Allowed

Smt Alka Madhavrao Kalyankar v. State Bank of India

DRT27 Sept 2022SA/264/2022

Case brief

AI extract

What is this about?

Applicants challenged the bank's possession action under SARFAESI Act alleging lack of service of Section 13(2) notice and procedural irregularities. Tribunal found the notice was never served and quashed the proceeding.

What did the court decide?

Notice u/s 13(2) quashed; possession ordered to be returned within one week; bank directed to reverse debited expenses.

Smt Alka Madhavrao Kalyankar versus State Bank of India — Banking and Recovery | DRT (2022)

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Presented on: 18.06.2022 Registered on: 20.06.2022 Decided on: 27.09.2022 Duration: Y M D 00 03 09

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IN THE DEBTS RECOVERY TRIBUNAL, AT AURANGABAD SECURITIZATION APPLICATION No.264/2022

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01.^Smt. Alka D/o Madhavrao Kalyankar, Age:43 years, Occupation: Service Resident of: Plot no.162, Survey no. 143/B, Shahajinagar, Manaspuri, Imamwadi Gram Panchayat, Taluka: Kandhar & District Nanded-431714. 02.^Shivkumar S/o Narayanrao Narangale , Age:43 years, Occupation: Agriculture Resident of: Plot no.162, Survey no. 143/B, Shahajinagar, Manaspuri, Imamwadi Gram Panchayat, Taluka: Kandhar & District Nanded-431714.

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… Applicants

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Versus

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State Bank of India, BranchKandhar, Regional Business Administrative Office: Latur 431714.

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The Authorised Officer, State Bank Of India, Branch: Kandhar, Taluka- Kandhar; District: Nanded 431601.

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… Respondents

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[APK] (SA No.264/2022) Page 1 of 18

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APPEARANCE

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For the Applicants Mr. A.A.Yadkikar - Advocate For Respondent bank Mr. Arun Rakh - Advocate

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Shri Vimal Gupta Presiding Officer

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JUDGEMENT PRONOUNCED ON : 27.09.2022

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JUDGMENT

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This is an application filed by the applicants under subsection (1) of Section 17 of The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short “the 2002 Act”) and the Security Interest (Enforcement) Rules (for short “the said Rules”) challenging the auction initiated by the respondent bank.

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The present Securitization Application is filed by the Applicants challenging the action of the respondent bank of taking illegal possession of the residential house of the applicants on 25^th May, 2022.

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The facts of the case are as under:

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(i) The applicants submit that, the applicant No. 1 is a borrower had obtained a housing loan of Rs.12,50,000/- in the year 2014. The Applicant no.2 is the Husband of the Applicant no.1 stood as Guarantor.

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[APK] (SA No.264/2022) Page 2 of 18

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(ii) The applicants submit that, in order to secure the loan amount the Applicants have executed mortgage with the Respondent Bank in respect of house property situated at Plot no.162, Survey No. 143/B, Shahajinagar, Manaspuri, Imamwadi Gram, Panchayat, Taluka: Kandhar, District: Nanded-431714 having boundaries Towards East: Plot No. 161, Towards West: Plot No. 163, Towards South: internal Road Towards North: Plot no.207

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(iii) The applicants submit that, on 25^th May, 2022 the Applicants were out of station for a wedding and behind the back of the Applicants and without any prior intimation or notice the respondent authority have entered onto the property and have broken the lock to the Applicant's residence and installed their own lock with seal purportedly acting under the order dated 03^rd March, 2022 passed by the Learned District Magistrate, Nanded under Section 14 of the SARFAESI ACT. Thereafter on 26^th May, 2022 to 30^th May, 2022 the applicants made a representation to the Learned District Magistrate Nanded, Circle Officer Kandhar & the Tahsildar, Kandhar.

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(iv) The applicants submit that, the Applicant no.1 got copies of Application under Section 14 made by the Respondent Bank along with supporting Affidavit,

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[APK] (SA No.264/2022) Page 3 of 18

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Notice dated 30^th December, 2019 & 08^th July, 2020, the Roznama of the proceedings, order dated 03^rd March, 2022 passed by the Learned District Magistrate, Nanded, report of the Circle Officer dated 25^th May, 2022, the Panchanam dated 25^th May, 2022, the Letter dated 11^th May, 2022 addressed by the Learned Tahsildar to the Police Inspector, Kandhar Police Station, Copy of Notice dated 27^th May, 2022 issued by the Learned Tahsildar, Kandhar to the Kotwal Shri Sanjay Kendre. The applicants further submit that, upon receipt of the documents it is evident that the Applicant not once was served with any intimation/notice from the office of the Learned District Magistrate, Nanded or the Learned Tahsildar, Kandhar.

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(v) The applicants submit that, a notice dated 29^th July, 2017 was purportedly issued by the Respondent nos.1 & 2 under Section 13(2) and possession Notice dated 01^st November, 2017 under Rule 8(1) of the SARFAESI Act against the Applicant no.1. However, it was never served upon either of the Applicants. Moreover, the demand notice is not in accordance with requirements of Section 13(2) of the Act. The Respondent Bank has failed to paste the notices as mandated under Rule 3 of the Security Interest

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[APK] (SA No.264/2022) Page 4 of 18

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Enforcement Rules, 2002. Therefore, the action initiated by the Bank is patently illegal, and is nothing but an abuse of process of law.

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(vi) The applicants submit that, on 31^st May, 2022 the applicants made an application to the Learned District Magistrate, Nanded requesting for stay to the impugned action. On 02^nd June, 2022 the applicants have made an application to the Branch Manager to supply all documents which are not received.

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(vii) The applicants submit that, the respondent bank has misled the District Magistrate by making false statements that the Notice under Section 13(2) has been properly served upon all the Applicants and has taken symbolic possession of the secured asset by affixing a copy of possession notice on the property. The applicants were not granted an opportunity of hearing to dispute the claim and/or discharge the liability alleged by Respondent Bank.

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(viii) The applicants submit that, the District Magistrate without considering the facts of the case and verifying record properly has allowed the application filed by the Respondent Bank under Section 14 on 03^rd March, 2022.

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(ix) The applicants submit that, the family of the Applicants has suffered immensely since the

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[APK] (SA No.264/2022) Page 5 of 18

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impugned action and the children of the Applicants are the worst affected amidst the ensuing controversy despite the Applicants having paid a substantial amount against its outstanding. The applicants further submit that, the rate of interest charged by the respondent bank is exorbitant and also has committed error in calculating the outstanding amount to be paid by the Applicant No.1 which is not in conformity with the terms of contract between the parties but also in violation of the RBI directives laid down in this regard. The applicants relied the settled law laid down in the case of Central Bank of India V.s Ravindra [AIR 2001 3095] that any interest charged and/or capitalised in violation of RBI directives as to the rate of interest or as to the periods at which rests can be arrived at would be disallowed or excluded from the capital sum.

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(x) The applicants submit that, the Respondent No.1 professes to have taken symbolic possession of the purported immovable property on 01^st November, 2017. However, no such symbolic possession has ever been taken by the Respondent Bank in presence of any of the Applicant.

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(xi) The applicants submit that, a photocopy of purported demand notice is attached with the application filed

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[APK] (SA No.264/2022) Page 6 of 18

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under Section 14 and first page of the said notice bears the signatures of both the Applicants shows that the Respondent Bank has misused the blank paper signed by the Applicants at the time of getting loan. Moreover, the newspaper publication of the Demand Notice was also grossly erroneous and bad in law as it is not published in any newspaper having circulation in Nanded, i.e. the place where the purported secured assets are situated.

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(xii) The applicants submit that, from the letter dated 25^th May, 2022 addressed by the Talathi, Manspuri to the Tehsildar. Kandhar that, the team of Respondent Bank including the Recovery Officer had already broken the locks and put new locks and also completed all formalities of taking possession by bypassing the procedure under Section 14 of the Act. Moreover, the Respondents failed to prepare a list of inventories available in the house at the time of taking physical possession for this purpose the applicants relied on the judgment passed by the Hon’ble Supreme Court in the case of Standard Chartered Bank Vs. V. Noble Kumarand others the Hon'ble Supreme Court has categorically laid down the methods available to for secured creditor to take possession of the secured asset and in the present case none of them have been

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[APK] (SA No.264/2022) Page 7 of 18

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adopted by the Bank.

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(xiii) The applicants submit that, the respondent bank has directly approached the District Magistrate by filing application under section 14 professing that it has taken symbolic possession of the property. The Respondent Bank have played a fraud on District Magistrate by providing wrong and false information and fudged documents, and have obtained orders under section 14 of the SARFAESI Act which is perverse and completely bad in law.\

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(xiv)The applicants also relied the observations laid down in the matter of Sardar Associates & Ors. V/s Punjab and Sindh Bank 2009(8) SCC 2571 , it is now settled that such guidelines have statutory force and are nondiscretionary and non-discriminatory in nature and are binding on Respondent No.1.

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(xv) The applicants submit that, the value of the alleged secured asset is substantially more than the alleged dues of the Respondents and in the event the bank initiates any coercive action the Applicants and their children would be deprived their only abode, grave harm and irreparable injury will be caused to the Applicants and their family. The Applicants so also their Children one of whom is studying in class 12^th and the other in Class 5^th are in crucial years of their

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[APK] (SA No.264/2022) Page 8 of 18

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education and the impugned action has driven us out of their home.

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The applicants prayed for the reliefs as under:

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A. That the Application presented by the Appellant under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 challenging the measures adopted by the Respondents under Section 13(2) and 13(4) of the said Act and the order passed by the District Magistrate under section 14 of the SARFAESI Act, on 03.03.2022 be declared illegal and thus quashed and set aside;

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B. The Applicants be put in possession by restoring the position as was before the impugned action and it be held and declared that the measures adopted by Respondents under Section 13(2), order passed by the District Magistrate under section 14 of the SARFAESI Act, on 03.03.2022 and the action dated 25.05.2022 is not in accordance with the procedure prescribed under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the rules made thereunder.

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C. During the pendency of the present Application, the Respondents may kindly be directed to refrain from taking any further coercive action including creating any third party interest upon the property owned by the

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[APK] (SA No.264/2022) Page 9 of 18

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Applicant no.1 which is:

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All that piece and parcel of Plot no.162, Survey No.143/B, Shahajinagar, Manaspuri, Imamwadi Gram Panchayat, Taluka: Kandhar, District:Nanded Pin431714 having boundaries as under: Towards East: Plot No.161 Towards West: Plot No.163 Towards South: internal Road, Towards North: Plot no.207,

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D. This Hon'ble Tribunal be pleased to exercise its powers under Section 19 of the SARFAESI Act and the Applicants be awarded a compensation of Rs.10,00,000/- towards the mental and physical agony which they were made to suffer by commission of illegalities by the Respondents.

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E. Any other equitable relief as may be deemed fit by this Hon'ble Tribunal be granted in favour of the Applicants in the circumstances of this case.

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The respondent bank appeared and filed its reply vide Exhibit-07 and prayed to dismiss the securitisation application.

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(i) The respondent bank submits that, the applicant no.1 has obtained loan and applicant no.2 stood as guarantor for loan and have mortgaged the property in favour of bank.

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(ii) The respondent bank submits that, the applicants have

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[APK] (SA No.264/2022) Page 10 of 18

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challenged the order passed by the learned District Magistrate dated 03^rd March, 2022, notice under section 13(4) issued in the year 2017 as such the application is not within the limitation.

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(iii) The respondent bank submits that, the bank has issued notice under section 13(2) & 13(4) and same are served and on applicants and also bank had paste the notice under section 13(4) on mortgaged property. The bank has also published the said notice in two newspapers. The action taken by the bank is legal and it is accordance with law. Moreover, the possession of the mortgaged property handed over to the bank as per the order of the District Magistrate and the applicants were present at the time of taking possession and in their presence the bank has made Panchnama.

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(iv) The respondent bank submits that, since the account of the applicants classified as NPA in the year 2017, the applicants have never come forward for regularization of account or closure of account. The applicant had also not taken any steps for the repayment of the overdue amount. The bank has time and again requested to repaid the loan amount but in vain.

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(v) The respondent bank submits that, the applicants are

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[APK] (SA No.264/2022) Page 11 of 18

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the willful defaulter of the bank and they have not taken any steps for repayment of the loan amount, since from beginning applicants are negligent in paying the instalments, it is public money, therefore it is necessary to recover the entire loan amount in the interest of public and lastly prayed to dismiss the securitisation application filed by the applicants.

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The applicants have filed rejoinder vide Exhibit-09 and submits as under:

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(i) The applicants submit that the Applicants and their Children who are taking education and the impugned action taken on 25^th May, 2022 has driven them out of their home and have left the Applicants without any shelter.

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(ii) The applicants submit that, the demand notice under Section 13(2) was neither issued nor served as required under Rule 3 of Security Interest (Enforcement) Rules. Moreover, no notice or intimation of the action under Section 14 has ever been served upon the Applicants.

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(iii) The applicants submit that, the Respondent Bank in order to demonstrate service of Demand notice upon the Applicants has misused forged documents to mislead the Learned District Magistrate at the time of obtaining orders under Section 14. The signatures on

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[APK] (SA No.264/2022) Page 12 of 18

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the demand notice are a poor attempt to replicate the signatures of the Applicants and have been made with an oblique motive of demonstrating service upon the Applicants.

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(iv) The applicants submit that, the team of the Respondent Bank including the Recovery Officer purposely arrived at the property when the applicants were out of station and broke open the locks and put new locks and also completed all formalities of taking possession in absence of the Learned Circle Officer/Tahsildar and/or Police Authorities. The applicants further submit that the value of the alleged secured asset is substantially more than the alleged dues of the respondents

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(v) The applicants submit that, the applicants submitted an Application for One Time Settlement on 19^th August, 2022 for an amount of Rs. 13,00,000/- and had revised the same on 02^nd September, 2022 with an amount of Rs. 14,50,000/- which is flatly rejected by the Respondent Bank.

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(vi) The applicants submit that, the respondent bank has committed a series of illegalities and the financial implications of such actions has been thrusted upon the Applicants and which they have been made to bear involuntarily and lastly prayed to allow the

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[APK] (SA No.264/2022) Page 13 of 18

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securitisation application.

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Heard the matter at length by all the parties. I have gone through the record and contents therein and observed as follows:

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(i) In this Securitisation Application the applicants have challenged the action of the bank but has admitted the fact that in the year 2014 the applicant no.1 has obtained the loan from the respondent bank of Rs.10,50,000/- and applicant no.2 i.e. husband of applicant no.1 stood as guarantor for the same.

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(ii) The contention of the applicants is that on 25^th May, 2022 the Authorised Officer of the respondent bank took the possession of the secured assets without giving any notice to them. The applicants submitted that they had got the certified copies of the documents from the office of District Magistrate and find out that the notice under section 13(2) was issued on 29^th July, 2017.

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(iii) The main contention of the applicants is that the notice under section 13(2) was never served on the applicants. The bank has filed the reply and then additional reply to show the service of notice on the applicants.

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(iv) The respondent bank has filed additional reply of Shri

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[APK] (SA No.264/2022) Page 14 of 18

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Vilas Dharmaraj Rinayat, Authorised Officer of State Bank of India, Kandhar Branch. The affidavit submitted by Shri Vilas Dharmaraj Rinayat does not discloses the and Under power authority. Securitisation Act, Chief Manager and above rank officers only can exercise the powers as an Authorised Officer. Shri Vilas Dharmaraj Rinayat, who appeared on the VC submits that he is a Branch Manager and the action was taken by the earlier Chief Manager. Be that it may be he should have written in his affidavit that he is a Branch Manager.

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(v) The report submitted by the Circle Officer to the Tahsildar stated that the respondent bank has broken the lock of the house even before the Circle Officer or revenue authority could arrive at the site. The counsel for the respondent bank denies the allegations of the circle officer and stated that it is not correct.

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(vi) The applicants have raised one another contention that as per the explanation of Kotwal he has not found the house of the applicants and he has returned the notice along with the remark on 27^th May, 2022 after taking of the possession. It clearly shows that the no notice has been served on the applicants. It was the duty of the Authorised Office to see whether the notice has been served or not.

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[APK] (SA No.264/2022) Page 15 of 18

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(vii) Now coming to the notice under section 13(2), service of the same is disputed by the applicants. The learned counsel for the respondent bank submits that on 10^th August, 2022 that the notices have been sent to the applicants by post but no any document have been filed by the respondent bank on record to show that the notices have been sent to the applicants by post.

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(viii) The office copy of the notice has been placed on record which does not disclose the name and the authority of the Authorised Officer and it is not possible to ensure whether a person who has signed the same who he is and what was his designation. Even on the possession notice the designation of the Authorised Office is not mentioned.

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(ix) The contention of the applicant is that the notices are not as per the judgment of Hon’ble Gujarat High Court and not in tune with the Section 13 of the Act.

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(x) The notice under section 13(2) has been issued only to the applicant no.1 at Abhinav Nagar, Post Kandhar, Nanded 413714. Copy of the said notice was marked to the guarantor but no demand was made from him. Interestingly the bank was having the mortgage property and no notice has been issued on the said address. There is no postal receipt filed on the record.

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(xi) In view of the above facts and circumstances it seems

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[APK] (SA No.264/2022) Page 16 of 18

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that the 13(2) notice was never served upon the applicants. Accordingly, the entire securitisation proceeding is liable to be set aside.

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(xii) The Tribunal has taken serious note of the fact that the Branch Manager is filing an affidavit showing himself as an Authorised Officer, which according the Securitisation Act, Authorised Officer is a Chief Manager and above rank officer. The officer present on VC has very diligently disclosed that he is a Branch Manager. The Branch Manager be cautious in future for such act.

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(xiii) The learned counsel for the applicant at this stage submits that if the 13(2) notice has been set aside with all consequential reliefs then any expenses incurred by the bank should not be permitted to debit in the account of the applicants. As 13(2) notice has been set aside on the ground of non service of the same on the applicants, all the expenses incurred by the bank after issuance of 13(2) notice are not recoverable from the applicants and bank has to reverse the same if debited in the account of the applicant.

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In view of the above facts and circumstances and the observations noted herein above, I pass the following order:

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[APK] (SA No.264/2022) Page 17 of 18

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ORDER

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A. Securitisation Application no. 264/2022 is allowed with no order as to cost.

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B. The notice under section 13(2) dated 29^th July, 2017 is hereby quashed and set aside.

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C. The respondent bank is hereby directed to reverse all the expenses incurred by the bank after issuance of 13(2) notice, if debited in the account of the applicant.

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D. The possession shall be returned within one week from the date of uploading of the order on the official web site of this Tribunal. The respondent bank will be at liberty to take appropriate steps to recover their dues.

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E. All interlocutory applications stand disposed off accordingly.

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F. File be consigned to record room.

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Copy of the order be uploaded on the website and free copy be sent to all the parties.

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(Vimal Gupta) Presiding Officer Debts Recovery Tribunal, Aurangabad.

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Order uploaded on official website on 19^th October, 2022

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[APK] (SA No.264/2022) Page 18 of 18

Smt Alka Madhavrao Kalyankar v. State Bank of India

Case brief

What is this about?

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Smt Alka Madhavrao Kalyankar v. State Bank of India

Case brief

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