Dismissed

Govindasamy Balasubramaniam v. Indian Overseas Bank

DRAT21 Nov 2025REGULAR APPEAL/40/2023

Case brief

AI extract

What is this about?

The Debt Recovery Appellate Tribunal rejected appeals against the confirming sale of mortgaged properties. The Tribunal held that retrospective NPA classification was valid, borrowers failed to prove objections were served in time, and recent Supreme Court authority negates the need for two separate pre-sale notices.

What did the court decide?

The appeals were dismissed, confirming the impugned sale and leaving the Debt Recovery Tribunal's orders intact.

Govindasamy Balasubramaniam versus Indian Overseas Bank — Company and Corporate | DRAT (2025)

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RA(SA) 39/2023 & RA(SA) 40/2023

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IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI

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Dated the 21^st day of November, 2025

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

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RA (SA) 39/2023 & RA(SA) 40/2023

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(Arising out of SA No.450/2021 and SA No.184/2021)

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I. RA(SA) 39/2023

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Between

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1. Mr. Govindasamy 2. Mrs. Jeevarathinam, Balasubramaniam, W/o Mr. Govindasamy S/o Mr. K.V. Govindasamy Balasubramaniam, Chettiar No.5, Vinayakar Koil Street, No.5, Vinayakar Kovil Street, Krishanaswamy Nagar, Krishnaswamy Nagar, Ramanathapuram, Ramanathapuram, Coimbatore District 641 045 Coimbatore District 641 045.

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…Appellants

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And

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1. The Authorised Officer, 3. M/s Garuda Steels, Indian Overseas Bank, A Partnership Firm, Large Corporate Branch, Represented by its partners, No.10, Kannusamy Street, DB Road, R.S. Puram, Mr. M. Ramesh, Coimbatore 641 002 Mrs. R. Dhanalakshmi

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2. M/s Organomix Ecosystems Private Ltd. Represented by its Managing Director, No.64, Dr. Nanjappa Road, Coimbatore 641 018.

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S.F. No. 309/1A, Kulathupalayam Pudur, Devanampalayam, Kanathukkadavu Taluk, Coimbatore 642 120.

RA(SA) 39/2023 &

RA(SA) 40/2023

4. Mr. R. Natarajan,	Represented by the Resolution
S/o Mr. Rangasamy,	Professional
No.3/252, NM Hospital
Compound,	Having its Registered Office at
Allikaranpalayam Pirivu,
Annur, Coimbatore 641 653.	No.5, Vinayakar Kovil Street, Krishnaswamy Nagar,
5. M/s Shree Murugan Flour Mills	Ramanathapuram,
Pvt. Ltd.	Coimbatore District 641 045.
(Undergoing CIRP Process)

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…Respondents

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Counsel for appellants	: Senior Counsel Shri Satish Parasaran for
	Advocate Shri T.K. Bhaskar
Counsel for R1 Bank	: M/s M.L. Ganesh & Co.
Counsel for R2	: M/s Ramalingam & Associates
Counsel for R3	: Ms. Shubharanjani Ananth
Counsel for R4	: Shri A.M. Esakkiappan

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II. RA(SA) 40/2023

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Between

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1. Mr. Govindasamy
Balasubramaniam,	2. Mrs. Jeevarathinam,
S/o Mr. K.V. Govindasamy	W/o Mr. Govindasamy
Chettiar	Balasubramaniam,
No.5, Vinayakar Kovil Street,	No.5, Vinayakar Koil Street,
Krishnaswamy Nagar,	Krishanaswamy Nagar,
Ramanathapuram,	Ramanathapuram,
Coimbatore District 641 045.
Coimbatore District 641 045

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…Appellants

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And

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1. The Authorised Officer,	2. M/s Organomix Ecosystems
Indian Overseas Bank,	Private Ltd.
Large Corporate Branch,	Represented by its Managing
No.10, Kannusamy Street,	Director,
DB Road, R.S. Puram,	No.64, Dr. Nanjappa Road,
Coimbatore 641 002	Coimbatore 641 018.

RA(SA) 39/2023 &

RA(SA) 40/2023

3. M/s Garuda Steels,	Allikaranpalayam Pirivu,
A Partnership Firm,	Annur, Coimbatore 641 653.
Represented by its partners,
	5. M/s Shree Murugan Flour Mills
Mr. M. Ramesh,	Pvt. Ltd.
Mrs. R. Dhanalakshmi	(Undergoing CIRP Process) Represented by the Resolution
S.F. No. 309/1A,	Professional
Kulathupalayam Pudur,
Devanampalayam,	Having its Registered Office at
Kanathukkadavu Taluk,
Coimbatore 642 120.	No.5, Vinayakar Kovil Street, Krishnaswamy Nagar,
4. Mr. R. Natarajan,	Ramanathapuram,
S/o Mr. Rangasamy,	Coimbatore District 641 045.
No.3/252, NM Hospital
Compound,

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…Respondents

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Counsel for appellants	: Senior Counsel Shri Satish Parasaran for Advocate Shri T.K. Bhaskar
Counsel for R1 Bank	: M/s M.L. Ganesh & Co.
Counsel for R2	: M/s Ramalingam & Associates
Counsel for R3	: Ms. Shubharanjani Ananth
Counsel for R4	: Shri A.M. Esakkiappan

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COMMON ORDER

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RA(SA) 39/2023 and RA(SA) 40/2023 are filed under Section 18 of the SARFAESI Act.

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a) RA(SA) 39/2023 is filed against the order dated 7.11.2022 passed in SA

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No.450/2021 by the Learned Presiding Officer, DRT, Coimbatore. The aforesaid SA

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was filed challenging the sale held on 15.3.2021.

RA(SA) 39/2023 &

RA(SA) 40/2023

b) RA(SA) 40/2023 is filed challenging the order dated 7.11.2022 passed in SA 184/2021 by the Learned Presiding Officer, DRT, Coimbatore. The aforesaid SA was filed challenging the Sale Notice dated 23.2.2021 fixing the sale on 15.3.2021.

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c) Aforesaid SAs had been disposed separately by independent orders by Learned Presiding Officer, DRT, Coimbatore vide his order dated 7.11.2022.

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Since parties to both appeals are same parties and the issue involved in both appeals arise out of the same loan transaction, in respect of sale notice and sale of the same property, this Tribunal has decided to take both appeals together for joint proposal.

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The case of the appellants who are the applicants before the Tribunal in brief is that first appellant is the Director of 5^th respondent M/s Shree Murugan Flour Mills Pvt. Ltd . First appellant availed Working Capital Limit (OCC) for a sum of Rs.30.00 crores in the year 2014 from the respondent bank. It was reduced to Rs.28.00 crores in the year 2016. Due to effect of de-monitization, there was strangulation of business activities of the 5^th respondent and despite that, 5^th respondent serviced the loan regularly. On 27.6.2018, 5^th respondent sent a letter requesting bifurcation of CC Limit into Term Loan and CC Loan. This request of 5^th respondent was not favourably considered by the bank. On 6.8.2019, first respondent bank issued demand notice under Section 13(2) of the SARFAESI Act.

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It is seen that this demand notice was issued on the basis of classification of the

RA(SA) 39/2023 &

RA(SA) 40/2023

loan account as NPA as on 31.3.2017. Retrospective classification of the account

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as NPA is illegal. For discharging the loan liability, one of the properties was sold for a sum of Rs.1.16 crores with the consent of the bank and the credit limit was reduced to Rs.26.84 crores. Another property was also sold with the consent of

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the bank for a sum of Rs.1.58 crores and the CC limit was reduced to Rs.25.26 crores. 5^th respondent had been taking steps for paying the amount due to the bank. Between April 2017 and March 2020, 5^th respondent paid a sum of Rs.9,59,64,910/-. Fifth respondent also paid a sum of Rs.25.30 lakhs between May, 2019 and August, 2019. These payments have been made after declaration of the loan account as NPA on 31.3.2017. Objections to demand notice was sent on 13.2.2020. Letter dated 21.1.2020 had also been sent questioning the classification of the loan account as NPA. This objection was not replied by the bank. Totally a sum of Rs.12,58,94,910/(Rs.9,59,64,910 + 1,16,00,000+1,58,00,000 + Rs.25,30,000) was paid by the appellants. Only due to ill-effect of COVID 19 pandemic crisis, there was some default in payment. Therefore, properties were brought for sale without following the mandatory provisions of the SARAFAESI Act. Market value of the property was not assessed properly. No steps had been taken for getting the valuation report immediately prior to the sale. Reserve price was fixed less than 50% of the market value. For 6 items of the properties, reserve price was fixed at Rs.46,19,11,000/- in the E-

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Auction Sale Notice dated 24.8.2020. It was drastically reduced to

RA(SA) 39/2023 &

RA(SA) 40/2023

Rs.38,82,11,000/- in the E-Auction Sale Notice dated 23.2.2021 without any justification for this drastic reduction. Pathway land leading to schedule I property was deliberately omitted for valuing the property. For all these reasons, the sale notice and the sale were challenged.

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The case of the first respondent is that 5^th respondent was not regular in repaying

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the loan despite several reminders. Stock Audit Report shows lot of discrepancies. Total value of finished goods and packing material have been shown as Rs.25.44 crores. There was a variance of Rs.10.00 crores in the value of raw materials opposed to the statement of account on 31.3.2016. Tax Audit Report and IT particulars were not available. Tax Audit Report dated 31.7.2015 did not contain particulars of stocks. Though opportunity was given to the 5^th respondent to explain the variance, no explanation was forthcoming. Without adhering to the repayment schedule, payments were made at the whims and fancies of 5^th respondent. Loan account was classified as NPA on the basis of the Audit Report dated 31.3.2017 and that was intimated to the 5^th respondent through a letter dated 1.7.2019. Another reason for classification of account as NPA was continuous withdrawal and drawing power was not computed. Master Circular of RBI (RBI/2015-16/101) dated 1.7.2015 permits classification of assets as Non Performing Assets on the basis of the report of statutory audit report. There was still considerable overdue. That was the reason why demand notice under Section 13(2) was issued followed by sale notice and sale. No reply was sent to demand

RA(SA) 39/2023 &

RA(SA) 40/2023

notice. There was no challenge to possession notice. Earlier two sale notices had been issued on 24.8.2020 and 3.12.2020. SA 492/2020 was filed against the sale notice dated 3.12.2020. A conditional order was passed directing 5^th respondent to pay a sum of Rs.12.50 crores. The conditional order was partially complied

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with. On failure to comply with the condition, this SA was dismissed as infructuous, since there had been no sale. Property was valued properly on the basis of valuer’s report and proper reserve price was fixed. Sale was held by following measures under the SARFAESI Act.

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Learned Presiding Officer considered the rival submissions and documents produced and then dismissed both the SAs on merits, paving way for filing of these appeals.

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In the written submissions filed by the appellants, aforesaid pleading have been reiterated and following specific grounds were taken.

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a) Retrospective classification of the loan account as NPA by the first respondent bank is erroneous.

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b) First respondent bank failed to comply with the mandatory requirement under Section 13(3A) of the SARFAESI Act.

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c) First Respondent bank failed to comply with Rule 8(5) of Security Interest (Enforcement) Rules, 2002 with respect to obtaining valuation prior to sale.

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RA(SA) 39/2023 & RA(SA) 40/2023

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d) First respondent bank failed to comply with Rule 8(6) read with Section 13(8) of the SARFAESI Act by not providing mandatory 30 days notice for redemption.

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e) Learned Presiding Officer has not given any acceptable, cogent and valid reasons for dismissing the SAs.

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Elaborating on the aspect of retrospective classification of loan account as NPA, It is submitted by the Learned Senior Counsel Shri Satish Parasaran for the appellants that respondent bank vide its letter dated 1.7.2019 informed that CC facility availed by 5^th respondent had been classified as NPA by the statutory auditors for the following reasons.

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“DP as per audited statements 2016 to 2017 is Rs.7.13 crores and DP as per stock statements Rs.31.40 crores. DP as per Inspection Report (Stock Audit 2017) is Rs.7.13 crores. Account is continuously overdrawn and DP is properly computed. The statutory auditors have brought the account to doubtful category(D21) and NPA date with effect from 31.3.2017.”

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7.1 It is the further submission of Learned Senior Counsel for the appellants that statutory auditors have no power to classify the account as NPA. More so, with retrospective effect. When the date of classification of account as NPA was on 31.3.2017, the bank renewed the CC facility of Rs.26.84 crores on 11.10.2017. It shows that account was renewed and was standard even on 11.7.2017 i.e., 7 months after the NPA date. When the facility was renewed on 11.10.2017, the bank has satisfied with all its parameters including drawing power. Therefore, classifying the account as NPA on 1.7.2019 on the basis of the Stock Audit Report

RA(SA) 39/2023 &

RA(SA) 40/2023

2017 with effect from 31.3.2017 is nothing but fraud and illegal. It is against the Master Circular issued by the RBI. Certain clauses of the Master Circular of RBI are referred in the written arguments.

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7.2 Overdrawal and drawing power not properly computed are only temporary deficiency and that cannot form basis for classifying the account as NPA. Outstanding total due as on 6.8.2019 was only Rs.26,44,51,383.62p as against the sanctioned limit of Rs.26,84,00,000/-. Thus, outstanding was within the sanctioned limit. Therefore, claim of the respondent bank that there was continuous withdrawal is blatant lie.

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7.3 Section 13(3A) of SARFAESI Act, 2022 mandates that secured creditor to consider

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the representations and objections raised by the borrower in response to the demand notice under Section 13(2) of the SARFAESI Act. This was a settled proposition in re ITC Ltd. Vs. Blue Coast Hotesl Ltd. reported in (2018) ibcLaw.in 60 SC. For the demand notice dated 6.8.2019, 5^th respondent sent a detailed reply under Section 13(3A) on 13.2.2020, raising objection to the demand notice. Bank disregarded the objections and did not send any reply. Instead, bank proceeded to issue possession notice dated 24.2.2020. Bank took a stand before

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DRT that 5^th respondent has not sent any reply to the demand notice but it is curious to note that bank filed counter along with the objections given by the 5^th respondent to the demand notice. Therefore, the claim of the bank that 5^th

RA(SA) 39/2023 &

RA(SA) 40/2023

respondent had not sent any reply to demand notice is a conscious attempt to mislead this Tribunal. Non-reply to borrower’s reply strikes at the very root of the proceedings and it vitiates subsequent proceedings taken under the SARFAESI Act. It was so held in the order passed by DRAT, Mumbai in re Bank of Baroda Vs.

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E-Star Infotech Ltd and another reported in (2025) ibclaw.in 10 DRAT .

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Further submission of Learned Senior Counsel for the appellants is that when the property is sought to be sold, rules 8 and 9 of Security Interest (Enforcement) Rules 2002 have to be meticulously followed. These rules are mandatory in nature intended to protect the interest of the borrowers, including the constitutional right to the property and for realising a proper asset value. When the property is sought to be sold below the reserve price, consent of the borrower is necessary to sell the property. No such consent was taken from the borrower. He brought to my notice the irregularities in fixing the reserve price and selling the property for a lesser value. As per the valuation report dated 15.6.2017 given by Mr. A. Adaikalavan, approved Engineer for Pollachi property measuring 8 cents and 97 sq.ft., fair market value was Rs.1.13 crores and fair sale value was 0.91crores. As per the valuation report of Mr. M.G. Sekar, valuer and structural consultant dated 21.9.2020, fair market value was fixed at Rs.1.05,58,000/-. In the sale notice dated 23.2.2021, reserve price was fixed at Rs.86,64,500/-. Sale was held, sale certificate was issued on 1.6.2021 for Rs.86,99,166/- When the property fetched a market

RA(SA) 39/2023 &

RA(SA) 40/2023

value of Rs.1.13 crores in the year 2017, it was sold for Rs.86,99,166/- with a shortfall of Rs.26,00,834/-. There is undervaluation to the extent of 23.01%.

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Similar computation was made in respect of other properties, as well. Thus, it is submitted by Learned Senior Counsel that bank without any contemporenous and independent reasoning or fresh valuation reduced the reserve price far below the market value by undervaluing the property and sold the property for a song. It shows mala fide action and breach of statutory duties to obtain fair value for the benefits of the bank and the borrower and the said sale is nothing but a gross illegal and invalid sale. This undervaluation greatly prejudiced the borrowers.

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Yet another submission made by the Learned Senior counsel for the appellant is that impugned sale notice dated 23.2.2021 was issued without adhering the procedural safeguards. SARFAESI Act and the Rules make it clear that there is express requirement for the secured creditor to furnish a clear 30 days prior notice to borrower under Rule 8(6) before effecting publication of sale notice under Rule 9(1,) to enable the borrower to redeem the property. This legal proposition was confirmed by the Hon’ble High Court of Telangana i n re KVV Prasad Rao Gupta Vs. State Bank of India reported in 2021 SCC Online TS 328. In re, Celir LLP Vs. Bafna Motors reported in (2023) ibclaw.in 105 SC , it is also held by Hon’ble Supreme Court of India that post amendment to Section 13(8), there must be a clear 30 days notice to be maintained between the issuance of sale notice under

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RA(SA) 39/2023 & RA(SA) 40/2023

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Rule 8(6) and publication of sale notice under Rule 9(1). DRAT Calcutta, in re Union Bank of India Vs. Dilshad Elahi reported in 2024 ibclaw.in 41 DRAT , held a similar view. This view was taken by DRAT, Calcutta in other two cases viz., in re, Bank of Baroda Vs. Sujatha & another reported in 2024 ibclaw.in 148 DRAT and in re, Alluri Vijayalakshmi Vs. Union of India reported in 2024 ibclaw.in 148 DRAT . Hon’ble High Court of Madras in re Staar Trace Engineering Division Vs. The Registrar, DRT-II, Chennai reported in 2023 ibclaw.in 940 HC held that once sale does not take place or if sale is set aside by the Tribunal or Court on material irregularities, right of redemption revives. Respondent bank by issuance of Joint Sale Notice under Rule 8(6) and 9(1) dated 23.2.2021 deprived the opportunity of redemption of the hard earned properties to the appellants. Therefore, sale is in violation of legal requirements and thus liable to be set aside.

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10.1 Following decisions are relied for the proposition that compliance of Rule 8(5) of Security Interest (Enforcement) Rules, 2002 with regard to valuation report prior to sale is mandatory in nature.

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Hon’ble High Court of Telangana in re Venshiv Pharma Chem (P) Ltd. and others Vs. State Bank of India Stressed Assets Recovery Branch and others reported in MANU/AP/0138/2018

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Hon’ble High Court of Andhra Pradesh in re M/s Pochiraju Industries Ltd. Vs. Punjan National Bank and others reported in 2018 SCC Online Hyd. 121

RA(SA) 39/2023 &

RA(SA) 40/2023

3. Honb’ble High Court of Haryana at Chandigarh in re Skytone Electricals (India) Limited Vs. Canara Bank and others reported in MANU/PH/3443/2022

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4. Hon’ble Supreme Court of India in re M/s IAA Hospital Pvt. Ltd. and another Vs. the Authorised officer, UCO Bank and others reported in 2014 SCC Online P&H 12717

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Hon’ble High Court of Madhya Pradesh in re Smt. Anita Sadana Vs. Smt. Baljinder Kaur and others reported in 2014 SCC Online MP 8685

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6. Hon’ble High Court of Karnataka M/s Hotel Vandana Palace, Belgaum Vs. The Authorised Officer, Syndicate Bank Belgaum and others reported in 2011 SCC Online Kar.3828

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10.2 Following decisions are relied for the for the proposition that compliance under Section 13(3A) of the SARFAESI Act is mandatory in nature .

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1. Hon’ble Supreme Court of India in re ITC Ltd. Vs. Blue Coast Hotels Ltd. reported in 2018 ibclaw.in 60 SC

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2. Order of DRAT, Mumbai in re Bank of Baroda Vs. E. Star Infotech Ltd. and another reported in 2025 ibclaw.in 10 DRAT dated 10.1.2025 passed in Appeal No.291/2009.

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Learned Counsel for first respondent bank submitted that account was classified as NPA, following the RBI Master Circular. Properties were properly valued and sold by following mandatory provisions of SARFAESI Act. This was not the first sale attempt. Earlier, two sale attempts failed and only in the 3^rd sale attempt, the property could be sold. After the failure of first sale, the reserve price had to be reduced and after the second sale attempt failed, reserved price had to be further reduced and only in the final 3^rd sale attempt, the sale was successful. There is

RA(SA) 39/2023 &

RA(SA) 40/2023

nothing illegal or irregular in the sale of the property. The claim of the Learned Senior Counsel for the appellant that borrowers had sent reply to Section 13(2) Demand Notice is not correct. Appellants have not produced single piece of evidence to show that service of reply / representation / objections to the bank. Right or redemption is lost once sale notice is published. When valuation report is challenged, appellants have not produced any independent valuation report obtained to counter the valuation report produced by the bank. If really the property was sold for a lesser vale, appellants should have brought some purchasers to buy this property. But that was not done. He pressed into service the judgment of Hon’ble Supreme Court of India in re Vasu P Shetty Vs. Hotel Vandana Palace reported 2014 5 SCC 660 with regard to valuation of property.

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He further submitted that 5^th respondent went into CIRP process. Appellants are suspended directors/mortgagors. Letter of the 5^th respondent dated 25.7.2019 shows that company knows about the classification of the loan account as a NPA. There is a demand of liability to the tune of Rs.26.16 crores. Demand Notice dated 6.8.2019 was received by the appellants and 5^th respondent and no objection was sent to this notice. Possession notice dated 24.2.2020 was sent. By Letter dated 27.2.2020, borrowers were informed about taking possession of the property and right to redemption available under Section 13(8) of the SARFAESI Act. Receipt of possession notice has been acknowledged. Possession Notice was affixed and published. Impugned sale notice was received by the appellants and

RA(SA) 39/2023 &

RA(SA) 40/2023

the 5^th respondent. It was published in newspapers, both English and vernacular language. After the sale of the property, sale was confirmed on 6.5.2021, followed by issuance of sale certificate. Hon’ble High Court passed order in WP No.18984/2021 to register the sale certificate. Auction purchaser converted the land into plots and third party interest is created. Therefore, challenge to sale notice and sale is nothing but a futile exercise to protract the litigation. Learned Counsel relied on the following decisions in support of his submissions.

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a) Hon’ble Supreme Court of India in re Shakeena and others Vs. Bank of India and others reported in (2021) 12 SCC 761

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b) Hon’ble Supreme Court of India in re S. Kathik and Others Vs. N. Subhash Chand Jain and others reported in MANU/SC/0703/2021

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c) Supreme Court of India in re Sanjay Sharma Vs. Kotak Mahindra Bank Ltd. and others reported in 2024 SCC Online SC 4589

¶125

Learned Counsel for the auction purchaser submitted that sale was successful only in the third sale attempt. Conditional order passed in the SA filed by the appellants was not complied in full. Though appellants have knowledge about the earlier sale attempts. No attempts were made to settle the loan account. 15 days notice is enough under Rule 9(1) for second and subsequent sale attempts. There is no whisper about undervaluation of the property in the Writ Petition filed by the appellants. There is no specific pleading about the under valuation. Auction purchaser invested huge money in developing the land and divided it into plots

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¶127

RA(SA) 39/2023 & RA(SA) 40/2023

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and sold some of them. Sale was registered as per the direction of the Hon’ble High Court of Madras in Writ Petition No.18984/2021. He relied on the following decisions in support of is submissions.

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a) Hon’ble High Court of Karnataka in re M/s Soumya Engineering Vs. The Chief Manager, Indian Bank reported in (2022) ibclaw.in 104 HC

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b) Hon’ble High Court of Telangana in re Indian Overseas bank Vs. M/s RA Pure Life Science Ltd. Reported in (202) ibclaw.in 61 HC.

¶131

In reply, Learned Senior Counsel for the appellants reiterated the non compliance of Rule 8(5), Rule 8(6), Rule 9(1) of SIE Rules, failure to send reply to the objections to the demand notice sent by the borrowers, illegal classification of loan account as NPA. Appellants made a payment of Rs.7.50 crores and right of redemption was available to the borrowers. When actual value is much higher, value was shown as depreciating, which is against all canons of justice. When the registration of the sale certificate is not necessary, Auction Purchaser filed Writ Petition for registration of the sale certificate. Bank is holding a position of a Trustee of the property of the borrowers/mortgagors. Therefore, it has every duty and responsibility to ensure that fair market value is obtained in the sale of the property for the benefit of the bank and the borrower as well.

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I have considered the rival submissions and perused the records.

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RA(SA) 39/2023 & RA(SA) 40/2023

¶135

From the pleadings and submissions made by learned counsel appearing for parties, the fact that M/s Shree Murugan Flour Mills Pvt. Ltd. represented by its director viz. the first appellant Shri G. Balasubramaniam availed Working Capital Limit of Rs.30.00 crores in the year 2014, it was reduced to Rs.28.00 crores in the year 2018 and by sale of property on 29.12.2017 with the permission of the bank, credit limit was further reduced to Rs.26.84 crores are not disputed by the appellants.

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The main ground taken by the appellants is that classification of the account as NPA, especially, retrospectively is illegal and against the Master Circular of the RBI. It is more so, when bank had the renewed the Cash Credit Facility of 26.84 crores on 11.10.2017. On the other hand, it is the submission of learned counsel for the respondent bank that account was classified as NPA on the basis of established guidelines issued by the RBI.

¶137

In the written arguments filed by the first respondent, reasons for classification of

¶138

the account as NPA was elaborated. Relevant points are as follows;

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a) The appellants were called upon to submit the sales and purchase of the first year 2018-2019 along with documents.

¶140

b) In the stock statements submitted as on 31.3.2018 and certified by the Chartered Accountant M/s Girirajan & Co., the total value of the inventory was Rs.8.77 crores and book debts was shown as Rs.27.66 crores.

¶141

c) The creditors figure furnished as on 31.3.2018 had shown only Rs.0.5 crores.

¶142

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RA(SA) 39/2023 & RA(SA) 40/2023

¶144

d) The drawing power was arrived based on the figures furnished and certified by the Chartered Accountant.

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e) As per the audited balance sheet for the year 2018, the value of inventory was shown as Rs.100.00 lakhs including creditors of Rs.9.69 crores, book debts of Rs.20.95 crores.

¶146

f) Based on these figures, the Drawing Power (DP) would be around Rs.3.76 crores.

¶147

g) Whenever bank officials visited the unit, there is no adequate stock and proper records submitted by the appellants.

¶148

h) It was reiterated in the stock audit reports submitted by the auditors.

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i) Loan was granted against the property for Rs.200 lakhs in the books of individual name for which MOD was not executed.

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j) Appellants were directed to furnish details of statutory dues and also to submit the accounts statement of M/s Axis Bank Ltd and SBI. But, appellants did not move their little finger.

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k) Appellants were not maintaining their records to the satisfaction of the respondent bank.

¶152

l) There was no sufficient stocks or business transactions despite the fact that appellants had great exposure of the credit limits.

¶153

m) Second appellant was disqualified as a Director of the Company for a period of 5 years from 1.11.2017 to 31.10.2022. However, only the second appellant has signed the balance sheet submitted as on 31.3.2018.

¶154

n) By letter dated 1.7.2019, appellants were informed that the account was classified as NPA by the statutory auditors due to following reasons;

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“Drawing Power (DP) as audit statements 16-17 – Rs.7.13crores and DP as per stock statement – Rs.31.40 crores. DP as per inspection report (stock audit 2017) – Rs.7.13 crores. The account is continuously overdrawn and DP not properly computed”

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¶157

RA(SA) 39/2023 & RA(SA) 40/2023

¶158

Thus, the statutory auditors have brought the account to doubtful category and NPA debt with effect from 31.3.2017.

¶159

One of the submissions of learned senior counsel Shri Satish Parasaran for the appellants is that account should be classified as NPA by the secured creditor and not by the statutory auditors.

¶160

This contention was refuted by the learned counsel for the respondent bank and

¶161

he submitted that account can be classified as NPA on the basis of statutory auditor’s report. He produced the Master Circular issued by RBI bearing No. (RBI/2015-16/101) dated 1.7.2015. Relevant portions of the Master Circular are as

¶162

under;

¶163

2.1 Non performing Assets

¶164

2.1.1 An asset, including a leased asset, becomes non performing when it ceases to generate income for the bank.

¶165

2.1.2 A non performing asset (NPA) is a loan or an advance where;

¶166

i . interest and/ or instalment of principal remain overdue for a period of more than 90 days in respect of a term loan,

¶167

ii . the account remains ‘out of order’ as indicated at paragraph 2.2 below, in respect of an Overdraft/Cash Credit (OD/CC),

¶168

iii . the bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted,

¶169

iv . the instalment of principal or interest thereon remains overdue for two crop seasons for short duration crops,

¶170

v . the instalment of principal or interest thereon remains overdue for one crop season for long duration crops,

¶171

vi . the amount of liquidity facility remains outstanding for more than 90 days, in respect of a securitisation transaction undertaken in terms of guidelines on securitisation dated February 1, 2006.

¶172

vii . in respect of derivative transactions, the overdue receivables representing positive markto-market value of a derivative contract, if these remain unpaid for a period of 90 days from the specified due date for payment.

¶173

2.1.3 In case of interest payments, banks should, classify an account as NPA only if the interest due and charged during any quarter is not serviced fully within 90 days from the end of the quarter.

RA(SA) 39/2023 &

RA(SA) 40/2023

2.1.4 In addition, an account may also be classified as NPA in terms of paragraph 4.2.4 of this Master Circular.

¶178

4. ASSET CLASSIFICATION

¶179

4.1 Categories of NPAs

¶180

Banks are required to classify nonperforming assets further into the following three categories based on the period for which the asset has remained nonperforming and the realisability of the dues:

¶181

i. Substandard Assets ii. Doubtful Assets i ii. Loss Assets

¶182

4.1.1 Substandard Assets

¶183

With effect from March 31, 2005, a substandard asset would be one, which has remained NPA for a period less than or equal to 12 months. Such an asset will have well defined credit weaknesses that jeopardise the liquidation of the debt and are characterised by the distinct possibility that the banks will sustain some loss, if deficiencies are not corrected.

¶184

4.1.2 Doubtful Assets

¶185

With effect from March 31, 2005, an asset would be classified as doubtful if it has remained in the substandard category for a period of 12 months. A loan classified as doubtful has all the weaknesses inherent in assets that were classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, – on the basis of currently known facts, conditions and values – highly questionable and improbable

¶186

4.1.3 Loss Assets

¶187

A loss asset is one where loss has been identified by the bank or internal or external auditors or the RBI inspection but the amount has not been written off wholly. In other words, such an asset is considered uncollectible and of such little value that its continuance as a bankable asset is not warranted although there may be some salvage or recovery value.

¶188

As per this classification, it is seen that loss asset is one where loss has once been

¶189

identified by the bank or by internal or external auditors or during RBI inspection,

¶190

but amount has not been written off wholly.

RA(SA) 39/2023 &

RA(SA) 40/2023

In the case before hand, there is no dispute with regard to the fact that statutory

¶195

auditors during the course of their inspection found that account was continuously overdrawn and Drawing Power (DP) not properly computed. These are the main reasons for classifying the account as NPA with effect from 31.7.2017. Bank permitted the overdrawal on the basis of the facts and figures furnished and certified by the Chartered Accountants of the Company. There was huge variance in the figures given and available on the ground . This fact was known to the bank only while audit was held in the year 2019 and on the basis of the report given by the statutory auditors. Therefore, this Tribunal finds that classification of the account as NPA was done on the basis of the report of the statutory auditors retrospectively from 31.3.2017 and on coming to know about the continuous overdrawal and improper calculation of DP. On the date of classification of the account as NPA , the account had not come to the stage of standard account. Therefore, the classification of the account as NPA was in accordance with the Master Circular issued by RBI and thus this Tribunal finds that there is no illegality in the classification of the account as NPA from 31.3.2017.

¶196

Next main submission of the learned senior counsel for the appellants is that on receiving the demand notice dated 6.8.2019, appellants sent objections/representation under Section 13(3A) of the SARFAESI Act on 13.2.2020. The objections were not considered and responded by the first respondent bank. Reply to the objections should be mandatorily sent within 15 days of receipt of the

¶197

¶198

RA(SA) 39/2023 & RA(SA) 40/2023

¶199

objections, as required under Section 13(3A) of the SARFAESI Act. In support of this

¶200

submission, he pressed into service the following decisions viz.

¶201

Hon’ble Supreme Court of India in re ITC Ltd. Vs. Blue Coast Hotels Ltd. reported in 2018 ibclaw.in 60 SC and

¶202

Order of DRAT, Mumbai in re Bank of Baroda Vs. E. Star Infotech Ltd. and another reported in 2025 ibclaw.in 10 DRAT dated 10.1.2025 passed in Appeal No.291/2009.

¶203

In reply, learned counsel first respondent bank submitted that appellants have not

¶204

replied to the demand notice dated 6.8.2019 and the objections/representation said to have been sent on 13.2.2020 and produced before the Tribunal was not at all sent to the first respondent bank. There is no proof filed in support of receipt of objections by the first respondent bank. Even assuming that such an objection was sent, objection was not sent within 60 days time granted for discharging the liability. Therefore, bank is not obligated to send any reply to the alleged objection said to have been sent by the appellants.

¶205

Refuting this submission, learned senior counsel for the appellants submitted that

¶206

in the typed set of papers filed before DRT, first respondent bank produced the objection sent by the appellants to Section 13(2) demand notice, therefore, it is not open to the respondent bank now to contend that objection dated 13.2.2020

¶207

was not sent by the appellants.

RA(SA) 39/2023 &

RA(SA) 40/2023

When the issue arose as to whether reply under Section 13(3A) by the respondent bank/financial institution to the objection/representation to Section 13(2) demand notice sent, by the borrower is mandatory, it was held in re ITC Ltd. Vs. Blue Coast Hotel Ltd. case referred above that a provision which requires reasons to be furnished must be considered as mandatory. However, in the facts and circumstances of the case, where many opportunities were given by the creditor to the debtor to repay the debt and that debtor executed letter of undertaking, it was held that failure to furnish reply to the representation is not of much significance, since Court is satisfied that creditor has undoubtedly considered the representation and the proposal for repayment.

¶212

In Bank of Baroda Vs. E. Star Infortech Ltd and another case, relying the decision rendered in re ITC Ltd. Vs. Blue Coast Hotel Ltd., DRAT Mumbai recorded the finding that compliance of Section 13(3A) is mandatory.

¶213

From these decisions, it is clear that courts have consistently held that reply to the objection/representation to section 13(2) demand notice should be mandatorily given by the bank within 15 days from the receipt of the objections/representation, failing to do so, would result in setting aside the SARFAESI proceedings initiated in pursuance of the demand notice.

¶214

Contradictory stand taken with regard to the reply to the

¶215

objections/representations dated 13.2.2020. Appellants claim that appellants sent

RA(SA) 39/2023 &

RA(SA) 40/2023

objections. But that was denied by the first respondent bank. Merely because respondent bank filed the objections filed by the appellants dated 13.2.2020 in its typed set of papers before the DRT, it does not mean that, service of objections dated 13.2.2020 on the respondent bank is proved. The objections should have been either served in person to the bank official or should have been sent through post. No acknowledgment is produced to evidence service of objection sent on the bank official or no postal receipt or acknowledgment card is produced to show proof of service of objection dated 13.2.2020 on the bank, through post. In the said circumstances, this Tribunal has to only hold that service of objections dated 13.2.2020 on the first respondent bank is not proved by the appellants. When that be the case, submission of the learned senior counsel for appellants that failure to send reply to the objections dated 13.2.2020 would result in setting aside the actions initiated under the SARFAESI Act cannot be accepted.

¶220

Even otherwise, on the receipt of demand notice issued under Section 13(2) of the

¶221

Act on classifying the account as NPA, borrower is expected to discharge the liability fully within 60 days from the date of notice. On failure to discharge the liability, secured creditor is entitled to exercise rights under Section 13(4) of the SARFAESI Act. Demand notice was issued on 6.8.2019 and sixty days would end on 5.10.2019. Objection of the appellants said to have been sent only on 13.2.2020,

¶222

which is beyond 60 days and nearly after 190 days. Only if the objection/representation was sent within 60 days, the borrowers can expect the

RA(SA) 39/2023 &

RA(SA) 40/2023

bank to reply. When the objection itself was submitted beyond 60 days and nearly

¶227

after 190 days, appellants/borrowers cannot complain that reply under Section 13(3A) was not sent by the respondent bank. The ground raised by the learned senior counsel in this regard is rejected.

¶228

Another main submission made by learned senior counsel for appellants is that there must be two notices issued under Rule 8(6) and Rule 9(1) of SIE Rules, 2002, giving 30 days time each prior to sale. As said above, he relied on the following decisions.

¶229

1. Hon’ble Supreme Court of India in re , Celir LLP Vs. Bafna Motors reported in (2023) ibclaw.105 SC

¶230

2. Hon’ble High Court of Telangana at Hyderabad in re K V V Prasad Rao Gupta Vs. State Bank of India reported in 2021 SCC Online TS 328)

¶231

3. Hon’ble High Court of Andhra Pradesh in re Sri Sai Annadhatha Polymers and another Vs The Canara Bank reported in (2018) ibclaw.in 49 HC.

¶232

Hon’ble High Court of Madras in re Star Trace Engineering Division Vs. The Registrar DRT-II, Chennai reported in Chennai (2023) ibclaw.in 940 HC

¶233

5. Hon’ble Supreme Court of India in re M.M.M. Thiagarajan Vs. Star Trace Engineering Division & Others.

¶234

DRAT, Kolkata in re Union Bank of India Vs. Dilshad Elahi reported in (2024) ibclaw.in 41 DRAT

¶235

¶236

RA(SA) 39/2023 & RA(SA) 40/2023

¶237

7. DRAT, Kolkata in re Bank of Baroda Vs. Sujatha and another reorted in 2024 ibclaw.in 52 DRAT)

¶238

30.1 The decision of Hon’ble High Court of Madras in re Star Trace Engineering Division Vs. Registrar, DRT-II, Chennai reported in (2023) ibclaw.in 940 HC is relied for the proposition that what is contemplated under Rule 9(5) of Security Interest (Enforcement) Rules, 2002 is not postponement of sale but a re-sale. Once the sale does not take place or if the sale is set aside by the Tribunal or a Court of Law on material irregularities, right of redemption will automatically revives.

¶239

30.2 In re Celir LLP Vs. Bafna Motors case, in paragraph 23 of the order, observations of Hon’ble High Court of Andhra Pradesh in Sri Sai Anndhatha Polymers and another are extracted, wherein it was summed up as follows:

¶240

“To sum up, post amendment scenario invariably requires a clear 30 day notice period being mandatory between issuance of sale notice under Rule 8(6) of Rules of 2002 and the publication of sale notice under Rule 9(1) thereof, as the right of redemption available to the borrower in terms of Rule 8(6) of 2002 rules as pointed out in Mathew Vargheese, e stands extinguished upon publication of sale notice under Rule 9(1).

¶241

When summarizing the order, Hon’ble Supreme Court of India held that decision of Hon’ble High Court of Andhra Pradesh in Sri Sai Annadhatha Poliyers and another and the decision of Hon’ble High Court of Telangana in K V V Prasad Rao Gupta Vs. State Bank of India laid down the correct position of law, while interpreting the mandatory Section 13(8) of the SARFAESI Act. “

¶242

30.3 In re, K.V.V. Prasad Rao Gupta Vs. State Bank of India case , it was held that petitioners are entitled for 30 days notice under Rule 8(6) for enabling them to clear the loan and to redeem the property as envisaged under Rule 13(8) of the

¶243

SARFAESI Act and that if they fail to repay the amount within the specified period

¶244

¶245

RA(SA) 39/2023 & RA(SA) 40/2023

¶246

after expiry of the said period of 30 days, secured creditor is entitled to issue publication of sale under Rule 9(1) and that on publication of such notice, right of the borrower to redeem the property stands extinguished.

¶247

30.4 In re, Sri Sai Annadhatha Polyers and another Vs. The Canara Bank case, aforesaid proposition was reiterated and it was held that even after amendment of Section 13(8) of the SARFAESI Act, the secured creditor is bound to afford the borrower a clear 30 days notice period under Rule 8(6) to enable him to exercise his right of redemption. In consequence, a notice under Rule 9(1) of the Rules 2002 cannot be published prior to expiry of 30 days period in the new scenario, post-amendment of Section 13(8) of SARFAESI Act, as such, right of redemption would stand terminated immediately upon publication of the sale notice under Rule 9(1) of Rules 2002.

¶248

30.5 DRAT, Kolkata in re Union Bank of India Vs. Dilshad Elahi case , reiterated that Authorised Officer even in case of subsequent sale has to comply with the provisions of Rule 8(6) as well as the proviso to Rule 9(1) of SIE Rules and he is required to issue 30 days notice under Rule 8(6) and thereafter 15 days notice under Rule 9(1).

¶249

30.6 In re Bank of Baroda Vs. Sujatha case , it was observed by DRAT, Kolkata that intentionally Rule 8(6) is not amended but the period in subsequent sale is

¶250

¶251

RA(SA) 39/2023 & RA(SA) 40/2023

¶252

curtailed to 15 days. It means that even in the case of subsequent sale, provisions of Rule 8(6) and proviso to Rule 9(1) are to be followed

¶253

30.7 Same view is reiterated by DRAT, Kolkata in re Alluri Vijayalakshmi Vs. Union of India reported in 2024 ibclaw.in 148 DRAT.

¶254

31 It is true that in KVP Prasad Rao Gupra and Sri Sai Annadhatha polymers and anothe r , it was held separate notices under Rule 8(6) and 9(1) of SIE rules giving 30 days time should be given to facilitate the right of redemption available to the borrower prior to publication of sale notice after amendment to Section 13(8) of the SARFAESI Act. It is also true that in re Celir LLP Vs. Bafna case , Hon’ble Supreme Court found that decision in re KV Prasad and Sri Sai Annadhata cases have taken a correct view with regard to right of redemption available to the borrows. However, DRAT, Mumbai in its order dated 19.9.2025 in Misc. Appeal 47/2025 considered this aspect and held that Hon’ble Supreme Court of India had approved the decision of the Hon’ble High Court in KV Prasad and Sri Sai Annadhata cases only in respect of right of redemption available to the borrowers. There was no decision as to whether two notices under Rule 8(6) and 9(1) of SIE rules giving 30 days time in each notice before sale and thus relying on

¶255

the other decisions held that there was no requirement of issuing two separate notices under Rule 8(6) and Rule 9(1) each giving 30 days notice prior to sale. It was also found that notices under Rule 8(6) and 9(1) can be simultaneously issued.

¶256

¶257

RA(SA) 39/2023 & RA(SA) 40/2023

¶258

Relevant portion of the order of DRAT, Mumabai dated 19.9.2025 passed in Misc.

¶259

Appeal 47/2025 is extracted hereunder for better understanding.

¶260

“28. For the sake of repetition, it is re-iterated that issue was whether sale notices, each giving 30 days, especially the need to issue publication of sale notice under Rule 9(1), after issuance of notice under Rule 8(6), each giving 30 days time was not the core issue and decided on the submissions made on this issue by the Hon’ble Supreme Court of India in Celir LLP case. Therefore, this Tribunal is of the view that decision in the case of Canara Bank Vs. Mr. Amarender Reddy will hold good on the point as to whether sale notices under Rule 8(6) and publication of sale notice under Rule 9(1) each giving 30 days time is required or not. This judgment categorically states that there is no need to give notice under Rule 8(6) only after expiry of 30 days of individual notice from the authorized officer to the borrower about the intention to sell the immovable secured asset.

¶261

Hon’ble High Court of Telangana in Writ Petition Nos.2109, 2276 & 2751/2020, Hon’ble High Court of Jammu & Kashmir at Jamu in WP (C) No.108/2021 and batch cases and Hon’ble High Court of Andhra Pradesh in Writ Petition Nos.24403, 19774 and 31324/2023 placing reliance on the decision of Hon’ble Supreme Court of India in re, Canara Bank Vs. Amarender Reddy case held that there is no need to observe a gap of 30 days between two notices and sale notice under Rule 8(6) and publication of sale notice under Rule 9(1) can be issued simultaneously.

¶262

Thus, on the basis of decision in re Canara Bank Vs. Amarender Reddy and the decisions of Hon’ble High Court of Telagana, Hon’ble High Court of Jammu & Kashmir and Hon’ble High Court of Andhra Pradesh referred above, this Tribunal finds that there is no need to wait for 30 days for publishing the sale notice under Rule 9(1) of the SIE Rules. Notices under Rule 8(6) and Rule 9(1) can be simultaneously issued after ensuring that there is clear 30 days gap between the publication of sale notice and the date of sale of the immovable secured asset.

¶263

Therefore, finding recorded by the Learned Presiding Officer that holding the sale notice is bad for lack of 30 days notice and bank has not followed the procedures laid down under Rule 8(6) read with Rule 9(1) of SIE Rules is not correct and is set aside.”

¶264

Subsequently, Hon’ble Supreme Court of India in its order dated 22.9.2025 passed

¶265

in Civil Appeal No.12174/2025 in re Shri M. Rajendran & Others Vs. M/s KPK Oils

¶266

and proteins India Pvt. Ltd. & Others held that there is no requirement of issuing

RA(SA) 39/2023 &

RA(SA) 40/2023

two separate notices under Rule 8(6) and Rule 9(1) each giving 30 days time prior

¶271

to sale. Relevant portion is extracted hereunder.

¶272

“Para 169 :From the above discussion, we have no hesitation in holding the following: -

¶273

(i) Rule(s) 8(6), the Proviso thereto, Rule 8(7) and Rule 9(1) of the SARFAESI Rules do not speak of any separate or distinct notice of sale that is required to be issued by the secured creditor for the transfer of the secured asset by way of lease, assignment or sale in accordance with any of the methods enumerated in Rule 8(5).

¶274

(ii) (ii)The different manner in which the notice of sale has to be served, caused, published, affixed, uploaded as stipulated in Rule(s) 8(6) and 8(7) of the SARFAESI Rules, do not constitute separate notices of sale by themselves, they are part and parcel of one single composite intended “notice of sale” of the secured asset by the secured creditor, by any of the mode of sale listed in Rule 8(5). All of the aforesaid rules are concerned with a single composite “notice of sale”, and the only Page 123 of 139 distinction between the said rules, is the manner in which the said “notice of sale” has to be given, on the basis of which relevant rule or rules are applicable, as the case may be.

¶275

(iii) Similarly, the stipulation under Rule 9(1) of a thirty-days gap between the date of publication of notice of sale and the date of actual sale does not impute a distinct characteristic to the public notice in the newspaper in contrast to the notice of sale that is served to the borrower. As is evident from Appendix IV-A to the SARFAESI Rules, the public notice of sale in newspaper as-well the notice of sale served to the borrower are one and the same, for the purpose of Rule 9(1).

¶276

(iv) The embargo enshrined under Rule 9(1), that no sale, in the first instance shall take place before the expiry of thirty-days, would be reckoned from the date of issuance of the “notice of sale”, which would include both the public notice of sale in the newspaper and the service thereof to the borrower, whichever is later.

¶277

(v) (v) Under Rule 8(6) read with Rule 9(1) both the notice of sale can be served as-well as published in the newspaper, simultaneously on the same date. All that is required under Page 124 of 139 Rule 9(1) is that thirty-day gap is maintained between when the notice of sale is served, affixed and published, whichever is later, as the case may be, till the date of actual sale.”

¶278

¶279

RA(SA) 39/2023 & RA(SA) 40/2023

¶280

Thus, this Tribunal finds that there is no requirement for issuing two separate notices under Rule 8(6) and Rule 9(1) of SIE Rules each giving 30 days time prior to sale for exercising the right of redemption.

¶281

Next submission of the learned senior counsel for the appellants is that Rule 8(5) of Security Interest (Enforcement) Rules, 2002 is not properly followed in the sense that valuation report was not obtained prior to sale and that reserve price was fixed low and grossly reduced during the impugned sale. It is relevant here to extract the decision relied on by him on the aspect of valuation of property.

¶282

34.1It is observed by Hon’ble High Court of Telagana in re Venshiv Pharva Chem(P) Ltd. and others Vs. State Bank of India case in paragraph 67 that Rule 8(5) of Security Interest (Enforcement) Rules, 2002 specifically provides that before effecting sale of immovable property, Authorised Officer should obtain valuation report thereof from an approved valuer and thereafter fix the reserve price in consultation with the secured creditor. The policy of the bank, however, seems to be that a valuation which is less than one year old, can be taken into account for this exercise. Given the fluidity and volatility of the real estate market, court found that broad time fame of one year adopted by the bank is not in the interest of the borrower.

¶283

34.2 Certain portions of decision render in re Rajiv Subramaniayan Vs. M/s Pandyas reported in AIR 2014 SC 1710 is reproduced wherein it is stated that it is expected

¶284

that all he banks and financial institutions to ensure that sale of the asset provides

RA(SA) 39/2023 &

RA(SA) 40/2023

maximum benefits to the borrower by the sale of such asset. Secured Creditors are expected to take bona fide measures to ensure that there is maximum yield from such secured assets for the borrowers. In paragraph 69, it is observed that it is not open to the bank to fall back upon a valuation report of over 11 months vintage to fix the reserve price for the sale of the secured assets. All the more so, when such reserve price indicates radical fall when compared with reserve price in the earlier sale notice issued less than four months earlier.

¶289

34.3 In re M/s Pochiraju Industries Ltd. Vs. Punjab National bank and other s case, valuation report dated 1.2.2017 contained a rider clause that it was valid only for a period of three months. This report could not have been taken into consideration for fixing the reserve price in the subsequent E-Auction Sale Notice dated 1.7.2017. Rule 8(5) of Rules 2002 mandates the authorized officer to obtain valuation from an approved valuer in consultation with the secured creditor before effecting sale of immovable property for fixing the reserve price. When reserve price was fixed based on the valuation report dated 1.2.2017 having validity only for three months, sale notice was set aside and auction sale held was declared as illegal.

¶290

34.4 In re Skytone Electricals (India) Limited Vs. Canara Bank case, old valuation report

¶291

dated 5.1.2019 was relied for the sale held on 29.2.2020, more than a year later from the date of the valuation report. In this context, it was held that had the

¶292

¶293

RA(SA) 39/2023 & RA(SA) 40/2023

¶294

valuation report been obtained before conducting the sale in 2020, reserve price

¶295

would have been fixed at much higher price. Therefore, sale was set aside.

¶296

34.5 In re , M/s IAA Hospital Pv. Limited and another Vs. The authorized officer, UCO Bank and others case , in paragraph 36 of the order, relying on J. Rajiv Subramanian’s case and Vasu P Shetty’s cases, it was reiterated that Rule 8(6) and 9(1) have to be mandatorily followed and that banks and financial institutions should ensure that sale of the secured assets provides maximum benefit to the borrowers by sale.

¶297

34.6 Following decisions are referred In re, Smt. Anitha Sadhana Vs/ Smt. Baljinder Kaur and others case reported in 2014 SCC Online MP 8685 .

¶298

i) Decision in Kerala Finance Corporation Vs. Vineet Paul reported in 2011 4 SCC 171

¶299

a) A highest bidder in public auction cannot have a right to get the property or any privilege, unless the authority confirms the auction sale, being fully satisfied that the property has fetched the appropriate price and there has been no collusion between the bidders.

¶300

b) In the matter of sale of public property, the dominant consideration is to secure the best price for the property to be sold. This can be achieved only when there is maximum public participation in the process of sale and everybody has an opportunity of making an offer. It becomes a legal obligation on the part of the authority that property be sold in such a manner that it may fetch the best price.

¶301

c) The essential ingredients of sale are correct valuation report and fixing the reserve price. In case proper valuation has not been made and the reserve price is fixed taking into consideration the inaccurate valuation report, the intending buyers may not come forward treating the property as not worth purchase by them.

¶302

d) Reserve price means the price with which the public auction starts and the auction bidders are not permitted to give bids below the said price, i.e., the minimum bid at auction.

¶303

¶304

RA(SA) 39/2023 & RA(SA) 40/2023

¶305

e) The debtor should be given a reasonable opportunity in regard to the valuation of the property sought to be sold, in absence thereof the sale would suffer from material irregularity where the debtor suffer substantial injury by the sale.

¶306

ii. Navalka and Sons Vs. Shri Ramanaya Das reported in AIR 1970 SCC 2037;

¶307

There must be a proper valuation report and it should be communicated to the judgment debtor and he should file his own valuation report and sale should be conducted in accordance with law. Unless court is satisfied about the adequacy of the price, confirmation of sale would not be an appropriate exercise of judicial discretion.

¶308

iii. Indore Vikas Pradhikaran Vs. Pure Industrial Code and Chemials Ltd. reported in AIR 2007 SC 2458;

¶309

Valuation report must be obtained before reasonable period of proclamation. Reserve price fixed on the basis of valuation report obtained two years prior to publication of sale proclamation cannot be considered.

¶310

iv. Anil kumar Shrivastava Vs. State of UP reported in (2004) 8 SCC 671

¶311

Concept of reserve price is not synonymous with the valuation of the property. Fixation of reserve price may be an indication of the probable price which the property may fetch from the point of view of intending bidders. It does not preclude the claimant from adducing proof that property had been sold for a lower price.

¶312

v. Lakchhman Dass Vs. Jagat Ram (2007) 10 SCC 448

¶313

Right to hold property is a constitutional right as well as human right. A person cannot be deprived of his property except in accordance with the provisions of the statute.

¶314

34.7 In re Hotel Vandana Palace, Belgaum Vs. The Authorised Officer, Syndicate Bank

¶315

Belgaum and others case, it is reiterated that Rule 8(6) and 9(1) have to be strictly

¶316

complied with and valuation report should be obtained under Rule 8(5) prior to

¶317

sale.

¶318

¶319

RA(SA) 39/2023 & RA(SA) 40/2023

¶320

35 These decisions make it clear that bank should make all endeavours to sell the property for the best price ensuring the right of the borrower is protected for getting a right and appropriate price. In case the property does to fetch adequate price, sale should not be confirmed. Grievance of the appellants is that property was not properly valued and the reserve price was fixed at 50% of the actual market value. Reserve price was drastically reduced in the impugned sale notice in comparison with the reserve price fixed in the earlier E-auction sale notice dated 24.8.2020. In the previous E-auction sale notice dated 24.8.2020, total reserve price for six items of mortgaged properties was Rs.46,19,11,000/- whereas in the impugned sale notice dated 23.2.2021, reserve price has been drastically reduced to Rs.38,08,11,000/-. This reduction was without any basis and justification.

¶321

36 Elaborating on this, he submitted and reiterated in the written notes of submissions the following details.

¶322

a) Pollachi property measuring 8 cents and 97 Sq.ft was undervalued by 23.01% as detailed below.

¶323

*highest documents value FMV Rs.1.13 crore as on 15.6.2017

¶324

*Sale consideration: Rs.86,99,166/- as per the sale certificate

¶325

*Absolute shortfall : Rs.26,00,834/-

¶326

*Percentage undervaluation : 23.01%

¶327

b) Kuruchi Property admeasuring 4.00 acres was undervalued by 34.85% as detailed below.

¶328

*Highest documented value : SRO recorded market value Rs.17,51,11,200/-

¶329

¶330

RA(SA) 39/2023 & RA(SA) 40/2023

¶331

*Sale consideration : Rs.11,41,07,725/-

¶332

Absolute shortfall l: Rs.6,10,03,475/-

¶333

*Percentage undervaluation : 34.85%

¶334

c) Kunnathur Property admeasuring 1.03 acres was undervalued by 26.35% as detailed below.

¶335

*Highest documented value : OMV Rs.4.52 crores

¶336

*Sale consideration: Rs.3,32,97,260/-

¶337

*Absolute shortfall :Rs.1,19,02,740/-

¶338

*Percentage undervaluation: 26.35%

¶339

As already stated this submission is refuted and strongly denied by both the bank

¶340

and the auction purchaser. It is submitted by them that previous two sale attempts had failed and only in the third sale attempt, sale was succeeded, that too, in respect of only three properties. Though sale notice dated 23.2.2021 was issued for the sale of Schedule I to Schedule VI properties, of which, Schedule 1 to 4 and 6 consists of one property and schedule 5 consists of 4 items of property. Only three properties described in the SARFAESI Application have been sold. Other properties have not been sold. There is no material, whatsoever, was produced by the appellants to show that reserve price arrived was on the lower side i.e., 50% of the market value of the property especially by producing comparable valuation report. When there is no bidder in the auction sale, reserve price has to be reduced and that was done in accordance with the guidelines issued by the bank. There is nothing wrong in reducing the reserve price.

¶341

¶342

RA(SA) 39/2023 & RA(SA) 40/2023

¶343

38 . Decision in re Shakeena and others Vs. Bank of India and others reported in (2021) 12

¶344

SCC 761 is relied by first respondent bank for the proposition that when the borrowers/guarantors have failed to exercise the right of redemption in the manner known to law, it is not possible to countenance the plea of re-open the entire action process.

¶345

38.1 Decision in re S. Kartick and others Vs. N. Subash Chand Jain and others reported in AIR 2021 SC 4559 is relied by the first respondent bank for the proposition that once time for redemption is lost prior to registration of sale certificate, right available to the mortgagor shall get extinguished. The appellants in that case had more than one opportunity for redemption of the mortgage. However, their conduct shows that they were only interested in protracting the litigation.

¶346

38.2 In re Sanjay Sharma Vs. Kotak Mahindra Bank Ltd reported in 2024 SCC Online 4589, relied by the first respondent bank, it was held that right of redemption on payment of dues is not unfettered right but subject to statutory limitation prescribed to it. As per unamended Section 13(8) of the SARFAESI act, right of the borrower to redeem the secured asset was available only till the sale or transfer of secured asset. It is a well settled principle that sale by way of public action cannot be set aside until there is any material irregularity and /or illegality committed in holding the auction or if such auction was vitiated by any fraud or collusion.

RA(SA) 39/2023 &

RA(SA) 40/2023

Decision in re M/s Sowmya Engineering Vs. CM Indian Bank reported in 2022 ibclaw.in 104 HC Is relied by the auction purchaser viz. third respondent for the proposition that Rule 8(5) of SIE Rules does not contemplate to get fresh valuation report for each and every sale notice. As valuation report has been obtained one

¶351

year three years prior to sale notice, there is no question of obtaining fresh valuation report.

¶352

It is seen from the typed set of documents produced by the appellants, valuation reports and the sale certificates have not been produced in the typed set of papers. Only from the records made available by the DRT, this Tribunal could gather six valuation reports with four valuation reports given on 19.3.2020 and two were given on 21.9.2020.

¶353

a) Value of Item No.1 of the schedule property in the valuation report dated 21.9.2020 ( at page 353) is Rs.1,05,58,000/- (fair market value).

¶354

b) Value of Item No.2 of schedule property in valuation report dated 19.3.2020 (at page 381) is Rs.14,00,00,000/- (fair market value)

¶355

c) Value of Item No.3 of schedule property in valuation report dated 19.3.2020 (at page 399) is Rs.4,30,00,000/- (fair market value).

¶356

It can be seen from the above data that valuation report was obtained within a

¶357

period of one year prior to the date of sale. Courts have generally approved valuation report obtained within a period of one year prior to sale for fixing the reserve price. It is an admitted position that appellants have not produced any valuation report before DRT to counter the valuation adopted in the valuation report

RA(SA) 39/2023 &

RA(SA) 40/2023

filed by the first respondent bank. When there is no comparable valuation report, it is not known on what basis it is projected that properties were valued at 50% of the market value. When respondent bank produced valuation reports given by the approved valuer, unless there is a valuation report obtained by the appellants and produced before DRT to show that value adopted in the valuation report filed by the respondent bank is low, this Tribunal is of the view that the submission of learned senior counsel for the appellants that property was grossly undervalued cannot be accepted.

¶362

Admittedly, prior to impugned sale, two sale attempts were made earlier and ended in failure, for want of bidders. When there is no bidder in the sale, it is an approved practice to reduce the reserve price. That had happened in this case. Therefore, reducing the upset price from the reserve price fixed for the first sale and the second sale and in the 3^rd sale cannot be said as illegal.

¶363

Appellants have not taken any steps to pay the loan amount to redeem the property. When earlier sale notice was challenged in SA 184/2021, there was a conditional order passed for depositing a sum of Rs.7.50 crores towards the debt due on 11.3.2021. That was only partly complied with and the sale did not materialise and

¶364

the said SA was dismissed. It shows that appellants instead of making genuine efforts to pay the debt due and redeem the property, filed SARFAESI applications to challenge every sale attempt. When the sale had materialised in the 3^rd attempt of

RA(SA) 39/2023 &

RA(SA) 40/2023

sale, it is now challenged on various grounds as projected above. Hon’ble High Court of Madras in Writ Petition No.18984/2021 directed registration of the sale certificate in favour of the auction purchaser, M/s Garuda Steels. Accordingly, sale was registered in favour of the auction purchaser viz. M/s Garuda Steels.

¶369

One more submission of the learned Senior Counsel for the appellants is that pathway to SF No.338/2 part and 341/1A part had been intentionally omitted. It is the case of the respondent bank that pathway referred is a private pathway and only right to use as ingress and egress was available to the mortgagors as per the sale deed dated 5.2.2007 and the Rectification Deed dated 18.3.2009. This is only a right of Easement and not a proprietory right. Valuation report specifically mentions about the pathway leading to Avinachi road. Therefore, it was not separately valued. This explanation given by the respondent bank for non valuing of pathway in the circumstances stated above, is justifiable. No fraud or collusion among the bank, auction purchaser and the authorised officer is made out.

¶370

Thus, this Tribunal finds from the material produced and the submissions made by learned counsel for parties, there is no case made out for setting aside the valuation report, finding fault with the reduction of upset price and sale of the property. Property was sold for a price more than the reserve price.

¶371

There is a ground taken in the SARFAESI application that the impugned sale notice had not been published in two leading dailies, in English and in vernacular language

RA(SA) 39/2023 &

RA(SA) 40/2023

and the same was not affixed on the conspicuous part of the property, as required under the SARFAESI Act and Rules. From the typed of papers, it can be seen that sale notice dated 23.2.2021 was personally served on the appellants and acknowledgement cards are made available a page 334 of the typed set. Publication of sale notice in both English and vernacular language newspapers dated 25.3.2021 is also made available at page 336 and 337. It appears that the question of affixture of sale notice is not seriously canvassed either before the DRT or before this Tribunal. Even assuming that affixture of sale notice is not proved, the impugned sale being a 3^rd sale attempt. Unless prejudice is shown to have been caused to the appellants by non affixture of sale notice, sale proceedings cannot be set aside on the ground of non affixture or non proving of affixture of sale notice.

¶376

From the consideration of material produced and submissions made by learned counsel appearing for parties, this Tribunal finds that appellants failed to establish that classification of account as NPA is illegal; reply to Section 13(2) demand notice was issued under Section 13(3A) of SARFAESI Act; that property was undervalued and the upset price was reduced illegally.

¶377

It is now settled in the decision rendered by Hon’ble Supreme Court of India order dated 22.9.2025 passed in Civil Appeal No.12174/2025 in re Shri M. Rajendran & Others Vs. M/s KPK Oils and proteins India Pvt. Ltd. & Others referred supra, that there is no requirement of issuing two separate notices under Rule 8(6) and 9(1)

RA(SA) 39/2023 &

RA(SA) 40/2023

each giving 30 days time prior to sale and it is enough to issue one notice. Thus, this

¶382

Tribunal finds that the impugned sale notice dated 23.02.2021 and the sale held on 15.3.2021, after substantially following the mandatory provisions of SARFAESI Act and the Rules made thereunder, cannot be set aside. That was rightly done by the

¶383

Debt Recovery Tribunal.

¶384

In this view of the matter, this Tribunal finds that SARFAESI Applications filed by the appellants viz., SA No.450/2021 and SA No.184/2021 had been rightly dismissed by

¶385

the Learned Presiding Officer, DRT, Coimbatore and there is no need to interfere with the orders.

¶386