The Supreme Court ruled that the borrower cannot redeem mortgaged property put for public auction by only paying the reserve price for the auction or even the highest.
The appellant bank granted a term loan of Rs.100 lakhs and cash credit limit of Rs.95 lakhs to the respondent borrower against the security of two mortgaged properties namely industrial plot situated at Chittor Road, Bundi measuring 500 Sq.Mtrs. and a residential/housing property. The borrower failed to repay the term loan as per the terms and conditions of the agreement.
The account of the borrower became NPA. A notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 was served upon the borrower demanding a sum of Rs.1,85,37,218.80/- The bank took symbolic possession of the immovable property/residential house and also issued a notice under Section 13(4) of the SARFAESI Act, 2002.
Advocate Praveena Gautam, appearing on behalf of the appellant bank, submitted that in the facts and circumstances of the case the Division Bench of the High Court has committed a grave error in directing the bank to release the property and handover the possession along with the title deeds of the residential/housing property in question to the borrower on making a further payment of Rs.17 lakhs only.
Advocate Christi Jain, appearing on behalf of the respondents borrowers, contended that as the highest bid received by the bank in the public auction was Rs.71 lakhs which the borrower agreed to deposit/pay and even earlier the borrower deposited a sum of Rs.48.65 lakhs as per the order passed by the DRT, thereafter when the Division Bench of the High Court has directed the bank to release the residential property on deposit of a further sum of Rs.17 lakhs and thereafter has directed to handover the original title deeds to the borrower, the impugned judgment and order passed by the High Court is equitable order which does not warrant any interference by the Court in exercise of powers conferred under Article 136 of the Constitution of India.
A division bench of Justice M. R. Shah and Justice Sanjiv Khanna observed that as such the bank had already initiated the proceedings under Section 13 of the SARFAESI Act and even the possession of the mortgaged property was taken over by the bank under Section 14 of the SARFAESI Act and thereafter the mortgaged property was put to sale by a public auction and at that stage the borrower wanted to stall the auction proceedings and restrain the secured creditor/bank from selling the property.
The court said that in such a situation the bank/secured creditor can be restrained from selling the mortgaged property/secured property where the borrower deposits entire dues that was Rs.1,85,37,218.80/- with the secured creditor.
Court quashed and set aside the impugned judgment and order passed by the Division Bench of the High Court.
The court directed that on public auction being finalized and the mortgaged property is sold by the bank the borrower has to handover the peaceful and vacant possession of the property to the bank and/or the auction purchaser.
Case title: Bank of Baroda v/s M/s Karwa Trading Company & Anr.
Citation: CIVIL APPEAL NO.363 OF 2022