Allowed

Ms Chelpuru Brothers Cloth Sotres v. Union Bank of India (Andhra Bank)

DRT5 Sept 2023SA/93/2022

Case brief

AI extract

What is this about?

The Tribunal allowed SA.No.93/2022 setting aside an auction sale due to failure by the Bank to comply with valuation and notice rules under the SARFAESI Act. However, SA.No.276/2022 challenging physical possession orders was dismissed as the possession action was initiated after the stay period expired.

What did the court decide?

SA No.93 allowed; auction set aside; sale certificate quashed; Bank directed to refund sale proceeds with interest within one month. SA No.276 dismissed.

Ms Chelpuru Brothers Cloth Sotres versus Union Bank of… — Execution and Attachment | DRT (2023)

¶1

IN THE DEBTS RECOVERYTRIBUNAL- IAT HYDERABAD

¶2

DATED THIS THE 5IFI DAY OF SEPTEMBER,2023

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PRESENT: GUMMADI GOPICHAND, PRESIDING OFFICER

¶4

SA.No.93 &276oF 2022

¶5

SA.No.93 of 2O22:-

¶6

M/s. Chelpuru Brothers Cloth Stores, Rep. by its Managing Partners, Chelpuru Harish Kumar & Chelpuru Shashi Kiran, H.No.8- 10- 16, Besides Ashok Electricals, JPN Road, Warangal.

¶7

Mr. Chelpuru Harish Kumar, S/o. Ch. Hema Kumar, aged 33 years, Gender: Male, Occ: Business, R/o.H.No. 1 5-7-48, Ramannapet, Warangal.

¶8

Mr. Chelpuru Sashi Kiran, S/o. Ch. Anand Kumar, aged 27 years, Gender: Male, Occ: Business, R/o.H.No. 15-7-48, Ramannapet, Warangal.

¶9

Applicants,

¶10

Versus

¶11

Andhra Bank, presently known as Union Bank of India, rep. by its Authorized Officer, Fathima Nagar, L Catholic, Fathima Nagar, Warangal-506004.

¶12

Mr. M. Sampath Kumar, S/o. Venkataiah, Aged 53 years, Gender: Male, Occ: Business, R/o.H.No.S- 1 2-80, Pinnavari Street, PNB Lane, JPN Road, Warangal - 506002. Respondents. (Respondent No.2 is impleadeded as per Orders in IA.No.362/ 2023, dt. 15.03.202t:,ot:.'o-'%

¶13

*\ Counsel for the Appticii:nt s Rauinder. Counsel for Respondcnt No. 1 Sethu Madhaua Rao. Aruna. C ouns el fo r Re sp ond.gnt fub SEP ?W

¶14

5A.Nos.93 &276of2022

¶15

SA.No.276l2022:-

¶16

1.	M/s.Chelpuru Brothers ClothStores, Rep.byitsManagingPartners, Chelpuru Harish Kumar & Chelpuru ShashiKiran,H.No.8-10-16,Besides Ashok Electricals,JPNRoad,Warangal.
2.	Mr. Chelpuru HarishKumar, S/o.Ch.HemaKumar,aged33 years, Gender:Male,Occ: Business, R/o.H.No.15-7-48,Ramannapet, Warangal.
3.	Mr. ChelpuruSashi Kiran, S/o.Ch.AnandKumar,aged27 years, Gender:Male,Occ: Business, R/o.H.No.I5-7-48,Ramannapet,Warangal. Applicants.
Ver 1.	sus Andhra Bank,presentlyknownas Union BankofIndia,rep. byits Authorized Officer,FathimaNagar, LCatholic,FathimaNagar,Warangal-506004.
2.	Mr.M. SampathKumar, S/o.Venkataiah, Aged53years, Gender:Male, Occ: Business, R/o.H.No.8-12-80,PinnavariStreet, PNBLane, JPN Road, Warangal-506002. Respondents.
	(RespondentNo.2is impleadededasper Orders inIA.No.1B/2023,dt.07.02.2023)
	CouruselfortLrcApplicants : CounselforRespondentNo.1 : V.Rauinder. V.SethuMadhauaRao. Sn Sn
	CounselforResporudentNo.2 : B.Aruna. Ms.

¶17

Since parties in both the SAs and the subject property involved in both the SAs are one and the same, Common Order is being passed in both the SAs:-

¶18

i j-. '.,

¶19

-: CO.,MMON ORDER lt'^.a

¶20

-l SA.No.e3 l2o22is filed -.i.^.:.1 6y thg {p$P.n,fi,rl..jz-r the SARFAESI Act, , .i 2OO2, challenging the r$goc_eedings initiated ty the 1st Respondent '' . ."'^ '1 ."^{" ''.'';'} ',,jy-t :';. ii'-r: :! . ' '*,,,,il.j,.;.',,, .. , ,^{j '!tit-it'} .,.;.. 1 ' j"-.("^" Fj'

¶21

5A.Nos.93 &276of2022

¶22

Bank under the said Act against the application schedule^property, including the auction of the application schedule^property conducted by the lst Respondent Bank pursuant to the Notice dt.O2.lL.2Ol9, issued under Rules 8(6) & 9(1) of the Security Interest^{(Enforcement)} Rules,2OO2.

¶23

SA.No.276l2O22 is filed by the Applicants u/s.17 of the^SARFAESI Act challenging the action of the lst Respondent Bank to take^physical possession of the application schedule property u/s.14 of the SARFAESI Act, in pursuance of the orders dt.18.1O.2O22,^{passed by} the Ld. Chief Judicial Magistrate, Warangal, in Cr1.M.P.No.9Ol2022.

¶24

The averments made by the Applicants in SA.No.93 12022, in brief, are as under:-

¶25

The l"t Applicant firm availed linancial facilities from the lst Respondent Bank by creating security interest over the application schedule property in favour of the lst Respondent Bank. Thereafter, due to demonetization effect and also implementation of GST, the business of the Applicants^got effected and payment of loan instalments fell in arrears and the 1st Respondent Bank sent Demand Notice u/s.13(2) of the SARFAESI Act on 01.08.2019 calling upon the Applicants to^pay entire outstanding dues of Rs.1,18,90,0821-.After receipt of the said notice, the Applicants approached the 1"t Respondent Bank and by explaining the prevailing market conditions, requested the l"t Respondent Bank for grant of time for settling the dues under OTS, to which the 1st Respondent Bank stated that it would look into the matter and it would get back.

¶26

ii) of is to

¶27

¶28

SA.Nos.93 & 276 o12022

¶29

Applicants again approached the lst Respondent Bank and requested time for bringing their loan account within the sanctioned limits but, the 1"t Respondent Bank did not consider the same and proceeded for the auction of the application schedule property. Aggrieved by the said action of the 1"t Respondent Bank, the Applicants preferred WP.No.1 134 of 2O2O before the Hon'ble High Court for the State of Telangana and the Hon'ble High Court while leaving it open for the Applicants to avail the remedies under the SARFAESI Act, disposed of the writ petition vide order dt.21.O3,2O22 granted interim stay to enable the Applicants to approach this Tribunal.

¶30

iii) The Authorized Ofiicer of the 1st Respondent Bank without satisfying the ingredients that are necessary for declaration of the subject loan account as NPA and without allowing the Applicants to make good the dues within few months in the light of circumstances prevailing the market, has highhandedly proceeded for the auction of the application schedule property without following the due procedure laid down under the SARFAESI Act. The 1"t Respondent Bank has not followed Rule 8(1) & (2) of the Security Interest (Enforcement) Rules, while issuing the Possession Notice. The l"t Respondent Bank has also failed to furnish detailed valuation, reserve^price, date and time of sale and thereby violated Rules 8(5) & 8(6) of the Rules, 2002. Hence, the SA.

¶31

4 . The l^st Respondent Bank filed its Reply Statement denying all^the adverse allegations made in the SA. The^{contentionsof the lst} Respondent Bank, in brief, are as under:-

¶32

The Applicant No. 1 iir.m, ?epiQ by its partners i.e., Applicants No.2 & 3, availed OCC Rs.80.00 lakhs and Term Loan of Rs.40.00 lakhs from th6: Respondent against the security

¶33

SA.Nos.gi & 276 of 2022

¶34

loan account of the Applicants became NPA on 22.e6.2O19 and the 1st Respondent Bank initiated proceedings under the SARFAESI Act, by issuing Demand Notice dt.O1.08.2019 and recalled the entire loan amount and despite receipt of the said notice, the Applicants did not come forward to pay the loan amount. So, the 1st Respondent Bank issued Possession Notice dt. 15.10.2019 and took symbolic possession of the application schedule property and the said notice was also published in two leading newspapers. Finally, the lst Respondent Bank issued Sale Notice dt.l7.l2.2ol9 fixing the auction of the application schedule property on 22.01.2O2O.

¶35

ii) Aggrieved by the said Sale Notice dt.17.t2.2O19, the Applicants filed WP.No. 1 134 l2O2O before the Hon'ble High Court for the State of Telangana and the Hon'ble High Court vide order dt.21.Ol.2O2O, granted stay of confirmation of sale proposed to be held on 22.O1.2O2O subject to Petitioner/Applicant depositing 25%o of the amount mentioned in the Sale Notice within four weeks from the date of order. The Applicants have not complied with the said orders but, mislead the Honble Court that they have deposited t]ire 25o/o of the amount mentioned in the sale notice i.e., Rs. 1,18,90,0821-. Finally, the Hon'ble High Court disposed of the said writ petition vide order dt.21 .O3.2022 granting 30 days time to the^{petitioner/Applicant} to approach the jurisdictional DRT u/s. 17 of the SARFAESI Act and continued the stay granted earlier for the said period of 30 days.

¶36

iii) The Applicants filed SA.No.93/2022 before this Tribunal and made a false representation that they have deposited the 25o/o amount and this Tribunai. ifter. perusing the orders of the Hon'ble High Court in WP.No.1 l34l2A2O, granted interim stay of all further ,,'.r .proceedings, incl sale the certificate in favour .. :..-':: "i ,t.i*.ritt,

¶37

SA.Nos.gj & 276 oJ 2022

¶38

Applicants to issue urgent notice to the Respondents and posted the matter to 24.05.2022 for liling of proof of service by the Applicants. But, the Applicants have neither issued any urgent notice to the lst Respondent Bank nor have complied with the orders of the Hon'ble High Court. In the meanwhile, the 1st Respondent Bank confirmed the sale of the schedule property in favour of the auction purchaser and issued Sale Certificate in his favour on 16.05.2022. The lst Respondent Bank contended that the Applicants herein by misleading the Court/Tribunal got the said stay orders behind the back of the 1st Respondent Bank and accordingly prayed for the dismissal of SA.No.93l2022.

¶39

The 2"d Respondent-auction purchaser reported no Reply Statement on his behalf.

¶40

During the course of hearing of SA.No.93/2022 and when the matter was coming up for arguments on behalf of the Applicants, there was no representation on behalf of the Applicants even though three adjournments were granted to them. So, on 05.07.2022, this Tribunal dismissed the said SA.No.93/2022 for default. The Applicants filed MA.No.27 122 for setting aside the dismissal order dt.O5.07.2022 and to restore SA.No.93/2022 to file. While the said MA.No.27 122 is pending, the lst Respondent Bank approached the Ld. Chief Judicial Magistrate, Warangal and Iiled Cr1.M.P.No.90 12022 on 18.07.2022 seeking orders u/s.14 of the SARFAESI Act, for taking physical possession of the application schedule property. Later, MA.No.27 12022 lied by the Applicants was allowed by this Tribunal vide order dt.31.1O.2O22 and SA.No.93 12022 was restored to file. Aggrieved by the action of rtheili.:,''R*qpo.d.nt Bank u/s. 14 of the ..,r. SARFAESI Act to take pfrVsical possession.o[ the schedule property, the Applicants filed SA.No.276l2022 oX riOS. 11.2022. In the meanwhile, Ld. cJM, wa.aiight$fr i!61a.. d;fia. rc.2o22. appointed Advocate Commissionei,fofqt"ki.,g physicql pos6ession of the schedule 'j:^.'."', ..: '- ..,'.'' property. .: .' .-1 . .' .-1 . .-1 .

¶41

.: .' .-1 . .' .-1 . .-1 . : ...-;'.t^. l'' -.- | -iz

¶42

sA.Nos.93 & 276 ol2022

¶43

SA.No.276l2022:-

¶44

The Applicants, while reiterating their^{avermentsin SA.No.93l2022'} have further averred in SA.No.276 12022^{that, this Tribunalwhile} allowing MA.No.27 12022 in SA.No.93l2022^{vide order dt.31.1O.2O22,} has extended the status quo orders^{granted on 3O.O9 .2022,till} 25.11.2022 but, the l"t Respondent^{Bank by suppressing the said fact} obtained orders from the Ld. CJM,^{Warangat in Cr1.M.P.No.9O} 12022 u/s.14 of the SARFAESI^{Act and got issued notice from the Advocate} Commissioner appointed by the Ld. CJM,^{Warangal in} Crl.M.P.No.90 12022, for taking^{physical possessionof the application} schedule^property and so,^{the action of the lst RespondentBankis} totaily illegal. It is further^averred that,^{as per the orders of the} Hon'ble High Court dt.2l.Ol.2O2O in^WP.No'1134 l2O2O'^the Applicants deposited an amount of^{Rs. 15'00 lakhs out of Rs.30.00} lakhs (25o/o of Rs. 1,18,9O,0821-)^{and later before this Tribunal in} SA.No.93/2022, the^{Applicants have deposited6 Demand Drafts of} different dates amounting to^Rs.69,89,500 l-^{and this Tribunalwhile} disposing of MA.No.27 12022^{passed orders inIA.No. 141112022} directing the Applicants to^{deposit the said 5 DDs amountingto} Rs.69,89,500/- into the^{interestbearingno-lien account with the 1"t} Respondent Bank and thus till^{today, the Applicantshave deposited} with the l"t Respondent Bank a sum of^{Rs.84,89,500/- out of} Rs. 1,18,90,0821- and the balance^{remainsto be paid to the lst} Respondent Bank is only Rs.3O,O0 ,4821-.^{It is also averred that, the} lst Respondent Bank has not^{issued any notice to the Applicants} u/s.14 of the SARFAESI^{Act and so violatedthe said provision of the} SARFAESI Act and further the^{notice affixed by the Advocate} Commissioner on the^{schedule property does not speakabout the} Crl.M.P.No.9O /2022, in which he Yr" as Advocate Commissioner. So, the Applicants^prayed br' Setti.qg aside the action of the l"t Respondent Bank to take^physiceil' ssion of the application schedule Property.

¶45

¶46

SA.Nos.g3 & 276 of 2022

¶47

¶48

The lst Respondent Bank filed its Reply Statement in SA.No.276l2022 reiterating its version taken in SA.No.93/2022 and further contended that, the Applicants have failed to comply interim orders dt.2l.Ol.2O2O passed by the Hon'ble High Court in IA.No.02l2020 in WP.No. 1 134 l2O2O and so the benefit of stay of confirmation of sale, as per the conditional orders passed by the Honble High Court, is not available to the Applicants. By misrepresenting that the Applicants have complied with the interim orders, they got disposed of the writ petition and obtained extension of interim orders for a period of 30 days, from the Hon'ble High Court. It is also contended that, the Applicants again made a misrepresentation before this Tribunal in lA.No.377 12022 in SA.No.93l2022 that they have complied with the interim orders of the Hon'ble High Court and obtained stay of all further proceedings, including registration of sale certificate in favour of the auction purchaser. The writ petition was disposed of by the Honlrle High Court on 21.03.2022 granting 30 days time to the Petitioner/Applicant to approach this Tribunal and seek appropriate orders. So, the sale was confirmed only vide letter dt.22.04.2022 and the auction purchaser paid the baiance bid amount on 29.O4.2022 and the Respondent Bank issued the Sale Certificate on 16.O5.2022. It is further contended that, SA.No.93l2O22 filed by the Applicants was dismissed by this Tribunal for default on O5.O7.2O22 and so the interim orders of stay granted by this Tribunal stood vacated on 05.O7.2022. The Respondent Bank filed Crl.M.P.No.9Ol2022 on 18.07.2022 before the Ld. CJM, Warangal and obtained orders dt.l8.lo.2o22, ie., appointment of Advocate Commissioner for taking physical possession of the application schedule property and MA.No.27 12022 lied by the Applicants for setting aside the dismissal order dt.05.07.2022 in SA.No.93/2022 was allowed by this Tribunal only on 31.10.2022., So, the 1st Respondent Bank contended that, the Appiicants have not approached this-Tribunal with clean hands and accordingly prayed foq tfre fljsmigsal of 8A.No.27612022. t ':' Jfr

¶49

SA.Nos.g3 & 276 ol2022

¶50

The 2"d Respondent-auction purchaser filed his Reply Statement in SA.No.276/2022, by sailing with the version of the 1st Respondent Bank. The further contentions of the 2"d Respondent in brief, are that, he purchased the application schedule property vide Sale Certificate dt.16.O5.2022, issued by ths 1"t Respondent Bank after being declared as successful bidder in the auction conducted on 22.01.2020, for a total bid amount of Rs. 1,47,52,000/- as against the Reserve Price of Rs.97,20,000 l- fixed by the 1"t Respondent Bank. It is also contended that, the misrepresentation made by the Applicants before the Hon'ble High Court that they have complied with the interim orders of the Hon'ble High Court and also making same false statement in their affidhvit filed before this Tribunal and obtaining interim orders from this Tribunal itself establishes the malafide intention of the Applicants and they have further concocted a false story and filed Tender Apolory Affidavit before this Tribunal. So, the 2"d Respondent contended that the Applicants are not entitled to any relief from this Tribunal in view of various contradictions, concealments, misrepresentation and misstatements made by them and accordingly prayed for the dismissal of SA.No.27612022.

¶51

During the course of arguments in both the SAs i.e., SA.No.93/2022 and SA.No.27612022, Ld. Counsels appearing for both sides filed their respective written arguments.

¶52

Now, the points that arise for consideration are,-

¶53

Whether the Applicants have established any valid grounds for setting aside the auction sale of the application schedule conducted by the 1st Respondent Bank on 22.01.2022

¶54

*.'{o^{the Sale Notice dt.77.12.2o19, which is under}

¶55

//E ,t cfraf f er', get?a Se .No.9 3 I 2022? il\ i W-t.rd$$ the,.$'pllicants have established any valid grounds for setting action of the 1"t Respondent Bank to take

¶56

SA.Nos.93 & 276 ol2022

¶57

¶58

physical possession of the application schedule property in pursuance of the order dt.18.1O.2O22, passed by the ld. CJM, Warangal in Crl.M.P.No .2O 12022, which is under challenge in SA.No.276l2022?

¶59

iii) To what relieP

¶60

Polnt No.lil:-

¶61

t2. Ld. Counsel for the Applicants in his written arguments reiterated the version of the Applicants as stated supra. He further contended that, the Applicants have been paying the loan instalments regularly and the loan accounts were within the sanctioned limits as on 22.06.2079, which is evident from the statement of account filed by the 1"t Respondent Bank in SA.No.93/2020 and as such the classification of loan account of the Applicants by the lst Respondent Bank on 22.06.2019 itself is iilegal and arbitrary and even after the classilication of the loan account, the Applicants paid the loan instalments and the lst Respondent Bank ought to have considered the proposal of the Applicants for settling the loan account under OTS. Ld. Counsel also argued that the stamp of the firm and the signature appearing on the copy of Possession Notice filed by the 1"t Respondent Bank towards acknowledgement of receipt of said notice, are different from the stamp of the firm and the signature appearing on the copy of Demand Notice filed by the 1"t Respondent Bank, which clearly manifests that the l"t Respondent Bank has forged the stamp and signature on the Possession Notice to claim service of the said notice personally and further, the^photographs filed by the lst Respondent Bank towards affixture of the said notice do not show date and time and so; there i*yl, ${ii"." of Rule 8(1) & (2) of the Rules, 2OO2. Ld. Counsel further conteri.tlg,ihat, the lst Respondent Bank ought to have isstied separate Possetsio4 Notice for movables as^per Rule 4(1) of the Ruleg 2o0e qul the i"t Respondent Bank has failed _l to do so. Ld. C<i-rlnsel also contended that the 1't Respondent Bank

¶62

'. .^.'^'i7> ,, -..^:;", "' 'ii)::a:i'r,-;^{11'1't' </sup> r;.;,.,9gi..,':, ._,.,}

¶63

SA.Nos.93 & 276 of²⁰²²

¶64

¶65

has failed to obtain correct valuation of the schedule property and the copy of purported valuation report dt. 15.10.2019, filed by the lst Respondent Bank is only a letter issued by the valuer for payment of fee lor revaluation of the schedule property and the lst Respondent Bank did not file any detailed valuation report and further, the l^st Respondent Bank has fixed reserve price of the schedule property at a very low price as against the present value of the property, which is worth of Rs.8.00 crores and so, there is a violation of Rule 8(5) of the Rules, 2002. Ld. Counsel further argued that, the lst Respondent Bank did not serve Rule 8(6) notice on the Applicants and the signature appearing on the copy of the alleged Rule 8(6) notice dt.02.1 1.2019 fi1ed by the 1st Respondent Bank, towards service of the said notice does not belongs to the Applicants and the names appearing on the postal receipts Iiled by the l"t Respondent Bank are no way connected to the loan transaction between the Applicants and the 1st Respondent Bank and further from the copies of photographs fi1ed by the lst Respondent Bank towards affixture of sale notice, it is not clear as to which notice was affixed and on which date at what time and so, the l"t Respondent Bank has violated Rule 8(7) of the Rules,2002 and the lst Respondent Bank has also not followed Rule 9(1) of the Rules, 2OO2, wh.ile issuing the sale notice. Ld. Counsel further submitted that the alleged misrepresentation regarding compliance of interim orders before the Hon'ble High Court and this Tribunal was done by the previous Counsel for the Applicants and the Applicants after coming to know about the same, changed the earlier counsel and engaged the present Counsel and filed Tender Apologi Affidavit before this Tribunal and that the Applicants have already deposited substantial amounts with the 1"t Respondent Bank during the pendency of the above Sa1 a1d that they are ready and willing to settle the entire dues by paytng^{'tliqr-.ba1ance} amount. Ld. Counsel :i r', r':, further contended that the while the staflrs quo orders^granted by this Tribunal in SA.No.93/2Q22 are subsisting the l"t Respondent Bank ;I ill nrn "" illegally obtained o.r,!ers'u/s:la'dfJthe SARFAESI Act, from the Ld. .l CJM, Warangal foi.i tat<ing physical ..i:ti6'session of the schedule

¶66

/ ,:, .t:.^. .,/i: .,.:-'

¶67

': .--,I:... .. *-:-: - -.:._

¶68

¶69

SA.Nos.93 & 276 ol2022

¶70

property and so the said action is liable to be set-aside. So, Ld. Counsel for the Applicants prayed for setting aside all the measures taken out by the 1st Respondent Bank against the application schedule property, including the auction of the schedule property. Ld. Counsel for the Applicants, in support of his contentions, placed reliance on the following decisions:-

¶71

i) Decision of the Hon'ble High Court of Orissa in " Swastik Agencg and Ors., Vs. State Bank of India, Main Branch and Ors.", reported in AIR 2019 Ori 147;

¶72

ii) Decision of the Hon'ble High Court of Telangana in WP.No. 11435 of 2O2l - Amme Sisailam Vs Union Bank of lndia, decided on t7.08.2022;

¶73

iii) Decision of the Hon'ble High Court of Andhra Pradesh in WP.No.8155 of2018 - Sn Sai Annadhata Polgmers and another Vs. The Canara Bank, rep. by its Branch Manage1 Madanapalle, decided on 27.06.2018.

¶74

Per contra, Ld. Counsel for the 1"t Respondent Bank, while reiterating the version of the l"t Respondent Bank, as stated supra, further argued that after the loan account of the Applicants became NPA on 22.06.2019, the lst Respondent Bank by duly following the procedure as laid down under the SARFAESI Act and the Rules made thereunder issued Demand Notice, Possession Notice and Sale Notice and that only after obtaining the valuation of the schedule property from the approved valuer dt. 15.10.2019, wherein the market value of the property is mentioned as Rs. 1,07,80,000 / -, the 1st Respondent Bank flxed the reserse price of the schedule property as Rs.97,02,000/- and the sold the property-in favour of the 2nd Respondent for a price of Rs. 1,47,52,O0O1- ard. so, iL cannot be said that the property was sold for a lesser pri". ;p" alleged- by the Applicants. It is further contended i- .rr 'l)^j

¶75

¶76

that, the sale was.conhrmed byThe l"t Respondent Bank in favour of

¶77

' | .. ,'-.;, .-, .' ' -'.:-:i i t ._.;-,:.:. ...1

¶78

SA.Nos.93 &276of2022

¶79

¶80

the 2"d Respondent-auction purchaser after lapse of 3o days time granted by the Hon'ble High court to the Applicants herein for approaching this Tribunal and so also the 1st Respondent Bank approached the Ld. cJM, warangal u/s.14 of the SARFAESI Act, 2oo2, for taking physical possession of the schedule propert5r, at which time there was no stay granted by this Tribunal was subsisting as by that time, the SA.No.93 l2o2o was dismissed for default. Ld. Counsel further contended that the Applicants did not communicate to the lst Respondent Bank about the status-quo orders passed by this Tribunal in MA filed by them for restoration of SA.No.g3l2o2o. Ld. counsel also contended that, the Applicants misrepresented before the Hon'ble High Court as well as before this Tribunal that they have complied with the interim orders passed by the Hon'ble High court, which is nothing but a fraud, and as such they are not entitled to seek any relief and in this regard, Ld. counsel for the 1st Respondent Bank placed his reliance on the following decisions:-

¶81

Decision of the Hon'ble supreme court in "s.p. chengaluaraaa Naidu (Dead) by L.Rs., Vs. Jagannath (Dead) bg L.Rs., and. Ors.',, reported in AIR 1994 SC 853;

¶82

ii) Decision of the Hon'ble Supreme court in "Bank of Baroda and. Ors., 7s. Parasaadilal Tursiram Sheetgrah put. Ltd and" Ors.,, reported in 2022 (l) ADJ2a6;

¶83

Ld. Counsel for the 2"d Respondent-Auction Purchaser in his written arguments reiterated the version of the 2nd Respondent as stated supra and while sailing with the version of the l"t Respondent Bank, he further contended that, the 2"d Respondent purchaser the schedule property in the auction conducted by the lst Respondent Bank and upon payment of 25o/o of..the Ui'a',Bri+srderation, the l"t Respondent ,l Bank confirmed the sale in favour "dtA$. 2,d Respondent, at which time, no stay granted by the !"ij!,. Higti\court was subsisting and after SA.No.93 12022 was disniissetl for defhult and upon payment of

¶84

SA.Nos.9i & 276 of²⁰²²

¶85

¶86

balance sale consideration, the lst Respondent Bank has issued Sale Certificate in favour of the 2"d Respondent. He further contended that, the Demand Notice and Possession Notice were served on the Applicants in the year 20 19, so the Applicants cannot dispute and challenge the said proceedings in the present SAs, which are filed at a belated stage. He also argued that, a party who secures an order but does not comply with the duties it is required to perform cannot take advantage when such order is not complied or obeyed by other party and the Applicants having failed to comply with the interim orders passed by the Hon'ble High Court and having misrepresented before the Hon'ble High Court that they have complied the said orders, are not entitled to seek any reiief. Ld. Counsel for the 2"d Respondent in support of his contentions, placed reliance on the following decisions:-

¶87

i) Decision of the Hon'ble High Court for the State of Telangana in WP.Nos.23804, 23805, 25432 ol 2018, decided on 18.01.2022; and

¶88

ii) Decision of the Hon'ble Supreme Court in "A. Venkatasubbiah Naidu Vs. S. Challappan and Ors.", reported in AIR 2000 SC 3032.

¶89

There is no dispute regarding the fact that the l"t Applicant firm, represented by Applicants No.2 & 3, availed loans from the 1st Respondent Bank by mortgaging the application schedule property as security. The Applicants themselves admitted that due to unfavourable market conditions during demonitization and GST implementation their business got affected and payment of loan instalments fell in arrears. However, the Applicants again taken a plea that the loan accounts were within the sanctioned limits and that the 1st Respondent edn6 fras itlegaityrjlg.Ss,ined the loan accounts as NPA at"',

¶90

on 22.06.2019')' which is totalty h'i&:rtradictory statement. The Applicants hqld-,atsoieta.leq *lqt aftirireceipt of Demand Notice dt.O1.08.2019,.'tl{ey have approdched,'the 1"t Respondent Bank and !, :^l. ,'. ,' .:.',.'' t't'' "t'" --lt ti' ,. .-' .'' .i.t'"i .:,,,

¶91

-*:-l' i1

¶92

5A.Nos.93 & 276 o12022

¶93

¶94

requested for time for settling the dues under OTS. If really, the accounts were maintained as per the terms of sanction, the Applicants would have certainly raised objections for classifying the loan accounts as NPA, which they did not do. Further, the Applicants have also not raised any objections to the Demand Notice dt.ol .08.2019, issued u/s. 13(2) of the SARFAESI Act, by the lst Respondent Bank. So, I do not {ind any substance in the contention of the Applicants that the 1st Respondent Bank has illegally classified the loan accounts as NPA.

¶95

The next contention raised by the Applicants is that, Possession Notice dt. 15.10.2019 was not served on the Applicants and that copies of photographs filed by the 1st Respondent along with its Reply Statement, do not reveal date and time of affixture of the said notice on the schedule property and that the 1st Respondent has not followed the procedure while taking publication of the Possession Notice in the newspapers and so, the 1"t Respondent Bank has violated Rule 8(1) & (2) of the Rules, 2002. The further contention of the Applicants is that, the stamp of the l"t Applicant firm and the signature of the partner appearing on the copy of Possession Notice dt. 15.10.2019, filed by the 1"t Respondent Bank in its material documents, does not belong to the 1"t Applicant Iirm as the stamps of the 1st Applicant and signatures of the Partners endorsed on copy of the Demand Notice dt.01.08.2019, towards receipt of the said notice are totally different and that the stamp and signature of the partner appearing on the Possession Notice are forged. I have perused the copy of Possession Notice dt. 15.10.2019 filed by the l"t Respondent Bank and on the said notice, there appears 1"t Applicant's firm stamp and signature of one of the Partners of the said firm. So also, copy of Demand Notice dt.o1.08.2019 filed by the l"t Respondent Bank bears the signatures of the Managing Partners of the 1s^''fpflicant along with their signatures. There is every possibility of having lirm's stamps with different fonts and stvte^lhid S$flereli because the lirm's stamp appearing on the Posgessign Notice is appQd$ing different from the r.,-.^.j.. , 'l 'j"' ' "^':i; "''^{l-' ''} ''.,.,11 ';'l;ii !. .-^';' , -.:.=:: " _r i

¶96

SA.Nos.93 & 276 ol2022

¶97

stamp that affixed on Demand Notice, it cannot be said that the stamp appearing on the Possession Notice is a forged one. Similarly, after careful examination, I do not find any much difference in the signatures of the Partner appearing on the Possession Notice and the Demand Notice. So, it cannot be said that, the Possession Notice dt. 15.10.2019 has not been served on the Applicants. The copies of photographs filed by the lst Respondent Bank clearly depict that the Possession Notice dt. 15.1O.2019 was affixed on the schedule propertlr. Rule 8(1) of the Rules , 2OO2 contemplates affxture of Possession Notice on the outer door or at such conspicuous place of the^property and the said rule provision does not include date and time. So, merely because date and time are not depicted on the affixture of Possession Notice, it cannot be said that the lst Respondent Bank has violated Rule 8(1) of the Rules, 2002. Further, the lst Respondent Bank has also filed copies of publication of Possession Notice dt. 15.10.2019 in Hans India and Namasthe Telangana newspapers dt. 15.10.2019 and so it is very clear that the 1"t Respondent Bank has duly followed Rule 8(2) of the Rules, 2002.

¶98

The further contention of the Applicants is that, the l"t Respondent Bank has failed to serve Notice prior to sale as contemplated under Rule 8(6) of the Rules, 2OO2 and that, the copy of Rule 8(6) Notice dt.02.1 1.2019, fi1ed by the 1st Respondent Bank bears a signature of some third-party, towards receipt of the said notice and from that it cannot be said that the said notice has been served on the Applicants. It is also the contention of the Applicants that, the copies of postal receipts filed by the lst.Respon@,,papk to establish service of Rule 8(6) notice, pertains to some other'fersons but not the Applicants herein and so, there is no proper serviq-e rof Rule 8(6) notice on the Applicants.

¶99

Admittedly, the App Hon'bte nigi, cor.ili#'.'[lri,srq 1Ete1" .of^{Telanganachallengingthe Rule} 8(6) Notice dt.O2.1I.2Olg aiid the action of the Ist Respondent Bank

¶100

¶101

SA.Nos.93 & 276 of 2022

¶102

in proceeding with auction of the schedule propert5r on 22.O1.2O2O vide paper publication. So, it is very clear that the Applicants are having knowledge of Rule 8(6) Notice dt.02.1 l.2Ol9 and the proposed auction of the schedule propert5r by the lst Respondent Bank on 22.01 .2020 . So, I do not find any merits in the contention of the Applicants that Rule 8(6) notice dt.02.1 1.2019 has not been served upon them.

¶103

t9. As regards the contention of the Respondents No. 1 & 2 that in view of the misrepresentation made by the Applicants before the Hon'ble High Court that they have complied with the interim orders, even though they have not complied, the Applicants are not entitled to any relief and the contra contention of the Applicants that the said misrepresentation was made by the earlier Counsel for the Applicants and that they have filed Tender Apologr Affidavit before this Tribunal are concerned, both parties have to approach the Hon'ble High Court to address their grievance.

¶104

The next crucial contention raised by the Applicants is that, the lst Respondent Bank has failed to obtain valuation of the schedule property before proceeding for the sale and it has sold the schedule property, which is worth of Rs.8.00 crores, for a meagre price. Per contra, the lst Respondent Bank contended that, it has fixed the reserve price of the schedule property as Rs.97,02,000/- basing on the valuation report dt. 15.iO.2019, issued by the valuer, wherein the value of the schedule property has been shown as Rs. 1,07,80,000/ - and the property was sold in favour of the 2"4 Respondent for Rs. 1,47,52,000/-, which is even more than the value mentioned by the valuer. But, it is contended by the Applicants that the purported Valuation Report dt. 15.10.2019, retfidl,.irpon by the 1st Respondent _ _ ".,,,i^"i:. Bank, which is filed in,its material doct1ry"ri:nts, cannot be treated as a Valuation Report qLail and it is only a lettet issued by the Valuer for ti^. .. fee payment of Rev.q,luati6ri R[p'ort..t have perused the said Valuation tt^.-. Report dt. 15.10.20i9_filed by the 1,t Respbndent Bank in its material

¶105

r': l''^' '^' ':. '' i:.-:'"-i;. ..,'..

¶106

SA.Nos.93 & 276 ol2022

¶107

documents. Undoubtedly, it is only a letter dt. 15.10.2019, issued by Ln. Jogu Umapathi, Chartered Engineer & Approved Valuer to the lst Respondent Bank for the fee payment of revaluation and he claimed the fee of Rs.5,000/- showing the value of the schedule propert5r as Rs. 1,07,80,000/-. Other than the said letter dt. 15.10.2019, issued by the Valuer, no Valuation Report has been filed by the lst Respondent Bank despite a specific plea taken by the Applicants that the lst Respondent Bank has failed to obtain valuation of the property before proceeding for sale, as mandated under Rule 8(5) of the Rules, 2002. It is also not clear from the said valuer's letter dt. 15.10.2019, as to whether the value of the property shown as Rs. 1,07,80,000/- is market value or realizable value or distress value. No proper valuation report, showing details of inspection of property conducted by the valuer, the locality of the property situated, the condition of the property, government value of the property etc., has been Iiled by the lst Respondent Bank. So, I am constrained to hold that, the 1st Respondent Bank has failed to comply with Rule 8(5) of the Rules, 2002.

¶108

As regards the contention ofthe Applicants that, the photographs filed by the 1st Respondent Bank towards affixture of Sale Notice on the application schedule property do not reflect that it was the Sale Notice that was affixed, so there is a violation of Rule 8(7) of the Rules, 2002, by the 1"t Respondent Bank, is concerned, indeed from a perusal of the said photographs filed by the lst Respondent Bank it is not at all clear as to which notice is said to have been affixed on the schedule property as they are not at all legible. So, I hoid that the lst Respondent Bank has failed to establish affixture of Sale Notice on the secured asset as contemplated under Rule 8(7) of the Rules, 2002.

¶109

2002, committed by the sale of the application auction is liable

¶110

SA.Nos.93 &276o12022

¶111

¶112

to be set-aside and SA.No.93l2O22 is liable to be allowed. Accordingly, this point is answered in favour of the Applicants and against the Respondents.

¶113

Potnt No.ltll:-

¶114

Insofar as the contention raised by the Applicants in SA.No.276l2022 that the 1st Respondent Bank has illegally and highhandedly obtained orders dt.1B.lO.2022 u/s.14 of the SARFAESI Act in Cr1.M.P.No.9Ol2022, from Ld. CJM, Warangal during subsistence of status quo orders granted by this Tribunal is concerned, it is a matter of record that SA.No.93l2022, wherein stay orders were granted, was dismissed by this Tribunal for default on O5.O7.2022. The lst Respondent filed Cr1.M.P.No.9Ol2022 before the Ld. CJM, Warangal on 18.07.2022 i.e., after dismissal of the SA.No.93 12022 for default. So, it cannot be said that, the lst Respondent Bank has proceeded u/s.14 of the SARFAESI Act, during subsistence any stay orders. Later when the Applicants filed MA.No.27 12022 to set-aside the order of dismissal for default dt.05.07.2022 and to restore SA.No.93 12022 to file, this Tribunal, during the course of hearing of the said MA, directed the lst Respondent Bank to maintain status-quo vide order dt.30.09.2o22 and later while allowing the said MA on 31.1O.2O22, extended the interim orders. Even though Ld. CJM, Warangal passed orders appointing Advocate Commissioner for taking physical possession of the schedule property on 18.1O.2022 and the Advocate Commissioner issued notice for taking physical possession of the schedule property, it is a matter of record that the Advocate Commissioner has not taken possession of the schedule property. So, I do not find any illegality in the action of the lst Respondent Bank in approached Ld. CJM, Warangal u/s.14 of the SARFAESI Act for taking physical possession of the schedule" . So, SA.No.276l2022 filed by the Applicants challenging the actiea-r of the l"t Respondent Bank to take physiq3] possesstQ4 of:{he schedule property u/s.14 of the SARFAESI Act, i{{iable to be dismissed-:ar,ld accordingly this point

¶115

¶116

5A.Nos.93 & 276 of 2022

¶117

is answered against the Applicants and in favour of the lst Respondent Bank.

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Point Ng.(ttil:-

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In the result, following orders are passed:-

¶120

SA.No.93 12022 is allowed by setting aside the auction sale of the application schedule property conducted by the 1st Respondent Bank on 22.O1.2O2O and the consequential Sale Certificate dt.16.05.2022, issued in favour of the 2nd Respondent. However, the 1st Respondent Bank is at liberty to proceed for the sale of the secured asset afresh in accordance with law. The 2"a Respondent is entitled to refund of entire sale consideration deposited by him with the 1st Respondent Bank with interest @ 60/o p.a., simple from the date of deposit till the date of refund and the lst Respondent Bank is directed to refund the amount within 1 month from the date of this order.

¶121

ii) SA.No.276 I 2022 is dismissed.

¶122