BANK OF BARODA Vs. M/S KARWA TRADING COMPANY [FEBRUARY 10,2022]

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FACTS

On failure on the part of the Borrower to repay the loan taken from the Appellant Bank, the Borrower’s mortgaged property was put up for auction. The Hon’ble Rajasthan High Court held that on payment of auctioned price of the mortgaged property by the Borrower, the Appellant Bank must handover the title deeds of the mortgaged property along with the possession thereof to the Borrower adding that such an action would discharge the liability of the Borrower for repayment of entire dues payable to the Appellant Bank. The counsel of the Appellant Bank argued that the order passed by High Court is in contravention of Section 13(8) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act“) and that High Court has erred in interpreting that payment of auctioned price amounts to repayment of entire outstanding amounts in respect of a loan.

ISSUES

Whether purchasing/ selling of the mortgaged property/ Secured Assets at reserved price or auctioned price discharges the borrower from its lability of the entire amount due?

CONTENTION

APEELLANT

The Counsel appearing on behalf of the Appellant Bank vehemently submitted that the learned Division Bench erred in directing the Appellant Bank to release the residential house upon payment of an additional sum of Rs.17,00,000/- (Rupees Seventeen Lakhs only).

And the Appellant Bank also contended that it was also the observation of the Division Bench that the Borrower did not come forward to redeem the property on basis of the Reserved Price but merely made an offer in the capacity of a purchaser upon payment of the Reserved Price. It was also clarified that payment of the Highest Bid would entail only reversion of the residential property of the Borrower and would not discharge the outstanding liability in full as against the misinterpretation of the Division Bench that such payment would discharge the entire liability against the Borrower. The Appellant also submitted that the Division Bench failed to appreciate the fact that the original order passed by the DRT was an interim order and therefore, the Division Bench could not have passed the final order.

RESPONDENT

The Borrower submitted that it has deposited the Reserved Price plus the additional cost of Rs.17,00,000/- (Rupees Seventeen lakhs Only) in accordance with the orders passed by the DRT and therefore the residential house must be released. The Counsel appearing on behalf of the Borrower submitted that the order passed by the Division Bench of High Court was equitable and does not warrant any interference by the SC in the exercise of power under Article 136 of the Constitution

JUDGEMENT

The SC noted that the impugned judgment and order passed by the Division Bench directing the Appellant Bank to release the mortgaged property/secured property and to handover the possession as well as the original title deeds to the Borrower on payment of a total sum of Rs. 65,65,000/- (Rupees Sixty-Five lakhs and Sixty-Five Thousand Only) is contrary to Sub-section (8) of Section 13 of the SARFAESI Act.

It further stated that the payment of Rs. 65,65,000/- (Rupees Sixty-Five lakhs and Sixty-Five Thousand Only) against the Outstanding Amounts could not be viewed as the discharge of total liability and even if the property were to be sold in an auction at the Highest Bid received, the liability of the Borrower to discharge/ pay the balance dues persist.

Further, the SC restored the Single Judge Bench Order and the judgment dated 20^th September 2017 passed by the Division Bench High Court was set aside and the Appellant Bank was permitted to proceed further with the auction proceedings of the mortgaged property i.e., residential house by inviting the bids afresh.

REFERENCE

• https://livelaw.org
• https://indiankanoon.org
• https://casemine.in

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