Allowed

Parthas Textiles v. Karur Vysya Bank

DRT17 Feb 2025SA/197/2023

Case brief

AI extract

What is this about?

This judgment quashes auction proceedings, sale certificates, and possession orders obtained by Karur Vysya Bank under the SARFAESI Act. The court found the bank violated multiple procedural rules concerning valuation, notice affixture, property description, and timelines for sale and possession.

What did the court decide?

The auction sale, sale certificate, and possession order were set aside. The bank was directed to refund sale proceeds, pay auction purchaser charges, and initiate fresh recovery action.

Parthas Textiles versus Karur Vysya Bank — Banking and Recovery | DRT (2025)

¶1

SA Nos.167/23, 614/23 & 197/23

¶2

Fair Order

¶3

IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI DATED THIS 17^th DAY OF FEBRUARY, 2025 PRESENT: SEEMA SINHA [PR. DISTRICT & SESSIONS JUDGE - Retd] PRESIDING OFFICER

¶4

SA No. 167/2023, SA No.614/2023 & SA No.197/2023

¶5

In SA No. 167/2023 & SA No.614/2023

¶6

M/s. Parthas Textile, A registered Partnership Firm,

¶7

No. 40/12, P.W.D. Road,

¶8

Nagercoil.

¶9

Represented by its Managing Partner Smt.V. Sujatha.

¶10

Smt.V. Sujatha,W/o. S. Viswanathan, No. 410/153E, New Kumari Colony, College Road, Nagercoil – 629 001.

¶11

Mr.S. Viswanathan,S/o. Srinivasa Reddiar, No. 410/153E, New Kumari Colony, College Road, Nagercoil – 629 001.

¶12

Mr.V. Sreenath, S/oS. Viswanathan, No. 410/153E, New Kumari Colony, College Road, Nagercoil – 629 001. …..… Applicants

¶13

¶14

SA Nos.167/23, 614/23 & 197/23

¶15

-Vs-

¶16

The Authorised Officer,

¶17

Karur Vysya Bank Limited,

¶18

Asset Recovery Branch, R.S.No. 170/9, Uthankudi Village, Near Mattuthavani Bus Stand,

¶19

Madurai – 625 107.

¶20

The Branch Manager, Karur Vysya Bank Limited, Door No. 47, 1^st Floor, Court Road, Nagercoil,

¶21

Kanyakumari District – 629 001.

¶22

M/s. Prasanthi Property DevelopersPrivate Limited, No. 21/640, Prasanthi Nagar, Mangadu Post, Kollam – 691915, Kerala State. ---- Defendants

¶23

**** (3**^rd Defendant impleaded as per order in I.A.No. 2684 of 2023 in S.A.No. 167 of 2023)

¶24

Appearance of Advocates: M/s S. Suresh ---- Counsel for the Applicant M/s V. Sukumar ---- Counsel for the Defendant Bank (D1&D2) Mr. M.V. Manibabu ---- Counsel for the 3^rd Respondent/ Auction Purchaser

¶25

In SA No. 197/2023

¶26

M/s. Parthas Textile

¶27

A registered Partnership Firm,

¶28

No. 40/12, P.W.D. Road,Nagercoil.

¶29

Represented by its Managing Partner Smt.V. Sujatha.

¶30

¶31

SA Nos.167/23, 614/23 & 197/23

¶32

Smt.V. Sujatha,W/o. S. Viswanathan, No. 410/153E, New Kumari Colony, College Road, Nagercoil – 629 001.

¶33

Mr.S. Viswanathan, S/o. Srinivasa Reddiar,

¶34

No. 410/153E, New Kumari Colony, College Road, Nagercoil – 629 001.

¶35

Mr.V. Sreenath, S/o S. Viswanathan, No. 410/153E, New Kumari Colony, College Road, Nagercoil – 629 001.

¶36

…. Applicant

¶37

-Vs-

¶38

The Authorised Officer,

¶39

Karur Vysya Bank Limited,

¶40

Asset Recovery Branch, R.S.No. 170/9, Uthankudi Village, Near Mattuthavani Bus Stand,

¶41

Madurai – 625 107.

¶42

The Chief Judicial Magistrate, Nagercoil, Kanyakumari District …. Defendants

¶43

Appearance of Advocates: M/s S. Suresh ---- Counsel for the Applicant M/s V. Sukumar---- Counsel for the Defendant Bank

¶44

This Application was heard in the presence of Mr. S. Suresh, Counsel for the Applicant and Mr. V. Sukumar, Counsel for the Defendant Bank and Mr. M.V. Manibabu, Counsel for Respondent-3 in the aforesaid cases and

¶45

¶46

SA Nos.167/23, 614/23 & 197/23

¶47

upon hearing the arguments of both sides Counsels and having stood over for consideration till this day, this Tribunal delivered the following:-

¶48

COMMON ORDER

¶49

These Applications have been filed under Section 17(1) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 by

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(i) the Applicant challenging the Auction Sale Notice dated 17.04.2023 fixing the auction sale on 10.05.2023 in the SA No.167/2023 and

¶51

(ii) the Applicant challenging the physical possession taken by the Advocate Commissioner on 12.04.2023 in pursuant to the order passed by the 2^nd defendant dated 03.02.2023 made in Cr.M.P. No.239/2023 for the schedule mentioned properties and to direct the defendants to redeliver the physical possession of the properties in the SA No.197/2023

¶52

(iii) the Applicant challenging the sale certificate dated 14.09.2023 issued by the 1^st defendant in favour of the 3^rd defendant pursuant to the auction sale conducted on 10.05.2023 in the SA No.614/2023

¶53

The brief averments of the Applications filed by the Applicants are as follows:-

¶54

The Applicants submitted that, the above applications were filed challenging the Auction Sale Notice dated 17.04.2023 fixing the date of Sale on 10.05.2023, which was issued by the 1^st Defendant under

¶55

¶56

SA Nos.167/23, 614/23 & 197/23

¶57

Section 13(4) and subsequent proceedings of the Act for the properties offered as security for the alleged dues in respect of the loan facilities availed by the 1^st Applicant.

¶58

The Applicants submitted that, the 1^st Applicant is a registered

¶59

Partnership Firm and doing Textile Retail and Wholesale Garments trading in the name and style of “PARTHAS” and doing business in Kerala and Nagercoil in Tamilnadu. The Firm had originally commenced its business during the year 1978 at Nagercoil as a small retail outlet and steadily expanded the same over the years. During the year 2011, the 1^st Applicant took a construction loan from SBI to procure a suitable land and started constructing a new showroom, however the project got delayed due to political hindrances and local interference of competitors and necessary Approvals and other permission were blocked. Hence the 1^st Applicant paid-off the entire loan taken from State Bank of India and started looking after their routine business. Later on the 2^nd Defendant Bank sanctioned a fresh term loan and an overdraft facility to the tune of Rs. 800 lakhs (Rupees Eight Hundred lakhs only) initially during the year 2016 and the same was enhanced to Rs.1200 lakhs (Rupees One Thousand and Two Hundred lakhs only) during 2018 vide sanction letter dated 13.08.2018, for which the Applicants had offered their showroom

¶60

¶61

SA Nos.167/23, 614/23 & 197/23

¶62

property at Nagercoil worth Rs. 28.00 crores and Trivandrum Showroom worth Rs.12.00 crores.

¶63

Further, the Applicants submitted that, they were prompt in repayment initially and regularly paying the EMI without default till February 2021 despite adverse conditions affecting the business due intervention of 1^st wave of Covid-19 Pandemic and the prevailing conditions. Subsequently, they could not revive the business and were not able to generate sufficient money to repay the loan dues to the Defendant Bank as such the loan account was classified as NPA on 02.05.2021 during the 2^nd wave of Covid-19 pandemic period when the RBI guidelines were issued to restructure the MSME Loans which are standard as on 01.03.2020, was in force. Hence the classification of the loan account as NPA during the 2^nd wave of Covid–19 Lock Down is against the RBI guidelines and the same is illegal, hence the Defendant Bank does not have any right or jurisdiction to proceed further under the SARFAESI Act, 2002.

¶64

Further, the Applicants submitted that the Defendant Bank initiated proceedings under the SARFAESI Act by issuing the 13(2) Demand Notice dated 19.06.2021 claiming a total sum of Rs.17,31,60,777.52 as on 18.06.2021. The Applicants immediately on

¶65

¶66

SA Nos.167/23, 614/23 & 197/23

¶67

receipt of the 13(2) Demand Notice, approached the Defendant Bank and sought for renewal/restructuring of the loan account. It is pertinent to point out here that due to Covid-19 the RBI had announced restructure package to MSME sector which was not considered by the Defendant Bank.

¶68

Further, the Applicants submitted that, in the meantime, the 1^st Defendant Bank took Possession of the property by issuing the Possession Notice dated 06.10.2021 under section 13 (4) of the SARFAESI Act, 2002. However the Possession Notice was not affixed on the conspicuous part of the properties nor the same was published in two leading news papers as contemplated under the Act and Rules.

¶69

Further, the Applicants submitted that, they have requested time to clear the overdues and to regularize the loan account but the 1^st Defendant Bank unmindful of the same had issued an Auction Sale Notice dated 17.06.2022 fixing the date of Sale on 27.07.2022. In the meantime the Applicants had approached the 1^st Defendant Bank for One Time Settlement, which was not considered by the 1^st Defendant Bank and they have proceeded with the Auction Sale. Aggrieved over the same the 1^st Applicant filed a Writ Petition in W.P.(MD) No. 17045 of 2022 before the Hon’ble High Court and the Hon’ble High Court granted

¶70

¶71

SA Nos.167/23, 614/23 & 197/23

¶72

stay on condition that the 1^st Applicant should deposit a sum of Rs.3,00,00,000/- vide order dated 01.08.2022 and the same was complied by the 1^st Applicant. Thereafter when the above Writ Petition was listed for hearing on 09.11.2022 it was informed to the Hon’ble High Court that the Auction Sale had not taken place on the Schedule date. Accordingly the Writ Petition was closed directing the 1^st Defendant Bank to consider the OTS proposal of the Applicants.

¶73

Further, the Applicants submitted that, 1^st Defendant Bank once again issued the Auction Sale Notice dated 26.12.2022 fixing the date of Sale on 20.01.2023. Aggrieved over the same the 4^th Applicant filed an Application before this Hon’ble Tribunal in S.A.No. 18 of 2023 and this Hon’ble Tribunal vide order dated 13.01.2023 granted conditional stay not to confirm the sale, on condition that the Applicant should deposit a sum of Rs. 8.00 Crores to the Defendant Bank, out of which a sum of Rs.4.00 Crores shall be paid, on or before 10.02.2023 and another sum of Rs. 4.00 Crores shall be paid, on or before 10.03.2023 to the Defendant Bank.

¶74

Further, the Applicants submitted that, the Applicants were taking steps and arranging funds to comply with the conditional order passed by this Hon’ble Tribunal. In the meantime the 1^st Defendant Bank

¶75

¶76

SA Nos.167/23, 614/23 & 197/23

¶77

suppressing the stay order granted by this Hon’ble Tribunal had approached the Learned Chief Judicial Magistrate, Nagercoil under section 14 of the SARFAESI Act, 2002 in Crl.M.P.No. 239 of 2023 and the same was ordered on 03.02.2023 and Advocate Commissioner was appointed for taking physical possession of the property and the Advocate Commissioner also issued notice fixing the date for taking physical possession of the property on 13.03.2023. Subsequently, Physical Possession was taken by the Advocate Commissioner on 12.04.2023, as per the order of Hon’ble CJM Court, Nagercoil and which was challenged in SA No.197/2023.

¶78

In view of the above developments, all the efforts taken by the Applicants to mobilize funds and to comply the order passed by this Hon’ble Tribunal failed as persons who had promised to fund the Applicants went back from their promise on seeing the above developments. Hence the Applicant therein was not able to comply with the conditional order passed by this Hon’ble Tribunal.

¶79

Further, the Applicants submitted that, taking advantage of the situation the Defendant Bank had issued E-Auction Sale Notice dated 22.02.2023 fixing the date of sale on 15.03.2023. However the said Auction Sale Notice was not affixed on the conspicuous part of the

¶80

¶81

SA Nos.167/23, 614/23 & 197/23

¶82

property nor the same was properly published in two leading news papers as contemplated under the Rules. Further the 1^st Defendant Bank had fixed the Reserve Price as Rs. 12,70,00,000/- (Rupees Twelve Crores and Seventy Lakhs only) for the 1^st item of the property at Nagercoil and Rs. 5,70,00,000/- (Rupees Five Crores and Seventy Lakh only) for the 2^nd item of the property at Trivandrum. Whereas the present market value of the properties are more that Rs. 40,00,00,000/- (Rupees Forty Crores) The above fact will clearly prove that the properties have been under valued by the 1^st Defendant Bank. Aggrieved over the order passed by the Learned Chief Judicial Magistrate under Section 14 of the Act dated 03.02.2023 and the Auction Sale Notice dated 22.02.2023 the 1^st Applicant filed a Writ Petition in W.P.(MD)No.5372 of 2023 before the Hon’ble Madurai Bench of the Madras High Court and the Hon’ble High Court vide order dated 10.03.2023 granted stay on condition that the Petitioner therein should deposit a sum of Rs.3,00,00,000/- (Rupees Three Crores Only) to the 1^st Defendant Bank on or before 30.03.2023.

¶83

Further, the Applicants submitted that with great difficulty the Applicants find out a prospective buyer namely M/s.Kasal (India) Pvt. Ltd., who can purchase the properties for a sum of Rs. 30.00 crores (Rupees Thirty Crores only) and entered into an Business Transfer

¶84

¶85

SA Nos.167/23, 614/23 & 197/23

¶86

Agreement (Memorandum of Understanding) with the prospective buyer on 29.03.2023 and prospective buyer submitted a letter to the 1^st Defendant Bank requesting for sale of the property under private treaty. The prospective buyer identified by the Applicants met the 1^st Defendant Bank Officials on the same day and they promised to consider the same. However the 1^st Defendant Bank did not cooperate with the Applicants for selling the property under private treaty and when the above Writ Petition was listed before the Hon’ble High Court on 05.04.2023 and the Advocate Commissioner appointed by the Learned Chief Judicial Magistrate took physical possession of the Nagercoil property on 12.04.2023 and handed over the same to the 1^st Defendant Bank. While executing the warrant for taking physical possession of the property, the Advocate Commissioner had not followed the procedures properly and the Panchanama drawn was not in accordance with law.

¶87

Further, the Applicants submitted that, taking advantage of the situation, the 1^st Defendant Bank had issued the impugned E-Auction Sale Notice dated 17.04.2023 fixing the date of sale on 10.05.2023. However the said Auction Sale Notice was not affixed on the conspicuous part of the property nor the same was properly published in two leading news papers as contemplated under the Rules. Further the Defendant

¶88

¶89

SA Nos.167/23, 614/23 & 197/23

¶90

Bank had undervalued the property and fixed lowest reserve price. Aggrieved over the same the Applicants have preferred the present application among the following, the other

¶91

Grounds raised by the Applicants:

¶92

a) The Auction Sale Notice dated 17.04.2023 fixing the date of sale on 10.05.2023, issued under section 13 (4) of the SARFAESI Act, 2002 by the 1^st Defendant is arbitrary, unreasonable and the same is not legally sustainable and is liable to be set aside vide SA No.167/2023.

¶93

b) The Sale Certificate dated 15.09.2023, issued by the Defendant

¶94

Bank in favour of the 3^rd defendant, in pursuant to the Auction sale conducted on 10.05.2023 is arbitrary, unreasonable and the same is not legally sustainable and is liable to the setaside vide SA No.614/2023.

¶95

c) The Physical Possession taken by the Advocate Commissioner illegally on 12.04.2023 in pursuant to the Hon’ble CJM, Nagercoil order dated 03.02.2023 made in Crl.MP No.239/2023 is arbitrary, unreasonable and the same is legally sustainable and liable to setaside vide SA No.197/2023.

¶96

¶97

SA Nos.167/23, 614/23 & 197/23

¶98

Other common grounds raised by the Applicants:

¶99

a) The impugned action of the Defendants suffers from errors apparent on the face of the record and hence the same is liable to be set aside/quashed by this Hon’ble Tribunal.

¶100

b) The 1^st Defendant ought to have seen that the classification of the Applicant loan accounts as NPA during the Covid –19 Lock Down is illegal, especially when the Applicants paid the EMI regularly till the intervention of Covid-19 Pandemic. Hence the 1^st Defendant Bank does not have right to classify the loan account as NPA as per RBI guidelines. Hence the classification of the loan account of the Applicants as NPA is bad in law and the same is not legally sustainable.

¶101

c) The 1^st Defendant ought to have seen that the Applicants are eligible for renewal/restructuring of the loan account in view of the RBI guidelines issued during Covid – 19 Pandemic.

¶102

d) The 1^st Defendant ought to have seen that the Possession of the properties by issuing the Possession Notice dated 06.10.2021 under section 13 (4) of the SARFAESI Act, 2002. However, the 1^st Defendant had not affixed the Possession Notice on the conspicuous part of the

¶103

¶104

SA Nos.167/23, 614/23 & 197/23

¶105

properties, nor the same was published in 2 leading news papers as contemplated under the Rules.

¶106

e) The 1^st Defendant Bank ought to have seen that the Applicants are

¶107

not chronic defaulters and they have paid the EMI regularly till February 2021 without any default of even single payment and only due to covid – 19 pandemic the present situation occurs.

¶108

f) The 1^st Defendant ought to have seen that the Applicants had paid a sum of Rs. 3.00 crores pursuant to the order of the Hon’ble High Court and the OTS proposal submitted by the Applicants for a sum of Rs. 17.00 crores on 05.08.2022 was mechanically rejected by the 1^st Defendant Bank on the same day in a haste manner without assigning any proper reason.

¶109

g) The 1^st Defendant pursuant to the order of the Learned Chief Judicial Magistrate had taken physical possession of the 1^st item of the property, while doing so the 1^st Defendant had violated all the procedures contemplated under the Act and Rules.

¶110

h) The 1^st Defendant ought to have seen that with great difficulty the Applicants found a prospective buyer namely M/s. Kasal (India) Pvt. Ltd., who could purchase the properties for a sum of Rs. 30.00 crores (Rupees

¶111

¶112

SA Nos.167/23, 614/23 & 197/23

¶113

Thirty Crores only) and entered into an Business Transfer Agreement (Memorandum of Understanding) with the prospective buyer on 29.03.2023 and submitted a letter to the 1^st Defendant Bank requesting for sale of the property under private treaty to the prospective buyer identified by the Applicants.

¶114

i) The 1^st Defendant failed in their duty to give consent for private treaty in terms of Rule 8 (5) & (6) of the Security Interest (Enforcement) Rules 2002, since the Applicants had identified a better purchaser for a sum of Rs. 30.00 crores, whereas the outstanding dues of the Bank is only Rs. 18.00 crores (including the payment of Rs. 3.00 crores made by

¶115

the Applicants) and the Reserve Price fixed by the 1^st Defendant Bank is also only Rs. 18.40 Crores.

¶116

j) The 1^st Defendant ought to have seen that by giving consent to the private treaty, no prejudice will be caused to the 1^st Defendant Bank as they are getting their entire dues wiped out and the Applicants are also benefitted out of the same.

¶117

k) The 1^st Defendant erred in under valuing the property and fixing the lowest upset price to suit their convenience. Further the Defendant Bank is doing excessive execution which is not permissible in law.

¶118

¶119

SA Nos.167/23, 614/23 & 197/23

¶120

l) The 1^st Defendant ought to have seen that the Auction Sale Notice dated 17.04.2023 fixing the date of sale on 10.05.2023, is not in pursuance of Rules 8 (6) and 9 (1) as the same does not contain the statutory period mentioned in the Rules.

¶121

m) The 1^st Defendant ought to have seen that the Auction Sale Notice dated 17.04.2023 was not affixed on the conspicuous part of the property nor the same was properly published in two leading news papers as contemplated under the Rules.

¶122

n) In any event the action of the Defendant Bank is unlawful, unreasonable, without jurisdiction and against principles of natural justice and the same is liable to be setaside.

¶123

Accordingly, the Applicant prayed for the following reliefs:

¶124

To set aside the entire SARFAESI Proceedings initiated by the Defendant Bank ending up with the issuance of E-Auction Sale Notice dated 17.04.2023 and sale held on 10.05.2023 and subsequent issuance of sale certificate by the Authorized Officer to the Auction Purchaser etc., and the physical possession taken by the Advocate Commissioner on 12.04.2023 in pursuant to the order passed by the Ld. CJM dated 03.02.2023 made in Cr.M.P. No.239/2023 for the schedule mentioned properties and to direct the defendants to redeliver physical possession of

¶125

¶126

SA Nos.167/23, 614/23 & 197/23

¶127

the properties and pass such other order or orders which this Hon’ble Tribunal may deem fit and proper and thus render justice.

¶128

b) To pay the costs of the Applications

¶129

SCHEDULE OF PROPERTIES

¶130

Property No.1

¶131

Kanyakumari District, Kanyakumari Registration District, Kanyakumari Registrar’s Office Jurisdiction – Nagercoil SRO, Agastheeswaram Taluk, Nagercoil Village, N.M.C. Ward No. 40- Santhan Chettivilai Road – Resurvey No.P-11/30 having full extent of 12.55.677 cres of land correlated to Old Survey No. 1636-B/1, with 35 cents of land out of which excluding the portion of the land in the southern extremity taken for road and the remaining are which is now as per the sold ReSurvey No.P-11/30 having a full extent of 12.55.677 Ares equaling 31.015 cents equaling 1255.677 square meters of land and the old filed building bearing N.M.C.No. 40/12 and the double storied terraced building bearing N.M.C. No. 40/12-A, 40/12-B, 40/12-C, 40/12-C-1, 40/12-C-2 and 40/12-C-3 and the electric and municipal water connections and the well and the compound walls situated in the sold land.

¶132

¶133

SA Nos.167/23, 614/23 & 197/23

¶134

Patta No. 6863, Electricity Connection Nos. 122-241-181, 122-241-182, 122-241-183, 122-241-278 and 111-227-247, Municipal Water connection No. 40/150.

¶135

Measurements:-

¶136

East to West on the North 163 Feet East to West on the South 149.50 Feet North to South on the West 98 Feet North to South on the East 75 Feet

¶137

Boundaries of the above Property:-

¶138

North : Nagara Manayidam West : Santhan Chettivilai Road (PWD Office Road), South : Ganesapuram Road, East : Re-Survey Nos.P-11/33 & 35

¶139

Property No. 2

¶140

Trivandrum Registration District, Trivandrum Sub-Registrar Office,

¶141

Trivandrum Taluk, Thycaud Town, Kerala State in Ward No. 38, Block No. 122 Old S.No. 2350/34,35,37,74,75,76 & 77 and New S.No. 74 an extent of 13.24 Ares and commercial building standing therein

¶142

Boundaries of above property:-

¶143

East : Property of Arumugham, Nadarajan & Karunakaran Nair

¶144

¶145

SA Nos.167/23, 614/23 & 197/23

¶146

North : Chenthitta Lane, West : Property of Shankar, Rama Thilakam & S. Parvathy, South : Property of Sethumadhavan.

¶147

(In SA No.197/2023, Property No.1 alone challenged by the Applicants)

¶148

Consolidated typeset of Documents filed by the Applicants:

¶149

Sl.No.	Date	Details of Documents
1.	17.09.2016	InformalSanction Letter
2.	13.08.2018	Renewal/Enhanced Sanction Letter
3.	19.06.2021	13(2)DemandNotice
4.	06.10.2021	13(4)Possession Notice
5	03.02.2022	Order passed by the Learned CJM under section 14oftheACT.
6.	05.08.2022	OTS proposalgivenby theApplicants
7.	05.08.2022	Letter from the 1^stDefendant rejecting the OTS offer
8.	09.11.2022	Finalorder in WP(MD)NO.17045/2022
9.	13.01.2023	InterimOrder inSA No.18/2023
10.	03.02.2023	Orderpassed byLearned CJM
11.	27.02.2023	Valuation Report
12	04.04.2023	Letter given by the Applicants for private treaty to the1^stDefendantBank
13.	29.03.2023	Business Transfer Agreement entered into between theApplicants andM/s.Kasal IndiaPvt.Ltd.,
14	04.04.2023	Letter given by the Applicants for private treaty to the1^stDefendantBank
15.	05.04.2023	FinalOrder in WP(MD)No.5372/2023
16	12.04.2023	Physical Possession of the 1^stproperty was taken by the Advocate Commissioner and handed over to the1^stDefendantBank
17	17.04.2023	Auction Sale Notice issued by the 1^stDefendant Bank fixing the date ofSale on 10.05.2023
18.	28.04.2023	Advocate Commissioner Report for taking physical possession
19	10.05.2023	AllegedAuctionSale conducted by the1^st

¶150

¶151

SA Nos.167/23, 614/23 & 197/23

¶152

		DefendantBank in favourofthe 3^rdDefendant
20	15.09.2023	Sale Certificate issued by the 1^stDefendant in favourofthe 3^rdDefendant
21	22.09.2023	Registration of Sale Certificate in favour of the 3^rd Defendant
22.		Statement of Accounts

¶153

Citations referred by Applicants:

¶154

The Hon'ble Division Bench of the Madras High Court in the judgement of M/s. Palpap Ichinichi Software ... vs M/S. Indian Bank on 16 September, 2011 has held as follows :-

¶155

" ... 13. The core question is whether the sale was conducted in a fair and transparent manner, fixing the fair market value and upset price strictly in accordance with the provisions of SARFAESI Act.

¶156

Hon'ble Division Bench of the Madras High Court in the case of Hemalatha Ranganathan vs The Authorised Officer, Indian Bank rendered on 13 August, 2012 which read as follows :-

¶157

48. Since the Authorised Officer of the Bank violated the mandatory provisions of the SARFAESI Act and the Rules made thereunder and suppressed material particulars and made false statements to take possession of property stating that it was sold to Mr.S.Manisekaran not withstanding the fact that he was not a bidder and obtained an order against a dead person, the impugned order passed by the learned Chief Metropolitan Magistrate on such factual background also must be set aside.

¶158

¶159

SA Nos.167/23, 614/23 & 197/23

¶160

Judgement of the Hon'ble High Court and this Hon'ble Tribunal vide order dated 05.03.2015 made in L.Noel Raj -Vs- Authorised Officer, State Bank of Travancore and Another reported in 2015 (2) DRTC 118 allowed the Appeal and setaside the Auction Sale in the said case.

¶161

DRT, Madurai orders in SA No.293/2018 – M/s Amutha Sweets Bakery and Snacks park Vs The Authorized Officer, TMB – Sale Notice property details and sale certificate property details are different – Sale is setaside

¶162

Hon’ble DRAT, Kolkata in Appeal NO.134/2018 (Arising out of SA No.79/2017 in DRT-1, Hyderabad) in Nampally Kishan Vs Telengana Grameena Bank – No date mentioned in the affixture of possession notice and sale notice in the conspicuous part of the premises – Appeal allowed.

¶163

Hon'ble Division Bench of the Andhra High Court in the case of Smt P. Sudha Lakshmi Vs Bank of India,, Boduppal Branch – Non compliance of Rule 8(6) and Rule 9(1) of the Act – sale is setaside

¶164

Hon’ble Division Bench of Telengana High Court Judgement – Sri Sai Annadatha Polymers Vs The Canara Bank on 27.06.2018 – Non compliance of Rule 8(6) and Rule 9(1) – No clear cut 30 days – Sale is setaside

¶165

3. On the other hand, the Defendant Bank appeared and filed their Reply Statement /Written Arguments along with the typed-set of papers.

¶166

The Defendant Bank stated that, initially in the year of 2016, the 1^st applicant through other applicants borrowed the Secured Over Draft

¶167

¶168

SA Nos.167/23, 614/23 & 197/23

¶169

loan facility to the tune of Rs. 6,00,00,000/- (Rupees Six Crores only) and TLO (Term Loan) to the tune of Rs. 8,00,00,000/- (Rupees Eight Crores only) from the Bank. They had executed necessary security upon the subject property in favour of the bank. The loan was sanctioned vide letter dated 29.09.2016 by the 1^st defendant bank. Further, in the year of 2018, the 1^st applicant requested to enhance the secured over draft loan facility to the tune of Rs. 8,00,00,000/- (Rupees Eight Crores Only) from the bank. The enhanced amount was sanctioned vide letter dated 11.05.2018 by the 1^st defendant bank. Further, in the year of 2018, the applicant requested to enhance the secured over draft loan facility to the tune of Rs. 12,00,00,000/- (Rupees Twelve Crores only) and same was sanctioned vide letter dated 13.08.2018 by the 1^st defendant bank. The applicants had also availed the Covid-19 credit facility i.e., Guaranteed Emergency Credit Line to the tune of Rs. 2,50,00,000/- (Rupees Two Crore Fifty Lakhs only) from the bank. The said enhancement was sanctioned vide letter dated 02.07.2020 by the 1^st defendant bank. The applicants and guarantors defaulted in repayment of the said loan facility. Hence their loan account was classified as Non-performing Assets on 02.05.2021. The demand notice under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act of 2002 (the SARFAESI Act) dated 19.06.2021 was issued to the applicants and guarantor. Even thereafter the applicants did not repay the outstanding loan amount.

¶170

Further, defendant Bank has stated that, the statutory Possession notice dated 06.10.2021 under the SARFAESI Act was issued and the same was delivered upon the applicants. Further, possession

¶171

¶172

SA Nos.167/23, 614/23 & 197/23

¶173

notice was also published in the vernacular newspaper namely the New Indian Express – English (Tirunelveli) Dinamani – Tamil (Tirunelveli), The New Indian Express – English (Tiruvananthapuram) and Mangalam – Malayalam (Tiruvananthapuram). The said possession notice dated 19.06.2021 was duly served by affixture in the premises/schedule of property/ secured assets also. Even thereafter the said applicant did not repay the outstanding loan amount.

¶174

Further, the defendant bank had issued the 1^st E-Auction sale notice dated 17.06.2022 against the schedule of property. The applicant filed W.P. (MD) No. 17045 of 2022 before the Madurai bench of Madras High Court and Obtained the conditional order. The bidders participated in the auction sale process and due to conditional order of the high Court, the bidders withdrew the bid. Hence the sale did not materialized. The Hon’ble High Court passed order on 09.11.2022 with remarks that, this Court cannot issue any positive direction to the respondent – Bank to consider the OTS proposal. It is purely the discretion of the respondentBank to consider such request of the petitioner purely on its own merits and accordance with the RBI norms in this regard. With the above observation, this Writ Petition is closed. No costs. Consequently, connected miscellaneous petitions are closed.

¶175

Further, the Bank had issued the 2^nd E-auction sale notice dated 26.12.2022 against the schedule of property. The 3^rd applicant filed SA No. 18 of 2023 before this Debt Recovery Tribunal, Madurai. By an order dated 13.01.2023, this Debt Recovery Tribunal, Madurai granted interim conditional order for the sum of Rs.8 crores in two instalments.

¶176

¶177

SA Nos.167/23, 614/23 & 197/23

¶178

In the mean time, the Chief Judicial Magistrate, Kanyakumari District at Nagercoil passed an order and appointed an Advocate commissioner (Adv. Perumal) for taking physical possession of the property on 03.02.2023. The applicant chose to file W.P (MD) No.5372 of 2023 before the Madurai Bench of Madras High Court challenging the order passed by Chief Judicial Magistrate, Nagercoil in Cr.M.P.No.239 of 2023 and the 3^rd Auction sale notice dated 22.02.2023. In the said writ petition. they have also obtained conditional order but failed to comply the said condition. The Hon’ble High Court dismissed the writ petition on 05.04.2023.

¶179

Further, defendant bank stated that, thereafter the advocate commissioner had taken physical possession of the property/secured asset on 12.04.2023 and handed over the same to the bank. In so far as the 3^rd E auction notice is concerned, no bidders participated and consequently the sale notice became infructuous.

¶180

After that, defendant bank had issued the 4^th E-auction notice dated 17.04.2023. The same was duly served to the applicants and also published in the newspapers namely Hindu-English (Tirunelveli), HinduTamil (Tirunelveli), The Hindu-English (Tiruvananthapuram) and Mangalam-Malayalam (Tiruvananthapuram). Similar to the earlier notice all the due process of law was followed by the bank and auction was scheduled on 10.05.2023 fixing the Reserve price of Rs.12,70,00,000/-

¶181

Further, as per defendant bank, the applicants challenging the said 4^th E-auction notice filed SA No.167 of 2023 before the Debt Recovery Tribunal, Madurai. This Tribunal passed the conditional order dated 09.05.2023 with a condition to deposit a sum of Rs.8 crores in two

¶182

¶183

SA Nos.167/23, 614/23 & 197/23

¶184

installments out of which a sum of Rs.4.00 Crores shall be paid, on or before 06.06.2023 and another sum of Rs.4.00 Crores shall be paid on or before 04.07.2023 to the Defendant Bank. The applicant failed to comply the said conditional order, as directed by this Hon’ble Tribunal, and consequently the bank had confirmed the auction sale in favour of the 3^rd defendant.

¶185

Further, defendant bank has stated that, the auction purchaser requested the authorized officer to grant time for making payment. The authorized officer of the bank granted time as per provisions under Rule 9(4) of the Security Interest Rules and accordingly the 3^rd defendant paid the total sale price of Rs.12,75,00,000/- Thereafter the Sale certificate dated 15.09.2023 was issued in favour of the 3^rd defendant and the same was also registered before the Sub-Registrar (Joint-I), Kanyakumari on 22.09.2023.

¶186

In the mean time, the applicant filed WP(MD) No.25123 of 2023 before the Madurai Bench of Madras High Court for directing the District Registrar, Registration Department, Kanyakumari for taking action under Registration Act for registering the above said sale certificate which was also dismissed on 12.12.2023.

¶187

In these circumstances the present SARFAESI application was filed by the applicants before this Hon’ble Tribunal for an extraneous consideration.

¶188

Typeset of documents filed by the Defendant Bank:

¶189

S.No.	Date	Description of Documents
1	29.03.2016	BuildingPlan Approval
2	19.09.2016	Valuation Report ofthe Subject property

¶190

¶191

SA Nos.167/23, 614/23 & 197/23

¶192

3	23.09.2016	Sanction Letter issued by theApplicantBank
4	29.09.2016	Sanction Letter issued by theApplicantBank
5	13.08.2018	Sanction Letter issued by theApplicantBank
6	02.07.2020	Sanction Letter issued by theApplicantBank
7	08.09.2020	Valuation Report ofthe Subject property
8	19.06.2021	DemandNoticeissued underSARFAESI Act
9	06.10.2021	Possession Notice issued by the respondent bank underSARFASI Act
10	10.10.2021	Possession Notice published in Dinamani Newspaper (Tamil)– Tirunelveli
11	10.10.2021	Possession Notice published in The New Indian ExpressNewspaper(English)– Tirunelveli
12	10.10.2021	Possession Notice published in Mangalam Newspaper(Malaylam)– Thiruvanathapuram
13	10.10.2021	Possession Notice published in The New Indian Express (English)– Thiruvanathapuram
14	09.06.2022	Valuation Report ofthe Subject property
15	09.06.2022	Valuation Report ofthe Subject property
16	17.06.2022	1^stE – Auction Sale Notice issued by the respondent bank
17	05.08.2022	OTS1^strequest by the applicant
18	05.08.2022	OTS Rejection by the Respondent Bank along with Postal Receipts acknowledgement Card
19	04.11.2022	OTS 2^ndrequest by the applicant bank
20	09.11.2022	Order in W.P.(MD)No. 17045 of 2022 passed by Maduraibenchof MadrasHighCourt
21	22.11.2022	OTS Rejection by the respondent bank along with postal receipts acknowledgement Card
22	26.12.2022	2^ndE – Auction Sale Notice issued by the respondent bank
23	27.12.2022	OTS 3^rdrequest by theapplicant bank
24	28.12.2022	OTS Rejection by the respondent bank along with postal receipts acknowledgement Card
25	13.01.2023	Order in SA No.18 of 2023 passed by this Hon’ble Court
26	22.02.2023	3^rdE – Auction Sale Notice issued by the respondent bank
27	17.03.2023	Valuation Report ofthe Subject property
28	05.04.2023	Order in W.P.(MD)No. 5372 of2023 passed by

¶193

¶194

SA Nos.167/23, 614/23 & 197/23

¶195

		Maduraibenchof MadrasHighCourt
29	17.04.2023	4^thE – Auction Sale Notice issued by the respondent bank
30	17.04.2023	E – Auction Sale Notice affixed in the subject property
31	20.04.2023	E-Auction Sale Notice published in the Hindu (English)– Tirunelveli
32	20.04.2023	E-Auction Sale Notice published in the Hindu (Tamil)– Tirunelveli
33	20.04.2023	E-Auction Sale Notice published in the Hindu (English)– Thiruvanathapuram
34	20.04.2023	E-Auction Sale Notice published in the Mangalam (Malayalam)– Thiruvanathapuram
35	08.05.2023	Copy ofS.A.No.167/2023field by theapplicant
36	09.05.2023	Order passed in S.A. 167 of 2023 by this Hon’ble Court
37	26.05.2023	Copy ofS.A.No.197/2023field by the applicant
38	20.06.2023	Auction Purchaser made a extension of time request to the1^st and 2^ndDefendants
39	22.09.2023	Sale Certificateissued by the defendantBank
40	26.10.2023	Copy ofS.A.No.614/2023field by theapplicant
41	12.12.2023	Order in W.P (MD) No. 25123 of 2023 passed by this Hon’bleHighCourt of Madurai
		Additional Documents filed by the D/B
42	06.10.2024	Possession Notice affixedinthe subject property
43	17.04.2023	SalePamphlet affixedinthe subject property
44	17.04.2023	SaleNotice affixedinthe subject property
45	07.06.2023	Sale Confirmation issued by the defendantBank
46	22.06.2023	The defendant bank granted extension to the auction purchaser

¶196

Citations referred by the Defendant Bank:

¶197

(i) The Applicant’s right of redemption extinguished on the date of publication of 1^st E-Auction sale notice dated 17.06.2022. The said proposition was upheld by the Hon’ble Supreme Court in CELIR LLP –

¶198

¶199

SA Nos.167/23, 614/23 & 197/23

¶200

vs- Bafna Motors (Mumbai) Private Limited and others, reported in (2024) 2 SCC 1. The operative portion of the judgement is as follows:-

¶201

“110.3 In accordance with the unamended Section 13(8) the SARFAESI Act, the right of the borrower to redeem the secured asset was available till the sale others. transfer of such secured asset.”

¶202

Further, the 3^rd defendant (Auction Purchaser) also appeared and filed his reply along with typeset of papers in SA No.167/2023 & 614/2023 wherein he has stated that, M/s. Prasanthi Property Developers Private Limited was impleaded as per the order of this Tribunal vide order in I.A. No. 2684/2023 dated 07.12.2023 as 3rd defendant. He has denied all the allegations and contentions raised by the applicants in their application and further submitted that the applicants are put to strict proof of the same.

¶203

Further, 3^rd defendant has stated that, his Company is carrying on Real Estate Business. As per the Auction Sale Notice dated 17.04.2023 issued by the Defendant Bank published in the newspaper namely Hindu, they had applied and participated in the auction sale conducted on 10.05.2023. The defendant bank had confirmed the auction sale in favour of his company and he had requested the authorized officer to grant time for making payment, as provided under Rule 9(4) of the Security Interest (Enforcement) Rules and the authorised officer also granted time. The 3^rd defendant had remitted the total sale price of Rs.12,75,00,000/- to the bank and thereafter, the bank issued Sale Certificate dated 15.09.2023 in their favour and the said Sale Certificate was also registered before the Sub-Registrar (Joint-I), Kanyakumari on 22.09.2023 as Document No. 3885/2023.

¶204

¶205

SA Nos.167/23, 614/23 & 197/23

¶206

Further, the defendant bank had complied with the procedures and followed the auction proceedings as contemplated in the SARFAESI Rules. Hence, the present application filed by the applicants had become infructuous and vexatious, since the sale process had attained finality. In these circumstances, the entire averments stated by applicant in the application are false and baseless.

¶207

Citations quoted by the 3^rd Defendant (Auction Purchaser):

¶208

The grounds taken by the applicants are irrelevant and deserve no merit consideration. The Hon'ble Supreme Court has held in "Celir LLP Vs Bafna Motors (Mumbai) Private Limited & Others in the Civil Appeal Nos. 5542 - 5543/2023 that the "Borrowers who fail to pay Dues before Auction Notice cannot Redeem Mortgage under SARFAESI Act".

¶209

Typeset filed by the 3^rd defendant (Auction Purchaser)

¶210

S.No.	Date	Description
1.	22.06.2023	Extension of time granted by the Defendant
		Bank
2.	22.09.2023	Sale Certificate registered in favour of the
		Auction Purchaser

¶211

5. On the basis of the above pleadings, the following issues have been framed:

¶212

(i) Whether actions initiated by the Defendant Bank in respect of the schedule mentioned properties under the SARFAESI Act are illegal, void and contrary to the settle principle of Law?

¶213

¶214

SA Nos.167/23, 614/23 & 197/23

¶215

(ii) Whether the applicant is entitled for relief as claimed for?

¶216

Arguments of both the parties were heard.

¶217

During arguments, the applicants have pointed out to this Hon’ble Tribunal that the consolidated Common Typed set of papers filed by the 1st Defendant Bank dated 30.07.2024 does not contain any proof of affixture of the possession Notice dated 06.10.2021. Further it is specifically argued that the sale notice was not affixed on the conspicuous part of the property and the photographs filed along with the typed Set by the 1^st defendant bank regarding affixture of Auction sale notice dated 17.04.2023, it was only an affixture of Pamphlet and not the Auction sale Notice. It is further argued that even though the 3rd defendant auction purchaser had requested for extension of time for payment of the remaining 75% of the sale consideration vide letter dated 20.06.2024, no extension was granted by the defendant Bank in writing as contemplated under Rule 9 (4) and no documentary proof was filed by the 1st defendant bank in this regard and in the absence of same the Auction sale is null and void.

¶218

The applicants stated that, Defendant Bank has again filed another additional type set of papers during the course of final hearing with the following documents:

¶219

(i) Photographs showing affixture of Possession Notice dated 06.10.2021 in the property.

¶220

(ii) Photographs showing affixture of sale Pamphlet in the property.

¶221

¶222

SA Nos.167/23, 614/23 & 197/23

¶223

(iii) Photographs showing affixture of sale notice dated 17.04.2023 in the property.

¶224

(iv) Sale confirmation letter issued by the defendant bank in favour of the 3rd defendant.

¶225

(v) Letter by the Defendant Bank granting extension of time to the 3^rd defendant auction purchaser.

¶226

Further, the Applicant stated that, in the above documents the serial No. 1 (D/B additional typeset Page Nos. 1 & 2) Photographs showing affixture of possession notice dated 06.10.2021 is not clear and legible and the same does not contain the date. So for as document at serial no. 2 is concerned it was already filed along with the consolidated common type set of papers dated 30.07.2024 and it was specifically argued by the applicants counsel on 23.10.2024 that it was only an affixture of pamphlet and not the Auction Sale Notice. Hence in order to overcome, the 1^st defendant had created and fabricated a new document as it was an after thought. With regard to serial no.3 Document (D/B additional typeset page nos. 6 to 8) claiming that the affixture of the Auction sale notice dated 17.04.2023 was done on the same day and filed a photograph. It is further argued that, the 1^st defendant bank is playing fraud on the court by producing fabricated documents which is evident from the fact that the person standing in the photographs in the pamphlet and the auction sale notice affixture are different persons even though both were done simultaneously on the same day. The above fact will clearly prove that the Serial No. 3 document is a created document as an afterthought after hearing the arguments of the applicant’s counsel on 23.10.2024 and to overcome the lacuna on their part the 1^st

¶227

¶228

SA Nos.167/23, 614/23 & 197/23

¶229

defendant had created this document and filed as if it was taken on 17.04.2023.

¶230

Further, the applicant argued that, the document at Serial No.5 (D/B additional typeset Page Nos. 14 & 15) granting extension of time for payment of 75% of the balance amount to the 3rd defendant Auction purchaser is concerned it is an another example for classic fraud and collusion on the part of the defendants. It is pertinent to point out here that the request letter of the 3^rd defendant auction purchaser for extension of time for payment of the remaining 75% of the sale consideration is dated 20.06.2024, the 1st defendant claim that the same was received by them in person on 22.06.2024 and the Extension for time was also granted on the same day and the same was received by the 3rd defendant in person on the same day. However the fact remains that seal of 3rd defendant affixed in both the letters differ and the same will clearly prove that the serial no.5 (D/B additional typeset Page Nos. 14 & 15) letter granting extension of time to the 3^rd defendant for payment of the remaining 75% of the sale consideration is a fabricated document created after hearing the arguments of the applicant’s counsel to fill up the lacuna. From the above it is crystal clear that the defendants are playing fraud on this tribunal by producing fabricated documents to suit their convenience in order to get favourable order from this Hon’ble Tribunal and the same cannot be entertained.

¶231

It is further argued by the Ld. Counsel on behalf of the Applicants that, all these documents are supposed to be in the hands of the 1st defendant bank at the time of filing the consolidated common type set of papers dated 30.07.2024 and if so what prevented the 1st defendant

¶232

¶233

SA Nos.167/23, 614/23 & 197/23

¶234

bank from producing those documents at that time itself. In the consolidated common type set of papers dated 30.07.2024 as serial no 38, Bank has not filed their own letter dated 22.06.2024 granting extension of time. These facts will clearly prove that the documents filed in the additional type set of papers filed by the defendant bank dated 25.10.2024, especially serial nos. 3 & 5, are fabricated documents created as if it was an afterthought. The above facts will clearly prove the collusion between the 1st defendant and the 3^rd defendant (Auction purchaser) and they are going to the extent of playing fraud on this Hon’ble Tribunal also to get favourable orders.

¶235

On the other hand, the Ld. Counsel appearing on behalf of the Defendant Bank has vehemently opposed the submission of the applicant and further argued that, the total Loan amount of the said M/s. Parthas textiles is Rs.19,50,00,000/- (Rupees Nineteen Crore Fifty Lakhs only) and necessary documents were also mortgaged by the Applicants and this fact was admitted by the Applicants. After that the Applicants neglected to repay the loan amount and interest as agreed. Thus the loan accounts were classified as Non-performing Asset since 02.05.2021 and Demand Notice dated 19.06.2021 was also issued under Section 13(2) of the Act and said notice was also received by the applicants and guarantors. They have not issued any reply to the said Demand Notice.

¶236

It is further contended that, defendant bank issued a statutory Possession Notice dated 06.10.2021 and the same was delivered to the applicants and guarantors. The said facts are also admitted by the

¶237

¶238

SA Nos.167/23, 614/23 & 197/23

¶239

applicants in all the SAs. Further possession notice were also published on 10.10.2021 in two leading news papers in Tirunelveli & Tiruvananthapuram. The said possession notice was duly served and affixture of the same in the conspicuous space of the premises/schedule of property/secured assets also done. Further, the bank had also obtained Valuation Reports (2 Nos) dated 09.06.2022 from the certified valuer and as per the valuation, the bank proceeded further and fixed sale price and issued the sale notices as contemplated under the SARFAESI Act.

¶240

It is also contended that, the said M/s Parthas Textiles or its guarantors have not come forwarded to settle the loan dues through OTS rather with an ulterior motive they have given a meagre OTS proposal. The same was rejected by the defendant bank. In fact, the issuance of OTS proposal reveals that they have having enough money to repay the loan.

¶241

Further, defendant bank contended that, the defendant bank has filed the Cr.M.P.No. 239 of 2023 before the Chief Judicial Magistrate, Kanyakumari District at Nagercoil under Section 14 of SARFAESI Act seeking to take and hand over the physical possession of the schedule of property to the bank and by an order dated 03.02.2023, the Chief Judicial Magistrate, Kanyakumari District at Nagercoil appointed an Advocate commissioner for taking physical possession of the schedule of property. Simultaneously, 3^rd sale notice was also issued by the Defendant Bank which was challenged by the Applicant vide WP (MD) No. 5372 of 2023 before the Madurai Bench of Madras High Court

¶242

¶243

SA Nos.167/23, 614/23 & 197/23

¶244

challenging the order passed by Chief Judicial Magistrate, Nagercoil in Cr.M.P.No. 239 of 2023 and the E-Auction sale notice dated 22.02.2023. In the said writ petition, the applicants obtained the conditional order but, have failed to comply the said condition. Therefore, the Hon'ble High Court dismissed the writ petition on 05.04.2023. Thereafter the advocate commissioner had taken the physical possession of the property/secured asset on 12.04.2023 as per the above said order of the Chief Judicial Magistrate and handed over the same to the bank.

¶245

Further, the bank had also obtained one another Valuation Report dated 17.03.2023 from the valuer and valued the schedule of property properly before issuance of 4^th sale notice. Thereafter as per the valuation, the bank proceeded further and fixed sale price and issued the 4^th sale notice as contemplated under the SARFAESI Act.

¶246

Further, the bank issued the 4^th E-auction Sale notice dated 17.04.2023. The same was duly served to the applicants. Further the said E-auction sale notice were also published on 20.04.2023 in the two leading news papers in Tirunelveli & Thiruvananthapuram. Similar to the earlier notices, all the due process of law was followed by the bank and auction scheduled on 10.05.2023 and Reserve price of the property was fixed as Rs. 12,70,00,000/-. The said E-auction notice dated 17.04.2023 was also challenged by the Applicant vide S.A.No. 167 of 2023 before this Tribunal and Tribunal also passed a conditional order for payment of Rs.8 crores in two installments vide order dated 09.05.2023 which was also not complied by the Applicants. As per the order, if the Applicant failed to deposit any part of the sum as ordered by

¶247

¶248

SA Nos.167/23, 614/23 & 197/23

¶249

this Tribunal, the Respondent Bank shall be at its liberty to proceed further under the SARFAESI Act, without any reference to this Tribunal. The said M/s. Parthas textiles failed to comply the said conditional order. Hence as directed by this Hon'ble Tribunal, the bank had confirmed the auction sale in favour of the auction purchaser namely M/s. Prasanthi Property Developers on 07.06.2023. The said M/s. Prasanthi Property Developers., paid the entire sale consideration as per extended period. The defendant bank has issued the Sale certificate dated 15.09.2023 to the auction purchaser. The same was also registered before the SubRegistrar (Joint- I), Kanyakumari District vide Document No. 3885 of 2023 dated 22.09.2023.

¶250

Thus the bank followed the all the due process of law as contemplated under the SARFAESI Act & Rules.

¶251

Further, Defendant Bank stated that, the Applicant categorically raised a plea that one M/s. Kasal India Private Ltd., intended to purchase the schedule of property and property situated at Tiruvananthapuram on higher amount and filed an Unregistered agreement dated 29.03.2023 as document in the typed set of papers. The said unregistered agreement created for some extraneous consideration and for the purpose of filing the SAs. For the sake of argument, the said agreement is believed to be true, they have to pay the loan amount to the bank as stated in agreement and before commencement of E-auction sale as per Section 13(8) of the SARFAESI Act. However no such bonafide attempt was made by the Applicant. It is pertinent to state that the said

¶252

¶253

SA Nos.167/23, 614/23 & 197/23

¶254

Parthas textiles obtained various conditional orders before DRT and High Court and they have not complied with any of these orders.

¶255

It is further argued that, the Applicant's right of redemption extinguished on the date of publication of 1^st E-auction sale notice dated 17.06.2022. The said proposition was upheld by the Hon'ble Supreme Court in CELIR LLP -vs- Bafna Motors (Mumbai) Private Limited and others, reported in (2024) 2 SCC 1. "110. 3 In accordance with the un amended Section 13 (8) the SARFAESI Act, the right of the borrower to redeem the secured asset was available till the sale or transfer of such secured asset. "

¶256

Hence, during the arguments, the Defendant bank submitted that, they have followed the due process of law and sold the schedule of property in accordance with the SARFAESI Act. Even after realizing sale proceeds of the schedule of property, there is an outstanding amount of Rs. 8,79,45,457.14/- as per account statement dated 08.05.2024 in the loan accounts of the applicant.

¶257

Thus the present SAs were filed for the purpose of delaying the process of recovering and to escape from the clutches of law. Hence all the SAs are liable to be dismissed.

¶258

The counsel appearing on behalf of 3^rd defendant (Auction Purchaser) in SA No.167/2023 & 614/2023 has argued that, the 3^rd defendant participated in the public auction as per the paper publication issued by the defendant bank and was declared as successful bidder.

¶259

¶260

SA Nos.167/23, 614/23 & 197/23

¶261

Further, the defendant bank had confirmed the auction sale in favour of this company after receiving entire payment. It is also submitted that, 3^rd defendant is one of the bonafide purchaser since the sale certificate issued to him was also registered before the Joint-I, Sub-Registrar, Kanyakumari on 22.09.2023 as Document No. 3885/2023.

¶262

In these circumstances, the entire averments stated by applicant in the application are false and baseless. Hence, all the applications may be dismissed.

¶263

Having heard the parties and after going through the documents filed by the Applicant as well as the Respondents, I find the following:

¶264

It is an admitted fact, that the Applicants have availed the loan facilities from the Defendant Bank and offered the impugned properties as collateral securities and the same was accepted by the Applicants.

¶265

The S.A. No. 167 of 2023 was filed by the Applicants challenging the E-Auction Sale Notice Dated 17.04.2023 fixing the date of sale on 10.05.23 issued by the defendant Bank. The S.A. No.197 of 2023 was filed challenging the order passed by the Learned Chief Judicial Magistrate, Nagercoil under section 14 of the SARFAESI Act, 2002 in Crl.M.P.No. 239 of 2023 dated 03.02.2023. The S.A. No. 614 of 2023 was filed challenging the Sale Certificate dated 14.09.2023, issued by the Defendant Bank in favour of the 3^rd defendant Auction Purchaser pursuant to the Auction sale conducted on 10.05.2023 under Section 13 (4) of the Act.

¶266

¶267

SA Nos.167/23, 614/23 & 197/23

¶268

The main grounds of the Applicant is that, the declaration of NPA during the Covid-19 Lock Down is illegal. As per RBI guidelines, they have not restructured the loan. On verification of documents, I find that, the account was classified as NPA on 02.05.2021 and thereafter, demand Notice was issued to the borrowers and the same was received by the borrowers (D/B typeset of page nos.49 to 57). I find that, the said demand notice was received by the Applicants and no reply has been sent to the Defendant Bank during the said period since no documental proof has been filed by the Applicants.

¶269

With regard to Possession Notice issued by the Defendant Bank, the applicant has raised the plea that, possession notice was not published in two leading news papers and possession notice was also not affixed in the conspicuous part of the premises. I find that, as per the documents produced by the Defendant Bank, the defendant bank has filed the proof of service, paper publications in two leading news papers etc., (D/B typeset page nos.58 to 71) except the affixture of possession notice but later on defendant bank has filed the affixture of possession notice in the additional typeset of documents Page Nos.1 & 2. At the same time, I find that, the affixture of possession notice copy is not legible.

¶270

I also find that, while the SA No.18/23 was pending and the stay was in operation, the 1st Defendant Bank had approached the Learned Chief Judicial Magistrate, Nagercoil under section 14 of the SARFAESI Act, 2002 in Crl.M.P.No.239 of 2023 and had obtained the order on 03.02.2023 which shows that, disrespect to the order of this Tribunal.

¶271

¶272

SA Nos.167/23, 614/23 & 197/23

¶273

Further, Advocate Commissioner was appointed by the Learned Chief Judicial Magistrate and he took physical possession of the Nagercoil property on 12.04.2023 and handed over the same to the 1st Defendant Bank. It is alleged that, while executing the warrant for taking physical possession of the property, the Advocate Commissioner had not followed the procedures properly and the Panchanama drawn was not in accordance with law. On the other hand, defendant Bank informed that, Panchanama was taken properly and it was enclosed with the commissioner report. But, I find that, Defendant Bank has not filed any documental proof of Panchanama.

¶274

Another ground raised by the Applicant is that the valuation report has not included the interior works of showroom & staff quarters. After completion of interior works, bank valuer has estimated the cost of interior works as Rs.8,44,00,000/- (Rupees Eight Crores and Forty Four lakhs only) apart from the Land Valuation Rs.9,92,00,000/- (Rupees Nine Crores Ninety Two lakhs only) and building valuation Rs.3,08,57,000/- (Rupees Three Crores Eight Lakhs and Fifty Seven Thousand only) (page no.44 of the D/B typeset). In the additional typeset of documents, D/B had filed valuation report dated 09.06.2022, assessed by Er. R. Ananthan, Shekinah Constructions, Tirunelveli and another valuation report assessed by Er. Muralidharan, Tirunelveli on the same date i.e, 09.06.2022. Before the auction of the scheduled property another valuation report assessed by Er.Jeya Thilak Laban, Nagercoil dated 17.03.2023. I find that, no valuer has taken the value of the interior items in their valuation reports. As per the Bank valuer Mr. Ganesh, Penel Engineer’s report dated 08.09.2020 (page no.44 of D/B

¶275

¶276

SA Nos.167/23, 614/23 & 197/23

¶277

typeset) estimated value of interior works of showroom & staff quarters is Rs.8.44 crores but it is not included/assessed in the recent valuation report dated 17.03.2023. Hence, I come to conclusion that, valuation of the impugned property was not taken as per the Act and Rules. Hence, without assessing the interiors of the premises, Defendant Bank fixed the upset price which is not acceptable as it violates the Rule 8(5) of the Act.

¶278

Another ground raised by the Applicant is that, schedule of property is changed in the sale notice and sale certificate. I find that, in both demand notice dated 19.06.2021 (common typeset of D/B Page 52) and Possession Notice dated 06.10.2021(common typeset of D/B page no.61) the Schedule of impugned property was mentioned as multistorey buildings , but in impugned sale notice dated 17.04.2023 in the schedule of property it is mentioned as double storied terraced building (common typeset of D/B page no.167) and in the publication of the Auction Sale Notices dated 20.04.2024 it is mentioned as double storied building in both news papers (common typeset of D/B Page 176 and 177). I find that, as per the photographs produced by the Defendant Bank, scheduled property is one of the 5 floor building. But, it was wrongly mentioned as Double Storied building in the sale notice. Further, I find that, 3^rd Defendant (Auction Purchaser) by their resolution dated 04.09.2023 (at page no.239 of D/B typeset) requested the D/B to specifically mention the building as multi storied building in the Sale Certificate and based on their request, the Defendant Bank had issued the Sale Certificate and specifically mentioned the building as multi storied building (D/B typeset page no.223). I find that, this act of the D/B creates a serious doubt. Hence, I find that, the sale certificate was

¶279

¶280

SA Nos.167/23, 614/23 & 197/23

¶281

not issued as per the schedule of property sold in public auction. It shows that, description of property mentioned in the sale notice is different from the sale certificate issued by the Defendant Bank. Hence, statutory provisions has not been followed by the Defendant Bank during the issuance of sale certificate.

¶282

Another ground raised by the Applicant is that, as per Section 13(8) readwith Rule 8(6) of the Act, no clear cut 30 days time is available for service of Sale Notice. I find that, as per the documents produced by the Defendant Bank, it is noticed that, impugned sale notice dated 17.04.2023 was served to borrower on 20.04.2023 (common typeset of D/B page no.171) and sale was fixed on 10.05.2023.

¶283

As per Rule 8(6) of the Act, Authorized Officer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets, under sub-rule (5). As per Rule 9(1) of the Act, No sale of immovable property, the first instance take place before the expiry of thirty days from the date on which the public notice of sale is published in newspapers as referred to in the proviso to sub-rule (6) of rule or notice of sale has been served to the borrower: provided further that if sale of immovable property by any one of the methods specified by sub-rule (5) of rule 8 fails and sale is required to be conducted again, the authorized officer shall serve, affix and publish notice of sale of not less than fifteen days to the borrower, for any subsequent sale. I find that, more than fifteen days time has been given to the applicant as the impugned sale notice is the 4^th sale notice.

¶284

Another ground raised by the Applicant is that, the sale notice was not affixed on the conspicuous part of the property and only the

¶285

¶286

SA Nos.167/23, 614/23 & 197/23

¶287

pamphlets affixed in the conspicuous part of the premises. I find that, initially D/B has filed the affixture of sale notice (common typeset of D/B page nos.174-175) which shows that it is pamphlet. But, subsequently, D/B has filed the additional typeset and filed both the sale notice pamphlet and sale notice affixture on the subject property (additional typeset of D/B page nos.3 to 8). From perusal of their document, I find that, they have affixed the sale notice pamphlets and sale notice on the same date i.e, 17.04.2023 and both notices were affixed by different officers. Moreover, sale notice affixture copy is not legible (additional typeset page no.7). No date and time is available on the affixture photographs. The Defendant Bank has initially not filed the sale notice affixture copy in their common typeset and subsequently they have produced the unlegible copies of sale notice affixture on the same day with different officer. This also creates a serious doubt about the documents produced by the Defendant Bank. Hence, I come to the conclusion that, sale notice affixture is not clear and it violates the Rule 8(7) of the SARFAESI Act.

¶288

Further, I find that, Auction purchaser had requested the extension of time for payment of the remaining 75% of the sale consideration vide letter dated 20.06.2023 (common typeset of D/B page no.219) and same was received by the D/B on 22.06.2023 and on the same day, 3 months time was granted by the Authorized Officer which is reflected in the additional typeset page no.14 of D/B. Moreover, seal made by the auction purchaser on the letter dated 20.06.2023 & 22.06.2023 are also different. Hence, these documents also creates a doubt.

¶289

¶290

SA Nos.167/23, 614/23 & 197/23

¶291

Further, another ground of the Applicants is that, they have found a prospective buyer namely M/s.Kasal (India) Pvt. Ltd., who could purchase the properties for a sum of Rs.30.00 crores (Rupees Thirty Crores only) and accordingly entered into an Business Transfer Agreement (Memorandum of Understanding) with the prospective buyer on 29.03.2023 and buyer submitted a letter to the 1st Defendant Bank requesting for sale of the property under private treaty. I find that, the said document was unregistered one and no documental proof was filed by the Applicant to show the request made for private treaty sale. Moreover, Private Treaty sale is between the borrowers, secured creditor and private purchaser.

¶292

Hence, under the above fact and circumstances of the case and in view of the above discussions, I find that, the Bank has miserably failed to follow the procedure mention under Rule 8(1), 8(5), Rule 8(7), Rule 9(4) and Rule 9(7) of the Act. Hence, issues 1&2 are decided in favour of the Applicant.

¶293

The Applicants, no doubt being defaulters, are liable to pay the loan amount to the Defendant Bank. At the same time, Bank has been given ample power to recover the outstanding loan amount from the borrower by invoking the SARFAESI Act and without the intervention of any court. But it shall not allow the Bank to sell the property of the Applicants without following the due process of law strictly.

¶294

Under these facts and circumstances, this Tribunal is of the considered view to allow these SARAFESI Applications. All the pending IAs are closed.

¶295

¶296

SA Nos.167/23, 614/23 & 197/23

¶297

In result, these SA No.167/2023, SA No.614/2023 & SA No.197/2023 are allowed on the following terms and directions :-

¶298

(i) The Sale notice dated 17.04.2023 (published on 20.04.2023) and sale held on 10.05.2023 conducted by the Defendant Bank is setaside due to violation of Rule 8(5) – Improper valuation made by the D/B, Rule 8(7) – Legible copy of the Sale notice not affixed on the conspicuous part of the immovable property mentioned in the impugned sale notice.

¶299

(ii) The Defendant Bank has violated the Rule 9(4) provision of the SARFAESI Act in issuance of Sale Notice dated 17.04.2023 and Sale certificate dated 22.09.2023, hence both are hereby setaside. – The schedule of properties mentioned in the sale notice and sale certificate are different, it violates the Rule 9(7) of the Act.

¶300

(iii) Order passed by Learned CJM, Nagercoil dated 03.02.2023 is setaside. – Violates Rule 8(1) under non-affixture of legible copy of the possession notice and physical possession was taken without inventory of the movable properties. Further, the Learned CJM order was obtained when the stay of the scheduled property was in operation.

¶301

(iv) All the expenditure incurred on the issuance of sale notice dated 17.04.2023, paper publications and conducting the sale, shall not be included to the loan account of Applicant.

¶302

(v) The Defendant Bank is directed to refund the entire sale consideration amount paid by the Auction purchaser to him along with 4% interest from the date of deposit of money by the

¶303

¶304

SA Nos.167/23, 614/23 & 197/23

¶305

Auction purchaser till the refund i.e, within 3 months from the date of receipt of this order.

¶306

(vi) The Applicant shall also make the payment to the Auction Purchaser towards the Stamp duty and Registration charges incurred by the Auction purchaser within 3 months from the date of receipt of this order.

¶307

(vii) The Defendant Bank is entitled to recover the 4% interest charges paid by them to the auction purchaser from the Applicants.

¶308

(viii) The Defendant Bank is at liberty to initiate fresh action, against the Applicants, towards recovery of loan dues in accordance with law.

¶309

(ix) The Registry is directed to inform the concerned Sub-Registrar (Joint I Sub Registrar, Kanyakumari @ Nagercoil) about this order so as to cancel the registration of the sale certificate No.3885/2023.

¶310

(Dictated to Assistant, taken down, transcribed, typed by him corrected and pronounced by me in the open court this the 17^th February, 2025)

¶311

Sd/- (SEEMA SINHA) PRESIDING OFFICER

¶312

Uploaded on 21.02.2025

¶313

Parthas Textiles v. Karur Vysya Bank

Case brief

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Parthas Textiles v. Karur Vysya Bank

Case brief

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