Dismissed

Messrs Gsk Industries and Others v. Union Bank of India and Others

DRT15 Oct 2025SA/204/2023

Case brief

AI extract

What is this about?

In a securitization application, applicants challenged the bank declaration of their loan account as NPA and subsequent enforcement proceedings under the SARFAESI Act, citing procedural defects and alleged MSME status. The Tribunal dismissed the application, holding that the applicants were not eligible for the MSME framework at the time of sanction and that the bank validly served all notices and

What the court decided

AI extract

Messrs Gsk Industries and Others versus Union Bank of India… — Company and Corporate | DRT (2025)

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DEBTS RECOVERY TRIBUNAL-III, CHANDIGARH

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PRESIDED OVER: SH. MRIDULESH KUMAR SINGH

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SECURITIZATION APPLICATION NO.204/2023

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Date of Institution: 22.09.2023 Date of Decision: 15.10.2025

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M/s GSK Industries having its registered office at D 61-62, Focal Point Chanalon Kurali District, SAS Nagar, Punjab-140103 through its partner Sh. Gurmail Singh S/o Sh. Balbir Singh R/o House No.311, Ward No.08, Chanalon Kurali District, SAS Nagar, Punjab-140103

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Sh. Gurmail Singh S/o Sh. Balbir Singh R/o House No.311, Ward No.08, Chanalon Kurali District, SAS Nagar, Punjab-140103

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Smt. Ku!want Kaur W/o Sh. Gurmail Singh R/o House No.311, Ward No.08, Chanalon Kurali District, SAS Nagar, Punjab-140103

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Smt. Neeru Bala W/o Sh. Toni Pushpinder Sharma, Chanalon, Ward No.8, Kurali, SAS Nagar, Mohali Punjab-140103

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--Applicants

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Versus

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Union Bank of India having its Branch Office at SCF 93 Sector-61 Phase VII SAS Nagar (Mohali), P.O. Mohali-160055 through its Authorised Officer

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Union Bank of India having its Head Office at Union Bank Bhavan, 239, Vidhan Bhavan Marg, Nariman Point, Mumbai 400021, Maharashtra, India through its MD and CEO

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Sh. Jashandeep Singh S/o Late. Sh. Amarjit Singh R/o H.No.311, Ward No.8, Chanalon Kurali, SAS Nagar, Mohali, Punjab

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--Respondents

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Argued by: Ms. Ridhi Bansal, Advocate for Applicants Sh. Gaurav Chadda, Advocate for Respondent Nos. 1 & 2 Respondent No. 3 already ex parte vide order dated 09.01.2024

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FINAL ORDER

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(1) This Securitization Application was filed under Section 17 (1) of the Securitization and Reconstruction of

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SA/204/2023

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M/S GSK INDUSTRIES AND OTHERS VS. UNION BANK OF INDIA AND OTHERS

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Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ‘the Act’ for brevity) for setting aside declaration of loan account as NPA on 28.12.2022, demand notice dated 31.01.2023 (Annexure A6) as well as all the subsequent proceedings arising therefrom under the Act and e-auction notice dated 09.08.2023 (Annexure A8).

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(2) It was stated in the application that applicant No.1, an MSME, is a partnership Firm constituted for the purpose of carrying on the business of manufacture of auto parts through applicant Nos. 2 & 3, who are the partners/guarantors; that considering the exponential growth of the applicant Firm, the Andhra Bank (now merged into Respondent bank w.e.f. 01.04.2020) approached the applicant Firm offering Credit Facilities at lucrative rate of interest and based on their assurances, the applicants availed the Credit Facilities in the shape of Open Cash Credit Facility to the tune of Rs. 65,00,000/, which was subsequently renewed/enhanced to Rs.90,00,000/- on 18.10.2018; that the said sum was duly secured by creation of equitable mortgage over immovable plot measuring 1 Kanal 2 Marla situated in Tehsil Kharar, District SAS Nagar in the name of applicant No.3 besides hypothecation of stock and book debts etc.; that while enhancement of the OCC limit to Rs.90,00,000/on 20.07.2018, additional collateral security in the nature of residential plot measuring 363 yards situated at Hadbast No.110, Village Chanalon, Tehsil Kharar, District SAS Nagar was also given by applicant No.4 (mortgagor); that thereafter, everything was going on smoothly and the applicant Firm was regularly paying the installments within due time; that however with roll out of GST followed by recession in the automobile industry in the year 2019 primarily due to BAN on BS IV vehicles, it became quite arduous for the applicants to maintain the financial discipline; that notwithstanding this, the applicant Firm never defaulted in tendering the installments within the due time and the loan account continued to remain standard; that due to COVID 19 Pandemic, a nationwide lockdown was announced and resultantly, the business of the applicant Firm suffered badly; that in order to cope-up with this unprecedented situation, the Government of India had announced a slew of relief measures for the MSME sector

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3 SA/204/2023

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M/S GSK INDUSTRIES AND OTHERS VS. UNION BANK OF INDIA AND OTHERS

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which was the worst hit and accordingly since the account of the applicants continued to remain standard, it was also extended the benefit of Union Guaranteed Emergency Credit Line (UGECL); that apart from this, on 27.03.2020, Reserve Bank of India formulated COVID-19 Regulatory Package imposing moratorium w.e.f. 01.03.2020 which continued till 31.08.2020 by virtue of subsequent circular dated 23.05.2020; that to the utter dismay of applicants, despite extension of the aforesaid relief measures, ultimately, it became quite difficult for it to pay the installments and consequently, loan account was declared as NPA on 28.12.2022 in violation of the mandatory procedure of referring the account of applicant Firm to Designated Committee for deciding on a Corrective Action Plan, the moment overdues are pending for 61 to 90 days, in terms of RBI Circular dated 17.03.2016 titled "Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises (MSMEs)"; that instead of cooperating with the applicants, respondent Nos. 1 & 2 initiated proceedings under the Act by issuance of notice under section 13(2) of the Act dated 31.01.2023 for a sum of Rs. 1,09,19,243/by flouting Rule 3 of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as ‘the Rules’ for brevity); that the said notice was ex facie defective as besides mentioning incorrect sanction date and incorrectly addressing the applicants, it inter-alia lacks the necessary particulars qua, overdue amount, description of assets along with its identification mark; that as a natural corollary of non-service of the impugned demand notice, the applicants were deprived of its right to prefer objections under section 13(3-A) of the Act; that thereafter, respondent Nos. 1 & 2 in an undue haste issued the possession notice dated 19.05.2023 under section 13(4) of the Act; that the said notice was never served upon applicants neither it was affixed on the conspicuous part of the property nor it was published in the newspapers as per Rule 8 & 9 of the Rules; that with their malafide conduct to harass the applicants and deprive them of their residential property, respondent Nos. 1 & 2 simultaneously proceeded to launch proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 by way of filing OA No. 778/2023 titled as "Union Bank of India vs. M/s GSK

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SA/204/2023

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M/S GSK INDUSTRIES AND OTHERS VS. UNION BANK OF INDIA AND OTHERS

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Industries and Others,"; that when the applicants approached the respondent Nos. 1 & 2 praying for restructuring of its loan account then they came to know about the proceedings launched by the respondent Nos. 1 & 2 under the Act; that notwithstanding negotiations were going on between the parties inter-alia for restructuring/regularization of loan account in part payment, the respondent Nos. 1 & 2 on 09.08.2023 issued the impugned sale notice for auction of both the mortgaged properties on 26.09.2023, in breach of Rule 8 & 9 of the Rules; that applicants came to know about the said notice only when respondent No.3 i.e., the owner of the adjoining piece of land, informed that the impugned sale notice had been affixed on their property. It was further stated that all the actions taken by respondent Nos. 1 & 2 are in violation of the provisions of the Act. Therefore, it was prayed that the present SA may kindly be allowed.

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(3)

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Reply filed by respondent Nos. 1 & 2.

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(4) It is stated in the reply that the present SA filed by applicants is not maintainable as the applicants are defaulters of the loan availed by them from respondent Nos. 1 & 2 having sole motive of stalling the lawful recovery proceedings initiated by the Respondent Nos. 1 & 2 under the provisions of the Act; that applicants have not kept their loan account regular and committed default in payment of the loan dues, therefore their loan account has been classified as NPA on 28.12.2022 and Rs.1,09,19,243/was outstanding amount as on 31.01.2023 in the loan account of applicants; that respondent Nos. 1 & 2 had undertaken all the measures in due compliance of the provisions of the Act; that in the month of August 2023, Bank Officials had visited at the Office of applicants and it has came to the notice of respondent Nos. 1 & 2 that the aforesaid M/s GSK Industries had not existed at aforesaid premises and found the Board of some other Firm under the name and style of M/s Metal Cut affixed on the premises instead of M/s GSK Industries, on the same day Bank Officials went to take symbolic possession of the properties mortgaged by the applicants with the respondent Nos. 1 & 2 and during discussion with the applicants it has come to knowledge of Bank Officials that borrowers had rented out the premises to some other Firm where M/s GSK

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5 SA/204/2023 M/S GSK INDUSTRIES AND OTHERS VS. UNION BANK OF INDIA AND OTHERS

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Industries was running its business earlier and photographs of the premises are attached as Annexure R2; that RBI Circular dated 17.03.2016 titled as Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises (MSMEs) provides at point No. 10.2 that framework of MSME is available to entities which are viable or potentially viable for restructuring under titled Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises (MSMEs) should first be tested for viability, whereas in the present case the Firm named as M/s GSK Industries had already wind up its business without informing to the respondent Nos. 1 & 2 and rented out the premises and machinery hypothecated with the applicants to some other entity without informing the same to the respondent Nos. 1 & 2; that in the year 2015, applicant Nos. 2 & 3 being the partners of applicant No.1 approached respondent Nos. 1 & 2 for seeking grant of Cash Credit Limit of Rs. 30 Lacs which was duly considered and sanctioned by respondent Nos. 1 & 2; that in the year 2016 the above said Cash Credit Limit was subsequently enhanced to Rs. 45 Lacs; that further the said facility was enhanced to Rs. 65 Lacs in the year 2017; that further the said facility was enhanced to Rs. 90 Lacs in the year 2019; that the above-mentioned loan facilities were secured by way of creation of security interest over the properties by way of deposit of Title Deeds i.e.,

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(i) Residential House No. 311, situated at Ward No. 8, Channalon, Hadbast No. 110, Tehsil Khara, District SAS Nagar owned by Smt. Kulwant Kaur W/o Sh. Gurmail Singh (applicant No.3)

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(ii) Plot measuring 363 sq. yards, situated Channalon, Hadbast No. 110, Tehsil Khara, District SAS Nagar owned by Smt. Neeru Bala W/o Sh. Toni Pushpinder Sharma (applicant No.4). (5) It was further stated that thereafter, applicant Nos. 2 & 3 being partners of applicant No.1 availed a Term Loan of Rs. 17.50 Lacs under UGECL on account of COVID-19 Pandemic; that respondent Nos. 1 & 2 sanctioned that above said loan bearing interest @7.5% p.a. with monthly rests repayable in 48 monthly installments with a moratorium of 12 months; that applicants were irregular in paying the loan dues of the secured creditor and failed to maintain financial discipline

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SA/204/2023

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M/S GSK INDUSTRIES AND OTHERS VS. UNION BANK OF INDIA AND OTHERS

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therefore on 28.12.2022, loan accounts of the applicants were classified as NPA in accordance with the guidelines issued by RBI in this regard; that thereafter, respondent Nos. 1 & 2 issued demand notice under Section 13(2) of the Act dated 31.01.2023 for a sum of Rs. 1,09,19,243/outstanding as on 31.01.2023; that the said notice was duly delivered to all the borrowers and guarantors yet the borrowers including applicants failed to raise any objections whatsoever against the said demand notice as per Section 13(3-A) of the Act; that thereafter, respondent Nos. 1 & 2 had issued possession notice under Section 13(4) of the Act dated 19.05.2023 in compliance of Rule 8(1) of the Rules, which was served upon the applicants through registered post and the said notice was duly affixed on the conspicuous part of the secured assets as well as the said notice was duly published in the two leading newspapers having vide circulation, one in Indian Express (English) and one in Rozana Chardikala (Vernacular) on 24.05.2023; that thereafter, notice for sale dated 09.08.2023 of immovable secured assets was served upon the applicants through post and the said notice was also affixed on the conspicuous part of the secured assets as well as duly published in the two leading newspapers as per the Rules; that applicants are defaulters of the respondent Nos. 1 & 2 for a sum of Rs. 1,27,92,195.15p as on 18.10.2023 and have no intention to repay the dues of the respondent Nos. 1 & 2; that applicants had approached numerous times to respondent Nos. 1 & 2 and sought time to repay/settle the loan dues of the bank but they have not paid even a single penny in their loan accounts to restructure or regularize the loan account and upgraded their loan account from NPA category nor shown any bonafide to regularize/upgrade their loan accounts. Therefore, it was prayed that the present SA may be dismissed.

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(6) After service of notice upon respondent No.3 no one had appeared on behalf of respondent No.3 and respondent No.3 was proceeded ex parte vide order dated 09.01.2024. No reply was filed by respondent No.3. (7) Replication by applicants to the reply filed by respondent Nos. 1 & 2 was filed, wherein the contents of SA were reiterated and that of the reply to the SA were denied.

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7 SA/204/2023 M/S GSK INDUSTRIES AND OTHERS VS. UNION BANK OF INDIA AND OTHERS

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(8) I have heard arguments advanced by Ms. Ridhi Bansal and Sh. Gaurav Chadda, Advocates and gone through the record carefully.

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(9) Ms. Ridhi Bansal, Advocate argued that loan accounts of applicants were wrongly classified as NPA on 28.12.2022 in contravention of clause 4.2.5 of the Master Circular dated 01.07.2015 issued by Reserve Bank of India and also in contravention of the mandatory procedure of referring the accounts of applicant Firm to designated committee for deciding on a Corrective Action Plan, the moment overdues are pending for 60 to 90 days in terms of RBI Circular dated 17.03.2016. It was further argued that applicant Firm is a MSME Unit but respondent Nos. 1 & 2 have not referred their matter to designated committee before classification of loan accounts as NPA on 28.12.2022.

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(10) Per contra , Sh. Gaurav Chadda, Advocate argued that applicants did not repay the loan amount as per terms and conditions of the agreement therefore, their loan accounts were classified as NPA on 28.12.2022 as per guidelines issued by RBI vide Master Circular dated 01.07.2015. It was further argued that as per Clause 4.2.7 of the Master Circular dated 01.07.2015 it was provided that asset classification to be borrower wise and not to be facility wise. It was further argued that RBI Circular dated 17.03.2016 titled as Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises (MSMEs) provides at point No. 10.2 that framework of MSME is available to entities which are viable or potentially viable for restructuring under titled Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises (MSMEs) should first be tested for viability, whereas in the present case the Firm named as M/s GSK Industries had already wind up its business without informing to the respondent Nos. 1 & 2 and rented out the premises and machinery hypothecated with the applicants to some other entity without informing the same to the respondent Nos. 1 & 2. It was further argued that applicants have not deposited substantial amount in order to get their loan accounts into standard category. It was further argued that loan accounts were classified as NPA in strict compliance of Rules and there is no illegality in it. It was further argued that as per RBI Circular dated 17.03.2016 on ‘Framework

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8 SA/204/2023

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M/S GSK INDUSTRIES AND OTHERS VS. UNION BANK OF INDIA AND OTHERS

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for Revival and Rehabilitation of Micro, Small and Medium Enterprises’, applicants were not entitled to get benefits of the provisions of the said Circular since the applicants were not a MSME Unit at the time of sanctioning of credit facilities.

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(11) It is admitted fact that applicants had failed to adhere financial discipline. It is also admitted fact that as per Master Circular dated 01.07.2015 issued by RBI, asset classification is to be borrower wise and not facility wise. Udhyam Registration Certificate dated 29.09.2017 is annexed as Annexure A2. Copy of Sanction Letter dated 21.07.2017 is also annexed as Annexure A3 to the SA. From the facts on the record, it reveals that the credit facilities were availed from Andhra Bank as stated in the Securitization Application. This Bank was amalgamated with Union Bank of India on 01.04.2020. It further reveals from record that Credit Facilities were availed in the month of July, 2017 as per Sanction Letter dated 21.07.2017 and applicants have registered as MSME Unit in the month of September, 2017 as per Udhyam Registration Certificate dated 29.09.2017. Admittedly, at the time of availing Credit Facilities applicant No.1 Firm was not registered as MSME Unit. There is no evidence on record to show that the said Udhyam Registration Certificate was ever provided to respondent Nos. 1 & 2.

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(12) In light of above, applicants cannot claim any benefit on the basis of being MSME Unit, in light of RBI Circular dated 17.03.2016 and 01.07.2015. Therefore, in the considered opinion of this Tribunal respondents have not classified the loan accounts as NPA illegally.

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(13) Ms. Ridhi Bansal, Advocate further argued that notice under Section 13(2) of the Act dated 31.01.2023 was not served upon applicants according to Rule 8 of the Rules. It was further argued that in the said notice incorrect sanction date and it lacks the necessary particulars qua, overdue amount, description of assets along with its identification mark.

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(14) Per contra , Sh. Gaurav Chadda, Advocate argued that notice under Section 13(2) of the Act dated 31.01.2023 was duly served upon all the applicants as per the Rules. It was further argued that copy of said notice is Annexure R3 to the reply, which shows that the said notice was issued to all the applicants. Copies of receipts of registered posts along with tracking reports

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9 SA/204/2023 M/S GSK INDUSTRIES AND OTHERS VS. UNION BANK OF INDIA AND OTHERS

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are also filed as Annexures R4 & R5 to the reply, which shows that notices were served upon all the applicants. (15) In light of above factual position, it is established that notice under Section 13(2) of the Act was validly issued and also served upon applicants as per the Rules. As far as the argument raised by Ms. Ridhi Bansal, Advocate that the date of sanction and particulars of property were wrongly mentioned in the said notice and no overdue amount was mentioned, this Tribunal is considered opinion that all above referred facts are nor material and there was no prejudice caused to applicants for non-mentioning of overdue amount in the said notice. In fact, it is established that there is no illegality/irregularity in the issuance of above notice. (16) Ms. Ridhi Bansal, Advocate further argued that notice under Section 13(4) of the Act dated 19.05.2023 was not served upon applicants neither it was affixed on the conspicuous part of the secured assets nor it was published in the leading newspapers as per the Rules. (17) Per contra , Sh. Gaurav Chadda, Advocate argued that notice under Section 13(4) of the Act dated 19.05.2023 was duly served upon applicants as per the Rules. It was further argued that copy of the possession notice is annexed as Annexure R6 to the reply. It was further argued that the above said notice was sent through registered post and copy of postal receipts were annexed as Annexure R7 to the reply. It was further argued that the said notices were came back undelivered therefore, respondent Nos. 1 & 2 had used alternative mode of service i.e., service through affixation as well as through publication. Copy of affixation as well copies of publication of two newspaper i.e., one in Indian Express (English) and one is Rozana Chardikala (Vernacular) dated 24.05.2023 are annexed as Annexures R8 & R9 to the reply.

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(18) It reveals that the notice under Section 13(4) of the Act was sent on the same addresses on which notice under Section 13(2) of the Act were sent and also served upon applicants. This fact infers that the said notices were returned by the applicants knowingly and willingly to avoid the service.

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(19) In light of above factual position, it is established that notice under Section 13(4) of the Act was validly issued and also served upon applicants as per

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10 SA/204/2023 M/S GSK INDUSTRIES AND OTHERS VS. UNION BANK OF INDIA AND OTHERS

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the Rules. There is no illegality/irregularity in the issuance and service of above notice.

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(20) Ms. Ridhi Bansal, Advocate further argued that sale notice dated 09.08.2023 was not served upon applicants as per the Rules.

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(21) Per contra , Sh. Gaurav Chadda, Advocate argued that sale notice dated 09.08.2023 challenged by the applicants in the present SA has been rendered infructuous for the reason that vide order dated 26.09.2023 this Tribunal had stayed the confirmation of sale till the disposal of this SA, therefore sale scheduled for 26.09.2023 in the term of the said notice dated 09.08.2023 was unsuccessful.

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(22) In light of above, there is no need to prove the service of above said sale notice challenged by the applicants in the present SA. Neither it required for any adjudication.

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(23) Ms. Ridhi Bansal, Advocate further argued that respondent Nos. 1 & 2 had never created its charge against the properties in question with CERSAI.

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(24) Per contra , Sh. Gaurav Chadda, Advocate argued that respondent Nos. 1 & 2 had duly created its charge against the properties in question with CERSAI and copy of CERSAI Certificate is annexed as Annexure R16 to the reply.

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(25) In the considered opinion of this Tribunal, that as per CERSAI Certificate, the secured assets were duly registered with Central Registry as per Rules. Therefore, there is no force in the argument of Ms. Ridhi Bansal, Advocate.

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(26) Sh. Gaurav Chadda, Advocate argued that Rs.1,27,91,195.12p was outstanding as on 18.10.2023 and applicants had never deposited even a single penny in their loan account after classification of loan accounts as NPA. It was further argued that applicants are chronic defaulters. Therefore, they are not entitled to get any relief from this Tribunal in their favour.

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(27) In the SARFAESI Act nowhere it is provided that applicants have any right not to deposit their outstanding dues. It appears applicants are not interested in deposit of their dues (public money) rather they are interested in the One Time Settlement and for that purpose this SA was filed without showing any bonafide . (28) No other point was argued/pressed.

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11 SA/204/2023 M/S GSK INDUSTRIES AND OTHERS VS. UNION BANK OF INDIA AND OTHERS

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(29) After the consideration of all facts, circumstances as well as after perusal of record, there is no case made out in favour of applicants and this SA deserves to be dismissed. SA is dismissed. Record be consigned to record room after due compliance. Date: 15.10.2025 Pronounced by me in the open Tribunal.

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(MRIDULESHKUMARSINGH) Presiding Officer, DRT-III, Chandigarh

Messrs Gsk Industries and Others v. Union Bank of India and Others

Case brief

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What the court decided

Messrs Gsk Industries and Others v. Union Bank of India and Others

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