Allowed

Ms Morinda Rice and General Mills v. State Bank of India

DRT23 Jan 2023SA/10/2023

Case brief

AI extract

What is this about?

The Tribunal allowed the applicant's application challenging the legal service of a Section 13(2) demand notice and the subsequent securitisation proceedings initiated by the respondent bank due to alleged non-compliance of procedural rules.

What did the court decide?

The Securitisation Application was allowed with costs; securitisation proceedings were held to have failed; the respondent bank is at liberty to issue fresh notice.

Ms Morinda Rice and General Mills versus State Bank of… — Insolvency and Bankruptcy | DRT (2023)

¶1

DEBTS RECOVERY TRIBUNAL-2, CHANDIGARH, PRESIDED OVER BY M.M. DHONCHAK

¶2

DATED THE 23^rd DAY OF JANUARY, 2023 SECURITISATION APPLICATION NO. 10/2023

¶3

M/s Morinda Rice and General Mills through its Proprietor, Sh. Gursewak Singh S/o Sh. Karam Singh R/o Village Rauni-Khurd, Tehsil Chamkaur Sahib, District Ropar, Punjab

¶4

…..Applicant

¶5

Versus

¶6

Authorised Officer, State Bank of India, Stressed Assets Recovery Branch, SCO No. 15, Sector 7, Madhya Marg, Chandigarh-160019

¶7

…..Respondent

¶8

Argued by: Sh. Rohit Sapra counsel for the SA applicant Sh. Navpreet Singh counsel for respondent bank

¶9

FINAL ORDER

¶10

This Securitisation Application is under Section 17 (1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ‘the Act’ for brevity).

¶11

In brief, the facts as per the SA are that sale notice dated 06.01.2023 in respect of immovable property of the applicant to held on 27.01.2023 was issued in violation of prescribed procedure and same was illegal; that the applicant is owner of the properties mentioned in para No. 1 of the SA; that applicant is stated to be mortgager of the above-mentioned two properties for Cash Credit Hypothecation limit of Rs. 375 lacs; that no demand notice under Section of 13(2) of the Act was served upon the applicant; that unit of the applicant was lying closed since 2013; that the envelope containing the demand notice, if any, might have been sent at the factory address; that it was incumbent upon the respondent bank to serve demand notice in terms of Rule 3 of the Security Interest (Enforcement) Rules of 2002 (hereinafter referred to as ‘the Rules of 2002’ for brevity) but Rule 3 was not invoked; that right under Section 13(3A) of the Act was taken away; that the respondent did not affix the possession notice on the immovable property of the applicant; that respondent bank did not deliver the

¶12

SA/10/2023 M/s MORINDA RICE AND GENERAL MILLS Vs STATE BANK OF INDIA

¶13

¶14

possession notice to the applicant; that possession notice was not published properly as required under the law; that valuation report of the property was not obtained from an approved valuer as defined in Rule 2(d) of the Rules of 2002 and thus, there was violation of Rule 8(5) of Rules of 2002; that no consultation was there between the secured creditor and the applicant and sale notice and sale publication was issued in the name of proprietorship concern which alone is not a legal entity and therefore, those were defective.

¶15

It was contended in the reply to the SA, that applicant had the knowledge about the facts of the case because the OA was filed in DRT-3 for a sum of Rs. 4,62,02,913/-; that recovery proceedings were also initiated against the applicant by the Recovery Officer; that applicant, Sh. Gursewak Singh was real nephew of Sh. Prem Singh, borrower who mortgaged property in question; that applicant approached the respondent bank for settlement and thus, he was not unaware of the recovery proceedings; that property in question was put to sale through e-auction on 22.11.2022 as well as 21.12.2022 but no objections were raised; that Authorised Officer was Scale-IV Officer who was competent to initiate the proceedings of securitisation; that copy of order dated 23.08.2017, passed in the OA was sent to the borrowers/defaulters; that notice under Section 13(2) of the Act was sent by registered post at all the addresses of the applicant; that notice was received by Sh. Avtar Singh, Sh. Prem Singh and Sh. Mandeep Singh on 13.03.2015; that Sh. Mandeep Singh was real brother of the applicant and they were living together as per the last address given by the applicant; that notice under Section 13(2) of the Act was got published in two local newspapers on 22.03.2015; that the applicant did not honour the OTS; that possession notice was sent by registered post on 30.05.2015 and it was duly pasted on the front wall of M/s Morinda Rice and General Mills on 27.05.2015 because the mill was closed; that the notice was got published in two newspapers; that final possession was obtained on 16.03.2017 after obtaining the order from the District Magistrate and proper valuation report was taken and reserve price was fixed by competent authority. Rest of the averments made in the SA were also denied in reply to the SA.

¶16

Rejoinder to the reply was filed wherein averments made in the application were reiterated and that of the reply to the SA were controverted.

¶17

I have heard the learned counsel for both the parties and also gone through the record carefully.

¶18

It was argued by the learned counsel for the applicant that there was no legal service with regard to the notice under Section 13(2) of the Act. On the other hand, it was argued by the learned counsel for the respondent bank

¶19

SA/10/2023 M/s MORINDA RICE AND GENERAL MILLS Vs STATE BANK OF INDIA

¶20

¶21

that applicant being one of the co-partners of M/s Morinda Rice and General Mills, had not put any papers under which capacity he had approached this Tribunal as the applicant had not taken any permission form other copartners/resolution for filing the SA.

¶22

Sh. Rohit Sapra, Advocate argued that the applicant was sole Proprietor of M/s Morinda Rice and General Mills as was evident from ExhibitR5, i.e. demand notice publication whereby Sh. Gursewak Singh had been shown as the sole Proprietor. It was further argued by Sh. Rohit Sapra, Advocate that even in the OA, respondent bank had filed a guarantee deed signed by M/s Morinda Rice and General Mills through Sh. Gursewak Singh, its sole proprietor and letter confirming the deposit of title deed of subject property was signed by Sh. Gursewak Singh, both on 26.09.2013.

¶23

In view of the arguments advanced by Sh. Rohit Sapra, Advocate there is no merit in the arguments advanced by Sh. Navpreet Singh.

¶24

Sh. Rohit Sapra, Advocate drew the attention of this Tribunal to Exhibit-R4, i.e. notice under Section 13(2) of the Act, which was addressed to M/s Morinda Rice and General Mills and not Sh. Gursewak Singh. He has placed reliance upon the judgment of the Hon’ble Delhi High Court in the case of “ Hindustan Pencils Limited Versus Raju Bhai Bhat ,” 2006 (131) DLT 97, decided on 08.05.2006, wherein it was held that sole proprietor firm has no legal entity in the eyes of law and is to be identified with the sole proprietor.

¶25

It was argued by Sh. Rohit Sapra, Advocate that the communication from the side of the bank was not made to the applicant at Village RauniKhurd and only sale notice was sent at the said address.

¶26

Nothing could be shown at Bar with regard to service upon applicant at Village Rauni-Khurd notwithstanding the fact that in the guarantee deed the address of the applicant was mentioned in respect of Village Rauni-Khurd and this guarantee deed was executed on 26.09.2013.

¶27

It was argued by the counsel for the respondent bank that notice was received by hand by Sh. Avtar Singh, Sh. Prem Singh and Sh. Mandeep Singh and Sh. Mandeep Singh was the real brother of the applicant, Sh. Gursewak Singh and they were living together as per last address given by the applicant himself. It was further argued that since the applicant was not available at the relevant time despite best efforts of the respondent bank, so, notice under Section 13(2) of the Act was got published in two newspapers dated 22.03.2015.

¶28

Rule 3 of the Rules of 2002 provides that in the eventuality of the borrower avoiding service, the service has to be effected by affixing a copy of demand notice on the outer door or some other conspicuous part of the house

¶29

SA/10/2023 M/s MORINDA RICE AND GENERAL MILLS Vs STATE BANK OF INDIA

¶30

¶31

or building in which the borrower or his agent ordinarily resides or carries on business or personally works for gain and also by publishing the contents of the demand notice in two leading newspapers, one in vernacular language, having circulation in that locality.

¶32

It was argued by Sh. Navpreet Singh, Advocate that Sh. Mandeep Singh was real brother of the applicant, Sh. Gursewak Singh and he had received the notice.

¶33

In fact, Sh. Mandeep Singh had not received the notice on behalf of Sh. Gursewak Singh. Admittedly, when the personal notice was not served upon Sh. Gursewak Singh, the compliance of Rule 3 of Rules of 2002 was required to be made.

¶34

No other point was urged before this Tribunal.

¶35

From the documents on file and arguments advanced before this Tribunal, this Tribunal is satisfied that there is non-compliance of Rule 3 of the Rules of 2002 in respect of affixation on the property in question. Even, if the publication in the two newspapers is deemed to be legal, this flaw remains incurable and thus, all cannot be said to be well with the securitisation proceedings initiated by the respondent bank. The argument advanced by Sh. Rohit Sapra, Advocate that even the publication in the newspapers was not made at the latest address of the applicant at village Rauni-Khurd, cannot be brushed aside. In these circumstances, the securitisation proceedings have failed to take off in accordance with law which warrants allowing of the present application. Consequently, the SA is allowed with costs. Needless to say that the respondent bank is at liberty to issue fresh notice under Section 13(2) of the Act. It hardly needs to be stated here that the notice under Section 13(2) of the Act not being served legally, all subsequent proceedings shall not hold good.

¶36

Announced in the open Tribunal (M.M.Dhonchak) Presiding Officer DRT-2, Chandigarh

Ms Morinda Rice and General Mills v. State Bank of India

Case brief

What is this about?

What did the court decide?

Ms Morinda Rice and General Mills v. State Bank of India

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

Mr Amrendra Kumar Jha versus Bank of Baroda

Ms Om Sai Baba Morden Rice Mill and Others versus Punjab National Bank

Narniat Powers and Company versus State Bank of India

Pawan Kumar Sharma versus Punjab National Bank

State Bank of India versus Ms Taj Agencies

Ms Vishnu Beej Bhandar versus State Bank of India