Rakesh Birani (Dead) Through Legal Representatives v. Prem Narain Sehgal And Another

Order

1. Leave granted. The auction-purchaser has come up in this appeal against the judgment and order passed 2016 SCC OnLine All 2585, AIR 2016 All 130 by the Division Bench of the High Court affirming the judgment passed 2014 SCC OnLine All 9868 by the Single Bench.

2. The brief facts in the present case are that the auction of the property was held on 14-2-2013. 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 1-2-2013. He further deposited 25% of the auction amount of Rs 5.80 lakhs on 15-2-2013 and remaining amount of Rs 8,69,500 on 13-3-2013. The auction-purchaser claimed that he was intimated regarding confirmation of sale by the authorised officer of the secured creditor by the letter dated 27-2-2013. As soon as he was intimated of the confirmation, he further deposited the 75% of the auction amount on 13-3-2013 within 15 days of the confirmation of sale.

3. The owner and principal borrower whose property was sold in auction questioned the same by way of filing a writ petition. Writ Petition (Civil) No. 20653 of 2013 was filed by the respondent. The Division Bench passed the order on 15-4-2013 2013 SCC OnLine All 14566 that as the property has already been auctioned, directed the respondent to file an appeal under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as “the 2002 Act”). Thereafter, an appeal was filed that was registered as SA No. 1133 of 2013. The Debts Recovery Tribunal, Allahabad vide order dated 19-12-2013, 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.

4. 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%; 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 the Security Interest (Enforcement) Rules, 2002 (for short “the 2002 Rules”).

5. 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 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 and 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 per cent of the amount of the sale price, which is inclusive of earnest money deposited, if any, to the authorised 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 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 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 which 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 purchaser free 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 purchased the immovable secured asset free from any encumbrances known to the secured creditor or not.”

6. The submission raised by the 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. The 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% of the amount after confirmation of sale. The 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 Rule 9 of the 2002 Rules to mean that date of the auction is also the date of its confirmation.

7. On the other hand, the learned counsel appearing on behalf of the Respondent 1 borrower 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 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.

9. 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 per cent 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 authorised 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.

10. In this case, confirmation has been made and communicated on 27-2-2013 and within fifteen days thereof i.e. on 13-3-2018, the amount of twenty-five per cent had been deposited. Thereafter, sale certificate has been issued under Rule 9(6). Rule 9(5) also makes it clear that in default of payment within the period mentioned in Rule 9(4), the deposit shall be forfeited. There cannot be any forfeiture of the amount of 25% in deposit until and unless the sale is confirmed by the secured creditor and there is a default of payment of 75% of the amount. The interpretation made by the High Court thus cannot be accepted.

11. 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 Rules 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 per cent 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 the Debts Recovery Tribunal and the Debts Recovery Appellate Tribunal and as affirmed by the High Court cannot be said to be correct.

12. 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 per cent of the amount from the date of confirmation of sale. The sale certificate was rightly issued in favour of the 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.

13. The appeal is allowed and the impugned orders are set aside. No order as to costs.