Allowed

State Bank of India v. Ms Asha Stimex Ltd. and Anr.

DRAT5 Feb 2025REGULAR APPEAL/48/2022

Case brief

AI extract

What is this about?

The Appellate Tribunal held that the lower Tribunal vitiated proceedings by dismissing an application against a borrower without impleading the successful auction purchaser. The Tribunal allowed the appeal and remanded the matter to allow the auction purchaser to be impleaded.

What did the court decide?

Impugned judgment and order dated 4th July 2022 are set aside. Matter remanded to DRT to decide afresh after impleading the auction purchaser as a respondent.

State Bank of India versus Ms Asha Stimex Ltd. and Anr. — Banking and Recovery | DRAT (2025)

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Reportable/Non-Reportable

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Appeal No.48 of 2022 -DRAT-Kolkata

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT

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KOLKATA

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HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA CHAIRPERSON

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Appeal No. 48 of 2022

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(Arising out of S.A. 597 of 2019 in DRT-III, Kolkata)

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State Bank of India, Behala branch, 1168/1, Diamond Harbour Road, P.S. Behala, Kolkata-700034 and Stressed Asset Recovery Branch, South Bengal, Jeevan Deep Building, 2^nd Floor, 1, Middleton Street, Kolkata – 700071.

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Authorised Officer, State Bank of India, Stressed Asset Recovery Branch, South Bengal, Jeevan Deep Building, 2^nd floor, 1, Middleton Street, Kolkata-700 071.

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.…Appellant

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-Versus-

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M/s Asha Stimex Limited, having its corporate office at flat no 4A, Mayur Apartment, 2, Mayurbhanj Road, Kolkata – 700 023.

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Nabaratan Rathi, Director, residing at Flat no. 4A, Mayur Apartment, 2, Mayurbhanj Road, Kolkata – 700 023.

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Mrs. Razia Khatoon of 40, 4B Ekbalpore Lane, Khidderpore, Kolkata – 700 023.

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		….Respon	dents
Counsel for Appellants	Mr. Lear Sub Cou	Debasish Cha ned Counsel hasree Dey, nsel	kraborty, Ms. Learned
Counsel for Respondents	Sk. Cou	Reazul Islam, nsel for the Resp	Learned ondent
JUDGMENT	:	5^thFebruary,	2025
THE APPELLATE TRIBUNAL :

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Appeal No. 48 of 2022-DRAT-Kolkata

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Instant appeal has arisen against judgment and order dated 04^th July, 2022, passed by Learned DRT-III, Kolkata, in S.A. No. 597 of 2019 (M/s. Asha Stimex Ltd. & Another - vs- State Bank of India & Others) whereby the Ld. DRT allowed the S.A. and set aside the impugned demand notice, possession notice and auction sale held on 24.02.2021 and the sale certificate dated 25.02.2021 issued in favour of the auction purchaser. Bank was directed to refund the sale proceeds to the auction purchaser and interest, if any. Feeling aggrieved, appellant has preferred the Appeal.

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2. As far as facts of the matter are concerned, Respondent No. 1, M/s. Asha Stimex Ltd., is the borrower and the Respondent No. 2 is the Director of the respondent no.1 company. Respondent no.1 availed cash credit facilities to the tune of Rs.2.50 crore and Bank guarantee of Rs. 50.00 lacs. Sri Vivek Rathi, Ms. Asha Rathi, Sri Vaibhav Rathi and Ms. Rashmi Rathi are all guarantors of the loan facilities. In order to create equitable mortgage, original title deeds of Flat No. 3A, 2, Mahurbhanj Road, Kolkata had been deposited by Ms. Reshmi Rathi and Sri Vaibhab Rathi. 3. Thereafter, borrower defaulted in making payment of the dues and loan account was classified as NPA on 18.03.2011. Notice u/s 13(2) of the SARFAESI Act, 2002 (hereinafter referred to as the Act) was issued by the Bank on 16.12.2011 calling upon the borrower to pay an amount

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Appeal No. 48 of 2022-DRAT-Kolkata of Rs.2,11,94,493.36, which was served upon the borrower. Respondents made a request for OTS, which was not acceded to.

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4. Thereafter, appellant bank put the mortgage property on sale. However, sale failed due to want of bidders. 5. Respondent no.1 borrower had filed Writ Petition being 20280(W) before the Hon’ble High Court at Calcutta challenging the SARFAESI action initiated by the Bank, which was disposed of with liberty to approach the DRT u/s 17 of the Act.

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6. Application under Section 17 of the Act being SA No. 597 of 2019 was filed by the respondent no.1 borrower before the DRT and the Bank filed its written objection.

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7. Learned DRT allowed the S.A. on the ground that detail breakup of outstanding dues was not reflected in the Section 13(2) notice thereby mandatory provision of Section 13(3) of the Act was violated. Learned DRT has recorded in the impugned judgement and order that only cash-credit amount has been indicated in the demand notice while detail breakup of the dues has not been recorded, as such, demand notice issued u/s 13(2) of the Act is not sustainable and liable to be quashed.

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8. SARFAESI proceeding is initiated by serving Section 13(2) notice to the defaulting borrower giving 60 days’ time to square up the entire dues failing which secured asset is liable to be enforced by issuing Sec. 13(4) notice. Section 13(2) notice is the foundation of the SARFAESI proceedings.

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Appeal No. 48 of 2022-DRAT-Kolkata Learned DRT recorded in the impugned judgement that since Section 13(2) notice by which the proceeding was initiated is liable to be quashed, then all extended measures taken thereafter are also liable to be quashed including Section 13(4) notice and auction sale. Hence, learned DRT quashed the Section 13(4) notice and auction sale notice.

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9. Heard the Learned Counsel for the parties and perused the record. 10. Learned counsel appearing for the appellant bank at the very outset submits that auction sale was confirmed and sale certificate was issued in favour of the successful auction purchaser. Auction purchaser has got vested right title and interest over the secured asset. Learned DRT quashed the auction sale notice without hearing the auction purchaser. Hence, doctrine of audi alteram partem has been violated.

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11. Learned counsel for the respondent submits that learned DRT has rightly come to a conclusion that that mandatory provision of Section 13(3) of the Act was violated since detail break up of outstanding dues has not been reflected in the demand notice. Hon’ble Apex Court in Merdia Chemicals Ltd. and Others versus Union of India and others (2004) 4 SCC 311 case held that secured creditor should give detail breakup of outstanding dues in the demand notice so that borrower can understand the dues to be square up. Learned counsel further submits that since demand notice is quashed for not following mandatory provision of Section 13(3) of the act, following all extended measures are also liable to be quashed.

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Appeal No. 48 of 2022-DRAT-Kolkata

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12. At the very outset, it is to be observed that in the present proceedings auction sale was conducted before the delivery of the Judgment by the Learned DRT. Successful Auction purchaser was not impleaded as a party before the Learned DRT. Learned DRT has set aside the auction sale without hearing the successful auction purchaser, whose right title interest over the secured asset was taken away. When the auction was conducted pending S.A. proceeding and auction sale was confirmed and it was brought to the notice of the DRT, then it was incumbent upon the DRT to implead the auction purchaser as a necessary party to the proceeding. However, Learned DRT disposed of the S.A. without impleading the auction purchaser. Hence, right title interest of the auction purchaser is adversely affected by non-impleadment as a party to the proceedings. It is settled legal proposition that everyone should have a right of hearing. No finding should be recorded against a person who is neither impleaded as a party nor opportunity of hearing is afforded to him.

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13. Accordingly, I am of the considered opinion that since the auction purchaser was a necessary party to the proceeding and he was not impleaded as a party to the proceedings before the Learned DRT, all the proceedings before the Learned DRT stand vitiated. Accordingly, Appeal deserves to be allowed and matter deserves to be remanded back to the DRT for decision afresh after impleading the auction purchaser as a Respondent in the S.A. proceedings.

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Appeal No. 48 of 2022-DRAT-Kolkata

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ORDER

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Appeal is allowed. Impugned judgement and order dated 4^th July, 2022 passed by Learned DRT III Kolkata in S.A No. 597 of 2019 is set aside. Matter is remanded back to the Learned DRT for hearing afresh by impleading the auction purchaser as a Respondent to the S.A. proceedings. Thereafter, Learned DRT should decide the S.A. afresh in accordance with law after affording opportunity of hearing to the parties. It is made clear that no findings on merit of the matter have been recorded in this judgment. Since it is an old S.A. of 2019, matter should be decided expeditiously without giving any unnecessary adjournment. If any adjournment is sought, DRT will be at liberty to grant the same after passing a reasoned order.

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No Order as to costs.

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File be consigned to Record Room.

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Copy of the order be supplied to Appellant and the Respondents and a copy be also forwarded to the concerned DRT.

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Copy of the Judgment/ Final Order be uploaded in the Tribunal’s Website.

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Order signed and pronounced by me in the open Court on this the 5^th day of February 2025.

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(Anil Kumar Srivastava,J) Chairperson

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Dated 5^th February, 2025 /tp

State Bank of India v. Ms Asha Stimex Ltd. and Anr.

Case brief

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State Bank of India v. Ms Asha Stimex Ltd. and Anr.

Case brief

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