Allowed

State Bank of India v. R. Shankar

DRAT9 Jun 2025REGULAR APPEAL/19/2016

Case brief

AI extract

What is this about?

The Debt Recovery Appellate Tribunal allowed the bank's appeal and set aside the original order setting aside an auction sale. The Tribunal held that the property was sold for a price commensurate with its realisable value and specific access constraints, and the borrower failed to produce a buyer at the auction.

What did the court decide?

Appeal RA(SA) 19/2016 allowed; Order in SA 89/2015 set aside; Sale held in favour of auction purchaser declared valid; Costs to appellant.

State Bank of India versus R. Shankar — Banking and Recovery | DRAT (2025)

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RA(SA) 19/2016

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IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI

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Dated the 9^th day of June, 2025

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PRESENT: HON’BLE MR. JUSTICE G. CHANDRASEKHARAN

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CHAIRPERSON

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RA(SA) 19/2016

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(a rising out of SA 89/2015 on the file of DRT-II, Chennai)

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Between

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State Bank of India Represented by its Authorised Officer, Stressed Assets Recovery Branch, Red Cross Building, 2^nd Floor, No.32, Montieth Road, Egmore, Chennai 600 018.

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…..Appellant Bank

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And Mr. R. Shankar, S/o Mr. S. Ramamurthy, No.13, Sudarshan Nagar, Tambaram, Chennai 45.

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…..Respondent

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Counsel for Appellant Bank : M/s M.L. Ganesh & Co. Counsel for Respondent : Mrs. V. Archana

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ORDER

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This appeal is filed by the Appellant Bank under Section 18 of the SARFAESI Act, challenging the order passed in SA 89/2015 on 27.4.2016 by Learned Presiding Officer, DRT-II, Chennai.

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RA(SA) 19/2016

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The aforesaid SA was filed by the respondent to set aside the sale notice dated 9.5.2015 issued by the appellant bank and all subsequent proceedings consequential to the same. After contest, SA was allowed and the E-Auction held on 12.6.2015 was set aside. Aggrieved by the said order, appellant bank filed this Appeal.

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It is the submission of Learned Counsel for the appellant that respondent availed loan facility to the tune of Rs.20.94 lakhs vide sanction letter dated 13.10.2004, which is a housing loan. His wife Mrs. Uma Mahehswari also availed loan facility as Proprietrix of M/s Arunachaleshwar Foundations for commercial purpose. For both loans, they offered a common security and created security interest in respect of immovable property. Since respondent has not paid the dues properly, loan account was classified as a NPA on 25.10.2006 and his wife’s loan account was also classified as a NPA on 27.9.2006. Thereafter, demand notice under Section 13(2) was issued on 3.7.2010. It was followed by measures initiated under Section 14 of the SARFAESI Act before Learned CJM in Crl.MP.No.6959/2013 and physical possession was also taken. Measures for bringing the property for sale were issued under Section 13(4) and sale notice was issued on 18.4.2012. However, sale did not fructify. It is his further submission that impugned sale notice was issued on 9.5.2015 fixing the sale on 12.6.2015. Respondent was aware of the sale date and the measures taken for the sale on 12.6.2015.

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It is further submitted that borrower visited the bank and he knew about the auction proceedings. Inspection visit report dated 12.6.2015 along with photos taken at the time of his visit shows that he requested the bank to consider the upset price fixed at Rs.58.56 lakhs for settlement. That was not accepted by the bank. Remarks of the bank official reads that when property was e-auctioned at 12.00 noon, borrower came

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RA(SA) 19/2016

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forward for a compromise. He offered the title deed of the unit of M/s Arunachaleshwar Foundations which is run by his wife Uma Maheswari for both loan account dues of Rs.82.66 lakhs, as on 12.6.2015. However, he has not shown any inclination to settle the loan dues. Auction was successfully conducted and sale was held. Only after the sale, he challenged the sale notice and the consequential measures taken.

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It is his further submission that Learned Presiding Officer rejected all other contentions raised by the respondent with regard to service of notice, non-registration with CERSAI, etc., but allowed the application on the ground that property, which would fetch Rs.1.08 crore was sold for a lesser price by fixing the upset price at Rs.58.56 lakhs.

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Learned Counsel drew the attention of this Tribunal with regard to valuation report filed by the approved valuer. As per the report dated 1.9.2012 and as per the document, land available was 1232 sq.ft, but land available on ground for valuation was 986.50 sq.ft. That apart, access to the main door is only five feet land. It is very difficult even for a two wheeler to enter the premises. Therefore, the market value will not fetch much and will fetch Rs.59.19 lakhs against the guideline value of Rs.88,78,500/- and on this basis, valuation was fixed. Even in the counter, letter dated 23.5.2025 sent by the respondent addressed to the Asst. General Manager, State Bank of India, he tacitly admitted the valuation of the property adopted by the bank and stated he has buyer ready to pay Rs.58.60 lakhs and he is ready to settle the loan liability of the bank.

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In the said circumstances, it is submitted by the Learned Counsel for appellant that allowing the SA on the ground that valuation adopted by

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RA(SA) 19/2016

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the bank as low is factually and legally not correct and thus he prayed to set aside the order and allow the appeal.

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Learned Counsel added that sale certificate was also registered and physical possession was taken and handed over to the auction purchaser. Therefore, right of redemption is also lost. In this regard, Learned Counsel relied on the judgment of Hon’ble Supreme Court of India in re CELIR LLP Vs. Bafna Motors (Mumbai) Pvt Ltd. & others for the proposition that the right of redemption stands extinguished on the publication of sale notice.

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When it was the turn for the respondent to advance arguments on 5.5.2025, Learned Counsel for appellant bank pointed out that as early as on 20.12.2022, this matter was adjourned, at request of Learned Counsel for respondent subject to payment of costs of Rs.5,000/- to the appellant bank and the costs was not paid till 5.5.2025. Therefore, on 5.5.2025, this Tribunal directed the Learned counsel for respondent to pay the costs of Rs.5000/- to the appellant bank for making submissions on behalf of respondent and adjourned the matter to this date for hearing the respondent, as last chance.

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9a. When the matter is taken up today, advocate Ms. Manimeghalai representing Learned Counsel for respondent on record Ms. V. Archana is present and informed that costs, as directed by this Tribunal earlier was not paid so far and Learned Counsel for respondent is not ready for making submissions on behalf of respondent today.

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9b It is seen that this appeal is of the year 2016. Therefore, this Tribunal is not inclined to grant any further adjournment and opportunity to the Learned Counsel for the respondent to make her submission and thus arguments is closed.

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RA(SA) 19/2016

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This Tribunal proceeded to pass orders on the submissions made by the Learned Counsel appellant bank and on the basis of the records available.

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Heard the Learned Counsel for appellant bank and perused the records.

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A reading of the impugned order shows that grounds taken, such as, no proper service of notice giving 30 days of time, classification of loan account as NPA, challenge to possession notice, non-registration with CERSAI had all been rejected by the Learned Presiding Officer. The only ground, on which, the SA was allowed was that when the appellant bank claimed in its letter dated 10.8.2013 that the value of the property was Rs.1.08 crores, it sold it for Rs.58.56 lakh. On this premise only, Learned Presiding Office held that the property was sold for a lesser price, therefore, the sale was set aside.

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It is true that when the respondent/borrower approached the appellant bank with an offer to settle the loan amount for Rs.45.00 lakhs when the due was Rs.71.80 lakhs, appellant bank rejected the proposal on the ground that loan amount due was Rs.71.80 lakhs and the valuation of the property was Rs.1.08 cores , as per their latest valuation report. The valuation report dated 2.3.2015, on the basis of which, reserve price was fixed shows that approach road to the property is only five feet land. It is very difficult even for a two wheeler to enter into the subject property. Taking all these factors into consideration, value of the property including land, building and infrastructure was arrived at Rs.98,57,000/-, forced sale value (80% of the fair market value) at Rs.55,12,000/- and realisable value (85% of the fair market value) at Rs.58,56,000/-.

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RA(SA) 19/2016

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The impugned sale notice was issued, fixing the reserve price at Rs.58.56 lakhs and the property was sold for a sum of Rs.59.06 lakhs. It is seen from the letter dated 23.5.2015 addressed by the borrower to the bank that after narrating several efforts taken and his intention to settle the dues, he informed the bank that he has a buyer ready to buy the property for Rs.58.60 lakhs. Photographs made available at page Nos.88 to 91 show that he visited the bank and also watched the sale proceedings. But, he has not brought the buyer identified by him to bid in the auction.

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It has to be borne in mind that property sold in auction sale will not always fetch the market price. Reason is that auction purchaser buys the property along with litigation. Therefore, bid would be offered, taking into consideration the prospective litigation and the time and cost involved in facing the litigation. That apart, value was fixed by the valuer after taking into consideration the difficulty in approaching the property. Borrower/respondent pretty well knew about the valuation report and the realisable price, fixed by the valuer. That was the reason, he sent a letter on 23.5.2015, informing the appellant bank that he has a buyer to buy the property for a sum of Rs.58.60 lakhs. He also watched the sale proceedings. As already stated, he did not bring his buyer to participate in the auction. There is no collusion between the appellant bank and the auction purchaser or fraud had been made out in this case.

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Under the circumstances, this Tribunal is of the view that setting aside the sale on the ground that property sold was not properly valued and sold for a lesser price cannot be accepted.

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In this view of the matter, Order of the Learned Presiding Officer, DRT-II, Chennai passed in SA 89/2015 dated 27.4.2016 is set aside and the sale

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RA(SA) 19/2016

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held in favour of the auction purchaser is held as valid and in accordance with law.

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In the result, Appeal RA(SA) 19/2016 is allowed with the costs of appellant bank. Consequently, SA No.89/2015 is dismissed.

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Pending IAs, if any, stand closed.

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[Dictated to Steno(SN), transcribed by him, corrected, signed and pronounced by me in open court, this 9^th June, 2025)

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Sd/-

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(JUSTICE G. CHANDRASEKHARAN) CHAIRPERSON

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State Bank of India v. R. Shankar

Case brief

What is this about?

What did the court decide?

State Bank of India v. R. Shankar

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

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