Allowed

Subhamasthu Papers P Ltd. v. Bank of India

DRAT14 May 2024REGULAR APPEAL/132/2018

Case brief

AI extract

What is this about?

The Appeal Tribunal allowed the appeal against a DRT order dismissing the Appellant's SARFAESI Application. The single judge held that the mandatory sale notice under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002 was not served on the borrowers, rendering the auction futility. Consequently, the Auction was set aside, and the Bank was directed to refund the sale consideration with in

What did the court decide?

The SARFAESI Application was allowed and the auction sale set aside. Respondent Bank was directed to refund the sale consideration along with interest calculated at the fixed deposit rate prevalent on

Subhamasthu Papers P Ltd. versus Bank of India — Company and Corporate | DRAT (2024)

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Reportable/ Non Reportable

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA

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(Appeal No. 132 of 2018)

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(Arising out of S.A. No. 28 of 2017 in DRT-1, Hyderabad)

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THE HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA

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CHAIRPERSON

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M/s Subhamasthu Papers Pvt. Ltd. Rep by its Director Sri Gadde Narender S/o. Late G. Gundaiah, H. No. 16-11-370/A, Moosarmbagh, Malakpet, Hyderabad.

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…Appellants

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1. Bank of India, Malakpat Branch, rep by its Authorized Officer, situated at 16-02-287/2 & 2/1, P.B. No. 1317, Judges colony, Malakpet, Hyderabad.

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1. Sri Kasam Mallikarjuna, H.No. 11-24-130/2, Shanthi Nagar, Near SR High Bank Colony -2, Warangal City & (Urban) District.

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1. Sri Kasam Namashivaya, H. No. 11-24-130/2, Shanthi Nagar, Near SR High

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Sri Kasam Kedarinath, H.No. 11-24-130/2, Shanthi Nagar, Near SR High School, Bank Colony, Warangal City & (Urban).

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1. Sri Kasam Shivaprasad, H.No. 11-24-130/2, Shanthi Nagar, Near SR High School, Bank Colony -2, Warangal City & (Urban) District.

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…Respondents

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Counsel for the parties Mr. Nemani Srinivas, Learned Counsel for the Appellant. Ms. Anindita Das, Learned Counsel for the Respondent

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JUDGMENT : On 14^th May, 2024

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THE APPELLATE TRIBUNAL :

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Instant Appeal has arisen against a judgment and order dated 19.04.2018 passed by Learned DRT-1 Hyderabad in S.A. No. 28 of 2017 whereby the SARFAESI Application filed by the Appellant was dismissed. Feeling aggrieved, Appellant preferred the Appeal. 2. I have heard the Learned Counsel for the Appellant and Respondent No. 1. Respondent Nos. 2 to 5 are served but not represented. Facts of the matter are that a loan of Rs. 490 lacs was sanctioned by the Respondent Bank to the Appellant against the security of the scheduled properties. The loan account became irregular and was classified as NPA. Proceedings under SARFAESI Act. were drawn by the Bank. An amount of Rs. 70 lacs was paid by the borrowers. At the request of the borrowers, Account was regularized but no notice was ever issued. But on 10.01.2017 Appellants came to know that Bank has conducted the auction on 29.12.2016 for three properties without any notice. SARFAESI Application was filed by the Appellants which was duly contested by the Bank stating that earlier Sale Notice dated 23.11.2015 was issued against which a Writ Petition No. 41622 of 2015 was filed by the Appellants wherein the same grounds were raised and that is still pending. But Account was classified as NPA on 29.07.2015. Thereafter, Demand Notice was issued on 30.07.2015. Possession Notice was issued on 12.11.2015 and 13.11.2015 which were duly published in the newspapers. Notice under Rule 8 (6) and 9(1) of the Security Interest (Enforcement) Rules, 2002(hereinafter referred to as the Rules) dated 02.12.2016 was issued fixing the date of sale as on 29.12.2016 which were also published in the newspaper. All the procedure required under the Law was followed. SARFAESI Application is liable to be dismissed. Learned DRT recorded a finding that Bank has followed all the procedure in accordance with law. Consequently, SARFAESI Application was dismissed.

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3. Learned Counsel for the Appellant would submit that the Sale Notice was dated 02.12.2016, it was published on 10.12.2016. Date of Auction Sale was fixed on 29.12.2016. But there is no proof of service of notice upon the Appellants.

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4. Learned Counsel for the Bank argued the matter at length and sought time to seek instructions about the service of Sale Notice. Learned Counsel for the Respondent No. 1 Ms. Anindita Das today made a categorical statement that as per instructions received, no receipt of the notice under Rule 8(6) dated 02.12.2016 is available with the Bank. It means that Notice under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002 was not served upon the borrower. Rules 8(6) of the Rules provides that Authorised officer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets, under sub-rule (5). It is a mandatory provision. It has been held by the Hon’ble Apex Court in Nasiruddin and others versus Sita Ram Agarwal (2003) 2 SCC 577 in para 35 that-

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“ in a case where the statutory provision is plain and unambiguous, Court shall not interpret the same in a different manner, only because of harsh consequences arising therefrom.”

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Hence, when the provisions of Rule 8(6) of the Security Interest (Enforcement) Rules, 2002 are mandatory in nature, they have to be followed and complied by the secured creditor in its true sense. In the present case, there is no compliance of mandatory provisions of Rule 8(6) of the Rules. Hence, the whole exercise undertaken by the secured creditor becomes futile. Accordingly, SARFAESI Application No. 28 of 2017 is liable to be allowed. Accordingly, Appeal deserves to be allowed.

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ORDER

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Appeal is allowed. Impugned judgment and order dated 19.04.2018 passed by Learned DRT - 1 Hyderabad in S.A. No.28 of 2017 is set aside. SA No. 28 of 2017 is allowed. Auction sale

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conducted on 29.12.2016 in respect of schedule A and C properties is set side. Respondent No. 1/ Bank is directed to refund the sale consideration to the auction purchasers, Respondent Nos. 2 to 5 with interest at the rate of fixed deposit prevalent on the date of deposit till the date of actual payment. Payment should be made within a period of 30 days. Respondent No. 1 Bank would be at liberty to proceed afresh in accordance with law to recover the amount. Physical possession of the auction property be also handed over to the Bank by the auction purchaser on receipt of sale consideration.

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No Order as to costs.

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File be consigned to Record Room.

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Copy of the order be supplied to Appellant and the Respondents and a copy be also forwarded to the concerned DRT.

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Copy of the Judgment/ Final Order be uploaded in the Tribunal’s Website.

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Order dictated and pronounced by me in the open Court on this the 14^th day of May, 2024.

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(Anil Kumar Srivastava,J) Chairperson

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Dated: 14^th May, 2024 17/tp

Subhamasthu Papers P Ltd. v. Bank of India

Case brief

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What did the court decide?

Subhamasthu Papers P Ltd. v. Bank of India

Case brief

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