Disposed

P Prema v. State Bank of India

DRT30 Jul 2024SA/462/2023

Case brief

AI extract

What is this about?

In this SARFAESI application, the Delhi High Court, Madurai Bench (Debts Recovery Tribunal) disposed of the case after finding that the bank violated enforcement rules by conducting property valuation before issuing the Demand Notice.

What did the court decide?

Disposition of the application with a direction to the Defendant Bank not to include the cost and expenditure involved in the issuance of the Sale Notice in the loan account of the Applicant.

P Prema versus State Bank of India — Banking and Recovery | DRT (2024)

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SA No.462/2023

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI

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DATED THIS 30^th DAY OF JULY, 2024

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PRESENT: SEEMA SINHA

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[PR. DISTRICT & SESSIONS JUDGE - Retd] PRESIDING OFFICER

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SA No.462/2023

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P. Prema, Proprietor, M/s. Kavi Suji Food Products, W/o. Mr. P. Palpandian, 13/14, Pappa Illam, Church Road, Income Tax Colony, Samayanallur Main Road, Vilangudi, Madurai – 625 018. --- Applicant

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-Vs-

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The Authorized Officer, State Bank of India, SARB, No.8, Dr. Ambedkar Road, Vinayaga Nagar Branch, First Floor, Madurai – 625 020. --- Defendant Bank

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Appearance of Advocates: Mr. M. Arunachalam ---- Counsel for the Applicant Mr. C. Deepak ---- Counsel for the Defendant Bank

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This SARFAESI Application was heard in the presence of Counsels for the Applicant and the Defendant Bank and fixed for passing final order before me and upon hearing the arguments of the Counsels and having stood over for consideration till this day, this Tribunal delivered the following:

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O R D E R

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1 . This Application has been filed under Sec.17 of the SARFAESI Act, 2002 by the Applicant praying that this Hon'ble Tribunal may be pleased to

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SA No.462/2023

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pass an order to declare the proceedings initiated by the Defendant Bank under the SARFAESI Act, 2002 ending up with the Sale Notice dated 10.08.2023 as invalid and set aside the same.

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

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The Applicant submitted that she is the Proprietrix of M/s. Kavi Suji Food Products and doing the business of manufacturing coconut powder. In order to develop the business, the Applicant approached the State Bank of Hyderabad for availing certain credit facilities. The secured asset more fully described in the description of property belongs to the Applicant. The Applicant's husband P. Palpandian agreed to stand as Guarantor for the credit facilities to be sanctioned to the Applicant. After perusing all the records of the Applicant and the Guarantor, State Bank of Hyderabad sanctioned a sum of Rs. 20,00,000/- towards Mortgage Loan and another sum of Rs. 15,00,000/- towards Cash Credit Loan on 07.04.2014. The Applicant has executed Memorandum of Deposit of Title Deeds in favour of State Bank of Hyderabad in respect of the said Mortgage Loan and Cash Credit Loan only on 07.04.2014.

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It is further submitted that the State Bank of Hyderabad has been merged with the Defendant Bank. The Applicant further submitted that as per RBI Instructions, the Defendant sanctioned Covid-19 Term Loan of Rs. 3,03,000/- for Mortgage Loan and another Covid-19 Term Loan of Rs. 2,99,700/- for Cash Credit Loan and the entire Term Loans amounts were adjusted in the respective loans without giving any amount for the development of the business. The Applicant did not execute any MODT in favour of Defendant for the two Term Loans sanctioned during Covid-19 Pandemic. The Applicant was servicing interest and principal very promptly and regularly and so far, paid a sum of Rs. 25,00,895/- towards the aforesaid loan amount. However, due to labour problem, and heavy competition in the field besides COVID-19 Pandemic, Applicant could not

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SA No.462/2023

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run the business activities as desired and closed the business after COVID19. Hence, the Applicant could not repay the loan amount.

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It is further submitted that all of a sudden the Applicant was shocked and surprised to receive a Demand Notice dated 27.04.2023 u/s. 13(2) of SARFAESI Act for a sum of Rs. 23,04,468/- (Rupees Twenty Three Lakhs Four Thousand Four Hundred and Sixty Eight only) issued by the Defendant Bank. In fact, the Applicant has not executed any Memorandum of Deposit of Title Deeds for the Two Term Loans sanctioned during COVID 19 period. But, the Defendant has cleverly included the said two Term Loans amount in the 13(2) notice which is blatant violation of SARFAESI Act and Rules. The Applicant submitted that after Demand Notice dated 27.04.2023, Applicant closed the entire Mortgage Loan. Despite that Defendant is initiating the measures under SARFAESI Act. Immediately, Applicant rushed to the Defendant and sought an explanation with regard to the said Demand Notice but the Defendant was not in a position to explain as to why the said Demand Notice was issued to the Applicant.

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The Applicant submitted that with an intention to exert pressure on the Applicant, Defendant issued Possession Notice dated 12.07.2023 U/s. 13(4) of SARFAESI Act. The Applicant submitted that the symbolic possession of the property described in the schedule allegedly taken by the Defendant is illegal and blatant violation of the provisions under SARFAESI Act and Rules framed there under and the said action including Possession Notice dated 12.07.2023 is liable to be set aside.

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It is further submitted that based on the illegal and unlawful Possession Notice dated 12.07.2023, Defendant issued e-auction notice dated 10.08.2023 for sale of the property described in the schedule on 21.09.2023. The Applicant further submitted that the Defendant without giving 30 days' time has gone ahead to publish the Auction Notice as mandated under Rule 8(5) of the Security Interest (Enforcement) Rules, 2002. The action of the Defendant in trying to bring the property worth

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SA No.462/2023

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about Rs. 1,00,00,000/- (Rupees One Crore only) to recover a debt of Rs. 24,26,881/- is arbitrary, illegal, malafide and therefore cannot be resorted to by the Defendant.

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The Applicant further submitted that all the measures initiated by the Defendant suffer from several severe irregularities and illegalities and is liable to be set aside for the reasons aforementioned. In brief Defendant has failed to observe the procedures while issuing notice under SARFAESI Act. The Defendant has acted in an arbitrary manner. Hence, this SARFAESI Application is preferred on the followings among other grounds:-

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Main Grounds:-

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The Defendant has not furnished the Statement of Account in oral to enable the Applicant to satisfy the liability due to the Defendant.

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The Defendant has not given the proper entries of various payments made by the Applicant. The interest charged by the Defendant is not in accordance with the RBI Guidelines.

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The Defendant has not made Paper Publication of the notice issued U/s. 13(2), 13(4) and Sale Notice of SARFAESI Act.

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The Act of the Defendant contravenes the provisions of SARFAESI Act.

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The Defendant did not give any proper Demand Notice, Possession Notice and Sale Notice as contemplated under SARFAESI Act.

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The classification of Applicant's account as NPA itself is invalid, incorrect and improper.

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The Defendant has failed to take proper valuation for the secured asset before issuing Sale Notice dated 10.08.2023.

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The reserve price fixed for the secured asset is very low price comparing to the market price prevailing at present.

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The Defendant has failed to affix the 13(4) and Sale Notice in the outer door of the secured assets as contemplated under SARFAESI Act and Rules.

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SA No.462/2023

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The Defendant has failed to give correct description of property for the secured asset. And failed to give the correct outstanding amount in the Sale Notice dated 10.08.2023.

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DESCRIPTION OF PROPERTY

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Residential Land and Building situated in Madurai District, Madurai North Registration District, Madurai North Sub-D Registration, Madurai North Taluk, Vilangudi Village, Comprised in R.S.No. 121 as per sub division R.S.No. 121/1A1A in which the Plot No. 1 situated at Income Tax colony, bearing Door No. 13/14 with the total extent of 2068 ½ sq.ft house site and the schedule as follows: (Sale Deed No: 1742/2007)

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North By : Comprised in R.S.No. 122 property South By : 20 ft width East-West Common road East By : Plot No.2 in house site West By : Comprise in R.S.No. 120 property

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Within these admeasuring:-

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East West on the Northern side 43 ¼ ft and Southern side 40 ¾ and North South on the Eastern side 49 ½ ft and Western side 49 ft with the total extent of 2068 ½ sq. ft house site and including usage rights of common pathway in the layout roads and with all its appurtenances.

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The Applicant has submitted the following List of documents in support of their claim in the SA, which are as follows:

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S.No.	Date	Description of documents
1.	07.04.2014	MODT
2.	27.04.2023	13(2)Notice
3.	19.07.2023	Statement of Accounts
4	12.07.2023	13(4)Notice
5	10.08.2023	Sale Notice

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3 . On the other hand, notices were issued to the Defendant Bank, and the Counsel for the Defendant Bank appeared before this Tribunal and filed

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SA No.462/2023

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Vakalat, Reply Statement and Typeset in which he has submitted that the Defendant Bank denies all the allegations and averments made in the above appeal except those that are specifically admitted hereunder. The Applicant is put to strict proof of all the averments and allegations. The Respondent submitted that the Applicant has not served the interest for the original Cash Credit Loan nor for the other Covid Term Loans.

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It is further submitted that the two loans sanctions are based on the loan availed in the original loan and merely because the Applicant has closed one account does not mean the Respondent cannot invoke SARFAESI Act for the over dues. Further, the Defendant Bank has issued the Demand Notice on 27.04.2023 and the same has been duly served upon and further symbolic possession was taken on 12.07.2023 and the same was duly served upon and further the Possession Notice was published in "The Hindu" on 13.07.2023 in English Daily and in "Hindu Tamil Thisai" in Tamil Daily on 13.07.2023 and the same was affixed in the conspicuous part of the property. And, the Possession Notice was duly served and Paper Publication was published as per the SARFAESI Act. The Defendant Bank further submitted that the Applicant made only imaginary statements and the averment does not have substantiated documents.

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It is further submitted that the Defendant Bank has properly issued the Sale Notice dated 10.08.2023 and the e-Auction is scheduled on 21.09.2023 (Time gap - 42 days). I further submitted that the Sale Notice was issued on 10.08.2023 and the same was duly served upon the Applicant and others and the Sale Notice was published in "The Hindu" on 11.08.2023 in English daily and in "Hindu Tamil Thisai" in Tamil daily on 11.08.2023 and the same was affixed in the conspicuous part of the property.

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Further, the Applicant accepting the sanction and executing the loan documents cannot question the terms of adjusting the loan. The Defendant Bank has issued the Demand Notice on 27.04.2023 and the same has been duly served upon and further symbolic possession was taken on 12.07.2023

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SA No.462/2023

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and the same was duly served upon and further the Possession Notice was published in "The Hindu" on 13.07.2023 in English daily and in "Hindu Tamil Thisai" in Tamil daily on 13.07.2023. And then, Sale Notice was issued on 10.08.2023 and the same was duly served upon the Applicant and others and the Sale Notice was published in "The Hindu" on 11.08.2023 in English Daily and in "Hindu Tamil Thisai" in Tamil daily on 11.08.2023 and the same was affixed in the conspicuous part of the property. The Applicant has not challenged or highlighted any valid violation committed by the Defendant Bank and he has accepted that he had received the Demand Notice, Possession Notice and Sale Notices. Hence, there is no merit in this Application.

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It is therefore prayed that this Hon'ble Tribunal may be pleased to dismiss the above SARFAESI Application with exemplary cost and thus render justice.

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Typed set of Papers filed by the Defendant Bank

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S.No.	Date	Particulars
1	27.04.23	Demand Notice with AD Cards
2	12.07.23	Possession Notice with AD Cards
3	13.07.23	Paper Publication of Possession Notice & Photos
4	10.08.23	Sale Notice with acknowledgment
5	11.08.23	Paper Publication of Sale Notice and Photos
6	09.01.23	Valuation Report

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4. ON THE BASIS OF ABOVE PLEADINGS THE POINT WHICH ARISES FOR CONSIDERATION IS:-

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WHETHER THE APPLICANT IS ENTITLED TO GET THE RELIEFS AS PRAYED FOR?

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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

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SA No.462/2023

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mortgage on her property. Since, the borrower failed to repay the loan amount that made the loan account as NPA on 26.11.2022. It is the contention of the counsel for the Defendant 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 labour problem, heavy competition and Covid19 Pandemic, the Applicant suffered with heavy financial problems. The averments narrated in the SA would strengthen the contention of the Defendant Bank 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 Defendant Bank was constrained to issue Demand Notice dated 27.04.2023 U/s. 13(2) of SARFAESI Act. I also perused the document filed by both the parties and I find that in the typed set of papers at page nos. 8 & 9, the Bank has produced the copies of acknowledgement cards also. And, on 12.07.2023, the Defendant Bank had issued Possession Notice U/s. 13(2) of SARFAESI Act. I perused the documents filed by the Defendant Bank and at page nos. 14 to 18 of the typed set of papers and I find that the copies of acknowledgement cards, photo copy showing the affixture of Possession Notice in the property and Paper Publication effected in both English and Tamil daily all are available. And, after that the Defendant Bank has issued Sale Notice dated 10.08.2023 and the sale is scheduled to be held on 21.09.2023. I also perused the documents filed by the Defendant Bank and at page nos. 19 to 22 of the typed set of papers and I find that the copies of acknowledgement cards, and Paper Publication effected in both English and Tamil daily & photo copy showing the affixture of Sale Notice in the property all are available. Further, the Defendant Bank has furnished the Valuation Report dated 09.01.2023 (at page nos. 28 to 45 of typed set of papers).

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However, on perusal of documents, I find that the Defendant Bank has submitted a photo copy of affixture of both Possession Notice & Sale Notice, but the documents produced by the Bank are not clear enough to

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SA No.462/2023

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verify the mandatory details, such as, on which property they had affixed on which date, etc., is not available in respect of both Possession Notice & Sale Notice. Moreover, the Valuation Report submitted by the Defendant Bank dated 09.01.2023, i.e. the valuation has been done before the date of issue of Demand Notice.

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While in Rule 8(5) of Security Interest (Enforcement) Rules, 2002, it is very clear that

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"Before effecting sale of the immovable property referred to in sub-rule (1) of rule 9, the Authorised Officer shall obtain valuation of the property from an approved Valuer and in consultation with the secured creditor, fix the reserve price of the property and may sell the whole or any part of such immovable secured asset"

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But the Defendant Bank has done the valuation of the property on 09.01.2023 and the date of issue of Demand Notice is 27.04.2023, i.e. the Bank has done the valuation of the property before issuance of Demand Notice, which is against the Security Interest (Enforcement) Rules, 2002.

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The Applicant has no doubt being a defaulter is liable to pay the loan amount to the Defendant Bank and the Bank has every right to recover its dues in accordance with law. But, it shall not allow the bank to sell the property of the Applicant without following the due process of law.

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Further, I also find that the Applicant has complied this Tribunal's conditional order dated 20.09.2023 by paying a sum of Rs. 7,30,000/- and submitted copies of challans dated 18.10.2023 & 20.11.2023 to show her bonafide. Moreover, the counsel for the Defendant Bank informed this Court, vide Memo in SR No. 590 dated 10.01.2024 that sale was not conducted on the fixed date as per the impugned Sale Notice dated 10.08.2023, since they have no bidders.

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SA No.462/2023

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In view of the above, this Tribunal is of the view to dispose of the case. In the result, the SA No.462/2023 stands disposed off with direction to the Defendant Bank not to include the cost and expenditure involved in issuance of Sale Notice in the loan account of the Applicant.

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Dictated to PA (DK), taken down, transcribed, typed by her, corrected and pronounced by me in the Open Court in this the 30^th July, 2024.

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sd/-

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(SEEMA SINHA) PRESIDING OFFICER

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Dictated & Corrected by me

sd/-

(SEEMA SINHA)

PRESIDING OFFICER

Typed by me

(D. Krishnaveni, PA)

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P Prema v. State Bank of India

Case brief

What is this about?

What did the court decide?

P Prema v. State Bank of India

Case brief

What is this about?

What did the court decide?

What the court decided

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Statutes considered

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