Dismissed

Srinivasa Traders v. South Indian Bank

DRT12 May 2023SA/662/2022

Case brief

AI extract

What is this about?

This application challenged a sale notice and subsequent auction under the SARFAESI Act. The Tribunal examined procedural compliance regarding NPA classification, rule compliance, and service of notices. The court found all statutory mandates were met and dismissed the application.

What did the court decide?

The application to set aside the sale notice and the auction conducted on 13.12.2022 was rejected, and the status quo was maintained.

Srinivasa Traders versus South Indian Bank — Banking and Recovery | DRT (2023)

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BEFORE THE DEBTS RECOVERY TRIBUNAL – II AT CHENNAI

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Dated this 19^th day of May, 2023

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PRESENT : SHRI T.RAJESH PRESIDING OFFICER

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SA No.662/2022

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M/s.Srinivasa Traders, Rep. by its Prop.Mr.R.Srinivasan, S/o.Rangaraj, No.18, Salt Office Road, Panjayankuppam, Cuddalore – 607 003. … Applicant.

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Vs.

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The Authorised Officer, South Indian Bank, Regional Office, No.43, Ground Floor, Hameediya Centre, Haddows Road, Nungampakkam, Chennai – 6.

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Mr.M.Gnanamani, S/o.Marimauthu, No.26, Appavu Street, Cuddalore OT -607 003. … Respondents. (Amended as per order dated 17.03.2023 in IA No.362 of 2022)

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Counsel for Applicant : Mr.A.Arokia Satheesh. Counsel for 1^st Respondent : M/s.M.L.Ganesh. 2^nd Respondent : …. ….. O R D E R

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

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Securitisation and Reconstruction of Financial Assets and Enforcement

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of Security Interest Act, 2002 (herein after called SARFAESI Act or the

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‘Act’, as the case be), to set aside the sale notice issued by the respondent dt.14.11.2022 fixing the sale on 13.12.2022.

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The applicant’s case as stated in the SA can be summarized as follows:

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The applicant is a proprietorship concern and had long standing relationship with the respondent bank. The applicant is also admitting the availment of credit facilities which were revised, reviewed and enhanced from time to time. At present the applicant is admitting the availment of facility of Rs.1,20,000/- in CCOL, Rs.24,21,000/- in TL Covid Moratorium and Rs.7,41,000/- in ECLGS accounts. It is also stated that to secure the credit limits, the mortgage was created over the properties. It is further case of the applicant that due to slump of the economy, the business went through difficult period and though restructuring was requested for, the bank had not acceded to the same and resorted to the proceedings under the Act by classifying the account as NPA on 29.05.2021. It is also stated that the demand notice u/s.13(2) was issued on 11.08.2021 demanding a sum of RS. 1,53,57,098/- and consequentially possession notice dt.10.02.2022 was issued. According to the applicant, the bank had hastily proceeded with the measures without affording an applicant a reasonable opportunity to get the loan re-scheduled. It is also stated by the applicant that though the facilities mentioned in the impugned notices are accounts of M/s.SAS Rice Merchant and M/s.Sri Annai Santha Stores, wherein the applicant is

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only a guarantor. It is also alleged that though several properties were given in as security, the demand notice and possession notice were issued separately and that the applicant is concerned with item no.3 of the schedule property.

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It is further contended by the applicant that, in order to protect the property, the applicant’s brother had approached the respondent bank expressing his readiness to redeem that property alone. It is further alleged that though the bank had virtually agreed for the proposal and directed the applicant to deposit the amount on or before 13.12.2022. The applicant is putting forth a further contention that due to the reluctance of bank in issuing the written communication regarding acceptance of the proposal, the amount as required for the accepted proposal could not be collected. It is also admitted that the bank had proceeded with the auction and the schedule property had been sold for a sum of Rs.23,50,000/- in a bid wherein only one bidder had participated. The applicant is expressing his willingness to pay Rs.25,00,000/- and is disputing the correctness of the sale claimed to have been conducted by the respondent.

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In the grounds to the SA, the applicant is reiterating the contentions as made in the statement of facts and also taken up a contention that there is no compliance of section 13(3A) of the Act. According to the applicant, the respondent had failed to consider the

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representation as mandated under Rule 3(A) of the Security Interest (Enforcement) Rules, 2002. In regard to the sale notice also, the applicant is contending that the sale notice is not served on the guarantors and the same is not affixed as required under the statute. The contention is also taken as to reserve priced fixed for the property. Hence on the above contentions, the applicant seeks to set aside the impugned sale notice and consequently the sale conducted on 13.12.2022. Along with SA, the applicant had produced the following documents:

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(a) Copy of Notice u/s.13(2) of SARFAESI Act dt.11.08.2021.

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(b) Reply to Demand Notice dt.07.10.2021.

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(d) Letter to bank to redeem the scheduled property dt.12.12.2022.

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(e) Impugned sale notice dt.14.11.2022.

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Subsequently the auction purchaser was impleaded as additional respondent as per the order dt.17.03.2023.

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The 1^st respondent had filed their counter denying the contentions as taken by the applicant in the SA and contending that the measures taken by them leading up to conduct of sale are in accordance with the statute. It is also stated that the loan account was rightly classified as NPA on 29.05.2021. The allegation as to the non-compliance of Rule 3A

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and the alleged non-service of impugned sale notice are also denied by the respondent. The claim of the applicant for partial redemption is also denied as not sustainable.

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Though the counsel for additional respondent had entered appearance pursuant to the notice issued in IA 362/2023, no vakalat and counter was filed by the additional respondent.

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Heard the Ld. Counsels for both sides and considered the rival contentions as taken in the SA and the counter affidavit in the light of documents available on record and the averments made therein by either side. The only issue that arise for consideration in this matter is, whether the measures initiated and continued by the respondent leading to the conduct of sale are in accordance with the mandate of the statute or not?

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The applicant is admitting the availment of facility and creation of security interest. The applicant is disputing the correctness of NPA contending that the respondent had failed to extend the benefits of moratorium declared by Reserve Bank of India due to COVID 19 to them. This contention is made without producing any evidence as to how the applicant is entitled for moratorium for the credit facilities. The applicant had not produced any supporting documents in their challenge as to NPA classification, which disentitles the respondent to classify the account as NPA as on the aforementioned dates. In their counter, the respondent had specifically contended that, as per RBI notification dt.07.04.2021, the commercial banks and financial institutions are instructed to declare the asset classification for the period commencing from 01.09.2020 as per applicable IRAC norms. It is also stated that the

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applicant’s account was running irregular and the same was finally classified as NPA on 29.05.2021. In the absence of any evidence showing the entitlement of the applicant to save his account from being classified as NPA, this Tribunal is of the view that the applicant had failed in putting forward any challenge as to the classification of account as NPA. This is more so, the applicant had in para 2 of the SA stated that the applicant had approached the bank seeking restructure of credit facility. In support of the said contention also no document is available which proves the entitlement of the applicant for such restructuring.

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The applicant though admitting the service of demand notice, had taken a contention that the representation submitted by the applicant was not duly considered by the respondent. The respondent along with their typed set produced copy of reply sent by the respondent to the representation. The production of said documents satisfactorily proves the compliance of Rule 3A. Apart from the above, the respondent themselves are admitting the consideration of the representation and is only complaining that the representation is not duly considered alleging that the contentions taken therein had not been gone into. It is to be noted that this Tribunal is not sitting on appeal over the reasoning given by the authorized officer in rejecting the representation. Though the applicant is entitled to raise the contentions in this section 17 application non-consideration of the contention of the applicant in the reply cannot be a ground to assail the proceedings. In view of the

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admitted case of both parties that the bank had considered the representation and sent a reply, the contention of the applicant as to the alleged non-compliance of Rule 3A is also to be rejected.

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In regard to the possession notice, the applicant is attributing the illegality as different possession notices were issued by the respondent bank. It is to be noted that the issuance of different possession notice pertains to different properties cannot be an illegality as it is the convenience of authorized officer to decide how and when the authorize officer take possession of the secured asset. The respondent had also produced proof of affixture of possession notice over the properties and publication of possession notice as made in two dailies. The documents so produced by the respondent prove the compliance of Rules 8(1) and 8(2) of Security Interest (Enforcement) Rules, 2002. Hence, this Tribunal is of the view that there is no procedural illegality in issuance of possession notice.

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In impugning the sale, the applicant is contending that the sale notice is not served on all the borrowers. It is to be noted that the respondent had produced the acknowledgment card evidencing service of sale notice on all the borrowers which falsifies the contention of the applicant in that regard. The respondent is also produced valuation procured from the approved valuer, proof of affixture of sale notice and its publication. Hence by production of documents, the respondent had

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successfully rebutted the contention of the applicant as to the alleged improper service of sale notice.

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Taking into consideration the discussions as made in the above paragraphs and the conclusion arrived therein can only lead this Tribunal to the irresistible finding that the SA is devoid of any merits and is liable to be rejected.

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In the result, SA 662/2022 stands dismissed. In view of the fact and circumstances of the case, no order as to cost is passed and 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 19^th day of May, 2023 )

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

Srinivasa Traders v. South Indian Bank

Case brief

What is this about?

What did the court decide?

Srinivasa Traders v. South Indian Bank

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

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