Allowed

S Malathi v. Indian Overseas Bank

DRAT23 Apr 2025REGULAR APPEAL/44/2023

Case brief

AI extract

What is this about?

Appeal filed challenging an auction sale for non-compliance of notice provisions. The Tribunal held that since the 15-day notice required under Rule 9(1) was not given from the date of receipt, the sale was invalid and set it aside.

What did the court decide?

Sale held on 19.3.2020 set aside; SA allowed; sale consideration refunded with interest.

S Malathi versus Indian Overseas Bank — Banking and Recovery | DRAT (2025)

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RA(SA) 44/2023

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IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI

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Dated the 23^rd day of April, 2025

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

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RA (SA) 44/2023

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(arising out of SA 86/2020 on the file of DRT-II, Chennai)

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Between

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1. Mrs. S. Malathi, W/o Sourirajan, No.555/3, Methu Street, Kamarajar Nagar, Thellar 604 406. Thiruvannamalai District.

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2. Mr. T.S. Kamalesh,

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S/o Sourirajan, No.555/3, Methu Street, Kamarajar Nagar, Thellar 604 406. Thiruvannamalai District.

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…..Appellants

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And

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1. The Authorised Officer, M/s Indian Overseas Bank, 2/278, Vandavasi Tindivanam Main Road, Thellar, Tamil Nadu 604 406.

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2. Mr. N.K. Kalidas, S/o Kuttaya Gounder, 116, Ponnapillai Street, Nerkundram Village, Vayalamur Post, Thiruvannamalai District 604 400.

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…..Respondents

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Counsel for Appellants : M/s R.K.M. Suresh & Adhitya D. Counsel for 1^st Respondent Bank : Mr. P.H. Vinodh Pandian Counsel for 2^nd respondent : Mr. Arun Pradeesh K.

RA(SA) 44/2023

ORDER

This appeal is filed under Section 18 of the SARFAESI Act, challenging the order passed by Learned Presiding Officer, DRT-II, Chennai dated 30.3.2023 passed in SA No.86/2020.

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Challenging the sale notice issued by the first respondent dated 28.2.2020, appellants filed SA 86/2020 under Section 17 of SARFAESI Act, 2002. After contest, SA was dismissed. Therefore, this appeal is filed.

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Learned Counsel for appellants submitted that grounds raised before the Tribunal were as follows:

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a) Sale Notice dated 28.2.2020 fixing the sale on 19.3.2020 was served on the appellant only on 5.3.2020.

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b) There was no clear 15 days notice prior to the date of sale, thus, there is violation of Rule 9(1) of Security Interest (Enforcement) Act, 2002.

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c) Sale Notice was published in Villupuram Edition on 5.3.2020.

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d) The publication was not effected in the locality where the property is situated by giving publication of newspaper, which has wide publicity.

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e) The property is situated in Vellore District but the sale notice was published in villupuram Edition, whereas publication of possession

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RA(SA) 44/2023

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notice was effected in Vellore District. Thus, there is clear violation of compliance of Rule 8(2) & Rule 9(1) of SIE Rules.

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f) Sale notice was not issued in terms of Rule 8(6) of Security Interest (Enforcement) Rules, 2002 and first appellant was not served with the sale notice.

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g) Learned Presiding Officer, DRT-II, Chennai granted an interim stay of E- Auction Sale scheduled on 19.3.2020 on 18.3.2020 subject to condition to deposit 10% of the amount mentioned in the sale notice on or before 11.00 AM on 19.3.2020. Appellant complied with the condition and informed the bank about the order of Learned Presiding Officer, DRT-II, Chennai and also the compliance of the conditional order. Despite that, sale was proceeded with and the property was sold.

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h) Sale consideration was not paid immediately and sale certificate was issued only on 18.9.2021.

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i) Extent of the building was not mentioned in the sale notice.

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Despite raising the above grounds, Learned Presiding Officer has not considered any of the grounds in the light of the evidence produced but gave a finding that measures had been properly taken, compliance of Rule 8(1) and 8(2) of SIE Rules was properly done and thus dismissed the SA No.86/2020. In such circumstances, Learned Counsel for appellants prayed

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to set aside the order of Learned Presiding Officer and allow this appeal.

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RA(SA) 44/2023

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In reply, Learned Counsel for first respondent bank submitted that first sale notice dated 23.8.2017 fixing the sale on 27.9.2017 was unsuccessful due to lack of bidders. Second sale notice dated 28.2.2020 was published in two newspapers namely Dinamani and New Indian Express in Villupram District which was widely circulated in Thellar, where the property is situated. Thellar is located within the Thiruvannamalai District and not in Vellore District. Sale Notice dated 28.2.2020 was sent to the appellant through speed post on 3.2.2020. Learned Presiding Officer, DRT-II, Chennai passed an order in IA 338/2020 in SA 86/2020 granting stay of E- Auction Sale scheduled on 19.3.2020 subject to deposit of 20% of the amount mentioned in the sale notice. Appellant was to deposit 10% on or before 11.00 AM on 19.3.2020 and the balance 10% within two weeks thereafter. Non compliance of the condition would result in the automatic vacation of the interim stay and the authorized officer was at liberty to proceed further as per law. Appellants partly complied with the order by deposit of 10% on 18.3.2020 but failed to deposit the remaining 10% within the stipulated time. The said order passed in IA 338/2020 was received by the bank on 20.3.2020 and before that sale was conducted and property was sold for Rs.28,45,000/- against the reserve price of Rs.27,95,000/-.

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RA(SA) 44/2023

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Thus, it is submitted by Learned Counsel for the first respondent that measures had been taken in compliance of statutory provisions of SARFAESI Act and the property was sold.

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Learned Counsel for second respondent/auction purchaser supported the arguments of Learned Counsel for first respondent bank and submitted that he is a bona fide purchaser for the value and was under the fond hope that bank had initiated proper measures prior to the sale of property. Appellants were given sufficient time for redeeming the property by paying the amount due. Without availing of the opportunity and by not complying with the conditional order in toto , appellant filed this appeal only with a view to protract the proceedings.

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I have considered the rival submissions and perused the records.

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From the records produced there is no dispute with regard to the fact that for the loan availed by first respondent, second respondent offered his property by way of mortgage and security interest was created on his property consisting of residential building and land in S.No.210, New S.No.210/4, No.555/2, Mettu Street, Kamaraj Nagar, Thellar,Vandavasi Tk, Thiruvannamalai district .

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RA(SA) 44/2023

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It is seen that borrower defaulted in paying the loan amount, therefore, demand notice dated 17.2.2016 was issued. Since amount demanded was not paid, first respondent bank proceeded with issuance of possession notice dated 28.7.2017, followed by affixture and paper publication. Paper publication was issued in Vellore edition of New Indian Express and Dinamani. Sale Notice dated 23.8.2017 fixing the sale on 27.9.2017 was issued. No sale took place for the reason that there were no bidders. Impugned sale notice dated 28.2.2020 fixing the E-Auction Sale on 19.3.2020 was issued to both appellants.

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It is the submission of Learned Counsel for appellants that this sale notice was served on the appellants only on 5.3.2020, therefore, there was no clear 15 days notice of sale prior to the date of sale. In support of this submission, Learned Counsel brought to my notice the postal cover containing impugned sale notice addressed to the second appellant, T.S. Kamalesh.

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The issue with regard to proper service of notice of sale will be considered in detail later. Prior to that, other contentions raised by the appellants like non-publication of sale notice in the newspapers of Vellore Edition in widely circulated newspaper, non-payment of sale consideration in time, omission to mention the extent of building in the sale notice are required to be considered.

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RA(SA) 44/2023

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As detailed above, property sold in the auction sale is situated in Kamarajar Nagar, Thellar, Vandavasi Taluk, Thiruvannamalai district and it is not situated in Vellore district as submitted by Learned Counsel for appellants. Admittedly, possession notice was published in newspapers in Villupuram Edition and sale notice was published in Vellore Edition. When it is not brought to the notice of this Tribunal the name of the newspapers that are published from Thiruvannamlai district and when it is claimed by the bank that publication was effected in Vellore edition of newspaper which had wide circulation in Thellar, this Tribunal does not find any wrong or fault in publishing the sale notice in Vellore edition of New Indian Express and Dinamani.

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It is seen from the counter affidavit filed by first respondent bank that auction purchaser deposited a sum of Rs.2,80,000/- on 17.3.2020 prior to the date of sale and a sum of Rs.25,65,000/- on the date of sale itself i.e., on 19.3.2020. There is no legal prohibition for the auction purchaser to deposit the entire sale consideration on the date of sale itself. Therefore,

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there is no ground made out by Learned Counsel for the appellants for challenging the deposit of sale price.

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Insofaras non-mentioning of extent of building in the sale notice is concerned, sale notice clearly describes about the residential building and

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RA(SA) 44/2023

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land. It is for the auction purchasers to decide whether to participate in the auction sale or not. Intending auction purchasers can always ask for inspection of the property and verify the extent and other details of the property. Thus, this Tribunal finds no merit in the submission of the Learned Counsel for appellants with regard to non-mentioning of extent of building, especially when no prejudice is established.

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It is an admitted position that interim order granting stay was passed on 18.3.2020 in IA No.338/2020 (stay) against proceeding with the sale on the condition of depositing 10% of the amount demanded in the sale notice on or before 11.00 AM on 18.3.2020 and another 10% within two weeks thereafter. Appellant claimed to have complied with the first condition but failed to comply with the second part of the condition due to intervention of COVID-19 pandemic. When the first condition is complied with as mandated, it is expected that sale should be put on hold. It appears that sale was not put on hold but proceeded with. It is the submission of Learned Counsel for first respondent bank that intimation

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with regard to grant of stay and compliance of first part of conditional order was brought to the notice of the bank only on 20.3.2020 and before that sale was completed. Learned Counsel of appellants produced copy of advocate notice along with challan showing deposit of first condition of 10% amount but he has not produced any material to show that this notice

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RA(SA) 44/2023

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was served on the first respondent bank prior to conduct of sale. Order granting stay was passed ex parte without notice to the first respondent. Without intimating the first respondent bank about the grant of stay, we cannot expect the bank to stop the sale. Had appellants taken pains to serve a copy of the order of stay to first respondent bank personally, probably sale would have been postponed. When that was not done, appellants cannot find fault with the conduct of sale on 19.3.2020, as originally scheduled.

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In respect of the contention that property was sold for lesser price than the guideline value, no evidence is produced to prove that property was sold for lesser price than the guideline value.

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Coming to the service of notice of 15 days when the second sale was scheduled on 19.3.2020, this Tribunal finds from the cover produced by appellants that second sale notice dated 28.2.2020 fixing sale on 19.3.2020 was served on the second appellant only on 5.3.2020. It is obvious that no 15 days clear notice of sale is given from the date of receipt of sale notice

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by appellants.

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Proviso to rule 9(1) of Security Interest (Enforcement) Rules, 2002 requires

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that if sale of immovable property by any of the methods specified under

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RA(SA) 44/2023

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Rule 8(5) fails, sale is required to be conducted again and authorized

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officer shall fix the sale not less than 15 days for subsequent sale.

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Borrower includes guarantor also. From the postal cover produced by the appellants, it is established that second sale notice dated 28.2.2020 fixing the sale on 19.3.2020 was served on the second appellant only on 5.3.2020. Therefore, there is no clear 15 days notice from the date of service to the second appellant till the date of sale. First respondent bank have not produced any records like acknowledgment card or returned cover with regard to service of impugned sale notice on the first appellant.

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It appears that probably finding that no clear 15 days was given from the date of receipt of sale notice till date of sale, first respondent bank has not immediately issued the sale certificate despite the fact that second respondent paid the entire sale consideration on the date of sale on 19.3.2020 itself and issued the sale certificate only on 18.9.2021 after the dismissal of SA on 5.8.2021. Thus, there is no bona fides in the action of first respondent bank in the conduct of sale pursuant to issuance of second sale notice. In the said circumstances, this sale has to fail due to non compliance of mandatory Rule 9(1) of Security Interest (Enforcement) Rules, 2002. In this view of the matter, sale held on 19.3.2020 is set aside and SA 86/2020 is allowed.

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RA(SA) 44/2023

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In the result, Appeal RA(SA) 44/2023 is allowed. First Respondent bank is directed to refund the sale consideration to second respondent with 6% interest p.a.(simple) from the date of deposit till the date of payment. First respondent bank is also directed to pay the stamp duty and registration charges to the second respondent at 6% p.a. (simple) from the

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date of registration of sale till the date of refund. It is open to the first respondent bank to initiate fresh sale measures, in accordance with law.

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Parties are directed to bear their own costs.

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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 23^rd Day of April, 2025)

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Sd/- (JUSTICE G. CHANDRASEKHARAN) CHAIRPERSON

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S Malathi v. Indian Overseas Bank

Case brief

What is this about?

What did the court decide?

S Malathi v. Indian Overseas Bank

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

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