CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. LTD. & ORS.

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mortgagor’s right of redemption will be extinguished but the conferment of power to sell the mortgaged property without intervention of the Court, in a mortgage deed, in itself, will not deprive the mortgagor of his right of redemption. This Court in the said case further explained that the extinction of the right of redemption has to be subsequent to the deed conferring such power and the right to redemption is not extinguished at the expiry of the period. This Court emphasized in the said decision that the equity of redemption is not extinguished by mere contract for sale.” (Emphasis supplied) REDEMPTION OF MORTGAGE UNDER THE SARFAESI ACT

45Copy pinpoint45. Sub-section (8) of Section 13 of the SARFAESI Act, as originally enacted, stated as under: - “13. Enforcement of security interest.– (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.”

46Copy pinpoint46. In Mathew Varghese (supra), this Court had the occasion to consider the right of redemption of mortgage under the SARFAESI Act vis-à-vis the Act 1882, wherein, this Court made the following relevant observations, being reproduced below: - “38. … a mere conferment of power to sell without intervention of the court in the mortgage deed by itself will not deprive the mortgagor of his right to redemption, that the extinction of the right of redemption has to be subsequent to the deed conferring such power, that the right of redemption is not extinguished at the expiry of the period, that the equity of redemption is not extinguished by mere contract for sale and that the mortgagor’s right to redeem will survive until there has been completion of sale by the mortgagee by a registered deed. The ratio is also to the effect that the power to sell should not be exercised

CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. 101 LTD. & ORS. [J. B. PARDIWALA, J.]

unless and until notice in writing requiring payment of the principal money has been served on the mortgagor. The above proposition of law of course was laid down by this Court in Narandas Karsondas [Narandas Karsondas v. S.A. Kamtam, (1977) 3 SCC 247] while construing Section 60 of the TP Act. But as rightly contended by Mr Shyam Divan, we fail to note any distinction to be drawn while applying the abovesaid principles, even in respect of the sale of secured assets created by way of a secured interest in favour of the secured creditor under the provisions of the SARFAESI Act, read along with the relevant Rules. We say so, inasmuch as, we find that even while setting out the principles in respect of the redemption of a mortgage by applying Section 60 of the TP Act, this Court has envisaged the situation where such mortgage deed providing for resorting to the sale of the mortgage property without the intervention of the Court. Keeping the said situation in mind, it was held that the right of redemption will not get extinguished merely at the expiry of the period mentioned in the mortgage deed. It was also stated that the equity of redemption is not extinguished by mere contract for sale and the most important and vital principle stated was that the mortgagor’s right to redeem will survive until there has been completion of sale by the mortgagee by a registered deed. The completion of sale, it is stated, can be held to be so unless and until notice in writing requiring payment of the principal money has been served on the mortgagor. Therefore, it was held that until the sale is complete by registration of sale, the mortgagor does not lose the right of redemption. It was also made clear that it was erroneous to suggest that the mortgagee would be acting as the agent of the mortgagor in selling the property.

39. When we apply the above principles stated with reference to Section 60 of the TP Act in respect of a secured interest in a secured asset in favour of the secured creditor under the provisions of the SARFAESI Act and the relevant Rules applicable, under Section 13(1), a free hand is given to a secured creditor to resort to a sale without the intervention of the court or tribunal. However, under Section 13(8), it is clearly stipulated that the mortgagor i.e. the borrower, who is otherwise called as a debtor, retains his full right to redeem the property by tendering all the dues to the secured creditor at any time

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before the date fixed for sale or transfer. Under sub-section (8) of Section 13, as noted earlier, the secured asset should not be sold or transferred by the secured creditor when such tender is made by the borrower at the last moment before the sale or transfer. The said sub-section also states that no further step should be taken by the secured creditor for transfer or sale of that secured asset. We find no reason to state that the principles laid down with reference to Section 60 of the TP Act, which is general in nature in respect of all mortgages, can have no application in respect of a secured interest in a secured asset created in favour of a secured creditor, as all the abovestated principles apply on all fours in respect of a transaction as between the debtor and secured creditor under the provisions of the SARFAESI Act. xxx xxx xxx

41. … even if there was some difference in the amount tendered by the borrower while exercising his right of redemption under Section 13(8), the question of difference in the amount should be kept open and can be decided subsequently, but on that score the right of redemption of the mortgagor cannot be frustrated. Elaborating the statement of law made therein, we wish to state that the endeavour or the role of a secured creditor in such a situation while resorting to any sale for the realisation of dues of a mortgaged asset, should be that the mortgagor is entitled for some lenience, if not more to be shown, to enable the borrower to tender the amounts due in order to ensure that the constitutional right to property is preserved, rather than it being deprived of.” (Emphasis supplied)

47Copy pinpoint47. In Dwarika Prasad v. State of Uttar Pradesh reported in (2018) 5 SCC 491, this Court speaking through one of us Dr. D.Y. Chandrachud, CJI., considered the unamended Section 13(8) of the SARFAESI Act, keeping in mind the decision in the case of Mathew Varghese (supra). The Court took the view that the right of redemption of mortgage is not lost until there is a transfer by a registered instrument. The following observations as contained in para 8 of the judgment are reproduced below:

CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. 103 LTD. & ORS. [J. B. PARDIWALA, J.]

“8. … These provisions have fallen for interpretation before this Court in Mathew Varghese. Dwelling on Section 60 of the Transfer of the Property Act, 1882 this Court held that the right of redemption is available to a mortgagor unless it stands extinguished by an act of parties. The right of the mortgagor to redeem the property survives until there has been a transfer of the mortgagor’s interest by a registered instrument of sale. …”

48Copy pinpoint48. In, yet one another decision of this Court in Allokam Peddabbayya & Anr. v. Allahabad Bank & Ors. reported in (2017) 8 SCC 272, a similar view was taken. The relevant observations made therein are as under: “23. The aforesaid discussion leads to the conclusion that the plaintiffs lost the right to sue for redemption of the mortgaged property by virtue of the proviso to Section 60 of the Act, no sooner that the mortgaged property was put to auction-sale in a suit for foreclosure and sale certificate was issued in favour of Defendant 2. There remained no property mortgaged to be redeemed. The right to redemption could not be claimed in the abstract.”

49Copy pinpoint49. Thus, prior to the amendment of Section 13(8) of the SARFAESI Act, this Court consistently held, that the borrower shall continue to have a right of redemption of mortgage until the execution of the conveyance of the secured asset by way of a registered instrument. Furthermore, this Court in Mathew Varghese (supra) found no inconsistency between the unamended Section 13(8) of SARFAESI Act and the general right of redemption under Section 60 of the Act 1882.

50Copy pinpoint50. However, later on 1st September, 2016, the Enforcement of Security Interest and Recovery of Debt Laws and Miscellaneous Provisions (Amendment) Act, 2016 (“2016 Amendment”) was enacted which inter-alia amended sub-section 8 of Section 13 of the SARFAESI Act, and substituted the words “any time before the date fixed for sale or transfer” of the original provision with “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”. The amended provision of Section 13 sub-section (8) of the SARFAESI Act, now reads as under: -

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“13. Enforcement of security interest. – (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.”

51Copy pinpoint51. The true purport and scope of the amended Section 13(8) of the SARFAESI Act was looked into by the Andhra Pradesh High Court in Sri. Sai Annadhatha Polymers & Anr. v. Canara Bank rep. by its Branch Manager, Mandanapalle reported in 2018 SCC OnLine Hyd 178. The court took the view that in accordance with the unamended Section 13(8) of the SARFAESI Act, the right of the borrower to redeem the secured asset was available till the sale or transfer of such secured asset. The court went on to say that the amended provisions of Section 13(8) of the SARFAESI Act brought in a radical change inasmuch as the right of the borrower to redeem the secured asset would stand extinguished thereunder on the very date of publication of the notice for public auction under Rule 9(1) of the Rules of

2002. It is pertinent to note that the High Court has referred to and relied upon the decision of this Court in Mathew Varghese (supra). The relevant observations made by the High Court are reproduced hereinbelow: “6. In terms of the amended provisions of Section 13(8) of the SARFAESI Act, the right of redemption given to the borrower would expire upon publication of such a notice. However, Rule 8(6) of the Rules of 2002, as interpreted by the Supreme Court in Mathew Varghese v. M. Amritha Kumar [(2014) 5 SCC 610], stipulates that the thirty day notice period mentioned therein is for the purpose of enabling the borrower to redeem his property. Significantly, this

CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. 105 LTD. & ORS. [J. B. PARDIWALA, J.]

provision remains unaltered. Therefore, this statutory notice period of thirty days is sacrosanct and deviation therefrom would curtail the statutory right of redemption available to the borrower. However, in terms of the amended Section 13(8) of the SARFAESI Act, once the notice under Rule 9 of the Rules of 2002 is published, the said right stands extinguished. xxx xxx xxx

20. In the light of the aforestated changes in the statutory scheme, certain crucial aspects may be noted. As per the unamended Section 13(8) of the SARFAESI Act, the right of the borrower to redeem the secured asset was available till the sale or transfer of such secured asset. Case law consistently held to the effect that a sale or transfer is not completed until all the formalities are completed and there is an effective transfer of the asset sold. In consequence, the borrower’s right of redemption did not stand terminated on the date of the auction sale of the secured asset itself and remained alive till the transfer was completed in favour of the auction purchaser, by registration of the sale certificate and delivery of possession of the secured asset. The recent judgment of the Supreme Court in ITC LIMITED v. BLUE COAST HOTELS LIMITED also affirmed this legal position.

21. However, the amended provisions of Section 13(8) of the SARFAESI Act bring in a radical change, inasmuch as 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 stands 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 completion of the sale or transfer of the secured asset in favour of the auction purchaser. … xxx xxx xxx

23. Therefore, even after the amendment of Section 13(8) of the SARFAESI Act, a secured creditor is bound to afford to the borrower a clear thirty day notice period under Rule 8(6) to enable him to exercise

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his right of redemption. In consequence, a notice under Rule 9(1) of the Rules of 2002 cannot be published prior to expiry of this thirty day period in the new scenario, post-amendment of Section 13(8) of the SARFAESI Act, as such right of redemption would stand terminated immediately upon publication of the sale notice under Rule 9(1) of the Rules of 2002. The judgment of the Supreme Court in CANARA BANK v. M. AMARENDER REDDY, which was rendered in the context of the unamended provisions, would therefore have no application to the post-amendment scenario in the light of the change brought about in Section 13(8). To sum up, the post-amendment scenario inevitably requires a clear thirty day notice period being maintained between issuance of the sale notice under Rule 8(6) of the Rules of 2002 and the publication of the sale notice under Rule 9(1) thereof, as the right of redemption available to the borrower in terms of Rule 8(6) of the Rules of 2002, as pointed out in MATHEW VARGHESE, stands extinguished upon publication of the sale notice under Rule 9(1).” (Emphasis supplied)

52Copy pinpoint52. The amended Section 13(8) of the SARFAESI Act was also looked into by the High Court of Telangana in the case of K.V.V. Prasad Rao Gupta v. State Bank of India reported in 2021 SCC OnLine TS 328 and relying on the decision of the Andhra Pradesh High Court in the case of Sri. Sai Annadhatha Polymers (supra), the court observed in para 21 as under: “21. Thus from the above judgments it is clear that under Rule 8(6) of the Rules of 2002, the petitioners are entitled for a thirty day notice period enabling them to clear the loan and to redeem the property as envisaged under Section 13(8) of the SARFAESI Act, and that if they fail to repay the amount within the stipulated period, after expiry of said period of 30 days, the secured creditor is entitled to issue publication of sale notice under Rule 9(1), and that on publication of such notice, the right of the borrower to redeem the property stands extinguished.” (Emphasis supplied)

53Copy pinpoint53. The Telangana High Court in Concern Readymix (supra), examined the amended Section 13(8) of the SARFAESI Act, & held that the same only restricts the right of the secured creditor and not the borrowers

CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. 107 LTD. & ORS. [J. B. PARDIWALA, J.]

right of redemption, which will continue to exist until the execution of the conveyance. The following relevant observations are reproduced below: - “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 sub-section (8) takes care of the contingency where steps have already been taken by the secured creditor for the transfer of the secured asset, before the payment was made. Except these two distinctions, there is no other distinction. xxx xxx xxx

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 Kumar [(2014) 5 SCC 610], 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

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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.” (Emphasis supplied) 54.We are conscious of the fact, that the aforesaid decision of Concern Readymix (supra) was carried upto and challenged before this Court by way of Special Leave Petition (C) No. 20500 of 2019, which came to be dismissed by this Court in limine, being as follows: - “ORDER Delay condoned. The Special Leave Petition is dismissed”

55Copy pinpoint55. In Shakeena (supra), while primarily dealing with the unamended provision of Section 13(8) of the SARFAESI Act, this Court also made certain pertinent observations in respect of the amended provision of Section 13(8), which are being reproduced hereunder: -

CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. 109 LTD. & ORS. [J. B. PARDIWALA, J.]

“15. Be it noted that on 1-9-2016 amendment to Section 13(8) of the 2002 Act came into force as a result of which the dues of the secured creditor together with all costs, charges and expenses incurred by him are required to be 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. xxx xxx xxx

30. A fortiorari, it must follow that the appellants have failed to exercise their right of redemption in the manner known to law, much less until the registration of the sale certificate on 18-9-2007. In that view of the matter no relief can be granted to the appellants, assuming that the appellants are right in contending that as per the applicable provision at the relevant time [unamended Section 13(8) of the 2002 Act], they could have exercised their right of redemption until the registration of the sale certificate — which, indisputably, has already happened on 18-9-2007. Therefore, it is not possible to countenance the plea of the appellants to reopen the entire auction process. This is more so because, the narrative of the appellants that they had made a valid tender towards the subject loan accounts before registration of the sale certificate, has been found to be tenuous. Thus understood, their right of redemption in any case stood obliterated on 18-9-2007. Further, the amended Section 13(8) of the 2002 Act which has come into force w.e.f. 1-9-2016, will now stare at the face of the appellants. As per the amended provision, stringent condition has been stipulated that the tender of dues to the secured creditor together with all costs, charges and expenses incurred by him shall be at any time before the “date of publication of notice” for public auction or inviting quotations or tender from public or private deed for transfer by way of lease assessment or sale of the secured assets. …” (Emphasis supplied)

56Copy pinpoint56. The Punjab & Haryana High Court while rendering its decision in Pal Alloys (supra), looked into the Report of the Joint Committee on the 2016 Amendment and the decision in Concern Readymix (supra), & concluded

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that under the amended Section 13(8) of the SARFAESI Act, the right of redemption of mortgage would continue till the execution of conveyance or issuance of sale certificate. It further observed that the decision in Shakeena (supra) was not applicable inasmuch as it did not deal with the right of redemption under the Act 1882. The observations made in it are given below: “78. It is interesting to note that para 24 of the Report of the Joint Committee referred to above deals with the proposed amendment to Section 13(8) of the SARFAESI Act and gives a heading “Provisions to stop secure creditor to lease or assignment or sale in the prescribed conditions-Amendment to Section 13(8) of the SARFAESI Act.”

79. Thus the amendment was proposed w.r.t. when to stop the secured creditor from selling/transferring the secured asset. The words ‘when to stop the exercise of right of redemption by the borrower/mortgagor’ were not used.

80. In the said Report, at pg.12, Clause 11(ii) of the Bill which proposed to amend Section 13(8) of the SARFAESI Act is noted. After extracting the existing Section 13(8) of the Act which stands as under: — “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.”

81. The proposed modifi cation to Section 13(8) is set out also at pg.12 as under:— “(8) Where the amount of 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 lease, assignment or sale of the secured assets,- (i) the secured assets shall not be leased, assigned or sold by the secured creditor; and

CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. 111 LTD. & ORS. [J. B. PARDIWALA, J.]

(ii) in case, any step has been taken by the secured creditor for 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 lease or assignment or sale of such secured assets.”

82. Strangely, on the next page at page 13, the following is stated:- “The Committee after examining the proposed amendment and the existing Rules in this regard decide to modify proposed Clause 11(ii) [section 13(8) of the principal Act] as under: “(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.”

83. Nothing is mentioned as to why the proposal indicated in Page-12 was changed on page-13 differently.

84. Admittedly, what is stated in page-13 was passed in the Lok Sabha and the Rajya Sabha and then it became the Act 44 of 2016 and came into effect on 01.09.2016.

85. But the important thing to note is that this Report does not indicate that the Committee had even considered Section 60 of the Transfer of Property Act, 1882, which provides the general law of right to redeem a mortgaged asset of a mortgager vis-a-vis the provisions of the SARFAESI Act.

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86. It no where says that there was an intention to bring about a change with regard to the time before which a mortgagor can exercise his right to redeem the mortgage.

87. Even the heading of Para 24 of the Report which says “Provisions to stop secure creditor to lease or assignment or sale in the prescribed conditions - Amendment to Section 13(8) of the SARFAESI Act” seems to suggest that the focus of the Committee was on the date when the secured creditor’s right to lease or assignment or sale would stop.

88. In our considered opinion, it is clear that the legislature did not have any intention to deal with the right of mortgagor to redeem the mortgage when they amended Sec.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 Sec.13(8) was intended to only deal with the date when the secured creditor’s right to transfer the secured asset should stop and nothing more. xxx xxx xxx

93. The view taken by the High Court for the State of Telangana and Andhra Pradesh in M/s. Concern Ready Mix [(2019) 3 ALD 384 : Law Finder Doc Id # 1380151] commends itself to us and we accept and approve the same.

94. We shall now consider the judgment of Supreme Court in Shakeena [(2019) 5 RCR (Civil) 689 (SC)]cited by the counsel for 1st respondent. In that case, sale certificate had been issued in favour of the auction purchasers on 06.01.2006 and a Writ Petition was filed on 19.01.2006 challenging the auction and it was registered on 18.9.2007. The Court held that the appellants had failed to make a valid tender of amounts due or exercise their right of redemption in a manner known to law until the registration of the sale certificate on 18.09.2007 and that the right of redemption stood obliterated on 18.09.2007. The statement therein in para 29 that as per the amended provision stringent conditions have been stipulated that the tender of dues to the secured creditor shall be at

CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. 113 LTD. & ORS. [J. B. PARDIWALA, J.]

any time before the date of publication of notice for public auction does not, in our opinion, lead to an expression of opinion by the Supreme Court that the law of redemption as per Section 60 of the Transfer of Property Act would not apply in view of amendment to Section 13(8). We do not fi nd any discussion in the decision in Shakeena [(2019) 5 RCR (Civil) 689 (SC)] about the decisions of the apex court dealing with the right of redemption under Sec.60 of the Transfer of Property Act, 1872. So reliance on the said decision does not help the 1st respondent. xxx xxx xxx

96. 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 [(2014) 5 SCC 610] and (iii) the decision in M/s. Concern Readymix [(2019) 3 ALD 384 : Law Finder Doc Id # 1380151] 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. …

97. It would, therefore, certainly be available to the petitioners herein before the issuance of sale certificate in favour of respondents No. 2 and 3. Point (a) is answered accordingly in favor of the petitioners and against the respondents.” (Emphasis supplied)

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57Copy pinpoint57. In S. Karthik (supra) a three-Judge Bench of this Court, made the following relevant observations given below: - “53. It could thus be seen that this Court in Mathew Varghese [Mathew Varghese v. M. Amritha Kumar, (2014) 5 SCC 610 : (2014) 3 SCC (Civ) 254] observed that the equity of redemption is not extinguished by mere contract for sale and that the mortgagor’s right to redeem will survive until there has been completion of sale by the mortgagee by a registered deed. This Court further observed that applying the principles stated with reference to Section 60 of the Transfer of Property Act in respect of a secured interest in a secured asset in favour of the secured creditor under the provisions of the SARFAESI Act and the relevant Rules applicable, a free hand is given to a secured creditor to resort to a sale without the intervention of the court or tribunal. It has, however, been held that under Section 13(8), it is clearly stipulated that the mortgagor i.e. the borrower, who is otherwise called as a debtor, retains his full right to redeem the property by tendering all the dues to the secured creditor at any time before the date fixed for sale or transfer.

54. This Court in Mathew Varghese [Mathew Varghese v. M. Amritha Kumar, (2014) 5 SCC 610 : (2014) 3 SCC (Civ) 254] further held that if the tender is made by the borrower at the last moment before the sale or transfer, the secured asset should not be sold or transferred by the secured creditor. This Court held that there was no reason as to why the general principle laid down by this Court in Narandas Karsondas [Narandas Karsondas v. S.A. Kamtam, (1977) 3 SCC 247] with reference to Section 60 of the Transfer of Property Act could not have application in respect of a secured interest in a secured asset created in favour of a secured creditor. It has been held that the said principles will apply on all fours in respect of a transaction as between the debtor and secured creditor under the provisions of the SARFAESI Act. xxx xxx xxx

115. Even if viewed from another angle, the claim of the appellants is not sustainable. The two-Judge Bench of this Court in Mathew Varghese [Mathew Varghese v. M. Amritha Kumar, (2014) 5 SCC 610

CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. 115 LTD. & ORS. [J. B. PARDIWALA, J.]

: (2014) 3 SCC (Civ) 254], has heavily relied on the judgment of the three-Judge Bench of this Court in Narandas Karsondas . It has been held by this Court in Narandas Karsondas [Narandas Karsondas v. S.A. Kamtam, (1977) 3 SCC 247], that the right of redemption, which is embodied in Section 60 of the Transfer of Property Act, is available to the mortgagor unless it has been extinguished by the act of parties. It has been held, that only on execution of the conveyance and registration of transfer of the mortgagor’s interest by registered instrument, that the mortgagor’s right of redemption will be extinguished. xxx xxx xxx

58Copy pinpoint58. Concern Readymix (supra) was referred to and relied upon later in another decision by the Telangana High Court titled Amme Srisailam (supra), wherein the following relevant observations were made: “38. After referring to the amendments brought to the Security Interest (Enforcement) Rules, 2002, this Court took the view that 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 if the dues are paid before issuance of notice for public auction. Thereafter it has been held that 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. 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 SARFAESI Act. Redemption comes later. It has been held as follows: 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.

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39. Thus this Court emphasised that the right of redemption is not lost immediately upon the highest bid made by the purchaser in an auction is accepted.

40. A three-Judge Bench of the Supreme Court in S.Karthik (supra) held that the right of redemption which is embodied in Section 60 of the Transfer of Property Act, 1882 is available to the mortgagor unless it has been extinguished by the act of the parties. Only on execution of the conveyance and registration of transfer of mortgagor’s interest by registered instrument that the mortgagor’s right of redemption will be extinguished. Referring to the previous decisions of the Supreme Court, it has been held that the right to redemption stands extinguished only on the sale certificate getting registered.

41. This position has been explained by the Punjab & Haryana High Court in Pal Alloys & Metal India Private Limited (supra), wherein it has been clarified that the amended Section 13(8) of the SARFAESI Act merely prohibits the secured creditor from proceeding further with the transfer of the secured asset by way of lease, assignment or sale if the dues are paid before issuance of sale notice for public auction. 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.

42. Let us now examine the decision of the Supreme Court in Shakeena (supra) relied upon by the petitioner. As opposed to S.Karthik (supra) which was rendered by a three-Judge Bench, Shakeena (supra) was delivered by a two-Judge Bench of the Supreme Court. That was a case which dealt with Section 13(8) of the SARFAESI Act prior to amendment. In this case, the appellants failed to exercise their right of redemption until registration of the sale certificate; therefore, relief was declined. While coming to the above conclusion, the Division Bench of the Supreme Court adverted to the amended Section 13(8) of the SARFAESI Act observing by way of obiter that tender of dues to the secured creditor with all costs, charges and expenses incurred by him shall be at any time before the date of publication of notice for public auction etc.

CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. 117 LTD. & ORS. [J. B. PARDIWALA, J.]

43. The decision in Shakeena (supra) was rendered by a two-Judge Bench of the Supreme Court on 20.08.2019. On the other hand, the decision in S.Karthik (supra) was rendered by a three-Judge Bench of the Supreme Court much later i.e., on 23.09.2021. The decision in S.Karthik (supra) being a later judgment and by a larger bench therefore will be binding on us and this decision says that the right of redemption stands extinguished only on the sale certificate getting registered.

44. Before we revert back to the facts of the present case, we may also refer to Sections 35 and 37 of the SARFAESI Act. While Section 35 says that the provisions of the SARFAESI Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force, Section 37 clarifies that provisions of the SARFAESI Act or the rules made thereunder shall be in addition to and not in derogation of any other law for the time being in force.

45. This brings us to Section 60 of the Transfer of Property Act, 1882. Section 60 says that at any time after the principal amount has become due, the mortgagor has a right, on payment or tender, of the mortgage money, to require the mortgagee (a) to deliver to the mortgagor the mortgage deed and all documents relating to the mortgaged property which are in possession or power of the mortgagee, (b) where the mortgagee is in possession of the mortgaged property, to deliver possession thereof back to the mortgagor, and (c) at the cost of the mortgagor either to re-transfer the mortgaged property to him or to such third person as he may direct, or to execute and to have registered an acknowledgement in writing that any right in derogation of his interest transferred to the mortgagee has been extinguished. As per the proviso, the right conferred under the aforesaid provision shall not be extinguished by any act of the parties or by decree of a Court.

46. Therefore, on a careful application of Sections 35 and 37 of the SARFAESI Act, it is evident that the situation contemplated under Section 13(8) of the SARFAESI Act does not exclude application of Section 60 of the Transfer of Property Act, 1882. As explained by this Court in Concern Readymix (supra), a restriction on the right of the mortgagee to deal with the property post issuance of notice for

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public auction is not the same as the right of redemption available to the mortgagor.” (Emphasis supplied)

59Copy pinpoint59. Thus, from the aforesaid, it is evident that the Telangana High Court in the Amme Srisailam (supra) has not referred to or looked into its earlier decision in the case of K.V.V. Prasad Rao Gupta (supra). The decision of the Andhra Pradesh High Court in Sri Sai Annadhatha Polymers (supra) was also not been looked into by the Telangana High Court in the case of Amme Srisailam (supra). It appears that the Telangana High Court in Concern Readymix (supra) and Amme Srisailam (supra) as well as the Punjab and Haryana High Court in the case of Pal Alloys (supra) have taken the view that the amended Section 13(8) of the SARFAESI Act does not exclude the application of Section 60 of the Act 1882 in view of Sections 35 and 37 respectively of the SARFAESI Act. EFFECT OF THE AMENDMENT TO SECTION 13(8) OF THE SARFAESI ACT

60Copy pinpoint60. Before proceeding with the analysis of the provision of Section 13(8) of the SARFAESI Act, it would be appropriate to refer to the said provision as it stood prior to the amendment and as it stands after the amendment, which is given below: - Pre-amendment Section 13(8) Post-amendment Section 13(8) (8) If the dues of the secured creditor (8) Where the amount of dues of the together with all costs, charges secured creditor together with all and expenses incurred by him are costs, charges and expenses incurred tendered to the secured creditor at by him is tendered to the secured any time before the date fixed for creditor at any time before the date sale or transfer, the secured asset of publication of notice for public shall not be sold or transferred by the auction or inviting quotations secured creditor, and no further step or tender from public or private shall be taken by him for transfer or treaty for transfer by way of lease, sale of that secured asset. assignment or sale of the secured assets,—

CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. 119 LTD. & ORS. [J. B. PARDIWALA, J.]

(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.

61Copy pinpoint61. At this juncture, it would be apposite to refer to the decision of this Court in Embassy Hotels Private Ltd. v. Gajraj and Company & Ors. reported in (2015) 14 SCC 316, wherein this Court had held that the expression “by act of the parties” in the Proviso to Section 60 would include the failure of the parties to settle the dispute and by their act allowing the mortgaged property to be sold in auction. The relevant observations made in it are reproduced below: - “16. Section 60 of the Transfer of Property Act protects the right of redemption available to a mortgagor by providing that the mortgagor can exercise such a right by paying the mortgaged money any time after the principal money has become due. But the proviso clarifies that the right conferred by that section is available only if it has not been extinguished by act of the parties or by decree of the court. The act parties would cover act of the mortgagor and mortgagee, if they are unable to settle the dispute arising out of money claim covered by the mortgage and by their action, allow the mortgaged property to be sold through auction in favour of a third party. Hence, it is not possible to accept the case of the plaintiff-respondent that in spite of sale of suit property becoming final through court auction, for the purpose of grant of specific relief to the plaintiff in the present suit, the first defendant would be deemed to still retain the right to the mortgage and transfer the suit property to the plaintiff regardless of the right, title and possession already legally vested in the auction- purchaser the appellant.” (Emphasis supplied)

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62Copy pinpoint62. It is equally well settled that the rights created for the benefit of the borrower under the SARFAESI Act, can be waived. Waiver can be contractual or by express conduct in consideration of some compromise. However, a statutory right may also be waived by implied conduct, like, by wanting to take a chance of a favourable decision. The fact that the other side has acted on it, is sufficient consideration, as observed by this Court in Arce Polymers Pvt. Ltd. v. Alpine Pharmaceuticals Pvt. Ltd. & Ors. reported in (2022) 2 SCC 221, referred as under: - “16. Waiver is an intentional relinquishment of a known right. Waiver applies when a party knows the material facts and is cognizant of the legal rights in that matter, and yet for some consideration consciously abandons the existing legal right, advantage, benefit, claim or privilege. Waiver can be contractual or by express conduct in consideration of some compromise. However, a statutory right may also be waived by implied conduct, like, by wanting to take a chance of a favourable decision. The fact that the other side has acted on it, is sufficient consideration.

17. It is correct that waiver being an intentional relinquishment is not to be inferred by mere failure to take auction, but the present case is of repeated positive acts post the notices under Sections 13(2) and (4) of the SARFAESI Act. Not only did the borrower not question or object to the auction of the Bank, but it by express and deliberate conduct had asked the Bank to compromise its position and alter the contractual terms. The borrower wrote repeated request letters for restructuring of loans, which prayers were considered by the Bank by giving indulgence, time and opportunities. The borrower, aware and conscious of its rights, chose to abandon the statutory claim and took its chance and even procured favourable decisions. Even if we are to assume that the borrower did not waive the remedy, its conduct had put the Bank in a position where they have lost time, and suffered on account of delay and laches, which aspects are material. Auction on the subject property was delayed by more than a year as at the behest of the borrower, the Bank gave them a long rope to regularise the account. To ignore the conduct of the borrower would not be reasonable to the Bank once third-party rights have been created. In this background, the

CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. 121 LTD. & ORS. [J. B. PARDIWALA, J.]

principle of equitable estoppel as a rule of evidence bars the borrower from complaining of violation.” (Emphasis supplied)

63Copy pinpoint63. We are of the view that the failure on the part of the borrower in tendering the entire dues including the charges, interest, costs etc. before the publication of the auction notice as required by Section 13(8) of the SARFAESI Act, would also sufficiently constitute extinguishment of right of redemption of mortgage by the act of parties as per the proviso to Section 60 of the Act 1882. Furthermore, in the case on hand, there was no claim for right of redemption by the borrower either before the publication of the auction notice or even thereafter. The borrowers entered into the fray only after coming to know of the confirmation of auction. Be that as it may, once the Section 13(8) stage was over and auction stood concluded, it could be said that there was an intentional relinquishment of his right of redemption under Section 13(8), whereby the Bank declared the appellant as the successful auction purchaser having offered the highest bid in accordance with the terms of the auction notice.

64Copy pinpoint64. The SARFAESI Act is a special law containing an overriding clause in comparison to any other law in force. Section 60 of the Act 1882, is a general law vis-a-vis the amended Section 13(8) of the SARFAESI Act which is special law. The right of redemption is clearly restricted till the date of publication of the sale notice under the SARFAESI Act, whereas the said right continues under Section 60 of the Act 1882 till the execution of conveyance of the mortgaged property. The legislative history has been covered in the preceding paragraphs of this judgment and how the Parliament desired to have express departure from the general provision of Section 60 of Act 1882. The SARFAESI Act is a special law of recovery with a paradigm shift that permits expeditious recovery for the banks and the financial institutions without intervention of Courts. Similarly, Section 13(8) of the SARFAESI Act is a departure from the general right of redemption under the general law i.e. the Act 1882. Further, the legislature has in the objects and reasons while passing the amending Act specifically stated “to facilitate expeditious disposal of recovery applications, it has been decided to amend the said Acts….”. Thus, while interpreting Section 13(8) vis-à- vis Section 60 of the Act 1882, an interpretation which furthers the said

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object and reasons should be preferred and adopted. If the general law is allowed to govern in the manner as sought to be argued by the borrowers, it will defeat the very object and purpose as well as the clear language of the amended Section 13(8).

65Copy pinpoint65. In Mathew Varghese (supra) this Court had interpreted the unamended section 13(8) of SARFAESI Act and Section 60 of Act 1882 respectively. However, thereafter the legislature amended Section 13(8) of the SARFAESI Act. Thus, on this score, the decision in Mathew Varghese (supra) could be said to have been partially legislatively overruled as the substratum of the verdict stands altered / amended.

66Copy pinpoint66. Even otherwise, we should not lose sight of the fact that in Mathew Varghese (supra) the court held in regard to the right of redemption that both the SARFAESI Act and Act 1882 are complimentary to each other and equally applicable. It had held this because, the words “before the date fixed for transfer” in the unamended Section 13(8), amongst other things also means and connotes the date of conveyance of the secured asset by a registered instrument (which is the ordinary process of extinguishment of right of redemption under Act 1882). Since, this Court observed that the stipulation or expression “date fixed for transfer” could also mean the date of conveyance / transfer of such secured asset and being so, is not much different from the ordinary process of redemption under the Act 1882, it could not be said that there was any material inconsistency between the SARFAESI Act & Act 1882, and thus it found no reason or hesitation to hold that the Act 1882 is inapplicable and thus made an endeavour of harmonizing the two.

67Copy pinpoint67. It appears that while considering the right of redemption of mortgage under the unamended Section 13(8), this Court in Mathew Varghese (supra) only went so far to say that in the absence of any material inconsistency between the SARFAESI Act & Act 1882, there was no good reason to hold that the Act 1882 would not be applicable and as such, held that general right of redemption of mortgage contained in Section 60 Act 1882 would apply even in respect of the SARFAESI Act.

68Copy pinpoint68. However, with the advent of the 2016 Amendment, Section 13(8) of the SARFAESI Act now uses the expression “before the date of publication notice for public auction or inviting quotations or tender from public or

CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. 123 LTD. & ORS. [J. B. PARDIWALA, J.]

private treaty for transfer by way of lease, assignment or sale of the secured assets” which by no stretch of imagination could be said to be in consonance with the general rule under the Act 1882 that the right of redemption is extinguished only after conveyance by registered deed. Thus, in the light of clear inconsistency between Section 13(8) of the SARFAESI Act and Section 60 of the Act 1882 the former special enactment overrides the latter general enactment in light of Section 35 of the SARFAESI Act. Thus, the right of redemption of mortgage is available to the borrower under the SARFAESI Act only till the publication of auction notice and not thereafter, in light of the amended Section 13(8).

69Copy pinpoint69. This aspect of inapplicability of the Act 1882 vis-a-vis the SARFAESI Act can be looked at from one another angle. In Madras Petrochem (supra) this Court made a pertinent observation that the Sections 35 and 37 respectively of the SARFAESI Act form a unique scheme of overriding provisions, however the scope and ambit of Section 37 is restricted only to the securities law. The relevant portion is given as under: - “39. This is what then brings us to the doctrine of harmonious construction, which is one of the paramount doctrines that is applied in interpreting all statutes. Since neither Section 35 nor Section 37 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is subject to the other, we think it is necessary to interpret the expression “or any other law for the time being in force” in Section 37. If a literal meaning is given to the said expression, Section 35 will become completely otiose as all other laws will then be in addition to and not in derogation of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Obviously this could not have been the parliamentary intendment, after providing in Section 35 that the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 will prevail over all other laws that are inconsistent therewith. A middle ground has, therefore, necessarily to be taken. According to us, the two apparently conflicting sections can best be harmonised by giving meaning to both. This can only be done by limiting the scope of the expression “or any other law for the time being in force” contained in Section 37. This expression will, therefore, have to be held to mean other laws having relation to the securities market only, as the

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Recovery of Debts Due to Banks and Financial Institutions Act, 1993 is the only other special law, apart from the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, dealing with recovery of debts due to banks and financial institutions. On this interpretation also, the Sick Industrial Companies (Special Provisions) Act, 1985 will not be included for the obvious reason that its primary objective is to rehabilitate sick industrial companies and not to deal with the securities market.” (Emphasis supplied)

70Copy pinpoint70. This Court in M.D. Frozen Foods Exports Private Limited & Ors. v. Hero Fincorp Limited reported in (2017) 16 SCC 741, observed that since as per Section 37 SARFAESI Act, the RDBFI Act which also contemplates arbitration proceedings, is in addition to the SARFAESI Act, it held that both Arbitration & Conciliation Act, 1996 and the SARFAESI Act would go hand in hand. The relevant observations are reproduced below: - “27. On the SARFAESI Act being brought into force seeking to recover debts against security interest, a question was raised whether parallel proceedings could go on under the RDDB Act and the SARFAESI Act. This issue was clearly answered in favour of such simultaneous proceedings in Transcore v. Union of India. A later judgment in Mathew Varghese v. M. Amritha Kumar also discussed this issue in the following terms: (Mathew Varghese case, SCC pp. 640-41, paras 45-46) “45. 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 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 the RDDB Act not being inconsistent with the provisions of the SARFAESI Act, the application of both the Acts, namely, the SARFAESI Act and the RDDB Act, would be complementary to each other. In this context reliance can be placed upon the decision in Transcore v. Union of India. In para 64 it is stated as under after referring to Section 37 of the SARFAESI Act: (SCC p. 162)

CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. 125 LTD. & ORS. [J. B. PARDIWALA, J.]

‘64. … According to American Jurisprudence, 2d, Vol. 25, p. 652, if in truth there is only one remedy, then the doctrine of election does not apply. In the present case, as stated above, the NPA Act is an additional remedy to the DRT Act. Together they constitute one remedy and, therefore, the doctrine of election does not apply. Even according to Snell’s Principles of Equity (31st Edn., p. 119), the doctrine of election of remedies is applicable only when there are two or more co-existent remedies available to the litigants at the time of election which are repugnant and inconsistent. In any event, there is no repugnancy nor inconsistency between the two remedies, therefore, the doctrine of election has no application.’

46. A reading of Section 37 discloses that the application of the SARFAESI Act will be in addition to and not in derogation of the provisions of the RDDB Act. In other words, it will not in any way nullify or annul or impair the effect of the provisions of the RDDB Act. We are also fortified by our above statement of law as the heading of the said section also makes the position clear that application of other laws is 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, 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 Financial Institutions Act, 1993, or any other law for the time being in force.” xxx xxx xxx

29. The aforesaid two Acts are, thus, complementary to each other and it is not a case of election of remedy.

30. The only twist in the present case is that, instead of the recovery process under the RDDB Act, we are concerned with an arbitration proceeding. It is trite to say that arbitration is an alternative to the civil proceedings. In fact, when a question was raised as to whether the matters which came within the scope and jurisdiction of the Debt Recovery Tribunal under the RDDB Act, could still be referred to arbitration when both parties have incorporated such a clause, the

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answer was given in the affirmative. That being the position, the appellants can hardly be permitted to contend that the initiation of arbitration proceedings would, in any manner, prejudice their rights to seek relief under the SARFAESI Act. xxx xxx xxx

32. The aforesaid is not a case of election of remedies as was sought to be canvassed by the learned Senior Counsel for the appellants, since the alternatives are between a civil court, Arbitral Tribunal or a Debt Recovery Tribunal constituted under the RDDB Act. Insofar as that election is concerned, the mode of settlement of disputes to an Arbitral Tribunal has been elected. The provisions of the SARFAESI Act are thus, a remedy in addition to the provisions of the Arbitration Act. In Transcore v. Union of India it was clearly observed that the SARFAESI Act was enacted to regulate securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith. Liquidation of secured interest through a more expeditious procedure is what has been envisaged under the Sarfaesi Act and the two Acts are cumulative remedies to the secured creditors.” (Emphasis supplied)

71Copy pinpoint71. It would be also appropriate to refer to another decision of this Court rendered in Vishal N. Kalsaria v. Bank of India & Ors. reported in (2016) 3 SCC 762 wherein this Court while construing the expression “any other law” occurring in Section 35 of the SARFAESI Act, held the same would mean any other law operating in the same field. The relevant observations made in it are given below: - “37. It is a settled position of law that once tenancy is created, a tenant can be evicted only after following the due process of law, as prescribed under the provisions of the Rent Control Act. A tenant cannot be arbitrarily evicted by using the provisions of the SARFAESI Act as that would amount to stultifying the statutory rights of protection given to the tenant. A non obstante clause (Section 35 of the SARFAESI Act) cannot be used to bulldoze the statutory rights vested in the tenants under the Rent Control Act. The expression “any other law for the

CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. 127 LTD. & ORS. [J. B. PARDIWALA, J.]

time being in force” as appearing in Section 35 of the SARFAESI Act cannot mean to extend to each and every law enacted by the Central and State Legislatures. It can only extend to the laws operating in the same field.” (Emphasis supplied)

72Copy pinpoint72. Thus, it appears from a combined reading of the decisions rendered by this Court in Madras Petrochem (supra) and M.D. Frozen Foods Exports (supra) that this Court has consistently construed that only those laws which have either been enumerated in Section 37 SARFAESI Act or similar to it would be applicable in addition to the SARFAESI Act i.e., laws which deal with securities or occupy the same field as the SARFAESI Act. Thus, even on this aspect, we are of the view that the Act 1882 would not be applicable in addition to the SARFAESI Act. Suffice to say, that in view of the above discussion, the statutory right of redemption under the Act 1882 will not be applicable to the SARFAESI Act at least in view of the amended Section 13(8) and any right of redemption of a borrower must be found within the SARFAESI Act in terms of the amended Section 13(8). WHY THE DECISION OF THE TELANGANA HIGH COURT IN THE CASE OF AMME SRISAILAM (SUPRA) IS NOT A GOOD LAW?

73Copy pinpoint73. The Telangana High Court’s judgment is in four parts. It takes the view as under: a. That amended Section 13(8) does not take away the right of redemption under Section 60 of the Act 1882 and for this proposition reliance was placed on the decisions in Concern Readymix (supra) and S. Karthik (supra). (Paras 37-40) b. Shakeena (supra) would not apply as it considered a litigation prior to the amendment to Section 13(8) of the SARFAESI Act and as such the observations made in it regarding the amended Section 13(8) were obiter dicta. Furthermore because S. Karthik (supra) is a subsequent decision of a three-Judge Bench, thus, Shakeena (supra) cannot be relied upon. (Paras 42-43) c. It placed reliance on Section 37 of SARFAESI Act which clarifies that the provisions of the SARFAESI Act or the Rules made thereunder shall be in addition to and not in derogation of any other

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law for the time being in force. Thus, the amended Section 13(8) does not exclude the application of Section 60 of the Act 1882. (Paras 44 and 46) d. Right to property is a constitutional right and such an interpretation of the amended section 13(8) subserves the said constitutional right. (Para 50)

74Copy pinpoint74. We are of the view that each of the foundation of the judgment is incorrect for the following reasons: a. The reliance on S. Karthik (supra) is misplaced because:- (i) Amme Srisailam’s case relies on S. Karthik (supra) to overcome Shakeena’s case on the ground that the latter deals with the unamended s. 13(8). Interestingly the same point also applies to S. Karthik (supra). A careful reading of the facts in S. Karthik (supra) in Para 3-26 clearly indicates that the sale auction notice and the auction in the said case took place in the year 2012. Para 59 of S. Karthik (supra) clinches the issue on the said score as this Court has limited its examination to the validity of the first sale notice dated 21.01.2012 i.e., the auction that took place before amendment of Section 13(8): “59. It can thus be seen that the properties at Items ‘B’ and ‘C’ in the schedule of properties in first sale notice dated 21-1-2012 have been sold through a private treaty, and as such, the said sales are not impugned in the present appeals. It is only the properties at Items ‘A’ and ‘D’ in the schedule of properties in first sale notice dated 21-1- 2012, which have been sold consequent to second sale notice dated 9-7-2012 by public auction in favour of the auction-purchaser, are impugned. We will therefore have to examine the correctness of the submission that since the second sale notice dated 9-7-2012 provided for a period of only 10 days, the auction-sale held on 20-7-2012 is vitiated in view of the law laid down by this Court in Mathew Varghese [Mathew Varghese v. M. Amritha Kumar, (2014) 5 SCC 610 : (2014) 3 SCC (Civ) 254] . For that, it will be necessary to refer to various orders passed by the tribunals as well as the High Court.” (Emphasis supplied)

CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. 129 LTD. & ORS. [J. B. PARDIWALA, J.]

(ii) The amendment to Section 13(8) is subsequent in point of time and came into effect from 01.09.2016. Thus, there was no scope for any discussion on the amendment of Section 13(8) in S. Karthik (supra). Strikingly, Shakeena (supra) though arising from an auction prior to amendment in Section 13(8) yet has taken notice of the amendment of Section 13(8). The relevant para of Shakeena (supra) is as under:- “30. A fortiorari, it must follow that the appellants have failed to exercise their right of redemption in the manner known to law, much less until the registration of the sale certificate on 18-9-2007. In that view of the matter no relief can be granted to the appellants, assuming that the appellants are right in contending that as per the applicable provision at the relevant time [unamended Section 13(8) of the 2002 Act], they could have exercised their right of redemption until the registration of the sale certificate — which, indisputably, has already happened on 18-9-2007. Therefore, it is not possible to countenance the plea of the appellants to reopen the entire auction process. This is more so because, the narrative of the appellants that they had made a valid tender towards the subject loan accounts before registration of the sale certificate, has been found to be tenuous. Thus understood, their right of redemption in any case stood obliterated on 18-9-2007. Further, the amended Section 13(8) of the 2002 Act which has come into force w.e.f. 1-9-2016, will now stare at the face of the appellants. As per the amended provision, stringent condition has been stipulated that the tender of dues to the secured creditor together with all costs, charges and expenses incurred by him shall be at any time before the “date of publication of notice” for public auction or inviting quotations or tender from public or private deed for transfer by way of lease assessment or sale of the secured assets. That event happened before the institution of the subject writ petitions by the appellants.” (Emphasis supplied) (iii) S. Karthik (supra) has followed Mathew Varghese’s case and hence not elaborated on the provisions, more particularly Section 13(8). Further Mathew Varghese’s case was decided prior to the amendment in Section 13(8). [See relevant para of S. Karthik (supra)] “39. This Court in Mathew Varghese [Mathew Varghese v. M. Amritha Kumar, (2014) 5 SCC 610 : (2014) 3 SCC (Civ) 254] has elaborately

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considered the provisions of Sections 13(1), 13(8), 35 and 37 of the SARFAESI Act so also Rules 8 and 9 of the said Rules. We, therefore, do not wish to burden the present judgment by reproducing all those provisions since they have already been reproduced and considered in Mathew Varghese [Mathew Varghese v. M. Amritha Kumar, (2014) 5 SCC 610 : (2014) 3 SCC (Civ) 254]. …” (iv) This Court in S. Karthik (supra) further noted that Section 13(8) supports the right of redemption at any time before the date fixed for sale or transfer. This is clearly in reference to the old Section 13(8) as interpreted by Mathew Varghese (supra) and as rightly made applicable in the said case as the facts therein arose prior to the amendment in Section 13(8). The said Section 13(8) now stands amended and provides a cut-off for the date of publication of the auction notice. Thus, now after the amendment the support of right of redemption is limited till the date of publication of the auction notice. The relevant Para is quoted for reference: “53. It could thus be seen that this Court in Mathew Varghese [Mathew Varghese v. M. Amritha Kumar, (2014) 5 SCC 610 : (2014) 3 SCC (Civ) 254] observed that the equity of redemption is not extinguished by mere contract for sale and that the mortgagor’s right to redeem will survive until there has been completion of sale by the mortgagee by a registered deed. This Court further observed that applying the principles stated with reference to Section 60 of the Transfer of Property Act in respect of a secured interest in a secured asset in favour of the secured creditor under the provisions of the SARFAESI Act and the relevant Rules applicable, a free hand is given to a secured creditor to resort to a sale without the intervention of the court or tribunal. It has, however, been held that under Section 13(8), it is clearly stipulated that the mortgagor i.e. the borrower, who is otherwise called as a debtor, retains his full right to redeem the property by tendering all the dues to the secured creditor at any time before the date fixed for sale or transfer.” (Emphasis supplied) (v) S. Karthik (supra) also noted Shakeena’s case but it seems the attention of the court was not drawn to the amendment in Section 13(8) and the observation by this Court in Shakeena on the said amendment. The para 118 of S. Karthik (supra) may be noted as below:-

CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. 131 LTD. & ORS. [J. B. PARDIWALA, J.]

1882. Thus, leading to upholding of the SARFAESI Act as the special law against the Act 1882 which is a general law. [See Para 53 of S. Karthik (supra) also quoted above.] (v) That the secured creditor, borrower as well as the auction purchaser under the SARFAESI Act are equally bound by the provisions of the enactment including Section 13(8). The secured creditor cannot act de hors the Section 13(8). An interpretation that declares secured creditor not bound by

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Section 13(8) makes it a bull in the china house and it leaves the entire process at the whims and fancies of the secured creditor. The auction purchaser is the most important actor of the enactment and it is on him the success of the enactment resides. Thus, any interpretation which discourages the auction purchaser to participate has a direct bearing on the implementation of the enactment and recovery of public dues and the same has to be avoided. The only caveat being that after the success of the auction bid the auction purchaser is required to comply with all the rules. c. The reliance on Section 37 of the SARFAESI Act is misplaced because this Court in Madras Petrochem (supra) has restricted its application to securities law only. (i) The relevant portion is as under:- “39. This is what then brings us to the doctrine of harmonious construction, which is one of the paramount doctrines that is applied in interpreting all statutes. Since neither Section 35 nor Section 37 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is subject to the other, we think it is necessary to interpret the expression “or any other law for the time being in force” in Section 37. If a literal meaning is given to the said expression, Section 35 will become completely otiose as all other laws will then be in addition to and not in derogation of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Obviously this could not have been the parliamentary intendment, after providing in Section 35 that the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 will prevail over all other laws that are inconsistent therewith. A middle ground has, therefore, necessarily to be taken. According to us, the two apparently conflicting sections can best be harmonised by giving meaning to both. This can only be done by limiting the scope of the expression “or any other law for the time being in force” contained in Section 37. This expression will, therefore, have to be held to mean other laws having relation to the securities market only, as the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 is the only other special law, apart from the Securitisation and Reconstruction of

CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. 133 LTD. & ORS. [J. B. PARDIWALA, J.]

28. This ejusdem generis principle is a facet of the principle of noscitur a sociis. The Latin maxim noscitur a sociis contemplates that a statutory term is recognised by its associated words. The Latin word “sociis” means “society”. Therefore, when general words are juxtaposed with specific words, general words cannot be read in isolation. Their colour and their contents are to be derived from their context. (See similar observations of Viscount Simonds in Attorney General v. Prince Ernest Augustus of Hanover [1957 AC 436 : (1957) 2 WLR 1 : (1957) 1 All ER 49 (HL)], AC at p. 461.)”

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d. The argument of Right to property being a constitutional right and the High Court’s interpretation subserving the same is irrelevant in light of the following:- (i) Because once it is established that Section 60 of the Transfer of Property, 1882 has no application under the Securitisation Act, 2002, nothing survives on the said count.

75Copy pinpoint75. It also needs to be stated that, in Amme Srisailam (supra) the High Court did not apply the observations made by this Court in Shakeena (supra) as regards the amended Section 13(8) because it was of the view that the same were only obiter dicta and moreover because a subsequent and larger bench decision of this Court in S. Karthik (supra) had held that right of redemption would be extinguished only upon issuance and registration of the sale certificate.

76Copy pinpoint76. We may however point out that, this Court in S. Karthik (supra) had made no reference as to whether it was considering the unamended or the amended Section 13(8), nor any reference was made to the 2016 Amendment. Thus, in our opinion, the decision in S. Karthik (supra) cannot be said to have considered the amended provision of Section 13(8) especially in view of the fact that, it had placed strong reliance on Mathew Varghese (supra) which as discussed before had dealt with the unamended provision of Section 13(8).

77Copy pinpoint77. We also find that, in Pal Alloys (supra) the reliance on the Joint Committee Report specifically the heading “Provisions to stop secure creditor to lease or assignment or sale in the prescribed conditions- Amendment to Section 13(8) of the SARFAESI Act” occurring in it, to construe that the said amendment was only to restrict the secured creditor is misplaced. We say this, because, initially in the Report, the proposed amendment to sub-section (8) of Section 13 stated as under: “The proposed modified section 13(8) provides as under:- “(8) Where the amount of 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 lease, assignment or sale of the secured assets,-

CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. 135 LTD. & ORS. [J. B. PARDIWALA, J.]

(i) the secured assets shall not be leased, assigned or sold by the secured creditor; and (ii) in case, any step has been taken by the secured creditor for 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 lease or assignment or sale of such secured assets.”” (Emphasis supplied) 78.The amendment as initially proposed specifically used the words “at any time before the date fixed for lease, assignment or sale of the secured assets”. The heading it was placed under read as to only restricting the rights of the secured creditor. However, remarkably, the Joint Committee subsequently changed the proposal to as under: - “The Committee after examining the proposed amendment and the existing Rules in this regard decide to modify proposed Clause 11(ii) [section 13(8) of the principal Act] as under: “(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.”” (Emphasis supplied)

79Copy pinpoint79. Thus, without indicating any reason for the change, the proposal now used the words “before the date of publication of notice for public

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auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets” and the same came to be incorporated by way of the 2016 Amendment. We feel, in such circumstances, given the abrupt and significant change in the proposal by the Joint Committee, the initial heading had been inadvertently left, and the same in no manner can be relied to construe the said provision as one intended to inhibit only the secured creditor. In any event, it is a well settled canon of law, that the sum and substance of a provision is determined by what is given in the provision and not by its heading or marginal note.

80Copy pinpoint80. To read it otherwise in a strict manner as to only stipulating a restriction upon the secured creditor and not on the borrower’s right of redemption would lead to a very chilling effect, where no auction conducted under the SARFAESI Act would have any form of sanctity, and in such a situation no person would be willing to come forward and participate in any auction due to the fear and apprehension that despite being declared a successful bidder, the borrower could still at any time come and redeem the mortgage and thereby thwart the very auction process.

81Copy pinpoint81. Such a scenario is all the more worrisome, because the general public who participate in such auctions are often neither aware nor informed by the secured creditors conducting the auctions, that as long as the sale certificate is not issued, they will not have a right in the said asset and that the borrower whose asset is being auctioned could sweep- in and redeem the mortgage any time, and thereby thwart their rights and the very auction process.

82Copy pinpoint82. Thus, it is necessary to interpret the amended Section 13(8) of the SARFAESI Act in such a manner where a legal sanctity is attached to an auction process and a bright line is drawn where a mischievous borrower is told ‘no more and no further’ and precluded from hastily exercising its right of redemption from nowhere at the very end of the process and thereby set the entire auction process at naught. If permitted to do so then all auctions under the SARFAESI Act would be meaningless and simply rendered otiose and the very object of Section 13 and the overall scheme of the SARFAESI Act of enabling the banks from recovering its dues in a timely manner without intervention of the courts would be simply defeated.

CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. 137 LTD. & ORS. [J. B. PARDIWALA, J.]

SANCTITY OF PUBLIC AUCTION

83Copy pinpoint83. This Court in Valji Khimji (supra) held that once an auction is confirmed the same can be interfered on very limited grounds as otherwise no auction would ever be complete, with the following relevant observations, being reproduced hereunder: - “11. It may be noted that the auction-sale was done after adequate publicity in well-known newspapers. Hence, if any one wanted to make a bid in the auction he should have participated in the said auction and made his bid. Moreover, even after the auction the sale was confirmed by the High Court only on 30-7-2003, and any objection to the sale could have been filed prior to that date. However, in our opinion, entertaining objections after the sale is confirmed should not ordinarily be allowed, except on very limited grounds like fraud, otherwise no auction-sale will ever be complete. xxx xxx xxx

29. … It may be mentioned that auctions are of two types – (1) where the auction is not subject to subsequent confirmation, and (2) where the auction is subject to subsequent confirmation by some authority after the auction is held.

30. In the first case mentioned above, i.e. where the auction is not subject to confirmation by any authority, the auction is complete on the fall of the hammer, and certain rights accrue in favour of the auction-purchaser. However, where the auction is subject to subsequent confirmation by some authority (under a statute or terms of the auction) the auction is not complete and no rights accrue until the sale is confirmed by the said authority. Once, however, the sale is confirmed by that authority, certain rights accrue in favour of the auction-purchaser, and these rights cannot be extinguished except in exceptional cases such as fraud.”

84Copy pinpoint84. In another decision by this Court in K. Kumara Gupta v. Sri Markendaya and Sri Omkareswara Swamy Temple & Ors. reported in (2022) 5 SCC 710, it was held that repeated interferences with public auction would frustrate the sanctity and purpose of holding auctions. The relevant observations made in it are given below: -

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“14. Once the appellant was found to be the highest bidder in a public auction in which 45 persons had participated and thereafter when the sale was confirmed in his favour and even the sale deed was executed, unless and until it was found that there was any material irregularity and/or illegality in holding the public auction and/or auction-sale was vitiated by any fraud or collusion, it is not open to set aside the auction or sale in favour of a highest bidder on the basis of some representations made by third parties, who did not even participate in the auction proceedings and did not make any offer. xxx xxx xxx

16. It is also required to be noted that the sale was confirmed in favour of the appellant by the Commissioner, Endowments Department after obtaining the report of the Assistant Commissioner. Therefore, we are of the opinion that in the aforesaid facts and circumstances of the case, the High Court ought not to have ordered re-auction of the land in question after a period of 23 years of confirmation of the sale and execution of the sale deed in favour of the auction-purchaser by observing that the value of the property might have been much more, otherwise, the object and purpose of holding the public auction and the sanctity of the public auction will be frustrated. Unless there is concrete material and it is established that there was any fraud and/or collusion or the land in question was sold at a throwaway price, the sale pursuant to the public auction cannot be set aside at the instance of strangers to the auction proceeding.

17. The sale pursuant to the public auction can be set aside in an eventuality where it is found on the basis of material on record that the property had been sold away at a throwaway price and/or on a wholly inadequate consideration because of the fraud and/or collusion and/or after any material irregularity and/or illegality is found in conducing/ holding the public auction. After the public auction is held and the highest bid is received and the property is sold in a public auction in favour of a highest bidder, such a sale cannot be set aside on the basis of some offer made by third parties subsequently and that too when they did not participate in the auction proceedings and made any offer

CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. 139 LTD. & ORS. [J. B. PARDIWALA, J.]

and/or the offer is made only for the sake of making it and without any serious intent. In the present case, as observed hereinabove, though Shri Jagat Kumar immediately after finalising the auction stated that he is ready and willing to pay a higher price, however, subsequently, he backed out. If the auction-sale pursuant to the public auction is set aside on the basis of such frivolous and irresponsible representations made by such persons then the sanctity of a public auction would be frustrated and the rights of a genuine bidder would be adversely affected.” (Emphasis supplied)

85Copy pinpoint85. In a recent decision by this Court in Eva Agro Feeds Private Limited v. Punjab National Bank & Anr. reported in 2023 SCC OnLine SC 1138, the following relevant observations were made, being reproduced as under: - “84. … mere expectation of the Liquidator that a still higher price may be obtained can be no good ground to cancel an otherwise valid auction and go for another round of auction. Such a cause of action would not only lead to incurring of avoidable expenses but also erode credibility of the auction process itself. That apart, post auction it is not open to the Liquidator to act on third party communication and cancel an auction, unless it is found that fraud or collusion had vitiated the auction. The necessary corollary that follows therefrom is that there can be no absolute or unfettered discretion on the part of the Liquidator to cancel an auction which is otherwise valid. As it is in an administrative framework governed by the rule of law there can be no absolute or unfettered discretion of the Liquidator. Further, upon a thorough analysis of all the provisions concerning the Liquidator it is evident that the Liquidator is vested with a host of duties, functions and powers to oversee the liquidation process in which he is not to act in any adversarial manner while ensuring that the auction process is carried out in accordance with law and to the benefit of all the stakeholders. Merely because the Liquidator has the discretion of carrying out multiple auction it does not necessarily imply that he would abandon or cancel a valid auction fetching a reasonable price and opt for another round of auction process with the

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expectation of a better price. Tribunal had rightly held that there were no objective materials before the Liquidator to cancel the auction process and to opt for another round of auction.” (Emphasis supplied)

86Copy pinpoint86. Thus, what is discernible from above is that, it is the duty of the courts to zealously protect the sanctity of any auction conducted. The courts ought to be loath in interfering with auctions, otherwise it would frustrate the very object and purpose behind auctions and deter public confidence and participation in the same.

87Copy pinpoint87. Any other interpretation of the amended Section 13(8) will lead to a situation where multiple redemption offers would be encouraged by a mischievous borrower, the members of the public would be dissuaded and discouraged from in participating in the auction process and the overall sanctity of the auction process would be frustrated thereby defeating the very purpose of the SARFAESI Act. Thus, it is in the larger public interest to maintain the sanctity of the auction process under the SARFAESI Act.

88Copy pinpoint88. In view of the aforesaid discussion, we hold that as per the amended Section 13(8) of the SARFAESI Act, once the borrower fails to tender the entire amount of dues with all cost & charges to the secured creditor before the publication of auction notice, his right of redemption of mortgage shall stand extinguished / waived on the date of publication of the auction notice in the newspaper in accordance with Rule 8 of the Rules of 2002. EXERCISE OF EXTRAORDINARY JURISDICTION BY THE HIGH COURT UNDER ARTICLE 226 OF THE CONSTITUTION IN SARFAESI MATTERS

89Copy pinpoint89. We shall now consider whether in the factual score of the present matter, any interference was warranted by the High Court in exercise of its discretionary powers under Article 226.

90Copy pinpoint90. The undisputed position that emerges is; (a) the appellant was the successful auction purchaser with a bid of Rs. 105.05 crore;

CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. 141 LTD. & ORS. [J. B. PARDIWALA, J.]

(b) On 30.06.2023, the Bank confirmed the sale of the secured asset in the appellant’s favour; (c) On 27.07.2023, the appellant had paid the entirety of the bid amount of Rs. 105.05 Crore to the Bank; (d) Out of this, a sum of Rs. 63,50,45,000/- was appropriated by the Bank against the Borrowers’ dues; (e) The Bank did not issue the sale certificate in the appellant’s favour which it ought to have on 27.07.2023; (f) After having initially invoked the jurisdiction of the DRT-I, Mumbai and invited an order on an application for redemption, the Borrowers invoked the Writ Jurisdiction of the Bombay High Court under Article 226 apprehending that the DRT may disallow their application; (g) By the Impugned Judgment dated 17.07.2023, the Bombay High Court allowed the Writ Petition on the basis of a consent granted by the Bank to give the Borrowers, time till 31.08.2023 to repay the outstandings and this has been treated as a redemption.

91Copy pinpoint91. The only justification for entertaining the Writ Petition is contained in paragraphs 11 and 14 respectively of the Impugned Judgment. Whilst the High Court has accepted that normally, such a Writ Petition would not be maintainable, it proceeded to entertain the same because of the “peculiar facts and circumstances of the present case”, “it would be in the interest of all concerned if the consensus reached between the Respondent Bank and the Petitioners is taken cognizance of by us.” Thereafter, it went on to say that the “arrangement referred to above is in the interest of all, including the Auction Purchaser”. A perusal of paragraph 14 would indicate that since the outcome which the High Court considered to be ideal could be achieved, it did not hold the Writ Petition to be an abuse of process.

92Copy pinpoint92. This Court has time and again, reminded the High Courts that they should not entertain petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person under the provisions of the SARFAESI Act. This Court in Satyawati Tondon (supra) made the following observations:

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“43. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc. the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are a code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi-judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, the High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute.

44. While expressing the aforesaid view, we are conscious that the powers conferred upon the High Court under Article 226 of the Constitution to issue to any person or authority, including in appropriate cases, any Government, directions, orders or writs including the five prerogative writs for the enforcement of any of the rights conferred by Part III or for any other purpose are very wide and there is no express limitation on exercise of that power but, at the same time, we cannot be oblivious of the rules of self-imposed restraint evolved by this Court, which every High Court is bound to keep in view while exercising power under Article 226 of the Constitution.

45. It is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the Constitution and pass interim order ignoring the fact that the petitioner can avail effective alternative remedy by filing application, appeal, revision, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance. xxx xxx xxx

CELIR LLP v. BAFNA MOTORS (MUMBAI) PVT. 143 LTD. & ORS. [J. B. PARDIWALA, J.]

55. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and the SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection.”

93Copy pinpoint93. In Commissioner of Income Tax & Ors. v. Chhabil Dass Agarwal reported in (2014) 1 SCC 603, this Court in para 15 made the following observations: “15. Thus, while it can be said that this Court has recognised some exceptions to the rule of alternative remedy i.e. where the statutory authority has not acted in accordance with the provisions of the enactment in question, or in defiance of the fundamental principles of judicial procedure, or has resorted to invoke the provisions which are repealed, or when an order has been passed in total violation of the principles of natural justice, the proposition laid down in Thansingh Nathmal case [AIR 1964 SC 1419], Titaghur Paper Mills case [Titaghur Paper Mills Co. Ltd. v. State of Orissa, (1983) 2 SCC 433 : 1983 SCC (Tax) 131] and other similar judgments that the High Court will not entertain a petition under Article 226 of the Constitution if an effective alternative remedy is available to the aggrieved person or the statute under which the action complained of has been taken itself contains a mechanism for redressal of grievance still holds the field. Therefore, when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation.”

94Copy pinpoint94. In Phoenix ARC Private Limited v. Vishwa Bharati Vidya Mandir & Ors. reported in (2022) 5 SCC 345, it was observed as under: “18. Even otherwise, it is required to be noted that a writ petition against the private financial institution — ARC — the appellant herein under Article 226 of the Constitution of India against the proposed action/actions under Section 13(4) of the SARFAESI Act can be said to be not maintainable. In the present case, the ARC proposed to

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