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Banking & Debt Recovery LawSupreme Court of India

Dwarika Prasad v. State of U.P. & Ors.

Civil Appeal · 2018 INSC 210Decided 6 Mar 2018
Civil Appeal No. 000148 of 2018
Chief Justice Dipak Misra · Justice A.M. Khanwilkar · Dr. Justice D.Y. Chandrachud

Background

The appellant had stood as guarantor for an educational loan and mortgaged his property to secure it. When the loan was not repaid, the bank classified the account as a non-performing asset, took symbolic possession, and put the mortgaged property up for e-auction under the SARFAESI Act after earlier auction attempts failed to attract bids. The appellant moved both the Debt Recovery Tribunal and the Allahabad High Court seeking to redeem the property by paying off the dues, depositing Rs. 7 lakh pursuant to a High Court order, but failed to deposit the remaining balance before the sale was confirmed and a registered sale deed was executed in favour of the auction purchaser.

Decision Breakdown

The Supreme Court examined Section 13(8) of the SARFAESI Act, which protects a borrower's right to stop a sale only if the full dues (with costs and charges) are tendered before the sale/transfer date, relying on its earlier ruling in Mathew Varghese v. M. Amritha Kumar that this right of redemption survives only until a registered sale deed is executed. Since the appellant deposited only a partial amount (Rs. 7 lakh) and never paid the balance even after the High Court proceedings concluded, and since the sale deed had already been registered, the Court held his right of redemption had been validly extinguished. However, the Court directed the bank to refund the Rs. 7 lakh deposit with 9% annual interest, since the bank itself had agreed it was liable to return this amount. Subject to that refund direction, the appeal was otherwise dismissed.

Lesson Learnt

Under the SARFAESI Act, a mortgagor's right to redeem a secured property by paying off the dues lasts only until the sale is completed through a registered sale deed: a partial payment or a mere expressed willingness to pay the rest is not enough to stop or unwind a completed sale, so full and timely payment of all dues is essential to preserve this right.

Dwarika Prasad v. State of U.P. & Ors. – Legal Case Shots | LegalAware