Disposed

A Sundarram v. Bank of Baroda

DRT16 Aug 2024SA/51/2024

Case brief

AI extract

What is this about?

This Tribunal disposed of a SARFAESI Application challenging an E-Auction Sale Notice. While confirming the bank's right to recover dues, the Court held that the Possession Notice was not published within the mandated seven-day limit. Consequently, the Tribunal directed the bank not to include the cost and expenditure incurred in issuing the Sale Notice in the applicant's account.

What did the court decide?

Direction to the Defendant Bank not to include the cost and expenditure incurred in issuance of Sale Notice in the loan account of the Applicant.

A Sundarram versus Bank of Baroda — Banking and Recovery | DRT (2024)

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SA No.51/2024

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI

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DATED THIS 16^th DAY OF AUGUST, 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. 51/2024

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A. Sundarram, Prop: M/s. Cauvery Oils & Foods, S/o. Arumugam, No. 33, 3^rd Main Road, Renga Nagar, K. K. Nagar, Trichy.

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Arumugam, S/o. P.A. Thangavelu, No. 32, 3^rd Main Road, Renga Nagar, K.K. Nagar, Trichy.

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Vasantha Kalyani, W/o. T. Arumugam, No. 32, 3^rd Main Road, Renga Nagar, K.K. Nagar, Trichy. --- Applicants -VsThe Authorized Officer, Bank of Baroda, Salai Road Branch, Trichy. --- Defendant Bank

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Appearance of Advocates: Mr. P. Ganapathi Subramanian ---- Counsel for the Applicants Mr. P. Madhan Alexandar ---- Counsel for the Defendant Bank

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This SARFAESI Application was heard in the presence of Counsels for the Applicants and the Defendant Bank and fixed for passing final order before me and upon hearing the arguments of the Counsels and having

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SA No.51/2024

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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(1) of the SARFAESI Act, 2002 by the Applicants praying that this Hon'ble Tribunal may be pleased to declare that the E-Auction Sale Notice dated 22.12.2023 issued by the Defendant as null and void and against the law and quash the same as illegal.

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

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The Applicants submitted that the 1^st Applicant is the Proprietor of M/s. Cauvery Oils and Foods. The Applicants had availed a business loan from the Defendant Bank for the purpose of developing and promoting the oil mill. For which the Applicants had mortgaged the Schedule mentioned property. The Applicants managed to repay the loan due properly till January 2022. The Applicants had invested the entire amount in purchasing new machineries for developing the oil mill and due to the COVID-19 Pandemic, the Applicants were not able to run the oil mill properly. Hence, the Applicants were not able to mobilize the money to repay the loan. The Defendant Bank issued Demand Notice on 09.04.2021 but the Sale Notice was not served and affixed and not published in the two leading newspapers.

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The Applicants submitted that though they were managed to run their business, it is very difficult to meet out the market conditions. Now, the Applicants are taking all the necessary steps to settle the loan amount. In the meantime, the Defendant Bank issued an E-Auction Sale Notice dated 22.12.2023 with regard to the Sale of the Schedule mentioned properties. The Applicants submitted that as per the Sale Notice dated 22.12.2023, the Defendant claims a sum of Rs. 1,24,63,803.84p is due from the Applicant as on 18.12.2023. The E-Auction is to be held on 30.01.2024, if the property is

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SA No.51/2024

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put to auction, it will cause immense difficulty to the Applicants to carry out the business activities. The Defendant Bank is taking hasty steps to sale the Applicants' Schedule mentioned property.

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Hence, this SARFAESI Application is preferred on the followings among other grounds:-

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Main Grounds:-

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The proceedings initiated by the Defendant Bank are against the provisions of the SARFAESI Act and the Security Interest (Enforcement) Rules 2002 and principles of natural justice.

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The Defendant failed to deduct various amount remitted by the Applicant towards the loan amount.

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The Defendant claimed the exorbitant interest which is against the Rules and Regulations issued by the Reserve Bank of India.

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The Defendant failed to furnish true account with regard to the Applicant's loan account.

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The Defendant failed to mention the date of NPA in the Demand Notice.

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The Defendant failed to publish the Sale Notice in two newspapers, one in vernacular language.

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

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The Defendant failed to take proper Valuation Report before issuing E-Auction Sale Notice dated 22.12.2023.

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The Defendant failed to give correct description of properties in the E-Auction Sale Notice dated 22.12.2023.

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The Defendant failed to mention correct outstanding amount in the E-Auction Sale Notice dated 22.12.2023.

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The Defendant has fixed the reserve price very low comparing to the present market value of secured asset prevailing at present. The present market value is more than Rs. 30,00,000/-,

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SA No.51/2024

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whereas the Defendant fixed the upset price at Rs. 15,00,000/which is 50% of its actual value.

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DESCRIPTION OF IMMOVABLE PROPERTY

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All the part and parcel of the property situated at Tiruchirappalli District, Manachanallur Taluk and Koothur Village,

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Item No.	Survey No.	Extn.	Boundaries
1	S.F.No. 130/3	3090 Sq.ft	North By: 30ft. wide East West Layout Road South By: Third Party Plot West By: Plot No. 11 East By: Third Party Plot

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The Applicants have 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.	28.01.2024	SARFAESI Application
2.	09.04.2021	Demand Notice
3.	21.06.2022	Possession Notice
4	22.12.2023	E-Auction Sale Notice
5	28.01.2024	Vakalat

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3 . On the other hand the Counsel for the Defendant Bank appeared before this Tribunal and filed 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.

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It is further submitted that the Defendant Bank do not admit all the allegations under the heading "Facts of the Case" as true & correct. The Applicants are put to strict proof of every one of the said allegations with

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SA No.51/2024

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valid & acceptable evidence. Most of the allegations are unwarranted so far as the matter-in-issue is concerned. The Defendant Bank has followed all the procedures as contemplated under SARFAESI Act & Rules while initiating the recovery measures. The Defendant Bank has appropriated all the amounts, as paid by the Applicants, into the concern loan account. The allegation with regard to those Applicants paying the loan installment regularly was nothing but tissues of falsehood. If the Applicants have repaid the loan installments regularly then the account would not be declared as NPA.

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It is further submitted that the Defendant Bank charged interest as per the agreed contractual terms in accordance with guidelines of RBI. Further, the Applicants failed to narrate to when & to what extent the rate of interest charged exorbitantly by the Defendant Bank. The Defendant Bank furnished the Statement of Account to the Applicants 'as & when' and 'then & there' as requested by them. The Defendant Bank mentioned the date of NPA in the Demand Notice. Further, the Defendant Bank affixed the Sale Notice in the conspicuous part of the property and that the Defendant Bank published the Sale Notice in two leading newspapers within the stipulated period and that the Defendant Bank mentioned the correct description of property & correct outstanding amount in the Sale Notice.

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It is further submitted that the Defendant Bank fixed the reserve price of the property, after obtaining proper Valuation Report from an approved valuer and that the value of the property has been fixed, as per the guidelines of Reserve Bank of India. The allegation with regard to the market value of the property is about Rs. 30 Lakhs is nothing but an afterthought. Further, the Applicants failed to submit the evidence with regard to the valuation of the property. The Bank has served the Demand Notice to the Applicants. And then, the symbolic possession of the property has been taken and Possession Notice was issued and served on the Applicants and affixed the Possession Notice on the conspicuous part of the property and the Possession Notice was also published both in Tamil Daily & in English

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SA No.51/2024

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Daily. Further, the Defendant Bank obtained Valuation Report from the approved valuer for the property who has assessed the value of the property and that the Defendant Bank has properly & rightly fixed the value of the property & reserve price. The Defendant Bank has also issued Sale Notice and Sale Notice was duly served on the Applicants and affixed the Sale Notice on the conspicuous part of the property and the Sale Notice was also published both in Tamil Daily & in English daily.

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It is further submitted that the Applicants have not sent any reply to the 13(2) Demand Notice. Not sending reply to 13(2) Demand Notice is fatal to their case. The Defendant Bank has auctioned the property and one Thiru. Punniyamoorthy has successfully declared as the highest bidder in the auction held on 31.01.24 and that the Defendant Bank not confirmed the sale in favour of the Auction Purchaser due to the interim conditional order and the said conditional order was complied by the Applicants. Further, there is no procedural irregularity on the part of the Defendant Bank in issuing the Demand Notice & taking Possession & issuing Possession Notice & Sale Notice under the SARFAESI Act & Rules and that the alleged procedural irregularity mentioned in the SARFAESI Application are not factually & legally correct and that the Defendant Bank has issued Demand Notice, Possession Notice & Sale Notice only as per the provisions & procedures of the SARFAESI Act & Rules. Hence, if the Sale Notice is setaside, the Defendant Bank will be put to untold hardships and irreparable loss & injury; on the other hand, no prejudice will be caused to the Applicants. The balance of convenience is only in favour of the Defendant Bank.

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It is further submitted that the Applicants are willful & chronic defaulter. They willfully, wantonly & deliberately not repaying the loan amount despite their sufficient means to repay the loan and that the main intention of the Applicants is only to drag on the proceedings and to defeat & delay & defraud the valuable rights of the Defendant Bank.

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SA No.51/2024

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It is therefore prayed that this Hon'ble Tribunal may be pleased to dismiss the above SARFAESI Application with 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	09.04.21	Demand Notice with AD Cards
2	21.06.22	Possession Notice with AD Cards
3	13.07.22	Paper Publication of Possession Notice in English daily
4	13.07.22	Paper Publication of Possession Notice in Tamil daily
5	….	Photo showingaffixture of Possession Notice
6	26.12.23	Sale Notice with AD Card
7	23.12.23	Paper Publication of Sale Notice in English daily
8	23.12.23	Paper Publication of Sale Notice in Tamil daily
9	06.03.23	Valuation Report
10	****	Statement of Account

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

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WHETHER THE APPLICANTS ARE ENTITLED TO GET THE RELIEF 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 mortgage on their property. Since, the borrower failed to repay the loan amount that made the loan account as NPA on 31.03.2021. 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 Applicants themselves have admitted the fact that they could not made payments regularly and that they committed default in payment of the outstanding dues, due to Covid-19 Pandemic, the Applicants suffered with heavy financial problems. The averments narrated in the SA

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SA No.51/2024

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would strengthen the contention of the Defendant Bank and due to the failure of the Applicants to repay the outstanding dues, their loan account has been classified as Non-Performing Asset. Therefore, the Defendant Bank was constrained to issue Demand Notice dated 09.04.2021 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. 1 to 10, the Bank has produced the copies of acknowledgement cards. But, I find that the Applicants have failed to give any representation to the Defendant Bank. Hence, the Defendant Bank had issued Possession Notice U/s. 13(4) of SARFAESI Act on 21.06.2022. I perused the documents filed by the Defendant Bank and at page nos. 23 to 26 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 dailies all are available but the Applicant has not challenged the Possession Notice even after receiving the said notice. However, the Defendant Bank has also not published the Possession Notice in the Newspapers within the stipulated time as mandated in Rule 8(2) of Security Interest (Enforcement) Rules, 2002, it is very clear that

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"[The Possession Notice as referred to in sub-rule (1) shall also be published, as soon as possible but in any case not later than seven days from the date of taking possession, in two leading newspapers], one in vernacular language having sufficient circulation in that locality, by the Authorized Officer."

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The Bank has published the Possession Notice on 13.07.2022 though he has issued Possession Notice on 21.06.2022 which is not within the prescribed time limit of seven days. Further, the Photo showing the affixture of Possession Notice on the Schedule mentioned property is also not clear. Hence, this issue is decided in favour of the Applicants.

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The Defendant Bank has also furnished the Valuation Report dated 06.03.2023 (at page nos. 51 to 66 of typed set of papers).

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SA No.51/2024

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The Applicants have no doubt being defaulters are 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 Applicants without following the due process of law.

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Further, I also find that the Applicants have complied this Tribunal's conditional order dated 30.01.2024, which is also confirmed by the Counsel for the Defendant Bank in his Reply Statement. Moreover, Counsel for the Defendant Bank informed this Court that in this case sale did not happen, since they have no bidders.

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Under these facts and circumstances, this Tribunal is of the considered view to dispose of the case. In the result, SA No.51/2024 stands disposed off with a direction to the Defendant Bank not to include the cost and expenditure incurred 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 16^th August, 2024.

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sd/- (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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A Sundarram v. Bank of Baroda

Case brief

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A Sundarram v. Bank of Baroda

Case brief

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