Allowed

Injamuri Arun Vilasini v. Union Bank of India

DRT6 Dec 2022SA/269/2022

Case brief

AI extract

What is this about?

Debts Recovery Tribunal allowed a Securitization Application filed by a borrower. The tribunal found procedural violations in theuteduction process initiated by the bank. Specifically, the bank failed to serve the statutory 30-day redemption notice and the auction purchaser paid the balance amount beyond the stipulated timeframe without valid permission.

What did the court decide?

Securitization Application allowed; all measures initiated by the first respondent under Section 13(4) including the auction held on 30.08.2022 are set aside.

Injamuri Arun Vilasini versus Union Bank of India — Company and Corporate | DRT (2022)

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IN THE DEBTS RECOVERY^{TRIBUNAL-IIAT HYDERABAD}

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DATED THIS^{THEO6THDAY OF DECEMBER,2022}

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PRESENT: SH.^{RAMESHWAR KOTHE,B'com, L'LB' (Hons')'M'A'} PRESIDING OFFICER

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Securitization Application^{No' 269 OF 2022}

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Between:

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Injamuri Arun^Vilasini W/o I. Arun Kumar Age:35^years, Occ:Housewife R/o Flat No.1O1,^{1't Floor} Balaji Homes APts ll-9-37/21A,^{Plot No.C-4, South Part} Saroor Nagar,^{HYderabad-500035}

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. . , . . . .APPlicant.

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Versus

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Union Bank of^India Gowliguda Branch,^{Hyderabad-500020} Rep. by its Authroized^Officer

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Kadaboina Ramulu^Venkatram S/o Ramulu, R/o H.No.12-l'1325/t Shanthi Nagar, North^Lallaguda Tarnaka, Secunderabad-5000¹⁷

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..... ..Res?ondents.

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: Mr. A. Vijay Kumar Counsel for the Applicant Counsel for 7tt Respondent Bank^{: M/s Dyumani & Co} Counsel for 2'd Respondent^{: In person}

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-:@-E-B:-

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The Applicant filed the^present Securitisation^{Application u/s.17} of the Securitization and Reconstruction^{of Financial Assetsand} Enforcement of Security Interest Act,^{2002 (hereinafter "the Act,} gfu'v*

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sA 269/2022

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2002" for short) to declare the auction sale conducted on 30.08.2022 by the 1't respondent bank pursuant to sale notice dated 28.07.2022 in respect of the SA schedule property.

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The averments made in the application, briefly, are that; the applicant availed the home loan of Rs.19 lakhs from the 1st respondent bank in the year 2010 and had been regularly paying the instalments. But due to economic recession during COVID_19 pandemic, the applicant committed default in repayment. Substantial amounts have been paid. In spite of the loan account being healthy, the respondent bank issued demand notice u/s 13(2) of the Act, 2002 but the same was not served on the applicant. The possession notice issued u/s 13(4) of the Act was not served on the applicant and the same was neither affixed on secured asset nor published in two leading newspapers thereby the 1't respondent bank violated Rules 8(1) and B(2) of the Security Interest (Enforcement) Rules, 2002 (.,the Rules,, for short). In spite of assurance that they would not proceed further on deposit of Rs.5 lakhs which the applicant was ready to deposit, the impugned sale notice was published. Rule 8(6) notice has neither been served nor published. Proper valuation has not been obtained at the time of fixing reserve price. The auction was conducted on 30.08.2022 with sole bidder. The 1st respondent bank proceeded with auctioning the property without heeding to the requests of the applicant for restructuring of the loan account as per RBI guidelines issued from time to time, for which the applicant is entitled for. The classification of loan account itself was incorrect. The 1't respondent bank also violated ft,* Sec,13(2),

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sA 269/2022

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13(4) of the Act and Rules 8(5), 8(6), B(7),^{9(1) of the Rules,} 2002 while^proceeding against the^{securedasset.Hencethis SA'}

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The 1st respondent bank filed^{reply statementalongwith} documents. The submissions made in^{the reply statement,} inter-alia, are that the home loan of^{Rs.20 lakhs sanctionedin} the year 2010 was repayable in 240^{EMIscommencing from} November, 2010. As the applicant failed to^{pay the instalments} as per agreed terms, the loan account^{was classified as NPA on} 31.03,2019 as^per RBI^guidelines and^{1't respondent bank} issued demand notice dated 31.10.2019 u./s^{13(2) and the} same was served^personally on the borrower'^{As no payment} was made, the^possession notice u/s 13(4) dated^08.03.2022 was issued, the same was sent by registered^{post on} 1503.2022, affixed on secured asset and^publishedon L2.03.2022 in Mana Telangana^{(Telugu)and Business Standard} (English) daily newspapers. The valuation report from^the approved valuer dated 15.07.2022^{has been obtained and the} reserve price has been fixed based on the^{said valuation report.} The 1't respondent bank issued Rule 8(6)^{notice dated} 25.07.2022 and e-auction sale notice dated^{28.07.2022. The e-} auction sale notice was was^{published in 'Business Line' and} 'Eenadu' English and Telugu newspapers respectively^on 29.07.2022. In the auction held on 30.08.2022^Mr.K.Ramulu Venkat Ram, (2nd respondent) stood as^{successfulbidder at} Rs.47,00,000/-. He deposited EMD of^{Rs.4,70,000/- on} 30.08.2022 and^paid 25o/o of the bid amount^{on 01.09.2022.} The sale was confirmed on 01.09.2022 and^{the auction} purchaser^'paid the balance bid amount on L2.10.2022 through Aw- ".c-" 'g,\Y "

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sA 269/2022

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NEFT. Thereupon, the 1st respondent bank issued sale certificate on t5.10.2022 in respect of the 2nd respondent-auction purchaser. The 1't respondent bank has duly followed the procedure contemplated under the provisions of the Act, 2002 and Rule framed thereunder. Hence, the SA is liable to be dismissed.

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4, The submissions of the 2nd respondent-a uction purchaser, as per reply statement are; that he participated in the auction on 30.08.2022 on seeing the publication of e-auction sale notice published by the 1't respondent bank on 03.08.2022 and became successful bidder of SA schedule property at Rs.47,00,0001-. He paid the 10olo EMD of Rs.4,70,000/- on 29.08.2022, 25o/o of the bid amount of Rs.7,50,000/- on 01.09.2022 and balance amount of Rs.35,25,000/- on t2.10.2022 which is within stipulated time. The flat is not having any legal Municipal permission, not assessed for property tax, the applicant has not paid regular taxes to the government and she is due heavy amount to the Association of the apartment. The residents were directly paying rent to the applicant.

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Heard learned counsel appearing for the applicant and learned counsel for the 1't respondent bank. Heard 2nd respondent as party-in-person. Perused the written arguments filed by the applicant and the material documents brought on record.

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The learned counsel for the applicant reiterated the averments made in the application. He further submits that classification of loan account as NPA itself is against RBI guidelines. After M,*

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sA 269/2022

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lssuance of demand notice, the 1st respondent bank^{failed to give} reply to the representation of the applicant^{dated 31.10.2019as} per Sec. 13(3A) of the Act, 2002. The 1't respondent bank filed only^proof of sending the^{possessionnotice and sale noticebut} not proof of service of the same on the applicant, It^appearsthe 1't respondent bank issued two^possession notices^dated 08.03.2022 and 09.03.2022 and two sale^{notices dated} 25.07.2022 and 28.07.2022 which is against^procedure of^law. The sale notice dated 25.07.2022 issued by the^{Regional Manager} refers to possession notice dated 09.03.2022^{whereas no such} notice filed before the Tribunal. The^{property was sold at} Rs.47,00,000/- which is the reserve^price on contrary^{to Rule} 9(2) of the Rules, 2002. No separate^{notices have been issued} under Rule 8(6) and 9(1) of the Rules,^{The auction was} conducted on 30.08.2022. The 75o/o of the bid^{amount was paid} on 12.10.2022 instead of depositing within^{15 days.There is no} proof filed by the respondent bank as to written instructions to permit the bidder for such belated payment. It is against Rule 9(4) of the Rules, 2002. The learned^{counselrelied on order} dated 08.02.2022^passed in IA No.1 of 202L in^{WP No.2823 of} 2O2l by the Hon'ble High court for the State of^Telanganaat Hyderabad in P. Madhusudan vs. Bank of India. With^these contentions, learned counsel sought to allow the SA.

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Learned counsel for the 1tt respondent bank reiterated^the submissions made in the reply statement. He further^submits that 31.08.2022 being holiday the successful bidder^{paid 25o/o of} bid amount on the next working day i.e.,01.09.2022.^The Regional Manager who issued sale notice is competent offierwithin the meaning of^"authorized officer" un-der^{Rule2(a) of}

ffir''.*-

sA 269/2022

the Rules, 2002. The learned counsel relied upon the material documents filed along with the reply statement to substantiate their defence that the respondent bank has scrupulously followed the procedure laid down under the provisions of the Act, 2002 and the Rules framed thereunder. With these submissions, learned counsel sought of dismissal of the SA.

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B. Now, the points that arise for consideration are;-

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(i) Whether the applicant establishes valid grounds for quashing the auction sate held on 30.08.2022 pursuant to sale notice dated 28.07.2022 in respect of the SA schedule property?

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(ii) To what relief?

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Point No.(i):-

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9, It is not in dispute that the applicant availed home loan and mortgaged the SA schedule property. The 1't respondent bank issued demand notice dated 31.10.2019. The demand notice displays the NPA date, loan details, outstanding dues, security details etc. It appears husband of the applicant and guarantor received the demand notice under signature on 31.10.2019. The postal cover sent to the applicant returned with remarks ',no such addressee in this flat no. at presently hence ret". However, the applicant herself submitted a letter to the respondent bank requesting to regularize the housing loan NpA account. The text of the letter dated 31.10.2019 is reproduced as hereunder:

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sA 26912022

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"Our housing loan became NPA and it is^required Rs.6,66,000/- for upgrading the^{loanaccount, hence request} you I will pay Rs.20,000/- each from November 19 to Jan²⁰ hence kindly consider my case sympathetically."

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It is pertinent to reproduce the^{provision under Sec.13(34) of the} Act, 2002 as hereunder:

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"(34) If, on receipt of the notice under^{sub-section(2), the} borrower makes any representation^{or raises any objection,} the secured creditor shall consider such^{representation or} objection and if the secured creditor^{comes to the conclusion} that such representation or objection is^{not acceptableor} tenable, he shall communicate within^{fifteen days of receipt} of such representation or objection the^reasonsfor non-acceptance of the representation or^{objection to the} borrower".

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The applicant subinitted a representation to^{the 1't respondent} bank on the same date of demand notice dated^31.10'2019to which the 1't respondent bank ought to^{have respondedunder} Sec.13(3A) of the Act within fifteen^{days of its receipt.But the} 1't respondent bank has neither stated anything^{in the reply} statement nor filed any document about^{issuing reply to the} representation of the applicant.

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The possession notice is dated 08.03.2022.^{The returned postal} covers do not clearly show the remarks for^{return of article, in} the absence of which, it is deemed that the^{possession notice} was not served. The 1st respondent bank^{partly complied the} Rule B(1) of the Rules, 2002 by affixture of the^possession notice on the secured asset as^{per photographs annexed to the} reply statement whereas failed^to serve on the applicant. The publication has been carried out as per Rule B(2) of the Rules, 2002.

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{w.*

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sA 26912022

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As regards Rule 8(6) notice dated 25.07.2022, it was^published on 29.07.2022 in 'Business Line' and 'Eenadu' English and Telugu newspapers respectively. Except filing copy of^postal receipt, the 1tt respondent bank has not filed^proof of service of 30 days notice on the applicant thereby failed to^provide right of redemption under Sec.13(B) of the Act,2002 r/w Rule 8(6) of the Rules, 2002.

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t4. The valuation report dated 15.07.2022 indicates the market price at Rs.52,53,000 l-, realizable value at Rs.47 ,27 ,BB0/- and distress sale value at Rs.44,65,220/-.The reserve^price kept is Rs.47,00,000/- and the property has also been sold at Rs,47,00,000/-. However, the auctioned price is not less than the reserve price. The 2nd respondent-auction^purchaser stated in his reply statement about the dates on which EMD of reserve price,25o/o and 75o/o of the bid amount were deposited. The learned counsel for applicant took strong objection that the auction^{purchaserpaid} 75o/o of bid amount on 12.10.2022 which was beyond stipulated time. The 1't respondent bank^placed copy of communication dated 01.09.2022 sent to the 2nd respondent-auction^purchaser informing him to deposit 25o/o of the bid amount not later than 02.09.2022 and 75o/o of bid amount within 15 days i.e., on or before 16.09.2022 whereas the auction purchaser deposited 75o/o of the bid amount on L2.10.2022. The objection of the learned counsel for the applicant is sustainable since neither the 1st respondent bank nor the 2nd respondent-auction purchaser produced any written communication permitting the auction purchaser to deposit /Xv-r-r_/ -6tw^-

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sA 269/2022

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As regards Rule 8(6) notice dated 25.07.2022, it was published on 29.07,2022 in 'Business Line' and 'Eenadu' English and Telugu newspapers respectively. Except filing copy of postal receipt, the 1't respondent bank has not filed proof of service of 30 days notice on the applicant thereby failed to provide right of redemption under Sec.13(B) of the Act, 2002 r/w Rule 8(6) of the Rules, 2002.

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L4. The valuation report dated 15.07.2022 indicates the market price at Rs.52,53,000/-, realizable value at Rs.47,27,88Q/- and distress sale value at Rs.44,65,220/-. The reserve price kept is Rs.47,00,000/- and the property has also been sold at Rs.47,00,000/-. However, the auctioned price is not less than the reserve price, The 2nd respondent-auction purchaser stated in his reply statement about the dates on which EMD of reserve price,25o/o and 75o/o of the bid amount were deposited. The learned counsel for applicant took strong objection that the auction purchaser paid 75o/o of bid amount on 12.10.2022 which was beyond stipulated time. The 1't respondent bank placed copy of communication dated 07.09.2022 sent to the 2nd respondent-auction purchaser informing him to deposit 25o/o of the bid amount not later than 02.09.2022 and 75o/o of bid amount within 15 days i.e., on or before 16.09.2022 whereas the auction purchaser deposited 75o/o of the bid amount on 12.10,2022. The objection of the learned counsel for the applicant is sustainable since neither the 1't respondent bank nor the 2nd respondent-auction purchaser produced any written

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' communication permitting the auction purchaser to deposit

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6ft(,-

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sA 269/2022

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balance consideration^{amount beyondthe time stipulated under} Rule 9(4) of the Rules,^2002.

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In view of the foregoing^{discussion,I find that there is infraction} of the^procedure laid^{down under the SARFAESIAct, 2002and} Rules framed thereunder^{while proceedingagainst the SA} schedule^{property. The applicant madeout valid groundsto set} aside the auction sale^{held on 30,08.2022 pursuant to salenotice} dated 28.07.2022.^{Accordingly, the SA deservesto be allowed'}

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Point No.(ii):

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In the result, the Securitization^{Applicationis allowed setting} aside all the measures^{initiated by the 1tt respondent bank under} Sec.13(4) of the SARFAESI,^{Act, 2002 includingauction heldon} 30.08.2022^pursuant to^{sale noticedated 28.07.2022in respect} of the SA schedule^property.

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However, this order does^{not precludethe l't respondentbank} from initiating fresh measures^{againstthe secured asset strictly} in accordance with law.

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Consequently, Interlocutory^{Applicationspending if any, shall} stand closed. No order as to costs. Communicate^{a copy of this} order to the^parties concerned.

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(Dictoted to the PS, tronscribed by him, corrected, signed ond^pronounced by me in the open court on this the o6th doy of December,^2022.).

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(RAMESHWAR Ory*KOTHE) PRESIDING OFFICER

Injamuri Arun Vilasini v. Union Bank of India

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Injamuri Arun Vilasini v. Union Bank of India

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