Moonlight Poultry Farm v. Union Bank of India.

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Page 1 Tuesday, March 05, 2024

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2022 SCC OnLine AP 2424 : (2022) 6 ALD 403
In the High Court of Andhra Pradesh at Amaravati

(BEFORE C. PRAVEEN KUMAR AND TARLADA RAJASEKHAR RAO, JJ.)
Writ Petition No. 15580 of 2022

Moonlight Poultry Farm, Rep. by its Proprietor Mrs.
Khazi Rasheeda and Others … Petitioners;
Versus
Union Bank of India, rep. by its Chief General
Manager Zonal Office and Others … Respondents.
With
Versus
And
Versus
Writ Petition Nos. 15580, 15632 & 23932 of 2022
Decided on August 26, 2022
Advocates who appeared in this case:
Counsel for the Petitioner(s) : 1) Sri. Mirza Nisar Ahmed Baig Nizami
Counsel for the Respondents : 1) Ms. V. Dyumani, learned Standing
Counsel for the Respondent/Bank. 2) Sri. Sasanka Bhuvanagiri,
Learned counsel for the Auction Purchaser.
The Order of the Court was delivered by
C. PRAVEEN KUMAR, J.:— As these three writ petitions are
interconnected, the same are disposed of by this common order:—
2. Heard Sri. Mirza Nisar Ahmed Baig Nizami, learned counsel for the
petitioners, Ms. V. Dyumani, learned Standing Counsel for the
respondent/bank and Sri. Sasanka Bhuvanagiri, learned counsel for the
auction purchaser.
3. W.P. No. 15580 of 2022 came to be filed to declare the e-auction
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dated 24.02.2022, in respect of non-agricultural land admeasuring

Ac.17.56 Cents in Survey Nos. 1.1, 1.3, 2.1 & 10.1 situated at
Mydgolam Village, Lepakshi Mandal, Hindupur, for recovery of Rs.
2,45,86,880.66 ps., as contrary to the orders passed in W.P. No. 3988
of 2022 and to declare the action of the fourth respondent in issuing
the undated Notice Memo for execution of warrant as against Section
13(8) of Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 [for short, “SARFAESI Act”]
as bad in law.
4. W.P. No. 15632 of 2022 came to be filed to declare the action of
respondent nos. 1 to 4 in issuing the Sale Confirmation Letter dated
24.05.2022 pursuant to e-auction dated 24.02.2022 with respect to
above land as illegal.
5. W.P. No. 23932 of 2020 is filed questioning the action of the
respondents in issuing Sale Certificate dated 02.06.2022, in favour of
fifth respondent therein in respect of the above property, without
adjusting/transferring the amount of Rs. 1,38,50,000/- deposited on
31.05.2022 in the two loan accounts, as highly illegal, improper and
incorrect.
6. The facts, which lead to filing of the above three writ petitions, are
as under:—
(a) The petitioners in all the three writ petitions secured loan from
the respondent/bank under two loan accounts. As the petitioners
committed default in payment of the amount, both the accounts
were declared as Non-Performing Assets [NPA] and the
respondent/bank demanded an amount of Rs. 2,39,90,868.20 ps.
and Rs. 5,96,012.46 ps. [totalling to Rs. 2,45,86,880.66 ps.]
towards outstanding loan amount. At that point of time, the
petitioners made an application for One Time Settlement [OTS]
vide representation dated 15.12.2021. Inaction on the part of the
respondent/bank, lead to filing of W.P. No. 30522 of 2021.
Pending the said writ petition, the respondent/bank issued e-
auction Sale Notice for Sale of immovable properties which were
mortgaged to the bank. The e-auction notice was challenged in
W.P. No. 1534 of 2022. However, the auction did not materialize,
and as such, both the writ petitions were dismissed as infructuous
on 08.03.2022. Thereafter, a second e-auction notice for sale of
immovable properties mortgaged to the bank came to be issued.
Challenging the same, the petitioners filed W.P. No. 3988 of 2022.
(b) On 23.02.2022, in I.A. No. 1 of 2022, this Court passed the
following interim order, which is as under:—
“…Taking into consideration the facts in issue, the auction
shall go on and the same shall not be finalized for a period of
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five weeks, subject to petitioners depositing a sum of Rs.

1,00,00,000/- to the credit of loan account within a period of
four weeks from today, in default, the stay stands vacated
automatically and the respondent-Bank can proceed further, in
accordance with law.
‘List after five weeks’.
(c) Thereafter, final order came to be passed in W.P. No. 3988 of
2022 on 21.04.2022, wherein the petitioner was directed to
deposit a sum of Rs. 1,00,00,000/- within a period of four (4)
weeks and the balance amount with interest and other charges
within a period of four (4) weeks thereafter.
(d) The claim of the petitioners is that they approached the
respondent/bank on 16.05.2022 and 20.05.2022 to deposit the
amount but on both the occasions, the bank officials refused to
receive the money, on the ground that they have neither received
any order from the High Court nor their Standing Counsel
informed them about the order. However, on 23.05.2022, the
Registry of the High Court dispatched a copy of the order dated
21.04.2022, which was received by the bank on 24.05.2022. It is
the case of the petitioners that they approached the
respondent/bank at Hindupur and offered to pay money enclosing
a copy of the order, but since the period of four weeks elapsed by
then the bank refused to accept the same.
(e) The petitioners also approached the third respondent-Authorized
Officer, Anantapur, but to no avail. Instead the Regional Manager
wanted the entire amount to be deposited immediately. While
things stood thus, the petitioners received a warrant of execution
on 01.06.2022. Left with no other option, the petitioners paid Rs.
1,38,50,000/- on 31.05.2022, which is the total amount with
accrued interest etc. Infact, the petitioners claim that they have
paid more than the demanded amount. In spite of the same, the
respondent/bank, with the help of Advocate-Commissioner
appointed under Section 14 of SARFAESI Act, approached the
property in dispute for executing the warrant.
(f) At that stage, the petitioners filed W.P. No. 15580 of 2022 before
this Court and vide order dated 02.06.2022, this Court stayed the
order of Principal Senior Civil Judge, Anantapur. Thereafter, W.P.
No. 15632 of 2022 came to be filed, questioning the Sale
Confirmation letter issued on 24.05.2022, wherein this Court
ordered status-quo as on that day to be maintained with regard to
issuance of Sale Certificate. In spite of the above orders, the Sale
Certificates came to be issued ante-dating the day, which lead to
filing of W.P. No. 23932 of 2022. Not only the Sale Certificate was
issued but the 75% of the auction amount was accepted from the
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auction purchaser on 01.06.2022.

7. A counter came to be filed by the respondent/bank disputing the
averments made in the affidavit filed in support of the writ petitions.
The averments in the counter would indicate that since the petitioners
have not complied with the order dated 21.04.2022, passed in W.P. No.
3988 of 2022, namely depositing of Rs. One Crore within four (4) weeks
from the date of the order, the respondent/bank was constrained to
issue Sale Confirmation letter on 24.05.2022 in favour of the highest
bidder and thereafter the Sale Certificate, after accepting the amount
on 01.06.2022. The auction purchaser also submits that since the
amount has been paid by him within the time fixed by the bank, he is
entitled for the property in dispute.
8. The point that arises for consideration is, whether the
respondent/bank was right in issuing the Sale Certificate in
favour of the auction purchaser though the petitioners have
deposited the entire amount prior to the date on which the
auction purchaser has deposited the amount?
9. The principal question that arises for consideration is, till what
time or date can the right of redemption of the mortgage be
exercised by the mortgagers/borrowers in the light of the
amendment to Section 13(8) of the SARFAESI Act?
10. In order to appreciate the arguments advanced, it would be
appropriate to extract Section 13(8) of SARFAESI Act, before and after
its amendment.
11. Section 13(8) of the SARFAESI Act before amendment, reads as
under:—
“Sec.13. …
(8) If the dues of the secured creditor together with all costs,
charges and expenses incurred by him are tendered to the secured
creditor at any time before the date fixed for sale or transfer, the
secured asset shall not be sold or transferred by the secured
creditor, and no further step shall be taken by him for transfer or
sale of that secured asset.”
12. The law relating to the availability of right of redemption after
the amendment to Section 13(8), was enacted in 2016 w.e.f.
01.09.2016, and the same reads as under:—
“Sec.13 …
(8) Where the amount of dues of the secured creditor together
with all costs, charges and expenses incurred by him is tendered to
the secured creditor at any time before the date of publication of
notice for public auction or inviting quotations or tender from public
or private treaty for transfer by way of lease, assignment or sale of
the secured assets,- (i) the secured assets shall not be transferred
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by way of lease assignment or sale by the secured creditor; and

(ii) in case, any step has been taken by the secured creditor for
transfer by way of lease or assignment or sale of the assets before
tendering of such amount under this sub-section, no further step
shall be taken by such secured creditor for transfer by way of lease
or assignment or sale of such secured assets.”
13. A reading of the amended Section 13(8) of the SARFAESI Act vis
-à-vis the report of the Joint Committee on the Enforcement of Security
Interest and Recovery of Debts Laws and Miscellaneous Provisions
(Amendment) Bill, 2016, which was made the basis to amend Section
13(8) of the SARFAESI Act, makes it clear that the legislature did not
have any intention to deal with the right of mortgagor to redeem the
mortgage, when they amended Section 13(8) or to modify it in any
manner; and amendment cannot be said to have intended to modify
the existing law which continued even when the un-amended Section
13(8) of the SARFAESI Act was in force. The amended Section 13(8) of
the SARFEASI Act was intended only to deal with the date when the
secured creditor's right to transfer the secured asset should stop and
nothing more.
14. In order to appreciate the effect of amendment, it will be
appropriate to refer to the judgment of Hon'ble Supreme Court in
Mathew Varghese v. M. Amritha Kumar1 , wherein the Hon'ble Supreme
Court has held that the right of redemption of the mortgagor/borrower
is not extinguished until the sale certificate is issued and the sale is
registered in favour of the auction purchaser even where the sale is
held under the SARFAESI Act. It does not get extinguished on the date
fixed for sale, i.e. the date of public auction/e-auction.
15. Similarly, the Division Bench of High Court of Telangana in
Concern Readymix, rep. by its Proprietor, Smt. Y. Sunitha Reddy v.
Authorised Officer, Corporation Bank, Hyderabad2 , observed the
difference between the unamended Section 13(8) and amended Section
13(8) of the SARFAESI Act, and held as under:—
“10. The first distinction between the unamended and amended
sub-section (8) of Section 13 is that before amendment, the facility
of repayment of the entire dues along with the costs, charges and
expenses, was available to the debtor at any time before the date
fixed for the sale or transfer. But after the amendment, the facility is
available upto the time before the date of publication of notice for
public auction or inviting quotations or tender from public or private
treaty. The second distinction is that the unamended sub-section (8)
did not provide for the contingency when the dues are tendered by
the borrower before the date of completion of the sale or lease but
after the issue of notice. But the amended subsection (8) takes care
of the contingency where steps have already been taken by the
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secured creditor for the transfer of the secured asset, before the
payment was made. Except these two distinctions, there is no other
distinction.
XXXX
13. What is important to note both from the amended and
unamended provisions of Section 13(8) and Rule 9(1) is that both of
them do not speak in express terms, about the equity of redemption
available to the mortgagor. The amended Section 13(8) merely
prohibits the secured creditor from proceeding further with the
transfer of the secured assets by way of lease, assignment or sale. A
restriction on the right of the mortgagee to deal with the property is
not exactly the same as the equity of redemption available to the
mortgagor. The payment of the amounts mentioned in Section 13(8)
ties the hands of the mortgagee (secured creditor) from exercising
any of the powers conferred under the Securitisation Act, 2002.
Redemption comes later. But unfortunately, some Courts, on a
wrong reading of the decision of the Supreme Court in Mathew
Varghese v. M. Amritha Kumar3 , have come to the conclusion as
though Section 13(8) speaks about the right of redemption. The
danger of interpreting Section 13(8) as though it relates to the right
of redemption, is that if payments are not made as per Section 13
(8), the right of redemption may get lost even before the sale is
complete in all respects. But in law it is not. It may be seen from
paragraphs-34 to 36 of the decision of the Supreme Court in Mathew
Varghese that the Supreme Court took note of Section 60 of the
Transfer of Property Act and the combined effect of Section 54 of the
Transfer of Property Act and Section 17 of the Registration Act to
come to the conclusion that the extinction of the right of redemption
comes much later than the sale notice. Therefore, we should first
understand that the right of redemption is not lost immediately upon
the highest bid made by a purchaser in an auction being accepted.
14. Perhaps the Courts were tempted to think that Section 13(8)
speaks about redemption, only on account of what is found in Rule 3
(5) of the Security Interest (Enforcement) Rules, 2002. Rule 3(5)
inserted by way of amendment with effect from 04-11-2016 states
that the demand notice issued under Section 13(2) should invite the
attention of the borrower to the provisions of Section 13(8), in
respect of the time available to the borrower to redeem the secured
assets. Today, it may be convenient for one borrower to contend that
the right of redemption will be lost immediately upon the issue of
notice under Rule 9(1). But if it is held so, the same would
tantamount to annulling the relevant provisions of the Transfer of
Property Act, which do not stand expressly excluded, insofar as the
question of redemption is concerned.
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16. The issue identical to the case on hand came up for

consideration before Punjab and Haryana High Court in Pal Alloys and
Metal India Private Limited v. Allahabad Bank3 , wherein the Division
Bench of the High Court after referring to the authorities on the subject
held as under:—
“91. Keeping in mind (i) the Report of the Joint Committee on the
Enforcement of Security Interest and Recovery of Debts Laws and
Miscellaneous Provisions (Amendment) Bill, 2016 discussed above,
(ii) the law laid down by the Supreme Court in Mathew Varghese
(supra) and (iii) the decision in Concern Readymix (7 supra) of the
Telangana and Andhra Pradesh High Court, with which we
respectfully agree, we hold that the amended Section 13(8) of the
SARFAESI Act merely prohibits a secured creditor from proceeding
further with the transfer of the secured asset by way of lease,
assignment or sale; a restriction on the right of the mortgagee to
deal with the property is not exactly the same as the equity of
redemption available to the mortgagor; the payment of the amount
mentioned in Section 13(8) of the SARFAESI Act ties the hands of
the mortgagee (secured creditor) from exercising any of the powers
conferred under the Act; that redemption comes later; extinction of
the right of redemption comes much later than the sale notice; and
the right of redemption is not lost immediately upon the highest bid
made by a purchaser in an auction being accepted. We also hold that
such a right would continue till the execution of a conveyance i.e.
issuance of sale certificate in favour of the mortgagee. A similar view
has been taken by this Bench in Hoshiarpur Roller Flour Mill Private
Limited v. Punjab National Bank. CWP No. 14440 of 2021, decided
on 10.12.2021 (AIR Online 2021 P & H 1985).
17. Keeping in view the law laid down in judgments referred to
above, we shall now proceed to deal with the case on hand. As seen
from the narration of events, in the instant case, undoubtedly, there is
some delay i.e. a delay of three or four days in paying the amount by
the petitioners. The reason given by the petitioners is that though the
order was passed by the High Court on 21.04.2022, giving four (4)
weeks time to deposit Rs. One Crore, the bank did not act on their
representation and insisted for a certified copy of the order, which, the
petitioner could secure only on 23.05.2022. Within two days thereafter,
they offered to pay the entire amount and in fact the petitioners
deposited the entire amount on 31.05.2022. The petitioners not only
deposited the entire loan amount but also interest and other charges
that got accrued till then. In fact, the claim of the petitioners appears
to be that they paid more than the required amount. The delay of three
days which occurred cannot be attributed to the petitioners, for the
reason that the certified copy of the order was given at a little belated
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stage. Apart from that, the petitioners paid the entire loan amount on
31.05.2022 itself. Having accepted the amount on 31.05.2022,
strangely, the bank deposited the amount in the current account of the
petitioners, without adjusting it to the loan account, though the
petitioners paid the amount for clearing the two loan accounts. After
depositing the amount in the current account of the petitioners on
31.05.2022, the respondent bank accepted 25% of the bid amount
from the auction purchaser on 01.06.2022 and issued the sale
certificate on 02.06.2022, which is after accepting the amount from the
petitioners.
18. The payment of the amounts mentioned in Section 13(8) ties
the hands of the mortgagee (secured creditor) from exercising any of
the powers conferred under the Securitisation Act, 2002. Redemption
comes later. Extinction of the right of redemption comes much later
than the sale notice and the right of redemption is not lost immediately
upon the highest bid made by a purchaser in an auction being
accepted.
19. It would be appropriate to refer to Section 13(8) of SARFAESI
Act, which reads as under:—
“Sec.13 …
(8) Where the amount of dues of the secured creditor together
with all costs, charges and expenses incurred by him is tendered to
the secured creditor at any time before the date of publication of
notice for public auction or inviting quotations or tender from public
or private treaty for transfer by way of lease, assignment or sale of
the secured assets,- (i) the secured assets shall not be transferred
by way of lease assignment or sale by the secured creditor; and
(ii) in case, any step has been taken by the secured creditor for
transfer by way of lease or assignment or sale of the assets before
tendering of such amount under this sub-section, no further step
shall be taken by such secured creditor for transfer by way of lease
or assignment or sale of such secured assets.”
20. Having regard to the above, the right to redeem the property
mortgaged to the bank survives and accordingly the Sale Certificate
and Sale Confirmation Letter issued by the respondent/bank in favour
of the auction purchaser shall stand cancelled. Further, the amount
paid by the petitioners shall be adjusted to the two loan accounts and
the amount paid by the auction purchaser shall be returned to the
auction purchaser in accordance with law. Accordingly, the three writ
petitions are allowed. There shall be no order as to costs.
21. Miscellaneous petitions pending, if any, shall stand closed.
———
1 (2014) 5 SCC 610
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2 (2019) 1 ALT 698
3 AIR 2022 P&H 23
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SCC Online Web Edition, © 2024 EBC Publishing Pvt. Ltd.

Page 1 Tuesday, March 05, 2024

2022 SCC OnLine AP 2424 : (2022) 6 ALD 403

In the High Court of Andhra Pradesh at Amaravati

Writ Petition No. 15580 of 2022

dated 24.02.2022, in respect of non-agricultural land admeasuring

five weeks, subject to petitioners depositing a sum of Rs.

auction purchaser on 01.06.2022.

by way of lease assignment or sale by the secured creditor; and

16. The issue identical to the case on hand came up for

2 (2019) 1 ALT 698

3 AIR 2022 P&H 23

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