Remanded

Pallam reddy Indira v. State Bank Of India

DRAT7 Aug 2024REGULAR APPEAL/136/2023

Case brief

AI extract

What is this about?

The Debt Recovery Appellate Tribunal allowed the appeal against the dismissal of a Securitisation application. The Court found that the lower Tribunal failed to record specific findings on material pleas regarding the borrower's death and violation of auction valuation rules. The matter was remanded for a fresh decision.

What did the court decide?

The appeal is allowed and the matter is remanded to the Learned DRT, Visakhapatnam to decide the Special Appeal afresh after recording findings on the specific pleas made.

Pallam reddy Indira versus State Bank Of India — Banking and Recovery | DRAT (2024)

¶1

Reportable/Non-Reportable

¶2

Appeal No. 136 of 2023-DRAT-Kolkata

¶3

IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA

¶4

THE HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA CHAIRPERSON

¶5

Appeal No. 136 of 2023

¶6

(Arising out of S.A. 165 of 2019 in DRT, Visakhapatnam)

¶7

Pallam Reddy Indira, wife of Late Pallam Reddy Gopal Reddy, resident of Chandramonli Nagar, Door No. 4-5-49/15A, Koretipadu, Guntur District, Andhra Pradesh. … Appellant

¶8

-Versus-

¶9

State Bank of India, represented by Authorised Officer, SARB Branch, Administrative Office, Balaji Nagar, Siripuram Junction, Visakhapatnam – 530 003;

¶10

Lakshman Kaza, , son of Late K.S. Krishna Murthy, Maple, 731, Rain Tree Park, Nambur, Pedakakani – 522 509, Guntur District, Andhra Pradesh.

¶11

… Respondents

¶12

Counsel for Appellants	…	Mr. Nemani Srinivas
Counsel for Respondent Bank	…	Mr. Soudip Pal Choudhuri Ms. Saswati Sikder
Counsel for Respondent No. 2	…	Mr. Prasenjit Pal
JUDGMENT	:	7^thAugust, 2024

¶13

THE APPELLATE TRIBUNAL :

¶14

Instant appeal is preferred by the Appellant against the judgment and order dated 9.1.2020 passed by Learned DRT, Visakhapatnam dismissing S.A. 165 of 2019 (Pallam Reddy Indira -vs- State Bank of India). 2. As per pleadings of the parties, facts of the matter are that the Appellant herein, Pallam Reddy Indira (who filed a Securitisation application under Section 17 of the SARFAESI Act, 2002 (hereinafter referred to as the Act) stating that she was a guarantor of her husband, Pallam Reddy Gopal Reddy, who has availed a loan of Rs.13.00 lac in the year

¶15

¶16

Appeal No. 136 of 2023-DRAT-Kolkata 2011. He was regularly paying the instalments. He died on 9.7.2015 leaving behind his wife and two daughters. They are residing in the secured assets. No notice was ever served upon them. Sale notice was published and sale was conducted on 10.4.2019. Signatures of the Borrower and the Guarantor were obtained on blank forms. SARFAESI proceedings were conducted by the Bank against a dead person. Property was auctioned at Rs.1,15,47,000.00 against such a low outstanding debt of Rs. 17,11,187.00. Accordingly relief was sought to declare the Demand Notice and Possession Notice as bad in law. 3. Reply is filed by the Bank stating that the Loan Account of the husband of the Appellant was irregular and was classified as N.P.A. Notice, under Section 13 (2) of the SARFAESI Act, 2002, was issued on 12.6.2017 which was acknowledged on 19.6.2017 but no reply was given. Possession Notice was issued on 4.12.2018 which was acknowledged on 8.12.2018. Possession Notice was published in the daily newspapers namely Sakshi and Indian Express on 9.12.2018 . Two valuation reports were obtained from approved Valuers, thereafter, Reserve Price was fixed at Rs.1,15,47,000.00. Notice, under Section 8 (6) of the Act, was issued on 18.01.2019 which was duly acknowledged on 23.01.2019 which was duly pasted in a conspicuous part of the property. E-Auction notice was duly published in Eenadu and The New Indian Express daily newspapers on 03.3.2019. Sale notice was also sent to the Appellant on 5.3.2019 fixing the date of auction sale on 10.4.2019. Sale

¶17

¶18

Appeal No. 136 of 2023-DRAT-Kolkata was confirmed on 10.4.2019 and Sale Certificate was issued on 24.4.2019. All the procedures, as required under the law, were followed by the Bank. Auction Purchaser also filed the opposition on the same line as was filed by the Bank. 4. Learned DRT, after hearing the Learned Counsel for the parties, recorded the finding that proceedings were conducted by the Bank in accordance with law and dismissed the SARFAESI Application.

¶19

I have heard the Learned Counsel for the parties and perused the records.

¶20

5. Learned Counsel for Appellant would submit that the Borrower, i.e. the husband of the Appellant, died on 9.7.2015 but the proceedings were conducted against him which is against the settled principles of law. Proceedings against a dead person are nullity.

¶21

6. It is further contended that the Valuation Reports were obtained from the approved Valuer but the property was sold at a price for Rs.1,15,47,000.00 against the outstanding debt of Rs. 17,11,187.00. It is submitted that it is against the law as for such a meager amount the whole property could not have been sold by the Bank. It is further submitted that it is in violation of Rule 8 (5) of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as the Rules).

¶22

7. Per contra, Learned Counsel for Respondent Bank and the Auction Purchaser would submit that no communication about the death of the husband of the Appellant was given by the Appellant to the Bank. Appellant also received the

¶23

¶24

Appeal No. 136 of 2023-DRAT-Kolkata notices issued in the name of her husband. Bank came to know about the death only on filing of the SARFAESI Application. It is further submitted that no specific plea of violation of Rule 8 (5) of the Rules was taken before the Learned DRT that the secured property was inseparable. No plea of violation of Rule 8 (6) of the Rules was taken before the Learned DRT.

¶25

8. A bare perusal of the SARFAESI Application reveals that a plea was taken about the death of the Borrower on 9.7.2015. In the reply the Bank has stated that the fact of the death of the Borrower on 9.7.2015 may be considered. If this was the position then Learned DRT should have recorded its specific finding on the issue as to what would be the effect on death of the Borrower and further proceedings undertaken by the Bank against a dead person? It was a specific plea which has not been considered by the Learned DRT.

¶26

9. Another plea is taken that the property was sold at the Reserve Price of Rs.1,15,47,000.00 against the outstanding debt of Rs. 17,11,187.00. Whether it was required to sell the whole property for a debt amount of Rs.17,11,187.00? It appears that the property was sold at Rs.1,15,47,000.00 against the outstanding debt of Rs. 17,11,187.00 and the sale proceeds of more than five times were received by the Bank but no specific finding is recorded by the Learned DRT on this issue.

¶27

10. In the notice, issued under Rule 8 (6) of the Rules, no specific date, time and place for sale has been mentioned. It

¶28

¶29

Appeal No. 136 of 2023-DRAT-Kolkata was specifically pleaded by the Appellant but no finding is recorded by the Learned DRT on the issue.

¶30

11. Learned Counsel for Respondent Bank and the Auction Purchaser would submit that the plea of death of the Borrower was not specifically taken. Further plea of violation of Rule 8 (5) of the Rules was also not taken by the Appellant in their application under Section 17 of the Act.

¶31

12. I am not able to accept the submission made by the Learned Counsel for Respondent Bank. There is a specific plea taken by the Appellant in paragraph 17 on the grounds regarding violation of Rule 8 (5) of the Rules. Further in the very initial part, plea of death of the Borrower was also taken and it was stated that all the actions of the Bank were undertaken against a dead person. In such circumstances, it was incumbent upon the Learned DRT to have dealt with all these issues and recorded a finding which was not done by the Learned DRT.

¶32

13. In Brijmani Devi -vs- Pappu Kumar and Another, reported in (2022) 4 SCC 497, The Hon’ble Apex Court held as under:

¶33

“32. On the aspect of the duty to accord reasons for a decision arrived at by a court, or for that matter, even a quasijudicial authority, it would be useful to refer to a judgment of this Court in Kranti Associates (P) Ltd., v. Masood Ahmed Khan, (2010) 9 SCC 496 wherein after referring to a number of judgments this Court summarised at para 47 the law on the point. The relevant principles for the purpose of this case are extracted as under:

¶34

32.1. Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well.

¶35

¶36

Appeal No. 136 of 2023-DRAT-Kolkata

¶37

32.2. Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power.

¶38

32.3 Reasons reassure that discretion has been exercised by the decision-maker on relevant grounds and by disregarding extraneous considerations.

¶39

32.4. Reasons have virtually become as indispensable a component of a decision making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies.

¶40

32.5. The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions based on relevant facts. This is virtually the lifeblood of judicial decision-making justifying the principle that reason is the soul of justice.

¶41

32.6. Judicial or even quasi-judicial opinions these days can be as different as the Judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This is important for sustaining the litigants’ faith in the justice delivery system.

¶42

32.7. Insistence on reason is a requirement for both judicial accountability and transparency.

¶43

32.8. If a Judge or a quasi-judicial authority is not candid enough about his/her decision-making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism.

¶44

32.9. Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or "rubber-stamp reasons" is not to be equated with a valid decision-making process.

¶45

32.10. It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision-making not only makes the Judges and decision-makers less prone to errors but also makes them subject to broader scrutiny.

¶46

32.11. In all common law jurisdictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of "due process".

¶47

“34. The Latin maxim “cessante ratione legiscessat lex” meaning “reason is the soul of the law, and when the reason of any particular law ceases, so does the law itself, is also apposite.”

¶48

14. Where an issue is specifically raised by the Appellant and denied by the Respondents then it is the duty of the

¶49

¶50

Appeal No. 136 of 2023-DRAT-Kolkata DRT to decide the issue on the basis of the material available on record, in accordance with law. Perusal of the impugned judgment would show that the Learned DRT has not undertaken the trouble to scrutinize the material on record rather a sketchy judgment is passed without recording specific findings on the issues raised by the parties. In such circumstances, such a judgment cannot be sustained rather it has to be remanded back to the Learned DRT to decide it afresh in accordance with law.

¶51

15. Accordingly, the appeal deserves to be allowed and the matter is to be remanded back to the Learned DRT to decide afresh in accordance with law.

¶52

O R D E R E D

¶53

Appeal is allowed. The matter be remanded back to DRT, Visakhapatnam to decide the S.A. 165 of 2019 (Pallam Reddy Indira -vs- State Bank of India) afresh after giving opportunity of hearing to the parties in the light of the observations made in the body of the judgment in accordance with law.

¶54

No order as to costs.

¶55

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

¶56

File be consigned to Record room.

¶57

Order signed, dated and pronounced in open Court.

¶58

¶59

Appeal No. 136 of 2023-DRAT-Kolkata

¶60