Dismissed

M S Sri Murari Oil Industries Pvt. Ltd. v. State Bank of India

DRT13 Jun 2023SA/471/2022

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal dismissed an appeal filed by an oil company seeking to quash a bank's auction sale notice under the SARFAESI Act. The Tribunal held the appeal devoid of merit as the appellant failed to tender dues under Section 13(8) to exercise the right of redemption before the sale, rendering the subsequent sale valid.

What did the court decide?

The secularization appeal no. 47/12/2022 is dismissed; interim order if any stands vacated; pending IAs if any stand closed as infructuous.

M S Sri Murari Oil Industries Pvt. Ltd. versus State Bank of… — Banking and Recovery | DRT (2023)

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IN THE DEBTS RECOVERY TRIBUNAL-I, KARNATAKA AT BENGALURU

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Dated this the 13th day of June, 2023

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Presenti Sri IMTIAZ ALI

Presiding Officer

S.A,No.47l12()22

BETWEEN:

M/s. Sri Murari Oil Industries Pvt Ltd. Represented by is Director Sri Harish Reddy Sy.No.75 A/2, 75 A3 Adoni Road Siruguppa 583 121

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.. APPELLANT

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AND:

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The Authorised Officer State Bank of India SME Branch⁽⁴³³⁰⁾ Opp. Railway Station SBI-Compound Ballari 583 101

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.. RESPONDENT

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Counsels on r€.ord/aopeared for: Appellant : Sri L.TH. Rabin Raja Respondent : Sri BRViswanath

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FINAL ORDER

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Present main^petition SA came to be filed by Appellant under Section 17(1) of SARFAESI Act, 2002^(for short the act), praying to quash/set aside the sale Notice dated 22.02.2022 consequentially set aside the^purported sale conducted by the Respondent Bank on 74.03.2022, in respect

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s.A.No.47t/2022

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of the schedule property to recover Rs.21,32,82,577/- frcm the borrowers including the Appellant herein.

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The case of the Appellant in a nutshell is that the Appellant is engaged in the field of oil industries and the absolute owner of one of the schedule properties and they have availed various loan facilities from the Respondent Bank. The Appellant also mortgaged the said movables and immovable properties. The Appellant claimed that it was regular in repaying the loan without any delay or default. Later on due to business loss, it was unable to repay the loan and despite difficulties and stringent situation, it had made several^payments. The Respondent Bank has invoked the provision of the Securitization and Reconstruction of financial assets and Enforcement and Security Interest Act, 2002 and issued a Demand Notice dated 01.03.2019 under section 13(2) of the Act, calling upon the Appellant to pay a sum of Rs.13,86,15,138/- as on 01.03.2019. Subsequently the Respondent Bank has issued the Possession Notice dated 02.05.2019 under section 13(4) of the Act and took the physical possession of the property on 17.0L.2020. The Respondent had issued a Public Notice for Auction Sale of the Property dated 22.02.2022 fixing the sale on 14.03.2022

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S.A.No.47ll2022

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between 12.00 pm to 01.00^pm. The Appellant is aggrieved by the said alleged sale conducted through the Auction-Sale Notice and filing this present Securitization Appeal. The action of the Respondent Bank apart from being high-handed is also arbitrary. The Respondent Bank has never been fair or reasonable and has not properly valued the movable and immovable properties. The Respondent Bank has not issued the Sale Notice to all the^parties. From the above, it is clearly seen that the Respondent Bank has issued the Sale Notice without following the^procedures laid down in the SARFAESI Act, 2002. Therefore, the Sale Notice issued by the Respondent Bank is liable to be set aside, failing^which the Appellant will incur heavy loss and damages and will also be deprived of its property and will be thrown to the streets. On the foregoing contentions and^{grounds,the Appellant has} sought this Tribunal to^quash/set aside the Sale^{Notice dated} 22.02.2022 and to consequently set aside the sale held pursuant thereto, In the interest of^justice.

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In response to the notice, the^{RespondentBank} appeared through its counsel and filed statement^of objections, contending that the^{Appellant is} a^{creditor under} the provisions of SARFAESI Act and the^interest in^{respect of}

s.a-No -47 712022

the schedule property has been created in favour^{of the} Respondent Bank as security for the loan. The^present outstanding is Rs.21,32,82,517l-^(Rupees twenty-one^crore thirty-two lakh eighty-two thousand five hundred^and seventeen only) as on the date of Sale Notice.^The Respondent Bank has further contended that, the^Appellant has availed a business loan of Rs.16,00,00,000/-^(Rupees sixteen crore only) from State Bank of India. The said^loan was repayable in 86 monthly installments of^{Rs.11,63,000/-.} The rates of interest agreed were l2.3Oo/o and 12.800/0.^The Appellant was chronic defaulter in repayment of^agreed equated monthly installments. The total dues after^deducting the recovered amount of Rs.11,60,00,000/- will^be Rs.g,72,82,517 /- with applicable interest thereon.^The schedule property was mortgaged in favour of the^{Bank as} security for the said loan. There^was a^{default committedby} the Appellant. The Appellant was called upon to repay^the amount as the same became NPA.^{TheRespondentBank has} further contended that, the Respondent^{Bankhas issuedthe} Demand Notice which was served on 01.03.2019^{under the} provisions of Section 13 of the SARFAESI Act; published the Demand Notice on 22.O2.2022i^{issued possession noticeon} 02.05.2019; took^{physical possession} of the^{secured asseton}

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S.A.No.47 7 /2022

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17.07.2020 in pursuance of the order^passed by the CMM Court. The Sale Notice was^published on 22.02.2022. In view of the default committed by the borrower, the security^was enforced and the mortgaged^property was auctioned.^The borrower had the knowledge of the said^proceedings and^had filed an appeal against the^proceedings initiated under^the SARFAESI Act. The Respondent^Bankhas further^contended that, the Auction Purchaser^has deposited the^{amount fully.} The Sale Certificate has been issued. The^{RespondentBank} has auctioned the mortgaged^property on^{14.03.2022.The} auction sale was also confirmed sale certificate issuedⁱⁿ favour of the auction^purchaser and also registered^on L4.03.2022 as Document No.SRG-^{1-01970/2022-23, storedin} CD.No.SRGD1010 in the Office of the^{Sub-Registrar,} Siruguppa. The relief sought by^{the Appellantis that to quash} and set aside the^{possessionnotice} dated^{22.02.2022.The} Sate Certiflcate is registered in favour of^{AuctionPurchaser'} Hence, the Appeal has become^{infructuous.In light of the} foregoing facts and^grounds, the^{RespondentBank prayed for} the dismissal of the^present appeal on^{merits with costs,in} the interest of^justice and^equity.

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On the above background, I have^{gone throughthe} records, heard the arguments advanced by^{LearnedCounsels}

s.A.No.47r/2022

appearing for both sides, written submissions filed by the Appellant side and the following points arise for my consideration:

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a) Whether the Appellant has made out the case to allow the appeal? and

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b) To what relief, the parties are entitled?

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REASONS

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A perusal of the records reveals that the Respondent classified the loan account as NPA and thereafter, waited for some period of time for repayment. As repayment was not coming, the Respondent Bank initiated the recovery proceedings under SARFAESI Act, took physical possession of the secured asset on 77.07.2020 and declared the auction. The first auction was declared on 18.03.2021. Thereafter, the present auction in question was declared on 14.03.2022. Despite that, the Appellant did not come forward to deposit the total outstanding amount. After the auction, the Respondent Bank has finalised the bid and the auction sale was also confirmed. Thereafter, the Sale Certificate was issued in favour of the auction purchaser and the same was registered.

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s.A.No.47t/2022

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In the meanwhile, the Appellant challenged the sale auction by filing the present SA before this Tribunal. However, the Appellant did not move for redemption. This Tribunal did not grant any stay on confirmation of sale. There is nothing to show that the Appellant was ready and willing to clear the outstanding dues of the Respondent Bank, although, the Appellant company had a right of redemption of the mortgaged property. Thus, the Appellant has failed to comply with the provisions of Section 13 (8) of SARFAESI Act. Statute mandates that, it is only where dues of the secured creditor are tendered together with cost, charges and expenses before the date fixed for auction sale of the secured asset, the secured asset is not to be sold. It seems that the Appellant was well aware of the^proceedings initiated by the Respondent with certain rights to recover its dues by selling the^property in question. But the Appellant has failed to deposit the amount in^question in accordance with^provisions of Section 13(8). The Appellant has failed to ensure compliance with Section 13(8), as a result of which the right of redemption stands extinguished on the execution of the^registered Sale Deed.

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5.4.No.471/2022

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The Respondent Bank has initiated the recovery proceedings under SARFAESI Act and has issued Demand Notice on 01.03.2019 and taken symbolic possession. The Respondent Bank has published the auction Sale Notice and copy of the auction Sale Notice was also qiven to the Appellant. The auction was held on 74.03.2022 and secured assets were sold for Rs.52,37,550/-. The auction purchaser has deposited the amount as per rules. The Respondent Bank has confirmed the sale and the auction purchaser has paid the full amount in accordance with law. The Sale Certificate was also issued by the Respondent Bank.

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It is noticed, that the Appellant took no steps whatsoever to pay outstanding dues to the Respondent Bank by way of valid tender. The Hon'ble Supreme Court interpreted the rule 8(6) of the Security Interest (Enforcement) Rules,2002 in l4athew Varghese case, which says that 30 days' notice period mentioned therein is for the purpose of enabling the borrower to redeem his property, It is stated by the Appellant that the 30 days clear notice of the auction was not served on the borrower. In the case, initial auction Sale Notice was issued on 23.02.2021 and the same was published in two leading newspapers. The present Sale Notice in question was published on 22.02.2022, which is

S.A.No.47 1/2022

subsequent Sale Notice giving a 15 days' clear notice. Therefore, subsequent Sale Notice of publishing the same of 15 days as provided under rule 9(1) of the Security Interest Enforcement rules 2002, which is mandatory. the Respondent has complied the same. Having said thus, in the peculiar facts of the present case, this Tribunal does not deem it necessary to deal it further the argument on the issues raised by the Appellant that there was no clear 30 days'notice published by the Respondent Bank while conducting the auction sale in question. Similarly, it is not necessary to examine other grounds urged by the Appellant, considering the facts that the Appellant has failed to make a valid and legal tender to the Respondent Bank within the time frame. The impugned sale did take place in subsequent auction and therefore, there were no defects in the concerned notice. The Appellant's contentions deserve to be rejected. since, there was clear 15 days' notice served on the Appellant and the same was also published as required under the law. The valuation of the property in question originally was obtained. But at the subsequent auction, the valuation was done to secure best possible price by the Respondent which would be beneficial to both the parties. But ideal situation does not arise in the auction, the Respondent Bank could not get buyer in earlier

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S.A.No.47U2O22

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auction. Therefore, the Appellant cannot make any issue out of the valuation report at this stage. For the aforesaid reasons, the appeal is devoid of merit and the same is liable

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to be dismissed.

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ORDER

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In the result, SA 47L12022 is dismissed.

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Interim order, if any, stands vacated. Pending IAs, if any, also stand closed as infructuous.

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There will be no order as to cost,

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(Dictated to the Stenographer, after its transcription and necessary corrections, signed and pronounced by me in the Open Court on this 13th day of lune, 2023)

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,r"rr)'X,-'rl' PRESIDING OFFICER DRT-I, BENGALURU

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M S Sri Murari Oil Industries Pvt. Ltd. v. State Bank of India

Case brief

What is this about?

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M S Sri Murari Oil Industries Pvt. Ltd. v. State Bank of India

Case brief

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