Partly allowed

Suganthi Educational Trust Rep by Its Managing Trustee Dr Sujatha Balasubramaniam and Two Others v. Cfm Asset Reconstruction Private Limited

DRT2 Feb 2024SA/15/2023

Case brief

AI extract

What is this about?

DRT-I Chennai dismissed an application seeking to apportion a secured asset for a partial sale to a third party, holding the Tribunal lacks power to fragment security assets under Section 17 of SARFAESI Act. The main Sale Notice application was disposed of as becoming infructuous since the sale date passed without a bid, avoiding merits determination.

What did the court decide?

IA No.178/2023 dismissed seeking apportionment of assets. SA No.15/2023 disposed of as infructuous; parties' contentions on legality not adjudicated.

Suganthi Educational Trust Rep by Its Managing Trustee Dr… — Banking and Recovery | DRT (2024)

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IN THE DEBTS RECOVERY TRIBUNAL –I AT CHENNAI

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Dated this 2^nd Day of February, 2024

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PRESENT: SHRI A.S.JAYACHANDRA

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Presiding Officer

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S.A. No.15 of 2023

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M/s. Suganthi Educational Trust, Rep. by its Managing Trustee Dr.Sujatha Balasubramanian, Administrative Office at:

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No.15, Corporation Colony, Kodambakkam,

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Chennai – 600024.

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Mrs.Sujatha Balasubramanian, W/o Mr.C.Balasubramanian, No.15, Corporation Colony, Kodambakkam,

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Chennai – 600024.

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Mr.C.Balasubramanian, S/o Mr.Chellaih Pillai, No.15, Corporation Colony, Kodambakkam, Chennai – 600024.

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. . . Applicants

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Versus

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CFM Asset Reconstruction Private Limited, Rep. by its Authorised Officer, Having Branch Office at: Hallmark Towers, 4^th Floor, No.550, TTK Road, Alwarpet,

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Chennai – 600018.

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Karur Vysya Bank Limited,

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Rep. by its Authorised Officer,

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Corporate Business Unit, No.1, 1^st Floor, Padmavathiyar Road,

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Gopalapuram, Chennai – 600018.

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Applicant by Ld. Counsel Sh.B.Gurumurthy & Sh.D.Thanigai Vel, Advs

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Defendant by Ld. Counsel Mr.B.Jagannath, Ms. Sneha Parthasarathy, & Ms.Aparajitha Vishwanath, Adv

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: - O R D E R - :

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The SA filed under Section 17 of the SARFAESI Act challenging the sale notice dated 21.07.2023 involving the debt of Rs.100,63,35,76/- and interest thereon, and the IA bearing No.128/2023 filed by the applicant seeking certain directions to apportion and release 12.93 acres of land out of 31.5 Acres of land with building to be registered in favour of the prospective buyer G Square Realtors Pvt. Ltd. – are being disposed of together in this Final Order.

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Facts of the Case :- The Applicant No.1 Trust managed by the 2^nd Applicant as Managing Trustee had approached the 2^nd Defendant for financial assistance in the year 2017. The applicants 2 & 3 who own certain immovable properties stood as guarantors. The 3^rd Applicant is the husband of the 2^nd Applicant.

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The 2^nd Defendant herein declared the loan account as Non Performing Asset on 14.12.2018 and issued demand notice dated 17.12.2018 demanding sum of Rs.71,23,55,312.37p. The 2^nd Defendant issued a Possession Notice 28.03.2019 and also filed OA No.621/2019 pending on the files of DRT-III in TA No.1278/2023. The applicants contend that they have paid certain amounts to the 2^nd Defendant.

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The 2^nd Defendant assigned the debt in favour of the 1^st Defendant ARC. It is pleaded that the 2^nd Defendant issued a sale notice dated 29.06.2023 and the same was cancelled and withdrawn. Such withdrawal amounts to abandonment of right to recover. However the said notice was challenged in SA No.14/2023, which came to be disposed by this Tribunal as becoming infructuous since the sale notice was withdrawn. The SA was disposed by an order dated 10.07.2023 by this Tribunal.

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In the instant petition, the applicants pray for setting aside the auction sale notice dated 22.07.2023 fixing the sale to be held on 18.08.2023. The same is challenged on various grounds including certain case law, which excerpts are reproduced in the grounds and the same are prolix. The main grounds urged are that the earlier SA disposed in SA No.14/2023 noting that the sale notice was withdrawn amounts to abandonment and the present sale notice is thus not enforceable.

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It is also pleaded that the Possession Notice was issued on 28.03.2019 and posted to the borrowers and guarantors only on 29.03.2019. Affixture was carried out on 28.03.2019 and sent to the borrowers on the next day. The publications of the Possession Notice details are not known to the Applicants. Rule 8(1) and (2) is of the SIE Rules is violated. The 1^st Defendant had violated the provisions of SARFAESI Act and the Rules made there under only with an intention to harass and humiliate the parties.

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Upon filing of the SA and since there was a caveat, the caveator was heard on the application filed by the applicants for stay of the sale notice dated 22.07.2023. This Tribunal by an order dated 10.08.2023 had stayed the sale notice subject to certain conditions and the applicants have complied the conditions of deposit of 20% of the debt which the Defendant No.1 also confirmed and the stay order continued.

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The above orders of Stay dated 10.08.2023 was challenged by the 1^st Defendant in WP No.25112/2023 before the Hon’ble High Court of Madras. The Hon’ble DB by its order dated 25.08.2023 disposed of the said writ petition with liberty to the 1^st Defendant to avail the alternate remedy holding that all the aspects can be brought to the notice of the Debt Recovery Appellate Tribunal.

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The Defendant No.2 was not served despite an order to take steps against them and the applicant did not serve the Defendant No.2. However, after hearing the counsel on both the sides, this Tribunal by an order dated 29.01.2024 noted the following:

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“The relief claimed is to set aside the auction sale notice dt 22.7.2023. The relief is against Defendant no-1 only. No specific relief is prayed against Defendant No-2. Therefore the participation of Defendant No-2 in these proceedings is superfluous on record. Hence the notices to Defendant No- 2 is dispensed.”

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Version of Defendant No.1 :- The Defendant No.1 has not filed a detailed

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counter to the SA-Considering the peculiarity of the case in the back drop of:

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(i) The applicant having complied the interim order and requested for the consideration of the OTS for which efforts were made, but in vain.

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(ii) The auction heralded – did not take place due to the interim order.

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(iii) The relief having becoming infructuous.

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(iv) However the applicant having moved IA No.178/2023, for which counter is filed and the version of the defendant is gathered from there.

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(v) The Defendant No.1 had moved an IA for advancing the case for urgent hearing, which this Tribunal allowed in IA No.16/2024, vide order dated 29.01.2024 and the matter was heard finally sans the objection statement by the Defendant No.1 at the

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request of the Ld. Counsel for the Defendant No.1, however, the gist of the grounds on which the Defendant No.1 contests the SA is as under:

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The 1^st Defendant in its counter to the IA and submits that the SA is liable to be dismissed in limine. The applicants have been repeatedly misusing the legal process since the year 2019. The applicants failed to effectively utilize the relief of time granted by this Tribunal. The present SA is filed only to bring the 1^st Defendant to agree for One Time Settlement in the guise of settling the loan to prevent the sale of property.

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It is also their case that these applicants are approaching the Tribunal by filing several applications. SA No.88/2019 was filed and this Defendant had given consent to the applicants to sell one portion of the property. The applicants did not avail this opportunity nor did they clear the debt. Again they have filed SA No.15/2020 challenging the sale notice dated 12.12.2019. The sale was stayed subject to the conditions and the conditions were not complied. Further they filed SA No.439/2022 challenging the sale notice dated 09.10.2022. Interim Stay was granted subject to deposit of 10% of the debt within four weeks. The said SA 439/2022 was closed by the Tribunal holding that there were no tenable infirmities. It also noted that the second limb of the interim order was not complied.

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It is also brought to notice that SA No.14/2023 was filed challenging the sale notice dated 29.06.2023 and the same had become infructuous. However, the Tribunal had granted 10 days time so as to the applicants utilizing the provisions of Section 13(8) of the SARFEASI Act. These Applicants made half hearted attempt by offering unreasonably low amount as OTS. The said offer was promptly rejected by the Defendant.

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It is averred that the present SA is filed and obtained the interim order of stay. These applicants cannot be allowed to continuously knock the doors of the Tribunal,

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which is an abuse of process of law. The apportionment of the property as sought by the applicants would diminish the value of the remaining parcel of the land for lack of access and practically become unsaleable. OTS proposed by the applicants is completely whimsical and disadvantageous to the Defendant. This Tribunal cannot enforce the OTS on the Defendants. The applicant had been attempting to stall the process of recovery. The Defendant had also filed certain documents, which will be discussed at the relevant paragraphs hereafter.

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As noted above the participation of Defendant No.2 in the present SA is dispensed since no relief is sought against Defendant No.2. The impugned sale notice is not issued by the Defendant No.2.

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Heard the Ld. Counsel on either side. It is canvassed on behalf of the applicants by the Ld. Counsel Sh.Gurumurthy that the impugned sale notice is dated 21.07.2023. The same is published in the newspapers dated 22.07.2023 and such notice published bears the date as 22.07.2023, instead of 21.07.2023, therefore he submits the very date of the sale notice renders it unbelievable and not in accordance with Rule 9(1) of the SIE Rules.

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The second limb of the argument is that the movables are hypothecated along with the mortgaged property. The Possession was taken on 28.03.2018 by the 2^nd Defendant. The debt was assigned on 30.03.2020. The deed of assignment was registered on 10.06.2021. Therefore he submits that the interest charged for the period is illegal and there has been a wanton delay on the part of the 1^st Defendant. He also submits that the 5^th Sale notice has undervalued the reserve price and the valuation report is not filed. He also submits that no insurance was taken on the debt. It is further urged that Rule 8(7) in so far as not uploading in the web site, the details of the property is fatal to the sale notice.

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On the other hand the Ld. Counsel Sh.B.Jagannath appearing for the Defendant No.1 submits that the typographical error found in the publication dated 22.07.2023 of the sale notice is only a curable defect and the sale notice dated 21.07.2023 is served on the applicant, which can be seen from the very annexure relied by the applicants in their application at Page 64 to the Petition duly sent, complying Rule 8 & 9 of the SIE Rules. He submits that the entire debt is assigned and the interest is chargeable till the debt is redeemed and there cannot be any relaxation to the periods prior to the Registration of Assignment Deed. Furthermore he submits that the arguments that the Defendant No.1 did not upload and the under value of the reserve price are not pleaded in the grounds and the same cannot be accepted at this stage.

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It is also canvassed on behalf of the Defendant that the entire SA becomes infructuous since no sale has taken place on the date fixed as per the sale notice published on 22.07.2023. The sale was fixed to be held on 14.08.2023. Since no sale took place no effective relief can be passed by this Tribunal.

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Point for determination :- After carefully listening the arguments at the Bar and the examination of pleadings, the only point that arises for determination in this SA is:-

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“Whether the measure in issuing the sale notice is in accordance with the provisions of SARFAESI Act and the Security Interest (Enforcement) Rules there under and what relief?”

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Orders on IA No.178/2023 :- Before answering the point for determination, it is to be noted that an IA is filed which needs the adjudication along with the main petition, hence the same is taken up for orders along with the SA.

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(a) By this application, the applicants pray for a direction to be issued to Defendant No.1 to consider the representation of the applicants dated 11.08.2023 to apportion and release 12.93 Acres of land out of 31.5 Acres

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of land along with the Building so that such released portion be registered in favour of the prospective buyer.

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(b) It is pleaded that the applicants have identified a prospective purchaser who is willing to acquire a part of the property measuring 12.93 acres out of the secured asset. The said prospective buyer offered to deposit Rs.10.10 Crores subject to the NOC to be issued by the Defendant No.1 and subject to the acceptance of OTS letter dated 11.08.2023 submitted by the applicants to the Defendant No.1. Therefore, such a direction is sought.

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(c) In the counter to this IA, it is submitted that the conditions imposed by the prospective buyer is whimsical and the applicant cannot dictate the proposed measures to be taken in a particular way. The Tribunal also does not have any powers to issue such directions either to direct the defendant to accept OTS nor the property can be apportioned. It is also pleaded that the applicant has been trying to stall the recovery proceedings on one pretext or the other and the present IA is one such attempt. It prays for dismissal of the IA.

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(d) Having heard the Ld. Counsel and having considered the IA and the counter, this Tribunal is of the opinion that no such directions can be issued under Section 17(3) of the SARFAESI Act for the following reasons:

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(i) The Security Asset cannot be allowed to be fragmented since this Tribunal’s power is only to examine the legality validity and the correctness of the measures to be tested with the touch stone of SARFAESI Act and the Security Interest (Enforcement) Rules.

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(ii) The powers conferred under Section 17(3)(c) is only to aid and implement the final orders passed under Section 17(3) of the SARFAESI Act.

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(iii) If such directions are given to fragment / bifurcate / dissect and to dismember the security asset, the same would be out of the purview of Section 17(3) and such a direction cannot be issued.

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(iv) Furthermore the prayer is based on a contingency that is only if the Defendant No.1 having accepted the OTS proposals. In the instant case, the OTS proposals were rejected. The measures to be initiated by the secured creditor cannot be dictated by this Tribunal to sell part of the properties.

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(v) The authorized officer has no powers to bifurcate or cause fragmentation to the secured assets under the Act.

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For the aforesaid reasons this Tribunal is of the considered opinion that the present IA lacks merits and hence the same stands dismissed.

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Now coming up to the aspect of the legality validity and correctness of the impugned sale notification, it is admitted by both the sides that the sale notification has become infructuous and no sale did take place on the date fixed. Therefore, the prayer becomes infructuous.

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It would be preposterous to give a finding on the legality, validity and correctness of the measures initiated by the Defendant No.1 in causing the impugned sale notification dated 21.07.2023, since the same has become infructuous.

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Furthermore, expressing any opinion on the same would serve no purpose since the relief becoming infructuous and the same may prejudice the contesting parties either. Therefore, the rights of the parties to be kept open without giving room to any expression either way to the course of proceedings open under the law.

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Before parting, it is also necessary to mention that while the matter is subjudice before this Tribunal, the 1^st Defendant resorted to issue another sale notice dated 18.01.2024 fixing the sale to be held on 09.02.2024. This was questioned by the applicant in an unnumbered IA seeking the initiation of contempt proceedings against the Defendant No.1. This Tribunal by the order dated 29.01.2024 had disposed the said IA recording the submission of the Ld. Counsel of the Defendant No.1 that this sale

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notice dated 18.01.2024 is withdrawn and would not be acted upon. The IA was allowed with a direction to the Defendant No.1 not to debit any expenses arising out of the sale notice to the account of the applicants.

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For the aforesaid reasons the present SA is being disposed of by the following:-

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IA No.178 of 2023 filed by the applicant stands dismissed.

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The SA No.15/2023 stands disposed of having become infructuous.

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The Defendant No.1 is at liberty to proceed in accordance with law if so advised and the contentions of the parties are not adjudicated herein in view of the provisions of Rule 9 of the Security Interest (Enforcement) Rules 2002.

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Parties to bear their own costs.

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It is hereby clarified that the Defendant No.1 shall not debit any expenses to the account of the Applicants concerning the sale notice dated 18.01.2024, which stood withdrawn.

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Sd/(A.S.JAYACHANDRA) PRESIDING OFFICER DRT-I, CHENNAI

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(Dictated to PS, in the computer, corrected, signed and pronounced by me on this 2^nd Day of February, 2024)

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Suganthi Educational Trust Rep by Its Managing Trustee Dr Sujatha Balasubramaniam and Two Others v. Cfm Asset Reconstruction Private Limited

Case brief

What is this about?

What did the court decide?

Suganthi Educational Trust Rep by Its Managing Trustee Dr Sujatha Balasubramaniam and Two Others v. Cfm Asset Reconstruction Private Limited

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

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