The Debt Recovery Tribunal examined an application seeking to set aside notices issued under the SARFAESI Act regarding loan recovery and possession. The court found that the notices were validly served and proceedings were lawful.
The Securitization Application was dismissed.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
DEBTS RECOVERY TRIBUNAL-III, CHANDIGARH
PRESIDED OVER: SH. MRIDULESH KUMAR SINGH
SECURITIZATION APPLICATION NO.286/2023
Date of Institution: 13.11.2023 Date of Decision: 28.08.2024
--Applicants Versus
--Respondents Argued by: Sh. Gurinderjit Singh, Advocate for Applicants Sh. Rahul Garg, Advocate for Respondents FINAL ORDER
(1) This Securitization Application was filed under Section 17 (1) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ‘the Act’ for brevity) to set aside impugned notice/order dated 19.10.2023 issued by Tehsildar cum Executive Magistrate, Khanna and respondents be restrained from initiating any further action under the Act against the applicants in any manner.
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SA/286/2023
M/S AMANDEEP AND BROTHER AND ANOTHER Vs. AXIS BANK LIMITED AND ANOTEHR
(2) It was stated in the application that applicant No.1, who is the proprietor of M/s Amandeep and Brothers is running the business of grain merchant in Khanna and availed the Draft Loan of Rs.5 Lacs, CC Limit of Rs. 85 Lacs and Covid related Aid Fund of Rs. 16,68,000/- from the respondent No.2, which was sanctioned by respondent No.1 in the year, 2017; that applicant No.1 repaid the loan amount regularly upto March, 2022; that due to matrimonial dispute going on between applicant No.1 and his wife and during the Covid Period, the business of applicant No.1 was also ruined badly therefore, the applicants were unable to pay the loan amount; that the account of applicants was classified as NPA on 28.09.2022 by respondents and no information regarding NPA of the loan account was ever given to the applicants; that when the applicants came to know about the declaration of the accounts as NPA, applicant No.1 deposited Rs.1,28,750/on 08.12.2022 and Rs.43,195.68p on 01.04.2023 with the respondents; that respondents have not issued any notice to applicants under Section 13(2) & 13(4) of the Act as per Rules and the said notices were neither affixed nor published in any newspapers; that respondents are charging unnecessarily rate of interest and extra ordinary charges in this case, which is not permissible under law; that respondents have not created charge against the property in question under CERSAI as per the Act; that the mortgaged property is single and only residential house of the applicant No.2, who is guarantor in this SA; that applicants are always ready and willing to settle the matter with the respondents and just need some time to arrange the funds; that thereafter, respondents moved Petition under Section 14 of the Act against the applicants in the Court of Additional District Magistrate, Khanna; that Additional District Magistrate, Khanna issued order dated 03.07.2023 for taking possession of the property in question; that the said order dated 03.07.2023 was never received by applicants; that notice dated 19.10.2023 issued by Tehsildar cum Executive Magistrate, Khanna was served to applicants on their phone; that the action taken by the respondents is totally against law, illegal and against the provisions of the Act. Therefore, the SA may be allowed and action taken by respondents are liable to be set aside.
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SA/286/2023
M/S AMANDEEP AND BROTHER AND ANOTHER Vs. AXIS BANK LIMITED AND ANOTEHR
(3) Reply filed by respondents.
(4) It is stated in the reply that the loan accounts have been declared as NPA strictly as per the guidelines of RBI and as per the Act; that moreover, the guidelines of RBI, nowhere mandate service of any notice prior to declaration of the status of his/her loan account as NPA; that after declaration of accounts as NPA, deposit of Rs. 1,28,750/- on 08.12.2022 and Rs. 43,195.68p on 01.04.2023 had not been sufficient enough so as to cover the overdue amount and the accounts could not be regularized on deposit of such a meagre amount; that after declaration of the loan account as NPA on 28.09.2022, the respondents issued demand notice dated 06.10.2022 under Section 13(2) of the Act, which had been duly sent to all the co-borrowers as well as guarantors i.e., the applicants through registered post on 07.10.2022; that tracking reports of the said registered posts clearly shows that the said notice had been duly delivered to all the applicants on 08.10.2022; that after service of demand notice through registered post there had been no requirement of publication or pasting the said notice; that after issuance of demand notice, applicants neither filed any objections under Section 13(3-A) of the Act nor came forward for repayment of the outstanding dues; that respondents proceeded further and issued symbolic possession notice under Section 13(4) of the Act dated 13.12.2022 as per Rules; that the said notice had been pasted outside the mortgaged property on 13.12.2022 and also sent to applicants through registered post on 16.12.2022; that the said notice was also published in two newspapers on 17.12.2022; that respondents has been charging rate of interest strictly as per the terms and conditions settled between the applicants and the respondents at the time of execution of loan documents; that respondents had duly created its charge against the property in question with CERSAI on 27.11.2018, which is evident from CERSAI Certificate; that after declaring the account as NPA, applicants have never paid any amount in their loan account; that notice dated 19.10.2023 issued by Tehsildar cum Executive Magistrate, Khanna had not been only served to the applicants on their phone but had also been pasted outside the mortgaged property on 20.10.2023. Therefore, the SA is liable to be dismissed.
4 SA/286/2023 M/S AMANDEEP AND BROTHER AND ANOTHER Vs. AXIS BANK LIMITED AND ANOTEHR
(5) No replication was filed by applicants. (6) I have heard arguments advanced by Sh. Gurinderjit Singh and Sh. Rahul Garg, Advocates and gone through the record carefully.
(7) It was argued by Sh. Gurinderjit Singh, Advocate that respondents have wrongly classified the account of applicants as NPA on 28.09.2022 because there was no 90 days default in continuation as per RBI Circular.
Per contra , Sh. Rahul Garg, Advocate argued that the account of applicants was classified as NPA in strict compliance of Rules and there is no illegality in it. Sh. Gurinderjit Singh, Advocate could not explained as to how loan account was wrongly classified as NPA. There is nothing on record, which can show that loan accounts can be classified as NPA only after continuous default of 90 days. In the considered opinion of this Tribunal, if borrower defaults in payment of three installments on due dates and whenever there is default of total 90 days then secured creditor is entitled to classify the loan account as NPA, if there is no legal impediment.
(8) Sh. Gurinderjit Singh, Advocate further argued that respondents have not issued any prior notice regarding classification of account as NPA therefore, the SARFAESI proceedings are illegal.
Per contra , Sh. Rahul Garg, Advocate argued that there is no requirement under any law to issue advance notice to borrowers and guarantors regarding the classification of account as NPA.
There is substance in the argument advanced by Sh. Rahul Garg, Advocate.
(9) Sh. Gurinderjit Singh, Advocate further argued that notice under Section 13(2) of the Act was not served according to Rule 8 of the Security Interest (Enforcement) Rules, 2002.
Per contra , Sh. Rahul Garg, Advocate argued that notice under Section 13(2) of the Act was duly served upon all the applicants as per Rules. It was further argued that copy of said notice is Annexure R1 (Colly) to the reply, which shows that the said notice was issued to both the applicants on 06.10.2022. Copies of receipts of registered posts along with tracking reports are also filed as Annexure R1 (Colly), which shows that notices were served upon both applicants.
5 SA/286/2023
M/S AMANDEEP AND BROTHER AND ANOTHER Vs. AXIS BANK LIMITED AND ANOTEHR
In light of above factual position, it is established that notice under Section 13(2) of the Act was validly issued and also served upon applicants as per Rules. There is no illegality/irregularity in the issuance of above notice.
(10) Sh. Gurinderjit Singh, Advocate further argued that possession notice was not issued as per Rules and not served in compliance of Rules. It was further argued that the said notice was not published in leading newspapers.
Per contra , Sh. Rahul Garg, Advocate argued that possession notice was issued and served strictly in accordance with law. It was further argued that copy of possession notice is annexed as Annexure R2 (Colly). It was further argued that copies of receipts of registered posts along with tracking reports are also filed with Annexure R2 (Colly), which shows that notices were served upon both applicants. It was further argued that possession notice was published in the ‘Yugmarg and Aaj Di Awaaz’ (Vernacular) newspapers on 17.12.2022. It was further argued that possession notice was also pasted on the secured asset.
In light of above factual position and evidences on record, this Tribunal is of the considered opinion that the possession notice was prepared and served upon applicants as per Rules. Nothing is on record which can show that possession notice was defective or not served according to Rules.
(11) Sh. Gurinderjit Singh, Advocate further argued that respondents had never created its charge against the property in question with CERSAI.
Per contra , Sh. Rahul Garg, Advocate argued that respondents had duly created its charge against the property in question with CERSAI on 27.11.2018 and copy of CERSAI Certificate is annexed as Annexure R3 to the reply.
In the considered opinion of this Tribunal, that as per CERSAI Certificate, the secured asset is duly registered with Central Registry as per Rules. (12) Sh. Gurinderjit Singh, Advocate further argued that applicants are ready to deposit the outstanding with the respondents. Applicants may deposit the amount as they wish. (13) There is no illegality in the possession notice as well as proceedings initiated under the Act.
6 SA/286/2023 M/S AMANDEEP AND BROTHER AND ANOTHER Vs. AXIS BANK LIMITED AND ANOTEHR
(14) After the consideration of all facts and circumstances, there is no case made out in favour of applicants and this SA deserves to be dismissed. SA is dismissed. Record be consigned to record room after due compliance. Date: 28.08.2024 Pronounced by me in the open Tribunal. (MRIDULESHKUMARSINGH) Presiding Officer, DRT-III, Chandigarh
3 issues framed by the court
Whether the classification of loan accounts as NPA without prior notice was illegal under the Act.
Whether notices under Sections 13(2) and 13(4) were validly issued and served according to the Security Interest (Enforcement) Rules, 2002.
Whether the Securitization Application challenging the enforcement proceedings deserves to be allowed.
4 provisions across 1 enactments
M/s Amandeep and Brothers
Smt. Karamjit Kaur
Authorised Officer, Axis Bank Limited
Branch Manager, Axis Bank
Mridulesh Kumar Singh
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
