SC: By selling the mortgaged property/secured property it cannot be said that the borrower is discharged from the entire liability outstanding against him

 

The Division Bench of the Supreme Court consisting of Justices M.R. Shah and Sanjiv Khanna, while hearing an appeal, opined that by selling the mortgaged property/secured property it cannot be said that the borrower is discharged from the entire liability outstanding against him.

Facts

The appellant herein – bank granted 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. The borrower failed to repay. The account of the borrower became NPA and a notice u/s 13(2) of   the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest   Act, 2002 (SARFAESI Act, 2002) was served demanding Rs.1,85,37,218.80/­ The bank took symbolic possession of the immovable property/residential house and issued a notice u/s 13(4) of the SARFAESI Act, 2002. An application was moved u/s 14 of the SARFAESI Act, 2002 and the bank took possession of the residential house (one of the mortgaged properties). The bank issued a sale notice by public auction of the property. The borrower challenged the auction before the DRT.

Procedural History

An interim order was passed by the DRT that if the borrower deposits Rs.20 lakhs the bank shall accept the bids but not finalize the bids/confirm the sale of the secured asset and if the borrower commits default in payment of balance amount, the restraint order shall stand vacated automatically. The DRT also observed that if the borrower deposits Rs.48.65 lakhs with the bank, the bank shall deliver the possession of the secured asset along with the original title deeds of the property in question. Aforesaid interim order passed by the DRT came to be challenged by the bank in appeal before the DRAT which was dismissed. The same was challenged before the learned Single Judge. The learned Single Judge set aside both the orders of DRT and DRAT. The judgment was challenged before the Division Bench of the High Court, which allowed the said appeal and quashed the judgment and order passed by the learned Single Judge and directed the bank to release the secured property (residential house) on the borrower depositing a further sum of Rs.17 lakhs to the bank and   handover the possession along with the title deeds to the borrower. Feeling aggrieved, the bank-financial institution-secured creditor preferred the present appeal. 

Contentions Made

Appellant: 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.

Respondent: Even the learned counsel appearing on behalf of the appellant – bank agreed that on payment of a total sum of Rs.65.65 lakhs the property in question may be released. Therefore, the Division Bench of the High Court has not committed any error which warrants interference of this Court in exercise of powers conferred under Article 136 of the Constitution of India.

Observations of the Court

The Bench observed that:

“Even as per the Division Bench of the High Court the borrower made an offer to deposit/pay Rs.71 lakhs as a purchaser and not by way of redeeming the mortgaged property. By selling   the mortgaged property/secured   property it cannot be said that the borrower is discharged from the entire liability outstanding against him. The liability of the borrower with respect to the balance outstanding dues would still be continued. Therefore, the Division Bench of the High Court has   erred   in   directing   to   release   the   mortgaged property/secured property and to handover the possession along   with   the   original   title   deeds   to   the   borrower   on payment of a total sum of Rs.65.65 lakhs only. So, the impugned judgment and order passed by the Division Bench of the High Court contrary to Sub­section (8) of Section 13 of the SARFAESI Act.”

Judgment

The impugned judgment passed by the Division Bench of the High Court was set aside and the order passed by the learned Single Judge quashing and setting aside the order passed by the DRT confirmed by the DRAT was hereby restored.

Case Name: Bank of Baroda vs M/s Karwa Trading Company & Anr.

Citation: CIVIL APPEAL NO. 363 OF 2022

Bench: Justice M.R. Shah, Justice Sanjiv Khanna

Decided on:10^th February 2022 

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