Right to Redemption of Property is Lost After Sale: DRT Dismisses Securitization Application [Read Order]

The Debts Recovery Tribunal (DRT), Chennai, in a securitization application, reiterated that the right to redemption is lost after sale.

The applicants, No.1 and No.2, were regular in payment of credit facilities availed from respondent finance institution but due to the Chennai flood of 2015 and covid pandemic, the applicants were unable to pay the monthly installments regularly. The bank issued demand notice under Section 13(2) and possession notice under Section 13(4) under the Securitization and Reconstruction of Financial Asset and Enforcement ofSecurity Interest Act, 2002 (SARFESI Act).

The applicants had made payments exceeding INR 90 lakhs towards the monthly installments and approached the respondent for one time investment which was rejected without cause. Further, the respondent issued an auction sale notice dated 21.09.2022 fixing the sale to be held on 04.11.2022. Applicants obtained Interim Stay with a conditional payment of 10% to be paid before the auction and another 10% to be paid within 4 weeks thereafter.

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They failed to comply with the latter part of the conditional order. Bank issued another sale notice dated 15.02.2023 fixing the sale to be held on 20.03.2023 but Applicant No.1 fell sick and Applicant No.2, S. Janaki, was taking care of him.

Applicant No.1, S. Sivakumar, was discharged on 05.03.2023 but failed to challenge the sale notice before the auction date, but is ready to settle by way of One Time Settlement. The bank submitted that the auction purchaser had paid a part of the bid amount but failed to furnish details of the auction purchaser.

The respondent bank, Sundaram Home Finance Limited, relied on Dwarika Prasad v. State of Uttar Pradesh (2018) and contended that the present application is not maintainable. They also placed on record the bids for auction sale. In spite of the receipt of sale notice, the applicants failed to challenge it and allowed the sale to take place.

The tribunal observed that initially as well the applicants did not raise objections to the issuance of demand notice. The bench, consisting of S.V. Gowramma, also noted that the applicants have once previously been given conditional orders which have not been complied with.

Conclusively, reliance was placed on Celir LLP v. Bafna Motors to hold that borrower’s right of redemption of mortgage under SARFAESI Act will get extinguished if there is a failure on the part of the borrower in tendering the entire dues before the publication of the auction notice as per Section 13(8) of the SARFAESI Act.

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