Partly allowed

Ms Sanjana Textiles and Furnitures v. City Union Bank Limited

DRT8 Aug 2023SA/656/2022

Case brief

AI extract

What is this about?

The Tribunal allowed the applicant's challenge against the sale notice under the SARFAESI Act. While NPA classification and possession notice measures were upheld as compliant, the sale notice was struck down because it included an unsecured credit facility, which is outside the Act's scope.

What did the court decide?

Sale notice struck down; NPA classification and possession notice measures upheld; respondent directed not to mulct cost for possession notice.

Ms Sanjana Textiles and Furnitures versus City Union Bank… — Banking and Recovery | DRT (2023)

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BEFORE THE DEBTS RECOVERY TRIBUNAL –II AT CHENNAI

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Dated this 8^th day of August, 2023

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PRESENT: SHRI T. RAJESH

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PRESIDING OFFICER

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SA No.656 of 2022

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M/s Sanjana Textiles & Furnitures

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Rep. by its Proprietor, Mr. S. Sivananthan No.218, PudhurPoongulam A.K. Mottur, JammanaPudur (Post) Tirupattur Taluk, Vellore District – 635652

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S. Sivananthan

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M/s Sanjana Textiles & Furnitures No.218, PudhurPoongulam

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A.K. Mottur, JammanaPudur (Post) Tirupattur Taluk, Vellore District – 635652

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Mrs. S. Geetha M/s Sanjana Textiles & Furnitures No.218, PudhurPoongulam A.K. Mottur, JammanaPudur (Post) Tirupattur Taluk, Vellore District – 635652 …Applicants

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Versus

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The Authorized Officer City Union Bank Limited Credit Recovery & Management Department No.24-B, Gandhi Nagar Kumbakonam – 612 001

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City Union Bank Limited Rep. by its Branch Manager Tirupattur Branch, KAP Tirunathar Nagar Tirupattur – 635 601 …Defendants

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Counsel for the Applicant : M/s K.A. Ramakrishnan Counsel for Respondent : M/s Ananda Gomathy & R. Roshan

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FINAL ORDER

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The sale notice issued by the respondent invoking the provisions of Section 17 of the Securitisation and Reconstruction of Financial Assets and

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Enforcement of Security Interest Act,2002 (SARFAESI Act), herein after been referred to as SARFAESI Act or the Act as the case be is challenged this Securitization Application, in short the SA.

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The availment of credit facilities for Rs.10 Lakhs is admitted by the applicants. The creation of Security Interest is also admitted. It is also the case of the applicant that before the availment of the credit facility based on security of the schedule properties, the applicant had availed unsecured loans without any security. In respect of the measures, the applicant contents that the applicant had been remitting monthly remittances and had not committed any defaults. Hence according to the applicant there is no reason for the respondent for classification of account as NPA. It is also contended that the respondent had without verifying the records and without following the guidelines not only classified the account as NPA but also issued the notice under section 13(2) of the Act on 4.8.2022.

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In respect of measures taken by the respondent the applicant contends that the demand notice is not served on 2^nd and 3^rd applicants. It is also stated by the applicant that after the issuance of the demand notice, the applicant had remitted a major portion of the liability and according to the applicant, the amount outstanding is only Rs.4,26,172/-. It is also specifically contented that despite the readiness of the applicant to pay the balance outstanding, the respondent had issued the possession notice which according to the applicant was served only on the 1^st applicant. The applicant had further contented that the impugned sale notice was also served on the 1^st applicant alone. It is also

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stated that in respect of issuance of the e-auction sale notice, also the same is not served on 2^nd and 3^rd applicant.

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In the ground to the SA also the applicant is reiterating the contentions as stated in the statement of facts. Another contention taken is that this respondent had not obtained the valuation of the property. The alleged nonaffixture of sale notice is also reitereated by the applicant. Along with the SA, the applicant had produced the following documents viz., Demand notice dated 4.8.2022, possession notice dated 13.10.2022, Impugned sale notice 9.11.2022 and Statement of accounts. Hence on the above contentions and grounds the applicant seeks to set aside the sale notice.

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The respondents entered appearance on notice and filed their counter contents that the SA is devoid of any merit. It is also stated that the NPA classification is also in accordance with the RBI guidelines. In respect of the demand notices and possession notice, the respondent submits that the same was issued and duly served on all the applicants. The respondent contents that there is no deviation from the provisions of the statute. In issuance of the sale notice, the respondent contents that the same is also issued, affixed and published as required under the statute. It is also stated that due to the stay order granted by this Tribunal no sale took place pursuant to the impugned sale notice. Along with the counter, the respondent had produced the following documents viz., Demand notice and acknowledgment cards, Possession notice and acknowledgment cards, Evidence as to affixture of possession notice, Paper publication of the possession, Sale notice and acknowledgment cards, Photographs evidencing affixture of sale notice,

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Paper publication of sale notice. Subsequently the respondent had produced the CERSAI search report and the valuation taken by the approved valuer.

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Heard the Ld. Counsel for both sides and considered the rival contentions in the light of pleadings and evidence produce by both sides. The issue that is to be gone into and decided is as to whether the measures taken by the respondent in classification of account and leading to the issuance of impugned sale notice are in accordance with the provisions of the statute.

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The first and foremost contention of the applicant is as to the NPA classification. According to the applicant the account was regular and there is no occasion for the respondent to classification of account as NPA. This Tribunal had considered the said contention in reference to the statement of accounts A mere perusal of the statement of accounts reveal that the account was in chronic default. It is also to be noted that even the applicant does not have a case that by the so claimed remittances the entire liability is wiped off.

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The next contention of the applicant as to the alleged flaws in issuance and service of demand notice as well as possession notice is rebutted by the respondent by producing the proof as to the service of demand notice as well as possession notice. The evidence as to the affixture and publication is also produced by the respondent. By production of above documents, the respondent had proved the strict compliance of Rule 3, 8(1) and 8(2) of the Security Interest (Enforcement) Rules.

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The proof as to the service of sale notice, and proof as the affixture and publication of the sale notice are also produced by the respondent along with

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the counter which disproves the contention of the applicant as to the irregularity in service of sale notice.

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The contentions raised regarding want of registration of the secured asset with central registry and the want of valuation are also refuted by production of the CERSAI registration and the valuation obtained from an approved valuer.

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The applicant’s counsel in reference to the sale notice had contended that the sale notice is issued including unsecured credit facility as the same is also mentioned in the impugned sale notice. In fact the said facility is mentioned in a note and in this regard eventhough this Tribunal is at lost to find how the applicant could be prejudiced by the said inclusion. This Tribunal is aware as to the fact that in their measures under the provisions of the Act, the Authorized Officer should follow the procedure. In issuance of sale notice, the only intention of the authorized officer should be to procure maximum value for the secured asset. The Authorized officer is discharging an independent function and cannot act as an agent of the bank. Any other transaction, the borrower has with the bank is not something in the preview of the measures under the Act and should not have found a place in notices issued as per the Act.

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For the aforementioned reason, this Tribunal is of the view that the impugned sale notice is liable to be struck down, though no sale took place pursuant to the same. The measures taken by the respondent in declaration of NPA, issuance of possession notice and demand notice all are found in accordance with the statute.

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In the result, the following order is passed: -

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(i) SA No.656 of 2022 stands allowed.

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(ii) The impugned tender cum sale notice is struck down being contrary to statute.

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(iii) All the measures taken by the respondent leading to the issuance of possession notice is found to be in order and it will be open for the respondent to continue the measures, if they are otherwise entitled for.

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(iv) The respondent is directed not to mulct the cost of issuance of impugned possession notice on the applicant. If any debit is already made in this regard, necessary reversals had to be made forthwith.

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(v) In the facts and circumstances no order as to cost is passed.

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(vi) All pending IAs closed.

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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 8^th day of August, 2023)

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Sd/-

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

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Ms Sanjana Textiles and Furnitures v. City Union Bank Limited

Case brief

What is this about?

What did the court decide?

Ms Sanjana Textiles and Furnitures v. City Union Bank Limited

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

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