Allowed

Nawabu Deen v. Canara Bank

DRT12 Jun 2024SA/252/2024

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal allowed the borrower's Securitization Application seeking to set aside a bank auction sale. The tribunal held that the application was not time-barred because the bank failed to inform the borrower of the sale until after the filing date, and the auction was invalid due to insufficient notice.

What did the court decide?

The sale of the secured asset on 28.11.2023 was set aside. The auction purchaser was ordered to refund the sale consideration with interest to the Bank.

Nawabu Deen versus Canara Bank — Company and Corporate | DRT (2024)

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DEBTS RECOVERY TRIBUNAL-2, CHANDIGARH

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SECURITISATION APPLICATION NO.252/2024

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DATE OF INSTITUTION: 19.04.2024

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DATE OF DECISION: 12^th OF JUNE, 2024

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Nawabu Deen alias Mohammad Nababdin S/o Sh. Janu Khan (Borrower & Mortgagor) proprietor M/s Laziz Ice Factory, R/o House No. 100/102, Village Malokheda, Tehsil Hathin, District Palwal 121 103 (Haryana)

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Versus

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....... Applicant

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Canara Bank, Branch Hathin, Housing Board Colony Road, Ward No. 13, Hathin, Tehsil Hathin, District Palwal (Haryana) through its Branch Manager

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Canara Bank, Branch Hathin, Housing Board Colony Road, Ward No. 13, Hathin, Tehsil Hathin, District Palwal (Haryana) through its Authorised Officer/Chief Manager 3. Sh. Sakir Khan S/o Sh. Haji Ishak (successful bidder) R/o Village Pachanka, Tehsil Hathin, District Palwal 121 103 presently at Housing Board Colony, Palwal, Tehsil and District Palwal, 121 102

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District Magistrate, Palwal, District Palwal (Haryana)

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…..Respondents

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Argued by: Sh. Diwan Sharma Advocate for the Applicant (SA) Sh. R.S. Bhatia Advocate for Respondent Bank

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FINAL ORDER

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Nawabu Deen alias Mohammad Nababdin (Applicant) has filed this Securitization Application (SA) under Section 17(1) and 17(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter ‘the Act’) against Canara Bank and Others.

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SA/252/2024 NAWABU DEEN Vs CANARA BANK AND OTHERS 2

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The case of the Applicant is that he is the Proprietor of M/s Laziz Ice factory. It is an MSME unit. On 06.02.2015, Canara Bank had sanctioned him overdraft facility of Rs. 10 lacs against the hypothecation of stocks and book debts. To secure the loan, he had created security interest in respect of the property measuring 15 Marlas, i.e. 430 sq. yards situated within Moja Hathin and within limits of Municipal Committee Hathin, Palwal (Haryana) (fully detailed in Para No. 5.1 of the application). At the time of sanctioning the loan, the Bank had assessed the value of the property as Rs. 25,20,000/-. On 14.11.2019, due to the application of exorbitant interest, unlawful expenses and capitalization of penal interest, his account was shown as overdrawn by Rs. 27,719.62. However, the Bank never informed him about the same and continued to debit interest. During Covid his business came to a standstill. He was entitled to get his account restructured as per the guidelines of the RBI. However, the Bank did not provide him any concession or moratorium and restructuring. He was entitled to be rehabilitated. However, the Bank in violation of the various schemes of RBI, did not rehabilitate him and issued him a legal notice dated 20.05.2022 calling upon him to pay Rs. 13,30,787.62 as on 13.05.2022. On 27.05.2022, the Bank issued a notice under Section 13(2) of the Act asking him to pay Rs. 13,31,787.62 within 60 days. He also got the property valued and the approved valuer stated that the market value of the property as on 29.04.2023 is Rs. 22,45,000/- It is stated that on 24.05.2023, the Bank issued a 30 days’ sale notice stating that the property would be sold by auction on 26.06.2023 at the reserve price of Rs. 19,67,000/-. On 11.07.2023, the Bank filed Civil Suit No. CS 301 of 2023 in the Court of Civil Judge (Senior Division) for the recovery of Rs. 14,46,841.62 with interest at the rate of 13.75% per annum. The Applicant states that he had got a copy of the statement of account from which, he came to know that the Bank had been charging interest even after the account had been declared NPA. On 25.09.2023, the Bank intimated him that on 27.05.2022, the Bank had issued the notice under Section 13(2) of the Act and possession notice under Section 13(4) of the Act on 25.04.2023 whereby symbolic possession was taken of the secured asset. On 08.11.2023, the Bank pasted a notice along with a 15 days’

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sale notice. On 20.12.2023, the Authorised Officer filed an application before the District Magistrate, Palwal, for taking the possession. On 11.03.2024, he got a message from the Bank that a sum of Rs. 4,34,822.38 has been credited to his saving Bank account. He rushed to the Bank where the Branch Manager told him that the secured asset has been sold by the Bank for the recovery of the dues on 28.11.2023. After getting the letter dated 11.03.2024, he consulted his Advocate who filed a Civil Suit in the Court of Additional Civil Judge, Senior Division, Hathin. The Civil Court issued summons to the Bank, which filed an application under Order VII Rule 11 of the Code of Civil Procedure, 1908. However, the Applicant withdrew the said suit. The Applicant alleged that the sale conducted by the Bank on 28.11.2023 in pursuance to the sale notice dated 04.11.2023 is liable to be set aside as the action of the Bank was highly unfair and unjust. Further, the Bank had declared his account NPA in an illegal manner. It is further stated that the Bank has debited interest of Rs. 12,904.00 on 13.07.2019 and a sum of Rs. 13,506/- on 13.08.2019 and also penalty of Rs. 33 with the result that the balance in the account swelled to Rs. 10,26,443.00. It is stated that the Bank has debited the penal interest illegally. He had deposited Rs. 20,000/- and another Rs. 20,000/- on 11.11.2019. The Bank has been debiting interest and penal interest every month and also capitalizing the same regularly. This is being done by the Bank in contravention of the Master Circular issued by the RBI which states that in case the interest is not serviced within 90 days in that eventuality only, the account can be declared NPA. Further, no prior notice was given to him before declaring the account NPA. It is also stated that the approach and conduct of the Bank is in violation of the law laid down by the High Courts. The account was declared NPA in violation of the RBI Circulars. The account could not be declared NPA at the whims and fancies of the Bank. The account was wrongly declared NPA on 30.10.2019 against the very definition of NPA. The Bank is not entitled to exorbitant interest and unauthorized expenses. The Bank is bound by the instructions of RBI. The SARFAESI action was taken by an Officer who had not been authorised for the same. The notices were not issued to all the borrowers and guarantors. The possession notice

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was not served dasti and it was also not published in the newspaper. The notices were also not served through electronic mode. The Bank also did not obtain valuation from an approved valuer. The Authorised Officer did not fix the reserve price in consultation with the secured creditors. The Bank had fixed up the reserve price below the valuation assessed by the valuer. Further, the value of the property at the time of the loan was much more than the valuation at the time of auction. Over the years, the value of the immovable property has increased and not reduced. No 30 days’ notice was given to the Applicant. There was no registration of the security interest. On these facts, the Applicant filed this Securitization Application, wherein he prayed that the whole of the SARFAESI action be set aside.

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Bank, in the reply to the Securitization Application, has denied the case of the Applicant. It is stated that the Securitization Application, is barred by time as the sale notice was issued on 08.11.2023 and the auction was held on 28.11.2023. The property was sold for Rs. 19,68,000/- and the sale certificate was issued on 14.12.2023. The present Securitization Application, was filed after 45 days from the date of auction. It is stated that the account of the Applicant was classified as NPA on 30.10.2019. The demand notice was issued on 27.05.2022 (Annexure-A4). The possession notice was pasted on the conspicuous part of the secured asset. The possession notice was published in Financial Express and Jansatta on 29.04.2023. The sale was held on 26.06.2023. The sale was fixed up for 28.11.2023. The sale notice was issued on 08.11.2023 which was sent by registered post on 17.11.2023. The sale notice was published in Financial Express and Dainik Bhaskar on 08.11.2023. Mr. Sakir Khan (R-3) purchased this property for Rs. 19,68,000/- in auction and on 14.12.2023, the Bank issued the sale certificate in his favour. It is stated that the account of the Applicant remained overdrawn since July 2019. The Applicant did not deposit the interest. The Applicant had deposited Rs. 20,000/- on 14.10.2019. Since, the interest was not serviced, the account was declared NPA on 30.10.2019. It is stated that since the account was declared NPA on 30.10.2019 and was running irregular, the question of restructuring did not arise. As per the valuation report

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SA/252/2024 NAWABU DEEN Vs CANARA BANK AND OTHERS 5

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dated 29.04.2023 (Annexure-A17), the realizable value of the property was Rs. 19.08 lakh. It has been denied that the action of the Bank is in violation of the principles of natural justice. The Authorized Officer has alleged that the Applicant had deposited only Rs. 40,000/- on 14.10.2019 and 11.11.2019. The account was classified as NPA as per the guidelines of RBI. The Bank has charged interest as per the terms of the sanction. It has been denied that the Bank had charged exorbitant interest. The Bank has alleged that there is no merit in the present SA and the same be dismissed.

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This deserves to be mentioned here that the notice of the SA was also given to the auction purchaser who was duly served. However, despite service, he did not put in appearance and was proceeded ex parte on 06.05.2024.

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I have heard Sh. Diwan Sharma counsel for the Applicant and Sh. R.S. Bhatia counsel for the Bank.

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Apart from making oral submissions, Sh. Diwan Sharma counsel for the Applicant has also filed on the record written synopsis which have been placed on the record. In his oral submissions as well as in the written submissions, Sh. Diwan Sharma has stated that the Bank has debited unauthorized interest and charges. No prior notice was issued before declaring the account NPA. Reliance has been placed on the judgment passed by Hon’ble Jharkhand High Court in the case of ‘M/s Stan Commodity Private Limited, Jamshedpur Vs Punjab and Sind Bank, New Delhi and Others’ 2009.

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The account was declared NPA against the provisions of the Securitization Act. The Bank never classified the account substandard, doubtful or loss before declaring the account NPA. The Bank did not obtain the valuation of the property from an approved valuer. Further, as per valuation of the Bank in the Year 2015, the property was valued at Rs. 25,20,000/- However, the Bank has now valued the property at a much lower rate. The Bank has conducted the auction in violation of the Rule 8(6) and 9(1) of the Security Enforcement Rules, 2002. Reiterating the contentions mentioned in the application, Sh.

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SA/252/2024 NAWABU DEEN Vs CANARA BANK AND OTHERS 6

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Diwan Sharma submitted that the sale be set aside. Winding up his arguments, Sh. Diwan Sharma submitted that the SARFAESI action taken by the Bank be also set aside.

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Per contra , Sh. R.S. Bhatia counsel for the Bank has submitted that there is no merit in the present SA. The Securitization Application is time barred. Sh. R.S. Bhatia Advocate submitted that in this case, the Bank had given an overdraft of Rs. 10 lacs. Drawing my attention to the statement of account, he submitted that right from the beginning, the amount due in the account was more than Rs. 10 lacs. The account remained overdrawn from the very beginning. He submitted that as per RBI guidelines, in case the loan account remains overdrawn, then the same is liable to be declared NPA. Considering this very circumstance, the Bank had declared the account NPA. He further submitted that the auction was conducted on 28.11.2023. Notice of the same was issued on 08.11.2023. This was a second sale. The Applicant was entitled to only 15 days’ notice which was given. Sh. R.S. Bhatia Advocate submitted that there is no merit in the present SA and the same be dismissed.

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9. I have considered the rival contentions.

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I am of the considered view that there is no merit in the contention of Sh. R.S. Bhatia that the SA is time-barred. As per the Applicant, he had got a message from the Bank on 11.03.2024 that a sum Rs. 4,34,822.38 has been credited to his account. He immediately rushed to the Bank where he came to know that his property has been sold by the Bank on 28.11.2023. Accordingly, he filed the present SA on 19.04.2024. Whereas Sh. Diwan Sharma Advocate argued that the limitation has to be counted from the date he got the information of the sale; Sh. R.S. Bhatia counsel for the Bank has argued that the period of limitation has to be counted from the date of sale. Sh. R.S. Bhatia further argued that though under the Securitization Act, the borrower is entitled to a notice prior to the sale, yet he is not entitled to any notice after the sale has been conducted. He submitted that as a rule every borrower comes to know as soon as the sale takes place. Accordingly, the limitation should be counted from the date of sale. Sh. R.S. Bhatia

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submitted that as per Section 17 of the Act, the ‘ terminus a quo’ is the date of sale. However. I express my inability to accede to the contention of Sh. R.S. Bhatia. I am of the considered view that even though there is no provision in the SARFAESI Act to intimate the borrower of the sale, yet it is the duty of the Bank to intimate the borrower that his property has been sold on a particular date. In fact, the Bank should inform the borrower as to on which date the property was sold; the price it fetched and the person along with his address to whom the property was sold. In the case in hand, admittedly, the Bank did not intimate the borrower. In these circumstances, the contention raised by the applicant deserves to be accepted that he came to know on 11.03.2024 that the sale has been conducted. In case the limitation is counted from 11.03.2024, the present SA filed on 19.04.2024 is within time.

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Though the Applicant has raised other contentions, yet I am of the considered view that there is no need to dilate on the same as it is admitted on the record that the Bank had issued the sale notice on 08.11.2023, which was sent by registered post by the Bank on 17.11.2023. The sale was fixed up for 28.11.2023. It was a second sale. The Applicant was entitled to 15 days’ clear notice. However, in the case in hand, 15 days’ clear notice was not given to the Applicant. Considering the above-mentioned circumstances, I am of the considered view that the present SA deserves to be allowed and the sale conducted by the Bank on 28.11.2023 deserves to be set aside. I order accordingly.

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The Bank would refund the total sale consideration deposited by the auction purchaser with the interest at the rate of 6% per annum from the date the auction purchaser had deposited it with the Bank till the date of refund. The auction purchaser would also return the original certificate to the Bank and the Bank would cancel it.

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However, Sh. Diwan Sharma counsel for the Applicant argued that the Applicant is ready to redeem the property. In case, the Applicant is inclined to redeem the property, he would deposit the total sale consideration with interest at the rate of 6% per annum

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SA/252/2024 NAWABU DEEN Vs CANARA BANK AND OTHERS 8

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from the date of the deposit by the auction purchaser till he deposits the money with the Bank. The Bank, in turn, may remit this money to the auction purchaser, who would return the sale certificate and any other documents handed over by the Bank to him. The Bank would cancel the sale certificate and in case, the certificate is registered, it would

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write to the Sub-Registrar to cancel the same.

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With the above observations, the SA is allowed.

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Let a copy of this Final Order be furnished to all the parties free of cost.

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Pronounced in the open Tribunal (A.S. Narang) Dated: 12.06.2024 Presiding Officer DRT-2, Chandigarh (Additional Charge)

Nawabu Deen v. Canara Bank

Case brief

What is this about?

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Nawabu Deen v. Canara Bank

Case brief

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