Allowed

Ms Sona Fashions Rep by its Proprietor Mr S Sudhir Kumar v. Union Bank of India

DRT25 Sept 2024SA/113/2023

Case brief

AI extract

What is this about?

The Tribunal allowed the applicant's application challenging an electronic auction sale notice issued by the Bank. It held the notice was liable to be set aside due to a violation of Rule 8(6) of the Security Interest (Enforcement) Rules, 2002, as the mandatory 30-day notice period between issuance and publication in newspapers was not maintained.

What did the court decide?

The impugned Sale Notice dt. 15.02.2023 issued by the Respondent Bank is set aside. The Bank is directed to proceed afresh for sale of the property by following the procedure laid down under the provi

Ms Sona Fashions Rep by its Proprietor Mr S Sudhir Kumar… — Banking and Recovery | DRT (2024)

¶1

IN^'T I II. I)I, I]']'S RECOVERY TRIBUNAL. I AT HYDERABAD I)AI I I) T I IIS I IiI: 25III DAYOFSEPTEMBER, 2C24

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PRL:S[-.N I : GUMMADI GOPICHAND, PRESIDING OFFICER

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sA.No. 1 13/2C23

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M/s Sona lrlrshions Rep. by its [)r'opri<.tor Mr. S.Sudhir [r.unrar S/o S. Krishna Rao, Aged 59 ycars, Ocr::business, Shop NO. I 1lj&,1 16, Nnkocia Complex, Hanuman Tc,kcli. I lt,<]crn bacl-SOO O0 I .

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...Applicant

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Versus

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Union Bank of'lrrclia, Rep. by its Aurlrorizcd Officer Assets Recovc.rl llri,rnch, #249 I3lR'l', I^s, tloor., S.R. Nagar, Mr,iin Roar1, Hyderabad,500 (lll8.

¶8

..Respondent

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Counsel for tlrc Apltlir:ant Counsel for /.,r 1?es7r onclenl bank

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Sn D. Raghauulu Smt. Tarangini Hsapati

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;ORDER:

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This Sc<'uririzrrion apprication is filed by the Applicant u/s.17 of the sARIrn l'lsl A.t, 2oo2 ctrallenging the e Auction Sale Notice d1.15.02.),o23 issuecr by thc Respondent Bank fixing the date of auctlon () 2,3.03,: spect of the schedule property and to

¶13

declart: tlrr The avc'i'niavc'i'ni ffi" tti in brief, are as under, Thc Appii, ifi^{,,,,,,?,,[IFfn tB!,,,,,,} a tune of Rs.47 lakhs from the Respor r<1r.n business, against the mortgage

¶14

The avc'i'niavc'i'ni

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SA,No.113/23

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of scht'tlt.tlt' ;-rt'op<:rt1z. 1;r" to ttre fire accident occurred in his shop, the Applicanl t:otrlr.l not make some payments, however he restarted the busincss arrrl rcqucstcd the Bank to regularize the loan account. All of a strddcn, orr 23.03.2023, the Applicant came to know that the Responrlcrri llrrrl< is trying to sell the schedule property by issuing Salc Notict' rlt. t5.02.2023. The Respondent Bank did not issue demand notit:tr rlnd posscssion notice and the said possession notice was nr:i1lrt:r' ;rl'lixcd on thc schedule property nor published in two daily newspapcrs. 1'hc Rcspondent Bank failed to comply Rule 8(6)(7)&9(1) of Scc:rrritr lntt'rcsl (l:)nf<lrccment) Rules,2OO2. The impugned Auction Salc noticc clt. 15.02.2023 was neither affixed on the schedule property nor pul;lishcri irt two leading newspapers. The Authorised officer of the Bank has not obtained valuation from the approved valuer prior to issuancr' <;l' Noticc u/r 8(6) of Security Interest (Enforcement) Rules, 2OO2. Ilt'rtt.t' tltc SA.

¶17

The Rt'slronclt'nl llank filcd t.hcir Reply and the contentions of the Responclcnt I3arrk, in brief, are as under-

¶18

Thc Ai;plit'irnt eivailcd loan facilities for the purpose of their business and crci,rtt <l rnortgagc ovcr thc schedule property as security towards the ref)irvrrrcrrL ol' said loan. After availing loan, the Applicant committr:tl dclirull and hence the loan account of the Applicant has been clirssil'iccl as NPA on 31.03.2021. The Respondent Bank issued demarrrl r)()ti('(' d1.09.O4.2021 u/s i3(2) of the SARFAESI Act, 2OO2 and scnt tlrt'samc to thc Applicant and others through regd. post. Whcn llru'c \,ars no rcsponse to the said notice, the Bank issued Posscssir>rr Noticc cll.14.10.2021 and the said notice was sent by Regd. Post lr> tht: Altplic ers. The said notice was published in two clarilr nc\'l 1 and the same was also affixed on the scc'r-r rt'ri pondent Bank issued E Auction Sale NoLicr th* id notice was served on the Applic,, r r t,,[i,f-o r"n Af6*EEP.,m[. ule property and the said notice was purlrlish($n "ti,n,o claily n on 25.02.2023. Thus the

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!,A.No.113/23

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Resporrclt'r r t l]rrnk has duly followed the procedure prescribed under the provisions ol SARFAESI Act, 2OO2 and Rules made thereunder in issuirrg ALrr:ti<>n Salc Notice dt.15.O2.2023.Accordingly, Respondent Bank pravcd to dismiss the SA.

¶21

Hearcl Lri. Corrnscl for the Applicant and ld. Counsel for the Responclcrl Ilankand peruscd the material brought on record.

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Now, tht: l)()ints that arisc lor consideration are,-

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Wltetler the Applicant has established anA ualid ground for cLtallerrying lhe e Auction Sale Notice dt.LS.O2.2O23 issued by tle l?esportdent Bank?

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ii) 'l'o rultat relieJ?

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Polnt Ne,li):-

¶26

During l l-ta cor lrse of arguments, Ld. Counsel for the Applicantand Ld.

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Cour.tsi l li;r- tlrc Rcspondent t3ank reiterated their respective version s as statc(l supra.

¶28

The s1','.ilir' ('onrcntion of the Applicant is that the Respondent Bank has nrt issr-r.<r crcmnnd notice , possession notice and sale notice on the Applica,r r.rcl lhc said notices were not affixed on the schedure property nor pr.rlrlishccl in daily newspapers and the Applicant came to know abour rirt: procc-edings initiated by the Respondent Bank under the , provisio.s ,l' SAIil'AI,,SI Act only on 23.03.2023 and further, the Responrlr.n r llank has ined valuation report from the apprr>r,r'<l r,tlr,rt.r bcfi price in respect of the schcdu lt' l) ro pc rt\i 6*. that no redemption noticc u,as iss Lr prior to issuance of E Aucl.iorr Sa l<' N d0r e date of auction on

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5,A.No.113/23

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28.03.2023 irr rcspect of the schedule property and hence the said procccclings arc linblc to be set aside in view of the deviations in follorx'ing thc proccdurc prescribed under the provisions of SARFAESI Act ancl Rr rlt:s. 20O2 made thereunder.

¶31

Therc is n o^(l isputc rcgarding the fact that the Applicant availed loan facilitics ll orrr thc Rcspondcnt Bank by mortgaging the schedule propcrtl irr l'irvorrr of the Respondent Bank and they failed to repay the outstanclirrrl dlrt:s hnd the loan account was declared as NPA and the Respon<lt'nt I}rnk initiated proceedings under the provisions of SARI,'A I.lSl A<:1, 2002. The Respondent Bank along with Reply, hled matcritrl rlo<'unrcnts to substantiate that they followed the procedure laid dori n rrrrrlt'r thc provisions of SARFAESI Act and Rules, 2002 in issuing tlcrrrrrrrl noti<:c and other mandatory notices. As per the said documcnts. il is clcar that the Respondent bank issued demand notice u/s l3(2) of thr: SAlll.'AESI Act, 2OO2 dt.O9.O4.2O2l calling upon the Apphcernt rrncl ol.he rs to pay the outstanding dues within 60 days and the saicl nolicc rvas scnt to the Applicant and others by Regd. Post. Hou,cvcr il,c nolice sent to the Applicant was retuned with e.rdo."",,'.:,',t "lt'ft" arrd the said notice was received by the proprietor of thc AppJir::rlrt and also guarantor who is his wife. When there was no responsc to thc said dcmand notice, the Respondent Bank issued Posscssir,n N<itict: dt.14.1O.2O21 u/s 13(a) of the SARFAESI Act, 2002 for takirrq svnrbolic posscssion of the schedule property and the said noticr: u a s r.l r.r11' rcccivcd by the proprietor of the Applicant and guaranlor as pt:r the postal acknowledgements and retuned covers hled br. tlrc Rcspondent Bank. The said possession notice was publislrt:t1in l,'inancial I,l Telangana daily newspapers on 21 .1O.,202 I and c was also affixed on the schcdurlc l) r1) l)⁽ rtv paper publican and photogrerphs lil v'n", ETtr tff'** the Respondent Bank issucd Not ir--c of .{ays{oi^{Sale dt.15.gr} fixing the date of auctiorr orr 28.03.2 edule property and the

¶32

Wffi#

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sA.No.113/23

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said no1 ict. \'ils scnt by Ilegd. Post to the Applicant and others and also publisirccl in^'l'lrt: llindu and Iicnadu daily newspapers on 25.02.2023 as pcr tlrr. r Olrits of paper publication fiied by the Bank and copy of the said rrotii:t. s,;rs affixcd on the secured asset as depicted from the photograplrs l'ilccl by the Respondent Bank. But the Bank has not issuccl scpar-rrtt' 3Odays Notice giving opportunity to the Applicant to redccnr tltr. scr:rrrccl ,rssct by paying the entire outstanding dues as mandirtr.ri I rr r a(6) o1'Sccurity Interest (Enforcement ) Rules, 2002.

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¶36

In a rt:ccr.rr jr-rclgmcnt, the I'lon'ble DRAT, Kolkata in^.Appeal No.43 of 2023 .Slr .Sli/irrnth Re.ddy Kasu us. The Authorized Officer, Bank of India and ors. ". clr.cidecl t.l't 22.04.2024, the Hon'ble DRAT, Koltaka after referring lo vir rious judgments of the Hon'ble High Courts and the Hon'blc Apt.x Court and discussing the issue elaborately, held that, there shor-rlcl lrc clcar thirty days notice period being maintained betwct:n rirr, issuanr:c of salc not.icc under Rule 8(6) of the Rules and the publir:ation ol thc salc noticc under Rule 9(1) of the Rules as right of redempliorr rrvrrilaltlc to thc borrower in terms of Rule 3(6) of the Rules stands (xt in qr,r ishc.cl or-r publication of the sale notice under Rule 9(1) of the Rnlt:s. l'ltc rr:lcvant portion of the said judgment, is extracted below for bct tr'r i r 1tJrt r.cial ion:-

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''.r.1. lr rurts Jurlher specificallA held that the decision of the 'l't'ltuttlLotct I|igh Court in the case of Concern Readgmlx -asAuthorized Offl.cer, Corporatlon Bank (2018 SCC OnLine A1' ,j4 81) antl the judgment of the Hon'ble hnjab & Haryana Ilt(jit⁽ t)tl irt the cose of M/s. Pal Allogs & Metal India 4"-i* @Ntq" te Limited (2021 scc onLine p&H 27ss) has not taid )b,i,. (:()rrect posttion of lauL, Houteuer, the decisions of the /**'Eg //.,r* /l,rr#r| Attclhr Prarlesh l.tigh Court in Sri Sai Annadhatha i;!j ?^{itt.) ?mlro,gf|rr} gupra) anct rronlbte Tetansana High court in K.v.v. i; \a Roo Gupta (supra) haue laid dou.tn the correct lrE-_ \Q+ru;-}fl, a "y-W tt oJ tcLtu tuhite interpretins the amended section of ls(B)

¶38

SA.No.773/23

¶39

oJ-ihe: S4RI'A/r'SI AcL At this stage it utould be apposite to refer to tlrc .jtLclglrnent of the Ilon'ble Andhra Pradesh High^{Court in} Sri Sai Annadhatha Polgmers^(supra) wherein^considering tlrc rtrrLer'rrlntent of Section 13(B) of the Act, it was^{held that} ,posl^{ctrrtqltQr-rLerltr-spglgrtg- ineuitablu requires a clear thirtu} ciatts - -J rrt>lice^period to be maintained betuteen issuance^{of the} sri/r, rro/rce. gtltcf,qr_Rl.e B(6.) of the Rules and the^publication of flrc srr/e, tetice-.U-A{kLBttle 9(1) of the Rules thereof as ttrc ight ol' x,t\t'rt'tSttiof Syailable to the Borrower tJirr /?rrir:_.s-_qapqinted out iru Mathew Varqhese^(supra), stands g-rlirrgrri-sfo9Q- Upon pl4blication of the sale notice under Rule 91.I )^{rl' t!19 llu!g--s.,(emphasissupplied). In the case of SiSai} Arttrrulltalha Polyme-rs (supra) notice under Rule 8(6) was i.ssrie'rl o,r t.3.2018 and publication of the sale noticeⁱⁿ ne.u)spupc:r unrler Rule 9(1) was on 3.3.2018. Hence it^u-tas lrclLl that there is a clear uiolatioru of statutory mandate^which urtrrrll's lhe exercise undertaken bg the Bank.^These findings het,e beert confirmed and affirmed by the Hon'ble Apex Court iri llrt' crrsr: o.f l3afna Motors (supr). Hence it is crustal^clear tltctt tlrcr'-e-$hslLl(1 be a dear thtrtA daus noti@^pe lnctirttui-rcQ-Qetuteen^{the issuance of the sale notice under Rule} Bl,6)^{oJ' tl9} l!t.!lr.s^{and the publlcation of ttu s} t?trle' 9(1) of the lluksggright of redemption auailable to^ttrc !)<tt't'<trrtr:r'_ⁱⁿ .lerrys^{ofRule BrcL of the Rubss} e.r/uiryrrislryd o_4 publication of the sale notice under Rule⁹⁽¹⁾ oJ tlrc,: /lulg.s.

¶40

'6fi,
.sirirl .jr:cigmcnt of the Hon'ble DRAT, Kolkota, squarely applies
;;;.'^s stated supra, the Sale Notice was issued by the
F"*B;,I[N" {P;';;,,;,i[,,;;;
( ,; "" ts 02 2023 and pubrished ; ";;; ;.;; * ,n"
i" 1 5 SlP";1yr[rn,r,.rfl,,, ):).o2.2o23, fixing the auction of the schedule property
t?,.r \r'-4 -A^ on ,dIp r.] 'l'ht-'rc: is no clear 30 days time as contemplated under
r hc Appricant bcforc publication of the sale notice in the
Qfur!-r_

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SA.No.113/23

¶42

newsperpet-s Lurclcr llulc 9(1). So, there is a clearviolation of Rule 8(6) of the Rult:s, ).oo2, bv l.hc Respondent Bank while proceeding for the sale of thc sc:hc'r1r rlc ltropcrty.

¶43

So, in vics'ul'non compliance of Rule 8(6) in issuing 30 days notice to the Applii'rrrrt lrt:lirrc publistring salc notice under Rule 9(1) of the Secttritr litii'r'r'st (linlbrccmr:nt) Rules,2OO2, by the Respondent Bank, I am ol'tht opinion ttrat the Sale Notice dt.15.02.2023 issued by the Responcit'nl []ank is liable to be set-aside. As far as demand notice and possc'ssiorr ntiticr: issucd by the Bank are concerned, they are legal and valid. Ar coltlrngll , tltis point is answered accordingly.

¶44

?obt No./ifl;

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In l.hc rc.surlt, thc prcscnt Securitization Application is^{allowed by} setting risitlc inrpugncd Salc Notice dt.15.O2.2023^issuedbythe Respon<it'rrr llank agarinst thc schedule^{property.The RespondentBank} is at lilrt.rlv Lo procced afresh for sale of^{the schedule property by} followirrg rirr' lrroccclure laid down under^{the provisionsof SARFAESI} Act, 200,2 trttcl tlulcs made^thereunder.

¶46

The Irrtcrlgt:ulory^{Applications, pendingif any, shall stand disposed of'} No ordcr iis to cost.s.

¶47

Commu,,l.,l.t,,^ar cop-y^{of this Order to the partiesconcerned.}

¶48

trtscribed bg her, corrected., signed and pronounced by me in the open
of'Septernber, 2024),
*-B
1/.b
fi fF
I i y't sdl -
? 5 SEP ?$2I rRuE ForyV
,tli I P" 'r (G. GOPICHAND)
.lt
'. (.1. ul,Q.%^ PRESIDING OFFICER
..":':, Assl Reglstrar
\r-' DEF.I, HYOERAEAO.
7
et,,re$

Ms Sona Fashions Rep by its Proprietor Mr S Sudhir Kumar v. Union Bank of India

Case brief

What is this about?

What did the court decide?

Ms Sona Fashions Rep by its Proprietor Mr S Sudhir Kumar v. Union Bank of India

Case brief

What is this about?

What did the court decide?

What the court decided

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