Allowed

Ms Bhawani Industries v. State Bank Of India

DRAT12 Feb 2024REGULAR APPEAL/226/2018

Case brief

AI extract

What is this about?

The Debt Recovery Appellate Tribunal set aside an auction sale conducted by the bank due to non-compliance with Rule 9(1) of the Security Interest (Enforcement) Rules, 2002, which mandates that a sale cannot occur before 30 days from the date notice is served on the borrower, as interpreted in Mathew Varghese vs. M. Amritha Kumar.

What did the court decide?

Auction sale of property item no.3 set aside. Bank directed to refund deposit with interest at fixed deposit rate from date of deposit.

Ms Bhawani Industries versus State Bank Of India — Banking and Recovery | DRAT (2024)

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IN THE DEBT RECOVERY APPELLATE TRIBUNAL - KOLKATA

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HON'BLE Justice Anil Kumar Srivastava, Chairperson

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REGULAR APPEAL/226/2018

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(Arising out of S.A. 286 of 2016 – DRT-I Hyderabad)

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Date:12/02/2024

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MS BHAWANI INDUSTRIES, H.No.4-3/216/3/1, PeddapalliKarimnager Dist. 505172

2.K PRABHAKAR RAO

3.SMT K SUJATHA

... Appellants

--Vs--

State Bank Of India having office atPeddapalle Branch, Karimnagar – 505172.

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Sri Kanaparthi Raju, H.No.4-147, Rampally, Peddapally, Karimnagar Dist.

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3.V PRAVEEN KUMAR, Flat 404, Prajay Sri Nilayam. Siddipet, Medak Dist.

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... Respondents

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For the appellants : Mr. Nemani Srinivas, ld. Adv.

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For the respondents: Mr. Soudip Pal Choudhuri, ld Av.

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Instant appeal has arisen against the judgement and order

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dated 28.07.2017 passed by learned DRT-I Hyderabad in S.A. 286 of 2016.

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Heard learned counsel for the parties and perused the records.

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As per pleadings of the parties, appellant no.1 has availed

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cash credit and term loan facilities from the respondent bank.

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Repayment of loan was irregular. Both the loan accounts became NPA. SARFAESI proceedings was initiated by the respondent bank by issuing demand notice u/s 13(2) of the Act on 30.04.2014 claiming outstanding duesof Rs.2,02,28,367/-. Possession notice u/s 13(4) of the Act was also issued on 12.07.2014. Notice under Rule 8(6) of the Rules was issued on 20.05.2016 intimating the borrower and guarantors that secured asset shall be sold by public auction to be held on 29.07.2016. Sale noticed was published on 26.06.2016 in two newspapers.

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Learned counsel for the appellant submits that whole exercise undertaken by the bank vitiates the SARFAESI proceedings as provisions of Rule 9(1) of the Security Interest (Enforcement) Rules, 2002 are not complied by the respondent bank. Notice issued under Rule 8(6) was not served.

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Respondent bank submitted that notice under Rule 8(6) of the Rules was issued on 20.05.2016 wherein it was stated that scheduled property shall be sold by public auction on 29.07.2016 at 10.30 a.m. and it was published in the Hindu and the Eenadu on 26.06.2016 as well as in website. Learned counsel further submits that notices were published and were duly affixed on conspicuous part of the secured asset. Accordingly, it is compliance of service as required under Rule 9(1) of the Rules.

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6. Provision of unamended Rule 9(1) of the Rules reads as under:

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“9(1) No sale of immovable property under these rules shall take place before the expiry of thirty days from the date on which the public notice of sale is published in newspapers as referred to in the proviso to sub-rule (6) of rule 8 or notice of sale has been served to the borrower:”

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As has been held by the Hon’ble Apex Court in Mathew Varghese Vs. M. Amritha Kumar [(2014) 5 SCC 610] decided on 10.02.2014 that word ‘or’ in Rule 9(1) of the Rules shall be read as ‘and’. Accordingly, date of service of notice upon the borrower attains importance. Notice should be served upon the borrower. Accordingly, ratio of the judgement delivered in Mathew Varghese (supra) shall be squarely applicable in the instant case.

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While entering into the merit of the issue it would appear that only the auction sale held for property mentioned in schedule item no.3 is challenged in the appeal. As far as item no.2 is concerned it is not challenged by the appellant.

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In the objection filed by the respondent there is no assertion made by the bank that service of notice was effected upon the borrower as provided in Rule 9(1). It is simply stated that notices were published in the newspapers and also affixed on the conspicuous part of the secure asset. It is not in compliance of unamended provision of Rule 9(1) of the Rules. Compliance of Rule 9(1) is a mandatory provision. Non-compliance of the provision of Rule 9(1) would vitiate the whole SARFAESI proceeding undertaken by the bank. Accordingly, auction sale

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conducted by the respondent bank would vitiate and is liable to be set aside. Appeal deserves to be allowed.

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O R D E R

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Appeal is allowed. Auction sale in respect of schedule of property at item no.3 in favour of respondent no.3 is set aside. Bank is directed to refund the amount deposited by respondent no.3 along with interest at fixed deposit rate from the date of deposit till the date of payment. No costs.

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File be consigned to record room. Copy of the order be supplied to the appellant and the respondents and a copy be also forwarded to the concerned DRT. Copy of the judgement/Final Order be uploaded in the Tribunal’s website.

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Order dictated, signed and pronounced by me in the open Court on this the 12^th day of February, 2024.

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(Anil Kumar Srivastava, J) Chairperson

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Dated : 12.02.2024 /pkb

Ms Bhawani Industries v. State Bank Of India

Case brief

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Ms Bhawani Industries v. State Bank Of India

Case brief

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