DRT-1 set aside an applicant's claim challenging multiple SARFAESI proceeds including a recent property auction. The tribunal held sale notices were validly served and published, the reserve price was not unduly low, and prior litigation barred the claims.
The Securitisation Application No.225 of 2022 was dismissed with no costs awarded.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
Fair Order
IN THE DEBTS RECOVERY TRIBUNAL - 1 AT ERNAKULAM
DATED THIS 20th DAY OF APRIL, 2023
PRESENT: Su. WILLYAHM, B.Sc., M.L. [DISTRICT JUDGE - Retd] PRESIDING OFFICER
S.A No.225 of 2022
Between
Francis Andrews Xavier, S/o. Andrews, “Lovely Land”, Kavamkulam, Puthiyathura, Neyyattinkara, Thiruvananthapuram.
---Applicant
And
---Defendants
SA No.225 of 2022
This Securitisation Application coming on 06.03.2023 for final hearing before me in the presence of Mr. P. Shrihari, Advocate for Applicant and Mr. Paulochan Antony, Advocate for Defendants 1 and 2 and Mr. Albin A Joseph, Advocate for Defendant No.3 and upon hearing the arguments of Counsels for all the parties and having stood over for consideration till this day, this Tribunal delivered the following:
O R D E R
The applicant had availed Housing Loan to the tune of Rs.1,16,90,323/- from the 2nd defendant on 29.08.2011. The 2nd defendant had obtained the original title deed from the Registrar’s office as security for the loan availed. At the time of submitting the loan applications and execution of the Sale Deed and obtaining the title deed from Registrar’s office, the applicant was not in India. At the time of executing the Sale Deed, there were tenants in all the rooms and the house. The applicant was employed abroad and due to global recession, his salary was reduced to 50% and as such he could not repay the loan amounts. Hence, the property covered by the Sale Deed No.4450/2011 of Alangad SRO is not a secured asset and the defendants have no security interest over the said properties. Bank declared the loan account as NPA on 09.05.2012. The 1st defendant issued a Demand Notice dated 19.07.2012 under SARFAESI Act, demanding a sum of Rs.1,22,80,455/- which was not delivered to the applicant. Applicant repaid an amount of Rs.48,50,000/- and requested the defendants to redeliver the property, but issued Possession Notice under Section 13(4) which was also not delivered to the applicant.
The 1st defendant thereafter approached the Hon’ble CJM Court, Ernakulam by filing application under Section 14 of SARFAESI Act. The Hon’ble CJM Court, Ernakulam appointed an Advocate Commissioner and the physical possession of the property was taken on 04.11.2014. True copies of (i) Section 14 application, CMP No.1403/2014, (ii) CMP No.2800/2015, (iii) Objection in CMP No.2800/2015 and (iv) Order dated 09.11.2015 in CMP No.2800/2015
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are produced herewith as Annexures-A1, A2, A3 and A4 respectively. Assailing the measure under Section 14, applicant filed W.P. (C) No.5154/2016 before the Hon'ble High Court of Kerala. True copy of the judgment dated 23.01.2017 in W.P. (C) No. 5154/2016 is produced herewith as Annexure-A5.
As per Annexure-A2, applicant had requested to redeliver the possession of the property, but however, Hon’ble CJM Court, Ernakulam without considering the matter meaningfully, dismissed the same as per Annexure-A4 order. Annexure-A1 Section 14 application is per se illegal and that the defendants have no security interest and that none of the 9 ingredients to be declared in an affidavit in adherence to the proviso to Section 14(1) of SARFAESI Act are not in Annexure-A1.
The 1st defendant thereafter issued a Sale Notice dated 01.10.2019, Annx.A6 for the sale scheduled to be held on 05.11.2019 by fixing the reserve price at Rs.1,55,00,000/-. Challenging Annx.A6 sale notice, applicant instituted S.A. No.308/2019 before this Tribunal, which is pending, wherein 1st defendant filed written statement, Annx.A7. True copy of the demand notice dated 19.7.2012 issued by the 1st defendant is produced as Annexure-A8. Without issuing notice before classifying the loan account as NPA, without giving copies of the loan agreements and documents, defendants classified the loan account as NPA on 09.05.2012.
Annexure-A8 Demand notice cannot be treated as Demand Notice as it was not issued by the secured creditor. Since the details of the claim showing the progressive total of the claim and details of the secured asset are conspicuously absent, Annx.A8 Demand Notice is illegal. The said contention of the applicant is fortified by the judgment dated 30.07.2010 of Calcutta high Court in the case of Madhu Sudan Ghosh Another Vs. The Axis Bank Ltd. Others and judgment dated 17.08.2020 of Division Bench of Gujarat High Court in the case of Punjab National Bank Vs. M/s. Mithilanchal Industries Pvt. Ltd.
The 1st defendant thereafter issued sale notice dated 20.09.2021, Annx.A9 along with notice dated 09.09.2021 enclosed thereto for the sale to be conducted on 22.10.2021, for the sale of the aforesaid properties, at a reserve price of Rs.1,39,50,000/-. Annx.A9 sale notice and the notice dated 09.09.2021 enclosed thereto is per se illegal as it is not published in two leading newspapers. The land and buildings now put for sale as per Annx.A10 is worth more than
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SA No.225 of 2022
Rs.3.50 Crores as per the prevailing market rate in the locality. Annx.A9 sale notice is also illegal on the ground that while fixing the reserve price at Rs.1,39,50,000/- the defendant has not taken proper valuation in adherence to Rule 8(5) and the value of the property with buildings adopted is patently wrong and there is gross undervaluation, which is discernible from the valuation reports filed by the 1st defendant along with the written statement in the aforesaid S.A. No.308/2019. True copies of valuation reports dated 18.08.2015, 06.01.2016 and 18.07.2019 are produced as Annexure-A10, A11 and A12 respectively.
W.P.(C) No. 22810/2021 filed challenging Annx.A9 sale notice was dismissed as withdrawn as per judgment dated 15.11.2021 as there was no bidders. True copy of judgment dated 15.11.2021 in W.P.(C) No. 22810/2021 is produced as Annexure-A13.
The 1st defendant thereafter issued sale notice dated 12.01.2022 Annx.A14 for the sale scheduled to be held on 31.01.2022. In Annx.A14 sale notice, the reserve price fixed is at Rs.1,12,50,000/when the subject property is worth more than Rs.3.50 Crores as per the prevailing market rate in the locality.
The Full Bench of the Hon'ble High Court of Kerala vide order dated 18.01.2022, Annx.A15 revived the interim order passed on 19.05.2021 in W.P.(C) No. 11316/2021 directing the State/Central/ Public sector undertakings not to take steps for recovery until 22.02.2022. However, in total disobedience to Annx.A15 order, 1st defendant conducted the sale. True copy of the sale certificate dated 03.03.2022 issued by the 1st defendant to the auction purchaser, 3rd defendant, is produced as Annexure-A16.
Applicant obtained valuation report dated 02.04.2022, Annx.A17 from a Chartered Engineer by name Er. George F Chethalan who is the Valuer of SBI, Bank of India and PNB also. As per the valuation of the said valuer, the subject property with buildings at Rs.2,70,70,000/-.
Annx.A14 Sale Notice is illegal on the ground that the built-up area of all the buildings are conspicuously absent in it and no proper valuation in adherence to Rule 8(5) obtained by the 1st defendant before fixing the reserve price, which renders Annx.A14 Sale Notice and sale conducted thereunder are illegal, as mentioning the built-up area of the building would certainly attract people who will offer better price for the landed properties with buildings put for auction. The said
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SA No.225 of 2022
issue was considered by the Hon’ble Apex Court in the judgment in J.Rajiv Subramaniyan’s case reported in (2014) 5 SCC 651. In the judgment of Hon’ble Himachal Pradesh High Court reported in 2018 KHC 4174 :: AIR 2018 HP 114. Court while setting aside the sale had held that even though, there was a four storied structure standing over the land in question, however, in none of the sale proclamations issued under the Act, was this fact mentioned. In the case of Unnikrishnan K.T. v. Authorised Officer, UCO Bank, Ernakulam and others reported in 2018 (1) KHC 927 :: 2018 (1) KLJ 796 :: 2018 (1) KLT 990 :: ILR 2018 (1) Ker. 969, Hon'ble High Court of Kerala held that Lack of reasonableness or even fairness at either of the two stages renders the take over and transfer invalid.
The auction conducted as per Annx.A14 Sale Notice and Annx.A16 Sale Certificate are invalid on the ground that the sale consideration not paid by the 3rd defendant within the time stipulated in Rule 9.
In this S.A the applicant is challenging the SARFAESI proceedings starting from the inception of symbolic possession onwards. The present S.A can sustain only with regard to the last sale notice dated 12.01.2022. Barring the said sale notice, rest of the proceedings are beyond limitation period and hence beyond the scope of judicial scrutiny.
The first S.A bearing No.283/2013 had challenged the SARFAESI Actions till the symbolic possession stage. The said S.A was dismissed and no further proceedings were initiated by the applicant against the said order and accordingly the said order had become final and conclusive against the applicant herein. Hence the securitisation action till symbolic possession is hit by res judicata and as regards the contentions regarding mortgage etc. The same is barred by constructive res judicata. The challenge in present S.A is sustainable only as regards the sale notice dated 12.01.2022.
It is true that there were some payments into the account, but awfully insufficient to satisfy the bank dues. The redelivery of property is out of the question since the payment paid by the applicant is totally inadequate to satisfy the dues.
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SA No.225 of 2022
W.P.(C) No. 5154/2016 was dismissed by the Hon'ble High Court of Kerala observing that there is no bonafide on the part of the applicant. The Sec.14 proceedings had not been challenged by the applicant within the period of limitation before this forum. Therefore the challenge against the symbolic or physical possession is barred by limitation and constructive resjudicata . The applicant herein also challenged the entire Sec 14 proceedings in SA 308/2019. Moreover, the contentions were answered in the written statement filed by the defendant in the above SA which is produced in the present SA as Annexure-A7. The scheduled property was properly mortgaged to the defendant bank. The applicant himself has produced by way of Annx.4, the order of CJM rejecting the objections raised in Sec.14 application including the validity of the mortgage. Another order passed by the Hon’ble CJM dated 23.10.2014 on various objections raised by the borrower, tenant etc. is Annexure-D2.
The applicant has already challenged the sale notice dated 01.10.2019 in SA 308/2019 and the same is pending before this Hon’ble Forum. The starting portion of the demand notice clearly affirms that the notice wasissued by the secured creditor and signed by the authorized officer. Moreover as per Enforcement Rules, it can be signed by either secured creditor or authorised officer.
The contention that the creditor viz. the second defendant has failed to furnish the copies of the loan documents and security documents to the applicant is incorrect and hence denied. The classification of NPA is strictly in accordance with the guidelines issued by the RBI.
The decisions quoted by the applicant has no bearing in the present case. The sale notice was issued as per Appendix-IV-A of the Security Enforcement Rules and the notices were published in the newspapers.
The contention that property put for sale is worth 3.50 Crore is incorrect. The Bank had obtained valuation reports from the authorised valuers. The reserve price is fixed by the secured creditor bank based on various yardsticks out of which one of the yardstick is the valuation of property. The 1st and 2nd sales failed with no bidders nor any inquiries. Accordingly the third sale notice, Annx.A9 had been issued for a lesser amount of Rs.1,39,50,000/- which is less than 10% of the initial reserve price. The Valuation Reports dated 28.05.2020 by Engineers & Valuers Chamber and dated 20.11.2021 by Engineers & Valuers Chamber are produced as Annexures-D3 and D4.
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SA No.225 of 2022
The sale notice dated 12.01.2022 was issued by the 1st defendant fixing the reserve price as Rs.1,12,50,000/-. The applicant has deliberately suppressed the receipt and publication of the sale notice dated 10.12.2021 which is the 4th sale notice fixing a reserve price of Rs.1,25,00,000/-. Copy of the sale dated 10.12.2021 along with postal receipts, acknowledgment and paper publication in English and vernacular dailies are produced as Annexures-D5 to D9.
The purpose behind the omission to mention the 4th sale notice is to mislead the Tribunal that there is an undue reduction of the reserve price. The sale notice dated 12.01.2022 is the 5th sale notice issued by the 1st defendant. The 2nd defendant is a private scheduled bank and the judgment mentioned in para 18 has no application. The auction purchaser approached the Hon'ble High Court of Kerala by filing W.P.(C) No. 9299/2022. The applicant herein also entered an appearance in the above writ petition by filing an impleading petition and the Hon'ble High Court of Kerala after hearing the applicant herein allowed the writ petition of the auction purchaser and a copy of the judgment of the Hon'ble High Court of Kerala dated 26.05.2022 is produced as Annexure-D10.
The sale certificate was issued strictly in compliance with provisions envisaged under the SARFAESI Act. The scheduled property was never undervalued by the 1st defendant at any point in time. The applicant received the sale notice in all auction sales and was not able to bring any purchasers for participating in the auction. Thus it is clear that the applicant is well aware of the fact that there is no demand for the scheduled property.
The allegation that the built-up area is not mentioned in the sale notice that will certainly attract people who will offer better price for the landed properties with buildings put for auction is not correct. A person who is interested in purchasing a property in a particular area will make an inquiry on seeing the sale notice without looking into any built-up area. Moreover, the bank was ready to allow inspection of the property to any intending buyer interested in the property. The sale notice was prepared in tune with Appendix-4A. The decision of the Hon’ble Supreme Court quoted by the applicant is with respect to the private treaty sale entered by the bank and not a public auction sale. The judgment of the Himachal Pradesh High Court quoted by the applicant is also have no relevance to the present case as in the present matter bank had given full description of the property in question along with building numbers. As regards the
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SA No.225 of 2022
decision in the Unnikrishnan case it may be noted that the said judgment is also not applicable to the present case. Here the sale in question is the 5th undertaken by a bank. The sale certificate is valid and the 3rd defendant has made the payment within the time stipulated under the Act.
The purchase of property and documentation, mortgage etc were done through the POA holder Smt. Mutthamma Thomassyal, mother of the borrower. Documentation has been done by the POA holder of the borrower. The question of re-delivery does not arise unless the loan due are closed or settled. It is humbly submitted that the S.A is devoid of any merit and hence be dismissed with cost.
The application is hopelessly barred by limitation. The Sec.13(2) notice was issued at a time when there was no Covid or other related issues. Dispossession also took place approximately a decade ago. Therefore, the very reason that dispossession is not under challenge indicates that major part of the actions took place much prior to the outbreak of Covid-19. This defendant had already remitted all the amounts due to the bank pursuant to the bid. The amount paid in total is Rs.1,12,60,000/-. This defendant verified the entries of the Sub Registry. It was found that certain bogus transactions were created and attachments were effected.
This defendant filed W.P.(C) No. 9299/2022 before the Hon'ble High Court of Kerala. In the said writ petition, an impleadment application was filed by the applicant. The same was allowed, the matter was heard by Hon'ble High Court of Kerala. Ultimately, the writ petition (civil) was allowed. The operative portion reads as follows:
“In the afore circumstances, I order this writ petition and direct the 2nd respondent to register Ext.P3 as and when it is presented before him and to efface the orders of the attachment reflected on the property in the encumbrance certificate, either simultaneously or immediately thereafter.”
There is no bonafides on the part of the applicant in instituting the securitisation application. The application is liable to be dismissed with costs.
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entire amount. Sale certificate, Annexure-A16 was issued to the 3rd defendant.
i) J.Rajiv Subramaniyan’s case reported in (2014) 5 SCC 651Hon’ble Supreme Court; and
ii) In 2018 KHC 4174 :: AIR 2018 HP 114 - Hon’ble Himachal Pradesh High Court.
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applicant and the paper publication in English and vernacular dailies have been produced as Annexures-D5 to D9 by defendants 1 and 2. According to the defendants 1 and 2, the purpose behind the omission to mention the issuance of fourth sale notice is to mislead this Tribunal that there is an undue reduction of the reserve price. The reserve price fixed as per the sale notice, Annexure-A6 is Rs.1,55,00,000/- and the reserve price fixed as per Annexure-A9 sale notice is Rs.1,39,50,000/- and the reserve price fixed as per sale notice dated 10.12.2021, Annexure-D5 is Rs.1,25,00,000/-, whereas the reserve price fixed as per the impugned sale notice, Annexure-A14 is Rs.1,12,50,000/-. The fixation of the reserve price and subsequent reduction in the aforesaid sale notice would show that the fixation of reserve price in the impugned sale notice, Annexure-A14 cannot be said to be low fixation of reserve price, since the sale of the secured asset was not materialized for the earlier sale notice issued. Further a perusal of the valuation reports, Annexure-D3 and D4 would show that the approved Valuer has fixed the value of the secured assets after having considered the various aspects in respect of the secured asset. The applicant has produced copy of the valuation report dated 02.04.2022, Annexure-A17 which is prepared by one Chartered Engineer by name Er. Geroge F Chethalan to prove his contention that the total value of the secured asset is Rs.2,70,70,000/-. A perusal and comparison of Annexure-A17 with Annexure-D4 would show that the particulars and reasons stated in Annexure-A17 cannot be accepted as correct.
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SA No.225 of 2022
that Annexure-A14 sale notice was served to the applicant. A perusal of Annexure-D8 and D9 show that the above sale notice was published in two leading newspapers. The property was sold to the successful bidder, who is the 3rd defendant herein, for an amount of Rs.1,12,60,000/- and sale was confirmed in his favour and Sale Certificate, Annexure-A10 was issued to him. Thus it is evident that there are no procedural irregularities in respect of the issuance of Annexure-A14 sale notice and sale of the secured asset and subsequent measures such as confirmation of sale and issuance of sale certificate to the 3rd defendant.
In view of the foregoing reasons, this Tribunal holds that the applicant is not entitled to get the reliefs sought for in this SA. In the result, S.A No. 225 of 2022 stands Dismissed. No costs.
Dictated to Steno, taken down, transcribed, typed by him, corrected and pronounced by me in the open court on this the 20th April, 2023.
(Su. WILLYAHM) PRESIDING OFFICER
Mj/
Page 14 of 16
SA No.225 of 2022
List of documents filed by the Applicant along with the application
| S.No. | Date | Particulars |
|---|---|---|
| 1. | --- | True copy of Section 14 Application CMP No.1403/2014. |
| 2. | --- | True copy of CMP No.2800/2015 on the file of CJM CourtErnakulam. |
| 3. | --- | True copy of objection in CMP No.2800/2015 on the file ofCJMCourtErnakulam. |
| 4. | 09.11.2015 | True copy of Order in CMP No.2800/2015 on the file of CJMCourtErnakulam. |
| 5. | 23.01.2017 | True copy ofjudgmentin W.P.(C)No. 5154/2016. |
| 6. | 24.09.2019 | True copy ofSaleNoticeissued by the1st defendant |
| 7. | --- | True copy of written statement (with annexures) in S.A. No.308/2019filed by the1st defendant. |
| 8. | 20.09.2021 | True copy ofSaleNoticeissued by the1st defendant. |
| 9. | 09.09.2021 | True copy Sale Notice along with notice enclosed thereto issued by the1st defendant. |
| 10. | 18.08.2015 | True copy of Valuation Reports. |
| 11. | 06.01.2016 | True copy of Valuation Reports. |
| 12. | 18.07.2019 | True copy of Valuation Reports. |
| 13. | 15.11.2021 | True copy ofjudgmentin WP(C)No. 22810/2021. |
| 14. | 12.01.2022 | True copy ofsalenoticeissued by1st defendant. |
| 15. | 18.01.2022 | True copy of Order in WP (C) No. 11316/2021 passed by the Hon’ble Full Bench of the Hon'ble High Court of Kerala. |
| 16. | 03.03.2022 | True copy ofSale certificateissued by the1st defendant. |
| 17. | 02.04.2022 | True copy of Valuation report of Chartered Engineer by nameEr.GeorgeFChethalan. |
List of documents filed by the Defendants 1 & 2 Bank along with the Written Statement
| S.No. | Date | Particulars |
|---|---|---|
| 1. | 27.03.2013 | True copy of SA filed by the applicant, SA No.283/2013 beforeDRT-1. |
| 2. | 23.10.2014 | True copy of order in CMPs 3461/14, 4368/14 & 4369/14 in CMP 1403/14 of the CJM Court Ernakulam. |
| 3. | 28.05.2020 | True copy of valuation report by Engineers & Valuers Chamber |
| 4. | 20.11.2021 | True copy of valuation report byEngineers &Valuers |
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SA No.225 of 2022
| Chamber. | ||
|---|---|---|
| 5. | 10.12.2021 | True copy ofthe salenotice. |
| 6. | -- | True copy ofthe postal receipt |
| 7. | --- | True copy ofpostal acknowledgment |
| 8. | 10.12.2021 | True copy of Englishdaily. |
| 9. | 10.12.2021 | True copy of Malayalamdaily. |
| 10. | 26.05.2022 | True copy of judgment of Hon'ble High Court of Kerala in WP(C)No.9299/2022. |
(Su. WILLYAHM) PRESIDING OFFICER
Mj/
Page 16 of 16
3 issues framed by the court
Whether the demand notice issued by the authorized officer constitutes a valid notice under Section 13(2) of SARFAESI Act when details of the claim are absent.
Whether the sale notice and auction conducted under the SARFAESI Act are invalid due to alleged undervaluation of the secured asset.
Whether the prior orders in related Securitisation Applications and Writ Petitions bar the present challenge by principles of res judicata and limitation.
Colour shows how this judgement treated each authority
Madhu Sudan Ghosh Another Vs. The Axis Bank Ltd. OthersDistinguished¶26
Madhu Sudan Ghosh Another Vs. The Axis Bank Ltd. Others
Punjab National Bank Vs. M/s. Mithilanchal Industries Pvt. Ltd.Distinguished¶26
Punjab National Bank Vs. M/s. Mithilanchal Industries Pvt. Ltd.
J.Rajiv Subramaniyan's caseDistinguished¶81
(2014) 5 SCC 651 - J.Rajiv Subramaniyan's case · Who else cites this
High Court of Himachal PradeshDistinguished¶82
2018 KHC 4174 :: AIR 2018 HP 114 · Who else cites this
Unnikrishnan K.T. v. Authorised Officer, UCO Bank, Ernakulam and othersDistinguished¶92
Unnikrishnan K.T. v. Authorised Officer, UCO Bank, Ernakulam and others
2 provisions across 2 enactments
Francis Andrews Xavier
The Authorised Officer, Axis Bank Ltd.
Axis Bank Ltd.
M.X. Johnson
Su. WILLYAHM
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
