Dismissed

Ramachandran Son of Narayanan v. Canara Bank

DRT13 Feb 2023SA/569/2022

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal dismissed the Securitization Application filed under Section 17 of the SARFAESI Act challenging Section 14 measures. The Tribunal found that evidence proved compliance of service notices under the Security Interest (Enforcement) Rules and upheld the impugned order.

What did the court decide?

SARFAESI Application dismissed; all pending Internal Applications closed; no order on costs.

Ramachandran Son of Narayanan versus Canara Bank — Banking and Recovery | DRT (2023)

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BEFORE THE DEBTS RECOVERY TRIBUNAL –II AT CHENNAI

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Dated this 13^th day of February, 2023

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PRESENT: SHRI T. RAJESH

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PRESIDING OFFICER

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SA No.569 of 2022

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N. Ramachandran S/o Narayanan Keezhakuppam, Nadukuppam Panruti Taluk

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…Applicant

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Versus

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The Authorised Officer Canara Bank Neyveli Main Branch, Block 6 Neyveli Township Cuddalore District – 607 803 …Respondent

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Counsel for the Applicant : M/s D. Durairaj Counsel for Respondent : M/s K.N. Chinnakrishnan

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FINAL ORDER

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This Securitization Application is filed under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), herein after been referred as SARFEASI Act challenging the orders passed by the Ld. Chief Judicial Magistrate, Cuddalore in CMP.577 of 2021 with a prayer to set aside the measures pursuant to the impugned order.

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It is stated by the applicant that the applicant had approached the respondent bank seeking financial assistance and availed a Cash credit for Rs.45,00,000/- . In regard to the above disbursement, it is stated that the bank had released only Rs.32,00,000/- which the applicant had utilized for development of agricultural land. It is also stated that the applicant had paid

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sum of Rs.54,00,000/- on various dates and without considering the remittances so made, the respondent had bought the residential house for sale by notice dated 22.6.2021 fixing the sale on 12.7.2021 which the applicant had impugned before the DRT-I Chennai by filing SA.199 of 2021 which now stands pending by way of a restoration petition MA.17 of 2021.

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It is further stated that, as the situation stands such, the respondent had obtained orders under Section 14 dated 3.10.2022. In regard to the proceedings, the contention that the applicant had been making the repayments without any default and had altogether made the remittance of Rs.54 lakhs is reiterated. At the same time the applicant is admitting that due to financial hardship, the applicant was unable to pay the interest in the loan amount as per terms. It is also stated that the applicant approached the respondent bank and the sought time to pay the overdue amount. It is the grievance of the applicant that the respondent had not considered the request for time for payment of the overdue and had without following the legal procedure had threatened that they are going to take physical possession of the secured asset without any intimation. Hence the applicant contends that the present proceedings are continued without issuing the demand notice and possession notice. It is also stated that parelly the respondent had proceeded as per the provisions of the Arbitration Act, wherein also an amount of Rs.9,50,000/- was paid. Therefore the applicant alleges that the respondent bank is using the Act and Rules in a highhanded manner without application of mind and had misused the power.

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In the grounds to the SA, apart from reiterating the contentions as above the applicants submits that the respondent had not followed the procedure as envisaged under the Act, the demand notice was not served, the possession notice was not in conformity with Appendix IV and also as to the alleged noncompliance of Rule 8(1) and (2) of the Security Interest (Enforcement) Rules. A further contention is also taken that the exact amount due is not mentioned in the demand notice. Along with the SA the applicant had produced the copy of the section 14 application filed before the Ld. Magistrate and also the order passed by the Ld. Magistrate therein. On the above contention and documents, the applicant seeks to set aside the measures leading up to the procurement of impugned orders.

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The respondent had filed their counter denying all the averments as stated in the SA. It is stated that the applicant along with others namely; Muniammal W/o Ramachandran, Mr. R. Dhavabalan, Mr. Thankapandiayan, Mr. Dhanapathi, Mr. Dharaniselvan had been sanctioned the term loan of Rs.45 lakhs. It is also admitted that out of the sanctioned amount of 45 lakhs, the borrowers had availed only Rs.32,51,799. It is also stated that only as the instalments were not paid, the account was classified as NPA on 16.4.2019; that too after continuous request made to regularize the loan was not materialized. After the classification of account as NPA the demand notice was issued on 22.5.2019 in respect to the scheduled properties claiming the outstanding liability of Rs.1,22,00,135/-. It is further stated in the counter that even as the borrowers and guarantors failed to close the loan account even after the expiry of 60 days, the possession notice was issued on 14.8.2019. It

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is also stated that the possession notice was published and affixed as required under the statute.

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It is further admitted in the counter that one of the borrowers cum mortgagor died on 27.1.2018 and another borrower cum mortgager died on 15.2.2020. It is stated that since the information as to the legal heirs of Mr. Dhavabalan who died on 27.1.2018 was not available with the bank. The 1^st sale notice was issued stating and describing Mr.Dhavabalan as “deceased”. In regard to the 2^nd sale notice issued on 15.10.2020, it is stated that the same was issued mentioning the aforementioned deceased borrowers as “deceased”. In regard to subsequent sale notice issued on 2.1.2021 and 27.1.2021, it is contended by the respondent that the same were issued against the legal heirs of the deceased borrowers. In respect of the 4^th sale notice the respondent contends that, though the applicant preferred SA.47 of 2021 the same stand dismissed for default. It is further contended in the counter that the respondent had subsequently issued the 5^th and 6^th sale notices dated 8.4.2021 and 22.6.2021, fixing the reserve price at 1.42 crores and 1.28 crores respectively. In regard to the issuance of the sale notice leading to the auction, it is stated that the same had been impugned in SA.199 of 2021 before DRT-I, Chennai. It is also stated that the sale had been conducted on 14.7.2021 under e-auction and the same was sold for a sum of Rs.1.29 crores to the highest bidder Mr.V.Selvaraj who remitted Rs.32,25,000/- being the 25% of the sale price of Rs.1,29,00,000/- and the balance has also been remitted by 27.7.2021. It is further stated by the respondent that the sale certificate dated 28.7.2021 had also been registered as document no.2080/2021 of SRO, Panruthi. The respondent had also informed that after

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adjusting the entire sale proceeds the account was closed and an excess amount of Rs.21,24,724.18 is kept in a separate account. In regard to the valuation, it is stated that the respondent had obtained the valuation from the approved valuer and based on the valuation so obtained, the reserve price was fixed. The information regarding the sale was also communicated to the applicant by letters dated 23.7.2021 and 12.8.2021 which had been returned with endorsement „refused‟. In the counter affidavit respondent had also stated that the property had been registered with the Central Registry on 24.9.2019.

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In regard to the SA.199 of 2021 which is filed impugning the sale notice, the respondent contends that the same was dismissed for default on 30.11.2021 and a restoration petition is filed therein. In regard to the impugned measures under Section 14, it is stated that there is no infirmity in the proceedings leading to the procurement of impugned order. It is reiterated that the respondent had in compliance of the mandate of Section 14 had filed the affidavit elaborating the procedure and petition before the Ld. Magistrate and only after being satisfied with the legality of the measures, the Ld. Magistrate had passed the order. The respondent had specifically denied the contentions as raised in the grounds to the SA and reiterated that they have followed the mandate of the statute. along with the counter affidavit the applicant had produced the demand notice dated 22.5.2019, acknowledgment card in regard to the demand notice, possession notice, acknowledgment card, photographs evidencing affixture, publication of the possession notice, returned covers as to the possession notice, sale notices dated 25.10.2019, 15.10.2020, 2.1.2021, 27.1.2021, 8.4.2021 and 22.6.2021. In respect of the

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6^th sale notice dated 22.6.2021, the respondent had produced the photographs evidencing affixture, acknowledgment card and publication in two dailies. The e-auction proceedings, sale certificate, communication dated 23.7.2021 and 12.8.2021were also produced. The respondent had also produced the MODTD, final order in SA.199 of 2021 and the statement of account.

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The respondent had filed additional counter affidavit along with copy of the demand notice, postal receipts and original acknowledgment cards. Apart from the above, a second additional counter was also filed along with the report of the advocate commissioner and order of the Hon‟ble High Court in “Rehamath Steel Versus Mahavir Plantation Pvt. Ltd.”

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Heard the counsel for both sides and considered the contentions as taken in the SA and the counter affidavit filed by the respondents. The documents produced by both sides were also considered. The following issues for consideration in this matter: -

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(i) Whether the applicant is entitled to impugn the legality of the measures taken by the respondent, when the SA impugning the measures up to the issuance of sale notice stand dismissed?

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(ii) Whether the measures taken by the respondent and procedure followed by the respondent in procuring the Section 14 order is in accordance with statute or not?

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Issue No. (i)

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Whether the applicant is entitled to impugn the legality of the measures taken by the respondent when the SA impugning the measures up to the issuance of sale notice stand dismissed?

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It is the admitted case of both sides that the applicant had preferred SA.199 of 2021 before DRT-I, impugning the sale notice and the same stands dismissed by the Tribunal. It is also admitted that a restoration petition in this regard is pending. The contention of the respondent that the applicant is precluded from challenging the measures leading up to the issuance of the impugned sale notice as the case filed challenging the same, stands dismissed as on date is having some force in it. However, it is to be noted that the SA is dismissed not on merit and no decision as to the legality of the measures was rendered therein. It is also stated that a petition seeking restoration of the said SA is pending. On consideration of the above facts this Tribunal is not inclined to accept the preposition that the challenge as to the validity of measures leading to issuance of impugned sale notice cannot be raised. This is more so as no orders on merit have been passed so as to hold that the said issue had attained finality.

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Issue No. (ii)

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Whether the measures taken by the respondent and procedure followed by the respondent in procuring Section 14 order is in accordance with statute or not?

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In this regard the applicant had taken the contention that the demand notice and possession notice were not served on him. It is also stated that the respondent had also proceeded under the Arbitration Act. However no particulars as to the so claimed arbitration proceedings are given by the applicant. Even otherwise the initiation of arbitration will not stand in way of

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the respondent continuing with the measures taken under the Act. In rebutting the contention as to service of demand notice, the respondent had produced the demand notice and the copy of the acknowledgment card evidencing receipt of the demand notice. Even as the applicant had disputed the genuinity of copy of acknowledgment card the respondent had produced the original of the postal receipts and acknowledgment cards evidencing the compliance of Rule 3 of the Security Interest (Enforcement) Rules.

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The applicant is disputing the issuance of possession notice also. Since the issuance of possession notice is not sinequanon for initiation of section 14 proceedings, the alleged non issuance and non service of the possession notice have no bearing as to the legality of the measures. However, the respondent had in their typeset produced the postal receipts evidencing issuance of the possession notice and the acknowledgment card evidencing receipt of the possession notice by the applicant. The returned covers of the possession notice issued to other borrowers were also produced. The photographs evidencing affixture of the possession notice is also produced. The paper publication of the possession notice as made in Dinamani and New Indian Express were also produced by the respondent. The said documents produced by the respondent are sufficient to hold that the respondent had successfully proved the compliance of Rule 8(1) and 8(2) of the Security Interest (Enforcement) Rules.

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Even though the legality of the sale notice is not an issue before this Tribunal the respondent had produced the evidence as to service affixture and publication of the sale notice dated 22.6.2021. The respondent had also

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produced the e-auction proceedings sale certificate and intimation issued to the applicant. The MODTD evidencing the creation of security interest and statement of account evidencing the defaults is also produced. Even otherwise, the availment of facility, creation of security interest and the defaults in the account are admitted by the applicant. In regard to the documents pertaining to the sale notice, this Tribunal is not endeavouring as to the legality of the sale notice as the same is not subject matter of the lis.

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Apart from the alleged non service of the demand notice and possession notice, which stands disproved by the evidence of the respondent, the applicant has not taken any valid ground as against the measures leading to impugned orders of the Magistrate.

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When the matter was heard a contention was taken by the applicant that the respondent had in fact released one item of property on payment of Rs.45,00,000/-, which has not been bought to the notice of the Magistrate. However, in the absence of any specific contention in this regard made in the Application, so as to enable the respondent to come out with their rebuttal, this Tribunal is not inclined to go into the said issue, especially when the applicant doesn‟t have a case that the bank is now attempting to take possession of the property which they have already released.

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On the basis of above discussions and findings entered therein, this Tribunal is of the view that the applicant had not put forth any valid challenge as against the measures leading up to the procurement of impugned orders from the magistrate and the SA is devoid of any merit and is liable to be dismissed.

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In the result the SA stands dismissed and all pending IA‟s stands closed, no orders as to cost. Issue copies in accordance with Rule 16 of the Debt Recovery Tribunal (procedure) Rules 1993.

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(Dictated to PS, transcribed by him, corrected, signed and pronounced by me in Open Court on this the 13^th day of February, 2023)

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Sd/(T. RAJESH ) PRESIDING OFFICER DRT-II, CHENNAI

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Ramachandran Son of Narayanan v. Canara Bank

Case brief

What is this about?

What did the court decide?

Ramachandran Son of Narayanan v. Canara Bank

Case brief

What is this about?

What did the court decide?

What the court decided

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Issues for consideration

Cases cited

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