Allowed

Ms Kumar Swajal Resort P Ltd. v. Indian Bank

DRT15 Jan 2025SA/114/2022

Case brief

AI extract

What is this about?

The Tribunal allowed the application to quash the SARFAESI action and auction sale initiated by the Indian Bank against the applicants. It found procedural irregularities in service of notices, lack of proper newspaper publication, failure to register charges with CERSAI, and disputed valuation, rendering the auction sale liable to be quashed.

What did the court decide?

The SARFAESI action, auction sale, and sale certificate are quashed; the respondent bank shall refund the auction purchaser's deposit with 10% simple interest upon handover of possession.

Ms Kumar Swajal Resort P Ltd. versus Indian Bank — Company and Corporate | DRT (2025)

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DRT, PATNA

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SA 114 of 2022 [J]

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DEBTSRECOVERYTRIBUNALPATNA

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Presiding Officer: Shri Kaushalendra Yadav

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SA- 114of 2022

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M/s Kumar SwajaL Resort (P) Ltd. (through its Director: Sri Suresh Kumar), KarmaLichak, N.H. 30, Bye Pass Road, Patna 800009.

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Suresh Kumar, S/o Late Ram Chander Mahto, 98, Purbi NandgoLa Chauraha, MaLsaLami,Patna 800 008.

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Smt. FuLwanti Devi, W/o Sri Suresh Kumar, 98, Purbi NandgoLa Chauraha, MaLsaLami,Patna 800 008.

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.........AppLicants

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Versus

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1 The Authorised Officer, Indian Bank, Patna University Branch, Ashok Rajpath, Patna 800 005.

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The Dy. GeneraL Manager, Indian Bank, ZonaL Office, Budh Marg, Opposite KotwaLi, Patna 800001.

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Sri SushiL Kumar, S/o Late Kishna Prasad, Near Amar Nath Mandir, FLat No. 403, Ganesh Tower, Kankarbagh, Patna 800026.

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--respondents

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Present:

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For the Applicant : Sh. S.K.Srivastava, Advocate For the Respondent Bank : Dr. Binod Kr. Jha, Advocate For the Respondent NO.3 : Sh. RahuL,Advocate

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Dated: 15.01.2025

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JUDGMENT

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Present appLication has been fiLed with a prayer to quash entire SARFAESI action taken against the properties of applicant aLongwith the possession notice as weLLas auction saLe heLd on 23.03.2022 by the respondent bank.

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DRT,PATNA

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SA 114 of 2022 [J]

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The brief fact of the case is that the applicants availed financial assistance to the tune of RS.l05Lacs from the respondent bank Lacs and mortgaged the property towards security of the loan. Due to default in repayment of dues of the bank, the accounts were classified as NPA on 01.04.2017.Subsequently, the respondent bank initiated SARFAESIaction against the borrower by issuing Demand Notice dated 18.04.2018u/s 13(2)of the act calling upon the borrower to make the payment of Rs.l,07,72,138/-. Thereafter, the respondent took symbolic possession of the property by issuing Possession Notice dated 21.06.2018u/s 13(4) of the SARFAESI Act. The respondent bank proceeded further and put the property on auction sale by issuing auction sale notice dated 03.03.2022fixing the date of auction sale on 23.03.2023. Aggrieved from the sale notice present SA has been filed by the applicants.

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It is submitted by the Ld. Counsel of applicant that the Demand Notice dated 18.04.2018issued u/s 13(2) issued by the Bank has only served applicant no.2 Suresh Kumar. The Demand Notice was never served to applicant no. I as well as applicant nO.3 Smt. Fulwanti Devi. Moreover, the Notice under section 13(2)of SARFAESIACT.2002 has been issued by the Authorised Officer, whereas in terms of sec 13(2) of Act 2002, it should have been issued by a secured creditor. The Possession Notice dated 21.06.2018not served on the applicants. The possession has also not been published in two leading newspapers within 07 days and thus there is violation of Rule 8 (2) of Security Interest (Enforcement) Rules, 2002. The Sale Notice has also not been served individually on each and every borrower. Intended Sale Notice dated 03.03.2023was served on the Applicants giving them 15 days time to repay the Bank's dues. This Notice cannot be treated as a Sale Notice as enclosed application as Annexure- I page 18-20. The impugned sale notice states that:

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"As per rule 6(2) and 8(6) of the Security Interest (Enforcement) Rules. 2002 framed under the Securitization and Reconstruction

DRT, PATNA

SA 114 of 2022 IJ]

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Financial Assets and Enforcement of Security Interest Act, 2002, 15days notice of intended sale is required to be given and hence we are issuing this notice.

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Please take note that this notice of 15 days and the Schedule mentioned in properties shall be sold under the Act by undersigned / Authorised Officer any time after 15days". The Sale Notice has not been drawn in the form of Appendix -IVA. It is a composite Notice contrary to the requirement of individual notice. No 30 days' Sale Notice not served on the applicants. Right of redemption was not allowed to the applicants. The Sale Notice contained mis-description of details of the property, which is built up over area of 9000 sq. feet and the floor is B+G +4, but this fact was concealed and not mentioned in the Notice for the sole purpose of undervaluing the property so that persons interested to purchase such property may not know the real construction of the property.

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The Property has been sold for a song. The Bank has not obtained Valuation of the property after its Possession and without valuation, the property has been sold. The Valuation of the Property was Rs.225.90 lacs as on 28.03.2014which is evident from the Sanction letter issued by the bank annexed with application as Annexure-2 - page 22 -28. Moreover, after sanction of loan the applicants had invested about Rs.1.00Crore in the property in the Hotel, while the Reserve Price of RS.1,40,82,300.00has been fixed by the bank and auction sold for Rs.1.40,92,300.00only on 23.03.2023. The AuctionPurchaser did not pay the consideration money in time. As per Confirmation letter dated 25.03.2022,he had to pay it within 15 days from the date of receipt of the said Confirmation letter but he paid it by 19.04.2022. Instead of forfeiting the Bid money, the Bank has issued a Sale Certificate dated 17.08.2022and also delivered physical possession of the secured assets to him on the same day, i.e. on 17.08.2022. Further, apart from the secured asset, the physical possession was taken of such part which was not

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ORT, PATNA

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SA 114 of 2022 [JI

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mortgaged with the bank. The charge of the Bank over secured assets was not registered with the CERSAI:hence sale is illegal in terms of sec. 26 D of the SARFAESIAct. 2002.

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On the contrary, ld. Counsel of the respondent bank submits that after availing the loan facilities the borrower failed and neglected to repay the amount due under facilities, hence, the accounts were classified as NPA on 01.04.2017.In order to recover outstanding dues the respondent bank initiated SARFAESIAction against the borrower & guarantor with service of demand notice u/s 13(2)dated 18.04.2018. The said demand notice was received by the applicants itself. Thereafter, the bank proceeded further and took possession of the secured asset by issuing possession notice dated 21.06.2018u/s 13(4) of the act. The possession notice was sent to the applicant through post on 21.06.2018.The possession notice was also affixed on the conspicuous part of the mortgaged property. Thereafter, the possession notice was published in two leading newspapers on 25.06.2018in The Telegraph and Dainik Bhaskar. Subsequently, the respondent bank approached the District Magistrate u/s 14of the act. Accordingly, physical possession was taken on 27.09.2019.

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Thereafter, the valuation of property has been obtained by the respondent bank from two panel valuers and the basis of the highest realizable value as assessed, Rs.1.40.82,300/- was fixed as the Reserve Price by the secured creditor. Further, the property has been put on auction sale by issuing auction sale notice dated 03.03.2022 fixing the date of auction sale on 23.03.2022. The sale notice was served upon the applicants in terms of the proviso to Rule 9(1) of the Rules r/w Rule 8'(6) of the Rules. The sale notice was affixed on the secured assets as well as published in Dainik Bhaskar and Indian Express on 05.03.2022.The auction sale was successfully conducted on 23.03.2022and that Sri Sushil Kumar, S/o Late Kishan Prasad emerged successful bidder with the highest offer of ~,"Q.92.388hRs.l.40.92.300/+ and that the sale has been ~ l\f)\

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ORT, PATNA

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SA 114 of 2022 [JI

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confirmed in his favour on 25.03.2022. The auction purchaser has requested from the bank by a letter dated 04.04.2023 requesting extension of time for deposit of remaining bid amount. Accordingly, the respondent bank vide letter dated 05.04.2022 extended the time for payment. The auction purchaser deposited the remaining amount within an extended period, which has been appropriated by the bank.

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It is further submitted that prior to auction sale, the bank had sanctioned the compromise proposal for Rs.93 lacs of the applicants vide sanction letter dated 3l.03.2021with a caveat that they would deposit the remaining amount of Rs.73 lacs (after adjustment of Rs. 20 lacs deposited upfront) within 90 days of sanction. But the applicant failed to meet the deadline, they requested for extension of time by another 03 months which also elapsed on 30.09.2021. After the failure of the OTSproposal, the Bank intimated it to the applicants by a letter dated 07.10.2021.

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It is submitted by the ld. Counsel of the auction purchasers that the auction purchasers after getting knowledge regarding e-auction sale notice published in local newspaper namely, Dainik Bhaskar on dated 03.03.2022, bonafidely participated in the auction sale held on 23.03.2022and submitted his bid. The respondent bank informed that the property has been sold to him as he has been declared as successful bidder against bid of Rs.l,40,92,300/-. Vide a letter dated 25.03.2022the respondent bank confirmed the sale in favour of the auction purchaser acknowledged that the auction purchaser has already deposited 25% of the amount as per procedure and further advised to remit the balance of 75%of the bid amount within 15days of the confirmation letter. The auction purchaser deposited the remaining 75%amount by 19.04.2022.Apart from this Rs.4,508/- has additionally deposited as an interest towards delayed payment. The delay was caused by a fatal accident of a close relative cum partner. The sale certificate was issued on 17.08.2022in favour of the auction purchaser. The physical possession has also been handed over to

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ORT. PATNA

SA 114 of 2022 [J)

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the auction purchaser. AccordingLy,the auction purchaser deposited the due Bhu Lagaan standing against the immovabLeproperty. The auction purchaser has aLsotaken eLectricity connection in his name.

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I have heard Ld. Counsel for the parties and gone through the record.

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It has been aLLegedthat the Demand Notice dated 18.04.2018issued u/s 13(2) issued by the Bank has onLyserved appLicant no.2 5uresh Kumar. The Demand Notice was never served to appLicantno. 1 as weLLas appLicantnO.3Smt. FuLwantiDevi. Moreover, the Notice under section 13(2) of 5ARFAESI ACT, 2002 has been issued by the Authorised Officer, whereas in terms of sec 13 (2) of Act 2002, it shouLd have been issued by a secured creditor. On perusaL of records it appears that the Demand Notice dated 18.04.2018was personally received by appLicant no.2 Suresh Kumar for himseLf as weLLas on behaLf of the applicant no.1and 3 aLso by appending his signature on the copy ef said demand notice. It is important to point out that the address is the same for applicant No.1,2& 3. To prove the same, the respondent bank has fiLeda copy of said demand notice with counter affidavit as annexure R/1,page 14. Under RuLe2(a) of Security Interest (Enforcement )RuLes 2002, the authorised officer may act as secured creditor aLso.

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The Possession Notice was issued on 21.06.2018and the same was sent to the appLicants through post on 22.06.2018. The copy of the postaL receipt has been fiLedwith the counter affidavit as annexure R/2 series, page 17. The possession notice was aLsoaffixed on the secured asset. 50 far as its pubLicationis concerned, the respondent bank did not discLose the name of the newspaper and date of its pubLicationin its counter affidavit. However, to prove the pubLication copy of newspaper has been annexed as R/2 series. page 18-19 wherein the respondent bank has marked the name of newspapers as Dainik Bhaskar and The TeLegraphwith the date of pubLicationas 25.06.2018but annexure R/2 series, page 20 indicates the name of newspaper as Hindustan i.e. contrary of name of newspaper marked ,g:/

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SA114 of 2022 [J)

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DRY,PAYNA

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In annexure. The respondent bank failed to file such copy of newspapers which indicates the name of newspapers and its date of publication to controvert the allegation of applicant that the possession notice has not been published within 07 days from the date of possession neither stated on affidavit.

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In reply to the allegation of undervaluation of the property for sale, it has been submitted that before putting the property for auction sale, the respondent bank obtained the valuation of the property from its registered valuer who estimated the value of property worth RS.l,40,82,300/-. The copy of valuation report has been filed with Written Argument filed by the respondent bank. This document has not been made part of the affidavit. On the other hand the applicant has annexed the copy of sanction letter dated 28.03.2014with the SA as annexure-4, which indicates that at the time of sanctioning the loan, the value of the property was estimated to worth Rs.225.90lacs. The respondent could not prove the reasons for such remarkable reduction of the value.

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Further, the respondent bank put the property on auction sale by issuing Notice of Intended Sale dated 03.03.2022fixing the date of auction sale on 23.03.2022. The applicant alleged that the above mentioned sale notice was issued to applicants giving 15 days time for repayment nor for the auction sale as there was a clause that on failing which property will be auctioned. Without issuing an auction sale notice for 30 days, the property was auctioned on 23.03.2022. The above said intended Sale Notice was sent to the applicants through post on 04.03.2022. Copies of postal receipt have been filed with the counter affidavit as annexure R/3 series, page 23. The impugned sale notice was affixed on secured asset and without affording opportunity to exercise right under S.13(8)of the Act, it was also published in Dainik Bhasker and The Indian Express on 05.03.2022.

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The property was auction sold on 23.03.2022to successful bidder

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ORT, PATNA

SA 114 of 2022 [J)

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Sri SushiL Kumar, S/o Late Kishan Prasad for Rs.1.40,92,300/-and that the saLe has been confirmed in his favour on 25.03.2022 on deposit of 25% of the auction amount. So far as deposit of the rest 75% of bid amount, the auction purchaser deposited the same by 19.04.2022. Apart from this an amount of Rs.4508/- has aLsobeen paid by the auction purchaser towards interest of deLayedpayment. From perusaL of counter affidavit of auction purchaser, it appears that auction purchaser himseLf admitted the deLayedpayment of an amount Rs.17,69,225/- on the ground of circumstances beyond controL as one of the cLosereLativecum partner had met with a fataL accident whiLethe respondent bank in its counter affidavit stated that the auction purchaser deposited the entire bid amount within time. Furthermore, the respondent bank in its written argument annexed a Letter dated 04.04.2023wherein the auction purchaser had requested to the bank for extension of time for deposit of remaining bid amount. Such fact has neither been stated in the counter affidavit either by the respondent bank or by the auction purchaser. It appears that said Letter dated 04.04.2023is manufactured and after thoughts. This document is aLsonot made part of the affidavit. The saLecertificate was issued on 17.08.2022in favour of the auction purchaser and aLso physicaL possession was deLivered to the auction purchaser on 17.08.2022.

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12.Therespondent bank aLsofaiLed to fiLe any documents to meet the allegations that the secured assets were not registered with the CERSAIin terms of sec. 26 D of the SARFAESIAct. 2002.

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13.In view of the above discussion, the present appLication succeeds. The SARFAESIAction in question including auction saLeis LiabLeto be quashed.

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ORDER

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The application SA 114 of 2022, is allowed with costs. The SARFAESIAction in question against appLicants,including auction saLe 23.03.2022and the saLecertificate dated 17.08.2022are hereby quashed. / A'""'" \b \1>

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DRT, PATNA

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SA 114 of 2022 IJI

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The respondent Bank shall refund the amount deposited by the auction purchaser with 10%simple interest, subject to the condition that the auction purchaser will hand over the vacant possession of the mortgaged property within one month from the date when the amount for refund is tendered by the respondent Bank. Thereafter the respondent Bank will hand over the possession of the property to the applicant. No interest will be payable to the auction purchaser, if the possession is not handed over to the bank within one month from the date of tender of the refund. The respondent Bank will be liable to pay compensation @ Rs.1000per day from today if the amount is not offered for refund to the auction purchaser within 30 days from the date of this order.

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~/ _f~_ [KaushalendraYadav]

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Presiding Officer

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Debts Recovery Tribunal. Patna

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Judgment signed, sealed, dated and pronounced in the open court

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on this 15 TH Dayof January, 2025.

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