Partly allowed

Jakkula Kanakaiah v. Union Bank of India

DRT4 Jun 2024SA/134/2022

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal set aside an auction of secured property conducted by a bank in favor of its auction purchaser. The court held that the bank failed to establish that the relevant Sale Notice was served on the applicants or affixed on the property as required by law, rendering the auction illegal. The proceedings for taking possession were upheld.

What did the court decide?

The auction conducted on 16.11.2021 set aside; Respondent Bank directed to refund sale consideration with 6% interest; liberty to auction property afresh.

Jakkula Kanakaiah versus Union Bank of India — Banking and Recovery | DRT (2024)

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IN THE DEBTS RECOVERY TRIBUNAL - I AT HYDERABAD

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DATED THIS THE 4TH DAY OF JUNE, 2024

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PRESENT: GUMMADI GoPICHAND, PRESIDING oFFICER

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SA.No. I 94/2022

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l.Jakkula kanakaiah, S/o J. Rangaiah,

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Occ:business,

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R/o H.No.8-2-684 149 lC, NBT Nagar, Road No. 12, Banjara Hills, Hyderabad-34.

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Mrs. Jakkula Lakshmi, W/o Kanakaiah,

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Aged 40 years, Occ:house wife,

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R/o H.No.8-2 -694 / 49 I C,

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NBTNagar, Road No.12,

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Banjara Hills, Hyderabad-34

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... Applicants.

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Versus

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l.Union Bank of India,

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Rep. by its Chief Manager/Authorized officer

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Hyderabad Main, Siddambarbazar,

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Hyderabad,^post Box No. 110g.

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Mr. DaggubatiJagannath, S/o D. Chinnarappa,

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Aged 44 years, Flat No.401,

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Viswam Elite, Deepti Sri Nagar, Near park, Miyapur, Hydereabad_49. (Respondent NO.2 added as per order

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Dt. tS. 12.2022 in t. A. t 4 1 4 [221

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..Respondents.

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Counselfor the Applicants :
Counsel for 1st R
Counsel for
,6r
!/ 6F &onr

iii ai;! Bf JUilmf

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M/s G.K.Law Associafes Sn .lV. Y. Subbaraju Sri T.P. Acharya

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This application.iq$filed by the u/s.17 of the SARFAESI Act,

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2002 chatlenAjJts'jlb issued by the Advocate

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Commissioner in on the file of CMM, Nampally,

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sA.No.1i4/2022

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Hyderabad and to set aside the auction conducted by the lst Respondent Bank on 16.rr.2o2r and arso the Sare certificate issued by the 1't Respondent Bank in favour of 2na Respondent in respect of the schedule property.

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The averments made in the application, in brief, are as under,_

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The Applicants availed financiar facilities from the l"tRespondent Bank but for the various reasons, they could not service the roan account and the loan account was decrared as NpA and the rstRespondent Bank initiated proceedings under the SARFAESI Act by approaching CMM, NampallyHyderabad by fling Cr1.M.p.no.6211/lg and got appointed an advocate commissioner for taking physicar possession of the schedule property. Aggrieved by the said proceedings, the Applicants filed SA 439/18 before DRT-II, Hyderabad and the same is pending. During the pendency of the said SA, the 1st Respondent Bank issued Sale Notice dt. 17.06.2021 for conducting sare of the schedule property on 22.07.2o2r and in the said notice, the lst Respondent Bank referred a demand notice dt. 1 5.06.20 I g. Thereafterthe 1 stRespondent Bank again issued freshsale notice dt.rg.06.2021 by superseding the earlier sale notice dt. 17.06.2021 . In the said sale notice, there is a reference to the demand notice dt. 15.09.2OlZ and, possession notice dt.04.12.2012. Thereafter the Appricants herein fired IA 1r4gl2o2r in sA 439/18 seeking amendment of preadings. Since the l stRespondentBank did not inform about the result of the auction scheduled to be conducted on 22.07.2021, the Applicants sent retter dt.3011.2021 under RTI Act to the Respondent Bank seeking information about the auction. To the said letter, the r stRespondentBank issued reply stating that the auctionfixed on 16.t 1 .2021 against the schedule property was successfully held for a Rs.71,60,000/- Thereafter the Applicants sought n but the same was not furnished by the 1 "}

k--Ty

SA.No.134/2022

Thereafter, The Advocate commissioner issued notice dt.25. OS.2O22 directing the Applicants to hand over the possession of the schedule property within 15 days. The Applicants completely unaware of the auction conducted on 16. 1 l.2O2l and, no notice to that effect was received by the Applicants. As the auction itself is chalrenged by the Applicants, the lstRespondent cannot takephysical possession of the schedule property. The Auction sale notice d,t.Ig.O6.2O21 was issued without giving redemption notice. The sale notice dt. 1g.0 6.202r was not affixed on the schedule property nor published in two daily newspapers. Respondent No.2 who is successfur bidder in the auctionconducted on l6.1L2O2l had deposited T Soh of the bid amount beyond 15 days from the date of the auction and so the sale certificate issued by the lst Respondent Bank in favour of 2"d Respondent is riable to be set aside. Hence the SA.

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The 1"t Respondent Bank filed its Reply Statement and Addl. Reply denying the adverse allegations made by the Applicants and the

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contentions of the l"t Respondent Bank , in brief, are as under-

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In view of thenon-payment of loan amount by the Applicants, the loan account was classihed as NpA on 14.Og.2017 and thereafter the 1"t Respondent Bank initiated proceedings under SARFAESI Act by issuing demand notice dt. lS.Og.2OlZ and possession of the secured asset was taken on 04.12.2012. Thereafter an application was filed u/s 14 of the Act before the CMM, Hyderabad vide Crl.M.p.N o.62ll/7g and an advocate commissioner was appointed for taking physical possession of the schedule property. Challenging the same, the Applicants herein filed SA 439 / 18 befogEl], Hyderabad and obtained interim order dt.30.10.2018 b with the said order. the said order. said order. order. As no biddersno biddersbidders

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dt.30.10.2018 b with the said order. the said order. said order. order. As no biddersno biddersbidders participated auction' .O7.2021, the Respondent Bank issued anot{po.,Sale Notiob at.zz.?o\zr for conducting auction on sold for Rs.71,60,000/sale consideration and

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SA.No.134/2022

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auction was confirmed and sale certificate was arso issued in favour of the auction purchaser, 2ncl Respondent. Thereafter the Advocate commissioner issued a notice dt. 25.05.2022 for taking physical possession of the schedure propert5r pursuant to the orders of cMM, Nampally, Hyderabad. The Applicants havenot approached this Tribunar with crean hands and therefore not entitled for any relief as sought for' Accordingly, 1"t Respondent Bank prayed to dismiss the sA.

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5' The 2"d Respondent filed Reply by contending that the rst Respondent Bank conducted auction on 16. 1t.2O22 in respect of the schedule property in pursuance of the sale notice dt.27.l o.202r and Respondent No'2 became successful bidder in the auction for a sare consideration of Rs.71,60,000/- and he paid the entire bid amount to the l"t Respondent Bank by 24 'or.2o22 and Sale certificate was issued in his favour. The Ist Respondent Bank has not violated any rules in conducting auction in respect of the schedule property. The 2"dRespondent deposited 25% of the bid amount within the stipulated time and 30 days time was granted to pay baiance amount and as the 2'd Respondent wanted some more time, he submitted a letter dt.22.12.2021 seeking to extend the time by 30 more days for making the balance amount. Considering the representation of the 2ndRespondent, Respondent No.l had issued a letter dt.23.12.2}21 granting further time for payment of balance amount' up to 2r'o7.2022. Later the 2-dRespondent submitted another letter dt' 1g.01 .2022 requestLng the Bank to grant r 5 days more time to make payment which was considered by the Bank and the Bank issued a letter dt.2O.O1.2O22 granting further time of 15 days i.e. upto 05'02'2022' By 24.O1.2022, t',e Respondent No.2 had paid the entire balance amount.

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6, Heard Ld. e Applicants, ld. Counsel for the l"t Respondq'fia$ank 2nd t and perused the material brought o., .""oid.1ll * ,."^{0 4 JUN21[t}

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SA.No.134/2022

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Now, the points that arise for consideration are,_

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Whether the Applicants haue estabtisled. ang ualid ground. for

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setting aside the auction conducted bg the 1"t Respond.ent Bank on 16.11.2021 in respect of tte schedule propertg pursuant to the Auction Sale Notice dt.2 7. 1 0.2 02 1 ?

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ii) Wlether the Applicants haue established any ualid ground for setting aside tLe sreps taken bg the j.t Respond.ent Bank before CMM, Hgderabad in Crl.M.p.No.43/22 for taking physicat

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possesslon of the schedule propertg?

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iii) To what relieJ?

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Polnts No.lll&llllt

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During the course of arguments, Ld. Counsel for the Applicants and the Ld. Counsel for the 1st Respondent Bank and 2d Respondent reiterated their respective versions as stated supra.

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In support of his contentions, Ld. Counsel for the Applicants relied upon the judgment of Honble High court of relangana in writ petition No'78o212016 between Smt. R. VimalaVs.state Bank of India, wherein it is held that:

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"Thus, in computing the 3O d"ays, the day of pubtication inneu.tspoper or tle day of sale one to be excluded. Therebg the contention that 30 dags to be counted_ is inclusiue of both d_ags €^{unsustainable on its} face from^u.that Rule 9(1) speaks of before of thirtA dags from the date of publication to the date of eith.er the date of publication or d ate of sale to be in computing the 3O dags. Once there must be clear 3O :.. .i^. ,:, ,.|,daas Ieaue about the exclusion of either or other of tlrc two

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SA.No.134/2022

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dags, there i_s no clear 30 days time from the pubtication dt.13.02.2Oi6 to the date of sale of 14.O3.2O j6 undi.sputedlg.."

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Ld. Counsel for the2"dRespondent placed his reliance on the judgement of Hon'ble Apex court between S. Karthik& others Vs.N.Subhash Chand Jain & others in Civil Appeal Nos.5920_ 592312021 wherein it is held in para 6g that

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"It could thus be seen that the appellants had. more than one opportunitg for redemption of tle mortgage. Hor.ueuer, from their conduc| it appears that theg were onlg interested in protracting the litigation. It is the appellants at whose interuention and on tphose incorrect representation, the sale, uhich was scheduled to be held on 27.02.2O12 in pursuance of the notice dt.21.O1.2012, could not be held. Euen afier the dismissal of SA No.69/ 12 on 02.O2.2021, the Respondent Bank again issued. a second Sale Notice dt.09.O7.2012 scheduling the sale on 2O.O2.20121 in which the auctionpurchaseremerged as a successfut bid.d.er. It is thus clear that the appellants had enough time from 21.01.2012 till 02.07.2012 for redemption of their mortgaged properties. Houteuer theg did not auail of that opportunitg. Euen after the auction purchaser emerged successful in the bid and had. paid. the bid moneA, an opportunitg tuas giuen by the DRT, Chennai, uide order dt.07.08.2012, to the appetlants to deposit the amount of Rs.4.80 crore within one month. Howeuer, without complging with the same, the appellants continued with their dilatory tactics bg filing an application being I.A.No.43Z/2012 in SA 222/2O12. Euen thereafter, theg continued with the proceedings before High Court, taherein certain interim orders uere passed., and fina g, the High finding^{that in uiew} of the sale being confirmed and. ttrc sale registered no interference could not utarranted., dismissed. Reuision Petitions. Thereafter again, theg approached. this wag of Special Leaue Petitions, tuhich were subsequentlg 0 4 JUN Nl'o"*Y Ideallg, the litigation ought to haue stopped. at least at

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SA.No.134/2022

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1 1. The undisputed facts of the case are that the Applicants availed housingloan from the lstRespondent Bank andlater failed to repay the loan amount' so the loanaccount was crassified as NpA and demand notice dt'15.o9.2017 was issued to the Appricants by invoking the provisions of SARFAESI Act. Later the lstRespondent Bankhas initiated proceedings before CMM, Nampally, Hyderabad u/s 14 of the Act for taking physical possession of the schedule property. chalrenging the said proceedings, the Applicants filed SA 439 I ).g before DRT_ll, Hyderabad. Later the rstRespondent Bank issued sale Notice dt.l7.06.202l fixing the date of auction on 22.OT.2021. By superseding the said sale notice, a fresh sale notice d,t.rg.o6.2o21 was issued by the lst Respondent Bank for conducting auction on 22.02.2021. However the auction proposed to be conducted on 22.07.202r was not materialised for want of bidders. So there is no need to decide the validity or otherwise of the sale notice dt. 1g.06.2021 issued by the lst Respondent Bank. The present SA is filed challenging the proceedings initiated by the lsr Respondent Bank before the cMM, Nampally, Hyderabad for taking physical possession of the schedule property and also the auction conducted by the 1"t Respondent Bank on 16. 1 l.2O2l in respect of the schedule property in which, the 2na Respondent became successful bidder.

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The main contention of the Applicants is that before conducting auction of the schedule propert5r on 16. 11.2021, no notice was issued by the 1st Respondent Bank to the Applicants and sale notice was not aflixed on the schedure property and the said notice was not published two leading newspapers.

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When pplicants are contending that sale notice for conducting schedule property on 16. 11.2021 was neither served on o 4 Jljillm'" t the ts nor published in two leading newspapers and also not

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SA.No.1i4/2O22

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affixed on the schedule property, the burden lies on the 1"t Respondent Bank to prove that it has duly followed the^procedure in issuing the sale notice for conducting auction of the schedule^property. In^order to establish its case, the 1"t Respondent Bank has filed relevant materiai documents. As^per the said documents, it is clear that^on 15.09.2017, the 1st Respondent Bank issued demand notice to the Applicants calling upon them to^pay the outstanding dues within 60 days from the date of said notice. As^per the^postal acknowledgements frled by the lstRespondent Bank, the said notice was received by the Applicants. Thereafter Possession Notice dt.O4.12.2017 was issued by the 1st Respondent Bank and admittedly the said notice was received by the applicants and the said notice was published in Telugu and English daily newspapers as evidenced by the copies of^paper publication filed by the Bank and the same was also affixed on the schedule property as depicted in the photographs filed by the l"t Respondent Bank.Though the l"t Respondent Bank issued several sale notices, the final Sale notice dt.27 .lO.2O2l was issued by the 1st Respondent Bank fixing the date of auction on 16. 1 7.2021 and the said sale notice was published in two daily newspapers including one in Telugu, however no material is placed by the lstRespondent Bank that the said sale notice was sent to the Applicants though regd. Post and no postal receiptsto that effect are filed by the 1"t Respondent Bank. Surprisingly, the l^st Respondent Bank is contending that the said notice was served personally on the Applicants by the authorized officer of the Bank and to substantiate the same, the lst Respondent Bank has filed copy of the photograph showing that a person who is said to be authorized officer of the l"tRespondent Bank personally served sale notice to the Applicants and copy of the photograph of Authorized g.t the schedule property affixing the sale notice on the schedule -$ on the said photographs frled by the lst Respondent t be said by any stretch of imagination, that the fficer of the Bank personally went to the schedule property sale notice dt.27 .lO.2O2l to the Applicants. Even if

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SA.No.134/2022

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really, the authorized oflicer personary served the sale notice to the Applicants, nothing prevented the Authorized officer to get signatures of the Applicants on the office copy of the said sale notice. But no such steps are taken by the authorized officer of the lst Respondent Bank. Even original photographs are not filed by the lst Respondent Bank. For the reasons best known to the Bank, it has filed only photocopies of the pictures taken by the authorized officer of the Bank. When demand notice and possession notices are served by the lst Respondent Bank through regd. post., the lst Respondent Bank is also expected to serve the auction sale notice dt.2Z.lO.2O2l through regd. Post. But noexplanation is given by the lstRespondent Bank for not serving the sale notice though regd. post to the Appricants. No material is placed by the lstRespondent Bank to establish that the sale Notice dt.27.1O.2O21was affixed on the schedule property.

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so considering all the circumstances, I holdthatthe 1 stRespondent Bank has failed to establish that it has served the Sare Notice dt.27.1o.2o21 on the Applicants and the said sale notice was affixed on the schedule property as per Rule g(6)&(7) of Security Interest (Enforcement) Rules, 2002.

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The other contention of the Applicants is that even though auction was conducted on 16. I l.2O2l, the balance bid amount was not paid by the 2na Respondent within 15 days from the date of confirmation of sale. But the lst Respondent Bank has filed correspondence between the 2oa Respondent, auction purchaser and the lst Respondent Bank which shows that the 2"a Respondent sought time for payment of barance 75% of bid amount hnd the lst Respondent Bank has extended the time and , the total bid amount was paid by the 2nd Respondent within from the date of confirmation of sale which is permitted

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provisions of Rule 9$) of Security Interest (Enforcement)

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na-.S1. $h,*"*W wffi#

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SA.No.134/2022

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So far as the procedure initiated by the rstRespondent Bank before the concerned CMM, Hyderabad for taking physical possession of the schedule property is concerned, I see no infirmities in initiating steps for taking physical possession of the schedule property as the l^stRespondent Bank admittedly issued possession notice dt.o4. 12.20 rT and the same was received by the Appricants. so considering all the circumstances, I hold that the auction conducted by the 1st Respondent Bank on 16.ll.202l in respect of the schedule property without serving Sale Notice is not valid and legal and so, the same is liable to be set aside. so far as the procedure initiated by the lst Respondent Bank before CMM, Hyderabad for taking physical possession of the schedule property vide crr.M.p.N o.43 /2022 is concerned, the same is legal and valid and binding on the Applicants. So, these pointsareanswered accordingly.

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Point No liiil

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17 . In the result, SA 134 122 is partly allowed by setting aside the impugned auction conducted by the 1st Respondent Bank in respect of the schedule property on 16. 1 1.202 1 pursuant to the Auction sare Notice dt.27. r o.2021. Accordingry, the lst Respondent Bank is directed to refund the entire sale consideration to the Respondent No.2 i.e. auction purchaser of the schedule property along with interest @ 6% p.a. simple from the date of deposit till the date of repayment, within one month from the date of receipt of this order. The l"t Respondent Bank is liberty to proceed afresh with the auction of the schedule accordance with law.

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of this Order to the parties concerned.

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SA.No.134/2022

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(Dictated to the P.A., transcribed. bg her, corrected, signed and pronounced- bg me in the open court on this the 4th dag of June, 2O24j.

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sd/(G. coPrcHANDl PRESIDING OFFICER

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Jakkula Kanakaiah v. Union Bank of India

Case brief

What is this about?

What did the court decide?

Jakkula Kanakaiah v. Union Bank of India

Case brief

What is this about?

What did the court decide?

What the court decided

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Cases cited

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