Partly allowed

Ms Amal Amenities v. Punjab National Bank

DRT1 Nov 2024SA/53/2024

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal held that the bank failed to issue a proper sale notice 30 days prior to the auction, violating Rule 8(6) of the Security Interest (Enforcement) Rules 2002. Consequently, the sale was set aside, and the bank was directed to reimburse specific expenses but denied the claimed compensation.

What did the court decide?

Sale of secured asset and Annexure-A5 notice set aside; bank directed to reimburse expenses debited; claim for Rs. 25 Lakhs compensation dismissed.

Ms Amal Amenities versus Punjab National Bank — Banking and Recovery | DRT (2024)

¶1

Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL - 1 AT ERNAKULAM

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DATED THIS 1^st DAY OF NOVEMBER, 2024

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PRESENT: Su. WILLYAHM, B.Sc., M.L. [DISTRICT JUDGE - Retd] PRESIDING OFFICER

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S.A No. 53 of 2024

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Between

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M/s. Amal Amenities, Door No. 21/1133, Rose Bhavan, Behind RTO Ground, Chevayur, Kozhikode -673 017, Rep. by Proprietor.

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Bancy Jose, Door No. 21/1133, Rose Bhavan, Behind RTO Ground, Chevayur, Kozhikode -673 017. --- Applicants

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And

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The Authorized Officer, Punjab National Bank, Circle Sastha Centre, Shanthibai Road, Mini Bypass Road, Govindapuram, Kozhikode 673 016.

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--- Defendant

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SA No.53 of 2024

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This Securitization Application coming on 17.10.2024 for final hearing before me in the presence of Ms. Liza P. Cherian, Counsel appearing for the Applicants and Mr. C.Ajith Kumar, Advocate appearing for the defendant and upon hearing arguments of learned Counsels for both the parties and upon perusing the material on records, this Tribunal delivered the following:

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O R D E R

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This Securitisation Application was filed on 16.01.2024 seeking to set aside Annexure-A1 Demand Notice, A3 possession notice and Annexure-A5 sale notice issued by the defendant and to direct the defendant to reimburse the entire expenses debited in the loan accounts and to pay the cost and compensation of Rs.25 Lakhs to the applicant.

¶16

The 1^st applicant availed cash credit facility to a limit of Rs.1,10,00,000/-, GECL facility to a limit of Rs.22,00,000/- and TL ECL facility to a limit of Rs.10,00,000/- and the 2^nd applicant availed term loan housing facility to a limit of Rs.17,45,273/-, HL-OD facility of Rs.20,00,000/-, another term loan housing facility to a limit of Rs.10,95,000/- and an Overdraft facility to a tune of Rs.15,00,000/from the defendant bank. For the aforesaid facilities, the 2^nd applicant has created equated mortgage by deposit of title deeds over four items of properties belonging to him, as described in the Demand Notice Annexure-B1. Annexure-B23 to B26 which are true copies of Security Interest ID Based Search report evidences the registration of the security interest over the secured assets mentioned in Annexure-B9, B11, B13 and B15 notices.

¶17

Since both the applicants committed default in repayment of the outstanding loan due to the defendant bank, their loan accounts came to be classified as Non-performing Asset and demand notice dated 15.05.2023 Annexure-B1 and Demand Notice dated 15.05.2023 Annexure-B4 was issued to the applicants calling upon them to repay the outstanding loan due within a period of 60 days from the date of receipt of the demand notices. The applicants neither sent any objection/representation to the demand notices nor did they clear off their liability due to the defendant bank.

¶18

Therefore, the defendant bank issued Annexure-A3 possession notice dated 11.09.2023 for symbolically taking physical possession of the secured assets. Possession notice was affixed conspicuously on the secured asset as evidenced from Annexure-B6 photograph. Possession notice was also published in two leading newspapers as per Annexures-B7 and B8.

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Page 2 of 9

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SA No.53 of 2024

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Since the applicants failed to clear off their liability due to the defendant bank, notice dated 15.11.2023, Annexure-B9 in respect of 7.80 cents of land in Re.Sy.No.198/3 of Chevayoor village and Annexure-B11 notice dated 15.11.2023 in respect of 6 cents of land in Re.Sy.No.326/2 of Chevayoor village and Annexure-B13 notice dated 15.11.2023 in respect of 14 cents of land in Re. Sy. No.58/2 A of Nellikkode village and Annexure-B15 notice dated 15.11.2023 in respect of 19.9 cents of land in Re.Sy.No.1/39 of Kayanna village were issued, calling upon them to pay the outstanding loan due and expenses incurred by the Authorised Officer and to get the release of the secured assets within 30 days from the date of receipt of the notice. It is also stipulated in the aforesaid notices that if they failed to pay the aforesaid outstanding amounts, the secured assets will be sold for realizing the dues. Therefore, it is evident that the aforesaid notices are not sale notices and these are the notices sent to redeem the secured assets on discharge of the outstanding loan due and other expenses.

¶22

All the aforesaid notices were served to the applicants as evidenced from the perusal of Annexure-B10, B12, B14 and B16, copies of postal acknowledgement cards. Annexures-B9, B11, B13 and B15 notices were published in two leading newspapers as per Annexures-B17 and B18. Indisputably, the applicants failed to clear off their liability due to the defendant bank.

¶23

Therefore, sale notice dated 27.12.2023 was issued. One Sri.Vivek Venugopalan Sudha, residing at D5, 110 KV Substation Colony, Chevayoor, Kozhikode and Shimna Chandra. N, Nandoth House, Kozhikode bided the aforesaid property on 18.01.2024 and became the successful bidders.

¶24

The counsel appearing for the applicants filed a brief written argument notes contending that 30 days’ mandatory notice was not served to the applicants as evidenced from Annexure-A5 sale notice and that hence Rule 8 (6) of the Security Interest (Enforcement) Rules 2002 was not complied with and that Annexure-B11 notice is only a notice issued under Section 13 (8) of the SARFAESI Act, 2002 and it is not a notice issued under Section 8 (6) of the Security Interest (Enforcement) Rules 2002 and that the defendant bank has admitted collection of only 10% EMD amount of the sale of the property and that one of the four items of the properties was sold and that though this Tribunal had stayed the confirmation of sale, receipt of balance of 15% of EMD amount by the defendant bank was not stayed by this Tribunal and that therefore, sale of the property should not be confirmed and that confirmation of sale could be done only on payment of balance 75% of the sale consideration amount and that when Rule 8 (6) of the Security Interest (Enforcement) Rules 2002 has

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Page 3 of 9

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SA No.53 of 2024

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been violated, Annexure-B11 sale notice and the sale of the property is liable to be set aside as null and void.

¶28

Per contra , the Counsel appearing for the defendant bank submitted that, though Annexure-B9, B11, B13 and B15 sale notices were issued for sale of four items of properties the property covered under Annexure-B11 alone was bid by the auction purchasers and that it is only after expiry of 30 days from the date of issuance of Annexure-B9, B11, B13 and B15 notices, sale of the secured assets was fixed on 18.01.2024, publishing the sale notice in two leading newspapers as per Annexure-B17 and B18 and that based on Annexure-B20 valuation report, distressed value shown as Rs.43,00,000/- was fixed as reserve price for the secured assets in the sale notice and that there is no procedural irregularity in respect of issuance of the sale notice and that the applicants failed to tender the entire dues to the defendant bank before the publication of the sale notice as mandated under Section 13 (8) of the SARFAESI Act, 2002 and that therefore, the SA is liable to be dismissed with cost to the defendants.

¶29

It is revealed from the averments of the written statement of the defendant bank that the applicants were sanctioned Covid-19 relief loan for Rs.22,00,000/- to revive the unit during June, 2020 and thereafter again second Covid-19 loan for Rs.10,00,000/- during January, 2022. The above averments of the defendant bank is neither challenged nor refuted by the side of the applicants. Therefore this Tribunal does not find any substance in the contention of the applicants that the benefit of moratorium declared by the Government during Covid-19 was not granted to the applicants.

¶30

A perusal of copy of Demand Notice dated 15.05.2023, Annexure-A1 shows that it was issued to one Rosamma Jose, who is the guarantor for the financial facilities availed by the applicants. Thus it is evident that, the applicants have not produced the Demand Notice served to them. Annexure-A2 Demand Notice dated 15.04.2023 was issued to M/s. R.B. Hygenic Products and Services which is a separate partnership firm wherein the 2^nd applicant is the Managing Partner and Smt. Rosamma Jose is a partner. According to the defendant bank, the financial liabilities of the above said firm was closed on 06.11.2023. Hence it is evident that Annexure-A2 Demand Notice dated 15.04.2023 is not concerned in any manner with the loan accounts of the applicants for which the SARFAESI measures has been initiated by the defendant bank. The applicants have failed to point out any procedural irregularity in respect of issuance of Annexure-A1 Demand Notice dated 15.05.2023.

¶31

This Tribunal has already observed supra that, the defendant bank affixed Annexure-A3 Possession notice conspicuously on the

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Page 4 of 9

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SA No.53 of 2024

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secured asset as evidenced from Annexure-B6 photograph and that Possession notice was also published in two leading newspapers as per Annexures-B7 and B8. The applicants have not pointed out any procedural irregularity in respect of issuance of Annexure-A3 possession notice. Be that it may so, possession notice was issued as early as on 11.09.2023. This SA was filed only on 06.01.2024, ie. beyond the period of 45 days. On this ground alone, the applicants are not entitled to seek the relief of setting aside Annexure-A3 possession notice as illegal.

¶35

Annexures-B9, B11, B13 and B15 are not the sale notices as evidenced from the contents of these notices which were issued to the applicants by affording an opportunity to repay the entire outstanding loan due and other expenses and to redeem the secured assets. Annexure-A5, according to the applicants, is the sale notice. A perusal of the same shows that it is not the sale notice and it is a letter sent to the applicants informing them that, sale notice dated 27.12.2023 has been published in newspapers and that the notice for publication of the secured asset was enclosed. But the contention of the applicants is that no sale notice was enclosed along with Annexure-A5 letter. The defendant bank has not produced any proof to show that sale notice dated 27.12.2023 was enclosed along with Annexure-A5. It is merely averred in para 3 of the written statement that the fact of e-auction of the secured asset was informed to the applicants vide Annexure-A5. In the absence of non-production of material proof to show that sale notice dated 27.12.2023 was issued to the applicants, this Tribunal has no choice except to accept the contention of the applicants that sale notice dated 27.12.2023 was not issued to the applicants.

¶36

Even assuming for argument’s sake Annexure-A5 is the sale notice, it was issued on 27.12.2023. Indisputably, the secured asset mentioned in Annexure-A5 notice was sold in the e-auction held on 18.01.2024 as admitted by the defendant bank in its written statement. Therefore, it is evident that there was no clear 30 days’ notice from the date of issuance of Annexure-A5 notice till the date of sale of the secured asset and there is violation of Rule 8 (6) as well as Rule 9 of the Security Interest (Enforcement) Rules 2002 in respect of sale of the secured asset which is 6 cents of land situated in Re.Sy. No.326/2 of Chevayoor Village, as mentioned in Annexure-B11 notice. Hence this Tribunal is inclined to set aside the above sale of the secured asset on 18.01.2024 to the successful bidder.

¶37

One of the reliefs sought for by the applicants in the SA is to reimburse the entire expenses debited in the loan accounts as the expenses has come out due to illegal proceedings. This Tribunal has held that issuance of Annexure-A5 notice is not in accordance with the provisions of Rule 8 (6) and 9 (1) of the SARFAESI Act, 2002.

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Page 5 of 9

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SA No.53 of 2024

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Therefore, the expenses incurred in respect of issuance of AnnexureA5 notice and its affixture on the secured assets and publication in newspapers and debited in the loan accounts of the applicants is liable to be reimbursed. The applicants have not placed any material before this Tribunal so as to get the relief of compensation of Rs.25 Lakhs on account of alleged abuse of the provisions of the SARFAESI Act and the Rules made thereunder. Therefore, the applicants are not entitled to get this relief. However, this Tribunal holds that the applicants are entitled to get the relief of setting aside Annexure-A5 notice as invalid.

¶41

In view of the foregoing reasons and discussions, this S.A No.53 of 2024 stands partly allowed in respect of the relief for setting aside Annexure-A5 notice as invalid and partly dismissed in respect of other reliefs sought for in the S.A.

¶42

It is made clear that the defendant bank shall be at liberty to issue fresh sale notice in order to bring the secured assets in accordance with law.

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Dictated to Steno, taken down, transcribed, typed by him, corrected and pronounced by me in the open court on this the 1^st day of November, 2024.

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(Su. WILLYAHM) PRESIDING OFFICER

Mj/

Page 6 of 9

SA No.53 of 2024

List of documents filed by the Applicants along with the S.A.

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Sl. No.	Date	Particulars
1.	15.05.2023	True copy of the Demand Notice issued to the applicant.	Annexure-A1
2.	15.04.2023	True copy of the Demand Notice pertaining toM/sHygienic	Annexure-A2
3.	11.09.2023	True copy of the possession notice issued by defendant.	Annexure-A3
4.	16.12.2023	True copy of the sale notice published in newspaper.	Annexure-A4
5.	27.12.2023	True copy of the intimation for sale of the secured asset issued to the applicants.	Annexure-A5

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List of documents filed by the defendant along with the written statement

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Sl. No.	Date	Particulars
1.	15.05.2023	True copy of the notice issued by defendant under Sec.13(2) of SARFAESI Act in respect of the financial facilities availed by the1^st applicant.	Annexure-B1
2.	---	True copy of the postal acknowledgement of Annexure-B1 by 1^st applicant.	Annexure-B2
3.	---	True copy of the postal acknowledgement of Annexure-B1 by 2^ndapplicant.	Annexure-B3
4.	15.05.2023	True copy of the notice issued by defendant under Sec.13(2) of SARFAESI Act in respect of the financial facilities availed by the 2^nd applicant.	Annexure-B4
5.	---	True copy of the postal acknowledgement of Annexure-B4 by 2^ndapplicant.	Annexure-B5
6.	---	True copy of the affixture of the propertiesmentionedin Annexure-A3.	Annexure-B6
7.	15.09.2023	True copy of the paper publication of Annexure-A3intheHindu daily.	Annexure-B7

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Page 7 of 9

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SA No.53 of 2024

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8.	15.09.2023	True copy of the paper publication of Annexure-A3 in the Malayala Manorama daily.	Annexure-B8
9.	15.11.2023	True copy of the notice of sale of secured assets issued by defendant in respect of 7.80 cents of land in Re.Sy. No.198/3 of Chevayoor village, owned by 2^nd applicant.	Annexure-B9
10.	---	True copy of the postal acknowledgment of Annexure-B11by the applicants.	Annexure-B10
11.	15.11.2023	True copy of the notice of sale of secured assets issued by defendant in respect of 6 cents of land in Re. Sy. No.326/2 of Chevayoor village, owned by 2^nd applicant.	Annexure-B11
12.	----	True copy of the postal acknowledgment of Annexure-B9 by the applicants.	Annexure-B12
13.	15.11.2023	True copy of the notice of sale of secured assets issued by defendant in respect of 14 cents of land in Re.Sy. No.58/2A of Nellicode village owned by 2^nd applicant.	Annexure-B13
14.	---	True copy of the postal acknowledgment of Annexure-B13 by the applicants.	Annexure-B14
15.	15.11.2023	True copy of the notice of sale of secured assets issued by defendant in respect of 19.91 cents of land in Re.Sy. No.1/39 of Kayanna village owned by 2^nd applicant.	Annexure-B15
16.	----	True copy of the postal acknowledgment of Annexure-B15 by the applicants.	Annexure-B16
17.	17.12.2023	True copy of the paper publication in the Hindu daily pertaining to the E- auctionofthe securedassets.	Annexure-B17
18.	17.12.2023	True copy of the paper publication in the Malayala Manorama daily pertaining to the E-auction of the secured assets.	Annexure-B18
19.	---	True copy of the valuation report pertaining to the property covered by Annexure-B9	Annexure-B19
20.	---	True copy of the valuation report pertaining to the property covered by Annexure-B11	Annexure-B20
21.	---	True copy of the valuation report pertaining to the property covered by Annexure-B13	Annexure-B21

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Page 8 of 9

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SA No.53 of 2024

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22.	---	True pertai Annex	copy of th ning to the ure-B15	e va prope	luat rty	ion report covered by	Annexure-B22
23.	---	True registr Annex	photocopy ation of the ure-B9	of prop	the erty	CERSAI covered by	Annexure-B23
24.	--	True registr Annex	photocopy ation of the ure-B11	of prop	the erty	CERSAI covered by	Annexure-B24
25.	---	True registr Annex	photocopy ation of the ure-B13	of prop	the erty	CERSAI covered by	Annexure-B25
26.	---	True registr Annex	photocopy ation of the ure-B15	of prop	the erty	CERSAI covered by	Annexure-B26

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(Su. WILLYAHM) PRESIDING OFFICER

¶59

Mj/

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Page 9 of 9

Ms Amal Amenities v. Punjab National Bank

Case brief

What is this about?

What did the court decide?

Ms Amal Amenities v. Punjab National Bank

Case brief

What is this about?

What did the court decide?

What the court decided

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