Allowed

Venus Exports v. Jana Small Finance Bank Ltd.

DRT22 Aug 2023SA/455/2022

Case brief

AI extract

What is this about?

The DRT allowed the SARFAESI application challenging a sale notice issued by the respondent bank. The Court found procedural lapses in serving the demand and possession notices, non-compliance with publication rules, and noted the antecedent sale notice was infructuous due to lack of bidders. Consequently, the current sale notice was set aside without costs.

What did the court decide?

The sale notice dated 18.10.2022 scheduling sale to 08.11.2022 is set aside. Respondent bank is directed not to debit SARFAESI expenses to the borrowers' loan account.

Venus Exports versus Jana Small Finance Bank Ltd. — Banking and Recovery | DRT (2023)

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S.A. 455 of 2022 22.08.2023

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IN THE DEBTS RECOVERY TRIBUNAL- III, CHENNAI

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Dated this the 22^nd day of August, 2023

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Present: Shri Ganapathi K.R.K. Presiding Officer

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SARFAESI APPLICATION No. 455 of 2022

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1. M/s Venus Exports

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No.54/23, Reddikuppam Road Saidapet

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Chennai – 600 015

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Represented by its Partners

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(i) Mr.K.K.Maheshwaran & (ii) Mrs.K.Kasthuri

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2. Mr.K.K.Maheswaran

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S/o.Krishnan

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No.73, West Jones Road, No.31/A Index Amber Apartment West Saidapet Chennai – 600 015

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3. Mrs.K.Kasthuri

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W/o Krishnan No.73, West Jones Road, No.31/A Index Amber Apartment West Saidapet Chennai – 600 015

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4. Mrs.K.Vijayalakshmi

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D/o Krishnan

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No.73, West Jones Road, No.31/A Index Amber Apartment West Saidapet Chennai – 600 015

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5. Mr.Sadhasivam

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S/o Krishnan No.73, West Jones Road, No.31/A Index Amber Apartment West Saidapet Chennai – 600 015

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… Applicants

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S.A. 455 of 2022 22.08.2023

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Vs.

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The Authorised officer

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Jana Small Finance Bank Ltd No.28/36 First Floor South West Boag Road T.Nagar Chennai – 600 017 … Respondent

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Counsels on record / appeared:

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Counsel for Applicants : M/s. T.Vijayaraghavan Counsel for Respondent : M/s. V.Balasubramani & V.Vadivelan

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ORDER

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This SA is filed challenging the Sale Notice dated 18.10.2022 issued by respondent financial institution scheduling sale to 08.11.2022 for recovery of a sum of Rs.17,21,802/- from applicants.

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Heard Ld.Counsel appearing for respondent financial institution. No representation for applicants even during 2^nd round of call work. However, written arguments were filed by applicants before the registry, during the course of the day, after serving copies on the other side through e-mail.

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It is the case of applicants that they had availed loan facilities from respondent and were regular in repaying their dues until about 2019, when their business fell into hard times and their account came to be classified as NPA by respondent. Respondent financial institution proceeded further in their course of recovery and issued demand notice dated 26.06.2019 and possession notice dated 15.07.2020, which were not duly served on applicants. It is the case of applicants that they had preferred SA

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S.A. 455 of 2022 22.08.2023

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No.184/2020 before DRT – II, Chennai, challenging the sale notice issued by respondent financial institution dated 05.11.2020 and deposited Rs.2 Lakhs thereon, as part compliance of conditional order and that the said SA is also transferred to this Tribunal, pursuant to change in jurisdiction. The said SA was allowed by this Tribunal, since respondent financial institution failed to file their counter and typed set of documents evidencing their actions. Notwithstanding the same, respondent bank has issued the impugned sale notice dated 18.10.2022 scheduling sale to 08.11.2022 for recovery of a sum of Rs.17,21,802/-. Submitting so, Ld.Counsel prayed for appropriate orders.

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Whereas Ld.Counsel appearing for respondent financial institution has filed counter and typed set of documents evidencing their actions, copy of which is served on the Ld.Counsel for applicants. It is submitted that applicants had approached respondent financial institution and availed credit facility to the tune of Rs.20,10,417/- by mortgaging their schedule mentioned property, which is repayable in 36 EMIs of Rs.76,780/- each. It is submitted that applicants committed default in repayment of their monthly instalments. Despite repeated requests, as applicants did not come forward to repay the dues, respondent financial institution had classified the loan account as NPA on 01.02.2018. Respondent financial institution issued Demand Notice under Section 13(2) of SARFAESI Act dated 26.06.2019 which was returned with postal endorsement “refused / unclaimed”. Hence, respondent financial institution effected paper publication in respect of the said demand notice on 12.03.2020 in two leading newspapers (Business Standard & Hindu Tamil). As applicants / borrowers did not come forward to clear the dues even after expiry of statutory period, respondent financial institution

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S.A. 455 of 2022 22.08.2023

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issued Possession Notice dated 15.07.2020, which was returned unserved, affixed in the conspicuous place of the secured asset and published on 18.07.2020 in two leading newspapers (Financial Express and Hindu Tamil) as warranted under law. Thereafter, respondent financial institution had issued notice of intention to sell on 18.08.2020 to applicants and issued sale notice dated 05.11.2020 which was challenged by borrowers in SA No.184/2020 before DRT – II, Chennai and the said sale notice became infructuous for want of bidders. Subsequently, respondent had also issued another Auction Sale notice on 04.09.2021 scheduling sale to 24.09.2021, which became infructuous for want of bidders.

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It is further submitted that respondent financial institution after obtaining valuation report in compliance of SIE rules had issued the impugned sale notice on 18.10.2022 fixing the sale on 08.11.2022 which was served, affixed in the conspicuous place of the secured asset and was also published in two leading newspapers (Business Standard and Dinakaran) on 17.10.2022. Ld.Counsel for respondent financial institution also submitted that the sale notice dated 18.10.2022 scheduling the sale to 08.11.2022 became infructuous as no sale took place for want of bidders and that there are no infirmities in the procedure adopted by them while initiating measures under the Act and prayed for passing necessary orders.

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From the foregone submissions, Ld.Counsel for respondent financial institution had not explained as to why, after issuing the demand notice on 26.06.2019, had published the same only on 12.03.2020, which is after an advent of 9 months. Respondent bank did not explain as to why it had to cause paper publication, when the

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S.A. 455 of 2022 22.08.2023

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demand notice cover returned as „refused / unclaimed‟, which is deemed to be sufficient service of the notice. Be it so. It is not explained as to why demand notice has not been affixed in the conspicuous place when respondent bank contemplated to serve demand notice by substituted service by way of paper publication. Thus, the inaction of the respondent in not affixing the demand notice on the conspicuous part of the mortgaged property will disentitle further actions, since the very demand notice has not been served in a manner known to law. It would have been a different contention if respondent bank would have considered the returned cover with the endorsement as „refused / unclaimed‟ to be sufficient service and proceeded further with their SARFAESI actions, however respondent bank had contemplated to cause service of demand notice by substituted service which was not complied as per the requirements of the act.

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On perusal of records, it is observed that respondent financial institution has furnished photographs evidencing, only the presence of Authorised officer and not the affixture of possession notice, since nothing is visible from the said affixture. Similarly, the said possession notice was also not published in widely circulated English newspaper, as warranted under law. It is also pertinent to note that the paper publication of the impugned sale notice is dated 17.10.2022, which is prior to the date of the impugned sale notice, i.e.,18.10.2022. Similarly, respondent bank also did not explain as to how it could issue possession notice on 15.07.2020, amidst national covid lockdown.

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In the result, as respondent financial institution could not establish its vires as warranted under law, while prosecuting its SARFAESI actions and since it is also

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S.A. 455 of 2022 22.08.2023

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submitted that no sale had taken place for want of bidders, even on that count, the impugned sale notice has become infructuous, this SA is liable to be allowed.

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Accordingly, this SA stands allowed, however without costs. Sale notice dated 18.10.2022 scheduling sale to 08.11.2022 is hereby set aside. Respondent bank is directed not to debit the SARFAESI expenses to the borrowers loan account. Interim order, if any granted and subsisting till this day stands vacated and all other IAs, if any pending stand closed. Liberty be with respondent financial institution to initiate action afresh, if the default of the borrowers continues.

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With the above directions, this SA stands disposed.

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A copy of the order be communicated to the parties concerned as per extant guidelines.

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(Dictated to Stenographer (DD), transcribed by her, corrected, signed and pronounced by me through e- drt, on this the 22^nd day of August, 2023)

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Sd/- (GANAPATHI K.R.K) PRESIDING OFFICER

Venus Exports v. Jana Small Finance Bank Ltd.

Case brief

What is this about?

What did the court decide?

Venus Exports v. Jana Small Finance Bank Ltd.

Case brief

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What did the court decide?

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