Allowed

V H Kunjumon v. Canara Bank

DRT4 Jun 2024SA/779/2023

Case brief

AI extract

What is this about?

This Securitization Application challenged the legality of a Sale Notice issued by the Bank which failed to mention an attached residential building. The court held that the Sale Notice did not comply with Rule 8(7)(a) of the Security Interest (Enforcement) Rules, 2002, regarding the description of the immovable property. Consequently, the Sale was set aside, and the Bank was allowed to issue a fr

What did the court decide?

The Sale Notice (Annexure-A2) was declared illegal and non-compliant; the Respondents are not entitled to conduct the sale pursuant to this notice.

V H Kunjumon versus Canara Bank — Banking and Recovery | DRT (2024)

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL - 1 AT ERNAKULAM

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DATED THIS 4^th DAY OF JUNE, 2024

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

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S.A No. 779 of 2023

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Between

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V.H. Kunjumon, S/o. Hydrose, Vazhayil House, Sreebhoothapuram, Sreemoolanagaram P.O., Ernakulam – 683 580.

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--- Applicant

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And

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Canara Bank, Sreemoolanagaram Branch, Vadakkumcherry Building, Kalady Road, Ernakulam-683 580 Rep. by its Branch Manager.

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The Authorized Officer, Canara Bank, Sreemoolanagaram Branch, Vadakkumcherry Building, Kalady Road, Ernakulam-683 580.

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--- Defendants

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SA No.779 of 2023

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This Securitization Application coming on 22.02.2024 for final hearing before me in the presence of Mr. C.P. Anil Raj, Advocate for the Applicant and Mr. Prem Das, Advocate for the defendants 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 19.12.2023 seeking to declare that Annexure-A1 Demand Notice, A2 Sale Notice are totally illegal and pass an order quashing the same and declare that the defendants 1 & 2 are not entitled to conduct sale of secured asset pursuant to under Annexure-A2 sale notice and direct the defendants to pay the entire cost of this proceedings to the applicant and a further compensation amount of Rs.10 Lakhs.

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The applicant has admitted his availment of credit facilities to the tune of Rs.20,20,000/- in the year 2019 in the 1^st defendant bank upon creation of security interest by way of deposit of title deeds over his property measuring an extent of 4.05 Ares in Re-Sy. No. 45/16 in Block No.30 Thekkumbhagam village, Aluva Taluk, Ernakulam District. He has also admitted his default in repayment of the outstanding loan due to the 1^st defendant bank. Hence the loan account of the applicant came to be classified as NPA on 28.02.2022.

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Demand Notice dated 07.07.2022, Annexure-A1 was issued to the applicant calling upon him to repay the outstanding loan due within 60 days from the date of receipt of the notice. The applicant has admitted the receipt of the Demand Notice. The defendants have also produced copy of Acknowledgment card, Annexure-B2 to prove the service of Demand Notice to the applicant. It is not in dispute that the applicant neither sent any objection/representation to the Demand Notice nor did he clear his outstanding liability due to the 1^st defendant bank.

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Therefore, the 2^nd defendant issued Possession Notice dated 13.10.2022, Annexure-B3 for symbolically taking physical possession of the secured asset. The defendants have produced copies of paper publications, Annexure-B4(a) and B4(b) to show that Possession Notice was published in Kerala Kaumudi daily dated 16.10.2022 and in The New Sunday Express daily dated 16.10.2022. It cannot be disputed that both newspapers have wide circulation in the locality where the secured asset is situated.

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Page 2 of 6

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SA No.779 of 2023

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Since the applicant failed to discharge the outstanding liability even after issuance of Possession Notice, 2^nd defendant issued sale notice dated 23.11.2023, Annexure-A2 in order to auction the secured asset.

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The counsel appearing for the applicant submitted that the existence of the residential building as shown in Annexure-A4 copy of photograph is not stated in Annexure-A1 demand notice as well as Annexure-A2 sale notice and that issuance of sale notice without showing the residential building and that for this reason alone, the sale notice is liable to be set aside.

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The Counsel appearing for the defendants submitted that the existence of the building in the sale notice need not be stated and that secured asset includes the building also and that the expression land includes the building. In support of his above submission, he drew the attention of this Tribunal to the provisions of Section 3(a) of the Land Acquisition Act, 2013 wherein the expression “land” is defined.

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Indisputably, the existence of the residential building which is shown in Annexure-A4 photograph is not mentioned in Annexure-A1 demand notice as well as Annexure-A2 sale notice. But, the 1^st respondent has shown the existence of the building in the schedule to the OA No.550/2023. Though it is not mandatory to mention the existence of the building in the demand notice, the mentioning of existence of any building in the sale notice is a must. The provisions of Rule 8 (7) (a) of Security Interest (Enforcement) Rules, 2002 mandates the furnishing of description of the immovable property to be sold in the sale notice. The failure of the 2^nd respondent to mention the existence of the residential building in Annexure-A2 sale notice prima facie appears to be non-compliance of the above said rules of the Security Interest (Enforcement) Rules, 2002.

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The provision of Rule 8 (7)(a) of the Security Interest (Enforcement) Rules, 2002 stipulates that the sale notice shall include the description of the immovable property to be sold, including the details of encumbrances known to the secured creditor. Though the 1^st defendant bank in the schedule to the O.A No.550/2023 has specifically mentioned as “all that part and parcel of the property viz. namely, 4.05 Ares of land and Building …… ” as the description of the property, the same description has been omitted to be stated in Annexure-A2 sale notice. Though the provisions of Section 3(a) of the Land Acquisition Act, 2013, defines the expression “land” as land includes benefits to arise out of land, and things attached to the earth or permanently fasten to anything attached to the earth, the above definition of the land cannot be considered as a proper description of the property under the SARFAESI Act, 2002 and the Rules made thereunder. When a statute is enacted to enforce the rights of the

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Page 3 of 6

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SA No.779 of 2023

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secured creditor mandates to do a particular thing in a particular manner, it should be done in that manner. Hence the above submission of the Counsel for the defendants does not hold good.

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The Counsel appearing for the applicant submitted that the correct value of the secured asset is Rs.75,00,000/- and that in Annexure-A3, the value of the property is mentioned as Rs.55,00,000/- and that the defendants have fixed a meagre reserve price of Rs.45,00,000/- and that the sale notice is to be set aside.

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The Counsel appearing for the defendants submitted that only approximate value of the property was mentioned as Rs.55,00,000/in the OA No.550/2023 based upon the valuation report prepared on 17.12.2022 and the contention of the applicant that the reserve price has been fixed lower than the current value is incorrect and that therefore the valuation fixed for the property is correct.

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Admittedly, in Annexure-A3, copy of OA No.550/2023, which has been filed by the 1^st defendant herein against the applicant, the value of the property is mentioned as Rs.55,00,000/-. According to the defendants, the above value was fixed based upon the valuation report dated 17.12.2022. If it is so, the present market value of the property ought to have been increased from Rs.55,00,000/- to higher value. During the advancement of the argument by the Counsel for the defendants in enquiry in IA No.4486/2023, it was submitted that the realizable value of the secured asset at present was Rs.46,00,000/- as per the latest valuation report, which was to be filed in the Registry. Though the above submission was made as early as on 22.12.2023, the above said latest valuation report was not filed by the defendants. No valid and convincing reasons is stated by the side of the defendants to fix the reserve price for the property at Rs.46,00,000/-. It could be presumed that latest valuation report was not obtained by the defendants prior to fixing the reserve price for the property at Rs.46,00,000/-. Hence this Tribunal does not find any valid force in the submission of the Counsel for the defendants that the reserve price for the property has been fixed at Rs.46,00,000/based upon the present valuation report.

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The object of serving Demand Notice to the borrower is to appraise him of the classification of his loan account as NPA due to his default in repayment of the outstanding loan due and bring the secured asset for sale, if he fails to discharge the outstanding liability. In the present case at hand, the existence of the building is not mentioned in the Demand Notice, Annexure-A1. The applicant ought to have been aware of the nature of the property mortgaged by him with the secured creditor. Therefore, non-mentioning of the building in the description of the property of Annexure-A1 could not have caused any prejudice to him. Further, the applicant did not send any

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Page 4 of 6

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SA No.779 of 2023

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objection raising the aforesaid issue to the 1^st defendant bank sooner after receipt of the Demand Notice. Therefore, the applicant is not entitled to get the relief of declaration that the Demand Notice is illegal.

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In view of the foregoing reasons and discussions this Tribunal holds that since Annexure-A2 sale notice is not in compliance with Rule 8 (7)(a) of the Security Interest (Enforcement) Rules, 2002, the applicant is entitled to get the relief of declaration that the defendants are not entitled to conduct the sale of secured asset pursuant to Annexure-A2 sale notice. However, it is made clear that the defendants are at liberty to issue fresh sale notice to bring the secured asset for sale after complying with the relevant provisions of the SARFAESI Act, 2002 and the Rules made thereunder.

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In the result, S.A No.779 of 2023 stands allowed. No costs.

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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 4^th day of June 2024.

(Su. WILLYAHM)

PRESIDING OFFICER

Mj/

Page 5 of 6

SA No.779 of 2023

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

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Sl. No.	Date	Particulars
1.	07.07.2022	True copy of the Demand Notice	Annexure-A1
2.	23.11.2023	True copy of Sale Notice	Annexure-A2
3.	---	True copy of OA No.550/2023 without annexures filed by the defendants before thisTribunal.	Annexure-A3
4.	---	True copy of the photograph showing residentialbuilding oftheapplicant.	Annexure-A4

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

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Sl. No.	Date	Particulars
1.	07.07.2022	True copy of the Demand Notice U/s 13(2) ofSARFAESI Act, 2002.	Annexure-D1
2.	---	True copy of the postal acknowledgment oftheDemandNotice.	Annexure-D2
3.	13.10.2022	True copy of the symbolic possession notice.	Annexure-D3
4.	---	True copy of the newspaper publication in Malayalamdaily.	Annexure-D4a
5.	---	True copy of the newspaper publication in Englishdaily.	Annexure-D4b
6.	17.12.2022	True copy of the valuation report.	Annexure-D5

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(Su. WILLYAHM) PRESIDING OFFICER

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Mj/

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Page 6 of 6

V H Kunjumon v. Canara Bank

Case brief

What is this about?

What did the court decide?

V H Kunjumon v. Canara Bank

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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