Allowed

Manju Devi v. Canara Bank

DRT10 Apr 2023SA/126/2022

Case brief

AI extract

What is this about?

Two applications challenging a bank's SARFAESI action under Section 17 were decided together. The Tribunal allowed the sale challenge where demand and possession notices were not proved served, setting aside the auction sale. The application by the heirs of a deceased debtor was dismissed as they were not aggrieved persons by earlier actions.

What did the court decide?

The sale dated 22.10.2020 and Sale Certificate dated 22.01.2021 set aside; Auction purchaser to get back total consideration with 10% simple interest; SA 126 of 2022 dismissed.

Manju Devi versus Canara Bank — Banking and Recovery | DRT (2023)

¶1

DRT,PATNA

¶2

SA 148 of 2020 [J] & SA 126 of 2022 [J]

¶3

DEBTS RECOVERY TRIBUNAL PATNA

¶4

Presiding Officer :Shri KaushalendraYadav

¶5

SA- 148 of 2020

¶6

1. MIs Saurabh Rice Mill through its partners

¶7

Saurabh Kumar - Deleted

¶8

Sugandh Kumar

¶9

Madhuri Devi

¶10

1 to 3 all Partners in MIs Saurabh Rice Mill, Son and daughter of Late Shyambabu Singh, Village - Kothma (MurgiaChak), P.O. - Khagaul, District - Patna, Pin Code - 801105.

¶11

5. Nand Kishore Verma - Deleted

¶12

......... Applicants

¶13

Versus

¶14

Canara Bank through Branch Manager, Danapur Cantt. Patna.

¶15

Authorised Officer, Canara Bank, through Branch Manager of Canara Bank, DanapurCantt., Patna.

¶16

Amit Kumar, S/o Krishna Singh, RIo House No.148, Bank Colony, Opposite Mukesh Tent House, Gola Road, Danapur, Patna - 801503.

¶17

--respondents

¶18

With

¶19

SA- 126 of 2022

¶20

Manju Devi, W/o Late Nand Kishore Verma, RIo - Viii - Bhagawatipur, P.O. Wajitpur, Anchal, Bihta, Patna.

¶21

. Applicant

¶22

Versus

¶23

Canara Bank through Zonal Manager, Exhibition Road, Luv Kush Tower, Patna - 800004.

¶24

The Authorized Officer, Canara Bank, DanapurCantt. Branch, Danapur, Patna.

¶25

The Branch Manager,Canara Bank, DanapurCantt. Branch, KeshriBhawan, First Floor, Main Road, Danapur, Patna.

¶26

Sugandh Kumar, S/o Late ShyamBabu Singh, RIo - Village - Kothma (MurgiaChak), P.O. - Khagaul, P.S. - Khagaul, District - Patna.

¶27

Madhuri Devi, W/o Late ShyamBabu Singh, RIo - Village - Kothma (MurgiaChak), P.O. - Khagaul, P.S. - Khagaul, District - Patna

¶28

--respondents

¶29

Present:

¶30

For the Applicant of SA 148 of 2020 : Dr. Binay Kr. Singh, Advocate

¶31

For the Applicant in SA 126 of 2022 : Sh. Anjani Kr. Singh, Advocate

¶32

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¶33

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¶34

¶35

DRT,PATNA

¶36

SA 148 of 2020 [J] & SA 126 of 2022 [J]

¶37

For the Respondents Bank

¶38

For the Auction Purchaser

¶39

: Sh.ManishKishore,Advocate

¶40

: Sh. Arbind Kr. Jha, Advocate

¶41

Dated: 10.04.2023

¶42

JUDGMENT

¶43

SA 148 of 2020 & SA 126 of 2022 have been filed pertaining to the same loan account. Hence, both the case have been heard together and are being decided together.

¶44

SA 148 of 2020 is the application uls 17 of SARFAESI Act which has been filed with a prayer to set aside, revoke and cancel the sale made as 22.10.2020 through Sale Notice dated 11.09.2020.

¶45

SA 126 of 2022 has been filed with the prayer to set aside the entire SARFAESI Action initiated against the loan account in question.

¶46

During pendency of the SA 148/2020 the applicants filed IA 1612021 with the prayer to quash the vacation notice dated 31.12.2020. IA 340/2021 was filed against direction issued for the physical possession of the property. IA 422/2021 was filed to restrain the bank for any coercive action. IA 102/2022 was filed with the prayer to stay all the proceedings initiated under SARFAESI Act. IA 103/2022 was filed to implead the auction purchaser as a party in the matter. IA 104/2022 was filed with the prayer to set aside the auction sale dated 22.10.2020. IA 123/2022 was filed with the prayer to deletelexpunge the name of Saurabh Kumar and Nand Kishore Verma from the array of applicants.

¶47

The brief facts of the cases are that, the applicant availed Term Loan and Cash Credit Facility to the tune of RS.20 Lacs from the respondent bank. On default in repayment of the dues of the bank, the account of the applicant was declared as NPA on 27.12.2013. Subsequently, the bank initiated SARFAESI Action against the borrower. Aggrieved from the auction sale notice dated 11.09.2020, SA 148 of 2020 has been filed by the applicants and SA 126 of 2022 has been filed on being aggrieved from the steps initiated for physical possession of the property.

¶48

As alleged by the applicant of SA 148/2020, without serving demand notice, possession notice or sale notice, the property of the applicants has been auction sold by the bank on 22.10.2020 in pursuance of sale notice dated 11.09.2020 against the adjudicated outstanding amount Qf RS.17,17,646/- J></./

¶49

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¶50

¶51

DRT,PATNA

¶52

SA 148 of 2020 [J] & SA 126 of 2022 [J]

¶53

as on 27.12.2013 vide judgment & certificate passed in the OA 448/2017. After the judgment & certificate, the applicant has already paid Rs.8.90 lacs with the bank.

¶54

The auction sale notice was issued in the name of deceased persons namely Late Saurabh Kumar and Late Nand Kishore Verma. Though earlier notice has not been served upon the applicants but it appears that earlier notice i.e. demand notice as well possession notice was also issued against the deceased. In the said OA, deceased were not added as a party but the SARFAESI Action has been initiated against the dead person. The applicant came to know from the newspaper, with regard to the Sale notice. The property worth Rs.1 Crore has been auctioned for Rs.51.35 lacs to one Amit Kumar, S/o Sri Krishna Singh, the single bidder. In the valuation report of the bank, it is revealed that the secured asset is only a double storey house comprising ground floor and 1 51 floor and that there is not even a whisper about the 2nd floor. Apart from the building over land. There exist 10ft. high boundary wall filled with Iron Gate and also a shed over the boundary wall around that. The applicants also have got report from govt. approved valuer, which assessed the property at Rs.1,00,83,130.00 and forced sale value has been put at Rs.80,66,504.00.

¶55

The applicants are ready and willing to liquidate the legitimate Bank dues as adjudicated by Hon'ble Tribunal in OA 448/2017 with interest after adjustment of Rs.8.90 lacs paid subsequent to judgment dated 09.01.2019 in OA.

¶56

Ld. Counsel of the applicant of SA 126/2022 has submitted that after death of deceased Nand Kishore Verma, she (herein applicant) has been impleaded as defendant no.5 in OA 448/2017. The said OA was disposed of vide order dated 09.01.2019 and judgment & certificate was issued against all the defendants including applicant herein for realization of Rs.17,17,646/- alongwith interest. The Recovery Process was going on against the defendants meanwhile, the applicant came to know that SARFAESI action had been initiated against her and a memo no. 529 dated 11.04.2022 has been issued under the authority of SOC, Oanapur for physical possession of the property. No notice under SARFAESI Act was served upon the applicant while the respondent bank had full knowledge about the death of Nand Kishore Verma as she has been substituted as defendant no.5 in the said OA. Hence, SARFAESI action of the bank may be set aside. c:pv .~

¶57

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¶58

¶59

DRT,PATNA

¶60

SA 148 of 2020 [J] & SA 126 of 2022 [J]

¶61

On the contrary, Id. Counsel of the respondent bank submits that the SA 148/2020 is not maintainable as the same was filed beyond the limitation from the date when cause of action arose. The action prior to sale cannot be challenged in present application being time barred. Moreover, in this S. application, only Sale has been challenged and did not raise any objection relating to earlier processes initiated under the SARFAESI Act. The valuation of the property had been obtained from Government Approved Valuer and such valuation cannot be brushed aside without any cogent evidence. The sale notice dated 11.09.2020 has been served by registered post followed by affixation of sale notice on the secured asset and publishing the same in newspapers on 19.09.2020 in Dainik Jagran and Times of India whereby date of auction was fixed on 22.10.2020. The property belonging to Applicant no.2 and 3 was sold out in e-auction and Amit Kumar, Sio Krishna Singh emerged to be successful bidder for RS.51.45 lacs. The auction purchaser deposited 25% within time accordingly, letter of confirmation of sale on 23.10.2020. The auction purchaser also paid the entire consideration amount of sale price in extended time and thereafter the Bank also delivered him the Sale Certificate dated 22.01.2021. It is false to allege that Defendant Bank sold the property after accepting 40% of the settled amount as the statement in this regard has been falsely made as there was no settlement because due to non fulfillment of terms of OTS settlement it stood cancelled.

¶62

In reply to SA 126/2022, Ld. Counsel of the respondent bank submit that SA 126/2022 is not maintainable as the same has been preferred by heir of deceased guarantor whose property is not involved nor she is aggrieved by any action of Bank. The application is also time barred. The respondent nO.5 Madhuri Devi has only executed registered mortgage deeds in favour of the bank in order to secure the credit facilities. Even if notice has been served upon a dead person then hislher heir cannot challenge in absence of security agreement with the deceased person. The SARFAESI action was never challenged at the opportune time nor raised any objection before the bank due to which the entire process prior to sale became final.

¶63

Ld. Counsel of the auction purchaser submits that in pursuance of sale notice dated 11.09.2020, the auction purchaser participated in the auction sale and was declared successful bidder in auction held on 22.10.2020 and after depositing of 25% amount sale was confirmed in his favour on

¶64

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¶65

¶66

DRT,PATNA

¶67

SA 148 of 2020 [J) & SA 126 of 2022 [J)

¶68

23.10.2020. The balance amount of purchase price was paid by the auction purchaser within an extended period of 03 months and sale certificate was issued on 21.01.2021 in his favour.

¶69

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

¶70

It has been alleged by the applicant of SA 148/2020 that without serving demand notice, possession notice or sale notice, the property of the applicants has been auction sold by the bank on 22.10.2020 in pursuance of sale notice dated 11.09.2020 against the adjudicated outstanding amount of Rs.17,17,646/- as on 27.12.2013 vide judgment & certificate passed in the OA 448/2017. The auction sale notice was issued against applicants and the deceased persons namely Late Saurabh Kumar and Late Nand Kishore Verma. The SARFAESI Action has been initiated against the deceased also. It has been alleged that the applicant came to know with regard to the Sale notice from the newspaper. The property worth Rs.1 Crore has been auctioned for Rs.51.35 lacs to the single bidder. In the valuation report of the bank, it is revealed that the secured asset is only a double storey house comprising ground floor and 1st floor and that there is no whisper about the 2nd floor. The applicants has also got valuation from govt. approved valuer which indicates the value of the property is Rs.1,00,83,130.00 and forced sale value has been put at Rs.80,66,504.00.

¶71

On perusal of records it appears that the valuation of the property was obtained from approved valuer of the bank and sale notice dated 11.09.2020 was sent to the applicants through registered post on 16.09.2020. Copy of the postal receipt annexed with the Counter Affidavit. The sale notice was affixed on the secured assets and got published in newspapers namely Dainik Jagran and Times of India on 19.09.2020. The property was auction sold on 22.10.2020 and auction purchaser deposited the auction amount within time. Accordingly, sale certificate issued in favour of auction purchaser on 21.01.2021.

¶72

It has been alleged by the applicant of SA 126/2022 that though in OA 448/2017 she was substituted as defendant no.5 but while initiating S. action she has not been served any notice and notices issued under SARFAESI Act has been issued against dead person. The applicant came to know about SARFAESI action through a memo no. 529 dated 11.04.2022 issued under the authority of 800, Oanapurfor physical possession of the property.

¶73

On perusal of records it appears that the loan in question was granted

¶74

¶75

DRT,PATNA

¶76

SA 148 of 2020 [J] & SA 126 of 2022 [J]

¶77

in favour of mls Saurabh Rice Mills; Shri Saurabh Kumar was the proprietor who died issueless. Shri sugandh Kumar and Smt. Madhuri Devi were guarantors of the loan transactions.

¶78

It has been alleged on behalf of the applicant that the auction sale notice dt.11.9.2020 was issued without serving demand notice or possession notice for outstanding dues amount. On the other hand Id. Counsel of the respondent bank submits that the SA 148/2020 is not maintainable as the same was filed beyond the limitation from the date when cause of action arose. The action prior to sale cannot be challenged in present application being time barred. Moreover, in this S. application, only Sale has been challenged and did not raise any objection relating to earlier processes initiated under the SARFAESI Act. As such the point under consideration is whether at this stage of sale notice, the applicant is barred by any provision of law from raising the issue relating to service of the demand notice as well as the possession notice.

¶79

In this regard it is pertinent to mention here that any notice for demand under section 13(2) and position notice under section 13(4) of the SARFAESI Act has not been served. The applicant came to know from the newspaper, with regard to the Sale notice. The respondent did not file any evidence to prove the service or even postal dispatch regarding these notices. However the notice for the sale was sent by the respondent Bank through post. In these circumstances when applicants had no knowledge of the action (as the service of notice of demand as well as possession notices have not been proved by the respondent Bank by filing the documentary evidence to show the service by way of delivery by hand or by the postal delivery.), the applicant can be given a chance of hearing so that the validity of the sale notice under challenge can be examined under S.17 of the SARFAESI Act. which runs as under:-

¶80

"17. [Application against measures to recover secured debts}. _ (1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorized officer under this Chapter, [may make an application alongwith such fee, as may be prescribed,] to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measures had been taken."

¶81

It is clear that any person who is aggrieved by measures referred to in sub-section 4 of the section 13 taken by secured creditor, may file the

¶82

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¶83

¶84

DRT,PATNA

¶85

SA 148 of 2020 [J] & SA 126 of 2022 [J]

¶86

application under this provision. The sub-section (4) of section 13 runs as under:

¶87

13(4) In case the borrower fail to discharge his liability in full within the

¶88

period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:-

¶89

(a) take possession of the secured assets of the borrow including the right to transfer by way of lease, assignment or sale for realizing the secured right a transfer by way of lease, assignment or sale for realizing the secured asset;

¶90

(b) ....

¶91

It is clear that subsection (4) of section 13 authorizes the secured creditor to take recourse to one or more of the measures for recovery of dues. Under these measures, the secured creditor may take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realization of dues.

¶92

Ld. Counsel for the applicant has further submitted that the right to challenge the SARFAESI action from very inception, still subsists as the possession of the property has not been transferred so far. The possession and sale of alleged property is the part of the measure and pre condition for sale process conducted on behalf of the secured creditor in exercise of such right.

¶93

It pertinent to mention here that u/s.13(7) of SARFAESI Act provides that-

¶94

(7) Where any action has been taken against a borrower under the provisions of sub-section (4), all costs, charges and expenses which, in the opinion of the secured creditor, have been properly incurred by him or any expenses incidental thereto, shall be recoverable from the borrower and the money which is received by the secured creditor shall, in the absence of any contract to the contrary, be held by him in trust, to be applied, firstly, in payment of such costs, charges and expenses and secondly, in discharge of the dues of the secured creditor and the residue of the money so received shall be paid to the person entitled thereto in accordance with his rights and interests.

¶95

In view of the above provision, the SARFAESI action u/s 13(4) comes to an end only after the stage of U/s 13(7) of SARFAESI Act. The

¶96

application U/s 17 of SARFAESI Act can be filed till the auction money is

¶97

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¶98

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DRT,PATNA

SA 148 of 2020 [J) & SA 126 of 2022 [J]

¶103

appropriated or adjusted according to section 13(7).

¶104

In view of the above discussion, the argument on behalf of the respondent that all the actions prior to sale notice cannot be challenged, holds no ground in the present circumstances as the dispatch or service of any notice to any of the applicant or even to the dead persons, prior to sale notice has not been proved or even alleged by the respondent Bank. Only the copies of postal recipes dated 16.09.2020for sale notice only have been filed.

¶105

On the point of valuation it has been alleged that the secured asset has been shown as a double storey house comprising ground floor and 1st floor only. While the applicant has filed a valuation report wherein the 2nd floor has also been mentioned and valued. Respondent has not controverted this fact. The respondents have not controverted this fact as alleged by the applicant.

¶106

In view of the above discussion, the auction sale becomes bad and liable to set aside. The interests of bonafide auction purchaser can be protected by refund of the sale consideration with interest. Accordingly SA 148 of 2020 deserves to be allowed while SA 126 of 2022 is liable to be dismissed as its applicant is not the aggrieved person.

¶107

ORDER

¶108

The application SA 148 of 2020 with all pending lAs is allowed with Rs.25000/- as the cost of litigation. The sale 23.10.2020 and Sale Certificate dated 22.01.2021 in pursuance of sale notice dated 11.09.2020, are hereby set aside. The Auction purchaser shall be entitled to get back the total sale consideration with 10% simple interest from the date of final payment. SA 126 of 2022 is liable to be dismissed.

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[KaushalendraYadav]

Presiding Officer

Debts Recovery Tribunal, Patna

¶114

Judgment signed, sealed, dated and pronounced in the open court on ' this 10TH Day of April, 2023. U _.r-/_ c. _, . " .<Y \ '-" \ v) [KaushalendraYadav] \ 0

¶115

Presiding Officer

¶116

Debts Recovery Tribunal, Patna

¶117

Manju Devi v. Canara Bank

Case brief

What is this about?

What did the court decide?

Manju Devi v. Canara Bank

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

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