Rakesh Birani (D) Thru Lrs. vs Prem Narain Sehgal

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3156 OF 2018 (Arising out of SLP (C) No.7626 of 2017)

RAKESH BIRANI (D) THROUGH LRS. ...APPELLANT (S)

VERSUS

PREM NARAIN SEHGAL & ANR. ...RESPONDENT (S)

ORDER

1. Leave granted.

2. The auction purchaser has come up in this appeal against the

judgment and order passed by the Division Bench of the High Court

affirming the judgment passed by the Single Bench.

3. The brief facts in the present case are that the auction of the

property was held on 14th February 2013. The appellant was the

highest bidder. He offered a bid of Rs.38.30 lakhs and deposited a

sum of Rs.3,90,500/- as earnest money on 1 st February 2013. He

further deposited 25% of the auction amount of Rs.5.80/- lakhs on

15th February 2013 and remaining amount of Rs.8,69,500/- on 13 th

March 2013. The auction purchaser claimed that he was intimated

regarding confirmation of sale by the Authorised Officer of the secured Signature Not Verified creditor by letter dated 27th February 2013. As soon as he was Digitally signed by ASHOK RAJ SINGH Date: 2018.04.04

intimated of the confirmation, he further deposited the 75% of the 13:55:35 IST Reason:

auction amount on 13th March 2013 within 15 days of confirmation of

sale.

2 4. The owner and principal borrower whose property was sold in

auction questioned the same by way of filing a writ petition. The Writ

Petition (Civil) No.20653 of 2013 was filed by the respondent. The

Division Bench passed the order on 25 th April 2013 that as the

property has already been auctioned, directed the respondent to file an

appeal under the provisions of Securitisation and Reconstruction of

Financial Assets and Enforcement of Security Interest Act, 2002

(hereinafter referred to as “the Act of 2002”). Thereafter, an appeal was

filed that was registered as S.A. No.1133 of 2013. The Debts Recovery

Tribunal, Allahabad vide order dated 19th December 2013, has set

aside the sale, the order was confirmed by the Debts Recovery

Appellate Tribunal as well as by the Single Judge and the Division

Bench of the High Court. Hence, the present appeal by the auction

purchaser.

5. The main question that arises for our consideration in the

appeal is, from which date the period of fifteen days would start for

making the deposit of remaining 75 percent; from the date of

communication of confirmation of sale or from the date of the auction.

The aforesaid dates are not in dispute. The decision depends upon

the interpretation of Rule 9 of Security Interest (Enforcement) Rules,

2002 (for short "the 2002 Rules). Rule 9 of the 2002 Rules reads as

under:

"9. Time of sale, issues of sale certificate and delivery of possession, etc.-

(1) No sale of immovable property under these rules, in 3

the first instance, shall take place before the expiry of thirty days from the date on which the public notice of sale is published in newspapers as referred to in the proviso to sub-rule (6) of rule 8 or notice of sale has been served to the borrower:

Provided further that if the sale of immovable property by any one of the methods specified by sub-rule (5) of rule 8 fails and sale is required to be conducted again, the authorised officer shall serve, affix and publish notice of sale of not less than fifteen days to the borrower, for any subsequent sale.

(2) The sale shall be confirmed in favour of the purchaser who has offered the highest sale price in his bid or tender or quotation or offer to the authorised officer shall be subject to confirmation by the secured creditor:

Provided further that if the authorised officer fails to obtain a price higher than the reserve price, he may, with the consent of the borrower and the secured creditor effect the sale at such price.

(3) On every sale of immovable property, the purchaser shall immediately, i.e., on the same day or not later than next working day, as the case may be, pay a deposit of twenty five percent of the amount of the sale price, which is inclusive of earnest money deposited, if any, to the authorized officer conducting the sale and in default of such deposit, the property shall be sold again.

(4) The balance amount of purchase price payable shall be paid by the purchaser to the authorised officer on or before the fifteenth day of confirmation of the sale of the immovable property or such extended period (as may be agreed upon in writing between the purchaser and the secured creditor, in any case not exceeding three months).

(5) In default of payment within the period mentioned in sub-rule (4), the deposit shall be forfeited (to the secured 4

creditor) and the property shall be resold and the defaulting purchaser shall forfeit all claim to the property or to any part of the sum for such it may be subsequently sold.

(6) On confirmation of sale by the secured creditor and if the terms of payment have been complied with, the authorised officer exercising the power of sale shall issue a certificate of sale of the immovable property in favour of the purchaser in the form given in Appendix V to these rules.

(7) Where the immovable property sold is subject to any encumbrances, the authorised officer may, if he thinks fit, allow the purchaser to deposit with him the money required to discharge the encumbrances and any interest due thereon together with such additional amount that may be sufficient to meet the contingencies or further cost, expenses and interest as may be determined by him:

(Provided that if after meeting the cost of removing encumbrances and contingencies there is any surplus available out of the money deposited by the purchaser such surplus shall be paid to the purchaser within fifteen days from the date of finalisation of the sale.)

(8) On such deposit of money for discharge of the encumbrances, the authorised officer shall issue or cause the purchaser to issue notices to the persons interested in or entitled to the money deposited with him and take steps to make the payment accordingly.

(9) The authorised officer shall deliver the property to the purchase fee from encumbrances known to the secured creditor on deposit of money as specified in sub-rule (7) above.

(10) The certificate of sale issued under sub-rule (6) shall specifically mention that whether the purchaser has 5

purchased the immovable secured asset free from any encumbrances known to the secured creditor or not.”

6. The submission raised by learned counsel appearing on behalf of

the appellant was that Rule 9(4) of the 2002 Rules provided that the

amount has to be deposited only after confirmation. Rule 9(2) also

contemplates confirmation of the bid. Learned counsel has also taken

us through Rule 9(5) so as to contend that in default of the payment

within the period mentioned in sub-rule (4), the deposit made shall be

forfeited. The forfeiture is only to follow as consequence of non-deposit of

75 percent of amount after confirmation of sale. Learned counsel has

also relied upon the provisions of Rule 9(6) to submit that after

confirmation of sale, in case, terms of sale have been complied with only

then sale certificate is issued. In this case, sale certificate has been

issued by the owner in favour of the auction purchaser. Thus, the High

Court has erred in law in interpreting the rule 9 of the rules of 2002 to

mean that date of the auction is also the date of its confirmation.

7. On the other hand, learned counsel appearing on behalf of the

borrower-respondent No.1 contends that it is apparent from Rule 9(2)

that there is confirmation of sale as soon as highest bid is accepted by

the authorised officer, within fifteen days, the deposit of 75% of the

amount is to be made, failing which the only course is the forfeiture of

the remaining 25% of the amount that has been deposited and the

property has to be resold.

8. In order to comprehend the rival submissions, it is necessary to

ponder as to intendment of Rule 9 of the 2002 Rules which deals with 6

the time of sale, issues of sale certificate and delivery of possession, etc.

Public notice of sale is to be published in the newspaper and only after

thirty days thereafter, the sale of immovable property can take place.

Under Rule 9(2) of the 2002 Rules, the sale is required to be confirmed

in favour of the purchaser who has offered the highest sale price to the

authorised officer and shall be subject to confirmation by the secured

creditor. The proviso makes it clear that sale under the said Rule would

be confirmed if the amount offered and the whole price is not less than

the reserved price as specified in Rule 9(5). It is apparent that Rule 9(1)

does not deal with the confirmation by the authorised officer. It only

provides confirmation by the secured creditor. Rule 9(3) makes it clear

that on every sale of immovable property, the purchaser on the same

day or not later than next working day, has to make a deposit of

twenty-five percent of the amount of the sale price, which is inclusive of

earnest money deposited if any. Rule 9(4) makes it clear that balance

amount of the purchase price payable shall be paid by the purchaser to

the authorized officer on or before the fifteenth day of "confirmation of

sale of the immovable property" or such extended period as may be

agreed upon in writing between the purchaser and the secured creditor.

Thus, Rule 9(2) makes it clear that after confirmation by the secured

creditor the amount has to be deposited. Rule 9(3) also makes it clear

that period of fifteen days has to be computed from the date of

confirmation. In this case, confirmation has been made and

communicated on 27th February 2013 and within fifteen days thereof i.e.

on 13th March 2018, the amount of twenty-five percent had been

deposited. Thereafter, sale certificate has been issued under Rule 9(6). 7

Rule 9(5) also makes it clear that in default of payment within the period

mentioned in sub-rule 9(4), the deposit shall be forfeited. There cannot

be any forfeiture of the amount of 25 percent in deposit until and unless

the sale is confirmed by the secured creditor and there is a default of

payment of 75 percent of the amount. The interpretation made by the

High Court thus cannot be accepted.

9. If we read the provisions otherwise then we find even before the

confirmation of sale within fifteen days, the amount would be forfeited

by the authorised officer who may decide not to confirm the sale that

would be a result not contemplated in Rule 9(2), 9(4) and 9(5) which

fortify our conclusion that it is only after the confirmation is made under

Rule 9(4) that amount has to be deposited and on failure to deposit the

amount, twenty-five percent amount has to be forfeited and property has

to be resold. The provisions of Rule 9(6) also fortifies our conclusion,

inasmuch as it is the expression used that on confirmation of sale by

the secured creditor and “if the term of payment has been complied

with” sale certificate is issued otherwise the forfeiture takes place, this

compliance has to be only after the confirmation of sale and not before

it. Thus, various provisions of Rule 9 makes it clear that interpretation

made by Debts Recovery Tribunal and Debts Recovery Appellate

Tribunal and as affirmed by the High Court cannot be said to be correct.

10. Thus, we find that the provisions had been fully complied with

by the auction purchaser as he has complied with the provisions of Rule

9 by making a deposit of 75 percent of the amount from the rate of

confirmation of sale. The sale certificate was rightly issued in favour of 8

auction purchaser. Thus, the auction could not have been set aside.

Since the sale certificate has been issued, let the possession be delivered

in accordance with law, as expeditiously as possible.

11. The appeal is allowed and the impugned orders are set aside. No

order as to costs.

....................................J. (ARUN MISHRA)

....................................J. (UDAY UMESH LALIT)

NEW DELHI;

MARCH 21, 2018.