Allowed

M S Vaishanavi Global Avenues and Infra Solutions Pvt. Ltd. v. State Bank of India

DRT4 Nov 2024SA/314/2022

Case brief

AI extract

What is this about?

In a securitization application challenging a possession notice and a sale notice, the Debts Recovery Tribunal held that the sale notice was liable to be set aside because the bank failed to issue a mandatory 30-day redemption notice before publishing the sale notice in newspapers, violating Rule 8(6) of the Security Interest (Enforcement) Rules, 2002.

What did the court decide?

Impugned Sale Notice dated 25.11.2022 set aside; Respondent Bank directed to proceed afresh for sale of schedule property.

M S Vaishanavi Global Avenues and Infra Solutions Pvt. Ltd. versus… — Arbitration | DRT (2024)

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IN THE DEBTS RECOVERY TRIBUNAL. I AT HYDERABAD DATED THIS THE 4TH DAY OF NOVEMBER, 2..24 PRESENT: GUMMADI GOPICHAND, PRESIDING OFFICER

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SA.No.B r 4/2C22

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1.M/s Vaishnavi Global Avenues & Infra Solutions^p.Ltd., rep. by its Managing Director

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PIot No.56, Cyber Meadows, Masjid B.-anda,

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Kondapur, Hyderabad-SOO Og4

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2.Naidu Venkat Rao, S/o Rajendra prasad, fsea^{49 years, Managing Director,}

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M/s Vaishnavi Global Avenues & Infra Solutions^p.Ltd.,

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,-^{Plgt No.56,Cyber Meadows, MasjidBanda,}

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Kondapur, Hyderabad-SOO 0g4

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3.Naidu Rajendra prasad,

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S/o Suraiah, aged 70 years, Director,

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M/s Vaishnavi Global Avenues & Infra

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Solutions^p.Ltd., rep. by its Managing Director _-^{Pl9, No.56, Cyber Meadows,Masjid} Blnda, Kondapur, Hyderabad-SO0 Og4

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Smt.Naidu Nirmala Devi, W/o Rajendra prasad,

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Aged 65 years, Director, M/s Vaishnavi Global Avenues & Infra

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Solutions^p.Ltd., rep. by its Managing Director

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,.^{Plg, No.56, Cyber Meadows,Masji?B"anda,}

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Kondapur, Hyderabad-SOO 0g4

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Smt. N.Paripurna, W f o Venkat Rao, Aged 43 years,

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M/s Vaishnavi Global Avenues & Infra

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Solutions P.Ltd., rep. by its Managing Director Plot No.56, Cyber Meadows, Masjid danda, Kondapur, Hyderabad-SO0 0g4

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{/6.-'-ffi lFffi :^o{ilouzrru :

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Versus

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l.State Bank of India, f.p.^{Uy its Chief Manager/ Authorized} Offic Stressed Assets Mana[ement branch,, 2,dfloor, TSRTC Bus TErminal Complex, Koti, Hyderabad.

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SA.No.314/2022

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State Bank of India, Yellareddyguda branch, Hyderabad Rep. by its Manager. Counsel for the Applicants Counsel for Respondents No. j&2

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..Respondents

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Si Sricharan Telaprolu Si C. Prabhakar

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:ORDER:

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i. This securitization application is rrred by the Applicants u/s. 17 of the SARFAESI Act, 2OO2 challenging thepossession Notice dt. 1S.1O.2O22 and Sale Notice dt.2s.11.2O22 issued by the Respondent Bank fixing the date of auction on 30.12.2022 in respect of the schedule property and to declare the same as null and void.

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The averments made in the application, in brief, are as under,_

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The Applicant No.1 is a company engaged in the business of Infrastructural developments and its Business of Road and Irrigation works primarily in the States of Jharkhand and Andhra pradesh. The Applicant No.2 is the Managing Director and Applicants No.3&4 are its Directors and Applicant No.S is the guarantor. The Applicant No.l, during 2072, availed Cash Credit loan to a tune of Rs.S crores from the lstRespondent Bank against the hypothecation of entire current assets and stocks and Applicant No.S stood as guarantor and created mortgage in respect of the schedule property. Thereafter Respondent No.2 granted Emergency Credit Line (GECL) loan of Rs. 1.2 crores in the year 2O2O and credit facilities were lastly extended up to 31.I2.2o2l,however the CC._ facilities - were not extended thereafter demanding tt " tr..,ou.. g6'fu#,.g1.r..q1pa*C" limits were declared as NPA not tor non-paydi$ or ffi"r-.'fu\i\Qut onty due to non_ submission ot rurnov6r/,'d"ST rerul'iis. rhe &;dlnments of Jharkhand and Andhra^pradesh ildv. "& *,Jl$l tflt.,.,o.ti oa, dues as welt as work dues so, the apili&n-l No.1 .l could .' .rpt &i6lit ,! GST bills but only . .-;$' ^, ,^.,1Y.- --:-

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SA.No,314/2022

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submitted certified bills. After classifying the loan accounts as NPA the Respondent Bank issued demand notice u/s l3(2) of the Act on 08.06.2022 and thereafter the Bank issued possession notice dt.15.1O.2O22 in respect of the schedule property. The Respondent Bank also filed 0.A.236 122 on the file of this Tribunal for recovery of an amount of Rs.6,53,35,358/ - and the Applicants are contesting the said case. After issuing possession notice, the Respondent Bank issued sale notice dt.25. 1 1.2022 fixing the auction of the schedule property on 30.12.2022. Hence the SA.

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3' The Respondents liled their Reply and the contentions of the Respondents,in brief, are as under-

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The Applicants availed various loan fac ities rrom 2or2 onwards for the purpose of their business and created mortgage over the schedule property as securit5z towards the repayment of said loans. After classifying the loan accounts as NpA, the Respondent Bank issued demand notice dt.O8.06.2O22 u/s 13(2) of the SARFAESI Act, 2002 and the said notice was served on the Applicants. When there was no response to the said notice, the Bank issued possession Notice dt.15.1O.2O22 and the said notice was received by the Applicants. The said notice was published in Indian Express and Andhra prabhadaily newspapers and the same was also affixed on the secured asset. Thereafter the Respondent Bank obtained valuation reports dt.26.1o.2o22 from the approved varuers and issued sale notice dt. 25.11.2o22rtxing the date of auction on 30.12.2022 and. the said notice was received by the Appiicants. The said notice was affixed on the schedule property and also published in two daily newspapers on 27.17.2022. lnfact, auctio t conducted on 30. 12.2022, as proposed, in view of the srdyi this Tribunal. Thus the Respondent Bank has dr,lly foll'ti{ea prescribed under the provisions of SARFAESf eci;'iOOZ ana made thereunder in issuing Sale Notice dt.2 slj1 (d[d2M""o.u,ibrv, Respondent Bank prayed to dismiss the SA.

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SA.No.314/2022

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Heard Ld. Counsel for the Applicants and ld. Counsei for the Respondents and perused the material brought on record.

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Now, the points that arise for consideration are,-

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Whether the Applicants haue established ang ualid. ground. for challenging the Possession Notice dt.15.10.2022 and Sale Notice dt.25.11.2022 issued bg the Respondent Bank in respect of the schedule propertg?

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ii) To what relieJ?

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Polnt No.lll:-

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During the course of arguments, Ld. Counsel for the Applicantsand Ld. Counsel for the Respondentsreiterated their respective versions as stated supra.

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There is no dispute regarding the fact that the Applicants availed loan facilities from the Respondent Bank by mortgaging the schedule property in favour of the Respondent Bank and they failed to repay the outstanding dues and the loan accountswere declared as NpA and the Respondent Bank initiated proceedings under the provisions of SARFAESI Act, 2OO2. There is also no dispute regarding the fact that the Applicants received the demandnotice dt.0g.0 6.2022 issued by the Bank demanding the Applicants to pay the outstanding dues within 60 days. The Applicants admitted the receipt of the said notice and it is also evident as per th ts filed by the Bank. After receipt of the sai licants have not raised any objections in respc;ris*,to the .- notice--_\ templated u/s 13(3A) of made by the Applicants in rhe SARFAESI Acij2002.0of mfffi", t compliance or tne, Saiaai-rnJ'"lT[., rfr, ndent Bank issued

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SA.No.314/2022

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possession notice dt.15. lo-2022 and admittedly, the Applicants received the said notice. As per the materialdocumentsfiled by the Respondentsalong with their Reply,it is clear that the said possession notice was published in Indian Express and Andhra prabhadaily newspapers on 2O.1O.2O22 and copy of the said notice was also affixed on the schedule property as per the copies of paper publican and photographs filed by the Bank. So, considering all the circumstances, I am of the opinion that the Respondents having declared the loanaccount as NPA,issued demand notice and also possession notice by duly following the provisions of SARFAESI Act and Rules, 2002. So, the said notices are regar and valid and alsobinding on the Appricants. Thereafter, the Respondent Bank issued Sale Notice dt.25. ll.2o22 fixing the date of auction on 3o.t2.2o22 in respect of the schedule property. As per the material documents filed by the Respondents, it is clear that the said sale notice was published in sunday Express and Sakhsi daily newspapers on 27.11.2022. It is pertinent to note that no opportunity is given to the Applicants to redeem the secured asset by issuing separate 30 days noticefor paying the entire outstanding dues as mandated u/r g(6) of Security Interest (Enforcement ) Rules, 2002.

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B. In a recent judgment, the Hon'ble DRAT, Kolkata in ,,Appeal No.43 of 2023 - sn srikanth Redd.g Kasu us. The Authorized. officer, Bank of Ind.ia and ors.", decided on 22.04.2024, the Hon,ble DRAT, Koltaka after referring to various judgments of the Hon,ble High courts and the Hon'ble Apex court and discussing the issue elaborately, held that, there should be clear thirty days notice period being maintained between the issuance olgery4:"qis,:\rr-rder Rure 8(6) of the Rules and the publication of ilre 9gI€ rrofiEYi'ticru"n-ug 9(r) of the Rures as right of redemption availadir$ tne ffirro.. itfrSi's of Rute 8(6) of the Rutes stands extinguis!,sg o" Rfi " ptif^["f if ,f^{it "ftf,'} i odhgf t herrsHre^tT,.q notice under Rule e(1) of ;;;.urr'LrrDr't'(+^"" i^{, ..-. r} -.)^.J.i

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sa.No.314/2022

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The relevant portion of the said judgment, is extracted below for better appreciation:-

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"34. It uas further specificallg held that the decision of the Telangana High Court in the case of Concern Read.gmlx -usAuthorized Officer, Corporatlon Bank (2018 SCC OnLine AP 3484) and the judgment of the Hon'ble Punjab & Haryana High Court in the case of M/s, Pal Allogs & Metat Indla Priuate Llmlted (2021 SCC OnLine p&H 2753) has not laid dotun the correct position of laut. Howeuer, the d.ecisions of the Hon'ble Andhr Pradesh High Court in Sri Sai Annad.ho:tha Polgm.ers (supra) and Hon'ble Telangana High Court in K.V.V, Prasad. Ro;o Gupta (supra) haue laid doutn the corect position of lau_t tuhile interpreting the amended Section of 13(B) of the SARFAESI Act. At this stage it would be apposite to refer to the judgment of the Hon'ble Andhra prodesh High Court in Sri Sci Annadhatha^polgmers (supra) tuherein considering the amendment of Section 13(8) of the Act, it uas held that

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9(1) of the Rules. (emphasis supplied). In ttrc case of Si Sai Annadhatha^polymers (supra) notice under RuIe 8(6) raas .a,^-..,.+i -'-j:f:':Ia-.a'^{.i"tfi.fti:don 1.3.2018 and publication of the sale notice in} ,-' .^';:a<L- r-el^'?ieu.spaper under Rule 9(l) utas on 3.3.2O18. Hence it utas -1 | tj! "{r" l.-? .:. hefd -thkt there is a clear uiolation of statutory mandate u.thich bs the Bank. These findings ii t^{q NII &P#-'.;si!'1e} '- ii^exelise ,und'ertoken ngyelepn confirmed and affirmed. bg the Hon,ble Apex Court \e.' .-',: ":^ ,i ..' ,,.: ;;ra$i!,$l'-': ..' '^1,- . _7p^{f!,t9 case of Bafna Motors(supr).Hence it is crustal clear}

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SA.No.314/2022

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ointrin"d b"t"", th" it"uon"" of th" "ol" noti." ,nder Rule porrouer in extinauished on nublication of the sale notice uniler Rule 9(jt

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The aforesaid judgment of the Hon'ble DRAT, Kolkota, squarely applies to the case on hand. without issuingany separate noticeu/r g(6) of Security Interest (Enforcement) Rule s, 2oo2, the Respondentsdirectly issued Sale Notice dt.25. 1r.2022 fixing the date of auction on 30.L2.2o22 in respect of the schedule property. There is no clear 30 days time as contemprated under Rule g(6) to the Appricant before publication of the sale notice in the newspapers under Rule 9(r). So, there is a clear violation of Rule g(6) of the Rules, 2oo2, by the Respondent Bank while proceeding for the sale of the secured asset.

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Even though, auction was not conducted on 30. 12.2022 in respect of the schedule property, as proposed, pursuant to the Sale Notice dt.25.71.2022, I am of the opinion that the impugned Sale Notice dt.25.11.2022 issued by the Respondent Bank is liable to be set-aside in view of non-compliance of Rule s(6) of Security Interest (Enforcement) Rules, 2002, in issuing 30 days notice to the Applicants before publishing sale notice under Rule 9(1) of the Security Interest (Enforcement) Rules, 2OO2. As|,tAriai.aejrrArd notice and possession notice issued by the ,^ryffi$*i6+.1','t+re regal and valid. rhis point is answered accorffi$y tS 'F oi,

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ii.t 41t
o 4 t{[| zut r;i
Point No.(it):- li; li.# ,..t,','
! ..1 .1: ,r"i .ai?- .[ |
".r ' tt",..*-
^.:," .':!,,,ti'

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, or"".rr:*ffi is partry auowed by setting aside impugned Sale Notice dt.25. tr.2022 issued by the

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SA.No.3t4/2022

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Respondents against the schedule property. The Respondent Bank is at liberty to proceed afresh for sale of the schedule propert5r by strictly following the procedure laid down under the provisions of SARFAESI Act,2OO2 and Rules made thereunder.

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