Partly allowed

Uppala Ravinder v. the South Indian Bank Ltd.

DRT27 Sept 2023SA/273/2022

Case brief

AI extract

What is this about?

In a securitization application under S. 23 of SARFAESI, the Tribunal examined borrower applicants' claims that the bank failed to disclose pending proceedings in the auction notice. Finding the forfeiture of the 25% bid amount arbitrary due to non-disclosure, the Tribunal allowed partial relief but denied compensation.

What did the court decide?

Refund of Rs.36,12,500/- with interest @9% p.a. simple; prayer for damages/compensation rejected.

Uppala Ravinder versus the South Indian Bank Ltd. — Banking and Recovery | DRT (2023)

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IN THE DEBTS RECOVERY TRIBUNAL^{AT HYDERABAD}

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DATED THIS THE 27TH DAY OF^{SEPTEMBER,2023}

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PRESENT: SH. RAMESHWAR^{KOTHE, B'Com, L.LB. (Hons.),M'A.} PRESIDING OFFICER

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Securitization ApPlication No'^{273 ot 2022}

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Uppala Ravinder S/o U. Anjaneyulu Aged about 57^years Occ: Insurance Agent

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SmL Uppala Anuradha W/o Uppala Ravinder Aged about 54^years Occ: Insurance Agent R/o 6-1-22, Flat No.202 Ba bu khanAn ieesh Towers Boiguda Main Road, Himmatnagar Secunderabad-500025

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..,,.Applicants.

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Versus

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The South Indian Bank Regional Office At 157/6 lst Floor, Chai Complex

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Staff Road, Gunrock Enclave Sikh Village, Diamond^Point Secunderabad-500009 Rep. by its Authorized Officer

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M/s Varadhi Advertisers Pvt. Ltd Rep. by its Managing Director H. No.IV-4, Dhruvatara APartments Med i nova Com^pound, somai^ig uda Hyderabad-500082

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Mrs. Chilakalpudi Shanta^Kumari W/o Sri Venkata Chilapudi Prasad Rao Aged about 61^years, Occ:Business H. No. IV-4, Dhruvatara Apa rtments Medinova Compound, Somaiiguda Hvderabad-500082 ' / /,/"'"Yfic6^{-- '}

1 -''\ 'q'-

.....Respondents.

Page 2 of 7

SA No.27312022

Counsel for the Applicants : Sri V.V. Ramana Counsel for 7st Respondent : Smich, Laxmi Chaya Respondents 2 & 3 : Ex^parte

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-:9-E_D_EB:-

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The^present Securitization Application is filed by the Applicant u/s.U of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002^("Act" for short) to cancel the auction conducted on 06.12.2021 in respect of SA schedule property and order refund of 25o/o bid amount of Rs.36,12,500/-, compensation and damages of Rs.10,00,000/- each together with interest @180/0 p.a. monthly compounded ftom 06.72.2027.

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The case of the applicant, briefly, is that the applicants 1 and 2 are husband and wife. They came to know through one Mr.P.R.V.R. Mallikarjuna Rao official of 1st respondent bank that 2nd respondent availed credit facility by creating mortgage over SA schedule property and default in repayment and consequential initiation of Securitization proceedings and that the secured asset was being put for action on 06.12.2021. Pursuant to Tender cum Auction Notlce dated 01.11.2021 the applicants filed bid form along with EMD of Rs.14,35,000/- on 24.11.2027 and stood as hlghest bidders at Rs.1,44,50,000/against reserve price of Rs.1,43,50,000/-. They paid Rs.36,12,500/- including EMD, towards 25o/o of bid amount and were advised on 08.72.2021 by the bank to deposit 75yo within 15 days. However, when approached for loan to Central Bank of India subsequently Bank of India, their loan application was rejected due to^pendency of SA Nos.427l2079 and 123/2021 pertaining to the subject property. The applicants issued legal ( an\z-".qi-/ rr-

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PaBe 3 of 7

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SA No.27312022

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notice for refund of 25o/o bid amount and in reply, the 1.t respondent bank stated that the applicants nomlnated Mr.P.R.V.R. Mallikarjuna Rao to partlcipate in the auction on their behalf which is not true. In fact the signatures of applicants were forged by Mr.Mallikarjuna Rao. The auction notice does not disclose about pendency of applications pending before the Tribunal. Since the respondent bank was insisting payment of 7570 amount otherwise lt would forfeil 25o/o amount, the applicants filed wP No.16415 of 2022 seeking direction to grant some more time to pay 75o/o bid price and the Hon'ble High Court initially granted interim direction to 1.t respondent bank not to conduct fresh auction and finally disposed of the WP granting to liberty to work out remedies under Act 54 of 2022. Hence this SA.

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The 1st respondent bank filed reply statement statingt inter alia, that Mr.P.R.V.R. Mallikarjuna Rao is authorized signatory of applicants and not agent of the respondent bank. The applicants deposited EMD to the account of l,lr.Mallikarjuna Rao by RTGS and submitted bid form along with KYC documents. There were seven other bidders^participated in the auction held on 06.12.2027 and applicants stood as the highest bidders. After^payment of 25o/o of bid amount, the applicants did not pa\ 75o/o even after extension of time twice upto 31.01.2022. They had knowledge of^pending SAs^prior to^{partlcipationin} auction. The contention raised^herein about^{non-disclosureof} pending SAs was not raised before the Hon'ble High Court ln WP No.16415 of 2022 filed by the appllcants^{seeking direction} to^grant some more time to deposit^75o/o of^{bid amount.Since} there is no status quo order ln this SA, the^{respondent bank} cancelled the auction vide letter dated 11.10.2022^{and forfeited}

%1oo

Page 4 of⁷

SA No.27312022

25o/o of bid amount of^{Rs.36,12,500/- depositedby applicants'} A fresh sale notice has been^{issued on 03.02.2023fixing} auction on 28.02.2023^{and the respondents 2 and 3 borrowers} redeemed the^{property at Rs' 1,14,80,000/-. The action of} respondent bank^{in forfeitureis as per Rules and therefore, SA} is liable to be dismissed.

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Respondents 2 and 3-borrowers^{remained ex parte to the} proceedings.

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Heard learned counsel for the^{applicantsand learned counsel} for the 1"t respondent bank.^{Perused the materialplacedon} record.

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During the course of arguments,^{the learned counsel for} applicants and respondent bank^{reiterated their respective} versions as submitted in the application^{and amended} application and reply^statement.

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Now, the^point that arises for determination^is;- i) Whether the applicants made out any^{valid ground to} order refund of 25o/o of bid amount^forfeitedby respondent bank and award damages and comPensation as PraYed for?

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ii) To what relief?

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This Securitization Application has been filed with the liberty granted by the Hon'ble High Court for the State of Telangana at Hyderabad in WP No.16415 of 2022. The main prayer is to order refund of 25o/o of bid amount of Rs.36,12,500/- forfeited by the 1't respondent bank vide its letter dated 11.10.2022. It is a matter of record, this Tribunal vide order dated 09.12.2022 ;a

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Page 5 of7

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SA No.27tlzo22

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in IA No.1390/2022 observed that the operation of forfeiture letter dated 11.LO.2022 shall be subject to outcome of this SA.

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Coming to merits of the case, the contention with regard to appointment of one Mr.Mallikarjuna Rao as agent of applicants or not is irrelevant here. It is sufficing that the amount has been paid through the applicants towards EMD as well as 25olo of bid amount. The primary contention of applicants is that the respondent bank did not notify pendency of SA Rted by the borrowers in the auction notice. I have perused the Tender Cum Auction Sale Notice dated 0L.t1 ZO2t fixing auction On 06.02.2027 in respect of SA schedule property. The respondent bank says the applicants had knowledge of pending cases. But such information must be kept in notice of all intending purchasers and one-to-one oral information is not a proper method of communication. It is observed that there is no mention of pendency of SA in the auction notice dated 01.11.2021 or bid acceptance tetter dated 06.12.202L or rcpty notice dated 29.0t.2022. It is well setHed principte that the secured creditor ought to provide material information to the intending bidders which is within its knowledge which respondent bank failed to follow.

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Further, the applicants discovered two things upon approaching Central Bank of India for loan. Firstly, there is discrepancy in sanction permission only for 900 sq.ft. and not for 1950 sq.ft. and secondly, pendency of SA. After questioning only, the respondent bank vide letter dated 27.72.2027 provided copy of regularization proceedings. The applicants requested the respondent bank vide e-mails dated 24.12.2027 and

{'*

Page 6 of⁷

SANo.273l2O22'

17.01.2022 for^{extenslonof time for 30 days and 60 days} respectively for^{paymentof 75o/obid amount'On firstoccaslon'} extension was^{granted lill 73.O7.2022and on second occasion} till 31.01.2022.^{Around 54 daysfurthertime was granted} though the^{secured creditor can extend time for 90 daysin} deserving cases as^{per Rule 9(4) ofSecurityInterest} (Enforcement) Rules, 2002.^{Thereafter, applicants filed WP} No.16415 of 2022^{and the same wasdisposedof by Hon'ble} High Court on^{22.08.2022 extendinginterim direction not to} issue fresh auction^{notlce,for 30 days fromthe date of order} and^{granting Iiberty to applicants hereinto avail appropriate} remedy. After filing^{of this SA, the respondentbank cancelled} the earlier auction,^{forfeited 2570 amount depositedby the} applicants and also^{issued fresh auctlon notice. Accordlngto} respondent bank as there^{was no stay order, it proceededto} issue fresh auction notice.^{However, as stated supra,this} Tribunal vide order^{dated 09.72.2022 held that the operation of} forfeiture letter dated 77.f0.2022^{shall be subject to outcome} of the SA. In my^{considered view, it is not a bonafide aclon} behalf of respondent^{bank in forfeiting the 25% amount of third} party-auction purchasers while keeping the^gross error on^its side in not disclosing the^pendency of^{SA apart from concealing} regularization^proceedings till the applicants^themselves discovered and^questioned about extent of^sanctioned permission. The respondent bank also did not keep in mind that the key issue of refund is^pending adjudication before^this Tribunal.

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In view of the discussion in preceding paragraphs 9 and 10, the applicants have made out valid^point to order to direct the 1st 0<*

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Page 7 of l

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SANo.273l2O22

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respondent bank to refund of Rs.36,12,500/_ with interest thereon from the date of deposit till date of payment.

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With regard to payment of damages and compensation, except claiming them, no tenable explanation has been oFfered in what way the applicants incurred damages. Hence the prayer is liable to be rejected.

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Point No.(ii):

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In the result, the SA is partly allowed by directing the 1st respondent bank to refund of Rs.36,12,500/_ to the applicants with interest @9olo p.a. simple thereon from the date of deposit till date of payment.

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14, The prayer with regard to grant of damages/compensation is rejected,

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Consequenfly, Interlocutory Applications pending, if any, shall stand closed.

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No order as to costs.

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Communicate a copy of this order to the parties concerned, (Typed to my djctatlon by.the pS-, -corrected,^{signed and pronouncedby me in the} open court on this the 2Vh day of September, Z6z11.

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PRESIDING OFFICER

Uppala Ravinder v. the South Indian Bank Ltd.

Case brief

What is this about?

What did the court decide?

Uppala Ravinder v. the South Indian Bank Ltd.

Case brief

What is this about?

What did the court decide?

What the court decided

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