Partly allowed

Surendra Agarwal v. Cholamandalam Investment and Finance Company Limited

DRT16 Oct 2023SA/398/2022

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal quashed the Respondent FI's Demand Notice dated 11.12.2018 for failing to bifurcate principal, interest, and charges as mandated by Section 13(3) of the SARFAESI Act, consequently setting aside subsequent recovery actions and ordering restoration of possession.

What did the court decide?

Demand Notice dated 11.12.2018 and all further actions like physical possession quashed; Respondent directed to restore possession.

Surendra Agarwal versus Cholamandalam Investment and Finance… — Banking and Recovery | DRT (2023)

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SA No. 398/2022

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DEBTS RECOVERY TRIBUNAL, JAIPUR PRESIDING OFFICER: SH. VIVEK SAXENA

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SA No.- 398/2022

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Surendra Agarwal S/o Raghuveer Sharan Agarwal, Resident of Ram Bhawan, Ramgarh Mod, Amer Road, Jaipur, Rajasthan

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... Applicant

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VERSUS

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Cholamandlam Investment and Finance Company Limited, Having Office at Dare House, 2, N.S.C. Bose Road, Parrys, Chennai and Sankhla Arcade, 2^nd Floor, New Sanganer Road, Vivek Vihar, Jaipur through its Authorised Officer

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…Respondent FI/Bank

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Present:

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Sh. Bhrigu Sharma, Ld. Counsel for the Applicant

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Sh. Atul Saxena, Ld. Counsel for the Respondent Bank/FI

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(Final Order)

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(16.10.2023)

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This SA was filed by SA applicant on 22.06.2022, the SA applicant was willing to deposit an amount of Rs. 5.00 Lac, when the arguments on admission were heard on 01.07.2022, and the applicant was directed to deposit an amount of Rs. 10.00 Lac within 15 days time from the date of order i.e. 01.07.2022 and was further directed to file proof of it and the matter was adjourned to 18.07.2022 for arguments on interim relief and both the parties were directed to maintain status quo.

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Ld. Counsel for the Respondent FI appeared on 18.07.2022 and sought time to file reply. Reply was not filed and therefore vide order dated 25.07.2022, the Respondent FI was directed to file reply and as the order passed by this Tribunal to deposit an amount of Rs. 10.00 Lac was not complied with, therefore last opportunity was granted to SA applicant to deposit a demand draft of Rs. 10.00 Lac on or before 28.07.2022, failing which a liberty was granted to respondent FI to proceed ahead as per law.

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On 01.08.2022, liberty was granted to Respondent FI as the amount of Rs. 10.00 Lac as directed by this Tribunal on 01.07.2022 to SA applicant was not deposited.

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Respondent FI was directed to file reply on or before 07.09.2022, but reply to SA was filed on 06.12.2022.

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The subject mortgaged property was put to auction through auction notice dated 30.12.2022 and auction resulted successful.

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Vide order dated 26.06.2023 an IA no. 286/2023 filed by SA applicant, challenging the auction notice dated 30.12.2022, was disposed of and the auction scheduled on 10.02.2023 was quashed and set aside mainly with the following observations.

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Accordingly the Respondent FI filed fabricated Valuation Reports that too with the delay of four months time and so, ground of auction at the distress value is liable to be accepted. Therefore, Auction, so conducted in the light of Auction Notice dated 31.12.2022, stands quashed and set aside. Auction proceedings, so conducted on 10.02.2023 also stands

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quashed. Amount, whatsoever deposited by Auction Purchaser, be refunded to Auction purchasers within 5 days from the date of this order.

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Vide order dated 26.06.2023, specific order was passed by this Tribunal, directing the Respondent FI to refund the amount deposited by auction purchaser within 5 days time from the date of order.

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Being aggrieved by this order, Respondent FI preferred an Misc. Appeal No. 131/2023 before the Hon’ble DRAT, Delhi and Hon’ble DRAT Delhi, disposed of the said Appeal with the following observations:-

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Heard. In view of the above, the impugned order dated 26.06.2023 passed by Ld. DRT in SA no. 398/2022 is hereby stayed to the extent whereby it directs refund of the amount to the auction purchaser. The Ld. Presiding Officer, DRT-Jaipur is requested to take up the SA no. 398/2022 on the next date of hearing and dispose of the same as expeditiously as possible in accordance with law after hearing both the parties concerned.

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With the above direction, the appeal stands disposed of.

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File be consigned to record room.

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On account of directions issued by Hon’ble DRAT, Delhi, both the parties were directed to file written arguments in support of their oral contentions and the same was filed and the matter was heard finally.

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It is an admitted fact that in the light of Annexure-1, Sanction Letter, credit facility was sanctioned by Respondent FI, in favour of SA applicant on 31.03.2015, mortgaged of subject property is admitted, the issue of declaration of account as NPA is taken by SA applicant in Para 5.VI of the SA.

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Objection with regard to declaration of account, during the pendency of order passed by Hon’ble Apex Court in the matter of Small Scale Industries Manufacturers Association Vs Union of India & Ors, dated 23.03.2021 is also taken.

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The order under Section 14 of the Act of 2002 is also challenged and amount as claimed by Respondent FI which includes interest of interest/ compound interest/ penal interest is also challenged.

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During the course of arguments Ld. Counsel for the applicant took various objections which are mentioned inter alia in the SA itself and he submitted that all the actions initiated by the Respondent FI are required to be quashed and set aside, because the amount as claimed in the demand notice itself is illegal, it is very exorbitant, it does not have details of outstanding amount and therefore the action initiated by them since the issuance of demand notice are required to be quashed.

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While filing reply to the SA, Ld. Counsel for the Respondent FI strongly objected the prayer and he argued that all the actions were initiated by them are as per law. He further submitted that the SA is barred by limitation because upon receiving of demand notice dated 11.12.2018, the SA applicant filed objection to it, which was replied by them, through letter dated 22.02.2019 and therefore he argued that all the actions initiated by them are as per law. There was nothing illegal in the actions initiated by them and so Ld. Counsel prayed that actions initiated by Respondent FI are

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required to be held legal and SA is required to be dismissed with heavy cost.

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Heard arguments and perused the record.

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As per facts of the case, Demand Notice was issued on 11.12.2018 (Annexure/2) and its service cannot be disputed upon the SA applicant as it is filed along with the SA, details of amount so sanctioned in 3 Home Equity Loan Accounts is mentioned in Para 2 of it and Para 5 of it amount due as outstanding on 11.12.2018 in all three loan accounts for Rs. 14,56,679/-, Rs. 94,52,568/- and Rs. 55,69,155/-, in total Rs. 1,64,78,404/- is mentioned as on 11.12.2018.

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From perusal of Annexure R/1, it is clear that the SA applicant wrote a letter on 13.02.2019 in reference of said Demand Notice dated 11.12.2018, but it cannot be said as objection to Demand Notice.

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Reply to Annexure R/1 was given by Respondent FI on 22.02.2019. As the account declared as NPA on 10.12.2018, therefore the SA applicant is not entitled to claim any relief on account of order passed by Hon’ble Apex Court on account of impact of COVID-19, it is also a fact that no amount stands deposited since the date of declaration of account as NPA and even SA applicant failed to deposit an amount of Rs. 10,00,000/- directed by this Tribunal on 01.07.2022.

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Now, the issue of legality of the actions taken by the Respondent FI is required to be decided.

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As per record, it is clear that the order under section 14 of the Act of 2002, passed on 16.08.2019 and since 16.08.2019, till filing of this SA, i.e. 22.06.2022, the Respondent FI failed to take possession of the subject mortgaged property.

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It is also important to mention that possession notice was issued on 12.11.2020 and so recovery proceedings were delayed by the Respondent FI itself.

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Further, when this Tribunal granted liberty, the respondent took physical possession.

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The issue of Demand notice dated 11.12.2018 issued by Respondent FI, for three loan accounts, is to be decided in the light of objection taken by SA applicant with regard to non mentioning of details/bifurcation of outstanding amount, in the light of provisions as contained under Section 13(3) of the Act of 2002.

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Demand Notice dated 11.12.2018, claims outstanding amount in Para 5 and the same is reproduced here as under for ready

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reference:-

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5. I state that, as on 11.12.2018 you are liable to pay a sum of Rs. 14,56,679.97/-, Rs. 94,52,568.48/- & Rs. 55,69,155.75/- totaling Rs.1.64,78,404.20 [Rupees One Crore Sixty Four Lakhs Seventy Eight Thousand Four Hundred Four and paise Twenty Only] under loan account Nos XOHEJPH00001144125, XOHEJPH00001394536 and XOHEJPH00001729563 to the secured creditor. Under section 13 of the Securitisation Act, the secured creditor is, interalia, entitled to take possession of the secured assets and has also been conferred the right of transfer of the secured asset by way of lease, assignment or sale for the purpose of recovering dues with contracted rate of interest from the date of this notice till the date of actual realisation together with incidental expenses.

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Respondent FI, failed to provide copy of said Demand notice, so the Demand notice at Annexure-2, is only required to be considered.

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Undoubtedly and undisputedly, above details as shown as outstanding on 11.12.2018 is only consolidated amount, having no details like principal amount, interest charges, rate of interest so claimed etc. It is also clear that the Respondent FI failed to comply with the mandatory provisions as contained in the provisions under Section 13 (3) of the SARFAESI Act of 2002 and so, only on this count Demand Notice is required to be quashed and set aside.

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Accordingly the Demand Notice dated 11.12.2018, which is not as per mandatory provisions as contained under Section 13(3) of SARFAESI Act of 2002 and also not as per direction issued by Hon’ble High Court of Gujarat in the matter of Punjab National Bank vs Mithilanchal Industries, is now quashed and set aside.

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All the further actions initiated by the Respondent FI, like physical possession etc also stands quashed and set aside. Respondent FI shall restore physical possession of the property in favour of SA applicant after passing of period of limitation, if they do not prefer to challenge this order.

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Needless to say the Respondent FI, shall be at liberty to proceed ahead as per law for recovery of outstanding amount, but as per provisions of SARFAESI Act of 2002.

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Vivek Saxena Presiding Officer DRT, Jaipur

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Surendra Agarwal v. Cholamandalam Investment and Finance Company Limited

Case brief

What is this about?

What did the court decide?

Surendra Agarwal v. Cholamandalam Investment and Finance Company Limited

Case brief

What is this about?

What did the court decide?

What the court decided

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Issues for consideration

Statutes considered

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