Allowed

Ms Breeze Aircon v. Union Bank of India

DRT23 Jan 2024SA/166/2022

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal allowed an application under Section 17 of the SARFAESI Act. The court set aside the bank's auction sale of the applicants' property, held by a state government tender award, due to procedural flaws and failure to consider a legitimate restructuring request from an MSME unit.

What did the court decide?

Sale conducted by the bank is set aside. Auction deposit refunded with 9% interest. Bank directed to consider restructuring under Section 13(3-A) within one month.

Ms Breeze Aircon versus Union Bank of India — Execution and Attachment | DRT (2024)

SA No_ 166/2022

DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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SA No.166/2022

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M/s Breeze Aircon and another Versus Union Bank of India and another

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23.01.2024 Item No.51

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Argued by: Sh.CS Pasricha, Counsel for the Applicants alongwith Sh.Ashwani Kumar/applicant No.2 in person. Sh.Sanjay Dalmia, Counsel for respondent Bank. Sh.KPS 12hillon, Counsel for auction purchaser.

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M/s Breeze Aircon and another (Applicants) have filed this Securitization Application under Section 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), against the Authodzed Officer, Union Bank of India (erstwhile Corporation Bank) and another (Respondents).

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Admittedly, in the year 2017, erstwhile Corporation Bala (now Union Bank of India) had sa/ntioned CC limit of Rs.29 laos to the applicants for establishing 14 Tuberclosis containment laboratories with Bio-safety level-3 HVAC systems. To secure the loan, applicants had created security hrterest of their plant and machinery in favour of the Bank. In fact, a contract had been awarded to one Pillar 9 (Tae), Kundapura, Karnataka, who engaged the applicants as a specialized agency for setting up HVAC system with Bio-safety level-3 gpeci:fications. The CC limit was enhanced to Rs.32 lacs. Applicants also availed Term Loan of Rs.20 laos. Applicants have alleged that though, they performed their pall of the conUaci, yet, M/s Pillar 9 (Tae) unlawnrlly wilhheld the payment of Rs.81.40 laos due to them. However, despite heavy setback, they paid upto date interest in the CC account. However, the Term Loan account was in default by only Rs.73,879/-, for a period of 2 years. The account was classified as NPA on 06.01.2020. Since, the Term Loan account had turned NPA, CC account also turned NPA' On 31.01.2022, bank issued the notice under Section 13(2) of the_ SARFAESI Act. It PanIc) issued the notice under Section 13(4) on 06.05.2022. Further, Bank issued the sale notice dated 15.06.2022, f„ 20.07.2022. AppH„nt, alleged that it is an MSME unit and th, a„O„„,t ,,uld not ,1,S,med NPA St„M,tI away. It is alleged th,t th, m,tt,„ should hav, b„n „f„„d to MSME „)mmM.e,,

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SA No. 166/2022

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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before declaring the account NPA. Applicants alleged that bank fixed the reserve it, price at Rs.77 lacs of the plant and machinery. In fact, in the year 2017, when the loan was sanctioned, Bank itself had got the property valued at Rs.101.16 laos. The recent sale transactions show that the value of the land is Rs.120 laos per bigha. It is alleged that the value of the land is approximately Rs.2.50 crores. Applicants, in para No.6 of the application, have given the details of the two recent transactions of the property, in the vicinity. It is alleged that the default in the payment of the loan was not willful or malicious, but due to financial crises faced by the applicant, QP account of the non-payment of its dues by the company Pillar 9 (Tae), whom the contract had been awarded. Applicants alleged that on 21.04.2022, they had sent representation to the bank in response to the notice under Section 13(2) of the SARFAESI Act issued by the bark, whoIl was not decided by the bank. On these facts, applicants filed the present SA.

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Bank, in the reply, has alleged that the present SA is not maintainable. Applicants have concealed material facts Rom this Tribunal and thus they are not entitled to any relief The account of the applicants was declared NPA on &I 06.01.2020 and bank issued the notice under Section 13(2) of the SARFAESI Acl on 04.02.2020. On account of order passed by the Hon’ble Supreme ComIP the bank did not initiate further SARFAESI proceedings against the applicants. On 31.01.2022, bank issued the notice under Section 13(2) of the SARFAESI Act. Despite passing of two and half years, applicants did not make any payment. Bank has denied that applicants responded/replied to the notice under Section 13(2) of the SARFAESI Act. It is alleged that applicants had never raised the issue that the matter should have been referred to MSME committee. It is also ft. alleged that applicants had earlier filed Civil Writ Petition in the Hon’ble Him&hal Pradesh High Coua, which di„,t,d th, ,ppH,a„t, to ,ppro„h thi, Tribunal. It is alleged that no „p„s„,t,tio„/,bj„tio„ w,s .e„iv,d by the bank in response to the notice i„ued und„ S,,ti,n 13(2). It i, ,11,g,d th,t bm,k h,d g.tI conducted proper valuation. Bank had aldo obtained the order under gectioh 14 o:

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SA No. 166/2022

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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the SAIWAESI Act. It is alleged that there is no merit in the present SA and the same be dismissed.

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It is admitted on the record that factory land and building was sold by the bank in e-auction on 2 G.07.2022, to Mr.Bharat Bhushan, who also filed written reply wherein it has been mentioned that applicants failed to make the payment and bank rightly initiated the SARFAESI action and sold the property, for Rs.78 lacs against the reserve price of Rs.77 laos.

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1 have heard Mr.CS Pasricha, counsel for the applicants; Mr.Sanjay Dalmia, Counsel for respondent and Mr.KPS Dhillon, counsel for auction purchaser.

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Mr.Pasricha, co8nsel for the applicants has argued that applicants, vide email dated 21.04.2022 had responded to the notice under Section 13(2) of the SARFAESI Act. However, bank did not dispose of their representation and issued the notice under Section 13(4) of the SARFAESI Act, which is not permissible under the law. Mr.Pasricha, further drew my attention to the valuation report filed by the bank, wherein it is mentioned that the valuer had not gone inside the premises, and given the valuation on the basis of earlier valuation report. Mr.Pasricha relied upon the judgment passed by the Hon’bIo Delhi High Court in &I case M/s Kaym£ Adaya india versus State Bank of India, WP (C) No.11340-2018, date of decision 26.10.2018. Counsel argued that earlier applicants could not make the payment on account of the fact that the contractor, to whom the contract had been awarded, did not make the payment due to them. Mr.Pasricha further argued that admittedly it is an MSME unit. As per the guidelines of RBI, the account of the applicants should have been placed before MSME committee, for taking corrective action. However, it wa, „,t d,„,. Wi„di„g „p hi, „g„m,„t,, Mr.Pasricha submitted that the sale was in violation of the provisions o: ttl SARFAESI Act and he ,ame b, „t „id,. A, n„th„ „W,d th,t ,ppli,,„t, h,„,

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SA No. 166/2022

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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already deposited Rs.20tlacs with the bank and is ready to pay the interest on the same which may be awarded by this Tribunal.

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Per contra, Mr.D'almia, counsel for the respondent bank submitted that the bank followed proper procedure for the SARFAESI proceedings. In pursuance to the notice under Section 13(2), applicants had not filed any representation/objections- He denied that objections were received by the bank. Counsel submitted that applicants did not make any payment.

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I have considered rival contentions

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Applicants in their email dated 22.04.2022 (Annexure P-13) had made an attachment of letter dated 21.04.2022. The letter stated that they are an MSME unit. They further stated that they were rurming Iheir account properly. However9 a sum of Rs.88 laos was stuck with M/s Pi11ar9 Tae (India), B,undapura2 Karnataka. They had also filed a suit for injunction to hold the bM gBarantee against M/s Pillm9 Tae (India), in Nalagarh Court. They also stated that they had submitted a proposal f& restructuring and requested R)r meeting. Howeverp {he bank did not take anY action in the matter and did not address the issues raised bi them in their representation. At the time of arguments! Mr.Dalmiap counsel hr the Tespondent bank denied that the bank had got tMs letter. However3 Mr.Dalmia was not sure as to whether this email was ever received by the bulk or not. I am of the considered view that the applicants have established that they had sent the email dated 22.04.2022. The notice under Section 13(2) was issued on 31'O1'2022- HQwever, this representation was filed ,n 25.04.2022. Mr.Dalmia 1, submitted that since the applicants had not responded to the notice under Section 13(2) within 60 days, the representation of .the applicants is of no consequence. Mr.Dalmia also argued that in the representation applicants had nowhere mentioned aat Mese were their obje dons under Secdoh 13(3_A) of the SARFAESI Aot

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SA No. 166/2022

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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Be Mat as it may, even though the applicants had submitted the representation even beyond time, it was incumbent upon the bank to dispose of the same before issuing the notice under Section 13(4) of the SARFAESI Act. Further, I am of the considered view that even if the applicants had not mentioned I in the letter that their representation be treated as reply under Section 13(3-A), still the bank was under obligation to consider the same. In these circumstances, I am of the considered view that the bank was not justified in issuing the notice under Section 13(4) of the SARFAESI Act on 06.05.2022 when it had already got the representation from the applicants, on 22.04.2022. Still further, admittedly applicants are an IV[SME unit. It is the case of the applicants that Foundation of Innovative New Diagnostics India had floated a tender. M/s Piller9 Tae (India) had responded to the sqme and tB the contract was awarded to it (M/s Piller9 Tae India), who had given the sub-contract to the applicants. Applicants had performed their part of the contract. However, M/s Piller9 Tae (India) had not made the payment to than. In this case, the NGO had floated the tender on behalf of Government of India. I am of the considered view that applicants had put forward a verY genuine case and the bank should have accepted the contentions of the applicants. In fact, for such like cases only Mere are provisions under Set/tion 13(3-A) of the Securitization Enforcement Rules, 2002. There could not be a better case for considerQjion of the bank for restructuring9 except the base in hand. I am of the considered view that the bank was in a hurry to make the recovery without taking into consideration the genuine hardship to the applicants and proceeded to sell the pfopeltY. I am of the considered view that the action of the bank oannot be oountenanced on any ground. That apart9 applicants have produced on the record valuation report, which states that the valuer had not enb'ed th' p''mi''S of th' appli'ants „,d „,bmMed the valuation report on the basis of earlier valuation. Fulther, the bM has not produced on the record of the auction proceedings and also not complied with Rule 8(6) and 9(1) of the J Seouatization Enforcement Rules, 2002.

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SA No. 166/2022

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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In view of the above, I hereby allow the present SA. Applicants have already deposited Rs.20 laos. The auction purchaser has dep9sited Rs.19 laos. The sale conducted by the bank is hereby set aside. Bank would refbnd the sum of Rs.19 lacs deposited by the auction purchaser with interest @ 9% per annum &om the date of deposit till the date of repayment. Bank is also directed to consider the representation of the applicants as mandated by the provisions under Section 13(3-A) of the Securitization Enforcement Rules, 2002. Bank would comply with this order within one month from today.

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