Dismissed

Rushikesh Paper Mills Pvt. Ltd. through chairman Sakharam S Landge v. the Cosmos Co-Op Bank Ltd.

DRT7 May 2025SA/228/2022

Case brief

AI extract

What is this about?

In a securitisation application under the SARFAESI Act, applicants challenged an auction sale of mortgaged industrial land by Cosmos Co-op Bank Ltd., alleging violations of notice periods, newspaper publication rules, and undervaluation. The Tribunal held the bank followed prescribed procedures and dismissed the application.

What did the court decide?

Securitisation Application No.228/2022 dismissed with costs; all pending I.A.s disposed of.

Rushikesh Paper Mills Pvt. Ltd. through chairman Sakharam S… — Company and Corporate | DRT (2025)

¶1

Presented on: 09.05.2022 Registered on: 17.05.2022 Decided on: 07.05.2025 Duration: Y M D 2 11 29

¶2

IN THE DEBTS RECOVERY TRIBUNAL AT PUNE (Before Shri Dilip G Murumkar, Presiding Officer) SECURITISATION APPLICATION No.228/2022

¶3

Rushikesh Paper Mills Pvt. Ltd., A Company incorporated under the provisions of Companies Act and having its Registered Office at – Gat No.309/A/2, Hupari Road, Opp. PWD Workshop, At Post Uchagaon (E), Taluka – Karveer, District – Kolhapur 416 005

¶4

Mr. Sakharam Sahadu Landge Age: 66 years R/at : 484/17, E Ward, Hindurao Ghatge Colony, Kadamwadi Road, Kolhapur – 416 003.

¶5

… Applicants

¶6

Versus

¶7

The Authorised Officer, The Cosmos Co.op Bank Ltd., At “Cosmos Tower”, Plot No.6, ICS Colony, University Road, Ganeshkhind, Shivajinagar, Pune – 411 007.

¶8

The Cosmos Co.op Bank Ltd., Branch At : Shahupuri Branch, Vasant Plaza, C.S. No.1079/KH/Z, “E”

(SA No.228/2022)

Page 1 of 18

[KAUR]

Ward, Shahupuri, Rajaram Road, Kolhapur – 416 003.

¶13

1. Mr. Vijay Balasaheb Shinde, A/P : Uchagaon, Near Ganesh Ratna Hotel, Taluka : Karvir, Dist.Kolhapur 416 005.

¶14

1. Mr. Rahul Sakharam Landge R/at : 484/17, E Ward, Hindurao Ghatge Colony, Kadamwadi Road, Kolhapur – 416 003.

¶15

1. Mrs. Asarabai Sakharam Landge R/at : 484/17, E Ward, Hindurao Ghatge Colony, Kadamwadi Road, Kolhapur – 416 003.

¶16

1. Mr. Suresh Tukaram Landge R/at : 484/17, E Ward, Hindurao Ghatge Colony, Kadamwadi Road, Kolhapur – 416 003.

¶17

1. Mr. Santosh Arjun Landge R/at : W 57, Shiroli, MIDC Police Station Road, At Post; Shiroli, Kolhapur – 416 122.

¶18

1. Mrs. Swati Rahul Landge R/at: 484/17, E Ward, Hindurao Ghatge Colony, Kadamwadi Road, Kolhapur – 416 003.

Deleted

Deleted

Deleted

Deleted

Deleted

... Defendants

APPEARANCES

For the Applicants For Defendant Nos.1 and 2	Mrs. Madhuri R. Vaidya - Advocate Mr. Subodh Shah – Advocate
For Defendant No.3	Mr. VijayV. Chandawale - Advocate

(SA No.228/2022)

Page 2 of 18

[KAUR]

JUDGMENT

(Delivered on 7^th May, 2025)

¶32

By the present Securitisation Application, the applicants have challenged the action taken by defendant Bank under The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act” for short) in respect of the mortgaged property i.e. All that piece and parcel of Industrial N.A. Land bearing Gat No.309/A/2, admeasuring area about 01H 18.50R with entire construction standing thereon at Hupari Road, Village Uchagaon, Tal. Karveer, Dist. Kolhapur and within the local limits of Grampanchayat Uchagaon, Taluka Panchayat Samittee Karveer, Zilla Parishad, Kolhapur (for short “suit property”) and have claimed following main reliefs:

¶33

(a) The E auction conducted by the Defendant No.1 in favour of Defendant No.3 on 24/03/2022 as per the notice dated 04/03/2022, of the suit property, or any such sale may kindly be quashed and set aside.

¶34

(b) The sale certificate issued by Defendant No.1 in favour of the defendant No.3 on 30/3/2022 and or registered of the suit property, may kindly be quashed and set aside.

(SA No.228/2022)

Page 3 of 18

[KAUR]

(d) The Defendant No.3 be restrained from dealing, on construction and or

¶40

demolishing, carry transferring alienating the suit property either by themselves, their agents, servants, assigns and or through any other person.

¶41

(e) The Defendant No.1 be directed to consider the sale of the suit property in favour of the Purchaser who is ready and willing to pay a much higher price than that offered by the Defendant No.3.

¶42

(f) The Defendant No.3 be restrained from demolishing, transferring, alienating, creating third party interest and or parting with the actual physical possession of the suit property to third party including its agents, servants during the pendency of the present SA.

¶43

(g) The Defendant No.3 be permanently restrained from transferring, alienating, creating third party interest in the suit property either by themselves, their agents, servants, assigns or through any other person.

¶44

(h) Pending final hearing and disposal of the present

(SA No.228/2022)

Page 4 of 18

[KAUR]

application the Defendant No.1 and Defendant No.3 be restrained by any order of temporary injunction from transferring, alienating, creating third party interests, demolishing and or parting with possession of the suit property either by themselves, their agents, servants, assigns or through any other person.

¶49

The case of the applicants can be summarized as under:

¶50

The applicant No.1 is Private Limited Company and applicant No.2 is the Director Chairman of the applicant No.1 Company. Applicant No.1 Company availed certain credit facilities from defendant No.2 bank for purchasing the machinery and as working capital. Though defendant No.2 bank sanctioned an amount of Rs.12,62,43,000/- but did not disburse the full amount. Due to insufficient finances the applicants could not do the business smoothly and hence the account was overdue. On 18^th April, 2018 the defendant No.2 bank issued Notice u/s 13(2) of the SARFAESI Act to the applicants. The applicants made representation to the said Notice which was duly replied by the defendant No.2 bank.

¶51

It is further alleged that defendant bank took forceful possession of the suit property without obtaining any orders from District Magistrate. The applicant lodged complaint and

(SA No.228/2022)

Page 5 of 18

[KAUR]

thereafter, the possession was restored.

¶56

It is further contended that defendant No.1 obtained orders from the District Magistrate and took physical possession of the running unit i.e. suit property on 18^th September, 2019. The applicants challenged the said action by filing SA No.125/2020, which is pending before this Tribunal.

¶57

It is further alleged that during the pendency of SA No.125/2020, the defendant bank issued various auction notices but for want of bidders the auctions failed.

¶58

On 28^th December, 2020 the defendant bank issued E-Auction Notice of movable and immovable property for the sale to be held on 18^th January, 2021. In the said auction the movable property was sold by the defendant bank at Rs.216 lakhs and the Sale Certificate was also issued on 26^th March, 2021. However, the applicants could not challenge the said sale.

¶59

It is further alleged that during pendency of SA No.125/2020 the defendant bank issued Notices for auction of the immovable properties on various dates. However, all auctions failed. Thereafter, on 4^th March, 2022 the defendant bank issued E-Auction Notice in respect of the suit property. The said Notice was delivered the applicants on 14^th March, 2022 for the sale to be held on 24^th March, 2022. Thus, there is no

(SA No.228/2022)

Page 6 of 18

[KAUR]

compliance of 15 days’ notice to the applicants for sale as required under the provisions of Rule 9(2) of the Security Interest Rules. Thereafter, the applicants moved IA No.407/2022 in SA No.125/2020 and same was disposed of as infructuous. The defendant bank did not inform the applicants about the sale conducted and the details of Auction Purchaser were provided only after filing of IA No.496/2022. Only then the applicants came to know that the Sale Certificate has been issued on 30^th March, 2022.

¶64

It is contended that the publication of E-Auction is not made in the local newspaper by the defendant bank as required under Rule 8(6) of The Security Interest (Enforcement) Rules. However, the said Notice is published newspapers in Pune and Mumbai.

¶65

It is further contended that the sale has been conducted in fraudulent manner and appears to be pre-planned. The applicants through its’ another firm is ready to repay the loan, however the same has not been considered by the defendant bank. The property is sold to Mr. Vijay B. Shinde, Auction Purchaser, defendant No.3 at Rs.4,40,50,000/- against the Reserve Price of Rs.4,40,00,000/-. The applicants are ready to deposit the said amount. The said sale is bad in law for want

(SA No.228/2022)

Page 7 of 18

[KAUR]

of following the provisions of Rule 8, 9(3) and 9(4) of the Security Interest (Enforcement) Rules. By letter dated 5^th April, 2022 the defendant bank provided the name of the Auction Purchaser to the applicant.

¶70

It is further contended that in the first auction notice the value of the land and building was Rs.924 Lakhs and the machinery was valued at Rs.451 Lakhs. The said auction failed for want of bids. Thereafter, the defendant bank reduced the Reserve Price from of the suit property from Rs.924 Lakhs to Rs.725 Lakhs and that of the movables from Rs.451 Lakhs to Rs.297 Lakhs. The last Reserve Price for land and building was fixed at Rs.440 Lakhs and the movable property was sold at Rs.216 Lakhs. Thus, the defendant bank has grossly undervalued the property causing irreparable loss.

¶71

Thus, the applicants have challenged the auction sale conducted on 24^th March, 2022 on grounds that there is no clear 15 days’ notice to the applicants. The property has been grossly undervalued. There is no compliance of Rule 8 and 9 of the Security Interest (Enforcement) Rules. No proper procedure is followed by the defendant and sale has been confirmed prematurely in contravention of Rule 9(4). There is no confirmation of sale before issuing Sale Certificate on

(SA No.228/2022)

Page 8 of 18

[KAUR]

30/03/2022. The defendants have failed to comply the provisions of Rule 8(5) and 9 of the Security Rules. The defendant failed to consider the pendency of SA No.125/2020. The entire procedure followed by the defendant bank is bad in law. Therefore, the applicants are claiming aforementioned reliefs and pray for allowing the same.

¶76

Defendant No.1 and defendant No.2 bank by filing Statement of Objection (Exhibit-12) resisted the said application. The defendants have denied the contentions taken by the applicants in the application. It is stated that the applicants had filed SA No.137/2018 in which the applicants have taken same contentions. The said SA No.137/2018 was dismissed as infructuous on 5^th August, 2019. It is stated that time and again the applicants were given the opportunity by the Tribunal to bring better purchaser but the applicants failed to do so. Thus, the defendant bank has followed the procedure as per law and there is no illegality. The applicants have not produced any evidence on record to support their case. It is further stated that defendant bank has sent e-mail dated 7^th March, 2022 attaching therewith the statutory notice which was sent by RPAD on 4^th March, 2022. The said auction notice was published in newspaper on 6^th March, 2022 and auction

(SA No.228/2022)

Page 9 of 18

[KAUR]

was held on 24^th March, 2022. The applicants were having adequate knowledge. Hence, defendant bank has issued 15 days’ notice as required under Rule 9(2) of the Security Interest Rules.

¶81

It is further stated that there is no grounds are available for the applicants to challenge Sale dated 24^th March, 2022 and the Sale Certificate dated 31^st March, 2022 as the right to redeem the property was available upto the date of publication of auction sale notice which was first published on 4^th August, 2018. The applicants have lost all their rights of redeeming the property. Further, the said sale is legal and defendant bank has not committed any violation of any of the provisions of the SARFAESI Act and Rules made thereunder. They, therefore, prays for dismissal of the Securitisation Application with exemplary costs.

¶82

Defendant No.3 by filing Reply (Exhibit-10) contested the application on the grounds that the applicants have no locus as the defendant bank is no more secured creditor as the Sale Certificate is issued. The defendant No.3 has denied the allegations raised by the applicants in the application. The Securitisation Application is barred by limitation as it is not filed within 45 days as the cause of action arose on 4^th March,

(SA No.228/2022)

Page 10 of 18

[KAUR]

2022 when Auction Notice was issued. The applicants have no case on merits. The applicants were well aware about the auction held on 24^th March, 2022 and it is falsely stated that they were served with auction notice only on 14^th March, 2022. It is stated that he bided in the auction as per notice by complying all legal obligations. There is no collusion with any of the officers of the defendant bank. All the contentions taken by the applicants in the Securitisation Application are denied in toto. There is no breach of Rule 8, 9(3) and 9(4) of the Security Interest (Enforcement) Rules, 2002. The Sale Certificate has been issued. All the opportunities given to applicants are lost. Therefore, the application be dismissed.

¶87

Defendant Nos.4 to 8 are deleted vide Pursis (Exhibit-11) of the applicant.

¶88

The applicants have filed Affidavit in Rejoinder (Exhibit-13) to the Statement of Objections filed by defendant Nos.1 to 3 in rebuttal.

¶89

The following points arise for my determination and I record my findings thereon as under:

¶90

(1) Whether applicants proved that the defendant bank has sold the suit property in auction illegally by violating Rules 8, 9 of the Security Interest

(SA No.228/2022)

Page 11 of 18

[KAUR]

(Enforcement) Rules, 2002?

¶95

(2) Whether applicants are entitled for reliefs in respect of disputed sale of suit property as claimed in Prayer Clause of the Application?

¶96

(3) Whether applicants are entitled for reliefs in respect of injunction against defendant No.3, Auction Purchaser as claimed in Prayer Clause of the Application?

¶97

(4) What order?

¶98

Findings:

¶99

Point No.1 – In the negative

¶100

Point No.2 – In the negative

¶101

Point No.3 – Does not survive

¶102

Point No.4 – As per final order passed below.

¶103

REASONS

¶104

I have heard arguments of all the parties. They have reiterated facts mentioned in the Application and Statement of Objections, respectively.

¶105

Point Nos.1 to 4:

¶106

Since all these points are interconnected with each other, I record my findings thereon simultaneously.

¶107

As per Rules 8 and 9 of The Security Interest

(SA No.228/2022)

Page 12 of 18

[KAUR]

(Enforcement) Rules, 2002 when mortgaged property is to be sold in auction, it is mandatory for secured creditor to serve the Sale Notice of prescribed period to the borrowers, guarantors and mortgagors and simultaneously Sale Notice shall be pasted on the suit property and published in two newspapers one in English and one in vernacular language having wide circulation in the locality where the suit property is situated. In view of these Rules I scan the evidence on record.

¶112

Admittedly, the suit property sold in auction is situated at Kolhapur and disputed sale is sixth (6^th ) sale. The applicants have challenged auction sale of the suit property dated 24^th March, 2022 in pursuance of Sale Notice dated 4^th March, 2022.

¶113

According to applicants, Sale Notice dated 4^th March, 2022 was received to them on 14^th March, 2022 whereas sale has been conducted on 24^th March, 2022. Thus, there was no gap of clear fifteen days between service of Sale Notice and date of sale and thus, defendant bank has violated proviso of Rule 9(1) of The Security Interest (Enforcement) Rules, 2002.

¶114

According to defendant bank, Sale Notice was also served upon the applicant Company through e-mail on 7^th March,

(SA No.228/2022)

Page 13 of 18

[KAUR]

2022 and sale was conducted on 24^th March, 2022. Thus, there was gap of clear fifteen days between service of notice and date of sale. In support print-out of e-mail of sending Sale Notice of suit property is produced by the defendant bank along with List (Exhibit-15) which shows that Sale Intimation Notice was served on applicant Company on 7^th March, 2022.

¶119

The applicants have deleted defendant Nos.4 to 8 who are Directors of applicant Company and guarantors and mortgagors to the loan vide Pursis (Exhibit-11). Having regard to these facts, it is candidly proved that Sale Notice dated 4^th March, 2022 was served upon the applicant Company on 7^th March, 2022 and sale was conducted on 24^th March, 2022. Thus, sale of suit property was conducted after gap of clear fifteen days and thus, there is no violation of Rule 9(1) of The Security Interest (Enforcement) Rules, 2002.

¶120

According to applicants, Sale Notice was not pasted on the suit property and thus, defendant bank violated Rule 9(1) of The Security Interest (Enforcement) Rules, 2002. In the arguments, the learned Advocate for the applicants submitted that defendant bank by not producing Panchnama or photographs regarding pasting of Sale Notice on the suit property has failed to prove pasting of the same. However,

(SA No.228/2022)

Page 14 of 18

[KAUR]

preparation of Panchnama or taking photograph of pasting the Sale Notice on the suit property is not mandatory by Law.

¶125

Per contra, the defendant bank has produced Affidavit of Authorised Officer along with List (Exhibit-15) contending that on 4^th March, 2022 he pasted the Sale Notice on suit property at 4.00 p.m., which is suffice to hold that pasting of Sale Notice was made on the suit property on 4^th March, 2022 i.e. date of Sale Notice.

¶126

According to applicants, suit property is situated at Kolhapur and disputed Sale Notice was not published in leading newspapers to be published and circulated at Kolhapur. The publication of Sale Notice was made in Financial Express and Loksatta published from Pune. These newspapers are not widely circulated at Kolhapur. Thus, the defendant bank has violated Rules 8 and 9 of The Security Interest (Enforcement) Rules, 2002. Therefore, sale of the suit property is illegal.

¶127

However, the defendant bank along with List annexed to Statement of Objection (Exhibit-12) has produced e-mail issued by The Indian Express (P) Ltd., which glaringly shows that Pune Edition of “Loksatta” and “Financial Express” covers Districts/areas – Pune, Kolhapur, Solapur, Sangli, Satara, etc. Therefore, I have no hesitation to hold that there

(SA No.228/2022)

Page 15 of 18

[KAUR]

is wide circulation of Loksatta and Financial Express newspapers at Kolhapur where suit property is situated though these are of Pune Edition. Therefore, there is no illegality in respect of publication of Sale Notice in the newspapers. The publication of Sale Notice was made on 4^th March, 2022 and sale was conducted on 24^th March, 2022 after gap of clear fifteen days, which appears to be legal.

¶132

An attempt was made by the applicants to show that sale is illegal by contending that suit property has been sold at lower price than market value. However, bare contention in that regard has been made in the Application and no details are provided. The applicants have produced Valuation Report of the year 2018 and Ready Reckoner extract of the suit property for the year 2022 along with IA No.1922/2022 and along with List (Exhibit-19).

¶133

On the contrary, the defendant bank has also produced two Valuation Reports along with List (Exhibit-17) and RBI Circular of the year 2024 which shows that Valuation Report is valid for three years. The Valuation Reports produced by defendant bank are of 2019 and the suit property has been sold in the month of March, 2022. Therefore, the said Valuation Reports can be considered.

(SA No.228/2022)

Page 16 of 18

[KAUR]

The Valuation Report dated 30^th September, 2019 produced by defendant bank shows that Realisable Value of the suit property i.e. land and construction was Rs.7,25,00,000/-. The Valuation Report dated 1^st October, 2019 shows that Distress Value was Rs.5,54,00,000/-. Admittedly, disputed Sale dated 24^th March, 2022 is sixth (6^th ) sale. When first sale was conducted on 13^th December, 2019 the Reserve Price was fixed at Rs.7,25,00,000/- based on Realisable value mentioned in the Valuation Report dated 30^th September, 2019. Thereafter, due to non-availability of bidder subsequently sale was conducted for five times by reducing the Reserve Price at reasonable rate/percentage. Therefore, at the time of conducting disputed sale (6^th sale) Reserve Price was fixed at Rs.4,40,00,000/- which is proper.

¶138

In view of these observations, I do not find that suit property has been sold at lower price or under value.

¶139

The Sale Certificate of suit property issued in the name of defendant No.3, Auction Purchaser by defendant bank produced by applicant along with List annexed to Affidavit in Rejoinder to the Statement of Objection of defendant Nos.1, 2 and 3 (Exhibit-13) shows that defendant No.3, Auction Purchaser has deposited EMD amount and 25% amount and

(SA No.228/2022)

Page 17 of 18

[KAUR]

remaining 75% amount within period prescribed by Law. Thus, there is no illegality in procedure for sale of the suit property adopted by the defendant bank. The defendant No.3, Auction Purchaser has purchased the suit property in auction as highest bidder.

¶144

Since it is held that sale procedure of the suit property is within framework of Law and sale is legal, reliefs of injunction claimed against defendant No.3, Auction Purchaser does not survive.

¶145

In view of above observations, I hold that the applicants are not entitled for reliefs as claimed against the defendant bank as well as defendant No.3, Auction Purchaser. Therefore, application is liable for dismissal.

¶146

Therefore, by answering these points accordingly , I pass the following order:

¶147

ORDER

¶148