Allowed

Mrs S Saroja v. State Bank of India

DRT8 Sept 2023SA/660/2022

Case brief

AI extract

What is this about?

The Tribunal allowed the stay application against a possession notice. The ruling held that the secured creditor failed to prove service of the demand notice on all borrowers as mandated by Rule 3 of Security Interest (Enforcement) Rules, 2002, triggering procedural vitiations.

What did the court decide?

Stay application allowed; impugned possession notice and connected measures set aside; Bank directed to serve demand notice properly and re-initiate proceedings.

Mrs S Saroja versus State Bank of India — Contract and Commercial Disputes | DRT (2023)

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BEFORE THE DEBTS RECOVERY TRIBUNAL – II AT CHENNAI

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Dated this 8^th day of September, 2023

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PRESENT : SHRI T.RAJESH PRESIDING OFFICER

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SA No.660/2022

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Mrs.S.Saroja,

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W/o.Mr.Subramanian, Pillai Street, Arangamangalam and Post, Kurinijipadi,

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Cuddalore – 607 302.

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Mrs.S.Govindammal,

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W/o.Mr.Subramanian,

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Pillai Street, Arangamangalam and Post, Kurinijipadi, Cuddalore – 607 302. … Applicants.

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Vs.

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The Authorized Officer, State Bank of India, Pinnalur Branch, Opp to Sri Ramalingeswarar Temple, Kumbakonam Road, Pinnalur Post, Bhuvanagiri Taluk, Cuddalore – 608 704. … Respondent. Counsel for Applicants : M/s.V.P.Parivallal. Counsel for Respondent : Dr.T.Ramasamy. …..

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O R D E R

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This application is filed by applicants under section 17(1) of the

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Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (herein after called SARFAESI Act or the ‘Act’, as the case be), with a prayer to set aside the impugned possession notice dt.28.11.2022 issued by the respondent.

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The applicants who admits to have availed overdraft facility for Rs.9,00,000/- in the year 2017 submits that the repayments were regular up to 2021. It is also stated that due to the problems faced consequential to COVID 2019, repayments were admittedly defaulted and the account turned into NPA. In respect of measures, the applicants are contending that the issuance of possession notice is flawed for nonservice of demand notice to all the borrowers. It is also contended that the measures in issuance of possession notice is also not in accordance with the statute. Along with SA the applicants had produced impugned possession dt.28.11.2022.

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The respondent had filed their counter denying the contentions of the applicants and contending that they had scrupulously followed the procedure as required under the statute. It is reiterated that the account was classified as NPA due to the defaults occurred in the account and that the respondent had followed the mandate of the statute in their measures leading to the impugned possession notice. Along with counter, the respondent had produced the following documents:

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(i) Demand Notice with acknowledgement of service dt.13.09.2022. (ii) Possession Notice with acknowledgement of service dt.28.11.2022.

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(iii)Photos evidencing affixation of possession notice dt.28.11.2022.

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(iv) Publication of possession notice in The New Indian Express dt.04.12.2022.

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(v) Publication of possession notice in Dhinakaran dt.04.12.2022.

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Heard the Ld. Counsel for both sides and considered the rival

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contentions as taken in the SA and the counter affidavit in the light of

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pleadings therein and the documents submitted by them. The only issue that arises for consideration in this matter is as to whether the respondent had followed the mandatory procedure as required under the Act.

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In their effort to rebut the contentions as to the alleged procedural flaws, the respondent had produced the demand notice dt.13.09.2022 and proof of dispatch of demand notice. However, specific contention of the applicants as to the non-service of demand notice on 2^nd applicant is not proved though issuance of demand notice to 1^st applicant is duly proved by postal receipt and proof as to acknowledgement. Rule 3 of Security Interest (Enforcement) Rules, 2002 mandates the service of demand notice on all the borrowers and the proviso to said Rules mandates that when the service of demand notice is avoided, it is obligatory for the secured creditor to publish and affix the said notice. Rule 3 of Security Interest (Enforcement) Rules, 2002 reads as follows:

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“3. Demand notice.- (1) The service of demand notice as referred to in subsection (2) of section 13 of the Act shall be made by delivering including hand delivery or transmitting at the place where the borrower or his agent, empowered to accept the notice or documents on behalf of the borrower, actually and voluntarily resides or carries on business or personally works for gain, by registered post with acknowledgement due, addressed to the borrower or his agent empowered to accept the service or by Speed Post or by courier or by any other means of transmission of documents like fax message or electronic mail service:

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Provided that where authroised officer has reason to believe that the borrower or his agent is avoiding the service of the notice or that for any other reason, the service cannot be made as aforesaid, the service shall be effected by affixing a copy of the demand notice on the outer door or some other conspicuous part of the house or building in which the borrower or his agent ordinarily resides or carries on business or personally works for gain and also by publishing the contents of the demand notice in two leading newspapers, one in vernacular language, having sufficient circulation in that locality.”

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In spite of specific contention that there is no proper service of demand notice to all the borrowers, the respondent had not proved the service of demand notice to 2^nd applicant or publication and affixture of the same. In view of absence of any evidence as to the due compliance of Rule 3, this Tribunal is of the view that there is force in the contention of the applicants that the measures are vitiated by procedural irregularities. In view of above findings as to the non-compliance of Rule 3, this Tribunal is not adverting as to the legality of issuance, publication and affixture of impugned possession notice. Even though the counsel for respondent submits that the principle of constructive notice applies, in the present case, this Tribunal is not inclined to accept the contention due to the mandatory nature of proviso to Rule 3.

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In view of absence of proof as to the compliance of mandate of Rule 3 of Security Interest (Enforcement) Rules, 2002, this Tribunal is of the view that SA is to be allowed.

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In the result,

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(i) SA 660/2022 stands allowed

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(ii) The impugned possession notice and the measures taken by the respondent leading to the issuance of impugned possession notice are set aside. It is made clear that the respondent will be at liberty to re-initiate the denovo

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proceedings by re-issuing the demand notice by following the procedure, if so advised.

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(iii) The respondent is directed not to mulct the cost of the proceedings leading upto the issuance of impugned possession notice and also the demand notice on the applicants. If any debit had already been made in this regard, necessary reversals had to be made forthwith.

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(iv) In view of the facts and circumstances of the case, since the applicants are compelled to approach this Tribunal, a cost of Rs.10,000/- is imposed on the respondent which is to be adjusted at the time of settlement or closure of the account, as the case be.

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All pending IAs stands closed. Issue copies in accordance with Rule 16 of the Debt Recovery Tribunal (Procedure) Rules, 1983.

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( Dictated to PA, transcribed by him, corrected, signed and pronounced by me in the Open Court, this 8^th day of September, 2023 )

Mrs S Saroja v. State Bank of India

Case brief

What is this about?

What did the court decide?

Mrs S Saroja v. State Bank of India

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

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Case details

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