Dismissed

Ms Jai Hanuman Agrotech Pvt. Ltd. and Others v. Canara Bank

DRT21 Dec 2022SA/188/2022

Case brief

AI extract

What is this about?

This applicant challenged a possession notice issued under the SARFAESI Act, alleging procedural violations such as the lack of a detailed account statement, non-compliance with RBI circulars regarding temporary deficiencies, and failure to prepare an inventory during symbolic possession. The Tribunal rejected the application, finding the borrower failed to demonstrate defects in the notice or sho

What did the court decide?

The application under Section 17 of the SARFAESI Act with all pending applications was dismissed with costs.

Ms Jai Hanuman Agrotech Pvt. Ltd. and Others versus Canara Bank — Money Laundering | DRT (2022)

DRT,PATNA

SA 188 of 2022 [J]

DEBTS RECOVERY TRIBUNAL PATNA

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Presiding Officer: Shri KaushalendraYadav

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SA- 188 of 2022

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1. MIs Jai Hanuman Agrotech Pvt. Ltd., through it's Director at Madhaipur, Vidyapatinagar, P.S. Dalsinghsarai, Samastipur. Mobile No. 7562838285, Email Id : [email protected].

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Shri Bishwanath Prasad @ Bishwanath Prasad Mahto, S/o Sadhu Lal Prasad, Rio Madhaipur, Vidyapatinagar, Samastipur.

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Mr. Ajeet Kumar, S/o Bishwanath Prasad, Rio Madhaipur, Vidyapatinagar, Samastipur. . Applicants

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Versus

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The Authorized Officer, Canara Bank, Dalsinghsarai, Tripit Sundar Complex, Gudhari Road, Dalsinghsarai 848114, Samastipur.

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2. MIs JMD Engineering & Construction Pvt. Ltd, Magistrate Colony, Khajpura, Patna - 800014.

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The Chairman-cum-Managing Director, Canara Bank, Naveen Complex, 14 MG Road, Bangalore. --respondents

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Present: For the Applicant : Sh. Arbind Kr. Jha, Advocate For the respondents Bank : Sh. Sanjay Singh Thakur, Advocate For the Auction Purchaser : Sh. Shiv Pratap, Advocate For the Intervener : Sh. Balkrishan Jha, Advocate

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Dated: 21.12.2022

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JUDGMENT

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Present application uls 17 of SARFAESI Act has been filed with a prayer to quash possession notice dated 06.06.2022.

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The brief facts of the care are that the applicant availed various loan facilities from the respondent bank. On default in repayment of the dues of the bank, the account of the applicant was declared as NPA on 31.03.2022. Subsequently, the bank initiated SARFAESI Action against the borrower and issued demand notice uls 13(2) dated 02.04.2022 calling upon the

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DRT,PATNA

SA 188 of 2022 [J]

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applicant to make the payment of Rs.751.32 lacs. Further possession notice dated 06.06.2022 u/s 13(4) of the SARFAESI Act was issued. Aggrieved from the possession notice, this SA has been filed by the applicant. During Pendency of SA IA 227/2022 has been filed challenging sale notice dated 27.06.2022. Further, IA 305/2022 has been filed against the order dated 10.08.2022for physical possession of the property.

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As alleged by the applicant, just after a day gap of NPA i.e. 31.03.2022, the demand notice issued u/s 13 (2) dated 02.04.2022 of the SARFAESI Act has been served to the applicant but neither the details of statement of account showing the amount due on date nor description of movable/immovable properties to be enforced has not been mentioned in the said demand notice. The statement of account has also not been provided with the demand notice. Against the demand notice, the applicant no.1 raised objection u/s 13(3A) before the bank and the bank rejected the said representation by it's letter dated 31.05.2022 without assigning any reason. Further, the bank issued possession notice dated 06.06.2022 but failed to take possession of plant and machinery after panchnama drawn and signed by witnesses in Appendix-I. No inventory was prepared while taking possession. In compliance with Rule 4(3) of the Act, neither authorized officer kept the property in his own custody nor custody of any person authorized by him. No steps were taken for preservation and protection of potato in compliance with Rule 4(4). The unit is an ongoing concern and is a case of transfer of "Ownership of business".

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It is further submitted that the applicant's account came in the category of "account with temporary deficiencies" and the borrower is ready to pay the overdue amount any action u/s 13 of the SARFAESI Act is in violation of the RBI Circular. As per Clause 4.2.5 of RBI circular:

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Up-gradation of loan accounts classified as NPAs : If arrears of interest and principal are paid by the borrower in the case of loan accounts classified as NPAs, the account should no longer be treated as non-performing and may be classified as 'Standard accounts'.

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The applicant raised the above mentioned issue in its representation made u/s 13 (3A) but the bank didn't consider and rejected the same. The

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SA 188 of 2022 [J]

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DRT,PATNA

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bank didn't take any steps for preservation and protection of secured assets and to insure them. Hence, Rule 4(4) has not been complied. During pendency of the SA, the bank issued a sale notice dated 26.06.2022 which was challenged by the applicant by filing IA 227/2022 and Hon'ble Tribunal by its order dated 29.7.2022 stayed the confirmation of sale. The auction sale was conducted on 30.7.2022. However, the applicant has deposited Rs.50 lacs on the 30.07.2022 itself towards overdue amount. It is further submitted that no possession of plant and machinery and building was taken by the bank. As per possession notice dated 6.6.2022, the possession was taken for land only and moreover valuation was made prior to possession of land.

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On the contrary, Id. Counsel for the respondent bank submits due to GECL facilities granted by the bank, the account has been declared as NPA on 31.03.2022 otherwise the accounts of the applicant was running irregular and it would have been declared as NPA much earlier. The term "temporary deficiency" used by the applicant has no relevance in the matter. Subsequent to declaration of NPA, the bank issued and served demand notice dated 02.04.2022 to the applicant as also admitted by the applicant. Against the said demand notice, the applicant submitted its representation/objection before the bank requesting therein to stop the effect of demand notice which was duly disposed of within time. Thereafter, symbolic possession of the immovable property and hypothecated plant and machinery was taken on 06.06.2022. Since, no physical possession was taken therefore; there is no question for preparation of inventory and panchnama. Possession notice dated 06.06.2022 was sent to the applicant through registered post on 07.06.2022 and was also affixed on all the properties and also got published in two newspapers on 08.06.2022 in Hindustan and Hindustan Times. Further, the bank issued e-auction sale notice dated 27.06.2022 fixing the date of e-auction on 30.07.2022 and the same was delivered on 29.06.2022 to the applicant as evident from its tracking report. The auction sale notice was affixed on the properties on the same day and also published in two newspapers 29.06.2022 in Prabhat Khabar and Indian Express. Prior to issuance of auction sale notice, the bank duly got valuation reports dated 02.06.2022 and 18.06.2022 of the

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DRT,PATNA

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SA 188 of 2022 [J]

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mortgaged property from its approved valuer. The property was successfully e-auctioned on 30.07.2022 to the Mis JDM Engineering & Construction Pvt. Ltd but the sale was not confirmed in compliance of order dated 29.07.2022 passed by this Tribunal. It is settled law that mortgage of land means and includes building constructed upon its as well so the objection regarding non mentioning building in the demand notice and possession notice has no force. The two of the Directors of the applicant firm gave in writing to the bank to realize the outstanding dues through e- auction of the immovable properties vide its letter dated 04.08.2022. The other two directors again vide its letter dated 10.09.2022 requested to the bank to proceed further in respect of e-auction dated 30.07.2022.

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The Master Circular of RBI which has been referred by the applicant in the matter, will not apply in the present case wherein the two of the directors out of three wants that the bank should not restructure the loan and realize the outstanding dues through e-auction of the mortgaged property because one of the director i.e. present applicant is not running the unit property and there is huge mismanagement.

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Ld. Counsel of the auction purchaser submits that auction purchaser has bonafidely participated in the e-auction held on 30.07.2022 and purchased the immovable asset as well as movable items. The auction purchaser deposited Rs.92.00 towards EMD and further deposited Rs.2, 29,50,000/- by 01.08.2022. The rest amount could not be deposited due to order dated 29.07.2022 passed by this Tribunal as the bank was retrained to confirm the sale till next date of hearing. Ld. Counsel of the auction purchaser further prayed that the auction purchaser may be allowed to make payment of the rest amount and hand over the physical possession of the properties.

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I have heard Ld. Counsel for the parties and gone through the record.

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It has been alleged that demand notice dated 02.04.2022 has been issued just after a day gap of NPA i.e. 31.03.2022. Neither statement of account has been provided nor description of movablelimmovable properties has not been mentioned in the said demand notice. The bank rejected the representation of applicant made uls 13 (3A) without assigning any reason. The Bank failed to take possession of the plant and machinery. Neither

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DRT,PATNA

SA 188 of 2022 [J]

inventory nor punchnama was prepared while taking possession. The bank has also violated the Rule 4(3) of the act. No steps were taken for preservation and protection of potato in compliance with Rule 4(4). It is also alleged that the applicant's account came in the category of "account with temporary deficiencies" and refer the Master Circular Clause 4.2.5 of RBI:

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On perusal of records it appears that the applicant did not claim any defect in the demand notice issued by the respondent bank to show that the demand notice was against the provisions of Sarfaesi Act and the rules framed there under. It is also important to mention here that no objection has been raised that the statement of account has not been provided to the applicant so that he was not in a position tochallenqe the amount disclosed against the applicant. No request to correct the demand notice or to restructure 1 reschedule the repayment of the loan in question.

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Although it has been mentioned in the application that the temporary default in payment can be made good and the deficiency may be corrected by payment of the default amount of the principal money as well interest but it has not been mentioned in this application that at any point of time such deficiency was made good after payment of default amount along with the interest thereupon. As such the applicant cannot claim benefit of such a circular of The Reserve Bank of India and the judgment cited by the applicant of Allahabad High Court passed in Rakesh sharma Vs. Central bank of India Writ C No. 31674/2015.

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No other infirmity in the demand notice has been pointed out by the applicant. As symbolic possession of the immovable property and hypothecated plant and machinery was taken on 06.06.2022, no question for preparation of inventory and panchnama. Possession notice dated 06.06.2022 was sent to the applicant through registered post on 07.06.2022 and was also affixed on all the properties and also got published in two newspapers on 08.06.2022 in Hindustan and Hindustan Times. Further, the bank issued e-auction sale notice dated 27.06.2022 fixing the date of e- auction on 30.07.2022 and the same was delivered on 29.06.2022 to the applicant as evident from its tracking report. The auction sale notice was affixed on the properties on the same day and also published in two

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DRT,PATNA

SA 188 of 2022 [J]

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newspapers 29.06.2022 in Prabhat Khabar and Indian Express. Prior to issuance of auction sale notice, the bank duly got valuation reports dated 02.06.2022 and 18.06.2022 of the mortgaged property from its approved valuer. The property was successfully e-auctioned on 30.07.2022 to the Mis JDM Engineering & Construction Pvt. Ltd but the sale was not confirmed in compliance of order dated 29.07.2022 passed by this Tribunal.

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