Allowed

M S Shiridi Sai Mineral Water Plant v. Bank of Baroda

DRT1 Mar 2024SA/241/2022

Case brief

AI extract

What is this about?

The Deuts Recovery Tribunal allowed the applicants' security application challenging the sale notice under the SARFAESI Act. The court held that the bank failed to serve the pre-sale notice as required by Rule 8(6) and concluded the sale notice became infructuous due to lack of bidders.

What did the court decide?

Sale Notice dt.02.09.2022 set aside and notice under Rule 8(6) of the Rules, 2002, set aside; bank at liberty to proceed against secured asset.

M S Shiridi Sai Mineral Water Plant versus Bank of… — Contract and Commercial Disputes | DRT (2024)

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IN THE DEBTS RECOVERY TRIBUNAL^- I AT HYDERABAD

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DATED THIS THE O I^ST DAY OF MARCH,2024

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PRESENT: GUMMADI GOPICHAND, PRESIDING OFFICER

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sA.No.2 41 /2022

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M/s. Shiridi Sai Mineral Water Plant, Rep. by its Proprietor Smt Munavath Rami, Plot at Sy.No.55 & 56, Thorrur (V) & (M), Warangal District. Presently Mahabubabad District, Telangana - 506 163.

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Mrs. Munavath Rami, W/o. late Sri M. Narsing, Gender: Female, aged about 51years, Occ: Business, H.No.1-9-839, Postal Colony, Subedari, Hanamkonda, Warangal-50600 1 .

Applicants.

Versus

Bank of Baroda,

Warangal Branch, Seetarama Complex, Op: Sunil Theatre, Station Road, Warangal - 506 0O2.

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Rep. by its Authorized Officer.

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Respondent.

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Counsel for the Applicants Counsel for the Respondent

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Sn R.N. Hemanand. Sri Sriniuas Chitturu.

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.:ORDER:-

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This application is filed by the Applicants u/s.17 of the SARFAESI Act,^2OO2, challenging the Sale Notice dt.02.09.2022, issued by the^{RespondentBank,} auction of the schedule property on 28.O9.2022.

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ts made in the application, in brief, are that, the approached the Respondent Bank in the year 2018 for .IiS 120.00 lakhs for setting-up a Mineral Water Plant in nSiiieli$ style of M/s. Sri Shiridi Sai Mineral Water Plant r tr-' r.-O,r;$i. ., , ,-tt'j.li,.t,;' t herein) but, the Respondent Bank has sanctioned only lakhs and has disbursed the said amount in small^portions different tranches. The said loan amount was not sufficient^to

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5,A.No.241/2022

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complete the^{project.Even after requests made by the Applicantsfor} enhancement of the^{loan, there was no responsefrom the Respondent} Bank. However,^{the Applicantsstarted paying EMIsregularly to the} Respondent Bank. While^{so, some agents visited the application} schedule property^{and demanded the Applicants tohandover} possession of the said^{property and they have alsohandedover a copy} ofSaleNoticedt'02.0g.2o22,whereinitisstatedthattheauctionof the subject^{property is fixed ot28.09.2O22} '^{Tlne RespondentBank'} without serving^{Demand Notice u/s. 13(2), has straightawayserved the} Possession Notice^{dt'02. ll.2}21on the Applicants, to whichthe} Applicants have taken^{objections but no reply was given by the} Respondent Bank.^{The Respondent Bank has failed to serve Sale} Notice under Rule^{8(6) and 9(1) of the Security Interest(Enforcement)} Ru]esandhasalsofailedtopublishtheSaleNoticeintwoleading newspapers. The^{reserve price fixed by the Respondent Bank for the} sale of the schedule^{property is very low when compared with the} market value^{of the property.Hence, the SA'}

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The Respondent Bank^{filed its Reply Statementdenying all the} adverse allegations^{and contended that, the RespondentBank has} sanctioned the loan^{of Rs.35.00 lakhsbased on the documents} submitted by the^{Applicants and the loan amount was releasedin} different tranches^{based on the project proposal provided by the} Applicants for^{purchasingthe raw materialsand machinery'The} Applicants vide their^{letter dt. 12.08.2021 requested for enhancement} ofthelimit,towhichtheRespondentBanksentitsreply dt.25.O2.2O21^{informing that the Applicantshave not complied with} terms and conditions^{and failed to installthe machinery and} nce the commerciai^{production.As the Applicantscommitted} in serving the^{interestand paymentsof instalments' the loan} of the Applicants^{was declaredas NPA on 24'12'2020,as per} norms. The^{RespondentBank initiated the SARFAESI} gs by issuing Demand^{Noticedt'23.07.2021 u/s'13(2)and} said notice sent^{to Applicant and other guarantors returned un-}

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SA.No.241/2022

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served with endorsements as "addressee left without instructions" and so, the said Demand Notice was published in newspapers. Thereafter, the Possession Notice dt.02.11.2021 was issued u/s.13(4) of the SARFAESI Act, in respect of the application schedule^property and the said notice sent to Applicant and guarantors was also returned unserved. The Respondent Bank has affixed the Possession Notice on the schedule property and thereafter published the said notice in two newspapers, including one in vernacular language. Thereafter, the Respondent Bank has issued notice dt.l4.Ol.2022 through registered post giving 30 days time to the Applicant to redeem the mortgage property and the said notice also returned un-served. Thereafter, the Respondent Bank published the Sale Notice dt.o2.o9.2022,^{fixing the} auction of the schedule property on 28.09.2022, in the^newspapers but, the auction did not materialize for want of^bidders. So,^the Respondent Bank prayed for the dismissal of the SA.

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Heard arguments of both the Counsels.

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Now, the points that arise for consideration are,-

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Whether the Applicants have established^{valid groundsfor setting} aside the Sale Notice dt.O2.O9.2O22,^{issuedby the Respondent} Bank for auction ofthe application schedule^property?

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ii) To what relief.2

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Polnt No.lilt

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The availing of loan of Rs.35.00 lakhs by^{the Applicant from the} not in dispute. The Applicant has also^{not raised} any dis g creation of security interest over the application in favour of the Respondent Bank.^{As regardsthe} the Applicants that, the loan sanctioned^{by the} was not sufficient, that the loan was^releasedrn different tranches and despite requests^{madeby the}

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SA.No.241/2022

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Applicants, the Respondent Bank did not^{enhancethe loanis} concerned, the Respondent Bank in its^{Replyhas categoricallystated} that, the loan was sanctioned to the Applicants^{based on the} documents submitted by the Applicants and that^{the loan amount} was released in tranches based on the^{project proposalsubmittedby} the Applicants for purchasing raw^{materials and machinery and that,} the loan could not be enhanced as the^{Applicants failed to comply} with terms and conditions of^{sanction and have also failed to install} the machinery and commence^{the commercialproduction.So, I do not} find any merits in the said^{contentionsof the Applicants'The} Respondent Bank, in order to^{establish that it has duly followedthe} procedure laid down under the^{SARFAESI Act and the Rules, 2002,} filed material documents along^{with its Reply Statement'Ihave} perused the said documents.^{The RespondentBank filed a copy of} Demand Notice dt.23.07.2021,^{issued u/s. 13(2) of the SARFAESIAct,} to the Applicants along^{with returned postalcovers. As the said notice} returned un-served,^{the RespondentBank published the saidnotice in} Hans India and^{Velugunewspapersdt. 10'08'2021'So, it cannot be} said that the Respondent^{Bank has not servedthe Demand Notice to} the Applicants.^{The Applicants have admitted the receiptof Possession} Noticedt.o2.lL.2o2|.TheRespondentBankhasalsofiledcopiesof publication of Possession^{Notice inHans India and Velugu} newspapersdt.oT.ll.2o2landalsophotographsdepictingaffixtureof possession Notice on the schedule property. As regards the^notice prior to sale as contemplated^{under Rule 8(6) of the Rules, 2002,is} concerned, the^{RespondentBank filed acopy ofsaid notice} dt.l4.ol.2022 in its^{materialdocuments,but neither postalreceipts,} ents nor returned^{postalcovers are filed by the} to establish service^{of said noticeon the Applicants'So, I} of th opinion that there^{is no complianceof Rule 8(6)} by tffifes ent Bank. Insofar^{as SaleNoticedt.O2.O9.2O22,issued} by dent Bank fixing^{the auction of the schedule property} on 2 is concerned, as^{per the version of the Respondent} 'auction of the^{schedule propertydid not materializeon}

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SA.No.241/2022

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28.09.2022 and so the said sale Notice dt.02.o9.2022 has become in frucfitous. Since there is no compliance of Rule g(6) by the Respondent Bank, it has to be held that the 30 days notice prior to sale dt.14.or.2o22, issued by the Respondent Bank is liable to be set_ aside.

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Point No.(it):-

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In the result, the present Securitization Application is allowed by setting aside the notice prior to sare dt.14.o r.2022, purportedry issued by the Respondent Bank under Rule g(6) of the security Interest (Enforcement) Rules, 2oo2. However, the Respondent Bank is at liberty to proceed against the secured asset in accordance with law. The Interlocutory Applications, pending if any, shall stand disposed of. No order as to costs.

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8. communicate a copy of this order to the parties concerned.

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(Dctated to the Priuate s.y::?.ra, transcribed bg him, corrected, signed. and. pronounced bg me in the open court on this the 1* dag of Marcl\ 2024).

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sd/(c. coPrcHANDl PRESIDING OFFICER

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(),"I:frw./'1Y,7*G|v1 ,ii:;';ffii

M S Shiridi Sai Mineral Water Plant v. Bank of Baroda

Case brief

What is this about?

What did the court decide?

M S Shiridi Sai Mineral Water Plant v. Bank of Baroda

Case brief

What is this about?

What did the court decide?

What the court decided

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Issues for consideration

Statutes considered

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