The Appellate Tribunal dismissed the appeal filed by a financial institution against a Debts Recovery Tribunal order that set aside a property sale for alleged procedural irregularities regarding notice periods and payment modes.
The impugned order dated 06.11.2017 is set aside, and the underlying Secure Recovery Application is dismissed.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
RA (SA) 162/2018
IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT CHENNAI
Dated the 10th of August, 2023
PRESENT: Hon’ble Mr. Justice S. Ravi Kumar
CHAIRPERSON
RA (SA) 162/2018
in
(SA 91/2017 on the file of DRT-II, Chennai)
Between
The Authorised Officer, CANFIN Homes Ltd., Trichy Branch, B-11, 2nd Floor Star Towers, 12th Cross Thillai Nagar, Trichy – 620 018.
…. Appellant
AND
Mr. V. Suresh, S/o Mr. A. Vaiyapuri, Rep. by his Power of Attorney holder Mr. A. Vaiyapuri S/o. Arapuli, No. 2/85, Anna Street, Chinnaiaya Nagar, Virugambakkam, Chennai – 600 092.
Counsel for Appellant : M/s. R. Gopinath & R. Ayyappan Counsel for Respondent : Mr. R. K. M. Suresh
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ORDER
Respondent herein filed above referred SA contending that the acts of Appellant herein are vindictive and malafide, and without following the guidelines of Reserve Bank of India (RBI). According to Respondent, Authorised Officer, failed to issue and affix Possession Notices dated 14.10.2016, 21.10.2016 and 26.10.2016 and failed to publish in newspapers which have sufficient circulation in the locality. According to Respondent, Authorised Officer failed to issue and affix impugned Sale Notice dated 07.02.2017 and publish it in newspapers having sufficient circulation in the locality and also failed to give 30 days’ Notice. According to Respondent, Authorised Officer failed to obtain Valuation Report as per Rule 8(5) of Security Interest (Enforcement)
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Rules, 2002, (hereinafter called the Rules) and reserve price fixed by Authorised Officer is lower than the actual Market value, and on these contentions, Respondent filed Securitisaion Application challenging SARFAESI measures.
Appellant herein resisted said Application contending that Possession Notice was sent to Respondent herein, and it was also published in local Dailies in “The Hindu” (Tamil) and “The Times of India” (English), on 26.10.2016. It also contended, Sale Notice dated 07.02.2017 was issued to Respondent herein and his Power Agent received the same. It also contended that the valuation is made by different Authorized Civil Engineers, basing on which reserve price is fixed. Appellant also contended that Sale Notice dated 07.02.2017 was also published in “Dinamani” and “The New Indian Express” on 08.02.2017 and pasted Sale Notice on the property, on the same day itself, thereby 30 days’ time was also given. It is also contended, Sale Notice dated
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07.02.2017 was also sent through e-mail, therefore, the Application is devoid of merits.
Considering the contentions and rival contentions of both parties, Tribunal below allowed Securitisation Application holding that there is no 30 days, clear Notice, as Sale Notice was served on Respondent herein on 10.02.2017 and Sale was fixed on 10.03.2017. Tribunal below also held that the Respondent herein is not entitled to challenge Possession Notice and Demand Notice, having challenged the Sale itself. Tribunal below also held that valuation fixed by Appellant herein is proper, but only on the ground that there is no 30 days’ Notice, Sale dated 10.03.2017 is set aside. Aggrieved by the same, Appellant, Financial Institution, preferred present Appeal.
Respondent herein has not filed any Appeal questioning findings in respect of Valuation Report and Possession Notice.
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3. Heard both sides.
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Rejoinder disputing said fact, therefore, Respondent herein has not produced copy of e-mail before Tribunal below, as said fact is not disputed. He further submitted, Tribunal below, erred in saying that Authorised Officer is obliged to accept only Demand Drafts from Auction Purchaser, and Cheques cannot be entertained in Sale proceeds. He submitted, Cheque is a valid instrument, and in the event of dishonour, it has to be treated as money is not paid. He further submitted, in SARFAESI Act nor in Rules, it is not specified that Cheques cannot be accepted as a mode of payment, therefore, it is not correct in saying that it is a violation.
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Secured Asset. He further submitted that 25% of bid
amount was paid through Cheque and 75% were also paid through Cheque dated 27.03.2017, which is contrary to the Rules, and Tribunal below is perfectly right in allowing Securitisation Application, and there are no grounds to interfere with.
“ GROUNDS
1) The impugned proceedings of the Respondent is per se illegal and non-est in the eyes of law.
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2) The impugned proceedings are contrary to the facts and evidence of the case.
The non3) impugned proceedings suffers from application of mind and against the probability of law.
4) The impugned act of the Respondent against the Applicant is vindictive and malafide as the respondent had charged penal interest and compounded them and classified the loan as Non performing assets.
5) The Respondent has not followed the RBI Guidelines before classifying the account as N.P.A and the same vitiates entire SARFAESI action taken in pursuant to the same.
6) The Respondent when failed to issue the demand notice to the borrower.
7) The Respondent when failed to issue and affix the possession notice dated 14/10/2016, 21/10/2016 and 26/10/2016 and failed to publish in the sufficient circulation in the locality of schedule mention property which is against the Rule 8(1) & 8(2) of The Security Interest (Enforcement) Rules, 2002, and the principles of natural justice.
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8) The Respondent when failed to issue and affix the Impugned sale notice dated 07/02/2017 and failed to publish in the sufficient circulation in the locality of schedule mention property which is against Rule 8(6) & 7 of The Security Interest (Enforcement) Rules, 2022, and the principles of natural justice.
9) The respondent failed to give clear 30 days notice which is against Rule 8(6) of The Security Interest (Enforcement) Rules, 2002, and the principles of natural justice.
10) The respondent when failed to obtain valuation as prescribed in the rule 8(5) of the Security Interest (Enforcement) Rules 2002, and where it clearly shows that the reserve price fixed by the respondent of the schedule mention property is very lower than the actual market value of the said property.
11) It is clear that on the date of which the transaction were made between the applicant and the respondent, the respondent is not a financial institution within the meaning of SARFAESI Act and the respondent could not invoke the Sec. 13. And that being the position, the notice which is issued to the applicant under SEC.13(2) of the SARFAESI Act is without jurisdiction.
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12) The respondent failed to mention the current outstanding due which is against the Rule 8(6) (b) of The Security Interest (Enforcement) Rules, 2002, and the principles of natural justice.
13) The Schedule mention in the Impugned Sale Notice Dated 17/02/2017 is incorrect.
14) At any event the alleged claim of the Respondent is imaginary and exorbitant.
15) The Applicants further reserves their right to file additional grounds as and when necessary.”
Out of these grounds, ground No.8 and ground No.9 are only relevant and concerned with the relief to set aside Sale. According to ground No.8, Appellant herein failed to affix the impugned Sale Notice and failed to publish in newspaper having sufficient circulation in the locality thereby contravened the Rules. As seen from the Counter, Appellant herein specifically stated that Sale Notice was published in vernacular newspaper “Dinamani” and also in
“The New Indian Express” in English, on 08.02.2017, and
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the same was also pasted on the property, on the same day itself. In fact, paper publication copies are produced before Tribunal below and herein also. Respondent, except saying that these papers in “Dinamani” and “The New Indian Express” are not having sufficient circulation in that locality, failed to place any evidence in support of said allegations. It is well settled law, mere allegations and pleas are not sufficient. It has to be proved with convincing material. Even Section 17 (3) of SARFAESI Act, 2002, mandates Presiding Officer of DRT to consider Securitisation Application and evidence produced, to pass any such Order. So, allegations that these two newspapers have no sufficient circulation, remained as a plea, without any proof.
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the fact that Sale Notice was also sent to Respondent directly through e-mail on 07.02.2017 itself, is not disputed by Respondent herein. Further, this fact was not at all taken into consideration by the Tribunal below. In fact, there is no reference about this, in its Order.
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above, it is clear that, Authorised Officer complied with, both Rules 8 (6) and 9(1) of Rules, 2002.
9. Time of sale, Issue of sale certificate and delivery of possession, etc.-
1) …………………
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(2) …………………
(3) On every sale of immovable property, the purchaser shall immediately, i.e. on the same day or not later than next working day, as the case may be, pay a deposit of twenty five per cent. of the amount of the sale price, which is inclusive of earnest money deposited, if any, to the authorized officer conducting the sale and in default of such deposit, the property shall be sold again;]
(4) The balance amount of purchase price payable shall be paid by the purchaser to the authorised officer on or before the fifteenth day of confirmation of sale of the immovable property or such extended period [as may be agreed upon in writing between the purchaser and the secured creditor, in any case not exceeding three months].
(5) ………
…….”
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From a reading of above two Rules, nothing is referred about mode of payment or method of payment. As rightly pointed out by Advocate for Appellant, it is for Authorised Officer to satisfy himself as to the payment, and in this case, the Cheques issued towards payment of bid amount, are duly honourned and realized. So, the contention of Respondent that payment is in contravention of Rules, is not tenable.
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Sal Notice is published and Sale consideration was paid through Cheques is contrary to the Rules.
[Dictated to Athistamani, PS, transcribed by her, corrected, signed and pronounced by me in open court, this 10th of August, 2023]
[ Justice S. Ravi Kumar] CHAIRPERSON
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3 issues framed by the court
Whether the Authorized Officer provided a clear 30-day notice before the sale of the secured immovable asset.
Whether the sale proceeds paid via cheque constitute a violation of the Security Interest (Enforcement) Rules, 2002.
Whether the impugned order setting aside the sale and allowing the securitisation application should be sustained.
2 provisions across 1 enactments
The Authorised Officer, CANFIN Homes Ltd.
Mr. V. Suresh
S. Ravi Kumar
As recorded by the court registry
13 orders share this CNR
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