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Shakeena & Anr. v. Bank of India & Ors.

Civil Appeal · 2019 INSC 922Decided 20 Aug 2019
Civil Appeal Nos. 8097-8098 of 2009
Justice A.M. Khanwilkar · Justice Ajay Rastogi

Background

The appellants had taken loans from Bank of India that turned into bad debts, after which the bank seized and auctioned their mortgaged property under the SARFAESI Act, with a third party emerging as the highest bidder and receiving a sale certificate in January 2006. After the auction and sale certificate but before the certificate was formally registered, the appellants attempted several times to pay off their outstanding dues (through money deposited in a relative's account, then cheques, then demand drafts) in an effort to redeem their mortgaged property, but the bank rejected each attempt as not being a valid tender. The Madras High Court's Division Bench ultimately ruled against the appellants, holding the sale had already become final and did not need registration to be complete, and the appellants appealed to the Supreme Court.

Decision Breakdown

The Supreme Court held that it did not need to decide the broader legal question of whether a SARFAESI sale certificate needs registration to be complete, because the appellants' own attempts to pay had failed on the facts: the money was deposited into someone else's account rather than their own loan accounts, the cheques were not an acceptable mode of payment under the loan terms, and the demand drafts were made out to the wrong payee. Because none of these constituted a valid, legally proper tender of the outstanding dues, the Court held the appellants never properly exercised their right of redemption, and by the time the sale certificate was finally registered in September 2007 (followed by a sale to a third party), their window to redeem the property had closed for good. The Court therefore declined to invoke its special constitutional powers to unwind the sale and dismissed the appeals, leaving the final sale to the third-party purchaser intact.

Lesson Learnt

When trying to pay off a loan to save mortgaged property from a bank auction, a borrower must pay in the exact legally valid manner, into the correct loan account, in an accepted payment mode, and made out to the correct payee, because even a genuine, timely attempt to pay can be rejected and ultimately cost the borrower their right to redeem the property if it is not done correctly.

Official source (sci.gov.in)View Judgment (PDF)

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