The Debts Recovery Tribunal dismissed an application challenging possession and sale notices under the SARFAESI Act. The Tribunal found no fresh default warranting fresh notices as per supplementary agreement terms, disposed of the case without cost.
Application disposed of without any cost; directions issued noting the sale was not conducted on the fixed date.
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.
SA No. 29 of 2022
Fair Order
IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI
DATED THIS 02nd DAY OF APRIL, 2024
PRESENT: SEEMA SINHA
[PR. DISTRICT & SESSIONS JUDGE - Retd]
PRESIDING OFFICER
SA No.29/2022
Between
Mr. B. Sriram, S/o. Mr. K. Balasubramanian, No.2/79, Middle Street, Vengadathanur, Thuraiyur Taluk, Trichy – 621 002 . ..… Applicant
And,
Appearance of Advocates:
M/s. Vastlaw Associates ---- Counsel for the Applicant Mr. P. Pethu Rajesh ---- Counsel for the 1st Respondent Bank No representation for the 2nd Respondent Bank.
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SA No.29/2022
This SARFAESI Application was heard in the presence of Counsel for the Applicant and Counsel for the 1st Respondent Bank and fixed for passing final order before me and upon hearing the arguments of both the Counsels and having stood over for consideration till this day, this Tribunal delivered the following:
O R D E R
1 . This Application has been filed under Sec. 17(1) of the SARFAESI Act 2002 by the Applicant praying to call for the records pertaining to the initiation of proceedings under the Securitization and Reconstruction of the Financial Assets and Enforcement of Security Interest Act, 2002 ending up with Possession Notice dated 02.12.2021 and the subsequent Sale Notice dated 04.01.2022 against the applicant and the schedule of property on the file of the defendants and quash the same.
2 . The brief averments of the Application filed by the Applicant are as follows:-
Ld. Counsel for the Applicant submitted that the applicant is an agriculturist. The applicant with an intention to develop his house further approached the 2nd Respondent Bank and availed Housing Term Loan facility to the tune of Rs.20.00 Lakhs on 23.03.2011. For the above loan facilities the applicant’s wife who is an advocate stood as a guarantor. The schedule mentioned property standing the name of the applicant was given as collateral security for the above loan transactions. It is further submitted that the applicant was very prompt in repaying the loan amount. But due to continuous monsoon failure and other reasons beyond his control the applicant suffered with heavy financial problems and hence the repayment was little bit irregular. But, the 2nd Respondent Bank wrongly classified the applicant’s loan account as Non Performing Asset (NPA) and proceeded under SARFAESI Act.
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It is further submitted that the authorized officer of the 2nd Respondent Bank issued demand notice dated 16.06.2014 demanding a sum of Rs.20,90,307/- (Rupees Twenty Lakhs Ninety Thousand Three Hundred and Seven Only) u/s.13(2) of the SARFAESI Act. After that the Authorized officer of the 2nd Respondent Bank further issued Possession Notice dated 08.09.2015 and took symbolic possession of the schedule mentioned property u/s.13(4) of the SARFAESI Act. The Applicant after the receipt of the Possession Notice approached the Respondent Bank to regularize/restructure the loan account. To that effect the guarantor gave a representations to the bank and paid a sum of Rs.1,31,965/- to that effect vide letter dated 02.11.2015. The Respondent Bank accepted the request of the applicant and regularize the loan account and permitted the applicant to operate the loan account regularly. Further in consideration to the above regularization, the Applicant also issued a supplementary agreement on 23.09.2015 in favour of the Bank. Therefore, the loan account of the Applicant was regularized by the bank authorities and the Applicant started to repay the EMI regularly. Therefore the account which was classified as NPA became regular from 23.09.2015.
It is submitted that the Applicant in the mean time approached the Respondent Bank and gave several representations for one time settlement. The 2nd Respondent Bank by their letter dated 25.06.2021 gave OTS proposal for a sum of Rs. 23.00 Lakhs to be paid before 02.07.2021. But unfortunately, the Applicant could pay only Rs. 5.00 Lakhs and the balance amount could not be paid due to heavy financial problem and other reasons beyond his control. Hence the 2nd Respondent Bank by their letter dated 02.08.2021 rejected the compromise OTS and decided to proceed further recovery proceedings.
It is further submitted that while so without classifying the loan account as NPA afresh and without issuing fresh Demand Notice, the 1st Respondent Bank went on further and issued the fresh Possession Notice dated 02.12.2021 and took symbolic possession of the schedule mentioned
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property u/s.13 (4) of the Act in a hasty manner based on the earlier Demand Notice is dated 14.06.2014.
It is submitted that the applicant was making arrangements to challenge the above possession notice dated 02.12.2021. But to the shock and surprise the 1st Respondent Bank without waiting for a period of 45 days (appeal period) issued Sale Notice dated 04.01.2022 fixing the E- Auction Sale on 09.02.2022. Hence, the Applicant prefers the present application under Section 17(1) of the SARFAESI Act, challenging the Possession Notice dated 02.12.2021 and the subsequent Sale Notice dated 04.01.2022 before this Hon’ble Tribunal for the following and among other grounds.
Main Grounds:
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and other guarantors were kept in dark for which it could be used. Thus in the interest of natural justice, the Respondents are called upon to furnish the entire documents available in their custody on which it has been alleged to rely upon confirming the creation of the mortgage. The Respondents herein cannot proceed under the provisions of the SARFAESI Act. The Respondents seek to exercise right over a property in respect of which there is no proper mortgage.
The Applicant has submitted the following List of documents in support of his claim in the SA, which are as follows:
INDEX TO LIST OF DOCUMENTS/ANNEXURE
| Sl.No. | Date | Documents/Annexure |
|---|---|---|
| 1. | 16.06.2014 | Demand Notice U/s. 13 (2) |
| 2. | 08.09.2015 | First Possession Notice U/s. 13(4) |
| 3. | 23.09.2015 | Supplementary Agreement executed by the Applicant |
| 4. | 02.11.2015 | Representation by the guarantor |
| 5. | 22.03.2021 | Payment Receipt |
| 6. | 02.08.2021 | Letter by the Defendants cancelling the OTS |
| 7. | 02.12.2021 | Impugned Possession Notice U/s. 13(4) |
| 8. | 04.01.2022 | Impugned Sale Notice |
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SA No.29/2022
DESCRIPTION OF THE IMMOVABLE PROPERTY
(As mentioned in the Sale Notice)
Tiruchirapalli Registration District, Ariyalur Sub District, Thuraiyur Taluk, Thuraiyur Sub Registry, Venkadathanur Village, Nathan Old SF.No. 126, UDR Patta New S.F.No. 230/15, Plot No. 2/79, House site measuring 10222 Sq.ft (0.0950 Acres) and building thereon, measuring 5077 Sq.ft in the ground floor and 822 Sq.ft in first floor having the following boundaries.
| North | : | East West Road |
|---|---|---|
| South | : | East West Road |
| East | : | House owned by Mrs.Seethalakshmi |
| West | : | House owned by Mr.C.Devaraj |
3 . On the other hand, the 1st Respondent Bank has appeared and filed his Written Statement along with the typed-set of paper.
The brief averments of the Written Statement filed by the Respondent Bank are as follows:-
Ld. Counsel for the 1st Respondent Bank denies the entire averments made by the Applicant in the main SA. The Applicant is the borrower of the loan and has approached the State Bank of Travancore, Tiruchirappalli for obtaining Housing Loan for a sum of Rs. 20,00,000/- (Rupees Twenty Lakhs Only) and the bank has also sanctioned the same on 23.03.2011. Ms. S. Shanmugapriya, the wife of the Applicant is another borrower. For availing the said loan facility, the Applicant herein mortgage the Schedule mentioned property in favour of the Respondent Bank through a Registered Memorandum of Deposit of Title Deeds at page no. 8 to 11 of typed set of papers. Apart from that the Applicant had already availed an Agricultural Cash Credit for a sum of Rs. 20,00,000/- and Agricultural Term Loan for a sum of Rs. 30,00,000/- in total to a sum of Rs. 50,00,000/-. For the said loan facility, the Applicant mortgaged a separate property in favour of the
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SA No.29/2022
said Bank. Since, the Applicant is a chronic defaulter, the Respondent Bank has classified the loan account of the Applicant as Non Performing Asset on 01.05.2014 and after restructuring on 01.01.2018. And, issued Demand Notice U/s. 13(2) of the SARFAESI Act dated 16.06.2014 for a sum of Rs. 20,90,307/- (Rupees Twenty Lakhs Ninety Thousand Three Hundred and Seven Only), which was served to the borrower on 21.06.2014. Despite the receipt of Demand Notice, the borrower failed to repay the loan amount, hence, the Respondent Bank had issued a Possession Notice U/s. 13(4) of the SARFAESI Act on 08.09.2015. In the meantime, the State Bank of Travancore was merged with the Stressed Assets Recovery Branch (SARB), Madurai. Hence, the earlier Possession Notice dated 08.09.2015 issued by the erstwhile branch was withdrawn by the bank and a fresh Possession Notice was issued on 02.12.2021, which was also served to the borrowers on 07.12.2021.
In the meantime, on receipt of the previous Possession Notice, the Petitioner and the Guarantor approached the State Bank of Travancore, Chinnakadai Street Branch and regularized the account by paying the defaulted amount and to that effect a supplementary Agreement was executed on 23.09.2015 by them in favour of the bank. Further, an OTS proposal was given by the Respondent Bank on 25.06.2021 to the Applicant and the Guarantor to settle the loan account by paying a sum of Rs. 23,00,000/-on or before 02.07.2021 and thereby an opportunity was given to the Applicant and the Guarantor to settle the issue and to close the loan account. But, the Applicant had failed to honour the OTS proposal and hence, the Respondent Bank proceeded with the further proceedings under SARFAESI Act. Before fixing the sale, the mortgaged property is properly valued by the Respondent Bank through an approved valuer. And, the alleged loan transaction was registered with the Central Registry by the Respondent Bank. The Bank has charged interest in accordance with the Terms & Conditions in the agreement and in accordance with law.
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SA No.29/2022
It is therefore, prayed that this Hon'ble Tribunal may be pleased to dismiss the SARFAESI Application with cost and thus render justice.
Index to the Typed-set of papers filed by the 1st Respondent Bank
| S.No. | Date | Particulars |
|---|---|---|
| 1. | 25.11.2010 | Application form for Agricultural Credit and Agricultural Term Loan |
| 2. | 23.03.2011 | Sanction Letter for the Housing Loan |
| 3. | 24.03.2011 | Memorandum of Deposit of Title Deeds executed by Applicants in favour of the Bank |
| 4. | 16.06.2014 | Demand Notice issued under section 13(2) of SARFAESI Act along with acknowledgement card signed |
| 5. | 02.12.2021 | Possession Notice under section 13(4) of the SARFAESI Act r/w Rule 8(1) with acknowledgement card signed and the photograph showing that the same is pasted in the mortgaged property |
| 6. | 04.12.2021 | Paper Publication in respect of Possession Notice in Dhinathanthi Tamil Daily and The Hindu English Daily |
| 7. | 04.01.2022 | Sale Notice under SARFAESI Act and Rule 8(6) issued by the Respondent Bank along with acknowledgement signed and the Photograph showing that the same is pasted in the mortgaged property |
| 8. | 07.01.2022 | Paper Publication for the Sale Notice in Dinathanthi Tamil Daily Newspaper and The Hindu English Daily Newspaper |
Index to the Additional Typed-set of papers filed by the 1st
Respondent Bank
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SA No.29/2022
| S.No. | Date | Particulars |
|---|---|---|
| 1. | 04.01.2022 | Photograph showing affixture of the Sale Notice in the |
| mortgaged premise | ||
| 2 | 10.04.2021 | Valuation Report for the mortgaged property |
4. ON THE BASIS OF ABOVE PLEADINGS THE POINT WHICH ARISES FOR CONSIDERATION IS:-
WHETHER THE APPLICANT IS ENTITLED TO GET THE RELIEF AS PRAYED FOR?
5 . Having heard the parties and after going through the entire documents available on the records, this Tribunal find that there is no dispute with regard to the availment of loan facilities by creating equitable mortgage on his property. Since, the borrower failed to repay the loan amount that made the loan account as NPA on 01.05.2014. It is the contention of the counsel for the 1st Respondent Bank that the Applicant after availing the above said loan facilities, failed to repay the outstanding loan dues regularly. The Applicant himself has admitted the fact that he could not made payments regularly and that they committed default in payment of the outstanding dues, due to continuous monsoon failure and other reasons which was beyond his control. The Applicant suffered with heavy financial problems. The averments narrated in the SA would strengthen the contention of the Respondents and due to the failure of the Applicant to repay the outstanding dues, his loan account has been classified as Non-Performing Asset. Therefore, the Respondent Bank was constrained to issue the Demand Notice dated 16.06.2014. In the typed set of papers at page no. 12 to 15, the Bank has produced the copies of acknowledgement cards also. And, on 02.12.2021, the Respondent Bank had issued Possession Notice. I perused the documents filed by the Respondents Bank and at page nos. 16 to 21 of the typed set of papers, copies of acknowledgement cards, photo copy showing the affixture of Possession Notice in the property and Paper Publication effected in both
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English and Tamil daily all are available. And, after that the Respondent Bank has issued Sale Notice dated 04.01.2022 and the sale is scheduled to be held on 09.02.2022. I also perused the documents filed by the Respondents Bank and at page nos. 22 to 29 of the typed set of papers, copies of acknowledgement cards, and Paper Publication effected in both English and Tamil daily all are available and in Additional type set of papers at page no.1, the Bank has produced the evidence, i.e. photo copy showing the affixture of Sale Notice in the property. Further, the Bank has furnished the Valuation Report dated 10.04.2021 (at page nos. 2 to 15 of additional type set of papers).
I also find that the Guarantor has given a Representation dated 02.11.2015 to regularize the loan account and also he has paid Rs. 1,31,965/- to the Respondent Bank (page nos. 19-21 of Applicant's typed set) and payment receipt dated 23.03.2021 for a sum of Rs. 5,00,000/(Rupees Five Lakhs only) (page no. 22 of Applicant's typed set). In addition to this, the Applicant has complied this Tribunal's conditional order dated 04.02.2022 by paying a sum of Rs. 12,00,000/-. which was also confirmed by the bank in IA No. 2601/23 (Vacate Stay). Hence, it proves that the Applicant does not seem to be a chronic defaulter. He is making payments to show his bonafide from time to time. Moreover, both Demand Notice and Possession Notice were issued during the period of COVID-19.
The Applicant has contended that the Respondent bank has to issue a fresh Demand Notice before issuing Possession Notice and Sale Notice, since the loan account was regularized the earlier Demand goes off automatically. Wherein, in the Supplementary Agreement filed by the Applicant himself in the typed set page no. 17, there is a conditional clause, which demonstrates that "In case of any such default for non-payment of installments, the proceedings under the Securitisation Act initiated by the Bank shall stand restored without any further notice, and the Bank shall continue to proceed further from the stage at which it was dropped for which the Borrower shall
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not raise any objection thereto". Hence, the Bank has issued directly a Possession Notice dated 02.12.2021, which is self explanatory.
Moreover, the counsel for the 1st Respondent Bank informed this Court, vide Memo in SR No. 10087 dated 24.11.2023 that sale was not conducted on the fixed date as per the impugned Sale Notice dated 04.01.2022 by virtue of the Interim Orders granted by this Tribunal.
In view of the above, this Tribunal is of the view to dispose of the case but without cost.
In the result, the SA No.29/2022 stands disposed off with above directions but of no cost.
Dictated to PA (DK), taken down, transcribed, typed by her, corrected and pronounced by me in the Open Court in this the 02nd April, 2024.
sd/-
(SEEMA SINHA) PRESIDING OFFICER
Dictated & Corrected by me
sd/ -
(SEEMA SINHA)
PRESIDING OFFICER
Typed by me
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2 issues framed by the court
Whether the applicant is entitled to relief praying to quash the possession and sale notices issued under the SARFAESI Act due to alleged procedural irregularities?
Whether a fresh demand notice was required after the regularization of the loan account before issuing possession and sale notices?
3 provisions across 1 enactments
Mr. B. Sriram
The Authorized Officer, State Bank of India, Stressed Assets Recovery Branch, Madurai
State Bank of India
SEEMA SINHA
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
