Allowed

A.O.,Lic Housing Finance Ltd. v. D.R.Premchander & Ors.

DRAT9 Sept 2025REGULAR APPEAL/18/2018

Case brief

AI extract

What is this about?

Applicability Rule, appeal against the sale notice service of the Sale Act. The Tribunal refused. The tribunal confirmed that no valid service of notice to the borrower, refusal to recognize the rental agreement of a third party, and the valuation of the property was not done properly in accordance with Rule 8(6) and 9(1) of Security Interest (Enforcement) Rules, 2002.

What did the court decide?

Sale set aside. Appellant directed to refund sale consideration, stamp duty, and registration charges with 6% interest per annum to the auction purchaser. Fresh sale measures permitted.

A.O.,Lic Housing Finance Ltd. versus D.R.Premchander & Ors. — Cheque Dishonour | DRAT (2025)

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RA(SA) 18/2018

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IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI

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Dated the 9^th day of September, 2025

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PRESENT: HON’BLE MR. JUSTICE G. CHANDRASEKHARAN CHAIRPERSON

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RA(SA) 18/2018

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(arising out of SA 11/2014 on the file of DRT-I, Chennai )

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Between

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The Authorised Officer, M/s LIC Housing Finance Ltd. “Harrington Chamber” Block No.C, No.30/1A, Abadul Razack 1^st Street, Saidapet, Chennai 600015.

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…..Appellant

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And

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1. Dr. Premchander, S/o Late Mr. D.S. Rajan, No.G4, Rams Apartments, Bharathiyar 5^th Street, SS Colony, Madurai 625 010.

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2. Ms. Haseena Parveen, D/o Mr. M.R. Sheik Abdul Rahim, No.20, Big Mosque Street, Elis Road, Chennai 600 002.

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3. The Senior Manager, Punjab National Bank, Asset Recovery Management Branch, Khivraj Buildings, First Floor, No.624, Anna Salai, Chennai 600 006.

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…..Respondents Counsel for Appellant : M/s Ramalingam & Associates Counsel for R1 : R. Sugumaran Counsel for R2 : Mr. TR Kumarvel Counsel for R3 : M/s M.L. Ganesh & Co

RA(SA) 18/2018

ORDER

This appeal is filed under Section 18 of the SARFAESI Act, challenging the order dated 31.8.2017 passed in SA 11/2014 by DRT – 1, Chennai. The first respondent before the DRT, filed this appeal. 1^st respondent herein, as an applicant, filed SA 11/2014 challenging the sale held on 23.12.2013, pursuant to the Sale Notice dated 18.11.2013. The Ld. Presiding officer, on considering the materials produced before him and submissions made by the Ld. counsel appearing for the parties, allowed the SA 11/2014 on the following grounds:

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a) Only a photocopy of English and Tamil Newspapers containing publication of auction sale notice dated 18.11.2013 was filed and the newspapers did not reflect the name of the newspapers.

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b) The appellant bank has not produced any record to show the service of sale notice.

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c) No evidence is produced to show the affixture of sale notice in the conspicuous part of the property.

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d) When the first respondent questioned the fixation of reserve price, the appellant bank should have filed the valuation report to find out whether the reserve price was fixed in conformity with the mandatory requirements of law. However the valuation report was not produced.

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e) Consent of the secured creditor had not been taken before fixing the reserve price.

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f) The minutes or the proceedings of the sale had not been produced.

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Ld. counsel for the appellant submitted that appellant filed IA 630/2018 to receive the additional documents which had been omitted to be produced before the DRT. This application was allowed on 14.12.2018. While disposing

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RA(SA) 18/2018

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RA (SA) 18/2018, this Tribunal, in Paragraph 10 of the order, found that additional documents cannot be received in appeal unless valid reasons are given. So stating, the petition to receive additional documents in IA 630/2018, which was already allowed, was dismissed and the appeal was also dismissed. Against this order, appellant filed WP No.23009/2023 before the Hon’ble High Court of Madras. The Hon’ble High Court of Madras was pleased to quash and set aside the order passed by this Tribunal in RA (SA) 18/2018 and remitted the matter back to this Tribunal for a fresh disposal. Thus, in effect, the order allowing IA 630/2018 to receive additional documents, holds good.

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In continuation of his submissions, Learned Counsel for the appellant brought to the notice of this Tribunal, the documents relating to proof of service of sale notice. He submitted that the sale notice dated 18.11.2013 fixing the sale on 23.12.2013 at 10.00 AM was sent along with the letter dated 14.11.2013. This was returned by the borrower as “unclaimed”. The copy of the Sale Notice dated 18.11.2013, the supporting letter dated 14.11.2013, copies of returned covers as “unclaimed” are produced in the additional type set of papers for the perusal of this Tribunal. Ld. counsel for the appellant also produced copies of affixture of sale notice in the property in dispute and copies of paper publication of sale notice made in English Daily Trinity Mirror and Tamil Daily Makkal Kural, for the perusal of this Tribunal.

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RA(SA) 18/2018

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The Valuation Report dated 11.11.2013 produced now shows that the fair Market Value of the property was fixed at Rs.69.45 Lakhs and its distress Value was fixed at Rs.41.67 Lakhs. The secured creditor has given consent for fixing the Reserve Price at Rs. 42.00 Lakhs and the letter dated 14.11.2013 in this regard is also produced. The copy of the proceedings of the Authorised Officer, fixing the Reserve Price at Rs.42.00 Lakhs on 14.11.2013 is also produced. Thus, Ld. counsel for the appellant submitted that the documents now produced clearly establishes that proper measures had been taken in the matter of service of sale notice, fixing the Reserve Price and in the conduct of the sale. The property was sold for a sum of Rs.42.25 Lakhs and copy of the Sale Certificate is also now produced. He reiterated that these documents clearly show that the sale was held properly. Out of the sale amount, after realising the debt due to the appellant, the balance sale consideration was paid to the 3^rd respondent towards the due, 1^st respondent owe to it.

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Learned Counsel for first respondent submitted that SA No.11/2014 was allowed, among other grounds, on the ground that personal service of sale notice was not effected on the first respondent and affixture was not done. The property was leased to one tenant, who has purchased the property and became the successful bidder in the auction. She is the second respondent

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here. The second respondent is residing in the property mortgaged.

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RA(SA) 18/2018

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5.1 Earlier sale notices were sent to Madurai address. as evidenced in the typed set of documents filed by the appellant at pages 6, 10 to 14. The impugned sale notice was not sent to Madurai address of the first respondent. Thus, there was no service of sale notice. It is submitted that tenant has filed SANo.118/2013 and the address of the first respondent was shown as Madurai address. Paper publication was effected in Madurai only. Valuation of the property was not done properly. Only the structure was valued and undivided share in the land was not valued at all. Additional documents sought to be filed should have been filed before the Tribunal below itself. Despite giving sufficient opportunities to produce those documents before the Tribunal below and having not produced the same, it is not now open to the appellant to produce the same in the appeal. Thus, Learned Counsel for first respondent prayed for confirmation of the impugned order and dismiss the appeal.

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Learned counsel for the auction purchaser, viz., the second respondent submitted he was previously a tenant in the subject property and has become the successful bidder. He has spent a sum of Rs.42,25,000/- for purchasing this property apart from Rs.2,80,544/- towards stamp duty and Rs.11,666/towards registration charges. Despite paying the aforesaid amounts, sale certificate was cancelled. Now, the auction purchaser viz. the second

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RA(SA) 18/2018

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respondent has no more interest in getting this property. She wants her money back for the reason that she has been facing the litigation since 2018.

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Learned counsel for the third respondent submitted that first respondent has availed loan with the third respondent as well. In the Appeal Memorandum it is stated in paragraph 9 referring to the order passed by Learned Presiding Officer, DRT-II, Chennai in SA 180/2007 filed by the Punjab National Bank against LIC and the borrower on 8.8.2008 that “after adjusting the dues of R1, balance has to be paid directly to the applicant towards their dues and the residue left if any may be paid by the authorized officer to the R2. In case the second respondent settles the dues of first respondent before the sale, documents of title deeds, which are under the custody of first respondent has to be deposited with the applicant .” Thus, Learned Counsel submitted that auction purchaser cannot disown the auction sale after participating in the auction and has become the successful bidder. He reiterated that interest of Punjab National Bank be protected.

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At this juncture, Learned Counsel for the appellant submitted that this is not the first sale attempt and that after previous six sale attempts, this sale ended in success. First respondent had the knowledge that the property was brought for sale not on one occasion but on multiple occasions. Therefore, first respondent cannot take a hyper-technical ground that no notice was served to Madurai address.

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RA(SA) 18/2018

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I have considered the rival submissions and perused the records.

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Borrowal of loan, classification of account as a NPA, issuance of demand notice are not in dispute. SA 11/2014 was allowed on the following grounds.

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a) Only a photocopy of English and Tamil Newspapers containing publication of auction sale notice dated 18.11.2013 was filed and the newspapers did not reflect the name of the newspapers.

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b) The appellant bank has not produced any record to show the service of sale notice.

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c) No evidence is produced to show the affixture of sale notice in the conspicuous part of the property.

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d) When the first respondent questioned the fixation of reserve price, the appellant bank should have filed the valuation report to find out whether the reserve price was fixed in conformity with the mandatory requirements of law. However the valuation report was not produced.

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e) Consent of the secured creditor had not been taken before fixing the reserve price.

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f) The minutes or the proceedings of the sale had not been produced.

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This appeal was dismissed by the Tribunal on 11/04/2023. As against the order of dismissal, appellant filed Writ Petition No.23009/2023 alleging that IA 630/2018 filed to produce additional documents for proof of measures taken for the sale of the property was allowed by this Tribunal on 14/12/2018. Despite that, while passing the final orders on 11/04/2023 in the main appeal, the Learned Chairperson dismissed the application and also the main appeal. Therefore, the Hon’ble High Court of Madras, set aside the

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RA(SA) 18/2018

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order passed by this Tribunal on 11/04/2023 and directed this Tribunal to dispose the appeal afresh.

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On going through the records, this Tribunal finds that IA 630/2018 was filed for receiving additional documents numbering 14 detailed in paragraph 15 of the affidavit. It appears that those documents were not filed along with the application. Only by filing a fresh application for additional documents in IA 632/ 2025, additional documents are produced on 03/04/2025.

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These additional documents are strongly opposed by the first respondent on the ground that though these documents were available with the appellant at the time of proceedings pending before the DRT, they had not produced these documents. It is just stated in the affidavit that the appellant inadvertently failed to produce the relevant documents before DRT to substantiate the measures taken. This is not a valid and sufficient ground for receiving additional documents.

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It is true that the reasons stated in the affidavit for not producing the relevant documents before the lower Tribunal, cannot be accepted in terms of Order 41 Rule 27 of CPC in Civil proceedings. However, the Debts Recovery Tribunal and Debts Recovery Appellate Tribunal are bound by the Principles of Natural Justice and also the provisions made under the SARFAESI Act. Strict compliance of the provisions of CPC is not required. Therefore, this Tribunal

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RA(SA) 18/2018

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is of the view that additional documents can be received, especially, when IA 630/2018 was allowed by this Tribunal on 14/12/2018, if the additional documents will aid this Tribunal in reaching a correct decision.

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From the additional documents produced, it is seen that copies of valuation report, letters sent by the secured creditors to borrower, minutes of the sale proceedings, copy of the sale notice with returned cover, proof of affixture of sale notice, paper publication and letter of sale confirmation are produced.

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The Valuation report dated 11/11/2013 shows that the value of flat No.304, the secured asset, was assessed at Rs.69.45 lakhs as fair market value of the property and Rs.41.67 lakhs was fixed as Distress Value of the property. The challenge to this valuation report is that this valuation report had not considered the right of the first respondent in respect of undivided share in the land. Admittedly, the valuation report does not indicate the value of the undivided share of the land associated with this flat.

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Thus, this Tribunal finds that there is merit in the submission of the Learned counsel for the first respondent that the valuation of the property was not valued properly and by omitting to include the value of the undivided share of

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the land and valuing the building alone, the value of the property is undervalued.

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RA(SA) 18/2018

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The appellant has produced a letter dated 14/11/2013 for the approval of the upset price for Rs.42.00 lakhs by the Regional Manager and the proceedings of the authorised officer for fixing the upset price at Rs. 42.00 lakhs. Therefore, it appears that the upset price or reserved price was fixed in consultation with the secured creditor. Copy of the sale notice is said to have been produced at page 16 of the typed set of papers. This notice shows that this is only an intimation dated 18/11/2013 to the borrower that after 30 days, the property will be sold in public auction in terms of the auction sale notice enclosed. However, the typed set of papers does not include the actual sale notice issued under Section 13(4) of SARFAESI Act, giving details of the auction sale. The cover sent to the first respondent and one S M A Syed Ibrahim are produced in proof of service of sale notice to them. Only xerox

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copy of the front page of the cover and acknowledgement alone are produced. Original covers are not produced to ensure that the covers contained the notice.

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It is the submission of the learned counsel for the first respondent that the appellant knew well that the first respondent is not residing in the address given in the notice for the reason that he leased the flat to S M A Syed Ibrahim and he was residing at the relevant point of time in Madurai. Previous notices had been taken to Madurai address but this notice was not

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taken to Madurai address. The first respondent had also not received this

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RA(SA) 18/2018

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notice and therefore, the service of notice cannot construed as completed in terms of Rule 8(6)and 9(1) of Security Interest (Enforcement) Rules, 2002.

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The typed set of papers dated 03/04/2025 shows that the appellant had taken a pre-sale intimation notice dated 12/01/2010 to the first respondent to his Madurai address. That is, to Mr. Premchander, No. 34 J.P. Enterprises, State Bank Officers II colony (opp. to Ware House Godown), By-pass Road, Madurai. Other pre-sale notices dated 5/8/2010 and 18/10/2010 had been taken to the aforesaid address. Then on 25/01/2011, another pre-sale notice was taken to Chennai Address at Choolaimedu/secured asset address. Thus, it is clear that the impugned sale notice was not taken to Madurai address where the first respondent was residing but to the Chennai address where only the tenant was residing.

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It is relevant here to note that the tenant S M A Syed Ibrahim filed SA 118/2013 before Debts Recovery Tribunal-I, Chennai, to declare that he is the statutory tenant entitled to protection under the Rent Control Act and to set aside the order of Chief Metropolitan Magistrate in Crl. M.P.No. 6099/2013 dated 14/09/2013. It establishes that the first respondent was not residing in the premises and tenant alone is residing.

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Further, on looking into the xerox copies of affixture said to have been affixed in the secured asset produced in page Nos.21 and 22 of the typed set of papers, we cannot construe anything from this notice, because it is totally

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RA(SA) 18/2018

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dark and unreadable. When documents are produced, it is expected that they are legible and readable. No purpose would be served by producing the documents, which cannot be read at all. When issues regarding nonproduction of documents in proof of measures was discussed and found against the appellant, the appellant is expected to produce the original documents. Even in Appellate Forum, the appellant had not chosen to produce the originals but only produced copies of documents. The documents filed to show the affixture of sale notice is not readable and therefore, from this document, it cannot be decided with certainty that the sale notice was affixed in the secured asset. Therefore, this Tribunal has to conclude that affixture of sale notice in the secured asset is not proved by the appellant.

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Paper publication of sale notice in Trinity Mirror and Makkal Kural are produced in Page Nos. 23 & 24 of the typed set of papers. It is debatable as to whether Trinity Mirror and Makkal Kural newspapers have wide circulation in that area. There is no statistics produced on that aspect of wide circulation

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of these newspapers and other newspapers circulated in that area. Therefore, this Tribunal is of the view that the publication of sale notice in Tamil and English news papers had not been fairly done by the appellant.

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The tenant S M A Syed Ibrahim, filed WP No. 8622/2012 on the file of the High Court of Madras forbearing the appellant herein from taking possession

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RA(SA) 18/2018

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of the property. It was expressed that he proposed to purchase the property in the High Court, wherein he was directed to make representation to the appellant herein and in such a case, if the borrower gives consent for sale, appellant can consider and act upon. This writ petition shows that S M A Syed Ibrahim, the tenant, wanted to purchase the property.

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The sale proceedings available in pages 30, 31 and 32 of the typed set of papers dated 03/4/2025 shows that the second respondent Ms. S Hasina Parveen and tenant S M A Syed Ibrahim participated in the sale and Hasina Parveen offered a price of Rs.42,10,000/- and S M A Syed Ibrahim offered a price of Rs.42.05,000/-. Since Hasina Parveen’s bid is the highest bid, her sale was confirmed and she was declared as a successful bidder. What had happened next is interesting and surprising. In the office note of the Authorised Officer dated 23/12/2013, available at page No.33 of the typed set, it is stated that the tenant Syed Ibrahim, gave a letter stating that a sum of Rs.10,00,000/- deposited by him may be adjusted to the amount payable by the successful bidder S. Hasina Parveen. Accordingly, this amount was adjusted. The letter of Syed Ibrahim is produced in page 34 of the Typed set of papers. It shows that there is no actual and competitive bidding. It is only a sham and nominal bidding. There is no way for adjusting the EMD amount of another bidder towards sale consideration of successful bidder.

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RA(SA) 18/2018

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For the foregoing reasons, this Tribunal finds that the appellant failed to take the sale notice to the first respondent to his Madurai Address where he was residing at the time of the sale. When previous notices had been taken to that address, sending the impugned sale notice to the Chennai address, where only the tenant resides, shows that there is no proper service or non service of sale notice as required under Rule 8(6) and 9(1) of the Security Interest (Enforcement) Rules, 2002. As already decided, with regard to affixture of notice, there is no proof even in the appellate forum. There is gross violation in receiving the balance sale consideration from the other bidder. The valuation of the undivided share of the land is not considered while valuing the secured asset and fixing the upset price. All these violations are gross violations, which cut at the root of the conduct of the sale. Therefore,

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this Tribunal is of the view that the sale was not held in the manner required under the provisions of the SARFAESI Act.

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It is relevant here to mention that a memo filed by the second respondent on 09/07/2025 wherein it is stated that the second respondent is the ultimate sufferer in view of the cancellation of sale, which held in the year 2013 and thus requested that the purchase price with interest along with the stamp duty and registration charges may be returned to her. This memo is objected by both the appellant and the third respondent. When this Tribunal finds that

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the sale had not taken place as required under the SARFAESI Act, sale has to

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RA(SA) 18/2018

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be necessarily set aside, as decided by the Tribunal below. Consequently, the

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sale price, registration charges, stamp duty have to be refunded to the second

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respondent/auction purchaser.

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In this view of the matter, the following order is passed.

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a) This Tribunal confirms the order of the learned Presiding Officer, DRT-I, Chennai dated 31.8.2017 passed in SA 11/2014, for the reasons stated above and dismiss this appeal.

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b) The sale held in favour of the second respondent dated 23/12/2013 is set aside.

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c) The appellant is directed to refund the sale consideration with 6% interest per annum (simple) to the second respondent/auction purchaser from the date of deposit made by her and also the stamp duty and the registration charges incurred by the second respondent with interest at 6% (simple) from the date of payment made her, till the date of payment.

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d) The appellant is entitled to proceed for taking fresh sale measures under the SARFAESI Act.

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In the result , Appeal RA(SA) 18/2018 is dismissed, with the above directions.

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Parties are directed to bear their own costs.

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Pending IAs, if any , shall stand closed.

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[Dictated to Steno(SN) and Steno (RA) , transcribed by them , corrected, signed and pronounced by me in open court, this 9^th Day of September, 2025)

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Sd/- (JUSTICE G. CHANDRASEKHARAN) CHAIRPERSON

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A.O.,Lic Housing Finance Ltd. v. D.R.Premchander & Ors.

Case brief

What is this about?

What did the court decide?

A.O.,Lic Housing Finance Ltd. v. D.R.Premchander & Ors.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

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