Allowed

Gurmeet Kaur and Others v. Union Bank of India

DRT16 Jul 2025SA/23/2025

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal quashed SARFAESI proceedings initiated by a bank because the borrower's loan account was classified as NPA in violation of RBI guidelines and a specific Supreme Court order. The Tribunal held the entire enforcement chain to be illegal and without authority.

What did the court decide?

Securitization application allowed; SARFAESI proceedings initiated by the respondent are quashed.

Gurmeet Kaur and Others versus Union Bank of India — Banking and Recovery | 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.23/2025

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Date of Institution: 24.01.2025 Date of Decision: 16.07.2025

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Smt. Gurmeet Kaur W/o Sh. Jaspal Singh, R/o House No.25/3, Ranchi Colony, Threekey, Baddowal, Ludhiana-142021

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Sh. Gurpreet Singh S/o Sh. Jaspal Singh, R/o D- 25/3, Ranchi Colony, Threekay Road, New BRS Nagar, Ludhiana-142021

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Sh. Jagdeep Singh S/o Sh. Jaspal Singh, R/o D- 25/3, Ranchi Colony, Threekay Road, New BRS Nagar, Ludhiana-142021

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--Applicants

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Versus

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Authorised Officer, Union Bank of India, 16681Model Town Extension, Ludhiana, SCO No.28, BlockA, Model Town Extension, Ludhiana-141002

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--Respondent

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Argued by: Sh. Rohit Suri, Advocate for Applicants Sh. C.K. Jha, Advocate for Respondent

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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 Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ‘the Act’ for brevity) to set aside demand notice dated 17.01.2024, possession notice dated 15.05.2024 and auction notices dated 24.09.2024 and 08.01.2025.

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(2) It was stated in the application that applicants had availed Housing Loan Facility of Rs.18 Lacs from the respondent for the purchase/renovation/construction of house property measuring 170 sq. yards being house situated at Village Threekey, locality known as Ranchi Colony, Ludhiana; that the said loan facility had been running regular, nor any sums overdue in as much as

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SA/23/2025

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GURMEET KAUR AND OTHERS VS. UNION BANK OF INDIA

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Covid-19 due to general distress in the economy, the repayment had been stopped to the account and as such the moratorium play; that it was imperative for the bank under the Emergency Credit Line Guarantee Scheme in terms with the directions of the RBI; that however no amount was released under the said Scheme; that the account was illegally classified as NPA on 30.11.2020 and notice dated 24.05.2021 was issued, whereby a sum of Rs.18,44,528.25p against the limit of Rs.18 Lacs by respondent was shown; that during the given period the bank could not classified the account as NPA, moreover it was incumbent upon the bank to provide support under the ECLGS Scheme, the Government of India, however the bank failed to do so; that classification of the loan account as NPA could not have been carried out in view of the fact that the same is contrary to the RBI Norms, however the bank did not pay heed and initiated in classification of the account as NPA; that no demand notice under Section 13(2) of the Act dated 17.01.2024 has been served upon the applicants and without service of demand notice, respondent has initiated process of possession and sale of the property; that as per knowledge of the applicants, there was no sum overdue and the account was within the financial discipline on the date of NPA; that respondent without any cause and without consideration of the fact that the RBI Guidelines make it imperative to carry out deep restructuring of the account beside failure to provide support under ECGLS Scheme, issued possession notice dated 15.05.2024; that thereafter, respondent had issued letter dated 06.08.2024 under Section 13(8) of the Act, however the said notice is meaningless; that in the said notice no amount was mentioned, which was payable to discharge the liability; that thereafter, respondent initiated the process of the sale of the properties and issued sale notice dated 24.09.2024, whereby auction of the secured asset is fixed for 29.10.2024, whereof reserve price of the property had been erroneously fixed as Rs.45 Lacs; that thereafter again sale notice dated 08.01.2025 was issued, whereby auction of the secured asset was fixed for 29.01.2025, whereof the reserve price of the property had been erroneously fixed as Rs. 37 Lacs; that apparently without obtaining any fresh valuation of the property, reserve price was already on the lower side and the Authorised Officer further reduced the reserve price of

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SA/23/2025

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GURMEET KAUR AND OTHERS VS. UNION BANK OF INDIA

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the property, whereas no powers are enshrined with the Authorised Officer of the bank to fix the reserve price of the property much less reduce the same; that reserve price of the property has been reduced by Rs.8 Lacs i.e., nearly 20% within a span of less than 03 months without any basis; that further there is no description in the auction notice as to the covered area of the property, in as much as the auction notice only speaks with regard to house without there being any description or detail of the actual constructed area, which is being put to auction; that thus the whole process of auction is bogus and nonest ; that as per the statement of account, there is no entry as on 31.12.2023 as claimed by the bank of Rs.27,99,873.78p to the contrary as to the statement of account, the amount which is due and outstanding as on 24.05.2023 is only to the extent of Rs.18,81,255.25p; that thus the amount has been claimed has no correlation to the demanded amount. Therefore, it was prayed that the SA may kindly be allowed.

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(3) Reply filed by respondent.

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(4) It is stated in the reply that present SA is not maintainable and also barred by Limitation and just filed to delay the recovery proceedings initiated by the respondent; that in the present case neither the balance of convenience lies in favour of the applicants nor the applicants have prima facie case nor the applicants are going to suffer an irreparable loss and injury in the event of respondent bank taking action against the property mortgaged with bank under the provisions of Act; that respondent has a prima facie case against the applicants and the respondent has to recover amount of Rs.31,84,526.78p as on 25.02.2025 including interest upto 25.02.2025 from borrower as well as guarantor as pleaded above and as such in case the respondent recovers its dues/which is public money by sale of its secured assets, the applicant is not going to suffer any loss and injury; that as alleged by applicants that the loan facility had been running regular, nor any sums overdue, in as much as Covid-19 due to general distress in the economy is totally incorrect; that Emergency Credit Line Guarantee Scheme was not applicable in the present case; that moreover, moratorium for the payment of instalment had been granted to the applicants; that applicants failed to maintain the financial discipline of the respondent so account of the applicants was classified as

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SA/23/2025

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GURMEET KAUR AND OTHERS VS. UNION BANK OF INDIA

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NPA on 30.11.2020; that applicants have been making false promises to pay the amount of debt from time to time after the account became NPA on 30.11.2020; that now instead of discharging their liability towards the respondent, the applicants in connivance with each other preferred to file the present SA to stall the recovery proceedings of the respondent so as such the present SA is not maintainable and is liable to be dismissed; that applicants have not come to this Tribunal with clean hands and have concealed the true facts from this Tribunal only with the aim of grabbing the public money and cheating the respondent, so the applicants are not entitled for any relief; that applicants had approached the respondent in the year 2016 with a request for the loan of Rs.20 Lacs and Rs.05 Lacs for purchase and repairing of house; that after considering the request of the applicants, credit facilities to the tune of Rs.20 Lacs and Rs.05 Lacs were sanctioned vide sanction letter dated 14.06.2016 and 15.07.2016; that applicants have executed documents on 22.06.2016 for creating security interest in favour of respondent and also created equitable mortgage of the property vide Sale Deed No.3930 dated 21.06.2016 registered with concerned Sub Registrar, Ludhiana Property/Plot/House No.24/3 area measuring 170 sq. yards situated at Village Threeke, Locality known as Ranchi Colony, Ludhiana in the name of Smt. Gurmeet Kaur W/o Sh. Jaspal Singh; that respondent in accordance with the directives of the RBI directive accounts of the borrower’s become NPA on 30.11.2020, respondent issued notice under Section 13(2) of the Act dated 17.01.2024 through registered post on the last correct known address of the borrower as well as guarantors; that thereafter, possession notice dated 15.05.2024 under Section 13(4) of the Act was sent to applicants for taking symbolic possession of the secured asset; that the said notice was duly affixed on the outer wall of the premises and the same was duly served through registered post on 17.05.2024 and the same was also published in the two leading newspapers i.e., in English as well as in Vernacular; that thereafter, respondent approached the District Magistrate for taking physical possession of the mortgaged property; that respondent, number of times put the property to auction under the Act and the same were failed due to want of bidder; that notices under Rule 8(6) of the Security

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SA/23/2025

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GURMEET KAUR AND OTHERS VS. UNION BANK OF INDIA

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Interest (Enforcement) Rules, 2002 were issued on 06.08.2024 duly informing the Borrower about sale of the secured assets, subsequently 30 days sale notice was issued on 24.092024; that thereafter, 15 days sale notices were issued on various dates last being on 04.02.2025; that fresh valuation report from the approved valuer was also obtained as per the guidelines of the Bank and reserve price has been fixed in accordance with the same; that required description in the auction notice has been given and respondent has complied the Rules framed under the Act; that prior to 08.02.2025 applicants have not raised any objection and now the applicants have filed false and frivolous SA by concealing these facts to defeat the rights of respondent; that action of the respondent was in consonance to the provisions of the Act, therefore the same is liable to be dismissed.

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(5) No replication filed by applicant to the reply filed by respondent. (6) I have heard arguments advanced by Sh. Rohit Suri and Sh. C.K. Jha, Advocates and gone through the record carefully.

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(7) Sh. Rohit Suri, Advocate argued that loan accounts of applicants was classified as NPA on 30.11.2020 by ignoring all the Circulars and Notifications issued by Government of India during Covid-19 Pandemic including the stay order passed by Hon’ble Supreme Court of India. It was further argued that Hon’ble Supreme Court of India has passed an order in Writ Petition No. 476/2020 titled as Small-Scale Industrial Manufacturers Association Vs. Union of India in which the order staying the classification of loan accounts as NPA was vacated on 23.03.2021 and stated that no account could have declared as NPA by any Bank or Financial Institution during this period from 31.08.2020 to 23.03.2021. Therefore, the loan accounts were classified as NPA on 30.11.2020 is bad in the eyes of law and therefore, all the proceedings initiated under the Act by respondent are illegal.

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(8) Per contra , Sh. C.K. Jha, Advocate argued that loan account of applicants was classified as NPA as per guidelines of Reserve Bank of India and there is no illegality in it. It was further argued that loan account of the applicants was not declared as NPA due to the Government Guidelines on moratorium period, which was

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SA/23/2025

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GURMEET KAUR AND OTHERS VS. UNION BANK OF INDIA

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granted upto 31.08.2020. It was further argued that Hon’ble Supreme Court of India has also issued directions that no account shall be declared as NPA till further orders, which were not declared as NPA till 31.08.2020. It was further argued that therefore, the loan account of applicant was classified as NPA on 30.11.2020.

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(9) Sh. Rohit Suri, Advocate placed reliance upon the judgment passed by Hon’ble Supreme Court in the matter of Gajinder Sharma Vs. Union of India and Another (Writ Petition (Civil) No. 825/2020) on 03.09.2020 in which order was passed that the accounts, which were not declared NPA till 31.08.2020 shall not be declared NPA till further orders. It was further argued that in light of this order loan account of applicants could not be classified as NPA on 30.11.2020. (10) It is admitted fact between both the parties that loan account of applicants was not NPA till 31.08.2020. It was further admitted by both the parties that in light of various Circulars issued by Reserve Bank of India and order passed by Hon’ble Supreme Court of India no account was to be classified/declared as NPA till 23.03.2021. It is further admitted fact between the parties that loan account of applicants was classified as NPA on 30.11.2020 as mentioned in the demand notice (Annexure R3).

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(11) In the present matter account was classified as NPA on 30.11.2020 and in light of order passed by Hon’ble Supreme Court of India in the matter of Gajinder Sharma Vs. Union of India and Another (Writ Petition (Civil) No. 825/2020) on 03.09.2020 it was ordered as under:

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“ Mr. Harish Salve, Learned Senior Advocate, submitted that no account shall became NPA atleast for a period of two months.

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In view of the above, the accounts which were not declared NPA till 31.08.2020 shall not be declared NPA till further orders .”

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(12) It was further held that accounts, which were not declared NPA till 31.08.2020 shall not be declared NPA till further orders. This shows that loan account was classified as NPA in contravention of the order passed by Hon’ble Supreme Court.

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(13) After considering the above facts and circumstances, in the considered opinion of this Tribunal, loan accounts could not be classified as NPA on

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SA/23/2025

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GURMEET KAUR AND OTHERS VS. UNION BANK OF INDIA

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30.11.2020 in light of Circulars issued by Reserve Bank of India as well as order passed by Hon’ble Supreme Court of India. There is no force in the argument of Sh. C.K. Jha, Advocate that despite the Circulars issued by Reserve Bank of India and order passed by Hon’ble Supreme Court of India, loan account of applicants can be classified as NPA during the period in which the said action was restrained and loan account may be declared as NPA after the said period w.e.f. date of classification as NPA.

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(14) In the considered opinion of this Tribunal when initial stage of proceeding under the Act was illegal then whole building constructed upon it is also without authority and base as well as liable to be quashed on this only ground.

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(15) Sh. Rohit Suri, Advocate further argued that notice under Section 13(2) of the Act dated 17.01.2024 was not served according to Rule 8 of the Security Interest (Enforcement) Rules, 2002 upon applicants.

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(16) Per contra , Sh. C.K. Jha, Advocate argued that notice under Section 13(2) of the Act was duly served upon all the applicants as per Rules. It was further argued that copy of said notice is Annexure R3 to the reply. Copies of receipts of registered posts along with tracking reports are also filed as Annexure R4 & R5, which shows that notices were served upon all the applicants.

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(17) In light of above factual position, it is established that notice under Section 13(2) of the Act dated 17.01.2024 was validly issued and also served upon applicants as per Rules. There is no illegality/irregularity in the issuance of above notice. (18) Sh. Rohit Suri, Advocate further argued that sale notices were duly served upon the applicants but respondent has not obtained a fresh valuation report before putting the property on sale.

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(19) Per contra , Sh. C.K. Jha, Advocate argued that sale notices were duly served upon applicants as per the Rules. It was further argued that respondent has duly obtained a fresh valuation report before putting the property on sale from the approved valuer dated 09.05.2024 (Annexure R23). It was further argued that in fact, applicants have also not placed on record any Valuation Report to controvert the Report of respondent.

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8 SA/23/2025 GURMEET KAUR AND OTHERS VS. UNION BANK OF INDIA

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(20) Annexure R-23 is a Valuation Report, which is obtained by respondent from the approved valuer. Therefore, it is incorrect to say that respondent has not obtained a fresh valuation report before putting the property on sale. Since applicants have failed to place on record any Valuation Report obtained by applicants, therefore it may be safely presumed that the Report filed by respondent is correct.

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(21) No other point/argument was pressed or advanced by any party. (22) After considering the above facts and circumstances as well as evidence on record, present SA is liable to be allowed. (23) SA is allowed . SARFAESI proceedings initiated by the respondent is quashed since initiation as loan account was classified as NPA wrongly and illegally in contravention of guidelines issued by Reserve Bank of India as well as order passed by Hon’ble Supreme Court of India. It is made clear that respondent may again initiate fresh SARFAESI proceedings according to law. Any other IA pending stands disposed of accordingly. Record be consigned to record room after due compliance. Date: 16.07.2025 Pronounced by me in the open Tribunal. (MRIDULESHKUMARSINGH) Presiding Officer, DRT-III, Chandigarh

Gurmeet Kaur and Others v. Union Bank of India

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Gurmeet Kaur and Others v. Union Bank of India

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