Allowed

N Sangiliayya v. Sriram Housing Finance

DRT10 Jul 2024SA/386/2022

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal allowed the applicant's application challenging an E-Auction sale notice under SARFAESI Act. The Tribunal dismissed procedural objections regarding notice issuance but set aside the auction citing excessive execution, as the upset price significantly exceeded the outstanding dues.

What did the court decide?

The sale notice dated 19.10.2022 and auction fixing are quashed. Expenditure on sale notice shall not be added to the loan account. Respondent is at liberty to initiate fresh recovery action.

N Sangiliayya versus Sriram Housing Finance — Execution and Attachment | DRT (2024)

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SA No.386/2022

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI DATED THIS 10^th DAY OF JULY, 2024 PRESENT: SEEMA SINHA [PR. DISTRICT & SESSIONS JUDGE - Retd] PRESIDING OFFICER

SA No. 386/2022

Between

Mr. N. Sangiliayya,

S/o. Narayanan, D.No. 13-B, Keelakrishina Kovil Street, Rajapettai,

Trichy-620 001

… Applicant

-Vs-

The Authorized Officer,

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Sriram Housing Finance,

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Reg office: No 123, Angppa Naicken Street, Chennai-600 001. … Defendant Bank / Respondent Institution

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Appearance of Advocate:

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Mr. Thevan ---- Counsel for the Applicant

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This SARFAESI Application was heard and fixed for passing final order before me in the presence of the above said Advocate for Applicant and the Defendant Bank has been set ex-parte and upon hearing the arguments of Counsel for Applicant and upon perusing the material available on the records and having stood over for consideration till this day, this Tribunal delivered the following:

pg. 1

SA No.386/2022

O R D E R

This Application has been filed under Section 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 by the Applicants praying to quash the E- Auction sale notice dated 19.10.2022 and fixing the auction sale on 22.11.2022 and further its connected proceedings under SARFAESI Act by the Respondent.

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The brief averments of the Application filed by the Applicant are as follows:-

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The applicant submits that the applicant has approached the defendant institution and sought credit facility of Rs. 5,00,000/-. Considering the request made by the applicant, the defendant bank has sanctioned Credit facility of Rs. 5,00,000/- in the year of 2015. It is further submitted that apart from the loan documents the defendant bank obtained signatures from the various papers from the applicant. The applicant has executed necessary security documents and he has deposited his title deeds with the defendant bank and created equitable mortgage over the property.

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Further, the applicant stated that, he has been regularly paying the loan dues and due to covid-19 pandemic period, the applicant could not able to repay the loan amount properly as agree to. But the Applicant never allowed his account slipped into NPA.

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In this situation, all of a sudden the Defendant Bank has obtained order from CJM, Trichy and tried to take physical possession of the dwelling house of the applicant. Hence the applicant filed writ petition before the Hon’ble Madurai Bench of Madras High Court in WP(MD)No.18103/2022, challenging the CJM order and the same was disposed off by the Hon’ble Madurai Bench of Madras High Court by its

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pg. 2

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SA No.386/2022

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order dated 10.11.2022 with liberty to approach the Debts Recovery Tribunal for Redressed for his grievance. After dismissal order passed by the Hon’ble Madurai Bench of Madras High Court, the defendant bank has issued sale notice dated 19.10.2022 under sec.13(4) of the Securitization And Reconstruction of Financial Assets and Enforcement of Security Interest act read with Rule 8(6) of the Security Interest (Enforcement) Rules, 2002 against the applicant and directed him to pay a sum of Rs. 4,61,562/- due failing which the schedule mentioned properties will be sold.

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Applicant further submitted that, the defendant bank has issued the sale notice without issuing demand notice & possession notice to the applicant under Section 13(2) and 13(4) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest act. Therefore, applicant has obtained papers from the CJM, Trichy.

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It is submitted that on receipt sale notice dated 19.10.2022, the applicant has approached the bank for furnishing statement of accounts and requested time to settle the loan account. The authorized officer also gave assurance and time to settle the loan amount.

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Further, Applicant stated that, possession notice was not affixed on the conspicuous part of the mortgaged property, besides the bank failed to publish the same in two leading news papers. The Applicant puts the defendant to strict proof of his designation, appointment, delegation and approval of the board as the authorized officer to initiate action under the SARFAESI ACT against the applicant.

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Further, the Applicant stated that the defendant failed to affix the sale notice on the conspicuous part of the mortgaged property and also failed to publish the possession & sale notice in two leading news papers. It would be absolutely just and necessary to restrain the defendant bank to proceed further in pursuant to the impugned sale

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pg. 3

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SA No.386/2022

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notice dated 19.10.2022, failing which the defendant bank would sell the Applicant property and he will incur heavy loss and damages. It is further submitted that the applicant’s account is term Loan account and the borrower is running his business and the defendant bank will have to regularize the loan Account, but the defendant bank failed to do the same.

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Applicant further submitted that, the defendant has not obtained proper valuation report from the approved valuer before fixing the upset price. It is further submitted that the valuer not at all inspected the schedule mentioned properties. Without inspecting the properties, how could the Authorized officer fixed the upset price of the schedule mentioned property as Rs. 24,30,000/-, whereas the real market value of the schedule mentioned properties is worth about more than Rs. 50,00,000/-. Even the bank in its own valuation the property is fixed upset price as 24,30,000/- whereas the liability is only as meagre sum of Rs.4,61,562/- which is excess execution and it cannot be permitted under law. Hence this SARFAESI application has been filed by the applicant before this Hon’ble Tribunal among the following

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The following grounds are raised by the Applicant:

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(i) The impugned Auction sale notice dated 19.10.2022 issued by the defendant bank and the entire measures initiated under the SARFAESI act are arbitrary in nature, illegal, contrary to law and thus liable to be set aside.

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(ii) Further submitted that the defendant bank failed to follow the procedures contemplated in the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 and Security Interest Rules.

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(iii) The impugned action of the defendant in issuing the E-Auction Sale notice dated 19.10.2022 under Sec 13(4) of the SARFAESI Act, seeking to proceed against the properties of the applicant

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pg. 4

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SA No.386/2022

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claimed to be the secured assets is contrary to law, without jurisdiction, arbitrary and unreasonable, violative of the principles of natural justice.

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(iv) Wrongful Classification of NPA: The defendant bank wrongly classified the applicant account as Non Performing Assets (NPA). The defendant have not followed the Reserve Bank of India guidelines while classification the account as NPA.

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(v) Non Compliance of Sec 13(2): The defendant bank failed to issue demand notice.

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(vi) Non Compliance of Sec 13(4): The defendant bank failed to affix the possession notice and also failed to publish the possession notice in two leading news papers.

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(vii) The E-Auction sale notice is liable to be set aside as admittedly the defendant has proceeded further without issuing demand & possession notice.

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(viii) Non Compliance of Section 20 of the SARFAESI Act: The applicant submits that the defendant have filed to register the alleged transaction registered with the Central Registry as per the Act & rules.

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(ix) The defendant bank failed to serve sale notice to the applicant. Further the defendant bank failed to affix the sale notice on the conspicuous part of the mortgaged properties and also failed to publish the sale notice in two leadings news papers as per rules. Further the bank failed to update the sale notice in the bank’s official website as per the rules.

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(x) Authorized Officer is a Quasi Judicial Authority under the Act and hence the Authorized Officer name must be mentioned in the sale notice.

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(xi) The defendant bank has undervalued the property and brought the same for sale, which is against the principle of natural

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pg. 5

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SA No.386/2022

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justice. The defendant bank has not obtained fresh valuation report before bringing the properties for sale as per rules.

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(xii) The applicant further alleges that the defendant bank has not furnished the complete statement of account as the details of certain credits to the account are not reflected. Hence the defendant bank has to be directed to issue complete statement of accounts.

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(xiii) It is submitted that at the time of loan sanction the defendant bank has obtained various signatures from the applicants as well as the guarantors in blank papers and prefilled forms and the guarantors and the applicants were kept in dark for which it could be used. Thus in the interest of natural justice, the bank is called for the entire documents available as its custody which it alleges to reply upon confirming the creation of the mortgage.

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(xiv) The interest levied by the defendant bank is against the principles laid down in Reserve Bank of India Guideline rules and the outstanding amount mentioned in the sale notice is incorrect and at any event the alleged claim of the defendant is imaginary and exorbitant.

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Applicants sought for the following reliefs also:

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i) To call for the records pertaining to the initiation of proceedings under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ending up with the E-Auction sale notice dated 19.10.2022 and fixing the auction sale on 22.11.2022 against the applicant and the schedule mentioned property on the file of the defendant and quash the same.

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ii) To pay the cost of the proceedings

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iii) To award the cost of this Application and to grant compensation under section 19 of the act and such other

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pg. 6

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SA No.386/2022

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relief’s as this Hon’ble Tribunal may deem fit and proper in the circumstances of the case and thus render justice.

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Schedule of Property:

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In Tiruchirappalli Registration district, Tiruchirappalli Joint I &II Sub Registration District, Tiruchirappalli District & Taluk, Sengulam Village, Municipal Old ward-8 block No. 23, T.S.No. 2286, New Ward1, Block No.32, T.S.No. 144, Khajapottai Arunthathiyar @ Sakkilar Street

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Measurement:

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North-South on western side: 40 ½ ft, on Eastern side: 39 ½ ft East-West on southern side:30 ½ ft northern side: 30 ½ ft Four Boundaries:

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North : Lane ; South : Manivannan’s Property,

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West : North-South Street ; East : Singaram Ammal’s Property

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Within these four boundaries:

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North-South (On the west side) 20 ½ ft, On Eastern side-19 ½ ft East-West on Sothern side 30 ft, on Northern side- 30 ft,

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Totally 600 ft house along a terrace building and titles.

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On the other hand, Notices were issued to Defendants and since the beginning of the case, there was no representation on behalf of the Defendant. Hence, the Defendant was called in the open court and set exparte on 01.05.2024.

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4. Now the main point for consideration before me is as to whether the Applicant has been able to prove his case on his own leg?

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pg. 7

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SA No.386/2022

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Having gone through affidavit of the applicant and the documents filed by him and also considering the submission of the counsel for the Applicant, I find that, the main grounds raised by the applicant is that,

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(i) Classification of the account as NPA is wrong and Demand Notice u/s 13(2) is not issued

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(ii) Possession Notice was not affixed and Bank failed to publish the same in two leading newspapers

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(iii) Upset price of the impugned schedule mentioned property is fixed at Rs. 24,30,000/-, whereas the real market value of the schedule mentioned property value is more than Rs. 50,00,000/-. Even according to banks own valuation, the upset price of the schedule property is fixed as 24,30,000/- whereas the liability is only as meagre sum of Rs.4,61,562/-, which is excessive execution and cannot be permitted under law.

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On verification, I find that, the borrower himself accepted that he availed credit facilities from the Defendant Financial Institution and mortgaged his property. Due to Covid-19 situation, he was not able to repay the loan account regularly, hence, automatically account become classified as NPA. Further, as per Section 13(2) of Demand Notice, the account was classified as NPA on 08.05.2018. Further, Possession Notice & Sale Notice were not affixed on the conspicuous part of the mortgaged property and failed to publish in two leading newspapers, which cannot be decided in this application without appearance of otherside. Moreover, Applicant informed that, all the papers obtained from the CJM, Trichy. I find that, he has not produced the CJM order copy and Index sheet along with documents obtained from CJM court, Trichy. Hence, the grounds regarding classification of account as NPA, non-service of Demand Notice u/s 13(2) and service of Possession Notice

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pg. 8

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SA No.386/2022

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u/s 13(4), non-affixure of Possession and Sale Notices cannot be decided in this Application in the absence of documents. Oral submission made by the Applicant cannot be taken as blanket evidence.

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With regard to impugned Sale Notice, it is alleged that, the value of the schedule property has been undervalued. Moreover, outstanding dues is only Rs.4,61,562/- as per Demand Notice dated 19.10.2022, but the upset price of the property is fixed as Rs.24,30,000/-. Further, Applicant mentioned that, property value is more than Rs.50,00,000/Hence, I come to the conclusion that, outstanding dues are Rs.4,61,562/- and the Defendant Institution fixed the upset price as Rs.24,30,000/- which amounts to excessive execution by the Defendant Institution. Hence, I find that Defendant Institution has not strictly followed the procedure prescribed under Rule 8(5) of the Security Interest (Enforcement) Rules, 2002. So, this point is decided in favour of the Applicant.

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In result,

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(a) SA No.386/2022 is Allowed as prayed for. No costs.

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(b) All the expenditure incurred in the issuance of Sale Notice dated 19.10.2022 and fixing the auction on 22.11.2022, shall not be included to the loan account of Applicant.

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(c) The Defendant Bank is at liberty to initiate fresh action, against the Applicant, towards recovery of loan dues in accordance with law.

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(Dictated to Assistant, taken down, transcribed, typed by him corrected and pronounced by me in the open court this the 10^th July, 2024)

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Sd/-

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(SEEMA SINHA) PRESIDING OFFICER

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pg. 9

N Sangiliayya v. Sriram Housing Finance

Case brief

What is this about?

What did the court decide?

N Sangiliayya v. Sriram Housing Finance

Case brief

What is this about?

What did the court decide?

What the court decided

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