Dismissed

Amritsar Cardiac and Implants Pharmacy v. Punjab National Bank

DRT17 Oct 2023SA/207/2023

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal dismissed a Securitization Application filed by a borrower challenging a bank's auction sale of mortgaged property. The Tribunal held that the application, filed 49 days after the sale date, was time-barred under Section 17 of the SARFAESI Act, noting that excluded time from the High Court did not suffice without a condonation application.

What did the court decide?

The Securitization Application challenging the sale under Section 13(4) of the SARFAESI Act was dismissed as time-barred.

Amritsar Cardiac and Implants Pharmacy versus Punjab National… — Specific Performance | DRT (2023)

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SA No.207/2023

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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SA No.207/2023 Amritsar Cardiac & Implants Pharmacy and others Versus Punjab National Bank and others

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17.10.2023 Item No.69

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Argued by: Sh.MS Khaira, Senior Advocate alongwith Sh.Ripudaman Singh Sidhu, Counsel for the Applicants. Sh.VK Sachdeva & Gaurav Goyal, Counsel for respondent No.1/bank.

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Sh.Tarlok, Counsel for respondents No.2 and 3.

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Amritsar Cardiac & Implants Pharmacy and others (Applicants) have filed

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the present Securitization Application under Section 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, against Authorized Officer, Punjab National Bank and others (Respondents).

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Whereas, applicant No.1 is a proprietorship concern, owned by applicant No.2; Applicant No.3 is the guarantor. Admittedly, vide sanction letter dated 16.10.2017, Punjab National Bank (PNB) had sanctioned CC Limit of Rs.50 lacs to applicant No.1. To secure the loan, applicant No.1 had created hypothecation of stocks and debts. Apart from this, applicant No.3 was the guarantor for the loan, who had also created mortgage of his property:-

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Land & Building situated at Mauja Chabal, Tehsil Kasauli, District Solan, Himachal Pradesh, bearing Khasra No.137, Khata/Khatoni No.27/31, Total area measuring 10 biswa, registered vide title deed No.17, dated 01.05.1998, in the name of Mr.Mohinder Pal Singh son of Shri Khazan Singh, situated at Mauja Chabal, Tehsil Kasauli, District Solan, Himachal Pradesh.

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Applicants did not make the repayment of the loan and PNB initiated the SARFAESI proceedings. On 18.09.2020, respondent No.1 issued the notice under Section 13(2) of the SARFAESI Act, which was sent by registered post on 24.09.2020. Respondent No.1 informed the applicants that their account had been declared NPA on 11.08.2020. Thereafter, on 29.10.2021, respondent No.1 issued the notice under Section 13(4) of the Act. Respondent No.1 put up the secured asset on auction number of times. However, no bidder came forward with any bid. Ultimately, on 06.05.2023, respondent No.1 issued the sale notice, for 24.05.2023 with a reserve price of Rs.1.26 crores. The notice was sent on 08.05.2023. In

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SA No.207/2023

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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pursuance to the same, respondent No.2 and 3 gave the bid of Rs.1.28 crores, which was accepted by respondent No.1. Aggrieved by the action of respondent No.1, in auctioning the property, on 10.08.2023 applicants filed the present SA.

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Applicants, in the impugned application, have alleged that applicant No.2 is a highly qualified cardiac surgeon. He had opened an hospital in the name of Holy Heart Hospital. To aid the daily needs of the said hospital, he also opened an implants pharmacy under the name and style of M/s Amritsar Cardiac and Implants Pharmacy. He was regularly making the payment of the bank dues. However, there arose some dispute between him and Jatinder Singh, in respect of the land of the property taken on lease for Holy Heart Hospital and there was litigation. On 20.02.2020, Jatinder Singh forcibly took the possession of the OPD area of the hospital. Again on 06.03.2020, Jatinder Singh came to the hospital and took the possession of the remaining portion of the hospital, alongwith medical equipment etc. and put up locks on the entire hospital. He filed the complaint with the police. However, no FIR was registered. He had sent many complaints to the police authorities. However, without any result. He had also filed CRM-M-298162022 in the Hon’ble Punjab and Haryana High Court, for directing the police to register the FIR. In fact, Jatinder Singh had already taken over the possession of the hospital and the pharmacy, in connivance with the bank officials. It is alleged that on the one hand, bank allowed Jatinder Singh to take possession of the hospital and the pharmacy and on the other hand, it declared the account NPA on 11.08.2020, against the RBI guidelines. This fact came to his notice when applicant No.2 visited the branch on 29.08.2020. Prior to that, no intimation had been given to him, though, he had visited the branch on number of occasions. He was told that a sum of Rs.1.50 lakhs was overdue, which he deposited with the bank. On 31.08.2020, he again sent an email to the bank and supplied all the information sought by the bank. He apprised the bank that Jatinder Singh had taken illegal possession of the hospital. He also requested the bank to provide all the relief measures provided by the Government of India and Reserve Bank of India to the borrowers. However, he was not granted any relief. On 30.05.2023,

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SA No.207/2023

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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applicants No.1 and 2 were shocked to get a message that their account had been credited with an amount of Rs.19.40 lacs. Vide email of the even date, they requested the bank to provide the information about the source of this funds. On 03.06.2023, they (Applicant No.1 and 2) again sought various details from the bank. However, bank failed to provide the same. On 10.06.2023, applicants No.1 and 2 were shocked to get a caveat notice from respondents No.2 and 3, through their counsel that they have purchased the property mortgaged in favour of respondent No.1, on 24.05.2023. Meanwhile, the RTI application dated 03.06.2023 filed by them was rejected by respondent No.1, vide letter dated 17.06.2023, which was received by them on 24.06.2023. Again on 29.06.2023, they requested respondent No.1 to provide the details. Another RTI application was moved on 04.07.2023. Since, respondent No.1 was not providing any details sought by them, they approached the District Magistrate, Solan, where they were shocked to know that respondent No.1 had already moved an application under Section 14 of the SARFAESI Act. They came to know that respondent No.1 had moved an application on 21.06.2023 before the District Magistrate, Solan on false and frivolous grounds. On 19.07.2023, they filed written submissions before the District Magistrate, where they came to know for the first time that respondent No.1 has auctioned the secured asset and also issued the sale certificate on 22.06.2023. On 07.08.2023, they got the reply dated 25.07.2023 from respondent No.1, in respect of the RTI application moved by them, on 29.06.2023 and 04.07.2023, informing them that the sale certificate has already been issued under the SARFAESI Act. Thereafter, they filed CWP No.4612-2023 before the Hon’ble Himachal Pradesh High Court, which vide order dated 26.07.2023 relegated the parties to this Tribunal. Applicants, in the present SA, challenged the SARFAESI proceedings conducted by the bank, before this Tribunal, on the following grounds:-

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i. That applicant No.1 an MSME Unit. As per the guidelines of the RBI, their case for rehabilitation should have been placed by the

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SA No.207/2023 DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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bank before the designated committee. However, their case was never placed before the said committee for restructuring. ii. No notice under Section 13(2) of the SARFAESI Act was served upon them. Respondent No.1 falsely represented before the DM in the application under Section 14 of the Act that the said notice had been duly served upon the applicants. Respondent No.1 in the application under Section 14 of the Act falsely represented before the DM that they had served the notice under Section 13(2) of the Act at the address of Holy Heart Hospital. Applicants No.1 and 2 have alleged that in fact Jatinder Singh had already taken the possession of the hospital from them on 20.02.2020, forcibly. Respondent No.1 is also claiming that it had served the notice under Section 13(2) of the Act to applicant No.2 at the address of House No.1006, Sector 36-C, Chandigarh. In fact applicant No.2 had sold this house way back in 2018 and respondent No.1 was aware of the same. On the envelope the address of Sector 36, Chandigarh it had wrongly mentioned the PIN Code as 160017. Further, respondent No.1 is claiming that it had served the notice under Section 13(2) at House No.280, Dream City, Manawala, Amritsar, which is not the correct address and respondent No.1 was fully aware of the same. On 31.08.2020, he had informed the bank that he had been residing at House No.486, Dream City, Manawala, Amritsar. Despite this, respondent No.1 sent him the notices at the wrong address. Respondent No.1 also issued the notice to applicant No.3 at the wrong address of Noida. In fact, applicant No.3 was residing at House No.351, Sector 44-A, Chandigarh. Applicants have alleged that on 01.04.2023, the DM also wrote to respondent No.1 to provide the proof of delivery of the notice under Section 13(2) and again on 06.06.2023 a letter was sent to them. However, respondent No.1 failed to provide the

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SA No.207/2023

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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same. Applicants have alleged that no notice under Section 13(2) of the Act was ever served upon them.

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iii. Applicants were not served with the possession notice. iv. No 30 days’ notice as mandated under Rule 8 of the Security Interest (Enforcement) Rules, 2002 was ever served upon them.

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v. Even the sale notice dated 06.05.2023 was posted on 08.05.2023 and the bank fixed up the auction for 24.05.2023. It is also alleged that, whereas, notice under Section 13(2) of the Act was served upon the address of applicant No.1 at House No.280, Dream City, Manawala, Amritsar; the sale notice dated 06.05.2023 was served upon House No.486, Dream City Jandiala Guru. However, the correct address is House No.486, Dream City Manawala Khurd, Amritsar, Punjab.

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vi. The bank sold the secured asset at a throwaway price. The subject property is not a land. In fact, there is an upscale building comprising 7 flats, having all the modern amenities, the current market value of which is Rs.3,44,19,000/-. However, bank sold it for Rs.1.28,00,000/- only.

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vii. The bank had sufficient security as hypothecated stocks, worth Rs.1.50 crores. However, bank did not take the possession of the primary security and sold the property.

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viii. Applicant No.2 is a bona fide borrower. When he was informed that a sum of Rs.1.50 lacs was overdue, he had deposited the same.

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ix. The bank had not extended the moratorium period as per RBI guidelines.

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x. The security interest was not registered with the Central Registry and without the same the bank could not initiate the SARFAESI action.

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xi. The applicants had taken the flat on lease for 99 years, vide registered lease deed No.1925, dated 28.10.2003. Accordingly,

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SA No.207/2023

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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applicant No.2 cannot not be evicted as the lease was prior in point of time to the creation of the security interest. xii. The sale notice did not contain the proper description of the secured asset. xiii. Whereas, respondent No.2 and 3 informed the applicants that they had purchased the property on 10.06.2023; the bank has issued the sale certificate on 22.06.2023. Applicants were not provided with the complete information in respect of the sale of the secured asset. On these facts, applicants filed the present SA.

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Respondent No.1, in the reply, denied the case of the applicants. Respondent No.1 has alleged that the account of the applicants was not regular. The primary security in the present case was hypothecation of stocks and book debts. The drawing power in the CC Limit account depends upon the stocks. However, in the present case, there was no stock available. Applicant No.2 also did not deposit the sale proceeds with the respondent bank. In fact, there was no transaction regarding the business in the CC Limit except with the sister concern of the applicant, namely M/s Amritsar Health and Hospitality Services. There were many irregularities in the loan account. Applicants had failed to submit the documents as required for the renewal of the limit. Applicants had not supplied the stock statement. Vide letter dated 06.07.2020, applicants were asked to provide the details given below:-

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i. There are irregularities in the loan account of the applicant and requested to remove the all irregularities within a week.

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ii. The loan account was due for renewal and also requested to submit ABS as at 31.03.2018, 31.03.2019 and 31.03.2020 and estimated balance sheet as on 31.03.2021.

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iii. You have not submitted the stock statements from the month of December 2019 onwards.

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iv. Sale proceeds are not being routed through the account and there are zero credit submissions after 01.04.2020.

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v. There is outstanding amount of Rs. 52,22,703.31 as on 03.06.2020 which is overdue by Rs. 2,20,703/-.

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SA No.207/2023

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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Despite receiving this letter, applicants did not regularize the account. The account of the applicants slipped into Non-performing Assets on 11.08.2020. The CC Limit of the applicants also remained overdrawn. Applicants had submitted the stocks statement on 29.11.2019. Thereafter, no stock statement was submitted. On 24.09.2020, they had sent a notice under Section 13(2) of the Act by registered post to the applicants. Though, applicants received the same, they did not make the repayment within 60 days. Accordingly, on 29.10.2021, respondent bank issued notice under Section 13(4) of the SARFAESI Act and on 02.11.2021, the notice was also published in the two newspapers. The bank had put up the secured asset on auction on 15.02.2022; 15.03.2022 and 28.03.2023 also. However, those auctions were not successful. Finally, on 06.05.2023 bank issued the sale notice, fixing the auction for 24.05.2023 with the reserve price at Rs.1.26 crores. This notice was sent by registered post on 08.05.2023, which was published in the two newspapers on 06.05.2023. The property was sold for Rs.1.28 crores. On 22.06.2023, the sale certificate was issued. Respondent No.1 further alleged that applicant No.2 is part of M/s Amritsar Health and Hospitality Services. The said firm had availed the loan facility of Rs.585.85 lacs. On 08.07.2019, the loan account of M/s Amritsar Health and Hospitality Services was also declared NPA. On 22.07.2019, respondent No.1 the issued notice under Section 13(2) of the Act to applicant No.2, informing them that a sum of Rs.3,94,03,021.97p was due. Applicant No.2 had also filed CWP No.26248-2019, before the Hon’ble Punjab and Haryana High Court in respect of account of M/s Amritsar Health and Hospitality Services, wherein the Hon’ble High Court directed them to deposit Rs.1.00 crore. However, applicant No.2 failed to deposit the same. Respondent No.1 alleged that SA is time barred. It is alleged that in this case, notice under Section 13(2) was issued on 18.09.2020 and notice under Section 13(4) was issued on 29.10.2021. Thereafter, bank put up the property on auction on number of occasions. The present SA was filed on 10.08.2023, which is time-barred. It is also alleged that even if the time period granted by the Hon’ble Himachal High Court is taken into consideration, the SA is time-barred.

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SA No.207/2023

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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In substance, respondent No.1 has alleged that it has carried out SARFAESI proceedings properly and served the notices upon the applicants. Despite that, applicants did not make the repayment of the loan and respondent No.1 was left with no other alternative except to sell the secured asset and it is submitted that the SA be dismissed.

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Respondents No.2 and 3 have alleged that they had participated in the auction and are bona fide purchasers. They had given highest bid and their bid was accepted by the bank. They had also deposited the balance sale consideration and bank has also issued the sale certificate in their favour. They alleged that the SA be dismissed.

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I have heard Mr.MS Khaira, Senior Advocate assisted by Mr.Ripudaman Singh Sidhu, counsel for the Applicants; Mr.VK Sachdeva, counsel for respondent No.1/Bank and Mr.Tarlok, counsel for respondent No.2 and 3.

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Drawing my attention to the application as well as the material placed on the record, Mr.Khaira, Senior Advocate, counsel for the applicants has submitted that sale conducted by respondent No.1, on 24.05.2023, is illegal and is liable to be set aside. He further submitted that notices issued under Section 13(2) and 13(4) of the SARFAESI Act were not served upon the applicants. Applicants were never informed that their account had been declared NPA. Though, the bank claims that it had sent many notices to the applicants, yet, all the notices were sent at the wrong address deliberately so that the applicants may not get to know about the same. Respondent No.1 also deliberately misstated the facts before the DM, Solan. No notice of sale was served upon them. Even after auction, respondent No.1 never informed them that the property has been sold. Mr.Khaira submitted that applicants had made many efforts with the bank to get the information. Applicants had moved many applications under RTI Act. However, respondent No.1 rejected the same on flimsy grounds that the identity of the applicants had not been established. Mr.Khaira submitted that all the SARFAEI proceedings be quashed and the sale be set aside.

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SA No.207/2023

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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Per contra , Mr.VK Sachdeva, counsel for respondent No.1 has argued that the present SA is time-barred. The sale was conducted on 24.05.2023 and the present SA was filed on 10.08.2023. Under Section 17 of the SARFAESI Act, applicants can challenge the same within 45 days. However, the application was moved beyond that. Applicants have not filed any application for condonation of delay. Applicants had approached the Hon’ble Himachal Pradesh High Court, which vide order dated 26.07.2023 relegated the parties to this Tribunal. The Hon’ble Himachal High Court granted them time from the date of filing of the CWP, till the date of order. Even if this period is excluded from consideration, the SA is time barred. Mr.Sachdeva submitted that respondent No.1 had carried out the SARFAESI proceedings properly. They had issued the notice under Section 13(2) of the Act to the applicants, which was duly served upon them. They had issued notice under Section 13(4) of the Act, which were also duly served upon the applicants. They had issued the sale notice on 06.05.2023, fixing the auction for 24.05.2023 and sent it to the applicants on 08.05.2023. It was not the first sale. Accordingly, applicants were entitled to only 15 days’ notice. The sale notice was duly published in two newspapers. However, despite that, applicants did not make the payment of loan. Accordingly, bank sold the secured asset and recovered its dues. The bank also credited the account of the applicants with the excess sale consideration. Mr.Sachdeva submitted that there is no merit in the present SA and the same be dismissed.

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I have considered the rival contentions.

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As per Section 17 of the Securitization Act, an aggrieved person can file a Securitization Application before the DRT, within 45 days from the date any measures are taken by the bank. In this case, bank had sold the property on 24.05.2023 and the present SA was filed on 10.08.2023. Whereas, the case of the applicants is that they were never served with any notice of sale; the case of the bank is that auction notices were duly served upon the applicants; affixed on the property and were also published in the newspapers.

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SA No.207/2023

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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Admittedly, the applicants had earlier filed writ petition before the Hon’ble Himachal High Court, which was dismissed. However, the Hon’ble High Court ordered that in case the applicants approach this Tribunal within 15 days, the time from the date of filing of the CWP till the passing of the order would be excluded. Before the Himachal High Hon’ble High Court, applicants alleged that they had got a letter from the purchasers on 10.06.2023 that they had purchased the property in auction. This letter was served upon them on 12.06.2023. This clearly shows that applicants had come to know on 12.06.2023 that their property had been sold. However, they filed the present SA on 10.08.2023. Even if the limitation is counted from 12.06.2023, the limitation for filing the SA expired on 27.07.2023. They had filed CWP on 17.07.2023 and it was disposed of on 27.07.2023. Even if this 10 days period is excluded, the limitation ended on 06.08.2023. However, the SA was filed on 10.08.2023. No application for condonation has been filed by the applicants. Since, present SA is time-barred, the same is hereby dismissed .

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All the pending IAs, if any, are also disposed of, accordingly. File be consigned to record room after due compliance.

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Pronounced in open court. MANOJ/17.10.2023

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(A S Narang) Presiding Officer DRT-I, Chandigarh

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Amritsar Cardiac and Implants Pharmacy v. Punjab National Bank

Case brief

What is this about?

What did the court decide?

Amritsar Cardiac and Implants Pharmacy v. Punjab National Bank

Case brief

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What did the court decide?

What the court decided

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