Allowed

M S Microlite Industries v. Indian Bank

DRT14 Jun 2023SA/185/2022

Case brief

AI extract

What is this about?

The Appellants appealed the Debts Recovery Tribunal's setting aside a sale notice issued by the Respondent Bank under the SARFAESI Act, 2002, alleging violation of the mandatory 30-day notice period and improper service procedures. The Tribunal held that the bank failed to maintain the statutory 30-day notice period and lacks documentary proof of service or publication, constituting a violation of

What did the court decide?

Set aside the sale notice dated 09.09.2021 and consequential actions taken by the Respondent Bank.

M S Microlite Industries versus Indian Bank — Banking and Recovery | DRT (2023)

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IN THE DEBTS RECOVERY TRIBUNAL.L KARNATAKA

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AT BENGALURU

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Dated this the 14th day of June 2023

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Present Sri IMTIAZ AU

Presiding Officer

SA No.185/2022

BETWEEN:

M/s. Microlite lndustries

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Regd Office -

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Plot No.93-A4, Jigani Industrial Area

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2nd Phase, Jigani, Anekal Taluk Bangalore

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Repd by its Managing Partner

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Sri Radhakrishnan Harikrishnan

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S/o. 5ri Bhaskaran Pillai Radhakrishnan

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No.41, Harmony, 1't Phase, Classic Orchars

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Bannarghatta Road, Bangalore 560 076

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M,/s. Southern Rubber Products

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Shed No.A2l., Industrial Estate

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Bommasandra, Anekal, Bangalore

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Repd by its Managing Partner Sri Sudarshan No.99,6th Cross, BTM Layou! Bangalore 560 076

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.. APPELLANTS

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AND:

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The Chief Manager and Authorised^Officer Indian Bank^(E6twhile Allahabad Bank) Stressed Assets Management Branch^No.10

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l.'t Floor,lndian Bank Buildings

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K.G. Road, Bengaluru 560 009

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\ Z \

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The Branch Manager tndian Bank^(Erstwhile Allahabad^Bank) Indiranagar Branch r.ro.zr, chinmaya Mission Hospital Road Indiranagar II Stage, Hoysala Nagar Indir.nagar, Bengaluru, Karnataka 560 038 .. RESPONDENT

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SA No.185/2022

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Counsels on record/Aopeared for: Appellants : Smt. Vijayakumari R. Respondent : Sri Vijayakumar V.

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FINAL ORDER

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The Appellants have filed the present Appeal under Section 17(1) of the SARFAESI Acl, 2002, seeking for quashing/setting aside the notice of intended sale (Annexure-A7) dated 09.09.2021 issued by the Respondent Bank, pursuant to which the sale proposed to be held by way of^public tender/auction adopting the auction mode of the schedule^property on

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28.O9.2O2L for recovery of Rs.4,45,68,905.12.

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The facts leading to the present Appeal in a nutshell are that the^first Appellant had approached the second Respondent Bank for a loan of^Rs.2.00

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crores to facilitate their business in 2014 and to avail the loan, the^second Appellant had mortgaged its own^property, the schedule^property, described as Item No.1 in the appeal. Accordingly, the Applicant Bank has sanctioned working capital limit of Rs.2.00 crores to the first Appellant on 24.01.2014 and thereafter, based on the application of the first Appellant, the second Respondent Bank has enhanced the limit of working capital to Rs.3.50 crores from the existing limit of Rs.2.00 crores. To top up the working capital ofthe limit, the partners-cum-mortgagors-Guarantors of the second Appellant have also mortgaged theirjoint property to the Respondent Bank.

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3 SA No-185/2022

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The Appellants have contended that on 28.02.2020,^{withoutgiving}

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any breathing time to the Appellants, the^{Respondent Bank has issued the} Demand Notice under section 13(2) of the SARFAESI^{Act-2002 informing the} Appellants that the account has become NPA on^{27.02.2020 and the total} outstanding amount payable by the Appellants is Rs.3,63,83,513/-.^Though the flrst Appellant has replied to the Demand^{Notice dated 28.02.2020} seeking to drop the^proceedings based on the^COVID-19 guidelines/relaxations issued by various courts, Central and^state Governments but the Respondent Bank^{has not respondedto the replyletter} or granted any moratorium and went on^{proceeding with themeasures} initiated.

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The Appellants further contended that on^{12.02.2021., the}

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Respondent Bank further issued the Possession^{Noticeon item No'1 in the} schedule^property informing^{the Appellantsto} pay the total outstanding amount of Rs.4,13,31.,969/-.^{The first Appellant} has also approached the Respondent Bank on 11.09.2021^{with an OTSproposalof theRs,.3.55crores} but the Respondent Bank without considering^{the proposalhas affixed the} intended sale notice on the^{it€m No.L} of the^{schedule propertyon} 09.09.2021, which was not served^{to the Appellants and the Appellantscame} to know about it only at the time^{of the sale of the item No.2of the schedule}

SA No.185/2022

property, as the said intended sale notice was affixed by the Respondent Bank on a closed premises. Since the Appellants have not received the said intended sale notice, the Appellants could not approach this Tribunal for redressing their grievances.

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The Appellants contended that the item No.2 of the schedule property is also placed for sale, the outstanding amount shown ln the notice is Rs.4,45,68,906.12, whereas the^possession of the said^property is still with the Appellants.

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The Appellants contends that the sale notice date 09.09.2021, which is under challenge, seems to be the second sale notice issued^{by the} Respondent Bank but the Appellants have not received any sale notice^prior to the notice under challenge. The Appellants while^going through^thesale notice of item No.2 of the schedule^property, one of the Partner-cummortgagor-guarantor of the second Appellant has informed to the first Appellant about the sale of the item No.1 of the schedule^property and by the time the first Appellant has approached the Respondent Bank the Respondent Bank has informed the first Appellant that the item No.1 of the schedule property has already been sold out by them on 28.09.202L. Moreover, the Appellant have also filed their appeal/petitions before the DRT-I Ernakulum and before the Hon'ble High court of Kerala seeking reliefs

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SA No.185/2022

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and the Hon'ble High Court of^{Keraladirectedthe Respondentsto file the}

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detailed statements.

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The Appellants have alleged that the^{item No.1} of^{the schedule} property was sold by the Respondent Bank for a^{meageramountof less than} the reserve^price and till date of^{filing the appeal, the salecertificatehas not} been issued to the Auction^{Purchaser,both the schedulepropertiesof item} No.1 and 2 are^purchased by the same^{AuctionPurchaser,the Respondent} Bank has got Rs.3.4O crores as^{the total proceeds of the saleproceeds. Hence} the Appellants suspects that the^{Respondent Bank had collusionwith the} Auction Purchaser, illegally sold^{the propertiesat undervalueto the same} Auction Purchaser etc.,^{prays to set asidethesale and allowthe appeal as} prayed for.

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Upon service of notice,^{the RespondentNo.L has enteredtheir} appearance through its^{Counsel and subsequentlyfiled its detailed} objections to the Appeal.^{Accordingto the RespondentNo.1,the appeal filed} by the Appellants is a^{misconceived one,baseless, irreverent, and the certain} averments and allegations^{are not true to thefacts,as statedby the} Appellants, not maintainable^{both in facts and in law liableto be dismissed} and hence^prays to dismiss^{the appeal in limine.}

SA No.185/2022

The first Respondent Bank in their objections under para 2 states

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that the averments of the Appellants in their appeal under^paras 1 to 4 are substantially correct and hence the Respondent Bank No.1 has no comments on it. except denying the claim that the Appellants were doing business since long and managing/maintaining the loan account till 2020, whereas the loan account was irregular, even^prior to 2020 and hence become as NPA.

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The Respondent Bank contents that with regard to the^para 5 of the appeal, though one of the Appellant's has replied to the Demand^Notice daled 28.02.2020, after a lapse of nearly four months on 09.06.202O^whichis

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a highly belated one, without raising any legitimate disputes/facts^and figures /containing any material disputes etc., in the said Demand^Notice and hence the Respondent Bank felt that no reply^{was warranted.}

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The Respondent Bank states that the Respondent Bank^hasissued the Possession Notice dated f2.02.2021-, after completion of almost^{one year} from the date of the Demand Notice dated 28.02.2020^(Annexure R1)^and

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hence the claim of the Appellants that the Respondent Bank^{has not} considered three months moratorium, due to COVID-19 are not true^{to the} facts and they denied the entire contents of the para 5 of the appeal.

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With regard to the^para 6 of the appeal, the Respondent Bank^has also contended that the facts in the^para are not true, as the alleged^OTs

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7 sA No.18s/2022

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proposal of Rs.2,56 cror6 dated 11.09.2021^{was a meagreamountagainst}

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the claim of R43,63,83,513/-,^{as per the Demand Notice,hencethesame} was not acceptable to the^{RespondentBank.The other contentsof the} Appellants that the Appellants^{had a buyer to purchase the property for} Rs.3.50 corers and still^{he is waiting etc.,are also not trueand thereby} proceeded with sale notice dated 09.09.2021,^{by affixing on the property in} question and by serving to the Appellants^{through other modes, in} accordance with the^law.

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With regard to the^{para7 and 8 of the appeal, theRespondentBank} contented that atl the allegations^{of the Appellantsthat the auctionsale} notice was not served,^{sale wasconductedwithout giving30 days' notice, the} property was sold for lesser^{price etc. are not trueand false,all these are} made as an afterthought,^{there is no merit on the allegations,the} Respondent Bank has^{followedall the mandatory procedures beforeinitiating} the measures and hence^{deniedthese paras of the appeal.}

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The Respondent^{Bank further contendedin their objectionsthat}

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para 9 of the appeal, the Respondent^{Bank hasno comments, whereas} on

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para 10 ofthe appeal, the Respondent^Bank

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8 SA No.185/2022

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The Respondent Bank has stated in their objections that they have no

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comments on the para 9 of the Appellants, whereas they denied the contentions of the Appellants in para 10 of the appeal and states that the recovery proceedings under SARFAESI Act especially the auction sale was conducted meticulously following the rules, the^property was sold to the best competitive price that the Appellants fetch for the properties.

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The Respondent Bank submits that nothing survives in the belated appeal of the Appellants, none of the^{prayers/relief} soughtⁱⁿ the^aPpeal survives for consideration and states that the baseless avermenG^and untenable grounds, urged by the Appellants in their appeal, no^primafacie ground is made out, appeal is barred by time hence prays to dismiss the appeal with exemplary costs.

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On the above background, I have gone through records of the^case and heard the arguments advanced by Learned Counsels appearing for both

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the parties and the following points arise for my consideration:

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a) Whether the Appellants have made out the case to allow the appeal? and

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b) To what reliel the parties are entitled?

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sA No.185/2022

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Accordingly, I pass following order:

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REASONS

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A perusal of the records reveal that the Res pondent Ba n k has in itiated the recovery proceedings under the SARFAESI ACI-2OO2, issued the Demand Notice under section 1-3(2) on 28.O2.2O2O and on receipt of the same the first Appellant has replied to the Respondent Bank to drop the proceedings. which is annexed as Annexure 43, the Possession Notice dated L2.o2.2021 issued under section 13(4) was served to the borrowers, the sale notice dated 09.09.2021 was affixed on the first item of the schedule property, fixing the public tender/auction on 28.O9.2021. without serving it to the Appellants and accordingly, the Respondent Bank had went on for sale of the schedule property on auction.

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on this background, the Appellants have filed this present SA, stating that the Respondent Bank^has not issued any sale notice and also claims that no

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10 SA No.185/2022

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paper publication was made by the Respondent Bank in respect of the sale notices dated 09.09.2021. The Respondent Bank has conducted the auction sale on 28.O9.2O2L, whereas the sale notice was issued on 09.o9.2021..

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As such. the Authorised officer of the Respondent Bank did not serve the sale notice of having clear 30 days'time period to the Appellants^for the first sale of the schedule property. Having regard to the above, the Respondent Bank has admitted^{the fact} that the auction sale of the schedule^proPertywas conducted on 28.09.2021'.

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Thereafter, according to the Respondent^Bank, the confirmation of sale was done on L4.1-2.2021 and the issuance of the sale certificate took^place on L9.OL.2022.

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The above said sale notice was also annexed by .the Appellants^{as Annexure 47. In this regard, the rule} 8(6) of the SARFAESI Act-2OO2, interpreted by the

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SA No.185/2022

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Hon'ble Supreme Court^{inMathew VargheseVs. M-} Amrutha Kumar case, which^{stipulates that the 30 days'} notice period mentioned therein^{is for the purpose of} enabling the borrower to^{redeem theproperty.} Therefore, this statutory^notice Period^{of 30days,} before conducting the^{auction is sacrosanctand if any} deviation from it, would^{curtail the statutory right of} the borrower for redeeming^{the schedule proPerty.}

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Thus, the secured creditor bound^{to afford to the} borrower, a clear 3O days'^{notice period for the first} sale, as per the rule 8(6) of^{SARFAESIAct-2002, to} enable the borrower to^{exercise the rightof} redemption. In the case on^{hand, it is an admittedfact,} that the Respondent^{Bank has not maintained a clear 3o} days' notice^p e riod, as^{required under ru le 8(6) of the} SARFAESI Act-2OO2.^{The said sale notice was issued on} 09.Og.2o2f, stating that^{the auction of theschedule} property will be held on 2A.O9.2021^andthe Respondent Bank do^{not have any documentary proof} to show and claim that^{the said auction sale was} !

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SA No.185/2022

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published in the newspapers, as required under the existing rules under SARFAESI Act-2OO2. There is also nothing to show that the impugned sale notice was of 15 days for subsequent sale and the Respondent Bank has failed to show any documentary proof/photographs for having affixed the sale notice on the scheduled property.

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Therefore, there is clear violation of the existing rules and statutory mandate falls^under SARFAESI Act-2OO2, which fictitious the action and exercise undertaken by the Respondent^Bank in^the above context. The three methods of serving, affixing and publishing the sale notice as^provided under^the law'is mandatory, and in this case, the requirement^was tampered with by the Respondent^Bank.

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Accordingly, the appeal filed by the Appellants deserves to be allowed to the extent of setting^aside the impugned sale notice dated O9.09.2o21^(Annexure A7), issued under the rule 8(6) of the SARFAESAI Act-

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sA N0.185/2022

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2OO2 and the consequential action taken by the

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Respondent Bank.

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ORDER

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In the result S.A.No.185/2022 is allowed by setting aside the impugned sale notice dated 09.o9.2021 and the consequential action taken by the Respondent Bank.

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However, this order shall not preclude the Respondent Bank from

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initiating fresh action under the aforesaid procedures in

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accordance with the existing rules and the law.

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Interim order, if any, stands vacated, Pending IAs, if any, also

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stand closed.

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(Dictated to the Stenographer, after its transcription and necessary corrections, signed and pronounced by me in the Open Court on this the 146 ol rune, 2023)

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\ ,"D Y iv'o'' oMrulz^Au) PRESTDING OFRCER DRT-!, Bengaluru

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Unni

M S Microlite Industries v. Indian Bank

Case brief

What is this about?

What did the court decide?

M S Microlite Industries v. Indian Bank

Case brief

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