Allowed

A Manoharan v. Canara Bank

DRT29 Dec 2023SA/132/2022

Case brief

AI extract

What is this about?

The Tribunal allowed two applications challenging an e-auction sale and possession order under the SARFAESI Act. The court found procedural lapses by the bank, including inconsistent dates on sale notices, incomplete annexure of terms and conditions, failure to proof payment of sale considerations, non-affixing of sale notices on property, and failure to consider learner installment settlement pro

What did the court decide?

Set aside the e-auction sale held on 17.08.2021; quash the order dated 16.12.2021 for taking physical possession; do not include expenditure for issuance of sale notices in the loan account.

A Manoharan versus Canara Bank — Banking and Recovery | DRT (2023)

¶1

Fair Order

¶2

IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI DATED THIS 29^th DAY OF DECEMBER, 2023 PRESENT: SEEMA SINHA

¶3

[PR. DISTRICT & SESSIONS JUDGE - Retd] PRESIDING OFFICER

¶4

SA No. 132/2022

¶5

& SA No.103/2022

¶6

IN SA No.132/2022

¶7

Between

¶8

A. Manoharan, Prop. of M/s. Arun Offset Printers, S/o. P. Andykonar, No. 22, East Pattamar Lane, North Avani Moola Street, Madurai – 625 001. --- Applicant

¶9

And

¶10

The Authorised Officer, Canara Bank, West Avani Moola Street Branch, Madurai – 625 001.

¶11

Karthick Raja, S/o. Baskaran, Door No. 385, Nallaiya Naidu Lane, Madurai – 625 001. --- Respondents

¶12

Appearance of Advocates: Mr. S. Palpandi ---- Counsel for the Applicant Mr. VS. Karthi ---- Counsel for the 1^st Respondent Bank Mr. M.V. Shankar ---- Counsel for the 2^nd

¶13

Respondent/Auction Purchaser

¶14

Page 1 of 20

¶15

SA 132/2022 & SA 103/2022

¶16

In SA No. 103/2022

¶17

Between

¶18

A. Manoharan, Prop. of M/s. Arun Offset Printers, S/o. P. Andykonar, No. 22, East Pattamar Lane, North Avani Moola Street, Madurai – 625 001. --- Applicant

¶19

And

¶20

The Authorised Officer, Canara Bank, West Avani Moola Street Branch, Madurai – 625 001.

¶21

The Chief Judicial Magistrate, Madurai

¶22

Mr. Karthick Raja, S/o. Baskaran, Door No. 385, Nallaiya Naidu Lane, Madurai – 625 001. --- Respondents

¶23

Appearance of Advocates: Mr. S. Palpandi ---- Counsel for the Applicant Mr. VS. Karthi ---- Counsel for the 1^st Respondent Bank Mr. M.V. Shankar ---- Counsel for the 3^rd Respondent/Auction Purchaser

¶24

These Applications were heard in the presence of Mr. S. Palpandi, Counsel for the Applicant and Mr. VS. Karthi, Counsel for the 1^st Respondent Bank And Mr. M.V. Shankar, Counsel for the 2^nd /3^rd Respondent (Auction Purchaser) in SA 132/22 & SA 103/22 respectively and upon hearing the arguments of the Counsels and having stood over for consideration till this day, this Tribunal delivered the following:

¶25

COMMON ORDER

¶26

1 . These Applications have been filed under Section 17(1) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 by the Applicant praying to set aside the E- Auction sale held on 17.08.2021 and all other consequential proceedings which has taken place pursuant to Sale Notice dated 13.07.2021 issued by the 1^st Respondent Bank and pass such further or other orders vide SA

¶27

Page 2 of 20

¶28

SA 132/2022 & SA 103/2022

¶29

No.132/2022. The Applicant has prayed to set aside all the measures of taking possession of the secured assets by the Authorized Officer through the order dated 16.12.2021 passed by the Ld. Chief Judicial Magistrate, Madurai in Crl.M.P.No.422 of 2021 as per-se illegal, arbitrary and as against law mandated under SARFAESI Act vide SA No.103/2022. Since the Applicant, Respondent Bank and Auction purchaser are common in both the cases, a common order is hereby passed by clubbing both the SAs.

¶30

2 . The brief averments of the Applications filed by the Applicant are as follows:-

¶31

Ld. Counsel for the Applicant submitted that the Applicant had availed loan amount for a sum of Rs. 50.24 Lakhs towards OCC and a sum of Rs. 46.03 Lakhs under Term Loan on 20.02.2015 by executing the necessary documents and by mortgaging his valuable property. The Applicant was regular in repayment of the loan amount without any delay or default. However, due to some business constraints, the Applicant found it difficult to repay the EMIs and accordingly the account of the Applicant was declared as Non Performing Assets and the 1^st Respondent Bank had issued the demand notice on 01.10.2017 and subsequently issued the possession notice on 03.10.2017 u/s 13(4) of the Act. Further, the Applicant contended that, the possession notice issued by the 1^st Respondent is not valid since the same was not served on him. Moreover in the possession notice dated 03.10.2017, the date of Demand notice is mentioned as 20.04.2017, which the applicant did not receive. The applicant further submits that it is seen that the 1^st Respondent bank had issued a second demand notice on 01.10.2017 and simultaneously first possession notice was issued on 03.10.2017 and another possession notice was issued on 22.12.2017, whereas in the second demand/possession notices, the 1^st Respondent bank had not mentioned anything about the withdrawal of earlier demand and possession notices. Even though the difference between the demand and possession notice is only two days, the act of 1^st Respondent bank in issuing two possession notices are not valid and accordingly is devoid of merits and therefore is liable to be set aside.

¶32

Further, the Applicant had approached the 1^st Respondent bank for settling the outstanding dues and submitted the OTS proposal to Bank on 29.10.2018, and also expressed his willingness to pay a sum of Rs. 92 Lakhs. The 1^st Respondent Bank had also agreed for the same and fixed the payment of OTS amount in three installments. The Applicant further submitted that he had paid a sum of Rs. 1.00 Lakh as spot payment and paid the following amounts of Rs. 40 Lakhs on 14.01.2019, Rs. 20 Lakhs on

¶33

Page 3 of 20

¶34

SA 132/2022 & SA 103/2022

¶35

13.02.2019, Rs. 12 Lakhs on 22.08.2019 and a sum of Rs. 6.5 Lakhs on 03.09.2019 totaling a sum of Rs. 79.5 lakhs towards OTS amount. However the Applicant was not able to pay the remaining amount of Rs.12.5 Lakhs as per time schedule due to COVID-19 Pandemic situation which made the Applicant’s business dull. Accordingly, the Applicant prayed for extension of OTS time and expressed his willingness to pay interest for the delayed payment, but the request was refused. When the Applicant had paid 80% of OTS and proved his bonafide, the 1^st Respondent Bank ought to have considered his request.

¶36

Thereafter, the Applicant had given another OTS letter on 08.12.2020 and was ready to pay a sum of Rs. 20.60 Lakhs in addition to the payment made during the previous OTS, but the 1^st Respondent Bank did not accept the same. The Applicant further gave another OTS Letter for a sum of Rs. 32.00 Lakhs and the same was pending before the 1^st Respondent Bank for a long period, and without considering all the above OTS requests made by the Applicant, the 1^st Respondent Bank had issued the sale notice on 26.02.2021 by fixing the sale on 29.03.2021. During pendency of OTS proposal, another sale notice was also issued by the 1^st Respondent Bank on 08.07.2021 by fixing the sale on 17.08.2021. The said notices were not served on the Applicant and he was not aware of the sale on 17.08.2021. By the above facts, it is evident that the 1^st Respondent Bank did not allow the Applicant to settle the outstanding dues amicably and instead sold the scheduled property to the 2^nd / 3^rd Respondent on 17.08.2021 and issued the sale certificate. In addition the 1^st Respondent Bank had not provided any particulars about the Auction Purchaser to the Applicant who came to know about issuance of sale certificate, which was registered as Doc No.211/2022 in the SRO, Madurai.

¶37

In continuation to the above proceedings, the 1^st Respondent Bank had approached the Ld. CJM, Madurai vide Crl.MP No.422/2021 and obtained an order on 16.12.2021. The submission of Applicant is that, the 1^st Respondent Bank had obtained the ibid order from Ld. CJM, Madurai under Section 14 of the SARFESI Act, after suppressing various material facts.

¶38

Being aggrieved over the action of the Respondent No. 1, the Applicant has challenged the E-Auction held on 17.08.2021 pursuant to the sale notice dated 13.07.2021 and the Ld. CJM court order in Crl.MP.No.422/2021 dated 16.12.2021 on the following Grounds:-

¶39

Page 4 of 20

¶40

SA 132/2022 & SA 103/2022

¶41

(i) The actions initiated by the Respondent Bank (R-1) in respect of the Schedule mentioned property under the SARFAESI Act are illegal and void and contrary to the settled principles of law in this regard.

¶42

(ii) The date of classification of the account as NPA is not as per RBI norms. Demand notice was not served to the Applicant.

¶43

(iii) The Possession Notice suffered from various errors and there is a huge discrepancy in the amount demanded. Possession notices were not published in two leading news papers.

¶44

(iv) Respondent Bank has issued two demand notices and two possession notices on various dates and was not served to the Applicant. 2^nd demand notice and possession notices were issued without withdrawal of earlier notices.

¶45

(v) The alleged possession notices were not published in two leading and wide spread Tamil and English news paper where the applicant resides, as @ contemplated under Rule 8(1) and 8(2) of the Act.

¶46

(vi) R-1 has not issued the possession notice as per the Appendix IV of the Act.

¶47

(v) R-1 has not followed the Rule 9(1) of SARFAESI Act, as there is no clear 30 days or 15 days notice before the date of sale. In short, any sale before expiry of 30 days or 15 days notice is contrary.

¶48

(vi) R-1 has not served the impugned sale notice dated 08.07.21 to the Applicant, R-1 has neither obtained the valuation report, before bringing the property for sale, nor affixed the sale notice in the conspicuous part of the property. Even the Sale notice was not published in two leading news papers. R-1 has not considered the amount paid by the Applicant. The 2^nd Respondent has not paid the entire amount in the within the stipulated time.

¶49

(vii) R-1 has not followed the rules under section 8(5), 8(6), 8(7) of the Act. Non compliance of Rule 8 & Rule 9(1) of security interest rules will render the sale notice as void because there is no clear 30 days or 15 days notice before the date of sale.

¶50

(viii) R-1 ought not to have sold the entire property for a meager outstanding dues.

¶51

(ix) R-1 has not filed proper Affidavit before Ld. CJM, Madurai and obtained the order under section 14 of the SARFAESI Act, after suppressing various material facts.

¶52

(x) Ld. CJM had passed the order without giving any opportunity to the Applicant in clear violation.

¶53

(xi) The Authorized Officer ought to have observed that the applicant have made payments even after the classification of loan accounts as NPA in their affidavit, which was suppressed before Ld. CJM court and obtained the

¶54

Page 5 of 20

¶55

SA 132/2022 & SA 103/2022

¶56

order. They have not considered the Rule under Section 14(viii) of the SARFAESI Act.

¶57

4. The Applicant has sought the following Reliefs:-

¶58

(i) To set aside the sale held on 17.08.2021 and all other consequential proceedings which had taken place based on sale notice dated 13.07.2021 issued by the 1^st Respondent Bank.

¶59

(ii) To set-aside all the measures taken for possession of the secured assets by the Authorized officer through the order dated 16.12.2021 made in Crl.MP No.422/2021.

¶60

(iii) To pass suitable order or orders as this Hon’ble Tribunal may deem fit and proper and thus render justice and to award compensation and costs.

¶61

List of documents filed on the side of the Applicant along with the Application

¶62

S.No.	Date	Description of Documents
1.	20.02.2015	Sanction Letter issued by the Respondent Bank
2.	29.10.2018	OTS letter
3.	30.09.2019	Letter given by the Respondent Bank
4.	08.11.2019	Sale Notice issued by the Respondent Bank
5.		OTS offer letter given by the Applicant
6.	08.12.2020	OTS letter
7.	23.02.2021	Letter given by the Applicant
8.	26.02.2021	Sale Notice issued by the Respondent Bank
9.	30.03.2021	OTS letter
10.	16.12.2021	Order passed by the Learned Chief Judicial Magistrate, Madurai (2^ndRespondent)
11.	24.12.2022	Encumbrance Certificate
12.	01.10.2017	Demand Notice

¶63

Page 6 of 20

¶64

SA 132/2022 & SA 103/2022

¶65

13.	03.10.2017	Possession Notice – Publication
14.	22.12.2017	Possession Notice
15.	07.02.2022	Application for obtaining Certified Copy of the Sale Certificate
16.	07.02.2022	Challan issued by TamilNadu Registration Department
17.	14.02.2022	Letter given by the Applicant to the Bank by requesting to give copy of Sale Certificate along with Postal receipt
18.	16.02.2022	Letter given by the Applicant to the Bank by requesting to give E-Auction log Details Certificate along with Postal receipt

¶66

The following citations are referred by the Applicant in support of his case:

¶67

(i) Hon’ble Supreme Court of India (1998) 8 SCC – Whirlpool Corporation VS Registrar of Trade Marks, Mumbai and others

¶68

(ii) AIR 2021 Supreme Court Civil Appeal Nos.1155 of 2021 – M/s Radha Krishnan Industries Vs State of Himachal Pradesh and others – (iii) Hon’ble Supreme Court of India Civil Appeal No.5393 of 2010 - M/s. Godrej Sara Lee Ltd., Vs The Excise and Taxation Officer – cum Assessing Authority & others – Procedural illegality proceedings are set aside (iv) Hon’ble Supreme Court of India Special Leave Appeal (C) No.10911/2021

¶69

5. On the other hand, Respondent Bank (R-1) appeared in this case and has filed his Reply Statement along with typed set of papers denying all the averments made by the Applicant in the SA and has further stated that the Applicant had availed MSME-MFG Industries and Term Loan for purchase of machineries to the tune of Rs. 50.25 Lakh plus Rs. 70 Lakh, totally amounting to Rs. 1,20,25,000/- on 11.07.2011 & 27.02.2015 respectively, and had agreed to pay the interest @ 13.40% plus penal interest @ 2% that may be revised by the bank from time to time. Further, the Applicant had deposited the original title deeds as security for the loan agreement and executed the registered memorandum of deposit of title deeds on 23.12.2009, 21.07.2011 vide document numbers 4238/2009 and 3791/2011 respectively.

¶70

Page 7 of 20

¶71

SA 132/2022 & SA 103/2022

¶72

R-1 has also submitted that the borrower had totally failed to adhere to the terms and conditions of the loan agreement and defaulted in repayment. Hence, the bank had classified the loan account as Non Performing Assets on 06.02.2017, which is in consonance with sec 2(o) of the SARFAESI Act 2002 and issued Demand Notice dated 01.10.2017 for an amount of Rs. 1,13,03,073.82p. The Demand Notice was served to the borrower on 01.10.2017 and the same has been acknowledged by the borrower on 05.10.2017. The Possession Notice was issued on 22.12.2017 and the same was sent through Registered post A.D. which was duly acknowledged by the borrower on 29.12.2017.

¶73

Since the borrower had resisted in taking Physical Possession of the scheduled property, the bank had obtained the order from Ld. Chief Judicial Magistrate, Madurai vide Cr.M.P.No. 422 of 2021 dated 16.12.2021, by appointing an Advocate Commissioner to assist the Authorized Officer to take Physical Possession. The physical possession of the secured asset was taken on 12.01.2022 with inventories and the property was sealed with wax seal in the lock. However, the Applicant subsequently, broke the seal and entered into the ground floor, but again with the help of police and the Advocate Commissioner, the Physical Possession of the secured asset was once again taken on 04.02.2022, by the time, most of the house hold articles were removed by the Applicant and the asset was totally vacant.

¶74

Thereafter, the Petitioner preferred Writ Petition before the Hon'ble High Court of Madras (Madurai Bench) vide W.P (MD) No. 1261 of 2022 challenging the order of the Ld. CJM, Madurai, which was dismissed as infructuous on 25.01.2022. The borrower was given enough time for payment of dues to the bank, but he failed to repay the dues. R-1 had preferred e-auction process, out of which the last sale notice was published on 13.07.2021 for e-auction sale of the secured asset. The sale was confirmed on 18.08.2021 in favour of Mr. Karthik Raja, S/o. Baskaran, Nallaiya Naidu Lane, North Masi Street, Madurai for a sale consideration of Rs.1,51,72,000/-. After adjusting the loan dues of the Applicant of Rs.76,56,320/- the remaining sale value of the secured asset at Rs.74,36,629/- has been deposited into the account of Applicant on 13.09.2021 by R-1.

¶75

It is further stated by R-1 that they had sent E-Auction sale notice to the Applicant on 08.07.2021 and the same was simultaneously published in Tamil and English dailies viz., Dinamani and Indian Express respectively on 15.07.2021 by fixing the e-auction on 17.08.2021. All the SARFAESI Act proceedings taken by R-1 are in order including taking physical possession

¶76

Page 8 of 20

¶77

SA 132/2022 & SA 103/2022

¶78

of the Secured Asset. Further, R-1 has informed that, both the sale notice and the CJM orders are barred by limitation, and therefore, the Petitioner is not entitled for challenging the same before this Tribunal. R-1 has filed the following documents (common additional typeset filed by R-1 in both SA 103/22 & SA 132/2022) along with dates and events for taking physical possession and E-Auction sale notice in support of their averments:

¶79

Typed set & Documents filed by the Respondent Bank

¶80

Sl. No.	Date	Description
1	01.10.2017	Demand Notice issued U/s 13(2) of the SARFAESI Act
2	05.10.2017	Acknowledgement Card-showing the receipt of Demand Notice issued U/s 13(2) of the SARFAESI Act
3	22.12.2017	Symbolic Possession Notice issued U/s 13(4) of the SARFAESI Act after 60 days of receipt of the Demand Notice as above
4	29.12.2017	Acknowledgement Card-showing the receipt of Possession Notice issued U/s 13(4) of the SARFAESI Act
5	22.12.2017	Affixture of Possession Notice in the property by the Authorized Officer
6	29.12.2017	Bilingual Newspaper Publication as to 13(4) Symbolic Possession
7	16.12.2021	Ld. CJM Court Order vide Crl. M.P. No. 422 of 2021
8	04.01.2022	Issued Warrant to the Advocate Commissioner by the Ld. CJM Court, Madurai
9	12.01.2022	Part execution of Warrant by taking Physical Possession of the Secured asset's ground floor
10	21.01.2022	Acknowledgement of taking Physical possession of the Secured asset's ground floor, letter issued to local police
11	19.01.2022	Interim report Memo with DVD intimating the CJM Court as to the taking of Physical possession of the Secured asset's ground floor
12	28.01.2022	Batta paid for more Police Assistance

¶81

Page 9 of 20

¶82

SA 132/2022 & SA 103/2022

¶83

13	12.01.2022	Police Complaint made as against the borrower for breaking the seal and locks of the ground floor which was taken Physical Possession on 12.01.2022
14	04.02.2022	With the help of Advocate Commissioner and Police assistance full and final Physical Possession of the total Secured asset was taken by the Authorised Officer
15	04.02.2022	Acknowledgement letter issued by Authorised Officer of the bank regarding Physical possession secured by the bank
16	04.02.2022	Inventories list affixed in the Secured asset, since the borrower has not given any proper address till now
17	04.02.2022	Photos showing the Physical Possession of the Secured Asset vested with the Authorised Officer of the bank
18	04.02.2022	Undertaking Letter given by the borrower and his son that, they will obey the Court Warrant and undertaken not to remove seal and locks in the Secured Asset
19	02.02.2022	Security Deployment in the Secured Asset given by the bank Registered Agency
20	08.02.2022	Letter of Bank as to Inventories affixed in the property
21	28.04.2022	Inventories List-Paper publication copy
22	---	Ld. CJM Court Diary On 16.12.2021 – Order for Advocate Commissioner appointment On 04.01.2022 – Commission Warrant issued to Advocate Commissioner On 12.01.2022-Taken up for hearing and reposted to 09.02.2022 for filing Commissioner report On 09.02.2022- Taken up for hearing and reposted to 09.03.2022 for filing Commissioner report On 09.03.2022- Taken up for hearing and reposted to 06.04.2022 for filing Commissioner report
23	26.09.2018	E-auction Sale Notice – Newspaper Publication
24 25	27.09.2018 28.09.2018	E-auction Sale Notice – Newspaper Publication E-auction Sale Notice – AD Card

¶84

Page 10 of 20

¶85

SA 132/2022 & SA 103/2022

¶86

26	29.07.2019	E-auction Sale Notice – Newspaper Publication
27	29.01.2020	E-auction Sale Notice
28	31.01.2020	E-auction Sale Notice – Returned cover
29	08.03.2020	E-auction Sale Notice – Newspaper Publication
30	16.12.2020	E-auction Sale Notice
31	26.02.2021	E-auction Sale Notice
32	26.02.2021	E-auction Sale Notice – Newspaper Publication
33	27.04.2021	E-auction Sale Notice
34	29.04.2021	E-auction Sale Notice – Newspaper Publication
35	08.07.2021	E-auction Sale Notice issued to the borrower before 30 days time of e-auction i.e. on 17.08.2021
36	13.07.2021	E-auction Sale Notice – Newspaper Publication
37	18.07.2021	E-auction Sale Notice – AD Card
38	11.01.2014	Valuation Report of Panel Engineer to the tune of Rs. 1,40,81,000/- and forced sale value is at Rs. 1,26,73,000/-
39	03.12.2020	Valuation Report of Panel Engineer to the tune of Rs. 1,87,00,000/- and forced sale value is at Rs. 1,49,60,000/-
40	25.02.2021	Fixation of Reserve Price under SARFAESI Act
41	24.09.2021	Valuation Report of Panel Engineer to the tune of Rs. 1,66,96,250/-
42	18.08.2021	Sale Certificate issued by R-1 Bank to Auction Purchaser P. Karthick Raja
43	13.01.2022	Sale Certificate Registration
44	21.01.2022	Letter intimating appellant about the e-auction sale, its value, its adjustment towards the loan, the deposit of remaining amount into savings bank account of appellant
45	24.01.2022	AD Card
46	---	Building plan as submitted by the appellant to the

¶87

Page 11 of 20

¶88

SA 132/2022 & SA 103/2022

¶89

		bank at the time of borrowal of the loan
47	23.03.2022	Statement of Accounts showing the e-auction sale, its adjustment to the loan and remaining sale value deposited into the account of the borrower at Rs. 74,36,679.18p on 30.09.2021
48	25.01.2022	Order in WP (MD) No. 1261 of 2022 Hon'ble High Court of Madras (Madurai Bench)
49	25.05.2022	Order in WP (MD) No. 10358 of 2022 Hon'ble High Court of Madras (Madurai Bench)
50	21.12.2022	Order in WP (MD) No. 14136 of 2022 Hon'ble High Court of Madras (Madurai Bench)

¶90

In view of the above facts, the Respondent Bank prayed for dismissing the appeal and thus render justice.

¶91

The following citations are referred by the Respondent Bank in support of their contention.

¶92

(i) Hon’ble Supreme Court of India Civil Appeal Nos.2763-2764 of 2008- Allokam Peddabbayya and antoher VS Allahabad Bank and others

¶93

(ii) Hon’ble Supreme Court of India Civil Appeal Nos.8097-8098 of 2009 – Sheekeena & Another Vs Bank of India & others

¶94

(iii) Hon’ble Supreme Court of India 2023 LiveLaw (SC)320, Civil Appeal Nos. 22021-22022 of 2022 – South Indian Bank Ltd., & others Vs Naveen Mathew Philip & Another

¶95

(iv) Hon’ble Supreme Court of India Civil Appeal Nos. 7372 of 2021 – Arce polymers private limited Vs M/s Alphine Pharmaceuticals private limited and others

¶96

(v) Hon’ble Supreme Court of India – Civil Appeal No.6954 of 2022 – State Bank of India Vs Arvindra Electronics Pvt Ltd., -

¶97

(vi) Hon’ble Supreme Court of India – Civil Appeal Nos.5920 of 2021– S. Karthik & others Vs N. Subhash Chand Jain & others

¶98

6 . The Auction purchaser (2^nd /3^rd respondent in SA 132/22 & 103/22 respectively) has also filed their reply statement denying all the allegations, and further submitted that he was informed that, the Applicant had not challenged the demand notice and possession notice within time limit before this Tribunal. The applicant pointed out many irregularities against R-1, but the same was not put forth by him in the Writ Petition in WP (MD) in 14136 of 2022 before the Hon’ble Madurai Bench of Madras High Court. The

¶99

Page 12 of 20

¶100

SA 132/2022 & SA 103/2022

¶101

Applicant had not given any representation under section 13(3A) raising his objection. The intention of the applicant is only to harass the auction purchaser and dragging the proceedings. The R2/R3 respondent has duly participated in the public auction held on 17.08.2021 and was declared as successful bidder upon paying a sale price of Rs.1,51,72,000/- and R-1 issued the sale confirmation on 18.08.2021.

¶102

The Sale certificate was executed in favour of Auction purchaser on 13.01.2022 and the same was registered as Doc. No. 211/2022 on the file of SRO, Madurai North (Jt I). The Auction purchaser submitted that, he is one of the bonafide purchaser and he is in possession of the property as of now. Auction Purchaser has also produced the documents to prove his claim viz., sale confirmation letter, sale certificate and subsequent equitable mortgage created in favour of R-1 and payment proof of electricity charges, property tax payment, water tax payment and UGD connection charges standing in the name of Auction purchaser (R2/R3). In addition to this, the Auction purchaser had also entered into a lease agreement with Shri. Ragesh Jain on 03.02.2023. The Advocate Commissioner who was appointed by the Hon’ble High Court of Madras at Madurai Bench in WP (MD) No. 14136 of 2022 has categorically stated that, R2/R3 was in possession of the schedule property and renovation was carried out by him. For renovation purpose, he had obtained a housing loan of Rs.1,23,00,000/- and created a equitable mortgage. Further, the Advocate Commissioner has submitted that the process of sale/transfer is complete as stipulated under Section 8 of Transfer of Property Act.

¶103

Typeset & Documents filed by the Auction Purchaser (R2 in SA 132/22 & R-3 in SA 103/22)

¶104

SL NO.	DATE	PARTICULARS
1	01.05.2023	Counter affidavit filed by the 2^ndDefendant
2	01.10.2017	Demand Notice issued under Section 13(2) under SARFAESI Act issued by the 1^stDefendant along with acknowledgement cards received
3	22.12.2017	Symbolic Possession Notice issued under Section 13(4) under SARFAESI Act issued by the 1^stDefendant along with acknowledgement cards received.
4	22.12.2017	Symbolic Possession Notice was affixed on the application mentioned property by the 1^stDefendant.

¶105

Page 13 of 20

¶106

SA 132/2022 & SA 103/2022

¶107

5	29.12.2017	Paper publication regarding possession notice was issued by the 1^stdefendant bank.
6	26.09.2018 TO 18.07.2021	E- auction Sale Notices issued by the 1^stDefendant bank
7	18.08.2021	Sale Confirmation issued to the 2^ndDefendant.
8	13.01.2022	Registration of Sale Certificate
9	21.01.2022	Intimation Letter sent to the applicant by the defendant regarding the auction sale along with Acknowledgement card.
10	23.11.2022	Report filed by the Advocate Commissioner in WP(MD) No.14136 of 2022 regarding to physical possession with the 2^nddefendant.
11	21.12.2022	Order passed in WP (MD) No.14136 of 2022 and WMP (MD) No.10098 of 2022 by Hon’ble Madurai Bench of Madras High Court.
12	07.08.2022	Equitable Mortgage created by the 2^ndDefendant in favour of the 1^stDefendant.
13	27.03.2023	Electricity charges paid receipt standing in the name of 2^ndDefendant
14	29.03.2023	Property Tax payment receipt standing in the name of 2^ndDefendant
15	29.03.2023	Water Tax paid Receipt standing in the name of 2^nd Defendant
16	29.03.2023	UGD Connection charges standing in the name of 2^nd Defendant
17	03.02.2023	Lease Agreement entered into between the 2^nd defendant and M. Rakesh Jain.

¶108

The following case is referred by the Auction Purchaser (R-2 in SA 132/22 & R-3 in SA 103/22):

¶109

Hon’ble Supreme Court of India Celir LLP Versus Bafna Motors (Mumbai) Pvt. Ltd., & Others dated 21.09.2023.

¶110

Page 14 of 20

¶111

SA 132/2022 & SA 103/2022

¶112

7. On the basis of the above pleadings, the following issues have been framed:

¶113

(i) Whether actions initiated by the Respondent Bank (R-1) in respect of the schedule mentioned property under the SARFAESI Act are illegal, void and contrary to the settle principle of Law?

¶114

(ii) Whether the proceeding is barred by limitation?

¶115

(iii) Whether the Applicant is entitled for relief as claimed for?

¶116

8. Having heard the Counsels of rival parties and also having gone through the materials including the documents available on the record and also considering the written arguments, I find that it is admitted fact that the borrower/Applicant has borrowed a sum of Rs. 1,20,25,000/- and mortgaged his house property with R-1. It is also admitted fact that later on the borrower failed to pay the loan amount and hence his loan account was classified as Non Performing Assets on 06.02.2017 and as per bank's Reply Statement dated 10.03.2022, the NPA was intimated to the Applicant on 01.10.2017, i.e. the bank has intimated the NPA status to the Applicant only after the lapse of 8 months delay. The bank has violated section 13(2) of SARFAESI Act. Thereafter, the bank has initiated SARFAESI proceedings u/s 13(2) of the SARFAESI Act, issued 1^st Demand Notice dated 01.10.2017 calling upon the Applicant to pay the outstanding amount of Rs. 1,13,03,073.82p (Rupees One Crore Thirteen Lakhs Three Thousand Seventy Three and Paise Eighty Two only) which was acknowledged by the borrower on 05.10.2017. I also find that, thereafter, R-1 had issued two Possession notices issued u/s 13(4), one is on 03.10.2017, (wherein the date of Demand Notice is given as 20.04.2017, i.e. 2^nd Demand Notice) (SA 103/22 vide page no.53) & another one is on 22.12.2017 (page no. 54 & 55 in SA 103/22). Whereas, in the Reply Statement filed by the R-1, the Bank has failed to give proper reply about these two possession notices. This arise a strong doubt about the procedures followed by the Respondent Bank. If, really the 1^st Possession Notice was issued on 03.10.2017, why the Bank was so hurry to issue a Possession Notice, when the Demand Notice itself is issued only on 01.10.2017. What is the compulsion for the Bank to issue a Possession Notice within two days of issuance of Demand Notice? What is the need of issuance of two Demand Notices? These questions are left without any reply. The Bank has failed to prove that the allegation of the Applicant is false on this issue. (Procedural Lapse no. 1).

¶117

Page 15 of 20

¶118

SA 132/2022 & SA 103/2022

¶119

9. Applicant made a request for OTS and has also made some payments as per his affidavit. It is submitted by the Applicant that his OTS proposal was not considered by the bank and R-1 proceeded further and issued a Sale Notice inviting the bidders to sell the property. I also find that R2/R3 participated in the sale conducted on 17.08.2021, and he was declared highest bidder and accordingly, a sale certificate was also issued to him. Thereafter, the Applicant has filed this SA before this Tribunal challenging the Sale Notice as well as the Possession Notice. I also find that in the meantime, the bank filed an Application before the Ld. CJM, Madurai u/s 14 of the SARFAESI Act in Crl.M.P.No. 422/2021 and obtained an order dated 16.12.2021 by appointing the Advocate Commissioner to take over the possession of the Property. From perusal of records, I also find that against the said order, the Applicant has preferred a Writ Petition before the Hon'ble High Court vide W.P. (MD) No. 1261 of 2022, wherein the Hon'ble division bench has recorded the submission made by the bank that the physical possession was taken and the possession was handed over to the Auction purchaser, subsequently, the Hon'ble Court dismissed the Writ Petition as become infructuous on 25.01.2022. I also perused the typeset of papers filed by R-1, I find that the bank has issued 7^th E-Auction sale notice on 13.07.2021(P-40 & 41 of Common typed set of papers of R-1 dated 10.03.2022). But, the bank has given the date of Sale Notice is as 08.07.2021. But, the bank has failed to produce the copy of Sale Notice dated 08.07.2021. Only in the index page, it is mentioned as Sale Notice is issued 08.07.2021. But, no such copy of Sale Notice dated 08.07.2021 is available in the documents. In the Paper Publication, the date of Sale Notice is mentioned as 13.07.2021 only. Here, the bank has given two different dates to the Sale Notice in question. But, the bank has failed to give proper reply on this point of variation of date of impugned Sale Notice. This also creates strong doubt on the procedures followed by the Respondent Bank.

¶120

10. The Respondent Bank conducted the auction and R-2/R-3 was the highest bidder with sale consideration of Rs. 1,51,72,000/- and the property was registered in his favour and the sale certificate was registered on 13.01.2022. I also find that after adjusting the loan due of the Applicant of Rs. 76,56,320/-, the remaining sale value of the secured asset at Rs. 74,36,679.08/- has been deposited into the account of the Petitioner on 13.09.2021 vide document proof submitted by R-1 in page no.139. This fact was also not denied by the Applicant. However, R-1 was questioning the limitation of challenging CJM order and Auction sale notice filed by the Applicant, for which the Applicant produced judgement of Hon’ble Supreme Court Miscellaneous application No.21/2022 in MA No.665/21 in Suo motto WP (C) No.3/2020 reg. cognizance for extension of limitation with MA

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Page 16 of 20

¶122

SA 132/2022 & SA 103/2022

¶123

No.29/2022 in MA No.665/21 in Suo-moto WP (C) No.3/20, it is confirmed that during Covid-19 period, limitation was covered. Hence, issue no.2 is decided in favour of the Applicant.

¶124

The main grounds taken by the Applicant is that the E-auction Notice dated 08.07.2021 was not served to the Applicant, E-Auction notice not published in two leading news paper and the bank has not obtained the valuation Report before bringing the sale of the property. R-1 has also not affixed the Sale Notice in the conspicuous part of the property and they have not followed the procedures under Rule 8 (5) (6) & Rule 9(1) of Security Interest (Enforcement) Rules. Secondly, the auction purchaser (R2/R3) has not paid entire sale amount in time as prescribed in the Act. The Authorized Officer had not followed the procedures laid down under Rule 8(1), 8(2) and Section 14(Viii) of the SARFAESI Act. Further, the Petitioner had questioned various allegations, irregularities in issuance of two demand notices, two possession notices, pending of OTS proposals, and 7 sale notices etc.

¶125

11 . On the other hand, R-1 had made their submissions and also their Written Arguments and typesets of paper before this Tribunal. It is true that the Applicant did not make payments as agreed to with R-1 but on the perusal of records and documents, I find the following:.

¶126

(i) R-1 had issued the sale notice to borrower on 13.07.2021, but on verification of the documents (additional typeset page nos. 92-95 refers) produced by the R-1, it appears that, the Bank has annexed the part of the schedule property in the sale notice dated 16.12.2020 along with part of the terms and conditions (R-1 additional Typeset page nos. 94 & 95 - paras 5 to 7 refers) in which paras 1 to 4 were missing. Hence, the terms and conditions of the sale notice were incompletely annexed with 08.07.2021 sale notice. Hence, I come to the conclusion that, sale notice dated 08.07.2021 issued to the petitioner is improper and thus I find that averment of the R-1 in Reply statement is not supported by their document.

¶127

(ii) As per the said sale notice dated 08.07.2021, annexure of the terms and conditions para 7(j), the successful bidder shall deposit 25% of sale price (inclusive of EMD already paid) immediately on declaring him as the successful bidder and the balance amount within 15 days from the date of confirmation of sale by the secured creditor. But, R-1 has not annexed the said 25% proof of payment on the same day of auction conducted, after declaring the successful bidder, as it appears from perusal of page no.95 of additional typeset. Further, I find that, R-1 has informed that, entire payment was received on the very next day i.e, 18.08.2021 and confirmation

¶128

Page 17 of 20

¶129

SA 132/2022 & SA 103/2022

¶130

of sale and sale certificate was issued on the same day i.e, on 18.08.2021, it gives the clear picture about the conduct, which is unbecoming of the bank. As per the sale notice Terms and conditions, compliance of payment 25% on the same day of auction neither proved by auction purchaser or Authorized Officer. Both the respondents have not produced the proof of payment of the sale amount. Hence, this point also does not support the contention of R-1.

¶131

(iii) As per the terms and conditions of para 6(b) of sale notice dated 13.07.2021 EMD & last date of deposit of EMD is mentioned as Rs.15,16,000/- on 17.08.2021 till 4 PM. On perusal of sale notice, EMD dated 17.08.2021, it appears that, there is overwriting (page no.94 of Typeset dated 10.05.2023) which creates a serious doubts in the veracity of documents produced by the Respondent Bank. As per the sale notice publication (in Tamil), it was mentioned that, EMD deposit date is on 16.08.2021 till 4 PM vide additional typeset at page no.97. Comparing with the terms and conditions in the sale notice issued by the Respondent Bank dated 13.07.2021 and sale notice issued through paper publication, I find that, both are not matching and thus, the documents filed by the R-1 does not support his contention. Hence, I find strength in the submission of the Applicant and thus R-1 has completely violated the terms and conditions of sale as prescribed in the Act.

¶132

(iv) Further, in the Additional typeset filed by the Respondent Bank and typeset filed by the Auction purchaser, the English publication of sale notice is not connected with this case. i.e. the name of the party is mentioned as M/s. Anandam Note Books instead of M/s. Arun Offset Printers. End of the portion of Sale Notice is made ripped and not available to see. Moreover, all the details provided in the sale notice are not relevant to this case. And, also date of Sale Notice is not available (Respondent Bank additional typeset page no.96 & typeset filed by auction purchaser page no.34). Moreover, both the Auction purchaser and Respondent Bank have produced the same documents and as per the documents produced by the Respondent Bank, and the sale notice dated 2013 .07.2021 is incomplete.

¶133

(v) Another ground raised by the petitioner was that copy of sale notice was not affixed in the conspicuous part of the scheduled mentioned property. As per Rule 8(7) every notice of sale shall be affixed on the conspicuous part of the immovable property. As per the documental proof submitted by Respondent Bank, they have affixed only the possession notice and not the sale notice. Hence, issue no.1 is decided in favour of the Applicant.

¶134

Page 18 of 20

¶135

SA 132/2022 & SA 103/2022

¶136

(vi) Respondent Bank had issued the two demand notices and two possession notices even though, it is a procedural lapse, this Tribunal cannot interfere because, cause of action was held in the year 2017. But, after issuance of demand notice, the account was classified as NPA and subsequently the Applicant had paid a sum of Rs.79.5 lakhs, i.e, about 80% of the OTS amount and the remaining meager amount of OTS was pending. Since the OTS was between bank and the borrower, this Tribunal cannot interfere, but, at the same time, they have not followed the Section 14(viii) of the SARFAESI Act. If, the borrower has not made any repayment for the financial assistance in spite of the 13(2) & reply notice, the Authorized Officer is entitled to take possession of the secured assets under the provision of sub–section (4) of Section 13 read with section 14 of the principal act. I find that, in this case, Applicant had paid a sum of Rs.79.5 lakhs. Further, he wants to settle the outstanding dues, his willingness to settle the matter for the amount of Rs.20.60 lakhs on 08.12.2020 (page no.28 of SA 103/22) and again a fresh offer for Rs.32 lakhs on 30.03.2021 (page no.36) were neither considered nor rejected. Hence, Section 14 (viii) of the SARFAESI Act, was not followed before taking physical possession of the property.

¶137

12 . Having considered the entire facts and circumstances of the case and in view of the above discussions, I find that, the Respondent has been miserably failed to prove that they have followed the SARFAESI proceedings in conducting the auction sale of schedule mentioned property. It is well settled law that the bank is entitled to recover the loan dues amount without interference of court/tribunal, but they have to follow the procedures as prescribed in the SARFAESI Act, strictly. In the instant case, the documents produced by the Respondent Bank itself not corroborated their contentions. The documents show that, the bank has not followed the procedures of the SARFAESI Act and they had sold the schedule mentioned property. Hence, Issue No.3 is also decided in favour of the Applicant .

¶138

In view of the foregoing reasons, this Tribunal holds that the Applicant is entitled to get the reliefs as prayed for in both SA No. 132 of 2022 & SA No. 103 of 2022.

¶139

Dictated to PA (DK), taken down, transcribed, typed by her, corrected and pronounced by me in the Open Court in this the 29^th December, 2023.

¶140

In result,

¶141

(a) SA No.132/2022 Application is Allowed as prayed for. Sale held on 17.08.2021 in pursuance to the sale notice dated 13.07.2021 is not in accordance with law as there is violation, and therefore the sale is set aside by this Tribunal.

¶142

Page 19 of 20

¶143

SA 132/2022 & SA 103/2022

¶144

(b) SA No.103/2022 Application is allowed as prayed for and all the measures taken for possession of the secured assets by the Authorized officer through the Ld CJM order dated 16.12.2021 made in Crl.MP No.422/2021, is hereby quashed.

¶145

(c) All the expenditure incurred in the issuance of sale notice, paper publications and sale auction shall not be included to the loan account of Applicant.

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sd/-

¶147

(SEEMA SINHA) PRESIDING OFFICER

¶148

Dictated & Corrected by me sd/-

(SEEMA SINHA)

PRESIDING OFFICER

Typed by me

(D. Krishnaveni, PA)

SCHEDULE OF PROPERTY

¶154

All that piece and parcel of the property and building situated at Madurai District, Madurai Registration District in JR Madurai North, Madurai Town, Old Survey Ward No. 7, Block No.2 within municipal ward no. 26, in Keela Pattamar Street, a permanent house bearing Door No. 22 and comprised in with two blocks Survey No. TS.70, D/No. 22 abounded by

¶155

North: House Property in T.S. No. 78 of Kalyana Sundara Battar South: House Property in T.S. No. 69 & 82 of Shenbagathammal East: Keela Pattamar street West: House Property in TS No. 79 & 80 of Kalyana Sundaram and Chinna Mayil Battar measuring First block on the East East West on the North : 94 ft On the South : 91 ft North South : 18 ft Second block on the West East West : 5 ft North South : 28 ft and the said entire property Total extent 1805 Sq.ft.

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sd/-

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(SEEMA SINHA) PRESIDING OFFICER

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Page 20 of 20

A Manoharan v. Canara Bank

Case brief

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What did the court decide?

A Manoharan v. Canara Bank

Case brief

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What did the court decide?

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