Dismissed

S Ganesan v. Union Bank of India

DRT6 May 2025SA/204/2023

Case brief

AI extract

What is this about?

The DRT dismissed a Securitization Application challenging a possession notice issued under the SARFAESI Act. The Tribunal rejected claims that the bank violated due process or Prudential Norms, finding the loan accounts were duly classified as NPA due to default and all procedural steps were validly followed.

What did the court decide?

The sale and possession notice dated 13.02.2023 was upheld, and the Securitization Application was dismissed.

S Ganesan versus Union Bank of India — Banking and Recovery | DRT (2025)

SA No.204/2023

06.05.2025

IN THE DEBTS RECOVERY TRIBUNAL-III, CHENNAI

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Dated this the 06^th day of May, 2025

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Present: SMT. S.V. GOWRAMMA Presiding Officer

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SA No. 204 of 2023

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1.	Mr. S. Ganesan, S/o. Sivasankaran, No.41/4 16(5), 1^stMain Road, Kalaimagal Nagar, Ekkatuthangal, Chennai -600 032.
2.	M/s. Sri Ram Hardwares, Represented by its proprietor, MR. S. Ganesan, TNHB Shopping Complex, Jafferkhanpet, Chennai 600 095.
3.	M/s. Sri Balaji Agencies, Represented by its Mrs. G. Krishna Amudha, No.33, Rajalakshmi Nagar, Bypass Road, Velachery, Chennai -600 042.	….Applicant
	-Vs-
1.	The Authorized Officer, Union Bank of India, Ashok Nagar Branch, Plot No.1208, 1^stAvenue, Ashok Nagar, Opp. Police Training College, Chennai -600 083.
2.	Mr. S. Sankarakumar, S/o. Sivasankaran, No.41/4 16(4), 1^stMain Road, Kalaimagal Nagar, Ekkatuthangal, Chennai -600 032.	….Respondent

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Counsels on record / appeared:

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Counsel for Applicant : M/s. KNS LAW chambers Counsel for respondent : M/s. G.V. Anjaneya Babu

SA No.204/2023

06.05.2025

ORDER ON SA 204/2023

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The present Securitization Application [SA] is filed under sub section [1] of S.17 of the Securitization And Reconstruction of Financial Asset and Enforcement of Security Interest Act,2002 (for short the ‘Act’) challenging the action and the measure taken by the secured creditor under the Security Interest Enforcement Rules, 2002 [for short the Rules].

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The Possession notice dated 13.02.2023 for recovery of a sum of Rs. 2,71,17.340.96/- is assailed in the present SA challenging

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The 1^st applicant is the mortgagor and guarantor for the loan facilities availed by 2^nd and 3^rd applicants for their business purpose. It is the case

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of applicants that borrowers were regular in repayment of loan, however, due to Covid-19 pandemic and consequent lockdown imposed to contain spread of virus, applicants could not continue their logistics business, which resulted in loss of income and default in repayment of loan dues.

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It is the further case of applicants that they made periodic payments, as evidenced from the statement of accounts enclosed along with SA, in respect of loan accounts. However, respondent bank had declared the loan account as NPA on 01.01.2022 and initiated SARFAESI measures by issuing demand notice on 01.12.2022, which was suitably replied vide letter dated 28.01.2023. On 02.03.2023 respondent had issued a formal reply to letter dated 28.01.2022, without considering the past payments made by

SA No.204/2023

06.05.2025

applicants and Respondent proceeded further and issued the possession notice impugned in this SA.

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It is contended that the applicant running a small family business dealing with hardware supply business and had mortgaged the property situated at 1^st street, Ekkatuthangal, Kalaimagal Nagar, Chennai – 600 097. Further Sri Ram Hardwares availed Cash credit of Rs. 1,34,00,000.00 (Account No. 409205040050112), Sri. Balaji Agencies had availed Over draft facility of Rs. 50,00,000.00 (Account No. 40920460000001), Sri. Balaji Agencies had availed Term Loan of Rs. 50,00,000.00 (Account No. 409204060000001) and Sri. Ganesan.S had availed an Term Loan of Rs 1,42,00,000.00 (Account No. 409206680000038).

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The applicant business is solely dependent on logistics was not able to perform or run its business due to complete lockdown and also due to second wave continued till mid-2021. The applicants submit that the Reserve Bank of India vide its circular DOR.No. BP. BC/3/21.04.048/202021 dated 06.08.2020 on “Resolution Framework for Covid – 19 related Stress” (Resolution Framework – 1.0”) had provided a window to enable lenders to implement a resolution plan in respect of eligible corporate exposures without change in ownership, and personal loans, while classifying such exposures as standard, subject to specified conditions.

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The 1^st respondent bank did not take initiative to provide any support

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or resolution with regards to the above mentioned circular, Inspite of

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SA No.204/2023

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4 06.05.2025

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payments made periodically and the same has been evidenced as per the statement of accounts of (a) Sri Balaji Agencies Vide A/c No. 409204060000001 and (b) S. Ganesan Vide A/c No. 409206680000038

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It is urged the statement of account produced by the 1^st respondent bank clearly shows that the bank have wrongfully classified all four accounts as NPA based on one particular account namely, Shri Ram Hardware’s, where the interest or principal amount remains overdue for a period of 90 days on 01.01.2022.

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M/s. Sri Ram Harwarwes account was used by the applicant and his brother Mr. Sankarakumar, the 2^nd respondent herein and there was an oral family arrangement for partition of the family business, M/s. Sri Ram Hardware’s was allotted to the 2^nd respondent who had opened a separate account and stopped operating the Sri. Ram Hardwares with the 1^st respondent bank.

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The applicants vide letter dated 15.03.2022 and 10.05.2022 requested to restructure the limits of Sri Ram Hardware Stores and to renew the existing limits of Sri Balaji Agencies and other mortgage loans. The applicant submits that out of four accounts the charge has been created only with Cash Credit Account of Sri Ram Hardware and Term Loan Account of S. Ganesan and with regard to Sri Balaji Agencies no charge has been created in respect of the property.

SA No.204/2023

06.05.2025

The applicants replied vide letter dated 28.01.2023 to the S.13[2] demand notice dated 01.12.2022 to which respondent bank replied on 02.03.2023.

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In the grounds, it is contended that the classification of the account as NPA is not as per the RBI guidelines and the applicants have made out a prima facie case as they were regularly repaying the payments and the accounts could not be classified as NPA by misusing the power by declaring the account as NPA.

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The S. 13(2) demand notice dated 01.12.2022 in not as per the Act as the demand notice lacks clarity due to the lack of detailed explanation on the due amount in respect of the principal and the interest. Secondly, the applicant had given a reply under S. 13(3A) on 28.01.2023 within 60 days from the date of receipt of the S. 13(2) demand notice. As per S. 13(3A) bank has responded within 15 days however, bank has issued letter dated 28.01.2023 which is after lapse of 30 days.

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The Respondent have issued the possession notice dated 13.02.2023 which is before the issuance of reply letter dated 02.03.2023. The respondent bank have classified the account as NPA disregarding the due process of law established under S. 13(2) of the Act, which clearly lays down that the accounts declared as NPA should satisfy the time period laid down under the RBI guidelines and the said act of the 1^st respondent bank is illegal, arbitrary, abuse of due process of law. Reliance is placed on the

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case Punjab National bank Vs. Mithilanchal Industries Pvt AIR 2020 SCC Online Guj 3441.

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A perusal of the said notice only mentions aggregate amount, but does not give the details of the outstanding amount payable by the borrower. It does not confirm to Section 13(3) of the SARFAESI Act, WHICH PROVISION IS REPRODUCED HERE UNDER: “13(3). The notice referred to in sub section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower”.

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The Borrowers – respondents preferred representation/objection dated 02.03.2015 under Section 13(3A) of SARFAESI Act requiring the Secured Creditor to withdraw the notice and issued a fresh notice in conformity with subsection (3). The Secured Creditor apparently did not find the representation/objections to be acceptable and accordingly communicated to the borrowers.

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The words used in Section 13(3) of the SARFAESI Act are “details of the amount payable by the borrower as also the details of the secured assets intended to be enforced by the Secured Creditor. “ So, the notice under Section 13(2) of the SARFAESI Act has to necessarily contain the details on the above two counts”.

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06.05.2025

Thus, the bank has failed to adhere to the due process and have wrongly classified the account as NPA. On these grounds, the applicant prays and quash to set aside the possession notice dated 13.02.2023.

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The respondent bank in their counter submits that the applicant had availed various credit facilities from the first respondent bank for their business activity and have mortgaged their property as a security for the availed credit facilities, Cash credit Loan vide A/c. No. 409205240050112, Over Draft Loan vide A/c No. 409204060000001, Term Loan vide A/c No. 409206400000001 and Term Loan A/c No. 409206680000038 from the first respondent bank.

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The borrowers were irregular in repaying the loans and despite several reminders and opportunities they have failed to repay the loans hence, the account was classified as NPA as per the RBI guidelines. Further, it is a settled guidelines of RBI if one of the many accounts of the borrower is classified as NPA then all the accounts immediately becomes an NPA.

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The respondent bank denies all the allegations that respondent bank are aware of the fact that M/s. Sriram Hardwares account was used by the applicant and his brother Mr. Sankarkumar, however, there was an oral family arrangement for partition of the family business, M/s. Sriram Hardwares was allotted to the second respondent who had opened a separate account and stopped operating the M/s. Sriram Hardwares with the bank.

SA No.204/2023

06.05.2025

It is submitted that the bank has not aware of such oral family arrangement for partition between the applicants and such frivolous claim and defense as the borrowers are jointly liable for the repayment of the loans and subsequently has classified the accounts as NPA and have issued the S. 13(2) demand notice dated 01.12.2022.

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Infact, the applicant have received the S. 13(2) demand notice dated 01.12.2022 as per postal acknowledgment card produced and they failed to comply with the demand in the S. 13(2) demand notice. The bank has issued the possession notice dated 13.02.2023 which is also received by the applicant herein.

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The possession notice is also published in English newspaper “Financial Express” affixed on the property as per procedures and the applicant had raised objections to the demand notice dated 01.12.2022 to which the bank issued a detailed reply on 02.03.2023 and also rejecting their proposal and ask them to clear the dues.

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The applicants were given enough time and opportunity to repay the loans and they have wilfully failed to do so and the bank has proceeded under the SARFAESI Act. Hence, prays for dismissal of the SA.

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Heard and perused the records of the case.

SA No.204/2023

06.05.2025

It is manifest from the records that S. Ganesan is the mortgagor of the loan availed by M/s. Ram Hardware Stores proprietory concern where the first applicant Ganesan is the proprietor. Mr. S. Ganesan, the first applicant is also the Co-obligant/guarantor to the loan availed by M/s. Sri. Ram Hardware Stores.

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First applicant is the proprietor of M/s. Ram Hardware Stores, second applicant is the M/s. Ram Hardware stores represented by the first applicant M/s. S. Ganesan and the third applicant is the proprietor concern and represented by its propreitrix M/s. G. Krishna Amudha.

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It is seen from the records that S. Sankarakumar is the guarantor to the loan. It is seen that the borrowers Sri. Ram Hardwares stores have availed Cash credit of Rs. 1,34,00,000.00/-, M/s. S. Ganesan have availed Term Loan of Rs. 1,42,00,000.00/-, Sri. Balaji Agencies has availed an Overdraft facility of Rs. 50,00,000.00/- and Term Loan of Rs. 50,00,000.00.

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As the applicants were irregular in repayments, the loan accounts of the borrowers were classified as NPA on 01.01.2022. Subsequent to the classification of the account as NPA, the bank has issued the S. 13(2) demand notice dated 01.12.2022.

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The first contention raised with regard to the classification of the account as NPA is that the applicant had made payments regularly and was servicing the loan account the bank has classified the account as NPA and have abused the due process of law. Applicants relied on the statement of

SA No.204/2023

06.05.2025

accounts produced by them at Pg. 25 to 35. It is seen from the statement of accounts that the borrowers/guarantors were irregular in the repayment and the payments made by the applicant is duly given credit to the receipt of the loan account. Hence, the contention that the applicants were regular in repaying the loan does not sustain.

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Therefore, bank had classified all the accounts as NPA is as per Prudential Norms procedures where it is held that if one of the many accounts of the borrowers is classified as NPA then all the accounts immediately becomes NPA. The respondent on classification of one account of the borrower as NPA, all the other accounts of the borrower is classified as NPA is as per Prudential norms which does not requires any adjudication of the issue. Hence, the Tribunal finds no merits in such the contention. The applicants does not dispute the default in repayment towards the loan accounts but have come with an oral family partition without any force as law as there is no change in the constitution of the firm and in the transactions of the borrowers account, even otherwise the family arrangement entered between the family for running business who not alter the status of the borrower or the guarantor or the loan documents executed favoring the bank.

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The respondent bank have produced the copy of the S. 13(2) demand notice dated 01.12.2022 which is admitted received by the applicants. The S. 13(2) demand notice is sent by RPAD as is evident from the acknowledgement card produced at pg. 4 of the typeset reflects that M/s.

SA No.204/2023

06.05.2025

S. Ganesan, the 1^st applicant have received it on 06.12.2022, Sri. Sankarakumar received it on 06.12.2022,Sri. Balaji Agencies had received the S. 13(2) demand notice on 06.12.2022 and G. Krishna Amudha has received the S. 13(2) demand notice on 06.12.2022. Hence, there is no dispute with the issuance and receipt of S. 13(2) demand notice and infact applicants raised an objections to S. 13(2) demand notice on 28.01.2023 to which the bank had given a detailed reply letter dated 02.03.2023 and it is not within the period of time.

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Thus, it is evident that the respondent have classified the account as NPA following to that issued the S. 13(2) demand notice dated 01.12.2022 which is duly served as per the procedures and is also supported by the postal acknowledgment cards.

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It is also seen from the records that after the issuance of S. 13(2) dated 01.12.2022 applicant had also given restructuring proposal after reply by the respondent bank on 15.03.2023 which clearly reflects that the applicants have failed miserably in servicing the loan accounts and also paying the interest as per terms of the sanction which is also contrary to the confirmation that the applicants were irregular in repayment.

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On the other hand, it is an admitted fact that there was an irregularity/ default in the repayment which resulted in the classification of account as NPA. Infact, the restructuring letter produced at Pg.No. 58 of the SA book highlights the fact that the outstanding amount in the Sri. Ram

SA No.204/2023

06.05.2025

Hardware to which the 1^st applicant neglected to close the account by making a payment of Rs. 25 Lakhs However, even as on date of hearing, the applicants had not chosen to close the loan accounts and have failed to their own proposals of settlement.

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As the applicants did not liquidate the liability in respect of the notice S. 13(2) demand notice dated 01.12.2022 and have issued the S. 13(4) possession notice dated 13.02.2023 which is sent by postal receipts and the S. 13(4) possession notice is sent to the home address as well as to the business address. As there is no dispute with regard to the S. 13(4) possession notice dated 13.02.2023 which is challenged in the present SA which is duly served as per procedures.

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The respondent bank have affixed the possession notice on the secured asset as evident from Pg. No. 8&9 published in “Hindu Tamil” as well as in English newspaper “Financial Express”.

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The records of the case clearly shows, that the applicants as borrowers have availed the credit facility mortgaging the property as collateral security.

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Due to the default in the repayment, the bank had initiated the measures under SARFAESI Act. After classification of the account as NPA and have issued the S. 13(2) demand notice 01.12.2022 which is admittedly received and as the applicant did not liquidate the liability, the

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SA No.204/2023

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13 06.05.2025

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bank had issued S. 13(4) possession notice dated 13.02.2023 which is challenged in the present SA.

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The respondent as a secured creditor have initiated the measures as required under the Act and have followed the procedures and issued S.13(2) Demand notice dated 01.12.2022 and have the issued the S. 13(4) possession notice dated 13.02.2023 as mandated under the Security Interest Enforcement Rules. Along with the supporting documents which established the due compliance of the procedures as required under the Act and the Rules.

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Upon cumulative examination of pleadings and the documents produced by both the parties, the Tribunal concludes that the S. 13(2) demand notice dated 01.12.2022 and the S. 13(4) possession notice dated 13.02.2023 are valid notices issued as enumerated under the acts and the rules.

SA No.204/2023

06.05.2025

For the foregoing reasons, the present SA fails and accordingly SA stands dismissed. Interim Order granted, if any stands vacated, pending

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IAs are disposed of in terms of this final order. No order as to cost.

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Sd/(S.V. GOWRAMMA) PRESIDING OFFICER, DRT-III, CHENNAI

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(Dictated to Stenographer (MS), transcribed by her, corrected, signed and pronounced by me on this the 6^th day of May, 2025)

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SUIT SCHEDULE PROPERTY

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All that piece and parcel of land situated at South Madras Registration, Saidapet, Sub Registrar district, Madras 600 097, Ekkathuthangal, Kalaimagal Nagar, 1^st Street, Patta No.421/94-95, Block No.1, Town survey No.41/4, Old survey no.20, extent 5000 sq.ft belonging to Mr. S. Ganesan and Mr. S. Sankarakumar, situated at Ekkatuthangal and bounded on the:-

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North by : House TS No.42 South by : 30 ft Road (1^st street, Kalaimagal Nagar) East by : House Plot TS No.41/5 West by : House Plot TS No.41/3

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Situated within the Registration Sub-District of Saidapet and Sub Registration District of South-Chennai.

SA No.204/2023

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Dated at Chennai on this 21^st day of March 2023.

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LIST OF DOCUMENTS PRODUCED BY THE APPLICANT

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Sl. No.	Description of Documents	Page No.
1.	Application filed U/s 17 read with of the SARFAESI Act, 2002 dated 21.03.2023.	A-1
2.	Restructuring proposal dated 15.03.2022.	A-2
3.	Restructuring proposal dated 10.05.2022.	A-3
4.	Demand notice under S.13(2) of the SARFAESI Act, 2002 sent by the 1^stRespondent Bank dated 01.12.2022.	A-4
5.	Statement of Account of M/s. Sri Ram Hardwares	A-5
	bearing A/c No.409205040050112 dated 27.01.2023.
6.	Statement of Account of Mr. S. Ganesan & G. Krishna Amudha bearing A/c No.409206680000038 dated 27.01.2023.	A-6
7.	Statement of Account of M/s. Sri Balaji Agencies bearing A/c No.409204060000001 dated 27.01.2023.	A-7
8.	Reply Letter given by the applicants dated 28.01.2023.	A-8
9.	Possession notice dated 13.02.2023.	A-9
10.	Reply letter by the 1^stRespondent bank dated 02.03.2023.	A-10
11.	Restructuring proposal dated 15.03.2023.	A-11
12.	Vakalat dated 21.03.2023.	A-12
13.	Proof of payment dated 24.03.2023.	A-13
14.	Proof of Service dated 27.03.2023.	A-14

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LIST OF DOCUMENTS PRODUCED BY THE RESPONDNET

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Sl. No.	Description of Documents	Page No.
1.	Notice of Demand U/s.13(2) of SARFAESI Act dated 01.12.2022.	R-1
2.	Postal Acknowledgement dated 06.12.2022.	R-2
3.	Possession Notice dated 13.02.2023.	R-3
4.	Postal Receipts dated 18.02.2023.	R-4

SA No.204/2023

06.05.2025

5.	Photo of the affixture of possession notice.	R-5
6.	Copies of Newspaper Publication (2) dated	R-6
	13.02.2023.

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Sd/(S.V. GOWRAMMA) PRESIDING OFFICER, DRT-III, CHENNAI

S Ganesan v. Union Bank of India

Case brief

What is this about?

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S Ganesan v. Union Bank of India

Case brief

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