR. It is further
reinforced to the effect that no further step should also
be taken by the SECURED CREDITOR for transfer or sale
of the SECURED ASSET. There is a valuable right
recognized and asserted in favour of the borrower, who
E is the owner of the SECURED ASSET and who is
extended an opportunity to take all efforts to stop the sale
or transfer till the last minute before which the said sale
or transfer is to be effected. Having regard to such a ·
valuable right of a debtor having been embedded in the
F said sub-section, ·it will have to be stated in
uncontroverted terms that the said provision has been
engrafted in the SARFAESI Act primarily with a view to
protect the rights of a borrower, inasmuch as, such an
ownership right is a Constitutional Right protected under
G Article 300A of the Constitution, which mandates that no
person shall be deprived of his property save by
authority of law. Therefore, de hors, the extent of
borrowing made and whatever costs, charges were
incurred by the SECURED CREDITOR in respect of such
H borrowings, when it comes to the question of realizing
MATHEW VARGHESE v. M. AMRITHA KUMAR &
743
ORS.
the dues by bringing the property entrusted with the
A
SECURED CREDITOR for sale to realize money
advanced without approaching any Court or Tribunal, the
SECURED CREDITOR as a TRUSTEE cannot deal with
the said property in any manner it likes and can be
disposed of only in the manner prescribed in the
8
SARFAESI Act. Therefore, the creditor should ensure that
the borrower was clearly put on notice of the date and
time by which either the sale or transfer will be effected
in order to provide the required opportunity to the
borrower to take all possible steps for retrieving his
C
property or at least ensure that in the process of sale the
SECURED ASSET derives the maximum benefit and the
SECURED CREDITOR or anyone on its behalf is not
allowed to exploit the situation of the borrower by vk1:ue
of the proceedings initiated under the SARFAESI Act. 0
[Para 26) [768-F-H; 769-C-H; 770-A]
Valji Khimji and Company vs. Official Liquidator of
Hindustan NitroProduct (Gujarat) Limited and Ors. (2008) 9
SCC 299: 2008 (12) SCR 1; United Bank of India vs.
Satyawati Tondon and Ors. (2010) 8 SCC 110: 2010 (9) SCR
E
. 1; Narandas Karsondas vs. S.A. Kamtam and Anr. (1977) 3
SCC 247: 1977 (2) SCR 341; Mardia Chemicals Ltd. and
Ors. vs. Union of India and Ors. (2004) 4 SCC 311: 2004 (3)
SCR 982 - referred to.
3. Rules 8 and 9 of the Security Interest · F
(Enforcement) Rules, 2002 prescribe the procedure to be
followed by a SECURED CREDITOR while resorting to a
sale after the issuance of the proceedings under Section
13(1) to (4) of the SARFAESI Act. Under Rule 9(1), it is
prescribed that no sale of an immovable property under · G
the rules should take place before the expiry of 30 days
from the date on which the public notice of sale is
published in the newspapers as referred to in the proviso
to sub-rule (6) of Rule 8 or notice of sale has been served
to the borrower. Sub-rule (6) of Rule 8 again states that
H
744
SUPREME COURT REPORTS
[2014] 2 S.C.R.
A the authorized officer should serve to the borrower a
notice of 30 days for the sale of the immovable
SECURED ASSETS. Reading sub-rule (6) of Rule, 8 and
sub-rule (1) of Rule 9 together, the service of individual
notice to the borrower, specifying clear 30 days time gap
8 for effecting any sale of immovable SECURED ASSET is
a statutory mandate. It is also stipulated that no sale
should be affected before the expiry of 30 days from the
date on which the public notice of sale is published in the
newspapers. The use of the expression 'or' in Rule 9(1)
should be read as 'and' as that alone woufd- l;>e in
C consonance with Section 13(8) of the SARFAESI Act. The_
other prescriptions contained in the- proviso to sub-rule
(6) of Rule 8 relates to the details to be set out in the
newspaper publication, one of which should be in
'vernacular language' with sufficient circulation in the
D locality by setting out the terms of the sale. While setting
out the terms of the sale, it should contain the description
of the immovable property to be sold, the known
encumbrances of the SECURED CREDITOR, the
secured debt for which the property is to be sold, the
E reserve price below which the sale cannot be effected,
the time and place of public auction or the time after which
sale by any other mode would be completed, the deposit
of earnest money to be made and any oth~r details which
the authorized officer considers material for a purchaser
to know in order to judge the nature and value of the
F property. Such a detailed procedure while resorting to a
sale of an immovable SECURED ASSET is prescribed
under Rules 8 and 9(1). The paramount objective is to
provide sufficient time and opportunity to the borrower
to take all efforts to safeguard his right of ownership
G either by tendering the dues to the creditor before the
date and time of the sale or transfer, or ensure that the
SECURED ASSET derives the maximum price and no one
is allowed to exploit the vulnerable situation in which the
borrower is placed. [Paras 28 to 30] [770-D-G; 771-B-F;
H 772-C-D]
MATHEW VARGHESE v. M. AMRITHA KUMAR &
745
ORS.
4. Rules 8(1) to (3) and in particular sub-rule (3)
A
speaks about the responsibility of the SECURED
CREDITOR vis-a-vis the SECURED ASSET taken
possession of. Under sub-rule (1) of Rule 8, the
prescribed manner in which the possession is to be
taken by issuing the notice in the format in which such
notice of possession is to be issued to the borrower is
stipulated. Under sub-rule (2) of Rule 8 again, it is stated
B
as to how the SECURED CREDITOR should publish the
notice of possession as prescribed under sub-rule (1) to
be made in two leading newspapers, one of which
should be in the vernacular language having sufficient C
circulation in the locality and also such publication
should have been made seven days prior to the intention
of taking possession. Sub-rule (3) of Rule 8 really casts
much more onerous responsibility on the SECURED
CREDITOR once possession is actually taken by its
D
authorised officer. Under sub-rule (3) of Rule 8, the
property taken possession of by the SECURED
CREDITOR should be kept in its custody or in the custody
of a person authorized or appointed by it and it is
stipulated that such person holding possession should
take as much care of the property in its custody as a
owner of ordinary prudence would under similar
circumstances take care of such property. The
underlining purport of such a requirement is to ensure
that under no circumstances, the rights of the owner till
such right is transferred in the manner known to law is
infringed. A reading of Rules 8 and 9, in particular, subrule (1) to (4) and (6) of Rule 8 and sub-rule (1) of Rule 9
makes it clear that simply because a secured interest in
a SECURED ASSET is created by the borrower in favour
E
F
of the SECURED CREDITOR, the said asset in the event G
of the same having become a NON-PERFORMING ASSET
cannot be dealt with in a light-hearted manner by way of
sale or transfer or disposed of in a casual manner or by
not adhering to the prescriptions contained under the
SARFAESI Act and the Rules. [paras 31, 32] [772-E-H;
H
746
SUPREME COURT REPORTS
[2014] 2 S.C.R.
A 773-A-C, F-G]
5. A close reading of Section 37 shows that the
provisions of the SARFAESI Act or the rules framed
thereunder will be in addition to the provisions of the
B RDDB Act. Section 35 of the SARFAESI Act states that
the provisions of the SARFAESI Act will have overriding
effect notwithstanding anything inconsistent contained
in any other law for the time being in force. Therefore,
reading Sections 35 and 37 together, it will have to be
held that in the event of any of the provisions of RDDB
C Act not being inconsistent with the provisions of the
SARFAESI Act, the application of both the Acts, namely,
SARFAESI Act and RDDB Act, would be complementary
to each other. The HEADING of the said Section also
makes the position clear that application of other laws are
D not barred. The effect of Section 37 would, therefore, be
that in addition to the provisions contained under the
SARFAESI Act, in respect of proceedings initiated under
the said Act, it will be in order for a party to fall back upon
the provisions of the other Acts mentioned in Section 37,
E namely, the Companies Act, 1956, the Securities
Contracts (Regulation) Act, 1956, the Securities and
Exchange Board of India Act, 1992, the Recovery of Debts
Due to Banks and Finances Institutions Act, 1993, or any
other law for the time being in force. [paras 42, 43] [780F H; 781-A-C, H; 782-A-B]
Transcore Vs. Union of India and Anr. (2008) 1 SCC 125:
2006 (9) Suppl. SCR 785; Ram Kishun and Ors. vs. State
of Uttar Pradesh and Ors. (2012) 11 SCC 511: 2012 (6) SCR
105; Bhinka and Ors. vs. Charan Singh AIR 1959 SC 960:
G 1959 Suppl. SCR 798 - relied on.
Eastern Counties etc. Railway Vs. Marriage (1861) 9
HLC 32 - referred to.
Craias on Statute Law, Seventh Edition, p.207- referred
H to.
MATHEW VARGHESE v. M. AMRITHA KUMAR &
747
ORS.
6. The application of the SARFAESI Act will be in
A
addition to, in the instant case to Section 29 of the RDDB
Act. Whatever stipulations contained in Section 29 as
regards the application of certain provisions of the
Income Tax Act, 1961 in particular Schedule 2 Part I Rule
15 of the Income Tax Rules, 1962 for effecting a sale or
B
transfer would apply automatically. 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 Rules, 1962. Section
29 of the RDDB Act is an enabling provision under which c
the Second and Third schedule 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,
0
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 Schedule to
the Income Tax Act and the Income Tax Rules, 1962 have
to be followed. Therefore, a reading Section 37 of the
E
SARFAESI Act and Section 29 of the RDDB Act, 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, no conflict with reference to any
of the provisions of the SARFAESI Act, takes place. [paras
45, 46] [783-B-H]
7. A reading of the Rule 15 of the Income Tax Rules,
1962 does not in any way conflict with either Section 13(8)
F
of the SARFAESI Act or Rules 8 and 9 of the Rules, 2002.
Sub-rule (1) of Rule 15 only deals with the discretion of G
the Tax Recovery Officer to adjourn the sale by recording
his reasons for such adjournment. The said Rule does
not in any way conflict with either Rures 8 or 9 or Section
13, in particular sub-section (1) or sub-section (8) of the
SARFAESI Act. Therefore, to that extent there is no
H
748
SUPREME COURT REPORTS
[2014] 2 S.C.R.
A difficulty in applying Rule 15. As far as sub-rule (2) is
concerned, the same is clear to the effect that a sale of
immovable property once adjourned under sub-rule (1)
for a longer period than one calendar month, a fresh
proclamation of sale should be made unless the defaulter
B consents to waive it. The said sub-rule also does not
conflict with any of the provisions of the SARFAESI Act,
in particular Section 13 or Rules 8 and 9. In fact there is
no provision relating to grant of adjournment or issuance
of a fresh proclamation for effecting the sale after the
c earlier date of sale was not adherered to in the SARFAESI
Act. In such circumstances going by the prescription
contained in Section 37 of the SARFAESI Act, the
provision contained in Section 29 of the RDDB Act will
be in addition to and not in derogation of the provisions
0 of the SARFAESI Act, the provisions contained in Rule 15,
which is applicable by virtue of the stipulation contained
in Section 29 of the RDDB Act, whatever stated in subrule (2) of Rule 15 should be followed in a situation where
a notice of sale notified as per Rules 8 and 9(1) of the
E Securitisation Trust Rules, read along with Section 13(8)
gets postponed. Such a construction of the provisions,
namely, Sections 37, 13(8) and 37 of the SARFAESI Act,
read along with Section 29 with the aid of Rule 15 could
alone be made and in no other manner, therefore, hold
that unless and until a clear 30 days notice is given to the
F borrower, no sale or transfer can be resorted to by a
SECURED CREDITOR. In the event of any such sale
properly notified after giving 30 days clear notice to the
borrower did not take place as scheduled for reasons
which cannot be solely attributable to the borrower, the
G SECURED C.REDITOR cannot effect the sale or transfer
of the SECURED ASSET on any subsequent date by
relying upon the notification issued earlier. In other
words, once the sale does not take place pursuant to a
notice issued under Rules 8 and 9, read along with
H Section 13(8) for which the entire blame cannot be
MATHEW VARGHESE v. M. AMRITHA KUMAR &
749
ORS.
thrown on the borrower, it is imperative that for effecting
A
the sale, the procedure prescribed above will have to be
followed afresh, as the notice issued earlier would lapse.
As per sub-rule (8) of Rule 8, sale by any method other
than public auction or public tender can be on such
terms as may be settled between the parties in writing.
B
As far as sub-rule (8) is concerned, the parties referred
to can only relate to the SECURED CREDITOR and the
borrower. It is, therefore, imperative that for the sale to be
effected under Section 13(8), the procedure prescribed
under Rule 8 read along with 9(1) has to be necessarily c
followed, inasmuch as that is the prescription of the law
for effecting the sale. Any other construction will be doing
violence to the provisions of the SARFAESI Act, in
particular Section 13(1) and (8) of the said Act. [para 48,
49] [784-D-H; 785-A-H; 786-A-B]
8. In the instant case, the initial sale was notified to
take place on 25.09.2007. The paper publication was
made on 23.08.2007. Respondents 1 and 2 were informed
D
by the 4th Respondent-Bank only on 30.08.2007.
Therefore, as the sale date was 25.09.2007 it did not fulfill
E
the mandatory requirement of 30 clear days notice to the
borrower as stipulated under sub-rule (6) of Rule 8. But
at the intervention of the Court, the sale date fixed on
25.09.2007 was adjourned by six weeks. In any case, the
sale was not effected even after the six weeks period
F
expired as directed. The Securitisation Application came
to be disposed of by the ORT only on 27 .12.2007.
Therefore, once the Securitisation Application was
dismissed on 27.12.2007, even assuming that there was
no impediment for the SECURED CREDITOR, namely,
G
the 4th Respondent-Bank to resort to sale under the
provisions of the SARFAESI Act, there should have been
a fresh notice issued in accordance with Rules 8(6) and
9(1) of the Rules, 2002. Unfortunately, the 4th
Respondent-Bank stated to have effected the sale on
H
750
SUPREME COURT REPORTS
[2014] 2 S.C.R.
A 28.12.2007 by accepting the tender of the appellant and
by way of further process, directed the appellant to
deposit the 25% of the amount on that very day and also
directed to deposit the balance amount within 15 days,
which was deposited by the appellant on 11.01.2008. In
B fact, after the deposit of the 25% of the amount on
28.12.2007, the 4th Respondent-Bank stated to have
confirmed the sale in favour of the appellant on
31.12.2007. After the deposit of the balance amount on
11.01.2008, the 4th Respondent-Bank informed the
c Respondents no.1 and 2 about the confirmation of sale
and thereby, provided no scope for Respondents no.1
and 2 to tender the dues of the SECURED CREDITOR,
namely, the 4th Respondent-Bank with all charges,
expenses etc., as has been provided under Section 13(8)
0 of the SARFAESI Act. Therefore, the whole procedure
followed by the 4th Respondent-Bank in effecting the sale
on 28.12.2007 and the ultimate confirmation of the sale
on 11.01.2008, stood vitiated as the same was not in
conformity with the provisions of the SARFAESI Act and
the Rules framed thereunder. Though, such a detailed
E consideration of the legal issues was not made by the
Division Bench while setting aside the sale effected in
favour of the appellant, having regard to the construction
of the provisions of the SARFAESI Act, the RDDB Act and
the relevant Rules, the Judgment of the Division Bench
F was perfectly justified. [Paras 50, 51] [786-C-H; 787-A-G]
9. In the order dated 18.06.2010 passed by the
Division Bench, reference was made to the stand of
Respondents 1 and 2 that they had to raise funds by
G arranging for the sale of the very same SECURED
ASSET, which took time as many buyers were reluctant
to come forward because of the chance of continued
litigation. The Division Bench without anything more,
accepted the said reason (lnd by allowing the I.A.
H permitted the 8th Respondent to deposit 2.03 crores by
MATHEW VARGHESE v. M. AMRITHA KUMAR &
751
ORS.
19.06.2001 and on such deposit it held that the time
A
granted for payment stood extended till 20.06.2010. It
further held that on such deposit being. made, the sale
made by the 4th Respondent-Bank in favour of the
appellant would be cancelled and the 4th Respondent
should effect a sale in favour of the 8th Respondent. In
B
the subsequent I.A., the Division Bench directed the 4th
Respondent-Bank to execute the sale in favour of the 8th
Respondent taking ote of the fact of deposit of Rs.2.03
crores by the 8th Respondent with the 4th RespondQntBank. After the Order dated 18.06.2010 and 08.07.20·10, c
the Appellant filed the Special Leave Petition in this Court.
Vide Order dated 08.08.2013, while declining to vacate
Status Quo Order dated 30.07 .2010, the Special Leave
Petition itself was directed to be listed for final hearing.
Though the 8th Respondent is stated to have deposited
D
the sum of Rs.2.03 crores with the 4th Respondent-Bank,
as per the Order dated 18.06.2010 in IA, the other
directions in the main Order and the subsequent
directions contained in the Orders dated 18.06.2010 and
08.07.2010, were not carried out. The sale which was
already fixed in favour of the appellant continued to. E
remain in force and the sum of Rs.2.03 crores deposited
by the 8th Respondent remained with the 4th
Respondent-Bank. [Paras 56, 57) [791-B-F; 792-A-C]
10. There was absolutely no justifiable grounds for
F
the Division Bench to grant further time in its Order dated
18.06.2010, it will be travesty of justice if the earlier
Judgment dated 08.03.2010, which worked itself out on
08.05.2010, is to be reversed for the flimsy grounds raised
by the Respondents no. 1 and 2 that they could not raise
G
funds in spite of two months time granted to them for
paying a sum of Rs.2 crores in favour of the appellant.
While the time granted by_ the Division Bench expired by
08.05.2010, the application for extension was filed 40
days later, i.e. on 10.06.2010. Therefore, for such a
H
752
SUPREME COURT REPORTS
[2014] 2 S.C.R.
A recalcitrant attitude displayed by Respondents 1 and 2
in respect of a litigation which involved very high stakes,
the Division Bench should not have come for their rescue
in the absence of any weighty reasons. The reason
adduced on behalf of Respondent 1 and 2 is the
B standard reason which any party would plead while
seeking for extension of time. Since very valuable rights
of the appellant were at stakes and the Order of the
Division Bench also remained in force, in so far as it
related to the cancellation of the sale deed, which existed
C in favour of the appellant till 08.05.2010 and by virtue of
the non-compliance of the conditions imposed in the said
Judgment dated 08.03.2010 by the Respondents no.1 and
2, the ownership rights of the appellant got crystallized
on and after 09.05.2010, there was no justification at all
0 for the Division Bench to interfere with the said right in
such a casual manner by accepting the flimsy reasons
of the Respondents no.1 and 2. The ownership right
which got crystallized in favour of the appellant as on
09.05.2010, could not have been snatched away by the
Division Bench by passing the impugned orders dated
E 18.06.2010 and 08.07.2010. With reference to the right of
ownership of the Respondents 1 and 2 with reliance
upon Article 300A of the Constitution would equally apply
to the appellant as well in such a situation. Therefore,
such a right which accrued in favour of the appellant
F ought not to have been interfered with by the Division
Bench and the Orders passed in the interim application
filed at the instance of the Respondents no.1 and 2, along
with the 8th Respondent herein are not justified.
Therefore, while upholding the Judgment of the Division
G Bench dated 08.03.2010, the Orders dated 18.06.2010 and
08.07.2010 are set aside. [Para 58] [792-E-H; 793-A-F]
11. There is another very relevant factor which
cannot be ignored, namely, that the value of the property
H which was knocked out in favour of the appellant in a
MATHEW VARGHESE v. M. AMRITHA KUMAR &
753
ORS.
sum of Rs.1.27 crores by confirming the sale by the 4th
A
Respondent-Bank on 31.12.2007 and 11.01.2008, the
same was found to be not in accordance with the
provisions of the SARFAESI Act. Since the proper
procedure for effecting the sale was not followed, it will
have to be held that the price fetched through the
B
appellant cannot be held to be the correct price for the
mortgaged property involved in these proceedings.
Further, the very fact that in the year 2010 the property
could fetch Rs.2.03 crores, in all fairness even while
confirming the Order of the Division Bench, by which the c
sale in favour of the appellant came to be confirmed, the
difference in the sale price should .. be directed to be paid
by the Appellant. While the price paid by the appellant
was Rs.1.27 crores, the price ultimately fetched at the
im;tance of the Respondents no.1 and 2 was Rs.2.03
0
crores. Therefore, after giving credit to Rs.1.27 crores, the
appellant would still be liable to pay a further sum of
Rs.76 lacs to the Respondents no.1 and 2. Accordingly,
the order is passed. [Para 59] [793-G-H; 794-A-D]
Case Law Reference:
E
2008 (12) SCR 1
referred to
Para 16
2010 (9) SCR 1
referred to
Para 16
1977 (2) SCR 341
referred to
Para 17
F
2012 (6) SCR 105
relied on
Para 21
2004 (3) SCR 982
referred to
Para 37
2006 (9) Suppl. SCR 785
relied on
Para 42
G
(1861) 9 HLC 32
referred to
Para 43
1959 Suppl. SCR 798
relied on
Para 44
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.
1927-1929 of 2014.
H
754
$UPREME COURT REPORTS
[2014] 2 S.C.R.
A
From the Judgment and Order dated 08.03.2010 in WA
No. 1555/2009 dated 18/06/2010 in IA No. 437/2010 in WA
No.1555/2009 and dated 08/07/2010 in IA No. 507/2010 in WA
No. 1555/2009 of the High Court of Kerala at Ernakulam.
B
Krishnan Venugopal, Abir Phukhan, Uday Rathore, A.
Raghunath for the Appellant.
Shyam Diwan, M.K.S. Menon, Meena, C.R., K.
Prabhakaran, Himanshu Munshi, Manish Garani, Durga Dutt,
Robin V.S., Abhinav Malhotra, Usha Nandini V. for the
C Respondents.
The Judgment of the Court was delivered by
FAKKIR MOHAMED IBRAHIM KALIFULLA, J. 1. Leave
D granted.
2. This appeal by the purchaser, in a tender-cum-auction
sale held by the 4th Respondent-Bank, is directed against the
judgments and final orders dated 08.03.2010 in Writ Appeal
No: 1555 of 2009, Order dated 18.06.2010 in I.A. No.437 of
E 2010 in Writ Appeal No.1555 of 2009 and Order dated
08.07.2010 in I.A. No.507 of 2010 in Writ Appeal No.1555 of
2009 passed by the High Court of Kerala at Ernakulam.
3. The interesting but very serious question that arises for
F consideration in this appeal is as regards the interpretation of
Section 13(8) of the SARFAESI Act read with Rules 8 and 9
of the Security Interest (Enforcement) Rules, 2002 (hereinafter
referred to as "the Rules, 2002").
4. The 1st and 2nd Respondents herein stood as
G guarantors in respect of a credit facility to the tune of
Rs.30,00,000/- granted by the 4th Respondent-Bank in favour
of a company called 'Jerry Merry Exports Private Limited'. As
guarantors, the 1st and 2nd Respondents created an
EQUITABLE MORTGAGE in favour of 4th Respondent-Bank
H by depositing the title deeds of their property bearing Survey
MATHEW VARGHESE v. M. AMRITHA KUMAR &
755
ORS. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.l
No.150/12A (40.20 cents), ~urvey No.150/12C (11 cents) and
A
Survey No.150/13 (26 cents) totaling 77.20 cents situated in
Padivattom Kana, Edappally South Village, Kanayanoor Taluk,
Emakulam District Kochi, Kerala (hereinafter referred to as "the
mortgage property"). When the transaction became a NONPERFORMING ASSET, the 4th Respondent-Bank filed O.A.
B
No.31 of 2002 for recovery of Rs.33,77,053/- along with interest
@ 18% per annum. The 4th Respondent-Bank also issued a
notice under Section 13(2) of the SARFAESI Act on
11.08.2006 for a sum of Rs.70,77,590/-. On 20.02.2007, the
4th Respondent-Bank is stated to have taken possession of the c
mortgaged property by invoking Section 13(4) of SARFAESI
Act, read along with Rules 8 and 9 of the Ru_les, 2002.
5. The 1st and 2nd Respondents filed a Securitisation
Application i.e. S.A. No.20 of 2007, before the Debt Recovery
Tribunal (hereinafter referred to as "the ORT") Ernakulam,
D
challenging the possession notice dated 20.02.2007 and
additionally also for an Order to restrain the 4th RespondentBank from evicting Respondents 1 and 2. Between 09.05.2007
and 24.07.2007 the attempts made for One Time Settlement
(hereinafter referred to as "OTS") also failed and the 4th
E
Respondent-Bank withdrew its offer of OTS, which was in a
sum of Rs.55,00,000/-.
F
6. On 14.08.2007, the 4th Respondent-Bank issued a
notice to Respondents 1 and 2, as well as others of its intention
to sell the property under Rule 8(6) of the Rules, 2002 by fixing
a reserve price of Rs.1,25,00,000/-. On 23.08.2007, the 4th
Respondent-Bank published its notice of sale of property in
Indian Express and Mathrubhoomi, inviting tenders-cum-auction
from the public. The 1st and 2nd Respondents were informed
by the 4th Respondent-Bank by its notice dated 30.08.2007,
G
about the publication made on 23.08.2007 and also enclosed
a tender form along with the terms and conditions for
participation in the tender. The Appellant and one M/s Kent
Construction stated to have submitted their tenders on
30.08.2007 and 01.09.2007.
H
756
SUPREME COURT REPORTS
[2014] 2 S.C.R.
A
7. On 20.09.2007, the 1st and 2nd Respondents filed W.P.
No.27182 of 2007 challenging the proceedings initiated under
the SARFAESI Act. The said writ petition was disposed of by
a learned Single Judge of the Kerala High Court by Order
dated 20.09.2007. By the said order, the High Court after
B taking note of the O.A. filed by the 4th Respondent-Bank, as
well as S.A. filed by the 1st and 2nd Respondents, directed the
DRT to hear the parties and dispose of both the cases or at
least the Securitisation Application filed by the 1st and 2nd
Respondents without any delay. The High Court also noted that
c at that point of time, the DRT had fixed 12.10.2007 as the date
for disposal of both the applications.