Dismissed

Shivanna P G v. Canara Bank

DRT18 Jul 2022SA/91/2022

Case brief

AI extract

What is this about?

The Tribunal dismissed the Securitization Application challenging the bank's possession notice. It held that the bank validly followed statutory procedures under SARFAESI. The majority of applicants admitted the sale and satisfaction of debt, rendering the challenge baseless due to internal family/company disputes.

What did the court decide?

The Securitization Application No.91/2021 stands dismissed upholding the issuance of Demand and Possession notices as valid.

Shivanna P G versus Canara Bank — Contract and Commercial Disputes | DRT (2022)

¶1

IN THE DEBTS RECOVERY TRIBUNAL II, KARNATAKA AT BENGALURU

¶2

Dated this the 18^th July, 2022

¶3

Present: SMT. S. V. GOWRAMMA

¶4

Hon`ble Presiding Officer

¶5

SA.No.91/2021

¶6

BETWEEN:

¶7

1.M/s. Vaijanth Industries PVT Limited, Plot No.107, R.S.No.107/2,3,4 Shinolli village, Chandgad Taluk, Kolhapur District.

¶8

Girish T. Huddar, Aged about 55 years, Plot No.78, T-4, Samgam Residency, Subhash Chandra Nagar, Belagavi-590006.

¶9

Sneha Girish Huddaar, Aged about 51 years, Plot No.78, T-4, Samgam Residency, Subhash Chandra Nagar, Belagavi-590006.

¶10

Dayanand M. Shastri Flat No.S-3, located on 2^nd floor, Samarth Apartment, S.No.19/3/5/2-P2 Municipal No. 724/4, Angol Extension, Belagavi.

¶11

Deepak Prashram Birje, Aged about 50 years, S.R. No. 15 Malaprasha Nagar, Taggin Galli, Belagavi-590005

¶12

Jeevan Parashram Birje, Aged 43 years, S.R. No. 15 Malaprasha Nagar, Taggin Galli, Belagavi-590005

¶13

Mallappa C. Shastri, Aged bout 75 years,

¶14

2 SA.No. 91/2021

¶15

Flat No.S-3, located on 2^nd floor, Samarth Apartment, S.No. 19/3/5/2-P2 Municipal No.724/4, Angol Extension Belagavi …APPLICANTS

¶16

AND:

¶17

The Authorized Officer, Union Bank of India, Registered office,1049/B-2, Tilkwadi, Khanapur Road, Belagum-5900006. ... RESPONDENT

¶18

Counsels on record/appeared for:

¶19

Applicants No.1,2, 3,4 &7 : Parties in person Respondent No.1 : M.V Kini Applicant No.5 & 6 : A. Mohammed Tahir and M. Mohammed Ibrahim

¶20

:FINAL ORDER ON SA:

¶21

The present Securitization Application is filed under sub-

¶22

Section [1] of S.17 of the Securitization and Reconstruction of Financial Asset and Enforcement of Security Interest Act,2002 (for short the ‘Act’) challenging the action and the measure taken by the secured creditor under the Security Interest [Enforcement] Rules, 2002 [for short the Rules]

¶23

The Annexure-1, Possession Notice dated 11-022021 issued by the respondent bank is impugned in the present SA and the amount outstanding due in the loan account is Rs.4,26,55,893/-(Rupees Four Crore Twenty Six Lakhs Fifty-

¶24

3 SA.No. 91/2021

¶25

Five Thousand Eight Hundred Ninety Three only) along with interest and other charges as per S.13[4] notice.

¶26

The Applicant No.1 is the Company; Applicant No.2 to 7 are the Guarantors; 2^nd Applicant is the Managing Director; 3^rd Applicant is the Shareholder; 4^th Applicant is the Director; Applicant No.5 & 6 are the Additional Directors and Applicant No. 7 is Director/Guarantor and mortgagor.

¶27

The case put forth by the applicants is that they are in the business of manufacturing steel and tools machineries equipment since 2008, have availed the credit facilities from the Respondent Bank and mortgaged the properties as collateral Security towards the loan.

¶28

The first Appellant is the owner of the immoveable property [as mentioned in SA] as bearing (i) EMG/ land and factory building on Plot NO.107, R.S.No.107/2,3,4 at Village Shinolli (BK) Tal. Chandgad Dist., Kolhapur and (ii) EMG/First charge on industrial open land bearing No.120/1/2,120/2/2, 123/3/2 at Village (BK), Tal: Chandgad, Dist., Kolhapur and (iii) EMG/First charge on residential Flat No.S-3 located on 2^nd floor, Samarth Apartment, S.No.19/3/5/2-P2, Municipal No.724/4, Angol Extension, Belagavi.

¶29

4 SA.No. 91/2021

¶30

The applicants vide letter dated 22-03-2014 addressed to the Chief Manager Corporation Bank at Belagavi sought for renewal of the Cash Credit of Rs.410 lakhs, LC facility of Rs.50 lakhs, and Term Loan of Rs.15 lakhs for die holders and conversion of dies of Rs.90,74,835/- to fixed assets and mortgaged properties of Director and personal property of Sri. Mallappa.C Shastri and Smt. Renuka Patil and the total mortgaged property is worth Rs.9,61,61,605/-.

¶31

The Applicants approached the bank for the business loan of Rs.3,94,58,361/- and the loan was renewed as per development of the business and the applicant paid approximately a sum of Crore on perusal of the Statement of Account.

¶32

The dispute between the Directors and other shareholders of the company was sorted out under NCLT Court on 05-02-2018 and settled. The property was released after making the payment as per letter dated 21-02-2018. The memorandum of understanding and the resolution was required to be passed for the functioning of the company.

¶33

The applicant due to the slump in the market and

¶34

due to the 2019 COVID pandemic were unable to sell and clear

¶35

5 SA.No. 91/2021

¶36

the materials, and due to nonpayment of the bill from the market, payment towards the loan became highly impossible, which was intimated to the bank.

¶37

The applicants had to make the payment to the employee for running the company by incurring expenses in croses. Due to slow is business and slump in the market, the applicant could not pay dues. However, have paid certain amounts which is also intimated to the bank.

¶38

The applicant requested the bank for release of the FD of Rs.1,05,00,000/- which the bank agreed to do so, however bank cancelled and issued another loan of Rs.90,00,000/- which was not required by the applicant company.

¶39

The mortgaged land and property are worth more than Rs.7 to 8 crores and the raw-material, machinery and equipment, are lying in the company without use which depreciates the values for the appellants.

¶40

13 The Applicant received the notice of seizure of the Car on 06-02-2021, for the default in not maintaining the account. But within 3 days, another notice dated 10-02-2021 is issued to take possession of assets.

¶41

6 SA.No. 91/2021

¶42

Due to the merger of the Corporation Bank with Union Bank of India, the bank are treating Appellants as new account and without knowledge of the goodwill of the company has taken action without giving an opportunity. The appellant has given various letter for operating the CC account to do business and are ready and willing to close the loan account as the property which are mortgaged are worth more than Rs.7-8 crores.

¶43

The Appellants Company is not running from the month of July 2020 and bank has closed the sanctioned loan of Rs.1,05,00,000/- also issued closure certificate and cancelled the other subsidiary facilities offered to the applicant at the time of sanctioning the loan.

¶44

The bank issued Sec.13(4) notice on 11-02-2021 without issuing Sec.13(2) Demand Notice. Hence, the present SA is filed on the grounds that the bank has not informed the applicant before declaring /classifying the account as NPA, and has not given any opportunity to settle liability. The applicant has relied upon the judgement in ‘In Stan Commodities Vs. Punjab & Sind Bank, Jharkhand High Court held that non intimation of account as NPA is not proper.

¶45

7 SA.No. 91/2021

¶46

The bank has recalled the loan calling upon the Borrower/Applicant to discharge the liabilities within 60 days from the dated of the S.13 (2) notices. The bank has issued the Possession Notice dated 11-02-2021 exercising their legal rights available under section 13(4) notices. The applicant further submits that, the bank has charged higher rate of interest resulting in nonpayment of monthly installments on time. The bank has not informed the applicant before classifying the account as a NPA, and no opportunity of settlement was granted.

¶47

Further bank has wrongly classified the account as NPA without following the RBI guidelines before proceeding to declare the account as NPA. The applicant had no information when their account is classified as NPA and same is not clear to the applicant even as on today. The applicant has not received any communication regarding recall of advances, prior to issuance of notice u/s 13(2) Act, which is precondition to classify the account as NPA before issuing the S.13(2) notice. Hence, S.13(2) notices without prior intimation is void-ab-into.

¶48

The Respondent Bank owes a duty to act fairly and in good faith, and not to ignore the performance of the bank

¶49

8 SA.No. 91/2021

¶50

obligation. The bank is possessing drastic power, which calls for exercise of higher degree of good faith and fair-play, and the borrowers cannot be left remediless in case of wronged against them.

¶51

It is necessary to recall the advances as per RBI guidelines, by following set of while recalling the account at the Senior Executive meetings after due procedures. As per the documents produced it is evident that no mortgage has been created by the applicants as mentioned in the illegal demand and possession notices. The Guarantors stood as guarantors in their individual capacity without any intent to create mortgage over the properties. The documents by the guarantor is in his individual capacity and Tittle Deed of the property have been illegally retained by the bank without intention of either of the parties to create any charge as is evident from the documents upon the bank is placing reliance.

¶52

The alleged demand notice dated 01-09-2020 was

¶53

not served upon the applicant giving 60 days’ time, there is no service of the S.13(2) Demand Notice by registered post and by any other modes and same is not served on the applicants. As the Demand Notice is not served, the bank without giving

¶54

9 SA.No. 91/2021

¶55

any opportunity for the applicant to repay cannot proceed in issuing Possession Notice.

¶56

The Possession Notice is to be published in two leading newspaper and no such notice have been served on applicant nor published. However the Possession Notice was affixed on the property on 11-02-2021 which was informed by the workers of the company. It is further submitted that the applicant is in continuous and uninterrupted established possession to the property in question.

¶57

The respondent bank has not addressed notice in the applicant name which is issued on 11-02-2021 and there is no details of the amount payable regarding principle and interest separately. It is submitted that the bank issued impugned notices u/s.13(2) which is served and thereafter the appellant has made the payments.

¶58

The property alleged to have been mortgaged in the Possession Notice is commercial property where the appellant is conducting the business and bank without following mandatory notice and without giving any opportunities to the applicant to repay the amount has issued the S.13(2) notice which is not as per the Rule 8(2). The possession Notice should

¶59

10 SA.No. 91/2021

¶60

be published in two leading Newspaper having sufficient circulation in the locality, which the bank failed to do so. The bank has wrongly calculated interest against the terms and conditions of the contract and claimed an alleged amount in the possession notice. It is alleged that the bank has not followed Rule 8(2), (3), (4) to (6). Hence the Possession Notice dated 11-02-2021 is also liable to be quashed.

¶61

The Respondent Bank has filed objections along with the supporting documents in support of their case contending that present SA challenging the Possession Notice dated 11-02-2021 is not maintainable either on facts on law. The applicant in para-4 page 13 of the SA has admitted the availment of loan and the mortgage of the property.

¶62

The Applicant No.1 is the company has availed credit facilities and mortgaged properties as security. The Applicant No.2-7 are the guarantor to the credit facilities and the amount due is Rs.3,94,58,361/- as on 01-09-2020.

¶63

The Account of the applicant was classified as NPA on 30-09-2019 and the bank issued the Demand Notice dated 01-09-2020, u/s 13(2) of the Act calling upon the applicants pay sum of Rs.3,94,58,361/- due as on 01-09-2020. The

¶64

11 SA.No. 91/2021

¶65

Demand Notice was send by RPAD and the applicants have not claimed the Demand Notice as per the postal acknowledgment card. Hence, the Respondent Bank published the Demand Notice in English Newspaper dated 20-11-2020 and also in Kannada “Vijayavani” dated 20-11-2020. Thus, the Respondent Bank has complied with Rule 8(1) Security Interest Rules 2002.

¶66

As the Applicants did not repay as demanded in the Demand Notice, the bank proceeded in issuing the Possession Notice Dated 11-02-2021 u/s.13(4) of SARFAESI Act. The S.13(4) notice was also sent by RPAD, which the applicant received as per postal acknowledge card produced. The bank published the possession notice not latter within 7 days as required under the law. The bank has compiled Rule 8(2), hence contention of the applicant that the Demand Notice dated 01-09-2020 is not received the is meaningless can’t be accepted.

¶67

The applicants in SA contended that the mortgaged property is worth more than Rs.7-8 crore. Thought the bank has given sufficient opportunity to the appellants to regularize the loan account and to pay the entire dues, the applicants

¶68

12 SA.No. 91/2021

¶69

failed to clear the liabilities and has filed the present SA with unattainable contention.

¶70

The respondent bank has countered the averments in the SA as under:

¶71

That the Applicant at para-20 stated that the bank has wrongly classified the account of NPA without issuing any recall notice to the applicants. It is contended by the bank that is has followed the norms prescribed by the RBI in classification of the account as NPA and the Demand Notice dated 01-092020 issued u/s 13(2) is the Recall Notice and Para-45(P-31) of the SA the service of the Demand Notice is admitted. Hence contention that the entire loan has not been recalled is meaningless and cannot be accepted.

¶72

The applicants at page 24 para 24 of Appeal Memorandum submits that no Mortgage has been created by any of the Appellants on the immovable property etc., however the Appellants had admitted the creation of Mortgage at page 14 para 04 of Appellants Appeal Memorandum.

¶73

The applicants at page 26 para 27 (e) of Appeal Memorandum, stated that, the Respondent Bank has illegally declared the Account as NPA on 01-09-2020 which is incorrect.

¶74

13 SA.No. 91/2021

¶75

The bank contends that the Demand Notice dated 01-09-2020, which is published in the newspaper dated 20-11-2020, clearly stated the date of NPA is 30-09-2019, but not on 01-09-2020, as contented by the Appellants.

¶76

Further applicants at page 33 para 48 of Appeal Memorandum, contends that the Respondent Bank has erred in not issuing the publication of Possession Notice in two leading newspapers, as required under the law. But the bank has published the notice in two newspapers as referred to Annexure-19-20 (para 8 of our above Objections) wherein the Respondent Bank has published the Possession Notice dated 11-02-2021, in the newspapers, and same have been furnished along with this Objections. Thus, the Respondent Bank has duly complied with Rule-8(2) of the Security Interest (Enforcement) Rules 2002, of the Act.

¶77

Further at page 35 para 51 of Appeal, that the Authorized Officer of the Respondent Bank has not followed Rule 8(2), (3), (4) to (6) are made applicable in respect of Sale of Immovable Property (Mortgage Property) but not in respect of Possession Notice issue under the Act. The present Appeal has been filed challenging the Possession Notice but not Sale

¶78

14 SA.No. 91/2021

¶79

Notice. The Respondent Bank has duly complied with Rule 8(1), (2) and (3) of the Security Interest (Enforcement) Rules, 2002, in the manner as stated above in our Objections.

¶80

Further on the contrary, the appellants at page 48 of Appeal Memorandum has produced the Possession Notice dated 11-02-2021 as Annexure-A, and contented that the Possession Notice has not been served on the Appellants. If the Possession Notice has not been served on the Appellants, how the Appellants have furnished the Possession Notice along with Appeal Memorandum is not clear. More so the Respondent Bank has furnished the Registered Postal Acknowledgement Cards for having served the Possession Notice on the Appellants as Annexure-12 to 18 (para 7 of our above objections). That being the fact, the contentions of the Appellants, the Possession Notice has not been served on the Appellants cannot be accepted.

¶81

As the Appellants defaulted in paying the dues, the Respondent Bank has issued the Demand Notice as well as the Possession Notice dated 01-09-2020 and 11-02-2021 respectively u/s.13(2) and S.13(4) of the SARFAESI Act by following the procedure of the SARFAESI Act. The Appellants

¶82

have not complied with the Interim Order of stay dated 24-022021, by paying the amount as directed by this Hon’ble Tribunal. The Respondent Bank has sold the Mortgaged Property on 18-08-2021 for Rs.5.50 Crores to the successful bidder. After adjusting the Sale proceeds towards the dues of the Respondent Bank, and after closing the Loan Accounts, the remaining Sale proceeds if any, will be refunded to the Appellants.

¶83

As there are no valid grounds made out by the Appellants in their Appeal Memorandum, there is no merit in the Appeal filed by the Appellants against the Respondent Bank, hence the bank prays for dismissal of SA with cost.

¶84

Heard the submission of both the counsels and perused the records.

¶85

Before proceeding with the Order, the Tribunal feels it apt to mention the relevant facts to appreciate the case of the contesting Applicants No.5 & 6 to find out whether the appellants No. 5 and 6 are entitled for the relief as prayed in this SA assailing the possession notice dated 11-02-2021.

¶86

it is discernible from the records that the Tribunal

¶87

vide order dated 2-02-2021 in IA.No.428/2021 had granted an

¶88

16 SA.No. 91/2021

¶89

interim order of stay of possession notice dated 11-02-2021 on conditional payments of Rs.1.5 crore in three installments; the 1^st installment of Rs.50 lakhs on or before 10.03.2021, 2^nd installment of Rs. 50 lakhs on or before 30.03.2021 and the 3^rd installment of Rs.50 lakhs on or before 15,04,2021.

¶90

The Tribunal had clarified that in case of default in conditional payment, the interim order would stand vacated. It is matter of record that the applicants could not comply with the payment of the interim order resulting in vacating of the stay order on 23-08-2021. Hence, the bank proceeded further and has put the property to auction, which has fructified into issuance of sale certificate favoring the successful bidder.

¶91

The Learned Counsel for the bank intimated the Tribunal vide proceeding dated 25-08-2021 that the property is sold on 18-08-2021 and the Tribunal recording the same on 06-12-2021 which is also conceded by the applicant disposed the SA as settled between the parties.

¶92

However, the Applicant No.6 Jeevan Parasharam filed an I.A.No.1006/2022 represented by Advocate A. Mohammed Tahir to restore ASA No.91/2021 (wrongly mentioned as ASA instead of SA) as per the Order dated 22-

¶93

17 SA.No. 91/2021

¶94

03-2022 of the Hon’ble High Court of Karnataka, Dharward Bench in W.P. No.100144/2022.

¶95

It is seen from the Order that the

¶96

W.P.No.100144/2022 came to be allowed setting aside the order of disposal of ASA No.91/2021 in part, restored the ASA on file of DRT for complete and final adjudication within 60 days from the date of receipt of the order. It further held that the court has not expressed any opinion on the auction being carried out. The relevant portion is extracted as under:

¶97

O R D E R

¶98

i. The Writ petition is partly allowed.

¶99

ii. The order dated 06-12-2021 passed by the DRT in ASA No.91/2021 is partly set aside. In that, the disposal of ASA is set aside.

¶100

iii. The proceedings in ASA No.91/2021 are restored on the file of the DRT for complete and final adjudication of the dispute raised by the petitioners, which shall be so done within a period of 60 days from the date of receipt of copy of this order.

¶101

18 SA.No. 91/2021

¶102

iv. The amount in deposit is directed to be transferred to the

¶103

DRT failing which the same to be refunded to the petitioners for onward deposit before the DRT which shall be done within a period of 21 days from today.

¶104

v. It is made clear that this Court has not expressed any opinion on the auction being carried out.

¶105

Sd/JUDGE

¶106

It is pertinent to note that the Applicant No.5 & 6 had not obtained “No objection” from their Counsel S. Kanchan and had engaged new counsel, A Mohammed Tahir and filed IA.No.1006/2022 for restoration of SA.No.91/2021 on 05-04-2022. As there was no objection issued by the earlier Counsel Ms.Kanchan.S on record, the Tribunal queried the Counsel A.Mohammed Tahir for which the Counsel did not have any answer.

¶107

Further it is seen on record that Advocate. Kanchana S has filed memo of retirement dated 17-06-2022 without any communication to the applicants about her retirement from the case. Hence, the Registry issued notices to applicants No.1,2,3,4 & 7 to appear before the Tribunal for

¶108

19 SA.No. 91/2021

¶109

re-consideration of SA as per the direction of Hon’ble High Court. Subsequently, M.Mohammed Ibrahimn has filed NON (ALONG WITH) VAKALATH FOR THE APPLICANTS No.5 & 6 on 12-06-2022 along with No objection of Advocate A.Mohammed Tahir to file vakalath along with him.

¶110

In the meanwhile, the Applicant No.5 & 6 has also filed SA.No.173/2022 on 07-04-2022 challenging the sale certificate dated 19-11-2021 during the pendency of W.P. No.100144/2022 before the Hon’ble High Court of Karnataka, Dharwad Bench. The W.P No.100144/2022 came to be allowed in part, remanding the matter SA.No.91/2021 for reconsideration. Aggrieved by the said order, the contesting applicant preferred WA.No.100155/2022 wherein this Tribunal is directed to hear the remanded matter SA.No.91/2021 along with SA.No.173/2022 and further not to register the sale certificate and the same was subject to the outcome of SA. No.91/2021.

¶111

It is discernible from the records that SA.No.173/2022 is filed impugning the sale certificate date 1911-2021 by the Applicants No.5 Deepak Prashram Birje and Applicant No.6-Jeevan Parashram Birje, however, the other

¶112

20 SA.No. 91/2021

¶113

applicants i.e., Applicants No.1,2,3,4 and 7 being the borrower Company and the Directors as well as the mortgagor are not aggrieved by the sale held by the bank as is evident from the affidavit filed by the Applicants No.1 to 4 & 7. The affidavit dated 12-04-2022 is reproduced as under for reference.

¶114

AFFIDAVIT

¶115

M/S. Vaijanath Industries Pvt. Ltd, represented by its Managing Director Mr. Girish T Huddar, Residing at Belgaum, now at Bangalore.

¶116

Girish T Huddar, age about 55 years, Residing at Belgaum, now at Bangalore, (Appellant No.2 in the above Appeal).

¶117

I Sneha Girish Huddar, age about 51 years, Residing at Belgaum, now at Bangalore, (Appellant No.3 in the above Appeal).

¶118

21 SA.No. 91/2021

¶119

I Dayanand M Shastri, age about 44 years, Residing at Belgaum, now at Bangalore, (Appellant No.7 in the above Appeal).

¶120

I Mallappa C Shastri, age about 75 years, Residing at Belgaum, now at Bangalore, (Appellant No.7 in the above Appeal).

¶121

Do hereby solemnly affirm and state on oath as follows:

¶122

We are the Appellants No. 1, 2, 3, 4 & 7 in the above Appeal and we are conversant with the facts and circumstances of the case and competent to swear this Affidavit.

¶123

The Appellant No.1 Company i.e. M/s. Vaijanath Industries Private Limited is borrower Company, Appellant No.2 Girish T Huddar is the Managing Director, the Appellant No.3 Sneha Girish Huddar is the Shareholder of the Company, Appellant No.4 Dayanand M Shastri is the Director of the Company & Appellant No.7 Mallappa C Shastri is the Guarantor for the loan availed by the Company.

¶124

We have preferred the above Appeal SA.No.91/2021 challenging the Possession Notice dated 11-02-2021, on the grounds mentioned therein.

¶125

22 SA.No. 91/2021

¶126

Notwithstanding anything contained in our above SA No.91/2021, we wish to state that the Respondent Bank i.e., Union Bank of India, after following all the procedures of SARFAESI Act, has sold the Properties to the Successful highest bidder i.e., auction purchaser M/s Master Precision represented by its partners, for Rs.5,51,00,000/- (Rupees Five Crores and Fifty One Lakhs Only). The Respondent Bank has executed the Sale Certificate Reference No.00592/RECOVERY/SALE CERTIFICATE/VAIJANATH/2021 dated 19-11-2021 in favour of above purchaser and possession of the Properties have been handed over to them. The above purchaser is now in Possession and enjoyment of the Properties.

¶127

The Sale proceeds of the said Properties have been credited to our Loan Account by the Respondent bank, and said amount has been utilized by our company for payment of statutory dues, sundry creditors and other business purposes.

¶128

The other 2 minority Directors i.e., Jeevan Prashram Brije and Deepak Prashram Brije (the Appellants No.5 & 6 in the above Appeal). Without the knowledge of our Company and to us and without the authority of our Company i.e. M/s. Vaijanath Industries Private Limited (the Appellant No.1 Company in the

¶129

23 SA.No. 91/2021

¶130

above Appeal) have filed untenable Writ Petition No.100144 OF 2022 (GM-DRT) in the High Court of Karnataka, Dharwad Bench and also filed the Writ Appeal No.100155/2022 before

¶131

the Division Bench of Karnataka High Court, Dharwad Bench and also filed SA.No.173/2022 in this Hon’ble Tribunal, by furnishing false information/documents, in the said proceedings.

¶132

We understand that, the other 2 minority Directors i.e., Jeevan Prashram Brije and Deepak Prashram Brije (the Appellants No.5 & 6 in the above Appeal) have obtained the order from the above High Court, in Writ Petition No.100144 of 2022 (GM-DRT) for reopening of above SA. 91/2021 by misleading the court. The order of Status-quo obtained by them in Writ Appeal No. 100155/2022 is also by misleading to the court.

¶133

That in view of the facts stated above, the question of continuation of above SA.No.91/2021 filed by us, and SA.No.173/2022 filed by other 02 Minority Directors i.e., Jeevan Prahsram Brije and Deepak Prashram Brije in this Hon’ble Tribunal, does not arise and same may kindly be disposed of accordingly, in the interest of justice and equity.

24 SA.No. 91/2021

Place: Bangalore

Date : 12.04.2022

Sd/-

1.Vaijanath industries private Limited

¶139

Sd/-

¶140

Girish T Huddar

¶141

Sd/-

¶142

Sneha Girish Huddar

¶143

Sd/-

¶144

Dayanand M Shastri

¶145

Sd/-

¶146

Mallappa C Shastri

¶147

Deponents.

¶148

49. The Appellants Nos. 1,2,3,4 after service of notice

¶149

for rehearing the matter were present personally. The Applicant No.4 is the son of the Applicant No.7 has filed Memo on 27-062022 submitting that his father Sri.Mallappa C Shastri is at USA due to ill health of his sister and unable to appear before this Tribunal.

¶150

The Appellants Nos. 1,2,3,4 yet again filed individual affidavits on 27-06-2022 contending that the affidavit filed on 12-04-2022 be treated as part and parcel of

¶151

25 SA.No. 91/2021

¶152

this affidavit and the same is filed after the matter is reopened as per the direction of the Hon’ble High Court of Karnataka, Dharwad Bench in W.P.No.100144/2022 and in WA.No.100155/2022. Due to differences between the Directors the company stopped functioning and on personal grudges cases are filed against each other.

¶153

It is categorically admitted that the bank has followed the procedures under the Act and have sold the mortgaged property to M.s, Master Precision which is not a continuous cause of action and prays for disposal of the matter. For better appreciation of the facts, the affidavit dated 27.06.2022 of 1^st applicant represented by its Managing Director is reproduced as under.

¶154

AFFIDAVIT

¶155

M/S. Vaijanath Industries Pvt. Ltd, represented by its Managing Director Mr. Girish T Huddar, Residing at Belgaum, now at Bangalore, do hereby solemnly affirm and state on oath as follows:

¶156

The Appellant No.1 is the Borrower Company, represented by its Managing Director Mr. Girish T Huddar (Appellant No.2)

¶157

26 SA.No. 91/2021

¶158

in the above Appeal and conversant with the facts of the case and competent to swear this Affidavit.

¶159

In the above case, we the Appellants No. 01, 02, 03, 04 & 07 have jointly filed the Affidavit dated 12-04-2022, same may be treated as part and parcel of this Affidavit, and in continuation of the same, we are submitting our Affidavit, after reopening of the above case, as per the directions given by the High Court of Karnataka, Dharwad Bench, in WP.No.100144/2022 and in WA.No.100155/2022.

¶160

The other 2 minority Directors i.e. Jeevan Prahsram Brije and Deepak Prashram Brije (the Appellants NO.05 & o6 in the above Appeal). Without the knowledge of our Company i.e. M/s. Vaijanath Industries Private Limited have filed untenable Writ Petition Ni.100144/2022 in the High Court of Karnataka, Dharwad Bench and also filed the Writ Appeal No.10155/2022 before the Division Bench of Karnataka High Court, Dharwad Bench and also file SA.No.173/2022 in this Hon’ble Tribunal, by furnishing false information/ documents, in the said proceedings.

¶161

The Appellant No.05 & 06 are having differences with other Directors of the Borrower Company on account of

¶162

27 SA.No. 91/2021

¶163

mismanagement by the Appellants and work of the Company has been stopped. The Appellant No. 05 & 06 are having personal grudges against the other Directors of the Company and Criminal Complaint filed against them, for their illegal Acts.

¶164

That the Respondent Bank, after following all the Procedures of the Act, have sold the mortgaged properties to M/s Master Precision a partnership Firm. In view of the facts stated above, the question of continuation of above SA No.91/2021 filed by us, and SA.No.173/2022 filed by other 02 Minority Directors i.e., Jeevan Prashram Brije and Deepak Prashram Brije in this Hon’ble Tribunal, does not arise and same may kindly be disposed of accordingly, in the interest of justice and equity.

¶165

Place : Bangalore Date : 27-06-2022

¶166

Sd/-

¶167

Vaijanath Industries Private Limited (Represented by Managing Director Mr. Girish T Huddar) Deponent

¶168

Further the Applicants No. 1,2,3,4 & 7 submitted that they do not intend to proceed in the matter and selfproclaimed and asserted that the bank has sold the property

¶169

28 SA.No. 91/2021

¶170

under public auction; the sale proceeds is appropriated towards the loan account and the balance amount is received by them which is used to pay other dues of the company and submits there is no requirement for re-opening the matter.

¶171

On these factual matrix and circumstances of the case, the Tribunal heard the matter on merits as per the direction of the Hon’ble High Court to adjudicate the matter on merits.

¶172

It is manifest from the records that the Applicant No.1 is a Company is the borrower had availed three credit facilities i.e.,

¶173

CCGN-560101000079508 for Rs.4,10,00,000/- 2) CVEHI-5607610000677817 for Rs.8,40,000/3) PBG201700008 for Rs.14,00,000/- and mortgaged the following properties as security towards credit facilities.

¶174

1.EMG/First charge on land & factory bldg. on Flat

¶175

No.107, R.S.no. 107/1E, 107/2,3,4 at village: Shinolli (BK) Tq. Chandgad, Dist: Kolhapur. It’s belonging to the M/S. Vaijanath Industries Pvt. Ltd.

¶176

29 SA.No. 91/2021

¶177

EMG/First charge on industrial open land bearing

¶178

no.120/1/2, 120/2/2, 120/3/2, at village: Shinolli (BK) Tq. Chandgad, Dist: Kolhapur. It’s belonging to the M/S. Vaijanath Industries Pvt. Ltd.

¶179

EMG/First charge on residential Flat No. S-3, located on 2^nd floor , Samarth Apartment, situated on S.No.19/3/5/2-P2, Municipal No.724/4, Angol Extn, Belgaum, is owned by Applicant 7 is the name of Mallappa C Shastri.

¶180

There is no dispute by the applicants with regard to the availing of credit facilities and mortgaged of the Company’s Immovable and the personal property of the Applicant No.7 as described in the possession notice towards credit facilities availed by 1^st applicant Company.

¶181

Concededly, there is default in the repayment resulting in classification of the account as NPA as per RBI guidelines. In fact, the applicants admits the default in the repayment towards the loan in Para-10 of the SA. The loan account of the applicant was classified as NPA on 30-09-2019 as per the RBI Guideline.

¶182

30 SA.No. 91/2021

¶183

Pursuant to the classification of the account as NPA,

¶184

the Respondent bank as secured creditor has issued S.13(2) Demand Notice on 01-09-2020, demanding an amount of Rs.3,94,58,361/- due as on 01-9-2020 to be repaid within 60 days. The Demand Notice produced by respondent bank at Annexure-A1 reflects the details of the borrowing, credit facilities availed and the outstanding amount dues in loan account along with the description of the mortgaged properties as security towards credit facilities.

¶185

In the side Demand Notice, there is demand made

¶186

to clear entire outstanding liabilities due within 60 days and attention is drawn to S.13(8) Act Read Rule 3(5) giving an opportunity for the applicants to tender amount due of the secured creditor together with all costs, and other charges before the date of publication of the notice for public auction notice.

¶187

The contents of the demand notice also intimate

¶188

that the applicants are restrained in dealing with the securities after issuance of S.13(2) notice. The said Sec.13(2) Demand

¶189

31 SA.No. 91/2021

¶190

Notice is sent by RPAD as per the postal receipt produced at

¶191

Annexure-1 to 7 which is refused by the applicants. The demand notice sent to the 1^st applicant is received on 11-062020 as per postal acknowledgement Card produced the Respondent Bank at Annexure-A2. However, the notice send to the Applicants No. 2,3,4,5,6 and 7 has returned unserved with postal endorsement as refused. The unclaimed cover with postal endorsement is produced by respondent at Annexure A4 to A8.

¶192

As the notices sent to the applicants returned unserved, the bank has published the contents of the Demand Notice in two newspapers, one in English newspaper, The Hindu on 20-11-2022 and in Kannada newspaper in Vijayavani on 20-11-2022 as per the copies of newspaper clipping produced at Annexure A9 & A10 respectively as per Rule 3 of the Security Enforcement Rule 2002.

¶193

The contention of the applicant that the bank has

¶194

not recalled the loan, nor has intimated about the date of classification and issued Sec.13(2) notice is refuted by the bank

¶195

32 SA.No. 91/2021

¶196

contending that in the Demand Notice, demand is made from the borrower and guarantor recalling the entire loan amount to be repaid within 60 days. Further the date of NPA is also seen mentioned in the demand notice.

¶197

As the borrower and guarantors did not liquidated the liability within 60 days as mandated under the Act, the respondent bank has proceeded further and issued the Possession Notice dated 11-02-2021 u/s 13(4) which is impugned in the SA.

¶198

The Possession Notice dated 11.02.2021 is send by RPAD to applicants in the SA and it is seen from records that S.13(4) notices sent to 1^st Applicant is received on 19-02-2021 and notice sent of the Applicant No.2 and 3 is not received and Applicant No.4 has also received as per the postal acknowledgement card Annexure-15; and Notice send to Applicant Nos. 5 & 6 return with postal endorsement as unclaimed; and notice sent to the Applicant No.7 is received as per postal acknowledgement card at Annexure-18. As per

¶199

33 SA.No. 91/2021

¶200

procedure, respondent bank has published the Possession Notice in two newspaper Prajavani and Hindu on 13-03-2021.

¶201

On the contrary, the applicant admits the issuance

¶202

of S.13(4) notice and has produced the original possession notice at Annexure A1 of the SA and also admits the affixture of the possession notice on the property on 11-02-2021 in para-34 of the SA. Even otherwise, the Respondent Bank has filed the copies of the Photographs evidencing the affixture of

¶203

the possession notice on the property vide memo dated 22-06-2022. Therefore, it is evident that Respondent bank has established the due compliance of the procedures in issuance of Sec.13(2) demand notice and the Sec.13(4) possession notice as prescribed under the SARFAESI Act and the Rule made thereunder

¶204

65. The applicants contention that bank has not given

¶205

any opportunity for them to the clear the liability is not support by any document to establish the applicants bonofide intention to clear the liability by way of any written communication to the

¶206

bank expressing their intention to clear and a mere oral

¶207

34 SA.No. 91/2021

¶208

contention without any supporting documents would not sustain.

¶209

The other contention that the property is worth Rs.7-

¶210

8 crores is also not substantiated by any valuation or the applicant made any effort in approaching the bank for any settlement with an prospective buyer to purchase the property as per their own valuation. In fact, the applicants have waived their right of redemption of the secured asset as per Sec.13(8) of the Act before the publication of sale notice in newspaper.

¶211

it’s evident that due to default in repayments to bank after clarifying the account as NPA bank has initiated measures under the Act for the enforcement of the security under the act.

¶212

The Learned Counsel for contesting Applicants No. 5 & 6 during the course of the arguments raised new plea that the bank has not published the possession notice in State of Maharashtra as the secured asset is in Kolhapur would not come to the rescue of the applicant as the publication of the

¶213

35 SA.No. 91/2021

¶214

possession notices is effected in two newspaper , one in vernacular and another in English having wide circulation where the parties are residing and the affixture of the possession notice is admitted by them. Further the mortgagor do not any grievance or aggrieved by the measures taken by the bank under the Act. On the other hand, the borrower, guarantor and the mortgagor admits due compliance of the procedures followed by the respondent bank under the SARFAESI Act in their affidavit filed.

¶215

Even considering the said submission of the Learned Counsel for the contesting applicant, it is evident that after the bank has filed objection, the contesting applicants has not chosen to file reply to the objection or any kind of rejoinder raising new contention which are not pleaded in the SA, refuting the contentions of the bank. The said contention is too technical in nature and the same would not frustrate the proceedings taken by the bank and there is no prejudice caused

¶216

to the applicants herein, more so when the other applicants have no grievance/challenge to the sale held and the same is

¶217

36 SA.No. 91/2021

¶218

raised by the contesting applicants No. 5 & 6 in the SA for their personal grudges against the other applicants.

¶219

In this regard, the Tribunal’s view is supported by

¶220

the Judgment of the Hon’ble Supreme Court in the case title M/s. L and T Housing Finance Limited V/S Trishul Developers wherein the Apex Court has held that technical defects or procedure lapses in recovery proceedings initiated by the secured creditor would not prejudice the debtors, unless the debtors shows that there is a substantial prejudice caused in the technical defect.

¶221

In the instant matter, there is no defect in the procedure in issuance of possession notice nor there is any prejudice caused to the borrower, guarantor or to the mortgagor. The statute mandates the publication of the possession notice in the two leading newspapers one in Vernacular and another in English language having sufficient circulation in the locality. It is also not the case of the contesting applicants that the paper publication of the Possession Notice published in the Hindu and in Prajavani

¶222

37 SA.No. 91/2021

¶223

newspaper is not having wide circulation in the locality or in regional edition. In absence of the any such contention not support by valid document it can’t be sustained.

¶224

Furthermore in view of the categorical admission of the Applicants No. 1,2,3,4 and 7 that the debt is satisfied and the sale proceeds are appropriated towards the loan account and the balance sale consideration is also received by the borrower and mortgagor who has utilized the same for clearance of other charges and due of the Company, there is no requirement of any further adjudication of the matter in respect of the measures under the Act.

¶225

The personal disputes of the contesting applicants

¶226

and the other applicants which are admittedly before competent Court of law cannot be bone of contention/ questioned in the present SA where only the measures initiated

¶227

by the bank under the Act to be ascertained under S.17 of the Act.

¶228

38 SA.No. 91/2021

¶229

Additionally, the Applicants No.1,2,3,4 and 7 by

¶230

way of affidavit explicitly admitted that there is no requirement of re-opening as they concede the sale and the procedures taken by the bank in selling the property are is accordance with the Act and Rules. The Tribunal relying on the Judgment of Hon’ble Apex Court rendered in Thimmappa Raj v/s Ramanna Raj & Ors on 9 May, 2007-sc where in it is held that an admission made by the party in a proceeding is admissible as against him. The relevant para is as under:

¶231

25. “An admission made by a party to the suit in an earlier proceeding is admissible as against him. Such an admission being a relevant fact, the courts below in our opinion were entitled to take notice there of for arriving at a decision relying on or on the basis there of with other materials brought on records by the parties. Once a party to the suit make an admission, the same can be taken in aid, for determination of the issue having regard to the provisions of Section 58 of the Indian Evidence Act” (Emphasized by the Tribunal).

¶232

In the instant matte, the applicant Nos. 1,2,3,4 & 7

¶233

have sworn to an affidavit before the Tribunal that SA is not required to be re-opened and against the challenge to the sale

¶234

39 SA.No. 91/2021

¶235

certificate in SA.No.173/2022 pending adjudication along with the present SA.

¶236

76. On a conspectus of the pleadings and evidence

¶237

available on record, the Bank has established the due compliance of the procedure as mandated in issuance of Sec.13(2) Demand Notice dated 01-09-2020 and Possession Notice dated 11-02-2021 and the Tribunal concludes that the recourse taken by the 1^st respondent bank under sub-section (4) of S.13 is in accordance with the provisions of the Act and the Rules framed there under.

¶238

Accordingly, SA No.91/2021 stands dismissed

¶239

upholding the issuance of Demand Notice dated 01-09-2020 and Possession Notice dated 11-02-2021 as valid notices issued as prescribed under the provisions of Act and Rules made there under.

¶240

Interim Order dated 25-02-2022 is already vacated on 23-08-2021. Pending IA/s if any does not survive and the same is disposed of. No order as to cost.

¶241

40 SA.No. 91/2021

¶242

(Dictated to the Stenographer (CS), after its transcription and necessary corrections,

¶243

signed and Order is passed on this day 18^TH July 2022).

¶244

Sd/-

¶245

PRESIDING OFFICE DRT-2, BENGALURU

¶246

APPENDIX

¶247

LIST OF DOCUMENTS PRODUCED BY THE APPELLANT

¶248

Sl	Particulars	Annexure
No.
1	Copy of Possession notice dated 11-02-2021.	A1
2	Copy of Notice Dated 06-02-2021	A2
3	Copy of the Notice dated 10-02-2021	A3
4	Notice date 24-01-2021 for taking the possession of the assets.	A4
5	Original bank statement	A5
6	Electricity bills	A6
7	Shri Vaijanath Industries Pvt. Ltd. Had given letter for chief manager on 14-12-2015,	A7 & A8
8	Shri Vaijanath Industries Pvt. Ltd given letter of chief manager on 16-04-2018	A13
9	Letter of chief manager for release of mortgaged immovable assets of outgoing director and shareholder dated 20-06-018	A14
10	Letter of chief manager dated 25-06-2018 for substitution of mortgaged immovable assets with fixed deposit of Rs.105,00,000/-	A15
11	Repay from the bank for substitution letter dated 02-07-2018	A16
12	Letter to chief manager corporation bank for transfer of share in accordance with law dated 09-07-2018.	A17
13	The letter dated 23-11-2018 from bank to company for various credit facilities availed from bank.	A18
14	Letter of chief manager of corporation bank for	A19

¶249

41 SA.No. 91/2021

¶250

	release to fixed deposited and closing term loan account dated 12-12-2018.
15	Letter to release of FD and closing term loan account dated 19-12-2018	A20
16	Letter to bank for release of FD of Rs.105,00,000/- for the payment of GST and VAT.	A21
17	Extension of Guarantee till 14-03-2020 dated 14-03-2019	A22
18	Loan closure certificate 13-08-2019	A23
19	Letter dated 18-03-2019 sanctioned of loan of Rs.105,00,000/-	A24
20	Letter to Deputy general manager sanctioned the loan against own loan deposits of Rs.105,00,000/-dated 18-03-2019.	A25

¶251

LIST OF DOCUMENTS PRODUCED BY THE RESPONDENT

¶252

Sl No.	Particulars	Annexure
1	Demand Notice dated 01-09-2020 issued u/s13(2) of SARFAESI Act	A1
2	Postal Acknowledgement cards/Receipts for having sent the Demand Notice to Appellants 1 to7 not claimed.	A2 to A8
3	Demand Notice dated 01-09-2020 issued u/s 13(2) of SARFAESI Act published in English Newspaper	A9
4	Demand Notice dated 01-09-2020 issued S.13(2) of SARFAESI Act published in Kannada Vijayavani Newspaper.	A10
5	Possession Notice dated 11-02-2021 issued u/s 13(4) of SARFAESI Act	A11
6	Postal Acknowledgement cards for having received the Possession Notice dated11-02-2021 issued u/s 13(4) of SARFAESI Act by the appellants.	A12 to A18
7	Possession Notice dated 11-02-2021 published in Kannada Prajawani daily Newspaper.	A19
8	Possession Notice dated 11-02-2021 published in English Hindu Newspaper.	A-20

¶253

42 SA.No. 91/2021

¶254

LIST OF ADDL. DOCUMENTS PRODUCED BY THE

¶255

RESPONDENT ON 22.06.2022

¶256

Sl No.	Particulars	Annexure
1	Order passed by this Hon’ble Tribunal in S.A.No.91/2021 dated 06-12-2021	A-1
2	Orders passed by High court of Karnataka, Dharward Bench in Writ Petition (WP) NO.100144/2022	A-2
3	Objections statement filed by the Respondent Bank in above Writ Petition (WP) No.100144/2022	A-3
4	Orders passed by High Court of Karnataka, Dharwad bench in Writ Appeal (WA) No. 100155/2022	A-4
5	Sale Certificate	A-5
6	Affidavit filed by Appellant 1,2,3,4 & 7, in SA 91/2021, admitting the fact of Sale and procedures followed by the Respondent Bank etc	A-6

¶257

Sd/PRESIDING OFFICE DRT-2, BENGALURU

Shivanna P G v. Canara Bank

Case brief

What is this about?

What did the court decide?

Shivanna P G v. Canara Bank

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

Mrs Radha Kushvakant Agrwal and Ors. versus Tata Capital Housing Finance Ltd.

Indian Overseas Bank versus M/s Shanakar Flour Mill and Others

Uco Bank versus MD Asgar

Jeevan Prashram Birje versus Union Bank of India

South Indian Bank versus Salim Km

Hdfc Bank versus R B M Stone Crusher