DWARIKA PRASAD Vs. STATE OF U.P .

JUDGEMENT

(1.) The appellant was a guarantor to a loan sanctioned for educational purposes to one Jitendra Kumar. Under the letter of sanction dated 20 June 2009, there was a 'repayment holiday' of 24 months (comprised of a grace period of 12 months and an additional 12 months) or six months after the borrower obtained a job, whichever was earlier. Repayment was to commence from 20 June 2011. In order to secure the liability, the appellant created an equitable mortgage in respect of an immovable property bearing Khasra Nos.185, 186 and 188, Central Doon, Dehradun. appellant, the period prescribed for repayment was extended by two periods each of six months (29 June 2011 to 20 December 2011 and again upto 30 June 2012). The loan was not repaid. The account was classified as a non- performing asset on 3 September 2013. Corporation bank (the second respondent) which had disbursed the loan initiated proceedings by issuing a recall notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act , 2002 (' SARFAESI Act ') on 12 September 2013. Neither was a representation made nor was any money deposited. The bank took symbolic possession on 14 February 2015. The property was put to e-auction on 30 March 2015. No bid was received. A second e-auction was scheduled on 30 January 2016. After the bank received one bid in response to the auction, the appellant initially proposed to deposit the amount of Rs 2,00,000 as against the dues of Rs.36 lakhs. This was not acceptable. The proceedings before the DRT were listed on 1 February 2016 during the course of which the appellant stated that he would move a redemption application within three days. The proceedings were adjourned to 4 February 2016. No stay was granted on the confirmation of the sale. The sale was confirmed on 2 February 2016. The appellant moved a redemption proposal on 3 February 2016. During the pendency of the proceedings before the DRT, the appellant filed a writ petition before the Allahabad High Court (Writ (C ) 10877 of 2016). The following order was passed on 15 March 2016 by a Division Bench of the Allahabad High Court:

(2.) The appellant filed a writ petition before the Allahabad High Court contending that since he was ready and willing to clear the outstanding dues of the bank, he has a right of redemption to the mortgaged property and that the auction sale without considering his offer for redemption was illegal and void. The Division Bench of the High Court rejected the writ petition, placing reliance on the provisions of Section 13(8) of the SARFAESI Act. The High Court held that the exercise of the right of redemption is permissible before the execution of the sale in favour of the auction purchaser. In this view, once the sale was complete and was registered, it was not open to the appellant to exercise the equity of redemption. The High Court has relied on the judgment of this Court in Mathew Varghese v M. Amritha Kumar(2014) 5 SCC 610.

(3.) The learned counsel appearing on behalf of the appellant submits that prior to the confirmation of the sale, the appellant voluntarily offered to defray an amount of Rs 36,00,000 towards claim of the bank and indicated his willingness to make an initial deposit of Rs 6,00,000. Though before the DRT the bank had on 1 February 2016 stated that the appellant should apply for redemption, when the application was moved on 3 February 2016 it was arbitrarily rejected. Thereafter in pursuance of the order of the High Court dated 15 March 2016, the appellant deposited a sum of Rs 7,00,000 and was ready to deposit the balance within 30 days, the time stipulated in the order dated 15 March 2016. Hence it was urged that there was no reason or justification for the bank to issue a certificate of sale on 12 April 2016. The fact that the appellant did not obtain an interim order before the DRT was not a circumstance within his control and the appellant demonstrated his willingness by making a part payment of Rs 7,00,000.