Dismissed

Binoy Paulose v. the South Indian Bank Ltd.

DRT23 Jul 2024SA/738/2023

Case brief

AI extract

What is this about?

Debts Recovery Tribunal dismissed an application challenging the legality of a bank's secured asset sale and possession measures under the SARFAESI Act, finding no procedural irregularity in reserve price reductions or statutory compliance. Bank succeeded.

What the court decided

AI extract

Binoy Paulose versus the South Indian Bank Ltd. — Company and Corporate | DRT (2024)

¶1

Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL - 1 AT ERNAKULAM

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DATED THIS 23^rd DAY OF JULY, 2024 PRESENT: Su. WILLYAHM, B.Sc., M.L. [DISTRICT JUDGE - Retd] PRESIDING OFFICER

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S.A No. 738 of 2023

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Between

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Binoy Paulose, S/o. Paulose, Madathiparambil House, Piravom P.O., Ernakulam-686664.

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--- Applicant

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And

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The South Indian Bank Ltd. Regional Office, SIB Building, Info Park Road, Rajagiri Valley P.O., Kakkanad, Ernakulam-682039.

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Joy Varghese, Padinjarepallipurathu, Palackamattom, Aikaranad North, Ernakulam-682 311.

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--- Defendants

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This Securitization Application coming on 20.05.2024 for hearing before me in the presence of Mr. Isac T. Paul, Counsel for the applicant and Mr.Sunil Shankar, Counsel for the 1^st defendant and Mr. Jerin Parakkal, Counsel for the 2^nd defendant and upon hearing arguments of both sides’ Counsels and upon perusing the material records, this Tribunal delivered the following:

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SA 738/2023

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O R D E R

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This Securitization Application was filed on 28.11.2023 seeking to declare that the sale notice dated 01.11.2023 issued by the 1^st defendant is illegal and declare that the sale of secured asset conducted by the 1^st defendant on 21.11.2023 pursuant to sale notice dated 01.11.2023 is illegal and to restrain the 1^st defendant from taking physical possession of the secured asset described in Schedule-B to the S.A and to declare the measures taken by the 1^st defendant for taking physical possession of the secured asset is illegal and to direct the 1^st defendant to pay the cost of this proceeding.

¶16

The applicant has averred in the S.A that he availed financial assistance in the year 2015 from the 1^st defendant bank for renovation of his theatre complex and that he also availed loan for meeting the working capital requirement arising in connection with operation of his petroleum bunk and he along with his wife and son also availed loans for agricultural purpose. But he has not specifically averred in the S.A as to the nature and quantum of the credit facilities availed in the 1^st defendant bank. However, the 1^st defendant bank has furnished the particulars of credit facilities availed by the applicant, his wife and his son in the form of tabular column in its written statement. The following credit facilities were availed :

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i) OD General – Rs.50,00,000/ii) ECLGS – Rs. 2,00,000/iii) Term Loan –I - Rs.20,00,000/iv) Term Loan re-structured – Rs.14,00,000/v) Term Loan-II - Rs.1,50,00,000/vi) Mobi loan (business class) - Rs.1,65,000/vii) Mobi loan (business class) - Rs.8,00,000/viii) Mobi loan – agricultural - Rs.5,35,000/ix) KCC OD - Rs.3,99,00,000/x) Term Loan – KCC OD re-structured - Rs.52,08,856/xi) Term Loan KCC OD re-structured - Rs.72,33,142/-

¶18

The 1^st defendant bank has also averred in the written statement that the wife of the applicant Mrs. Sarah Benoy also availed FCL Agri limit of Rs.8,01,868/- and KCC OD facility of Rs.65,00,000/-.

¶19

The applicant has admitted in the S.A that all the aforesaid loans were secured by the mortgage of properties belonging to him, described in Schedule–A and B to the S.A. It is seen from the perusal of the averments of the written statement of the 1^st defendant bank that the above credit

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Page 2 of 10

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SA 738/2023

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facilities availed by the wife of the applicant were also secured by the equitable mortgage of the aforesaid properties.

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The applicant has also admitted in the S.A due to default in repayment of the outstanding loan dues, various loan accounts were classified as NPA by the 1^st defendant bank on 20.01.2021 onwards. The 1^st defendant bank has stated in its written statement that the loan account of M/s. Madathiparambil Agencies was classified as NPA on 31.03.2021 and the loan accounts of M/s. Darsana Movie House was classified as NPA on 24.03.2021 with effect from 29.12.2020 and loan accounts of the applicant were classified as NPA on 20.01.2020 and the loan accounts of wife of the applicant was classified as NPA on 01.05.2021 as per RBI guidelines. Thus it is evident that due to the default in repayment of the above outstanding loan dues, the aforesaid accounts were classified as NPA as per the RBI guidelines.

¶24

The Demand Notices dated 01.06.2021 and 10.08.2021 were issued to the applicant and other co-borrowers calling upon them to pay the outstanding loan due within 60 days from the date of receipt of the notices. The receipt of the Demand Notices is admitted by the applicant. It is not in dispute that the applicant neither sent any objection/representation to the Demand Notices nor did he clear off the outstanding liability due to the 1^st defendant bank. Therefore, Annexure-A1 Possession Notice dated 20.10.2021 came to be issued for taking physical possession of the secured assets. The 1^st defendant bank has produced copy of acknowledgment card, Annexure-B1 to prove the service of the Possession Notice on the applicant. Though the applicant has admitted the receipt of the Possession Notice, he has averred in the S.A that Possession Notice was not affixed on the secured assets and that it was also not published in newspapers. The 1^st defendant bank countered the above averment of the applicant contending in its written statement that Possession Notice was affixed on the secured asset and that it was also published in newspapers by producing Annexure-B2 and B3. A perusal of the same shows that Annexure-A1 Possession Notice was published in The New Indian Express, Kochi edition dated 22.10.2021 and in Malayala Manorama, Kochi edition dated 22.10.2021 and that Possession Notice was affixed on the conspicuous part of the secured asset.

¶25

Subsequently, the 1^st defendant bank filed application, Annexure-A4 and affidavit, Annexure-A5 under Section 14 of the SARFAESI Act, 2002 before the Additional Chief Judicial Magistrate Court (MPs/MLAs) Ernakulam. Order dated 08.08.2023, Annexure-A6 in M.C. No.597/2022 came to be passed for taking physical possession of the secured asset. The Advocate Commissioner issued notice dated 23.09.2023 to the applicant and other borrowers calling upon them to hand over the vacant possession of the secured asset to the 1^st defendant bank.

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Page 3 of 10

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SA 738/2023

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The 1^st defendant bank issued sale notice dated 09.08.2022, Annexure-A2 for sale of the SA schedule ‘A’ property. Subsequently, the 1^st defendant bank issued the following sale notices: Sale notice dated 09.11.2022, Sale notice dated 15.12.2022, Sale notice dated 04.05.2023, Sale notice dated 07.07.2023, Sale notice dated 03.08.2023. Admittedly, sale was not held for want of bidders in respect of the aforesaid sale notices. However, secured asset was sold on 21.11.2023 pursuant to issuance of Annexure-A3 Sale notice dated 12.09.2023 (Annexure-B11).

¶29

The 1^st defendant bank has produced Annexure-B5 to B7 to prove his contention that Annexure-A3 sale notice was served to the applicant and other borrowers and that it was published in Deepika Kochi edition dated 03.11.2023 and in The New Indian Express Kochi edition dated 03.11.2023 and that it was affixed on the conspicuous part of the secured asset. The 2^nd defendant is the successful bidder to purchase the secured asset on 21.11.2023.

¶30

According to the 1^st defendant bank, the 2^nd defendant bided the property for Rs.2,41,70,000/- and that he remitted Rs.24,16,635/- on 14.11.2023, Rs.36,25,865/- on 22.11.2023 (being 25% of the bid amount) and on his request for payment of the balance amount as per Annexure-B9. Time was extended upto 01.01.2024 by letter dated 02.12.2023, AnnexureB9(a) of the Authorized Officer and on payment of the balance sale consideration of Rs.1,81,27,500/- on 29.12.2023. Sale was confirmed in favour of the 2^nd defendant.

¶31

It is submitted by the counsel for the applicant that the reserve price fixed for the property in the sale notice Annexure- A2 is Rs.3,31,50,000/and that in Annexure-A3 sale notice, the reserve price fixed is Rs.2,41,66,350/- which is much lower than the reserve price fixed in Annexure- A2 and that the 1^st defendant bank did not disclose the details of the successful bidder for the property and that the 1^st defendant initiated measures under Section 14 of the SARFAESI Act, 2002 without complying with the mandatory requirements of Section 14 of the SARFAESI Act, 2002 and that the Advocate Commissioner without issuing notice orally informed the applicant that he would take physical possession of the ‘B’ schedule property within a week and that therefore the SA may be allowed as prayed for.

¶32

Per contra , the Counsel appearing for the 1^st defendant submitted that petition filed under Section 14 of the SARFAESI Act, 2002 is duly supported by the affidavit of the Authorized Officer and that IA No. 4385/2023 filed for staying of the proceedings was dismissed by the learned Chief Judicial Magistrate Ernakulam and that the reserve price was fixed on the basis of the valuation report dated 11.5.2022, Annexure-B8 and that the sale of the secured asset was not materialized for want of bidders pursuant to issuance

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Page 4 of 10

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SA 738/2023

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of seven sale notices and that the property was sold pursuant to AnnexureA3 sale notice dated 01.11.2023 to the successful bidder, who is the 2^nd defendant herein for the sale consideration amount of Rs.2,41,70,000/- and that sale was confirmed in his favour on remittance of the entire sale consideration amount and that therefore SA may be dismissed.

¶36

The Counsel appearing for the 2^nd defendant submitted that since the 2^nd defendant bided the property for Rs.2,41,70,000/- and that he remitted Rs.24,16,635/- on 14.11.2023, Rs.36,25,865/- on 22.11.2023 (being 25% of the bid amount) and on his request for payment of the balance amount as per Annexure-B9. Time was extended upto 01.01.2024 by letter dated 02.12.2023, Annexure-B9(a) of the Authorized Officer and on payment of the balance sale consideration of Rs.1,81,27,500/- on 29.12.2023, sale was confirmed in favour of the 2^nd defendant and that sale certificate was not issued to him since this Tribunal had deferred the issuance of the sale certificate and that the 2^nd defendant is entitled to the issuance of the sale certificate since he has invested his life savings in the property on the assurance and belief that sale process would be completed at the earliest and that therefore the SA may be liable to be dismissed with cost to the 2^nd defendant.

¶37

The 1^st defendant has produced Annexure-B5 copy of acknowledgment card to prove his contention that Annexure-A3 sale notice dated 01.11.2023 (the same sale notice produced as Annexure-B11 by the 1^st defendant) was served to the applicant. Annexure-B6 ( the same copies of paper publications are again produced as Annexure-B13 ) are the copies of paper publications for publication of Annexure-A3 sale notice in two leading newspapers, one in vernacular language, ‘Deepika’ edition dated 03.11.2023 and in ‘The New Indian Express’. The 1^st defendant has produced Annexure-B7 copy of photograph ( the same photograph is again produced as Annexure-B14 ) to prove that Annexure-A3 sale notice was affixed on the conspicuous part of the secured asset.

¶38

The 1^st defendant has furnished the details of issuance of eight sale notices, the date of publication of the sale notices, fixation of reserve prices in tabular column wise in its written statement as detailed hereunder.

¶39

Date of SaleNotice	Date of Auction	Reserve Price	Result
09.08.2022	17.09.2022	Rs.3,31,50,000/-	No bidders
09.11.2022	30.11.2022	Rs.2,98,35,500/-	No bidders
15.12.2022	07.01.2023	Rs.2,98,35,500	No bidders
04.05.2023	25.05.2023	Rs.2,68,51,500/-	No bidders
07.07.2023	28.07.2023	Rs.2,68,51,500/-	No bidders

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Page 5 of 10

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SA 738/2023

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03.08.2023	24.08.2023	Rs.2,68,51,500/-	No bidders
12.09.2023	04.10.2023	Rs.2,41,66,350/-	No bidders
01.11.2023	21.11.2023	Rs.2,41,66,350/-	Sold for Rs.2,41,70,000/-

¶43

It is seen from the perusal of the written statement of the 1^st defendant that for the first sale notice dated 09.08.2022 the reserve price fixed for the property is Rs.3,31,50,000/- based on the valuation report dated 11.05.2023, Annexure-B8 ( the same valuation report is again produced as Annexure-B15). Indisputably, the sale of the secured asset was not fructified pursuant to issuance of seven sale notices, dated 09.08.2022, 09.11.2022, 15.12.2022, 04.05.2023, 07.07.2023, 03.08.2023 and 12.09.2023 as evidenced from the perusal of the aforesaid tabular column furnished in the written statement of the 1^st defendant. The sale was materialized only pursuant to the last sale notice dated 01.11.2023, Annexure-A3. It is also noticed from the above mentioned tabular column of the 1^st defendant that the 1^st defendant was constrained to reduce the reserve price considerably and reasonably for each and subsequent sale notices for the reason that no prospective bidders came forward to bid the property. The reserve price fixed in the sale notice dated 12.09.2023 was also fixed in the sale notice dated 01.11.2023, Annexure-A3. Therefore this Tribunal does not find any substance in the submission of the counsel for the applicants that the reserve price fixed in Annexure-A3 sale notice is very low.

¶44

Since the 2^nd defendant who offered the highest bid of Rs.2,41,70,000/- was declared as the successful bidder to purchase the secured asset in the e-auction held on 21.11.2023. On payment of entire sale consideration amount, sale of the property was confirmed in his favour as per letter of confirmation of sale Annexure-B16. The 1^st defendant has also produced copy of the letter dated 02.12.2023, Annexure-B9 given by the 2^nd defendant requesting the 1^st defendant to grant 30 days’ time to pay the balance 75% of the sale consideration. Annexure-B9 (a) is the reply given by the 1^st defendant to the 2^nd defendant granting extension of time for payment of the balance bid amount of 75% till 01.01.2024. It cannot be disputed that the 2^nd defendant paid the balance consideration of Rs.1,81,27,500/- on 29.12.2023 to the 1^st defendant and that in view of the interim stay granted by this Tribunal issuance of sale certificate in favour of the 2^nd defendant had to be deferred until further orders of this Tribunal. This Tribunal does not find any procedural irregularity in respect of issuance of Annexure-A3 sale notice and conduct of the e-auction and sale of the secured asset to the 2^nd defendant.

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Page 6 of 10

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SA 738/2023

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A perusal of Annexure-A4 copy of application and Annexure-A5 copy of affidavit filed by the 1^st defendant in MC No.597/2022 on the file of the Additional chief Judicial Magistrate Court (MPs/MLAs) Ernakulam, Ernakulam would show that all the statutory requirements contemplated under Clause (i) to (ix) to the provisions of Section 14(1) of the SARFAESI Act, 2002 were furnished by the 1^st defendant in MC No.597/2022. It is seen from the perusal of the copy of the order dated 08.08.2023, Annexure-A6 that the learned Additional Chief Judicial Magistrate Court (MPs/MLAs) Ernakulam after having perused the contents of the affidavit and the documents filed in support of the affidavit and having satisfied over the same, passed order appointing Advocate Commissioner to take physical possession of the secured asset and to hand over the same to the 1^st defendant. Therefore, the contention of the applicant that the 1^st defendant pursued the measures without complying with the mandatory requirements under Section 14 of the SARFAESI Act, 2002 for taking possession of the secured asset is absolutely incorrect. This Tribunal does not find any procedural irregularity either in Annexure-A5 affidavit filed in MC 597/2022 or in Annexure- A6 order passed in MC No.597/2022.

¶48

This Tribunal holds that since the applicant has failed to establish his case, he is not entitled to get the reliefs sought for in the SA which deserves to be dismissed.

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Resultantly, this S.A. No. 738 of 2023 stands dismissed. No costs.

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Dictated to Steno, taken down, transcribed, typed by him, corrected and pronounced by me in the Open Court, this the 23^rd day of July, 2024.

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[Su. WILLYAHM] PRESIDING OFFICER

Mj/

Page 7 of 10

SA 738/2023

SCHEDULE ‘A’

Land having an extent of 15.78 Ares with building thereon in Sy. No.595/9/2 in Piravom Village, Muvattupuzha Taluk, Ernakulam District in property is bounded on the North by Velankuzhi Purayidom, South by Devippady Road, East by Payittattuparambu, West by Makkanamattathil Purayidom.

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SCHEDULE ‘B’

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Land having an extent of 40.38 Ares with buildings bearing Door Nos.6/166 and 6/166A-D in Sy. Nos.752/4 and 752/5 in Piravom Village, Muvattupuzha Taluk, Ernakulam District. The property is bounded on the North by Thodu, South by property of Isac, East by PWD Road and property of Velukkattil Thomas and West by property of Kuriakose.

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Page 8 of 10

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SA 738/2023

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

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Sl.	Date	Particulars
No.
1.	20.10.2021	True photocopy of possession notice issued by defendant to applicant.	Annexure-A1
2.	09.08.2022	True photocopy of the sale notice issued by the defendant.	Annexure-A2
3.	01.11.2023	True photocopy of the sale notice issued by the defendant.	Annexure-A3
4.	---	True photocopy of petition in MC. No.597/2022 filed by the 1^stdefendant before the Additional Chief Judicial Magistrate Court, Ernakulam.	Annexure-A4
5.	---	True photocopy of the affidavit in MC No.597/2022 filed by the 1^stdefendant before the Additional Chief Judicial Magistrate Court, Ernakulam.	Annexure-A5
6.	08.08.2023	True photocopy of the order passed by the Additional Chief Judicial Magistrate Court, Ernakulam in MC No.597/2022	Annexure-A6
7.	23.09.2023	True photocopy of the notice issued by the Advocate Commissioner appointed by the Additional Chief Judicial Magistrate Court, Ernakulam in MC No.597/2022.	Annexure-A7

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List of documents filed by the 1^st Defendant Bank

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Sl.	Date	Particulars
No.
1.	---	True copy of the acknowledgment card in respect of the possession notice.	Annexure-B1
2.	22.10.2021	True copy of the paper publication effected	Annexure-B2
3.	---	True copy of the photographs of affixture.	Annexure-B3

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SA 738/2023

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4.	---	True copy of Sec.14 petition and affidavit in MC No.597/2022 before the Chief Judicial Magistrate Court, Ernakulam.	Annexure-B4
5.	---	True copy of the acknowledgement card in respect of the sale notice.	Annexure-B5
6.	03.11.2023	True copies of the paper publications effected in Deepika newspaper, Kochi edition and in The Indian Express newspaper, Kochi edition.	Annexure-B6
7.	---	True copy of the photographs of affixture	Annexure-B7
8.	11.05.2022	True copy of the valuation report.	Annexure-B8
9.	02.12.2023	True copy of the request letter of the auction purchaser.	Annexure-B9
10.	02.12.2023	True copy of the reply letter of the auction purchaser.	Annexure-B9(a)
11.	---	True copy of judgment in WA No.2110 of 2023.	Annexure-B10
12.	01.11.2023	True copy of sale notice.	Annexure-B11
13.	---	True copy of acknowledgment cards in respect of sale notice.	Annexure-B12
14.	03.11.2023	True copy of paper publication effected	Annexure-B13
15.	----	True copy of photographs of affixture	Annexure-B14
16.	11.05.2022	True copy of valuation report	Annexure-B15
17	21.11.2023	True copy of letter confirming the sale.	Annexure-B16
18	---	True copy of Section 14 affidavit and petition	Annexure-B17
19	---	True copy of judgment in WA No.2110 of 2023	Annexure-B18 *(repeat …B10)*

(Su. WILLYAHM)

PRESIDING OFFICER

Mj/-

Page 10 of 10

Binoy Paulose v. the South Indian Bank Ltd.

Case brief

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What the court decided

Binoy Paulose v. the South Indian Bank Ltd.

Case brief

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What the court decided

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