Dismissed

Ms Sri Radhakrishna Agro Industries v. Union Bank of India

DRT11 Oct 2023SA/63/2022

Case brief

AI extract

What is this about?

This Security Application filed under Section 17 of the SARFAESI Act by a borrower challenging possession and auction notices issued by a bank for repayment of dues was dismissed. The Debts Recovery Tribunal held that the application was not maintainable because the applicant failed to implead the mortgagor of the schedule property, precluding relief in the borrower's absence. Additionally, the Tribunal noted that the challenged auction notice became non-est as the auction failed to attract bidders.

What did the court decide?

Application dismissed; no relief granted to applicant.

Ms Sri Radhakrishna Agro Industries versus Union… — Contract and Commercial Disputes | DRT (2023)

¶1

IN THE DEBTS RECOVERYTRIBUNAL- IAT HYDERABAD

¶2

DATED THIS THE^'1 1TH DAY OF OCTOBER, 2023

¶3

PRESENT: GUMMADI GOPICHAND, PRESIDING OFFICER

¶4

sA.No.63,/2022

¶5

M/s. Sri Radhakrishna Agro Industries, Rep. by its Proprietor, Mr. Vanaparthi Rajaiah, Situated at: H.No.5-79l3, Das Nagar, Makloor, Nizamabad-SO32 13.

¶6

Applicant.

¶7

Versus

¶8

Union Bank of India, Hyderabad Road Branch, Dwaraka Nagar, Hyderabad Road, Nizamabad - 503 O0l.

¶9

Respondent.

¶10

Counsel for the Applicant Sri D. Raghauulu. Counsel for the Respondent Si V. Raghu.

¶11

-:ORDER:-

¶12

This application is filed by the Applicant u/s. 17 0f the sARFAESI Act, 20O2, challenging the possession Notice dt. 14.O2.2022 and the e_Auction Sale Notice dt.O8.O4.2O22, issued by the Respondent Bank fixing the auction of the application schedule property on 20.O5.2022.

¶13

'lhe averments made in the application, in brief, are that, the Applicant is engaged in the business of rice milling and trading and during the course of its business, the Applicant availed working capital facilities to the tune of Rs.200'00 rakhs from the Respondent Bank and the said credit facilities are secured by way of portgage over the application sc nh e od u tl e property. After avai li ing the sai d 'Gqij: . et€\ t facilities ,. tr he ApplicantAnnli.qnt was paying the ioan amoi:nts regtiiarly forig. time but in the year to pay the loan and requested lor

¶14

SA.No.6i/2O22

¶15

regularizing the loan amount by receiving overdue amount. But, the Respondent Bank by illegally classifying the loan account as NpA invoked the measures under the SARFAESI Act. On 10.03.2022, tlre Applicant came to know that the Respondent Bank issued possession Notice dt. 14,O2.2O22, which was not served on the Applicant and even the Demand Notice u/s.13(2) was not served on the Applicant. The Respondent Bank has also failed to affix the possession Notice on the schedule property and has also failed to publish the said notice in two newspapers as contemplated under Rule g( 1) & (2) of the Security Interest (Enforcement) Rures, 2002. The Respondent Bank issued e- Auction Sale Notice dt.o9.o4.2022 for sale of the application schedule property, without serving Notice prior to sare as contemplated under Ruie 8(6) of the Ruies, 2oo2. The Respondent Bank has also failed to obtain valuation of the schedule property before fixing the reserve price, as contemplated under Rule g(5) of the Rules, 2002. The Respondent Bank has failed to affix the Sare Notice on the schedule property as contemplated under Rure s(5) of the Rules, 2oo2, and has also failed to publish the sale Notice in two newspapers as contemplated under Rule 9(1) of the Rules, 2002. The description of the schedule property was not correctly mentioned in the sale Notice dt.0g.04.2022. Hence, the sA.

¶16

¶17

The Respondent Bank filed its Reply statement denying a, the adverse allegations made in the application. The contentions of the Respondent Bank, in brief, are that, the Applicant, who is a borrower, cannot maintain the SA without impleading the mortgagor/ guarantor. The Applicant availed open cash credit facility and the account has to be conducted as per the terms.*gf sanction with regular transactions supported by were no regular transactions in the loan ctivity of the Applicant was closed, the loan AS A on 31.03.2021 as per the {: RBI norms. The Otma 2 1 , issued u/ s. 13(2) of the vr 5vr got r vLqrretu r eLr ned un-servedLrrr_D('l vc(l with .I So, the Demand Notice was 'Mana Telangana' newspapers

¶18

SA,No,63/2022

¶19

dt.16.04.2O2L. As the Applicant failed to liquidate the outstanding dues within 60 days from the date of Demand Notice, symbolic^possession of the application schedule property was taken by issuing^Possession Notice dt.21.06.2021 u/s.i3(4) of the SARFAESI Act, and the said notice sent to Applicant got returned un-served. The Possession^Notice dt.21.O6.2O21 was affixed on the schedule property and thereafter published in Business Standard and Mana Telangana newspapers dt.25.06.2021. Thereafter, physical possession of the schedule property was taken on 14.02.2022 by following the standard procedure i.e., pasting the Possession Notice on the schedule property and causing paper publication in English and Telugu newspapers. The Respondent Bank has issued 30 days sale notice on o4.o3.2o22 and the Appticant and other parties deliberately avoided to receive the said notice. So, the said Sale Notice was published in Hans India and Andhra Jyothi newspapers dt.06.03.2o22. The Respondent Bank obtained valuation report dt.16.02.2022, from its panel valuer, wherein the realizable market value is indicated at Rs.2,04,12,oool-. Thereafter, e-Auction Sale Notice dt.08.04.2022 was published in two newspapers i.e., The 'Hindu' and 'Eenadu' dt.12.o4.2o22, and was also pasted on the schedule property. Again the Applicant and other parties deliberately avoided to receive the e-Auction Notice, which was sent to them. The auction of the schedule property pursuant to e-Auction Sale Notice dt.09.04.2022, did, not materiahze for want of bidders. Subsequently, e-Auction Notice dt.23.05.2022, fixing the auction on 17,06.2022 and another e-Auction Notice dt.22.o6.2o22, fixing the auction of the schedule property on 20.o7.2022, were issued but, due to frequent goading of the Applicants and also the value of the property was on higher side, the bidders did not participate in the said,auctions.. 9p, !f,. Respondent Bank by intimation dt.18.06.2022 uroy€ht to tQe notrcpr;of.,comperent - ---iditi,,----- authority about the li. need to reduce rtAt ,.".rua''brilrice^toti1g90.0o *^lakhs and also sought permission vide JetterJ qt.g0pZ0W22 Q on for sale of the schedule property by pri . Upon f permission by the competent authority, the issued notice of intimation dt.05.08.2022 to rs about the sale of the schedule

¶20

SA.No.63/2022

¶21

property by private treaty, which notice was duly served upon them. The e-Auction Notice dt.08.04.2022, fixing the date of auction of the schedule property, which is challenged by the Applicant in the present SA do not survive, as auction could not be conducted for want of bidders, and the prayer of the Applicant became non-est, So, the Applicant is not entitled to any relief and the present SA is liabte to be dismissed.

¶22

Heard both Counsels. Ld. Counsel appearing for the Respondent Bank Iiled his written arguments.

¶23

Now, the points that arise for consideration are,-

¶24

i) whether the Applicant is entitled to seek any relief in the present SA and if so, the Applicant has established any valid grounds for setting aside the measures initiated by the Respondent Bank under the SARFAESI Act, against the application schedule property?

¶25

ii) To what relieP

¶26

Point No.lil:-

¶27

During the course of arguments, Ld. Counsel for the Applicant argued that, the Respondent Bank has illegally classified the loan account of the Applicant as NPA and without duly following the procedure laid down under the SARFAESI Act and the Rules made thereunder, the Respondent Bank took possession of the schedule property and has proceeded for the sale of the subject property by issuing e-Auction Sale Notice dt.o8.04. 2022. ifoira ,ag:U.r-yayed for setting aside the measures li n il l t i ate d o \y"ith" ?y/riEne KR esp l6Srdent _oJde., o.,r.ehr\ under the SARFAESI Act against the applicatioe schedulq.Bfopglty. : l.-"nit'nffrff" ;I

¶28

Per contra, Ld. t Bank argued that, the Applicant, after nduct the loan account as per the terms of sanction siness activity, which resulted in the classification of the loan account as NPA as per RBI guidelines. He

¶29

sA.No.6i/2022

¶30

also argued that the Respondent Bank has^{scrupulouslyfollowed the} procedure laid down under the SARFAESI Act and the^{Rules made} thereunder while enforcing the security^{interestto recover its legitimate} dues from the borrower/^guarantors. He further^{arguedthat the present} SA filed by the Applicant, who is the borrower,^{is not maintainableas the} mortgagor of the schedule^property is not made^{as a party to the SA and} in this regard he placed his reliance on a^{judgment of the Hon'bleHigh} Court for the State of Telangana in^{WP.Nos.5685,8240 and I i618 of} 2OIg -^.M/ s. Pince Cornqated Packaging,^{HgderabadVs. Andhra Bank",} dated 26.O9.2019, wherein in^{paragraphNo.1O, it is held as under:-}

¶31

"10. We mag note that Section 2(fl of the^{SARFAES/ Act} defines 'borrouer' not onlg to^{mean the personuLho has been} granted financial assislance by ang bank or financial institution but also a^person who^{has giuen ong guarantee or} created anA mortlJage cs security for such financial assistance. Therefore, a^{guarantor uLould stand inthe} position of a 'borouter' under the^prouisions of the^SARFAESI Act. That apart, Section 17 of the .SARFAES/ Act^{uests not} only a 'borrower' but any^{person aggieued by the measures} initiated under Section 13ft) thereof^{utith the ightto} challenge the same before the^{junsdictional Debts Recouery} TibunaL Though the position is widely worded^{and enables} 'any person aggieued' bg the^{measuresinitiatedunder} Section 13(4) to approach the^{jurisdictional Tribunal,the} grieuance entertained bg such a partA would^haue to^be demonstrated. When the actual owner of the^propeltu the borrower at whose behest t o SARFAESI Ac, . Therefore, in the statutory^{scheme,if the} guarantors had any gieuance with regard to sale of^their plots uhich were offered bg them as security for repayment gated Packaging, Hyderabad, theY to approach the Tibunal under Act. SignificantlA, none of them Further, though theg uere arrayed as application filed bg Prince and its Managing theg chose in ex parte and did not euer yg rights be, 't{u€ Tnbunal, at least in the capacitg n.ikrt, theg^practicalty waiued^their rlSht of the subject^{plots. (See} GENERAL MANAG ;ESHWARA COOPERATNE, BANK LTD.

¶32

SA.No.63/2022

¶33

V/s. IKBAL). Euen after dlsmissal of SA.No.457 of 2015 specificallg recording this aspect, they took no measures to independently challenge the sale bg u)aA of separate application under Section 17 of the SARFAESI Act. Without doing so, they chose to ftle W.P.No.8249 of 2019 assailing the order dismisslng 5.A.No.457 of 2015.'

¶34

There is no dispute regarding the fact that the Applicant availed Open Cash Credit facility for its business and the said credit facility is secured by way of mortgage over the application schedule property. The Applicant in its pleading has admitted that, due to COVID pandemic and other reasons, loan amount could not be paid regularly. The Respondent Bank in its Reply Statement has categorically stated that, the Applicant failed to conduct the loan account as per the terms and sanction and the business activity of the Applicant was also closed and so the loan account has been classified as NPA as per RBI guidelines. The Applicant did not deny the said statement of the Respondent Bank. Further, a perusal of the statement of account filed by the Respondent Bank also justifies the action of the Respondent Bank in classifying the loan account of the Applicant as NPA. So, I do not find any merits in the contention of the Applicant that the Respondent Bank has^illegally classified the loan account as NPA.

¶35

Admittedly, the Applicant is the borrou,er. One Mr. V. Santhosh Kumar, who is the orn ner of the schedule property, has created mortgage over the said property as security and stood as guarantor for the due^repayment of the credit facilities availed by the Applicant-borrower. The Applicant did not make the said mortgagor/guarantor as a^party to the^{present SA.} The said mortgagor/guarantor has not approached this^Tribunal challenging the measures initiated by the Respondent^{Bank underthe} SARFAESI Act against tle,l.g,,fre,0ute tropg5 As^{per the ratio laid down} by the Hon'ble High "'.. for theiState'$fi3langana in WP.Nos.5685, 8240 and 11618 of 2of5, a",.a'1b.og.zor'o;[ilr.r.ed^{supra), whenthe} actual owner of the q&..q tr0Er,?[}B ""ro-i$i not aggrieved^{and does} not come forward, open to the l4party,^{even if he be the} principal borrower /of such property offered a

¶36

SA.No.63/2022

¶37

guarantee, to maintain a challenge under Section 17 of the SARFAESI Act. The said decision of the Hon'ble High Court squarely applies to the present case on hand. So, the present SA filed by the Applicant-borrower without impleading the mortgagor/ guarantor, is not maintainable and the Applicant is not entitled to seek any relief in the present SA. Even otherwise, as per the material documents filed by the Respondent Bank, it is very clear that the Respondent Bank has meticulously followed the procedure laid down under the SARFAESI Act and the Rules made thereunder while proceeding against the application schedule property, being secured asset, to recover its legitimate dues. Further, the e-Auction Notice dt.08.04.2022 has become non-est as auction did not materialize, pursuant to the said auction notice, for want of bidders. Further, subsequent efforts of the Respondent Bank for conducting auction of the schedule property on two occasions failed for want of bidders. So, the Respondent Bank has initiated steps for sale of the schedule property under private treaty, as per the provisions of the SARFAESI Act, and intimated about the same to the Applicant and others and all these steps are not under challenge in the present SA.

¶38

So, considering all the circumstances, I hold that, the present SA is devoid of merits and the Applicant is not entitled to seek any relief in the present SA. Accordingly, the present SA is liable to be dismissed.

¶39

Point No.lii)t

¶40

In the result, the present Securitization Application is dismissed. -lnterlocutory^{Applications,} pending if any, shall stand r.as to costs.

¶41

Communicate a coov of order to the parties concerned.

¶42

; 11 otT trra'" : him, corrected, siqned ond pronounced bg me in the opea court on this sd/-

¶43

(G. GOPTCHAND)

¶44

S;;E;ritl>* Presiding Officer

¶45

Asst.

¶46

OEI-i.^{n i/llSi:48.4}

Ms Sri Radhakrishna Agro Industries v. Union Bank of India

Case brief

What is this about?

What did the court decide?

Ms Sri Radhakrishna Agro Industries v. Union Bank of India

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

State Bank of India versus Ms Indira Poultry Farm

Bank of India versus M/S. Sri Sharadha Binders

Bank of India versus M/S. S. v. Constructions

Union Bank of India versus M/S. Vedanta Cosmecuticals

State Bank of India versus M/S. Flagsquare Infracon Pvt. Ltd.

Andhra Pradesh Grameena Vikas Bank versus Sri. Mamilla Damodar Yadav