The Kerala High Court set aside the auction sale that was undertaken by the Bank for recovery of arrears due to it on the basis that the auction sale was conducted beyond the prescribed limitation period of 3 years from the end of the financial year in which the Debts Recovery Tribunal has issued the recovery certificate. The Bench comprising of Chief Justice Hrishikesh Roy and Justice A K Jayasankaran Nambiar made the observation in view of the provisions stipulated under Section 29 of the Recovery of Debts Due to Banks and Financial Institutions Act,1993 (RDDBFI) read with Rule 68B of Second Schedule of the Income Tax Act,1961 that:

“Rule 68B of the Second Schedule to the IT Act clearly mandates that no sale of immovable property shall be made after the expiry of three years from the end of the financial year in which the order giving rise to a demand of dues became conclusive. In the context of the recovery steps initiated under the RDDBFI Act, this would translate as three years from the end of the financial year in which the recovery certificate was issued. While, the learned counsel for the auction purchaser would vehemently contend that Rule 68B would apply only in a situation where there was an attachment of the immovable property prior to its sale, we are of the view that the phrase “shall, as far as possible, apply with necessary modifications as if the said provisions and the rules referred to the amount of debt due under this Act instead of to the Income Tax Act” appearing in Section 29 of the RDDBFI clearly indicates that the words “for the recovery of which the immovable property has been attached” appearing in Rule 68B are wholly irrelevant, when an attachment of the immovable property is not required prior to its sale, on account of the title deeds of the property already being in the hands of the creditor consequent to the creation of the mortgage by deposit of title deeds.”

 

The Bench further noted the violation of Article 300-A of the Constitution with respect to the petitioner’s rights being infringed and observed:

“Under normal circumstances, therefore, acting on the plethora of precedents from the Supreme Court on this issue, this court would not interfere with the rights that have accrued to an auction purchaser pursuant to a sale validly held. That being said, one cannot forget that when a mortgagor is deprived of his right to redeem the mortgaged property, he effectively loses all his rights over the property in question, including the valuable right that he has in terms of Article 300-A of our Constitution which, in unambiguous terms, states that no person shall be deprived of his property save by authority of law. It follows, therefore, that if we were to find that the sale of the mortgagors property was held in a manner not authorised by the statutory provisions, or in gross disregard to those statutory provisions as are designed to prevent an unjust deprivation of the mortgagors right to redeem his property, then we would be constrained to recognise the larger Constitutional right of the mortgagor and hold the deprivation of property from the mortgagor, as without the authority of law.”

Subsequently the Court held the sale as illegal and void and furthermore set aside the recovery certificate issued by the DRT and the sale proclamation for the property. The Court further directed the petitioner to pay a sum of Rs.43,51,362.85/- to redeem its mortgaged property as well as to pay a sum of Rs. 1,89,000/- to the auction purchaser. The Court further permitted the auction purchaser to refund of the amount paid by him towards the auctioned property along with interest and further granted liberty to the bank to pursue a fresh recovery certificate in case the petitioner fails to make payment towards the mortgaged property as mentioned.

 

Image Link: https://bit.ly/2VfCQXr

Judgment: Ratheesh MN Versus DRT (Kerala and Lakshwadeep) and Ors