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REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3156    OF 2018 (Arising out of SLP (C) No.7626 of 2017)

RAKESH BIRANI (D) THROUGH LRS. ...APPELLANT (S)

                                                                VERSUS     

PREM NARAIN SEHGAL & ANR. ...RESPONDENT (S)

O R D E R

1.  Leave granted.

2. The auction purchaser has come up in this appeal against the

judgment and order passed by the Division Bench of the High Court

affirming the judgment passed by the Single Bench.

3.  The brief facts in the present case are that the auction of the

property  was  held  on  14th  February  2013.  The  appellant  was the

highest bidder.   He offered a bid of Rs.38.30 lakhs and deposited a

sum of Rs.3,80,500/­  as earnest  money on 1st  February 2013.  He

further deposited 25% of the auction amount of Rs.5.80/­ lakhs on

15th February 2013 and remaining amount of Rs.28,69,500/­ on 13th

March 2013.   The auction purchaser claimed that he was intimated

regarding confirmation of sale by the Authorised Officer of the secured

creditor  by letter  dated  27th  February  2013.   As soon  as  he  was

intimated of the  confirmation,  he further  deposited  the  75% of the

auction amount on 13th March 2013 within 15 days of confirmation of

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sale.

4. The owner and principal borrower whose property was sold in

auction questioned the same by way of filing a writ petition.  The Writ

Petition  (Civil)  No.20653 of  2013 was  filed by  the respondent.  The

Division Bench passed the order on 25th  April 2013 that as the

property has already been auctioned, directed the respondent to file an

appeal  under the provisions of  Securitisation and Reconstruction of

Financial Assets and Enforcement of Security Interest Act, 2002

(hereinafter referred to as “the Act of 2002”).  Thereafter, an appeal was

filed that was registered as S.A. No.113 of 2013.  The Debts Recovery

Tribunal,  Allahabad  vide  order  dated  19th  December  2013,  has set

aside the sale, the order was confirmed by the Debts Recovery

Appellate Tribunal  as well  as by the Single Judge and the Division

Bench of the High Court.   Hence, the present appeal by the auction

purchaser.

5.   The  main question that arises for our consideration in the

appeal is, from which date the period of fifteen days would start for

making the deposit of remaining 75 percent; from the date of

communication of confirmation of sale or from the date of the auction.

The aforesaid dates are not in dispute.   The decision depends upon

the interpretation of Rule 9 of Security Interest (Enforcement) Rules,

2002 (for short "the 2002 Rules).   Rule 9 of the 2002 Rules reads as

under:

        "9. Time of sale, issues of sale certificate and delivery of

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possession, etc.­  

(1)   No sale of immovable property under these rules, in

the  first instance,  shall take place before the expiry of

thirty days from the date on which the public notice of

sale is published in  newspapers as referred to in the

proviso to sub­rule (6) of rule 8 or notice of sale has been

served to the borrower:

 Provided further that if the sale of immovable property

by any one of the methods specified by sub­rule  (5)  of

rule 8 fails and sale is required to be conducted again,

the authorised officer shall serve, affix and publish notice

of sale of not less than fifteen days to the borrower, for

any subsequent sale.

(2) The sale shall be confirmed in favour of the purchaser

who has offered the highest sale price in his bid or tender

or  quotation or  offer to the  authorised  officer  shall  be

subject to confirmation by the secured creditor:

Provided further that if the authorised officer fails to

obtain a price higher than the reserve price, he may, with

the consent of the borrower and the secured creditor

effect the sale at such price.

(3) On every sale of immovable property, the purchaser

shall immediately, i.e., on the same day or not later than

next working day, as the case may be, pay a deposit of

twenty five percent of the amount of the sale price, which

is inclusive  of earnest  money  deposited, if any, to the

authorized officer conducting the sale and in default of

such deposit, the property shall be sold again.

(4) The balance amount of purchase price payable shall

be paid by the purchaser to the authorised officer on or

before the fifteenth day of confirmation of the sale of the

immovable property or such extended period (as may be

agreed upon in writing between the purchaser and the

secured creditor, in any case not exceeding three

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months).

(5) In default of payment within the period mentioned in

sub­rule (4), the deposit shall be forfeited (to the secured

creditor) and the property shall be resold and the

defaulting purchaser shall forfeit all claim to the property

or to any part of the sum for such it may be subsequently

sold.

(6) On confirmation of sale by the secured creditor and if

the terms of payment have been complied with, the

authorised officer exercising the power of sale shall issue

a certificate of sale of the immovable property in favour of

the purchaser in the form given in Appendix V to these

rules.

(7) Where the immovable property sold is subject to any

encumbrances, the authorised officer may,  if he thinks

fit, allow the purchaser to deposit with him the money

required to discharge the encumbrances and any interest

due thereon together with such additional amount that

may be sufficient to  meet the  contingencies  or further

cost, expenses and interest as  may  be  determined  by

him:

(Provided that  if  after meeting the cost of removing

encumbrances and contingencies there is any surplus

available out of the money deposited by the purchaser

such surplus shall be paid to the purchaser within fifteen

days from the date of finalisation of the sale.)

(8) On such deposit of money for discharge of the

encumbrances, the authorised officer shall issue or cause

the purchaser to issue notices to the persons interested

in or entitled to the money deposited with him and take

steps to make the payment accordingly.

(9) The authorised officer shall deliver the property to the

purchase fee from encumbrances known to the secured

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creditor on deposit of money as specified in sub­rule (7)

above.

(10) The certificate of sale issued under sub­rule (6) shall

specifically mention that whether the purchaser has

purchased  the immovable secured  asset free from any

encumbrances known to the secured creditor or not.”

6. The submission raised by learned counsel appearing on behalf of

the appellant was that Rule 9(4) of the 2002 Rules provided that the

amount  has  to  be  deposited  only  after confirmation.  Rule  9(2)  also

contemplates confirmation of the bid.   Learned counsel has also taken

us through Rule 9(5) so as to contend that in default of the payment

within the period mentioned in sub­rule (4), the deposit made shall be

forfeited. The forfeiture is only to follow as consequence of non­deposit of

75 percent of amount after confirmation of sale.   Learned counsel has

also relied upon the provisions of Rule 9(6) to submit that after

confirmation of sale, in case, terms of sale have been complied with only

then sale certificate is  issued.  In this case, sale certificate has been

issued by the owner in favour of the auction purchaser.   Thus, the High

Court has erred in law in interpreting the rule 9 of the rules of 2002 to

mean that date of the auction is also the date of its confirmation.

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

borrower­respondent No.1 contends that it is apparent from Rule 9(2)

that there is confirmation of sale as soon as highest bid is accepted by

the authorised officer,  within  fifteen days, the deposit  of  75% of the

amount is to be made, failing which the only course is the forfeiture of

the remaining  25% of the  amount that  has  been  deposited  and the

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property has to be resold.

8. In order to comprehend the rival submissions, it is necessary to

ponder as to intendment of Rule 9 of the 2002 Rules which deals with

the time of sale, issues of sale certificate and delivery of possession, etc.

Public notice of sale is to be published in the newspaper and only after

thirty days thereafter, the sale of  immovable property can take place.

Under Rule 9(2) of the 2002 Rules, the sale is required to be confirmed

in favour of the purchaser who has offered the highest sale price to the

authorised officer and shall be subject to confirmation by the secured

creditor.  The proviso makes it clear that sale under the said Rule would

be confirmed if the amount offered and the whole price is not less than

the reserved price as specified in Rule 9(5).  It is apparent that Rule 9(1)

does not deal with the confirmation by the authorised officer.   It only

provides confirmation by the secured creditor.  Rule 9(3) makes it clear

that on every sale of immovable property, the purchaser on the same

day or not later than next working day, has to make a deposit of twenty­

five percent of the amount of the sale price, which is inclusive of earnest

money deposited if any.  Rule 9(4) makes it clear that balance amount of

the purchase price payable shall be paid by the purchaser to the

authorized officer on or before the fifteenth day of "confirmation of sale

of the immovable property" or such extended period as may be agreed

upon in writing between the purchaser and the secured creditor.  Thus,

Rule 9(2) makes it clear that after confirmation by the secured creditor

the amount has to be deposited.   Rule 9(3)  also makes  it  clear  that

period of fifteen days has to be computed from the date of confirmation.

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In this case, confirmation has been made and communicated on 27 th

February 2013 and within fifteen days thereof i.e. on 13th March 2018,

the amount of seventy­five percent had been deposited.  Thereafter, sale

certificate has been issued under Rule 9(6).  Rule 9(5) also makes  it

clear that in default of payment within the period mentioned in sub­rule

9(4), the deposit shall be forfeited.  There cannot be any forfeiture of the

amount of 25 percent in deposit until and unless the sale is confirmed

by the secured creditor and there is a default of payment of 75 percent

of the amount.  The interpretation made by the High Court thus cannot

be accepted.

9. If we read the provisions otherwise then we find even before the

confirmation of sale within fifteen days, the amount would be forfeited

by the authorised officer who may decide not to confirm the sale that

would be a result not contemplated in Rule 9(2), 9(4) and 9(5) which

fortify our conclusion that it is only after the confirmation is made under

Rule 9(4) that amount has to be deposited and on failure to deposit the

amount, twenty­five percent amount has to be forfeited and property has

to be resold.   The provisions of Rule 9(6) also fortifies our conclusion,

inasmuch as it is the expression used that on confirmation of sale by

the secured creditor  and “if the  term of  payment has been complied

with” sale certificate is issued otherwise the forfeiture takes place, this

compliance has to be only after the confirmation of sale and not before

it.  Thus, various provisions of Rule 9 makes it clear that interpretation

made by Debts Recovery Tribunal and Debts Recovery Appellate

Tribunal and as affirmed by the High Court cannot be said to be correct.

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10.  Thus, we find that the provisions had been fully complied with

by the auction purchaser as he has complied with the provisions of Rule

9 by making a deposit of 75 percent of the amount from the date of

confirmation of sale.  The sale certificate was rightly issued in favour of

auction purchaser.   Thus, the auction could not have been set aside.

Since the sale certificate has been issued, let the possession be delivered

in accordance with law, as expeditiously as possible.

11. The appeal is allowed and the impugned orders are set aside. No

order as to costs.

....................................J. (ARUN MISHRA)

....................................J. (UDAY UMESH LALIT)

NEW DELHI;       MARCH 21, 2018.