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2019 DIGILAW 749 (KER)

Mehar Reynolds v. Josemon Simon

2019-09-19

P.B.SURESH KUMAR

body2019
ORDER : 1. The petitioner in the review petition is a third party to the proceedings. Parties are referred to in this order for convenience, as they appear in the writ petition. 2. The petitioner purchased a property owned by the review petitioner on 22.02.2018 in a proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (the Act). On the date of sale, the petitioner paid 25% of the sale price as provided under sub-rule (3) of Rule 9 of the Security Interest (Enforcement) Rules, 2002 (the Rules). In terms of sub-rule (4) of Rule 9 of the Rules, the balance sale price should have been paid by the petitioner within 15 days from the date of confirmation of sale or within such extended period not exceeding three months, as may be agreed upon in writing between him with the respondent, the secured creditor. The petitioner did not remit the balance sale price within 15 days of the date of confirmation of the sale. He, however, paid the balance sale price in two instalments within the outer time limit prescribed under the Rules namely, three months. Nevertheless, the respondent cancelled the sale in favour of the petitioner for non payment of the balance sale price within 15 days from the date of confirmation of sale. The petitioner, in the circumstances, preferred an application for extension of time for payment of the balance sale price. The writ petition was filed thereafter for a direction to the respondent to take a decision on the said application. 3. When the writ petition was taken up for consideration, the learned counsel for the petitioner made available a copy of the judgment rendered by this court in a similar case, viz. W.P. (C) No. 4896 of 2017, involving the very same respondent. In that case, the respondent refused to accept the balance sale price tendered by the auction purchaser within the outer time limit of three months and chose to forfeit the part payment of the sale price initially made by the auction purchaser. This court, in the said case, took the view that the delay on the part of the auction purchaser is not gross enough to decline an equitable consideration in favour of the auction purchaser, and consequently directed the respondent to accept the balance sale price with interest, costs and charges. This court, in the said case, took the view that the delay on the part of the auction purchaser is not gross enough to decline an equitable consideration in favour of the auction purchaser, and consequently directed the respondent to accept the balance sale price with interest, costs and charges. In the light of the said judgment, this court disposed of the writ petition on the same lines and it is the said judgment that is sought to be reviewed in this proceedings. 4. Heard the learned counsel for the review petitioner, the learned counsel for the petitioner and the learned counsel for the respondent. 5. The learned counsel for the review petitioner contended at the outset that the review petitioner being the owner of the property, he ought to have been made a party to the writ petition. According to the learned counsel, as the judgment sought to be reviewed is one obtained in a proceedings in which he was not a party, the same is liable to be set at naught on that sole ground. It was also contended by the learned counsel that the balance sale price, if not paid by the auction purchaser within 15 days, can be accepted by the secured creditor in terms of Rule 9(4) of the Rules only in furtherance to an agreement in writing entered into by them with the auction purchaser. According to the learned counsel, in so far as there was no such agreement in writing between the petitioner and the respondent, this court ought not have directed the respondent to accept the balance sale price, for, the same would amount to an infraction of the statutory requirement under Rule 9(4) of the Rules. It was also pointed out by the learned counsel, placing reliance on Annexure A3 communication that the sale in favour of the petitioner was in fact cancelled by the respondent for non payment of the balance sale price within the time prescribed under the Rules and in so far as the said decision of the respondent was neither challenged nor set aside by this court, it was inappropriate for this court to direct the respondent to accept the balance sale price and complete the proceedings relating to the sale of the property. 6. I have given my thoughtful consideration to the contentions raised by the learned counsel for the review petitioner. 7. 6. I have given my thoughtful consideration to the contentions raised by the learned counsel for the review petitioner. 7. It is clear from sub-rule (4) of Rule 9 of the Rules that if the auction purchaser and secured creditor agree in writing, the balance sale price can be accepted by the secured creditor within three months from the date of confirmation of sale. Sub-rule (4) of Rule 9 of the Rules, prior to its amendment with effect from 4.11.2016, stood thus: “The balance amount of sale price payable shall be paid by the purchaser to the authorised officer on or before the 15th day of confirmation of sale of the immovable property or such extended period as may be agreed upon in writing between the parties.” As evident from the extracted provision, the position prior to the amendment was that if the balance sale price is not paid by the auction purchaser within 15 days from the date of confirmation of sale, the same could not have been accepted thereafter by the secured creditor, unless the parties agree in writing. It is beyond dispute that the word "parties" contained in sub-rule (4) of Rule 9 was understood and interpreted by courts to mean the secured creditor, borrower and auction purchaser. It is the said rule that was substituted by the present sub-rule (4) of Rule 9. It is evident from the substituted sub-rule that the purpose of the amendment was to confine a limited meaning to the word "parties" contained in the un-amended sub-rule by taking out from its sweep parties other than auction purchaser and secured creditor and for prescribing an outer time limit for accepting the balance sale price from the auction purchasers who fail to pay the balance sale price within 15 days from the date of confirmation of the sale. In other words, after the amendment, the Act and the Rules do not provide for or contemplate concurrence of the owner of the property for enabling the secured creditor to accept the balance sale price before the expiry of the outer time limit prescribed therein, viz. three months from the date of confirmation of the sale. In other words, after the amendment, the Act and the Rules do not provide for or contemplate concurrence of the owner of the property for enabling the secured creditor to accept the balance sale price before the expiry of the outer time limit prescribed therein, viz. three months from the date of confirmation of the sale. If that be the legislative intention, in so far as the petitioner has tendered the balance sale price within three months from the date of confirmation of the sale, acceptance of the same was purely a matter between the petitioner and the respondent. In other words, if the respondent had accepted the balance sale price tendered by the petitioner, none of the rights of the review petitioner would have impaired and the review petitioner would not have had a say at all in the matter. The contention raised by the learned counsel for the review petitioner that the review petitioner was a necessary party to the writ petition is, therefore, without substance. 8. Coming to the contention as regards the requirement of an agreement in writing, it is conceded that there was no agreement in writing between the petitioner and the respondent for accepting the balance sale consideration. The question, therefore, is as to whether this court was justified in issuing a direction to the respondent, in the absence of an agreement in writing between the petitioner and respondent to accept the balance sale price. In Civil Appeal Nos. 6991-6992 of 2013, having regard to the un-amended provision contained in Rule 9(4) of the Rules, the Apex Court has held that the use of the expression written agreement contained in the said rule only means a mutual understanding or an arrangement about the relative rights and duties by the parties. Paragraph 18 of the judgment of the Apex Court in the said case reads thus: “A reading of sub-rule (1) of Rule 9 makes it manifest that the provision is mandatory. The plain language of Rule 9(1) suggests this. Similarly, Rule 9(3) which provides that the purchaser shall pay a deposit of 25% of the amount of the sale price on the sale of immovable property also indicates that the said provision is mandatory in nature. The plain language of Rule 9(1) suggests this. Similarly, Rule 9(3) which provides that the purchaser shall pay a deposit of 25% of the amount of the sale price on the sale of immovable property also indicates that the said provision is mandatory in nature. As regards balance amount of sale price, sub-rule (4) provides that the said amount shall be paid by the purchaser on or before the 15th day of confirmation of sale of immovable property or such extended period as may be agreed upon in writing between the parties. The period of 15 days in Rule 9(4) is not that sacrosanct and it is extendable if there is a written agreement between the parties for such extension. What is the meaning of the expression written agreement between the parties in Rule 9(4) 2002 Rules do not prescribe any particular form for such agreement except that it must be in writing. The use of term written agreement means a mutual understanding or an arrangement about relative rights and duties by the parties. For the purposes of Rule 9(4), the expression "written agreement" means nothing more than a manifestation of mutual assent in writing. The word "parties" for the purposes of Rule 9(4) we think must mean the secured creditor, borrower and auction purchaser.” The purpose of the statutory requirement to have an agreement in writing is, therefore, only to ensure transparency in the decisions taken by the secured creditors in the matter of accepting the balance sale price beyond 15 days. Be that as it may. When the secured creditor in a given case is entitled to accept the balance sale price in terms of the provisions of the Rules after entering into an agreement in writing with the auction purchaser on mutually agreed terms, and when they fail to exercise that power or refuse to exercise that power, this court would certainly be within its powers under Article 226 of the Constitution of India to compel the secured creditor to exercise that power and in exceptional cases, to exercise that power in a particular fashion acceptable to the secured creditor as done in the instant case. The contention raised by the review petitioner that this court was not justified in compelling the respondent to accept the balance sale price in the absence of an agreement in writing is also, therefore, without substance. 9. The contention raised by the review petitioner that this court was not justified in compelling the respondent to accept the balance sale price in the absence of an agreement in writing is also, therefore, without substance. 9. There is no substance in the contention raised by the review petitioner based on Annexure A3 as well. In so far as it is found by this court that the respondent ought to have extended the time for payment of the balance sale price beyond 15 days from the date of confirmation of the sale, it was unnecessary for the petitioner to challenge the decision taken by the respondent to cancel the sale on the premise that the petitioner should have paid the balance sale price within 15 days from the date of confirmation of the sale. 10. The Review Petition is therefore, without substance and the same is, accordingly, dismissed.